Norcia v. Samsung Telecomms. Am., LLC

• Decision Date: 19 January 2017
• Docket Number: No. 14–16994,14–16994
• Parties: Daniel NORCIA, on his own behalf and on behalf of all others similarly situated, Plaintiff–Appellee, v. SAMSUNG TELECOMMUNICATIONS AMERICA, LLC, a New York Corporation; Samsung Electronics America, Inc., a New Jersey corporation, Defendants–Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

845 F.3d 1279

Daniel NORCIA, on his own behalf and on behalf of all others similarly situated, Plaintiff–Appellee,

v.SAMSUNG TELECOMMUNICATIONS AMERICA, LLC, a New York Corporation; Samsung Electronics America, Inc., a New Jersey corporation, Defendants–Appellants.

No. 14–16994

United States Court of Appeals, Ninth Circuit.

Argued and Submitted October 17, 2016 San Francisco, California

Filed January 19, 2017

John R. Hurley (argued), Eduardo G. Roy, Daniel C. Quintero, and Jill Dessalines, Prometheus Partners L.L.P., San Francisco, California, for Plaintiff–Appellee.

Sean D. Unger (argued), John P. Phillips, and Ryan C. Nier, Paul Hastings LLP, San Francisco, California, for Defendants–Appellants.

Before: Sidney R. Thomas, Chief Judge, and Carlos T. Bea and Sandra S. Ikuta, Circuit Judges.

OPINION

IKUTA, Circuit Judge:

Daniel Norcia filed a class action complaint against Samsung Telecommunications America, LLC, and Samsung Electronics America, Inc., (collectively, "Samsung"), alleging that Samsung made misrepresentations as to the performance of the Galaxy S4 phone. Samsung moved to compel arbitration of the dispute on the ground that an arbitration provision, which was contained in a warranty brochure included in the Galaxy S4 box, was binding on Norcia. We affirm the district court's denial of Samsung's motion.

I

On May 23, 2013, Norcia entered a Verizon Wireless store in San Francisco, California, to purchase a Samsung Galaxy S4 phone. Norcia paid for the phone at the register, and a Verizon Wireless employee provided a receipt entitled "Customer Agreement" followed by the name and address of the Verizon Wireless store. The receipt stated the order location, Norcia's mobile number, the product identification number, and the contract end date. Under the heading "Items," the receipt stated "WAR6002 1 YR. MFG. WARRANTY." Under the heading "Agreement," the receipt included three provisions, including a statement (in all capital letters):

I agree to the current Verizon Wireless Customer Agreement, including the calling plan, (with extended limited warranty/service contract, if applicable), and other terms and conditions for services and selected features I have agreed to purchase as reflected on the receipt, and which have been presented to me by the sales representative and which I had the opportunity to review.

The receipt also stated (in all capital letters): "I understand that I am agreeing to ... settlement of disputes by arbitration and other means instead of jury trials, and other important terms in the Customer Agreement." The Customer Agreement did not reference Samsung or any other party. Norcia signed the Customer Agreement, and Verizon Wireless emailed him a copy.

After signing the Customer Agreement, Norcia and a Verizon Wireless employee took the Galaxy S4 phone, still in its sealed Samsung box, to a table. The front of the product box stated "Samsung Galaxy S4." The back of the box stated: "Package Contains ... Product Safety & Warranty Brochure." The Verizon Wireless employee opened the box, unpacked the phone and materials, and helped Norcia transfer his contacts from his old phone to the new phone. Norcia took the phone, the phone charger, and the headphones with him as he left the store, but he declined the offer by the Verizon Wireless employee to take the box and the rest of its contents.

The Samsung Galaxy S4 box contained, among other things, a "Product Safety & Warranty Information" brochure. The 101–page brochure consisted of two sections. Section 1 contained a wide range of health and safety information, while Section 2 contained Samsung's "Standard Limited Warranty" and "End User License Agreement for Software." The Standard Limited Warranty section explained the scope of Samsung's express warranty. In addition to explaining Samsung's obligations, the procedure for obtaining warranty service, and the limits of Samsung's liability, the warranty section included the following (in all capital letters):

All disputes with Samsung arising in any way from this limited warranty or the sale, condition or performance of the products shall be resolved exclusively through final and binding arbitration, and not by a court or jury.

Later in the section, a paragraph explained the procedures for arbitration and stated that purchasers could opt out of the arbitration agreement by providing notice to Samsung within 30 calendar days of purchase, either through email or by calling a toll-free telephone number. It also stated that opting out "will not affect the coverage of the Limited Warranty in any way, and you will continue to enjoy the benefits of the Limited Warranty." Norcia did not take any steps to opt out.

In February 2014, Norcia filed a class action complaint against Samsung, alleging that Samsung misrepresented the Galaxy S4's storage capacity and rigged the phone to operate at a higher speed when it was being tested. The complaint alleged that these deceptive acts constituted common law fraud and violated California's Consumers Legal Remedies Act (Cal. Civ. Code §§ 1750 –1784 ), California's Unfair Competition Law (Cal. Bus. & Prof. Code §§ 17200 –17210 ), and California's False Advertising Law (Cal. Bus. & Prof. Code §§ 17500 –17509 ). The complaint sought certification of the case as a class action for all purchasers of the Galaxy S4 phone in California. Norcia did not bring any claims for breach of warranty.

Instead of filing an answer to the complaint, Samsung moved to compel arbitration by invoking the arbitration provision in the Product Safety & Warranty Information brochure. The district court denied Samsung's motion. It held that even though Norcia should be deemed to have received the Galaxy S4 box, including the Product Safety & Warranty Information brochure, the receipt of the brochure did not form an agreement to arbitrate non-warranty claims. Samsung timely appealed the district court's order.

The district court had jurisdiction under 28 U.S.C. § 1332(d)(2), because the parties satisfied minimal diversity and the amount in controversy exceeded $5 million. We have jurisdiction under the Federal Arbitration Act, 9 U.S.C. § 16. "We review the district court's decision to deny the motion to compel arbitration de novo." Davis v. Nordstrom, Inc. , 755 F.3d 1089, 1091 (9th Cir. 2014). "Factual findings are reviewed for clear error, but where no facts are in dispute our entire review is de novo." Id. (internal citation omitted).

II

"[A]rbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit." AT&T Techs., Inc. v. Commc'ns Workers of Am. , 475 U.S. 643, 648, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986) (quoting United Steelworkers of Am. v. Warrior & Gulf Navigation Co. , 363 U.S. 574, 582, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960) ). Therefore, to evaluate the district court's denial of Samsung's motion to compel arbitration, we must first determine "whether a valid agreement to arbitrate exists." Chiron Corp. v. Ortho Diagnostic Sys., Inc. , 207 F.3d 1126, 1130 (9th Cir. 2000) ; see also Kilgore v. KeyBank, Nat'l Ass'n , 718 F.3d 1052, 1058 (9th Cir. 2013) (en banc). As the party seeking to compel arbitration, Samsung bears "the burden of proving the existence of an agreement to arbitrate by a preponderance of the evidence." Knutson v. Sirius XM Radio Inc. , 771 F.3d 559, 565 (9th Cir. 2014) (citing Rosenthal v. Great W. Fin. Sec. Corp. , 14 Cal.4th 394, 413, 58 Cal.Rptr.2d 875, 926 P.2d 1061 (1996) ).

Samsung raises two theories of contract formation to support its argument that Norcia entered into a binding contract with Samsung to arbitrate his claims. First, Samsung claims that the inclusion of the arbitration provision in the Product Safety & Warranty Information brochure created a valid contract between Samsung and Norcia to arbitrate all claims related to the Galaxy S4 phone. Second, Samsung contends that the Customer Agreement signed by Norcia incorporated the terms of its Product Safety & Warranty Information brochure by reference and created a binding contract between Norcia and Samsung.

In analyzing these arguments, we "apply ordinary state-law principles that govern the formation of contracts" to decide whether an agreement to arbitrate exists. First Options of Chi., Inc. v. Kaplan , 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995). Here, the parties agree that California law governs the issue of contract formation. In discerning California law, we are bound by the decisions of the California Supreme Court, "including reasoned dicta." Muniz v. United Parcel Serv., Inc. , 738 F.3d 214, 219 (9th Cir. 2013). If the California Supreme Court has not directly addressed the question before us, we must predict how it would decide the issue. See Glendale Assocs., Ltd. v. NLRB , 347 F.3d 1145, 1154 (9th Cir. 2003) (internal quotation marks omitted). We generally will "follow a published intermediate state court decision regarding California law unless we are convinced that the California Supreme Court would reject it." Muniz , 738 F.3d at 219. Applying California law, we address each of Samsung's theories in turn.

A

We first evaluate whether the Product Safety & Warranty Information brochure in the Galaxy S4 box created a binding contract between Norcia and Samsung to arbitrate the claims in Norcia's complaint. Although the brochure is in the form of an express consumer warranty from Samsung to Norcia, the arbitration provision states that arbitration is required not only for "[a]ll disputes with Samsung arising in any way from this limited warranty" but also for all disputes arising from "the sale, condition or performance of the products." Norcia's complaint involves a non-warranty dispute. Thus, our analysis is governed by contract law—not warranty law.

We begin with the basic principles of California contract law. Generally, under California law, "the essential elements for a contract are (1) ‘[p]arties capable of...