Galitski v. Samsung Telecomms. Am., LLC

• Decision Date: 05 December 2013
• Docket Number: Civil Action No. 3:12-CV-4782-D
• Parties: SHANE GALITSKI, et al., Plaintiffs, v. SAMSUNG TELECOMMUNICATIONS AMERICA, LLC, Defendant.
• Court: U.S. District Court — Northern District of Texas

SHANE GALITSKI, et al., Plaintiffs, v. SAMSUNG TELECOMMUNICATIONS AMERICA, LLC, Defendant.

Civil Action No. 3:12-CV-4782-D

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS DALLAS DIVISION

December 5, 2013

MEMORANDUM OPINIONAND ORDER

In this putative class action arising from allegedly defective Galaxy S mobile phones manufactured by defendant Samsung Telecommunications America, LLC ("Samsung") and sold to plaintiffs by non-parties Sprint and Verizon Wireless ("Verizon"), Samsung moves under the doctrine of arbitration by estoppel as a third-party nonsignatory to plaintiffs' contracts with Sprint and Verizon to compel plaintiffs to arbitrate their claims. Alternatively, Samsung moves for partial dismissal of plaintiffs' claims under Fed. R. Civ. P. 12(b)(6). For the reasons that follow, the court denies the motion to compel arbitration and grants in part and denies in part the motion for partial dismissal.

I

Plaintiffs Shane Galitski ("Galitski"), Richard Taliaferro ("Taliaferro"), and Brian Newbold ("Newbold") bring this putative class action against Samsung on behalf of a class of California residents who purchased allegedly defective Galaxy S mobile phones. Plaintiffs allege that Galaxy S phones—smartphones using the Google Android operating system thatare marketed, distributed, and warranted by Samsung—frequently freeze, shutdown, and power-off randomly while in standby mode, rendering the phones inoperable.¹ The complaint refers to these problems collectively as "[t]he defect." E.g., Compl. ¶ 17.² Plaintiffs allege that, although Galaxy S phones are sold under different names by various wireless carriers, they are essentially the same phones with different names and experience the defect regardless which carrier distributes the phone.

The complaint alleges that Galitski and Newbold purchased their Galaxy S phonesfrom Sprint, their wireless carrier. When making the purchase, each entered into a Sprint Service Agreement that contains a clause requiring binding arbitration.³ According to the complaint, Galitski began experiencing the defect within a few months of purchasing a Galaxy S phone from Sprint; and after he experienced a problem with the headphone jack as well, he contacted Samsung for assistance with the headphone jack problem and also informed Samsung of the defect, but he was not given any assistance regarding the defect. Although Sprint provided Galitski a replacement Galaxy S phone due to the headphone jack problem, that phone experienced the defect more frequently than did his original phone. Galitski's replacement phone later suffered from a significant screen burn-in, resulting in his obtaining a second replacement Galaxy S phone from Sprint. When contacting Sprint regarding this problem, he informed Sprint about the defect, but again received no assistance. Galitski continues to use the second replacement phone, but plaintiffs allege that it, too, experiences the defect. Galitski has attempted unsuccessfully to resolve the defect by changing the operating system.

Newbold also purchased his Galaxy S phone from Sprint. Shortly after the purchase, his phone experienced the defect. Newbold attempted to resolve the problem by changing the operating system and installing the newest version of Android. When these changes failed to repair his phone, Newbold returned it to the factory settings and installed a software update that Samsung provided. After the update was installed, his phone experienced the defect more frequently. Although Newbold contacted Sprint customer service several times about the defect, Sprint refused to offer a replacement; instead, it attempted on multiple occasions to repair the phone by asking Newbold to reset the device. Although Newbold followed this direction, he continued to experience the same defect. After contacting Sprint several times in unsuccessful attempts to repair or replace his phone, he finally purchased a new phone, receiving no credit for his initial purchase of Galaxy S.

Taliaferro purchased his Galaxy S phone at an electronics store that is an authorized Samsung agent and reseller, and his wireless carrier is Verizon. When making the purchase, he entered into a Verizon Wireless Customer Agreement ("Verizon Customer Agreement") that provided for binding arbitration of claims arising out of or relating to the agreement.⁴Shortly after Taliaferro purchased his Galaxy S phone, he began experiencing the defect. After he contacted Verizon several times, Verizon replaced his phone with another Samsung Galaxy S, but he continued to experience the same defect with the replacement phone. When Taliaferro contacted Verizon again, it recommended that he install a software update intended to fix the defect. But the new software update instead exacerbated the problem, causing the phone to experience the defect more often. After contacting Verizon several more times and continuing to experience the defect with his replacement phone, Taliaferro finally discontinued using the phone and purchased a new phone, receiving no credit for the purchase of his Samsung phone.

In 2011 Taliaferro and Barbara McKinney ("McKinney"), a Georgia resident, filed in this court a putative nationwide class action against Samsung asserting claims arising from their purchases of allegedly defective Galaxy S phones. See Taliaferro v. Samsung Telecomms. Am., LLC, 2012 WL 169704 (N.D. Tex. Jan. 19, 2012) (Fitzwater, C.J.).⁵ They alleged claims under federal, California, and Georgia law for breach of express warranty, breach of implied warranty, money had and received, and violations of the Magnuson-MossWarranty Act ("MMWA"), 15 U.S.C. § 2301 et seq. Taliaferro, 2012 WL 169704, at *1. Samsung filed a motion to dismiss under Rule 12(b)(6), which the court granted as to all but one of plaintiffs' claims (Taliaferro's claim for breach of implied warranty under the Song-Beverly Consumer Warranty Act ("SBA"), Cal. Civ. Code § 1792 (West 2009)). Taliaferro, 2012 WL 169704, at *12. In dismissing the breach of express warranty claims, the court held that, because plaintiffs did not allege that they returned their phones to a Samsung "authorized phone service facility," as required by the Samsung warranty, they did not satisfy a contractual precondition to recovery under the express warranty. Id. at *3, *6. The court granted Taliaferro and McKinney leave to replead. Id. at *12.

Taliaferro and McKinney filed a second amended class action complaint in which they re-pleaded their dismissed claims, added Newbold as a plaintiff, and asserted two new claims under California law. Samsung filed a motion to compel arbitration, but plaintiffs voluntarily dismissed the suit without prejudice before the court ruled on the motion.

In June 2012 Taliaferro and Newbold, joined by Galitski, sued Samsung in the Central District of California alleging claims under federal and California law for breach of express warranty, breach of implied warranty, violations of the SBA, violations of the MMWA, violations of the Consumers Legal Remedies Act ("CLRA"), Cal. Civ. Code §§ 1750 et seq. (West 2009), violations of the California Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code § 17200 et seq. (West 2008), and common law claims for assumpsit and quasi-contract. Samsung filed a motion to transfer to this court, which the Central District of California granted. Samsung now moves as a third-party nonsignatory to compel arbitrationpursuant to the arbitration agreements signed between plaintiffs and their wireless carriers.⁶ If the court denies the motion to compel arbitration, Samsung moves in the alternative to dismiss all of plaintiffs' claims other than the SBA implied warranty claims of plaintiffs Taliaferro and McKinney.

II

The court turns first to Samsung's motion to compel arbitration.

A

Samsung is not a signatory either to the Sprint Service Agreement or the Verizon Customer Agreement. It argues, however, that it is entitled as a third-party nonsignatory under principles of equitable estoppel to compel arbitration pursuant to the arbitration provisions contained in these agreements because plaintiffs' complaint raises allegations of substantially interdependent and concerted misconduct by Samsung, Sprint, and Verizon.

Samsung maintains that, although plaintiffs are suing Samsung, they are complaining of the failure of Sprint and Verizon to repair or replace their Samsung phones; that is, they are seeking to hold Samsung responsible for the conduct of Sprint and Verizon, and it is impossible to consider their claims against Samsung without considering the alleged failures of Sprint and Verizon to repair their phones. Samsung contends that, after the court dismissed plaintiffs' warranty claims in Taliaferro (in part based on their failure to plead thatthey had satisfied the condition precedent of the Samsung warranty that they attempt to service their phones at an authorized phone service facility), plaintiffs revised their claims to allege that they attempted to service their phones through Sprint and Verizon, Samsung's authorized agents. Citing various allegations of the complaint, including some that group Samsung, Verizon, and Sprint as "Defendants," Samsung posits that plaintiffs' claims are wholly dependent on the conduct of Sprint and Verizon, acting as Samsung's alleged agents, in failing to perform Samsung's contractual duties. Samsung reasons that plaintiffs' claims involve substantially interdependent and concerted misconduct among Sprint, Verizon, and Samsung because the claims not only implicate the alleged conduct of these entities, they wholly depend on allegations that Verizon and Sprint acted as Samsung's agents when they breached the Samsung warranty by failing to repair plaintiffs' phones. According to Samsung, plaintiffs' claims are founded in the contractual relationship between Verizon and Sprint and plaintiffs because plaintiffs attempted to service their phones at their wireless carriers...