When it comes to consumer class actions, Arkansas is normally not high on the list of states that retailers should be concerned about. However, a new wave of Magnuson-Moss Warranty Act (MMWA) lawsuits have changed the legal landscape, with at least 23 class actions filed against retailers and manufacturers of consumer products in Arkansas alone in recent months. Several others have been filed in the Court of Common Pleas in Pennsylvania, and some of the companies sued in Arkansas and/or Pennsylvania have also been hit with copycat suits in Illinois and California. Because the MMWA is a federal law that applies nationwide, more suits could be coming in other jurisdictions.

The Magnuson-Moss Warranty Act

The MMWA is the federal law governing written warranties for consumer goods. See 15 U.S.C. §§ 2301-2312. Congress has also empowered the Federal Trade Commission (FTC) to adopt regulations covering other requirements under the MMWA. Together, the MMWA and FTC rules establish the federal requirements for consumer product warranties, providing a private, federal cause of action against warrantors who fail to comply. 15 U.S.C. § 2310(c).

Sellers Beware of the Pre-Sale Availability Rule

Most of the recent suits against retailers have been brought pursuant to the FTC regulation governing "Pre-Sale Availability of Written Warranty Terms" (16 C.F.R. Part 702), or, as it's more commonly known, the "Pre-Sale Availability Rule."

Pursuant to this rule, retailers must, for any consumer product that costs more than $15 and has a consumer warranty, "make a text of the warranty readily available for examination by the prospective buyer." This can be done in one of two ways. First, retailers can display the warranty "in close proximity to the warranted product," including through electronic or other means. Alternatively, the retailer can post signs in "prominent locations" that advise customers prior to sale that the warranty is available upon request. If the warrantor has supplied the warranty online, the retailer may provide the warranty in an electronic format. 16 CFR § 702.3. The Rule does not specify any particular method for fulfilling its requirements.

Since June 2022, at least 13 suits have been filed in Arkansas against some of the biggest retail and e-commerce giants in the country—including Bed Bath & Beyond, Lowe's, Hobby Lobby, Dollar General, and Best Buy—for failing to satisfy these requirements. With some exceptions, these lawsuits have targeted traditionally large retailer entities with a brick and mortar presence.

These lawsuits allege that plaintiffs shopped at the retailers "with the intent to purchase" at least one product subject to the Pre-Sale Availability Rule, meaning the product (a) cost more than $15 and (b) is subject to a manufacturer's warranty. Plaintiffs then claim that the retailers failed to comply with the Pre-Sale Availability Rule by neither (1) displaying product warranties in close proximity to the products it sells, nor (2) placing signs in prominent locations to advise consumers of the availability of warranties upon request. Additionally, plaintiffs in some of these actions have claimed that the retailers' noncompliance is part of a deliberate, self-serving attempt to sell the retailer's own warranties and protection plans for already-covered products.

These cases are still in their early stages. As a threshold issue, defendants in several lawsuits have removed their cases to the Eastern District of Arkansas, pursuant to the Class Action Fairness Act (CAFA); plaintiffs have consistently moved to remand. Plaintiffs appear to have intentionally sought to avoid federal jurisdiction by only seeking injunctive and declaratory relief, so as to avoid CAFA's amount in controversy requirements (although the MMWA also provides for federal question jurisdiction, it has its own amount in controversy requirement, in addition to other requirements.)

Warrantors Beware of Anti-Tying Provisions

Recent suits against manufacturers have generally been brought under the MMWA's "anti-tying" provision, which prohibits warrantors from stating or implying that a warranty is conditioned on the purchase or use of an item or service from a particular company. See 16 CFR § 700.10. Plaintiffs allege that by dissuading customers from seeking third-party repair services, manufacturers have violated this requirement and created a monopoly on repairing the goods they sell, as well the after-market parts. At least 10 of these suits have been filed in Arkansas since June 2022, generally targeting the manufacturers of household electronic products, such as computers, vacuum cleaners, razors, and coffee machines.

Plaintiffs in these suits have alleged that warrantors violated the "anti-tying" provision of the MMWA by telling consumers their warranty will be void if third-party repair services are used to fix their products. See, e.g., Allinder v. Wahl Clipper Corp., Case No. 4:22-cv-0723 (E.D. Ark.).

Notably, the FTC has explained that "a warrantor can require a consumer to use select items or services if they're provided free of charge under the warranty or the warrantor receiver a waiver from the FTC." Furthermore, a warrantor is permitted to disclaim warranty coverage for defects or damage caused by parts or services it did not provide.

Conclusion

So far, these suits have primarily been filed in Arkansas, Pennsylvania, Illinois, and California. However, if history is any indicator, attention-getting litigation against some of the biggest retailers in the country may inspire more copycat suits in other jurisdictions. Retailers and manufacturers alike should review their warranty practices now to protect themselves.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.