Reinsurance & Arbitration Focus

In White v. Samsung Electronics America Inc., the Third Circuit Court of Appeals, in a precedential opinion, affirmed a district court order denying defendant Samsung’s motion to compel arbitration, concluding that, “[t]hrough its actions expressing an intent to litigate, Samsung waived its right to arbitration.”

The plaintiffs in this putative class action filed in 2017 brought claims alleging that Samsung, and others, illegally monitored their use of certain internet-based services on their smart TVs and collected personally identifying information, which they transmitted to third-party advertisers and data brokers. The “terms and conditions” the plaintiffs had to accept when setting up their smart TVs included an arbitration provision. Samsung initially moved to dismiss the complaint; however, the parties agreed to a stay and administrative dismissal of the case. In early 2018, the case was reinstated when the plaintiffs filed an amended complaint, which Samsung again sought to dismiss. Samsung also submitted a proposed discovery plan, which did not raise the arbitration provision or a possible motion to compel arbitration. The district court granted the motion to dismiss, after which the plaintiffs filed a second amended complaint in November 2018, which Samsung again moved to dismiss. The district court granted the motion in part, dismissing all but the Wiretap Act claims.

In May 2020, Samsung filed a motion to compel arbitration, which was denied without prejudice. Samsung then refiled its motion to compel in May 2021, arguing that “it did not waive its right to arbitrate because ‘the prerequisites of waiver — extensive discovery and prejudice — are lacking, and the [relevant] factors do not support a finding of waiver.’” The district court denied the motion, concluding that Samsung had waived its right to arbitrate, and the plaintiffs would suffer “significant prejudice” if compelled to arbitrate. Samsung appealed the district court’s decision to the Third Circuit, and while the appeal was pending, the U.S. Supreme Court issued its decision in Morgan v. Sundance Inc. Through supplemental briefing, Samsung brought the decision in Morgan to the court’s attention, arguing that the decision rejected a “prejudice-based waiver analysis” in connection with motions to compel arbitration.

Relying on the Federal Arbitration Act and the recent decision in Morgan, the Third Circuit concluded that “Samsung’s litigation actions here evince a preference for litigation over arbitration.” The court noted that Samsung agreed to stays in discovery so it could instead pursue its motions to dismiss the plaintiffs’ claims on the merits, which, to Samsung’s advantage, resulted in the dismissal of all but one claim. The court also found that Samsung “engaged in multiple instances of non-merits motion practice and acquiesced to the District Court’s pre-trial orders” and noted that Samsung submitted pro hac vice applications in the case and participated in several court conferences. The court also noted that the discovery plan asked whether the case was subject to court-annexed arbitration and, while the case was not subject to that particular type of arbitration, “Samsung should have disclosed that another type of arbitration may be applicable.” Relying on Morgan, the court affirmed the district court’s decision refusing to refer the matter to arbitration, concluding that Samsung waived its right to arbitrate.

White v. Samsung Electronics America Inc., No. 22-1162 (3d Cir. Mar. 7, 2023).