(Rhode Island Supreme Court)

• Enforcing Class-Action Waivers in Consumer Arbitration Contracts

This is a consumer class action raising the same issues before the Rhode Island Supreme Court as were raised in Massachusetts in Feeney v. Dell Computer Corp. (see supra at p. 1).  As in the Feeney case, the plaintiffs purchased computers and optional service contracts from Dell and were allegedly wrongfully charged sales tax on the service contracts.  The question that NELF briefed was whether Rhode Island would enforce a class-action waiver in the arbitration clause of the service contracts where the waiver was enforceable under the agreement’s chosen law (in these cases, the law of Texas).  This question resolved into the question whether Rhode Island had a fundamental public policy against the waiver of class actions in consumer arbitrations, and NELF argued in its brief in support of Dell that Rhode Island does not have such a substantial public policy.  In its December 2009 decision, the Rhode Island Supreme Court never reached the issue that NELF had briefed, holding instead that, as a whole, the “shrinkwrap” terms and conditions agreement containing the arbitration provision was not enforceable because it failed to inform consumers adequately of their right to reject the agreement by returning the goods. Therefore, consumers’ retention of the goods did not indicate overall assent to the terms and conditions agreements, including the arbitration provision.  “We are not persuaded that a reasonably prudent [consumer] would understand that by keeping the Dell computer he or she was agreeing to be bound by the terms and conditions agreement and retained, for a specified time, the power to reject the terms by returning the product.”