New Mexico Court: Class Actions Can’t Be Barred in Small Claims

August 20, 2008

The New Mexico Supreme Court has ruled that contractual prohibitions on class actions for small consumer claims violates public policy and is therefore unenforceable.

According to Robert Fiser, individually and as a representative of a class of persons within the state of New Mexico v. Dell Computer Corp., Fiser purchased a computer from Dell’s Web site and subsequently filed a putative class action lawsuit contending that the company misrepresented the memory size of its computers. He alleged violations of the New Mexico Unfair Practices Act, New Mexico False Advertising Act, New Mexico Uniform Commercial Code, and common law concepts of breach of contract, breach of warranty, misrepresentation, violations of the covenants of good faith and fair dealing, bad faith, and unjust enrichment. He estimated that Dell’s alleged misrepresentation resulted in a monetary loss to its customers of just $10 to $20 per computer.

Pursuant to the “terms and conditions” on its Web site at the time of purchase, Dell said “the plaintiff was required to individually arbitrate his claims and was precluded from proceeding on a classwide basis either in litigation or arbitration,” court documents state.

The district court agreed that Fiser was bound by Dell’s arbitration provision, and the Court of Appeals affirmed.

Then, Fiser petitioned for a write of certiorari; both the New Mexico Attorney General and Public Justice filed amicus briefs in support of Fiser.

The Supreme Court reversed the decision, saying New Mexico respects choice-of-law provisions unless application of chosen law would contravene New Mexico public policy. Furthermore, the court said, “It is fundamental New Mexico Policy that consumers have a viable mechanism for dispute resolution, no matter the size of the claim,” and that “the class action device is critical to enforcement of consumer rights in New Mexico.”

“In New Mexico, we recognize that the class action was devised for vindication of the rights of groups of people who individually would be without effective strength to bring their opponents into court at all,” the court wrote. “In view of the fact that Plaintiff’s alleged damages are just $10 to $20, by attempting to prevent him from seeking class relief, Defendant has essentially foreclosed the possibility that Plaintiff may obtain any relief.

“Contractual prohibition for class relief, as applied to claims that would be economically inefficient to bring on an individual basis, is contrary to the fundamental public policy of New Mexico to provide a forum for the resolution of all consumer claims and is therefore unenforceable in this state,” the high court added.

The case was remanded for proceedings consistent with the Supreme Court decision.

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Source: New Mexico Supreme Court

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