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Gateway at Risk in BlueHippo Class Action

Computer maker had exclusive contract with BlueHippo for years

By Joseph S. Enoch
ConsumerAffairs.com

May 8, 2008 

“A third party does not have a duty to report another's tortious activity. But neither does a third party have a right to aid and abet another in a tortious activity and profit from it by providing substantial assistance,” said United States District Judge Jeffrey White.

The class action lawsuit seeks restitution for “thousands” of California BlueHippo customers who paid thousands of dollars for overpriced merchandise and in many cases received nothing, said David Marshall, the lead counsel on the case.

“The indications we have so far is that for most of the period BlueHippo has been in business, around two-thirds of the customers never received anything for the money that they paid,” Marshall said. “(It is) one of the most bold-faced scams that I've ever seen as a consumer lawyer.”

Advertisements across the country that promised “no credit check” and “low weekly payments” lured low-income consumers into paying $2,000 or more for desktop and laptop computers that would normally be valued at around $500.

ConsumerAffairs.Com has received 517 complaints from BlueHippo consumers, many from parents who thought it would be a great way to give their children an educational advantage, only to discover the company rarely meets its promise to deliver a computer after 13 consecutive weeks of payments and many times never delivers the computer at all.

“I ordered a computer in March, 2006,” wrote Yvette of Bellmawr, N.J. “It was paid off in May, 2007. ... but I still have not received my computer. I am told the same thing, '6-8 more weeks.' I have spent over $2000 on this computer for my three children, and they still have no computer.”

Gateway's role

This latest installment to the class action, which was first filed March 2006, could make Gateway partially responsible for allowing BlueHippo to advertise its involvement with Gateway and use its logos to legitimize the offer, Marshall said.

“There are consumers that we've talked to who said they would have never bought a computer from BlueHippo if they hadn't believed it was a legitimate operation and that was shown in part by the fact that BlueHippo touted its relationships with manufactures and suppliers, used the Gateway name in its advertisements for a long period of time. And we believe that that had the effect to lure people into very unconscionable deals,” Marshall said.

Gateway had an exclusive deal with BlueHippo from December 2003 to “some time in early 2007,” according to court documents.

In an interview with BusinessWeek a year ago, a Gateway representative admitted the company knew about BlueHippo's business practices.

“We've clearly been aware of their business model from the get-go,” Gateway spokesman David Hallisey told the business magazine.

"Trying to make a profit"

Hallisey said that was the reason Gateway severed ties with BlueHippo. When BusinessWeek asked him why it took the company so long to come to this conclusion, Hallisey said, “We're publicly traded and trying to make a profit, so that's a consideration.”

BlueHippo and Gateway did not return phone calls seeking comment.

BlueHippo no longer has an exclusivity deal and sells computers from Apple, Hewlett-Packard and Lenovo. Marshall said he believes BlueHippo buys the computers on a per-sale basis and has no contracts with the manufacturers. The three companies did not return phone calls from ConsumerAffairs.Com in time for publication.

Marshall said he and his team will spend the next few months in discovery.

“We plan to pursue both companies aggressively in the discovery process, obtaining documents that reveal the specific practices of BlueHippo and its dealings with customers – the number of people BlueHippo has gotten money from and not provided computers to – as well as the relationship between Gateway and BlueHippo,” Marshall said.

He said he does not believe the companies will try to settle the lawsuit before discovery can take place, a practice companies often rely on to block consumer lawyers from discovering and releasing secret documents.

“We plan to press ahead with the litigation and hold BlueHippo responsible to pay back the money that it has taken from consumers and if we show that Gateway is liable then to hold Gateway responsible in some proportion or some percentage of that,” Marshall said.

BlueHippo is also at the center of investigations by the state attorneys general in Florida, West Virginia and Illinois and has settled fines with the Maryland attorney general and Federal Trade Commission in the past year.

BlueHippo consumers are encouraged to file complaints with the FTC and their local attorney general. ConsumerAffairs.Com also accepts complaints, which are considered for publication, shared with news media and reviewed by consumer lawyers.

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