By Dan Levine
SAN FRANCISCO, April 11 (Reuters) – Car owners with warranty
claims faced a setback on Wednesday when a federal appeals court
withdrew a controversial ruling that had struck down a
requirement for arbitration, saying it would now wait for the
California Supreme Court to decide on a similar issue.
The 9th U.S. Circuit Court of Appeals, which dealt a blow
last year to dealers who prefer to resolve disputes out of
court, said it would issue a replacement opinion only after the
higher court makes its ruling.
The 9th Circuit – which covers nine western U.S. states –
had sided with a Porsche 911 Turbo owner w ho claimed t hat her
sales contract requiring her to submit warranty claims to
mandatory arbitration violated a federal law. The Magnuson-Moss
Warranty Act governs consumer product warranties.
The ruling in September was at odds with those by two other
federal appeals courts that upheld similar arbitration clauses.
An attorney for plaintiff Diane Kolev could not immediately
be reached on Wednesday, nor could a representative for Porsche
Cars North America Inc, a unit of Germany’s Porsche AG.
Aaron Jacoby, an attorney for defendant car dealer The Auto
Gallery, called the withdrawal a “positive development,” even
though it does not necessarily mean his side will ultimately
prevail.
“The basic debate here is pretty simple: are we going to
have consumer arbitration, or are we not?” Jacoby said.
Supporters of arbitration say the process is a more
efficient way to resolve disputes, while critics claim the
panels are too business friendly.
In a separate case, a California appellate court had found
that a Mercedes-Benz dealer’s mandatory arbitration clause was
“unconscionable.”
However, the California Supreme Court decided to review that
ruling – after the 9th Circuit panel had already ruled in the
Porsche case.
Porsche and the dealership argued that its mandatory
arbitration clause should stand, partly because of a recent U.S.
Supreme Court ruling upholding individual arbitration clauses in
phone contracts that prohibit class action lawsuits.
The case in the 9th Circuit is Diana Kolev v. Porsche Cars
North America, 09-55963.
