Originially from: World Arbitration and Mediation Review (WAMR)

Recent Decision Opens Wider Gateway to Unfair Binding Arbitration
By Jean R. Sternlight, Assistant Professor Law, Florida State University
College of Law and Director of Education and Research, Florida Dispute
Resolution Center. J.D., Cum laude, Harvard Law School (1983); B.A.,
High Honors, Swarthmore College (1979).

When Rich and Enza Hill opened the boxes to their new Gateway 10th
Anniversary computer system they had no idea they were trading their
right to a jury trial for binding arbitration. Nonetheless, the Seventh
Circuit has held that because the boxes contained a "Standard Terms and
Conditions Agreement" including an arbitration clause, the Hills waived
their right to sue Gateway in court when they failed to return the computer
within 30 days. Instead, the Hills could only file a claim against Gateway
in arbitration, and pay fees totaling at least $2,000 to get there.

[Editor's Note: The case, Hill v. Gateway, 105 F.3d 1147 (7th Cir.
1997) (rehearing denied), was summarized in 7 WAMR 295 (Dec. 1996).]

Hill v. Gateway, is but the most extreme example of a series of court
decisions that allow large companies to impose potentially unfair binding
arbitration agreements on unwitting consumers. In Badie v. Bank of
America, 1994 WL 660730 (Cal. Ct. App. 1994) (not officially reported),
a California state court allowed the bank to deprive consumers of their
right to a jury trial by sending the customers an envelope stuffer
announcing that all future claims must be arbitrated. The Utah Supreme
Court, in Sosa v. Paulos, 924 P.2d 357 (Utah 1996), found that a doctor
could require a patient to arbitrate any future medical malpractice
complaint before a panel of specialists in the doctor's own field because
the woman signed an arbitration clause amongst a number of other
documents just a few minutes before she went into surgery.

The Gateway decision is even more striking than many other proarbitration
cases because the Hills literally had no chance to escape the
arbitration clause other than by making the heroic effort of returning their
new computer. Realistically, they had no chance to even learn of the
existence of the arbitration clause before the computer was ordered, paid
for, and delivered. While the Seventh Circuit implied potential buyers
might learn about Gateway's arbitration program through advertisements,
the Gateway web page, or conversations with Gateway personnel, these