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According to a Florida appellate court, Magnuson-Moss Warranty Act claims are not arbitrable if the arbitration agreement is presented as a stand alone document in violation of the FTC's "single document rule," instead of within the warranty disclosure itself.
In Larrain v. Bengal Motor Co., No. 3D07-132, 2008 WL 183495 (Fla. Ct. App. Jan. 23, 2008), Larrain purchased a truck from Bengal. At the time of purchase, Larrain was presented with a 60-day limited warranty. Also, in a separate document, Larrain and Bengal executed an arbitration agreement, covering all claims arising out of the parties' dealings.
During the warranty period, Larrain unsuccessfully requested some repairs. Larrain then sued Bengal, alleging violations of the Magnuson-Moss Warranty Act (MMWA). Bengal moved to compel arbitration, and the trial court granted the motion.
On appeal, a majority of the Court held that the arbitration agreement was unenforceable because it was a standalone agreement and thus violated the "single document rule" promulgated by the Federal Trade Commission (FTC). Under the single document rule, the terms and conditions of a warranty, including any ADR provisions, must be fully and conspicuously disclosed in a single document.
In reaching its holding, the Court found that the FTC properly exercised its rulemaking authority in enacting the single document rule because "[t]he disclosure requirements set forth by the FTC are central to the purposes of the MMWA" – namely, the avoidance of confusion and complexity with respect to warranties. The Court expressly withheld any opinion on whether MMWA claims are subject to arbitration where the agreement complies with the single document rule.
The majority opinion was premised largely on the Eleventh Circuit Court of Appeals' decision in Cunningham v. Fleetwood Homes of Georgia, Inc., 253 F.3d 611 (11th Cir. 2001). However, the continuing vitality of that decision has been called into doubt.
Specifically, in Patriot Manufacturing, Inc. v. Jackson, 929 So.2d 997 (Ala. 2005), the Alabama Supreme Court stated that, based on a later Eleventh Circuit decision, it "no longer regard[s] Cunningham as reliable authority on the question whether a stand-alone arbitration agreement may be used to compel arbitration." In Patriot Manufacturing¸ which was cited by the dissenting judge in this case, the court analyzed the issue in depth and held that an arbitration agreement does not have to be disclosed within the warranty.
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