Browne v. Kline Tysons Imports, Inc.

Citation190 F.Supp.2d 827
Decision Date14 March 2002
Docket NumberNo. CIV.A. 01-1888-A.,CIV.A. 01-1888-A.
PartiesGeorge BROWNE Plaintiff, v. KLINE TYSONS IMPORTS, INC. Defendant.
CourtU.S. District Court — Eastern District of Virginia

Alexander Hugo Blankinship, Esquire, Blankinship & Associates, Alexandria, VA, for Plaintiff.

Robert Tayloe Ross, Esquire, Midkiff Muncie & Rosse, Richmond, VA, for Defendant.

MEMORANDUM OPINION

LEE, District Judge.

THIS MATTER is before the Court on Defendant's Motion to Stay Pending Arbitration. The issue before the Court is whether to stay litigation pending arbitration on the basis that Plaintiff waived his right to bring his Magnuson-Moss Warranty Act, other statutory, and common law claims arising from the sale of a vehicle by signing a Buyer's Order, which contained an agreement to submit all claims related to the sale of the vehicle to binding arbitration. This Court heard oral arguments on Friday, March 1, 2002 and for the reasons stated in open court and below, this Court holds that Plaintiff's claims under the Magnuson-Moss Warranty Act, with respect to written warranties, are not subject to binding arbitration because Congress evinced an intent to allow consumers the ability to adjudicate such claims in court. Therefore, Plaintiff's Magnuson-Moss Warranty Act claim (Count I) is not stayed. However, Plaintiff's remaining claims are stayed pending arbitration (Counts II-XI) because the parties waived their right to adjudicate these claims in court, and Plaintiff asserts no mandate that waiver of these claims is impermissible. Therefore, with the exception of Plaintiff's claims under the Magnuson-Moss Warranty Act (Count I), Defendant's Motion is GRANTED.

I.

This case involves Plaintiff George Browne's purchase of a 1998 Toyota Camry ("Vehicle") from Defendant Kline Tysons Imports, Inc. ("Kline"). Kline marketed this Vehicle as a Toyota Certified Used Vehicle, which allegedly guarantees that the Vehicle would be defect free or will meet a specified level of performance. (Compl.¶ 37.) On December 14, 2000 and January 13, 2001, Browne signed numerous documents in order to facilitate the purchase the Vehicle. In particular to the matter before the Court, Browne signed a Buyer's Order relating to the purchase of the Vehicle, which provided that:

16. We agree that any claim dispute or controversy relating to this agreement shall be resolved by binding arbitration through the National Arbitration Forum under its code of procedure then in effect.... The parties acknowledge that they have knowingly waived their rights to a judge or jury trial ....

(Def. Ex. A, ¶ 16: Buyer's Order.) On December 12, 2001, Browne filed an eleven-count Complaint against Kline alleging violations under the Magnuson-Moss Warranty Act ("MMWA"), 15 U.S.C. § 2301 et seq. (Count I), Truth in Lending Act ("TILA"), 15 U.S.C. § 1601 et seq., (Count II), various sections of the Virginia Consumer Protection Act ("VCPA"), VA. CODE § 59.1-196 et seq. (Counts III-IX), breach of contract (Count X), and fraud (Count XI). On January 30, 2002, Kline filed a motion for stay of litigation pending binding arbitration, pursuant to the arbitration provision in the Buyer's Order. Kline's motion for stay pending arbitration is now before this Court.

II.

The Federal Arbitration Act ("FAA") requires the Court to enforce arbitration agreements. 9 U.S.C. § 1, et seq. In particular, section 3 of the FAA gives courts the power to stay an action pursuant to an enforceable arbitration agreement until after the arbitration. See id. at § 3. When considering whether the parties' agreement to arbitrate is enforceable it is important for the court to consider the FAA's purpose "to reverse the long-standing judicial hostility to arbitration agreements ... and to place arbitration agreements upon the same footing as other contracts." Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24, 111 S.Ct 1647, 114 L.Ed.2d 26 (1991). Whether a party has agreed to arbitrate is an issue that is a matter of contract interpretation. See Johnson v. Circuit City Stores, Inc., 148 F.3d 373, 377 (4th Cir.1998). The FAA permits contracting parties to include a provision in their agreement that refers statutory claims arising under the contract to arbitration. See, e.g., Gilmer, 500 U.S. at 26, 111 S.Ct. 1647. However, in determining whether statutory claims may be sent to arbitration, the Court should engage in a two-part inquiry. See Green Tree Financial Corp.-Alabama v. Randolph, 531 U.S. 79, 90, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000). First, the court should ask whether the parties agreed to submit their claims to arbitration. See id. Second, the court should ask whether Congress has evinced an intention to preclude a waiver of judicial remedies for the statutory rights at issue. See id. The burden of establishing that Congress intended to preclude arbitration for a statutory claim rests with the party seeking to avoid arbitration. See Gilmer, 500 U.S. at 26, 111 S.Ct. 1647.

A.

Browne assented to arbitration of his disputes arising out of the sale and financing of the Vehicle. One who signs a contract is presumed to know and assent to the terms contained therein. See General Ins. of Roanoke, Inc. v. Page, 250 Va. 409, 464 S.E.2d 343, 344 (1995); see also Sydnor v. Conseco Fin. Serv. Corp., 252 F.3d 302, 306 (4th Cir.2001). Browne signed the Buyer's Order on January 13, 2001, which consummated the sale of the Vehicle pending approval of a retail installment sale contract. (Def. Ex. A, ¶ 16: Buyer's Order.) The back of the Buyer's Order states that the parties agree that "any claim, dispute or controversy relating to this agreement shall be resolved by binding arbitration ..." (Id.) Browne signed the Buyer's Order and initialed on the back of the Order just below the arbitration provision. Browne's knowledge and intent to be bound by arbitration is shown through his signature on the Buyer's Order and initialing the reverse side. Therefore, Browne intended to submit claims arising out of the dispute of the sale of the Vehicle to arbitration.

B.

Kline argues that the language of the MMWA evidences Congress' intent not to preclude parties from agreeing to binding arbitration of written warranties. Congress' intention may be found in the text, legislative history, or in the statute's language and underlying purpose. See Gilmer, 500 U.S. at 26, 111 S.Ct. 1647; Ford Motor Credit Co. v. Cenance, 452 U.S. 155, 158 n. 3, 101 S.Ct. 2239, 68 L.Ed.2d 744 (1981). Congress enacted the MMWA to "improve the adequacy of information available to consumers, prevent deception, and [to] improve competition in the marketing of consumer products." See Cunningham v. Fleetwood Homes of Georgia, Inc., 253 F.3d 611, 617 (11th Cir.2001) (quoting 15 U.S.C. § 2302). Even though the MMWA does not require manufacturers to provide warranties, the MMWA creates specific duties and liabilities for manufacturers that choose to do so. See id. (citing 16 C.F.R. § 700.03). With respect to dispute resolution for alleged breach of duties arising under written warranties, the text of the MMWA states in relevant part:

Congress hereby declares it to be its policy to encourage warrantors to establish procedures whereby consumer disputes are fairly and expeditiously settled through informal dispute settlement mechanisms.

15 U.S.C. § 2310(a)(1). In addition, with respect to remedies, the statute states that:

... a consumer who is damaged by the failure of a supplier, warrantor or service contractor to comply with any obligation under this chapter under a written warranty, implied warranty or service contract may bring suit for damages and other legal and equitable relief ... (B) in an appropriate district court.

Id. at § 2310(d)(1). A clear reading of the statute evinces Congress' intent to encourage informal dispute settlement mechanisms, yet not deprive any party of their right to have their written warranty dispute adjudicated in a judicial forum. See Pitchford v. Oakwood Mobile Homes, Inc., 124 F.Supp.2d 958, 963 (W.D.Va.2000); Raesly v. Grand Housing, Inc., 105 F.Supp.2d 562, 573 (S.D.Miss.2000) (holding that binding arbitration of written warranty agreements is forbidden by the MMWA); Wilson v. Waverlee Homes, Inc., 954 F.Supp. 1530, 1538 (M.D.Ala.), aff'd, 127 F.3d 40 (11th Cir.1997) (holding that intent of the MMWA with respect to written warranties is that consumers are to retain full and unfettered access to courts for resolution of their disputes); but see Southern Energy Homes, Inc. v. Ard, 772 So.2d 1131, 1135 (Ala.2000)(holding that binding arbitration is permissible under the MMWA); Southern Energy Homes, Inc. v. Lee, 732 So.2d 994, 1008 (Ala.1999)(dissent), overruled by and dissent adopted in Ard, 772 So.2d at 1135 (same). Any informal dispute settlement procedure that may be utilized to resolve written warranty disputes under the MMWA must be a non-binding mechanism, which serves as a prerequisite, and not a bar, to relief in court.

Agency interpretation supports the reasoning that written warranty claims under the MMWA are not subject to binding arbitration. Regulations, promulgated by the governmental body responsible for interpreting or administering a statute, are entitled to considerable respect. See Ford Motor Credit Co., 452 U.S. at 158 n. 3, 101 S.Ct. 2239. The Federal Trade Commission ("FTC") was charged with administering the MMWA. See 15 U.S.C. § 2302(b)(1). The FTC's regulations mirror the MMWA's statutory language to encourage dispute resolution, yet mandate that consumers have full and final access to the courts for resolution of their written warranty disputes. In particular, the FTC states that informal dispute settlement procedures must be set forth in the terms of the written warranty. See 16 C.F.R. § 703.1(c). Nonetheless, any informal dispute mechanism for resolving a written warranty dispute "shall not be legally binding on any person." Id. at § 703.5(j). The FTC also provides that if...

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