Appeals Court Reverses Decision; Allows Class-Action Lawsuit Against Dell

The Ninth Circuit of the US Court of Appeals has filed its decision in the case of Olmstead v. Dell and reversed a decision by the lower court to dismiss the original case. The issue in question was whether or not Dell's Terms and Conditions of Sale (available here) could legally force the company's customers to settle disputes through arbitration rather than in a court of law. This is the second time in recent history that the ninth circuit has found such arbitration clauses unenforceable due to the unconscionable burden they place upon the purchaser.

The Dubious Nature of "Neutral" Arbitration

In Olmstead v. Dell, plaintiff's propose a class action lawsuit on the grounds that Dell "designed, manufactured, and sold defective notebook computers" between July 2004 and January 2005. Specifically, plaintiffs allege that individuals who purchased a Dell Inspiron 1100, 1150, 5100, or 5160 for a cost between $1200-$1500 were affected. The appeals' court decision today does not validate or speak to the accuracy of that claim; it only addresses the applicability of certain Dell terms and conditions (the full text of which is here.) Dell first attempts to mandate that the case be handled under Texas law, which conveniently allows consumers to waive their right to form a class action lawsuit. It then moves on to compel arbitration, as quoted below:
12. Dispute Resolution: ANY CLAIM, DISPUTE, OR CONTROVERSY... SHALL BE RESOLVED EXCLUSIVELY AND FINALLY BY BINDING ARBITRATION ADMINISTERED BY THE NATIONAL ARBITRATION FORUM ("NAF") under its Code of Procedure and any specific procedures for the resolution of small claims and/or consumer disputes then in effect."
Arbitration might bring to mind images of neutral mediation and fair consideration but the system can be abused by large companies seeking to avoid damages that might be individually small, but encompass large numbers of people. By forcing individuals to mediate each claim separately rather than combining them in a class action, companies can avoid much of the cost, particularly when contested sums ($1200-1500 in this case) are too small to be worth the cost of pursuing. Under the rules of the National Arbitration Forum, moreover, corporations can limit discovery to an amount "commensurate with the amount of the Claim." Since each claim is arbitrated individually, Dell (or any OEM) is only required to provide a relative scrap of information as opposed to a unified amount many times larger.

Dude, You're Getting A Lawsuit

The court based its ruling in Omstead v. Dell directly upon an earlier case, Oestreicher v. Alienware, in which Alienware (a Dell subsidiary) attempted to force Mr. Oestreicher into arbitration. In that decision, the court wrote that the Alienware contract was unconscionable because it was a "contract of adhesion." A contract of adhesion is a standardized contract, which, imposed and drafted by the party of superior bargaining strength, relegates to the subscribing party [the customer] only the opportunity to adhere to the contract or reject it."

Dell's allegedly flawed Inspiron 1100.

Dell's contract is unquestionably a contract of adhesion and is unenforceable on that basis. In addition, the ninth circuit found that California law took precedence over Texas law, in part because Texas law 'allows' consumers to waive their right to a class action lawsuit. Courts across the nation at multiple levels of jurisdiction have generally found against clauses that compel the use of the corporation's choice of state law when the customer lived in another state, particularly when that choice would place the customer at a disadvantage. Based on its findings, the ninth circuit court reversed a lower court's order to compel arbitration and cleared the way for the class action suit to go forward. Again, this is not a judgment on the merits of the claims made against the Round Rock-based company, but it's a legal blow against companies that exploit their size and position of strength to force customers into unfair contracts. Arbitration may not be inherently biased as such, but it's a system a conflict resolution that works best when the two parties in question are on relatively equal footing.
Via:  Yahoo News
rapid1 4 years ago

This is what I do not understand on this type of thing. This individual and in concert his organization through him chose to use the product. The advantages of the product were really in no way singular to what he could get from another vendor. However; he chose to use this product and stick with this distributor "DELL". How in any real world is this the OEM's "DELL" fault. The enabling by the court system, and specifically by a higher court just further trashes the American legal system. How does no one in the courts realize this. Trash is trash you discard it bundle it in a bag and leave it on the curb for sanitation services to remove. You do not take it out of the bag and convene a scientific study to make sure it's all trash.

Xylem 4 years ago

I have the exact same computer. A 2004 Dell Inspiron 1100 in the same blue color as the illustration. Damn even mine from day one was defective. Every other time it will shut itself down saying "The machine shutdown to prevent internal damage". Call tech support, they say the machine is overheating due to lack of ventilation when my room is air conditioned. Really irritating!! Dell were making real bad laptops not so long ago. One of my friends have a Dell Studio 15 and its built well and that's about it.

My Acer Aspire One 8.9" has been performing like a rocket since day one. i have started to believe smaller players are better. My other desktop is hand assembled!!

gibbersome 4 years ago

So what's wrong with Arbitration? Everything...


When you see that everyone from Credit Card companies to Cell Phone uses mandatory binding arbitration, you know there's something shady about it.

realneil 4 years ago

The arbitration "Specialists" that the Aerospace Companies used for employee's labor relations disputes when I was still working were payed by the Aerospace Companies. The Aerospace Companies got to pick them too,..................

Guess how most of those disputes were adjudicated,.................

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