Law School Case Brief
Defontes v. Dell Computs. Corp. - 2004 R.I. Super. LEXIS 32 (Super. Ct. Jan. 29, 2004)
The Federal Arbitration Act, 9 U.S.C.S. § 1, et seq., ("FAA"), governs contracts containing arbitration clauses involving interstate commerce. When applicable, the FAA ordinarily preempts state law. However, when deciding whether the parties agreed to arbitrate a certain matter, courts should apply ordinary state law principles governing the formation of contracts.
Plaintiffs Mary DeFontes and Nicholas Long purported to be representatives of a class of persons who purchased computers from defendants Dell Computers Corporation and affiliated others (collectively, "Dell"). Dell was a Texas corporation shipping computers from either Texas or Tennessee throughout the 50 states. In their class action suit filed in Rhode Island state court, plaintiffs alleged two causes of action: (1) violation of the Rhode Island Consumer Protection Act via unfair or deceptive acts and practices, and; (2) common law negligence. The basis for each claim rested on the proposition that Dell was overcharging its customer by collecting a tax on both service contracts and transportation costs. Plaintiffs claimed that no tax was owing on such contracts. Pursuant to the Federal Arbitration Act, 9 U.S.C.S. § 1, et seq., Dell filed a motion to stay proceedings and compel arbitration pursuant to an arbitration clause contained in the parties' agreement for sale. Plaintiffs filed an objection to the motion.
Were the parties bound by the arbitration clause?
The court denied Dell's motions to stay and to compel arbitration. The court first held that Texas law would be applied to determine whether the arbitration clause was applicable. The court observed that plaintiffs were given the opportunity to read the terms and conditions in the form of a "browsewrap" agreement on Dell's internet site, but the court ruled that it was not sufficient to put plaintiffs on notice of the terms and conditions of the sale of the computer. The court further held that a "shrinkwrap" agreement enclosed within the packaging of the computers was not sufficient to provide notice of the arbitration clause. The shrinkwrap agreement contained no express disclaimer stating that plaintiffs or other purchasers could reject the terms of the agreement by returning the product. Because plaintiffs did not receive sufficient notice of the arbitration clause, the court held that they were not bound by the arbitration clause.
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