# Borowiec v. GATEWAY 2000, INC.

> Illinois Supreme Court · April 1, 2004 · 209 Ill. 2d 376

URL: https://www.frixlaw.com/law-library/cases/9720902

## Case

- **Full name:** MICHAEL BOROWIEC Et Al., Appellees, v. GATEWAY 2000, INC., Appellant
- **Court:** Illinois Supreme Court
- **Decided:** April 1, 2004
- **Citations:** 209 Ill. 2d 376; 283 Ill. Dec. 669; 808 N.E.2d 957; 2004 Ill. LEXIS 675
- **Precedential status:** Published
- **Opinion:** Dissent by Kilbride
- **Judges:** Freeman, Kilbride, Rarick
- **Cited by:** 134 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/9720902

## How later opinions describe it (automated extraction)

- noting that the purpose was " 'to reverse the longstanding judicial hostility to arbitration agreements that had existed at English common law and had been adopted by American courts, and to place arbitration agreements upon the same footing as other contracts' " (quoting Gilm…
- finding the Walton analysis "particularly helpful"

## Opinion text

JUSTICE KILBRIDE, dissenting:
I join in Justice Rarick’s dissent, but I write separately to raise several additional points, including my belief that the majority opinion runs afoul of the most fundamental of all statutory rules, namely, to construe statutes so as to effectuate the true intent of the drafters. See Kraft, Inc. v. Edgar, 138 Ill. 2d 178, 189 (1990) (stating that “[i]n interpreting a statute, the primary rule *** is to ascertain and give effect to the true intent and meaning of the legislature”).
The Magnuson-Moss Act was specifically designed to protect consumers. See 15 U.S.C. § 2302 (a) (1994) (stating the Magnuson-Moss Act was enacted “to improve the adequacy of information available to consumers, prevent deception, and improve competition in the marketing of consumer products”). The result reached by the majority, however, directly undermines this purpose by permitting manufacturers to slip mandatory, binding arbitration provisions into nonnegotiable consumer product warranties and, thus, to limit consumers’ avenues of relief in the event of a warranty dispute. Because I believe this result contradicts the legislature’s intent to protect consumers’ interests in product warranty disputes, I respectfully dissent.
In rejecting the FTC’s regulations interpreting the Magnuson-Moss Act, the majority relies heavily on both Walton v. Rose Mobile Homes LLC, 298 F.3d 470 (5th Cir. 2002) (209 Ill. 2d at 389-92), and Davis v. Southern Energy Homes, Inc., 305 F.3d 1268, 1276 (11th Cir. 2002) (209 Ill. 2d at 392-94). I cannot agree with the majority’s approach to these cases.
In Walton, the federal appeals court applied the test adopted by the Supreme Court in Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43 , 81 L. Ed. 2d 694, 702-03 , 104 S. Ct. 2778, 2781-82 (1984), to determine whether courts must defer to agencies’ statutory interpretations. Under this test, a court must first determine “whether Congress has directly spoken to the precise question at issue.” Chevron, 467 U.S. at 842 , 81 L. Ed. 2d at 702-03 , 104 S. Ct. at 2781 . If the legislature’s intent is clear and unambiguous, we must follow it. Chevron, 467 U.S. at 842-43 , 81 L. Ed. 2d at 703 , 104 S. Ct. at 2781 . If Congress has not clearly addressed the issue before us, however, we must consider whether the agency’s interpretation of the section is reasonable. Chevron, 467 U.S. at 843 , 81 L. Ed. 2d at 703 , 104 S. Ct. at 2781-82 . “ If [the agency’s] choice represents a reasonable accommodation of conflicting policies that were committed to the agency’s care by the statute, we should not disturb it unless it appears from the statute or its legislative history that the accommodation is not one that Congress would have sanctioned.’ ” Chevron, 467 U.S. at 845 , 81 L. Ed. 2d at 704 , 104 S. Ct. at 2783 , quoting United States v. Shimer, 367 U.S. 374, 383 , 6 L. Ed. 2d 908, 915 , 81 S. Ct. 1554, 1560 (1961).
In the instant case, I believe the majority has unwisely chosen to follow the Walton court’s erroneous conclusion on prong one of the Chevron test. 209 Ill. 2d at 389 (finding the Walton analysis “particularly helpful”). The Walton court held that Congress had spoken directly to the precise issue of whether binding arbitration provisions are permissible in consumer product warranties. Walton, 298 F.3d at 478 (stating that “[t]he clear congressional intent in favor of enforcing valid arbitration agreements controls in this case”). That mistaken conclusion, in turn, obviated the need to reach the second prong of the Chevron analysis and, thus, to address the reasonableness of the FTC’s interpretation. Walton, 298 F.3d at 478 n.14.
The Walton court’s error is apparent from both the text and the legislative history of the Magnuson-Moss Act. Notably, the text of the Act is completely silent concerning its interaction with the Arbitration Act in consumer warranty cases. Walton, 298 F.3d at 475 (acknowledging that the text did not address the permissibility of binding arbitration clauses in consumer warranties). Under the Chevron analysis, if the statute is silent on a given issue, we must next consider whether the agency’s construction of the statute is permissible. Chevron, 467 U.S. at 843 , 81 L. Ed. 2d at 703 , 104 S. Ct. at 2782 . Thus, since the statute itself is silent on the precise question at issue here, the Walton court should have proceeded to prong two of the analysis. At best, the statute’s silence necessarily creates a strong ambiguity regarding Congress’ true intent on this issue. By overlooking the absence of any language in the MagnusonMoss Act directly addressing its potential conflict with the Arbitration Act and rushing headlong to the conclusion that Congress has directly spoken on this precise question, the majority in both Walton and this case ignore the express directive of the Supreme Court established in the Chevron test. Since the Magnuson-Moss Act is undisputedly silent on this issue, this court should proceed with an analysis of prong two of the Chevron test and consider whether the FTC’s regulations are “arbitrary, capricious, or manifestly contrary to the statute.” Chevron, 467 U.S. at 844 , 81 L. Ed. 2d at 703 , 104 S. Ct. at 2782 .
In addition, yet another material ambiguity exists in the Magnuson-Moss Act, precluding adoption of the Walton court’s conclusion that Congress had already directly spoken to this issue. The scope of the term “informal dispute settlement procedures” in section 2310 is directly at issue here, yet it is not at all clear whether Congress intended that term to include mandatory binding arbitration. This additional ambiguity in the text of the Magnuson-Moss Act again requires reviewing courts to examine the second prong of the Chevron test and determine the reasonableness of the FTC’s interpretation. See Chevron, 467 U.S. at 843 , 81 L. Ed. 2d at 703 , 104 S. Ct. at 2782 (explaining that “if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency’s answer is based on a permissible construction of the statute”). I believe that here the statutory language is inherently ambiguous and, thus, a reviewing court must proceed to prong two of the Chevron analysis. Due to the Walton court’s failure to recognize any of these ambiguities, however, it erroneously concluded its analysis under prong one of the Chevron test.
Moreover, the Supreme Court has explained that, in examining the first prong of the Chevron test, courts should view the relevant statutory language in context and with an eye toward advancing the overall statutory scheme. FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 132-33 , 146 L. Ed. 2d 121, 133-34 , 120 S. Ct. 1291, 1300-01 (2000). While the Walton court purported to review the relevant legislative history, it appears to have applied the wrong standard in conducting the Chevron test. Walton, 298 F.3d at 276-77 . The court required a showing that the legislature clearly intended to preclude the arbitration of claims under the MagnusonMoss Act before it would proceed to prong two of the Chevron test. Walton, 298 F.3d at 477 . As stated in Chevron, the actual test under prong one is not whether the legislature expressed a clear intent to adopt the premise underlying the regulation subsequently issued by the agency but, rather, whether the “statute is silent or ambiguous with respect to the specific issue.” Chevron, 467 U.S. at 843 , 81 L. Ed. 2d at 703 , 104 S. Ct. at 2782 . I believe that, at most, when reviewed under the proper standard, the legislative histories of the relevant acts demonstrate the ambiguous nature of the relationship between section 2310 and the Arbitration Act. Thus, the majority’s reliance on Walton is misplaced.
In Davis v. Southern Energy Homes, Inc., 305 F.3d 1268, 1276 (11th Cir. 2002), cited with favor by the majority here (209 Ill. 2d at 392-94), the federal appeals court also concluded that the legislative history of the Magnuson-Moss Act “is ambiguous at most.” As the Davis court noted, a preliminary Senate report on the Magnuson-Moss Act stated that “ ‘it is Congress’ intent that warrantors of consumer products cooperate with government and private agencies to establish informal dispute settlement mechanisms that take care of consumer grievances without the aid of litigation or formal arbitration.’ ” (Emphasis added.) Davis, 305 F.3d at 1276 , quoting S. Rep. No. 91—876, at 22-23 (1970). Viewed in this context, the congressional intent underlying section 2310 is not at all clear from the statutory language and legislative history, contrary to the Walton court’s conclusion. Accordingly, the Davis court concluded that “the intent of Congress is unclear,” requiring it to proceed to prong two of the Chevron test. Davis, 305 F.3d at 1278 .
Although the majority also supports its decision by looking to Harrison v. Nissan Motor Corp., 111 F.3d 343 (3d Cir. 1997), I fail to see how Harrison adds any substantial support to the result reached in this case. Harrison held that a voluntary, nonbinding arbitration provision in a car warranty does not qualify as “a contract to arbitrate their dispute within the meaning of the FAA,” thus leaving the court without jurisdiction over the appeal. Harrison, 111 F.3d at 351 . This is not the same case. Here, a mandatory, binding arbitration provision, that is nonnegotiable and was unilaterally created by Gateway, effectively cuts off all consumers’ rights to any opportunity for judicial recourse.
Despite the widely conflicting analyses in Walton and Davis, and the tangential and inapposite reference to Harrison, the majority in this case attempts to support its result by citing the uniformity of the federal appellate courts that have reviewed the issue. 209 Ill. 2d at 397-98. Even a cursory examination of the Walton and Davis decisions, however, reveals that they could not be further apart in their rationales. Thus, the purported uniformity of the federal circuit courts of appeals relied on here by the majority is illusory. Regrettably, the majority opinion does not adopt a single rationale based on either of these cases, appearing instead to apply both. 209 Ill. 2d at 397-98. Without any explanation of the specific rationale used to decide this case, the majority’s opinion fails to provide any guidance for future cases. I cannot countenance such an open-ended approach to setting precedent in this state.
I also believe the majority has ignored a basic rule of statutory construction by approving the rationale in Walton. The Walton court failed to apply the long-standing general rule that more recent and specific legislation prevails over broader, earlier legislation. Knolls Condominium Ass’n v. Harms, 202 Ill. 2d 450, 459 (2002). See 209 Ill. 2d at 416, 424 (Rarick, J., dissenting, joined by Kilbride, J.). Recently, the United States Supreme Court also applied this fundamental rule of construction.
“The ‘classic judicial task of reconciling many laws enacted over time, and getting them to “make sense” in combination, necessarily assumes that the implications of a statute may be altered by the implications of a later statute.’ [Citation.] This is particularly so where the scope of the earlier statute is broad but the subsequent statutes more specifically address the topic at hand. As we recognized recently ***, ‘a specific policy embodied in a later federal statute should control our construction of the [earlier] statute, even though it ha[s] not been expressly amended.’ [Citation.]” FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 143 , 146 L. Ed. 2d 121, 140 , 120 S. Ct. 1291, 1306 (2000).
Here, the Magnuson-Moss Act was passed 50 years after the Arbitration Act and expressly addressed consumer warranty issues. In contrast, the Arbitration Act concerned the use of arbitration in general contract disputes. Under the applicable rule of construction, the Magnuson-Moss Act trumps the Arbitration Act when addressing arbitration clauses in consumer warranties because it was enacted after the Arbitration Act and deals directly with the consumer warranty issue.
The Walton court relied exclusively on the favorable treatment of arbitration reflected in the Arbitration Act. Walton, 298 F.3d at 474 . Thus, the court relied on “a general policy expressed in a prior, less specific statute. The Supreme Court has never invoked similar reasoning in applying the first prong of the Chevron inquiry.” Walton, 298 F.3d at 483 (King, C.J., dissenting). In doing so, the majority in Walton failed to recognize the precedence that the Magnuson-Moss Act had over the Arbitration Act in consumer warranty cases such as this one. By approving of the Walton rationale, this court has duplicated this error.
Finally, if the Act is viewed in the proper historical context, it is apparent that the disputed terms “informal dispute settlement procedures” and “informal dispute settlement mechanisms” fail to support the Walton court’s conclusion that the Magnuson-Moss Act was not intended to preclude mandatory binding arbitration. See Walton, 298 F.3d at 476 . Assuming, arguendo, that the Act is unambiguous, these terms must be considered in light of their meaning in 1975, when the Magnuson-Moss Act was enacted. The Walton court appears to have erroneously based its conclusion on its belief that, under today’s standards, “binding arbitration is normally considered to be an ‘informal dispute settlement procedure,’ and *** therefore seems to fall outside the bounds of the MMWA and of the FTC’s power to prescribe regulations.” Walton, 298 F.3d at 476 . That is not the correct context for reviewing the meaning of the statutory language. Statutes are to be construed to effectuate the intent of the drafters at the time of their adoption. Sayles v. Thompson, 99 Ill. 2d 122, 125 (1983).
In 1975, contractual arbitration outside the context of labor law was not the same highly evolved creation it is today, and binding arbitration was not the norm. Today, binding arbitration is quite formalized, with many of the trappings of traditional litigation, but in 1975, it was in its relative infancy. See 4 Am. Jur. 2d Alternative Dispute Resolution § 1, at 64 (1995). See also Walton, 298 F.3d at 484 (King, C.J., dissenting). I believe it is error to apply today’s standards to determine whether the “informal dispute settlement procedures” prohibited by the Magnuson-Moss Act include mandatory binding arbitration clauses in consumer warranties. As viewed in 1975, “informal dispute settlement procedures” were equivalent to today’s “alternative dispute resolution” and meant any nonjudicial redress mechanisms. See 4 Am. Jur. 2d Alternative Dispute Resolution § 1, at 64-65 (1995).
A leading advocate of arbitration at the time, the American Arbitration Association, referred to arbitration as a settlement mechanism (American Arbitration Association, A Dictionary of Arbitration and Its Terms— Labor — Commercial—International, A Concise Encyclopedia of Peaceful Dispute Settlement 12 (1970)), and the plain and ordinary meaning of the word “arbitrate” included “[t]o submit to settlement or judgment by arbitration” (American Heritage Dictionary of the English Language 87 (1969)). It is a fundamental rule of statutory construction that the plain and ordinary meaning of the language employed by the drafters is the best evidence of their intent. Lulay v. Lulay, 193 Ill. 2d 455, 466 (2000). Moreover, the Supreme Court was also contemporaneously using the term “dispute settlement” to include arbitration, reflecting the widely held view that arbitration was a “dispute settlement procedure.” Detroit & Toledo Shore Line R.R. Co. v. United Transportation Union, 396 U.S. 142, 149-50 , 24 L. Ed. 2d 325, 332-33 , 90 S. Ct. 294, 298-99 (1969).
Thus, the Magnuson-Moss Act’s prohibition of “legally binding” mechanisms (16 C.ER. § 703.5(j) (2003)) is properly interpreted to mean that permissible “informal dispute settlement procedures,” including arbitration, may not preclude subsequent judicial redress. Arbitration may, however, be a necessary condition precedent to litigation under the Magnuson-Moss Act. In any case, it may not be the exclusive remedy for claims involving consumer warranties.
This interpretation comports with the primary purpose of the Magnuson-Moss Act, that is, to protect consumers. See 15 U.S.C. § 2302 (a) (2000) (stating the Magnuson-Moss Act was enacted “to improve the adequacy of information available to consumers, prevent deception, and improve competition in the marketing of consumer products”). The result reached by the majority directly conflicts with this purpose by approving manufacturers’ unilateral inclusion of mandatory, binding arbitration provisions in consumer product warranties. As a practical matter, these warranties are contracts of adhesion, and the binding arbitration provisions are nonnegotiable. Consumers possess disparate bargaining power and are faced with the dilemma of having to either “ ‘take it or leave it.’ ” Williams v. Illinois State Scholarship Comm’n, 139 Ill. 2d 24, 72 (1990). Thus, even though the Magnuson-Moss Act was intended to improve competition, under the majority’s ruling consumers have no ability to shop for products without these overreaching, binding arbitration provisions. Under these circumstances, permitting manufacturers to cut off consumers’ right to a judicial remedy and review cannot be construed as upholding the legislature’s true intent in drafting the Magnuson-Moss Act. Such a result flies in the face of Congress’ express desire to protect average consumers from harmful overreaching in consumer product warranties. See 15 U.S.C. § 2303 (a) (2000).
For these reasons, as well as those outlined in Justice Rarick’s dissent, I respectfully dissent from the majority opinion in this case.
JUSTICE RARICK joins in this dissent.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/9720902. Public record. Not legal advice.