Krol v. FCA US, LLC

• Citation: 273 So.3d 198
• Decision Date: 10 May 2019
• Docket Number: Case No. 5D18-2149
• Parties: Les KROL, Appellant, v. FCA US, LLC and Gibson Auto Sales, Inc. d/b/a Gibson Truck World, Appellees.
• Court: Court of Appeal of Florida (US)

273 So.3d 198

Les KROL, Appellant,

v.FCA US, LLC and Gibson Auto Sales, Inc. d/b/a Gibson Truck World, Appellees.

Case No. 5D18-2149

District Court of Appeal of Florida, Fifth District.

Opinion filed May 10, 2019

Jeremy Kespohl and Angela Thomas, of Morgan & Morgan, P.A., Jacksonville, for Appellant.

Robert E. Sickles and Yesica S. Liposky, of Nelson Mullins Broad and Cassel, Tampa, for Appellee, Gibson Auto Sales, Inc. d/b/a Gibson Truck World.

No Appearance for other Appellee.

ORFINGER, J.

Les Krol appeals an order compelling arbitration of the written warranty claims that he brought against Gibson Auto Sales, Inc. ("Gibson Auto") under the Magnuson-Moss Warranty Act ("MMWA").¹ Because we conclude that the MMWA does not prohibit binding arbitration of written warranty claims and the arbitration agreement here does not violate Federal Trade Commission ("FTC") disclosure rules, we affirm the order compelling arbitration.

BACKGROUND

This case arises from Mr. Krol's purchase of a used truck from Gibson Auto. As part of the sale, the parties executed an installment sales contract and a separate retail purchase order that included a binding arbitration agreement for any dispute related to the truck's purchase.² Gibson Auto also extended an express written warranty on the truck.

A few months after purchasing the truck, Mr. Krol sued Gibson Auto under the MMWA, asserting several causes of action related to alleged defects in the truck that Gibson Auto was unable to remedy. In response, Gibson Auto moved to stay the proceedings and to compel arbitration in accordance with the parties' agreement. Mr. Krol opposed the motion, asserting the same arguments he makes in this appeal. Following a hearing, the trial court entered an order granting Gibson's motion to stay and compelling arbitration.

ANALYSIS

We review a trial court's ruling on a motion to compel arbitration de novo. Tropical Ford, Inc. v. Major, 882 So. 2d 476, 478 (Fla. 5th DCA 2004). When deciding whether to compel arbitration according to an agreement, a trial court must consider: "(1) whether a valid written agreement to arbitrate exists; (2) whether an arbitrable issue exists; and (3) whether the right to arbitration was waived." Seifert v. U.S. Home Corp., 750 So. 2d 633, 636 (Fla. 1999). Mr. Krol's appeal centers on the second factor. He argues that no arbitrable issue existed here because MMWA claims are exempt from binding arbitration. Alternatively, he posits that the arbitration agreement is unenforceable because it violates the FTC's disclosure rules since the arbitration clause does not appear in a single document with the other warranty terms.

I. The Arbitrability of MMWA claims.

The United States Supreme Court has not addressed whether MMWA claims are arbitrable, and state and lower federal courts are divided on the issue.³ However, both federal circuit courts to consider the issue have concluded that the MMWA does not prohibit binding arbitration of written warranty claims.⁴ Davis v. S. Energy Homes, Inc., 305 F.3d 1268, 1272 (11th Cir. 2002) (holding that MMWA permits enforcement of binding arbitration agreements related to written warranties); Walton v. Rose Mobile Homes LLC, 298 F.3d 470, 479 (5th Cir. 2002) (holding that "MMWA does not preclude binding arbitration of claims pursuant to a valid binding arbitration agreement, which the courts must enforce pursuant to the [Federal Arbitration Act]").⁵ After considering the MMWA and its legislative history, the federal policy favoring binding arbitration, and the persuasive federal circuit court opinions, we conclude that the MMWA permits pre-dispute binding arbitration of written warranty claims.

A. MMWA.

Because product warranties often left consumers with "little understanding of the frequently complex legal implications of warranties on consumer products," 40 Fed. Reg. 60168 (Dec. 31, 1975) (quoting S. Rep. No. 93-151 (1973)), Congress enacted the MMWA "[t]o provide minimum disclosure standards for written consumer product warranties; to define minimum federal content standards for such warranties; to amend the federal trade commission act in order to improve its consumer protection activities; and for other purposes." Magnuson-Moss Warranty-Federal Trade Comm'n Improvement Act, Pub. L. No. 93-637, § 356, 88 Stat. 2183 (1975). The MMWA requires warrantors to "fully and conspicuously disclose in simple and readily understood language the terms and conditions of such warranty." 15 U.S.C. § 2302(a) (2012). It also creates a private right of action for those consumers who have been "damaged by the failure of a ... warrantor ... to comply with any obligation under this chapter, or under a written warranty, implied warranty, or service contract." Id. § 2310(d)(1). An aggrieved consumer has the option to sue for damages and equitable relief in either state courts or federal district courts. Id. If the consumer prevails, he or she is entitled to attorney's fees and costs. Id. § 2310(d)(2).

Along with a private right of action, the MMWA encourages warrantors to settle consumer claims "fairly and expeditiously" through informal dispute settlement procedures. Id. § 2310(a). While the term "informal dispute settlement procedures" is not defined in the MMWA, Congress authorized the FTC to establish minimum requirements for any such procedures that are incorporated into the terms of a written warranty. Id. § 2310(a)(2). If a warrantor establishes an informal dispute settlement procedure, it may include within the written warranty "a requirement that the consumer resort to such procedure before pursuing any legal remedy." Id. § 2310(a)(3)(C). The FTC has broadly interpreted the term "informal dispute settlement procedures" to include both binding and nonbinding arbitration, 16 C.F.R. § 700.8 (2015), and has adopted a regulation stating that informal dispute settlement procedures under the MMWA cannot be legally binding. 16 C.F.R. § 703.5(j) (2015).

B. Federal Policy.

Federal policy favors arbitration. In 1925, Congress enacted the Federal Arbitration Act ("FAA") "to reverse the longstanding judicial hostility to arbitration agreements that had existed at English common law and had been adopted by American courts, 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). To this end, the FAA provides that

[a] written provision in any maritime transaction or a 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 a 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 (2012).

The FAA establishes a "liberal federal policy favoring arbitration." Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). The Supreme Court has interpreted this policy as establishing a strong presumption favoring the enforcement of binding arbitration agreements so that any doubts over whether an issue is arbitrable should be resolved in favor of arbitration.

Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985). This presumption applies equally to statutory claims. Shearson/Am. Exp., Inc. v. McMahon, 482 U.S. 220, 226, 107 S.Ct. 2332, 96 L.Ed.2d 185 (1987). Courts will enforce binding arbitration of statutory claims, unless Congress has expressed a clear intention to preclude arbitration. Gilmer, 500 U.S. at 26, 111 S.Ct. 1647. The party challenging arbitration bears the heavy burden of proving such congressional intent. Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 91-92, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000).

C. The McMahon Test.

To determine whether Congress has intended to prohibit binding arbitration of a statutory claim, we apply the Supreme Court's McMahon test, which requires us to consider three factors to determine Congress's intent: "(1) the text of the statute; (2) its legislative history; and (3) whether ‘an inherent conflict between arbitration and the underlying purposes [of the statute]’ exists." Davis, 305 F.3d at 1273 (quoting McMahon, 482 U.S. at 226, 107 S.Ct. 2332 ). To date, "[i]n every statutory right case that the Supreme Court has considered, it has upheld binding arbitration if the statute creating the right did not explicitly preclude arbitration."⁶ Id.

Turning to the first McMahon factor, the text of MMWA does not expressly preclude or even mention "binding arbitration." Despite a lack of an express reference, Mr. Krol argues that Congress expressed its intention to prohibit binding arbitration in two ways. One, it created a right to commence a civil action for written warranty claims. Two, when Congress enacted the MMWA, arbitration—both binding and non-binding—was widely considered an "informal" procedure. Hence, he posits that it was likely that Congress would have considered binding arbitration an informal dispute settlement procedure that would serve as a prerequisite to litigation that would be regulated by the FTC.

Both of these arguments fail. First, the provision of a private right of action alone does not establish Congressional intent to prohibit binding arbitration. Davis, 305 F.3d at 1274 (citing Gilmer, 500 U.S. at 29, 111 S.Ct. 1647 (rejecting argument that binding arbitration is improper "because it deprives claimants of the judicial forum provided for by the ADEA")). Second, binding arbitration is not comparable to the informal dispute settlement procedures described in the MMWA because it is not a prerequisite to litigation—it is a substitute for litigation. Walton, 298 F.3d at 475 ; see Mi...