A federal court in New Jersey has determined that the arbitrator specified in the “Terms and Conditions of Sale” applicable to the purchase of a laptop computer was integral to the agreement and its unavailability precluded arbitration of a dispute between the parties to the agreement. Khan v. Dell, Inc., No. 09-3703 (U.S. Dist. Ct., D.N.J., decided August 18, 2010). The plaintiff alleged that his laptop overheats under normal operating conditions, thereby shortening its useful lifespan, and sued the manufacturer on behalf of a class of consumers who purchased or leased the computer. The defendant sought to compel arbitration, citing the “Terms and Conditions of Sale” to which every consumer must agree before concluding an online purchase.
The plaintiff countered that the arbitration provision was unenforceable because it provides for arbitration to be administered exclusively by the National Arbitration Forum (NAF), which “is no longer administering consumer arbitrations.” The plaintiff also argued that the arbitration provision is unconscionable and therefore invalid. The court agreed that the designation of an arbitrator was integral to the agreement, and, because the NAF was unavailable and because the court “cannot appoint a substitute arbitrator and compel the parties to submit to an arbitration proceeding to which they have not agreed,” the court denied Dell’s motion to compel.