Norcia v. Samsung Telecommunications America, LLC
845 F.3d 1279 (2017)
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Rule of Law:
Under California contract law, a consumer's silence or failure to opt out of an arbitration provision contained within a product's warranty brochure does not constitute acceptance of an agreement to arbitrate non-warranty claims, particularly when the consumer is not reasonably on notice that the document contains a freestanding contractual offer.
Facts:
- On May 23, 2013, Daniel Norcia purchased a Samsung Galaxy S4 phone at a Verizon Wireless store.
- Norcia signed a "Customer Agreement" with Verizon Wireless, which contained an arbitration clause for disputes with Verizon.
- A Verizon employee opened the sealed Samsung box for Norcia; the box contained a brochure titled "Product Safety & Warranty Information."
- The brochure contained a provision stating that all disputes with Samsung arising from the warranty, sale, or performance of the product must be resolved through binding arbitration.
- The brochure also provided a 30-day period for the purchaser to opt out of the arbitration agreement via email or a toll-free number.
- Norcia took the phone and accessories but declined to take the product box and its contents, including the warranty brochure, when he left the store.
- Norcia did not take any steps to opt out of the arbitration provision.
Procedural Posture:
- Daniel Norcia filed a class action complaint against Samsung in the United States District Court.
- Samsung filed a motion to compel arbitration based on a provision in the product's warranty brochure.
- The district court (trial court) denied Samsung's motion to compel arbitration.
- Samsung, as the appellant, timely appealed the district court's order to the U.S. Court of Appeals for the Ninth Circuit, with Norcia as the appellee.
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Issue:
Does a consumer's failure to opt out of an arbitration provision, contained within a product's warranty brochure inside the sealed product box, constitute acceptance of a contract to arbitrate non-warranty claims under California law?
Opinions:
Majority - Ikuta, Circuit Judge
No. A consumer's failure to opt out of an arbitration provision contained in a product's warranty brochure does not create a binding contract to arbitrate non-warranty claims. Under fundamental principles of California contract law, arbitration is a matter of consent, and the party seeking to compel it bears the burden of proving a valid agreement exists. Generally, silence or inaction does not constitute acceptance of an offer. Exceptions to this rule, such as a duty to respond or the voluntary acceptance of a benefit, do not apply here because Norcia had no prior relationship with Samsung imposing a duty to act, and the brochure stated that warranty benefits were not conditioned on accepting arbitration. Furthermore, a contract cannot be formed when the offeree is not on reasonable notice that an offer has been made. A brochure titled "Product Safety & Warranty Information" does not provide a reasonable consumer with notice that it contains a separate contractual offer to arbitrate all claims, not just those related to the warranty. Therefore, Norcia did not manifest consent to Samsung's arbitration provision, and no contract was formed.
Analysis:
This decision reinforces the high bar for establishing contractual consent through a consumer's inaction under California law, particularly in the context of 'in-the-box' terms. It distinguishes between warranty terms, which impose obligations on the seller, and freestanding contractual obligations, which require the buyer's affirmative consent. The court's refusal to adopt the reasoning from cases like Hill v. Gateway 2000 signals that federal courts applying California law will require clear and conspicuous notice for a consumer to be bound by terms they have not expressly signed. This ruling limits the ability of manufacturers to bind consumers to broad arbitration clauses for all disputes by burying them in warranty materials without obtaining a clear manifestation of assent.
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