Borowiec v. GATEWAY 2000, INC.

• Decision Date: 31 May 2002
• Docket Number: No. 1-01-0480, No. 1-02-0001., No. 1-01-4187
• Citation: 265 Ill.Dec. 218,331 Ill. App.3d 842,772 N.E.2d 256
• Parties: Michael BOROWIEC, Plaintiff-Appellee, v. GATEWAY 2000, INC., Defendant-Appellant. Tadeusz Kobik and Dorota Kobik, Plaintiffs-Appellees, v. Gateway, Inc., Defendant-Appellant. Leslie Waldron, Plaintiff-Appellee, v. Gateway, Inc., Defendant-Appellant.
• Court: United States Appellate Court of Illinois

772 N.E.2d 256

331 Ill. App.3d 842

265 Ill.Dec. 218

Michael BOROWIEC, Plaintiff-Appellee, v. GATEWAY 2000, INC., Defendant-Appellant.

Tadeusz Kobik and Dorota Kobik, Plaintiffs-Appellees, v. Gateway, Inc., Defendant-Appellant.

Leslie Waldron, Plaintiff-Appellee, v. Gateway, Inc., Defendant-Appellant.

Nos. 1-01-0480, 1-01-4187, 1-02-0001.

Appellate Court of Illinois, First District, Fifth Division.

May 31, 2002.

Adducci, Dorf, Lehner, Mitchell & Blankenship, P.C., Chicago (James D. Adducci and Marshall L. Blankenship, of counsel), for Appellant.

Andrew P. Lamis (argued), Law Offices of Andrew P. Lamis, Chicago; Krohn & Moss, Ltd., Chicago (Adam J. Krohn, of counsel), for Appellee.

Justice REID delivered the opinion of the court:

The defendant, Gateway, Inc., appeals the trial courts' orders which denied its motions to dismiss. The plaintiffs, Michael Borowiec, Tadeusz and Dorota Kobik, and Leslie Waldron purchased personal computers from Gateway and subsequently sued in their individual capacities to recover damages alleging: (1) breach of express and implied warranty pursuant to the Magnuson-Moss Warranty-Federal Trade Commission Improvement Act (Warranty Act) (15 U.S.C. § 2301 et seq. (1994)), (2) violations of the Illinois Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/2, (West 1998)) and (3) common law fraud. Gateway moved to have the complaints dismissed pursuant to sections 2-615 and 2-619 of the Illinois Code of Civil Procedure. 735 ILCS 5/2-615. 2-619 (West 1998). The trial courts denied Gateway's motions to dismiss. The cases were subsequently consolidated, and this appeal ensued. The main issue before this court, which is one of first impression, is whether a written warranty governed by the Warranty Act can require a consumer to submit to binding arbitration, or simply, does the Warranty Act preclude binding arbitration? For the reasons that follow, we affirm the decisions of the trial courts.

I THE FACTS

A. Michael Borowiec

On or about November 18, 1999, Borowiec purchased a Gateway Performance 600 PC computer from Gateway, Inc. (Gateway), which was formerly doing business as Gateway 2000, Inc. The sale and purchase of the computer were subject to Gateway's "Limited Warranty and Terms and Conditions Agreement." Upon receiving the computer in the mail, Borowiec discovered that it was defective. On three different occasions, Borowiec attempted to have Gateway repair the computer. After Gateway failed to repair the computer, Borowiec subsequently revoked acceptance of it and sued to recover damages.

On May 26, 2000, Borowiec filed a four-count complaint against Gateway alleging: (1) violations of the Warranty Act, (2) violation of the Consumer Fraud and Deceptive Business Practices Act, and (3) common law fraud. Gateway filed a motion to dismiss Borowiec's complaint pursuant to section 2-615 for lack of subject matter jurisdiction and to compel arbitration. On September 20, 2000, the trial court denied Gateway's motion to dismiss. Following an unsuccessful attempt to have the cause removed to federal court, Gateway timely filed a notice of appeal.

B. Tadeusz and Dorota Kobik

On or about January 31, 2001, the Kobiks purchased a Gateway Performance 1000 PC computer and services from Gateway Country Stores LLP (Gateway). The sale and purchase of the computer were subject to Gateway's "Limited Warranty and Terms and Conditions Agreement." Upon receiving the computer, the Kobiks realized that it was defective. After unsuccessfully attempting to have Gateway cure the defects, the Kobiks revoked acceptance of the computer and brought suit against Gateway to recover damages. On September 13, 2001, the Kobiks filed a three-count complaint wherein they alleged: (1) violations of the Warranty Act, and (2) violations of the Consumer Fraud and Deceptive Business Practices Act. Gateway subsequently filed a motion to dismiss or alternatively to compel arbitration and stay proceedings pending completion of arbitration pursuant to section 2-619. The trial court denied Gateway's motion on November 27, 2001, and Gateway timely filed a notice of appeal.

C. Leslie Waldron

On or about November 14, 2000, Waldron purchased a Gateway Essential 866 computer and services from Gateway Direct LP (Gateway). The sale and purchase of the computer were subject to Gateway's "Limited Warranty and Terms and Conditions Agreement." After receiving the computer in the mail, Waldron discovered that it was defective. After several failed attempts to have Gateway cure the defects, Waldron revoked acceptance of the computer.

On October 19, 2001, Waldron filed a four-count complaint wherein she alleged: (1) violations of the Warranty Act, and (2) violations of the Consumer Fraud and Deceptive Business Practices Act. On November 21, 2001, Gateway filed a motion to dismiss or alternatively to compel arbitration and stay proceedings pending completion of arbitration pursuant to section 2-619. The trial court denied Gateway's motion to dismiss on December 20, 2001, and Gateway timely filed its notice of appeal the same day.

D. Gateway's Warranty Agreement

It is undisputed that Gateway's "Limited Warranty and Terms and Conditions Agreement" governed the purchase of the computers in all three matters. In each of the plaintiffs'"Limited Warranty and Terms and Conditions Agreement" there appears a dispute resolution clause. The dispute resolution clause is identical in all the plaintiffs' warranties and is as follows:

"You agree that any Dispute between You and Gateway will be resolved exclusively and finally by arbitration administered by the National Arbitration Forum (NAF) * * *. * * * Any decision rendered in such arbitration proceedings will be final and binding on each of the parties * * *. * * * You understand that You would have had a right to litigate disputes through a court, and that You have expressly and knowingly waived that right and agreed to resolve any Disputes through binding arbitration. This arbitration agreement is made pursuant to a transaction involving interstate commerce, and shall be governed by the Federal Arbitration Act, 9 U.S.C. Section 1, et seq."

E. Consolidation of the Cases

In each of Gateway's motions to dismiss, Gateway argued that dismissal was proper because the "Limited Warranty and Terms and Conditions Agreement" requires all disputes between Gateway and its customers to be resolved through binding arbitration pursuant to the Federal Arbitration Act (FAA) (9 U.S.C § 1 et seq. (1994)). In response, the plaintiffs argued that the Warranty Act precludes binding arbitration, and as such, the arbitration agreement in Gateway's warranty is unenforceable. On February 11, 2002, the three cases were consolidated.

II ANALYSIS

The issue before this court is whether the trial courts erred when they denied Gateway's motions to dismiss pursuant to sections 2-615 and 2-619. "A section 2-615 motion poses the question of whether the complaint states a cause of action upon which relief can be granted. [Citation.] A section 2-619 motion, on the other hand, raises certain defects or defenses and questions whether defendant is entitled to judgment as a matter of law. [Citation.] Since the resolution of either motion only involves a question of law, the standard of review is de novo. [Citation.] On a motion to dismiss, this court must accept all well-pleaded facts as true. [Citation.]" In re Parentage of M.J., 325 Ill.App.3d 826, 829, 259 Ill.Dec. 641, 759 N.E.2d 121 (2001).

On appeal, Gateway argues that the trial courts erred when they denied its motions to dismiss pursuant to sections 2-615 and 2-619. Specifically, Gateway maintains that when the plaintiffs accepted the terms in the warranty agreement, they agreed to resolve any dispute with Gateway through binding arbitration, and subsequently, the trial courts erred when they did not dismiss the plaintiffs' complaints and enforce the binding arbitration clause in the warranty.

In reply, the plaintiffs assert that the binding arbitration clause in Gateway's warranty violates the Warranty Act, and as such is unenforceable. In particular, the plaintiffs contend that the Warranty Act preserves for consumers the right to ultimately have their disputes with warrantors settled in a judicial forum and consequently precludes binding arbitration. We agree.

A. The Warranty Act and the FAA

In 1975, Congress enacted the Warranty Act in order "to improve the adequacy of information available to consumers [and] prevent deception's in connection with written warranties issued with consumer products. 15 U.S.C. § 2302(a) (1994). The Warranty Act sets out clear and comprehensive requirements regarding disclosures, duties, and remedies associated with warranties on consumer products. Products covered by the Warranty Act include any "tangible personal property which is distributed in commerce and which is normally used for personal, family, or household purposes." 15 U.S.C. § 2301(1) (1994).

In 1925, Congress passed the FAA to reverse the long-standing judicial hostility to arbitration agreements and to place arbitration agreements upon the same footing as other contracts. Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24, 111 S.Ct. 1647, 1651, 114 L.Ed.2d 26, 36 (1991); Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 111, 121 S.Ct. 1302, 1307, 149 L.Ed.2d 234, 244 (2001). The FAA provides:

"A written provision in any * * * contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2 (1994).

The United States Supreme Court...