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