This action involved a class action suit brought in New Jersey federal court. The complaint alleged that plaintiff David Noble saw Samsung advertisements stating that the Samsung smartwatch’s battery lasted 24 to 48 hours with typical use. Noble claimed that the battery in his Samsung smartwatch lasted only four hours, and that two replacements provided equally poor battery life. The suit was brought based on the New Jersey Consumer Fraud Act, common law fraud, negligent misrepresentation, breach of warranty and unjust enrichment, accusing the company of deceptive marketing and pricing. Samsung moved to compel arbitration, based on an arbitration provision, printed on page 97 of a 143-page “Health and Safety and Warranty Guide” in the watch box. The New Jersey district court denied the motion, finding that there was no binding contract and that the arbitration clause was unreasonably hidden. Samsung appealed.
In its analysis whether the arbitration clause is a valid contractual term, the Third Circuit noted that under New Jersey law, mutual assent between the parties is required for a contract to be binding and that mutual assent requires reasonable notice to the contracting parties of the contract’s terms. The Court noted that when the writing does not appear to be a contract and the terms are not called to the attention of the recipient, there is no reasonable notice and the terms cannot be binding. Thus, the Court stated that a contractual term, like an arbitration clause, is binding only when the terms are reasonably conspicuous, rather than in a manner that de-emphasizes its provisions. The Third Circuit then analyzed the arbitration clause at issue. The Court found that that the Samsung smartwatch arbitration clause was contained in a 3-inch by 2.5-inch booklet whose cover referred to itself as a “manual,” which “did not appear to be a bilateral contract, and the terms were buried in a manner that gave no hint to a consumer that an arbitration provision was within.” The Court also noted that the index in the manual includes “no language to tell consumers to expect bilateral terms, such as a bilateral arbitration agreement, in the guide.” Thus, the Third Circuit held that the arbitration clause was not a binding or valid contractual term, and affirmed the district court’s decision denying the motion to compel arbitration.
Noble v. Samsung Electronics America, Inc., No. 16-1903 (3rd Cir. Mar. 3, 2017).
This post written by Jeanne Kohler.
See our disclaimer.