Case Brief - Hill V. Gateway

Case Brief – Hill v. Gateway

Case Citation RICH HILL and ENZA HILL v. GATEWAY 2000, INC., 105 F.3d 1147; 1997 U.S. App. LEXIS 176; 31 U.C.C. Rep. Serv. 2d (Callaghan) 303

Parties (must include all designations) RICH HILL and ENZA HILL, on behalf of a class of persons similarly situated, Plaintiffs-Apellees, v. GATEWAY 2000, INC., and DAVID PRAIS, Defendants-Appellants.

Original Legal Action (Why they are suing) Plaintiff filed a class action alleging various claims and damages under the RICO Act stating the Defendant is a racketeer (mail and wire fraud), leading to treble damages for the Plaintiff and a class of all other purchasers.

Facts Rich and Enza Hill ordered a Gateway 2000 computer system via telephone from Gateway and paid for it with a credit card. The computer system was delivered to the Hills and inside the box was a list of terms. The terms stated that they had 30 days to return or the terms would be accepted. Included in those terms was an arbitration clause by the supplier. The Hills were unhappy with their purchase and returned the product after more than 30 days from receipt of the computer system. They then filed suit alleging that Gateway was a racketeer, and as a result, the Hills were entitled to damages under the Racketeer Influenced and Corrupt Organizations Act (RICO). Gateway sought enforcement of the arbitration clause contained in the materials they shipped to plaintiff.

Results in Trial court The trial court denied Gateways motion to enforce the arbitration clause saying that the record was insufficient to find that the customers were given adequate notice of the arbitration clause.

Gateway appealed claiming that an arbitration clause was contained in the Hills' package and that the terms were accepted when the Hills elected to keep the computer system past the 30 days of return policy.

Legal Issues - Must phrase as question(s) 1. Are the terms which were shipped with the supplier's product enforceable as part of the parties' contract even though they were not specifically pointed out to plaintiff?

2. Is a party bound by arbitration terms contained inside a shipping box if they have not been specifically made aware of the terms?

Holding - Answer to question(s) 1. Yes, the terms inside a box of software were binding on a consumer who subsequently used it.

2. Yes, a party is bound by the arbitration clause contained in the materials shipped to and accepted by them, regardless of whether that provision was prominently displayed or