Sample Case Brief
Brower v. Gateway 2000, Inc.
, 246 A.D.2d 246, 676 N.Y.S.2d 569 (1st Dep’t 1998).
Procedural Posture:
New York appellate court review of trial court’s order granting defendant Gateway 2000,
Inc.’s motion to dismiss plaintiffs’ claims as there was a required arbitration clause in the contracts.
Issues:
Whether an arbitration clause in a contract to sell a computer between a computer company and various consumers requiring arbitration was sufficiently unconsionable to be invalid.
Facts:
The appellants/plaintiffs, Tony Brower and others, purchased computers and software products from the defendant, Gateway 2000, through a direct-sales system, by mail or telephone order. The plaintiffs’ Gateway PC boxes contained a “shrinkwrap agreement,” which included an arbitration clause. The shrinkwrap agreement basically said that if you keep the computer beyond 30 days after the date of delivery, you've agreed to the terms.
The agreement spanned sixteen paragraphs. Paragraph 10 entitled "dispute resolution" is relevant here. It reads as follows: "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 in Chicago, Illinois, U.S.A. before a sole arbitrator. Any award rendered in any such arbitration proceeding shall be final and binding on each of the parties, and judgment may be entered thereon in a court of competent jurisdiction."
Plaintiffs brought an action "alleging deceptive sales practices in seven causes of action, including breach of warranty, breach of contract, fraud and unfair trade practices." The defendant moved to dismiss the Plaintiffs' complaint based on the existence of the
Arbitration Clause in Paragraph 10.
In response, plaintiffs argued that the arbitration clause was "invalid under UCC 2-207, unconscionable under UCC 2-302 and an unenforceable contract of adhesion." Plaintiff lived in New York, the forum for the arbitration was in Chicago and the headquarters of the arbitral body, the "International Chamber of Commerce" ("ICC") was located in
France.
Plaintiff claimed that the arbitral body's rules were difficult to locate; its costs were prohibitive (for claims less then $50,000, litigants had to advance fees of $4000, $2000 of which was non-refundable); travel expenses would be disproportionate to the amount sought; and if the plaintiffs were to lose, they would have to pay the defendant's legal fees. The amount of money was more than the cost of most of the defendant's products.

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Issues:
1) Is the arbitration clause violative of §2-207 of the Uniform Commercial Code ("UCC") as a material alteration to which there was no express agreement to arbitration?
2) Is the arbitration clause unenforceable as a contract of adhesion?
3) Does the arbitration clause violate §2-302 of the UCC as unconscionable "due to the unduly burdensome procedure and cost for the individual consumer?"
4) Does the arbitration clause apply to the false advertising cause of action under
General Business Law sections as there is no mention of arbitration in the technical service contract?
Rule(s):
1) UCC §2-207 requires that a material alteration of a preexisting oral contract must be expressly agreed to. A material alteration is an addition to the contract.
2)
3) UCC § 2-302 allows courts to flexibly police against clauses that they find unconscionable as a matter of law.
To establish an agreement is unconsionable, procedural and substantive unconscionability. Gilman and other NY cases.
There must be some showing of “an absence of meaningful choice … together with contract terms which are unreasonably favorable to the other party.” Matter of State of
New York v. Avco Financial Service
To determine procedural unconscionability, a court will look at factors to determine if in fact one party lacked meaningful choice. Gillman .
However, substantive unconscionability alone may be enough to render the terms unenforceable. Gillman , NY v. Avco, Mater of Teleserve.
4) Various section of the General Business Law require that contracts be clear about what is offered and accepted.
Holdings:
1) Shrinkwrap terms delivered following a mail order purchase were not proposed additions to the contract, but part of the original agreement between the parties, therefore outside the scope of §2-207. At 250–51.
2)
3) The portion of the arbitration provision requiring arbitration before the ICC was unconscionable.
4)
Reasoning:

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1) Pursuant to Hill v. Gateway 2000 (7 th
Cir.) and ProCD, Inc. v. Zeidenberg (7 th
Cir.), the arbitration clause does not violate UCC § 2-207.
Hill construed the identical arbitration clause and the court here observed "the contract was not formed with the placement of a telephone order or with the delivery of the goods. Instead, an enforceable contract was formed only with the consumer's decision to retain the merchandise beyond the 30-day period specified in the agreement."
The Hill court noted that the ProCD court observed "UCC 2-207 did not apply and indeed was 'irrelevant' to such transactions, noting that the section is generally invoked where multiple agreements have been exchanged between the parties in a classic 'battle of the forms,' whereas ProCD (as well as Hill and this case) involves but a single form."
The particular arbitrator chosen was not fair and was designed to deter individual customers from using the arbitration process, since the organization providing the rules
(the International Chamber of Commerce) was based in France. And it is unreasonable to assume that someone would be familiar with European arbitration law.
2 ) Unequal bargaining power? Yes. But, since the consumer had "the ability to make the purchase elsewhere and the express option to return the goods, the consumer is not in a
'take it or leave it' position at all; if any term of the agreement is unacceptable to the consumer, he or she can easily buy a competitor's product instead–either from a retailer or directly from the manufacturer–and reject Gateway's agreement by returning the merchandise." At 252. Carnival Cruise .
The consumer had 30 days to make their decision. The fact that the consumer does not read or understand certain portions of the contract is irrelevant. Filias , Morris .
3) The court then recognized that in this case, unlike most other cases, both procedural and substantive unconscionability did not need to exist for unconscionability to be found.
Gilman .
The substantive portion of the analysis:
Alone, the site of the arbitration (Chicago) being inconvenient is not enough to rise to the level of unconscionability. However, the "excessive cost factor that is necessarily entailed in arbitrating before the ICC is unreasonable and surely serves to deter the individual consumer from invoking the process." At 254. Teleserve .
Since the consumer is "[b]arred from resorting to the courts by the arbitration clause in the first instance, the designation of a financially prohibitive forum effectively bars consumers from this forum as well; consumers are thus left with no forum at all in which to resolve a dispute." At 254.
US laws generally do not allow a contract to force the loser in arbitration to pay the legal fees of the winner.
Gateway has extended a new arbitration offer to substitute AAA for ICC. However,
Brower and plaintiffs claim AAA fees are also excessive.

Sample Case Brief
Court cannot determine on this record if the arbitration with AAA is unconscionable.
Avildsen .
4) “[T]he service contract does not apply to some separate product that could be retained whiled the computer products—and the accompanying agreement—could be returned.”
Judgment:
Affirmed in part, modified in part, and remanded. Modified to order that abribtration in front of the ICC is unconscionable. Remanded so that the parties could seek an appropriate substitution of an arbitrator (AAA?), pursuant to the Federal Arbitration Act
(9 USC §1 et seq.), which provides for such court designation of an arbitrator upon application of either party, where, for whatever reason, one is not otherwise designated
(9 USC §5) (at 255.)
Functional Analysis:
I assigned you this case to show you: 1) legal authority including a common law rule; 2) how to case brief – what all the pieces mean; 3) jurisdiction can matter in analysis of precedent; and 4) to introduce some U.S. legal language.