Justice REID delivered the opinion of the court:
The defendant, Gateway, Inc., appeals the trial courts' orders which denied its motions to dismiss. The plaintiffs, Michael Borowiec, Tadeusz and Dorota Kobik, and Leslie Waldron purchased personal computers from Gateway and subsequently sued in their individual capacities to recover damages alleging: (1) breach of express and implied warranty pursuant to the Magnuson-Moss Warranty-Federal Trade Commission Improvement Act (Warranty Act) (15 U.S.C. § 2301 et seq. (1994)), (2) violations of the Illinois Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/2, (West 1998)) and (3) common law fraud. Gateway moved to have the complaints dismissed pursuant to sections 2-615 and 2-619 of the Illinois Code of Civil Procedure. 735 ILCS 5/2-615. 2-619 (West 1998). The trial courts denied Gateway's motions to dismiss. The cases were subsequently consolidated, and this appeal ensued. The main issue before this court, which is one of first impression, is whether a written warranty governed by the Warranty Act can require a consumer to submit to binding arbitration, or simply, does the Warranty Act preclude binding arbitration? For the reasons that follow, we affirm the decisions of the trial courts.
A. Michael Borowiec
On or about November 18, 1999, Borowiec purchased a Gateway Performance 600
On May 26, 2000, Borowiec filed a four-count complaint against Gateway alleging: (1) violations of the Warranty Act, (2) violation of the Consumer Fraud and Deceptive Business Practices Act, and (3) common law fraud. Gateway filed a motion to dismiss Borowiec's complaint pursuant to section 2-615 for lack of subject matter jurisdiction and to compel arbitration. On September 20, 2000, the trial court denied Gateway's motion to dismiss. Following an unsuccessful attempt to have the cause removed to federal court, Gateway timely filed a notice of appeal.
B. Tadeusz and Dorota Kobik
On or about January 31, 2001, the Kobiks purchased a Gateway Performance 1000 PC computer and services from Gateway Country Stores LLP (Gateway). The sale and purchase of the computer were subject to Gateway's "Limited Warranty and Terms and Conditions Agreement." Upon receiving the computer, the Kobiks realized that it was defective. After unsuccessfully attempting to have Gateway cure the defects, the Kobiks revoked acceptance of the computer and brought suit against Gateway to recover damages. On September 13, 2001, the Kobiks filed a three-count complaint wherein they alleged: (1) violations of the Warranty Act, and (2) violations of the Consumer Fraud and Deceptive Business Practices Act. Gateway subsequently filed a motion to dismiss or alternatively to compel arbitration and stay proceedings pending completion of arbitration pursuant to section 2-619. The trial court denied Gateway's motion on November 27, 2001, and Gateway timely filed a notice of appeal.
C. Leslie Waldron
On or about November 14, 2000, Waldron purchased a Gateway Essential 866 computer and services from Gateway Direct LP (Gateway). The sale and purchase of the computer were subject to Gateway's "Limited Warranty and Terms and Conditions Agreement." After receiving the computer in the mail, Waldron discovered that it was defective. After several failed attempts to have Gateway cure the defects, Waldron revoked acceptance of the computer.
On October 19, 2001, Waldron filed a four-count complaint wherein she alleged: (1) violations of the Warranty Act, and (2) violations of the Consumer Fraud and Deceptive Business Practices Act. On November 21, 2001, Gateway filed a motion to dismiss or alternatively to compel arbitration and stay proceedings pending completion of arbitration pursuant to section 2-619. The trial court denied Gateway's motion to dismiss on December 20, 2001, and Gateway timely filed its notice of appeal the same day.
D. Gateway's Warranty Agreement
It is undisputed that Gateway's "Limited Warranty and Terms and Conditions Agreement" governed the purchase of the computers in all three matters. In each of the plaintiffs'"Limited Warranty and Terms and Conditions Agreement" there appears a dispute resolution clause. The dispute resolution clause is identical in all the plaintiffs' warranties and is as follows:
E. Consolidation of the Cases
In each of Gateway's motions to dismiss, Gateway argued that dismissal was proper because the "Limited Warranty and Terms and Conditions Agreement" requires all disputes between Gateway and its customers to be resolved through binding arbitration pursuant to the Federal Arbitration Act (FAA) (9 U.S.C § 1 et seq. (1994)). In response, the plaintiffs argued that the Warranty Act precludes binding arbitration, and as such, the arbitration agreement in Gateway's warranty is unenforceable. On February 11, 2002, the three cases were consolidated.
The issue before this court is whether the trial courts erred when they denied Gateway's motions to dismiss pursuant to sections 2-615 and 2-619. "A section 2-615 motion poses the question of whether the complaint states a cause of action upon which relief can be granted. [Citation.] A section 2-619 motion, on the other hand, raises certain defects or defenses and questions whether defendant is entitled to judgment as a matter of law. [Citation.] Since the resolution of either motion only involves a question of law, the standard of review is de novo. [Citation.] On a motion to dismiss, this court must accept all well-pleaded facts as true. [Citation.]" In re Parentage of M.J., 325 Ill.App.3d 826, 829, 259 Ill.Dec. 641, 759 N.E.2d 121 (2001).
On appeal, Gateway argues that the trial courts erred when they denied its motions to dismiss pursuant to sections 2-615 and 2-619. Specifically, Gateway maintains that when the plaintiffs accepted the terms in the warranty agreement, they agreed to resolve any dispute with Gateway through binding arbitration, and subsequently, the trial courts erred when they did not dismiss the plaintiffs' complaints and enforce the binding arbitration clause in the warranty.
In reply, the plaintiffs assert that the binding arbitration clause in Gateway's warranty violates the Warranty Act, and as such is unenforceable. In particular, the plaintiffs contend that the Warranty Act preserves for consumers the right to ultimately have their disputes with warrantors settled in a judicial forum and consequently precludes binding arbitration. We agree.
A. The Warranty Act and the FAA
In 1975, Congress enacted the Warranty Act in order "to improve the adequacy of information available to consumers [and] prevent deception's in connection with written warranties issued with consumer products. 15 U.S.C. § 2302(a) (1994). The Warranty Act sets out clear and comprehensive requirements regarding disclosures, duties, and remedies associated with warranties on consumer products. Products covered by the Warranty Act include any "tangible personal property which is distributed in commerce and which is normally used for personal, family, or household
In 1925, Congress passed the FAA to reverse the long-standing judicial hostility to arbitration agreements and to place arbitration agreements upon the same footing as other contracts. Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24, 111 S.Ct. 1647, 1651, 114 L.Ed.2d 26, 36 (1991); Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 111, 121 S.Ct. 1302, 1307, 149 L.Ed.2d 234, 244 (2001). The FAA provides:
The United States Supreme Court has recognized an "emphatic federal policy in favor of arbitral dispute resolution." Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 631, 105 S.Ct. 3346, 3356, 87 L.Ed.2d 444, 458 (1985). To further this purpose, the FAA compels judicial enforcement of a wide range of written arbitration agreements. Circuit City Stores, Inc., 532 U.S. at 111, 121 S.Ct. at 1307, 149 L.Ed.2d at 244. Only a contrary congressional command can override the FAA's mandate to enforce arbitration agreements. Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 226, 107 S.Ct. 2332, 2337, 96 L.Ed.2d 185, 194 (1987). Thus, to overcome the presumption favoring arbitration agreements, the party opposing arbitration must show that Congress intended to preclude a party's waiving a statute's judicial remedies. McMahon, 482 U.S. at 227, 107 S.Ct. at 2337, 96 L.Ed.2d at 194.
The Supreme Court has articulated a test for determining whether a federal statute may override the FAA's directive to enforce arbitration agreements. In essence, this test requires the party opposing arbitration to show a clear congressional intent to override the FAA's mandate to enforce binding arbitration agreements. According to the Supreme Court, this congressional intent must be evidenced in the statute's text, history or through an inherent conflict between arbitration and the statute's purposes. McMahon, 482 U.S. at 226-27, 107 S.Ct. at 2337, 96 L.Ed.2d at 194. "[A]ny doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration * * *." Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 941, 74 L.Ed.2d 765, 785 (1983).
B. Other Jurisdictions
We note that there is a split among the courts that have visited this issue. The cases which support the position that the Warranty Act precludes binding arbitration are as follows: Wilson v. Waverlee Homes, Inc., 954 F.Supp. 1530 (M.D.Ala. 1997); Boyd v. Homes of Legend, Inc., 981 F.Supp. 1423 (M.D.Ala.1997); Rhode v. E & T Investments, Inc., 6 F.Supp.2d 1322 (M.D.Ala.1998); Pitchford v. Oakwood Mobile Homes, Inc., 124 F.Supp.2d 958 (W.D.Va.2000); Raesly v. Grand Housing, Inc., 105 F.Supp.2d 562 (S.D.Miss.2000); and Philyaw v. Platinum Enterprises, Inc., No. CL00-236, 2001 WL 112107 (Va. Cir. Ct.2001).
We agree with the rationale of these cases and for the reasons that follow, we reject the reasoning of the following cases,
C. Text of the Warranty Act
An examination of the Warranty Act's text shows that it was Congress' intent to ultimately preserve a judicial forum for consumers.
The Warranty Act provides that "a consumer who is damaged by the failure of a supplier, warrantor, or service contractor to comply with any obligation under this chapter, or under a written warranty, implied warranty, or service contract, may bring suit for damages and other legal and equitable relief." 15 U.S.C. § 2310(d)(1) (1994). The Warranty Act recognizes only one exception to this entitlement and, hence, provides for the establishment of "informal dispute settlement mechanisms" (15 U.S.C. § 2310(a)(1) (1994)) or "informal dispute settlement procedures" (15 U.S.C. § 2310(a)(3) (1994)).
Warrantors may establish "informal dispute settlement mechanisms" to further the congressional goal of encouraging consumers and warrantors to settle their disputes. Section 2310(a)(1) of the Warranty Act states that "Congress hereby declares it to be its policy to encourage warrantors to establish procedures whereby consumer disputes are fairly and expeditiously settled through informal dispute settlement mechanisms." 15 U.S.C. § 2310(a)(1) (1994).
These informal dispute settlement mechanisms are proper so long as they comply with the Federal Trade Commission's (FTC) minimum standards. 15 U.S.C. §§2310(a)(2), (a)(3) (1994). The Warranty Act authorizes the FTC to prescribe rules about the presale disclosure of a written warranty's terms and conditions and the minimum federal requirements for any informal dispute settlement mechanism incorporated in a written warranty. 15 U.S.C. §§ 2302(b)(1)(A), 2310(a)(2) (1994).
If the informal dispute settlement mechanisms comply with FTC regulations and if the written warranty states that the consumer must resort to this procedure before pursuing any legal remedy, then "the consumer may not commence a civil action * * * unless he initially resorts to such procedure." 15 U.S.C. § 2310(a)(3) (1994). The Warranty Act states that "in The Warranty Act states that "in any civil action arising out of a warranty obligation and relating to a matter considered in such a procedure, any decision in such procedure shall be admissible in evidence." 15 U.S.C. § 2310(a)(3)(C) (1994).
In other words, the informal dispute settlement procedures are a prerequisite, not a bar, to relief in court. "[T]he consumer may not commence a civil action * * * unless he initially resorts to such procedure." 15 U.S.C. § 2310(a) (1994). The consumer must first try to settle his or her dispute with the warrantor by resorting to an informal dispute settlement procedure. If the consumer is dissatisfied with the result reached in the informal dispute settlement, the consumer may then commence a civil action and the results of the informal dispute settlement procedure shall be admissible as evidence.
D. Legislative History of the Warranty Act
A review of the legislative history of the Warranty Act provides further evidence that Congress intended for consumers to retain the right to have their disputes with warrantors decided in the courts. Specifically, remarks made by one of the sponsors
Congressman Moss' remarks follow:
Congressman Moss' remarks show that the informal dispute settlement mechanisms or procedures are simply a "prerequisite" and not a bar to suit. The mechanisms were created to act as a filter as opposed to a stopper.
The report on the bill makes this point even clearer. The report states that "[a]n adverse decision in any informal dispute settlement proceeding would not be a bar to a civil action on the warranty involved in the proceeding, but the decision reached in any informal dispute settlement procedure relating to any matter considered in such procedure would be admissible in any civil action arising out of a warranty on a consumer product." H.R.Rep. No. 93-1107 (1974), reprinted in 1974 U.S.C.C.A.N. 7702, 7723.
E. FTC Regulations
The regulations adopted by the FTC pursuant to the Warranty Act provide more evidence of an intent that consumers have final access to the courts. In particular, the regulations show that the informal dispute settlement procedure was meant to act only as a prerequisite and not as a bar to a consumer ultimately going to court.
The first evidence appears in 16 C.F.R. 700.8 (2001). The section is entitled "Warrantor's decision as final" and states:
Stronger evidence is found further in the regulations. Under the regulations, a "mechanism" is defined as an informal dispute settlement procedure which is incorporated into the terms of a written warranty. 16 C.F.R. § 703.1(e) (2001). The regulations require that a "mechanism" comply with the requirements prescribed by the FTC and contained in 16 C.F.R. §§ 703.3 through 703.8. 16 C.F.R. § 703.2(a) (2001). The regulations then state that the [d]ecisions of the Mechanism shall not be legally binding on any person. * * * In any civil action arising out of a warranty obligation and relating to a matter considered by the Mechanism, any decision of the Mechanism shall be admissible in evidence * * *." (Emphasis added.) 16 C.F.R § 703.5(j) (2001).
Moreover, and to bring this point further home, the regulations add that "The
Finally, if any doubt remains about whether the Warranty Act precludes binding arbitration agreements, our examination of the remarks made by the FTC upon adopting 16 C.F.R. § 703.5(j) show that binding arbitration is precluded under the Warranty Act. The FTC's comments are as follows:
The Commission goes on to state:
Here, Gateway's "Limited Warranty and Terms and Conditions Agreement" contains a binding arbitration clause. This clause is in violation of the Warranty Act and is therefore unenforceable. As such, the trial courts' decisions are affirmed.
For the foregoing reasons, the decisions of the trial courts are affirmed.
CAMPBELL, P.J., and GREIMAN, J., concur.