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Hubbert v. Dell Corp., 359 Ill.App.3d 976, 835 N.E.2d 113 (5th Dist. 2005) (full-text).
Factual Background Edit
Plaintiffs purchased computers online through defendant’s website in 2001 and 2002. The computers contained the “Pentium 4” microprocessor, which was advertised by the defendant as being the “fastest, most powerful Intel Pentium processor available." The plaintiffs asserted that the Pentium 4 is actually slower, less powerful and provides less performance than either the Pentium III or an AMD Athlon processor, but costs considerably more. The plaintiffs challenged the defendant’s marketing in connection with the Pentium 4 processor, describing it as false, misleading, and deceptive. Due to this misrepresentation, the plaintiffs sought damages that amount to around $75,000 per person.
Defendant, Dell Corporation, filed a motion to dismiss the plaintiff’s complaint or, alternatively, to stay the proceedings and to compel arbitration. The defendant claimed that each plaintiff had agreed to a binding arbitration clause, which was contained in the defendant’s “Terms and Conditions of Sale.”
Dell points out that the “Terms and Conditions of Sale”, which were accessible by clicking on the blue hyperlink located on each of the five webpages the plaintiff was required to visit when completing an online purchase, stated in the opening paragraph “. . . this document contains a dispute resolution clause.” Additionally, the defendant points out that a hard copy of the “Terms and Conditions of Sale” was sent to all plaintiffs in the same shipping boxes the computers arrived in as well as on the back of every plaintiffs’ invoice.
Trial Court Proceedings Edit
The district court found that the defendant’s online terms and conditions had not been “adequately communicated.” In arriving at this decision, the district court determined that there was insufficient notice to the plaintiffs because the defendant did not provide a text display on the website that manifested a clear assent to the terms and conditions before an order could proceed. The court went on to say that the “manner in which the existence of the arbitration provision was minimized so as not attract the attention of the customer . . . [was] fundamentally unfair.”
Further, the district court reasoned that the “Terms and Conditions of Sale” and the arbitration clause located therein was either not part of the contract or unconscionable to the extent that the terms invalidated the agreement.
Under the procedural unconscionability analysis, the district court concluded that the terms of the arbitration clause left no room for bargaining power for the plaintiffs and amounted to a contract of adhesion.
Under the substantive unconscionability analysis, the court relied on numerous pieces of evidence that illustrated the National Arbitration Forum’s (NAF) bias toward retailers. The district court pointed out that being bound by the NAF’s ruling would substantially affect the plaintiffs statutory rights and remedies and amounted to substantive unconscionability.
Since both procedural unconscionability and substantive unconscionability was found to be present in the arbitration agreement, the district court dismissed the defendant’s motion to compel arbitration.
Appellate Court Proceedings Edit
On appeal, the Fifth District reversed the district court's order denying the defendants motion to compel arbitration. The Fifth District also found that the trial court erred in finding that the arbitration clause was not a part of the contract between the defendant and plaintiffs and, in the alternative, that if it was part of the contract it was procedurally and substantively unconscionable.
In arriving at this decision, the appellate court reasoned that the five-step process for ordering the computers is analogous to a multi-page written paper contract. The Fifth District stated that the blue "Terms and Conditions of Sale" hyperlink should be treated as another page of the contract and that when a customer clicks on the link it is similar to turning the page of a paper contract.
Additionally, the court stated that the plaintiffs were put on sufficient notice that the "Terms and Conditions of Sale" would bind them. The court acknowledged that the plaintiffs were "not novices when using computers" since they were savvy enough to order a computer online and should have known that ". . . more information [was] available by clicking on a blue hyperlink."
In conjunction with this, the Fifth District pointed out that on three of the defendant’s webpages the plaintiffs were required to complete during the check-out process, the statement "All sales are subject to Dell's Terms and Conditions of Sale" appeared. The court concluded that the statement that all sales were subject to the defendant's "Terms and Condition of Sale" along with the accessibility of the Terms via hyperlink was sufficient notice that plaintiffs would be bound by the Terms.
The appellate court also found that the trial court erred in its unconscionability analysis. First, the Fifth District found that the district courts procedural unconscionability analysis rested solely on the fact that arbitration clause was a contract of adhesion. The appellate court noted that a contract of adhesion is not automatically unconscionable. Since the trial court's analysis went no further than simply declaring the contract to be a contract of adhesion, it erred in its conclusion.
Second, the Fifth District noted that the lower court's substantive unconscionability analysis was primarily based on inadmissible hearsay. After granting Dell's motion to strike the inadmissible evidence, the appellate court determined that the plaintiff's generalized argument that they would be deprived of a remedy are insufficient to sustain the burden of proving that the arbitration provision was substantively unconscionable. As a result, the Fifth District concluded that the trial court's finding that the defendant's arbitration agreement was unconscionable was error and the plaintiffs are bound by the arbitration agreement.