Payne v. Samsung Electronics America, Inc.

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
JOHN C. PAYNE, )
)
Plaintiff, )
) C.A. No. N23C-03-193 FWW
v. )
)
SAMSUNG ELECTRONICS AMERICA, )
INC. and CELLULAR SALES )
MANAGEMENT GROUP, LLC, )
)
Defendants. )
Submitted: December 18, 2023
Decided: February 21, 2024
Upon Defendant Samsung Electronics America, Inc.’s Motion to Compel
Arbitration, Dismiss Plaintiff’s Claims and Stay All Proceedings, Treated as a
Motion to Dismiss
GRANTED
MEMORANDUM OPINION
David C. Malatesta, Jr. Esquire SHELSBY & LEONI, 221 Main Street, Wilmington,
DE 19804, Attorney for Plaintiff John C. Payne.
Donald M. Ransom, Esquire, Daniel P. Daly, Esquire, CASARINO CHRISTMAN
SHALK RANSOM & DOSS, P.A., 1000 N. West Street, Suite 1100 Wilmington,
DE 19899, Attorneys for Defendant Samsung Electronics America.
Christopher T. Logullo, Esquire, COBB & LOGULLO, 3 Mill Road, Suite 301,
Wilmington, DE 19806
WHARTON, J.
I. INTRODUCTION
The Court has before it Defendant Samsung Electronics America, Inc.’s
(“Samsung”) Motion to Compel Arbitration, Dismiss Plaintiff’s Claims, and Stay all
Proceedings (“Motion”).1 Plaintiff John C. Payne (“Payne”) opposes the Motion.2
Defendant Cellular Sales Management Group, LLC (“Cellular Sales”) does not
oppose Samsung’s request to compel arbitration, provided its crossclaim is not
extinguished.3 In its response to the Motion, Cellular Sales opposed a stay of all
proceedings in the underlying case.4 At argument, however, it stated that it would
not oppose a stay if it were permitted to participate in discovery during the arbitration
process.
For the reasons explained below, Samsung’s Motion to Compel Arbitration
and to Dismiss Plaintiff’s Claims and Stay All Proceedings, treated as a Motion to
Dismiss, is GRANTED. The Amended Complaint is DISMISSED. The crossclaim
of Cellular Sales is not dismissed, however. The proceedings between Cellular Sales
and Samsung on Cellular Sales’ crossclaim in this Court are STAYED to the extent
that Cellular Sales is permitted to participate in discovery during any arbitration
process.
1
Samsung’s Mem. of Law, D.I. 27.
2
Pl.’s Resp., D.I. 33.
3
Id.
4
Id.
2
II. FACTS AND PROCEDURAL HISTORY
Payne’s Amended Complaint alleges that in May 2021 he purchased a
Samsung Galaxy S-10+ Smartphone and a car charger at a Verizon store in
Salisbury, Maryland.5 While driving in Newark, Delaware with the phone next to
his right leg, the phone burst into flames causing severe burns to Payne’s right leg
and hip.6 He brings claims for Negligence, Res Ipsa Loquitor, and Breach of
Warranty.7 Cellular Sales answered and crossclaimed against Samsung for
contribution and/or indemnification.8
Samsung moves to dismiss. Although the title of the Motion purports to move
for dismissal of Payne’s claims, the Motion itself does not make that request.
Instead, it suggests that “this Court should order arbitration and stay the proceedings
without reaching the question of whether the Arbitration Agreement covers the
claims in the Complaint;”9 “In addition to compelling arbitration of Plaintiff’s
claims, the Court should stay all further proceedings in this litigation pending
arbitration;”10 and, “For the reasons set forth above, [Samsung] respectfully requests
5
Amend. Compl. at ⁋ 10, D.I. 3.
6
Id. at ⁋⁋ 11, 12, 14, 16.
7
Id.
8
Cellular Sales’ Ans. and Crossclaim., D.I. 9.
9
Samsung’s Mem. of Law at 23, D.I. 27.
10
Id. at 24.
3
that the Court (1) order plaintiff to submit his claims to binding arbitration, and (2)
stay this action pending the outcome of any such arbitration…”11
On December 22, 2023, the Court wrote to the parties.12 It noted that in Jones,
et al. v. 810 Broom Street Operations, Inc.,13 cited by Samsung, the Court stated,
“This Court has the authority [to] determine whether a valid and enforceable
arbitration agreement exists for purposes of determining whether it has subject
matter jurisdiction,” but, it also stated, “It is well settled in Delaware that the power
to compel arbitration lies exclusively with the Court of Chancery.” 14 In an effort to
clarify the intent of the motion and give all parties an opportunity to comment, the
Court posed two questions: “(1) in light of Jones, does this Court have the authority
to compel the Plaintiff to submit to binding arbitration; and (2) if not, does Samsung
seek dismissal of the Complaint under Superior Court Civil Rule 12(b)(1)?”.15
In its response, Samsung acknowledges that this Court does not have the
authority to compel arbitration.16 Accordingly, it seeks dismissal of the Amended
Complaint.17 Cellular Sales agrees that if this Court finds a valid binding arbitration
11
Id. at 25.
12
D.I. 38.
13
2014 WL 1347746 (Del. Super. Ct. Apr. 7, 2023).
14
Id. at *1.
15
D.I. 38.
16
D.I. 39.
17
Id.
4
agreement, it does not have subject matter jurisdiction to compel arbitration.18 It
does not oppose Samsung’s motion provided that its crossclaim is not
extinguished.19
III. THE PARTIES’ CONTENTIONS
In its Motion, brought under Superior Court Civil Rule 12(b)(1), Samsung
argues that this Court lacks subject matter jurisdiction because Payne entered into a
binding agreement to arbitrate his claims against Samsung.20 In particular, it
contends that the parties manifested their mutual consent to arbitrate claims in three
ways: (1) Payne entered into a valid “shrinkwrap” arbitration agreement;21 (2) Payne
entered into a valid arbitration agreement based on the notice inside the box with his
phone;22 and (3) Payne entered into a valid arbitration agreement through the
“clickwrap” process during device activation.23 As clarified, the Court understands
18
D.I. 40.
19
Id.
20
Samsung’s Mem. of Law at 9-23, D.I. 27.
21
Id. at 14-17. A “shrinkwrap” agreement is one where notice of the contractual
terms is provided on the exterior packaging of the product which terms consumers
are presumed to accept when they open or use the product. Id. at 14.
22
Id. at 17-19.
23
Id. at 19-21. A “clickwrap” agreement is one where the customer is presented with
the terms of the agreement during the activation process and must affirmatively
“click” a box accepting those terms before continuing with the activation process.
Id. at 19.
5
Samsung now to be seeking an order dismissing all of Payne’s claims and staying
Cellular Sales’ crossclaim pending the outcome of that arbitration.24
In his response, Payne describes how his purchase of the phone occurred.25
He supports that description by affidavit.26 Payne states that he purchased the phone
at a Verizon store in Maryland.27 He was shown the new phone after it had been
removed from the box by the salesperson and he did not open or review the box prior
to the salesperson removing the phone.28 The salesperson then took his old phone
and set up his new phone by transferring the data from his old phone to the new
one.29 After the new phone was set up, Payne was given the phone and a bag with
24
See, D.I. 39. Samsung would be amenable to Cellular Sales participating in
discovery as part of an arbitration process, however.
25
Pl.’s Resp., D.I. 33.
26
Id. Ex 1. D.
27
Id. at ⁋⁋ 1-2. It appears Payne may not have been the actual purchaser of the
phone. Verizon Wireless Service, LLC (“Verizon”) originally was named as a
defendant in the Amended Complaint. D.I. 3. Later, Verizon was dismissed. D.I.
22. Prior to being dismissed, however, like Samsung, it moved to compel arbitration.
D.I. 16. Attached to that motion was a “Service Summary” showing the purchase of
two Samsung cell phones with separate cell phone numbers. D.I. 16, at Ex. A. The
purchaser listed is Patricia Payne, presumably Payne’s wife, not Payne himself. Id.
Whether this fact is significant is not before the Court because the parties have not
raised it as an issue. It is interesting to the Court to note, though, that the documents
attached to Verizon’s motion include a Customer Agreement for each phone, signed
by Patricia Payne, for “settlement of all disputes [with Verizon] by arbitration
instead of jury trial.” Id. at Exs. A, C and D.
28
Id. at ⁋ 3.
29
Id. at ⁋ 4.
6
the box for the new phone inside, and probably a car phone charger.30 At no time
did he understand that he had entered into a binding contract with Samsung to waive
his right to a jury trial and resolve any dispute with Samsung through binding
arbitration.31 Based on these facts, Payne urges the Court to conclude: (1) there was
no contract between Samsung and Payne due to a lack of mutual assent and a failure
of consideration;32 and (2) Payne did not clearly express an intent to waive his right
to a jury trial.33
Cellular Sales initially did not oppose Samsung’s motion to compel arbitration
provided its crossclaim was not extinguished.34 It did oppose a stay if arbitration
were ordered, suggesting that the parties should jointly engage in discovery while
arbitration moves forward.35 In response to the Court’s inquiry, it does not oppose
dismissal as long as its cross-claim is not extinguished.36
IV. STANDARD OF REVIEW
A motion to dismiss based on lack of subject matter jurisdiction implicates
Superior Court Civil Rule 12(b)(1). The burden rests on the plaintiff to prove that
30
Id. at ⁋ 5.
31
Id. at ⁋ 6.
32
Id. at ⁋ 10.
33
Id. at ⁋ 11.
34
Cellular Sales’ Resp., D.I. 28.
35
Id. at ⁋ 9.
36
D.I. 40.
7
jurisdiction exists, and “where the plaintiff's jurisdictional allegations are challenged
through the introduction of material extrinsic to the pleadings, he [or she] must
support those allegations with competent proof.” 37 To determine if Payne has met
his burden, the Court may consider the pleadings, and matters extrinsic to the
pleadings.38 In deciding whether a matter is required to be arbitrated for purposes
of determining subject matter jurisdiction, this Court must assess, at most: “(1)
Whether a valid binding arbitration agreement exists; and (2) Whether the scope of
the agreement covers all of the parties’ claims.”39 The Court may be divested of
determining arbitrability, however, if “the parties clearly and unmistakably provide
otherwise.”40
V. DISCUSSION
Both the Federal Arbitration Act (“FAA”)41 and Delaware’s Uniform
Arbitration Act42 recognize the validity and enforceability of agreements to settle
37
Abbott v. Vavala, 2022 WL 453609, at *5 (Del. Super. Ct. Feb. 15, 2022) (quoting
Lewis v. AimCo Properties, LP, 2015 WL 557995 (Del. Ch. Feb. 10, 2015).
38
Id.39
Antognoli v. Christiana Care Health Serv., 2023 WL 5441891 (Del. Super. Ct.
Aug. 22, 2023) (citing Bacon v. Avis Budget Grp., Inc., 959 F.3d 590, 599 (3d Cir.
2020)).
40
Agspring, LLC v. NGP X US Holdings, L.P., 2022 WL 17367807, at *2 (Del.
Dec. 2, 2022) (quoting Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83
(2002).
41
9 U.S.C. § 2.
42
10 Del. C. § 5701.
8
disputes through arbitration rather than by litigation in courts. The FAA
“establishes ‘a liberal federal policy favoring arbitration.’”43 Similarly, the public
policy of Delaware “favors resolution of disputes through arbitration.”44 The
Court’s first task is to determine whether a valid agreement to arbitrate existed
between Payne and Samsung.
Under Delaware law, contract formation requires mutual assent, meaning a
complete meeting of the minds of the parties.45 No agreement to arbitrate exists
unless there is a clear expression of such an intent.46 Establishing a meeting of the
minds and mutual assent turns on the existence of “reasonable notice to each
contracting party of the contractual terms.”47
There seems to be little dispute that, had Payne gone through what the Court
assumes to be the regular process one goes through when purchasing a cell phone,
he would have encountered the “shrinkwrap” arbitration agreement notice on the
exterior of the box; the arbitration notice included on the inside of the box, and the
43
Epic Sys. Corp. v. Lewis, 584 U.S. 497, 506 (2017) (quoting Moses H. Cone
Memorial Hospital v. Mercury Const. Corp., 460 U.S. 1, 24 (1983)).
44
Graham v. State Farm Mut. Auto Ins. Co., 565 A.2d 908, 911 (Del. 1989) (citing
Pettinaro Constr. Co. v. Harry C. Partridge, Jr. & Sons, Inc., 408 A.2d 957, 961
(Del. Ch. 1979)).
45
United Health Alliance, LLC v. United Medical, LLC, 2913 WL 6383026, at *6
(Del. Ch. Nov. 27, 2013).
46
Id.47
Noble v. Samsung Electronics America, Inc. 682 F. App’x. 113, 116 (3d. Cir.
2017).
9
“clickwrap” agreement when he attempted to activate his device. Under those
circumstances, Payne would be hard pressed to claim ignorance of the arbitration
agreement, or that he did not assent to it. Samsung cites substantial authority, which
the Court accepts, and which Payne does not challenge persuasively,48 confirming
that enforceable contracts may be formed in the context of consumer electronics
purchases by “shrinkwrap” agreements, inside the box agreements, and “clickwrap”
agreements.49
In Payne’s telling, he was shown the phone after it was taken out of the box
by the salesperson, who transferred the data from his old phone and set up his new
phone, after which he was given a bag with the phone’s box, and a car phone charger
he also had purchased.50 It is those facts upon which the Court must rely to
determine if Payne had inquiry notice. Thus, the question becomes, does Payne’s
professed ignorance of those notices, which the Court must accept at this stage of
the proceedings, matter? Samsung contends that it does not, arguing that Payne had
“inquiry notice.”
48
Payne cites Chilutti v. Uber Technologies, Inc. 300 A.3d 430 (Pa. Super. Ct. July
19, 2023), but that case involved a “browsewrap” agreement, a type of agreement
at “the other end of the spectrum” from the “clickwrap” agreements which courts
have routinely found enforceable. Id. at 444.
49
Samsung’s Mem. of Law at 9-21, D.I. 27.
50
Pl’s Resp., Ex. 1 at ⁋⁋ 5-7, D.I. 28.
10
A. The Notices
It is useful to describe the various forms of notice Samsung provides to cell
phone purchasers. They are the “shrinkwrap” agreement on the exterior of the box
which Payne admits was in the bag he was given, and the notice inside the box,
which the Court presumes remained inside the box when Payne received it, the
“clickwrap”’ agreement encountered during activation of the phone which Payne
says was performed by a store employee, and any other notices of the arbitration
agreement potentially available to Payne. For descriptions of those notices, the
Court turns to the Certification of Nicole Cantwell (“Cantwell”), the Director of
Digital Content & UXC/UI Strategy at Samsung.51 Cantwell describes five places
Samsung makes the arbitration agreement known to purchasers: (1) outside the box;
(2) in a “Terms & Conditions” booklet inside the box; (3) during the activation
process; (4) on Samsung’s website at the specific URL provided on the outside of
the box; and (5) on the device itself.52
The notice on the outside of the box notifies customers that, if they “use or
retain” their phones, they “accept Samsung’s Terms and Conditions including an
Arbitration Agreement.”53 Also on the exterior of the box is a URL where Payne
51
Samsung’s Mem. of Law, Ex. B, D.I. 27.
52
Id. Ex. B at ⁋ 8.
53
Id. Ex. B at ⁋⁋ 15, 16.
11
could find the full terms and conditions, including opt-out information.54 The notice
also informs customers that the full terms are available in the box and in their phone
settings.55 Further, at the top of the notice on the outside of the box, purchasers are
informed: “Packaging contains…Terms and Conditions.”56 Cantwell provides a
screenshot of the exterior notice with her Certification.57
The box contains a paper copy of the “Terms & Conditions” booklet.58 That
booklet alerts customers to the binding arbitration agreement and opt-out
provision.59 The booklet is titled in large bold font “Terms & Conditions / Health
& Safety Information.”60 Below the title, also in bold font is this notification:
“Electronic acceptance, opening the Product packaging, use of the Product, or
retention of the Product constitutes acceptance of these Terms and
Conditions.”61 Also on the cover page is a list of four sections, the first of which is,
“Arbitration Agreement.”62 Cantwell provides a screenshot of the title page of the
booklet and a copy of the booklet itself.63
54
Id. Ex. B at ⁋ 15.
55
Id. Ex. B.
56
Id. Ex. B at ⁋ 16.
57
Id. Ex. B at ⁋ 18, and at Ex. B to Ex. B.
58
Id. Ex. B at ⁋ 23.
59
Id. Ex. B.
60
Id. Ex B at ⁋ 24, and at Ex. A to Ex. B.
61
Id. Ex. B.
62
Id. Ex. B.
63
Id. Ex. B at Ex. A to Ex. B.
12
When the device is turned on for the first time, users are presented with a
series of interactive screens requiring them to complete the setup process before
activating or using their phones.64 The setup process requires users to affirmatively
accept the terms and conditions, including the arbitration agreement set out at a
hyperlink, before they can complete the setup process and use their phones.65
The exterior of the box and the Terms and Conditions booklet both provide a
URL link to the arbitration agreement – www.samsung.com/us/Legal/Phone-
HSGuide/.66 The website lists four bullets, the first of which is “Arbitration
Agreement” in bold.67 Finally, the printed Terms and Conditions booklet in the box
advises users that the arbitration agreement can be found on the phone itself in the
Samsung legal section of Settings.68
B. Inquiry Notice
Samsung contends these various forms of notice put Payne on “inquiry notice”
to discover the arbitration agreement.69 The concept of inquiry notice is frequently
64
Id. Ex. B at ⁋⁋ 26-29.
65
Id. Ex. B.
66
Id. Ex. B at ⁋ 20.
67
Id. Ex. B at ⁋ 21.
68
Id. Ex. B at ⁋ 32.
69
See, Letters from Donald M. Ransom, Esquire dated November 20, 2023 and Dec.
7, 2023, D.I. 36 (Nov. 20) and D.I. 37 (Dec.7).
13
invoked in determining the applicability of relevant statutes of limitations,70 but it is
not limited that class of cases.71 “A party is deemed to have inquiry notice ‘upon
discovery of facts constituting a basis for the cause of action, or [where the party]
knows facts sufficient to put a person of ordinary intelligence and prudence on
inquiry, which if pursued would lead to the discovery of such facts.’”72 “The court
should consider whether there were red flags that would have left a prudent person
of ordinary intelligence to inquire further.”73
Samsung refers the Court to four cases it argues support its contention that
Payne was on inquiry notice – McDougal v. Samsung Electronics America, Inc.;74
Beture v. Samsung Electronics America, Inc.;75 Taylor v. Samsung Electronics
America, Inc.;76 and Lewis v. Samsung Electronics America, Inc.77 McDougal was a
70
See, e.g. Lehman Brothers Holdings, Inc. v. Kee, 268 A.3d 178 (Del. 2021);
Ocimum Biosolutions (India) Limited v. Astrazenica UK Limited, 2019 WL 6726836(Del. Super. Ct. Dec. 4, 2019); In re Dean Witter Partnership Litigation, 998 WL
422456 (Del. Ch. Jul. 17, 1998).
71
See, Wilmington Trust, National Association v. Sun Life Assurance Company of
Canada, 292 A.3d 1062 (Del. 2023).
72
Altenbaugh v. Benchmark Builders, Inc. 2022 WL 176292, at *2 (Del. 2022)
(quoting Wal-Mart Stores, Inc. v. AIG Life Ins. Co., 860 A.2d 312, 319 (Del. 2004).
73
Id. (citing Coleman v. Pricewaterhousecoopers, LLC, 854 A.2d 838, 842 (Del.
2004).
74
2023 WL 6445838 (S.D. N.Y. Oct. 3, 2023).
75
2018 WL 4621586 (D. N.J. Jul. 18, 2018).
76
2018 WL 3921145 (N.D. Ill. Aug. 16, 2018).
77
2023 WL 7623670 (S.D. N.Y. Nov. 14, 2023).
14
putative class action alleging breaches of contract and various warranties.78 The
plaintiffs alleged that Samsung misled them into purchasing their devices by
overstating the amount of “available memory.”79 There, as here, notice of the
arbitration agreement was provided on the box, in a “Terms and Conditions”
pamphlet in the box, and through an interactive set-up process on the phone’s
screen.80 Unlike here, however, there is no allegation that a third party performed
the set-up process. Rather, the plaintiffs argued that there was no binding agreement
to arbitrate because the clickwrap process did not put them on notice of the terms of
the agreement and the agreement was unconscionable and unenforceable,81
arguments Payne does not advance directly. Nevertheless, McDougal is helpful for
its discussion of “inquiry notice” which the Court found placed the plaintiffs on
notice of the arbitration agreement’s terms.82 The Court observed that an offeree
may be bound by certain terms of a contract, even if he does not have actual notice
of those terms if he is on inquiry notice of them and assents to them by conduct that
a reasonable person would understand to constitute assent.83 “Offerees are on
78
McDougal, 2023 WL 6445838, at *1.
79
Id.80
Id.81
Id. at 3.
82
Id.
83
Id. (citing Meyer v. Uber Techs., Inc., 868 F.3d 66, 76 (2d Cir. 2017). Consistent
with the arbitration agreement, McDougal applied New York law. Id. at *2.
Samsung addresses choice of law. Samsung’s Mem. of Law at 12-14, D.I. 7, while
15
inquiry notice ‘where the notice of the arbitration provision was reasonably
conspicuous and manifestation of assent unambiguous as a matter of law’”84
Beture was a class action where certain of the plaintiffs purchased their phones
from a retailer that had already performed the clickwrap setup process prior to
purchase.85 For that reason, they claimed they lacked reasonable notice of, and did
not agree to, an End User License Agreement (“EULA”).86 The Court found that
argument both factually and legally deficient.87 Factually, the Court noted that the
EULA was displayed not only at setup, but also during the factory resets which
several plaintiffs acknowledged they performed.88 Further, the EULA also always
was available for plaintiffs to read on the Settings menu.89 More importantly, the
Court found plaintiffs’ argument legally deficient because:
“[o]nce there is reasonable notice, a party is bound by
those terms, even if he failed to read them.” Defendant
provided reasonable notice of the terms of the license
agreement by displaying the EULA during the
initialization of the [phone] and restricting activation of
the phone until the Agreement was affirmatively assented
to. Even when a carrier store representative
performed the [phone] initialization, a smartphone
Payne does not. The Court sees no material difference between Delaware and New
York for purposes of considering inquiry notice.
84
Id. (quoting Meyer, 856 F.3d at 76).
85
Beture, 2018 WL 4621586, at *2.
86
Id. at *6.
87
Id.
88
Id. No such facts have been developed here, though.
89
Id. Likewise, the arbitration agreement is available in the Settings menu here.
16
user still has reasonable notice that use of the device is
subject to terms and conditions. Where the user knew
or should have known about such terms, the clickwrap
agreement is enforceable.90
Taylor presents facts similar to those here. In that case, plaintiff Taylor sued
Samsung alleging he sustained injuries from a Samsung cell phone.91 The phone
was purchased for him by his company from a cellular service and given to him to
use the same day.92 The phone was accompanied by a “Health & Safety and
Warranty Guide (“Guide”) which stated on its from page that the manual should be
read before operating the phone and that it contained important terms and conditions
that the user accepted by using the device.93 The next page again cautioned the user
to read the manual before using the device and advised that it included an arbitration
agreement.94 Like the arbitration agreement here, the Guide was also made available
online and on the phone itself in the Settings menu.95 The first question before the
Court was whether there was an enforceable agreement to arbitrate in the face of
Taylor’s contention that he never saw the Guide in the box because his employer
purchased the phone, removed it from the box and gave it to him to use.96 The Court
90
Id. (citations omitted)(emphasis added).
91
Taylor, 2018 WL 3921145 at *1.
92
Id.78
Id.94
Id.95
Id. at *2.
96
Id. at *3.
17
was not persuaded by Taylor, holding, “Whether plaintiff took advantage of the
opportunity to read the terms and conditions does not affect the contract’s
enforceability; as long as there was a reasonable opportunity for plaintiff to read the
terms and reject them, he is bound by them.”97 “‘[W]here there is no actual notice
of the term, an offeree is still bound by the provision if he or she is on inquiry notice
of the term and assents to it through the conduct that a reasonable person would
understand to constitute assent.”’98 A contrary view ‘“would mean that purchasers
can deny unwanted terms, as long as they avoid reading them prior to purchase and
then have the product delivered to someone else. With good reason, prior courts
have rejected this outcome. Similarly, this Court finds that Plaintiffs alleged lack of
actual notice is not enough to overturn the valid arbitration agreement.”’99
Similar to McDougal, Lewis was a putative class action alleging breaches of
contract and various warranties related to the purchase of Samsung smartphones.100
As here, Cantwell provided a declaration describing the notices: (1) on the exterior
of the smartphone’s box, including a URL where the full terms and conditions were
found; (2) in a pamphlet titled “Quick Star Guide & Terms and Conditions;” and (3)
97
Id.
98
Id. (quoting McNamara v. Samsung Telecomms. Am., LLC, 2014 WL 5543955,
at *2 (N.D. Ill. Nov. 3, 2014)) (emphasis in original).
99
Id. at *5 (quoting Hoekman v. Tamko Build. Prods., Inc., 2015 WL 9591471, at
*7 (E.D. Cal. Aug. 26, 2015)).
100
Lewis, 2013 WL 7623670, at *1.
18
through an interactive set-up process.101 The plaintiff did not challenge the content
of the arbitration agreement, rather he claimed that he did not unambiguously assent
to the terms of the agreement because he never viewed the terms, which he argued
were not presented clearly and conspicuously.102 The Court found that the plaintiff
agreed to the arbitration by virtue of using and retaining the phone as explained on
the exterior “shrinkwrap” agreement and by going through the interactive set-up
process.103
Payne maintains that the only contract he knowingly and voluntarily entered
into was with Verizon, from whom he purchased the phone, to make monthly
payments.104 He never signed any contract with Samsung, nor is there evidence that
he was made aware through the language on the exterior of the phone that he was
agreeing to a contract with Samsung that contained an arbitration clause.105 He also
contends that there is a “complete lack of evidence to show that [he] received any
consideration from Samsung for the proposed contract” since he paid full price to
Verizon for the phone that allowed him to use the Verizon network. 106 Finally,
101
Id. at *1-3.
102
Id. at *6.
103
Id. at *7.
104
Pl.’s Resp. at ⁋ 9, D.I. 33.
105
Id.
106
Id. at ⁋ 10.
19
Payne maintains that Samsung has failed to show that he clearly and unambiguously
waived his right to a jury trial.107
C. Payne Was on Inquiry Notice.
The Court finds that Payne was on inquiry notice of the arbitration agreement.
The first notice Payne received was the “shrinkwrap” notice on the exterior of the
box. It is beyond dispute that Payne received the box. His Response says as much
- “Once the transfer was complete, Plaintiff was handed his new phone along with a
bag containing the phone’s box as well as a car phone charger he recalled purchasing
at the same time,”108 and so does his affidavit – “Upon completion, I was handed my
new phone along with a bag containing the phone’s box. I believe I also purchased
a car phone charger at the same time.”109
All Samsung smartphones of the model purchased by Payne sold through
Verizon were packaged in a box labeled on the outside with the notification to
customers that if they “use or retain” their phones, they “accept Samsung’s Terms
and Conditions, including an Arbitration Agreement.”110 Had Payne looked at the
box he clearly would have seen in bold font:
107
Id. at ⁋ 11.
108
Pl.’s Resp. at ⁋ 5, D.I 33. .
109
Id. at Ex. 1 at ⁋ 7.
110
Samsung’s Mem. of Law, Ex. B at ⁋ 15, D.I. 27.
20
IMPORTANT INFORMATION
If you use or retain the device, you accept Samsung’s
Terms and Conditions, including an Arbitration
Agreement. Full terms, warranty and opt-out
information are at www. samsung.com/us/Legal/Phone-
HSGuide/, and enclosed materials & device settings.111
Had Payne read the “Important Information” he would have learned that there was
an arbitration agreement as well as other terms and conditions he accepted by using
or retaining the phone. He also would have learned that there were materials
enclosed with the phone that explained the full terms and conditions, including the
arbitration agreement as well as opt-out information. Finally, had he read the
“Important Information” he would have learned that, in addition to the written
materials included the phone’s box, there was a URL link to all of that information.
The Court finds that the statements in the notices on the exterior of the box constitute
“facts sufficient to put a person of ordinary intelligence and prudence on inquiry
which, if pursued would lead to the discovery” of the arbitration agreement.112
Those notices constituted “red flags that would have left a prudent person of ordinary
intelligence to inquire further.”113
111
Id. Ex. B at ⁋ 17.
112
Altenbaugh, 2022 WL 276292, at *2.
113
Id.21
The cover page of the booklet, and the first few pages of the booklet itself
found inside the box also put Payne on inquiry notice of the arbitration agreement.
The booklet is titled in large, bold font “Terms &Conditions / Health & Safety
Information,” followed directly underneath with the following notice, also in bold:
Read this document before operating the mobile device,
accessories or software (defined collectively and
individually as the “Product”) and keep it for future
reference. This document contains important Terms
and Conditions. Electronic acceptance, opening the
Product packaging , use of the Product, or retention of
the Product constitutes acceptance of the Terms and
Conditions.114
Directly under that statement are four bullet points, the first of which is “Arbitration
Agreement.”115
The Table of Contents notifies users of “Section 1: Arbitration Agreement.”116
The first page after the Table of Contents again notifies users of the arbitration
agreement:
Important Legal Information
READ THIS INFORMATION BEFORE USING YOUR
MOBILE DEVICE.
114
Samsung’s Mem. of Law, Ex. B at ⁋ 24 and Ex. A to Ex. B, D.I. 27.
115
Id.116
Id.22
Arbitration Agreement – This Product is subject to a binding
arbitration agreement between you and SAMSUNG
ELECTRONICS AMERICA, INC. (“Samsung”). You can
opt out of the agreement within 30 calendar days of the first
consumer purchase by emailing optout@sea.samsung.com
or calling 1-800-SAMSUNG (726-7864) and providing the
applicable information. For complete terms and conditions
that bind you and Samsung, refer to the “Arbitration
Agreement” section of this document.117
The Court finds it more probable than not that Payne had access to the booklet.
Although Payne does not address whether the Terms and Conditions booklet was in
the box in the bag he received from the sales representative, there appears to be no
reason it would not be there. Had Payne looked at the Terms and Conditions booklet,
he, like any reasonably intelligent and prudent person, upon encountering these
notices on its exterior and immediately inside it, would have been on notice to
inquire further.
Payne does not directly challenge the adequacy of the notices contained on
the box and in the box. He simply says “there is no evidence to suggest that Plaintiff
was put on notice through boilerplate language on the bottom of a box that he was
agreeing to a contract with Samsung that contained an arbitration clause[.]”118 But,
it is Payne’s own inattention in failing to look at the box or the materials contained
117
Id.118
Pl.’s Resp. at ⁋ 9, D.I. 33.
23
in it that made him unaware of the contractual relationship into which he was
entering with Samsung.119 The notices provided to Payne on the box and in the box
are identical to those considered by the Court in Visadi v. Samsung Electronics
America, Inc. 120 There, the Court held, “the print materials provided to Plaintiffs
with their…phone purchases establish – independently and certainly in combination
– Plaintiffs had reasonably conspicuous notice of contract terms to support mutual
assent to the Arbitration Agreement.”121 This Court, having reviewed the language
of the notices as well as photocopies of them provided in Cantwell’s Certification,
agrees that the notices, individually and in combination, provided Payne with
“reasonably conspicuous notice of contract terms to support mutual assent to the
arbitration agreement.”122 Thus, having been put on inquiry notice, Payne’s
argument that he did not realize he was entering into a contractual relationship with
Samsung involving mutual obligations and consideration is unpersuasive.
D. The Arbitration Agreement Delegates Questions of Arbitrability to
the Arbitrator.
119
The Court suspects that had Payne considered the question more carefully, he
would have understood that he had a continuing relationship with Samsung, despite
purchasing the phone from Verizon, due, at a minimum, to the occasional updates to
the factory installed Android operating system and the possibility of future factory
resets.
120
2021 WL 5578736 (D. N.J. Nov. 29, 2021).
121
Id. at *10.
122
See, Id.
24
Having determined that a valid agreement to arbitrate exists, the Court’s next
task is to determine whether the scope of the agreement covers all of the parties’
claims.123 The Court may be relieved of that task, however, if “the parties clearly
and unmistakably provide otherwise.”124 Here, the parties did just that by agreeing
to arbitrate questions of arbitrability.125 The arbitration agreement provides that,
“[t]he arbitrator shall decide all issues of interpretation and application” of the
agreement.126 Further, the agreement incorporates the rules of the American
Arbitration Association which provide that the arbitrator decides objections relating
to “the existence, scope, or validity of the arbitration agreement or the arbitrability
of any claim or counterclaim.”127
E. Cellular Sales’ Crossclaim is Conditionally Stayed, but not Dismissed.
Cellular Sales maintains a crossclaim against Samsung for contribution and/or
indemnification.128 Superior Court Civil Rule 13(g) allows a party to file cross
claims against “co-parties.”129 Although cross-claims cannot be asserted against a
party who was dismissed from the action prior to the assertion of the cross-
123
Antognoli, 2023 WL 5441891, at *2 (citing Bacon v. Avis Budget Grp., Inc. 959
F.3d 590, 599 (3d. Cir. 2020)).
124
Agspring, 2022 WL 17367807, at *2.
125
Samsung’s Mem. of Law, Ex. B at ⁋ 10, D.I. 27.
126
Id.127
Id.128
Cellular Sales’ Ans. and Crossclaim, D.I. 9.
129
Super. Ct. Civ. R. 13(g).
25
claim, ‘“dismissal of the original complaint as to one of the defendants named
therein does not operate as a dismissal of a cross-claim filed against such defendant
by a co-defendant.’”130 In other words, where a crossclaim is properly filed against
a co-party, ‘“[it] [will] not cease to be so because the party to whom they were
addressed subsequently ceased to be a co-party.”’131 Accordingly, Cellular Sales’
properly asserted, pre-existing crossclaim against Samsung survives the dismissal of
Payne’s complaint.
Cellular Sales does not oppose Samsung’s motion to dismiss. It did oppose a
stay initially, correctly observing:
[It] would be more beneficial for the parties to engage in
discovery (regardless as to whether Plaintiff’s case against
Defendant Samsung proceeds in compulsory arbitration).
The parties should jointly engage in discovery depositions
of witnesses, jointly examine the cell phone at issue, and
exchange expert discovery/reports so that all matters may
proceed expeditiously and without duplication.132
At argument, Cellular Sales withdrew its opposition to a stay, conditioned on its
ability to participate in discovery during the arbitration process. That arrangement
strikes the Court as reasonable. Therefore the Court will stay the crossclaim
130
Antognoli, 2023 WL 5441891, at *3 (quoting Samoluk v. Basco, Inc. 1989 WL
1235703, at *2 (Del. Super. Ct. Nov. 3, 1989)).
131
Id. (quoting Washington House Condominium Association of Unit Owners v.
Daystar Sills, Inc. 2017 WL 3412079, at *9 (Del. Super. Ct. Aug. 8, 2017)).
132
Cellular Sales’ Resp. at ⁋ 9, D.I. 9.
26
proceedings conditioned on Cellular Sales ability to participate in discovery during
the arbitration process.
V. CONCLUSION
THEREFORE, for the reasons explained above, Defendant Samsung
Electronics America Inc.’s Motion to Compel Arbitration, Dismiss Plaintiff’s
Claims, and Stay All Proceedings, treated as a Motion to Dismiss, is GRANTED.
Plaintiff John C. Payne’s Amended Complaint is DISMISSED. The crossclaim of
Defendant Cellular Sales Management Group, LLC against Defendant Samsung
Electronics America, Inc. is not dismissed. The crossclaim is STAYED, however,
conditioned upon Defendant Cellular Sales Management Group, LLC’s ability to
jointly participate in discovery during the anticipated arbitration process.
IT IS SO ORDERED.
/s/ Ferris W. Wharton
Ferris W. Wharton, J.
27