Maronyan v. Toyota Motor Sales, U.S.A., Inc.

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

MARIAM MARONYAN,  No. 09-56949

Plaintiff-Appellant,

D.C. No.

v.

 8:08-cv-00905-

TOYOTA MOTOR SALES, U.S.A., DOC-MLG

INC.,

OPINION

Defendant-Appellee.



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

MARONYAN v. TOYOTA MOTOR SALES 17821

COUNSEL

Martin W. Anderson, Anderson Law Firm, Santa Ana, Cali-

fornia, for plaintiff-appellant Mariam Maronyan.

Peder K. Batalden, Horvitz & Levy LLP, Encino, California,

for defendant-appellee Toyota Motor Sales, U.S.A., Inc.

17822 MARONYAN v. TOYOTA MOTOR SALES

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 pro-

cedure],

(B) such procedure, and its implementation meets

the requirements of [the FTC’s rules under para-

graph (2)], and

(C) he incorporates in a written warranty a require-

ment that the consumer resort to such procedure

before pursuing any legal remedy under this section

respecting such warranty,

MARONYAN v. TOYOTA MOTOR SALES 17823

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 set-

tlement 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 pruden-

tial 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 mat-

ter jurisdiction only in those cases in which Congress makes

plain the jurisdictional character of the exhaustion require-

ment in question. “Consistent with the Supreme Court’s guid-

ance 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

17824 MARONYAN v. TOYOTA MOTOR SALES

exhaust does not deprive a federal court of jurisdiction when

the exhaustion statute is merely a codification of the exhaus-

tion requirement,” unless Congress uses “ ‘sweeping and

direct’ language that goes beyond a requirement that only

exhausted claims be brought.” Id. at 979 (quoting Weinber-

ger, 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 Con-

gress 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 com-

ply 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. Shin-

seki, 131 S. Ct. 1197 (2011), unanimously held that the dead-

line 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 jurisdic-

tional 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

MARONYAN v. TOYOTA MOTOR SALES 17825

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 jurisdic-

tion 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 subject-

matter jurisdiction of federal district courts based on a wide

variety of factors,” and lists a number of previously-

recognized 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 con-

siderations resembles the MMWA’s requirement that a plain-

tiff exhaust pre-filing remedies before bringing an action. Id.

at 515 n.11.

The Court has chastised lower courts for their overly zeal-

ous application of the term “jurisdictional” to what are accu-

rately understood as claims-processing rules or elements of a

plaintiff’s claim. Reed Elsevier, 130 S.Ct. at 1243-44. A unan-

imous court in Arbaugh restated the necessity of a clear Con-

gressional mandate to elevate a statutory requirement to a

jurisdictional prerequisite, emphasizing that “[i]f the Legisla-

ture 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 acknowl-

edged that “Congress is free to attach . . . the jurisdictional

label to a rule that [the courts] would prefer to call a claims-

processing rule,” Henderson, 131 S.Ct. at 1203, it has cau-

tioned lower courts to refrain from capriciously assigning the

jurisdictional label when Congress has failed to clearly pro-

vide the requisite mandate, see Reed Elsevier, 130 S.Ct. at

17826 MARONYAN v. TOYOTA MOTOR SALES

1244 (cautioning courts against engaging in “drive-by juris-

dictional 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 fail-

ure to exhaust did not deprive the district court of jurisdiction. See Ander-

son 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. Hel-

man, 196 F.3d 727, 732 (7th Cir. 1999).

MARONYAN v. TOYOTA MOTOR SALES 17827

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 require-

ment.” 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 jurisdic-

tional 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 juris-

dictional 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 con-

stitute 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 jurisdic-

tion. See Dawson Farms, 504 F.3d at 603; Ace Prop., 440 F.3d at 999;

McBride, 290 F.3d at 980.

17828 MARONYAN v. TOYOTA MOTOR SALES

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 pru-

dential exhaustion requirement. Neither § 2310(a)(3) nor

§ 2310(a)(4) even mentions subject matter jurisdiction. Else-

where, the statute prompts warrantors to include

“[i]nformation respecting the availability of any informal dis-

pute 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, Interpreta-

tions 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 juris-

diction 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 lan-

guage, the Court has repeatedly held that “a statutory condi-

tion 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-

MARONYAN v. TOYOTA MOTOR SALES 17829

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 juris-

diction. Nor does Toyota rely on a single case in which a

court dismissed an action for lack of subject matter jurisdic-

tion 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 pre-

filing 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 dis-

pute 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-to-

exhaust 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 jurisdic-

tion 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 mind-

ful that we are a court of review, not first view, we do not consider them

here.”)

17830 MARONYAN v. TOYOTA MOTOR SALES

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 exhaus-

tion] 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 fed-

eral 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 mean-

1

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).

MARONYAN v. TOYOTA MOTOR SALES 17831

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 adminis-

trable bright line” test from Arbaugh v. Y&H Corp. for decid-

ing such questions: “we look to see if there is any “clear”

indication that Congress wanted the rule to be ‘jurisdiction-

al.’ ” 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 dis-

cern[ ] by looking to the condition’s text, context, and rele-

vant 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 juris-

diction) falling within a court’s adjudicatory authority.”

(emphasis added)).

Section 2310(d)(1) of the MMWA ties Mechanism exhaus-

tion to the jurisdiction of the courts by expressly incorporat-

ing § 2310(a)(3):

(d) Civil action by consumer for damages, etc.;

jurisdiction; recovery of costs and expenses; cog-

nizable claims

(1) Subject to [the exhaustion requirement in] sub-

section[ ] (a)(3) . . . of this section, a consumer who

is damaged by the failure of a supplier, warrantor, or

17832 MARONYAN v. TOYOTA MOTOR SALES

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 “juris-

diction,” § 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 pro-

vision 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). How-

ever, 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.

MARONYAN v. TOYOTA MOTOR SALES 17833

a civil action . . . unless he initially resorts to [an informal dis-

pute 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 sub-

section 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 opin-

ion 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 claim-

processing rule.” Id. This attachment need not be consistent

with other statutes. Our inquiry simply turns on whether Con-

3

The majority simply applies the “sweeping and direct language” stan-

dard from Weinberger v. Salfi, 422 U.S. 749 (1975). This is not the stan-

dard 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) convey-

ing 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.

17834 MARONYAN v. TOYOTA MOTOR SALES

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 chal-

lenges 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 pro-

gram. She argued to the district court that (1) Toyota’s pro-

gram 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 com-

pliance 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 Mecha-

nism compliance and the propriety of making such decisions

were properly raised on appeal, the majority’s opinion curi-

ously declined to address them. Because I believe these ques-

tions 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 responsi-

bilities to the FTC: (1) establish the minimum requirements

MARONYAN v. TOYOTA MOTOR SALES 17835

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 stat-

ute) 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 “pre-

requisite[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).

17836 MARONYAN v. TOYOTA MOTOR SALES

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 responsibili-

ties may preclude it from acting in some cases where

private dispute settlement procedures may not com-

ply 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 participa-

tion, 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 approv-

als, 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 proce-

dure is unfair,” but only “until [FTC rules] take effect.”

MARONYAN v. TOYOTA MOTOR SALES 17837

§ 2310(a)(5) (emphasis added). Because the FTC adopted

rules in 1975, see Promulgation of Rule, 40 Fed. Reg. 60190-

01 (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 autho-

rizing 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 ulti-

mately approved by Congress.

Instead, Congress vested the FTC with authority to promul-

gate 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. Nis-

san Motor Corp., 111 F.3d 343, 346 n.3 (3d Cir. 1997) (stat-

ing 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

17838 MARONYAN v. TOYOTA MOTOR SALES

“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 certi-

fication standards. Id. at 19,707-08. The manufacturers sug-

gested 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 certifi-

cation 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 litiga-

tion.” Id. Thus, the FTC did not disavow compliance over-

sight 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 litiga-

tion 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 exist-

ing 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 deter-

mined 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,

MARONYAN v. TOYOTA MOTOR SALES 17839

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 doc-

trine. 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 “in-

volves 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 substan-

tial 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 deter-

mine the national implications of compliance orders determin-

ing, 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

17840 MARONYAN v. TOYOTA MOTOR SALES

as the national overseer of Mechanism operations. The FTC

processes data from annual audits submitted by every Mecha-

nism in the country to evaluate Mechanisms’ overall perfor-

mance 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 regu-

latory regime.

Second, Mechanism compliance is “particularly within the

agency’s discretion.” Congress gave the FTC substantial lee-

way in reviewing Mechanism compliance and taking “appro-

priate 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 pro-

posed 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 “competi-

tion” and “experimentation” by warrantors in setting up and

administering Mechanisms, and “would be loathe to take reg-

ulatory 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 compli-

ance 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 expedi-

tious settlement of consumer disputes. See § 2310(a)(1).

Finally, “there [is] a substantial danger of inconsistent rul-

ings” that could compromise Congressional objectives under-

MARONYAN v. TOYOTA MOTOR SALES 17841

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 inevita-

ble. 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 com-

pliant when they assert § 2310(a)(3) exhaustion as a jurisdic-

tional 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 compli-

ance 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 con-

sumer 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 compli-

ance 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 deci-

sions deserve judicial deference under the primary jurisdiction

doctrine. Maronyan’s challenge to Toyota’s Mechanism com-

pliance 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 Mecha-

nism 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 aris-

ing under the MMWA.