United States District Court, N.D. California, San Jose Division
IN RE SAMSUNG GALAXY SMARTPHONE MARKETING AND SALES PRACTICES LITIGATION
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO
COMPEL ARBITRATION AND DISMISS PLAINTIFFS' CLASS ACTION
CLAIMS AND STAYING PROCEEDINGS PENDING COMPLETION OF
ARBITRATION [Re: ECF 67]
LABSON FREEMAN United States District Judge.
putative class action, consumers contend that certain models
of the Samsung Galaxy smartphone have the propensity to
overheat, often to volatile levels. Specifically, Plaintiffs
Demetrius Martin, Omar Atebar, Esther Vega, Jesus Vega,
Lizett Anguiano, Tomas Hernandez, Greg Robison, Dale
Holzworth, Eric Pirverdian, Tomig Salmasian, Michael
Kouyoumdjian, Dior Dee, Cory Raymond, and Jesus Sanchez
(collectively, “Plaintiffs”) allege that their
smartphones are prone to explode or burst into flames. They
assert claims for violations of state consumer-protection
laws and unjust enrichment against Samsung Electronics
America, Inc. and Samsung Electronics Co., Ltd.
before the Court is Samsung's Motion to Compel
Arbitration, Dismiss Plaintiffs' Class Claims, and Stay
All Proceedings. Mot., ECF 67. The Court held a hearing on
Samsung's motion on March 1, 2018. The Court has
considered the arguments presented at oral argument and in
the briefing, as well as the submitted evidence and
applicable law. For the reasons that follow, the Court
concludes that certain Plaintiffs formed a valid arbitration
agreement with Samsung, and therefore GRANTS Samsung's
motion as to those Plaintiffs, DENIES Samsung's motion as
to the remaining Plaintiffs, and STAYS the case pending the
outcome of arbitration.
following facts are drawn from the First Amended Consolidated
Class Action Complaint (“FAC”), ECF 65. In
October 2016, Samsung recalled the Samsung Galaxy Note7
(“Note7”) after reports that numerous devices had
exploded and burst into flames. FAC ¶¶ 38, 42.
Plaintiffs own at least one of six other models of Samsung
phones-the Galaxy S7 (“S7”), the Galaxy S7 Edge
(“S7 Edge”), the Galaxy S6 (“S6”),
the Galaxy S6 Edge (“S6 Edge”), the Galaxy S6
Edge (“S6 Edge”), and the Galaxy Note5
(“Note5”). Id. ¶ 37. Plaintiffs
plead that these models, like the Note7, “pose a risk
of overheating, fire and explosion as they were designed,
engineered, developed, manufactured, produced and/or
assembled in a substantially similar manner to the
commenced this putative class action on November 2, 2016 and
filed the operative FAC on August 3, 2017. ECF 1, 65.
Plaintiffs hail from California, Massachusetts, or Maryland
and seek to represent three statewide classes, which
encompass all consumers who reside in and purchased one of
the relevant Samsung phones in California, Massachusetts, and
Maryland, respectively. FAC ¶¶ 95, 107,
Plaintiffs bring six causes of action: (1) violation of
California's Unfair Competition Law on behalf of the
California class, (2) violation of California's False
Advertising Law on behalf of the California class, (3)
violation of California's Consumers Legal Remedies Act on
behalf of the California class, (4) violation of
Maryland's Consumer Protection Act on behalf of the
Maryland class, (5) violation of Massachusetts Regulation of
Business Practices for Consumers Protection on behalf of the
Massachusetts class, and (6) unjust enrichment on behalf of
all classes. Id. ¶¶ 143-85, 198-201.
September 2017, Samsung moved to compel arbitration on the
ground that Plaintiffs assented to, and did not opt out of,
an arbitration clause that appeared either in a guidebook
included in the box with their phones or on Samsung's
website. Mot. 8-23. As discussed in more detail below, the
analysis of assent hinges on what information was presented
and how that information was presented to each individual
Plaintiff-including the box, guidebook, and website. Samsung
also requests that the Court dismiss the class-action claims
of all Plaintiffs compelled to arbitrate and stay all
proceedings in the litigation pending arbitration. Mot.
23-25. Plaintiffs filed an opposition, Opp., ECF 74, and
Samsung filed a reply, Reply, ECF 76.
of an arbitration clause, and the determination of the scope
of that clause, is governed by the Federal Arbitration Act
(“FAA”). 9 U.S.C. §§ 1 et seq.
Under the FAA, arbitration agreements are a matter of
contract, and “shall be valid, irrevocable, and
enforceable, save upon such grounds as exist at law or in
equity for the revocation of any contract.” 9 U.S.C.
§ 2. Such generally applicable contract defenses include
“fraud, duress, or unconscionability, ” but not
“defenses that apply only to arbitration or that derive
their meaning from the fact that an agreement to arbitrate is
at issue.” AT&T Mobility LLC v.
Concepcion, 563 U.S. 333, 339 (2011) (citation omitted).
A party seeking to invoke an arbitration agreement may
petition the district court “for an order directing
that such arbitration proceed in the manner provided for in
such agreement.” 9 U.S.C. § 4; see also
Trompeter v. Ally Fin., Inc., 914 F.Supp.2d 1067, 1071
(N.D. Cal. 2012).
district court faced with a petition to enforce an
arbitration clause engages in a limited two-part inquiry:
first, it determines whether the arbitration agreement is
valid, and second, it determines whether the agreement
encompasses the claims at issue. Ashbey v. Archstone
Prop. Mgmt., Inc., 785 F.3d 1320, 1323 (9th Cir. 2015).
A district court does not consider challenges to the contract
as a whole, but rather only specific challenges to the
validity of the arbitration clause itself. See
Rent-A-Center, W., Inc. v. Jackson, 561 U.S. 63, 70
(2010) (noting the “two types of validity
challenges” but holding that only challenges to the
validity of the agreement to arbitrate are “relevant to
a court's determination whether the arbitration agreement
at issue is enforceable”).
Motion to Compel Arbitration
issue before the Court is a focused one. “[A]rbitration
is a matter of contract and a party cannot be required to
submit to arbitration any dispute which he has not agreed so
to submit.” AT & T Techs., Inc. v. Commc'ns
Workers of Am., 475 U.S. 643, 648 (1986) (quoting
United Steelworkers of Am. v. Warrior & Gulf Nav.
Co., 363 U.S. 574, 582 (1960)). Plaintiffs' sole
contention is that they did not form an agreement to
arbitrate with Samsung, an argument which the Court resolves
under “ordinary state-law principles that govern the
formation of contracts.” First Options of Chi.,
Inc. v. Kaplan, 514 U.S. 938, 944 (1995). Because the
parties agree that the law of each Plaintiff's home state
controls, the Court proceeds to analyze Plaintiffs'
claims by state.
Holzworth is a resident of Massachusetts who purchased an S7
Edge in Massachusetts. FAC ¶ 17. The parties agree that
Massachusetts law governs the question whether he formed an
agreement to arbitrate with Samsung.
parties also agree on the universe of applicable cases. In
1-A Equipment Co. v. Icode, Inc., the Massachusetts
District Court Appellate Division held that a buyer was bound
by a contractual forum selection clause sent with the
purchased software program even though the buyer did not
receive the agreement until after the purchase was made. No.
1460, 2003 WL 549913, at *2 (Mass. App. Div. 2003). The court
emphasized that an inside-the-box setup can be an efficient
way to do business, especially when the alternative of orally
reciting terms is costly and ineffective. Id.
Likewise, in Feeney v. Dell Inc., the Appeals Court
of Massachusetts enforced an arbitration agreement, which was
enclosed with the shipped product and provided that the
customers would be bound by accepting delivery. 2015 WL
4460182, at *2, *4-5 (Mass. App. Ct. 2015). The court
concluded that “a purchaser of a computer, upon placing
an order, would expect additional terms, such as a warranty
and a period of time to return the goods, given the nature of
the product involved.” Id. at *4.
Massachusetts cases rely on two Seventh Circuit cases that
approve of inside-the-box agreements; indeed, the court in
1-A Equipment explicitly “adopt[ed] the
rationale of these cases.” 2003 WL 549913, at *2. The
Seventh Circuit considered similar facts to those in the
Massachusetts cases and held that terms inside the box of a
product bind consumers who keep the product beyond a
specified window if the consumer has an opportunity to review
the terms and reject them by returning the product. Hill
v. Gateway 2000, Inc., 105 F.3d 1147, 1148 (7th Cir.
1997); ProCD, Inc. v. Zeidenberg, 86 F.3d 1447, 1451
(7th Cir. 1996) (“Notice on the outside, terms on the
inside, and a right to return the software for a refund if
the terms are unacceptable (a right that the license
expressly extends), may be a means of doing business valuable
to buyers and sellers alike.”). The Seventh Circuit
explained that practicality favors this conclusion because
“[c]ustomers as a group are better off when vendors
skip costly and ineffectual steps such as telephonic
recitation, and use instead a simple approve-or-return
device.” Hill, 105 F.3d at 1149. Moreover, the
Uniform Commercial Code allows acceptance by conduct, for
example by using software after having a chance to read the
accompanying license. ProCD, 86 F.3d at 1452.
these cases, Plaintiff Holzworth is clearly bound by
Samsung's arbitration agreement. The outside of the box
states that purchase is “subject to additional Samsung
terms and conditions.” Blackard Decl., ECF 68, Ex. D.
Inside the box, there is a guidebook titled “Important
Information” and subtitled “Health and Safety
Information” and “Warranty Legal
Information” with those topics' respective page
numbers. Id., Ex. I, at 2. On the page immediately
following the cover, the user is instructed in bold that the
guidebook contains “important terms and
conditions” that the user accepts by using the phone.
Id. at 3. Further down the page, under the bold and
larger-text heading “Legal Information, ” the
This product is covered under the applicable Samsung Limited
Warranty INCLUDING ITS DISPUTE RESOLUTION PROCEDURE and your
right to opt out of arbitration within 30 calendar days of
the first consumer purchase.You may opt out by either sending
an email to email@example.com with the subject
line “Arbitration Opt-Out” or by calling
Id. Finally, the Table of Contents lists the page
for “Procedures for Dispute Resolution/30-day
Arbitration and Opt-Out Policy, ” id. at 9,
and the guidebook sets forth the arbitration agreement in
capital letters on the indicated page, id. at 30.
These circumstances neatly fit within the Seventh
Circuit's approval of “[n]otice on the outside
[and] terms on the inside.” ProCD, 86 F.3d at
sole challenge is to the remaining element-namely, “a
right to return the [product] for a refund if the terms are
unacceptable.” Id. Specifically, Plaintiffs
contend that Samsung fails to specify “how a consumer
may reject the terms and conditions.” Opp. 18.
As a preliminary matter, Plaintiff Holzworth does not allege
or argue that he was unable to return his phone for a refund
if he disagreed with the terms. It is not clear that anything
more is required- the cases reference “an opportunity .
. . to reject [the terms] by returning the product.”
Hill, 105 F.3d at 1148 (citing ProCD, 86
F.3d at 1451). In any event, the first page of the guidebook
and the arbitration section both inform users exactly how to
opt out of the arbitration provision: users can send an email
or call the toll-free number. As the guidebook explains, a
user does not forfeit anything by opting out. See
Blackard Decl., Ex. I, at 33 (“Opting out of this
dispute resolution procedure will not affect the coverage of
the Limited Warranty in any way, and you will continue to
enjoy the benefits of the Limited Warranty.”). In this
way, the opt-out provision is even more favorable than a
return policy because the user may keep the phone and avoid
light of these circumstances, Plaintiff Holzworth agreed to
arbitrate under Massachusetts law. Accordingly, the Court
GRANTS Samsung's motion to compel arbitration as to
Martin, Atebar, Esther Vega, Jesus Vega, Anguiano, Hernandez,
Pirverdian, Salmasian, Kouyoumdjian, Dee, Raymond, and
Sanchez are residents of California who acquired their
Samsung phones in California. FAC ¶¶ 10-15, 18-23.
The parties agree that California law governs the question
whether they formed an agreement to arbitrate with Samsung.
parties dispute the importance of the Ninth Circuit's
recent decision in Norcia v. Samsung Telecommunications
America, LLC, 845 F.3d 1279 (9th Cir.), cert.
denied, 138 S.Ct. 203 (2017). The Court begins with an
overview of Norcia, then examines the circumstances
of the California Plaintiffs in the instant case.