Arbitration Provision Must Be Sufficiently Conspicuous to the Parties

By Thomas Paschos, Esq. of Thomas Paschos & Associates, P.C.

The case Noble v. Samsung Electronics America, No. 15-3713 (D.N.J. March 12, 2016) involves allegations that Samsung misrepresented the battery life of one of its smart watch products. Samsung made claims that the smart watch’s battery would last 24 to 48 hours without charging. Plaintiff David Noble alleged that the battery on his smart watch lasted about four hours before he had to recharge it. Unsatisfied with its performance, Noble replaced his watch twice, but plaintiff alleges that both times the replacement watches he received had the same problem.

The watch’s guide booklet contained a Standard Limited Warranty with an arbitration provision (the “Arbitration Agreement”) beginning on page ninety- seven of the guide book. The Arbitration Agreement contained an opt-out provision, which permits the purchaser to “opt out of this dispute resolution procedure by providing notice to SAMSUNG no later than 30 calendar days from the date of the first consumer purchaser’s purchase of the Product.” Plaintiff claimed he was not aware of the arbitration agreement.

Plaintiff filed a law suit in June 2015 on behalf of himself and other users of the smart watch, raising claims for fraud under the New Jersey Consumer Fraud Act and under common law, negligent misrepresentation, breach of express and implied warranty and unjust enrichment.

Samsung filed a motion to compel arbitration arguing that the claims must be arbitrated in light of the arbitration provision contained in the product’s guide booklet. Noble responded that he did not agree to be bound because he did not have actual notice of the provision and was not on constructive notice given how Samsung concealed the Arbitration Agreement within the Guide Booklet.

The court rejected Samsung’s argument that the parties can be bound to agreements included inside product packaging (“shrink wrap” agreements). The court acknowledged that while this is the law in New Jersey, in this matter plaintiff maintained that he did not have actual notice of the arbitration provision. In addition, the Court could not conclude that Noble had reasonable notice of the Arbitration Agreement since Samsung provided no evidence of writing on the outside of the package that informed purchasers of the important information inside the booklet. The court held that in order for an arbitration provision to be sufficiently conspicuous under New Jersey law, the consumer must have a fair opportunity to know that it exists. “[T]he issue is whether the terms therein were readily ascertainable or unreasonably hidden.” The court held that here the arbitration agreement was not sufficiently conspicuous and denied Samsung’s motion.

For additional information, please contact Thomas at TPaschos@paschoslaw.com or (856)354-1900

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