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Licitra v. Gateway, Inc.

Other Lower Courts

October 18, 2001

Emanuel Licitra, Claimant,
v.
Gateway, Inc., Defendant.

COUNSEL

Harold Campbell, Hempstead, for defendant.

Emanuel Licitra, claimant pro se.

Page 722

OPINION

Philip S. Straniere, J.

Claimant, Emanuel Licitra, commenced this small claims action against the defendant, Gateway, Inc. (Gateway), alleging that the defendant failed to accept return of defective equipment and reimburse him the purchase price. Defendant filed a motion seeking (1) dismissal of the complaint on the grounds that the contract between the parties precluded a court action and limited the resolution of all disputes to arbitration; (2) an award to the defendant granting summary judgment on various theories; and (3) an order compelling arbitration pursuant to the CPLR. Claimant opposes the motion.

Defendant, in its papers, indicates that the correct name of the defendant is Gateway Corp. The agreement that the defendant claims is an enforceable contract between the parties indicates that the correct name is " Gateway Companies, Inc." The copyright on the agreement is held by " 2000 Gateway, Inc." The trademark is registered to " Gateway, Inc." Since the correct identity of the defendant is not raised as an issue and the defendant has agreed to appear and answer the action, the court does not have to address the issue of whether or not the use of all these different corporate entities is a deceptive practice under General Business Law article 22-A.

Background:

In January 2001 claimant allegedly presented Gateway with a certificate for a " free" computer or a $700 credit towards the purchase of one as part of a promotion with Isuzu Motors. On January 14, 2001 claimant ordered a computer that cost in excess of the $700. He was able to use the promotional certificate for credit. Claimant asserts that almost immediately he experienced problems with the computer and sought to return it to defendant and have his money refunded. After negotiating with the defendant he agreed to accept a replacement computer. He received a new unit on or about February 9, 2001. Claimant alleges that the new unit still did not operate properly and he again demanded to return it and receive his money back. Claimant contends that the defendant refused to do so but continued to only offer to fix or replace the unit.

It is common in this industry to accept orders for computers by telephone, facsimile transmission and electronic mail. These are often referred to as " cash now, terms later" transactions. The consumer pays for the equipment, usually by credit card, and the seller sends the equipment with the written agreement

Page 723

contained in the packaging with the item shipped. There is never a document signed by the parties. A contract results when the package is opened and the consumer uses the equipment for a specified period of time which is set forth in the written agreement. Courts have held that such a practice results in a binding contract between the parties, " [c]ompetent adults are bound by such documents, read or unread" (Hill v Gateway 2000, 105 F.3d 1147, 1149 [7th Cir 1997]; Brower v Gateway 2000, 246 A.D.2d 246 [1st Dept. 1998]).

In this case the shipment to claimant contained a document with the following language in capital letters and bold type: " THIS AGREEMENT CONTAINS THE LIMITED WARRANTY AND TERMS AND CONDITIONS THAT APPLY ...YOU AGREE THAT THIS AGREEMENT APPLIES TO YOUR PURCHASE OF THE PRODUCT, ACCESSORIES AND SERVICES. AFTER YOUR LIMITED MONEY BACK GUARANTEE EXPIRES, THE REMAINING PROVISIONS OF THIS AGREEMENT WILL CONTINUE TO APPLY. THIS DOCUMENT CONTAINS A DISPUTE RESOLUTION CLAUSE. PLEASE READ SECTION 9 BELOW." Section 2 of the agreement provides: " LIMITED MONEY BACK GUARANTEE ... TO RECEIVE A REFUND THE LIMITED MONEY BACK GUARANTEE, YOU MUST NOTIFY GATEWAY OF YOUR DESIRE TO RETURN THE PRODUCT WITHIN THIRTY (30) DAYS OR FIVE (5) DAYS, AS APPLICABLE, FROM THE DATE YOU RECEIVED YOUR PRODUCT. YOU MUST ALSO RETURN THE PRODUCT AND ALL ACCESSORIES TO GATEWAY'S DESIGNATED ADDRESS WITHIN SEVEN (7) DAYS AFTER YOU RECEIVE A RETURN MERCHANDISE AUTHORIZATION (RMA) KIT AND OTHERWISE FOLLOW THE PROCEDURES SET FORTH IN THIS SECTION 2."

Section 9 of the agreement states: " DISPUTE RESOLUTION. You agree that any Dispute between You and Gateway will be resolved exclusively and finally by arbitration administered by the National Arbitration Forum (NAF) and conducted under its rules, except as otherwise provided below ... You understand that You would have had a right to litigate disputes through a court, and that You have expressly and knowingly waived that right and agreed to resolve any Disputes through binding arbitration. This arbitration agreement is made pursuant to a transaction involving interstate commerce, and shall be governed by the Federal Arbitration Act, 9 U.S.C. Section 1, et seq."

Before deciding the merits of this case the court must address a troubling issue. The computer industry and other courts have adopted the term " pizza box" to describe the package in which the document containing the terms and conditions of the agreement is shipped. As a matter of law in the State of New York, such a container is not a " pizza box." No self-respecting

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New York pizza would be caught soggy in such a box. The container may pass as a " pizza box" in those parts of the world that think food from Domino's, Little Caesars, Pizza Hut, and Papa John's is pizza. In this court's opinion such a classification cannot be recognized east of the Hudson River.

Issues Presented:

A. Is There A Contract?

The first issue presented is whether or not a contract exists between the parties and, if so, what are the terms of the contract? Common sense tells us that if you pay money and receive a product in return, a contract has been created. The unique issue with the purchase of computers is that there is no negotiation of the terms of the agreement. The written " Agreement" arrives with the product and by retaining the computer for 30 days, the consumer consents to be bound by the terms of the entire writing. As cited above, courts ...


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