Arbitration Update - Wednesday, March 5, 2014 9:42 - 1 Comment
The claims in a class action lawsuit against Dell Inc. were sent to arbitration last month in a New Jersey federal court. Judge Michael A. Shipp granted a request from Dell and ordered the Plaintiff who had filed a proposed class action lawsuit, alleging the company sells defective laptops prone to overheating, to enter arbitration with the computer giant. A stay of Plaintiff Raheel Ahmad Khan’s claims was issued and he was ordered to participate in the arbitration sessions. The judge cited the terms of an agreement the Plaintiff consented to when he purchased his Inspiron 600m computer.
Lawyers from the two sides had been at odds over the enforceability of the agreement, which Khan entered when he clicked a box on Dell’s website indicating that he had read and understood the terms and conditions of sale for the $1,200 device. The agreement contained a provision requiring any disputes arising over the agreement to be exclusively arbitrated through the National Arbitration Forum. By the time Khan’s suit was filed in July 2009, however, the NAF was no longer accepting consumer arbitration.
Interestingly, a motion filed by Dell seeking to force Khan into arbitration was denied by the court in 2010 due to the NAF’s unavailability. In early 2012, however, the Third Circuit reversed that ruling, saying the law allowed for an alternative party to be assigned to the case. When the case came back, Judge Shipp wrote in that issue:
Faced with a divide in relevant case law outside the Third Circuit, the court determined that the parties could substitute another arbitral body for NAF.
The Plaintiff argued that forcing individuals into arbitration against a large company like Dell puts him at a clear disadvantage because Dell has litigated various similar disputes in the past, which allows the company to make “an informed, calculated decision about how to proceed.” The Plaintiff also argued that various other portions of the agreement were legally unconscionable, including its ability to force Plaintiffs to attend arbitration sessions in Texas at their own expense, and the lack of opportunity for customers to object or refuse its terms if they chose to purchase the computer. Judge Shipp rejected all of these arguments.
The Plaintiff filed the class action on behalf of everyone who has leased or purchased a Dell Inspiron 600m notebook laptop computer. According to the Plaintiff, the 600m suffers from a design defect that makes it overheat after as little as 15 minutes of normal use. He alleged that overheating makes the machines’ processors run at dramatically lower speeds, rendering the computers unusable for the intended purpose, and leads to vital system components failing. The case is a classic example of how huge corporations take advantage of their customers.
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