Arbitration Agreement Without Providing a Written Warranty

In Boyd v. Homes of Legend, Inc., 981 F. Supp. 1423 (M.D. Ala. 1997), the issue was whether a defendant mobile home dealer who was a signatory to a purchase contract containing an arbitration agreement but had not provided any written warranty to the consumer could compel arbitration of the consumer's claims involving only non-written warranties.

The court noted that this question was not presented in Waverlee, where the defendant manufacturer had provided a written warranty to the consumer. Boyd, 981 F. Supp. at 1435.

The court noted:

Here, however, the dealer defendants are not written warrantors under the Magnuson-Moss Act, having provided no written warranty to the purchaser plaintiffs.

Consequently, they are not subject to the numerous provisions of the Act aimed exclusively at written warranties, including those governing the establishment of informal dispute procedures, which were shown in Waverlee Homes to be the source of the clearest expressions of congressional intent to preclude binding arbitration in certain circumstances.

The dealer defendants are, however, 'warrantors' under the Act, which defines such a person as 'any supplier or other person. . . who is or may be obligated under an implied warranty, 15 U.S.C.A. § 2301(5), and defines an implied warranty as one 'arising under State law (as modified by . . . this title) in connection with the sale by a supplier of a consumer product.' 15 U.S.C.A. § 2301(7).

Thus, the dealer defendants are subject to those provisions of the Act that address warranties in general, and implied warranties in particular, but not those specifically directed to written warranties. Boyd, 981 F. Supp. at 1436-37.

The Boyd court concluded that because the dealer was not a "written warrantor," the Act did not preclude binding arbitration of the consumers' implied and other non-warranty claims. Id.

In Rhode v. E & T Investments, Inc., 6 F. Supp. 2d 1322 (M.D. Ala. 1998), the plaintiff brought breach of warranty claims against both the manufacturer and the seller of a mobile home. Rhode, 6 F. Supp. 2d at 1325.

As in Waverlee, the manufacturer had provided the plaintiff with a written warranty, but was a signatory to neither the installment contract, which included an arbitration agreement, nor a separate arbitration agreement between the plaintiff and the seller. Rhode, 6 F. Supp. 2d at 1328-29.

The plaintiff's breach of warranty claims against the manufacturer were not intertwined with his breach of warranty claims against the seller. Id. at 1331.

As in Waverlee, the court held the arbitration agreement included in the sales contract was not applicable to the manufacturer, and refused to compel arbitration of plaintiff's claims against the manufacturer. Id.

The mobile home seller in Rhode, like the seller in Boyd, was a signatory to both an installment contract containing an arbitration agreement and a separate arbitration agreement, but did not provide the plaintiff with a written warranty. Id. at 1332.

In fact, the installment contract between the plaintiff and seller specifically disclaimed all warranties except the implied warranties that could not be avoided by law. Id.

Nonetheless, the court held that insofar as the plaintiff's claims against the seller included express-warranty claims, the Act precluded the seller from invoking the arbitration clause as to those claims, but that the seller could compel arbitration of plaintiff's breach of implied-warranty claims. Id.