September 22, 2021

Volume XI, Number 265

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September 20, 2021

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Disclosure of Binding Arbitration Not Required In Consumer Warranties, Says Florida Supreme Court

On February 18, the Florida Supreme Court ruled that a warrantor of a consumer product is not required to disclose a binding arbitration agreement as part of the warranty-related items that must be disclosed “in a single document.” In reaching its decision that the Federal Trade Commission’s “single document rule” does not require the disclosure of binding arbitration, the court resolved a conflict that had existed under Florida law since 2008 and departed from Eleventh Circuit authority.

The Magnuson-Moss Warranty Act, set forth in 15 U.S.C. §§ 2301–2312, is a federal law that governs written warranties on consumer products. The act permits the Federal Trade Commission (FTC) to require that certain information be included in consumer product warranties. Pursuant to the act, the FTC promulgated its “single document rule,” requiring that all consumer product warranties contain nine specific pieces of information in a single document. 16 C.F.R. § 701.3(a). One of the items required by the FTC is “[i]nformation respecting the availability of any informal dispute settlement mechanism elected by the warrantor.” § 701.3(a)(6).

In Krol v. FCA US LLC, the Florida Supreme Court analyzed the FTC’s single document rule to resolve a dispute between a car dealer and the retail purchaser of a used truck. The purchase order for the truck included a binding arbitration agreement, but the written warranty did not. Following a dispute regarding alleged defects in the truck, the retail purchaser filed a lawsuit against the dealer. The dealer moved to compel arbitration, citing the arbitration agreement in the purchase order. The retail purchaser, however, challenged the arbitration agreement, arguing that it was not disclosed in the written warranty pursuant to the FTC’s single document rule, and is therefore unenforceable.

Ultimately, the supreme court held that a binding arbitration agreement does not qualify as an “informal dispute mechanism elected by the warrantor,” as listed in the FTC’s single document rule. The court reasoned that the informal dispute mechanisms contemplated by the FTC (a) are not legally binding, and (b) allow for “legal remedies” if the consumer is dissatisfied with the results of the informal dispute mechanisms. A binding arbitration agreement, on the other hand, is (a) legally binding, and (b) a substitute for litigation. These material differences, in the court’s opinion, dictate that a binding arbitration agreement is not one of the nine items that must be disclosed in a written warranty pursuant to the single document rule.

Accordingly, companies litigating in Florida state courts may enforce a separate binding arbitration agreement related to the sale of consumer products in Florida. However, in order to ensure the availability of binding arbitration, a warrantor of consumer products should nonetheless include binding arbitration with the other warranty-related items that must be listed in a single document, in the event a warrantor finds itself litigating in federal courts in Florida.

© 2021 Faegre Drinker Biddle & Reath LLP. All Rights Reserved.National Law Review, Volume XI, Number 54
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About this Author

Traci T. McKee Litigation Attorney Faegre Drinker
Counsel

As a product liability litigator, Traci McKee defends medical devices that save lives and consumer products that enhance lives. She represents product manufacturers in complex, high stakes litigation such as mass torts and class actions, as well as single-plaintiff claims. With more than a decade of litigation practice, Traci has substantial experience in all phases of litigation from discovery through trial, having served as first chair and second chair in multiple jury trials. She understands the strategies and goals of the clients she represents and develops tailored...

202-312-7028
Lexi Fuson Litigation Lawyer Faegre Drinker Biddle
Associate

Lexi Fuson litigates product liability cases in state and federal courts around the country, including federal multidistrict litigation (MDLs). She represents manufacturers of medical devices, consumer products and food products.

Lexi has experience drafting discovery, drafting Daubert and other motions, preparing for expert witness depositions, preparing for oral arguments, and implementing global settlement programs. As a member of several trial teams, Lexi also has experience developing case strategy, evaluating witnesses, preparing for fact...

317-237-8287
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