Brower v. Gateway 2000, Inc

In Brower v. Gateway 2000, Inc. (246 A.D.2d 246 [1st Dept 1998]), plaintiffs purchased computers from Gateway through a direct-sales system. They sued Gateway complaining of claimed misrepresentations concerning the provision of technical support services. Gateway moved to dismiss the complaint based on the arbitration clause in the parties' agreement. Plaintiff opposed the motion on the grounds of unconscionability, because the clause: (a) required the parties to arbitrate in Chicago, Illinois; and (b) required the arbitration to be conducted in accordance with the rules of the International Chamber of Commerce ("ICC"), a forum headquartered in France that is not commonly used for consumer matters. Plaintiff further complained that: The cost of ICC arbitration was prohibitive, particularly given the amount of the typical consumer claim involved. For example, a claim of less than $ 50,000 required advance fees of $ 4,000 (more than the cost of most Gateway products), of which the $ 2000 registration fee was nonrefundable even if the consumer prevailed at the arbitration. Consumers would also incur travel expenses disproportionate to the damages sought, which appellants' counsel estimated would not exceed $ 1,000 per customer in this action, as well as bear the cost of Gateway's legal fees if the consumer did not prevail at the arbitration; in this respect, the ICC Rules follow the "loser pays" rule used in England. Also, although Chicago was designated as the site of the actual arbitration, all correspondence must be sent to ICC headquarters in France. (246 A.D.2d, at 249). In Brower v. Gateway 2000, Inc. (246 A.D.2d 246 [1st Dept 1998]), which involved the enforceability of an arbitration clause the Appellate Division explained: As a general matter, under New York law, unconscionability requires a showing that a contract is "both procedurally and substantively unconscionable when made" ( Gillman v. Chase Manhattan Bank, 73 N.Y.2d 1 [1988]). That is, there must be "some showing of" an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party' " ( Matter of State of New York v. Avco Fin. Servs., 50 N.Y.2d 383 [1988]). The Avco Court took pains to note, however, that the purpose of this doctrine is not to redress the inequality between the parties but simply to ensure that the more powerful party cannot "'surprise'" the other party with some overly oppressive term (supra, at 389). ( Id., 246 A.D.2d, at 253).