Fiser v. Dell Computer Corporation
144 N.M. 464, 188 P.3d 1215, 2008 NMSC 046 (2008)
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Rule of Law:
In the context of small consumer claims that are prohibitively expensive to litigate individually, a contractual provision that prohibits class action relief is contrary to fundamental state public policy and is therefore unconscionable and unenforceable.
Facts:
- Robert Fiser purchased a computer from Dell Computer Corporation via the company's website.
- Fiser alleged that Dell systematically misrepresented the memory size of its computers.
- The estimated monetary loss for each affected customer was between ten and twenty dollars.
- Dell's online "terms and conditions" of sale included a mandatory arbitration clause.
- The terms also contained a class action ban, specifying that any dispute was limited solely to the controversy between the individual customer and Dell.
- A choice-of-law provision within the terms designated Texas law as controlling any disputes.
Procedural Posture:
- Plaintiff Robert Fiser filed a putative class action lawsuit against Defendant Dell Computer Corporation in a New Mexico district court (court of first instance).
- Dell filed a Motion to Stay and Compel Arbitration based on the terms and conditions of the sale.
- The district court granted Dell's motion, ordering the parties to arbitration.
- Fiser, as appellant, appealed the district court's decision to the New Mexico Court of Appeals.
- The Court of Appeals affirmed the district court's ruling in favor of Dell, the appellee.
- Fiser, as petitioner, sought and was granted a writ of certiorari from the New Mexico Supreme Court.
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Issue:
Does a contractual provision in a consumer agreement that bans class action relief violate New Mexico public policy and is it therefore unenforceable when applied to small-dollar claims that are not economically viable to pursue on an individual basis?
Opinions:
Majority - Serna, Justice
Yes. A contractual provision banning class action relief violates New Mexico public policy and is unenforceable when it effectively prevents consumers from vindicating small-dollar claims. The court reasoned that New Mexico has a fundamental public policy of ensuring consumers have a meaningful mechanism for dispute resolution, regardless of the claim's size, as evidenced by consumer protection statutes like the Unfair Practices Act (UPA). For claims as small as $10-$20, the cost of individual arbitration or litigation is prohibitive, making the class action device the only economically viable path to a remedy. By banning class actions for such claims, the provision functions as an exculpatory clause that shields Dell from accountability for widespread, low-damage misconduct. Therefore, the class action ban is substantively unconscionable as it is contrary to public policy. This holding is not preempted by the Federal Arbitration Act (FAA) because unconscionability is a generally applicable contract defense. The unconscionable class action ban is central to the arbitration agreement and cannot be severed, rendering the entire arbitration provision unenforceable.
Analysis:
This decision establishes a significant consumer protection precedent in New Mexico by prioritizing the state's public policy of providing meaningful remedies over contractual autonomy and choice-of-law provisions. It places a clear limit on the enforceability of class action waivers in consumer adhesion contracts, particularly for low-value claims where individual actions are not feasible. The ruling signals that New Mexico courts may find a contract term substantively unconscionable and unenforceable even without a strong showing of procedural unconscionability, especially when the term effectively insulates a party from liability. This case strengthens the viability of consumer class actions as a tool for redressing widespread but low-damage corporate misconduct.
