Pang et al v. Samsung Electronics America, Inc.

Filing 66

ORDER RE MOTION TO COMPEL ARBITRATION 59 by Judge Phyllis J. Hamilton. (pjhlc2S, COURT STAFF) (Filed on 3/4/2019)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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LYNETTE PANG, et al.,

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Case No. 18-cv-01882-PJH

Plaintiffs,

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v.

ORDER RE MOTION TO COMPEL
ARBITRATION

SAMSUNG ELECTRONICS AMERICA,
INC.,

Re: Dkt. No. 59

United States District Court
Northern District of California

Defendant.
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Defendant Samsung Electronics America, Inc.’s (“Samsung”) motion to compel

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arbitration came on for hearing before this court on February 27, 2019. Plaintiffs

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appeared through their counsel, Michael Woerner. Defendant appeared through its

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counsel, Michael McCarthy and Robert Herrington. Having read the papers filed by the

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parties and carefully considered their arguments and the relevant legal authority, and

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good cause appearing, the court hereby GRANTS IN PART and DENIES IN PART

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defendant’s motion, for the following reasons.

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BACKGROUND
Plaintiffs Lynette Pang, Timo Masalin, and Cindy Seminatore bring this putative

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false advertising and warranty class action against Samsung. Generally, plaintiffs allege

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that, contrary to Samsung’s representations and advertising, the rear cameras on various

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Samsung smartphones—the Galaxy S7, Galaxy S7 Edge, Galaxy S7 Active, the Galaxy

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S8 and Note 8 (the “devices”)—are not high quality because the lenses spontaneously

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shatter (the “defect”), rendering the camera all but useless. Plaintiffs’ warranty claims

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allege that Samsung failed to honor its warranty by requiring consumers whose phone

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exhibited the alleged defect to pay for the repair.

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On November 20, 2018, plaintiffs filed their Second Amended Class Action

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Complaint (the “SAC”), which added plaintiff Cindy Seminatore as a named plaintiff. See

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Dkt. 53, SAC. Seminatore was added as a named plaintiff because, unlike Pang and

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Masalin, Seminatore did not opt out of the Samsung arbitration agreement that

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accompanied her phone purchase. Id. ¶ 47.
Other than that difference, Seminatore’s experience was largely similar to Pang

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and Masalin’s. On November 19, 2016, Seminatore purchased a Samsung Galaxy S7

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from T-Mobile. Id. ¶ 46. On December 4, 2016, “Seminatore discovered the cover of the

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rear-facing camera was shattered in the shape of a circle[,]” even though “the phone had

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United States District Court
Northern District of California

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merely been charging, undisturbed on her counter.” Id. ¶¶ 48-49; Dkt. 62, Cindy

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Seminatore Decl. ¶¶ 10-11. “Upon discovering the shattered lens cover, [ ] Seminatore

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immediately took the phone to T-Mobile, which refused to repair or replace the device.”

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SAC ¶ 49; Seminatore Decl. ¶¶ 13-14. T-Mobile directed Seminatore to contact

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Samsung and Seminatore did so the next day, on December 5, 2016. Seminatore Decl.

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¶¶ 15-16; SAC ¶ 50. During her phone call with Samsung support, “Samsung’s

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representative informed Seminatore that the device was ‘in warranty’ and directed [her] to

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mail [her] device to a Samsung repair center in Plano, Texas,” which Seminatore did.

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Seminatore Decl. ¶¶ 17-18; SAC ¶ 50. On January 30, 2017, however, “Samsung

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updated [Seminatore’s] service ticket to indicate that the damage to the device was [ ]

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‘out of warranty.’” Seminatore Decl. ¶ 19; SAC ¶ 51. Samsung informed Seminatore that

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the repair fee was $182.89 and that if she did not pay that fee, Samsung would dispose

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of the device. Seminatore Decl. ¶¶ 20-22; SAC ¶¶ 51-52. Because Seminatore was not

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given an option to have the device returned unrepaired, she agreed to pay the repair fee.

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Seminatore Decl. ¶¶ 22-23; SAC ¶ 52.

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As noted, the Galaxy S7’s packaging includes the following relevant features. The

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middle of the second to last paragraph on the back of the box states, in tiny text that

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contrasts badly with the black box, “Device purchase subject to additional Samsung
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Terms and Conditions.” Dkt. 59-2, McBeth Ex. B. Upon opening the box, the purchaser

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finds a textless black envelope under the device. McBeth Ex. I. Within the black

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envelope, there are four booklets. McBeth Ex. J. The second of which is issued by

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Samsung (as opposed to T-Mobile) and its cover states: “Health & Safety and Warranty

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Guide” (the “Guidebook”). Id.
As the cover of the Guidebook indicates, the Guidebook includes health and safety

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information, as well as information about Samsung’s Limited Warranty. See generally id.

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Ex. C. The first page of the Guidebook states “Please read this manual before operating

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your device and keep it for future reference. This document contains important terms
and conditions with respect to your device. By using your device, you accept those terms

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United States District Court
Northern District of California

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and conditions.” Id. at ECF p. 7.1 The next page of the Guidebook discloses that the

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Guidebook contains a dispute resolution procedure and, in conjunction with the prior

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sentence, indicates that use of the phone subjects the user to that dispute resolution

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procedure (the “Arbitration Agreement”). Id. at 8. Specifically, the pages states, inter

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alia, “Samsung Limited Warranty – This product is covered under the applicable

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Samsung Limited Warranty INCLUDING ITS DISPUTE RESOLUTION PROCEDURE

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and your right to opt out of arbitration within 30 calendar days of the first

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consumer purchase. You may opt out by either sending an email . . . or by

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calling[.]” Id. (also referring reader to the “‘Dispute Resolution Procedure and Arbitration

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and Opt-Out’ section of the Limited Warranty”). The contents page, appearing on the

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seventh page of the Guidebook, also references Samsung’s Arbitration Agreement and

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the Opt-Out policy. Id. at 13; see also id. at 32-35 (Samsung’s dispute resolution

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procedures).
Based on the Arbitration Agreement, Samsung now moves to compel Seminatore

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to arbitrate all claims she asserts in this action, including warranty claims based on

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Samsung’s Limited Warranty. Plaintiffs respond only that the Arbitration Agreement is

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Henceforth, Exhibit C pin cites are to the ECF/PDF page numbers.
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unenforceable as to Seminatore because she never agreed to arbitrate. Specifically,

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plaintiffs argue that that Seminatore never accepted Samsung’s offer to arbitrate as she

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did not know an offer was made because Samsung’s offer was inconspicuous.
DISCUSSION

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A.

Legal Standard
“The party seeking arbitration bears the burden of proving the existence of an

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arbitration agreement, and the party opposing arbitration bears the burden of proving any

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defense, such as unconscionability.” Pinnacle Museum Tower Assn. v. Pinnacle Mkt.

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Dev. (US), LLC, 55 Cal. 4th 223, 236 (2012).

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The "first principle" that underlies the U.S. Supreme Court's arbitration decisions is

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Northern District of California

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that “[a]rbitration is strictly a matter of consent and thus is a way to resolve those

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disputes—but only those disputes—that the parties have agreed to submit to

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arbitration[.]” Granite Rock Co. v. Int’l B’hd of Teamsters, 561 U.S. 287, 299 (2010)

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(quotations marks, citations, and emphasis omitted). Thus, "a court may order arbitration

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of a particular dispute only where the court is satisfied that the parties agreed to arbitrate

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that dispute." Id. at 297 (citations omitted).

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Under the FAA, any party bound to an arbitration agreement that falls within the

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scope of the FAA may bring a motion in federal district court to compel arbitration and

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stay the proceeding pending resolution of the arbitration. 9 U.S.C. §§ 3–4; see also

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Lifescan, Inc. v. Premier Diabetic Servs., Inc., 363 F.3d 1010, 1012 (9th Cir. 2004). The

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FAA requires the court to compel arbitration of issues covered by the arbitration

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agreement. Dean Witter Reynolds, Inc., v. Byrd, 470 U.S. 213, 218 (1985). In ruling on a

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motion to compel arbitration under the FAA, the district court’s role is typically limited to

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determining whether (i) an agreement exists between the parties to arbitrate; (ii) the

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claims at issue fall within the scope of the agreement, unless that question has been

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delegated to the arbiter; and (iii) the agreement is valid and enforceable. Lifescan., 363

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F.3d at 1012; Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524, 527

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(2019). If the answers are yes, the court must enforce the agreement. Lifescan, 363
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F.3d at 1012.
Here, the parties’ only dispute the first question: whether the parties formed a

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contract. “[W]e apply ordinary state-law principles that govern the formation of contracts

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to decide whether an agreement to arbitrate exists.” Norcia v. Samsung Telecomm. Am.,

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LLC, 845 F.3d 1279, 1283–84 (9th Cir. 2017) (quotation marks omitted). The parties

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agree that California law governs the issue of contract formation.

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The general rule under California law is that “silence or inaction does not

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constitute acceptance of an offer. . . . There are exceptions to this rule, however. An

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offeree’s silence may be deemed to be consent to a contract when the offeree has a duty
to respond to an offer and fails to act in the face of the duty.” Id., 845 F.3d at 1284-85;

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United States District Court
Northern District of California

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see also Cal. Civ. Code § 1589 (“A voluntary acceptance of the benefit of a transaction is

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equivalent to a consent to all the obligations arising from it, so far as the facts are known,

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or ought to be known, to the person accepting.”).

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“Even if there is an applicable exception to the general rule that silence does not

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constitute acceptance, courts have rejected the argument that an offeree’s silence

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constitutes consent to a contract when the offeree reasonably did not know that an offer

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had been made.” Norcia, 845 F.3d at 1285. “[A]n offeree, regardless of apparent

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manifestation of his consent, is not bound by inconspicuous contractual provisions of

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which he was unaware, contained in a document whose contractual nature is not

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obvious.” Windsor Mills, Inc. v. Collins & Aikman Corp., 25 Cal. App. 3d 987, 993 (Ct.

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App. 1972).

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However, when an offer is accepted, “[a] party who is bound by a contract is

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bound by all its terms, whether or not the party was aware of them. A party cannot avoid

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the terms of a contract on the ground that he or she failed to read it before signing.”

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Norcia, 845 F.3d at 1284 (quotation marks omitted); Windsor Mills, 25 Cal. App. 3d at

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992 (“an offeree, knowing that an offer has been made to him but not knowing all of its

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terms, may be held to have accepted, by his conduct, whatever terms the offer

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contains”).
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B.

Analysis

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Samsung essentially raises two theories of contract formation to support its

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argument that Seminatore entered into a binding contract with Samsung to arbitrate her

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claims. First, Samsung argues that Seminatore should have known that the phone

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included an offer to contract because the offer was obvious. Second, Samsung argues

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that Seminatore invoked the warranty within 30 days of her purchase and in doing so

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accepted, or was on notice of, Samsung’s offer, but nevertheless failed to opt out of the

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Arbitration Agreement.

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Samsung’s Offer to Arbitrate Was Not Conspicuous.

The court finds that Samsung’s offer to arbitrate was not conspicuous to a

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Northern District of California

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reasonable consumer who purchased or used the Galaxy S7. That finding aligns with

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directly on point Ninth Circuit precedent and district court decisions considering nearly the

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exact same packaging and offer to arbitrate.

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In Norcia, the Ninth Circuit confronted the question of whether the brochure in

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Samsung's Galaxy S4 box created a binding arbitration contract between Samsung and

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the consumer. 845 F.3d at 1284-90. Within the box at issue in Norcia, there was a

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brochure entitled “Product Safety & Warranty Brochure.” Id. at 1282. That brochure was

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101 pages long with two sections: (1) health and safety information and (2) Samsung's

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limited warranty and the user's software license agreement. Id. Within the warranty

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section, the brochure contained an arbitration provision that applied to all disputes arising

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from the limited warranty or the sale, condition, or performance of the product. Id. A

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subsequent paragraph explained the procedures for arbitration and stated that, without

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losing the benefits of the warranty, consumers could opt out of arbitration within 30 days

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of purchase by phone or email. Id.

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The Ninth Circuit concluded that the Norcia plaintiff did not agree to arbitrate. Id.

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at 1291. First, the court applied the no-acceptance-by-silence rule because the plaintiff

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neither had a duty to act in response to the brochure nor retained the benefit of the

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agreement. Id. 1284-85. Second, the court found that “the Galaxy S4 box did not notify
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the consumer that opening the box would be considered agreement to the terms set forth

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in the brochure.” Id. at 1287. Third, the Ninth Circuit explained that enforcement of the

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inside-the-box provisions—i.e., the arbitration agreement in the brochure—required the

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consumer have adequate notice of the contractual terms. Id. at 1289-90. The Ninth

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Circuit found that notice lacking because the arbitration provision appeared in a brochure

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titled “Product Safety & Warranty Information” and “[a] reasonable person in [the

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plaintiff’s] position would not be on notice that the brochure contained a freestanding

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obligation outside the scope of the warranty.” Id. at 1289. “Nor would a reasonable

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person understand that receiving the seller’s warranty and failing to opt out of an
arbitration provision contained within the warranty constituted assent to a provision

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United States District Court
Northern District of California

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requiring arbitration of all claims against the seller, including claims not involving the

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warranty.” Id.; see also Dang v. Samsung Elecs. Co., 673 F. App'x 779 (9th Cir. 2017)

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(similar).

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Recent decisions in this circuit have applied Norcia to facts matching those

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presented here. In In re Samsung Smartphone Marketing and Sales Practices Litig., 298

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F. Supp. 3d 1285, 1297 (N.D. Cal. 2018), a plaintiff bought an S7 that came in a box that

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had an identical statement to the one in this case, id. (“Device purchase subject to

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additional Samsung terms and conditions.”), and included a guidebook entitled “Important

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Information,” id. Finding the guidebook “nearly identical” to the brochure at issue in

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Norcia, In re Samsung explained: “Although opening the guidebook would have revealed

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the language that the consumer accepts the Guidebook's terms by using the device, a

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reasonable person had no fair notice that he should read the ‘Important Information’

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guidebook for binding terms and conditions before using the phone.” Id. at 1298-99

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(finding plaintiff did not assent to arbitration agreement). Other courts agree. Velasquez-

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Reyes v. Samsung Electrs. Am., Inc., Case No. ED CV 16-1953-DMG(KKx), 2017 WL

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4082419, *7 (C.D. Cal. Sept. 13, 2017) (“[T]he Guide’s cover page indicates only that it

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contains health, safety, and warranty information” and thus “cannot bind [plaintiff] to an

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arbitration provision” therein.); Samsung Elecs. Am., Inc. v. Ramirez, No.
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117CV01462AWISAB, 2018 WL 2198721, at *10 (E.D. Cal. May 14, 2018) (because the

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cover of the brochure merely “indicate[d] that it contains safety information and the

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seller’s warranty, . . . a reasonable person would not be on notice that the brochure

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contained a freestanding obligation outside the scope of the warranty.”).
With respect to whether Seminatore had notice of the offer to arbitrate based only

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upon the device’s packaging and the inclusion of the Guidebook, the court finds the

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above courts’ analysis persuasive and, in the case of Norcia, binding.
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A Reasonable Consumer Who Invokes The Limited Warranty Would
Be On Notice Of The Offer to Arbitrate

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All that said, the present facts are distinct from the above decisions in one

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Northern District of California

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important way: Seminatore invoked Samsung’s Limited Warranty within the Arbitration

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Agreement’s 30-day opt-out period. That fact, and her continued attempts to enforce that

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warranty in this action, puts this case outside the purview of Norcia. In fact, the Ninth

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Circuit emphasized that its decision might be different if the action involved a warranty

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dispute. Norcia, 845 F.3d at 1284, 1288 n.3 (“Samsung may be able to require Norcia to

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arbitrate claims arising out of the Standard Limited Warranty . . . but we need not

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consider the enforceability of any such limitation because Norcia has not brought any

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warranty claims against Samsung.”).2
Under the facts present here, the relevant question is whether a reasonable

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person in Seminatore’s position—i.e., one who invoked the warranty within 30-days of

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purchase—would be on notice of Samsung’s offer to arbitrate. Seminatore’s invocation

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of Samsung’s Limited Warranty makes this case meaningfully dissimilar to the decisions

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discussed above that essentially held that those plaintiffs had no reason to open the

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guidebooks accompanying their devices.3 Contrary to those cases, here, Seminatore

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No party has requested that the court compel arbitration of only Seminatore’s warranty
claims. Nor have plaintiffs asked the court to keep Seminatore’s non-warranty claims.
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The court notes that Samsung’s Arbitration Agreement’s opt-out period begins to run on
the date of “the first consumer purchase.” Ex. C. at 8 (emphasis added). While the
circumstances present here give the court no cause to reach the issue, the court notes
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“had [ ] fair notice that [s]he should read” the Guidebook entitled “Health & Safety and

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Warranty Guide,” In re Samsung, 298 F. Supp. 3d at 1297, because she intended on

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making a warranty claim. A reasonable person in that position would have opened the

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Guidebook because the cover page indicates that the Guidebook contains information

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about that topic. “[O]pening the guidebook would have [immediately] revealed the

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language that the consumer accepts the Guidebook's terms by using the device[.]” Id. at

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1298; Ex. C. at 7. And the next page would have informed Seminatore that the Limited

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Warranty included an arbitration agreement with an opt-out period. Ex. C at 8. The

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Guidebook’s contents page would have informed Seminatore of the same. Id. at 13.4

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Further, Samsung’s Arbitration Agreement is part of Samsung’s Limited Warranty:

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Northern District of California

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“This product is covered under the applicable Samsung Limited Warranty INCLUDING

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ITS DISPUTE RESOLUTION PROCEDURE[.]” Ex. C. at 8 (emphasis added); see also

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id. (referring reader to the “‘Dispute Resolution Procedure and Arbitration and Opt-Out’

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section of the Limited Warranty”). That suggests either that arbitration is a condition of

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enforcing the Limited Warranty, see Norcia, 845 F.3d at 1288 (“A condition” of enforcing

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a warranty “is not equivalent to a freestanding obligation that limits a buyer’s rights

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outside of the scope of warranty itself.”), or that the Limited Warranty is a term of a single

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contract that includes an arbitration agreement, id. at 1284-85 (“[a] party who is bound by

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a contract is bound by all its terms . . .; “An offeree’s silence may also be treated as

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consent to a contract when the party retains the benefit offered”). See also Cal. Civ.

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Code § 1589 (“A voluntary acceptance of the benefit of a transaction is equivalent to a

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consent to all the obligations arising from it, so far as the facts are known, or ought to be

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known, to the person accepting.”).

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that in certain circumstances that opt-out period may expire before a consumer receives
fair notice of the existence of the arbitration agreement. That circumstance strikes this
court has highly inequitable.
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It is of no import that Seminatore attests she did not in fact read the Guidebook until
nearly two months later. See Seminatore Decl. ¶ 25. A reasonable person would have
done so and, in doing so, would have been put on notice of the Arbitration Agreement.
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Lastly, the present situation does not clearly fall under the general rule that

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“silence or inaction does not constitute acceptance of an offer.” Norcia, 845 F.3d at

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1284-85. That is because Seminatore acted by invoking Samsung’s Limited Warranty.

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In California, “mutual consent is gathered from the reasonable meaning of the words and

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acts of the parties, and not from their unexpressed intentions or understanding.”

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Reigelsperger v. Siller, 40 Cal. 4th 574, 579–80 (2007). Invocation of a Limited Warranty

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that includes an arbitration agreement might reasonably be understood as acceptance of

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the offer.
CONCLUSION

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For the foregoing reasons, defendant’s motion to compel arbitration is GRANTED

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Northern District of California

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and Seminatore is hereby COMPELLED TO ARBITRATE all claims she asserts in this

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action. The court STAYS the action only with respect to Seminatore’s claims. See 9

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U.S.C. § 3. Defendants’ request for a stay of the entire action pending the resolution of

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Seminatore’s arbitration is DENIED. See Congdon v. Uber Techs., Inc., 226 F. Supp. 3d

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983, 990-91 (N.D. Cal. 2016) (explaining why opt-out plaintiffs’ litigation should not be

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stayed pending resolution of another plaintiff’s arbitration).

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IT IS SO ORDERED.
Dated: March 4, 2019
__________________________________
PHYLLIS J. HAMILTON
United States District Judge

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