In Norcia, Plaintiff filed a putative class action against Samsung, alleging that it made misrepresentations as to the performance of the Galaxy S4 phone. Plaintiff purchased his Samsung phone from a Verizon Wireless store in San Francisco, California. As part of the purchase process, he signed a Customer Agreement with Verizon, containing an arbitration provision that did not reference Samsung or any other party. The phone also came in a sealed box containing a Product Safety & Warranty Brochure issued by. Among other provisions, the Brochure stated that all disputes with Samsung relating to its warranties or relating to the sale, condition, or performance of the product shall be resolved exclusively through arbitration. The Brochure also stated that purchasers could opt out of the arbitration agreement by providing notice to Samsung within 30 calendar days of purchase. Plaintiff did not take any actions to opt out of the arbitration agreement.
In February 2014, Plaintiff filed a class action complaint alleging that Samsung misrepresented the storage capacity of the phone and rigged the phone to operate at a higher speed when it was being tested. Samsung moved to compel arbitration. It raised two theories: (i) the inclusion of the arbitration provision in the Product Safety & Warranty brochure created a valid contract between Plaintiff and Samsung to arbitrate all claims related to the Galaxy S4 Phone; and (ii) the Customer Agreement between Plaintiff and Verizon created a binding contract between Plaintiff and Samsung. The Ninth Circuit rejected both of Samsung’s arguments.
First, the court rejected Samsung’s claim that the Brochure created a binding contract to arbitrate. In California, subject to few exceptions, “silence or inaction does not constitute acceptance of an offer.” Thus, Samsung could not form a binding contract with Plaintiff by dictating that Plaintiff agrees to the terms in the Brochure unless he opts out of them. Nor did any exceptions recognized by California law apply because Plaintiff did not have a duty under California law to respond to the Brochure and did not retain a unique benefit offered with the Brochure. Accordingly, the court refused to interpret his silence as assent to the contractual terms in the Brochure, including the arbitration provision.
Second, Samsung could not compel arbitration pursuant to the arbitration provision in Plaintiff’s Customer Agreement with Verizon. Samsung argued that it was a third-party beneficiary of the Customer Agreement and, therefore, could compel arbitration under its terms. The court rejected this argument, ruling that “nothing in the agreement references Samsung or any other party.” Further, the court noted that Samsung failed to submit any evidence demonstrating that plaintiff or Verizon intended for the Customer Agreement to benefit Samsung. Accordingly, the court rejected Samsung’s argument that it was a third-party beneficiary to the Customer Agreement and could compel arbitration with Plaintiff pursuant to that agreement.
Norcia v. Samsung, No. 14-16994 (9th Cir. Jan. 19, 2017) [click for opinion]
A version of this post originally appeared in the March 2017 edition of Baker McKenzie’s International Litigation & Arbitration Newsletter, which is edited by David Zaslowsky and Grant Hanessian.