Abela v. Gen. Motors Corp.

• Decision Date: 15 July 2003
• Docket Number: No. 236238.,236238.
• Citation: 669 N.W.2d 271,257 Mich. App. 513
• Parties: John ABELA and Barbara Abela, Plaintiffs-Appellees, v. GENERAL MOTORS CORPORATION, Defendant-Appellant.
• Court: Court of Appeal of Michigan — District of US

669 N.W.2d 271

257 Mich. App. 513

John ABELA and Barbara Abela, Plaintiffs-Appellees, v. GENERAL MOTORS CORPORATION, Defendant-Appellant.

No. 236238.

Court of Appeals of Michigan.

Submitted June 11, 2003, at Detroit.

Decided July 15, 2003, at 9:00 a.m.

Released for Publication September 18, 2003.

Mantese, Miller and Shea, P.L.L.C. (by E. Powell Miller and Gerard Mantese), Troy, and Consumer Legal Services, P.C. (by Christopher M. Lovasz and Mark Romano), Garden City, and Trial Lawyers for Public Justice, P.C. (by F. Paul Bland, Jr., and Michael J. Quirk), Washington, DC, for the plaintiff's.

Feeney Kellett Wienner & Bush, P.C. (by S. Thomas Wienner and Seth D. Gould), Bloomfield Hills, and Kirkland & Ellis (by Richard C. Godfrey and J. Robert Robertson), Chicago, IL, (Carol H. Lesnek-Cooper, of counsel), Detroit, for the defendant.

Clark Hill, PLC (by F.R. Damm and Paul C. Smith), Detroit, for Michigan Manufacturers Association, amicus curiae.

Before: RICHARD ALLEN GRIFFIN, P.J., and MURPHY and JANSEN, JJ.

JANSEN, J.

Defendant appeals as of right from an order resolving all pending claims and closing the case in this action brought under the Magnuson-Moss Warranty Act (hereinafter MMWA), 15 USC 2301 et seq.; Michigan's warranties on new motor vehicles act (hereinafter lemon law), M.C.L. § 257.1401 et seq.; and Michigan's Consumer Protection Act (hereinafter MCPA), M.C.L. § 445.901 et seq.¹ Although the order appealed from is the final order in this case, defendant's arguments on appeal take issue with the trial court's denial of defendant's motion for summary disposition to compel arbitration, as well as the trial court's grant of summary disposition in favor of plaintiff's pursuant to MCR 2.116(C)(9), for failing to state a valid defense.² We reverse and remand.

The lone issue in this case is whether the agreement between plaintiff's and defendant to submit any warranty claims to binding arbitration must be enforced. Plaintiffs argue that the MMWA and, alternately, the Michigan lemon law preclude a party from waiving the right to pursue legal action in a judicial forum. Plaintiffs assert that, under the MMWA and the Michigan lemon law, the agreement that the parties entered into, requiring binding arbitration of disputes, is unenforceable.³ Defendant, on the other hand, maintains that the Federal Arbitration Act (FAA), 9 USC 1 et seq., requires enforcement of otherwise valid agreements to arbitrate.

Plaintiffs purchased a 1999 Chevrolet truck from John Bowman Chevrolet, a dealership that sells automobiles that defendant manufactures. At the time of the purchase, defendant offered plaintiff's various warranties related to the automobile. In addition to those warranties, plaintiff's entered into defendant's new vehicle purchase program. This purchase program was offered to, among other people, defendant's employees. On the agreement form, for this purchase, plaintiff John Abela is listed as the purchaser of the truck, and his spouse, plaintiff Barbara Abela, is the eligible employee. Although all the terms of this purchase program are not clearly set forth, defendant represents, and plaintiff's do not dispute, that a purchaser agreeing to participate in the purchase program could purchase a car for "either dealer cost or dealer cost + 2.5% of the MSRP [manufacturer's suggested retail price], depending on whether the participant purchased the car from dealer stock or directly from [defendant]."

The key provision of the purchase program agreement states:

In addition, if I am the purchaser/lessee, I understand that, in consideration of the discount I receive on the purchase or lease of the vehicle, I will not be able to bring lawsuit for any dispute involving repairs made to that vehicle under GM's Limited Warranty or regarding the extent to which such warranty coverage is provided on that vehicle. Instead, I AGREE to address such disputes through the GM Dispute Resolution Process, which includes mandatory arbitration that is binding on both GM and me. I acknowledge that this Certificate evidences a transaction involving interstate commerce. The Federal Arbitration Act ... shall govern the interpretation, enforcement, and proceedings of the arbitration. For matters the FAA does not cover, the laws of the State in which I reside shall govern. [Emphasis in original.]

Plaintiffs, apparently, encountered several problems with the truck that required numerous repairs by defendant and the dealership, and brought suit. Immediately following the filing of the complaint, defendant moved for summary disposition pursuant to MCR 2.116(C)(7), alleging that plaintiff's had agreed to arbitrate any claims that they had against defendant.

Defendant's first issue on appeal is that the trial court erred as a matter of law in holding that plaintiff's can breach the agreement to arbitrate warranty-related disputes with defendant because the MMWA bars the application of the FAA. We agree.

The trial court granted summary disposition in favor of plaintiff's pursuant to MCR 2.116(C)(9), for failure to state a valid defense. Our Court set forth the applicable standard of review for a motion under MCR 2.116(C)(9) in Slater v. Ann Arbor Pub. Schools Bd. of Ed., 250 Mich.App. 419, 425-426, 648 N.W.2d 205 (2002), as follows:

This Court reviews de novo the trial court's grant or denial of a motion for summary disposition. Schulz v. Northville Public Schools, 247 Mich.App. 178, 182, 635 N.W.2d 508 (2001). When deciding a motion under MCR 2.116(C)(9), which tests the sufficiency of a defendant's pleadings, the trial court must accept as true all well-pleaded allegations and properly grants summary disposition where a defendant fails to plead a valid defense to a claim. Village of Dimondale v. Grable, 240 Mich.App. 553, 564, 618 N.W.2d 23 (2000).... Summary disposition under MCR 2.116(C)(9) is proper when the defendant's pleadings are so clearly untenable that as a matter of law no factual development could possibly deny the plaintiff's right to recovery. Alcona Co. v. Wolverine Environmental Production, Inc., 233 Mich.App. 238, 245-246, 590 N.W.2d 586 (1998). Statutory interpretation is a question of law also reviewed de novo on appeal. Id. at 246, 590 N.W.2d 586.

The trial court ruled that defendant's program for binding arbitration was contrary to federal law. The trial court noted that the MMWA and the federal regulations interpreting it permit a consumer to bring an action for damages and other relief in court. The trial court also noted that if the warrantor establishes an informal dispute settlement procedure that complies with the regulations, the consumer must use that mechanism, although the consumer is not bound by that decision. The trial court continued that the FAA was not instructive, because the MMWA was more specific in the area of arbitration in the area of warranties and was more recent. Accordingly, the trial court determined that the MMWA, and not the FAA, was controlling on this issue, and that the MMWA prohibited the use of binding arbitration for warranty claims.

Defendant asserts that the trial court erred as a matter of law in finding that the MMWA prohibited the use of binding arbitration for warranty claims. Specifically, defendant contends that the trial court's ruling is contrary to years of case law, both state and federal, that permit and uphold agreements for binding arbitration of disputes such as the warranty-related claims presented here.⁴ As a general rule, the MMWA provides that "a consumer who is damaged by the failure of a supplier, warrantor, or service contractor to comply with any obligation under this chapter, or under a written warranty, implied warranty, or service contract, may bring suit for damages and other legal and equitable relief...." 15 U.S.C. 2310(d)(1). In keeping with its stated purpose that "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), the MMWA provides in 15 U.S.C. 2310(a)(3) that a warrantor may develop its own dispute settlement procedure. That provision in 15 U.S.C. 2310(a)(3) reads, in part:

If—

(A) a warrantor establishes such a procedure,

(B) such procedure, and its implementation, meets the requirements of such rules, and

(C) he incorporates in a written warranty a requirement that the consumer resort to such procedure before pursuing any legal remedy under this section respecting such warranty,

then (i) the consumer may not commence a civil action (other than a class action) under subsection (d) of this section unless he initially resorts to such procedure....

Thus, if a warrantor has an informal dispute settlement procedure in place, any warranty claim must be submitted for resolution under that procedure before a suit may be filed.

The Federal Trade Commission (FTC) was empowered to develop the minimum requirements for the informal dispute settlement mechanisms. 15 USC 2310(a)(2). By its very terms, the FTC guidelines specifically preclude a warrantor from implementing a procedure that is binding on the consumer, and that precludes bringing suit, 16 CFR 703.5(j) ("Decisions of the Mechanism shall not be legally binding on any person."). Moreover, a review of the FTC's response to public comments regarding the issue of binding arbitration indicates that the FTC was of the opinion that informal dispute settlement mechanisms, provided for in the MMWA, were intended to be nonbinding:

"Several industry representatives contended that warrantors should be allowed to require consumers to resort to mechanisms whose decisions would be legally binding (e.g., binding arbitration). The Rule does not allow for this for two reasons. First, ... Congressional intent was that Section 110 Mechanisms not be legally binding. Second, even if binding Mechanisms were contemplated by Section 110 ...