Full opinion text
ORDER GRANTING REQUEST FOR LEAVE TO FILE MOTION FOR RECONSIDERATION, AND ORDER DENYING RECONSIDERATION PHYLLIS J. HAMILTON, District Judge. Before the court is plaintiffs’ motion for leave to file a motion for reconsideration of the order granting defendant’s motion to compel arbitration. Having read the parties’ papers and carefully considered their arguments and good cause appearing, the court hereby GRANTS the motion for leave to file a motion for reconsideration, and DENIES reconsideration. BACKGROUND Plaintiffs filed this action on October 6, 2006 as a proposed class action, and filed an amended complaint (“FAC”) on November 10, 2006. Plaintiffs allege that defendant Dell, Inc., deliberately manufactured defective laptop computers and sold them. The proposed class consists of “[a]ll individuals and entities in the State of California who own or have owned any one or more of the following Dell Inspiron notebook computer models: 1100, 1150, 5100, or 5160.” FAC ¶ 41. Plaintiffs purchased the allegedly defective computers from Dell, through its website. Each purchase was subject to a written agreement, the “Terms and Conditions.” Customers were requested to check either “I agree to Dell’s Terms and Conditions of Sale” or “I do not agree to Dell’s Terms and Conditions of Sale.” If a customer did not check the “I agree” box, the order could not be placed. The “Terms and Conditions” provided that the purchaser could return the computer within 30 days if he/she was unsatisfied with either the computer or the agreement. Not only was the agreement on Dell’s website, but Dell also sent the plaintiff a copy of the agreement with the computer. The agreement provided that it “shall be governed by the laws of the state of Texas,” and included a dispute resolution clause entitled “Binding Arbitration,” stating that “any claim, dispute, or controversy ... arising from or relating to this [ajgreement, its interpretation, or the breach, interpretation or validity thereof, ... Dell’s advertising, or any related purchase shall be resolved exclusively and finally by binding arbitration administered by the National Arbitration Forum.” The arbitration clause also provided that “[t]he arbitration will be limited solely to the dispute or controversy between the customer and Dell,” and that neither the customer nor Dell “shall be entitled to join or consolidate claims by or against other customers, or arbitrate any claim as a representative or class action .... ” In the FAC, plaintiffs assert claims under the Consumer Legal Remedies Act, Cal. Civ.Code § 1750, et seq. (“CLRA”), and the Unfair Practices Act, Cal. Bus. & Prof.Code §§ 17200 and 17500; and also allege fraudulent concealment/nondisclosure; breach of the Song-Beverly Consumer Warranty Act, Cal. Civ.Code § 1791, et seq.; breach of express warranty; breach of implied warranty; and unjust enrichment. On December 22, 2006, Dell filed a motion to compel arbitration. Under the Federal Arbitration Act, 9 U.S.C. § 1, et seq. (“FAA”), the question whether an agreement to arbitrate is valid is governed by state law. See First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995). Where an arbitration agreement contains a choice-of-law clause, the court must apply the appropriate analysis to determine which state’s laws govern the validity of the agreement to arbitrate. Federal courts sitting in diversity look to the law of the forum state in making a choice-of-law determination. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). Thus, the complaint in the present action having been filed in California, California’s choice-of-law rules apply. In deciding whether to enforce a contractual choice-of-law provision, California courts follow Restatement (Second) of Conflict of Laws (“Restatement”) § 187(2), which reflects a strong policy favoring the enforcement of such provisions. Nedlloyd Lines B.V. v. Superior Court, 3 Cal.4th 459, 464-65, 11 Cal.Rptr.2d 330, 834 P.2d 1148 (1992). Those policy considerations apply equally to all contracts, including consumer contracts of adhesion. Washington Mut. Bank v. Superior Court, 24 Cal.4th 906, 918, 103 Cal.Rptr.2d 320, 15 P.3d 1071 (2001). Under this analysis, the court must first determine whether the chosen state has a substantial relationship to the parties or their transaction, or whether there is any other reasonable basis for the parties’ choice of law. If either of these tests is met, the court must decide whether the chosen state’s law is contrary to a “fundamental policy” of the forum state. If there is no such conflict, the court must enforce the choice-of-law provision. If there is such a conflict, the court must then determine whether the forum state has a materially greater interest than the chosen state in the determination of the particular issue. If the forum state has a materially-greater interest, the court should decline to enforce a law that is contrary to the state’s fundamental policy. See Nedlloyd, 3 Cal.4th at 466, 11 Cal.Rptr.2d 330, 834 P.2d 1148. In this case, plaintiffs conceded that “a reasonable basis exists” for the application of Texas law. Thus, the issues remaining for the court to decide in determining which state’s law applies were, first, whether Texas law (allowing class action waivers) is contrary to a fundamental policy of California; and, if so, whether California has a materially greater interest than Texas does in the determination of the particular issue. As explained above, if both conditions exist, then the choice-of-law provision should not be enforced. On June 27, 2005, a little over a year before plaintiffs filed the present action, the California Supreme Court issued its decision in Discover Bank v. Superior Court, 36 Cal.4th 148, 30 Cal.Rptr.3d 76, 113 P.3d 1100 (2005). The plaintiff in that case had obtained a credit card from Discover Bank in April 1986. The Bank’s cardholder agreement provided for the application of Delaware and federal law to any dispute between the Bank and the cardholder. In July 1999, the Bank added a provision to the agreement, requiring arbitration “in the event you or we elect to resolve any claim or dispute between us by arbitration.” The arbitration clause also precluded both sides from participating in classwide arbitration, from consolidating claims, or from arbitrating claims as a representative or a private attorney general. In 2001, the plaintiff filed a proposed class action — Boehr v. Discover Bank (No. BC 256167, Superior Court, Los Angeles County) — alleging breach of contract and violation of Delaware consumer law. The plaintiff asserted that the Bank had breached the cardholder agreement by imposing a late fee of $29 and finance charges when payments were received on the due date but after the Bank’s undisclosed 1:00 p.m. “cut-off time.” The Bank moved to compel arbitration and to dismiss the class action pursuant to the class action waiver. In response, the plaintiff argued that the class action waiver was unconscionable and unenforceable under California law. The Bank asserted, however, that the FAA requires enforcement of the express provisions of an arbitration clause, including class action waivers. The trial court initially granted the Bank’s motion to compel arbitration, finding no fundamental California public policy requiring it to reject the parties’ selection of Delaware law, and also finding no California public policy reason to invalidate the class action waiver. The plaintiff filed a motion for reconsideration, based on a newly-filed decision by the California Court of Appeal, Szetela v. Discover Bank, 97 Cal.App.4th 1094, 118 Cal.Rptr.2d 862 (2002). The plaintiff asserted that the Court of Appeal had articulated a fundamental public policy basis for invalidating the class action waiver. Szetela involved the identical Discover Bank arbitration provision that was at issue in Boehr v. Discover Bank. The Szete-la court found that the class action waiver was both procedurally and substantively unconscionable under California law. The court held that the class-action waiver was substantively unconscionable because it gave the advantage to Discover Bank, in that customers such as the proposed class members would be essentially prevented “from seeking redress for relatively small amounts of money, such as the $29 sought by [the plaintiff].” Id. at 1101, 118 Cal. Rptr.2d 862. The court found that this “manner of arbitration” was harsh and unfair, and violated both the Legislature’s stated policy of discouraging unfair business practices (referring to California Business & Professions Code § 17200, et seq.), and the public policy of promoting judicial economy, which the court noted is inherent in the procedural mechanism of the class action. Id. at 1101-02, 118 Cal. Rptr.2d 862. Based on the Szetela ruling, the trial court in Boehr v. Discover Bank granted the motion for reconsideration, and invalidated the class action waiver. The Bank petitioned for writ of mandate, and the Court of Appeal granted the petition. Discover Bank v. Superior Court, 129 Cal. Rptr.2d 393 (2003). Because the plaintiff failed to provide any authority to support the contrary proposition, the Court of Appeal assumed that a valid agreement to arbitrate had been formed. Furthermore, the court found, that agreement was governed by § 2 of the FAA. The court held that California’s ability to refuse to enforce a class action waiver as substantively unconscionable was preempted by § 2 of the FAA (agreement to arbitrate is valid, irrevocable, and enforceable, as a matter of federal law “save upon such grounds as exist at law or in equity for the revocation of any contract”). The California Supreme Court granted review, and issued an opinion superseding the opinion of the Court of Appeal. The California Supreme Court ruled that waivers of class arbitration in consumer contracts of adhesion are unconscionable under certain circumstances and should not be enforced — specifically, where they “operate effectively as exculpatory contract clauses that are contrary to public policy.” Discover Bank, 36 Cal.4th at 161, 30 Cal. Rptr.3d 76, 113 P.3d 1100. The court also held that Court of Appeal had erred in holding that California law prohibiting waivers of class actions is preempted by § 2 of the FAA. With regard to the general question of the enforceability of class action waivers, the court noted that the plaintiff had not pled a CLRA cause of action (and therefore had not invoked the CLRA’s anti-waiver provision, Civil Code § 1751), and also had not sought recovery under any other California statute as to which a class action remedy is essential. Id. at 160, 30 Cal.Rptr.3d 76, 113 P.3d 1100. Rather, the plaintiff had argued that class action waivers in consumer contracts were generally unconscionable and invalid under California law. Id. The court declined, however, to find that all class action waivers are necessarily unconscionable. The court first observed that while class action waivers “are not, in the abstract, exculpatory clauses,” in certain consumer cases where the damages are often small, and where “[a] company which wrongfully extracts a dollar from each of millions of customers will reap a handsome profit,” the class action device “is often the only effective way to halt and redress such exploitation.” Id. at 161, 30 Cal.Rptr.3d 76, 113 P.3d 1100 (quotations and citations omitted). Moreover, the. court noted, class action waivers are “indisputably one-sided,” as credit-card companies, for example, do not typically sue their customers in class action lawsuits. Id. (quoting Szetela, 97 Cal.App.4th at 1101, 118 Cal.Rptr.2d 862). The court concluded that “[s]uch one-sided, exculpatory contracts in a contract of adhesion, at least to the extent they operate to insulate a party from liability that otherwise would be imposed under California law, are generally unconscionable.” Id. The court concluded that when the waiver is found in a consumer contract of adhesion in a setting in which disputes between the contracting parties predictably involve small amounts of damages, and when it is alleged that the party with the superior bargaining power has carried out a scheme to deliberately cheat large numbers of consumers out of individually small amounts of money, then, at least to the extent the obligation at issue is governed by California law, the waiver becomes in practice the exemption of the party “from responsibility for [its] own fraud, or willful injury to the person or property of another.” (Civ.Code § 1668.) Under these circumstances, such waivers are unconscionable under California law and should not be enforced. Id. at 162-63, 30 Cal.Rptr.3d 76, 113 P.3d 1100. With regard to the Court of Appeal’s conclusion that § 2 of the FAA preempts any California statute or state judicial policy precluding class actions, the California Supreme Court held that the principle that class action waivers are, under certain circumstances, unconscionable as unlawfully exculpatory “is a principle of California law that does not specifically apply to arbitration agreements, but to contracts generally” — that is, “it applies equally to class action litigation waivers in contracts without arbitration agreements as it does to class arbitration waivers in contracts with such agreements.” Id. at 165-66, 30 Cal. Rptr.3d 76, 113 P.3d 1100. The court remanded the case, so that the Court of Appeal could resolve the question whether the enforceability of the waiver should be governed by Delaware law, and if so, whether it would be enforceable under Delaware law. In a decision issued on December 7, 2005, the Court of Appeal applied the choice-of-law analysis from Restatement § 187(2). See Discover Bank v. Superior Court, 134 Cal.App.4th 886, 890-91, 36 Cal. Rptr.3d 456 (2005). The court first found that Delaware had a substantial relationship to the parties because Discover Bank is domiciled in Delaware. Id. at 891, 36 Cal.Rptr.3d 456. The court then considered whether enforcing the class action waiver would contravene a fundamental policy of California and whether California had a materially greater interest than Delaware in determining the issue. The court concluded that because the plaintiff had conceded at the inception of the lawsuit that his claims would be governed by the substantive law of Delaware, not California, the “obligations at issue” were not governed by California law.- Id. at 894, 36 Cal.Rptr.3d 456. Thus, according to the Court of Appeal, “the Supreme Court did not conclude that, under California law, the class action waiver is unenforceable in this case. At the same time, the court did not conclude that the waiver is enforceable under California law. Rather, the court declined to decide the issue.” Id. Finally, the court found that even if enforcement of the waiver would be contrary to a fundamental policy of California, California did not have a materially greater interest in determination of the issue than Delaware did, as the plaintiff (a California resident) had asserted two claims under Delaware law (and none under California law) on behalf of a putative nationwide class, against a bank that was domiciled in Delaware. Indeed, the court noted, Delaware’s interest was demonstrably greater than California’s. Id. at 894-95, 36 Cal.Rptr.3d 456. Thus, because the required elements — violation of a fundamental policy, and materially greater interest — were not present, the court concluded that California law did not apply. In its motion to compel arbitration in the present case, Dell argued that the court should apply Texas law, as provided in the “Terms and Conditions.” Dell asserted that under both the FAA and Texas law, the arbitration agreement was fair and enforceable, and, in particular, argued that under Texas law, class action waivers in arbitration agreements are enforceable. Plaintiffs opposed the motion, arguing that under California’s choice-of-law analysis, Texas law should not be applied because it conflicts with fundamental policies of California law — specifically, that “take it or leave it” arbitration clauses containing class action waivers are contrary to fundamental public policy in California — and because California’s interests are materially greater than those of Texas and would be more impaired by the application of Texas law than would the interests of Texas by application of California law. Plaintiffs also argued that the arbitration clause was both procedurally and substantively unconscionable under California law and was therefore unenforceable. In the alternative, plaintiffs asserted that if the court found the arbitration agreement enforceable, it should sever the class action waiver as an unconscionable term, and order that court-supervised arbitration proceed on a classwide basis. On February 13, 2007, the court granted Dell’s motion to compel arbitration. The court found that Texas has a substantial relationship to the parties or their transaction, and that Texas law would be a reasonable choice of law. The court then considered whether the law of Texas is contrary to a “fundamental policy” of California. The court found that plaintiffs had not established that there is a fundamental policy against class action waivers in California. The court found that under the rule articulated by the California Supreme Court in Discover Bank, the class action waiver in the present action does not conflict with fundamental California policy, because the disputes concerning the allegedly faulty computers do not involve “small amounts of damages,” and because the customer agreement provided the purchasers with a 21-day rescission option. The court found no indication in the facts alleged that Dell had engaged in a deliberate “scheme” to cheat large numbers of consumers out of individually small amounts of money, noting that it did not “make sense” that Dell would deliberately manufacture computers that were defective or would deliberately sell defective computers — under warranty — to thousands of customers. The case was stayed and the parties were directed to file a status statement in six months. Five months later, on July 12, 2007, plaintiffs filed a request for leave to file a motion for reconsideration. The parties have not proceeded to arbitration. DISCUSSION A. Legal Standard A party seeking to file a motion for reconsideration must first request leave to do so, and “must specifically show” one of three things- — either [t]hat at the time of the motion for leave, a material difference in fact or law exists from that which was presented to the Court before entry of the interlocutory order for which reconsideration is sought. The party must also show that in the exercise of reasonable diligence the party applying for reconsideration did not know such facts or law at the time of the interlocutory order; or [t]he emergence of new material facts or a change of law occurring after the time of such order; or [a] manifest failure by the Court to consider material facts or dispositive legal arguments which were presented to the Court before such interlocutory order. Civ. L.R. 7-9. To prevail on a motion for reconsideration, “a party must set forth facts or law of a strongly convincing nature” to induce the court to change its prior decision. Van Slyke v. Capital One Bank, 503 F.Supp.2d 1353, 1366 (N.D.Cal.2007). B. Plaintiffs’ Motion After plaintiffs filed their motion for leave to file a motion for reconsideration, Dell filed an opposition to the motion, and plaintiffs filed a reply to the opposition. Both sides also requested leave to file recent decisions. In their reply, plaintiffs request the court to decide the motion for reconsideration on the papers presented. Accordingly, the court GRANTS the motion for leave to seek reconsideration, and now rules on the motion for reconsideration itself. 1. Plaintiffs’ Arguments Plaintiffs argue that reconsideration is warranted for four reasons. First, they assert that the court improperly placed the burden on plaintiffs to establish application of California law, as opposed to Texas law. Plaintiffs contend that under America Online, Inc. v. Superior Court, 90 Cal. App.4th 1, 108 Cal.Rptr.2d 699 (2001), the burden properly rested on Dell — not oh plaintiffs — to establish application of Texas law. In America Online, the plaintiff filed a proposed class action alleging claims under the CLRA and Business & Professions Code § 17200, alleging that defendant AOL continued to debit former subscribers’ credit cards for monthly service fees after they had terminated their subscriptions. AOL’s customer agreement contained a forum-selection clause designating Virginia courts as the place where any claims against AOL had to be resolved, and designating Virginia law as the governing law. AOL moved to dismiss or stay on grounds of inconvenient forum. The Court of Appeal held that where a plaintiff seeks a remedy based on the CLRA, the burden of proof regarding enforcement of a choice-of-forum clause shifts to the party seeking enforcement. Id. at 10-11, 108 Cal.Rptr.2d 699. The court concluded that because Virginia law does not allow consumer lawsuits to be brought as class actions, and because the available remedies are more limited than those afforded by California law, the rights of the plaintiff and the proposed class members would be substantially diminished if they were forced to litigate their dispute in Virginia. Id. at 11, 108 Cal.Rptr.2d 699. Plaintiffs second argument is that June 22, 2007 decision in Gatton v. T-Mobile USA, Inc., 152 Cal.App.4th 571, 61 Cal. Rptr.3d 344 (2007) addresses many of the key issues raised in the February 13, 2007 order, and reaches conclusions at odds with that order. In Gatton, the plaintiffs (past and current subscribers to defendant T-Mobile’s mobile phone service) brought a proposed class action, alleging that T-Mobile’s practice of imposing a $200 fee for early termination of the contract was an unfair business practice and that the fee constituted unlawful liquidated damages. The company’s service agreement contained a mandatory arbitration provision with a class action waiver. The court held that the arbitration agreement was at least minimally procedurally unconscionable, despite the presence of market alternatives, because it was offered on a take-it or leave-it basis. Id. at 581-86, 61 Cal.Rptr.3d 344. The court also found that the class action waiver had a high degree of substantive unconsciona-bility, because the $200 early termination fee at issue was “sufficiently small” to bring the case within the ambit of Discover Bank. Id. at 586-88, 61 Cal.Rptr.3d 344. The court cited with approval the decision in Cohen v. DirecTV, 142 Cal.App.4th 1442, 48 Cal.Rptr.3d 813 (2006), where the court found that damages that might approach $1000 did not take the class action waiver in that case outside a setting in which “disputes between the contracting parties predictably involve small amounts of damages.” Gatton, 152 Cal.App.4th at 587, 61 Cal.Rptr.3d 344 (citing Cohen, 142 Cal.App.4th at 1452, 48 Cal.Rptr.3d 813). In the present case, plaintiffs appear to be suggesting that Gatton (relying on Cohen) modified the Discover Bank rule so that a “small amount[ ] of damages,” Discover Bank, 36 Cal.4th at 162, 30 Cal.Rptr.3d 76, 113 P.3d 1100, can actually be as high as $1000, or more. Plaintiffs contend that Gatton is relevant to what they characterize as a ruling in the February 13, 2007, order that the agreement at issue in the present case was not a “take it or leave it” contract because it provided the plaintiffs with a 21-day rescission period. In Gatton, the court held that a contract that “relegates to the subscriber only the opportunity to adhere to the contract or reject it” is a contract of adhesion, and rejected the contention that the existence of market choice altogether negates the “oppression” aspect of procedural unconscionability. Gatton, 152 Cal.App.4th at 582-83, 61 Cal.Rptr.3d 344. Plaintiffs claim that the ruling in the February 13, 2007, order therefore conflicts with California law. Plaintiffs’ third argument is that the court improperly rejected plaintiffs’ factual allegations. Relying on Johnston v. Beazer Homes Texas, L.P., 2007 WL 708555, at *2 (N.D.Cal., March 2, 2007), plaintiffs assert that when considering a motion to compel arbitration, the court is required to apply a standard similar to the federal summary judgment standard; and that where such a motion is opposed on the ground that no valid agreement to arbitrate was made, the court should give the opposing party the benefit of all reasonable doubts and inferences that may arise. Specifically, plaintiffs take issue with the statement in the February 13, 2007 order that “[i]t makes no sense to claim that Dell had a ‘deliberate scheme’ to manufacture four computer models that did not work or that Dell would deliberately sell defective computers — under warranty — to thousands of customers.” February 13, 2007, Order at 7. Plaintiffs contend that the court simply adopted an argument made by Dell, thereby failing to afford plaintiffs the benefit of reasonable doubts and inferences to which they are entitled. Plaintiffs maintain that the complaint asserts “a deliberate fraudulent scheme by Dell to knowingly manufacture and sell defective computer models that it knew would fail shortly outside the warranty period.” In support, they cite the complaint, which alleges that Dell deliberately failed to adequately test the computers, deliberately falsely represented that the computers were free of defects and were of merchantable quality, and deliberately failed to remove the faulty computers from the market. Plaintiffs contend that the court committed error by rejecting these allegations. Plaintiffs’ fourth argument is that the court erred in ruling that plaintiffs would lose no substantive rights if Texas law were applied to this case, because they would lose only the ability to utilize the procedural class action device. They contend that the right to bring a class action is not merely procedural, and that under Gatton and Discover Bank, class actions may, especially in the consumer context, be inextricably linked to the vindication of substantive rights. 2. Douglas v. U.S. District Court After plaintiffs filed their motion on July 12, 2007, they requested leave to file a decision issued by the Ninth Circuit on July 18, 2007 — Douglas v. U.S. District Court, 495 F.3d 1062 (9th Cir.2007). In Douglas, the plaintiff contracted for long distance telephone service with America Online (“AOL”). The charges were billed to his credit card. Talk America, Inc. (“Talk America”) subsequently acquired the long distance service business from AOL, and added new provisions to the customer service contract, including increased service charges, a class action waiver, and a choice-of-law provision requiring application of New York law. Talk America posted the revised contract on its website, but never notified the plaintiff directly that the contract had changed. Allegedly unaware of the changes, the plaintiff continued using Talk America’s services for four years. After he became aware of the increased service charges, he filed a proposed class action in federal district court, asserting violations of the Federal Communications Act and various California consumer protection statutes. Talk America moved to compel arbitration based on the modified contract, and the district court granted the motion. The district court determined under California’s choice-of-law rules that New York had a substantial relationship to Talk America, and that New York law did not violate a fundamental policy of California; and thus, that New York law should be applied in analyzing whether the arbitration clause was unconscionable. The district court found that the arbitration provision was not procedurally unconscionable under New York law because plaintiff had a choice of other providers and therefore did not lack “meaningful choice” when he entered into the agreement. As for substantive unconscionability, the district court noted that the only challenge to the arbitration clause was to the class action waiver, and found that under New York law, class action waivers are neither unconscionable nor violative of public policy. The Ninth Circuit granted plaintiffs petition for a writ of mandamus, and vacated the order compelling arbitration. The Ninth Circuit held that the district court had erred in holding that the plaintiff was bound by the terms of the revised contract when he had not been properly notified of the changes. Id. at 1067. The Ninth Circuit also stated that even if the plaintiff had been bound by the new terms of the contract, the new terms “probably would not be enforceable in California because they conflict with California’s fundamental policy as to unconscionable contracts.” Id. (emphasis added). The Ninth Circuit asserted that California’s interest in “protecting the thousands of citizens in the California subclass of this class action from unconscionable contracts” was materially greater than New York’s interest because Talk America was a Pennsylvania corporation with its principal place of business in Pennsylvania, not a New York corporation. Id. at 1067 n. 2. The court then added that “if New York law conflicts with a fundamental policy of California, the choice-of-law provision cannot be enforced and California law would apply.” Id. (emphasis added). The court then considered whether the class action waiver was unconscionable under California law. The court first noted that it had previously found that the California Court of Appeal has “ ‘rejected the notion that the availability ... of substitute ... services alone can defeat a claim of procedural unconscionability,’ ” based on the fact that “[i]n California, a contract can be procedurally unconscionable if a service provider has overwhelming bargaining power and presents a ‘take-it-or-leave-it’ contract to a customer — even if the customer has a meaningful choice as to service providers.” Id. at 1068 (quoting Nagrampa v. MailCoups, Inc., 469 F.3d 1257, 1283 (9th Cir.2006)). With regard to the question whether the class action waiver was substantively unconscionable, the court first noted that the district court below had cited Provencher v. Dell, Inc., 409 F.Supp.2d 1196 (C.D.Cal. 2006), for the proposition that class action waivers are not per se substantively unconscionable in California. However, the Ninth Circuit asserted, the California Court of Appeal in Cohen had “expressly disavowed Provencher. ” Id. (citing Cohen, 142 Cal.App.4th at 1445 n. 13, 48 Cal. Rptr.3d 813). The Ninth Circuit concluded that [a] class action waiver provision thus may be unconscionable in California. Whether it is depends on the facts and circumstances developed during the course of litigation.... The district court clearly erred in holding that the clauses (assuming they are part of the contract at all) are consistent with California policy and therefore enforceable as a matter of law. Id. Oddly, the Ninth Circuit never mentioned Discover Bank, despite the fact that it was discussed by the court below. The district court in Douglas noted that while Discover Bank had outlined a test to determine whether a class action waiver provision is unconscionable, the California Supreme Court had specifically stated that it did not hold all class action waivers to be necessarily unconscionable. Douglas v. Talk America, Inc., No. CV-06-3809, 2006 WL 5217301, *4-5 (C.D. Cal., Oct. 20, 2006) (citing Discover Bank, 36 Cal.4th at 162, 30 Cal.Rptr.3d 76, 113 P.3d 1100). The district court then added, “[S]ee also Provencher v. Dell, Inc., 409 F.Supp.2d 1196, 1201 (C.D.Cal.2006) (‘In Discover Bank, the California Supreme Court made it clear that there is no blanket policy in California against class action waivers in the consumer context.’) (emphasis added).” In other words, the district court cited Provencher only for its citation of Discover Bank. Provencher involved facts similar to the facts in the present case — the plaintiff purchased a computer from Dell over the Internet. The purchase was subject to written “Terms and Conditions” providing that the purchaser could return the computer within 30 days if he/she was unsatisfied with either the computer or the agreement. The agreement was on the website, and Dell also sent the plaintiff a copy of the agreement with the computer. The agreement included an arbitration provision containing a class action waiver, and also provided that Texas law would govern any dispute. The plaintiff filed a proposed class action alleging numerous causes of action, primarily based on Dell’s alleged failure to repair plaintiffs computer to his satisfaction. Unlike the present case, the plaintiff sought certification of a nationwide class, and all but one of the state law claims were brought under Texas law. The district court found that enforcing Texas law would not violate a fundamental policy of California. Provencher, 409 F.Supp.2d at 1201. The court cited the standard set forth in Discover Bank, and found that the plaintiff had “put forth no evidence to suggest that this case involves such a small amount of money and fraudulent avoidance of liability on the part of Dell.” Id. at 1201-02 (citing Discover Bank, 36 Cal.4th at 162-63, 30 Cal.Rptr.3d 76, 113 P.3d 1100). First, the court found that the computer purchased by the plaintiff was not “an essential consumer good,” and noted as well that the plaintiff could have purchased a computer from numerous other retailers and manufacturers. Id. at 1202. Further, the court found, the plaintiffs claims did not involve a small amount of money — the plaintiff had paid $1600 for the computer, including more than $250 for the extended warranty; and he alleged numerous claims and sought compensatory and punitive damages, in addition to attorney’s fees. Id. In a footnote, the court added that the total damages sought would be considerable — hundreds of millions of dollars — in light of the fact that the plaintiff had filed the suit on behalf of 500,000 purchasers of Dell computers. Id. at 1202 n. 7. The court also found that the facts in the case before it did not resemble the facts the California Supreme Court had found so troubling in Discover Bank — where the plaintiff credit cardholder had alleged that the Bank had engaged in a deceptive practice of representing to cardholders that late payment fees would not be assessed if payment was received by a certain date, when, in actuality, the Bank assessed late fees if payment was received after 1:00 p.m. on that date, thereby leading to minimal damages of approximately $29 as to each affected individual cardholder. Id. at 1203 citing Discover Bank at 152, 30 Cal.Rptr.3d 76, 113 P.3d 1100. The court noted that the California Supreme Court had found that the Bank had abused its superior bargaining power to carry out a “scheme,” through the class action waiver, to deliberately cheat large numbers of consumers out of individually small amounts of money — and that the class action waiver" was an exculpatory provision in violation of California public policy because the Bank, by design, was granting itself both a license to push the boundaries of good business practices to their furthest limits and immunity from any wrongdoing. Id. (citing Discover Bank at 153, 30 Cal.Rptr.3d 76, 113 P.3d 1100). In contrast to the arbitration provision and class action waiver in Discover Bank, the Provencher court found that the arbitration provision and class action waiver in the case before it did not act to exempt Dell from the consequences of its alleged wrongdoing, but simply limited the means by which the plaintiff could enforce his substantive rights against Dell. Id. at 1203-04. Accordingly, the court found that the arbitration provision and class action waiver did not violate a fundamental policy of California, and that Texas law applied. Id. In Cohen, a subscriber to DirecTV’s satellite television service filed a proposed ■class action alleging that DirecTV’s covert degradation of certain high-definition transmissions violated the CLRA and the UCL. The plaintiff sought damages for costs of equipment and monthly subscription fees, restitution, and an injunction. DirecTV moved to compel arbitration under the provision in the customer agreement, which also prohibited class litigation of claims in arbitration. The Court of Appeal found the prohibition on class litigation to be unconscionable and unenforceable, under the guidelines set by Discover Bank. First, the court found that the customer agreement at issue was a “consumer contract of adhesion” — as in Discover Bank, the plaintiff was “given an amendment to [his customer] agreement in the form of a ‘bill stuffer.’ ” Cohen, 142 Cal.App.4th at 1451, 48 Cal.Rptr.3d 813 (quoting Discover Bank, 36 Cal.4th at 160, 30 Cal.Rptr.3d 76, 113 P.3d 1100). Similarly, the plaintiff was “ ‘deemed to accept [it] if he did not close his account.’ ” Id. Second, the Cohen court found that “customer agreements with television programming providers, like other consumer contracts of adhesion, necessarily occur ‘in a setting in which disputes between the contracting parties predictably involve small amounts of damages.’ ” Id. at 1452, 48 Cal.Rptr.3d 813 (quoting Discover Bank, 36 Cal.4th at 162, 30 Cal.Rptr.3d 76, 113 P.3d 1100). The court noted that DirecTV’s fee for its high-definition services was $10.95 a month, and that the contracts impose additional fees in small amounts. The court added, however, that even if one considered the value of DirecTV’s high-definition package — which could amount to as much as $1000 (“not an insignificant sum”) — this additional element of damages did not “affeet[ ] the foundational premise that DirecTV’s class action waiver occurs in a setting where disputes between the contracting parties ‘predictably involve small amounts of damages.’ ” Id. The court concluded that “[d]amages that may or may not exceed $1000 do not take DirecTV’s class action waiver outside ‘a setting in which disputes between the contracting parties predictably involve small amounts of damages.’ ” Id. Third, the Cohen court found that the class action waiver was unconscionable because the plaintiff alleged that the party with the superior bargaining power (DirecTV) had “ ‘carried out a scheme to deliberately cheat large numbers of consumers out of individually small amounts of money.’ ” Id. (quoting Discover Bank, 36 Cal.4th at 162-63, 30 Cal.Rptr.3d 76, 113 P.3d 1100). The court noted that DirecTV had represented its high-definition package as providing “astonishing picture clarity,” but then had reduced its HDTV transmission quality by 33%. The court concluded that the customers were being deliberately cheated, because they were paying for something (HDTV) they were not receiving. Following this analysis of the Discover Bank requirements, the Cohen court stated in a footnote that it did not find the Provencher court’s analysis “compelling” because of its conclusion that the amount of class-wide damages could reach a significant amount — hundreds of millions of dollars — because the Provencher court had “focused on aggregate amounts, not individual amounts.” Cohen, 142 Cal.App.4th at 1455 n. 13, 48 Cal.Rptr.3d 813. It was this statement in Cohen that led the Ninth Circuit in Douglas to suggest that the California Court of Appeal had “disapproved” Provencher — which is true only in a limited sense. Moreover, the Douglas court omitted to state that Cohen also distinguished Provencher on the basis that the plaintiff there had “entered into his transaction with full knowledge of its terms, and indeed with a 30-day rescission option, rather than having the class action waiver presented by means of amendment as a ‘take it or leave it’ bill staffer” (as in Cohen and also in Discover Bank.) See Cohen, 142 Cal.App.4th at 1455 n. 13, 48 Cal.Rptr.3d 813. In other words, there was significantly less procedural unconsciona-bility in Provencher than the Cohen court found in the case before it. 3. Dell’s Opposition In its opposition, filed July 27, 2007, Dell contends that reconsideration should be denied because plaintiffs have not established a change in law since the time of the February 13, 2007, ruling — asserting in particular that neither the Gatton nor the Douglas decisions announce any new or changed law or suggest any different outcome in this case, and that plaintiffs’ arguments regarding the issues of burden of proof and pleading requirements are incorrect and also were never previously presented to the court as required by Local Rule 7-9(b). Dell’s first argument is that Gatton does not announce a change in the law. Dell asserts that in holding that T-Mobile’s service agreement was a “take-it or leave-it” contract, the Gatton court did not consider what effect a rescission period would have had on that conclusion. Moreover, Dell notes, the Gatton court favorably cited the Cohen decision — which had expressly distinguished the situation where a consumer had time to reconsider and rescind its purchase agreement. Cohen, 142 Cal.App.4th at 1455 n. 13, 48 Cal.Rptr.3d 813. Thus, Dell asserts, the February 13, 2007, order does not conflict with Gatton. Dell also contends that the holding that the $200 early termination fee in Gatton was “sufficiently small” does not mandate a finding that the damages here — approximately $1,500 plus statutory damages and civil penalties and attorney’s fees — are sufficiently small to be governed by the rule in Discover Bank. Dell argues further that the Gatton court’s citation to Discover Bank (for the proposition that class action waivers that effectively exculpate defendants from alleged fraud may be unenforceable) does not conflict with the court’s opinion here, because Gatton merely applied Discover Bank to the facts before it, and because this court carefully considered Discover Bank when it entered the order compelling arbitration in this case. Dell’s second argument is that Douglas did not announce a change in the law. Dell contends that this court’s analysis is consistent with Douglas, noting that this court recognized that California has a “limited policy” against class action waivers, and that it distinguished that limited policy on the grounds that the plaintiffs here had damages that were not “small,” that they were given 21 days to reconsider, and that plaintiffs’ own allegations did not describe the type of deliberate scheme found in Discover Bank to be intended to cheat large numbers of customers out of individually small amounts of money. Dell notes further that Douglas did not overrule Provencher, a case that was also cited in the February 13, 2007, order. Douglas simply remarked that Cohen had “disapproved” Provencher. Dell points out in addition that the Provencher court also discussed the plaintiffs individual damages when doing its Discover Bank analysis, and didn’t base its conclusion on the amount of the aggregate class damages. Dell’s third argument is that plaintiffs did not previously present the court with any argument or authority on the burden of proof for the choice of law question. In particular, Dell asserts, plaintiffs did not make the argument in their opposition to Dell’s motion to compel arbitration that under AOL v. Superior Court, the burden of proof on the choice of law issue should have been shifted to Dell because of the presence of CLRA claims in the case. Thus, Dell submits, the issue cannot properly be presented to the court on a motion for reconsideration. Moreover, Dell asserts, plaintiffs have failed to explain what difference the burden of proof issue makes in terms of changing the outcome of this matter, as the February 13, 2007, order was based on a review of plaintiffs’ allegations, a review of the holding in Discover Bank, and the undisputed facts regarding the parties’ residences and transactions. Dell contends that even if plaintiff had properly raised the issue, it would not change the outcome here. Plaintiffs argue in their opposition that under America Online, the traditional burden of proof regarding enforcement of a choice of law clause shifts to the party seeking its enforcement when there is a CLRA claim in the case. But, Dell notes, the ruling in America Online was directed to the forum-selection clause, not the choice-of-law clause. Thus, the Court of Appeal did not apply Restatement § 187(2), the test applied to questions of enforcement of choice-of-law provisions. In addition, Dell asserts, America Online did not involve an arbitration provision or the limits the FAA places on judicial consideration of non-arbitration merits issues. Dell notes that the Ninth Circuit held in Ting v. AT&T, 319 F.3d 1126 (9th Cir.2003) that because the CLRA applies only to “consumer contracts,” and not to “any contract,” the FAA preempts consideration of the CLRA’s anti-waiver provision, Civil Code § 1751, in the context of evaluating the enforceability of an arbitration provision with a class waiver. In Ting, which preceded Discover Bank by two years, the plaintiffs alleged that certain provisions AT & T had added to its consumer services agreement violated the CLRA — in particular, the provision mandating binding arbitration of disputes against AT & T and barring customers from pursuing claims against AT & T on a classwide basis. The district court found the “remedies” provisions of the consumer services agreement unconscionable. AT & T appealed, arguing (among other things) that the application of California’s consumer laws was preempted by the FAA. The Ninth Circuit first noted that federal courts should enforce state law contract defenses when considering the validity or enforceability of arbitration provisions, but only when those defenses are “generally applied to all contracts, and not limited to arbitration clauses.” Ting, 319 F.3d at 1148 (citation and quotation omitted). The court held that despite the fact that in barring class-action lawsuits, the consumer services agreement violated the express terms of the CLRA, application of the anti-waiver provision (Civil Code § 1751) was nonetheless preempted by the FAA because the CLRA does not apply to all contracts, but only to consumer contracts, and is therefore not a “law of general applicability.” Id. at 1147-48. Similarly, Dell argues, the FAA in this case preempts consideration of Civil Code § 1751 in any evaluation of whether Dell’s class action waiver violates fundamental public policy under California law. Dell’s final argument is that plaintiffs did not previously present argument regarding the legal standard applicable to the allegations in the complaint. Dell asserts that the case plaintiffs rely on in support of their argument that the applicable standard is the standard applied in motions for summary judgment — Johnston v. Beazer Homes — actually holds that the summary judgment standard applies only where the motion to compel arbitration is “opposed on the ground that no valid agreement to arbitrate was made.” See Johnston, 2007 WL 708555, at *2. 4. Plaintiffs’ Reply In their reply, filed August 1, 2007, plaintiffs contend that several of Dell’s arguments are misleading. First, they take issue with Dell’s assertion that Johnston is inapplicable here because it governs situations in which the validity of an arbitration clause is in dispute, not its enforceability. Plaintiffs assert that the question whether an arbitration clause is valid or not is precisely the question at issue in the un-conscionability analysis as to its enforceability. Plaintiffs agree that they do not dispute the existence of an arbitration clause in Dell’s service contract. But, they argue, the question whether that clause is valid is determined by whether or not it is enforceable. For example, they note that in Douglas, the Ninth Circuit applied the well-known rule that in evaluating the validity of an arbitration clause, the court must apply ordinary state law defenses to contract formation, including the doctrine of unconscionability, to determine whether or not it is enforceable. Douglas, 495 F.3d at 1067 n. 2. With regard to Dell’s contention that the arbitration provision is not procedurally unconscionable because the customer has 21 days to rescind the agreement, plaintiffs assert that it is still a “take it or leave it” proposition. They also argue that under Gatton, the fact that a customer might be able to buy a computer from another manufacturer is not determinative. See Gatton, 152 Cal.App.4th at 583-85, 61 Cal. Rptr.3d 344. They suggest that a true alternative would be to allow customers to remain customers but still opt out of arbitration requirements. With regard to Dell’s argument that plaintiffs failed to address the issue of who bears the burden of establishing choice of law, they assert that this issue was not raised until Dell’s reply in support of the motion to compel arbitration, where plaintiffs claim that Dell argued for the first time that plaintiffs had failed to demonstrate that California has a materially greater interest than Texas. However, they do not respond to the substance of Dell’s argument on this issue. Finally, with regard to Dell’s assertion that the FAA preempts the holding of America Online — that the burden is shifted to Dell because of the presence of the CLRA claims in the case — plaintiffs argue that the FAA preempts only those 'rules of law that apply solely to arbitration clauses as opposed to all contracts. They contend that because the holding in America Online had nothing to do with an arbitration provision, and the court applied the burden-shifting rule in the context of an ordinary contract analysis of a choice-of-forum clause, there can be no preemption. At the conclusion of their reply brief, plaintiffs again request leave to file a motion for reconsideration, or, in the alternative, “now that the parties have briefed the issues,” request that the court simply grant the motion to reconsider. 5. Subsequent Filings Plaintiffs filed four additional requests during the month of August 2007, seeking leave to file recent decisions. Dell filed a response that addresses the first three of those requests. In October 2007, Dell also filed a request for leave to file a recent decision. The court has considered all these recent decisions, and the requests are GRANTED. a. Brazil v. Dell On August 6, 2007, plaintiffs requested leave to file the decision in Brazil v. Dell, Inc., 2007 WL 2255296 (N.D.Cal., Aug. 3, 2007). In Brazil, two individuals who purchased Dell computers online through Dell’s website filed a proposed class action alleging that the discounts offered to them when they purchased the computers were falsely advertised, as they were discounts from prices higher than those that were normally offered for the “discounted” items. In other words, the purported “discount” was really no discount because Dell had raised the price before applying the discount. Plaintiffs asserted claims under the CLRA, and Business & Professions Code §§ 17200 and 17500. As in the present case, the purchase was governed by “Terms and Conditions” containing an arbitration provision, a class action waiver, and a provision designating Texas law as the governing law. Dell moved to compel arbitration, and plaintiffs argued that the choice-of-law provision was invalid because applying Texas law would conflict with California’s fundamental policy of protecting consumers from the oppressive use of superior bargaining strength and the false advertising alleged in the complaint. The court analyzed the class action waiver under Discover Bank, and found that the agreement was a contract of adhesion under California law; that plaintiffs had alleged that Dell (the party with superior bargaining power) had carried out a scheme to deliberately cheat large numbers of consumers; and that the amount of damages the plaintiffs claimed were small — only the amount of the cost to them of the alleged inflation of the price from which the discounts were taken from the usual price of the discounted item — an amount the court estimated to be, at most, “a few hundred dollars.” Id. at *5-7. Based on this analysis, the court found that “it appears that Texas law conflicts with California public policy in the circumstances presented by this case.” Id. at *7. The court then considered whether the arbitration clause was unconscionable under California law, and found that it was both minimally procedurally unconscionable, and substantively unconscionable. The court indicated, however, that since the inquiry whether a class action waiver provision will be considered unconscionable in California “is a fact-specific, case-by-case inquiry,” id. at *4 (citing Discover Bank, Cohen, and Douglas), the denial of the motion to compel arbitration would be without prejudice to renewing the motion “should facts or circumstances develop that would materially impact this court’s assessment of the application of the principles articulated by Discover Bank, ” id. at *8. b. Oestreicher v. Alienware On August 13, 2007, plaintiffs requested leave to file the decision in Oestreicher v. Alienware Corp., 502 F.Supp.2d 1061 (N.D.Cal.2007). In Oestreicher, the plaintiff purchased a $4,149 laptop computer from defendant Alienware via the company’s website, and subsequently filed a proposed class action alleging that Alienware had made misrepresentations and concealed material information in its sale of computers it knew to be defective. Plaintiff asserted claims under the CLRA and Business & Professions Code §§ 17200 and 17500, and also alleged claims of breach of warranty and unjust enrichment. Alienware’s “Terms and Conditions” contained an arbitration provision and a class action waiver, and provided that Florida law would govern any disputes concerning the Terms and Conditions or sales of the computer. Alienware moved to compel arbitration, and plaintiff argued that the arbitration provision was unconscionable because of the class action waiver. The court denied the motion, finding that the class action waiver was unconscionable because the facts met Discover Bank’s three criteria. First, the court found that the contract was presented on a “take it or leave it” basis. Id. at 1067. Second, with regard to the amount of damages, the court noted that the Court of Appeal in Cohen had rejected the proposition that sums exceeding $1000 necessarily fall outside the framework of Discover Bank, and also had rejected the reasoning in Provencher regarding the amount of recovery. Based on Cohen, the court found that the $4,149 that the plaintiff paid for his computer was within the Discover Bank limit. Id. at 1067-68. Finally, the court found that the complaint alleged that Alienware had acted deliberately to deprive consumers of money, in that Alienware was alleged to have been aware of defects in its products, concealed those defects from consumers, and chose to sell defective products rather than correcting the defects. Id. at 1068. c. Shroyer v. New Cingular On August 20, 2007, plaintiffs requested leave to file the decision in Shroyer v. New Cingular Wireless Sews., Inc., 498 F.3d 976 (9th Cir.2007). In Shroyer, the plaintiff filed a proposed class action against New Cingular Wireless Services and AT & T, alleging that he and the members of the proposed class had suffered injuries as a result of the 2004 merger between Cingu-lar Wireless and AT & T Wireless, which had created New Cingular Wireless Services. The plaintiff asserted that when the two companies merged, the services received by AT & T’s customers deteriorated, and that Cingular then attempted to induce AT & T’s customers to transfer their service plans and equipment from AT & T to Cingular in order to boost Cingular’s profits. In particular, he claimed that when customers complained about problems associated with their service plans, they were told that they could get a new “chip” that would solve the problems, but only if they extended their current contracts with Cin-gular. Plaintiff asserted claims under the CLRA and Business & Professions Code §§ 17200 and 17500, and also asserted claims of breach of contract, breach of the implied covenant, fraud, and unjust enrichment. The plaintiffs new service agreement with Cingular included an arbitration provision and a class action waiver, but apparently no choice-of-law provision. Cingular moved to compel arbitration and to dismiss the action, and the district court granted the motion. The court found that plaintiff had not met his burden of establishing both procedural and substantive uncon-scionability; that plaintiff had not shown that the arbitration provision operated to insulate Cingular from liability; that the challenge to the arbitration provision was preempted by § 2 of the FAA; and that the FAA preempted the CLRA’s anti-waiver provision as applied to arbitration provisions. See Shroyer v. New Cingular Wireless Services, Inc., No. CV-06-1792, slip op. at 3-7 (C.D. Cal., filed May 26, 2006). Shroyer is significant because it is the first reported Ninth Circuit decision to apply the Discover Bank standard in an analysis of whether a class action waiver in an arbitration provision is unconscionable. Previously, in Ting v. AT&T and Ingle v. Circuit City Stores, Inc., the Ninth Circuit had ruled that any bar on class actions in an arbitration agreement would be unconscionable under California law because it would be an essentially unilateral bar (as the class action device is used by consumers or employees against companies, but not by companies against consumers or employees). Ting, 319 F.3d at 1150; Ingle, 328 F.3d 1165, 1175-76 (2003). In Shroyer, the Ninth Circuit held that the arbitration provision was both procedurally and substantively unconscionable because of the class action waiver. The court found that the Discover Bank requirements were satisfied — Cingular’s agreements were consumer contracts of adhesion, presented on a “take it or leave it” basis; the agreements “occurred in a setting in which disputes between the contracting parties predictably involve small amounts of damages,” as the claims involved “individual damages in the hundreds of dollars, an objectively small amount, and a smaller amount than the $1,000 amount that the Court of Appeal in Cohen had found to be a small enough sum to satisfy the second element of the Discover Bank test;” and the complaint alleged that the party with the superior bargaining power had carried out a scheme to cheat large numbers of customers out of individually small sums of money. Shroyer, 498 F.3d at 983-84 (quotations and citations omitted). d. Dell’s response to plaintiffs’ requests On August 23, 2007, Dell filed a response to plaintiffs’ requests for leave to file the Brazil, Oestreicher, and Shroyer decisions. Dell argues that the reasoning in Brazil does not mandate a different outcome in the present case. Dell notes that in Brazil, the court stated that it did not hold that a class action waiver provision would be considered unconscionable under circumstances other than the ones presented in that case, and also noted that other courts had held the class action waiver provision in Dell’s agreement to be enforceable in circumstances involving warranty claims. The court added that its decision was not intended to address or to apply to the facts or circumstances of those cases (including the present case). As for Oestreicher, Dell notes only that the order denying the motion to compel arbitration is being appealed to the Ninth Circuit. (Case No. 07-16531, appeal docketed August 28, 2007). Fin