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Mandatory Arbitration Requirement Overruled in 9th Circuit Case

Tuesday, September, 27, 2011

Judge Stephen Reinhardt ruled against mandatory arbitration in a decision of the 9th U.S.  Circuit Court of Appeals, thereby overturning a lower court decision that had found for the practice in a case involving a warranty dispute with The Auto Gallery, an independent car dealer.  The case of Kolev vs. Porsche Cars North America, Inc. will now be heard in court.  “Written warranty provisions that mandate pre-dispute binding arbitration are invalid,” wrote Judge Stephen Reinhardt in his opinion.  The decision was not unanimous, but a 2-1 split vote.


The dissenting vote came from Judge N.  Randy Smith, who noted that the decision ignores clear precedents from the U.S. Supreme Court.  According to Smith, the 9th Circuit's ruling “nullifies nearly every binding, non-judicial warranty dispute remedy adopted by private parties.” The decision currently applies only to warranties issued in the 9th Circuit's area of governance.  The 9th Circuit covers states in the western United States and includes California.


Diana Kolev to Avoid Mandatory Arbitration


At issue was a Porsche 911 Turbo that had a stalled engine, problems with suspension, and a foul smell emanating from interior vents, among other problems.  Diana Kolev alleges that Porsche refused to offer repairs as required by the warranty on the $92,000 car. She had signed a commercial arbitration agreement. The case will now be returned to the California federal district court in Santa Ana.