Harrison v. Nissan Motor Corp

Opinions of the United
1997 Decisions States Court of Appeals
for the Third Circuit

4-15-1997

Harrison v. Nissan Motor Corp
Precedential or Non-Precedential:

Docket 95-1300

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 UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
______________________

NO. 95-1300
______________________

FANNIE HARRISON,
Appellee

v.

NISSAN MOTOR CORPORATION IN U.S.A.,
Appellant
_________________________

Appeal from the United States District Court
For the Eastern District of Pennsylvania
D.C. Civ. No. 94-cv-06791
_________________________

Argued: February 9, 1996
Opinion Filed: October 9, 1996
Panel Rehearing Granted and Opinion Vacated: November 4, 1996

Reargued: December 17, 1996

BEFORE: BECKER, ROTH and MCKEE, Circuit Judges.

(Filed: April 15, 1997)

JOHN E. HALL, ESQUIRE
ALFRED S. PELÁEZ, ESQUIRE (ARGUED)
BRIAN K. PARKER, ESQUIRE
Pietrangallo, Bosick & Gordon
One Oxford Centre
38th Floor
Pittsburgh, PA 15219

Attorney for Appellant
SAMUEL B. FINEMAN, ESQUIRE
GLENN I. GERBER, ESQUIRE
CRAIG THOR KIMMEL, ESQUIRE (ARGUED)
ROBERT M. SILVERMAN, ESQUIRE
Kimmel & Silverman
30 E. Butler Pike
Ambler, PA 19002

Attorney for Appellee

_______________________

1
 OPINION OF THE COURT
_______________________

BECKER, Circuit Judge.

This appeal arises from a civil suit based on diversity

jurisdiction brought by appellee, Fannie Harrison ("Harrison"),

against appellant, Nissan Motor Corporation in U.S.A. ("Nissan"),

seeking damages for alleged defects in the 1994 Nissan Sentra

that Harrison purchased on July 11, 1994. Nissan moved to

dismiss the complaint for failure to "first resort" to the

informal dispute resolution procedure provided by Nissan pursuant

to the Pennsylvania Automobile Lemon Law, 73 P.S. § 1951 et seq.

(Purdon 1993). The district court denied the motion, and also

denied Nissan's subsequent motion for reconsideration. Nissan

has appealed from both orders.

Harrison submits that, because the district court has

not entered a final order, the appeal should be dismissed for

lack of appellate jurisdiction. Nissan rejoins that we have

appellate jurisdiction under § 16 of the Federal Arbitration Act

("FAA"), 9 U.S.C. § 16, which allows an interlocutory appeal of

an order denying a motion to compel arbitration under the FAA.

Nissan argues that appellate jurisdiction lies under this

provision because its motion to dismiss was a surrogate for a

motion to compel arbitration. Harrison takes issue with this

characterization, and also contends that the FAA does not apply

to the informal ADR procedure provided by Nissan under the Lemon

Law. We need not decide if Nissan’s motion to dismiss is the

2
functional equivalent of a motion to compel arbitration because

we agree with Harrison’s latter contention, and hence we will

dismiss the appeal for lack of appellate jurisdiction.
I.

Under the Pennsylvania Automobile Lemon Law ("Lemon

Law"), "any purchaser of a new motor vehicle who suffers any loss

due to nonconformity of such vehicle as a result of the

manufacturer's failure to comply with this act may bring a civil

action." 73 P.S. § 1958. However, the law requires the claimant

to "first resort" to any alternative dispute resolution

procedures that the manufacturer has established before

initiating litigation. Id. § 1959.1

By the terms of the Lemon Law, id., before a consumer

must “first resort” to it, the alternative dispute resolution

procedure provided by the manufacturer must comply with the

Federal Trade Commission ("FTC") regulations, 16 C.F.R. pt. 703,

promulgated under a cognate federal act, the Magnuson-Moss

Warranty Act, 15 U.S.C. § 2301 et seq. The most important of

1. The statute provides:
If the manufacturer has established an informal dispute
settlement procedure which complies with the provisions
of 16 C.F.R. Pt. 703, as from time to time amended, the
provisions of [73 P.S. § 1958] shall not apply to any
purchaser who has not first resorted to such procedure
as it relates to a remedy for defects or conditions
affecting the substantial use, value or safety of the
vehicle. The informal dispute settlement procedure
shall not be binding on the purchaser and, in lieu of
such settlement, the purchaser may pursue a remedy
under [§ 1958].
73 P.S. § 1959.

3
these regulations for purposes of the case at bar requires

alternative dispute resolution "mechanisms" to render a decision

within forty days of notification of the dispute. Id. §

703.5(d). The regulations provide that a “requirement that a

consumer resort to the Mechanism prior to commencement of an

action . . . shall be satisfied 40 days after notification to the

Mechanism of the dispute or when the Mechanism completes all of

its duties under . . . this section, whichever occurs sooner.”

Id. § 703.5(i).2

Nissan has contracted with the Better Business Bureau

("BBB") to provide a mechanism, the BBB “Auto Line,” that will

satisfy the alternative dispute resolution provisions of both the

Pennsylvania Lemon Law and the Magnuson-Moss Warranty Act. The

contract between Nissan and the BBB provides that the Auto Line

program will provide arbitration services that comply with the

FTC requirements described above.3
2. This provision refers explicitly only to the "resort"
requirement of §110(d) of the Magnuson-Moss Warranty Act. We
find, however, that this provision also applies to the "first
resort" requirement of the Lemon Law. As explained in the text,
the FTC regulations were promulgated only with the Magnuson-Moss
Act in mind, but the Lemon Law requires that qualifying
mechanisms comply with the FTC regulations. Hence, these
regulations apply to Lemon Law ADR even if they reference only
the Magnuson-Moss Act explicitly.

3. Harrison contends that the BBB Auto Line program does not
comply with 16 C.F.R. pt. 703; inter alia, she relies on a letter
written by a FTC investigator. Nissan responds that the
investigator's letter is taken out of context and has no
relevance to the point for which Harrison submits it. Nissan
also submits that, at all events, the BBB Auto Line informal
dispute resolution mechanism is used nationally by several
automobile manufacturers, and in virtually every state, and that

4
 The warranty that accompanies Nissan's vehicles

describes the BBB Auto Line as a remedy available to consumers

who are dissatisfied with their vehicles' performance.4 The

warranty informs consumers how to register their complaints with

the BBB Auto Line and what information to provide. It also

explains that the BBB Auto Line has both a mediation and an

arbitration component. If the complaint cannot be mediated, the

consumer can present the matter to an impartial person or a

three-person arbitration panel. The arbitrators' decision is not

binding unless the consumer accepts it as binding. While the

warranty states that resort to the BBB Auto Line is completely

voluntary, it also notes that some state laws require resort to

the program before filing a lawsuit.

Harrison, through counsel, sent to the BBB Auto Line a

request for arbitration, dated August 16, 1994, which claimed

that her 1994 Nissan Sentra did not comply with the warranty.

The Sentra allegedly had a faulty engine, air conditioner, and

steering system, as well as other defects. Harrison requested a
(..continued)
all such mechanisms are audited "at least annually, to determine
whether the Mechanism and its implementation are in compliance
with this part." Id. § 703.7(a). It points out that the
attorney charged with insuring that the BBB Auto Line is in
compliance with the FTC regulations has testified that neither
the FTC nor any state has ever found the BBB Auto Line program to
be wanting. In the final analysis, however, that question is for
the FTC, and not this Court, to decide.

4. A copy of the warranty was submitted after this Court asked
the parties to supplement the record pursuant to Fed. R. App. P.
10(e). This document was not in the record before the district
court.

5
refund of her purchase price, approximately nineteen thousand

dollars. After forty days had passed without a response, at

least according to Harrison, she filed a diversity-based civil

suit, 28 U.S.C. § 1332, against Nissan in the District Court for

the Eastern District of Pennsylvania. Harrison's five-count

complaint pled a Pennsylvania Lemon Law claim, a Magnuson-Moss

Warranty Act claim,5 a Uniform Commercial Code claim, a

detrimental reliance claim, and a Pennsylvania Unfair Trade

Practices and Consumer Protection Law ("UTPCPL") claim. Harrison

asserts that her UTPCPL claim, under which she could be awarded

three times the amount recoverable under the Lemon Law (the

purchase price of the car), see 73 P.S. § 1955 (Purdon 1993); id.

§ 201-9.2, allows her to satisfy the amount in controversy

requirement of 28 U.S.C. § 1332.

Nissan moved to dismiss the complaint for lack of

subject matter jurisdiction, pursuant to Fed. R. Civ. P.

12(b)(1). It argued that the Lemon Law claim should be dismissed

because the “first resort” provision requires that a claimant

fully exhaust the available ADR procedures, in this case the BBB

Auto Line, before filing suit. Because, according to Nissan, the

BBB Auto Line had responded to Harrison’s request for arbitration

and she had failed to take action, she had not satisfied this

5. Although the Magnuson-Moss Act is a federal law, a private
enforcement action cannot be brought in federal court unless the
value of all of the claims in the suit is at least $ 50,000. 15
U.S.C. § 2310(d)(1)(B) and (d)(3).

6
exhaustion requirement. In Nissan's submission, if the Lemon Law

claim was dismissed, Harrison could no longer assert an UTPCPL

claim, and thus the amount in controversy would no longer meet

the $50,000 statutory requirement. Under these circumstances,

the district court would lack subject matter jurisdiction.

In response, Harrison contended that there is no such

exhaustion obligation, reasoning that the Lemon Law is a consumer

statute that imposes burdens on manufacturers, but not on

claimants, and that the regulations promulgated under the

Magnuson-Moss Warranty Act clearly imply that the customer need

only make the initial notification. Harrison repeated her

allegation that she had never received a response from the BBB

Auto Line.

The district court denied the motion to dismiss,

reasoning that, taking the facts of the complaint as true,

Harrison had sufficiently resorted to the alternative remedies

under the Lemon Law before filing her complaint. In doing so, it

relied upon the opinion in Polischchuk v. Nissan Motor Corp. in

U.S.A., Civ. No. 94-6771, 1995 WL 94798 (E.D. Pa. Mar. 6, 1995).

In Polischchuk, the court held that the Lemon Law did not
require exhaustion of the mechanism prior to filing suit, and

that the “first resort” requirement was satisfied by the

plaintiffs’ allegations that they had forwarded a request for

arbitration to the BBB Auto Line and had received no response.

7
Id. at *2.6

Nissan moved for reconsideration, and in the

alternative, to treat the motion to dismiss as a motion for

summary judgment. In its motion, Nissan again represented that

Harrison had failed to comply with the “first resort” requirement

of the Lemon Law. Nissan attached as an exhibit an affidavit

from the director of the Eastern Pennsylvania BBB Auto Line

Program who stated that, a few days after receiving Harrison's

request for arbitration, she sent a letter to Harrison's counsel

informing him that he had an affirmative duty to respond and

6. There has been a recent proliferation of Lemon Law cases in
the district courts of this Circuit regarding the import of the
“first resort” requirement. The question that has divided the
district courts is whether, after requesting arbitration,
claimants are entitled to resort to the district court
immediately upon expiration of the forty-day period set forth in
the FTC regulations if they have not heard from the contracting
ADR agency, see Polischchuk v. Nissan Motor Corp., No. 94-6991,
1995 WL 94798 (E.D. Pa. Mar. 6, 1995) (sending in request to BBB
Auto Line and not receiving a response was sufficient); Jenkins
v. General Motors Corp., No. 95-2710, 1995 WL 422680 (E.D. Pa.
July 13, 1995) (issue of material fact precluded summary judgment
as to whether plaintiff failed to ‘first resort’ to the informal
dispute mechanism where plaintiff claimed that she was never sent
a notice of hearing but defendant claimed it sent notice); Rudder
v. American Motor Co., No. 94-6769, 1995 WL 216955 (E.D. Pa. Apr.
12, 1995) (complaint dismissed where plaintiff refused to
participate in ADR procedure after requesting arbitration and
receiving notice of hearing); Morganstein v. General Motors
Corp., No. 94-3795, 1994 WL 558822 (E.D. Pa. Oct. 12, 1994)
(claim dismissed where plaintiff filed a complaint rather than
responding to notice of hearing from ADR procedure), or whether
they must call or write so as to manifest a good faith effort to
schedule the arbitration if the ADR body has not independently
done so within that period, Levin v. American Honda Motor Co.,
No. 94-5380, 1994 WL 719856 (E.D. Pa. Dec. 12, 1994) (court
dismissed claim without prejudice where plaintiff had requested
arbitration and allegedly had not received a response).

8
schedule an arbitration hearing within five days. The director

represented that neither Harrison nor her counsel contacted the

BBB regarding arbitration. Therefore, a week after sending the

letter, the BBB Auto Line closed the case. The district court

denied the motion for reconsideration as well.
II.

A.

The denial of a motion to dismiss for lack of subject

matter jurisdiction is not appealable. Commonwealth of Pa. v.

Brown, 373 F.2d 771 (3d Cir. 1967). However, an order denying a

motion to compel arbitration under the Federal Arbitration Act

("FAA") is immediately appealable. 9 U.S.C. § 16. Nissan submits

that this Court has jurisdiction because the district court

orders were equivalent to orders denying motions to compel

arbitration under the FAA.

In 1925, Congress enacted the FAA to encourage courts

to enforce arbitration clauses in contracts, contrary to prior

common law which disfavored such agreements. Gilmer v.

Interstate/Johnson Lane Corp., 500 U.S. 20, 24 (1991). The FAA

provides in this regard the following:
A written provision in any...contract evidencing a
transaction involving commerce to settle by
arbitration a controversy thereafter arising
out of such contract or transaction, or the
refusal to perform the whole or any part
thereof, or an agreement in writing to submit
to arbitration an existing controversy
arising out of such contract, transaction, or
refusal, shall be valid, irrevocable, and
enforceable, save upon such grounds as exist
at law or in equity for the revocation of any

9
 contract.

9 U.S.C. § 2. In furtherance of this provision, § 4 of the FAA

authorizes a party to file a motion to compel arbitration if the

other party refuses to comply with the agreement to arbitrate.

Id. § 4.7

Section 16 of the FAA, passed in 1988, allows the

interlocutory appeal of an order denying a motion to compel

arbitration under the FAA. The section was added to "make[]

clear that any order favoring litigation over arbitration is

immediately appealable and any order favoring arbitration over

litigation is not." Ballay v. Legg Mason Wood Walker, Inc, 878

F.2d 729, 732 (3d Cir. 1989). Nissan argues that, since the

district court chose litigation over arbitration, the orders are

immediately appealable.8

7. § 4 provides:
A party aggrieved by the alleged failure, neglect, or refusal of
another to arbitrate under a written agreement for
arbitration may petition any United States district
court which, save for such agreement, would have
jurisdiction under Title 28 in a civil action or in
admiralty of the subject matter of a suit arising out
of the controversy between the parties, for an order
directing that such arbitration proceed in the manner
provided for in such agreement. . . . The court shall
hear the parties, and upon being satisfied that the
making of the agreement for arbitration or the failure
to comply therewith is not in issue, the court shall
make an order directing the parties to proceed to
arbitration in accordance with the terms of the
agreement. . . . If the making of the arbitration
agreement or the failure, neglect, or refusal to
perform the same be in issue, the court shall proceed
summarily to the trial thereof.

8. We note as a threshold matter that, for the FAA to apply, the
party seeking to compel FAA arbitration must show the existence

10
 Nissan’s jurisdictional argument, however, faces two

significant hurdles, both of which present issues of potential

first impression for this Court. First, it is not evident that

Nissan's motion to dismiss was a sufficient surrogate for a

motion to compel arbitration under the FAA to enable us to

sustain appellate jurisdiction under § 16. Second, it is unclear

whether the FAA applies to an agreement to participate in an

"informal dispute resolution mechanism," such as the BBB Auto

Line.

Turning to the first question, we note that other

courts have treated a motion to dismiss for failure to arbitrate

claims as a motion to compel arbitration. See Hercules & Co. v.

Beltway Carpet Serv., 592 A.2d 1069, 1071-72 (D.C. App. 1991)
(..continued)
of a written agreement that contains an arbitration clause and
affects interstate commerce. See 9 U.S.C. § 1, § 2, and § 4.
The point is not free from doubt in the case at bar. However,
leaving aside for a moment the (cognate) question whether the ADR
procedure at issue here is "arbitration" within the meaning of
the FAA, the point we find case-dispositive, see infra, we are
satisfied that there is a sufficient agreement qua agreement.
Although the warranty states that the use of the BBB Auto Line is
voluntary, and it alone does not constitute a sufficient written
agreement, the warranty constituted an offer to arbitrate that
was accepted by the written request for arbitration sent by
Harrison's counsel to the BBB Auto Line, the manner of acceptance
prescribed by the offer, see Kroeze v. Chloride Group Ltd., 572
F.2d 1099, 1105 (5th Cir. 1978) ("The offeror is the master of
his offer. An offeror may prescribe as many conditions, terms or
the like as he may wish, including but not limited to, the time,
place and method of acceptance."); Glenway Indus., Inc. v.
Wheelabrator-Frye, Inc., 686 F.2d 415, 417 (6th Cir. 1982)
(same). Alternatively, Harrison's counsel's letter to the BBB
Auto Line constituted an offer to arbitrate which was accepted by
Nissan’s reply to the BBB Auto Line that it would arbitrate the
dispute. Under either of these theories, there was a sufficient
agreement.

11
(holding that an order denying a motion to dismiss for failure to

arbitrate was appealable under the D.C. arbitration statute,

which is similar to the FAA); Interstate Securities Corp. v.

Siegel, 676 F. Supp. 54, 55 (S.D.N.Y. 1988) (motion to dismiss

treated as a motion to compel arbitration and to stay proceedings

until completion of arbitration).9 There is, of course, logic to

this construction. On the other hand, linguistically, a motion

to dismiss, even for failure to pursue the statutorily provided

threshold arbitral remedy, is a far cry from a "motion to compel

arbitration." Fortunately, we need not resolve this question

here because of our resolution of the second issue before us.10

B.

We turn to the question whether the FAA cognizes an

agreement to submit to the ADR procedure at issue here. Harrison

contends that, because the BBB Auto Line arbitration is

nonbinding (at least on the claimant), the FAA is not applicable

here. Contrary to Harrison’s contention, there is authority for

the proposition that a court may issue an order compelling

9. We note, too, the policy favoring the avoidance of
jurisdictional-based dismissals that might waste judicial
resources. See, e.g., Newman-Green, Inc. v. Alfonzo-Larrain, 490
U.S. 826 (1989) (holding that the courts of appeals may grant a
motion to dismiss a dispensable party when dismissal is required
to maintain diversity jurisdiction and results in no prejudice to
any of the parties, even though no statute specifically
authorizes granting the motion at the appellate level).

10. Judge Roth would hold that, under the facts of this case, a
motion to dismiss is not a surrogate for a motion to compel
arbitration and would dismiss the appeal on that ground as well.

12
nonbinding arbitration under the FAA. See AMF Inc. v. Brunswick

Corp. 621 F. Supp. 456, 461 (E.D.N.Y. 1985) (court could compel

the parties to submit their dispute to third party for an

advisory non-binding opinion under the FAA); Kelley v. Benchmark

Homes, Inc., 550 N.W.2d 640 (Neb. 1996) (FAA applies to non-

binding arbitration). Moreover, New York appellate courts have

held that, under the New York Arbitration Act, courts should

enforce agreements to submit disputes to nonbinding arbitration,

see Board of Educ. v. Cracovia, 321 N.Y.S.2d 496 (App. Div. 1971)

(court can compel arbitration although the arbitration may be

advisory rather than binding), and the Federal Arbitration Act

was modeled after the New York Arbitration Act. See S. Rep. No.

536, 68th Cong. 1st Sess. 3 (1924). These courts have pointed

out that the arbitration acts were designed to encourage courts

to enforce agreements to arbitrate, and have suggested that this

policy is no less compelling where the parties have agreed to

submit their disputes to nonbinding arbitration.

Perhaps the most useful approach to the question

whether the FAA applies to nonbinding arbitration is that of

Judge Weinstein in AMF v. Brunswick Corp., 621 F. Supp. 456
(E.D.N.Y. 1985). In that case, Judge Weinstein enforced an

agreement to submit a dispute to nonbinding arbitration. He,

however, did not explicitly hold that the FAA applies to all

forms of non-binding arbitration; rather, he relied on § 2 of the

FAA which states that the FAA applies to “contract[s] . . . to

13
settle [disputes] by arbitration,” 9 U.S.C. § 2 (emphasis added).

Thus focusing the question on whether the arbitration at issue

there might realistically settle the dispute, Judge Weinstein

held that "[v]iewed in the light of reasonable commercial

expectations the dispute will be settled by this arbitration."

Id. at 461.

Considering the Auto Line mechanism in light of Judge

Weinstein’s approach, the question whether the nonbinding

character of the procedures precludes the application of the FAA

is close. Harrison contends that the requirements for Lemon Law

mechanisms are such that there is no reasonable expectation that

resort to the mechanism will settle the dispute. In this regard,

Harrison argues that the Lemon Law and the FAA are a mismatch.

The FAA was intended to apply to those contracts that show a true

undertaking by both parties to arbitrate the dispute. But Lemon

Law mechanisms are conditional and one-sided -- in particular,

decisions are not binding on the claimants and claimants may file

suit after forty days if a decision is not forthcoming -- and it

cannot be said, according to Harrison, that claimants under all

circumstances undertake to settle their disputes when they submit

them to Lemon law arbitration.

At oral argument, Harrison’s counsel also pointed out

that a Lemon Law claimant will almost always file suit after the

completion of the BBB Auto Line procedures because the BBB Auto

Line is not authorized to award many types of damages that a

14
plaintiff can receive under the Lemon Law. Moreover, a Lemon Law

plaintiff will usually have other causes of action against the

dealer or manufacturer (e.g., Consumer Fraud Act, UCC) that can

only be resolved through litigation. In sum, Harrison credibly

asserts that there is no reasonable commercial expectation that

the disputes will be resolved through the BBB Auto Line.

Nissan rejoins that the purpose of the Lemon Law “first

resort” requirement is to encourage manufacturers to establish

informal dispute resolution mechanisms through which the bulk of

warranty disputes can be resolved fairly and quickly without

resort to litigation. Under this view, the FTC regulations are

slanted in favor of consumers to ensure that the informal dispute

resolution procedures are as fair as possible to the consumers.

Because of the safeguards guaranteeing fairness, Nissan contends

that there is a reasonable expectation that Lemon Law disputes

will be resolved by the BBB Auto Line. If there was no

expectation that these procedures would settle the majority of

such disputes, Nissan forcefully points out, automobile

manufacturers would refuse to bear the cost of creating

mechanisms such as the BBB Auto Line.

We also acknowledge the force of Nissan's arguments

that Congress intended to provide for the enforcement of

arbitration agreements within the full reach of the Commerce

Clause, see Perry v. Thomas, 482 U.S. 483, 490 (1987), and that

whether an agreement to arbitrate a dispute in interstate

15
commerce is "binding," "partially binding" or "not binding at

all" may have nothing to do with "the full reach of the Commerce

Clause." All that is required for any such agreement to trigger

the Commerce Clause, the argument continues, is that it pertain

to a matter affecting interstate commerce, and the agreement

involved in this case does. However, we need not reach the

question whether the FAA applies to nonbinding arbitration in

general, or whether the nonbinding character of the BBB Auto Line

prevents the application of the FAA to this particular case,

because we are satisfied that the informal dispute resolution

procedure provided by Nissan pursuant to the Lemon Law and the

Magnuson-Moss Warranty Act is not “arbitration” as contemplated

by the FAA.

We note first that the FAA does not define the term

“arbitration,” and both courts and commentators have struggled to

do so. This debate has occurred largely in the context of

whether the FAA applies to nonbinding arbitration, as we

explained above. Judge Weinstein has pointed out that

arbitration has been defined in different ways, and “[a]t no time

have the courts insisted on a rigid or formalistic approach to a

definition of arbitration.” AMF, 621 F. Supp. at 460. In

defining arbitration for purposes of determining whether the

nonbinding arbitration clause before him was subject to

enforcement under the FAA, he concluded that “[a]rbitration is

creature of contract, a device of the parties rather than the

16
judicial process. If the parties have agreed to submit a dispute

for a decision by a third party, they have agreed to

arbitration.” Id.

Although it defies easy definition, the essence of

arbitration, we think, is that, when the parties agree to submit

their disputes to it, they have agreed to arbitrate these

disputes through to completion, i.e. to an award made by a third-

party arbitrator. Arbitration does not occur until the process

is completed and the arbitrator makes a decision. Hence, if one

party seeks an order compelling arbitration and it is granted,

the parties must then arbitrate their dispute to an arbitrators’

decision, and cannot seek recourse to the courts before that

time. Cf. Great Western Mortgage Corp. v. Peacock, ___ F.3d ___,

1997 WL 153012 (3d Cir. 1997) (“Once a dispute is determined to

be validly arbitrable, all other issues are to be decided at

arbitration.”).

But the informal alternative dispute resolution process

contemplated by the Lemon Law does not fit this characterization.

Rather, while many cases in which claimants invoke the informal

process will proceed to an arbitrator’s award, some will not.

That is because, under the FTC regulations with which a mechanism

must comply, a dissatisfied car owner can file suit under the

Lemon Law if he or she has not received a decision from the

arbitrator after forty days. In other words, whatever the

meaning of the “first resort” requirement, a claimant cannot be

17
barred from pursuing litigation under the Lemon Law if the

mechanism delays for more than forty days. The claimant would

not, therefore, pursue the procedure to completion in all cases.

Under all these circumstances, the informal dispute resolution

mechanism provided for by Nissan pursuant to the Lemon Law does

not constitute arbitration within the meaning of the FAA.

This conclusion is supported by the policies that

underlie the Lemon Law. Consumer statutes, such as the Magnuson-

Moss Warranty Act and the Lemon laws, were enacted under the

assumption that manufacturers are often reluctant to provide the

relief to consumers that their warranties promise. See H.R. Rep.

93-1107, reprinted in 1974 U.S.C.C.A.N. 7702 (“Another growing

source of resentment has been the inability to get many . . .

products properly repaired and the developing awareness that the

paper with the filigree border bearing the bold caption

‘Warranty’ . . . was often of no greater worth than the paper it

was printed on.”).

Therefore, the consumer laws and the FTC regulations

promulgated to guide providers of alternative dispute resolution

mechanisms are slanted toward the consumer: consumers must comply

with only minimal requirements, while the warrantors must follow

more elaborate and more burdensome rules, 16 C.F.R. § 703.2, and,

moreover, are bound by the results of the arbitration, see 73
P.S. § 1959. Additionally, the contracting ADR agency must

comply with certain requirements under the FTC regulations; among

18
them is the requirement that the body not delay its decision for

more than forty days, with only few exceptions. 16 C.F.R. §

703.5(d), (e) & (i). Applying the FAA to these procedures would

arguably frustrate the policies underlying the consumer laws by

placing additional burdens on consumers. That is, if forced to

arbitrate their disputes with the manufacturers to an

arbitrator’s decision in every case, consumers would face

additional hurdles that were not contemplated by the drafters of

the Lemon Law.

We find further support for the conclusion that the FAA

does not apply to Lemon Law ADR procedures in the fact that the

Lemon Law, the Magnuson-Moss Warranty Act, and the FTC

regulations all refer to the procedure at issue as an “informal

dispute resolution procedure.” If the drafters had intended this

procedure to be cognizable under the FAA, then it is likely that

they would have referred to it as “arbitration.” Indeed, the

term “arbitration” has come into this case solely because the BBB

Auto Line has labeled the second part of its procedures

“arbitration.” That alone is not sufficient to trigger the FAA.

We, therefore, hold that Harrison and Nissan did not enter into

a contract to arbitrate their dispute within the meaning of the

FAA and that we lack jurisdiction over Nissan’s appeal.

In reaching this holding, we acknowledge the force of

Nissan’s contention that refusing to extend the FAA to Lemon Law

arbitration would make
a mockery of the scheme Congress created, [would] discourage,

19
 rather than encourage, manufacturers from establishing
and making available such mechanisms, and delay
resolution of consumer warranty claims. That would be
in a direct conflict with the expressly stated
Congressional policy of "encourag[ing] warrantors to
establish procedures whereby consumer disputes are
fairly and expeditiously settled through informal
dispute settlement mechanisms.”

We are sympathetic to Nissan’s concerns, and view with disfavor

the apparent policy of some Lemon Law counsel of “going through

the motions” of the alternative dispute resolution process to get

quickly into court, rather than trying to effect a speedy

resolution of the claim through the ADR procedures.11 We also

understand that such tactics might frustrate the policies behind

the Pennsylvania Lemon Law. But such an argument cannot and does

not control the question whether § 16 of the FAA permits our

11. We note in this regard that representations made during oral
argument on the question of the extent to which the “first
resort” requires Lemon Law claimants to exhaust the available ADR
procedures before filing suit were troubling. Counsel for Ms.
Harrison, who concededly has one of the largest Lemon Law
practices in Southeastern Pennsylvania, acknowledged during oral
argument that he has never participated in a BBB Auto Line
arbitration, observing that “the program cannot provide what our
clients want.” Tr. of Oral Arg. at 47. Nissan asserts, against
this background, that Harrison’s contention that the consumer
should be able to satisfy the "first resort" requirement by the
simple act of "requesting" arbitration and then refusing to
participate further is suspect. In Nissan's submission,
counsel's actions and contentions are contrary to the very
purpose of the Magnuson-Moss Warranty Act and the state lemon
laws, which is to encourage manufacturers to establish informal
dispute resolution mechanisms so that the bulk of warranty
disputes can be quickly and inexpensively resolved in unbiased
neutral nonjudicial forums. See 15 U.S.C. § 2310(a)(1). We
could not, of course, decide what the Lemon Law requires in the
way of first resort even if it were before us, because of the
absence of a record. We assume that the matter will come before
us after final judgment in one of the district courts of this
Circuit in the not too distant future.

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asserting appellate jurisdiction in this case.

C.

Nissan has not argued that these orders entered by the

district court are collaterally appealable. See Cohen v.

Beneficial Indus. Loan Corp., 337 U.S. 541 (1949). At all

events, there is no support for treating the orders as such. To

satisfy Cohen, the order must be conclusive, resolve an important

issue severable from the merits of the action, and be effectively

unreviewable upon appeal from the final order. The district

court's orders do not meet these requirements. The fact that an

order will require a party to continue to litigate the matter

does not alone make the order effectively unreviewable. See

Lauro Lines v. Chasser, 490 U.S. 495 (1989) (district court order

denying a motion to dismiss based on a forum selection clause in

a contract was not a collaterally appealable order under Cohen);

Digital Equipment Corp. v. Desktop Direct, Inc., 511 U.S. 863

(1994) (district court's order vacating dismissal based on

settlement agreement that would protect settling parties from

trial was not a collaterally appealable order). Therefore, there

is no other basis for exercising appellate jurisdiction.

III.

For the foregoing reasons, the district court's orders

denying appellant's motion to dismiss for lack of subject matter

jurisdiction and appellant's motion for reconsideration are not

immediately appealable. The appeal will therefore be dismissed

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for lack of appellate jurisdiction.

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