Automobile Importers of America, Inc. v. State of Minn., 88-5131
| Decision Date | 17 March 1989 |
| Docket Number | No. 88-5131,88-5131 |
| Citation | 871 F.2d 717 |
| Parties | , 1989-1 Trade Cases 68,486 AUTOMOBILE IMPORTERS OF AMERICA, INC.; Alfa Romeo, Inc.,; American Isuzu Motors, Inc.,; BMW of North America, Inc.,; Hyundai Motor Co. America; Jaguar Cars, Inc.; Mazda Motors of America (Central), Inc.; Mitsubishi Motor Sales of America, Inc.; Nissan Motor Corporation in U.S.A.; Peugeot Motors of America, Inc.; Porsche Cars of North America, Inc.; Rolls Royce Motors, Inc.; Saab-Scania of America, Inc.; Suzuki of America Automotive Corporation; Volvo of North America Corporation; and Yugo of America, Inc., Appellants, v. STATE OF MINNESOTA and the Attorney General for the State of Minnesota, Appellees. Chrysler Corporation, Amicus/Appellant. |
| Court | U.S. Court of Appeals — Eighth Circuit |
John M. Mason, Minneapolis, Minn., for appellants.
Stephen P. Kilgriff, St. Paul, Minn., for appellees.
Before HEANEY, * Circuit Judge, HENLEY, Senior Circuit Judge, and FAGG, Circuit Judge.
The appellants, an organization of foreign automobile manufacturers ("Automobile Importers"), brought suit in the United States District Court for the District of Minnesota, challenging a Minnesota consumer law. The law requires automobile manufacturers to participate in informal dispute resolution, including oral hearings at the consumer's option, and permitting the dispute resolution mechanisms to charge consumers a fee for their use. The district court held that the Minnesota law is not preempted by the Magnuson-Moss Warranty Act. The plaintiffs appeal that decision to this Court. We affirm.
In 1974, Congress enacted the Magnuson-Moss Warranty Act governing written warranties on consumer products. 15 U.S.C. Secs. 2301 et seq. Congress, recognizing that American consumers have been confused and misled by warranties, 1 adopted that Act to make warranties on consumer products more readily understandable and enforceable, and to provide the Federal Trade Commission (FTC) with means to better protect consumers. H.R.Rep. No. 1107, 93d Cong., 2nd Sess., reprinted in 1974 U.S.Code Cong. & Admin.News 7702. To achieve these goals section 110 of the Act encourages warrantors to establish informal dispute settlement mechanisms whereby consumer complaints are fairly and expeditiously settled. 2 15 U.S.C. Sec. 2310(a)(1). Congress recognized that the Magnuson-Moss Warranty Act would create conflicts with state law rights and remedies and, therefore, set forth language to resolve such conflicts--broad savings clause with narrow preemption provisions. 3
Pursuant to 15 U.S.C. Sec. 2310(a)(2) of this Act, the FTC adopted Rule 703 to promulgate "minimum requirements" intended to promote the independence of informal dispute resolution mechanisms. See generally 16 C.F.R. Part 703; H.R.Rep. No. 1107, 93d Cong., 2d Sess., reprinted in 1974 U.S.Code Cong. & Admin.News 7722. Rule 703 permits manufacturers to require consumers to use its dispute mechanism before the consumer can seek direct redress from the warrantor. The Rule permits an oral hearing only if both parties consent. Each mechanism must be staffed and funded at sufficient levels to ensure fair and expeditious resolution. Each must also develop written operating procedures and make them available to consumers. Individual members of a mechanism cannot be a party, or an agent of a party, to the dispute. The mechanism will investigate disputes and must permit each party an opportunity to contradict facts submitted by the other party.
In 1987, the Minnesota Legislature amended the Minnesota lemon law. 4 Appellants challenge three aspects of the Minnesota law as being preempted by federal law: the requirement that automobile manufacturers doing business in Minnesota participate or operate such a mechanism; the provision of the law that permits either party, without the other's consent, to make oral presentations; and the provision allowing a consumer to be charged a fee for the mechanism.
Automobile Importers commenced an action in district court challenging the Minnesota law. They argued that the Magnuson-Moss Warranty Act leaves no room for state regulation of informal dispute resolution mechanisms, citing Wolf v. Ford Motor Co., 829 F.2d 1277 (4th Cir.1987). The appellants also argued that Fidelity Fed. Sav. & Loan Ass'n v. de la Cuesta, 458 U.S. 141, 102 S.Ct. 3014, 73 L.Ed.2d 664 (1982) was controlling because the state law limited a federal option. The district court disagreed, relying instead on Chrysler Corp. v. Texas Motor Vehicle Comm'n, 755 F.2d 1192 (5th Cir.1985), and distinguishing Fidelity Federal. In sum, the district court found that the Minnesota lemon law is not preempted under the established tests and, therefore, granted summary judgment to the State of Minnesota. 5
A state law is preempted when the federal regulatory scheme is sufficiently comprehensive to make reasonable the inference that Congress "left no room" for supplementary state regulation. Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230, 67 S.Ct. 1146, 1152, 91 L.Ed. 1447 (1947); see International Paper Co. v. Ouellette, 479 U.S. 481, 491, 107 S.Ct. 805, 811, 93 L.Ed.2d 883 (1987). In other words, the regulation must be sufficiently pervasive to demonstrate an intention on the part of Congress that it wished to displace state law.
Automobile Importers argue that such an intention can be inferred from the legislative history of the Magnuson-Moss Act. They argue that a compromise was struck in Congress between the interests of the warrantors and the interests of consumers, and that permitting Minnesota's private dispute resolution mechanism to stand upsets that compromise. Such a compromise may have well occurred, see FTC Statement of Basis and Purpose, 40 Fed.Reg. 60168, 60193 (Dec. 31, 1975), but Automobile Importers fail to provide sufficient evidence to support their assertion that an aspect of this compromise was the preemption of supplemental state regulation in the area of private dispute resolution mechanisms.
Both the Fourth Circuit and the Fifth Circuit have faced the issue of preemption of state law by the Magnuson-Moss Warranty Act. In Wolf v. Ford Motor Co., 829 F.2d 1277 (4th Cir.1987), the plaintiff alleged state common law that Ford had fraudulently represented that its private dispute mechanism, established pursuant to the Act, was an independent and impartial apparatus for resolving disputes between Ford and its customers. The character of the action required the court to determine if the mechanism operated fairly. The Fourth Circuit held that the state common law fraud action was preempted on three alternative grounds: (1) Congress' intent to preempt state regulation of informal dispute resolution mechanisms is inferred from the pervasive nature of the federal regulatory scheme; (2) allowing consumers to challenge the operation of dispute settlement mechanisms through state fraud actions would conflict with enforcement of the FTC regulations; and (3) to permit consumers to test the bona fide nature and validity of private dispute settlement mechanisms under the law of each state would completely frustrate the goal of national uniformity painstakingly designed by federal statute and regulation. The Wolf court noted, with particular importance, that the comprehensive details of the regulation demonstrate that any attack on the fairness or legitimacy of a dispute resolution mechanism must be through the FTC. Id. at 1279 n. 3.
In the Fifth Circuit case of Chrysler Corp. v. Texas Motor Vehicle Comm'n., 755 F.2d 1192 (5th Cir.1985), Chrysler challenged the Texas lemon law, which granted, inter alia, automobile purchasers a proceeding before a commission made up of automobile dealers and consumers to assert certain new warranty remedies. The Fifth Circuit held that federal law does not occupy the field of informal dispute resolution for warranty disputes. Id. at 1203-04. 6 The court based this finding on several conclusions: (1) consumer protection through warranty law is an area traditionally regulated by states--requiring a "clear statement" of Congress' intent to preempt; (2) neither the language of the Act nor the legislative history provide any such "clear statements;" and (3) section 111 of the Act preserves for consumers any rights or remedies created by state law. Id. at 1205-06. The Fifth Circuit summed up the effect that the Magnuson-Moss Warranty Act has on state-created informal dispute resolution mechanisms:
We think it plain that the preclusive effect of section 110 is limited to rules governing informal dispute resolution procedures created by private warrantors and does not affect such schemes where provided as an option for consumers by state law.
Id. at 1206 (emphasis added).
We agree with the Fifth Circuit that to infer preemption in an area traditionally regulated by the states--consumer protection through warranty law--requires a "clear statement" of occupation. We find no "clear statements" of congressional intent to preempt here. The six pages of regulations are far from pervasive. The special competence of the FTC to deal with unfair trade practices is unpersuasive in light of the states' traditional role in this area. The fact that Congress gave some regulatory authority to the FTC over informal dispute resolution mechanisms fails, without any other supporting evidence, to demonstrate that Congress mandated national uniformity regarding such mechanisms.
The language, structure and history of the Act emphasize its supplemental, rather than preemptive nature. Congress authorized the FTC to adopt only "minimum requirements," implying that it intended to leave room for further state regulation. The Act's structure is supplemental: a...
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