Car owners with warranty claims got a setback last month when a federal appeals court withdrew a ruling that had struck down a requirement for arbitration. The appellate court said 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 force arbitration on their customers, 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 who claimed that 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. Supporters of arbitration say the process is a more efficient way to resolve disputes, but it’s become obvious 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.” But, 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.

Source: Claims Journal