SW Legal studies in Business

Ban on Class Action Suits in Sales Contract Held Unconscionable
Description

New Mexico high court held that the buyer of a Dell computer, who claimed the company misrepresented the capability of its machines, could not be required to arbitrate his claim and could not be prohibited from bringing a class action suit against the company.

Topic

Consumer Protection

Key Words

Arbitration; Class Action; Unconscionability

C A S E   S U M M A R Y
Facts

Fiser bought a computer from Dell via the company website. He later filed a class action suit contending that Dell systematically misrepresented the memory size of its computers. He contended this violates the New Mexico Unfair Practices Act, was a breach of contract, misrepresentation, and other claims. Dell moved to force arbitration of the complaint, as the sales contract required arbitration of consumer complaints. Fiser appealed; the appeals court affirmed the district court. Fiser appealed again.

Decision

Reversed. The arbitration clause in the Dell contract prohibits class action lawsuits by consumers against the company. This is an integral part of the contract and it is unconscionable; therefore, the entire arbitration clause in unconscionable and unenforceable. Class action suits provide a remedy for consumers when the cost of bringing a single claim is greater than the damages alleged. The clause in the contract violates New Mexico public policy by depriving small claims consumers of meaningful remedy and exculpating manufacturers from potential wrongdoing.

Citation

Fiser v. Dell Computer Corp., ---P.3d--- (2008 WL 2896294, Sup. Ct., N.M., 2008)

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