Kolev v. Porsche Cars North America

The FTC’s interpretation of the MMWA’s bar of mandatory pre-dispute binding arbitration is a reasonable interpretation and construction of the statute.

Kolev brought suit against Porsche Car North America and others when her pre-owned vehicle began having serious mechanical problems. The Dealership refused to honor her warranty claims. Kolev brought suit alleging violation of the Magnuson-Moss Warranty Act (MMWA), breach of contract, and unconscionability under California law. Kolev argues that the MMWA bars the provision in her warranty claims mandating pre-dispute binding arbitration. The FTC was delegated rulemaking authority under the statute by Congress. FTC barred pre-dispute mandatory binding arbitration provisions regarding written warranty agreements and judicial enforcement of such. The Court applied a two-step inquiry evaluating the agency construction of the statute. (Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc. 467 U.S. 837 (1984)). The Court held the MMWA did not speak directly to the issue of binding arbitration. Because the FTC looked to Congress’s intent, the interpretation protects consumers from being forced into involuntary agreements that they cannot negotiate, and the FTC’s interpretation is longstanding and consistent. The Ninth Circuit Court of Appeals held that the FTC’s interpretation of the MMWA was a reasonable construction of the statute. Additionally, the Court rejected the argument that Congress created a liberal policy preferring arbitration under the Federal Arbitration Act, enacted fifty-one years before the MMWA. REVERSED and REMANDED.