Samsung Successfully Enforces Arbitration Clause
Wednesday, November, 12, 2014
A dispute over allegedly defective batteries in Samsung Galaxy S4 smartphones will be forced into arbitration as per the language in the company’s warranty. The ruling was made by a federal judge in Illinois considering an application for a class action lawsuit concerning the battery issue.
The plaintiffs bringing the lawsuits to court had argued that they were not given a “meaningful opportunity” to agree or disagree with the warranty’s arbitration clause, essentially arguing that no one can be reasonably expected to read the dense “small print” of a warranty before purchase. The judge however pointed out that users could “opt out” of this clause if they chose, and did not consider it unreasonable to expect purchasers of complex devices like smartphones to read underlying documentation carefully.
Complicating matters is a recent ruling in a California federal court that found the opposite, deciding that Samsung could not compel arbitration in a separate case involving performance claims in the S4. The California ruling found that because the arbitration language was not clearly identified as a contractual agreement, it was not enforceable as such.
As mandatory arbitration agreements become increasingly popular, the way these agreements are presented to consumers is under increasingly scrutiny, as many companies are aware that binding arbitration is viewed negatively by their customers as a way for the company to control damages. As a result many companies seek “stealth” ways of slipping arbitration language into agreements with customers, leading to many confusing legal challenges and rulings.