ATTORNEY NEWSLETTER

Arbitration Clause in Warranty Struck Down

Consumer Protection

California consumers gained added protection recently when the Ninth Circuit Court of Appeals denied a manufacturer’s move to compel a consumer to arbitrate a dispute over product warranties. In Norcia v. Samsung Telecommunications America, LLC, 845 F.3d 1279 (9th Cir. 2017), a consumer sued Samsung alleging misrepresentations about the performance of the Galaxy S4 phone. Samsung claimed a warranty clause included in a pamphlet in the box bound the buyer to arbitrate any disputes with Samsung. The Court disagreed. If you have suffered injury as a result of a product misrepresentation or are headed to arbitration of any dispute, including a securities or financial FINRA arbitration, contact the consumer protection and arbitration lawyers of Evans Law Firm at 415-441-8669.

Mutual Assent

Under California law, contracts are enforceable only where there is mutual assent to be bound by the terms of the contract. The Ninth Circuit recognized that a consumer’s silence does not constitute acceptance. In lay terms, the point here is that the typical consumer, by buying a new phone or any other product, does not consent to all the clauses buried in a warranty or other contract included in the product package. After all, the consumer cannot negotiate the terms or expressly “opt out” of any contract provision when he or she is in the store. The reality is that consumers do not – and are not encouraged or given the opportunity to – read through an entire warranty before making a purchase. The act of buying the phone is not acceptance of all the accompanying warranty provisions, including the arbitration provision.

Exceptions

To be sure, there are exceptions to the rule that silence does not bind a party to the terms of a contract. In business transactions, or individually negotiated contracts, for example, the principle may not apply. But in the routine consumer/retailer transaction, there is no negotiation over terms. In law, the contracts that accompany the transactions are referred to as adhesion contracts. (Think of all those paragraphs on the back of an airplane ticket, back when there were airplane tickets.) In any event, in the Norcia case the Ninth Circuit puts the burden squarely on a seller to show “by a preponderance of the evidence” the existence of an agreement by both parties to arbitrate. That is a heavy burden for any manufacturer or retailer of consumer goods.

Contact Us

If you or a loved one has been a victim of any kind of consumer fraud or misrepresentation or securities fraud or misrepresentation and is headed to arbitration, including FINRA arbitration in San Francisco County or in any California county, contact the Evans Law Firm elder attorneys at (415) 441-8669, or by email at info@evanslaw.com. Our attorneys have experience with securities and financial fraud, annuity and insurance fraud and statutory violations by large insurance companies. We can help guide your case through a jury trial, arbitration, FINRA arbitration or toward an equitable settlement. We also handle cases involving physical and financial elder abuse, qui tam and whistleblower law, nursing home abuse, whole life insurance and universal life insurance, and indexed, variable, and fixed annuities.