Court Declines to Compel Arbitration in Wireless Litigation—At Least For Now

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Judge William Alsup of the Northern District of California issued in order last week declining to compel arbitration since a trial would be “necessary to determine whether plaintiffs agreed to the terms and conditions of defendants’ service, which included [the applicable] arbitration clauses.” Barraza v. Cricket Wireless LLC, No. C 15-02471, 2015 WL 6689396 (Nov. 3, 2015).

The court began by noting a split in opinions regarding whether documents enclosed in a wireless phone package give rise to inquiry notice of the arbitration clause.  Compare Dang v. Samsung Electronics Co., Ltd., No. 14-00430, 2015 WL 4735520 (N.D. Cal. Aug. 10, 2015) (granting motion to compel arbitration where the arbitration clause was on the fifth page of an “Important Information” booklet enclosed in the phone packaging); with Norcia v. Samsung Telecoms. Am., LLC, No. 14-00582, 2014 WL 4652332 (N.D. Cal. Sept. 18, 2014) (denying the motion to compel arbitration because the arbitration provision was inconspicuously located in a 101-page booklet called “Product Safety & Warranty Information”).

Rather than weighing in on one side or the other of the split, the court distinguished the earlier cases on their facts, noting that in this case, the arbitration clause appeared in a “Quick Start Guide” that “lacked any indication of its contractual nature.”  Barraza, 2015 WL 6689396, at *5. … Read more

Defects Manifesting Outside Warranty Can Still Be Material

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In class actions alleging a failure to disclose a product defect, defendants often argue that consumers’ reasonable expectations should be defined by the product’s warranty. In other words, if a defect causes out-of-warranty failures only, the defect can’t possibly matter to consumers and defendants have no legal duty to disclose the defect in advance.

This argument drew considerable traction in California in recent years, often requiring plaintiffs to plead the defect posed a safety hazard in order to state a claim. See, e.g., Wilson v. Hewlett-Packard Co., 668 F.3d 1136, 1142-43 (9th Cir. 2012). That pendulum now appears to be swinging back in California, however, with courts recognizing a broader duty to disclose under California law. Rutledge v. Hewlett Packard, 238 Cal.App.4th 1164 (July 2015); see also Norcia v. Samsung Telecommunications Am., 2015 WL 4967247 (N.D. Cal. Aug. 20, 2015).

In Chiarelli v. Nissan N. Am., 2015 WL 5686507 (E.D.N.Y. Sept. 25, 2015), Judge Nicholas Garaufis recently had occasion to consider the argument in the context of New York, Florida, and Maryland law, and he rejected the argument nearly in full:

Nissan next argues that the terms of the express warranty set the consumer’s expectations as a matter of law, and therefore there can be no claim that Nissan’s omissions could be viewed as a practice likely to mislead a reasonable consumer acting reasonably under the circumstances. … Read more