Third Circuit Rules that Samsung Cannot Compel Arbitration Based on Clause “Buried” in Safety and Warranty Guide

The Third Circuit Court of Appeals recently held that Samsung cannot force arbitration in a consumer fraud class action about the battery life of its Galaxy Gear S Smartwatch.  Noble v. Samsung Electronics America, Inc.

Plaintiff had purchased a smartwatch but found, after trying three of them, that the battery lasted for only a few hours, compared to the advertised “24 to 48 hours with typical use.” Finding that others were in a similar position, Noble filed a class action complaint in federal court in New Jersey. Samsung sought to compel arbitration based on an arbitration clause in the company’s 143 page “Health and Safety and Warranty Guide,” included in the Samsung Smartwatch box.

Affirming the district court’s decision denying Samsung’s motion to compel arbitration, the Third Circuit found that Noble had no actual or constructive notice of the arbitration provision because it was not “reasonably conspicuous.”  The “Guide” in which the arbitration clause was included, “buried” the terms on page 97 of the document.  Unlike previous cases involving “shrinkwrap” or “clickwrap” agreements, Samsung’s “Guide” did not clearly inform customers that they are agreeing to certain terms upon purchase and use of the product.

The Third Circuit’s decision is a reminder to businesses to ensure not only the visibility of their terms and conditions, but also an indication that the terms are a contract to which a consumer is binding himself.

For assistance in editing your company’s agreements or product enclosures, or for further information on the Noble decision, please contact Kathleen Barnett Einhorn, Esq., Chair of the Firm’s Complex Commercial Litigation Group, at keinhorn@genovaburns.com or Jennifer Borek, Esq., Partner in the Complex Commercial Litigation Group, at jborek@genovaburns.com.