                          STATE OF MICHIGAN

                           COURT OF APPEALS



LORETTA GAYLE GALEA,                                               FOR PUBLICATION
                                                                   March 13, 2018
               Plaintiff-Appellant,

v                                                                  No. 334576
                                                                   Oakland Circuit Court
FCA US LLC, JIM REIHL’S FRIENDLY                                   LC No. 2016-150986-NZ
CHRYSLER JEEP, INC., and US BANK NA,

               Defendants-Appellees.


Before: GLEICHER, P.J., and GADOLA and O’BRIEN, JJ.

GLEICHER, J. (concurring in part and dissenting in part).

        Plaintiff Loretta Galea contends that her brand new Jeep Cherokee turned out to be a
lemon. She sued the dealer who sold it and the bank that financed the deal, asserting a variety of
warranty claims. The defendants countered with a signed arbitration agreement. Galea argues
that the Magnuson-Moss Warranty Act (MMWA), 15 USC 2301 et seq., prohibits binding
arbitration of warranty disputes. This argument collides with Abela v Gen Motors Corp, 469
Mich 603; 677 NW2d 325 (2004), in which the Supreme Court held directly to the contrary. But
Galea also maintains that by failing to mention arbitration, her warranty violated the single-
document rule embodied in 16 CFR 701.3, a Federal Trade Commission (FTC) regulation
implementing the MMWA. This omission, Galea insists, takes arbitration off the table.

        The majority interprets the Supreme Court’s analysis in Abela to mean that a binding
arbitration provision need not be included in a vehicle warranty. But Abela never mentions the
single-document rule, and neither do the two federal cases guiding the Abela majority’s
memorandum opinion. The only appellate federal case squarely addressing the issue holds that
arbitration agreements outside a warranty are not enforceable. Cunningham v Fleetwood Homes
of Georgia, Inc, 253 F3d 611 (CA 11, 2001). I believe Cunningham’s reasoning should prevail
over the equivocal dicta on which the majority relies, and respectfully dissent.

                                                     I

        Congress passed the MMWA in 1975, as a remedy for inadequate and misleading
warranties on consumer goods. Davis v Southern Energy Homes, Inc, 305 F3d 1268, 1272 (CA
11, 2002). Senator Frank Moss, one of the act’s sponsors, explained on the Senate floor that
“ ‘[b]y making warranties of consumer products clear and understandable through creating a
uniform terminology of warranty coverage, consumers will for the first time have a clear and
                                               -1-
concise understanding of the terms of warranties of products they are considering purchasing.’ ”
Steverson & Munter, Then and Now: Reviving the Promise of the Magnuson-Moss Warranty Act,
63 U Kan L Rev 227, 229 n 6 (2015), quoting 120 Cong Rec 40711 (1974).

        The act encourages warrantors to let consumers know exactly what to do when a product
fails. The second section of the MMWA (only definitions occupy the first) highlights the act’s
disclosure function:

               In order to improve the adequacy of information available to consumers,
       prevent deception, and improve competition in the marketing of consumer
       products, any warrantor warranting a consumer product to a consumer by means
       of a written warranty shall, to the extent required by rules of the Commission,
       fully and conspicuously disclose in simple and readily understood language the
       terms and conditions of such warranty. [15 USC 2302(a).]

This paragraph delegates to the FTC (“the Commission”) the authority to make rules advancing
Congress’s information-sharing goal. The principle guiding the rule-making, as expressed in the
balance of the text of 15 USC 2302(a), is that a warrantor must advise a consumer of the
practical components of a warranty in language that the consumer can easily find and
understand. “The comprehensive disclosure requirements of [the MMWA] are an integral, if not
the central, feature of the [a]ct, perhaps eclipsing even the civil action and informal dispute
resolution mechanisms in their importance to consumers.” Cunningham, 253 F3d at 621.

        The act commanded the FTC to consider 10 “items” as fodder for informational
regulations. 15 USC 2302(a). The “items” include very basic matters such as “[t]he
identification of the names and addresses of the warrantors,” § 2302(a)(1), “[t]he identity of the
party or parties to whom the warranty is extended,” § 2302(a)(2), and “[t]he products or parts
covered,” § 2302(a)(3). Also included in the list are: “[i]nformation respecting the availability of
any informal dispute settlement procedure offered by the warrantor,” § 2302(a)(8), and “[a] brief,
general description of the legal remedies available to the consumer,” § 2302(a)(9).

        The FTC implemented its charge by promulgating 16 CFR 701.3(a), which obliges
warrantors to “clearly and conspicuously disclose in a single document” all information relevant
to enforcement of a warranty:

       Any warrantor warranting to a consumer by means of a written warranty a
       consumer product actually costing the consumer more than $15.00 shall clearly
       and conspicuously disclose in a single document in simple and readily understood
       language, the following items of information. . . .

The mandatory disclosures that must appear in a single document are nine in number. The most
pertinent here are:

       (6) Information respecting the availability of any informal dispute settlement
       mechanism elected by the warrantor in compliance with part 703 of this
       subchapter;



                                                -2-
       (7) Any limitations on the duration of implied warranties, disclosed on the face of
       the warranty as provided in . . . 15 USC 2308 . . .;

       (8) Any exclusions of or limitations on relief such as incidental or consequential
       damages . . .;

       (9) A statement in the following language:

       This warranty gives you specific legal rights, and you may also have other rights
       which vary from State to State. [16 CFR 701.3.]

Read together, these provisions communicate that warrantors must thoroughly advise consumers
of the contours of their legal rights and remedies.

        The majority and I part company regarding whether the term “informal dispute settlement
mechanism” encompasses binding arbitration in the context of the single-document rule. The
FTC has expressed that a binding arbitration agreement qualifies as an “informal dispute
settlement mechanism” and is not permitted by the MMWA. See 16 CFR 703.5(j); Davis, 305
F3d at 1277 (compiling federal register citations). The FTC’s rejection of arbitration as an
acceptable mechanism was the subject of the two federal appellate opinions on which Abela
relies. But subsections (6), (7) and (8) concern a consumer’s right to notice about available legal
remedies, not whether some remedies are barred. Galea contends that a mandatory arbitration of
a warranty dispute falls within these notice requirements, and I agree.

                                                II

       Galea’s complaint alleges that the warranty on her vehicle did not include an arbitration
provision. Defendants have not rebutted this allegation. The arbitration agreement they seek to
enforce is instead contained in a “Friends Program Pricing and Acknowledgement Form” bearing
Galea’s signature and advising that in consideration for the discount she received on her vehicle,
she agreed to arbitrate any warranty disputes:

                 The Chrysler Employee Friends Program allows eligible purchasers to
       obtain a new vehicle at a substantial discount. I understand that, in
       consideration for this discount, I will not be able to bring a lawsuit for any
       warranty disputes relating to this vehicle. Instead, I agree to submit any and
       all disputes through the Chrysler Vehicle Resolution Process, which includes
       mandatory arbitration that is binding on both Chrysler and me. Before
       initiating this binding arbitration, I will attempt to resolve the dispute (1) at the
       dealership, (2) through the Customer Assistance Center. . . . . I represent to
       Chrysler that before purchasing or leasing a vehicle under this Program, I
       received and read the Program Rules and Provisions (“Rules”), specifically
       including a document entitled “Vehicle Resolution Process – Binding Arbitration”
       . . . . [Emphasis in original.]




                                                -3-
       The referenced “Official Program Rules” document is eight pages long and covers a
number of subjects including the “program overview,” the characteristics of the employees and
others eligible for discounted pricing, and “dealer reimbursement.” Pages six through seven
address arbitration and other dispute resolution processes:

       Dispute Resolution Process – Binding Arbitration:

       Friends program participants must follow the Vehicle Resolution Process
       summarized below for warranty disputes regarding a vehicle purchased or leased
       under the Program.

       Experience has shown that most problems can be resolved by taking the following
       steps:

              1.   Attempt to resolve problems with dealership management.

              2. If additional help is needed, contact Chrysler’s Customer Assistance
                 Center at 1-800-992-1997.

              3. If still unable to resolve the problems satisfactorily, the last stage is
                 binding arbitration. Contact NCDS (National Center for Dispute
                 Settlement) at 1-866-937-2461 for further information.

       1. ARBITRATION

       Arbitration is a process by which two or more parties resolve a dispute through
       the use of a third party neutral. As a condition of participation in the program,
       employees, retirees and eligible family members agree that binding arbitration is
       solely and exclusively the final step for resolving any warranty dispute
       concerning the vehicles purchased or leased under the Program. They may not
       bring a separate lawsuit. . . .

       . . . NCDS reviews only vehicle disputes involving Chrysler’s Limited Warranty
       on a Chrysler vehicle. If the complaint is eligible, the customer has the option to
       select either an oral presentation with a single dispute settler or a “documents
       only” review by a panel of three decision-makers. . . .

        The warranty for Galea’s vehicle occupies a separate booklet and consumes
approximately 30 pages. Toward the end is a five-page section titled “How to Deal With
Warranty Problems.” Arbitration is not mentioned. The first “remedy” suggested is to “talk to
your dealer’s service manager or sales manager,” and if unsuccessful, “[d]iscuss your problem
with the owner or general manager of the dealership.” If that does not work, the warranty offers
that the consumer should “contact the Chrysler Customer Assistance Center. You’ll find the
address in section 7.2.”




                                               -4-
       By omitting any mention of the legal remedies available (including binding arbitration),
the warranty on Galea’s Jeep violates the single-document rule.

                                                     III

        The majority reads Abela to mean that “[a]greements to submit to binding arbitration . . .
fall outside the FTC’s rule-making authority under the MMWA,” and therefore, “the single
document rule does not apply to binding arbitration agreements.” My disagreement hinges on
the interpretation of subsection (6) of the FTC’s implementing regulation, which declares that a
warranty must include “[i]nformation respecting the availability of any informal dispute
settlement mechanism elected by the warrantor in compliance with part 703 of this subchapter.”
16 CFR 701.3(6). The majority holds that in Abela the Supreme Court rejected the single-
document rule, even though the subject was not raised or even mentioned in the opinion.

        Abela’s rationale rests on two decisions rendered by two federal appellate courts, the
Courts of Appeal for the Fifth and Eleventh Circuits. The majority asserts that those two cases
hold that arbitration is not an “informal dispute settlement procedure,” and extrapolates from
there to a conclusion that the single-document rule does not require mention of arbitration in a
warranty. Here is the paragraph from Abela that guides the majority’s analysis:

               Although the federal courts of appeals decisions are not binding, we
       nevertheless affirm the decision of the Court of Appeals. We have examined the
       decisions in Walton v Rose Mobile Homes LLC, 298 F3d 470 (CA 5, 2002), and
       Davis v Southern Energy Homes, Inc, 305 F3d 1268 (CA 11, 2002), and find their
       analyses and conclusions persuasive. Both decisions carefully examined the
       MMWA and the [Federal Arbitration Act], and both concluded that the text, the
       legislative history, and the purpose of the MMWA did not evidence a
       congressional intent under the FAA to bar agreements for binding
       arbitration of claims covered by the MMWA. Persuaded by these analyses of
       the federal courts of appeals, we conclude that plaintiffs’ agreement with
       defendant to address the warranty claim through defendant’s dispute resolution
       process, including mandatory arbitration, is enforceable. [Abela, 469 Mich at 607
       (emphasis added).]

        This paragraph, and the highlighted portion in particular, do not support (or even speak
to) the proposition advanced by the majority. Abela holds that Congress did not intend the
MMWA to bar binding arbitration. Walton and Davis express the same holding. The majority
seizes on obiter dictum in Walton and Davis positing that the FTC improperly nixed binding
arbitration as an available remedy by mistakenly interpreting arbitration as an “informal dispute
settlement procedure.” That dicta, the majority concludes, means that “[a]greements to submit to
binding arbitration . . . fall outside the FTC’s rule-making authority under the MMWA, and the
single-document rule does not apply to binding arbitration agreements. A warranty need not
inform the consumer that his or her legal rights are limited to binding arbitration.”

       I submit that the majority over-reads all three cases and incorrectly treats dicta as
precedent. None of the three cases erase notice of binding arbitration from the single-document
rule and none contradict Cunningham. Further, an analysis of the single-document rule rests on

                                               -5-
an entirely different legal framework. That framework supports that a warrantor must notify a
consumer in the warranty that any breach of warranty claim must be submitted to binding
arbitration.

                                                A

        I begin with Cunningham because it is a decision of the same court that decided Davis,
one of the two cases relied on by the majority.

        The Cunningham plaintiffs purchased a motor home. They sued for breach of warranty
and also raised other claims. The defense moved to compel arbitration. The parties presented
two issues to the federal court of appeals: whether the MMWA prohibits binding arbitration, and
whether the warranty violated the single-document rule by omitting any reference to binding
arbitration. The Court concluded that the informal dispute resolution procedures mentioned in
the act were “prerequisites” to a lawsuit rather than substitutes barring other procedures, such as
arbitration. Cunningham, 253 F3d at 618-619. This conclusion rested on the court’s analysis of
the legislative history of the MMWA and abundant United States Supreme Court jurisprudence
standing for the proposition that “the presence of one type of non-judicial mechanism in the text
does not necessarily preclude the possibility of alternative mechanisms.” Id. at 620. The Court
spent little time on this subject, however, because it found another aspect of the case
dispositive—the single-document rule. The court explained:

       [W]hile we are inclined to think that the presence of the non-binding § 2310
       mechanism in the statutory text does not in and of itself mandate the conclusion
       that [the MMWA] renders binding arbitration agreements unenforceable, other
       key provisions of [the MMWA], together with § 2310, cast considerable doubt on
       the propriety of the particular arrangement at issue here. These provisions include
       the requirements that significant conditions, limitations, and terms of the warranty
       be included in simple language in the warranty itself, and that the warranty must
       consist of a single, understandable document made available prior to sale to the
       consumer. [Id.]

In other words, the Eleventh Circuit in Cunningham found that although the “informal dispute
settlement procedure” language of the statute could not be construed as a bar to arbitration, it
nevertheless compelled that a mandatory arbitration be included in a single warranty document.

       This is so because context matters. When considered as an impediment to arbitration, the
phrase does not do enough work to supplant the presumption in favor of arbitration described
throughout United States Supreme Court caselaw. When considered as part of a regulation
governing the content of a warranty, the phrase embraces arbitration because the FTC says it
does. In the notice context, the FTC makes the rules.

        The Cunningham Court had no difficulty concluding that in contrast with the “procedural
protections” of arbitration found in federal law, “§ 2302 of [the MMWA] and the rules
promulgated by the FCC . . . do in fact impose substantive obligations on manufacturers that
choose to issue warranties, requiring clear disclosure of warranty terms in a single document.”
Id. at 623. The Court drew this conclusion from the legislative history and purpose of the act,

                                                -6-
emphasizing that the MMWA was remedial legislation intended to counteract complex,
misleading warranty language: “Congress sought to remedy the situation by requiring that
material terms be presented in clear language in a single document.” Id. at 621. At Congress’s
behest, the FTC “crafted the disclosure requirements so that they might ‘inform the consumer of
the full extent of his or her obligations under the warranty, and to eliminate confusion as to the
necessary steps which he or she must take in order to get warranty performance.’ ” Id. (citation
omitted). The FTC understood that a warranty omitting relevant terms was just as unhelpful as a
warranty written in a complicated or misleading way. “The single document rule reinforces
these concerns by requiring warrantors to present all information relevant to the warranty in one
place, where it might be easily located and assimilated by the consumer. Id. The Court
concluded, “Compelling arbitration on the basis of an arbitration agreement that is not referenced
in the warranty presents an inherent conflict with the [a]ct’s purpose of providing clear and
concise warranties to consumers.” Id. at 622.

                                                B

        I turn next to Davis, also decided by the Eleventh Circuit. Judge Anderson signed both
Cunningham and Davis, a fact that should not be lost in the caselaw shuffle. Had the results in
these two cases been incompatible, one would expect that Judge Anderson would have called
that fact to a reader’s attention. But he did not, and they are not incompatible because Davis’s
holding is sharply limited: “We hold that the [MMWA] permits binding arbitration and that a
written warranty claim arising under the [MMWA] may be subject to a valid pre-dispute binding
arbitration agreement.” Davis, 305 F3d at 1270 (emphasis added). Cunningham is cited several
times in Davis, never disapprovingly. Although the majority locates in Davis a snippet of text
citing another case (Walton) for the proposition that arbitration was not considered by Congress
as “an informal dispute settlement procedure,” the case does not stand for that proposition.
Rather, the Davis Court painstakingly analyzed the question of arbitrability under the MMWA
based on two lines of federal caselaw: Shearson/American Express, Inc v McMahon, 482 US
220; 107 S Ct 2332; 96 L Ed 2d 185 (1987), and Chevron USA, Inc v Natural Resourse Defense
Council, Inc, 467 US 837; 104 S Ct 2778; 81 L Ed 2d 694 (1984).

        These cases present the tests used by the federal courts to ascertain whether Congress
intended to preclude arbitration of a statutory claim (McMahon) and whether an agency
regulation merits a federal court’s deference (Chevron). The Davis Court determined that
Congress did not clearly express in the MMWA the intent to preclude binding arbitration. Davis,
305 F3d at 1272. It further found that the FTC’s belief to the contrary was unreasonable and not
worthy of deference. Id. at 1280. This analysis does not undermine Cunningham’s conclusion
that to be enforceable, a binding arbitration provision must be included in a warranty. The
FTC’s opinion that arbitration is barred received no deference, but its view that a warranty must
describe the legal remedies available to a consumer did. Davis and Cunningham peacefully
coexist in the Eleventh Circuit because they address different legal issues in a readily
reconcilable way.




                                               -7-
                                                  C

         Now to Walton, a two-to-one decision of the Fifth Circuit. Like Davis, Walton does not
discuss the single-document rule. Also like Davis, the analysis presented in Walton rests on
McMahon and Chevron. In dictum, the Court observed, “We also note that binding arbitration is
not normally considered to be an ‘informal dispute settlement procedure,’ and it therefore seems
to fall outside the bounds of the MMWA and of the FTC’s power to prescribe regulations.”
Walton, 298 F3d at 476.1 This rather tentative conclusion about the common understanding of
an “informal dispute settlement procedure” appears at the end of an extended discussion of the
first of the McMahon factors, whether in drafting the MMWA Congress spoke to the issue of
arbitration. I respectfully submit that the majority errs by elevating this dicta to a rule of law that
the FTC lacked the authority to consider arbitration as a remedy that must be included in a single
warranty document.2

                                                  IV

        When it comes to the information that must be included in a warranty, the real question
presented is: who makes the rules? The answer is incontrovertible: Congress entrusted the FTC
with the authority to decide what information a warranty must contain. 15 USC 2302(a). The
FTC promulgated a regulation mandating that the availability of any “informal dispute settlement
procedure” must be disclosed “clearly and conspicuously in a single document.” 16 CFR
701.3(a)(6). The FTC has taken the position that arbitration is an “informal dispute settlement
procedure” for that purpose. Abela, Walton, and Davis hold that a consumer may be compelled
to arbitrate. But none of those cases considered whether the FTC could properly require that an
arbitration agreement be included in the warranty. In the federal appellate courts, only
Cunningham has reached that issue, and its verdict supports Galea.

        The single-document rule furthers an important congressional objective: notifying
consumers about their warranty rights. Including all relevant information in a single location
allows a consumer to easily locate her remedies. When a warranty dispute erupts, there is no
more important piece of information to a consumer than: what do I do now? If a consumer is
limited to binding arbitration, it follows that this information must be included in the warranty.
That is what both Congress and the FTC intended. Holding otherwise dilutes a critical protection
of the MMWA and contradicts its history and purpose. Based on defendant Reihl’s violation of


1
  Ironically, our Supreme Court disagrees and most assuredly views arbitration as an “informal”
dispute resolution procedure: “By narrowing the grounds upon which an arbitration decision may
be invaded, the court rules preserve the efficiency and reliability of arbitration as an expedited,
efficient, and informal means of private dispute resolution.” Gordon Sel-Way, Inc v Spence
Bros, Inc, 438 Mich 488, 495; 475 NW2d 704 (1991).
2
  The holding in Walton does not speak to whether arbitration is or is not an “informal dispute
settlement procedure”: “We therefore hold that the text, legislative history, and purpose of the
MMWA do not evince a congressional intent to bar arbitration of MMWA written warranty
claims.” Walton, 298 F3d at 478.


                                                 -8-
the single-document rule, I would reverse the circuit court’s order sending the case to arbitration
and would remand for a trial.



                                                            /s/ Elizabeth L. Gleicher




                                                -9-
