Appeal No IN THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT DANIEL NORCIA, vs.

Transcription

1 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 1 of 80 Appeal No IN THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT DANIEL NORCIA, vs. Plaintiff/Appellee, SAMSUNG TELECOMMUNICATIONS AMERICA, LLC AND SAMSUNG ELECTRONICS AMERICA, INC., Defendants/Appellants. On Appeal from the U.S. District Court, Northern District of California Case No. 3:14-cv JD The Honorable James Donato Presiding APPELLANTS OPENING BRIEF PAUL HASTINGS LLP John P. Phillips (SB# ) Sean D. Unger (SB# ) Ryan C. Nier (SB# ) 55 Second Street Twenty-Fourth Floor San Francisco, CA Telephone: (415) Facsimile: (415) seanunger@paulhastings.com Attorneys for Defendants/Appellants Samsung Telecommunications America, LLC and Samsung Electronics America, Inc.

2 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 2 of 80 CORPORATE DISCLOSURE STATEMENT Pursuant to Rule 26.1 of the Federal Rules of Appellate Procedure, Appellants Samsung Telecommunications America, LLC ( STA ) and Samsung Electronics America, Inc. ( SEA ) provide the following information: 1. SEA is a wholly-owned subsidiary of Samsung Electronics Co., Ltd., a corporation organized under the laws of the Republic of Korea. No other publicly-held corporation owns 10% or more of SEA s stock. 2. At the time of the August 14, 2014 bench trial, STA was a whollyowned subsidiary of SEA. On January 1, 2015, STA merged into SEA. February 19, 2015 Respectfully submitted, By: s/ John P. Phillips John P. Phillips Attorneys for Defendants/Appellants Samsung Telecommunications America, LLC and Samsung Electronics America, Inc. -i-

3 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 3 of 80 REQUEST FOR ORAL ARGUMENT Appellants Samsung Telecommunications America, LLC and Samsung Electronics America, Inc. request oral argument on their appeal. Given the issues raised by this appeal, Defendants suggest that 20 minutes per side will be sufficient and productive. February 19, 2015 Respectfully submitted, By: s/ John P. Phillips John P. Phillips Attorneys for Defendants/Appellants Samsung Telecommunications America, LLC and Samsung Electronics America, Inc. -ii-

4 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 4 of 80 TABLE OF CONTENTS Page CORPORATE DISCLOSURE STATEMENT... i REQUEST FOR ORAL ARGUMENT... ii STATEMENT OF JURISDICTION... 1 STATEMENT OF ISSUES ON APPEAL... 3 STANDARDS OF APPELLATE REVIEW... 4 STATEMENT OF THE FACTS AND STATEMENT OF THE CASE... 5 I. PLAINTIFF S PURCHASE OF A SAMSUNG GALAXY S4 SMARTPHONE... 7 II. A. Plaintiff s Phone Came with a Samsung Limited Warranty... 7 B. Samsung s Product Safety & Warranty Information Booklet Was Included in Plaintiff s Box... 9 C. Samsung s Limited Warranty Includes an Arbitration Provision... 9 D. Plaintiff Left His Product Packaging and Written Materials In the Store PLAINTIFF SUED SAMSUNG, CLAIMING FALSE ADVERTISING III. SAMSUNG MOVED TO COMPEL ARBITRATION ARGUMENT SUMMARY ARGUMENT I. INTRODUCTION II. IN THE BOX AGREEMENTS ARE VALID AND ENFORCEABLE A. California Law Enforces Contracts that Accompany Consumer Goods iii-

5 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 5 of 80 TABLE OF CONTENTS (continued) Page B. The Ninth Circuit Holds Shrinkwrap Licenses Are Enforceable Under California Law; ProCD and Hill v. Gateway Confirm that Arbitration Provisions Included in Product Packaging Are Valid C. District Courts Enforce In the Box Contracts D. Other Courts Have Enforced the Same Arbitration Provision E. Plaintiff Was Bound by All of the Terms of the Warranty that Accompanied His Phone III. IV. PLAINTIFF SIGNED A CUSTOMER AGREEMENT ACKNOWLEDGING HE PURCHASED A SAMSUNG WARRANTY A. California Enforces Signed Agreements, Including Incorporated Documents B. Plaintiff Specifically Acknowledged His Opportunity To Review the Samsung Warranty THE DISTRICT COURT IMPROPERLY IMPOSED A SPECIAL CONSPICUOUSNESS REQUIREMENT FOR FORMATION OF ARBITRATION AGREEMENTS A. Windsor Mills Does Not Apply To Agreements that Are Clearly Contracts Samsung s Warranty Is Clearly a Contract The Customer Agreement Is Clearly a Contract B. The Federal Arbitration Act Preempts a Court From Applying a Heightened Standard to Arbitration Provisions C. California Law Does Not Require that the Arbitration Provision Be Called Out to a Consumer D. Federal Guidance Recognizes Warranties Can Be Placed in Question and Answer Format E. Samsung s Warranty Was Offered to Plaintiff iv-

6 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 6 of 80 TABLE OF CONTENTS (continued) Page F. The Arbitration Provision Was Not Hidden V. CONCLUSION ADDENDUM... Addendum -v-

7 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 7 of 80 TABLE OF AUTHORITIES CASES Page(s) Al-Thani v. Wells Fargo & Co., No. C CW, 2009 WL (N.D. Cal. Jan. 7, 2009)... 37, 38 Allied-Bruce Terminix Cos., Inc. v. Dobson, 513 U.S. 265 (1995)... 48, 51 AT&T Mobility LLC v. Concepcion, 131 S. Ct (2011)... 28, 47 Balen v. Holland Am. Line Inc., 583 F.3d 647 (9th Cir. 2009)... 4 Boese v. Couch Oil & Gas, Inc., No. A138323, 2014 WL (Cal. Ct. App. Feb. 28, 2014) Brown v. Dillard s, Inc., 430 F.3d 1004 (9th Cir. 2005)... 4 Carbajal v. H&R Block Tax Servs., Inc., 372 F.3d 903 (7th Cir. 2004)... 25, 51 Carwile v. Samsung Telecomms. Am., LLC, No. CV CJC, 2013 U.S. Dist. LEXIS (C.D. Cal. July 9, 2013) Circuit City Stores, Inc. v. Ahmed, 283 F.3d 1198 (9th Cir. 2002) Datel Holdings Ltd. v. Microsoft Corp., 712 F. Supp. 2d 974 (N.D. Cal. 2010) Daugherty v. Am. Honda Motor Co., 144 Cal. App. 4th 824 (2006) Davis v. Nordstrom, Inc., 755 F.3d 1089 (9th Cir. 2014)... 4 Deleon v. Verizon Wireless, LLC, 207 Cal. App. 4th 800 (2012) vi-

8 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 8 of 80 TABLE OF AUTHORITIES (continued) Page(s) Doctor s Assocs., Inc. v. Casarotto, 517 U.S. 681 (1996)... 47, 48 DVD Copy Control Ass n, Inc. v. Kaleidescape, Inc., 176 Cal. App. 4th 697 (2009) E. & J. Gallo Winery v. EnCana Corp., 503 F.3d 1027 (9th Cir. 2007) Employers Ins. of Wausau v. Granite State Ins. Co., 330 F.3d 1214 (9th Cir. 2003) Espinal v. Nw. Airlines, 90 F.3d 1452 (9th Cir. 1996)... 4 Fariba v. Dealer Servs. Corp., 178 Cal. App. 4th 156 (2009) Ferguson v. Corinthian Colls., Inc., 733 F.3d 928 (9th Cir. 2013) First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995) Frost v. LG Elecs. MobileComm U.S.A., Inc., No. D062920, 2013 WL (Cal. Ct. App. Sept. 27, 2013)...passim Gentry v. Superior Court, 42 Cal. 4th 443 (2007) Herron v. Best Buy Stores, L.P., No. 12-CV GEB-JFM, 2014 WL (E.D. Cal. June 2, 2014) Hill v. Gateway 2000, Inc., 105 F.3d 1147 (7th Cir. 1997)...passim Kato v. Level 7, LLC, No. B223543, 2011 WL (Cal. Ct. App. Mar. 10, 2011) vii-

9 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 9 of 80 TABLE OF AUTHORITIES (continued) Page(s) Knutson v. Sirius XM Radio Inc., 771 F.3d 559 (9th Cir. 2014)...38, 39, 40, 42, 45 Lexmark Int l, Inc. v. Static Control Components, Inc., 134 S. Ct (2014) Lima v. Gateway, Inc., 886 F. Supp. 2d 1170 (C.D. Cal. 2012) Lozano v. AT & T Wireless, 216 F. Supp. 2d 1071 (C.D. Cal. 2002) Lucas v. Hertz Corp., 875 F. Supp. 2d 991 (N.D. Cal. 2012) Marts v. Xerox, Inc., 77 F.3d 1109 (8th Cir. 1996) May v. Higbee Co., 372 F.3d 757 (5th Cir. 2004) McGill v. Citibank, N.A., 232 Cal. App. 4th 753 (2014) McNamara v. Samsung Telecomms. Am., LLC, No. 14 C 1676, 2014 WL (N.D. Ill. Nov. 3, 2014)...passim Meridian Project Sys., Inc. v. Hardin Const. Co., LLC, 426 F. Supp. 2d 1101 (E.D. Cal. 2006) Mortensen v. Bresnan Commc ns, LLC, 722 F.3d 1151 (9th Cir. 2013)... 48, 49 Murphy v. DirecTV, Inc., 724 F.3d 1218 (9th Cir. 2013)...passim Murphy v. Mallard Coach Co., 179 A.D.2d 187 (N.Y. App. Div. 1992) viii-

10 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 10 of 80 TABLE OF AUTHORITIES (continued) Page(s) Nguyen v. Barnes & Noble Inc., 763 F.3d 1171 (9th Cir. 2014) Oblix, Inc. v. Winiecki, 374 F.3d 488 (7th Cir. 2004)...passim Parada v. Superior Court, 176 Cal. App. 4th 1554 (2009) Pinnacle Museum Tower Assn. v. Pinnacle Mkt. Dev. (U.S.), LLC, 55 Cal. 4th 223 (2012) ProCD, Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996)...passim Progressive Cas. Ins. Co. v. C.A. Reaseguradora Nacional De Venezuela, 991 F.2d 42 (2d Cir. 1993) Rodriguez v. Am. Techs., Inc., 136 Cal. App. 4th 1110 (2006) Rodriguez v. Citigroup Global Mkts., Inc., No. B230310, 2012 WL (Cal. Ct. App. July 18, 2012) Saturn Distrib. Corp. v. Williams, 905 F.2d 719 (4th Cir. 1990) Schnabel v. Trilegiant Corp., 697 F.3d 110 (2d Cir. 2012)... 29, 44 Schwartz v. Comcast Corp., 256 Fed. App x 515 (3d Cir. 2007) Sheffer v. Samsung Telecomms. Am., LLC (Sheffer I), No. CV GW AJWX, 2013 WL (C.D. Cal. Oct. 21, 2013) ix-

11 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 11 of 80 TABLE OF AUTHORITIES (continued) Page(s) Sheffer v. Samsung Telecomms. Am., LLC ( Sheffer II ), No. CV GW AJWX, 2013 WL (C.D. Cal. Dec. 16, 2013)...passim Sheffer v. Samsung Telecomms. Am., LLC ( Sheffer III ), No. CV GW AJWX, 2014 WL (C.D. Cal. Jan. 30, 2014)...passim Slaught v. Bencomo Roofing Co., 25 Cal. App. 4th 744 (1994) Specht v. Netscape Commc ns Corp., 306 F.3d 17 (2d Cir. 2002)... 28, 29, 52, 53 Storquest Oakland, LLC v. E. Bay Orthopedic Specialists Med. Corp., No. A134049, 2014 WL (Cal. Ct. App. Dec. 23, 2014)... 36, 45 Tompkins v. 23andMe, Inc., No. 5:13-CV LHK, 2014 WL (N.D. Cal. June 25, 2014) Wall Data Inc. v. Los Angeles County Sherriff s Dep t, 447 F.3d 769 (9th Cir. 2006)... 24, 25 Weinstat v. Dentsply Int l, Inc., 180 Cal. App. 4th 1213 (2010)... 22, 23, 26 Windsor Mills, Inc. v. Collins & Aikman Corp., 25 Cal. App. 3d 987 (1972)...passim Wolschlager v. Fid. Nat l Title Ins. Co., 111 Cal. App. 4th 784 (2003)... 36, 52 STATUTES 9 U.S.C U.S.C x-

12 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 12 of 80 TABLE OF AUTHORITIES (continued) Page(s) 9 U.S.C U.S.C OTHER AUTHORITIES 4 Witkin, SUMMARY OF CAL. LAW 10TH, Sales, 7 (2005) Witkin, SUMMARY OF CAL. LAW 10TH, Sales, 51 (2005) , 53 -xi-

13 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 13 of 80 STATEMENT OF JURISDICTION On February 7, 2014, Appellee and Plaintiff Daniel Norcia filed a putative class action against Defendants and Appellants Samsung Telecommunications America, LLC and Samsung Electronics America, Inc., raising claims regarding his purchase of a Samsung Galaxy S4 smartphone. Excerpts of Record ( ER ) Subject Matter Jurisdiction in the District Court: Subject matter jurisdiction was proper in the District Court pursuant to the Class Action Fairness Act, 28 U.S.C. 1332(d)(2). Plaintiff Norcia, a California citizen, is diverse from STA (which was headquartered in Texas) and SEA (with headquarters in New Jersey) and seeks recovery on behalf of the class in excess of the jurisdictional minimum. ER 808, 8, 9, 11. Subject Matter Jurisdiction in this Court: Subject matter jurisdiction is proper in this Court pursuant to the Federal Arbitration Act, 9 U.S.C. 16, because this appeal arises from the denial of a motion to compel arbitration. 1 Entry of Order and Timely Notice of Appeal: On April 21, 2014, STA and SEA (collectively Samsung ) sought a stay in the District Court and moved to 1 Specifically, Section 16(a) provides that [a]n appeal may be taken from an order refusing a stay of any action under section 3 of this title and from an order denying a petition under section 4 of this title to order arbitration to proceed[.] -1-

14 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 14 of 80 compel individual arbitration of Plaintiff Norcia s claims pursuant to the arbitration clause included in the Samsung Limited Warranty that he purchased along with his Samsung Galaxy S4 smartphone and which was included inside his phone s packaging. ER Samsung filed its motion pursuant to the Federal Arbitration Act, 9 U.S.C. 3, 4. Id. The District Court held a bench trial on that motion on August 14, 2014 pursuant to 9 U.S.C. 4, focused on contract formation. ER 823. Based on the record and the parties pre- and post-trial briefing, the District Court denied Samsung s motion in a written order on September 18, ER STA and SEA filed a timely notice of appeal on October 10, ER

15 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 15 of 80 STATEMENT OF ISSUES ON APPEAL 1. Formation of the Arbitration Agreement Plaintiff Norcia purchased a Samsung Galaxy S4 smartphone, signed a receipt acknowledging that his purchase included a Samsung warranty, and received that warranty and its arbitration provision when he purchased his phone (though he left his warranty and other papers at the store). Given these undisputed facts, did the District Court err in concluding that Plaintiff Norcia did not agree to arbitrate his claims, when the law recognizes that arbitration agreements are validly formed and enforced in similar circumstances? Should this Court find a validly formed agreement that required Plaintiff to arbitrate his claims? 2. Preemption The District Court acknowledged that Samsung s warranty purchased by Plaintiff Norcia was contractual but then applied a heightened burden to the arbitration clause in that warranty finding no agreement to arbitrate. Did the District Court err by applying a legal standard the Federal Arbitration Act preempts? -3-

16 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 16 of 80 STANDARDS OF APPELLATE REVIEW 1. Formation of the Arbitration Agreement The denial of a motion to compel arbitration is reviewed de novo. Brown v. Dillard s, Inc., 430 F.3d 1004, 1009 (9th Cir. 2005). The underlying factual findings are reviewed for clear error. Balen v. Holland Am. Line Inc., 583 F.3d 647, 652 (9th Cir. 2009). [W]here no facts are in dispute[,] our entire review is de novo. Davis v. Nordstrom, Inc., 755 F.3d 1089, 1091 (9th Cir. 2014). 2. Preemption This Court reviews a district court s decision regarding preemption de novo. Espinal v. Nw. Airlines, 90 F.3d 1452, 1455 (9th Cir. 1996). -4-

17 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 17 of 80 STATEMENT OF THE FACTS AND STATEMENT OF THE CASE This case arises from Plaintiff Daniel Norcia s purchase of a Samsung Galaxy S4 smartphone and Standard Limited Warranty. ER 812. This appeal arises from Plaintiff Norcia s claim that he did not review the warranty for his phone when he purchased it, is not bound by its arbitration clause, and the District Court s subsequent denial of Samsung s motion to compel arbitration. ER 1-16, Discussed in greater detail below, the key facts are as follows: Plaintiff Norcia purchased his Samsung Galaxy S4 smartphone and Standard Limited Warranty from a Verizon store on May 23, ER 2, at 2:18-21; ER ; The phone came in a sealed Samsung box. ER 693, at 2:12-13; ER 193, at 93: The paper-sleeve that surrounds the outside of the box references Samsung s warranty as something the Package Contains. ER The box includes a copy of a booklet, entitled Product Safety & Warranty Information. ER ; ER 133, at 33: The booklet s table of contents prominently identifies the exact page where a consumer can find Samsung s Standard Limited Warranty. ER

18 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 18 of 80 Samsung s Standard Limited Warranty includes an arbitration provision, which requires a consumer to resolve claims relating to the purchase of his phone in binding, individual arbitration. ER A consumer has thirty days to opt-out from the provision, which Plaintiff did not do. ER , at 110:24-111:16; ER 295. Plaintiff signed a Customer Agreement receipt at the Verizon store, which he retained, a copy of which was also ed to him moments later. ER ; ; ER 693, at 2: By signing his Customer Agreement, Plaintiff acknowledged that he was purchasing a manufacturer s warranty, was bound by its terms, and that a copy of the manufacturer s warranty had been made available to him. ER ; ER Plaintiff understood that Samsung was the manufacturer of his phone and testified that had he reviewed his Customer Agreement receipt which he chose not to do he would have seen the reference to a manufacturer s warranty. ER 193, at 93:5-7; ER 209, at 109:1-13. Despite these facts, the District Court denied Samsung s motion to compel arbitration. ER Samsung respectfully submits that the Court s conclusion was erroneous. -6-

19 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 19 of 80 I. PLAINTIFF S PURCHASE OF A SAMSUNG GALAXY S4 SMARTPHONE A. Plaintiff s Phone Came with a Samsung Limited Warranty. On May 23, 2013, Daniel Norcia walked into a Verizon Wireless Store at 768 Market Street in San Francisco, California because he wanted to purchase a newly-released Samsung Galaxy S4 smartphone. ER 167, at 67:8-12; ER He knew a lot about phones and considered himself a sophisticated purchaser of consumer electronic products. ER 175, at 75:5-8. He knew, for example, that [w]hen you buy consumer products... they come with paperwork. ER , at 75:25-76:5. Upon entering the store, he told the sales representative that he wanted to purchase a new Samsung phone, which he did. ER 166, at 66:6-11; ER 167, at 67:8-12; ER Norcia signed a receipt entitled Customer Agreement, which he took with him when he left the store, and which Verizon ed to him moments later. ER ; ER ; ER 693, at 2:23-24; ER 4, at 4: During the bench trial requested by the District Court, Plaintiff testified that he did not review the entire Customer Agreement before he signed it (reviewing only the signature display); nor did he review it when it was ed to him the same day. See ER , at 100:16-101:16; ER , at 108:16-109:10; ER But, he does not dispute that he could have reviewed the Customer Agreement, ER 201, at 101:1-13; that he received the Customer Agreement, ER 693, at 2:22-24; -7-

20 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 20 of 80 ER 171, at 71:1-10; ER 208, at 108:20-23; or that he signed the Customer Agreement. ER 200, at 100: Just above his signature, the Customer Agreement includes certain representations affirmed by Norcia. Stated in all caps, Norcia agreed that: I AGREE TO... 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. ER 627. One of the features listed clearly on the Customer Agreement was a 1 YR. MFG. Warranty, ER 4, at 4:14-16; ER 626, referencing Samsung s Standard Limited Warranty. ER , at 60:15-61:15. Norcia understood that Samsung was the manufacturer of his phone and testified had he reviewed the Customer Agreement receipt he would have understood it to reference the manufacturer and its warranty. ER 193, at 93:5-7; ER 209, at 109: While Plaintiff disputed knowing what Samsung s deal was, ER 175, at 75:20-24, and claimed that he was unaware of the Samsung arbitration provision, ER 5, at 5:13-14, he later testified that he purchased supplemental phone insurance because it give[s] you protection beyond what you would get from the manufacturer s warranty, ER 197, at 97:7-12 a statement made after he acknowledged Samsung was the manufacturer of his phone. ER 193, at 93:5-7. Norcia never disputed that he thought he had a warranty attached to his phone, but he thought it came through Verizon, see ER 176, at 76:17-22 a statement in -8-

21 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 21 of 80 B. Samsung s Product Safety & Warranty Information Booklet Was Included in Plaintiff s Box. When Norcia purchased his phone, every Samsung Galaxy S4 smartphone sold for use on Verizon s network came with a standard limited warranty included in a Product Safety & Warranty Information booklet, which was enclosed in the phone s packaging provided to consumers. ER ; ER ; ER 122, at 22:4-22. Verizon had no discretion to remove the warranty from the phone s packaging, ER 127, at 27:2-6, and a consumer could not purchase a Galaxy S4 without also buying Samsung s Standard Limited Warranty. ER , at 21:22-22:3. Samsung specifically references the warranty on the box sleeve for the Galaxy S4, see ER ; ER , at 20:4-21:24, and on a sticker applied to the phone s charger, which Norcia took with him when he left the store. ER , at 46:15-47:10; ER 210, at 110:17-20; ER 632 (photo of the sticker). C. Samsung s Limited Warranty Includes an Arbitration Provision. The first page of the Product Safety & Warranty Information booklet states, in bold text, Health and Safety and Warranty Guide - Please read this manual before operating your phone and keep it for future reference. ER 251; ER 124, at 24:3-18. The booklet s table of contents discloses, again in bold text, conflict with his agreement with Verizon, which disclaims any warranty. ER

22 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 22 of 80 that Warranty Information can be found starting on page 70 of the notecardsized booklet (formatted to fit in the box), and in a subheading, that the Standard Limited Warranty begins on the same page. ER 290; ER , at 24:9-27:6. The bottom right corner of each page in the booklet also references Warranty Information, when discussing the warranty. ER The Standard Limited Warranty is effective upon the date of purchase by the first consumer purchaser[.] ER 290. The Standard Limited Warranty includes an arbitration clause, found under the bolded heading What is the procedure for resolving disputes?, which provides: 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. ER (italics added). The arbitration provision applies to claims against SAMSUNG s employees, representatives and affiliates if any such claim arises from the Product s sale, condition or performance, and further states that such a dispute shall not under any circumstances proceed as part of a class action. ER

23 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 23 of 80 Like other Galaxy S4 purchasers, Norcia could have opted out of the arbitration agreement by providing notice to Samsung within 30 calendar days of the purchase, either via or toll-free telephone number. ER 295. The opt-out procedure is described in plain language and is disclosed in bold print. Id. As the arbitration provision makes clear, had Norcia opted out, he would not have been required to return the Galaxy S4, pay a fee or penalty, or give up any of the protections provided under the Standard Limited Warranty. Id. Norcia did not opt out. ER , at 110:24-111:16. The Standard Limited Warranty was also available to Norcia in locations other than the Product Safety & Warranty Information booklet that accompanied his phone. The Standard Limited Warranty was available online in at least two locations, linked on Samsung s website to the product specification page for the Galaxy S4 as a free-standing document and within the User Manual for the phone. ER ; ER ; ER , at 28:10-39:5. The stand-alone, two-page warranty also was linked to an intuitive, bold heading entitled: Warranty. ER , at 37:16-38:10; ER The User Manual also was linked to a bold heading on the website and could be searched easily through use of an online search tool or by using the table of contents. ER ; ER 132, at 32:

24 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 24 of 80 D. Plaintiff Left His Product Packaging and Written Materials In the Store. Plaintiff agrees that Samsung s warranty was readily available for review and referenced on and in his phone s packaging. ER192-96, at 92:1-96:7. He just chose not to read it. ER , at 95:1-96:7. Instead, Norcia and a store representative took his new phone, still in its packaging, and went to a table where the representative opened the box, unpacked the phone and the materials, and then helped Norcia transfer his contacts from his old phone to his new phone. ER , at 73:22-74:10. Norcia then picked up the phone charger, the headphones, and the earbuds that came with the phone and left the store. ER 174, at 74:5-8. The store representative offered Norcia all of the materials that came in the phone s box, including the warranty, but he declined, conceding they were his to take and to review. ER , at 95:18-96:7. Despite signing a Customer Agreement referencing his purchase of a manufacturer s warranty, see ER , Norcia never asked about Samsung s warranty. ER , at 111:24-112:3. He explained that he chose not to read Samsung s warranty. ER 218, at 118:13-14 (emphasis added). He was in a hurry to leave the store and get to work. ER 201, at 101: II. PLAINTIFF SUED SAMSUNG, CLAIMING FALSE ADVERTISING. On February 7, 2014, Norcia sued Appellants Samsung Telecommunications America, LLC and Samsung Electronics America, Inc. in the United States District -12-

25 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 25 of 80 Court for the Northern District of California. ER Norcia seeks to represent a class of [a]ll persons or entities who purchased one or more 16 GB Galaxy S4 smartphones in the State of California, and a subclass of [a]ll persons or entities who purchased one or more 16 GB Galaxy S4 smartphones in the State of California for personal, family, or household purposes. ER 812, 35. He has alleged four causes of action under California s Consumers Legal Remedies Act (Cal. Civil Code 1750, et seq.), California s Unfair Competition Law (Cal. Bus. And Prof. Code 17200, et seq.), California s False Advertising Law (Cal. Bus. And Prof. Code 17500, et seq.), and common law fraud. ER Plaintiff claims that Samsung manipulates its performance on certain third-party benchmarking applications in a manner that constitutes false advertising and also makes misrepresentations regarding the phone s storage capacity. ER Norcia seeks monetary relief, equitable relief, and attorney s fees. ER 817. III. SAMSUNG MOVED TO COMPEL ARBITRATION. On April 21, 2014, in lieu of responding to the Complaint, Samsung moved to compel arbitration by invoking the arbitration provision in Samsung s warranty and the Federal Arbitration Act. ER Samsung submitted the declaration of Tim Rowden, then Vice President and General Manager of Samsung Telecommunications America, LLC. Mr. Rowden explained how the Product Safety & Warranty Information booklet was included with all Samsung Galaxy S4-13-

26 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 26 of 80 smartphones for sale on the Verizon network, and how, at 2½ inches by 4¾ inches, it was formatted to fit within the phone s sealed box. ER 717, at 4. He also submitted a copy of the then current warranty booklet and pictures of a Galaxy S4 being unboxed, showing the booklet being placed on top of the earphones and charger. ER Norcia opposed Samsung s motion and made a number of factual claims. He argued that [he] never received the packaging and booklet containing an arbitration provision. ER 673, at 1: Later, he claimed that the sales associate never gave Norcia the box the phone came in, nor any written materials that were contained in the box. ER 674, at 2: He also claimed that the Product Safety & Warranty Information booklet was not even given to him after he paid for his phone. ER 676, at 4:3-4. These factual claims were incorrect, as the trial proved. Norcia was offered the box and its contents but he declined. ER , at 95:18-96:7. During trial, additional evidence was received, including Plaintiff s Customer Agreement which Plaintiff had not disclosed prior to the motion or in his opposition where Plaintiff signed a document acknowledging his receipt of the manufacturer s one year warranty, a warranty which included the arbitration provision. ER The District Court denied Samsung s motion. The Court acknowledged that Samsung s warranty was contractual, ER 11, at 11:26, but nonetheless -14-

27 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 27 of 80 invalidated the arbitration clause in that warranty. ER 12, at 12:9-23. While noting the signed Customer Agreement in its Findings of Fact, see ER at 4:10-27, the District Court did not address the impact of that Agreement in its opinion in significant detail. The Court did, however, note that another district court had reached the opposite conclusion several months before and had enforced the identical arbitration provision in Samsung s warranty. ER 14, at 14, n.4 (citing Sheffer v. Samsung Telecommunications America, LLC, No. 2:13-cv GW (C.D. Cal. 2014)) (class action on behalf of Galaxy S4 purchases). 3 Without explaining why, the District Court disagreed with that Court s analysis and denied Samsung s motion. Id. This appeal followed. 3 After the District Court below ruled, a separate District Court in Illinois, with knowledge of this decision, decided that a valid agreement to arbitrate existed and compelled the plaintiffs there (also Galaxy S4 purchasers) to arbitrate their claims. See McNamara v. Samsung Telecomms. Am., LLC, No. 14 C 1676, 2014 WL (N.D. Ill. Nov. 3, 2014) (applying Illinois law). -15-

28 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 28 of 80 ARGUMENT SUMMARY California enforces contract terms, like warranties, that accompany consumer products. What holds true for warranties holds true for the arbitration provisions they contain. Similarly, California enforces a written agreement read or unread when a Plaintiff signs his name to it. Here, both of these rules apply and both support reversal of the District Court s Order denying Samsung s motion to compel arbitration. Plaintiff Norcia purchased a Samsung Standard Limited Warranty when he purchased his Samsung Galaxy S4 smartphone. A copy of the warranty was included in the phone s packaging. And, the outer packaging clearly stated that warranty information was contained in the box. Plaintiff Norcia disputes seeing any of that, but for a simple reason. He did not try. Because he was in a hurry, he chose to leave the written materials that accompanied his phone and his phone s packaging at the Verizon store despite knowing important documents come with consumer products. The store representative offered him the materials. He declined to take it. It was his choice. The District Court erred by not binding Norcia to the arbitration agreement in his warranty. Numerous courts applying California law recognize that enforcing the arbitration provision was the legally appropriate outcome. But by applying a heightened standard to formation of an arbitration agreement, the District Court -16-

29 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 29 of 80 below applied a standard the law does not support and one which is inconsistent with the Federal Arbitration Act s preemption jurisprudence. The District Court s Order denying arbitration should be reversed on these bases alone. It should also be reversed because Norcia signed a Customer Agreement in the Verizon store where he acknowledged that he purchased a Samsung warranty, to which he was bound. California law recognizes that a signature binds an individual to a contract, including incorporated documents that require arbitration. In short, the law compels reversal. Plaintiff Norcia signed an Agreement incorporating a warranty which required him to arbitrate his claims. The District Court below erred in not holding Norcia to his signed agreement. Samsung respectfully asks this Court to reverse the District Court s Order denying its motion to compel arbitration. -17-

30 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 30 of 80 I. INTRODUCTION ARGUMENT Plaintiff Norcia purchased a Samsung smartphone and a Samsung warranty. He does not dispute that the warranty was included with his phone, referenced on the phone s packaging, and offered to him at the time of his purchase. See ER 133, at 33:18-23; ER , at 95:18-96:7; ER ; ER He also admits that he signed and received a Verizon Customer Agreement, and that Agreement acknowledges his purchase of the Samsung warranty and his agreement to its terms. ER , at 100:12-101:18; ER 204, at 104:7-14; ER In spite of these facts, Plaintiff denies that he agreed to Samsung s warranty and its included arbitration provision. At its essence, that is what this appeal is about: contract formation. Under California law, two paths one based on modern consumer law, the other based on Plaintiff s signature lead independently to the same conclusion. Plaintiff Norcia agreed to arbitrate his claims, and the District Court erred as a matter of law when it concluded otherwise. 4 The first path analyzes modern consumer transactions and leads inevitably to the conclusion that California (like other states) enforces warranty agreements and 4 See First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995) (federal courts apply ordinary state-law principles that govern the formation of contracts in determining whether a valid arbitration agreement exists under the Federal Arbitration Act). -18-

31 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 31 of 80 other contractual terms included with consumer products. See infra at II.A. The Ninth Circuit has confirmed that California enforces shrinkwrap licenses, and a number of federal courts have done likewise. See infra at II.B-II.C. 5 Those courts, following general consumer contract law and guidance from other Circuits, have upheld and found binding contract terms including arbitration provisions included in contracts that accompany consumer products, like the Galaxy S4 smartphone. Id. Even more specifically, district courts faced with this same arbitration provision (or one just like it) have enforced it. See infra at II.D. Similarly, the California Court of Appeal has concluded that warranties that accompany a product are binding and enforceable and has specifically endorsed the view that an arbitration provision included in a phone warranty binds the consumer. See infra at II.A. To reject this view, this Court would not only have to treat arbitration provisions differently than the warranties that contain them (something modern preemption jurisprudence rejects, see infra at IV.B), it would also have to create a split with both California courts and the Seventh Circuit. The latter court, in a 5 A shrinkwrap agreement generally refers to a situation where a customer buys and receives a product, the written agreement is presented with the product after purchase, and the customer implicitly accepts by opening and keeping the product. Tompkins v. 23andMe, Inc., No. 5:13-CV LHK, 2014 WL , at *5 (N.D. Cal. June 25, 2014). As used here, shrinkwrap licenses is used to mean an in the box contract. -19-

32 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 32 of 80 number of decisions endorsed by both the United States Supreme Court and California courts, has as applied general contract law, answered and resolved many of the questions this appeal presents, and done so in favor arbitration. See infra at II.B and IV.B. This path supports reversal. The second path does not require this Court to consider modern consumer transactions and should raise no question of federal preemption a separate ground for reversal. Instead, the second path requires the Court to simply apply California law and conclude that a litigant is bound by his signature on a contract. See infra at III.A-III.B. Plaintiff Norcia does not dispute he signed a contract at the Verizon store acknowledging his purchase of a Samsung phone and a manufacturer s warranty. ER , at 100:12-101:18; ER ; ER ; ER 693, at 2:23-24; ER 4, at 4: Nor does he dispute that the contract he signed expressly confirmed that he was bound by the terms of Samsung s warranty, which had been made available for him to review. ER 627. With the warranty including an arbitration provision, he should be bound to arbitrate his claims. This second path also supports reversal. In the face of this law and record, Samsung anticipates that Plaintiff will argue that the District Court s decision should be affirmed, at least in part, because of its reliance on Windsor Mills, Inc. v. Collins & Aikman Corp., 25 Cal. App. 3d 987 (1972). Such arguments should be quickly set aside. Windsor Mills only -20-

33 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 33 of 80 applies when there is no conspicuous contract. Here there are two (a warranty and a Customer Agreement that incorporates the warranty). The decision was based on older state law that imposed special burdens on arbitration agreements, and numerous courts have already concluded that state laws of this kind are preempted by the Federal Arbitration Act. See infra at IV.B. The legal conclusions the District Court reached are respectfully out-of-step with both California and federal law and its Order should be reversed. See infra at IV.A-IV.F. The final disposition, instead, should reduce to this: Modern consumer law recognizes the need to enforce contracts terms included with a product. A number of California and federal courts have already recognized this reality, and there is no indication that California law is an outlier. But the Court can avoid that question altogether by simply binding Plaintiff Norcia to his signature. Either conclusion is sufficient. The law supports both, and Samsung therefore respectfully requests that this Court reverse the decision below. Plaintiff Norcia should arbitrate his claims like he contractually agreed to do. 6 6 While this appeal presents many important legal arguments, they all deal with the law governing contract formation in the context of a motion to compel arbitration. This is not an appeal about unconscionability. Cf. Gentry v. Superior Court, 42 Cal. 4th 443, 468 (2007), overruled on other grounds by Iskanian v. CLS Transp. Los Angeles, 59 Cal. 4th 348 (2014) ( The question whether an arbitration agreement has been validly formed is of course different from whether that agreement was unconscionable. ). -21-

34 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 34 of 80 II. IN THE BOX AGREEMENTS ARE VALID AND ENFORCEABLE. It is an undisputed fact of modern life that electronic products come with important documents, like warranties, manuals and guides, in the box. Plaintiff Norcia acknowledged as much. ER , at 75:5-76:5. The District Court s decision below, however, erred in not adhering to modern consumer law and the manner in which consumer contracts are formed. A. California Law Enforces Contracts that Accompany Consumer Goods. The first path to reversal thus starts with the premise that California authority recognizes in the box contract formation, and its demonstration of mutual assent, particularly with respect to warranties. A warranty is a contractual term concerning some aspect of the sale[.] 4 Witkin, SUMMARY OF CAL. LAW 10TH, Sales, 51, p. 62 (2005). California has already held that warranties that accompany a product in its packaging are enforceable. The California Court of Appeal confirmed this in Weinstat v. Dentsply International, Inc., 180 Cal. App. 4th 1213 (2010). There, the defendant sought to avoid an express warranty that was found in directions that were sealed within the product package, 180 Cal. App. 4th at 1228, claiming the warranty was not part of the bargain between the parties (and thus not an enforceable contractual term) despite the fact that it accompanied the product. The California Court of Appeal rejected the argument. The Court found that the -22-

35 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 35 of 80 warranty was part of the agreement between the parties under 1201(b)(3) of the Uniform Commercial Code. 180 Cal. App. 4th at The Court explained, that [u]nder [the defendant s] view of express warranty law, the company would not be obliged to stand by any statement it made in the Directions, including the printed limited warranty guaranteeing against defects in manufacture and workmanship. Surely this is not the law. Id. at Instead, embracing the view explained in Murphy v. Mallard Coach Co., 179 A.D.2d 187, 193 (N.Y. App. Div. 1992), the California Court of Appeal refused to adopt an interpretation [that] would, in effect, render almost all consumer warranties an absolute nullity[,] and instead embraced the practical realities of consumer transactions wherein the warranty card generally comes with the goods, packed in the box of boxed items[.] Weinstat, 180 Cal. App. 4th at 1230 (quoting Murphy). [A]lthough the warranty was technically handed over after plaintiffs paid the purchase price, the fact that it was given to plaintiffs at the time they took delivery of the [product] renders it sufficiently proximate in time so as to fairly be said to be part of the basis of the bargain. Id. Other California law is in accord. The Court in Frost v. LG Electronics MobileComm U.S.A., Inc., No. D062920, 2013 WL , at *8 (Cal. Ct. App. Sept. 27, 2013), affirmed the denial of a motion to compel arbitration where a phone manufacturer relied on an estoppel theory. The Court chastised the phone -23-

36 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 36 of 80 manufacturer for relying on estoppel when, in its view, the phone manufacturer could have contractually bound the plaintiff to arbitrate his claims by including an arbitration provision with the phone s warranty: LG could have bargained to compel arbitration of claims asserted against it by including an arbitration provision in its written warranty, but it chose not to do so. Id. 7 Here, of course, the opposite is true. Samsung included an arbitration provision in its written warranty, see ER , such that Frost would find a bargained for agreement to arbitrate. Existing California authority thus confirms that the District Court erred in failing to bind Norcia to his agreement to arbitrate. B. The Ninth Circuit Holds Shrinkwrap Licenses Are Enforceable Under California Law; ProCD and Hill v. Gateway Confirm that Arbitration Provisions Included in Product Packaging Are Valid. The Ninth Circuit has already recognized that California clearly enforces shrinkwrap licenses. Other courts have likewise offered compelling guidance that California has suggested it would follow. That law is consistent with Weinstat and Frost and further illustrates the District Court s error. The discussion begins with Ninth Circuit law. In Wall Data Inc. v. Los Angeles County Sherriff s Department, 447 F.3d 769 (9th Cir. 2006), a copyright dispute, the Ninth Circuit rejected appellant s argument that a certain report was 7 See Employers Ins. of Wausau v. Granite State Ins. Co., 330 F.3d 1214, 1220, n.8 (9th Cir. 2003) (Ninth Circuit may consider unpublished state court decisions). -24-

37 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 37 of 80 admissible because it showed that shrink-wrap licenses may be unenforceable. Id. at 782. The Ninth Circuit rejected the argument out of hand. Such licenses, the Court explained, are clearly enforceable in California and Washington, which were the relevant jurisdictions in Wall Data. Id. The Ninth Circuit s confirmation of the enforceability of shrinkwrap agreements is in accord with law from other jurisdictions. In its landmark decision in ProCD, Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996), the Seventh Circuit noted several aspects of contract formation that this appeal implicates. The Court explained that: Someone who wants to buy a radio set visits a store, pays, and walks out with a box. Inside the box is a leaflet containing some terms, the most important of which usually is the warranty, read for the first time in the comfort of home.... [S]o far as we are aware no state disregards warranties furnished with consumer products. Id. at 1451 (emphasis added). A contract is formed by the inclusion of the warranty with the product s packaging. Cf. id. Following on its decision in ProCD, the Seventh Circuit held in Hill v. Gateway 2000, Inc., 105 F.3d 1147, 1148 (7th Cir. 1997), that the rule was the same when arbitration was the issue, and then explained in Carbajal v. H&R Block Tax Services, Inc., 372 F.3d 903 (7th Cir. 2004) that what holds true for warranties holds true for arbitration. Id. at

38 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 38 of 80 The Court s reasoning in Hill is particularly instructive and echoes the practical considerations California law embraced in Weinstat. There, as here, an issue was the enforceability of written terms included with a product. Hill, 105 F.3d at The customers, the Hills, ordered a computer over the phone, and when the computer arrived, it included a list of terms, said to govern unless the customer return[ed] the computer within 30 days. Id. One of the terms in the box containing [the] Gateway 2000 system was an arbitration clause. Id. The District Court in Hill, like the District Court here, refused to enforce the arbitration agreement, concluding no agreement had been formed. The Seventh Circuit, like this Court should do, reversed. Citing to ProCD, the Seventh Circuit explained that there are many commercial transactions in which people pay for products with terms to follow[.] Hill, 105 F.3d at Practical considerations, the Court explained, support allowing vendors to enclose the full legal terms with their products. Cashiers cannot be expected to read legal documents to customers before ringing up sales. Id. at And, even if they did, oral recitation[,] the Court recognized, would not avoid customers assertions (whether true or feigned) that the clerk did not read term X to them, or that they did not remember or understand it. Id. Writing from the manufacturer instead provides benefits for both sides of commercial transactions. Customers as a group are better off when vendors skip -26-

39 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 39 of 80 costly and ineffectual steps... and use instead a simple approve-or-return device. Hill, 105 F.3d at When they do, [c]ompetent adults are bound by such documents, read or unread. Id. The Court understood that [t]he document in Gateway s box includes promises of future performance that some consumers value highly; these promises bind Gateway just as the arbitration clause binds the Hills. Id. at The Court therefore agreed that approve-or-return contracts suffice to show offer and acceptance. Id.; see also Deleon v. Verizon Wireless, LLC, 207 Cal. App. 4th 800, 813 (2012) ( The manifestation of mutual consent is generally achieved through the process of offer and acceptance[;] and noting acceptance does not require a signature). The law established by ProCD and Hill does not depend on any particular state s law. The Court explained that ProCD relied on the Uniform Commercial Code rather than any peculiarities of Wisconsin law; both Illinois and South Dakota, the two states whose law might govern relations between Gateway and the Hills, have adopted the UCC; neither side has pointed us to any atypical doctrines in those states that might be pertinent[.] Hill, 105 F. 3d at Both Hill and ProCD thus are relevant to states which adhere to the UCC. California is one of those states. California adopted the UCC in 1963, see 4 Witkin, SUMMARY OF CAL. LAW 10TH, Sales, 7, p. 26 (2005), and California law -27-

40 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 40 of 80 expressly endorses reliance on other forum s laws in evaluating California law. See, e.g., Fariba v. Dealer Servs. Corp., 178 Cal. App. 4th 156, 166, n.3 (2009) ( Case law from other jurisdictions applying our Commercial Code, the UCC, or the uniform code of other states, are considered good authority in litigation arising under the California act. ). California, in other words, would look to ProCD and Hill to inform its own law. In fact, the California Court of Appeal has already cited ProCD positively, noting the benefits shrinkwrap licenses convey. See DVD Copy Control Ass n, Inc. v. Kaleidescape, Inc., 176 Cal. App. 4th 697, 716 (2009). And, the United States Supreme Court has already cited ProCD, Hill, and Carbajal as reflective of the general law. See Lexmark Int l, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377, 1383 (2014) (citing ProCD as example of shrinkwrap licensing ); AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740, 1750 (2011) (citing Hill and Carbajal). Other federal circuit courts have also relied upon ProCD and Hill in applying California law to conclude that, where a consumer receives a paper copy of his contract with his product, it is enforceable. In Specht v. Netscape Communications Corp., 306 F.3d 17 (2d Cir. 2002), for example, the Court examined California law and concluded that receipt of a physical document containing contract terms or notice thereof is frequently deemed, in the world of -28-

41 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 41 of 80 paper transactions, a sufficient circumstance to place the offeree on inquiry notice of those terms such that they would be bound to the terms of the contract by keeping the product. Id. at 31. Specht cites ProCD and Hill as well-known cases, explaining that they are consistent with California law. Id. at 32 ( Defendants cite certain well-known cases involving shrinkwrap licensing.... ). Likewise, in discussing a different case under California and Connecticut law, the Second Circuit cited both Hill and ProCD, and explained that when a purchaser opens the packaging for goods and discovers that they are covered by additional provisions, the reasonable purchaser will understand that unless the goods are returned, he or she takes them subject to those provisions. Schnabel v. Trilegiant Corp., 697 F.3d 110, 125 (2d Cir. 2012). Decisions from other federal courts thus recognize that California routinely enforces limited warranties and other terms found in form contracts. Oblix, Inc. v. Winiecki, 374 F.3d 488, 491 (7th Cir. 2004) (reversing denial of motion to compel arbitration). C. District Courts Enforce In the Box Contracts. District Court authority further supports the view that California recognizes the in the box method of contract formation, and enforces arbitration clauses that are parts of those agreements. -29-

42 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 42 of 80 Setting aside the District Court s decision here, other California district courts examining consumer transactions have examined modern business practices and enforced contracts included in product packaging. The Court in Herron v. Best Buy Stores, L.P., No. 12-CV GEB-JFM, 2014 WL , at *1 (E.D. Cal. June 2, 2014), for example, enforced an arbitration provision included in a consumer warranty, noting that contracts contained in [ ] boxes... are no less enforceable than any other type of contract. Id. (quoting Novell, Inc. v. Unicom Sales, Inc., No. 03-cv-2785 MMC, 2004 WL , at *11 (N.D. Cal. Aug. 17, 2004)). Likewise, the Court in Datel Holdings Ltd. v. Microsoft Corp., 712 F. Supp. 2d 974 (N.D. Cal. 2010), rejected the argument that the Warranty could not have been discovered by consumers until the box was opened[.] Id. at 989. The weight of authority, the Court recognized is that shrinkwrap licenses are enforceable. (citations omitted)). 8 D. Other Courts Have Enforced the Same Arbitration Provision. Other courts (including three applying California law) recently examined the same arbitration provision at issue here, offered to consumers in the same way, and concluded that in the box contract formation is validly formed. 8 See also Meridian Project Sys., Inc. v. Hardin Const. Co., LLC, 426 F. Supp. 2d 1101, 1107 (E.D. Cal. 2006) ( The [End User License Agreement] is not rendered invalid merely because defendant purchased the Prolog software and then received the EULA after opening the package. ). -30-

43 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 43 of 80 In two separate putative class actions brought against Samsung (both were handled by the same District Court Judge), the Court expressly considered the question of formation, and concluded that Samsung s delivery of its warranty to consumers in its product packaging binds them to that warranty and its included arbitration provision: While [the plaintiff] Sheffer asserts that he did not actually see and was not aware of the terms in the arbitration clause..., Defendants point out that courts have repeatedly rejected similar arguments from plaintiffs who maintain they did not review materials they received in analogous contexts. Sheffer v. Samsung Telecomms. Am., LLC ( Sheffer I ), No. CV GW AJWX, 2013 WL , at *5 (C.D. Cal. Oct. 21, 2013). 9 The Sheffer Court gave Plaintiffs the opportunity to brief the formation issue multiple times, and each time found that under California law in the box formation of an included warranty is proper and appropriate. In its second order, the Court explained that it would not alter its previous conclusion that, under California law, Plaintiffs agreed to be bound to the terms of the Standard Limited Warranty that accompanied their Galaxy S4 phones. Sheffer v. Samsung Telecomms. Am., LLC ( Sheffer II ), No. CV GW AJWX, 2013 WL , at *4 (C.D. Cal. Dec. 16, 2013). The Standard Limited Warranty, 9 The second case was styled Han. et al. v. Samsung Telecommunications America, LLC, et al.; Case No. CV GW (C.D. Cal.). Because the cases were considered together, Samsung here only cites to the Sheffer orders. -31-

44 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 44 of 80 the Court explained, discloses that Plaintiffs could opt out of this dispute resolution procedure by providing notice to SAMSUNG no later than 30 calendar days from the date of the first consumer purchaser s purchase of the Product [by ing or calling Samsung]. Id. Plaintiffs presumably had their choice of mobile devices and providers, and there is no indication that they were offered the entirety of the agreement on a take-it-or-leave-it basis; to the contrary, they were expressly permitted to leave the precise terms of which they now complain out of the Standard Limited Warranty. Id. In its final analysis, the Court incorporated by reference its prior orders, noting the analysis remain[ed] applicable[.] Sheffer v. Samsung Telecomms. Am., LLC ( Sheffer III ), No. CV GW AJWX, 2014 WL , at *2 (C.D. Cal. Jan. 30, 2014). Further rejecting Plaintiffs arguments that the documents including the arbitration provision were too long, the Court also noted that each page of the Verizon and AT & T Booklets are designed to fit within the packaging of the Galaxy S4 phones, and held that the fact that the warranty s arbitration clause is contained in a larger document or collection of documents provided with a consumer good does not invariably render that provision unenforceable. Id. at * While the District Court below was not bound by Sheffer, it offered no meaningful discussion of its analysis. Instead, in a single footnote, the Court -32-

45 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 45 of 80 Other courts have examined the same or similar Samsung arbitration provisions and reached similar results. The Court in McNamara v. Samsung Telecommunications America, LLC, No. 14 C 1676, 2014 WL (N.D. Ill. Nov. 3, 2014) (applying Illinois law), enforced Samsung s arbitration provision, concluding that a review of the Samsung Health and Safety Warranty Guide shows that it does provide a meaningful opportunity to reject the arbitration provision. Id. at *2. Likewise, the Court in Carwile v. Samsung Telecommunications Am., LLC, No. CV CJC (JPRx), 2013 U.S. Dist. LEXIS (C.D. Cal. July 9, 2013) (applying California law), enforced a similar Samsung arbitration provision, noting [t]he Warranty provides that a purchaser may opt out within 30 days of purchase by simply sending an or calling a phone number. Opting out also has no effect on the other terms of the Warranty. Id. at * E. Plaintiff Was Bound by All of the Terms of the Warranty that Accompanied His Phone. All of these cases from the federal Courts of Appeals to the California Court of Appeal to the district courts that have considered Samsung arbitration provisions confirm that an individual may be bound to a contract that is included in the packaging of a product he or she buys. The receipt of the contract s terms, explained that to the extent its decision and Sheffer were in conflict, the Court disagrees with [Sheffer.] ER 14, at 14, n

46 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 46 of 80 an opportunity to review those terms, and then an opportunity to return or opt-out of those terms, satisfy the traditional concepts of offer and acceptance. See Hill, 105 F. 3d at 1150 ( By keeping the computer beyond 30 days, the Hills accepted Gateway s offer, including the arbitration clause. ). Here, Norcia had all of that. He received a phone that referenced the warranty on the back of the phone s packaging. ER ; ER 3, at 3: The warranty accompanied the phone. ER 3, at 3. [C]ustomers expect at least some warranty period on most products. Marts v. Xerox, Inc., 77 F.3d 1109, 1112 (8th Cir. 1996). The Verizon store representative offered Norcia the paper copy of the warranty he purchased, but he declined. ER , at 95:15-96:7. 11 He had thirty days to opt out of the arbitration provision, but he never did. ER 295; ER , at 110:24-111:16. He could have returned his phone. ER , at 48:23-49:15. He was a sophisticated consumer who knew that products come with paperwork. See ER , at 75: He simply chose not to read it. That choice, however, did not relieve him of his obligation to arbitrate his claims, as he was bound by Samsung s warranty even if he did not read it. Murphy v. DirecTV, Inc., 724 F.3d 1218, 1225, n.4 (9th Cir. 2013). 11 The District Court correctly decided that [d]eclining to read a contract is analytically indistinguishable from declining to take a copy of the contract in the first place, and the legal effect of holding the person accountable should be the same. ER 9-10, at 9:26-10:

47 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 47 of 80 In short, the District Court erred in failing to bind Norcia to the terms of the warranty that he purchased and that accompanied his phone. Under the law, Norcia s receipt of the warranty and his ability to opt-out of the arbitration clause was sufficient to bind him to arbitrate. He should have arbitrated his claims, and Samsung s motion to compel arbitration should have been granted. III. PLAINTIFF SIGNED A CUSTOMER AGREEMENT ACKNOWLEDGING HE PURCHASED A SAMSUNG WARRANTY. While the inclusion of Samsung s Standard Limited Warranty, its incorporated arbitration provision and the opt-out clause, in the phone s packaging was sufficient to bind Norcia to that arbitration provision, there is a second, independent path that also confirms why the District Court erred in refusing to compel Norcia to arbitrate his claims. Namely, Norcia signed a Customer Agreement, listing the Samsung warranty as an item he purchased, where he specifically agreed to its terms. See ER A. California Enforces Signed Agreements, Including Incorporated Documents. Two bedrock principles of California contract law are the starting point for the second analytical path that warrants reversal. The first principle holds that ordinarily one who signs an instrument which on its face is a contract is deemed to assent to all its terms. Rodriguez v. Am. Techs., Inc., 136 Cal. App. 4th 1110, 1124 (2006) (citations omitted); see also -35-

48 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 48 of 80 Storquest Oakland, LLC v. E. Bay Orthopedic Specialists Med. Corp., No. A134049, 2014 WL , at *4 (Cal. Ct. App. Dec. 23, 2014) ( It is undisputed East Bay entered a contract when Bruno signed the rental agreement, so, under the general rule stated above, East Bay is deemed to have assented to all its terms, whether or not Bruno read all of them. ). The second principle holds that [a]n agreement need not expressly provide for arbitration but may do so in a secondary document which is incorporated by reference. See, e.g., Rodriguez v. Citigroup Global Mkts., Inc., No. B230310, 2012 WL , at *4 (Cal. Ct. App. July 18, 2012) (enforcing arbitration clause; quoting Boys Club of San Fernando Valley, Inc. v. Fid. & Deposit Co., 6 Cal. App. 4th 1266, 1271 (1992)). In Wolschlager v. Fidelity National Title Insurance Co., 111 Cal. App. 4th 784, 791 (2003), for example, the Court reversed the denial of a petition to compel arbitration where the plaintiff argued the incorporated arbitration provision was inconspicuous. The Court explained, [t]here is no authority requiring the defendant to specify that the incorporated document contains an arbitration clause in order to make the incorporation valid. All that is required is that the incorporation be clear and unequivocal and that the plaintiff can easily locate the incorporated document. Id.; see also Slaught v. Bencomo Roofing Co., 25 Cal. App. 4th 744, 748 (1994) ( Under California law, parties may validly incorporate -36-

49 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 49 of 80 by reference into their contract the terms of another document. ) (citations and internal quotations omitted). B. Plaintiff Specifically Acknowledged His Opportunity To Review the Samsung Warranty. These established principles of California contract law should have led the District Court to compel Norcia to arbitrate his claims. It is undisputed that Norcia signed a Customer Agreement with Verizon and purposefully purchased a Samsung phone. ER ; ER It is undisputed that his Customer Agreement referenced his purchase of a manufacturer s warranty, that Norcia understood Samsung was the manufacturer of his phone, and that he would have seen the warranty had he reviewed the Agreement he signed. ER 626; ER 645; ER 193, at 93:5-7; ER , at 100:12-101:13, ER 209, at 109:4-9. It is undisputed that Samsung s Warranty included an arbitration provision. ER And, finally, it is undisputed that Norcia agreed to 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. ER 646. In similar situations, as Wolschlager shows, courts have enforced incorporated arbitration provisions. In Al-Thani v. Wells Fargo & Co., No. C CW, 2009 WL (N.D. Cal. Jan. 7, 2009), for example, the court -37-

50 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 50 of 80 compelled arbitration, noting [t]he acknowledgment form clearly states that the signatory acknowledges receipt of the Brokerage Account Agreement and agrees to be bound by its terms. If Plaintiff had not received the agreement and was concerned about being bound to terms she had not read, she could have asked to see it before signing it. Id. at *6. Likewise, in Lucas v. Hertz Corp., 875 F. Supp. 2d 991 (N.D. Cal. 2012), the court compelled arbitration and rejected the argument that a plaintiff was never given a copy of the folder jacket [n]or was given it after he signed the rental agreement, concluding the claim was immaterial because the terms of an incorporated document must only have been easily available to him; they need not have actually been provided. Id. at 999; cf. Lima v. Gateway, Inc., 886 F. Supp. 2d 1170 (C.D. Cal. 2012) (denying arbitration as unconscionable but finding the parties had agreed to the warranty because it was available on Gateway s website, reflected on the receipt, and was included in the product s box.). The Ninth Circuit has already endorsed this reasoning as a matter of California law. In Knutson v. Sirius XM Radio Inc., 771 F.3d 559 (9th Cir. 2014), this Court found that a party had not agreed to the terms of a promotional radio service he had never purchased (he purchased a truck; the satellite radio was an add-on promotion, which Plaintiff did not intend to buy) when the terms of the radio service were sent a month after his truck purchase. Id. at 562, 566. In doing -38-

51 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 51 of 80 so, the Court both noted that the plaintiff had received no documents about his relationship with Sirius XM at the outset, id. at 568, and explained that it would have found an enforceable arbitration agreement had it been shown that the truck seller (Toyota) had referenced the promotional radio service (Sirius) in Toyota s purchase documents. Id. ( The Toyota purchase agreement could clearly state that Toyota has a relationship with Sirius XM to provide Toyota customers with a trial service, and that therefore the Toyota customer is entering into a contractual relationship with Sirius XM. ). Because that was not the case on its facts in Knutson, the Court concluded the Plaintiff has no reason to read the Sirius terms when they were later sent to him. Id. at 566 (... in view of his lack of awareness of any contractual relationship with Sirius he had no reason to do [so]. ). Here, the opposite is true. Norcia received the written warranty with his Samsung phone, in the box, at the time of purchase, see ER ; ER 133, at 33:18-23; ER 193, at 93:11-15 facts Knutson suggested would support a finding of an agreement to arbitrate. Knutson, 771 F.3d at 567 (distinguishing Lozano v. AT & T Wireless, 216 F. Supp. 2d 1071 (C.D. Cal. 2002);... the customer signed a contract for service from the service provider, AT & T, and a Welcome Guide was provided in the box with the newly purchased phone. ) He had to open the box to get the phone and thus would have been aware of the additional binding terms. See Schnabel, 697 F.3d at 125 (a reasonable -39-

52 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 52 of 80 And, Verizon expressly disclosed the manufacturer s (Samsung s) warranty as something Norcia purchased. ER ; ER Wolschlager, Al-Thani, Lucas, Knutson and similar cases demonstrate that California law binds parties to the terms of incorporated documents. This Court should do the same. Norcia signed an Agreement which reflected he was agreeing to be bound by the terms of the Samsung warranty he was purchasing. ER He acknowledges those documents were made available to him. Id.; see also ER , at 95:18-96:7. The law confirms that Norcia s signature bound him to all of the terms of the Samsung warranty, including the Samsung arbitration provision. The District Court below erred in failing to conclude otherwise. IV. THE DISTRICT COURT IMPROPERLY IMPOSED A SPECIAL CONSPICUOUSNESS REQUIREMENT FOR FORMATION OF ARBITRATION AGREEMENTS. The contract to which Norcia was bound, regardless of whether he read it, included the provision that he would incur obligations to which he would assent by conduct (i.e., by failure to take steps rejecting the offer). The contract specifically spelled out in bold print that the consumer could opt out of the arbitration dispute resolution procedure by giving telephone or notice to Samsung within 30 days of purchase. ER 295. A vendor, as master of the offer, may consumer understands he is bound by the terms in the box); see also Knutson, 771 F.3d at 569 ( We find the reasoning of the Second Circuit [in Schnabel] persuasive[.] ). -40-

53 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 53 of 80 invite acceptance by conduct, and may propose limitations on the kind of conduct that constitutes acceptance. A buyer may accept by performing the acts the vendor proposes to treat as acceptance. Hill, 105 F.3d at 1149 (quoting ProCD, 83 F.3d at 1449). Norcia thus assented to arbitration by not following the opt-out procedure that was required by contract. In finding that Norcia was not bound, the District Court did not hold that arbitration agreements could not be concluded through a contract where the terms came inside of the box rather than being specifically disclosed to the consumer at or prior to purchase or where the method of acceptance was through the practice of accept-or-return (or in this case, return-or-opt-out ), nor did it rule out categorically the validity of arbitration provisions within manufacturer s warranties. ER 13. Rather, it concluded that [a]n agreement to arbitrate is different in nature from other contractual terms like a manufacturer s warranty, and that under the rule of Windsor Mills (a California case applying New York law) the arbitration provisions were on the whole too inconspicuous to create a binding arbitration agreement. ER The District Court s erred in imposing a special rule of conspicuousness for arbitration clauses in a number of ways. First, Windsor Mills does not apply to documents that are obviously contracts. Second, by applying a heightened standard of conspicuousness in order to form an arbitration agreement, the District -41-

54 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 54 of 80 Court applied a standard the FAA preempts. Third, California law also rejects a conspicuousness requirement. Fourth, federal warranty law endorses the form of the Samsung s warranty. Fifth, established law confirms Samsung s warranty was offered to Norcia. And finally, contrary to the District Court s conclusion, there is nothing stealth about including an arbitration provision in a consumer warranty. California law already recognizes arbitration has become a routine practice, and the District Court s implicit suggestion otherwise is respectfully mistaken. A. Windsor Mills Does Not Apply To Agreements that Are Clearly Contracts. As an initial matter, the District Court should never have invoked Windsor Mills. Windsor Mills defines rules for determining when contracts should be formed from documents that are not obviously contracts. Knutson, 771 F.3d at 566 (citing Windsor Mills). It has no application to provisions of consumer contracts (as here) that are facially contractual. In Windsor Mills, the Court of Appeal affirmed a grant of preliminary injunction and a judgment, enjoining the Defendant, Collins & Aikman, a New York company, from prosecuting an arbitration against the plaintiff, Windsor Mills, a California company. 25 Cal. App. 3d at The case emanated from a series of yarn purchases Windsor Mills made from Collins in California. Id. at 989. [A]ll of the orders were placed orally, by Windsor Mills, but at least one was evidenced by a purchase order from [Windsor Mills] to [Collins.] Id. -42-

55 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 55 of 80 As each order was received, [Collins] completed a printed form entitled Acknowledgment of Order and sent a copy to [Windsor Mills.] Id. Near the bottom of the [Acknowledgment,] there was in fine print, a note explaining this order is given subject to all of the terms and conditions on the face and reverse sides hereof including provisions for arbitration[.] Id. at 990. On the reverse side there appeared in small print an arbitration provision requiring arbitration in New York, not in California. Id. Windsor Mills did not sign the forms and had no knowledge that the terms were different than its oral orders. Id. at 991. Of the yarn ordered, 30,000 pounds were shipped to and received by [Windsor Mills.] Id. at 990. [Windsor Mills] complained of the quality of the yarn and instructed defendant not to ship the remaining 25,000 pounds, and did not pay for the 30,000 pounds of yarn it had received. Id. Collins initiated arbitration proceedings in New York, which the California trial court enjoined. Id. at Citing to both California and New York law, the Court of Appeal concluded Windsor Mills did not agree to arbitrate in New York or at all. The Court explained that regardless of [a party s] apparent manifestation of his consent, a party is not bound by inconspicuous contractual provisions of which he was unaware, contained in a document whose contractual nature is not obvious. Id. -43-

56 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 56 of 80 at 993. The Court further explained that [t]his principle of knowing consent applies with particular force to provisions for arbitration[,] and that buyers in one state should not be forced into arbitration in another state unless there has been a definite contract entered into containing such provision. Id. at 993. In rejecting Defendant s argument that a valid arbitration agreement existed under New York law, the Court later relied on the fact that a special rule had been formulated in New York with respect to arbitration clauses, namely, that the agreement to arbitrate must be direct and the intention made clear, without implication, inveiglement or subtlety, and in application, the threshold for clarity of agreement to arbitrate might be greater than with respect to other contractual terms. Id. at (citations omitted). The District Court should never have invoked Windsor Mills. The Windsor Mills rule that an inconspicuous contract terms is unenforceable only applies when the underlying contract containing the term is not obvious[ly] a contract. Windsor Mills, 25 Cal. App. 3d at 993. Here, there are two obvious contracts a Standard Limited Warranty and a Customer Agreement; ER ; ER making Windsor Mills inapplicable. 1. Samsung s Warranty Is Clearly a Contract. In advising businesses like Samsung on how to comply with federal warranty law, the Federal Trade Commission explains that [y]our warranty is a -44-

57 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 57 of 80 contract that commits you to stand behind your product. (last checked February 18, 2015) (emphasis added). It is a fundamental tenant of California law that [a] warranty is a contractual promise from the seller that the goods conform to the promise. Daugherty v. Am. Honda Motor Co., 144 Cal. App. 4th 824, 830 (2006) (emphasis added); see also Oblix, 374 F.3d at 491( California routinely enforces limited warranties and other terms found in form contracts. ); Frost, 2013 WL , at *8 (including arbitration provision in written warranty proper way to bargain for arbitration). To suggest that a warranty is not an obvious contract is simply at odds with the law. 2. The Customer Agreement Is Clearly a Contract. Likewise, the Customer Agreement Norcia signed was facially a contract. ER ; see also Storquest Oakland, LLC, 2014 WL , at *4 (where document is on its face a contract, Windsor Mills does not apply). It used the all caps terms CUSTOMER AGREEMENT at the top. ER 626. It required Norcia to attest that I AGREE to various terms. ER And, it ends with the clause Contract Acceptance Date. ER 628. With two binding contracts, the District Court should not have relied on Windsor Mills. As set forth in ProCD and Hill, the proper rule is that, when a customer has accepted an in-box contract, he is bound by all the terms therein. -45-

58 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 58 of 80 Hill, 105 F.3d at 1149; ProCD, 83 F.3d at As a matter of law, the customer is deemed to have constructive notice of (and to be bound by) all of the terms, including arbitration requirements and opt-out provisions, regardless of whether he reads them. Murphy, 724 F.3d at 1225, n.4. B. The Federal Arbitration Act Preempts a Court From Applying a Heightened Standard to Arbitration Provisions. The District Court s differing treatment of the arbitration provision from the rest of the Samsung warranty, and its reliance on Windsor Mills to do so, was also erroneous. ER The FAA preempts such differing treatment. As noted above, Windsor Mills found no contract formation in reliance on a special rule under New York law imposing a heightened requirement inapplicable to other contract terms that the agreement to arbitrate must be direct and the intention made clear, without implication, inveiglement or subtlety. 25 Cal. App. 3d at 995 (citations omitted). The Windsor Mills Court suggested California followed a similar approach. Id. at 993 ( This principle of knowing consent applies with particular force to provisions for arbitration. ). Declaring that an agreement to arbitrate... is different in nature from contractual terms like a warranty, the District Court likewise applied a special prominence requirement, finding no valid offer where there were no words alerting consumers that Samsung s arbitration terms was a contract or agreement[;] no requirement of signature of acceptance or acknowledgement; -46-

59 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 59 of 80 and inclusion of the arbitration term in the warranty and as an answer to a posed question about dispute resolution. ER 12, at 12:24-13:3, 14: According to the District Court, Windsor Mills requires a different outcome with regard to the arbitration agreement from that which would apply to ordinary physical receipt of contract terms. ER 10, at 10: The District Court s application of Windsor Mills in this way is respectfully at odds with federal arbitration jurisprudence the heart of which was decided well after Windsor Mills. Over a series of cases, the Supreme Court has explained that courts applying state law may not treat arbitration provisions differently than other contracts or apply rules to arbitration provisions that would stand as obstacles to the FAA s liberal policy in favor of arbitration. See, e.g., AT&T Mobility LLC, 131 S. Ct. at 1748 ( nothing in [the law] suggests an intent to preserve state-law rules that stand as an obstacle to the accomplishment of the FAA s objectives ). Section 2 of the FAA provides that written arbitration agreements shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract. 9 U.S.C. 2 (emphasis added). Under this provision, [c]ourts may not... invalidate arbitration agreements under state laws applicable only to arbitration provisions. Doctor s Assocs., Inc. v. Casarotto, 517 U.S. 681, 687 (1996). A state or a court, for example, may not decide that a contract is fair enough to enforce all its basic terms (price, service, credit), but not -47-

60 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 60 of 80 fair enough to enforce its arbitration clause. Allied-Bruce Terminix Cos., Inc. v. Dobson, 513 U.S. 265, 281 (1995). Thus, states cannot enact special arbitrationspecific rules requiring heightened notice that the proposed contract contains an arbitration clause. Doctor s Assocs., 517 U.S. at (finding preempted a rule that required [n]otice that a contract is subject to arbitration be included in underlined capital letters on the first page of the contract, because the rule singled out arbitration provisions). 13 Likewise courts applying state contract law cannot develop arbitration-specific rules, for this would enable the court to effect what... the state legislature cannot. Id. at 688 (quoting Perry v. Thomas, 482 U.S. 483, 492, n.9 (1987)). This Court has interpreted this Supreme Court guidance and explained that current law outlaws discrimination in state policy that is unfavorable to 13 In citing Windsor Mills, this Court in Knutson did not have occasion to apply the special rule of heightened clarity for formation of arbitration clauses because it found that the consumer had no contract at all with Sirius XM. Moreover, the question of whether Windsor Mills can be reconciled with modern FAA preemption jurisprudence does not appear to have been raised by Sirius in Knutson. See Sirius XM s Opposition Brief, No , 2012 WL (9th Cir. Nov. 6, 2012); see also E. & J. Gallo Winery v. EnCana Corp., 503 F.3d 1027, 1046 n.l4 (9th Cir. 2007) ( County of Stanislaus did not expressly address this issue, and ʻ[q]uestions which merely lurk in the record, neither brought to the attention of the court nor ruled upon, are not to be considered as having [been] so decided as to constitute precedents. ) (citations omitted). The California Court of Appeal has recently acknowledged the need for a reevaluation of all state statutes and rules that allowed courts to deny enforcement of arbitration agreements, see McGill v. Citibank, N.A., 232 Cal. App. 4th 753, 766 (2014), and the Windsor Mills approach is no exception. -48-

61 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 61 of 80 arbitration[.] Mortensen v. Bresnan Commc ns, LLC, 722 F.3d 1151, 1160 (9th Cir. 2013); see also Ferguson v. Corinthian Colls., Inc., 733 F.3d 928, 932 (9th Cir. 2013) ( Pursuant to the Supremacy Clause of the United States Constitution, the FAA preempts contrary state law. ) (citations omitted). Other Circuits have similarly applied these rules to questions of contract formation, barring a court or a state from applying special rules in evaluating whether a party has agreed to an arbitration provision. See, e.g., May v. Higbee Co., 372 F.3d 757, 765 n.13 (5th Cir. 2004) (state not permitted to employ special rules of contract formation that apply only to arbitration agreements ); Saturn Distrib. Corp. v. Williams, 905 F.2d 719, 723 (4th Cir. 1990) ( [A] state may not refuse to enforce and may not revoke an existing arbitration agreement on the ground that the contract did not comply with the rules of contract formation applicable only to arbitration provisions. ). These Circuits recognize that [s]tandard-form agreements are a fact of life[.] Oblix, 374 F.3d at 491. [A]rbitration provisions in these contracts must be enforced unless states would refuse to enforce all off-the-shelf package deals. Id. Two of those decisions are particularly germane. The Seventh Circuit in Hill, invoking this jurisprudence, directly rejected as contrary to the FAA and contrary to the approach the District Court took here the imposition of conspicuousness requirements for arbitration clauses in in-the-box agreements: -49-

62 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 62 of 80 The Hills say that the arbitration clause did not stand out: they concede noticing the statement of terms but deny reading it closely enough to discover the agreement to arbitrate, and they ask us to conclude that they therefore may go to court. Yet an agreement to arbitrate must be enforced save upon such grounds as exist at law or in equity for the revocation of any contract. Hill, 105 F.3d at 1148 (quoting 9 U.S.C. 2; and citing Doctor s Associates). All the terms in the contract stand or fall together, and a court cannot apply special standards to void the arbitration clause for lack of conspicuousness. Id. Likewise, the Second Circuit has already rejected the New York rule which applied a heightened burden to formation in the arbitration context that Windsor Mills relied on. In Progressive Casualty Insurance Co. v. C.A. Reaseguradora Nacional De Venezuela, 991 F.2d 42 (2d Cir. 1993), the Second Circuit acknowledged that New York State law provides that parties will not be held to have chosen arbitration in the absence of an express, unequivocal agreement to that effect. Id. at 46 (quoting Marlene Indus. Corp. v. Carnac Textiles, Inc., 408 N.Y.S.2d 410, 413 (1978)). But, the Second Circuit also recognized that New York law requires that nonarbitration agreements be proven only by a mere preponderance of the evidence. Id. Holding that because the Supreme Court prohibits such discriminatory treatment of arbitration agreements, the Second Circuit concluded that New York s special arbitration rule was preempted. Id. -50-

63 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 63 of 80 So too here. The District Court applied an analysis to the arbitration provision that was different than its approach to the larger warranty which contained it, treating a term different from the contract itself. ER 12, at 12:9-23 ( An agreement to arbitrate, however, is different in nature.... ). The law should have precluded the District Court from doing so. [W]hat holds true for warranties holds true for arbitration. Carbajal, 372 F.3d at 906. By applying a special burden to a single term in an otherwise valid contract, the District Court deviated from the FAA s command. See Allied-Bruce, 513 U.S. at 281 (terms of a contract must be given like treatment). C. California Law Does Not Require that the Arbitration Provision Be Called Out to a Consumer. The District Court s approach is not just in conflict with FAA s preemption law but with California law, too. By focusing on the arbitration provision separate from the larger warranty in its formation analysis, the District Court imposed burdens on the arbitration provision that California does not. Specifically, the District Court reasoned that without anywhere requiring consumers, like Mr. Norcia to sign in order to accept the arbitration provision or at least to acknowledge having received it, the arbitration provision was invalid, citing Windsor Mills in support. ER 12, at 12: Setting aside the fact that Norcia did sign the Customer Agreement acknowledging his receipt of the warranty, see ER itself suggesting the District erred the District Court also erred by -51-

64 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 64 of 80 focusing on a single term of the warranty rather than the whole warranty in evaluating contract formation. ER 12, at 12: The District Court implicitly suggested that Samsung s duty was to expressly call the arbitration provision out to Norcia. California law holds otherwise. Wolschlager explains there is no authority in California law requiring the defendant to specify that the incorporated document contains an arbitration clause in order to make the incorporation valid. Wolschlager, 111 Cal. App. 4th at 791. The question, in other words, is not whether express attention was called to the arbitration provision, but whether the whole contract had been validly formed a formation that can occur with or without a signature. Pinnacle Museum Tower Assn. v. Pinnacle Mkt. Dev. (U.S.), LLC, 55 Cal. 4th 223, 236 (2012) ( A signed agreement is not necessary, however, and a party s acceptance may be implied in fact[.] ) Although involving Browsewrap Agreements, where mere use of a website is deemed sufficient acceptance of the website s terms and conditions, the Ninth Circuit s decision in Nguyen v. Barnes & Noble Inc., 763 F.3d 1171 (9th Cir. 2014) further confirms this point. Also an arbitration case, the Court evaluated whether the customer had manifested consent to the Terms of Use as a whole and concluded based on the structure of the website that consent had not been provided by use. Id. at 1176 ( Were there any evidence in the record that Nguyen had actual notice of the Terms of Use or was required to affirmatively acknowledge the Terms of Use before completing his online purchase, the outcome of this case might be different. ). In contrast, this case deals with paper documents, the receipt of which the law deems sufficient to bind a consumer to contract. See Specht,

65 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 65 of 80 D. Federal Guidance Recognizes Warranties Can Be Placed in Question and Answer Format. The District Court also erred in holding the arbitration provision was invalid, in part, because Samsung s warranty is in a question and answer format. ER 12, at 12:9-11; ER 14, at 14: Other than Windsor Mills, which is not a warranty case, the District Court cited no law in support of this critique and relevant guidance is to the contrary. Federal warranty law, which applies to any consumer warranty for a good sold in excess of $15, requires that warranties be stated in plain language. 15 U.S. Code 2302(a) (warranty required to be stated in simple and readily understood language ); 16 C.F.R (noting the $15 threshold). The Federal Trade Commission advises businesses on how to comply with that requirement, and offers examples of warranties that comply. See (last checked February 18, 2015) (emphasis added). Some of the examples provided are in a question-and-answer format like Samsung s warranty. Id. In fact, the Federal Trade Commission expressly advises that questions can be used as headings in the warranty. Id. ( The five basic questions about warranty coverage can be used as headings for organizing your warranty. ). Here, of course, F.3d at 31. Thus while Nguyen is of little import here, it confirms that the law focuses on formation of the contract as a whole. -53-

66 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 66 of 80 Samsung s arbitration provision appears under the bolded heading What is the procedure for resolving disputes? ER (italics added). Samsung should not have been criticized for drafting a warranty that is in accord with federal guidance on the format of a warranty. E. Samsung s Warranty Was Offered to Plaintiff. Established law also conflicts with the District Court s conclusion that Samsung s warranty was not offered to Plaintiff. ER 12-13, at 12:28-13:3. There is no dispute that Samsung s warranty was available for Plaintiff s review prior to purchase or that the warranty was referenced on his phone s packaging. See, e.g., ER , at 88:25-89:24; ER 195, at 95:1-17. There is no dispute that Norcia acknowledged his purchase of a manufacturer s warranty in a signed Customer Agreement, which was also ed to him, and where he represented he had the opportunity to review the warranty s terms. ER , Likewise, there is no dispute that Norcia could have returned his phone to reject the warranty, see ER , at 48:23-49:5, a fact that Hill and Murphy (applying California law) confirm satisfies both the offer and acceptance requirement. Hill, 105 F.3d at 1149; Murphy, 724 F.3d at 1225, n.4 ( conclusion that continued use of service after receipt of contract terms bound Plaintiff, is correct ). -54-

67 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 67 of 80 Nor, is there any dispute that Norcia could have opted out of just the arbitration clause within thirty days and did not. ER 295; ER , at 110:24-111:16. Two other courts examining this identical opt out right have concluded it satisfies the mutual assent requirement, and the Ninth Circuit has endorsed no opt out formation. See Sheffer III, 2014 WL , at *3 ( Crucially, the Court once again stresses that Plaintiffs were given a full month to opt out of the terms at issue, and both the choice-of-law provision and arbitration clauses appear underneath a bold heading entitled, What is the procedure for resolving disputes? ); McNamara, 2014 WL , at *2 ( [A] review of the Samsung Health and Safety Warranty Guide shows that it does provide a meaningful opportunity to reject the arbitration provision[.] ); cf. Circuit City Stores, Inc. v. Ahmed, 283 F.3d 1198, 1199 (9th Cir. 2002) ( Ahmed was not presented with a contract of adhesion because he was given the opportunity to opt-out of the Circuit City arbitration program by mailing in a simple one-page form. ). Under this authority, the authority it relies on, and the discussion in sections II-III supra, the District Court s conclusion that no offer was made is respectfully mistaken. F. The Arbitration Provision Was Not Hidden. Finally, the District Court s legal determination that Norcia was not bound to the arbitration provision because it was hidden and it was stealth is incorrect. -55-

68 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 68 of 80 ER 12, at 12:12. The arbitration provision here is included in the warranty. ER The warranty is included with the phone in a booklet entitled Product Safety & Warranty Information, which is formatted to fit in the phone s box. Id. A consumer wishing to review the warranty could easily pick up the Warranty Information booklet, find the table of contents, and review the warranty. Id.; ER 198, at 98:4-9. Once there, as Norcia himself confirmed, it would be a matter of seconds before a consumer got to the What is the procedure for resolving disputes? heading and the arbitration provision immediately underneath it. ER 198, at 98: Samsung s arbitration provision was neither stealth nor hidden. California law recognizes that [a]rbitration itself is a fairly common means of dispute resolution and would not be beyond the reasonable expectation of the weaker party. Parada v. Superior Court, 176 Cal. App. 4th 1554, 1571 (2009). California courts have recognized that when an arbitration provisions is included in a separate section of an agreement and is in the same text size as the rest of the agreement, it is not hidden. Boese v. Couch Oil & Gas, Inc., No. A138323, 2014 WL , at *4 (Cal. Ct. App. Feb. 28, 2014) ( The arbitration provision is not hidden in the fine print of a prolix agreement. ); Kato v. Level 7, LLC, No. B223543, 2011 WL , at *7 (Cal. Ct. App. Mar. 10, 2011) (arbitration provision not hidden where it is printed in the same font used throughout the -56-

69 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 69 of 80 agreement ). Here, the arbitration provision is in all capital letters below a bolded heading regarding dispute resolution. ER Moreover, a warranty is a proper place to include an arbitration clause, because that is the procedure used to enforce a warranty (although not limited to warranty claims). McNamara, 2014 WL , at *2. Norcia, himself, explained that had he reviewed the warranty he would have understood he was bound to arbitrate his claims on an individual basis. ER , at 98:7-99:8. There was nothing stealth here. Other courts have recognized that where a consumer brings a false advertising claim regarding a sophisticated purchase, the notion that the advertisement is the only material term between the parties is nonsensical. Schwartz v. Comcast Corp., 256 Fed. App x 515, 519 (3d Cir. 2007) ( Schwartz s contention, that the only agreement he was aware of was the always on promise, is nonsensical. ). Here, the Galaxy S4 smartphone came with a warranty, and the two were sold together as the District Court recognized. ER 11, at 11: Norcia signed a document acknowledging he purchased Samsung s warranty. ER To suggest that the arbitration provision was stealthily included or hidden from a consumer is inconsistent with California law. The District Court s conclusion otherwise is respectfully incorrect and should be reversed. -57-

70 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 70 of 80 V. CONCLUSION Two independent paths lead to the conclusion that the District Court erred in not compelling Norcia to arbitrate his claims against Samsung pursuant to the arbitration provision in Samsung s Standard Limited Warranty. By agreeing that the law compels the enforcement of the terms of contracts and warranties included with consumer products, this Court should compel Norcia to arbitrate his claims. Likewise, by simply enforcing the Customer Agreement, which incorporated Samsung s Standard Limited Warranty and which Norcia signed, this Court should compel Norcia to arbitrate his claims. For these reasons and the reasons stated above, Samsung respectfully asks this Court to reverse the District Court s Order denying their motion to compel Norcia to arbitrate his claims, and to order Norcia to arbitrate his claims pursuant to his contractual agreement. February 19, 2015 Respectfully submitted, By: s/ John P. Phillips John P. Phillips Attorneys for Defendants/Appellants Samsung Telecommunications America, LLC and Samsung Electronics America, Inc. -58-

71 Case: , 02/19/2015, ID: , DktEntry: 8-1, Page 71 of 80 CERTIFICATE OF COMPLIANCE I certify that the attached Appellants Opening Brief uses a 14 point Times New Roman font and contains 13,208 words, relying on the word count of the computer program used to prepare Appellants Opening Brief. February 19, 2015 Respectfully submitted, By: s/ John P. Phillips John P. Phillips Attorneys for Defendants/Appellants Samsung Telecommunications America, LLC and Samsung Electronics America, Inc.

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