Norcia v. Samsung, 1/19/17, 9C
Norcia bought a calling plan and a Samsung Galaxy phone from Verizon. The Verizon customer agreement included an arbitration clause, but it didn’t mention Samsung. The Samsung Galaxy box said that warranty information was inside, and the box contained a warranty brochure over 100 pages long. The brochure included an arbitration agreement with a 30-day opt out period, although Norcia didn’t opt out. He later filed a putative class action against Samsung alleging the phone had performance issues. Samsung filed a motion to compel arbitration arguing that the in-the-box agreement was enforceable, and the trial court denied the motion. Held: Affirmed.
Arbitration is a matter of contract, and Samsung had the burden to prove the parties agreed to arbitration. Applying California law, 9C held that Samsung could not meet this burden. A party is bound by all the terms of the contract, whether aware of the terms and even if he or she didn’t read it before signing. While conduct can be sufficient to show agreement, silence generally does not constitute acceptance. (That’s reasonable — Until there is an agreement, one side can’t bind the other to act in a particular way.)
Silence can operates as consent if the party has a duty to respond (e.g., by signing an agreement that silence/inaction will be deemed assent to certain things), or where the party retains the benefit offered. A limit to the exception: An “offeree, regardless of apparent manifestation of his consent, is not bound by inconspicuous contractual provisions of which he was unaware, contained in a document whose contractual nature is not obvious.”
Norcia did not have a duty to respond, and the court concluded that “accepting the benefit” exception didn’t apply either, because according to the brochure the warranties were effective whether or not Norcia opted out. (Query: Why is the “accepting the benefit” reference point the warranty and not the fact that Norcia kept the phone?)
9C rejected Samsung’s analogy to shrink wrap licenses (notice on outside of box that opening box constitutes agreement to license), which 9CA had previously said is enforceable. In its analysis, 9CA seemed to rely on distinctions between a license and a contract (isn’t a license a contract), as well as between warranty and contract law (warranties are contractual in nature, but are affirmations that impose duties on the seller not buyer), but where those distinctions led wasn’t 100% clear. The real issue is based on what Samsung’s box says — Samsung’s box notified the user of warranty information and said nothing about arbitration, making Samsung’s reliance on shrink wrap cases tenuous.
Even if in-the-box contracts are enforceable under California law (which is apparently not established), that does “not nullify the requirement that a consumer be on notice of the existence of a term before he or she can be legally held to have assented to it.”