(CN) – Customers who bought defective Dell notebook computers can sue as a class because the binding arbitration agreement in the “Terms and Conditions of Sale” is unenforceable, the 9th Circuit ruled.
Customers filed suit in district court against Dell in 2005 after purchasing defective notebook computers worth $1,200 to $1,500. The sales agreement barred disputes from being brought against the company by a consumer class, and instead provided that all claims be resolved individually and through arbitration.
The individual customers refused to engage in arbitration, claiming it was “not economically feasible for them” to bring separate suits.
The district court denied the customers bid to file jointly and ultimately dismissed the case for failure to prosecute, despite a request that they be allowed to appeal the arbitration order.
The three-judge, San Francisco-based appeals panel ruled that the “Plaintiffs did not cause any unreasonable delay in the progression of their case,” so dismissal for failure to prosecute was not proper.
Judge Lyle Strom wrote for the panel that the “public’s interest in a resolution on the merits weighed strongly in plaintiffs’ favor, and less drastic and more appropriate alternatives were available.”
The appeals panel also ruled that the arbitration agreement in the sales contract is unenforceable because it calls for disputes to be settled under Texas law.
In this case, California has a greater interest because the plaintiffs live and filed suit in California.
Because Dell’s class action waiver is “unconscionable” under California law, it cannot be enforced.