McNamara et al v. Samsung Telecommunications America, LLC
Filing
60
MEMORANDUM OPINION AND ORDER Signed by the Honorable Harry D. Leinenweber on 11/3/2014:Mailed notice(wp, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
JOHN McNAMARA, TONY GUGLIOTTA,
MELISSA NELSON, and RUDY
WOODWARD, Individually and on
Behalf of All Others Similarly
Situated,
Case No. 14 C 1676
Plaintiffs,
Hon. Harry D. Leinenweber
v.
SAMSUNG TELECOMMUNICATIONS
AMERICA, LLC and SAMSUNG
ELECTRONICS COMPANY, LTD.,
Defendants.
MEMORANDUM OPINION AND ORDER
I.
The
Plaintiffs
are
all
BACKGROUND
purchasers
of
Samsung
Galaxy
S4
smartphones. They contend that the Galaxy’s battery failed to live
up
to
consumer
specifications.
and
industry
standards
and
the
product
The specific complaint is that the capability of
continuous usage was far short of what Samsung claimed in the
specifications.
Plaintiffs seek to represent various classes of
consumers. They bring claims under the Illinois Consumer Fraud and
Deceptive Business Practices Act, 815 ILCS 505/2, and the MagnusonMoss Warranty Act, 15 U.S.C. § 2301 et seq. alleging breach of
express warranty and breach of implied warranty.
Each Plaintiff purchased his smartphone through a different
provider:
McNamara through T-Mobile, Gugliotta through AT&T,
Nelson through Cricket, and Woodward through Verizon.
Samsung has
moved to compel arbitration on an individual, non-class basis
because of arbitration agreements contained in the Standard Limited
Warranty which was located in the respective manuals provided in
the packaging.
The arbitration agreement reads as follows:
ALL DISPUTES WITH SAMSUNG ARISING IN ANY WAY
FROM THIS LIMITED WARRANTY OR THE SALE,
CONDITION, OR PERFORMANCE OF THE PRODUCTS
SHALL BE RESOLVED EXCLUSIVELY THROUGH FINAL
AND BINDING ARBITRATION, AND NOT BY A COURT OR
JURY.
It
also
provides
that any
dispute
“shall not
circumstances proceed as part of a class action.”
under
In addition it
states in bold lettering the following opt out language:
You may opt out of this dispute resolution
procedure by providing notice to SAMSUNG no
later than 30 calender days from the date of
the first consumer purchaser’s purchase of the
Product. To opt out, you must send notice by
e-mail to optout@sta.samsung.com, with the
subject
line:
Arbitration
Opt
Out.
. . . Alternatively, you may opt out by
calling 1-888-987-4357 no later than 30
calender days from the date of the fist
consumer purchaser’s purchase of the Product
and providing the same information. These are
the only two forms of notice that will be
effective
to opt
out
of
this
dispute
resolution procedure.
Opting out of this
dispute resolution procedure will not affect
the coverage of the Limited Warranty in any
way, and you will continue to enjoy the
benefits of the Limited Warranty.
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any
It
also
provides
that Texas
law applies
to
the
alleged
agreement. The Standard Limited Warranty is also available on line
as a free standing document and within the “User Manual” for each
carrier’s phone.
The Plaintiffs contend that this arbitration provision was
never agreed to and is invalid.
guide
did
not
notify
They assert that the warranty
Plaintiffs
of
what
conduct
constituted
acceptance, did not afford a meaningful opportunity to reject the
terms, and was unconscionable.
They further contend that merely
offering an opt out for the dispute resolution procedure rather
than the right to return the product and reject all of the terms of
the Standard Limited Warranty was insufficient.
They, however, do
not deny that the received copies of the Standard Limited Warranty
containing the arbitration provision at the time of purchase of the
smartphones.
Their argument is that it was buried in the Warranty
booklet and was not specifically listed on the table of contents.
Plaintiffs contend that Illinois law applies but have not suggested
that there is any difference between Illinois law and Texas law nor
do Defendants.
Both sides cite Illinois law thought out their
briefings.
II.
DISCUSSION
The Federal Arbitration Act, 9 U.S.C. § 1 et seq. (the “FAA”)
“requires a District Court to stay litigation upon the application
of one of the parties if any issue involved in the suit is
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referable to arbitration.”
ChampionsWorld, LLC v. U.S. Soccer
Federation, Inc., 487 F.Supp.2d 980, 985 (N.D. Ill. 2007). The FAA
further provides that a written arbitration provision “shall be
valid, irrevocable, and enforceable save upon such grounds as exist
at law or in equity for the revocation of any contract.”
§ 2.
The FAA was designed to promote arbitration.
LLC v. Concepcion, 131 S.Ct. 1740, 1745 (2011).
9 U.S.C.
AT&T Mobility
In the so-called
“shrink wrap” cases, the Seventh Circuit as held that a party can
manifest agreement to an arbitration clause even where the party
does not become aware of the terms and conditions of such an
agreement until after the purchase.
Hill v. Gateway 2000, Inc.,
105 F.3d 1147, 1148 (7th Cir. 1997).
In Hill, the plaintiff
ordered a computer which came in a box that contained a list of
terms that govern unless the customer returned the computer within
30 days.
judge,
Among the terms was an arbitration clause.
at
arbitration
the
request
provision
inadequate notice.
of
based
plaintiff,
on
what
refused
the
to
judge
The trial
enforce
the
concluded
was
The Seventh Circuit reversed holding that such
provisions contained within the packaging were valid under the law
of contracts provided there is an ability to reject.
Plaintiffs argue that unlike Hill and its predecessor, ProCD,
Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996) they were not
warned about the legal consequences of the arbitration provision
and were not given a meaningful opportunity to reject.
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However, a
review of the Samsung Health and Safety Warranty Guide shows that
it does provide a meaningful opportunity to reject the arbitration
provision.
First, with regard to the arbitration provision, the consumer
is advised that he has 30 calender days after purchase to reject
the arbitration provision.
provides
that
the
The End User License Agreement further
purchaser
upon
use
agrees
to
the
license
provisions but if the purchaser felt the End User License Agreement
to be onerous could return the product for a refund or credit.
But
as far as the arbitration provision is concerned there is no reason
to reject the product just on the basis of loss of access to the
courts because by taking a relatively simple act one can be
excluded from the arbitration requirement.
Plaintiffs dispute its location in the warranty section but
that is precisely where it belongs as least as far as Plaintiffs
are concerned.
the warranty.
What they are seeking to do is prove a breach of
Moreover, the location of the arbitration provision
in a large document is reasonable.
We are dealing with so-called
“smart phones” which by their nature are extremely complicated and
provide for a multitude of activities. Because of these qualities,
a purchaser would be expected to review the product user guide in
order to get as much out of the product as he can.
The Court
therefore finds that the contract between Plaintiffs and Samsung
provided reasonable notice of the arbitration clause.
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Plaintiffs
next
argue
that
the
arbitration
provision
is
unconscionable under Illinois law. The argument here is that it is
difficult to find and therefore was concealed from them.
As the
Court said in Hill, a contract need not be read to be enforced,
people who do not read a contract run the risk that the unread
terms may in retrospect prove unwelcome.
Furthermore, the Supreme
Court has held that arbitration agreements must be enforced “save
upon such grounds as exist at law or in equity for the revocation
of any contract.”
S.Ct. 1652.
Doctor’s Associates, Inc. v. Casarotto, 116
In other words, a state may not place restrictions on
arbitration provisions that are not applicable to other contracts.
Moreover, the provision in question is neither procedurally nor
substantively unconscionable.
There are no penalties associated
with opting out and opting out does not affect the warranty
coverage.
The provision also provides limitation on fees and
allows the arbitrator to assess attorneys’ fees on small claims.
See, Carbajal v. H & R Block Tax Services, Inc., 372 F.3d 903, (9th
Cir. 2004) (“The cry of ‘unconscionable!’ just repackages the tired
assertion that arbitration should be disparaged as second-class
adjudication.”).
Plaintiffs’ final argument is that the arbitration provision
is inconsistent with AAA rules and for this further reason is
unconscionable.
Plaintiffs, however, do not cite any case that
holds that failure to abide by the AAA rules renders a provision
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unconscionable.
However, a reading of Principle 11 of AAA’s
Consumer Due Process Protocol shows that the subject arbitration
provision is not inconsistent with the Protocol. Since the subject
arbitration provision is mandatory the only applicable provision is
the one on notice which the Court has held was adequate.
III.
CONCLUSION
For the reasons stated herein, Defendants’ Motion to Compel
Arbitration is granted.
The proceedings in this matter are stayed
pending outcome of Plaintiffs’ arbitrations.
IT IS SO ORDERED.
Harry D. Leinenweber, Judge
United States District Court
Date:11/3/2014
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