Kolev v. Euromotors West/The Auto Gallery
658 F.3d 1024
9th Cir.2011Background
- Kolev purchased a used car from the Dealership and later faced serious warranty issues during the warranty period.
- The dealership refused to honor warranty claims, leading Kolev to sue for breach of warranty under the MMWA and California law.
- The district court granted the Dealership’s petition to compel arbitration based on a pre-dispute arbitration clause in the sales contract and stayed the action against Porsche.
- Most claims were resolved in the arbitration in the dealership’s favor, and the district court confirmed the arbitration award.
- Kolev appealed arguing that the MMWA precludes pre-dispute binding arbitration for warranty claims.
- The Ninth Circuit held that the MMWA precludes enforcement of pre-dispute mandatory binding arbitration and reversed and remanded for the breach of warranty claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the MMWA bar pre-dispute binding arbitration? | Kolev argues the MMWA forbids pre-dispute binding arbitration of warranty claims. | Dealership argues FAA presumption favors arbitration and MMWA allows some arbitration. | Yes; MMWA precludes pre-dispute binding arbitration. |
| Is FTC Rule 703 controlling here as to IDSMs and binding arbitration outside IDSMs? | FTC interpretation should govern the issue and preclude binding arbitration under MMWA. | Rule 703 only covers IDSMs; the arbitration here is not an IDSM, so Rule 703 does not apply. | FTC Rule 703 applies only to IDSMs; arbitration here is not an IDSM. |
| Should Chevron deference be given to FTC interpretations of the MMWA? | FTC construction should govern due to statutory ambiguity and longstanding interpretation. | Chevron deference is inappropriate because FTC lacks authority over non-IDSM remedies and Congress reserved adjudication to courts. | Chevron deference governs; FTC interpretation is reasonable and controlling. |
| Does the FAA’s pro-arbitration policy override the MMWA interpretation? | FAA favors arbitrability of statutory claims including MMWA claims. | Congress intended to override FAA where MMWA prohibits binding arbitration to protect consumers. | No; MMWA contains a contrary command sufficient to override FAA. |
Key Cases Cited
- Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) (two-step inquiry; deference to agency interpretations when statute is ambiguous)
- Walton v. Rose Mobile Homes LLC, 298 F.3d 470 (5th Cir. 2002) (arbitration presumptions under FAA and MMWA analysis)
- Davis v. S. Energy Homes, Inc., 305 F.3d 1268 (11th Cir. 2002) (EE arbitration under MMWA preemption discussion)
- Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983) (federal policy favoring arbitration)
- Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985) (arbitration of statutory claims under FAA)
- Adams Fruit Co. v. Barrett, 494 U.S. 638 (1990) (Congress vs. agency deference; enforcement schemes and courts’ role)