LOS ANGELES (Legal Newsline) – A lawsuit against Samsung over allegations that storage and speed claims are misrepresented in its Galaxy S4 is not eligible for arbitration, the U.S. Court of Appeals for the Ninth Circuit has ruled.
On Jan. 19, the court
denied Samsung’s claim that the plaintiff accepted the terms of arbitration
based on the warranty brochure included with Galaxy S4.
In February 2014, Daniel Norcia filled a class action suit against Samsung contending that the company misrepresented the speed
and storage capacity of the Galaxy S4. Norcia filed the claim citing common law fraud in addition to violation of the state's Unfair Competition Law, False Advertising Law, and Consumer Legal Remedies Act. The putative class included all the owners of Samsung S4
Samsung moved to compel arbitration.
However, the district court denied the motion.
Samsung based its argument on
the grounds that there was an arbitration provision located in the warranty and product safety brochure in the Galaxy S4 box. However, the
district court pointed out that receipt of the booklet
does not form a binding agreement to arbitrate claims unrelated to product
warranty. Samsung consequently appealed the court’s ruling.
Samsung used several theories and tactics to argue its
point. However, a Ninth Circuit panel including Judge Sandra S. Ikuta was not swayed by its logic.
One of Samsung's arguments hinged on the inclusion of the arbitration provision in
the product warranty and safety information brochure.
Attorney Stephen Newman, partner at Stroock &
Stroock & Lavan LLP of Los Angeles, said Samsung presented a viable argument.
argument was not a long shot," Newman said. "The Ninth Circuit recognized that decisions in
other circuits (such as in the Seventh Circuit, which is based in Chicago) reach different outcomes. It has long been accepted that 'shrink-wrap,' 'browse-wrap' and 'click-wrap' agreements are enforceable. The argument to enforce the 'in
box' agreement is similar to those that have been
accepted in the shrink-wrap cases.”
Therefore, depending on the court, placement of the
arbitration provision, and cited precedent, companies may be held liable more
The obvious takeaway is for companies to consider the location of any arbitration provisions
“The company appears to have done a lot already to put
customers on notice of the agreement," Newman said. "Had this been packaged as a traditional ‘shrink-wrap’
agreement, (where the customer would have to tear through packaging that
specifically called out the presence of the agreement) the court would have been more likely to enforce the agreement.
"It is ironic, however,
that packaging the product in a way that is easier for the customer to get to
the product, and that generates less packing waste,
has resulted in diminished legal protection for the company.”