Supreme Court Allows For Rare Win In Customers’ Lawsuit Against Samsung

The Supreme Court has a long history of ruling against consumers when it involves a company’s attempt to strip its customers of their right to a day in court, but this week the nation’s highest court decided to not hear an appeal in a lawsuit involving Samsung, marking a rare instance in which SCOTUS came down on the consumers’ side in this issue.

This case, Norcia v. Samsung, involves Samsung customers who allege the company misled them about the speed, performance, and memory capacity of the company’s Galaxy S4 phone.

Samsung, like just about every other tech company, includes a “forced arbitration” clause in its terms of service. This clause effectively says two things: First, customers can’t sue Samsung, regardless of the allegation against the company. Second, they certainly can’t join together with other, similarly wronged customers in a class action against Samsung.

Instead, each aggrieved customer must go through the process of individual, private arbitration; a process many American consumers don’t even know exist. Arbitration proceedings are done behind closed doors and the rulings are often confidential, taking away a very vital aspect of a lawsuit: Holding a company publicly accountable for its failings.

Many arbitration clauses — particularly for software and websites — are buried deep in one of those multi-thousand-word user agreements that you must click “yes, I read and agree” to, even when you haven’t. In other instances, companies will put an arbitration statement on the product’s box, or — in the case of the Stormtrooper Snuggie — on a slip of paper inside the box.

But in Norcia, Samsung put the language of the forced arbitration clause inside the warranty booklet that was included among the many other pieces of paper and plastic in the S4 box that all gets thrown away or recycled immediately. Samsung believes that putting the clause in the warranty booklet was sufficient to shunt Mr. Norcia’s lawsuit out of the legal system and into arbitration.

However, Norcia fought back, pointing out that he purchased his phone at a Verizon store, where an employee unboxed the device and set it up for him. He says that when he left the store, the phone was all he took with him. The packaging — including the warranty booklet — remained behind.

In Sept. 2014, a U.S. District Court judge in California agreed with Norcia, concluding that the “inconspicuous placement of the arbitration provisions in the warranty booklet, and Samsung’s failure to inform consumers in any way about the proposal to require arbitration,” meant that the tech giant could not force Norcia into arbitration.

Samsung appealed this ruling to the Ninth Circuit Court of Appeals, which heard arguments on the matter in Oct. 2016. It argued that, because Samsung is bound by the terms of the warranty, the customer must also be bound by the arbitration clause that Samsung inserted into the warranty information.

But once again, Samsung failed to convince the court. In a unanimous ruling, the three-judge panel noted that a warranty is not a two-way contract, as it “does not impose binding obligations on the buyer.”

Samsung also tried to argue that Norcia should be bound by the arbitration agreement because he did agree to one when he set up his phone with Verizon. This seemed to baffle the appeals court, which pointed out that Samsung has nothing to do with the Verizon customer agreement, and that Samsung provided no evidence to show that Verizon intended its agreement to cover both the wireless provider and the makers of the devices used on the Verizon network.

Not to be stopped, Samsung petitioned the Supreme Court, asking the justices to decide whether or not this lawsuit could be compelled into arbitration. Even though the court has repeatedly (though often by only a narrow margin) come down on the side of forced arbitration, SCOTUS decided on Monday to deny the Samsung petition.

The denial, made without comment, means that the Ninth Circuit ruling stands and that Samsung can not force Norcia into arbitration.

No courts have yet to make any rulings on the merits of Norcia’s allegations, but at least he’ll now have the chance to make those allegations in public in a court of law, rather than in the black hole of a closed-door arbitration hearing.