In re American Homestar of Lancaster

Decision Date07 June 2001
Docket NumberNo. 00-0722,00-0722
Citation50 S.W.3d 480,44 Tex. Sup.Ct. J 815
Parties(Tex. 2001) In re American Homestar of Lancaster, Inc. and Nationwide Housing Systems, Inc., Relators
CourtTexas Supreme Court

On Petition for Writ of Mandamus

[Copyrighted Material Omitted]

Justice Baker delivered the opinion of the Court.

The issue in this mandamus proceeding is whether the Magnuson-Moss Warranty Act prohibits enforcing predispute binding arbitration agreements in warranty disputes involving a consumer-product purchase. The court of appeals held that the Magnuson-Moss Act prohibits such agreements. 19 S.W.3d 484, 491. We disagree. Accordingly, we conditionally grant a writ of mandamus and direct the court of appeals to vacate its order.

I. BACKGROUND

In May 1997, James and Clara Van Blarcum bought a manufactured home from Nationwide Housing System. American Homestar manufactured the home, and Associates Housing Financing Services financed it. At closing, Nationwide Housing provided the Van Blarcums with a written warranty. The parties also signed a "Retail Installment Contract-Security Agreement" and a separate "Arbitration Provision." The arbitration provision, executed contemporaneously and as part of the installment contract, provides:

[A]ll claims, disputes, and controversies arising out of or relating in any way to the sale, purchase, or occupancy of the [manufactured home] including . . . any claims under any warranties, either express or implied, . . . or claims based on any consumer protection act or Deceptive Trade Practices Act, contract, tort, statute, common law or any alleged breach, default, and/or misrepresentation, will be resolved by means of final and binding arbitration . . . . This Agreement, including any contests to the validity or enforceability of this Agreement, shall be governed by the provisions of the Federal Arbitration Act and the rules of the [American Arbitration Association].

(emphasis added). The arbitration agreement also states that it "inures to the benefit of" the home's manufacturer "as fully as if the manufacturer was a signatory to the [installment contract]."

After their manufactured home was installed, the Van Blarcums complained about various alleged defects with the home. Despite receiving assurances that these defects would be remedied, nine months later, the defects remained. Accordingly, in July 1998, the Van Blarcums sued American Homestar, Nationwide Housing, and Associates Financing, alleging Magnuson-Moss Warranty Act, Texas Deceptive Trade Practices Act, and Texas Manufactured Housing Standards Act violations. The Van Blarcums also alleged breach of express and implied warranties.

American Homestar and Nationwide Housing moved to compel binding arbitration. The trial court granted the motion, stayed the litigation, and ordered the parties to proceed to arbitration. The Van Blarcums filed a petition for a writ of mandamus with the court of appeals, arguing that the Magnuson-Moss Act prohibits binding arbitration of consumer warranty disputes. The court of appeals, sitting en banc, conditionally granted a writ, holding that the trial court abused its discretion by compelling arbitration. 19 S.W.3d at 496. The court held that the Magnuson-Moss Act, which it concluded prohibits using binding arbitration clauses in written warranties, supersedes the Federal Arbitration Act. 19 S.W.3d at 491. The court reasoned that, because the arbitration provision in the contract violates the Magnuson-Moss Act, the agreement was invalid and unenforceable in its entirety for all the Van Blarcums' claims. 19 S.W.3d at 496.

Two justices dissented. 19 S.W.3d at 496. They agreed that the arbitration provision violated the Magnuson-Moss Act and, consequently, was invalid and unenforceable against the Van Blarcums' express warranty claims. 19 S.W.3d at 496. But they disagreed that the Magnuson-Moss Act could be read to invalidate the agreement to arbitrate the Van Blarcums' implied warranty claims and non-warranty claims. 19 S.W.3d at 498.

American Homestar and Nationwide Housing petitioned this Court for mandamus relief, requesting that we vacate the court of appeals' order. Because we hold that the Magnuson-Moss Act does not override the Federal Arbitration Act's mandate to enforce binding arbitration agreements, we conditionally grant mandamus relief.

II. APPLICABLE LAW
A. Standard of Review

Mandamus will issue only if the trial court abused its discretion or violated a legal duty and if there is no adequate remedy by appeal. See Walker v. Packer, 827 S.W.2d 833, 839 (Tex. 1992). Mandamus is the proper means for reviewing an order compelling arbitration under the FAA. Freis v. Canales, 877 S.W.2d 283, 284 (Tex. 1994). In reviewing a court of appeals' decision to grant mandamus relief, we focus on whether the trial court abused its discretion. See Johnson v. Fourth Court of Appeals, 700 S.W.2d 916, 918 (Tex. 1985). A trial court has no discretion to determine what the law is or in applying the law to the facts, and, consequently, the trial court's failure to analyze or apply the law correctly is an abuse of discretion. Walker, 827 S.W.2d at 840. If the trial court did not abuse its discretion, then the court of appeals erred in granting mandamus relief. Johnson, 700 S.W.2d at 917.

B. the Magnuson-Moss Warranty Act

In 1975, Congress passed the Magnuson-Moss Act "to improve the adequacy of information available to consumers [and] prevent deception" in connection with written warranties issued with consumer products. 15 U.S.C. § 2302(a). Under the Magnuson-Moss Act, warrantors may establish "informal dispute settlement mechanisms" to further the congressional goal of encouraging consumers and warrantors to settle their disputes. 15 U.S.C. § 2310(a)(1) ("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."). These informal dispute settlement mechanisms are proper so long as they comply with the Federal Trade Commission's minimum standards. 15 U.S.C. § 2310(a)(2), (a)(3).1 If they comply, and if the written warranty states that the consumer must resort to this procedure before pursuing any legal remedy, then "the consumer may not commence a civil action . . . unless he initially resorts to such procedure." 15 U.S.C. § 2310(a)(3).

The Magnuson-Moss Act does not define what qualifies as an informal dispute settlement mechanism. But the FTC has concluded that decisions of an informal dispute settlement mechanism shall not be binding on any person. 16 C.F.R. § 703.5(j).

C. The Federal Arbitration Act

Congress passed the Federal Arbitration Act in 1925 to reverse the longstanding judicial hostility to arbitration agreements and to place arbitration agreements upon the same footing as other contracts. Circuit City Stores, Inc. v. Adams, 121 S. Ct. 1302, 1307 (2001); Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24 (1991). The FAA provides:

A written provision in any . . . contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

9 U.S.C. § 2.

The United States Supreme Court has recognized an "emphatic federal policy in favor of arbitral dispute resolution." Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 631 (1985); see also Prudential Sec. Inc. v. Marshall, 909 S.W.2d 896, 898 (Tex. 1995) ("Arbitration of disputes is strongly favored under federal and state law."). To further this purpose, the FAA compels judicial enforcement of a wide range of written arbitration agreements. Circuit City Stores, Inc., 121 S. Ct. at 1307.

Only a contrary congressional command can override the FAA's mandate to enforce arbitration agreements. Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 226 (1987). Thus, to overcome the presumption favoring arbitration agreements, the party opposing arbitration must show that Congress intended to preclude a party's waiving a statute's judicial remedies. McMahon, 482 U.S. at 227. A party may show this intent through the statute's text or legislative history or through an inherent conflict between arbitration and the statute's underlying purposes. McMahon, 482 U.S. at 227. And, "any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration." Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983).

D. Arbitrating Federal Statutory Claims

For many years, the Supreme Court did not favor enforcing arbitration agreements. In 1953, holding that a claim under the Securities Act of 1933 could not be arbitrated, the Court opined that arbitration was an inadequate forum in which to enforce such a statutory claim. Wilko v. Swan, 346 U.S. 427, 435-37 (1953), overruled by Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477 (1989).

But the Supreme Court has since abandoned that view. In fact, since 1985, the Supreme Court has consistently upheld agreements to arbitrate federal statutory claims under the FAA. See Gilmer, 500 U.S. at 35 (Age Discrimination in Employment Act of 1967); Rodriguez de Quijas, 490 U.S. at 481 (Securities Act of 1933); McMahon, 482 U.S. at 238, 241 (Securities and Exchange Act of 1934 and Racketeer Influenced and Corrupt Organizations Act); Mitsubishi Motors Corp., 473 U.S. at 640 (Sherman Antitrust Act). "By agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute; it only submits to their resolution in an arbitral, rather...

To continue reading

Request your trial
92 cases
  • In re Acad., Ltd.
    • United States
    • Supreme Court of Texas
    • June 25, 2021
    ...A trial court's "failure to analyze or apply the law correctly is an abuse of discretion." In re Am. Homestar of Lancaster, Inc. , 50 S.W.3d 480, 483 (Tex. 2001) (orig. proceeding) (citation omitted). Here, the propriety of the trial court's order denying Academy's summary-judgment motion h......
  • Texas Dept. of Transp. v. Barber, 01-0414.
    • United States
    • Supreme Court of Texas
    • July 3, 2003
    ...43 Tex. Admin. Code ch. 21, subch. I. 79. Id. § 21.147(b)(1)(A). 80. Tex. Trans. Code § 391.001(10). 81. See In re Am. Homestar of Lancaster, Inc., 50 S.W.3d 480, 490-91 (Tex.2001). 82. See Tex. Transp. Code § 391.002(b)(1), (2); id. § 391.034(a). 83. See City of Renton, 475 U.S. at 48, 106......
  • Krol v. FCA US, LLC, Case No. 5D18-2149
    • United States
    • Court of Appeal of Florida (US)
    • May 10, 2019
    ...669, 808 N.E.2d 957, 970 (2004), Abela v. Gen. Motors Corp., 469 Mich. 603, 677 N.W.2d 325, 327 (2004), and In re Am. Homestar of Lancaster, Inc., 50 S.W.3d 480, 492 (Tex. 2001) (all holding MMWA claims are subject to binding arbitration), with Higgs v. Warranty Grp., No. C2-02-1092, 2007 W......
  • Koons Ford v. Lobach, 66, September Term, 2006.
    • United States
    • Court of Special Appeals of Maryland
    • March 20, 2007
    ...677 N.W.2d 325 (2004); Howell v. Cappaert Manufactured Housing, Inc., 819 So.2d 461, 464 (La.Ct. App.2002); In re American Homestar of Lancaster, Inc., 50 S.W.3d 480, 492 (Tex. 2001); S. Energy Homes, Inc. v. Ard, 772 So.2d 1131, 1135 The Majority opinion, to its credit, gives a fair (and p......
  • Request a trial to view additional results
2 books & journal articles
  • Table of Cases
    • United States
    • James Publishing Practical Law Books Texas DTPA Forms & Practice
    • March 31, 2016
    ...Alford Chevrolet-Geo, 997 S.W.2d 173 (Tex. 1999), §§1.02.1, 3.02, 4.01, 6.01.1, 7.46, 7.50 In re American Homestar of Lancaster, Inc. , 50 S.W.3d 480 (Tex. 2001), §8.01.6 In re Bruce Terminix Co. , 988 S.W.2d 702 (Tex. 1998), §§8.01.5, 8.01.6 In re Citigroup Global Mkts., Inc. , 258 S.W.3d ......
  • Pre-Trial Proceedings
    • United States
    • James Publishing Practical Law Books Texas DTPA Forms & Practice
    • March 31, 2016
    ...overrides the consumer’s statutory right to bring suit under the Magnuson-Moss Warranty Act. In Re American Homestar of Lancaster, Inc. , 50 S.W.3d 480 (Tex. 2001) (arbitration compelled absent clear legislative intent to override the FAA policy favoring enforcement of arbitration agreement......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT