Feeney v. Dell Inc.

We decide in this case whether a statutory right to participate in class action lawsuits can permissibly be foreclosed by a provision in a consumer contract compelling individual arbitration. The plaintiffs, John A. Feeney and Ded-ham Health and Athletic Complex (Dedham Health), appeal from an order of a judge in the Superior Court compelling arbitration of their claims — brought as a putative class action — alleging that Dell improperly collected Massachusetts sales tax on the purchase of optional service contracts sold in connection with the purchase of Dell computers when (according to the plaintiffs) no such tax was due, and that the collection of such tax violated the Massachusetts consumer protection act, G. L. c. 93 A. We conclude that the provision compelling individual arbitration in the plaintiffs’ consumer contracts is not enforceable because it is contrary to the fundamental public policy of the Commonwealth favoring consumer class actions under G. L. c. 93A. We also conclude, however, for reasons we shall explain, that because the plaintiffs’ complaint does not contain sufficient allegations to make out a claim under G. L. c. 93A, it should be dismissed without prejudice. We reverse the order compelling arbitration and remand for further proceedings.4

1. Factual background. We summarize the relevant facts from *194the judge’s memorandum of decision and from undisputed facts in the record. Dell Catalog Sales Limited Partnership (Dell Catalog) and Dell Marketing Limited Partnership (Dell Marketing), wholly owned subsidiaries of Dell Inc. (formerly Dell Computer Corporation), sold computers and related products to consumers and businesses and, in connection with such sales, also sold optional computer hardware service contracts under which Banc-Tec, Inc. (BancTec); QualxServ LLC; or Dell Marketing agreed to provide onsite computer repairs to the purchasers. Feeney and Dedham Health purchased Dell computer hardware from Dell Catalog and Dell Marketing, respectively, and optional service contracts provided by either Dell Marketing or BancTec.5 Dell Catalog and Dell Marketing collected sales tax on the plaintiffs’ respective optional service contracts, totaling $13.65 from Feeney and $215.55 from Dedham Health.6

The “Dell Terms and Conditions of Sale”7 (terms)8 in effect at the time of the plaintiffs’ purchases contain an arbitration clause compelling arbitration of any claim against Dell (but not binding Dell in connection with any claims it may have against a customer) and mandating that any such claims be arbitrated on *195individual basis.9 Specifically, the terms provide that claims against Dell “arising from or relating to this Agreement” shall be resolved “exclusively and finally” by arbitration, and that the arbitration “will be limited solely to the dispute or controversy between Customer and Dell.”10 The effect of these provisions is to prohibit a Dell customer from participating in a class action — whether by litigation or arbitration — against Dell.11

The terms also include a choice-of-law provision that provides: “This agreement and any sales thereunder shall be governed by the laws of the State of Texas, without regard to conflicts of laws rules.”12

*1962. Prior proceedings, a. Prearbitration. Feeney commenced a putative class action against Dell Computer Corporation (Dell Computer) in March, 2003,13 alleging that its “deliberate and systematic practice” of charging and collecting from plaintiffs and other Massachusetts residents monies falsely characterized as a lawful sales tax on the purchase of optional service contracts for computers constituted “unfair or deceptive acts or practices” in violation of G. L. c. 93A and regulations issued by the Attorney General of Massachusetts.14 See G. L. c. 93A, § 2.15 Asserting that they and other Massachusetts customers had suffered damages because Dell Computer caused them to pay monies for a “tax” that had not been imposed by any Massachusetts taxing authority, the plaintiffs sought relief under provisions of the consumer protection act providing for class actions, G. L. c. 93A, §§ 9 (2)16 and 11.17 On July 3, 2003, Dell Computer moved to stay the proceedings and to compel arbitration pursuant to the Federal Arbitration Act (FAA), 9 U.S.C. § 4 (2000). The plaintiffs responded that the prohibition on class actions in the arbitration clause was unconscionable and undermined “the very purpose of the Massachusetts Consumer Protection Act.” The motion to *197compel arbitration should be denied, they argued, because, inter aha, the terms unilaterally preclude class actions. A judge in the Superior Court allowed Dell Computer’s motion to compel arbitration without decision, and the plaintiffs sought interlocutory review pursuant to G. L. c. 231, § 118, first par.18 A single justice of the Appeals Court denied the plaintiffs’ petition.19,20

b. Arbitration. Unable to appeal from the decision of the single justice, see Ashford v. Massachusetts Bay Transp. Auth., 421 Mass. 563, 566-567 (1995), Feeney and Dedham Health each filed a claim of arbitration “under protest” in November, 2004.21 Their requests for class certification were denied by an *198arbitrator of the National Arbitration Forum (NAF). Relying on the provisions of the Dell terms and on “[cjlear rules of contract interpretation and construction,” the arbitrator concluded that “class action relief has been waived, by the parties” and was not available in the arbitration despite the plaintiffs’ “compelling arguments in favor of this relief.” The arbitrator conducted a consolidated hearing on the merits of the plaintiffs’ individual claims, ruled in favor of the defendants on the merits,22 and dismissed the plaintiffs’ respective claims with prejudice.

c. Postarbitration. In February, 2008, the plaintiffs moved in the Superior Court to vacate the arbitration award and to reconsider the orders allowing the defendants’ motion to compel arbitration. The defendants responded by moving to confirm the arbitration award and to dismiss the case. A different judge denied the plaintiffs’ motions, allowed the defendants’ motion,23 and dismissed the case with prejudice. The plaintiffs appealed, and we granted their application for direct appellate review.

3. Jurisdiction and standard of review. The defendants argue that because the arbitrator declined the plaintiffs’ request to certify a class, that decision may not now be reviewed. We reject the argument. Although the plaintiffs disagree with the arbitrator’s decision declining to certify a class, their challenge here is to the order compelling arbitration in the first instance, and the plaintiffs thus present a “gateway dispute about whether the *199parties are bound by a given arbitration clause,” an issue for judicial resolution. In re Am. Express Merchants’ Litig., 554 F.3d 300, 311 (2d Cir. 2009), quoting Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84 (2002). Where, as here, the plaintiffs challenge the enforceability of a class action prohibition embedded in a binding arbitration clause, they are “plainly” challenging “the validity of the parties’ agreement to arbitrate,” and a court is the appropriate forum for such a challenge. In re Am. Express Merchants’ Litig., supra. See Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 445 (2006), quoting Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 403-404 (1967) (courts may adjudicate challenge “of the arbitration clause itself”).

We review the decision on the motion to compel arbitration de novo. Commonwealth v. Philip Morris, Inc., 448 Mass. 836, 844 (2007), citing Miller v. Cotter, 448 Mass. 671, 676 (2007). See Kristian v. Comcast Corp., 446 F.3d 25, 31 (1st Cir. 2006) (evaluating District Court’s denial of motion to compel arbitration de novo).24

4. Public policy. The plaintiffs argue that the class action prohibition in Dell’s terms “contravenes Massachusetts public policy.”25,26 We agree. It is “universally accepted” that public policy sometimes outweighs the interest in freedom of contract, *200and in such cases the contract will not be enforced. Beacon Hill Civic Ass’n v. Ristorante Toscano, Inc., 422 Mass. 318, 321 (1996), citing Spence v. Reeder, 382 Mass. 398, 413 (1982); Broussard v. Melong, 322 Mass. 560, 561 (1948); Restatement (Second) of Contracts § 179 (1981); 6A A. Corbin, Contracts § 1375 (1962); and 6 S. Williston, Contracts § 12:4 (R. Lord 4th ed. 1995). See A.Z. v. B.Z., 431 Mass. 150, 160 (2000) (“It is well established that courts will not enforce contracts that violate pubhc policy”). See also id. at 160 n.24 (noting numerous cases in which this court has “in a variety of contexts” refused to enforce contracts because of conflict with pubhc policy). “ ‘Public policy’ in this context refers to a court’s conviction, grounded in legislation and precedent, that denying enforcement of a contractual term is necessary to protect some aspect of the pubhc welfare.” Beacon Hill Civic Ass’n v. Ristorante Toscano, Inc., supra, citing Somerset Sav. Bank v. Chicago Title Ins. Co., 420 Mass. 422, 431 (1995). See A.Z. v. B.Z., supra at 160-161, citing Capazzoli v. Holzwasser, 397 Mass. 158, 160 (1986) (we “look to the expressions of the Legislature and to those of this court” to determine pubhc pohcy).

Here, expressions of three branches of Massachusetts government indicate that the pubhc pohcy of the Commonwealth strongly favors G. L. c. 93A class actions. First, the Legislature has expressly provided for such mechanisms, G. L. c. 93A, §§ 9 (2) & 11, and, as we discuss infra, the legislative history of those enactments demonstrates that the Legislature specifically intended to provide for the vindication of small-value claims. We have, in turn, recognized that G. L. c. 93A, and in particular, the class action provision in § 9 (2), “was designed to meet a pressing need for an effective private remedy,” Baldassari v. Public Fin. Trust, 369 Mass. 33, 40-41 (1975). This court has cautioned that a judge deciding a request for class certification under § 9 (2) “must” bear in mind this “pressing need,” and that “traditional technicalities are not to be read into the statute in such a way as *201to impede the accomplishment of substantial justice.” Aspinall v. Philip Morris Cos., 442 Mass. 381, 391-392 (2004), quoting Fletcher v. Cape Cod Gas Co., 394 Mass. 595, 605-606 (1985). This court has also recognized that the requirements for class certification under the statutory class action provision in § 9 (2) are easier to satisfy than under Mass. R. Civ. P 23, 365 Mass. 767 (1974). See Ciardi v. F. Hoffmann-La Roche, Ltd., 436 Mass. 53, 62-63 n.17 (2002) (provisions of rule 23 are “more burdensome” than those of § 9 [2]); Baldassari v. Public Fin. Trust, supra at 40 (G. L. c. 93A “has a more mandatory tone. We do not believe that the subsequent adoption of Rule 23 was intended to curtail any remedial rights granted by the statute”). Finally, the Attorney General, on behalf of the Commonwealth, has filed an amicus brief in this case asserting that the Dell class action prohibition “violates the public policy in favor of class actions” reflected in G. L. c. 93A.

The legislative history of G. L. c. 93A further demonstrates that its class action provisions evidence a strong public policy in favor of the aggregation of small consumer protection claims. When originally enacted in 1967, G. L. c. 93A contained no provision for private remedies; only the Attorney General was empowered to bring enforcement proceedings. Slaney v. Westwood Auto, Inc., 366 Mass. 688, 697-698 (1975). As a result of the number of complaints lodged with the Attorney General, “it became clear that private remedies were needed.” Id. at 699. As a result, G. L. c. 93A was amended in 1969, see St. 1969, c. 690, to provide for an “effective private remedy.” Slaney v. Westwood Auto, Inc., supra at 699-700. Recognizing that “causes for which advocates cannot be obtained are, in effect, not adjudicadle,” id. at 699, quoting Eovaldi, Justice for Consumers: The Mechanisms of Redress, 66 Nw. U.L. Rev. 281, 286 (1971), the 1969 amendments to G. L. c. 93A included provisions for a minimum recovery, attorney’s fees, treble damages in certain cases, and most relevant to this case, class actions.27 Slaney v. Westwood Auto, Inc., supra at 699-700. In other words, because the need for class actions for c. 93A claims had been “most persuasively demonstrated,” Rice, New Private Remedies for Consumers: The Amend*202ment of Chapter 93A, 54 Mass. L.Q. 307, 315 (1969),28 the purpose of amending the statute was to “provide an effective private consumer remedy” by overcoming the hurdle of “economic limitations to the litigation of an otherwise valid claim.” Id. at 307. Permitting consumers to sue as a class cured the defect inherent in the consumer protection statute that no matter how egregiously a consumer might have been wronged, “the economics of a litigation designed to seek redress precluded an effective attack.” Id.

The right to a class action in a consumer protection case is of particular importance where, as here, aggregation of small claims is likely the only realistic option for pursuing a claim. See Leardi v. Brown, 394 Mass. 151, 164 (1985), quoting Rice, supra at 316 (“one of the basic purposes” of G. L. c. 93A was to provide “a device for vindicating claims which, taken individually, are too small to justify legal action but which are of significant size if taken as a group”). See also Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 617 (1997), quoting Mace v. Van Ru Credit Corp., 109 F.3d 338, 344 (7th Cir. 1997) (“The policy at the very core of the class action mechanism is to overcome the problem that small recoveries do not provide the incentive for any individual to bring a solo action prosecuting his or her rights. A class action solves this problem by aggregating the relatively paltry potential recoveries into something worth someone’s [usually an attorney’s] labor”). Dell’s class action prohibition undermines this policy and, in so doing, defeats “the presumption” that arbitration provides “a fair and adequate mechanism for enforcing statutory rights.” Kristian v. Comcast Corp., 446 F.3d 25, 54 (1st Cir. 2006), quoting Rosenberg v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 170 F.3d 1, 14 (1st Cir. 1999). See Kristian v. Comcast Corp., supra at 54-55, quoting Gilíes, Opting out of Liability: The Forthcoming, Near-Total Demise of the Modern Class Action, 104 Mich. L. Rev. 373, 407 (2005) (“The class mechanism ban — ‘particularly its implicit ban on spreading across multiple plaintiffs the costs of experts, depositions, neutrals’ fees, and other disbursements’ — forces the putative class member ‘to assume financial burdens so prohibitive as to deter *203the bringing of claims’ ”); Carnegie v. Household Int’l, Inc., 376 F.3d 656, 661 (7th Cir. 2004) (“The realistic alternative to a class action is not 17 million individual suits, but zero individual suits, as only a lunatic or a fanatic sues for $30”); State ex rel. Dunlap v. Berger, 211 W. Va. 549, 562 (2002), cert, denied sub nom. Freidman’s Inc. v. West Va. ex rel. Dunlap, 537 U.S. 1087 (2002) (class action remedies are effective at addressing “small-dollar/ high volume” illegality; “[i]n many cases, the availability of class action relief is a sine qua non to permit the adequate vindication of consumer rights”).

Permitting Dell to prohibit class actions against it through its contracts with its customers would be counter to our public policy for two additional reasons. First, it undermines the public interest in deterring wrongdoing. See Salvas v. Wal-Mart Stores, Inc., 452 Mass. 337, 371-372 (2008), quoting 2 A. Conte & H.B. Newberg, Class Actions § 4.36, at 314 (4th ed. 2002) (“Class actions were designed not only to compensate victimized group members, but also to deter violations of the law, especially when small individual claims are involved”); In re Am. Express Merchants’ Litig., 554 F.3d 300, 320 (2d Cir. 2009) (allowing enforcement of class action waiver in credit card acceptance agreement would grant corporation “de facto immunity from antitrust liability by removing the plaintiffs’ only reasonably feasible means of recovery”); Dale v. Comcast Corp., 498 F.3d 1216, 1224 (11th Cir. 2007) (“Corporations should not be permitted to use class action waivers as a means to exculpate themselves from liability for small-value claims”). Second, the loss of an individual consumer’s right to bring a class action negatively affects the rights of those unnamed class members on whose behalf the class action would proceed. In this sense, the right to participate in a class action under G. L. c. 93A is a public — not merely a private — right: it protects the rights of consumers as a whole. See Muhammad v. County Bank, 189 N.J. 1, 20 (2006) (“without the availability of a class-action mechanism, many consumer-fraud victims may never realize that they may have been wronged”).

The defendants argue that Feeney and Dedham Health have not made a sufficient showing that the class action mechanism is necessary for them to obtain relief for their statutory rights under G. L. c. 93A. They point out, with some force, that there *204is here no attempt to displace a statutory scheme, as was the case in Beacon Hill Civic Ass’n v. Ristorante Toscano, Inc., 422 Mass. 318, 321-323 (1996). The argument is nevertheless unavailing. The claimed damages here are small (Feeney claims damages of $13.65, and Dedham Health claims damages of $215.55), and we need not engage “in an exhaustive analysis” to determine that the costs of bringing such claims are “prohibítive.”29 Fiser v. Dell Computer Corp., 144 N.M. 464, 469 (2008). It is sufficient that the plaintiffs’ claims are of a class of disputes that “predictably involve small amounts of damages.” Discover Bank v. Superior Court, 36 Cal. 4th 148, 162 (2005). The defendants’ argument that the statutory availability of attorney’s fees, damages, and multiple damages to a prevailing plaintiff under G. L. c. 93A would “enable the plaintiffs to vindicate valid claims without a class action” is unpersuasive; these statutory provisions are not sufficient to ensure that a consumer or business with a small-value claim will be able to find an attorney willing to take the case absent the ability to aggregate claims. See Gentry v. Superior Court, 42 Cal. 4th 443, 464 (2007), quoting Discover Bank v. Superior Court, supra at 162 (rejecting “unsupported assertions” of some courts that, “in the case of small individual recovery, attorney fees are an adequate substitute” for class actions); Muhammad v. County Bank, supra at 21 (where damages sought by plaintiff and those she seeks to represent are small, “availability of attorney’s fees is illusory if it is unlikely that counsel would be willing to undertake the representation”). This is the import of the Legislature’s 1969 amendment of G. L. c. 93A to provide for class actions in addition to statutory damages and attorney’s fees. Finally, as the legislative history of G. L. c. 93A makes clear, the availability of the Attorney General’s enforcement authority is also not sufficient to ensure that the goals of the statute are realized.30 Cf. Kristian v. Comcast Corp., supra at 59 (“When Congress enacts a statute that *205provides for both private and administrative enforcement actions, Congress envisions a role for both types of enforcement”).

We decline to enforce a prohibition on class actions in a consumer contract where to do so would in effect sanction a waiver of the right to proceed in a class action under G. L. c. 93A. Allowing companies that do business in Massachusetts, with its strong commitment to consumer protection legislation, to insulate themselves from small value consumer claims creates the potential for countless customers to be without an effective method to vindicate their statutory rights, a result clearly at odds with our public policy.

The defendants’ argument that a class action prohibition is not contrary to “any Massachusetts policy” because such a prohibition is “inherent” in an agreement to arbitrate is misplaced. First, the argument’s premise, that arbitration and class actions are incompatible, is undermined by the reality — which defendants acknowledge — that class arbitrations do in fact occur. See In re Am. Express Merchants’Litig., supra at 310 n.7, quoting Clancy, An Uninvited Guest: Class Arbitration and the Federal Arbitration Act’s Legislative History, 63 Bus. Law. 55, 56 (2007) (“It is apparent that ‘[c]lass arbitration is a swiftly growing phenomenon’ ”); McKee v. AT&T Corp., 164 Wash. 2d 372, 395 (2008) (“Class actions are often arbitrated”). Moreover, a majority of the Justices of the United States Supreme Court has, at least implicitly, indorsed class arbitrations as consistent with the FAA. See Shroyer v. New Cingular Wireless Servs., Inc., 498 F.3d 976, 992 (9th Cir. 2007), citing Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444, 454 (2003). Second, the defendants’ claim that “[cjlass proceedings in arbitration are highly problematic” is the sort of “singling out” of arbitration for “suspect status” that the United States Supreme Court has rejected. Doctor’s Assocs., Inc. v. Casarotto, 517 U.S. 681, 687 (1996). See Discover Bank v. Superior Court, supra at 167, quoting Armendariz v. Foundation Health Psychcare Servs., Inc., 24 Cal. 4th 83, 120 (2000) (lower court’s “conclusion regarding the unsuitability of arbitration to class actions reflects . . . ‘the very mistrust of arbitration that has been repudiated by the United States Supreme Court’ ”).

Our decision is not based on any judgment about the merits of a particular forum for class action adjudication — arbitration *206or litigation — but rather on a determination that in the circumstances of a case such as this (small value claims sought under our consumer protection statute, G. L. c. 93A), a clause effectively prohibiting class proceedings in any forum violates the public policy of the Commonwealth.

5. Choice of law. Dell’s terms include a provision specifying that Texas law applies to “[t]his agreement and any sales thereunder . . . .” Because Texas law would appear to allow a prohibition on class actions, see AutoNation USA Corp. v. Leroy, 105 S.W.3d 190, 199-200 (Tex. Ct. App. 2003), we must decide whether Texas or Massachusetts law applies.

Where State policies differ, “we look to our established ‘functional’ choice of law principles and to the Restatement (Second) of Conflict of Laws,.with which those principles generally are in accord.” Hodas v. Morin, 442 Mass. 544, 549 (2004), quoting Bushkin Assocs., Inc. v. Raytheon Co., 393 Mass. 622, 631-632 (1985). Where parties have specifically expressed an intent as to the governing law, we respect that intent unless the result would be contrary to our public policy. Hodas v. Morin, supra at 549-550, quoting Steranko v. Inforex, Inc., 5 Mass. App. Ct. 253, 260 (1977). See Jacobson v. Mailboxes Etc. U.S.A., Inc., 419 Mass. 572, 575 (1995) (applying law of State designated in contract “in the absence of any substantial Massachusetts public policy reason to the contrary”). Applying the “two-tiered analysis” of the Restatement (Second) of Conflicts of Laws § 187 (1971), Hodas v. Morin, supra at 550, we inquire first whether the State chosen by the parties has a “substantial relationship” to the transaction and, second, whether “ ‘application of the law of the chosen state [here, Texas] would be contrary to a fundamental policy of a state [here, Massachusetts] which has a materially greater interest than the chosen state’ and is the State whose law would apply ... ‘in the absence of an effective choice of law by the parties.’ ” Id., quoting Restatement (Second) of Conflicts of Laws, supra.

The plaintiffs do not contest that the chosen State, Texas, has a “substantial relationship” to the transaction.31 Nor does either party contest that, as the forum State, Massachusetts law would *207apply were the choice of law provision in the terms deemed ineffective. Our inquiry is therefore limited to whether the application of Texas law would lead to a result contrary to a “fundamental policy” of Massachusetts and, if so, whether Massachusetts has a “materially greater interest” than Texas.32

We have no trouble concluding that the strong public policy in favor of class actions for small value claims under G. L. c. 93A is a “fundamental policy” contemplated by § 187 of the Restatement (Second) of Conflict of Laws. See Fiser v. Dell Computer Corp., 144 N.M. 464, 468 (2008) (fundamental New Mexico policy to ensure that consumers have “an opportunity to redress their harm”); McKee v. AT&T Corp., supra at 386 (“Washington’s strong Consumer Protection Act policy favoring class adjudication of small-dollar claims is a ‘fundamental policy’ ”). See also Restatement (Second) of Conflict of Laws, supra at § 187 comment g (“The forum will- apply its own legal principles in determining whether a given policy is a fundamental one within the meaning of the present rule and whether the other state has a materially greater interest”; “a fundamental policy may be embodied in a statute . . . which is designed to protect a person against the oppressive use of superior bargaining power”). We likewise have little trouble concluding that the interest embodied in this policy — the protection of large classes of consumers and the deterring of corporate wrongdoing — is materially greater than Texas’s interest, which the defendants identify as “minimizing its companies’ legal expense.” See Canal Elec. Co. v. Westinghouse Elec. Corp., 406 Mass. 369, 378 (1990) (“we ordinarily would not effectuate a consumer’s waiver of rights under c. 93A,” [emphasis in original]); Spence v. Reeder, 382 Mass. 398, 413 (1981) (“courts have long refused to give effect to purported waivers of statutory rights where enforcement of the particular waiver would do violence to the public policy underlying the legislative enactment”). See also Homa v. American Express Co., 558 F.3d 225, 232-233 (3d Cir. 2009) (concluding that Supreme Court of New Jersey would apply New Jersey *208law to class-arbitration waiver in “small-sum” case despite choice-of-law provision favoring Utah; although Utah statute expressly allowing class action waivers in consumer credit agreements indicated that Utah had “a strong policy in favor of the enforcement of the waivers,” New Jersey has “a materially greater interest than Utah in the enforceability of a class-arbitration waiver that could operate to preclude a New Jersey consumer from relief under the [New Jersey Consumer Fraud Act]”); Brazil vs. Dell Inc., No. C-07-01700 RMW (N.D. Cal., Aug. 3, 2007) (declining to enforce Texas choice-of-law provision in Dell consumer agreement; California’s interest in protecting its citizens from “take it or leave it” agreements that incorporate one-sided protections outweighed Texas’s interest in “protecting its resident business’s expectations of consistent legal standards”); McKee v. AT&T Corp., supra (“Washington’s interest in protecting large classes of its consumers materially outweighs New York’s limited interest”). Because Texas law likely would result in the enforcement of the class action prohibition, leaving Massachusetts consumers and businesses with small claims without an effective remedy, enforcing the choice-of-law provision would lead to a result contrary to our fundamental policy. For this reason, Massachusetts law applies, and Dell’s class action prohibition is unenforceable.

6. Federal preemption. The defendants argue that, even if Massachusetts rather than Texas law applies, the FAA preempts any defense based on State public policy.33 We disagree. The FAA, which was designed to “place arbitration agreements ‘upon the same footing as other contracts,’ ” Scherk v. Alberto-Culver Co., 417 U.S. 506, 511 (1974), quoting H.R. Rep. No. 96, 68th Cong., 1st Sess., 1, 2 (1924), provides that arbitration agreements are “valid, irrevocable, and enforceable, save upon such grounds that exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. Arbitration agreements are therefore meant to be “as enforceable as other contracts, but not more so” (emphasis in original). Opals on Ice Lingerie v. Body Lines, *209Inc., 320 F.3d 362, 369 (2d Cir. 2003), quoting Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404 n.12 (1967). For this reason, a court may apply generally applicable State law contract defenses to determine the validity of an arbitration agreement, St. Fleur v. WPI Cable Sys./Mutron, 450 Mass. 345, 350 (2008), and may invalidate an arbitration agreement on such grounds without contravening the FAA. Doctor’s Assocs., Inc. v. Casarotto, 517 U.S. 681, 687 (1996).

Because the tenet that a contract may be invalidated on grounds that it violates public policy is a principle of State contract law that “arose to govern issues concerning the validity, revocability, and enforceability of contracts generally,” see Perry v. Thomas, 482 U.S. 483, 492-493 n.9 (1987), our conclusion that the class action prohibition is unenforceable on those grounds is not preempted by the FAA. See Shroyer v. New Cingular Wireless Servs., Inc., 498 F.3d 976, 990 (9th Cir. 2007), quoting Kinkel v. Cingular Wireless LLC, 223 Ill. 2d 1, 19 (2006) (FAA “does not require state courts, when applying state law to a question of the enforceability of a particular contract, to necessarily reach an outcome that encourages individual arbitration”); Kinkel v. Cingular Wireless LLC, supra at 20 (“the FAA neither expressly nor impliedly preempts a state court from holding that an arbitration clause or a specific provision within an arbitration clause is unenforceable; it merely frames the issue by requiring that a state court examine the disputed provision in the same manner that it would examine any contract”).

While the defendants are correct that the FAA prohibits courts from “singling out arbitration provisions for suspect status,” quoting Doctor’s Assocs., Inc. v. Casarotto, supra at 687, our conclusion does not selectively target arbitration. The problem inherent in Dell’s terms is not that they compel arbitration but that, by mandating individual arbitration, they compel a procedure for resolving claims that effectively eviscerates the c. 93A right to participate in a class action. See Leardi v. Brown, 394 Mass. 151, 164 (1985). Simply put, a prohibition on class actions “has nothing to do with a valid agreement to arbitrate.” McKee v. AT&T Corp., supra at 395. E is the effective ban on class actions — not the mandating of arbitration — that is repugnant to the public policy of the Commonwealth. Our decision is not, as the defend*210ants argue, “tantamount to a policy against arbitration,” but rather the logical corollary of our fundamental public policy in favor of preserving the ability of consumers and businesses to vindicate their rights under G. L. c. 93A. See Lowden v. T-Mobile USA, Inc., 512 F.3d 1213, 1221 (9th Cir. 2008) (FAA does not preempt Washington State law from rendering unconscionable arbitration provision containing class action prohibition because State law principles “apply equally to a contract that permits only individual, not aggregate, litigation in court”); Gentry v. Superior Court, 42 Cal. 4th 443, 465 (2007) (“The principle that in the case of certain unwaivable statutory rights, class action waivers are forbidden when class actions would be the most effective practical means of vindicating those rights is an arbitration-neutral rule: it applies to class waivers in arbitration and nonarbi-tration provisions alike”).

7. Severability. The contracts at issue here do not contain a severability or savings clause. We agree with the Supreme Court of New Mexico, which held that a similar class action waiver was not severable because the class action bar was “part of the arbitration provision” and “central to the mechanism for resolving the dispute between the parties.” Fiser v. Dell Computer Corp., 144 N.M. 464, 471 (2008). Cf. Kristian v. Comcast Corp., 446 F.3d 25, 62 (1st Cir. 2006) (concluding that class arbitration bar was severable where arbitration agreement contained savings clause, but noting that courts typically prefer “declaring an arbitration agreement unenforceable rather than using severance as a remedy when fundamental elements of the arbitration regime are at issue,” and that severing class arbitration bar would be “difficult to justify” absent savings clause).34 The defendants argue, correctly, that the absence of a severability or savings clause does not, by itself, necessarily mean that the class waiver is “insever*211able.” Our decision in this regard does not rest solely on the absence of such a clause.

8. Failure to state a claim. The defendants argue that, even if arbitration should not have been compelled, the complaint should be dismissed for failure to state a claim on which relief can be granted. Mass. R. Civ. R 12 (b) (6), 365 Mass. 754 (1974). Specifically, they claim that the plaintiffs’ allegation that Dell erroneously collected sales tax attributable to the purchase of computer service contracts falls outside “the conduct of trade or commerce” as those terms are used in G. L. c. 93A, § 2 (a). The defendants did not move for dismissal on this basis in the trial court. However, as the prevailing party, they are “entitled to argue on appeal that the judge was right for the wrong reason, even relying on a principle of law not argued below.” Aetna Cas. & Sur. Co. v. Continental Cas. Co., 413 Mass. 730, 734-735 (1992). Moreover, we may consider any ground apparent on the record that supports the result reached in the trial court. Gabbidon v. King, 414 Mass. 685, 686 (1993), citing Aetna Cas. & Sur. Co. v. Continental Cas. Co., supra; St. Germaine v. Pendergast, 411 Mass. 615, 619 n.9 (1992); North Shore Corp. v. Selectmen of Topsfield, 322 Mass. 413, 416 (1948); and Rosenfeld v. Board of Health of Chilmark, 27 Mass. App. Ct. 621, 626 n.10 (1989). Here, the result reached by the judge in the Superior Court was a dismissal of the plaintiffs’ lawsuit. Looking, as we must, to the allegations of the complaint, we may determine whether the plaintiffs have failed to state a claim. See, e.g., Eigerman v. Putnam Invs., Inc., 450 Mass. 281, 285 n.6 (2007) (“The only facts appropriate for consideration in deciding a motion to dismiss are, as has been noted, those drawn from factual allegations contained within the complaint or within attached exhibits”). Cf. Aetna Cas. & Sur. Co. v. Continental Cas. Co., supra at 735 (we “cannot” accept “new” argument on appeal that “depends on facts not established in the record”). If the allegations are insufficient, the complaint fails and must be dismissed.

The defendants argue that the plaintiffs fail to state a claim for two reasons. First, the defendants assert that G. L. c. 93A does not apply “by its terms.” Second, they urge us to hold that the application of G. L. c. 93A “would improperly displace the tax code.” We agree with the defendants on the first point, and we therefore need not reach the second.

*212General Laws c. 93A prohibits “unfair or deceptive practices in the conduct of any trade or commerce.” G. L. c. 93A, § 2 (a). “Trade or commerce” refers to transactions in a “business context,” Lantner v. Carson, 374 Mass. 606, 611 (1978), which, in turn, is “determined by the facts of each case,” on consideration of “the nature of the transaction, the character of the parties and their activities, and whether the transaction was motivated by business or personal reasons.” Poznik v. Massachusetts Med. Professional Ins. Ass’n, 417 Mass. 48, 52 (1994), quoting All Seasons Servs., Inc. v. Commissioner of Health & Hosps. of Boston, 416 Mass. 269, 271 (1993). Where a party’s actions are motivated by “legislative mandate, not business or personal reasons,” this court has “repeatedly held that c. 93A does not apply.” Lafayette Place Assocs. v. Boston Redevelopment Auth., 427 Mass. 509, 535 (1998), quoting Peabody N.E., Inc. v. Marshfield, 426 Mass. 436, 439-440 (1998). See Poznik v. Massachusetts Med. Professional Ins. Ass’n, supra; Barrett v. Massachusetts Insurers Insolvency Fund, 412 Mass. 774, 777 (1992).

Although the plaintiffs claim that no tax was due on the optional service contracts under any State statute, they do not allege — nor do they argue here — that Dell did not remit the tax it collected to the Commonwealth.35 For this reason, their argument that Dell’s “for-profit sales of computer hardware and optional service contracts” were “by definition” in a business context misses the mark. There is no dispute that Dell’s sales to the plaintiffs occurred in a business context. But the issue here is more textured: the plaintiffs’ claim is based not on the transactions as a whole, but on a particular component of the transactions, the allegedly improper collection of sales tax in connection with the sales of the computer service contracts. See G. L. c. 64H, § 5 (“amount of [sales] tax collected by the vendor from the purchaser shall be stated and charged separately from the sales *213price and shown separately on any record thereof”). Even if, as the plaintiffs allege, Dell was not properly charging and collecting the taxes because optional service contracts are not subject to such tax,36 that Dell remitted the proceeds from the tax collected to the Commonwealth — rather than retaining them for its own enrichment — compels a conclusion on the record here that Dell’s collection of such tax was not motivated by “business or personal reasons” but was pursuant to legislative mandate.37 See Household Retail Servs., Inc. v. Commissioner of Revenue, 448 Mass. 226, 230 (2007) (vendors who, “on behalf of the Commonwealth, compute, collect, and file sales tax returns, and remit full sales tax for each customer transaction” serve as “trustees for the Commonwealth’s retail sales taxes”); Poznik v. Massachusetts Med. Professional Ins. Ass’n, supra at 53 (“Chapter 93A imposes liability on persons seeking to profit from unfair practices”). Considering, as we must, only the allegations of the complaint, the plaintiffs have not alleged facts sufficient to make out a claim under G. L. c. 93A. See Iannacchino v. Ford Motor Co., 451 Mass. 623, 633 (2008).

It is the case that the plaintiffs have variously implied (without alleging any such facts) that, notwithstanding the defendants’ remittance of taxes to the Commonwealth, profit might be the motive behind the defendants’ collection of the tax on the sale of its optional service contracts. In their “statement of facts” in their initial brief to this court, the plaintiffs suggest that the defendants collected tax in connection with the sales of service contracts as part of an attempt to transfer the tax burden on repair parts for *214Dell hardware from the repairer, whether Dell or BancTec, to the customer. If true,38 such an allegation could conceivably state a claim under G. L. c. 93A, to the extent that it demonstrated a profit-seeking motive for the collection of the tax. Where, as here, the plaintiffs made no such allegation in their complaint, dismissal is warranted.39 In these circumstances, however, “we think it appropriate to give the plaintiffs the opportunity to file an amended complaint.” Iannacchino v. Ford Motor Co., supra at 635. Accordingly, on remand, the complaint is to be dismissed without prejudice.

9. Conclusion. For the foregoing reasons, we conclude that the arbitration clause is unenforceable but that plaintiffs failed to state a claim under G. L. c. 93A. The decision of the judge in the Superior Court compelling arbitration is reversed. On remand, the case is to be dismissed without prejudice.

So ordered.