Ninth Circuit Panel Withdraws Opinion Holding That Magnuson-Moss Warranty Act Prohibits Mandatory Arbitration Clauses in Consumer Sales Contracts

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California is a difficult jurisdiction for sellers of consumer products, due in part to the pro-consumer Song-Beverly Consumer Warranty Act, which expands the consumer rights codified in the federal Magnuson-Moss Warranty Act (“MMWA”). Things seemed to be getting even tougher for sellers when the United States Court of Appeals for the Ninth Circuit issued its September 20, 2011 Opinion in Kolev v. Euromotors West/The Auto Gallery, Case No. 09-55963, in which the court effectively barred mandatory arbitration provisions in consumer warranty contracts. In a belated victory for sellers, however, on April 11, 2012 the panel that decided Kolev entered an order withdrawing its prior Opinion and implicitly restoring the validity of mandatory arbitration provisions in consumer product warranties.

Case History

Plaintiff Diana Kolev purchased a pre-owned Porsche from the defendant dealership. The sales contract contained a mandatory arbitration provision that encompassed all warranty disputes with the dealer. After the vehicle developed significant mechanical problems, Kolev alleged that the dealership refused to honor her warranty claims, and she brought suit under the MMWA. The district court granted the dealership’s motion to compel arbitration, and the arbitrator resolved most of Kolev’s claims in the dealership’s favor; the district court subsequently confirmed the arbitration award. Kolev appealed, arguing that the MMWA barred the mandatory arbitration provision. Prior to this decision, the Fifth and Eleventh Circuits had reviewed this question, and both held that the MMWA did not bar similar mandatory arbitration provisions. See Walton v. Rose Mobile Homes LLC, 298 F.3d 470, 475 (5th Cir. 2002); Davis v. S. Energy Homes, Inc., 305 F.3d 1268, 1278 (11th Cir. 2002).

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Published In: Alternative Dispute Resolution (ADR) Updates, Civil Procedure Updates, General Business Updates, Consumer Protection Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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