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'Stubborn' PC owner takes on Gateway

As Grizzly Flats resident Dennis Sheehan tells his story, he has lived a computer buyer's worst nightmare after purchasing a defective PC from Gateway last year. Gateway wouldn't fix the machine, replace it or refund his money, he alleges, so he filed a small claims case in El Dorado County against the multibillion-dollar corporation. "I could've bought another computer, but I'm a little bit stubborn," said the 46-year-old Sheehan, who describes himself as a retired real estate investor. As Gateway tells it in court filings, the company replaced Sheehan's computer a few months after he first complained, and he kept both machines. The company's bigger concern, however, is that Sheehan sued in court and did not arbitrate the case, as required by Gateway's sales agreement. In that regard, the case highlights a reality for today's consumers. Arbitration clauses -- slipped into sales agreements and scroll-down boxes on computer screens -- require a dispute to be settled in private forums chosen by companies instead of in public courtrooms. Often unaware, consumers agree to arbitration -- with the click of a mouse or even simply by using a product -- and give up their right to sue. Corporations contend that private arbitration saves everyone time and money, allowing disputes to be decided in one session by a neutral arbiter and avoiding lengthy and costly litigation in far-flung locations. But some critics say arbitration allows companies to avoid consumer lawsuits, including multimillion-dollar class actions. With the bottom line at stake, corporations such as Gateway will go to great lengths to defend those agreements, they say. "We are at a point now where every large corporation that has the ability to say 'take it or leave it' is opting out of the civil justice system," said Cliff Palefsky, a San Francisco trial lawyer and expert on arbitration agreements. "Some do it in a straightforward manner. Others do it in an underhanded manner." According to court papers and interviews, Sheehan's story started in January 2006 when he ordered a Gateway desktop computer with a widescreen monitor, intending to use it to start a sign-making business. Right out of the box, he says, the computer displayed scattered graphics and wouldn't work properly. He says he called a Gateway salesman five times and sent him an e-mail to get an authorization number to send the computer back, but his phone calls and message were never returned. Then, over the course of months, Sheehan said he called Gateway technical support dozens of times. Technicians kept telling him the problems could be fixed, but they never were, he says. Eventually, Gateway refused to provide him with any more technical support, and despite his repeated demands, the company would not return his money or replace his computer, Sheehan contends. So, Sheehan said he decided to file a case against Gateway in small claims court, where lawyers are banned and citizens can seek basic justice. A March trial was scheduled in Placerville. Gateway responded with a Bay Area lawyer and a 2-inch thick stack of legal documents. The company had the case moved to a higher court and then tried to compel private arbitration on its own terms. Sheehan argued in a court filing that he had never accepted Gateway's arbitration agreement. He didn't receive any paperwork with the computer that explained the agreement, he said. And the computer's graphics were so scattered that he says he couldn't read the box of terms and conditions or click the "accept" button. A Gateway technician had him bypass the screen altogether, he said. Gateway responded in court papers that its terms of sale and warranty are included with every shipment, and that it was impossible for Sheehan to use the computer without accepting its terms and conditions or to bypass the screen. In a tentative ruling on May 24, El Dorado Superior Court Judge Daniel Proud sided with Sheehan and said the dispute should remain in small claims court. "The court finds that based on the evidence submitted, the respondent has met his burden to prove there was no agreement to arbitrate the subject dispute," Proud wrote in his ruling. Gateway's lawyers asked the judge to hear them again in the matter. On Monday, Attorney William Portello, a partner in a Concord law firm, and Sheehan, a high-school dropout who has argued his own case, faced off in a Cameron Park courtroom. Portello tried to persuade Proud to change his ruling and send the case to arbitration, where he said it belonged. "This is no different from virtually every other software and computer company in America," Portello told the judge. Sheehan again said he had never received the arbitration agreement via written materials or his computer screen, and told the judge he never received a replacement computer. Gateway insisted to Proud that the company had delivered a new PC. Proud, who urged the parties to settle their case, said he would take the matter under submission. He has 90 days to issue a final ruling. Portello could not talk about the case outside of court, and David Hallisey, Gateway's director of communications, said the company does not discuss pending litigation. Sheehan says he will continue to fight the case as long as Gateway refuses to give him justice. "I started the battle," he said. "I don't want to be the one who walks away because they're muscling me." Palefsky said that it is ultimately up to Gateway to show that a customer accepted their arbitration agreement. "Gateway has the burden of proving the existence of a contract," he said. If Sheehan continues to be successful in the trial court, Palefsky said, he can look forward to a protracted appeal process, with hundreds of pages of legal filings and years of delay. At some point, he will likely be overwhelmed by the vast legal and financial resources of Gateway. "This poor guy now faces daunting reality of having to litigate this on appeal against Gateway," Palefsky said. "By winning, he's lost."