Arbitration & Mediation

Florida Car Dealer's Free-Standing Arbitration Agreement Violates Magnuson-Moss Warranty Act

By Christopher B. Hopkins, Esq.

A man and a woman purchase and finance a 2001 Ford Expedition from Maroone Honda in South Florida. The truck allegedly did not work properly and a lawsuit under the Magnuson-Moss Warranty Act was filed. The Defendants (car dealership and financing people) won their motion to compel arbitration. There was no procedural or substantive unconscionability. No violation of public policy. So why did the Third DCA reverse?

We're no scholars of the Magnuson-Moss Act ("MMWA") (see here for a quick study) but suffice it to say the Act is a consumer protection law which aims to make warranties fair and understandable. That goal is achieved, in part, by the "single document rule" which includes "disclosing material terms, such as an arbitration agreement, within the written warranty..."

In Juan Pablo Larrain and Maria Cecilia Sotomayor v. Bengal Motor Co,, Ltd., American Honda Service Contract Corporation, Bank of America Corporation and AutoNation, Inc., the seller had the purchaser sign a "stand-alone arbitration agreement." The Third DCA declined to assess the wording and enforceability of the arbitration provision but determined that this free standing ADR agreement violated the "single document rule" of the MMWA. Arbitration was denied.

Note the Third DCA dodged (car pun) the question of the enforceability of arbitration in conjunction with a MMWA claim.

Full post as published by Florida Arbitration Law on January 30, 2008 (boomark / email).