DeFontes v. Dell, Inc.
| Decision Date | 14 December 2009 |
| Docket Number | No. 2004-114-Appeal.,No. 2004-137-Appeal.,2004-137-Appeal.,2004-114-Appeal. |
| Citation | 984 A.2d 1061 |
| Parties | Mary E. DeFONTES and Nicholas T. Long, individually and on behalf of a class of persons similarly situated v. DELL, INC., et al. |
| Court | Rhode Island Supreme Court |
Christopher Whitney, Providence, Esq., Joseph Makalusky, Pro Hac Vice, for Plaintiff.
Stephen MacGilivray, Esq., Darlene Alt, Providence, Esq., Heather Pierce, Esq., John Shope, Pro Hac Vice, for Defendant.
Present: GOLDBERG, FLAHERTY, JJ., and WILLIAMS, C.J. (ret.).
The defendants, Dell, Inc. f/k/a Dell Computer Corp. (Dell), Dell Catalog Sales LP (Dell Catalog), Dell Marketing LP (Dell Marketing), QualxServ, LLC (QualxServ), and BancTec, Inc. (BancTec), collectively (defendants), appeal from a Superior Court order denying their motion to stay proceedings and compel arbitration. This case is the first of two companion cases now before this Court. See Long v. Dell Inc., No.2007-346-M.P., 984 A.2d 1074 (R.I., filed Dec. 14, 2009). It arises out of a long-frustrated putative class-action suit brought against the defendants. For the reasons set forth below, we affirm the judgment of the Superior Court.
This litigation began on May 16, 2003, when Mary E. DeFontes, individually and on behalf of a class of similarly situated persons, brought suit against Dell, alleging that its collection of taxes from them on the purchase of Dell optional service contracts violated the Deceptive Trade Practices Act, G.L.1956 chapter 13.1 of title 6. Ms. DeFontes asserted that service contracts, such as the option service contract offered by Dell, were not taxable within the State of Rhode Island. Nicholas Long joined the suit as a plaintiff, and an amended complaint was filed on July 16, 2003, that also added Dell subsidiaries Dell Catalog and Dell Marketing, and two service providers, QualxServ and BancTec as defendants.1
Dell is an international computer hardware and software corporation. Within the Dell corporate umbrella, Dell Catalog and Dell Marketing primarily are responsible for selling computers via the internet, mail-order catalogs, and other means to individual and business consumers. Dell ships these orders throughout all fifty states from warehouses located in Texas and Tennessee. As part of these purchases, Dell offers consumers an optional service contract for on-site repair of its products, with Dell often acting as an agent for third-party service providers, including BancTec and QualxServ. Parties opting to purchase a service contract are charged a "tax," which is either paid to the State of Rhode Island directly or collected by the third-party service provider and then remitted to the state.
The two initial plaintiffs, Ms. DeFontes and Mr. Long, engaged in slightly different transactions. Ms. DeFontes purchased her computer through Dell Catalog and selected a service contract with BancTec. She paid a total of $950.51, of which $13.51 was characterized as tax on the service contract. Mr. Long purchased his computer through Dell Marketing and opted for a service contract managed by Dell. In total, he paid $3,037.73, out of which $198.73 was designated as tax paid on the service contract. There is no allegation that Dell improperly retained any of the collected tax. Several months after plaintiffs filed their amended complaint, defendants filed a motion to stay proceedings and compel arbitration, citing an arbitration provision within the parties' purported agreements.2 The defendants argued that the arbitration provision was part of a "Terms and Conditions Agreement," which they contended plaintiffs had accepted by accepting delivery of the goods. Specifically, they averred that plaintiffs had three separate opportunities to review the terms and conditions agreement, to wit, by selecting a hyperlink on the Dell website, by reading the terms that were included in the acknowledgment/invoice that was sent to plaintiffs sometime after they placed their orders, or by reviewing the copy of the terms Dell included in the packaging of its computer products.
The hearing justice issued a written decision on January 29, 2004. He first addressed which state law to apply to the parties' dispute. After determining that the choice-of-law provision included in the terms and conditions agreement, which identified Texas as the controlling jurisdiction, was enforceable, he then analyzed whether the parties had, in fact, agreed to be bound by the terms and conditions agreement. The hearing justice found that although plaintiffs had three opportunities to review the terms, none was sufficient to give rise to a contractual obligation. First, he noted that plaintiffs could have reviewed the terms and conditions agreement had they clicked a hyperlink that appeared on Dell's website. The hearing justice found, however, that this link was "inconspicuously located at the bottom of the webpage" and insufficient to place customers on notice of the terms and conditions.3 Nevertheless, the hearing justice noted that the terms and conditions agreement also appeared both in the acknowledgment that Dell sent to plaintiffs when they placed their orders and later within the packaging when the computers were delivered.4
The hearing justice found that this language was insufficient to give a reasonable consumer notice of the method of rejection. He found that defendants' failure to include an express disclaimer meant that they could not prove that plaintiffs "knowingly consent[ed]" to the terms and conditions of the agreement. Accordingly, the hearing justice found that Plaintiffs could not be compelled to enter arbitration.
Although the hearing justice noted that it was unnecessary to address plaintiffs' alternative arguments that the contract was both illusory and unconscionable, he discussed them in his decision "for the sake of completeness." First, he rejected plaintiffs' argument that the agreement was unconscionable because it prevented them from asserting rights as a class. He found that there was no right under Texas law to proceed as a class action litigant. See AutoNation U.S.A. Corp. v. Leroy, 105 S.W.3d 190, 199-200 (Tex.App.2003).
Second, the hearing justice addressed whether the agreement was illusory. He found that the arbitration agreement was not illusory merely because it required plaintiffs to submit to arbitration while allowing defendants to litigate any of its claims in court. He noted the well-settled principle that "although mutuality of obligation is necessary to create a valid contract, `equivalency of obligation' is not." The hearing justice went on, however, to find that the terms and conditions agreement was illusory because it included the language "[t]hese terms and conditions are subject to change without prior written notice, at any time, in Dell's sole discretion."7 He rejected defendants' contention that this language applied only to future transactions and found that it failed to bind defendants to the terms and conditions agreement.
An order of final judgment was entered on March 29, 2004, from which defendants timely appealed. Additionally, defendants filed a motion to stay the Superior Court proceedings. That motion was denied and, after defendants appealed that decision, the two matters were consolidated. On June 13, 2005, upon discovery that Ms. DeFontes was an employee of plaintiffs' counsel, plaintiffs filed an assented to motion to substitute a proposed class representative that replaced Ms. DeFontes with Julianne Ricci.8 After plaintiffs filed a substituted first amended class action complaint, defendants renewed their motion to stay the proceedings and to compel arbitration, which was denied, as was defendants' subsequent motion for entry of final judgment of that order.9
We review the trial court's denial of a motion to compel arbitration de novo. See Kristian v. Comcast Corp., 446 F.3d 25, 31 (1st Cir.2006). The parties acknowledge that because their transactions involved interstate commerce, the Federal Arbitration Act (FAA) is applicable. See 9 U.S.C. §§ 1 through 16. Congress enacted the FAA to "overrule the judiciary's longstanding refusal to enforce agreements to arbitrate." Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 219-20, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985). It requires enforcement of privately negotiated arbitration agreements "save upon such grounds as exist at law or in equity for the revocation of...
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...either by a prompt promise to ship or by the prompt or current shipment of conforming or nonconforming goods."); DeFontes v. Dell, Inc. , 984 A.2d 1061, 1067 (R.I. 2009) (explaining that "The U.C.C. creates the assumption that, unless circumstances unambiguously demonstrate otherwise, the b......
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Long v. Dell, Inc.
...the facts of this case in detail in two previous opinions. See Long v. Dell Inc., 984 A.2d 1074, 1075–78 (R.I.2009); DeFontes v. Dell Inc., 984 A.2d 1061, 1062–65 (R.I.2009). Therefore, we will only recount recent events and those facts that are necessary for context. The named plaintiffs, ......
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Long v. Dell, Inc.
...facts of this case in detail in two previous opinions. See Long v. Dell, Inc., 984 A.2d 1074, 1075-78 (R.I. 2009); DeFontes v. Dell, Inc., 984 A.2d 1061, 1062-65 (R.I. 2009). Therefore, we will only recount recent events and those facts that are necessary for context. The named plaintiffs, ......
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GERHART AND PRIVATE LAW'S MELODY OF REASONABLENESS.
...This result is achieved by applying the materially alter test in [section] 2-207(2) (b) to both forms. (239.) DeFontes v. Dell, Inc., 984 A.2d 1061, 1068-70 (E.I. (240.) Id. (241.) Id. at 1070. (242.) Melvin A. Eisenberg, Foundational Principles of Contract Law 5-6 (2018). (243.) Fried, sup......