Customer Agreement With Verizon And Samsung Product And Safety & Warranty Agreement In The Box Failed To Bind Plaintiff To Arbitrate.
In Norcia v. Samsung Telecommunications America, LLC, et al., No 14-16994 (9th Cir. 10/17/17) (Ikuta, Thomas, Bea), Judge Ikuta provides in depth analysis of whether a 101 page brochure containing an arbitration provision and placed in the box containing a purchaser’s Galaxy S4 phone bound Daniel Norcia to arbitrate. For a number of reasons, the panel concludes that Mr. Garcia was not bound to arbitrate. He had not signed the brochure, the box did not state that opening it meant he agreed to the terms found in the brochure, generally, “silence or inaction does not constitute acceptance of an offer” (Golden Eagle Ins. Co. v. Foremost Ins. Co., 20 Cal.App.4th 1372, 1385 (1993), and the brochure stated that Norcia was entitled to “the benefits of the Limited Warranty” regardless whether he opted out of the arbitration agreement. As the party seeking to compel arbitration, Samsung bore the burden of proving the existence of an arbitration agreement, and it failed to carry its burden.
Samsung also argued that Norcia agreed to arbitrate by signing a Customer Agreement with Verizon, an argument that Judge Ikuta dismissed in three paragraphs as “meritless.” Samsung was not a signatory, nor was there evidence that Samsung was intended as a third-party beneficiary of the Verizon agreement.
COMMENT: The Federal Arbitration Act, embodying the national policy favoring arbitration, applies to this case. However, the parties agreed that California law governs the issue of contract information, and thus Judge Ikuta applies basic principles of California contract law.
Samsung sought to rely on several cases involving licenses and warranties, arguing that those cases are analogous to the brochure in the box. Because the panel’s analysis involves contract law, the opinion examines differences between contract, license, and warranty cases. For example, a shrink-wrap license imposing limits on the number of authorized licenses has been held to be enforceable in California. Wall Data Inc. v. L.A. Cty. Sheriff’s Dep’t, 447 F.3d 769, 782 (9th Cir. 2006). Such a license states that by opening a package or wrapper, the user agrees to the terms of the license. In Wall Data Inc., the court avoided the issue of contract formation. Norcia explains it makes sense that a user who opens a box with notice of a shrink-wrap license cannot do more than what the license permits -- say, installing software on 6,007 computers when the license is only for 3,663 computer. In Norcia, “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.”