Let's be honest, most of us aren't reading every word of our warranties, and we're certainly not doing it before we purchase a product. And while that might save us a ton of time, it may cost us our ability to take companies to court if their products don't perform as advertised. That's because more and more manufacturers are tucking mandatory arbitration clauses deep in their warranties.
But the Supreme Court is pushing back on those clauses, handing a small victory to consumers. Here's how.
Arbitrators, as opposed to juries, tend to be more pro-business, so big businesses like to funnel their customer complaints to arbitration rather than a class action lawsuit. But they need consumers to forfeit their right to sue in court, and they get it by hiding mandatory arbitration provisions deep inside warranty booklets rather than the outside of the box. That's what Samsung was accused of doing with its Galaxy S4 and SIII devices, forcing all disputes to be resolved through arbitration and specifically forbidding class actions. But in two separate cases, the U.S. Ninth Circuit Court of Appeals denied Samsung's efforts to force customers into arbitration.
In Norcia v. Samsung, the court upheld a lower court's ruling that a Product and Safety & Warranty Information brochure in the Galaxy S4 box did not create a binding contract between potential plaintiffs and Samsung to arbitrate the claims contained in the lawsuit. And in Dang v. Samsung, it overturned a lower court order compelling arbitration, finding a customer did not expressly agree to the arbitration provision contained in the "Standard Limited Warranty" included in the brochure entitled "Important Information for the Samsung SPH-L710" contained in the Galaxy SIII box.
In both cases, the Ninth Circuit reasoned that silence from an offeree (in these cases, the customers) does not constitute acceptance of a contract (in these cases, binding arbitration clauses), and that the customers did not have adequate notice of the arbitration provisions.
Samsung appealed these decisions to the Supreme Court, and the Court last week declined to review the cases, leaving the Ninth Circuit's decisions intact. That's good news for customers trying to hold electronics manufacturers liable. Though it does make one wonder where those companies will move their mandatory arbitration clauses to next, and whether we'll be more likely to read them then.