In the event a consumer believes a warrantor has breached the terms of its warranty, the MMWA provides for a private cause of action. The MMWA also allows a warrantor to adopt an “informal dispute settlement mechanism” as prerequisite to litigation so long as it complies with the requirements of 16 C.F.R. § 703. 15 U.S.C. § 2310(a)(3);see also15 U.S.C. § 2302(a)(8) (referring to use of the informal procedure “before pursuing any legal remedies in the courts”).The term “informal dispute settlement mechanism” lies in the plain text of the MMWA.

For more information and to read the decision, click here.Footnotes:15 U.S.C. § 2310(d)(3)(B).15 U.S.C. § 2310(d)(3)(B).Shoner v. Carrier Corporation, 30 F. 4th 1144, 1148 (9th Cir. 2022).Although the plaintiff initially brought his claim as a putative class action, on appeal, the sole issue was whether the federal court had jurisdiction over his individual claim under the MMWA.

The Court noted that it had federal question subject matter jurisdiction over the named plaintiffs’ individual claims under Magnuson–Moss. However, the plaintiffs clearly could not maintain a class action directly under Magnuson–Moss because they could not satisfy the requirements of 15 U.S.C. § 2310(d)(3)(C) that the number of named plaintiffs equal or exceed one hundred. And the one-hundred plaintiff requirement for maintenance of a class action under Magnuson–Moss is in addition to the requirements of Fed. R. Civ. P. 23.

The MMWA provides that federal jurisdiction is not available under certain circumstances, including “if the amount in controversy is less than the sum or value of $50,000 (exclusive of interests and costs) computed on the basis of all claims to be determined in this suit.” 15 U.S.C. § 2310(d)(3) (emphasis added).Here Shoner alleged he paid $1,266 for his allegedly defective air conditioner and argued his awardable attorneys’ fees could provide the remaining $48,000 required.

Among other things, it provides that class action claims brought under the statute are not “cognizable” in federal court if “the number of named plaintiffs is less than one hundred.” 15 U.S.C. § 2310(d)(3)(C). The defendants in Floyd argued that this statutory requirement precluded the plaintiffs from bringing their case in federal court (as there were only three named plaintiffs), while the plaintiffs asserted that the Court could still exercise jurisdiction because they satisfied all of the elements for diversity jurisdiction under CAFA.Over the years, a split among federal district courts has emerged regarding whether class action plaintiffs can rely on CAFA jurisdiction despite failing to satisfy the MMWA’s particular jurisdictional requirements.

The consumer argued the arbitration provision violated the Magnuson-Moss Warranty Act because “informal dispute settlement procedures” under the Act did not include binding arbitration.Considerations Of Whether Binding Arbitration Agreements Violate The Magnuson-Moss ActTo determine whether the binding arbitration provision in the warranty violated the Act, the U.S. Court of Appeals for the Ninth Circuit used a two-prong test, looking first to see if Congress “directly spoke to the precise question at issue” and, second, whether the FTC’s interpretation of the Act is reasonable. The Ninth Circuit noted the Act is silent on whether informal dispute settlement procedures include binding arbitration, but recognized that Congress expressly delegated rulemaking authority under the Act to the FTC. 15 U.S.C. § 2310(a)(2). The FTC’s interpretation of these binding arbitration provisions was that “informal dispute settlement procedures” did not include binding arbitration.

The amended complaint alleges two types of claims: warranty claims and consumer claims. The warranty claims include breach of express warranty under California law, breach of the implied warranty of merchantability under California and Texas law, and violations of the Magnuson-Moss Warranty Act, 15 U.S.C. § 2310. The claims under the Magnuson-Moss Act are identical to the other warranty claims because they are also based on state law.

The Magnuson-Moss Warranty Act requires that the amount in controversy equal or exceed “the sum or value of $50,000 (exclusive of interest and costs) computed on the basis of all claims to be determined in this suit.” 15 U.S.C. § 2310(d)(3)(B). Burzlaff’s compensatory damages under the Act amounted to his purchase price, $35,633.23.

Under MMWA, a plaintiff may not bring a claim in federal court (a) if the amount in controversy of any individual claim is less than the sum or value of $25; (b) if the amount in controversy is less than the sum or value of $50,000 (exclusive of interests and costs) computed on the basis of all claims to be determined in the suit; or (c) if the action is brought as a class action and the number of named plaintiffs is less than one hundred.” Id. at *4 (citing 15 U.S.C. §§ 2310(d)(3)).Even though the McCalley class had fewer than one hundred plaintiffs, the United States District Court for the District of New Jersey held that CAFA creates an alternative basis for federal jurisdiction over the MMWA claims.

Acknowledging that her court did not have jurisdiction under the M/M Act, South Carolina Federal District Judge Margaret B. Seymour also recognized that other courts had previously heard M/M Act claims under alternative bases of federal jurisdiction. After reviewing these cases, Judge Seymour concluded, “Federal jurisdiction may be appropriate for the M/M Act claims that fail to satisfy the requirements of 15 U.S.C. § 2310(d)(1)(B) if a valid alternative federal jurisdictional basis exists.” Then CAFA entered the fray.