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Consumer product warranties and mandatory arbitration


The 9th United States Circuit Court of Appeals handed car owners a victory by striking down a requirement that they arbitrate warranty disputes with dealers. Reversing a lower court ruling, the court agreed with a Porsche 911 Turbo owner that her sales contract requiring her to submit warranty claims to mandatory arbitration violated the federal Magnuson-Moss Warranty Act, which governs consumer product warranties. “Written warranty provisions that mandate pre-dispute binding arbitration are invalid,” Judge Stephen Reinhardt wrote. This decision is at odds with rulings by two other federal appeals courts that upheld similar arbitration clauses. That raises the prospect that the decision may be reconsidered by the 9th Circuit, or appealed to the U.S. Supreme Court. Reinhardt said that the law’s purpose is “to protect consumers from predatory warrantors” and shield them from “involuntary agreements that they cannot negotiate”. See more on Thomson Reuters. The decision, including the dissenting opinion written by Judge N. Randy Smith, can be found here.


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