Samsung Loses 9th Circuit Arbitration Bid in Two Smartphone Class Actions

In a double win for smartphone buyers, the Ninth Circuit has denied Samsung’s motion to force arbitration in two separate California class action lawsuits.

After hearing back-to-back arguments in October, the three-judge panel unanimously ruled against Samsung on Thursday.

In their decision, Chief Judges Sidney R. Thomas, Carlos T. Bea and Sandra S. Ikuta agreed that while the language used in the warranty is “contractual,” the warranty is there to guarantee Samsung’s obligations as the phone’s manufacturer and does not impose anything binding on the part of the buyer.

The Appeals Court further ruled that because the clause in the warranty is specifically written to cover “the sale, condition or performance” of the device, the court ruled that contract law should apply.

“Language in a written warranty agreement is ‘contractual’ in the sense that it creates binding, legal obligations on the seller, but a warranty does not impose binding obligations on the buyer,” the order said.

The first class action lawsuit was filed in 2014 by San Francisco plaintiff Daniel Norcia. Norcia claims Samsung gave smartphone users the impression that the Galaxy S4 runs faster, performs better and has more memory capacity than it actually does.

Samsung challenged Norcia’s claims, stating that the warranty booklet inside the smartphone’s retail box constituted a binding contract prohibiting consumers from bringing individual legal action against the company or initiating a class action.

Norcia says he never knew about the arbitration agreement because he left the warranty sheets and the box at the store, taking home only the phone and related hardware.

The tech company countered, arguing that while Norcia voluntarily did not take the warranty information with him, he did receive it when he purchased the smartphone.

In 2014, a U.S. District Court in California disagreed with Samsung’s motion to compel arbitration.

The court ruled that the warranty papers found inside the box do not provide enough of a notice to alert consumers about the arbitration clause. Samsung appealed, and both sides presented their case before the Ninth Circuit Court of Appeals last October.

But the Ninth Circuit rejected Samsung’s appeal, ruling that a reasonable consumer would not think the booklet would contain anything but warranty information, and certainly not an in-box agreement to arbitrate claims.

“Because Samsung failed to carry its burden of proving the existence of a contract with Norcia to arbitrate as a matter of California law, the district court did not err in denying Samsung’s motion to compel arbitration,” Judge Ikuta wrote.

The panel further added that “No contract was formed between Norcia and Samsung, and Norcia is not bound by the arbitration provision contained in the brochure.”

The second class action lawsuit filed by San Jose plaintiff Hoai Dang, also in 2014, alleges the resale value of Samsung smartphones and tablets was significantly diminished after court rulings found the tech company infringed on Apple’s patents.

Dang also contended he never agreed to arbitrate claims because he was not aware the product guide included with his phone contained such an agreement.

Just like Norcia’s lawsuit, Samsung argued that Dang agreed to arbitrate claims when he purchased his Galaxy S3 smartphone.

In August 2015, U.S. District Judge Lucy Koh ruled in favor of Samsung, stating that even if Dang failed to read the arbitration clause, he was still legally bound by it.

However, in it is ruling Thursday, the Ninth Circuit reversed Judge Koh’s decision, finding Dang’s amended complaint did not concede that he formed an agreement to arbitrate with Samsung pursuant to California law. The panel remanded the case back to the lower court.

The Samsung Class Action Lawsuits are Dang v. Samsung Electronics Co. Ltd., et al., Case No. 5:14-cv-00530, and Norcia v. Samsung Telecommunications America LLC, et al., Case No. 3:14-cv-00582, both filed in the U.S. District Court for the Northern District of California.

UPDATE: On Jan. 31, 2019, a Samsung Galaxy owner is seeking Class certification in his lawsuit alleging that the company rigged its smartphones to run faster in pre-sale speed tests.

UPDATE 2: On Sept. 26, 2019, Samsung agreed to pay $2.8 million to resolve class action claims that the company misled customers about their Galaxy S4 speeds.