Inside Samsung's Legal Nightmare

By Chris Combs




Samsung is having a bad year. A very bad year.

First there were the reports that the lithium batteries in their Note 7 phones were, well, exploding. Since random explosions are not a feature people typically look for when purchasing technology, Samsung was forced to recall 2 million of their phones.

To add insult to injury, the Galaxy Note 7 was then banned from airline flights and added to a list of banned items such as fireworks and lighter fluid. Ouch. Shortly after that news, Samsung entirely cancelled the Note 7 line from production, an unprecedented move for the electronics giant.

And then came the lawsuits. So far there are at least two class-action lawsuits pending, one in the United States and one in Korea. Reports suggest Samsung is already anticipating future lawsuits and have brought on major legal counsel: Gwangjang law firm and Quinn Emanuel Urquhart & Sullivan. Both firms have worked with Samsung in the past on their patent disputes with Apple.

If only Samsung’s very bad year ended there, they may only be having a somewhat bad year. But then their washing machines started blowing up.

It seems consumers all over the country have been reporting hearing loud booms followed by holes being ripped in walls, their houses shaking, metal shards flung into hallways and laundry rooms flooding.

And then more legal action followed.

Instead of lithium batteries being the cause, these explosions were a result of violently vibrating forces in the washing machines, which cause the tubs to “become unfastened, resulting in a dramatic centrifugal explosion that destroys the machine and nearby property.”

Plaintiffs allege that Samsung knew about their exploding washing machine problems for years, but did little to warn consumers.

One month after the initial lawsuit was filed, the U.S. Consumer Product Safety Commission issued a statement about “safety issues” with Samsung washers.

In a statement released on its website, CPSC said it is “actively and cooperatively working with Samsung to address safety issues related to certain top-load washing machines made between March 2011 and April 2016.”

Samsung, for its part, declined to comment on pending litigation, according to CNN, but released a statement on its website addressing the CPSC warning.

In its statement, Samsung called these incidents “rare” and said affected units “may experience abnormal vibrations that could pose a risk of personal injury or property damage.”

But the lawsuit dismisses the claim of “rare” occurrences and paints a drastically different scenario.

“Samsung knowingly, affirmatively and actively misrepresented and concealed the true character, quality and nature of the washing machines and sold the washing machines into the stream of commerce as if they were safe for use,” the lawsuit alleges.

The lawsuit has called on Samsung to take “corrective” action by releasing a consumer warning, issuing a national recall, discontinuing the manufacture and distribution of the affected machines and informing the public of the pending class action lawsuit lodged against the company.

In its statements Samsung and CPSC said they are working on a “remedy” that will “help ensure that there are no further incidents” but gave no further information.

No Rest for Samsung’s Legal Department

When a major company like Samsung is hit with a lawsuit, never mind multiple class action lawsuits, their legal department is on call 24/7 trying to handle and clean up the mess. As soon as a product (let alone 2 products) gets recalled, it’s the legal department that works around the clock to manage and renegotiate all of the manufacturing agreements.

To do this, they must read all contracts and terms that outline exactly what happens should a product ever be recalled. Are there fines, or is some kind of compensation involved when an agreement is broken with a manufacturer?

When any kind of issue arises, it’s not just the manufacturing agreements that are affected, but also the agreements with distributors and other partners and contractors that are affected as well. Right now, Samsung’s legal team is experiencing a nightmare, having to review, negotiate and draft all new contracts. They are spending countless hours manually reviewing their contracts to pull out critical information regarding obligations, payment terms, refunds, etc.

This is exactly the type of problems that having a platform like LinkSquares can save time and costs around. Specifically helping companies search for important information within their legal contracts and customer agreements. We not only convert PDF files into readable digital files, our solution makes that conversion 99% more accurate than what current technology allows.

On top of this, we’ve created a search engine so legal teams can find information across any number of contracts quickly and easily, which means no more time-consuming and costly manual reviews.

Hopefully you never experience the legal nightmare Samsung is currently experiencing, but if you are a part of a legal, finance or operations team working with contracts, check out LinkSquares to save costs on outside counsels and help your contract teams reduce time spent on manual reviews.


Topics: Contract Management Contract Negotiation legal Risk