Klocek v. Gateway
104 F.Supp.2d 1332 (D.
Vratil, District Judge.
William S. Klocek brings suit against Gateway, Inc. and Hewlett-Packard, Inc. on claims arising from purchases of a Gateway computer and a Hewlett-Packard scanner. This matter comes before the Court on the Motion to Dismiss filed by Gateway. . . For reasons stated below, the Court overrules Gateway's motion to dismiss . . .
A. Gateway's Motion to Dismiss
Plaintiff . . . claims breach of contract and breach of warranty, in that Gateway breached certain warranties that its computer would be compatible with standard peripherals and standard internet services.
Gateway asserts that plaintiff must arbitrate his claims under Gateway's Standard Terms and Conditions Agreement ("Standard Terms"). Whenever it sells a computer, Gateway includes a copy of the Standard Terms in the box which contains the computer battery power cables and instruction manuals. At the top of the first page, the Standard Terms include the following notice:
NOTE TO THE CUSTOMER:
This document contains Gateway 2000's Standard Terms and Conditions. By keeping your Gateway 2000 computer system beyond five (5) days after the date of delivery, you accept these Terms and Conditions.
The notice is in emphasized type and is located inside a printed box which sets it apart from other provisions of the document. The Standard Terms are four pages long and contain 16 numbered paragraphs. Paragraph 10 provides the following arbitration clause:
DISPUTE RESOLUTION. Any dispute or controversy arising
out of or relating to this Agreement or its interpretation shall be settled
exclusively and finally by arbitration.
The arbitration shall be conducted in accordance with the Rules of Conciliation
and Arbitration of the International Chamber of Commerce. The arbitration shall be conducted
Gateway urges the Court to dismiss plaintiff's claims under the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq. The FAA ensures that written arbitration agreements in maritime transactions and transactions involving interstate commerce are "valid, irrevocable, and enforceable." 9 U.S.C. § 2. . .
[The court holds that the FAA applies only if there is an enforceable agreement to arbitrate; hence,] . . . [b]efore granting a stay or dismissing a case pending arbitration, the Court must determine that the parties have a written agreement to arbitrate. . . . When deciding whether the parties have agreed to arbitrate, the Court applies ordinary state law principles that govern the formation of contracts. . . .
Before evaluating whether the parties agreed to arbitrate, the Court must determine what state law controls the formation of the contract in this case. . . .
[The plaintiff resides in Missouri, and the computer was purchased in Kansas and shipped to Missouri; the court] . . . discerns no material difference between the applicable substantive law in Kansas and Missouri and--as to those two states--it perhaps would not need to resolve the choice of law issue at this time. . .
The Uniform Commercial Code ("UCC") governs the
parties' transaction under both
State courts in
Gateway urges the Court to follow the Seventh Circuit decision in Hill. That case involved the shipment of a Gateway computer with terms similar to the Standard Terms in this case, except that Gateway gave the customer 30 days-- instead of 5 days--to return the computer. In enforcing the arbitration clause, the Seventh Circuit relied on its decision in ProCD, where it enforced a software license which was contained inside a product box. See Hill, 105 F.3d at 1148-50. In ProCD, the Seventh Circuit noted that the exchange of money frequently precedes the communication of detailed terms in a commercial transaction. See ProCD, 86 F.3d at 1451. Citing UCC § 2- 204, the court reasoned that by including the license with the software, the vendor proposed a contract that the buyer could accept by using the software after having an opportunity to read the license. ProCD, 86 F.3d at 1452. Specifically, the court stated: “A vendor, as master of the offer, may invite acceptance by conduct, and may propose limitations on the kind of conduct that constitutes acceptance. A buyer may accept by performing the acts the vendor proposes to treat as acceptance.” ProCD, 86 F.3d at 1452. The Hill court followed the ProCD analysis, noting that "[p]ractical considerations support allowing vendors to enclose the full legal terms with their products." Hill, 105 F.3d at 1149.
The Court is not
Additional terms in acceptance or confirmation.
(1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.
(2) The additional terms are to be construed as proposals for addition to the contract [if the contract is not between merchants]....
K.S.A. § 84-2-207; V.A.M.S. § 400.2-207.
By its terms, § 2-207 applies to an acceptance or written confirmation. It states nothing which requires
another form before the provision becomes effective.
In fact, the official comment to the section specifically provides that § § 2-207(1) and (2) apply "where an agreement has been reached orally ... and
is followed by one or both of the parties sending formal memoranda embodying the
terms so far agreed and adding terms not discussed." Official Comment 1 of UCC § 2- 207.
In addition, the Seventh Circuit provided no explanation for its conclusion that "the vendor is the master of the offer." See ProCD, 86 F.3d at 1452 (citing nothing in support of proposition); Hill, 105 F.3d at 1149 (citing ProCD ). In typical consumer transactions, the purchaser is the offeror, and the vendor is the offeree. See Brown Mach., Div. of John Brown, Inc. v. Hercules, Inc., 770 S.W.2d 416, 419 (Mo.App.1989) (as general rule orders are considered offers to purchase); Rich Prods. Corp. v. Kemutec Inc., 66 F.Supp.2d 937, 956 (E.D.Wis.1999) (generally price quotation is invitation to make offer and purchase order is offer). . . . The Court therefore assumes for purposes of the motion to dismiss that plaintiff offered to purchase the computer (either in person or through catalog order) and that Gateway accepted plaintiff's offer (either by completing the sales transaction in person or by agreeing to ship and/or shipping the computer to plaintiff). . . .
The cases the court cites show that the display of an item in a retail store is not an offer from the retailer to sell the item. However, when a consumer purchases a product in a retail store, the customer typically enters two contracts: one with the store, and one with the manufacturer of the item purchased. The warranties asserted in the contract that comes with the item are asserted by the manufacturer (unless the consumer purchases and additional warranty from the store). In light of these considerations, do the cases cited by the court show that Gateway is the manufacturer?
Under §2-207, the Standard Terms constitute either an expression of acceptance or written confirmation.
As an expression of acceptance, the Standard Terms would constitute
a counter-offer only if Gateway expressly made its acceptance conditional on
plaintiff's assent to the additional or different terms. K.S.A. § 84-2-207(1); V.A.M.S. § 400.2- 207(1). "[T]he
conditional nature of the acceptance must be clearly expressed in a manner
sufficient to notify the offeror that the offeree is unwilling to proceed with
the transaction unless the additional or different terms are included in the
Brown Machine, 770 S.W.2d at 420. Gateway provides no evidence that at the
time of the sales transaction, it informed plaintiff that the transaction was
conditioned on plaintiff's acceptance of the Standard Terms. Moreover, the mere fact that
Gateway shipped the goods with the terms attached did not communicate to
plaintiff any unwillingness to proceed without plaintiff's agreement to the
Standard Terms. See, e.g.,
Arizona Retail, 831 F.Supp. at 765 (conditional acceptance analysis rarely appropriate where
contract formed by performance but goods arrive with conditions attached);
Leighton Indus., Inc. v. Callier Steel Pipe & Tube, Inc., 1991 WL 18413, *6, Case No.
89-C-8235 (N.D.Ill. Feb. 6, 1991)
Because plaintiff is not a merchant, additional or different terms
contained in the Standard Terms did not become part of the parties' agreement
unless plaintiff expressly agreed to them.
See K.S.A. § 84-2- 207,