Mariam Maronyan v. Toyota Motor Sales, U.S.A., In
Filing
FILED OPINION (DOROTHY W. NELSON, STEPHEN R. REINHARDT and N. RANDY SMITH) REVERSED AND REMANDED. Judge: SR Authoring, Judge: NRS Dissenting. FILED AND ENTERED JUDGMENT. [7899019]
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FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
MARIAM MARONYAN,
Plaintiff-Appellant,
v.
TOYOTA MOTOR SALES, U.S.A.,
INC.,
Defendant-Appellee.
No. 09-56949
D.C. No.
8:08-cv-00905DOC-MLG
OPINION
Appeal from the United States District Court
for the Central District of California
David O. Carter, District Judge, Presiding
Submitted February 7, 2011*
Pasadena, California
Filed September 20, 2011
Before: Dorothy W. Nelson, Stephen Reinhardt, and
N. Randy Smith, Circuit Judges.
Opinion by Judge Reinhardt;
Dissent by Judge N. R. Smith
*The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
17819
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COUNSEL
Martin W. Anderson, Anderson Law Firm, Santa Ana, California, for plaintiff-appellant Mariam Maronyan.
Peder K. Batalden, Horvitz & Levy LLP, Encino, California,
for defendant-appellee Toyota Motor Sales, U.S.A., Inc.
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OPINION
REINHARDT, Circuit Judge:
Mariam Maronyan brought suit against Toyota Motor
Sales, U.S.A. Inc. when the new car that she leased developed
mechanical problems during the warranty period and Toyota
failed to repair them to her satisfaction. In addition to several
California state law claims, she alleged breach of warranty
under the Magnuson-Moss Warranty Act (“MMWA”). The
district court granted Toyota’s motion to dismiss for lack of
subject matter jurisdiction on the ground that Maronyan did
not before filing suit in civil court pursue her claims through
the California Dispute Settlement Program (“CDSP”) that
Toyota maintained and specified in its warranty.
[1] Maronyan appeals. She argues that her failure initially
to resort to the CDSP provides Toyota an affirmative defense
to her warranty claims under the MMWA, but does not defeat
subject matter jurisdiction. We review de novo whether the
district court properly dismissed for lack of subject matter
jurisdiction. BNSF Ry. Co. v. O’Dea, 572 F.3d 785, 787 (9th
Cir. 2009). Neither party disputes that § 2310(a) of the
MMWA imposes a prior-resort requirement on prospective
consumer claimants seeking recovery in court. The MMWA
provides that if
(A) a warrantor establishes [a dispute settlement procedure],
(B) such procedure, and its implementation meets
the requirements of [the FTC’s rules under paragraph (2)], and
(C) he incorporates in a written warranty a requirement that the consumer resort to such procedure
before pursuing any legal remedy under this section
respecting such warranty,
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then . . . the consumer may not commence a civil
action (other than a class action) under subsection
(d) of this section unless he initially resorts to such
procedure . . . .
15 U.S.C. § 2310(a)(3) (2007). The only question before us is
whether Maronyan’s failure to comply with the MMWA’s
requirement that a consumer resort to an informal dispute settlement procedure before filing a civil action deprives the
court of subject matter jurisdiction. We hold that it does not.
[2] Most exhaustion requirements established by Congress
do not result in a loss of subject matter jurisdiction. See I.A.M.
Nat’l Pension Fund Benefit Plan C. v. Stockton TRI Indus.,
727 F.2d 1204, 1208 (D.C. Cir. 1984) (“Only when Congress
states in clear, unequivocal terms that the judiciary is barred
from hearing an action until the administrative agency has
come to a decision . . . has the Supreme Court held that
exhaustion is a jurisdictional prerequisite”). Rather, statutorily
created exhaustion requirements ordinarily constitute prudential affirmative defenses that may be defeated by compelling
reasons for failure to exhaust. See Weinberger v. Salfi, 422
U.S. 749, 757 (1975) (distinguishing prudential exhaustion, “a
codified requirement of administrative exhaustion,” from
jurisdictional exhaustion which requires “sweeping and direct
language which states that no action shall be brought under
[the statute at issue], not merely that only those actions shall
be brought in which administrative remedies have been
exhausted”).
[3] A consumer’s failure to exhaust an administrative or
other pre-filing remedy deprives federal courts of subject matter jurisdiction only in those cases in which Congress makes
plain the jurisdictional character of the exhaustion requirement in question. “Consistent with the Supreme Court’s guidance in Weinberger, we have rarely found exhaustion statutes
to be a jurisdictional bar.” McBride Cotton and Cattle Corp.
v. Veneman, 290 F.3d 973, 978 (9th Cir. 2002). “[F]ailure to
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exhaust does not deprive a federal court of jurisdiction when
the exhaustion statute is merely a codification of the exhaustion requirement,” unless Congress uses “ ‘sweeping and
direct’ language that goes beyond a requirement that only
exhausted claims be brought.” Id. at 979 (quoting Weinberger, 422 U.S. at 757).
That a failure to satisfy a statutory prerequisite to filing suit
deprives a court of subject matter jurisdiction only when Congress provides a sweeping and direct jurisdictional mandate
helps to explain why none of the cases on which Toyota relies
concludes that the statutory provision at issue operates as a
jurisdictional bar. See Reed Elsevier v. Muchnick, 130 S. Ct.
1237 (2010) (holding that a copyright holder’s failure to comply with § 411(a)’s registration requirement does not restrict
a federal court’s subject-matter jurisdiction over copyright
infringement claims involving unregistered works); Arbaugh
v. Y & H Corp., 546 U.S. 500 (2006) (holding that Title VII’s
“employee-numerosity requirement,” which requires potential
defendants to maintain at least fifteen employees, does not
limit a court’s jurisdiction); Kontrick v. Ryan, 540 U.S. 443,
454-55 (2004) (holding that a bankruptcy rule that allows a
creditor sixty days to object to a debtor’s discharge was not
a jurisdictional bar to considering an untimely objection);
McBride, 290 F.3d at 979 (holding that the exhaustion
requirement of 7 U.S.C. § 6912(e) is not jurisdictional).
Most recently, the Supreme Court in Henderson v. Shinseki, 131 S. Ct. 1197 (2011), unanimously held that the deadline for filing a notice of appeal with the Veterans Court was
not jurisdictional because Congress, in enacting the statute,
did not “mandate[ ]” that it was. Id. at 1203. The Court
explained:
Because the consequences that attach to the jurisdictional label may be so drastic, we have tried in recent
cases to bring some discipline to the use of this term.
. . . Other rules, even if important and mandatory, we
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have said, should not be given the jurisdictional
brand. . . . Under Arbaugh, we look to see if there
is any “clear” indication that Congress wanted the
rule to be “jurisdictional.”
Id. at 1202-03 (citations omitted). Arbaugh emphasized that
filing requirements restrict a court’s subject matter jurisdiction only “[i]f the Legislature clearly states that a threshold
limitation on a statute’s scope shall count as jurisdictional.”
546 U.S. at 515 (emphasis added). In an explanatory footnote
immediately following this passage, the Court noted that
“Congress has exercised its prerogative to restrict the subjectmatter jurisdiction of federal district courts based on a wide
variety of factors,” and lists a number of previouslyrecognized jurisdictional criteria, such as restrictions on the
classes of plaintiffs empowered to bring a civil action or
defendants potentially subject to liability. None of these considerations resembles the MMWA’s requirement that a plaintiff exhaust pre-filing remedies before bringing an action. Id.
at 515 n.11.
The Court has chastised lower courts for their overly zealous application of the term “jurisdictional” to what are accurately understood as claims-processing rules or elements of a
plaintiff’s claim. Reed Elsevier, 130 S.Ct. at 1243-44. A unanimous court in Arbaugh restated the necessity of a clear Congressional mandate to elevate a statutory requirement to a
jurisdictional prerequisite, emphasizing that “[i]f the Legislature clearly states that a threshold limitation on a statute’s
scope shall count as jurisdictional, then courts and litigants
will be duly instructed and will not be left to wrestle with the
issue.” 546 U.S. at 515-16. Although the Court has acknowledged that “Congress is free to attach . . . the jurisdictional
label to a rule that [the courts] would prefer to call a claimsprocessing rule,” Henderson, 131 S.Ct. at 1203, it has cautioned lower courts to refrain from capriciously assigning the
jurisdictional label when Congress has failed to clearly provide the requisite mandate, see Reed Elsevier, 130 S.Ct. at
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1244 (cautioning courts against engaging in “drive-by jurisdictional rulings”).
[4] The MMWA’s requirement that a “consumer may not
commence a civil action. . . unless he initially resorts to [an
informal dispute settlement procedure],” 15 U.S.C. § 2310(a),
is similar in all material respects to the requirements in two
other statutes that we have examined previously.1 In both
cases, we held that the exhaustion requirements do not
deprive the district court of subject matter jurisdiction. First,
in Rumbles v. Hill, 182 F.3d 1064 (9th Cir.1999), we
reviewed the exhaustion requirement of 42 U.S.C. § 1997e(a):
No action shall be brought with respect to prison
conditions under section 1983 of this title, or any
other Federal law, by a prisoner confined in any jail,
prison, or other correctional facility until such
administrative remedies as are available are
exhausted.
We held that the exhaustion of remedies under § 1997e(a) was
not a jurisdictional prerequisite to suit under 42 U.S.C.
§ 1983. See Rumbles, 182 F.3d at 1067-68.2 Second, in
McBride, we held that a failure to comply with 7 U.S.C.
§ 6912(e)’s requirement that “a person shall exhaust all
1
We are aware of no other statutory pre-filing requirement similar to
§ 2310(a) of the MMWA that has been held to deprive a district court of
subject matter jurisdiction.
2
All nine other circuits to have considered § 1997e(a) also held that failure to exhaust did not deprive the district court of jurisdiction. See Anderson v. XYZ Correct’l Health Services, Inc., 407 F.3d 674, 677 (4th Cir.
2005); Richardson v. Goord, 347 F.3d 431, 433-34 (2d Cir. 2003); Steele
v. Fed. Bureau of Prisons, 355 F.3d 1204, 1206 (10th Cir. 2003); Ali v.
Dist. of Columbia, 278 F.3d 1, 5-6 (D.C.Cir. 2002); Casanova v. Dubois,
289 F.3d 142, 147 (1st Cir. 2002); Wright v. Hollingsworth, 260 F.3d 357,
358 n.2 (5th Cir. 2001); Curry v. Scott, 249 F.3d 493, 501 n. 2 (6th Cir.
2001); Nyhuis v. Reno, 204 F.3d 65, 69 n.4 (3d Cir. 2000); Massey v. Helman, 196 F.3d 727, 732 (7th Cir. 1999).
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administrative appeal procedures established by the Secretary
or required by law before the person may bring an action in
a court of competent jurisdiction,” did not result in loss of
subject matter jurisdiction. We held, rather, that the provision
constituted “merely a codification of the exhaustion requirement.” 290 F.3d at 980.3 For the same reason that we held in
McBride and Rumbles that the virtually identical exhaustion
requirements of § 6912(e) and § 1997e(a) were not jurisdictional in character, we hold that § 2310(a) does not strip the
district court of subject matter jurisdiction in the case before
us.
Toyota urges us to conclude that Congress has clearly
“mandated” that the MMWA exhaustion requirement is jurisdictional based on its aggregation of three scattered pieces of
ambiguous and indirect statutory language. Toyota apparently
perceives a clear mandate in: (1) a later subsection of the
MMWA whose provisions are made “subject to subsection[ ]
(a)(3)” and includes “jurisdiction” as one among several other
subheading labels; (2) the same later subsection, which
merely refers to and by no means incorporates the exhaustion
requirement in § 2310(a)(3), and states that “any court of
competent jurisdiction” may hear MMWA claims; and (3)
that same subsection which identifies the class of cases that
fall within courts’ adjudicatory authority under the MMWA.
No serious analysis is required to explain why such obscure
references to jurisdiction elsewhere in the statute do not constitute the kind of “sweeping and direct” language necessary,
3
Two of the three other circuits to have considered § 6912(e) held that
it was not jurisdictional. See Dawson Farms, LLC v. Farm Serv. Agency,
504 F.3d 592, 606 (5th Cir. 2007); Ace Prop. & Cas. Ins. Co. v. Fed. Crop
Ins. Corp., 440 F.3d 992, 999 (8th Cir. 2006). The only circuit to hold that
it was jurisdictional is the Second. See Bastek v. Fed. Crop Ins. Corp., 145
F.3d 90, 94-95 (2d Cir. 1998). The Fifth, Eighth, and Ninth Circuits
soundly rejected the Second Circuit’s erroneous presumption that statutory
exhaustion requirements deprive district courts of subject matter jurisdiction. See Dawson Farms, 504 F.3d at 603; Ace Prop., 440 F.3d at 999;
McBride, 290 F.3d at 980.
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Weinberger, 422 U.S. at 757, to demonstrate that Congress
“clearly state[d],” Arbaugh, 546 U.S. at 515, its intention to
“mandate[ ]” that a consumer’s failure to comply with
§ 2310(a)(3)’s exhaustion requirement deprives the district
court of subject matter jurisdiction to hear his warranty
claims. Henderson, 131 S.Ct. at 1203.
[5] To the contrary, the statute’s plain language reflects
that its provision for the use of dispute settlement procedures
before filing suit is not a jurisdictional bar but rather a prudential exhaustion requirement. Neither § 2310(a)(3) nor
§ 2310(a)(4) even mentions subject matter jurisdiction. Elsewhere, the statute prompts warrantors to include
“[i]nformation respecting the availability of any informal dispute settlement procedure” and a recital “that the purchaser
may be required to resort to such procedure before pursuing
any legal remedies in the courts.” § 2302(a)(8). Moreover, the
agency to which Congress expressly delegated authority to
interpret the MMWA explained shortly after its enactment
that it seeks “to ensure that the consumer is not deceived into
believing that prior resort to the Mechanism is required in all
instances.” FTC Rules, Regulations, Statements, Interpretations Under Magnuson-Moss Warranty Act, 40 Fed. Reg.
60,168, 60,194-95 (Dec. 31, 1975) (codified at 16 C.F.R.
701). None of these subsections mention subject-matter jurisdiction or otherwise “speak in jurisdictional terms.” Arbaugh,
546 U.S. at 515 (quoting Zipes v. Trans World Airlines, 455
U.S. 385, 394 (1982)). While they do employ mandatory language, the Court has repeatedly held that “a statutory condition that requires a party to take some action before filing a
lawsuit is not automatically ‘a jurisdictional prerequisite to
suit.’ ” Reed Elsevier, 130 S.Ct. at 1246 (quoting Zipes, 455
U.S. at 393). See also Henderson, 131 S.Ct. at 1205; Arbaugh
546 U.S. at 510. In light of the Supreme Court’s current and
continuing precedent, we cannot accept Toyota’s argument
that the statutory language used to establish MMWA’s
exhaustion requirement evinces a clear Congressional man-
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date to bestow jurisdictional status on a prerequisite that is
properly deemed an affirmative defense.
To summarize, the MMWA’s exhaustion requirement does
not use sweeping and direct language demonstrating clear
congressional intent to mandate loss of subject matter jurisdiction. Nor does Toyota rely on a single case in which a
court dismissed an action for lack of subject matter jurisdiction on the basis of a plaintiff’s failure to exhaust a statutory
prerequisite to filing suit. In the only two cases in which we
have considered statutory provisions similar to the MMWA’s
exhaustion requirement, we held that a failure to exhaust prefiling requirements does not strip a district court of its subject
matter jurisdiction, a conclusion almost unanimously
approved by the other circuits. Supra at 17825-27 & nn. 2-3.
[6] For the reasons explained above, we hold that
§ 2310(a)’s prerequisite that a “consumer may not commence
a civil action. . . unless he initially resorts to [an informal dispute settlement procedure]” is merely a codification of the
MMWA’s exhaustion requirement and does not operate as a
jurisdictional bar. Accordingly, we reverse and remand so that
the district court may consider, in light of this opinion, how
to proceed with the instant action, including the failure-toexhaust issues.4
REVERSED and REMANDED for further proceedings in
light of this Opinion.
4
The district court did not recognize that it had subject matter jurisdiction over Maronyan’s claim and therefore could not address the validity
of Toyota’s failure to exhaust argument as an affirmative defense. The
only issue properly before this court on appeal is thus the question of
subject-matter jurisdiction. We remand to the district court to allow it to
address any issues related to the assertion of the exhaustion defense in the
first instance. See Cutter v. Wilkinson, 125 S.Ct. 2113, 2120 n.7 (“Because
these defensive pleas were not addressed by the [court below], and mindful that we are a court of review, not first view, we do not consider them
here.”)
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N.R. SMITH, Circuit Judge, dissenting:
The Supreme Court recently explained in Henderson ex.
rel. Henderson v. Shinseki that “Congress is free to attach the
conditions that go with the jurisdictional label to a[n exhaustion] rule that we would prefer to call a claim-processing
rule.” 131 S. Ct. 1197, 1203 (2011) (emphasis added).
Because Congress incorporated the exhaustion requirement of
the Magnuson-Moss Warranty Act, 15 U.S.C. § 2301 et seq.
(“MMWA”) into the statute’s jurisdiction-granting provisions,
we must defer to Congress’s treatment of this provision as
jurisdictional. See Henderson, 131 S. Ct. at 1203. Therefore,
I must dissent from the majority’s conclusion that the
MMWA’s exhaustion provision is merely procedural.
Additionally, the majority errs in declining to address a
critical question of law properly raised on appeal—whether
courts (rather than the Federal Trade Commission) should
decide challenges to a “Mechanism’s”1 compliance with federal regulations. Under the MMWA, courts no longer have
authority to decide compliance issues, because Congress
vested authority to decide those issues in the first instance
with the FTC. On the other hand, even if the judiciary
retained authority to address these issues, courts should defer
to the FTC’s unique expertise in Mechanism compliance
under the primary jurisdiction doctrine.
I. Mechanism exhaustion under the MMWA is a
jurisdictional prerequisite to filing suit
Judicial interpretation of the MMWA “begins with the
plain language of the statute. If the text of the statute is clear,
this court looks no further in determining the statute’s mean1
The FTC refers to “informal dispute settlement procedures” authorized
by the MMWA as “Informal Dispute Settlement Mechanisms” (IDSMs)
or simply “Mechanisms.” See 16 C.F.R. § 703.1(e); 64 Fed. Reg. 19700,
19701 (Apr. 22, 1999).
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ing.” K & N Eng’g, Inc. v. Bulat, 510 F.3d 1079, 1081 (9th
Cir. 2007) (citation omitted). The key question in this case is
“whether Congress mandated that the [exhaustion provision]
be ‘jurisdictional.’ ” Henderson, 131 S. Ct. at 1203. (emphasis
added). The Henderson Court reiterated the “readily administrable bright line” test from Arbaugh v. Y&H Corp. for deciding such questions: “we look to see if there is any “clear”
indication that Congress wanted the rule to be ‘jurisdictional.’ ” 131 S. Ct. at 1203 (quoting Arbaugh, 546 U.S. 500,
515-16 (2006)). To indicate such a preference, Congress can
“[1] speak in jurisdictional terms or [2] refer in any way to the
jurisdiction of the [district court].” Id. at 1204 (quoting Zipes
v. Trans World Airlines, Inc., 455 U.S. 385, 394 (1982));
accord Arbaugh, 546 U.S. at 516. “Congress, of course, need
not use magic words in order to speak clearly on this point.”
Henderson, 131 S. Ct. at 1203. The analysis might also turn
on “the ‘legal character’ of the requirement, which we discern[ ] by looking to the condition’s text, context, and relevant historical treatment.” Reed Elsevier, Inc. v. Muchnick,
130 S. Ct. 1237, 1246 (2010) (citations omitted); see Kontrick
v. Ryan, 540 U.S. 443, 455 (2004) (“[L]itigants [should use]
the label ‘jurisdictional’ not for claim-processing rules, but
only for prescriptions delineating the classes of cases
(subject-matter jurisdiction) and the persons (personal jurisdiction) falling within a court’s adjudicatory authority.”
(emphasis added)).
Section 2310(d)(1) of the MMWA ties Mechanism exhaustion to the jurisdiction of the courts by expressly incorporating § 2310(a)(3):
(d) Civil action by consumer for damages, etc.;
jurisdiction; recovery of costs and expenses; cognizable claims
(1) Subject to [the exhaustion requirement in] subsection[ ] (a)(3) . . . of this section, a consumer who
is damaged by the failure of a supplier, warrantor, or
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service contractor to comply with any obligation
under this chapter, or under a written warranty,
implied warranty, or service contract, may bring suit
for damages and other legal and equitable relief —
(A) in any court of competent jurisdiction
in any State or the District of Columbia; or
(B) in an appropriate district court of the
United States, subject to paragraph (3) of
this subsection.
15 U.S.C. § 2310(d)(1) (emphasis added). There is no doubt
that section 2310(d)(1) is a jurisdiction-granting provision,
because: (1) the subsection heading includes the label “jurisdiction,” § 2310(d); (2) it speaks in jurisdictional terms by
specifying which courts may hear MMWA claims, Arbaugh,
546 U.S. at 515; and (3) it identifies the classes of cases that
fall within courts’ adjudicatory authority under the MMWA,
see Kontrick, 540 U.S. at 455. Therefore, because Congress
incorporated § 2310(a)(3)’s exhaustion requirement into the
jurisdictional provisions of § 2310(d)(1), the exhaustion provision must be treated as jurisdictional.2
The majority correctly notes that the MMWA’s exhaustion
provision— providing that a “consumer may not commence
2
The majority points out that the Court warned lower courts not to find
jurisdictional limits unless the “Legislature clearly states that a threshold
limitation on a statute’s scope shall count as jurisdictional . . . .” Reed
Elsevier, 130 S. Ct. at 1244 (quoting Arbaugh, 546 U.S. at 515-16). However, Reed Elsevier concluded that the numerosity provision at issue in
Arbaugh, after examining the text of the provision, is not jurisdictional
because “the employee numerosity provision is located in a provision
‘separate’ from” the jurisdiction section. Id. “Accordingly, the numerosity
requirement could not fairly be read to ‘speak in jurisdictional terms or in
any way refer to the jurisdiction of the district courts.’ ” Id. (quoting
Arbaugh, 546 U.S. at 515.). Here, unlike Arbaugh, the Mechanism
exhaustion provision is incorporated into the jurisdictional provisions of
the statute.
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a civil action . . . unless he initially resorts to [an informal dispute settlement procedure],” § 2310(a)(3)—is not, standing
alone, “jurisdictional in character.” Maj. Op. at 17826-27.
However, the majority ignores the fact that Toyota never
made this argument, and the district court, therefore, did not
address it. Instead, Toyota argued that Congress imbued
§ 2310(a) with jurisdictional character by incorporating the
exhaustion provision into a clearly jurisdiction-granting subsection of the statute. The majority dismisses this argument as
requiring “[n]o serious analysis,” because the incorporation is
not sufficiently “sweeping and direct” to convey an intent to
tie exhaustion to jurisdiction. Maj. Op. at 17827. One can
reach this conclusion only by ignoring the Supreme Court’s
most recently elucidated indicia of Congressional intent: (1)
“speak[ing] in jurisdictional terms,” or (2) “refer[ring] in any
way to the jurisdiction of the courts.” Henderson, 131 S. Ct.
at 1204 (quoting Zipes, 455 U.S. at 394). Nowhere in its opinion does the majority employ this “readily administrable
bright line” rule.3 Id. at 1203 (quoting Arbaugh, 546 U.S. at
515-16). When this standard is applied, it becomes clear that
incorporating the exhaustion requirement into a subsection
that both “speaks in jurisdictional terms” and “refer[s] in
[some] way to the jurisdiction of the [courts],” id., conveys an
intent to tie exhaustion to jurisdiction.
In sum, Congress is “free to attach the conditions that go
with the jurisdictional label” at its discretion, even in cases
where “we would prefer to call [the provision] a claimprocessing rule.” Id. This attachment need not be consistent
with other statutes. Our inquiry simply turns on whether Con3
The majority simply applies the “sweeping and direct language” standard from Weinberger v. Salfi, 422 U.S. 749 (1975). This is not the standard employed by the Supreme Court in Henderson, Arbaugh, or Zipes. To
the extent “sweeping and direct language” is still the applicable standard,
it has been refined to encompass (1) “speak[ing] in jurisdictional terms,”
(2) refer[ing] in any way to the jurisdiction of the [courts],” or (3) conveying jurisdictional intent in the “context” of the statute. Henderson, 131 S.
Ct. at 1204; Arbaugh, 546 U.S. at 516; Zipes, 455 U.S. 394.
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gress has tied jurisdiction to the exhaustion requirement; in
this case, it clearly has. I would therefore affirm on this issue
and hold that the district court lacks jurisdiction to consider
Maronyan’s claims until she exhausts Toyota’s Mechanism.
II. The Federal Trade Commission must decide challenges to a Mechanism’s regulatory compliance
Regardless whether Toyota’s dispute settlement program is
a jurisdictional or procedural prerequisite to filing suit,
Maronyan contends she was not required to exhaust the program. She argued to the district court that (1) Toyota’s program does not qualify as a Mechanism pursuant to certain
MMWA and FTC regulations; and (2) courts, rather than the
FTC, should determine a Mechanism’s regulatory compliance
before making exhaustion a prerequisite to filing suit. Toyota
argued to the district court that state and federal agencies have
authority to assess Mechanism compliance, agency decisions
should be conclusive, and litigating Mechanism compliance in
every instance will produce inconsistent results. The district
court granted Toyota summary judgment on the assumption
that (1) courts have authority to review a Mechanism’s compliance with federal regulations and (2) Toyota’s program
was, in fact, sufficiently compliant to require exhaustion.
Although the issues of a court’s authority to decide Mechanism compliance and the propriety of making such decisions
were properly raised on appeal, the majority’s opinion curiously declined to address them. Because I believe these questions of law should have been answered by our court, I
address each in turn below.
A.
Courts no longer have authority under the MMWA
to review Mechanism compliance
The text and structure of the MMWA reveal that the FTC
should determine a Mechanism’s compliance with federal law
in the first instance. The statute assigns several clear responsibilities to the FTC: (1) establish the minimum requirements
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for Mechanisms, id. § 2310(a)(2); (2) on its own initiative, it
may review Mechanism operations for compliance, id.
§ 2310(a)(4); (3) upon written complaint, it must review
Mechanism operations for compliance, id.; and (4) it may take
appropriate remedial action against non-compliant programs,
id.4 The role of the courts (apparent from the text of the statute) is simply to invalidate any procedure that is “unfair” until
the FTC adopts its own certification regulations. § 2310(a)(5).
Maronyan argues that, because Mechanisms operate as “prerequisite[s] to pursuing a legal remedy” under
§ 2310(a)(3)(B), the MMWA impliedly authorizes courts to
determine whether Mechanisms comply with FTC regulations
when consumers bring claims under the statute. She supports
this argument with an excerpt from a 1974 Senate Conference
Report stating:
4
The statute provides, in relevant part:
(2) The [FTC] shall prescribe rules setting forth minimum
requirements for any informal dispute settlement procedure
which is incorporated into the terms of a written warranty to
which any provision of this chapter applies. . . .
....
(4) The Commission on its own initiative may, or upon written
complaint filed by any interested person shall, review the bona
fide operation of any dispute settlement procedure resort to which
is stated in a written warranty to be a prerequisite to pursuing a
legal remedy under this section. If the Commission finds that
such procedure or its implementation fails to comply with the
requirements of the rules under paragraph (2), the Commission
may take appropriate remedial action under any authority it may
have under this chapter or any other provision of law.
(5) Until rules under paragraph (2) take effect, this subsection
shall not affect the validity of any informal dispute settlement
procedure respecting consumer warranties, but in any action
under subsection (d) of this section, the court may invalidate any
such procedure if it finds that such procedure is unfair.
§ 2310(a) (emphasis added).
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This is not intended to exclude the courts from
reviewing the fairness, and compliance with FTC
rules, of such procedures even where the FTC has
not acted to disapprove them. In this connection the
conferees recognize the limited resources of the
Commission and the fact that its other responsibilities may preclude it from acting in some cases where
private dispute settlement procedures may not comply with the legislation or the Commission’s rules
thereunder. Accordingly, the courts would be free to
determine that a given dispute settlement procedure
need not be exhausted because it was not fair, had no
provision for governmental or consumer participation, or did not comply with FTC rules.
S. Rep. No. 93-1408, at 5 (1974) (Conf. Rep.), reprinted in
1974 U.S.C.C.A.N. 7755, 7759.
This legislative history is not persuasive. As the Supreme
Court observed in Puerto Rico Department of Consumer
Affairs v. Isla Petroleum Corp., courts “never [search for]
congressional intent in a vacuum, unrelated to the giving of
meaning to an enacted statutory text. . . . [U]nenacted approvals, beliefs, and desires are not laws.” 485 U.S. 495, 501
(1988). A legislative report may simply be “precatory” where
the actual text of the statute does not support the language of
the report. Sec’y of the Interior v. California, 464 U.S. 312,
322 n.9 (1984). Thus, legislative history is only persuasive to
the extent it finds textual support in the statute. Shannon v.
United States, 512 U.S. 573, 583 (1994) (the Court will not
give “authoritative weight to a single passage of legislative
history that is in no way anchored in the text of the statute”);
Isla Petroleum, 485 U.S. at 501.
Here, the statute identifies one instance in which courts
should play a role in the Mechanism qualification process:
“invalidat[ing] any such procedure if it finds that such procedure is unfair,” but only “until [FTC rules] take effect.”
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§ 2310(a)(5) (emphasis added). Because the FTC adopted
rules in 1975, see Promulgation of Rule, 40 Fed. Reg. 6019001 (Dec. 31, 1975), courts no longer have statutory authority
to decide a procedure’s fairness or compliance with FTC
rules. If Congress intended courts to continue playing this
role, it should have (1) omitted the limiting qualification
“until [FTC rules] take effect,” or (2) included similar authorizing language elsewhere in the statute, such as § 2310(a)(3)
or (4). Thus, the intent of the Senate report authors (that
courts continue playing a role in the review of Mechanism
compliance) did not bear out in the statutory language ultimately approved by Congress.
Instead, Congress vested the FTC with authority to promulgate rules, monitor Mechanism compliance, and take remedial
action against non-compliant programs. Id. § 2310(a)(2), (4).
Significantly, Congress also established the process by which
consumers should challenge the compliance of a Mechanism:
“The Commission . . . upon written complaint filed by any
interested person shall[ ] review the bona fide operation of
any [Mechanism]” for compliance with FTC rules. Id.
§ 2310(a)(4). As this provision suggests, the proper way to
challenge a Mechanism’s compliance with federal regulations
is to lodge a written complaint with the FTC. See Wolf v. Ford
Motor Co., 829 F.2d 1277, 1279 (4th Cir. 1987) (“[T]he
[MMWA]’s . . . mandate that the [FTC] prescribe minimum
requirements for such mechanisms, evince a congressional
intent to reserve to the federal regulatory body the authority
to supervise whether the mechanisms are created and operated
fairly.”); id. at 1279 n.3 (“[A]ny attack on the fairness or
legitimacy of a dispute settlement mechanism must be
through administrative channels.”); see also Harrison v. Nissan Motor Corp., 111 F.3d 343, 346 n.3 (3d Cir. 1997) (stating in dicta that whether the “BBB Auto Line [Mechanism]
is in compliance with the FTC regulations . . . . is for the FTC,
and not this Court, to decide”).
Maronyan also claims the FTC renounced this role in an
Action statement, suggesting Mechanism compliance is an
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“issue for litigation.” See Interpretations of Magnuson-Moss
Warranty Act, 64 Fed. Reg. 19,700, 19,708 (Fed. Trade
Comm’n Apr. 22, 1999). This is inaccurate. In that Action,
the FTC declined auto manufacturers’ request to establish a
national “prior approval” certification program that would
determine Mechanism compliance with Rule 703 before
mechanisms became effective and preempt certain state certification standards. Id. at 19,707-08. The manufacturers suggested a federal certification program would (1) eliminate the
uncertainty of conflicting state certification standards; (2)
diminish the risk of litigation over a mechanism’s compliance
with federal rules; and (3) encourage more warrantors to
establish Mechanisms by diminishing the cost of compliance
with unified standards for mechanism certification. Id. at
19,708. The Commission “recognize[d] that a uniform certification program could possibly diminish uncertainty,” but
declined the recommendation because, among other things,
“FTC certification would not eliminate a [Mechanism]’s
alleged non-compliance with Rule 703 as an issue for litigation.” Id. Thus, the FTC did not disavow compliance oversight as an “issue for litigation.” It merely disputed one of the
purported benefits of a national certification program by
explaining that federal certification might create more litigation from auto manufacturers challenging the FTC’s denial of
certification and consumers challenging the FTC’s approval
of certification. Id. at 19,708 n.65.
If there is any doubt, the FTC acknowledges its continuing
role in the compliance verification process under Rule 703.
Id. at 19,707; see 16 C.F.R. §§ 703.6, 703.7. The FTC’s existing regulations require Mechanisms to (1) maintain detailed
records on each dispute referred to it, organize the records in
categorical indices, generate semi-annual aggregated statistics
based on the result of arbitration, and maintain such records
for four years, id. § 703.6; (2) make these records available to
independent auditors for evaluation based on criteria determined by the FTC, id. § 703.7(a), (b), (d); and (3) submit
audits to the FTC on an annual basis, id. § 703.7(c). Thus,
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under both the statute and relevant FTC regulations, the FTC
exclusively oversees warrantors’ Mechanism compliance.
B. Courts should defer to the FTC on issues of
Mechanism compliance
Even if courts had authority under the MMWA to address
Mechanism compliance with federal regulations, courts
should defer to the FTC under the primary jurisdiction doctrine. The primary jurisdiction doctrine prescribes deference
to an administrative agency where (1) the issue is not “within
the conventional experiences of judges,” (2) the issue “involves technical or policy considerations within the agency’s
particular field of expertise,” (3) the issue “is particularly
within the agency’s discretion,” or (4) “there exists a substantial danger of inconsistent rulings.” Brown v. MCI WorldCom
Network Servs., Inc., 277 F.3d 1166, 1172-73 (9th Cir. 2002)
(citations omitted); accord Nat’l Commc’n Ass’n, Inc. v.
AT&T Co., 46 F.3d 220, 222-23 (2d Cir. 1995). The issue of
Mechanism compliance falls within each of these categories.
First, Mechanism compliance involves “technical [and]
policy considerations within the [FTC]’s field of expertise,”
which considerations fall outside the conventional experience
of judges. The FTC has exclusive authority to promulgate
minimum standards for Mechanisms, see § 2310(a)(2), and it
alone monitors IDSM compliance nationally, see id.
§ 2310(a)(4). Thus, the FTC is in a unique position to determine the national implications of compliance orders determining, among other things, how strict compliance must be with
certain provisions and whether the substantial compliance
doctrine applies to the overall operation of the Mechanism.
For example, the FTC declined to establish a national “prior
approval” certification program in part because it might “exert
a chilling effect on competition and on experimentation by
Mechanisms, warrantors, and state governments in setting up
and administering these programs.” 64 Fed. Reg. at 19,708.
This was a policy judgment informed by the FTC’s expertise
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as the national overseer of Mechanism operations. The FTC
processes data from annual audits submitted by every Mechanism in the country to evaluate Mechanisms’ overall performance in a broad range of categories. See 16 C.F.R. § 703.7.
Because a court (utilizing the narrow facts in a single case)
cannot evaluate the many policy considerations hanging in the
balance of a compliance order, the FTC is better suited to
decide compliance issues under the national Mechanism regulatory regime.
Second, Mechanism compliance is “particularly within the
agency’s discretion.” Congress gave the FTC substantial leeway in reviewing Mechanism compliance and taking “appropriate remedial action” against non-compliant Mechanisms.
See § 2310(a)(4). The FTC is in the best position to determine
whether strict compliance with some provisions in Rule 703
(e.g., the four-year record keeping requirement, 16 C.F.R.
§ 703.6(f)) may be less important than strict compliance with
other provisions (e.g., the requirement that manufacturers act
in good faith in deciding whether to accept the outcome proposed by a Mechanism arbitrator, id. § 703.5(j)). Similarly,
the FTC can better assess when the volume of a Mechanism’s
irregularities rise to the level of non-compliance such that
consumers need not exhaust the Mechanism before filing suit.
The FTC has also expressed its desire to encourage “competition” and “experimentation” by warrantors in setting up and
administering Mechanisms, and “would be loathe to take regulatory action likely to exert a chilling effect” on this process.
64 Fed. Reg. at 19,708. Strict enforcement by a court of any
particular regulation could have the same chilling effect on
warrantors’ Mechanism experimentation or even warrantors’
willingness to create Mechanisms. Thus, Mechanism compliance falls “particularly within the [FTC’s] discretion,”
because the FTC is in the best position to balance consumers’
needs with Congress’s desire to encourage fair and expeditious settlement of consumer disputes. See § 2310(a)(1).
Finally, “there [is] a substantial danger of inconsistent rulings” that could compromise Congressional objectives under-
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lying the MMWA. If warrantors must prove a Mechanism’s
compliance to trial courts anytime a consumer brings a claim
under the MMWA, inconsistent rulings are virtually inevitable. Courts would create a national patchwork of Mechanism
compliance decisions that companies would have to monitor
and adapt to ensure their own Mechanisms are deemed compliant when they assert § 2310(a)(3) exhaustion as a jurisdictional bar. This would raise the cost of compliance for
warrantors and likely discourage companies from using
Mechanisms to resolve consumer complaints. The FTC, by
contrast, operates as the national clearinghouse for compliance standards. If all compliance decisions are rendered by
the same agency, the standards will be more consistent and
easy to identify. Congress explicitly declared its “policy to
encourage warrantors to establish procedures whereby consumer disputes are fairly and expeditiously settled through
informal dispute settlement Mechanisms.” § 2310(a)(1).
Because creating an inconsistent regulatory patchwork
through the courts could compromise this policy, the FTC
should remain the primary judge of a Mechanism’s compliance with federal regulations.
In sum, given the statutory framework establishing the FTC
as the principal authority on Mechanism compliance, the FTC
is best suited to address challenges to Mechanism compliance
in the first instance. Therefore, the FTC’s compliance decisions deserve judicial deference under the primary jurisdiction
doctrine. Maronyan’s challenge to Toyota’s Mechanism compliance status should have been be directed to the FTC rather
than the courts. See § 2310(a)(3). Because Maronyan has not
demonstrated that the FTC regards Toyota’s CDSP Mechanism as non-compliant with Rule 703 or applicable provisions
of the MMWA, she must exhaust her warranty claims through
Toyota’s Mechanism before filing suit. Her failure to do so
deprives the federal courts of jurisdiction over her claims arising under the MMWA.
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