Magnuson Moss Warranty Act Section 2310
The Federal Magnuson-Moss Act. 15 U.S.C. 2310(d)(2), provides:
If a consumer finally prevails in any action brought under paragraph (1) of this subsection, he may be allowed by the court to recover as part of the judgment a sum equal to the aggregate amount of cost and expenses (including attorneys' fees based on actual time expended) determined by the court to have been reasonably incurred by the plaintiff for or in connection with the commencement and prosecution of such action, unless the court in its discretion shall determine that such award of attorneys' fees would be inappropriate.
" 2310(e) provides, "no action may be brought for failure to comply with any obligation under any written or implied warranty . . . unless the person obligated under the warranty is afforded a reasonable opportunity to cure such failure to comply."
The Federal Trade Commission under authority of the Magnuson-Moss Act. That paragraph reads:
"This limited warranty is intended to comply with the requirements of the Magnuson-Moss Warranty Act, the regulations of the Federal Trade Commission issued thereunder, and any applicable State or local laws, rules or regulations. Any part of this warranty in conflict with any such law, rule or regulations shall be effective to the extent required thereby."
The FTC regulations promulgated under the Magnuson-Moss Act do not permit binding arbitration. See 16 C.F.R. 700.8. Section 700.8 provides:
"A warrantor shall not indicate in any written warranty or service contract either directly or indirectly that the decision of the warrantor, service contractor, or any designated third party is final or binding in any dispute concerning the warranty or service contract. ... Such a statement is deceptive since section 110(d) of the Act gives state and federal courts jurisdiction over suits for breach of warranty and service contract."
Thus, under 700.8, a warrantor, such as X of Legend, is prohibited from including in its written warranty a provision calling for binding arbitration of any dispute between it and a consumer, such as X, concerning that warranty.
The Magnuson-Moss Act, though, does provide for "informal dispute settlement mechanisms," similar to arbitration, to resolve disputes between warrantors and consumers. 15 U.S.C. 2310.
The Magnuson-Moss Act permits a warrantor to "incorporate in a written warranty a requirement that the consumer resort to an informal dispute-settlement mechanism before pursuing any legal remedy" under the Act against the warrantor, id. 2310(a)(3), provided that the decisions reached through use of those mechanisms are not legally binding, see 16 C.F.R. 703.5(j) ("Decisions of the Mechanism shall not be legally binding on any person.").