Oestreicher v. Alienware Corp.

• Decision Date: 10 August 2007
• Docket Number: No. C 07-00512 MHP.,C 07-00512 MHP.
• Citation: 502 F.Supp.2d 1061
• Parties: Harry OESTREICHER, on behalf of himself and all others similarly situated, Plaintiff, v. ALIENWARE CORPORATION, and Does 1-100, inclusive, Defendants.
• Court: U.S. District Court — Northern District of California

Page 1061

502 F.Supp.2d 1061

Harry OESTREICHER, on behalf of himself and all others similarly situated, Plaintiff, v. ALIENWARE CORPORATION, and Does 1-100, inclusive, Defendants.

No. C 07-00512 MHP.

United States District Court, N.D. California.

August 10, 2007.

Behram Viraf Parekh, Michael Louis Kelly, Robert Kenneth Fried', Kirtland & Packard LLP, El Segundo, CA, David P. Meyer, Matthew Ryan Wilson, Patrick G. Warner, David P. Meyer & Associates Co., LPA, Columbus, OH, Jeffrey B. Kaplan, Dimond Kaplan & Rothstein, PA., Miami, FL, Jonathan David Selbin, New York, NY, Kristen Elizabeth Law, Esq., Lieff, Cabraser, Heimann & Bernstein, LLP, San Francisco, CA, for Plaintiff.

C. Brandon Wisoff, Cory Michelle Mason, Douglas Rea Young, Farella Braun & Martel LLP, San Francisco, CA, Kim Brightwell, Paul Schlaud, Sinead O'Carroll, Reeves & Brightwell LLP, Austin, TX, for Defendants.

MEMORANDUM AND ORDER

MARILYN HALL PATEL, District Judge.

On December 6, 2006 Plaintiff Harry Oestreicher ("Oestreicher") brought this action against defendant Alienware Corporation ("Alienware") in San Francisco County Superior Court on behalf of himself and all others similarly situated in forty-nine U.S. states. Oestreicher alleges that Alienware made misrepresentations and concealed material information in its sale of certain computers which Alienware knew to be defective. On January 25, 2007 Alienware removed the action to this court. Alienware now moves to compel arbitration of all claims asserted in Oestreicher's complaint and to stay further proceedings pending arbitration. Having considered the parties' arguments and for the reasons stated below, the court enters the following memorandum and order.

BACKGROUND¹

Oestreicher purchased a notebook computer from Alienware, via Alienware's website, on or around June 30, 2005. Alienware is a Florida corporation with its principal place of business in Miami. In using the Alienware website to shop for and select his purchase, Alienware contends that Oestreicher necessarily encountered hyperlinks, contained in the footer of each page on the site, leading to Alienware's terms and conditions for sale. Lewis Dec. ¶ 7. To place his order, on the Alienware website's final checkout page, Oestreicher had to click a "Place Order" button. Id. ¶ 8. To the left of this button the following text appeared: "By clicking `Place Order,' you confirm that you have read and agree to the Customer Terms and Conditions Agreement" (emphasis in original). By clicking on "Customer Terms and Conditions Agreement," Oestreicher could access the text of this agreement. Id., Exh. B. However, orders could be placed whether or not the user had actually accessed and read the agreement; the page merely required the user to acknowledge he or she had done so in order to complete the transaction. Oestreicher claims he does not recall accessing or viewing the Terms and Conditions.

In making his purchase from Alienware, Oestreicher therefore allegedly agreed to Alienware's standard terms and conditions for sale agreement. For the purposes of this motion, Oestreicher does not dispute that the terms of the sale agreement were in accord with those now before the court. The sale agreement contained the following arbitration clause including a waiver of the right to pursue class actions:

Binding Arbitration. You and Alienware agree that any claim, dispute, or controversy, whether in contract, tort, or otherwise, and whether preexisting, present or future, and including statutory, common law, intentional tort and equitable claims ("Dispute") against Alienware ... arising from, in connection with or relating to this Agreement, its interpretation, or the breach, termination or validity thereof, the relationships which result from this Agreement ..., Alienware's advertising or any related purchase SHALL BE RESOLVED EXCLUSIVELY AND FINALLY BY BINDING ARBITRATION ADMINISTERED BY THE NATIONAL ARBITRATION FORUM .... YOU UNDERSTAND THAT IN THE ABSENCE OF THIS PROVISION, YOU WOULD HAVE HAD A RIGHT TO LITIGATE DISPUTES THROUGH A COURT, INCLUDING THE RIGHT TO LITIGATE CLAIMS ON A CLASS-WIDE OR CLASS-ACTION BASIS, AND THAT YOU HAVE EXPRESSLY AND KNOWINGLY WAIVED THOSE RIGHTS AND AGREED TO RESOLVE ANY DISPUTES THROUGH BINDING ARBITRATION IN ACCORDANCE WITH THIS SECTION.

Lewis Dec., Exh. A, Agreement ¶ 11. The sale agreement also contained the following choice of law clause: "Governing law. This Agreement and any sales hereunder shall be governed by the laws of the state of Florida, without regard to conflicts of laws principles, and excluding the United Nations Convention on the International Sale of Goods." Lewis Dec., Exh. A ¶ 13 (emphasis in original).

Oestreicher paid $4,149 for his purchase. Six months later, Oestreicher's Alienware notebook overheated and shut down and has not worked since. Complt. ¶ 18. Oestreicher alleges that Alienware made misrepresentations and concealed material information in its sale of certain computers which Alienware knew to be defective. See id. ¶ 2, 15, 17, 31-36. Oestreicher asserts six causes of action: (1) unfair, deceptive and unlawful business practices in violation of California's Unfair Competition Law, Bus. & Prof.Code sections 17200 et seq., (2) untrue and misleading advertising in violation of Cal. Bus. & Prof.Code sections 17500 et seq., (3) violation of the California Legal Remedies Act ("CLRA"), Cal. Civ.Code sections 1750 et seq., (4) breach of express warranties in violation of Cal. Comm.Code section 2313, (5) breach of implied warranties in violation of Cal. Comm.Code section 2314, and (6) unjust enrichment. Oestreicher filed this case on behalf of himself and all other similarly situated residents of California and forty-eight other U.S. states who purchased Alienware notebook computers of the Area 51 product line: models Area-51m 5550, 5700, 5750, 7500 and 7700.

On February 1, 2007 Alienware brought the present motion to stay proceedings and to compel arbitration pursuant to the arbitration clause. Alienware argues that the arbitration clause's validity, in accordance with the choice of law clause, must be determined under Florida law. On May 1, 2007, after all briefing related to this motion was complete but before oral argument, Oestreicher filed his First Amended Complaint ("FAC"). The proposed class as defined in the FAC is limited to California residents. FAC ¶ 29.

LEGAL STANDARD

The Federal Arbitration Act ("FAA"), 9 U.S.C. sections 1-16, requires federal courts to enforce arbitration agreements and to stay any litigation that contravenes such agreements. Arbitration is a matter of contact, and the court cannot require a party to arbitrate a dispute unless the party has agreed to do so. United Steelworkers of Am. v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960). Accordingly, the court's role under the FAA is limited to (1) determining whether a valid agreement to arbitrate exists and, if it does, (2) deciding whether the agreement encompasses the dispute at issue. 9 U.S.C. § 4; Simula, Inc. v. Autoliv, Inc., 175 F.3d 716, 719-20 (9th Cir.1999).

Despite the "liberal federal policy favoring arbitration agreements," Green Tree Fin. Corp. v. Randolph, 531 U.S. 79, 81, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000), state law still has a role to play. In interpreting 9 U.S.C. section 2, the Supreme Court has held that "state law, whether of legislative or judicial origin, is applicable if that law arose to govern issues concerning the validity, revocability, and enforceability of contracts generally." Perry v. Thomas, 482 U.S. 483, 492 n. 9, 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987) (emphasis in original). Therefore, "generally applicable contract defenses, such as fraud, duress or unconscionability, may be applied to invalidate arbitration agreements without contravening Section 2." Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 687, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996). "In making this determination, federal courts may not address the validity or enforceability of the contract as a whole." Ticknor v. Choice Hotels Inn, Inc., 265 F.3d 931, 937 (9th Cir.2001) (citing Prima Paint, Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 401, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967)).

DISCUSSION

The two-pronged Simula test requires the court to determine, first, if the arbitration clause is valid, and second, if the instant dispute falls within the scope of the arbitration clause. Because the parties do not dispute that the instant dispute falls within the scope of the clause, the court directs, its analysis to the validity of the clause.

I. Applicable State Law

To determine the validity of the arbitration clause, it is first necessary to establish the applicable law. Alienware claims that the choice of law clause of the sale agreement mandates the application of Florida law for disputes arising out of the agreement itself or out of sales thereunder. Oestreicher, on the other hand, contends that the clause's validity must be determined under California law. Federal courts sitting in diversity look to the law of the forum state in making choice of law determinations. Fields v. Legacy Health Sys., 413 F.3d 943, 950 (9th Cir.2005). Because the complaint in the present action was filed in California, California's choice of law rules apply.

Under California law, the party advocating a contractual choice of law clause bears the burden of showing that the claim falls within the scope of the choice of law provision. Washington Mut. Bank, FA v. Superior Court, 24 Cal.4th 906, 916, 103 Cal.Rptr.2d 320, 15 P.3d 1071 (2001). "If the trial court finds that the ... claims fall within the scope of a choice-of-law clause, it must next evaluate the clause's enforceability pursuant to the analytical approach reflected in section 187, subdivision (2) of the Restatement Second of Conflict of Laws[.]" Id. In Nedlloyd Lines B.V. v. Superior Court, 3 Cal.4th 459, 466, ...