Arbitration Clause Overturned| in Class Action Against Gateway

SPRINGFIELD, Ill. (CN) - The Illinois Supreme Court has given new life to a class action against computer giant Gateway. In a unanimous opinion, the court ruled that Gateway could not enforce an arbitration clause in its sales contract because the arbitrator, the National Arbitration Forum, no longer accepts consumer cases.

"Neither party has indicated whether an arbitrator could be appointed who would be allowed to conduct arbitration under NAF rules," Justice Rita Garman wrote for the court. "Nor is it known whether NAF rules could be used in a consumer arbitration, given the fact that NAF no longer accepts such arbitrations. Thus, any finding by this court concerning the use of NAF rules by a substitute arbitrator would be based on speculation."

So the 2002 class action from lead plaintiff William Carr can proceed. Carr claims Gateway and Intel falsely claimed that the Pentium 4 worked faster than the Pentium 3.

The case was severed in 2003 and the two cases carried on as Carr v. Gateway and Barbara Sales v. Intel.

A 2007 decision by the Illinois Supreme Court effectively ended the Intel case, when the court found that Intel's alleged representations were not actionable under Illinois law.

Gateway asked Madison County Associate Circuit Judge Ralph Mendelsohn to send the other case to arbitration. Gateway appealed to the 5th District in Mount Vernon after Mendelsohn denied the request.

During this time, the National Arbitration Forum stopped hearing consumer complaints.

Gateway claimed it could pick a substitute, but the state's 5th Circuit found that the designation of the forum was central to the contract and denied the appeal.

The Supreme Court's decision upheld that.

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