Headline: Ninth Circuit panel, applying California contract law, declined to enforce the arbitration provision in a brochure contained in a Samsung phone box’s Product & Safety Warranty Information brochure, holding that California courts have not adopted the Seventh Circuit’s view that arbitration clauses contained in in-the-box contracts are enforceable.
Areas of Law: Contract Law, Arbitration Clause, Warranty Law
Issues Presented: Whether an arbitration clause in a Product & Safety Warranty Information brochure included in the box of a phone created a binding contract between the phone purchaser and the phone manufacturer to arbitrate the purchaser’s claim; and (2) whether a Customer Agreement signed by the product seller created a binding contract between the phone purchaser and the phone manufacturer to arbitrate the purchaser’s claim.
Brief Summary: The Ninth Circuit panel affirmed the district court’s order denying Samsung’s motion to compel arbitration of a class action complaint alleging that Samsung made misrepresentations as to the performance of the Galaxy S4 phone. Samsung moved to compel arbitration of the dispute on the ground that an arbitration provision, contained in a warranty brochure in the Galaxy 4S box, was binding on plaintiff.
The panel applied California contract law and held that Samsung failed to demonstrate the applicability of any exception to the general California rule that an offeree’s silence does not constitute consent. The panel further held that the brochure was not enforceable as an “in-the-box” contract ruling that, even if a customer may be bound by an in-the-box contract under certain circumstances, such a contract is ineffective where the brochure entitled “Product & Safety Warranty Information” did not give the purchaser notice that the brochure contained a freestanding obligation outside the scope of the warranty.
The panel also rejected Samsung’s argument that the plaintiff agreed to arbitrate his claims by signing a Customer Agreement with Verizon Wireless. The panel concluded that Samsung failed to bear its burden of establishing that it was a third party beneficiary of the Customer Agreement, and therefore Samsung could not enforce the arbitration provision in the agreement.