McGlynn reverses Kardis decision on his last day

Steve Gonzalez Sep. 5, 2005, 9:39pm

Appellate Judge Stephen McGlynn

Stephen Tillery

Appellate Judge Terrance Hopkins

As Madison County Circuit Judge Philip Kardis enjoyed his last day on the job, a freshman appellate court judge--the position Kardis once aspired to--helped reverse a decision he made in a class action case against Dell Corp.

In his first published opinion as an appellate justice, Fifth District Appellate Judge Stephen McGlynn concurred with fellow Judges Terrance Hopkins--who wrote the decision-- and James Donovan to reverse and remand a class action case against Dell.

The plaintiffs, represented by Stephen Tillery of St. Louis, claim that Dell's Pentium 4 microprocessor was slower and less powerful and provided less performance than either a Pentium III or an AMD Athlon, but at a greater cost.

Dell appealed Kardis' order denying its motion to compel arbitration and the court's related orders denying its motion to strike exhibits and an affidavit. Kardis retired Sept. 2.

"Common sense dictates that because the plaintiffs were purchasing computers online, they were not novices when using computers. A person using a computer quickly learns that more information is available by clicking on a blue hyperlink," wrote Hopkins in the court's opinion.

"The trial court erred in refusing to grant the defendant's motion to strike, and the trial court should not have considered any of these exhibits in making its decision," he continued.

The affidavit was submitted by the plaintiffs, Dewayne Hubbert, Elden Craft, Chris Grout, and Rhonda Byington, in opposition to Dell's motion to compel arbitration.

On appeal, Dell argued that the trial court erred in finding that its arbitration clause was not a part of the contract between the defendant and the plaintiffs and that the court erred in finding that if the arbitration clause was a part of the contract between the parties, then the arbitration clause was unenforceable because it was procedurally and substantively unconscionable.

In 2000 and 2001, the plaintiffs purchased computers online through the Dell web site. Before purchasing them, each of the plaintiffs customized their models.

To make their purchases, each of the plaintiffs completed online forms on five of Dell's web pages. On each page, Dell's "terms and conditions of sale" were accessible by clicking on a blue hyperlink.

The terms and conditions also were printed on the back of the plaintiffs' invoices, which were sent along with separate documents containing the terms in the shipping boxes with the plaintiffs' computers. They also could be obtained by calling Dell.

On the last three forms the plaintiffs completed online, the following statement appeared: "All sales are subject to Dell's Term[s] and Conditions of Sale." Dell's "total satisfaction" return policy also was included, which provided that purchasers would receive a full refund or credit if the computers were returned within 30 days. None of the plaintiffs returned their computers within that time.

On June 3, 2002, the plaintiffs filed their complaint, both as individuals and on behalf of others similarly situated against Dell.

In their complaint, the plaintiffs-three Illinois residents and one Missouri resident-alleged that they had purchased computers online from Dell that contained Pentium 4 microprocessors, which Dell claimed were the fastest, most powerful Intel Pentium processors available.

After the plaintiffs filed their complaint, Dell made a demand for arbitration, but the plaintiffs did not respond. On Sept. 13, 2002, Dell filed a motion to dismiss the plaintiffs' complaint or, alternatively, to stay the proceedings and to compel arbitration.

Dell alleged that as a part of the online contract, the plaintiffs agreed to a binding arbitration clause, which was contained in the defendant's terms.

At a hearing, the plaintiffs agreed that a contract had been formed by their online purchase of the Dell computers, but they denied that the binding arbitration clause in the terms was a part of the contract. Dell moved to strike certain exhibits and an affidavit filed by the plaintiffs in opposition to their motion to compel arbitration.

Kardis denied Dell's motion to dismiss or, alternatively, to compel arbitration and their motions to strike and Dell appealed to the appellate court.

The plaintiffs argued that simply making the terms available online was insufficient and that a clear manifestation of assent to the "Terms and Conditions of Sale" was needed to create a binding arbitration agreement.

In the order reversing Kardis, Hopkins also wrote, "Federal and state laws strongly favor arbitration, and a presumption exists in favor of arbitration agreements."

"If a valid arbitration agreement exists and the claims raised are within the scope of the agreement, a trial court has no discretion but to compel arbitration."

In its motion to strike, Dell objected to seven of the plaintiffs' exhibits: a newspaper article from a March 2000 edition of the Washington Post; a transcript of a deposition of Edward C. Anderson, an employee of the National Arbitration Forum (NAF), taken in the case of Toppings v. Meritech Mortgage Services, Inc., and five documents, purported to be drafted by persons at NAF, that may or may not have been disseminated to unknown persons.

Dell also argued to the appellate court that Kardis erred in finding that if the arbitration agreement was binding, it was unenforceable because it was procedurally and substantively unconscionable.

When Kardis ruled that the arbitration clause was procedurally unconscionable, he held that the arbitration agreement should have been conspicuous and determined that the arbitration clause was procedurally unconscionable because it was a contract of adhesion.

Hopkins wrote, "A contract of adhesion is not automatically unconscionable, and because the court engaged in no other analysis and simply found that the defendant's arbitration clause was unconscionable because it was a contract of adhesion, the court erred in finding that the arbitration agreement was procedurally unconscionable.

Tillery told the appellate court at the hearing that Kardis held that Dell's arbitration agreement was unconscionable because it prevented the plaintiffs from proceeding with a class action lawsuit.

He also argued that the arbitration clause prevents punitive damages because the amount of filing fees in the arbitral forum rests upon the amount of damages asserted in a claim. In order for the plaintiffs to assert a claim for punitive damages, they would have to pay an excessive filing fee, making a request for punitive damages prohibitive, Tillery argued.

"The plaintiffs' generalized arguments that they would be deprived of a remedy if they were forced to arbitrate are insufficient to sustain the burden of proving that the arbitration provision is unconscionable," wrote Hopkins.

Dell is represented by the Chicago law firm of Jenner & Block.

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