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Suppose a consumer wants to buy a new mobile home. As part of the sale the manufacturer provides a written warranty, in which he promises to compensate the consumer if certain defects in the home arise within a specified time period. Suppose further that the warranty contains an arbitration clause. The clause requires the consumer to submit any claim arising under the warranty to binding arbitration. The consumer signs the agreement and purchases the home. Later, the consumer complains of defects in her new home, claiming that the warranty entitles her to compensation. The manufacturer objects to the consumer's claim. Is the consumer bound by her agreement to arbitrate the warranty claims, or may she disregard the agreement and pursue her claims in a judicial forum?
The answer to this question turns on the resolution of the conflict between two federal statutes: the Federal Arbitration Act' ("FAA") and the Magnuson-Moss Warranty Ace ("MMWA"). The FAA states that agreements to submit disputes to arbitration "shall be valid, irrevocable, and enforceable."' Thus, if the FAA applies to the preceding scenario without qualification, the consumer must arbitrate her claims according to the agreement.` The MMWA, on the other hand, regulates consumer warranties such as this one and specifically provides for certain "informal dispute settlement procedures."' If the MMWA is understood to create an exception to the FAA's general mandate, the arbitration agreement is void, and the consumer is free to pursue her claim in a judicial forum.
Despite the FAA's all-encompassing language, the United States Supreme Court has held that it does not apply where "Congress intended to preclude a waiver of judicial remedies for the statutory rights at issue."6 Under ShearsonlAmerican Express, Inc v McMahon,'
courts consider three factors to determine whether Congress intended to exclude a particular statutory claim from the FAA's mandate: (1) the text of the statute; (2) its legislative history; or (3) whether there is "an inherent conflict" between arbitration and the statute's underlying purposes.
The Supreme Court has not yet considered how the McMahon framework applies to the MMWA. In brief, the MMWA regulates the content of consumer warranties and allows a consumer to bring a civil action for breach of warranty! Significantly, the MMWA also allows manufacturers to establish "informal...