Rogers v. Dell Computer Corp.

Name: Rogers v. Dell Computer Corp.

Cite: 138 P.3d 826 (Okla. 2005)

• Court: Supreme Court of Oklahoma

• Procedural Posture: District court held in favor of Rogers and Palmer (plaintiffs) denying Dell's (defendant) motion to compel arbitration. Defendant appealed. The Court of Civil Appeals affirmed. The Supreme Court of Oklahoma granted Dell's petition for certiorari.

• Overview: The question of whether disputes arising from computers purchased from Dell required resolution through arbitration was dependent on when the contracts were formed. Dell agreed to ship the computers, but included additional terms on the invoice sent with shipment. If enforceable, the additional terms would have compelled arbitration. Upon consideration of state (Oklahoma Uniform Arbitration Act (OUAA)) and federal law (the Federal Arbitration Act (FAA)), the court found the Uniform Commercial Code (UCC) to be controlling. Because both Oklahoma (the plaintiffs' state) and Texas (defendant's state) had adopted the pre-2003 versions of Article 2 of the UCC, the conflict of laws was not an issue. Applying Article 2 of the UCC, the court held that UCC § 2-207 (the "battle of the forms") would control the addition of terms. However, the record was incomplete as to the conversations and circumstances of the transactions between the plaintiffs and Dell at the time the orders were placed. Therefore, the court held that the order below denying the application to compel arbitration was improper. Reversed and Remanded.

• Background and Description: Plaintiffs Rogers and Palmer (d/b/a Fab Seal Industrial Liners, Inc.) filed suit seeking class action certification due to alleged violations of the Oklahoma Consumer Protection Act, negligence and breach of contract. The precise nature of their complaints were not addressed in the opinion, however, because the appeal was based solely on the lower court's denial of Dell's motion to compel arbitration. After a finding by the court that it had jurisdiction over the appeal, the court stated that while "the FAA requires the question of the contract's validity as a whole to be submitted to arbitration," the FAA does not preempt a state court from ruling on the "issues relating only to the validity of an arbitration provision" (p. 829). To do so, the court may sever the arbitration provision from the contract as a whole to determine whether it binds the parties.

• Holding: The court found that the parties made contracts for the purchase of computers. The question was when these contracts were formed and what terms became part of the contracts, specifically, whether Dell's "Terms and Conditions of Sale" documents, which added the arbitration language, were made known to the plaintiffs prior to the placing of orders OR if the language and circumstances of the transaction unambiguously indicated that the contracts were not formed until after the plaintiffs received the "Terms and Conditions of Sale" documents. If the terms including the arbitration provision were not known to the plaintiffs until after the orders were placed, the arbitration provisions would not be part of the contracts, but rather, proposals to modify under § 2-207 of the UCC unless facts clearly indicated otherwise. Unfortunately, the record did not contain any facts concerning the discussions surrounding the purchases. Therefore, the court could not determine when the arbitration provisions came into the contracts, nor could the court below. Thus, the court could hold only that the record was insufficient to affirm the lower court. Reversed and remanded.

• Other Discusion: The significance of this decision is that it implicitly rejects the 7th Circuit's analysis in ProCD, Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996), a watershed case upholding the validity of "shrinkwrap" (money now, terms later) contracts. The Rogers court examined Stenzel v. Dell, Inc., 870 A.2d 133 (Me. 2005) which, based on ProCD's analysis, upheld ProCD's famous "notice on the outside, terms on the inside, and a right to return" mantra. The Rogers court found the opinion of Defontes v. Dell Computers Corp., 2004 WL 253560 (R.I. Super. Jan. 29, 2004), which reached the opposite conclusion "better reasoned," primarily due to the Stenzel and ProCD courts' failure to include the battle of the forms (UCC § 2-207) analysis in reaching their holdings.