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In honoring a choice-of-law provision and upholding a class action waiver under Texas law, a federal court in Washington ruled that the application of Texas law would not violate a fundamental public policy of Washington because the party opposing arbitration failed to cite any authority for the proposition that Washington has a fundamental policy against class action waivers.
In Carideo v. Dell, Inc., No. C-06-1772, 2007 WL 1753511 (W.D. Wash. June 18, 2007), Carideo bought a laptop computer from Dell. The "Terms and Conditions of Sale" included a Texas choice-of-law provision and an arbitration agreement that barred class-wide proceedings.
Some time later, Carideo and another laptop buyer filed a class action against Dell, alleging violations of Washington's Consumer Protection Act (CPA) and several other causes of action. In response, Dell filed a motion to compel arbitration.
Despite the Texas choice-of-law provision, Carideo relied on Washington law in opposing Dell's motion to compel. Specifically, she argued that the arbitration agreement was unconscionable under Washington law. In arguing for the application of Washington law, Carideo argued that the Texas choice-of-law provision was invalid because the application of Texas law would violate a fundamental public policy of Washington.
The Court rejected this argument because Carideo failed to cite any authority for the proposition that Washington has a fundamental policy against class action waivers. Moreover, as the Court noted, the Washington legislature has not made any pronouncements regarding the propriety of class action waivers, thus implying the absence of any fundamental policy.
Carideo attempted to demonstrate a fundamental policy by citing cases in which courts ruled that a class action waiver rendered an arbitration agreement unconscionable under Washington law. The Court found this argument unpersuasive and dismissed it as an "attempt to conflate the concepts of fundamental public policy (which operates to invalidate an entire area of contract law) and substantive unconscionability (which examines one contract provision at a time)."
The Washington Supreme Court has already heard oral arguments in a case concerning whether a class action waiver may render an arbitration agreement unenforceable under Washington law. See Scott v. Cingular, 135 P.3d 478 (Wash. 2005). A decision is pending.
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