Khan v. Dell, Inc.

Raheel Khan (plaintiff) purchased a computer from Dell, Inc. (defendant) through Dell’s website. In completing the online purchase, Khan was required to accept Dell’s Terms and Conditions of Sale that included an arbitration provision. The provision stated, in capital letters, that disputes “shall be resolved exclusively and finally by binding arbitration administered by the National Arbitration Forum (NAF).” The NAF and the Federal Arbitration Act (FAA) rules were incorporated into the agreement. After the parties entered the agreement, the NAF was subject to government investigation and ultimately was barred from administering consumer arbitrations based on deceptive practices, including appointing anticonsumer arbitrators. Khan sought repair of his computer past its warranty period, and Dell refused. Khan filed suit, and Dell filed a motion to compel arbitration. Khan argued that the arbitration agreement was not enforceable because the NAF was unable to conduct the arbitration. Khan further argued that this did not amount to a lapse in arbitrator selection, which would allow for a substitute arbitrator under the FAA. Khan thus argued that litigation rather than arbitration was appropriate. The district court ruled that it could not compel the parties to arbitrate before a substitute arbitrator they did not agree to and denied Dell’s motion.