Thomas White, Jr. v. Samsung Electronics America In ( 2023 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
______________
No. 22-1162
______________
THOMAS ROGER WHITE, JR.; PATRICIA CAULEY,
on behalf of themselves and all others similarly situated
v.
SAMSUNG ELECTRONICS AMERICA, INC.;
SONY ELECTRONICS INC.
Samsung Electronics America, Inc.,
Appellant
______________
On Appeal from the United States District Court
for the District of New Jersey
(D.C. No. 2-17-cv-01775)
District Judge: Honorable Madeline C. Arleo
______________
Argued
December 6, 2022
Before: SHWARTZ, MATEY, and FUENTES, Circuit
Judges
(Filed: March 7, 2023)
Javier Bleichmar [ARGUED]
Bleichmar Fonti & Auld
7 Times Square
27th Floor
New York, NY 10036
Counsel for Appellees Thomas Roger White, Jr. and
Patricia Cauley
Simon J. Frankel * [ARGUED]
Covington & Burling
415 Mission Street
Suite 5400
San Francisco, CA 94105
John A. Boeglin
Covington & Burling
850 10th St., N.W.
One City Center
Washington, DC 20001
Brielle A. Basso
Michael R. McDonald
Gibbons
One Gateway Center
Newark, NJ 07102
Counsel for Appellant
*
Attorney Simon J. Frankel argued the appeal, but withdrew
his appearance on 02/27/2023.
2
______________
OPINION OF THE COURT
______________
FUENTES, Circuit Judge.
In this putative class action, the District Court for the
District of New Jersey determined that defendant Samsung
Electronics America, Inc. (Samsung) waived its right to
arbitrate. Samsung appeals the District Court ruling, arguing
that Morgan v. Sundance, Inc., 142 S. Ct. 1708 (2022),
abrogated this Court’s prejudice-based approach to analyzing
waiver of arbitration rights and requires reversal. Because we
conclude that Samsung waived its arbitration rights under
Morgan, we will affirm the order of the District Court.
FACTS AND PROCEDURAL HISTORY
Plaintiffs are owners of Samsung SmartTVs who allege
that Samsung, among others, was illegally monitoring their
usage of Internet-enabled services on their televisions. 1 They
claimed that Samsung SmartTVs used automatic tracking
software to collect personally identifying information about
them, such as the videos or streaming services they watch, and
transmit that data to third party advertisers and data brokers.
In turn, these third parties allegedly used the collected
information to display targeted advertisements to consumers.
1
All defendants except for Samsung and SONY Electronics,
Inc. were dismissed from the action upon consent of the
parties. The claims against SONY were eventually severed
from those against Samsung and dismissed with prejudice.
3
When setting up their SmartTVs, plaintiffs had to agree
to certain Terms and Conditions to access the Internet-enabled
services. On some SmartTVs, the Terms and Conditions
contained the following arbitration provision:
By using the Services, the User unconditionally
consents and agrees that: (a) any claim, dispute
or controversy (whether in contract, tort, or
otherwise) the User may have against any
Samsung entity . . . arising out of, relating to, or
connected in any way with the Services or the
determination of the scope or applicability of this
clause, will be resolved exclusively by final and
binding arbitration[.] 2
According to Samsung, not all of its SmartTVs have arbitration
provisions. 3 Samsung is able to tell by the Model Number on
a SmartTV whether that Model contains an arbitration clause
in the Terms and Conditions. The Serial Number specific to
each SmartTV can be used to confirm whether a user agreed to
the Terms and Conditions.
In their 2017 complaint, then-plaintiffs Thomas Roger
White, Jr., David Espinoza, and Christopher Mills did not
provide the Model or Serial Numbers for their SmartTVs. It
was clear from this complaint, however, that plaintiffs were
SmartTV users who were able to access Internet-enabled
services, which they claimed Samsung was unlawfully
monitoring. Defendants jointly moved to dismiss the
complaint, but the parties agreed to a stay and administrative
2
JA 4, 658, 661.
3
Only one of White’s TVs had an arbitration provision.
4
termination of the case. In order to reactivate the case,
plaintiffs were directed to file a letter with the Court by
December 2017 requesting that the case be restored, along with
a proposed amended complaint for filing. The case was
reactivated and in January 2018 plaintiffs submitted a proposed
amended complaint.
Defendants moved again to dismiss the amended
complaint, arguing that plaintiffs had not resolved the
insufficiencies of the original complaint, and that plaintiffs
failed to meet federal pleading standards for stating a claim as
to each count. While that motion was pending, defendants
submitted a proposed discovery plan in which they did not
mention a possible right to arbitrate. Defendants also moved
for a stay pending the outcome of their motion to dismiss,
which was granted.
In April 2018, prior to the District Court’s decision on
the motion to dismiss, plaintiffs submitted their initial
disclosures, which contained the Model and Serial Numbers
for all of plaintiffs’ SmartTVs. 4 Thereafter, the Court granted
the motion to dismiss in full, and plaintiffs indicated that they
would submit a second amended complaint. Plaintiffs filed a
second amended complaint in November 2018, removing
former-plaintiff Mills from the action, keeping White as a
plaintiff, and adding Patricia Cauley as a plaintiff. The second
amended complaint included the Model Numbers for both
White’s and Cauley’s SmartTVs, as well as the Serial Numbers
for White’s SmartTVs. Defendants once again moved to
dismiss. The District Court granted in part and denied in part
4
The Serial Number for one of White’s Samsung SmartTVs
was missing a number.
5
this motion to dismiss and dismissed all of plaintiffs’ claims
except for the Wiretap Act claims. Samsung moved for
reconsideration of the Court’s order, which was denied.
Samsung notified the Court in May 2020 that it would
move to compel individual arbitration. In response, counsel
for plaintiffs stated that Samsung had waived its arbitration
rights. Nevertheless, Samsung filed a motion to compel
arbitration in May 2020, which was denied without prejudice
for docket management purposes. Samsung refiled the motion
in May 2021, arguing, as relevant here, that it did not waive its
right to arbitrate because “the prerequisites of waiver—
extensive discovery and prejudice—are lacking, and the
[relevant] factors do not support a finding of waiver.” 5
Plaintiffs opposed.
The District Court denied the motion in a letter order,
explaining that Samsung waived its right to arbitrate, and that
compelling arbitration would cause plaintiffs to suffer
significant prejudice. The District Court diligently reviewed
the factors set forth in Hoxworth v. Blinder, Robinson & Co.,
980 F.2d 912, 926-27 (3d Cir. 1992), determining that of the
six relevant factors, five weighed in favor of finding that
Samsung had waived its right to arbitrate. Samsung appeals.
JURISDICTION & STANDARD OF REVIEW
The District Court had jurisdiction pursuant to 28
U.S.C. § 1332(d)(2) (the Class Action Fairness Act) and 28
U.S.C. § 1331. This Court has jurisdiction under 9 U.S.C.
§ 16(a)(1)(B) because the District Court’s order denied a
motion to compel arbitration under the Federal Arbitration Act
5
JA 628.
6
(FAA). 6 Our review of a district court order denying a motion
to compel arbitration is plenary over the Court’s determination
as to “whether a party[,] through its litigation conduct, waived
its right to compel arbitration.” 7 “To the extent that a district
court makes factual findings” in making this determination, the
Court reviews those findings for clear error. 8
DISCUSSION
Samsung originally argued that the District Court’s
holding was in error under the Hoxworth factors; however,
while this case was pending, the Supreme Court issued a
decision in Morgan v. Sundance, Inc. As Samsung pointed out
in supplemental briefing, in Morgan the Supreme Court
“expressly ‘rejected’ the prejudice-based waiver analysis
undergirding the Hoxworth line of cases and similar prejudice-
focused approaches of other Circuits.” 9 We now analyze the
facts of this case under the standard emphasized in Morgan.
To compel arbitration, a court must consider whether
(1) “valid agreement to arbitrate exists” and (2) “the particular
dispute falls within the scope of that agreement.” 10 The FAA
provides that “[a] written provision . . . to settle by arbitration
a controversy . . . shall be valid, irrevocable, and enforceable,
6
See O’Hanlon v. Uber Techs., Inc., 990 F.3d 757, 762 (3d Cir.
2021).
7
Gray Holdco, Inc. v. Cassady, 654 F.3d 444, 450-51 (3d Cir.
2011) (internal quotation marks and citation omitted).
8
Id. at 451.
9
Samsung Supp. Br. at 1. Morgan, 142 S. Ct. at 1712-13.
10
Trippe Mfg. Co. v. Niles Audio Corp., 401 F.3d 529, 532 (3d
Cir. 2005).
7
save upon such grounds as exist at law or in equity for the
revocation of any contract.” 11 Decades ago, the Supreme
Court discussed 9 U.S.C. § 2 as “a congressional declaration of
a liberal federal policy favoring arbitration agreements.” 12 But
as Morgan explained, that “phrase” “is merely an
acknowledgment of the FAA’s commitment to overrule the
judiciary’s longstanding refusal to enforce agreements to
arbitrate and to place such agreements upon the same footing
as other contracts.” 13 Or in another formulation: The policy is
to make “arbitration agreements as enforceable as other
contracts, but not more so.” 14
Simply put, Morgan clarified that § 2 never permitted
Courts of Appeals to create “arbitration-specific variants of
federal procedural rules, like those concerning waiver, based
on the FAA’s ‘policy favoring arbitration.’” 15 Specifically, in
the context of waiver of the right to arbitration, this Court and
others had created tests that placed prejudice to the party not
seeking arbitration as the focus of the waiver inquiry. 16 The
Court stated, however, that the FAA does not authorize the
11
9 U.S.C. § 2.
12
Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460
U.S. 1, 24 (1983).
13
Granite Rock Co. v. Int’l Bhd. of Teamsters, 561 U.S. 287,
302 (2010) (citation and quotation marks omitted).
14
Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S.
395, 404 n.12 (1967).
15
Morgan, 142 S. Ct. at 1712 (internal citation omitted).
16
Id. at 1711; see, e.g., PaineWebber Inc. v. Faragalli, 61 F.3d
1063, 1068-69 (3rd Cir. 1995); Shinto Shipping Co. v. Fibrex
& Shipping Co., Inc., 572 F.2d 1328, 1330 (9th Cir. 1978).
8
courts to invent arbitration-preferential rules. 17 Thus, the
Court directed the Courts of Appeal to “hold a party to its
arbitration contract just as the court would to any other kind[,
b]ut . . . not devise novel rules to favor arbitration over
litigation.” 18
In support of this directive, the Supreme Court rejected
the prejudice-focused inquiry established by this and other
Courts of Appeals. Instead, the inquiry for waiver of
arbitration rights must be identical to the inquiry for waiver of
other contractual rights. 19 Indeed, the Court emphasized that
any defense existing in contract law, “whether of waiver or
forfeiture or what-have-you,” 20 is available to a party resisting
arbitration. 21 This result flows directly from the plain language
17
Morgan, 142 S. Ct. at 1713; see 9 U.S.C. § 6 (providing that
any application under the statute “shall be made and heard in
the manner provided by law for the making and hearing of
motions”).
18
Morgan, 142 S. Ct. at 1713.
19
Id. at 1714 (focusing on whether the moving party
“knowingly relinquish[ed] the right to arbitrate by acting
inconsistently with that right”); see Simko v. U.S. Steel Corp.,
992 F.3d 198, 205 (3d Cir. 2021) (“Waiver is the intentional
abandonment of an argument.”); Barna v. Bd. of Sch. Dirs. of
Panther Valley Sch. Dist., 877 F.3d 136, 146-47 (3d Cir. 2017)
(applying this same waiver rule in this Circuit in a non-
arbitration context); In re RFE Industries, Inc., 283 F.3d 159,
164 (3d Cir. 2002) (same).
20
That “what-have-you” list might also include, for instance,
estoppel, laches, and procedural timeliness. See Morgan, 142
S. Ct. at 1712.
21
Id. at 1713-14.
9
of the FAA, which states clearly that an arbitration provision is
valid, except “upon such grounds as exist at law or in equity
for the revocation of any contract.” 22 Thus, parties have the
entire contractual toolbox available to them to seek to enforce
or oppose an arbitration provision.
For purposes of resolving this case, we need only
address one of the tools at the parties’ disposal—waiver.
Applying the general rule for waiver as Morgan directs, waiver
occurs where a party has “intentional[ly] relinquish[ed] or
abandon[ed] . . . a known right.” 23 In analyzing whether waiver
has occurred, a “court focuses on the actions of the p[arty] who
held the right”24 and is informed by the “circumstances and
context of each case.” 25 We therefore must now decide
whether Samsung acted inconsistently with an intent to assert
its right to arbitrate. 26
Samsung’s litigation actions here evince a preference
for litigation over arbitration. As Samsung itself states, it was
aware that pursuant to its standard Terms and Conditions,
certain SmartTVs require users to agree to arbitration to utilize
the Internet-based services of the television. Thus, from the
outset of litigation, Samsung was on notice that plaintiffs’
claims could be arbitrable, as each plaintiff had necessarily
agreed to Terms and Conditions to utilize their SmartTVs’
Internet-enabled services. It was also always aware that the
22
9 U.S.C. § 2 (emphasis added).
23
Morgan, 142 S. Ct. at 1713.
24
Id.
25
Gray Holdco, Inc., 654 F.3d at 451.
26
See Nat’l Found. for Cancer Rsch. v. A.G. Edwards & Sons,
Inc., 821 F.2d 772, 774-75 (D.C. Cir. 1987).
10
Model and Serial Numbers of the specific TVs were necessary
to determine with accuracy whether plaintiffs agreed to
arbitrate their claims. Samsung’s actions, despite this
awareness to invoke the litigation process, demonstrates a
waiver of its alleged right to arbitrate.
Samsung also continuously sought and agreed to stays
in discovery—which may have resulted in receipt of the
necessary Model and Serial Numbers—to pursue motions to
dismiss on the merits. Those motions to dismiss were
favorable to Samsung, resulting in all but one claim being
dismissed. On the surviving claim, Samsung moved for
reconsideration. Although motions to dismiss will not always
evince an intent to litigate instead of arbitrate, 27 Samsung
clearly sought to have this case dismissed by a court on the
merits. Only after it was apparent that further litigation would
be required, and it could not get the case fully dismissed before
discovery, did Samsung attempt to arbitrate the remaining
claim.
Samsung also engaged in multiple instances of non-
merits motion practice and acquiesced to the District Court’s
pre-trial orders. Considering just the activity after the filing of
the second amended complaint, Samsung submitted an
unopposed pro hac vice application, sought leave to file a reply
in further support of its motion for reconsideration, requested
additional time to file a response to the second amended
27
Cf. Palcko v. Airborne Express, Inc., 372 F.3d 588, 596-98
(3d Cir. 2004) (defendant did not waive its right to arbitrate
when it moved to compel arbitration within 22 days of filing
its motion to dismiss on procedural grounds, for insufficiency
of process).
11
complaint, and filed a motion for certification of an
interlocutory appeal pursuant to 28 U.S.C. § 1292(b). It further
assented to all of the District Court’s pre-trial orders and
participated in numerous court conferences.
Several facts compound this apparent preference for
litigation. First, as part of the discovery plan, the parties were
asked if the case was subject to court-annexed
arbitration. While this particular case would not necessarily be
subject to that form of arbitration, arbitration was mentioned in
the plan and completeness would suggest that Samsung should
have disclosed that another type of arbitration may be
applicable. Samsung did not inform plaintiffs of the potential
for arbitration at any point during the litigation before May
2020, when it informed them seven days in advance that it
intended to raise it to the Magistrate Judge. Next, plaintiffs
provided Samsung with Model and Serial Numbers for
plaintiffs’ SmartTVs in their April 2018 initial disclosures. 28
Given that all plaintiffs had activated their SmartTVs,
Samsung should have been aware at this point, given the Model
Numbers, that plaintiffs had agreed to arbitrate their claims.
By November 2018, Samsung had the Model Number for
newly added plaintiff Cauley’s Samsung television. Thus, by
November 2018, Samsung should have known definitively that
plaintiffs had agreed to arbitrate in this case. 29 Samsung,
28
JA 758, 760 (“Thomas Roger White, Jr.: Samsung, Model
No. UN55KU6300F, Serial No. 05HX3CAHB11790N; . . .
Samsung, Model No. UN32J5500AF, Serial No.
03NL3CGG90593M”).
29
By November 2018, Samsung knew plaintiffs’ SmartTV
Model Numbers and that plaintiffs used the smart features on
their SmartTVs. So, Samsung had the requisite information
12
however, continued to pursue dismissal on the merits through
litigation. Samsung’s pursuance of dismissal of the action and
failure to notify plaintiffs or the Court of its right to arbitrate,
prior to May 2020, demonstrated a decision to pursue the
benefits of litigating its arbitrable claims and is inconsistent
with an intent to arbitrate. Contrary to Samsung’s contention,
a motion to compel arbitration—or at the very least notice of
an intent to seek arbitration—would not have been “futile.” 30
Through its actions expressing an intent to litigate,
Samsung waived its right to arbitration. As the District Court
noted, Samsung is “a large and sophisticated corporate leader
in electronics” and as such is “uniquely positioned to . . . know
exactly which models had arbitration agreements for its
products.” 31 Therefore, even without the Serial Numbers,
Samsung should have known it could arbitrate plaintiffs’
claims and yet expressly went forward with litigation. There
is no clear error in the factual findings of the District Court and,
pursuant to Morgan, Samsung waived its right to arbitrate.
CONCLUSION
For the foregoing reasons, we will affirm the District
Court’s order holding that Samsung waived its right to
arbitrate.
to determine that plaintiffs’ SmartTVs had an arbitration
provision based on the Model Numbers, and that plaintiffs
consented to arbitration in order to use the smart features.
30
Samsung Opening Br. at 19-20, citing Chassen v. Fidelity
Nat’l Fin., Inc., 836 F.3d 291 (3d Cir. 2016).
31
JA 5.
13