Wigginton v. Dell, Inc.

Procedural entryThis page is a short order in Wigginton v. Dell, Inc.. Read the opinion of the Court — 382 Ill. App. 3d 1189
Appellate Court of Illinois·Decided June 2, 2008·No. 5-07-0076 Rel·Published

Opinion

Rule 23 order filed NO. 5-07-0076 April 25, 2008; Motion to publish granted IN THE June 2, 2008. APPELLATE COURT OF ILLINOIS

FIFTH DISTRICT ________________________________________________________________________

STEPHEN R. WIGGINTON and WEILMUENSTER ) Appeal from the & WIGGINTON, P.C., Individually and on Behalf of ) Circuit Court of Others Similarly Situated, ) St. Clair County. ) Plaintiffs-Appellees, ) ) v. ) No. 03-L-455 ) DELL, INC., f/k/a Dell Computer Corporation, ) Honorable ) Lloyd A. Cueto, Defendant-Appellant. ) Judge, presiding. ________________________________________________________________________

JUSTICE CHAPMAN delivered the opinion of the court:

The plaintiff, Stephen R. Wigginton, filed a class action, alleging that the defendant,

Dell, Inc. (Dell), refused to honor rebates that it offered its customers to induce them to

purchase computer equipment from Dell. The defendant filed a motion to compel arbitration.

The court found that a prohibition on class arbitration contained in the defendant's arbitration

clause was unenforceable, and it entered an order striking that prohibition and compelling

arbitration. The defendant appeals, arguing that the arbitration clause in the parties'

agreement is not severable and is enforceable in its entirety. We affirm.

On December 17, 2002, the plaintiff purchased $4,535.67 in computer equipment for

his law firm. He was offered a $500 rebate on the equipment, which could be redeemed after

the purchase. According to the plaintiff, he made several attempts to obtain the forms

necessary to claim the rebates, both by calling Dell and by attempting to download the forms

from Dell's Web site. He alleges that he was not able to obtain the forms for several months.

When he submitted the rebate forms, the claim was rejected on the basis that the eligibility

1 period had expired. According to the plaintiff, he was never told that there was a limitation

on the period of eligibility to claim the rebate.

On July 22, 2003, the plaintiff filed his original complaint in this matter. On

September 22, the defendant filed its first motion to dismiss or, in the alternative, to compel

arbitration and stay litigation pending arbitration. The defendant pointed to its terms and

conditions of sale, which contain a provision that all disputes or claims against Dell are

subject to binding arbitration, to be administered by the National Arbitration Forum. The

arbitration clause further provides that "arbitration will be limited solely to the dispute or

controversy between Customer and Dell." The terms and conditions also include a choice-of-

law provision making disputes subject to Texas law.

On March 31, 2004, with the defendant's motion still pending, the plaintiff filed a first

amended complaint, adding his law firm as a plaintiff. On May 7, 2004, the defendant filed

a new motion to dismiss the amended complaint or, in the alternative, to compel arbitration

and stay litigation pending arbitration.

On December 19, 2006, the court held a hearing in the matter. Prior to that time, both

parties had submitted briefs in support of their positions. Although the plaintiff initially

argued that the arbitration clause was unconscionable in its entirety, before the hearing he

conceded that the dispute was subject to arbitration, but he argued that the prohibition on

class arbitration was unconscionable. On January 11, 2007, the trial court entered an order

striking the class arbitration prohibition and compelling arbitration. The court found that the

class prohibition was unconscionable. On February 9, 2007, the defendant filed this

interlocutory appeal pursuant to Supreme Court Rule 307(a) (188 Ill. 2d R. 307(a)).

As the defendant correctly contends, this court has applied Texas law to the same

provision as the one at issue here and found it to be enforceable, in Hubbert v. Dell Corp.,

359 Ill. App. 3d 976, 835 N.E.2d 113 (2005). We emphasize that, while the provision

2 involved here is identical to the provision involved in Hubbert, the circumstances

surrounding the formation of the contract in the instant case differ greatly from those in

Hubbert. This distinction is significant for reasons we will explain in detail later. Moreover,

in deciding to apply Texas law in Hubbert, we explained that we will only apply the law of

another state pursuant to a choice-of-law provision if (1) there is some relationship between

that state and the controversy at issue and (2) applying the other state's law does not violate

the public policy of this state. Hubbert, 359 Ill. App. 3d at 982, 835 N.E.2d at 120 (citing

Potomac Leasing Co. v. Chuck's Pub, Inc., 156 Ill. App. 3d 755, 758-59, 509 N.E.2d 751,

753-54 (1987)). In Hubbert, we found no public policy reason not to apply Texas law.

Hubbert, 359 Ill. App. 3d at 982, 835 N.E.2d at 120. This conclusion has been undermined

by subsequent decisions of the Illinois Supreme Court.

In Kinkel v. Cingular Wireless, LLC, 223 Ill. 2d 1, 857 N.E.2d 250 (2006), the

supreme court found a class arbitration prohibition similar to the one here at issue to be

unconscionable. This holding presents a conflict between Illinois law and Texas law that did

not exist when we decided Hubbert. See Hubbert, 359 Ill. App. 3d at 982, 835 N.E.2d at 120

(noting that the result would be similar under the law of either state). For reasons we will

explain, we find that it would violate the public policy of this state to enforce the provision

at issue, even assuming it would be enforceable under Texas law. First, however, we turn

to the impact of the differing circumstances surrounding the contract formation here and in

Hubbert.

Under Texas law, as under Illinois law, there are two components to

unconscionability–procedural and substantive. Hubbert, 359 Ill. App. 3d at 986, 835 N.E.2d

at 123 (citing AutoNation USA Corp. v. Leroy, 105 S.W.3d 190, 198 (Tex. App. 2003)).

Procedural unconscionability relates to the circumstances surrounding the formation of the

contract, while substantive unconscionability deals with the unfairness of the provision itself.

3 Hubbert, 359 Ill. App. 3d at 986, 835 N.E.2d at 123 (citing AutoNation USA Corp., 105

S.W.3d at 198). When this court decided Hubbert, our precedents required us to find both

procedural and substantive unconscionability in order to conclude that a provision was

unconscionable. See Zobrist v. Verizon Wireless, 354 Ill. App. 3d 1139, 1147, 822 N.E.2d

531, 540 (2004). Subsequently, the supreme court rejected this requirement, holding that

unconscionability may be either procedural or substantive; although it can be a combination

of the two types, it does not need to include both. Kinkel, 223 Ill. 2d at 21, 857 N.E.2d at 263

(citing Razor v. Hyundai Motor America, 222 Ill. 2d 75, 99, 854 N.E.2d 607, 622 (2006)).

It is less clear whether Texas courts will likewise invalidate a provision on the basis of either

substantive unconscionability or procedural unconscionability alone. See In re Halliburton

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