Arbitration

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7^th Circuit Court of Appeals

Case Name: Paula Wallrich v. Samsung Electronics America, Incorporated

Case No.: 23-2842

Officials: Sykes, Chief Judge, and Easterbrook and Kirsch, Circuit Judges.

Focus: Arbitration

Consumers brought arbitration claims against Samsung Electronics Co., Ltd. and Samsung Electronics America, Inc., alleging that Samsung unlawfully gathered and retained sensitive biometric data from their electronic devices, violating Illinois law. Samsung contested the claims and declined to cover the required administrative filing fees of the American Arbitration Association (AAA). As a result, the AAA halted the arbitration proceedings. The consumers then petitioned the district court to compel arbitration. The district court sided with the consumers, ordering Samsung to participate in arbitration and to pay the AAA filing fees. Samsung appealed, challenging the existence of an arbitration agreement with the consumers and disputing the district court’s authority to compel payment of the AAA fees.

The Seventh Circuit determined that the consumers had not sufficiently demonstrated the existence of an arbitration agreement with Samsung. Furthermore, the Seventh Circuit ruled that the district court had exceeded its authority by mandating Samsung to cover the AAA filing fees. The court reasoned that the alleged agreement between the parties incorporated the AAA’s rules and procedures, which explicitly delegated discretion to the AAA in resolving fee disputes. Therefore, the Seventh Circuit concluded that the arbitration process should have been conducted in accordance with the terms outlined in the alleged agreement, and the district court did not possess the jurisdiction to compel Samsung to pay the AAA’s fees.

Reversed.

Decided 07/01/24

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