A federal appeals court ruled in San Francisco Thursday that two consumer lawsuits filed over Samsung smartphones can’t be forced to go to arbitration and instead can proceed toward trials.
The 9th U.S. Circuit Court of Appeals said that in both cases, a mandatory arbitration provision contained in a warranty booklet placed in a box packaging the smartphone didn’t amount to a contract.
A three-judge panel issued a pair of unanimous decisions in two separate cases filed in 2014 by Bay Area smartphone buyers with differing claims against Samsung Electronics America Inc.
One lawsuit, filed in federal court in San Francisco by Daniel Norcia of San Francisco, alleges Samsung misled buyers of the Galaxy S4 by misrepresenting the phone’s storage capacity and rigging the device to operate at a higher speed when being tested.
The other suit, filed in federal court in San Jose by Hoai Dang of San Jose, alleges that the value of his Samsung Galaxy SIII “dropped dramatically” after Apple Inc. began claiming in court that Samsung violated its patents.
Both lawsuits seek to be certified as class actions on behalf of all California buyers of those smartphones, but have not yet reached the certification stage.
Instead, Samsung sought to have both cases dismissed on the ground that an arbitration provision in the phones’ warranty booklets required consumers with a complaint to go to arbitration rather than the court system.
In lower court rulings, U.S. District Judge Lucy Koh of San Jose agreed with Samsung and said Dang had to resolve his claim through arbitration.
But U.S. District Judge James Donato of San Francisco disagreed and said Norcia’s lawsuit could proceed through the courts.
In Thursday’s decisions, the panel said both lawsuits should go ahead because the phone buyers weren’t given adequate notice that the warranty booklets contained an arbitration provision.
In addition, the court said, the two buyers did not explicitly agree to the arbitration provision.
Circuit Judge Sandra Ikuta wrote for the court:
“A reasonable person in Norcia’s position would not be on notice that the brochure contained a freestanding obligation outside the scope of the warranty.”
“Nor would a reasonable 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 requiring arbitration of all claims against the seller, including claims not involving the warranty.”
The decisions send the two cases back to the district court for further proceedings or trials.
A Samsung spokesperson was not immediately available for comment.