The U.S. Supreme Court Just Rejected Samsung’s Latest Appeal

The justices left intact a lower court’s ruling that purchasers of certain Galaxy smartphones made by the South Korean electronics company were not bound by a warranty provision that compelled arbitration of customer complaints.

Warranties with arbitration clauses have become common in consumer electronics and other industries. Courts and regulatory agencies increasingly are scrutinizing arbitration agreements that seek to limit options for resolution of future disputes.

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The Samsung (SSNLF) case involves two smartphone buyers from California who separately filed proposed class-action lawsuits in 2014 over concerns about the products’ performance and resale value.

Neither Daniel Norcia, who owned a Galaxy S4 device, nor Hoai Dang, who owned an S3, saw the arbitration provisions when they bought the phone because the language was placed deep inside the warranty booklet and not mentioned on the box, according to their legal papers.

The agreement states that all disputes must be resolved through arbitration, and specifically rules out class actions.

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Samsung tried to force the customers to arbitrate their claims, but a unanimous three-judge panel of the 9th U.S. Circuit Court of Appeals in San Francisco denied the request in January. The court said Samsung did not provide proper notice of the arbitration provision and neither customer had expressly consented to be bound by it.

Appealing to the Supreme Court, Samsung noted that the 9th Circuit decided that the warranty was valid except for the arbitration provision. Samsung argued that the 9th Circuit ruling violated a U.S. law called the Federal Arbitration Act that requires arbitration agreements to be treated equally with other contracts.