Fiser v. Dell Computer Corporation

• Decision Date: 27 June 2008
• Docket Number: No. 30,424.,30,424.
• Citation: 2008 NMSC 046,188 P.3d 1215
• Parties: Robert FISER, individually, and as a representative of a class of persons within the State of New Mexico, Plaintiff-Petitioner, v. DELL COMPUTER CORPORATION, a/k/a Dell, Inc., Defendant-Respondent.
• Court: New Mexico Supreme Court

188 P.3d 1215

2008 NMSC 046

Robert FISER, individually, and as a representative of a class of persons within the State of New Mexico, Plaintiff-Petitioner, v. DELL COMPUTER CORPORATION, a/k/a Dell, Inc., Defendant-Respondent.

No. 30,424.

Supreme Court of New Mexico.

June 27, 2008.

Morgan Law Office, Ltd., Ronald Calvin Morgan, Whitney C. Buchanan, P.C., Whitney C. Buchanan, Albuquerque, NM, Feazell & Tighe, L.L.P., Austin Tighe, Austin, TX, for Petitioner.

Rodey, Dickason, Sloan, Akin & Robb, P.A., Edward Ricco, Leslie McCarthy Apodaca, Albuquerque, NM, Reeves & Brightwell, L.L.P., Kim E. Brightwell, Paul Schlaud, Austin, TX, for Respondent.

Gary K. King, Attorney General, David K. Thomson, Assistant Attorney General, Nanette E. Erdman, Assistant Attorney General, Scott Fuqua, Assistant Attorney General, Santa Fe, NM, for Amicus Curiae Office of the Attorney General.

Feferman & Warren, Robert Dale Treinen, Albuquerque, NM, Amy Radon, F. Paul Bland, Jr., Washington, DC, for Amicus Curiae Public Justice, P.C.

OPINION

SERNA, Justice.

{1} We granted certiorari to review whether Defendant Dell Computer Corporation's Motion to Stay and Compel Arbitration pursuant to the Federal Arbitration Act was properly granted. We hold that, in the context of small consumer claims that would be prohibitively costly to bring on an individual basis, contractual prohibitions on class relief are contrary to New Mexico's fundamental public policy of encouraging the resolution of small consumer claims and are therefore unenforceable in this state. We reverse.

I. FACTUAL BACKGROUND AND PROCEEDINGS BELOW

{2} Plaintiff Robert Fiser purchased a computer from Defendant via the company's website. He subsequently filed a putative class action lawsuit contending that Defendant systematically misrepresents the memory size of its computers. He alleges violations of the New Mexico Unfair Practices Act (UPA), NMSA 1978, Sections 57-12-1 to -26 (1967, as amended through 2003), the New Mexico False Advertising Act, NMSA 1978, Sections 57-15-1 to -10 (1965), the New Mexico Uniform Commercial Code (UCC), NMSA 1978, Sections 55-1-101 to -12-111 (1961, as amended), and common law concepts of breach of contract, breach of warranty, misrepresentation, violations of the covenants of good faith and fair dealing, bad faith, and unjust enrichment.

{3} Central to the issue presented is the scant amount of damages alleged: Plaintiff estimates that Defendant's alleged misrepresentation results in a monetary loss to its customers of just ten to twenty dollars per computer.

{4} Defendant filed a Motion to Stay and Compel Arbitration pursuant to the Federal Arbitration Act (FAA). See 9 U.S.C. §§ 3, 4 (2000). Defendant argued that, pursuant to the "terms and conditions" on its website at the time of the purchase, Plaintiff is required to individually arbitrate his claims and is precluded from proceeding on a classwide basis either in litigation or arbitration. The "terms and conditions" included an arbitration clause mandating that "any claim, dispute, or controversy ... against Dell ... [was subject to] binding arbitration administered by the National Arbitration Forum (NAF)." The terms also included a clause (hereinafter referred to as the class action ban) which directed that the arbitration was "limited solely to the dispute or controversy between [Plaintiff] and Dell."¹ Finally, the "terms and conditions" contained a choice-of-law provision declaring Texas law to be controlling. Although the parties disagree over whether Plaintiff assented to Defendant's "terms and conditions," we do not reach that issue. We assume without deciding, for the purpose of our analysis, that he assented to the terms.

{5} The district court agreed with Defendant that Plaintiff was bound by the arbitration provision and thus granted Defendant's motion. The Court of Appeals affirmed. Fiser v. Dell, 2007-NMCA-087, ¶ 1, 142 N.M. 331, 165 P.3d 328. Plaintiff petitioned for a writ of certiorari; both the New Mexico Attorney General and Public Justice filed amicus briefs in support of Plaintiff. Because we conclude that the class action ban is contrary to fundamental New Mexico public policy, we reverse.

II. DISCUSSION

A. Application of Texas Law Would Violate New Mexico Public Policy

1. New Mexico Respects Choice-of-Law Provisions Unless Application of the Chosen Law Would Contravene New Mexico Public Policy

{6} The threshold question in determining the validity of the class action ban is which state's law must be applied to this potentially multi-state class action that was filed in New Mexico by a New Mexico resident against a defendant that maintains its principal place of business in Texas for damages relating to a contract that contains a choice-of-law clause directing that Texas law be applied.

{7} New Mexico respects party autonomy; the law to be applied to a particular dispute may be chosen by the parties through a contractual choice-of-law provision. Section 55-1-301(A); see also United Wholesale Liquor Co. v. Brown-Forman Distillers Corp., 108 N.M. 467, 470, 775 P.2d 233, 236 (1989). However, when application of the law chosen by the parties offends New Mexico public policy, our courts may decline to enforce the choice-of-law provision and apply New Mexico law instead. United Wholesale Liquor, 108 N.M. at 470, 775 P.2d at 236; Sandoval v. Valdez, 91 N.M. 705, 707, 580 P.2d 131, 133 (Ct.App.1978). New Mexico courts will not give effect to another state's laws where those laws would "violate some fundamental principle of justice." Reagan v. McGee Drilling Corp., 1997-NMCA-014, ¶ 9, 123 N.M. 68, 933 P.2d 867 (quoted authority omitted).

{8} Application of Texas law to the instant matter would likely require enforcing the class action ban. See AutoNation USA Corp. v. Leroy, 105 S.W.3d 190, 199-201 (Tex.App.2003) (contractual prohibition of class actions not fundamentally unfair or violative of public policy). Unless enforcement of the class action ban would run afoul of fundamental New Mexico public policy, our conflict of law rules counsel respecting the choice-of-law provision and applying Texas law.

2. It is Fundamental New Mexico Policy that Consumers Have a Viable Mechanism for Dispute Resolution, No Matter the Size of the Claim

{9} New Mexico policy strongly supports the resolution of consumer claims, regardless of the amount of damages alleged. That policy is demonstrated by several of our statutes. For example, the New Mexico legislature enacted the UPA, which is unequivocal: "[u]nfair or deceptive trade practices and unconscionable trade practices in the conduct of any trade or commerce are unlawful." Section 57-12-3. The UPA was clearly drafted to include a remedy for small claims: a party need not show any monetary damage to be entitled to an injunction, Section 57-12-10(A), and "[a]ny person who suffers any loss of money ... [may] recover actual damages or the sum of one hundred dollars ($100), whichever is greater." Section 57-12-10(B) (emphasis added).

{10} The fundamental New Mexico policy of providing consumers a mechanism for dispute resolution is also seen in the False Advertising Act, which specifically empowers private individuals to bring rights of action in the name of the state and for "all others similarly situated." Section 57-15-5.

{11} Yet another example of New Mexico's fundamental public policy in ensuring that consumers have an opportunity to redress their harm is the Consumer Protection Division of the Attorney General's Office, which is charged with protecting New Mexico citizens from unfair and deceptive trade practices. In this effort, the Consumer Protection Division is authorized and funded to investigate suspicious business activities, informally resolve the complaints of dissatisfied consumers, educate citizens about their consumer rights, and file lawsuits on behalf of the public.

3. The Class Action Device is Critical to Enforcement of Consumer Rights in New Mexico

{12} The opportunity to seek class relief is of particular importance to the enforcement of consumer rights because it provides a mechanism for the spreading of costs. The class action device allows claimants with individually small claims the opportunity for relief that would otherwise be economically infeasible because they may collectively share the otherwise prohibitive costs of bringing and maintaining the claim. See, e.g., 1 Alba Conte & Herbert B. Newberg, Newberg on Class Actions § 1.6, at 26 (4th ed.2002). "In many cases, the availability of class action relief is a sine qua non to permit the adequate vindication of consumer rights." State ex rel. Dunlap v. Berger, 211 W.Va. 549, 567 S.E.2d 265, 278 (2002). "The class action is one of the few legal remedies the small claimant has against those who command the status quo." Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 186, 94 S.Ct. 2140, 40 L.Ed.2d 732 (1974) (Douglas, J., dissenting in part).

{13} The opportunity for class relief and its importance to consumer rights is enshrined in the fundamental policy of New Mexico and evidenced by our statutory scheme. See, e.g., Rule 1-023 NMRA (setting forth the rules of civil procedure governing class actions). Notably, the UPA specifically references class actions as a private remedy available under the act. Section 57-12-10(E). Further, the New Mexico Uniform Arbitration Act declares that arbitration clauses that require consumers to decline participation in class actions are unenforceable and voidable. See NMSA 1978, §§ 44-7A-1(b)(4)(f), 44-7A-5 (2001). While this provision may be preempted by the FAA, see Perry v. Thomas, 482 U.S. 483, 492 n. 9, 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987) ("A state-law principle that takes its meaning precisely from the fact that a contract to arbitrate is at issue does not comport with [the FAA]."), it is clear evidence of the fundamental New Mexico policy of allowing consumers a means to redress their injuries via the...