Unless you have been living on the moon for the last year or so, you have probably heard much about Samsung's continual difficulties with its combustible mobile devices. Problems began surfacing with the brand's popular Note 7 device when batteries began spontaneously catching fire. Soon after, the Samsung's flagship Galaxy 7s phones began experiencing the same problem. After a spate of damage control the company finally recalled the devices and eventually enacted a "kill switch" software update to put phones yet to be returned out of commission.
In the ensuing months, word of injuries and damages resulting from these spontaneous combustion episodes surfaced and recently the first reported case of a class action personal injury suit came to light.
News outlets quickly jumped on a defense put forth by Samsung that a forced arbitration agreement place in the warranty pamphlet of the phones' packaging prevents customers who accept and use the phone from suing in cases of damage, but binds the customer to seek third-party arbitration, effectively taking the case out of court. Further, Samsung contends that the agreement also prevents any single customer dispute from representing other customers as in the case of a class action, forcing each claimant to pursue separate arbitration.
In this case, the consumer who brought the case to court did not opt out of the agreement by following instructions contained therein.
The plaintiff in this case held that the phone was set up by a Verizon technician and he never saw the warranty or the agreement contained therein. Further, the plaintiff maintained that he did not even carry the warranty home after having had the new device set up and activated in the store. But none of that really seemed to matter in this case.
Both a U.S. District Court judge and a three-judge panel of the Ninth Circuit Court of Appeals denied Samsung's resulting motions based on contract law to compel arbitration by the terms of the forced arbitration agreement included in the phone's warranty booklet.
The Ninth Circuit Court of Appeals found in a unanimous ruling that:
“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…”
Per standard contract law, establishment of an agreement on both sides is necessary to prove Samsung's case. And courts in California, where the plaintiff in this case purchased his phone, have held that “silence or inaction does not constitute acceptance of an offer.” One exception to this rule arises when the consumer continues to receive a benefit from the agreement despite their inaction.
“Samsung has not pointed to any principle of California law that imposed a duty on [the plaintiff] to act in response to receiving the Product Safety & Warranty Information brochure…Moreover, Samsung has not alleged that [the plaintiff] retained any benefit by failing to act. Indeed, the brochure states that [the plaintiff] was entitled to ‘the benefits of the Limited Warranty' regardless whether Norcia opted out of the arbitration agreement.”
Samsung further claimed that there was no difference between its in-the-box warranty and so-called “shrink wrap” agreements that the same Ninth Circuit had upheld as binding in a prior case. The company cited a case where a software company had included a notice outside of the box, under shrink wrap, notifying customers that opening the very package constituted agreement to the terms of the license of the product.
But the Ninth Circuit maintained that the two cases were not actually comparable from a legal perspective. The court held:
“Even if a license to copy software could be analogized to a brochure that contains contractual terms, the outside of the Galaxy S4 box did not notify the consumer that opening the box would be considered agreement to the terms set forth in the brochure.”
Samsung's final argument pointed to a “Customer Agreement” the plaintiff signed with Verizon Wireless, which included an arbitration agreement.
The panel held that:
“Samsung is not a signatory. While the agreement itself includes a number of terms governing the relationship between [the plaintiff] and Verizon Wireless, including an arbitration provision, nothing in the agreement references Samsung or any other party.”
Samsung still has one last opportunity to appeal the case to the Supreme Court, but has yet to make a statement on the recent ruling or to indicate whether it will pursue the case further with a final Supreme Court appeal.
The lesson for consumers is clear, never take for granted that you can pursue personal injury damages should a product you purchase prove defective if you disregard seemingly standard disclaimers on packaging. Read all disclaimers carefully and ensure you are not surrendering your right to pursue damages in a court of law just by removing packaging.
Indeed, this case is still playing out in the courts and no definitive ruling will truly be made unless and until the case is heard by the Supreme Court.
Of course, if you are harmed by a defective product, you should always seek the counsel of an experienced personal injury attorney like those at Panio Law Offices. We understand your rights and the scope of damages you are entitled to in these cases. We can help you document the evidence in your case and determine all the parties liable for damages in your case.
Please call us at (312) 313-0305 if you have questions about filing a personal injury claim. We can help.