Manufacturer arbitration is an informal dispute resolution program operated or sponsored by a vehicle manufacturer through which consumers can seek repurchase, replacement, or repair before filing a civil lawsuit. Under California Civil Code § 1793.22(d), when a manufacturer maintains a qualified informal dispute settlement procedure, the consumer must participate to receive the benefit of the lemon law presumption. The most common qualified program is BBB Auto Line. Arbitration is non-binding on the consumer — an unfavorable award can be rejected, and the consumer can proceed to civil litigation with full Song-Beverly remedies intact.
What Manufacturer Arbitration Is
Manufacturer arbitration is an informal hearing — sometimes a paper review only — where a neutral arbitrator hears the consumer’s complaint, reviews repair records, and issues a written decision. Decisions can require the manufacturer to repurchase the vehicle, replace it, perform additional repairs, or do nothing. The arbitrator does not award the civil penalty or attorney’s fees available under § 1794.
Common programs:
- BBB Auto Line — used by Honda, Acura, Hyundai, Kia, Nissan, Toyota, Lexus, and others
- National Center for Dispute Settlement (NCDS) — used by Ford and Lincoln
- Manufacturer in-house panels (rare; less likely to be “qualified”)
When Arbitration Is Required Before Suit
Civil Code § 1793.22(d) requires the consumer to “first resort to” a qualified manufacturer arbitration program only if:
- The manufacturer operates such a program, and
- The program is qualified under California’s statutory criteria, and
- The consumer received notice of the program at point of sale (typically in the warranty booklet).
If any of these is missing, arbitration is not required and the consumer can sue directly. Importantly, the requirement to “first resort” only conditions the benefit of the § 1793.22 presumption — failing to arbitrate does not bar the underlying lawsuit, only the presumption shortcut.
How the Arbitration Hearing Works
- Filing. Consumer files a claim form with the arbitration program, identifying the vehicle, the defect, and the requested remedy.
- Manufacturer response. The OEM submits its own statement and supporting documentation, typically including warranty claim history.
- Hearing. Conducted in person, by phone, or as a documents-only review. Hearings typically last 30–90 minutes.
- Decision. The arbitrator issues a written decision within 40 days of filing under BBB Auto Line rules.
- Acceptance or rejection. The consumer has a fixed period (typically 30 days) to accept or reject. Rejection preserves all litigation rights.
What Arbitration Cannot Award
Even at its most consumer-favorable, manufacturer arbitration cannot award:
- Civil penalty under § 1794(c) — up to 2x actual damages for willful violations
- Attorney’s fees under § 1794(d)
- Pre-judgment interest
- Damages outside the vehicle (loss of use beyond loaner-car reimbursement, consequential damages)
For these reasons, even a “successful” arbitration award is usually substantially less than what a represented consumer recovers in civil litigation.
Why Most Consumers Should Be Represented in Arbitration
Manufacturers send experienced consumer-affairs representatives to arbitration with prepared evidence packages. A pro se consumer is matched against an opposing party that has handled hundreds of these cases. Represented consumers:
- Submit better-organized repair-record exhibits
- Frame the complaint in legally precise language
- Preserve the litigation record for civil suit if arbitration fails
- Avoid concessions that could be used in later litigation
Because § 1794(d) shifts fees onto the manufacturer in subsequent litigation, representation in arbitration costs the consumer nothing.
If You Lose Arbitration
Reject the award. Under California’s qualified informal dispute resolution rules, the arbitration decision is non-binding on the consumer. The consumer files a civil lawsuit in California Superior Court and proceeds with the full slate of Song-Beverly remedies — including the civil penalty and attorney’s fees that arbitration cannot award.
See civil litigation.
Free Case Review
If you’re facing manufacturer arbitration or unsure whether it applies, McMillan Law Group will evaluate your case at no cost. We handle arbitration and the litigation that follows, with no fee unless we win.
Frequently Asked Questions
Is manufacturer arbitration mandatory before filing a lawsuit?
Only when the manufacturer operates a qualified program under § 1793.22(d). Even then, participation conditions only the lemon presumption — not the underlying right to sue.
What is the difference between arbitration and litigation?
Arbitration is informal and faster but cannot award the civil penalty or attorney’s fees. Litigation is the full civil action with Song-Beverly’s complete remedy set.
Can I reject an arbitration award and sue?
Yes. Qualified manufacturer arbitration is non-binding on the consumer.
Do I need an attorney for arbitration?
Strongly recommended. Manufacturer representatives are experienced; representation costs the consumer nothing under § 1794(d).