Borowiec v. GATEWAY 2000, INC.

808 N.E.2d 957

209 Ill.2d 376

283 Ill.Dec. 669

Michael BOROWIEC et al., Appellees, v. GATEWAY 2000, INC., Appellant.

No. 94235.

Supreme Court of Illinois.

April 1, 2004.

James D. Adducci and Marshall L. Blankenship, of Adducci, Dorf, Lehner, Mitchell & Blankenship, P.C., Chicago, Mark R. Kravitz and Sandra Slack Glover, of Wiggin & Dana, L.L.P., New Haven Connecticut, for appellants.

Adam J. Krohn, of Krohn & Moss, Ltd., Andrew P. Lamis, Chicago, for appellees.

Howard L. Teplinsky, of Seidler & McErlean, Chicago, Robin S. Conrad, Washington, D.C., for amicus curiae Chamber of Commerce of the United States of America.

Howard L. Teplinsky, of Seidler & McErlean, Chicago, Michael Petricone, Arlington, Virginia, for amicus curiae Consumer Electronics Association.

Dom J. Rizzi, Christopher B. Sanchez, of Miller, Faucher & Cafferty, L.L.P., Chicago, Kevin P. Roddy, of Hagens Berman, L.L.P., Los Angeles, California, for amicus curiae National Association of Securities and Commercial Law Attorneys.

Justice FREEMAN delivered the opinion of the court:

In this appeal, we consider whether the circuit court of Cook County erred in denying the motion to dismiss or to compel arbitration filed by Gateway 2000, Inc. (Gateway), in each of three cases seeking, inter alia, damages for breach of express and implied warranties under the Magnuson-Moss Warranty—Federal Trade Commission Improvement Act (15 U.S.C. § 2301 et seq. (1994)), and violation of the Illinois Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/1 et seq. (West 1998)). The appellate court consolidated the cases and affirmed the circuit court's denial of each motion to dismiss or to compel arbitration. 331 Ill. App.3d 842, 265 Ill.Dec. 218, 772 N.E.2d 256. We granted Gateway's petition for leave to appeal pursuant to Supreme Court Rule 315 (177 Ill.2d R. 315), and now reverse and remand for further proceedings.

BACKGROUND

A. Michael Borowiec

In November 1999, plaintiff Michael Borowiec purchased a Gateway Performance 600 PC computer and a three-year parts and on-site labor services contract from Gateway. In connection with the purchase, Gateway extended a limited moneyback guarantee to Borowiec, upon notification to Gateway within 30 days of shipment of the computer and prompt return of the computer. Gateway also warranted that the computer was free from defects in materials and workmanship. Both the "Labor Services Service Contract" and the "Limited Warranty Agreement" contained a dispute resolution clause whereby the parties agreed that any dispute between them would be "resolved exclusively and finally by arbitration administered by the National Arbitration Forum (NAF) and conducted under its rules."

In June 2000, Borowiec filed a complaint against Gateway in the circuit court of Cook County. In the complaint, Borowiec alleged that the computer had numerous defects and nonconformities. Borowiec also alleged that Gateway refused to perform on-site repair of the computer. As a consequence, Borowiec delivered the computer to Gateway on numerous occasions for repair. Gateway was unable to repair the computer to Borowiec's satisfaction. On May 13, 2000, Borowiec revoked his acceptance of the computer. The complaint sought damages for breach of written and implied warranties pursuant to the Magnuson-Moss Warranty—Federal Trade Commission Improvement Act (Magnuson-Moss Act or MMWA) (15 U.S.C. § 2301 et seq. (1994)), violation of the Illinois Consumer Fraud and Deceptive Business Practices Act¹ (Consumer Fraud Act) (815 ILCS 505/1 et seq. (West 1998)), and common law fraud.

On September 1, 2000, Gateway filed a motion to dismiss the complaint, pursuant to section 2-615 of the Code of Civil Procedure (735 ILCS 5/2-615 (West 2000)), for lack of subject matter jurisdiction and to compel arbitration. The circuit court denied the motion to dismiss and Gateway appealed.

B. Dorota and Tadeusz Kobik

In January 2001, plaintiffs Dorota and Tadeusz Kobik purchased a Gateway Performance 1000 PC computer, and a one-year on-site service, three-year labor and parts contract from Gateway. In connection with the purchase, Gateway extended a limited money-back guarantee to the Kobiks, upon notification to Gateway within 30 days of shipment of the computer and prompt return of the computer. Gateway also warranted that the computer was free from defects in materials and workmanship. The "Limited Warranty Agreement" contained a dispute resolution clause whereby the parties agreed that any dispute between them would be resolved exclusively and finally by arbitration administered by the NAF.

In October 2001, the Kobiks filed a complaint against Gateway in the circuit court of Cook County. In the complaint, the Kobiks alleged that the computer had numerous defects and nonconformities, including a defective hard drive. The Kobiks also alleged that Gateway refused to perform on-site repair of the computer. As a consequence, the Kobiks delivered the computer to Gateway on numerous occasions for repair. Gateway was unable to repair the computer and the Kobiks lost confidence in the computer's reliability. On August 30, 2001, the Kobiks revoked their acceptance of the computer. The complaint sought damages for breach of written and implied warranties pursuant to the Magnuson-Moss Act and violation of the Consumer Fraud Act.

Pursuant to section 2-619 of the Code of Civil Procedure (735 ILCS 5/2-619 (West 2000)), on October 22, 2001, Gateway filed a motion to dismiss the complaint or, in the alternative, to compel arbitration and stay the proceedings pending completion of arbitration. The circuit court denied the motion and Gateway appealed.

C. Leslie Waldron

In November 2000, plaintiff Leslie Waldron purchased a Gateway Essential 866 computer and a labor services contract from Gateway. In connection with the purchase, Gateway extended a limited money-back guarantee to Waldron, upon notification to Gateway within 30 days of shipment of the computer and prompt return of the computer. Gateway also warranted that the computer was free from defects in materials and workmanship. The "Limited Warranty Agreement" contained a dispute resolution clause whereby the parties agreed that any dispute between them would be resolved exclusively and finally by arbitration administered by the NAF.

In November 2001, Waldron filed a complaint against Gateway in the circuit court of Cook County. In the complaint, Waldron alleged that shortly after the purchase the computer exhibited numerous defects and nonconformities, including a defective CD-ROM, motherboard, power supply, and processor. Waldron also alleged that Gateway refused to perform on-site repair of the computer and required that Waldron bring the computer to Gateway's facility for repairs. Waldron delivered the computer to Gateway on numerous occasions for repair. Gateway was unable to repair the computer, and Waldron lost confidence in the computer's reliability. On October 1, 2001, Waldron revoked her acceptance of the computer. The complaint sought damages for breach of written and implied warranties pursuant to the Magnuson-Moss Act, revocation of acceptance pursuant to the Magnuson-Moss Act, and violation of the Consumer Fraud Act.

Pursuant to section 2-619 of the Code of Civil Procedure (735 ILCS 5/2-619 (West 2000)), on November 21, 2001, Gateway filed a motion to dismiss the complaint or, in the alternative, to compel arbitration and stay the proceedings pending completion of arbitration. The circuit court denied the motion, and Gateway appealed.

D. Common Facts

In the consolidated appeals, the appellate court held that the Magnuson-Moss Act precluded binding arbitration of the consumer disputes. 331 Ill.App.3d at 848, 265 Ill.Dec. 218, 772 N.E.2d 256. The court reasoned that Congress intended to preserve a judicial forum for consumers. 331 Ill.App.3d at 848, 265 Ill.Dec. 218, 772 N.E.2d 256. Gateway's limited warranty agreement, with its binding arbitration clause, violated the Magnuson-Moss Act and was therefore unenforceable. 331 Ill. App.3d at 851, 265 Ill.Dec. 218, 772 N.E.2d 256. Accordingly, the court affirmed the decisions of the circuit court denying Gateway's motion to dismiss and compel arbitration.

We granted Gateway's petition for leave to appeal. We allowed the Chamber of Commerce of the United States of America and the Consumer Electronics Association to file an amicus curiae brief in support of Gateway. We also allowed the National Association of Securities and Commercial Law Attorneys to file an amicus curiae brief in support of the plaintiffs.

ANALYSIS

A. Standard of Review

As noted above, Gateway filed a motion to dismiss Borowiec's complaint for lack of subject matter jurisdiction and to compel arbitration pursuant to section 2-615 of the Code of Civil Procedure. See 735 ILCS 5/2-615 (West 2000). In the actions initiated by Waldron and the Kobiks, Gateway filed motions to dismiss and to compel arbitration pursuant to section 2-619 of the Code of Civil Procedure. See 735 ILCS 5/2-619 (West 2000). A section 2-615 motion to dismiss attacks the legal sufficiency of the complaint. Illinois Graphics Co. v. Nickum, 159 Ill.2d 469, 484, 203 Ill.Dec. 463, 639 N.E.2d 1282 (1994). Such a motion does not raise affirmative factual defenses, but alleges only defects appearing on the face of the complaint. Illinois Graphics, 159 Ill.2d at 484,203 Ill.Dec. 463,639 N.E.2d 1282; Kolegas v. Heftel Broadcasting Corp., 154 Ill.2d 1, 8, 180 Ill.Dec. 307, 607 N.E.2d 201 (1992). Thus, the question presented by a section 2-615 motion is whether the allegations of the complaint, when viewed in a light most favorable to the plaintiff, are sufficient to state a cause of action upon which relief can be granted. Vernon v. Schuster, 179 Ill.2d 338, 344, 228 Ill.Dec. 195, 688 N.E.2d 1172 (1997); Bryson v. News America Publications, Inc., 174 Ill.2d 77, 86-87, 220 Ill.Dec. 195, 672 N.E.2d 1207 (1996). When ruling on...