In denying a request to move for reconsideration of a motion to compel arbitration, a federal district court in California found that subsequent case law had not changed California law governing the enforceability of class waivers. Accordingly, the Court upheld its earlier ruling that the class waiver in this case was enforceable under Texas law and that the application of Texas law would not violate California public policy.

In Omstead v. Dell, Inc., No. C 06-6293 PJH, 2008 WL 341099 (N.D. Cal. Feb. 5, 2008), Omstead bought a notebook computer from Dell for approximately $1,200. The purchase was subject to various terms and conditions, including a Texas choice-of-law provision and an arbitration agreement containing a class waiver.

When Omstead experienced problems using the computer, he brought a putative class action against Dell, alleging manufacturing defects and violations of California law. Dell filed a motion to compel arbitration.

In opposing the motion, Omstead argued that under California law, the class waiver rendered the arbitration agreement unconscionable and therefore unenforceable. In response, Dell argued that the Texas choice-of-law provision precluded the application of California law.

The Court ruled that the application of Texas law would not violate California public policy and thus applied Texas law in upholding the class waiver. Specifically, the Court reasoned that enforcement of the class waiver would not offend the rule set forth in Discover Bank v. Superior Court, 113 P.3d 1100 (Cal. 2005) because (1) the amount in controversy was not trivial, (2) Omstead had a rescission option, and (3) there was no evidence suggesting a scheme to cheat consumers. See Omstead v. Dell, Inc., 473 F.Supp.2d 1018 (N.D. Cal. 2007).

Five months later, Omstead requested permission to move for reconsideration on various grounds.

First, Omstead argued that the he had no burden to establish the application of California law but instead that Dell had the burden to establish the application of Texas law. The Court rejected this argument because Omstead did not raise the issue in opposing the motion to compel. Moreover, as the Court noted, the Federal Arbitration Act foreclosed Omstead's reliance on the anti-waiver provision in the California Consumer's Legal Remedies Act.

Second, Omstead argued that Gatton v. T-Mobile USA, Inc., 61 Cal. Rptr. 3d 344 (Cal. Ct. App. 2007) required reconsideration because the court in that case rejected the "marketplace alternatives" theory as preclusive of procedural unconscionability. In rejecting that argument, the Court explained that Gatton did not change the law and, in any event, that Omstead's rescission option, not any marketplace alternatives, was the factor weighing against a finding of procedural unconscionability.

Third, Omstead argued that the Court was required to apply a summary judgment standard in ruling on Dell's motion to compel arbitration. In rejecting this argument, the Court explained that the summary judgment standard applies where the existence of an arbitration agreement is at issue, not where the enforceability of a choice-of-law provision is at issue.

Lastly, Omstead argued that the application of Texas law would deprive California consumers of their substantive rights. In rejecting this argument, the Court found that the procedural right to proceed as a class did not implicate any substantive rights in this case because the amount in controversy was not trivial.

Having rejected Omstead's arguments, the Court denied permission to move for reconsideration.