ABELA V GENERAL MOTORS CORPORATION
Docket No. 236238
Court of Appeals of Michigan
Submitted June 11, 2003. Decided July 15, 2003.
257 Mich. App. 513
Leave to appeal sought.
The Court of Appeals held:
1. The federal circuit courts of appeal have consistently held that the MMWA permits agreements for binding arbitration of disputes such as the warranty-related claims presented in this case. The Court of Appeals is bound by those holdings with regard to questions of federal law. The MMWA permits the enforcement of binding arbitration agreements within written warranties. The trial court erred in denying the defendant‘s motion for summary disposition with regard to this claim.
2. The Federal Arbitration Act,
Reversed and remanded.
- ARBITRATION — WARRANTIES.
The Magnuson-Moss Warranty Act permits the enforcement of binding arbitration agreements within written warranties (
15 USC 2301 et seq. ). - CONFLICT OF LAWS — ARBITRATION — WARRANTIES.
The Federal Arbitration Act preempts any state law that invalidates agreements to submit warranty-related claims to binding arbitration (
9 USC 1 et seq. ).
Mantese, Miller and Shea, P.L.L.C. (by E. Powell Miller and Gerard Mantese), and Consumer Legal Services, P.C. (by Christopher M. Lovasz and Mark Romano), and Trial Lawyers for Public Justice, P.C. (by F. Paul Bland, Jr., and Michael J. Quirk), for the plaintiffs.
Feeney Kellett Wienner & Bush, P.C. (by S. Thomas Wienner and Seth D. Gould), and Kirkland & Ellis (by Richard C. Godfrey and J. Robert Robertson) (Carol H. Lesnek-Cooper, of counsel) for the defendant.
Amicus Curiae:
Clark Hill PLC (by F. R. Damm and Paul C. Smith) for Michigan Manufacturers Association.
Before: 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),
The lone issue in this case is whether the agreement between plaintiffs 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),
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 plaintiffs various warranties related to the automobile. In addition to those warranties, plaintiffs 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 plaintiffs 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 plaintiffs 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 plaintiffs 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 plaintiffs 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 NW2d 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 NW2d 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 NW2d 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 NW2d 586 (1998). Statutory interpretation is a question of law also reviewed de novo on appeal. Id. at 246.
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
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.
“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 of the Act, the Commission is not prepared, at this point in time, to develop guidelines for a system in which consumers would commit themselves, at the time of product purchase, to resolve any difficulties in a binding, but non-judicial, proceeding. The Commission is not now convinced that any guidelines which it set out could ensure sufficient protection for consumers against warrantors, even if the Congressional report had not made clear, as it did, that it wished for such mechanisms to not be binding.” [40 Fed
Reg 60168, 60210 (1975), quoted in Wilson v Waverlee Homes, Inc, 954 F Supp 1530, 1539 (MD Ala, 1997).]
The Michigan Supreme Court has “repeatedly given great deference to the construction placed upon a statute by the agency legislatively chosen to enforce it.” Breuhan v Plymouth-Canton Community Schools, 425 Mich 278, 282-283; 389 NW2d 85 (1986), citing Magreta v Ambassador Steel Co, 380 Mich 513, 519; 158 NW2d 473 (1968).
However, in Walton v Rose Mobile Homes LLC, 298 F3d 470, 478 (CA 5, 2002), the United States Court of Appeals for the Fifth Circuit held that the text, legislative history, and purpose of the MMWA does “not evince a congressional intent to bar arbitration of MMWA written warranty claims.” Additionally, the Walton court held “that the MMWA does not preclude binding arbitration of claims pursuant to” the FAA. Id. at 479. Therefore, the Walton court found that a purchaser‘s MMWA claim was subject to compulsory arbitration, and that such purchasers were “bound to arbitrate their claims.” Id.
In Davis v Southern Energy Homes, Inc, 305 F3d 1268, 1272 (CA 11, 2002), the United States Court of Appeals for the Eleventh Circuit held that the MMWA permits the enforcement of valid binding arbitration agreements within written warranties. The Eleventh Circuit concluded that the purposes of the MMWA and the FAA are very similar, stating:
The last [Shearson/American Express, Inc v] McMahon [482 US 220; 107 S Ct 2332; 96 L Ed 2d 185 (1987)] factor requires us to examine the purposes of the MMWA to determine whether the MMWA and the FAA conflict. The MMWA expressly states three purposes: “to improve the adequacy of information available to consumers, prevent deception,
and improve competition in the marketing of consumer products.” These purposes are not in conflict with the FAA. In fact, the Supreme Court has repeatedly enforced arbitration of statutory claims where the underlying purpose of the statutes is to protect and inform consumers. . . . The MMWA‘s legislative history also indicates that Congress was concerned with addressing the unequal bargaining power between warrantors and consumers with the enactment of the MMWA, thus creating another possible purpose. Unequal bargaining power alone, however, is not a sufficient reason to never enforce an arbitration agreement of a statutory claim. [Id. at 1276-1277 (citations omitted).]
In Davis, supra, the Eleventh Circuit concluded that the text, history, and purpose of the MMWA did not show a congressional intent to preclude predispute agreements to submit warranty claims to binding arbitration. Moreover, the Davis court examined the FTC regulations discussed hereinbefore, and determined that those regulations, which were ostensibly based on the plain language of the MMWA, were unreasonable, as follows:
In the legislative regulations, the FTC bases its construction on Congress’ grant of concurrent jurisdiction. As we previously discussed, a statute‘s provision for a judicial forum does not preclude enforcement of a binding arbitration agreement under the FAA. Thus, the FTC‘s motive behind the legislative regulation is contradictory to Supreme Court rationale, and we conclude that its interpretation is unreasonable. We also conclude that the FTC‘s additional rationale is unreasonable. Although the FTC first stated that it looked to a subcommittee staff report (which appears to no longer be attainable) to determine Congress’ intent, the FTC continued, evincing its major concern that an arbitral forum will not adequately protect the individual consumers. The Supreme Court in McMahon, however, rejected this same hostility shown by the SEC. Instead, the Supreme Court
holds that arbitration is favorable to the individual. [Id. at 1280 (citations omitted).]
“The interpretation of a federal statute is a question of federal law.” Ann Arbor Housing Comm v Wells, 240 Mich App 610, 614 n 4; 618 NW2d 43 (2000), quoting Auto-Owners Ins Co v Corduroy Rubber Co, 177 Mich App 600, 604; 443 NW2d 416 (1989). Where there is no conflict among the circuits of the federal court of appeals on a question of federal law, we are bound by the authoritative holdings of the federal circuit courts on federal questions. See Schueler v Weintrob, 360 Mich 621; 105 NW2d 42 (1960); Woodman v Miesel Sysco Food Co, 254 Mich App 159, 165; 657 NW2d 122 (2002); Ann Arbor House Comm, supra at 614 n 4. Both the Fifth Circuit Court of Appeals and the Eleventh Circuit Court of Appeals have ruled that binding arbitration agreements are not prohibited by the MMWA, albeit with a different rationale. We are unaware of any conflict among the federal appellate courts with regard to this issue and, thus, are bound by the holdings of Walton, supra, and Davis, supra, to the extent they are consistent in permitting the enforcement of valid binding arbitration agreements within written warranties.5 Consequently,
Defendant‘s final issue on appeal is that the trial court erred as a matter of law in holding that plaintiff Barbara Abela‘s agreement to arbitrate warranty-related claims violates the Michigan lemon law. We agree.
We find that the FAA surmounts plaintiffs’ lemon law claim. In DeCaminada v Coopers & Lybrand, LLP, 232 Mich App 492, 498; 591 NW2d 364 (1998), this Court noted that “[s]tate courts are bound, under the Supremacy Clause,
This is a crucial distinction, because application of the FAA implicates the Supremacy Clause, which precludes us from applying our state constitution or laws to defeat federal legislation.
US Const, art VI, cl 2 . Thus, as the United States Supreme Court has held, where the FAA applies, it preempts any state law or policy that specifically invali-dates arbitration agreements. Doctor‘s Associates, Inc v Casarotto, 517 US 681, 686-688; 116 S Ct 1652; 134 L Ed 2d 902 (1996). [DeCaminada, supra at 501-502.]
Here, there is no question that the FAA applies. Plaintiffs’ only defense to its application is that the MMWA surmounts it, but as we determined, hereinbefore, the MMWA does not surmount the FAA in this regard.7
The case law is clear that the FAA surmounts any state law that invalidates agreements to submit claims to binding arbitration. Thus, the trial court erred in ruling that Michigan‘s lemon law precludes enforcement of predispute agreements to submit claims to binding arbitration. Plaintiffs’ lemon law claim should have been resolved through binding arbitration. The trial court erred in ruling that Michigan‘s lemon law bans binding arbitration because the FAA surmounts applicable state law claims. Because the FAA surmounts any state law, to the extent that that law prohibits a binding arbitration agreement, the trial court erred in granting summary disposition in favor of plaintiffs on the basis that the lemon law forbids agreements to submit to binding arbitration. We reverse on the basis that the lemon law claim should have been resolved in binding arbitration.
We reverse the trial court‘s grant of summary disposition on plaintiffs’ MMWA and lemon law claims, and reverse the trial court‘s denial of defendant‘s motion for summary disposition on the MMWA and lemon law
Reversed and remanded to the trial court with instructions to enter judgment in favor of defendant consistent with this opinion. We do not retain jurisdiction.
GRIFFIN, P.J., concurred.
MURPHY, J. (concurring). I concur with the majority that we are required to conclude that warranty claims arising under the Magnuson-Moss Warranty Act (MMWA),
I also concur with the majority that plaintiffs’ claim under Michigan‘s lemon law,
I write separately to merely voice my disagreement with the federal appellate court rulings on the interpretation of the MMWA and the FAA. I agree with the dissenting opinion of Chief Judge King in Walton, supra at 480. After a very reasoned analysis, Chief Judge King concluded:
Accordingly, because I find that Congress has not “directly spoken to the precise question” whether binding arbitration clauses in written warranties governed by the MMWA are enforceable, and because the FTC‘s construction of the statute is eminently reasonable, I would defer to the Commission‘s expertise and affirm the district court‘s judgment refusing to compel arbitration of the Waltons’ written warranty claims. [Id. at 492.]
If we were not obligated to apply the majority opinion from Walton and the holding in Davis, I would conclude that the MMWA, as reasonably interpreted by the FTC,1 precludes the application of binding arbitration agreements to claims arising under the MMWA for the reasons set forth by Chief Judge King in Walton, supra at 480-492.
I concur.