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Proposed Amended Complaint

May 21, 2007

[CORRECTED] [PROPOSED] SECOND AMENDED COMPLAINT FOR MONETARY, DECLARATORY, AND INJUNCTIVE RELIEF

CLASS ACTION

JURY TRIAL DEMANDED

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
SAN FRANCISCO DIVISION

ROYLENE RAY, KELLY CANNON, JOAN HILL-RODRIGUEZ, VINCENT HUMPHRIES, REGINA KLEIN, MOSES SABB, PEDRO SANTIUSTE, and SERRENIA WHITE,
individually and on behalf of others similarly situated,
Plaintiffs,
v.
BLUEHIPPO FUNDING, LLC, and CAPITAL MEDIA, INC., and GATEWAY, INC.,
Defendants.

Case No. C 06-1807 JSW

TABLE OF CONTENTS

INTRODUCTION

JURISDICTION AND VENUE

PARTIES

FACTUAL ALLEGATIONS

BlueHippo's False and Deceptive Advertising
BlueHippo's Automatic Payment Plan
BlueHippo's Forfeiture Policy
Other Terms and Conditions
Gateway's Assistance to BlueHippo
Capital Media's Assistance to BlueHippo
BlueHippo's Transaction with Roylene Ray
BlueHippo's Transaction with Kelly Cannon
Transactions with Other Plaintiffs

Gateway's Aiding and Abetting of BlueHippo's Wrongdoing
Gateway's Liability as a Coconspirator
Gateway's Liability for Receiving and Retaining Fruits of BlueHippo's Fraud
Gateway's Liability as a Principal for BlueHippo's Acts

DEMAND FOR JURY TRIAL

PRAYER FOR RELIEF

INTRODUCTION.

1. Roylene Ray, Kelly Cannon, Joan Hill-Rodriguez, Vincent Humphries, Regina Klein, Moses Sabb, Perdo Santiuste, and Serrenia White, bring this action against BlueHippo Funding LLC ("BlueHippo"), Gateway, Inc ("Gateway") and Capital Media, Inc.("Capital Media"), on behalf of themselves and a Class of similarly situated consumers in California and across the country who have been deceived by BlueHippo's false and misleading advertising into ordering computers at exorbitant prices and on unconscionable terms, and then cheated by them out of their money altogether. BlueHippo markets the computers, collects consumers' money, and then provides them with nothing in return. Gateway, a computer manufacturer, selected and retains BlueHippo as a "Gateway Authorized Reseller" to market low-end and discontinued computer models, knowing that BlueHippo markets, sells and finances such computers on misleading, unfair and fraudulent terms to vulnerable, low-income consumers who lack access to traditional and legitimate sources of credit. Gateway provides a panoply of benefits to help BlueHippo lure customers into ordering Gateway computers and providing BlueHippo information to access their checking accounts. Capital Media is a California advertising agency that assists BlueHippo in the production and/or placement of its California advertising.

2. BlueHippo does not manufacture or stock computers. Instead, it markets, sells and finances computers. In its advertisements, BlueHippo promises to make "brand name", "top-of-the-line" computers "affordable" by allowing customers to pay in weekly or bi-weekly payments. In reality, however, the computers are actually low-end and/or technologically outdated models that BlueHippo sells at prices that are several times the prices that consumers would pay if they purchased the merchandise from manufacturers or legitimate retailers. For example, during much of the period relevant to this lawsuit, BlueHippo has marketed and sold bottom-of-the-line computers to consumers for over $1,900 each, when comparable or even superior products have been widely available from manufacturers and retailers for less than $400.

3. In addition, BlueHippo structures its sales transactions so that, like Plaintiffs, many consumers neither receive nor own any computer, even though they have paid hundreds of dollars toward the purchase of one. Under the program it claims to follow, BlueHippo requires the customer to make an immediate payment of $99 followed by at least 3 months of consecutive weekly payments of at least $36 each before it ships the computer. The consumer thus must pay BlueHippo at least $567 - more than the widely available retail price of the product - before BlueHippo will arrange for a manufacturer to ship the consumer a low-end computer that would cost $400 elsewhere. In order to discharge his or her obligation under BlueHippo's 52-week payment requirement, the consumer must pay the Company an additional $1,404 in 39 weekly payments.

4. If a customer defaults on any payment before receiving merchandise, BlueHippo increases the number of payments it requires before shipment. It also raises the interest rate it charges on the unpaid balance.

5. In addition, BlueHippo maintains a no-refund policy that requires forfeiture of all money paid by any consumer who fails to complete every payment in the pre-payment plan. Under this policy, BlueHippo refuses to permit customers to terminate payments and to get any of their money back, even if the Company never ships the merchandise that the consumer ordered. Through this scheme, BlueHippo has collected hundreds of dollars each from the bank accounts of each Plaintiff and thousands of others, without providing anything in return.

6. Gateway, which is the third largest computer manufacturer in the United States and is headquartered in California, has knowingly assisted Blue Hippo in this unlawful scheme in a number of ways, including by selecting and retaining BlueHippo as a Gateway Authorized Reseller® and a Gateway Business Partner, by directing and referring customers to BlueHippo, by including BlueHippo in Gateway marketing material, and by licensing the Gateway trade name to BlueHippo for use in BlueHippo's marketing, sales and financing promotions. Gateway provides this and other assistance to BlueHippo while knowing that BlueHippo uses its relationship with Gateway to lure unwitting consumers through false and deceptive advertising and sales practices into paying BlueHippo money and receiving nothing in return.

7. Capital Media, an advertising agency in California, knowingly, recklessly and/or negligently assists Blue Hippo in its fraudulent scheme by helping BlueHippo market its sales and financing scheme in California, in particular to the Hispanic community, which comprises a substantial sector of the low-income consumer market in California.

8. The actions of BlueHippo, Gateway and Capital Media violate a host of federal and state laws. In this lawsuit, Plaintiffs seek compensatory and punitive damages, rescission, restitution, declaratory and injunctive relief, and attorneys' fees, costs and expenses.

JURISDICTION AND VENUE.

9. This court has jurisdiction over this matter pursuant to 28 U.S.C. § 1331 in that two of Plaintiffs' claims arise under federal law, and this court has supplemental jurisdiction over related state claims pursuant to 28 U.S.C. § 1367(a). This court also has original jurisdiction over this matter pursuant to 28 U.S.C § 1332(d)(2). This is a Class action in which Plaintiffs and members of the Plaintiff Class are citizens of California, Georgia, Illinois, New Jersey, New York, Maryland and Virginia, and Defendants are citizens of California and Maryland. The matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs.

10. Venue is proper in this Court because Ms. Ray lives in this judicial district and the transactions that give rise to her claims all occurred in this judicial district.

PARTIES.

11. Plaintiff Roylene Ray is an individual consumer who, at all times relevant to this action, has resided in the city of Oakland, California. She is a disabled senior citizen who derives her income from government disability and pension payments.

12. Plaintiff Kelly Cannon is an individual consumer who, at all times relevant to this action, has resided in the city of Stockton, California. She is employed by the Sacramento County Sheriff's Department.

13. Plaintiff Joan Hill-Rodriguez is an individual consumer who, at all times relevant to this action, has resided in the city of Randallstown, Maryland.

14. Plaintiff Vincent Humphries is an individual consumer who, at all times relevant to this action, has resided in the city of Atlanta, Georgia.

15. Plaintiff Moses Sabb is an individual consumer who, at all times relevant to this action, has resided in Baltimore, Maryland.

16. Plaintiff Pedro Santiuste is an individual consumer who, at all times relevant to this action, has resided in Far Rockaway, New York.

17. [This paragraph is intentionally left blank.]

18. Plaintiff Sellenia White is an individual consumer who, at all times relevant to this action, resided in Hammonton, New Jersey.

19. The Class of similarly situated persons Plaintiffs seek to represent (hereafter the "Plaintiff Class" or the "Class") is comprised of all consumers who have paid money to BlueHippo for merchandise but never received their merchandise, since BlueHippo began doing business in early 2003. A Subclass of similarly situated persons Plaintiffs Roylene Ray and Kelly Cannon seek to represent is comprised of all California residents who who have paid money to BlueHippo for merchandise but never received their merchandise, since BlueHippo began doing business in early 2003.

20. At all times relevant to the allegations herein, Defendant BlueHippo Funding, LLC, has been a Maryland corporation, doing business throughout the nation and throughout the State of California.

21. Defendant Gateway, Inc., is a Delaware corporation with its headquarters located at 7565 Irvine Center Drive, Irvine, California 92618. At all times relevant to the allegations herein, Gateway has been doing business in the state of California. Upon information and belief, all of the actions attributed to Gateway in this Second Amended Complaint occurred within and/or emanated from Gateway's offices in Irvine, California.

22. Defendant Capital Media, Inc., is a California corporation with its principal place of business at 26691 Plaza Drive, Suite 100A, Mission Viejo, California 92691. At all times relevant to the allegations herein, Capital Media has been doing business in the state of California. Upon information and belief, all of the actions attributed to Capital Media in this Second Amended Complaint occurred within and/or emanated from its offices in Mission Viejo, California.

FACTUAL ALLEGATIONS.

23. Plaintiffs' factual allegations are organized into the following parts. Section A describes the various false, unfair and misleading representations that Blue Hippo and Capital Media disseminate in order to lure customers into ordering computers from BlueHippo and disclosing their bank account information to BlueHippo. Section B describes the automatic payment plan that BlueHippo imposes on customers and through which BlueHippo obtained the funds of Plaintiffs and members of the Class. Section C describes the forfeiture policy BlueHippo imposes and through which BlueHippo converted the money it collected from its customers' accounts to its own use while providing nothing of value to Plaintiffs and Class members. Section D describes the various unlawful and unconscionable terms that BlueHippo seeks to impose on its customers before it will deliver a computer. Section E describes how Gateway has knowingly assisted BlueHippo in its unlawful scheme, agreed to provide BlueHippo help in marketing knowing that BlueHippo was engaging in fraudulent, unlawful and misleading business practices, received funds from Blue Hippo knowing they were fraudulently obtained, appointed BlueHippo as Gateway's agent and/or was aware of BlueHippo's appearance in the market as Gateway's ostensible agent, and negligently operated its Gateway Authorized Reseller and Gateway Business Partner programs leading to the foreseeable injuries that Plaintiffs and members of the Class have suffered. Section F describes how Capital Media has assisted BlueHippo by making and/or disseminating advertising in California while it knew or reasonably should have known of the false, misleading and unfair character of the BlueHippo advertisements. Sections G and H describe the particular transactions between BlueHippo and Plaintiffs Roylene Ray and Kelly Cannon, respectively. Section I summarizes the substantially similar transactions between BlueHippo and the remaining Plaintiffs.

A. BlueHippo's False and Deceptive Advertising.

24. From early 2003 through the present, BlueHippo has advertised the sale of personal computers throughout the United States, including throughout California. BlueHippo's advertising has appeared in newspapers, on the radio, on television, and on the Internet. BlueHippo represents that it spends some $7.5 million annually on advertising. BlueHippo makes the same or substantially the same deceptive and misleading representations and material omissions to all consumers who hear or view its television, internet, radio, and newspaper advertisements, as well as to all consumers who call BlueHippo in response to its advertising and hear BlueHippo's scripted sales presentation.

25. BlueHippo's advertising is false, deceptive, and misleading. It is targeted at low-income consumers who lack access to traditional and legitimate sources of financing and who lack knowledge about computer products, and BlueHippo promises to finance "name brand" and "top-of-the-line" for such consumers. For example, as of December 2005, BlueHippo's website proclaimed in oversized, bold font:

Bad Credit? No Credit?
No Problem. You're Approved!
BlueHippo Funding offers new, brand
name products at low weekly prices. And
with our Guaranteed Approval Program,
you will get approved for financing
regardless of your credit - Guaranteed.

After luring consumers with these and/or substantially similar promises to provide financing that low-income consumers are not able to obtain elsewhere, BlueHippo's advertising makes a host of additional misrepresentations and material omissions, described below.

1. Misrepresentations about the Merchandise.

26. BlueHippo's advertising misrepresents the characteristics, uses, benefits, quality and grade of the products it sells. From early 2003 until at least December of 2005, for instance, its web site and sales documents described BlueHippo's desktop computer, which it called a "Desktop 2004A", as a "top-of-the-line" computer, among "the finest computers on the market", and "lightning fast". In fact, the Desktop 2004A had only 128 MB RAM, an amount of memory that fell far below the industry standard at the time, and that rendered it an extremely low-end model.¹

27. BlueHippo's Internet advertisements have also falsely claimed that BlueHippo has "relationships that let us offer the finest computers on the market, made by the most recognizable names in the industry". This statement falsely represents that the consumer gains some advantage by purchasing through BlueHippo, when the consumer can order the same or better products directly from the manufacturers or from other retailers at a fraction of the prices that BlueHippo charges.

28. BlueHippo's television advertisements contain many of the same false, misleading and deceptive representations that are contained in its Internet ads. One television ad, which is substantially similar to other television advertisements BlueHippo has run during the Class Period, falsely represents that BlueHippo is making a "great offer" on a "brand new, brand name computer", when in fact it is offering the low-end product described above at a price that is several times the price a consumer would have to pay elsewhere. The advertisement describes a "complete multimedia system" featuring "free Internet" and "free e-mail", when in reality the Internet access and e-mail are part of a free trial offer that America Online offers to all consumers for a limited time. BlueHippo's television advertisements do not disclose the brand, model or manufacturer of the computer it offers for sale.

2. Misrepresentations About its Financing Plan.

29. BlueHippo's web site and the sales documents that it sends to certain customers describe BlueHippo as a "consumer finance compan[y]" that "provides financing.." "Since we don't check your credit", BlueHippo tells potential customers, "we do ask that you build a short credit history with us by making 3 month's worth of payments before we ship the computer. It's that simple".

30. But the Company does not provide "financing" in the commonly understood meaning of the word. Rather than delivering a product and providing the credit a consumer needs in order to meet the purchase price, BlueHippo collects more money than the consumer would need to pay for the product elsewhere, up front.

31. Only after posting those payments does BlueHippo even purport to arrange to deliver the product, and it continues to extract several times the purchase price from the consumer by requiring additional weekly or bi-weekly payments for the balance of a year.

32. By touting its so-called "Guaranteed Approval Program" and repeatedly emphasizing that "approval is guaranteed with just an active checking account", as it does in television commercials and other advertisements, BlueHippo deceives consumers into believing that the Company is "approving" the consumer's worthiness for an extension of credit that potentially places the Company at risk as a creditor. This is misleading because, by the time it arranges for the purchase and shipping of a product, BlueHippo has already collected more than enough funds to cover its cost, and it is never at risk of loss.

3. Misrepresentations About Prices.

33. BlueHippo misrepresents the prices at which it sells products. The representation that BlueHippo makes computers "affordable" at "low weekly prices" is false. To the contrary, computers comparable to the low-end Desktop 2004A, which BlueHippo sells for $1,971 with a $99 down payment and 52 weekly payments of $36, are widely available from retailers for $400 or less. The Company also offers an "upgrade" package which, for approximately $415, provides a slightly faster processor, a CD burner and a DVD drive. This brings to $2,386 BlueHippo's price for a computer having features that have become standard in personal computers, and that is widely available in retail stores for $600 or less. BlueHippo offers peripheral products at similarly exorbitant prices, such as an entry-level color printer for $312, a low-end digital camera for $520, or a basic optical mouse for $104.

34. On its web site, in its television commercials, and in its other advertising, BlueHippo does not disclose to prospective purchasers the full purchase price of the advertised computer system separate from finance charges; the dollar amount of the finance charges; the full costs that BlueHippo imposes on the consumer before shipment; the total number of payments required; or the specific model of the computer that BlueHippo is offering to sell to the consumer. Until it began openly using the Gateway trade name in its advertising, it also did not disclose the manufacturer of the computer that it offered for sale.

35. BlueHippo's television advertisements, which Plaintiffs viewed, did not and do not reveal the full costs that the consumer will incur before shipment; they say nothing about the finance charge or annual percentage rate, or even the fact that financing is involved; and they fail to mention that the consumer has to do more than make "one call", and must in addition make several months of consecutive, weekly pre-payments before receiving a computer. The television advertisements do not disclose the no-refund and forfeiture obligations that BlueHippo imposes on its customers, or the requirement that consumers must agree to preauthorized recurring debits to their bank accounts.

4. Misrepresentations about Timing of Shipment.

36. BlueHippo's advertising misrepresents the conditions under which it will ship the computer. "Once you have submitted your first 3 months of payments", as the web site states, "we will immediately ship your computer leaving only 9 months of payments until the computer is completely yours". This statement, repeated in the same or substantially the same words in BlueHippo's sales documents and telephone sales scripts, is false. In reality, BlueHippo routinely waits an additional six to eight weeks, or even longer, before arranging for shipment of the customer's computer, so that the customer ends up making at least 21 or more weekly payments, and waiting some 5 months or more, before BlueHippo ships the merchandise. This practice is described in small print in the "Terms and Conditions" document that BlueHippo mails to some customers after receiving their orders and after beginning electronic debits to their checking accounts. The document recites that it might take "7 to 10 business days for your drafts to clear our bank and post to your account" (a period that is inexplicable in the context of electronic debits) and that the purchaser should also "allow 4 to 6 weeks after your required payments are posted to your account for your merchandise to be shipped, provided you are not in default".

B. BlueHippo's Automatic Payment Plan.

37. BlueHippo insists that customers agree to electronic debits to their checking accounts via Automated Clearinghouse ("ACH") transactions, either weekly for a period of one year or more, or bi-weekly for a shorter period. Following a scripted telephone conversation with a potential purchaser, in which BlueHippo purports to obtain the purchaser's preauthorization to execute these recurring electronic payments and the customer's consent to various other terms of sale, payment and financing, BlueHippo executes an initial debit of approximately $100. BlueHippo then begins debiting the consumer's bank account on a weekly or bi-weekly basis. The weekly electronic debits have ranged from $35.99 for the purchase of a desktop computer to $75.00 or more for the purchase of a computer with "upgrades" and "accessories". These debits occur every week for one year or longer; bi-weekly debits are in twice the amount of weekly debits. BlueHippo charges a $2.00 "transaction fee" for each debit. BlueHippo does not obtain written authorization for these debits from its customers before it begins the debits, and BlueHippo continues these debits without obtaining the legally required authorization from any customer.

38. BlueHippo does not deliver the merchandise to the purchaser when it receives the order. Instead, it waits until the purchaser has made payments for at least several months, in an amount that exceeds the amount that the purchaser would pay for the merchandise elsewhere. BlueHippo calls this payment method its "DEFERRED SHIPMENT PROGRAM", and explains in its Shipping Verification Form that, "after 13 consecutive weekly (or 7 consecutive biweekly) minimum payments have been posted to your account, provided you are not in Default, we will process your order and ship your merchandise. . . ." The purchaser then must continue to make payments for the remainder of a year or more in order to complete the purchase.

39. It is BlueHippo's policy and practice to require strict adherence to the automatic payment plan. In the event that an attempt to debit a purchaser's checking account fails, BlueHippo requires the purchaser to make additional payments to reach 66% of the full purchase price before it will begin to arrange to ship the computer.

40. If an electronic debit attempt fails during the extended pre-payment period described in paragraph 39 above, BlueHippo requires the purchaser to make all 52 or more payments, paying the purchase price in full, before shipment of the computer. This policy means that a purchaser whose checking account fails to satisfy a single weekly debit in the first three to five months of payments would not receive a computer until he or she completed twelve months of payments, plus an additional 7 to 10 days for those payments to post and then an additional 4 to 6 weeks before shipment, as described in paragraph 36, above.

C. BlueHippo's Forfeiture Policy.

41. Under its no refund policy, BlueHippo retains any and all money that it collects from purchasers - regardless of the purchaser's request for cancellation of the purchase, and regardless of whether BlueHippo even sends the purchaser the merchandise for which BlueHippo debits the purchaser's checking account. This policy is not disclosed in BlueHippo's advertisements, it is stated in cursory terms in scripted telephone sales calls, and it is only vaguely described in the "Shipping Verification Form" and "Terms and Conditions" documents that BlueHippo mailed to Kelly Cannon and to certain members of the Class after they placed their orders, and after BlueHippo had already begun to debit their checking accounts electronically.

42. The "Shipping Verification Form" describes the no refund policy as follows: "All payments are NON-REFUNDABLE except when the original or similar merchandise is no longer available". The "Terms and Conditions" document, in a paragraph entitled "Deferred Shipment Program", tells the purchaser that "establishing a consecutive payment history is a strict requirement to release your merchandise for shipping before your purchase is paid in full", and that "any payments are non-refundable". While these documents use the term "non-refundable", neither of the documents states that the purchaser will forfeit all money paid toward merchandise even if BlueHippo never sends the merchandise to the purchaser. Upon information and belief, this sales practice is unique and uncommon in the consumer marketplace, and not within the reasonable expectation of average consumers or the consumers at whom BlyeHippo directs its marketing. Consumers reasonably expect that a merchant's "no refund" policy means that sales are final and therefore the product may not be returned for a refund; consumers do not reasonably expect "no refund" to mean a complete and total forfeiture of any and all money paid toward a product that they have never received.

43. The forfeiture that BlueHippo imposes pursuant to its no refund policy bears no reasonable relationship to any damages that BlueHippo may suffer from any alleged breach of contract, and there is no legal ground for BlueHippo to retain the money it collects from consumers, like Plaintiffs and members of the Class, to whom it sends no merchandise and to whom it provides nothing of value. By retaining the property of Plaintiffs and members of the Class pursuant to its "no refund" policy, BlueHippo has asserted dominion over such property and has used the property of the Plaintiffs and members of the Class for its own purposes.

D. Other Terms and Conditions.

44. In addition to the misleading and unlawful no refund policy, BlueHippo's sales and finance documents provide consumers with a number of other confusing, even incomprehensible, and often unconscionable terms. The "Terms and Conditions" document that BlueHippo mails to certain members of the Class is a mix of specialized legal and financial terms that the average reasonable consumer cannot possibly understand. For example, the document purports to be an agreement setting forth the terms and conditions that apply to the customer's use of a "BlueHippo Funding, LLC Credit Account", but does not explain the nature of the "Account". The introductory paragraph states the following virtually meaningless provision for the "agreement" to become active: "This Agreement begins on the date that we extend credit to you and your account as evidenced by a signed sales order that we honor, an accepted communication, memorandum, or otherwise."

45. The "Terms and Conditions" document purports to contain an authorization for BlueHippo to "initiate debit entries to your financial institution . . . until your Account is paid in full." The extent of this purported authorization is extremely difficult to comprehend: the document states that "[t]his authority shall remain in full force and effect until we have received written notification from the authorized party(s) to terminate this arrangement in such time and manner to afford us a reasonable time to act on it. . . . Thirty (30) calendar days are required to make any changes to your automatic debit." The document nowhere notifies the consumer of his or her right to terminate such preauthorized electronic fund transfers within 3 days by notifying their bank.

46. The "Terms and Conditions" document demonstrates that BlueHippo makes it unnecessarily difficult for customers to learn the status of their purchases and payments. BlueHippo agrees to produce a billing statement "after each billing cycle" but does not define the term "billing cycle". It also requires that the purchaser access these billing statements on BlueHippo's website, despite the fact that the purchaser of a computer would likely lack regular access to the internet. Alternatively, BlueHippo purports to allow the purchaser to receive billing statements in the mail, but only upon written request and at the cost of $4.00 per statement.

47. The "Terms and Conditions" document contains a provision regarding finance charges, but the provision is not reasonably comprehensible because the purchase price of the financed merchandise is not disclosed separate from the finance charge.

48. BlueHippo purports to reserve to itself the right to "at any time and subject to applicable law: (a) terminate this Agreement, . . . or (e) change any other terms and conditions of this Agreement relating to your Account (including increasing any Finance Charge or interest rate). Unless prohibited by applicable law, we may apply such changes or new terms to any outstanding balance of your Account . . . . When required by applicable law, we will mail a notice of change(s) to you. No change to any term of this Agreement will affect your obligation to pay all amounts owed under this Agreement."

49. The "Terms and Conditions" document provides that "[a]ny dispute between us arising out of this Agreement or the breach of this Agreement, . . . shall be determined by individual (and not Class) binding arbitration by the National Arbitration Forum" and that the arbitrator may not "award punitive damages in excess of twice the amount of the actual damages." The document purports to require that all such arbitration actions be brought in Baltimore, Maryland. While BlueHippo requires the purchaser to arbitrate any dispute, it reserves other remedies for itself. BlueHippo asserts a "purchase money security interest" in all items purchased until they are paid in full, and retains the right to "repossess" merchandise if the purchaser fails to make a minimum payment, or to terminate the Agreement at any time as described in paragraph 46, above. Upon information and belief, BlueHippo and/or its successors in interest to whom it assigns accounts in default regularly threaten and/or institute judicial proceedings to enforce BlueHippo's purported contractual rights, and BlueHippo and/or its successors in interest to whom it assigns accounts in default do not and have not initiated arbitration proceedings to resolve any dispute. Upon information and belief, despite that fact that many thousands of consumers have been cheated out of their money by BlueHippo and at least a thousand such consumers have complained to Better Business Bureau chapters, the Federal Trade Commission, and the Attorneys' General offices in many states, no consumer has initiated an individual arbitration to attempt resolve the consumer's dispute. Upon information and belief, the costs and expenses of travel to and back from Baltimore, Maryland, to attend individualized arbitration would be greater than the amounts that virtually all Plaintiffs and members of the Class seek to recover, and in any event are not affordable for virtually any of BlueHippo's customers. BlueHippo imposes this mandatory individual arbitration clause with the intent to protect its wrongdoing from any effective legal redress, and it would have such an effect if enforced.

50. The "Terms and Conditions" document also purports to require the consumer to "agree that you will not bring, join, or participate in any Class action as to any claim, dispute or controversy you may have against us . . . . You agree to the entry of injunctive relief to stop such a lawsuit or to remove you as a participant in the suit. You agree to pay the attorney's fees and court costs we incur in seeking such relief." The purpose, intent and effect of this purported Class action waiver, like the mandatory individualized arbitration described above, are to enable BlueHippo to cheat Plaintiffs and other consumers out of relatively small amounts of money and to discourage and/or prevent consumers from asserting their legal rights to relief from this wrongdoing against BlueHippo. BlueHippo imposes this Class action waiver with the intent to protect its wrongdoing from any effective legal redress.

51. In the "Default" paragraph of the "Terms and Conditions" document, BlueHippo purports to reserve to itself broad rights to declare the consumer in default and to impose substantial additional costs on the consumer. The provision states that a consumer is in default if BlueHippo does not receive the minimum payment by the due date, or "[i]f any of your preauthorized debits are returned unpaid for any reason, at any time . . . , if you request to cancel your account, if you change the bank account we are drafting, . . . or if we deem ourselves in any way insecure, you will be in Default of the terms of this Agreement." (Emphasis added.) In the event of default, BlueHippo may require immediate payment of the full account balance, and can impose a "24% APR or the maximum allowed by law and that rate shall be applicable to any post-judgment interest as well. If you are in default you give us permission to draft your checking or savings account in any amount at any time until your account balance is paid in full." (Emphasis added.) The default provisions also purport to charge consumers for collection charges of "25% of the unpaid amount, including court costs, disbursements and reasonable attorneys fees of 33% of the amount."

E. Gateway's Assistance to BlueHippo.

52. In April 2004, Gateway closed its company-owned retail computer stores and began relying more heavily on third-party retailers and resellers for the sale and distribution of its computers to consumers. Gateway has trademarked the term "Gateway Authorized Reseller"® ("Reseller"), and uses that term and the term "Gateway Business Partner" ("Partner") to refer to entities which it appoints to market and sell Gateway computers to consumers and businesses. Gateway benefits from its relationships with resellers in the form of revenues from the Resellers' purchases of Gateway computers.

53. Gateway assists its Resellers and Partners in the marketing and sale of Gateway computers by licensing the Gateway trade name to them, by providing marketing and training programs to the Resellers and Partners, by granting them price discounts on Gateway products, by providing shipping services directly to customers at the Resellers' and Partners' direction, by legally obligating itself to perform various contractual duties, including but not limited to warranty coverage and service, for the customers of the Resellers and Partners and on behalf of the Resellers and Partners, by financing the Resellers' and Partners' purchases of Gateway computers, and by providing various other benefits and incentives.

54. Gateway selected and appointed BlueHippo as a Gateway Reseller and/or Partner in or about mid-2004. Since that time, Gateway has agreed to provide and has provided substantial assistance to BlueHippo by providing the Company with the afore-described services that it provides to Resellers and Partners. In addition, some of BlueHippo's advertisements specifically and prominently offer the sale of Gateway computers, which Gateway allows; BlueHippo represents to consumers that is it a Gateway Reseller; Gateway represented to consumers that BlueHippo is a "Gateway Business Partner" and a "Gateway Authorized Reseller", and Gateway has directed customers to BlueHippo through a link to BlueHippo on Gateway's web site. Gateway steers customers who complain to it about BlueHippo back to BlueHippo, and despite receiving substantial information regarding BlueHippo's lawbreaking, Gateway fails to notify law enforcement officials or other responsible parties about BlueHippo's wrongdoing. Gateway's assistance to BlueHippo has significantly enhanced BlueHippo's ability to lure the Plaintiffs and other Class members into transactions through which BlueHippo advertises Gateway computers for sale, represents itself as authorized by Gateway to enter contracts for the future delivery of Gateway products directly from Gateway to the consumer, purports to enter specific agreements to sell Gateway computers to consumers and to provide Gateway warranty benefits to customers, and then BlueHippo unlawfully collects money from consumers that is purportedly paid toward the purchase of a Gateway computer but in fact BlueHippo converts to its own use.

55. Gateway's agreement and relationship with BlueHippo as a Gateway Reseller and/or Partner has allowed Gateway to sell low-end, outdated computers that it would have difficulty selling through legitimate retail channels and/or that it does not want advertised in Gateway's own marketing for fear of degrading the Gateway brand name in the marketplace by associating it with such low-end and outdated merchandise.

56. Prior to entering into a Reseller and/or Partner relationship with Gateway, BlueHippo had entered into a similar relationship with Dell, Inc., another large computer manufacturer. Upon information and belief, Dell severed its reseller relationship with BlueHippo because Dell concluded, based on customer complaints and other information, that BlueHippo was using the Dell trade name to facilitate unlawful marketing, sales and financing schemes in connection with the sale of Dell computers.

57. Gateway knows that BlueHippo engages in illegal marketing, sales, and financing schemes, and Gateway knows that its agreement with and assistance to BlueHippo significantly enhances BlueHippo's ability to carry out these illegal schemes. Since shortly after Gateway appointed BlueHippo as a Reseller and/or Partner, numerous consumers, including consumers from California, have contacted Gateway and complained of BlueHippo's marketing and sales practices, including BlueHippo's misleading and deceptive advertising and its taking of consumers' money without delivering computers as promised. BlueHippo's misleading, deceptive and fraudulent practices have attracted critical media coverage, including stories as early as 2004 in such prominent media outlets as the Rocky Mountain News and CBS's MarketWatch. The Better Business Bureaus in several cities have issued repeated alerts concerning BlueHippo's practices since early 2004, and in July 2005, the editors of Mozilla Quest, an online computer magazine, wrote e-mails to Gateway criticizing its relationship with BlueHippo and asking the computer company for an explanation. Persons representing themselves as Gateway employees and purporting to be acting with Gateway's approval have responded to consumer complaints about BlueHippo by defending BlueHippo's practices. In addition, during the time that BlueHippo marketed Gateway computers as a Gateway authorized Reseller or Gateway Business Partner, it became public that the Federal Trade Commission was investigating BlueHippo's sales practices, and that the State of Illinois had filed suit against BlueHippo and its owner, Joseph K. Rensin, for consumer fraud in the marketing, sales and financing of computers. Also, Gateway purports to require its Resellers to comply with various laws, regulations, and Gateway policies which would prohibit the unlawful practices that BlueHippo uses in the marketing, sale and financing of computers, and also purports to monitor Resellers' and Partners' activities for client satisfaction. Through these sources, Gateway has known since the inception of its Reseller and/or Partner relationship with BlueHippo or soon thereafter that BlueHippo utilizes and benefits from its agreement and relationship with Gateway in the unlawful marketing, sales and financing of Gateway computers through which BlueHippo collects moneys from consumers without providing anything of value in return.

58. Pursuant to its Reseller and/or Partner relationship with BlueHippo, Gateway has received and retains money from BlueHippo that Gateway knows was obtained through BlueHippo's fraudulent, deceptive and unfair marketing, sales and financing practices.

59. It was and is reasonably foreseeable to Gateway that its failure to use reasonable care in the selection, appointment, retention, and supervision of its Gateway Authorized Resellers and its Gateway Business Partners would put Plaintiffs and members of the Plaintiff Class in danger of being cheated out of their money by BlueHippo. At all relevant times, Gateway had a contractual right to control the marketing, sales, and financing practices of BlueHippo, and/or to terminate its agreement and relationship with BlueHippo. Gateway failed to use reasonable care in its selection, appointment, retention, and supervision of BlueHippo as a Gateway Authorized Reseller or Gateway Business Partner, and such negligence proximately caused injuries and property damage to Plaintiffs and members of the Class who ordered computers from BlueHippo during the time that BlueHippo has marketed Gateway computers.

60. Upon information and belief, the agreement between Gateway and BlueHippo, and the powers and rights that Gateway grants to BlueHippo, render BlueHippo an express or de facto or ostensible agent of Gateway for the purpose of marketing, selling and financing Gateway computers.

F. Capital Media's Assistance to BlueHippo.

61. At some time in late 2005 or early 2006, Blue Hippo retained the services of Capital Media to help organize BlueHippo's marketing efforts, in particular those efforts targeted at the Hispanic community. At or about the time of their agreement for Capital Media to assist BlueHippo in its above-described marketing of computers, Capital Media knew or should have known that the BlueHippo advertising it made and/or disseminated on behalf of BlueHippo was false and misleading and likely to deceive members of the public, that hundreds of consumers had accused BlueHippo of fraudulent and unfair practices in connection with the sale of computers, including accusations regarding misrepresentations in BlueHippo's advertising, that two or more chapters of the Better Business Bureau issued repeated "consumer alerts" about BlueHippo's practices, that various news organizations including but not limited to the Rocky Mountain News and CBSMarketwatch had issued warnings about BlueHippo, that the Federal Trade Commission had initiated an investigation of BlueHippo's sales practices, and that the State of Illinois had filed suit against BlueHippo and its owner, Joseph K. Rensin, for consumer fraud in the marketing, sales and financing of computers.

62. According to its web site, Capital Media is "a US Hispanic DRTV [direct-response television] advertising agency providing our clients with end-to-end production, marketing and advertising services." In a news release it issued on March 14, 2006, Capital Media stated that it had "added ... BlueHippo Funding ... to the ever-expanding world of US Hispanic DRTV." Upon information and belief, Capital Media has made and/or disseminated, and continues to make and/or disseminate, advertising for BlueHippo in California containing the misrepresentations described above.

G. BlueHippo's Transaction with Roylene Ray.

63. On or about April 7, 2004, plaintiff Roylene Ray viewed a BlueHippo television advertisement at her home in Oakland, California that was the same as, or identical in every material respect to, the television advertisements described above. The television advertisement provided a toll-free telephone number to call to order the advertised computer. In reliance on the representations in the television advertisement that she would qualify for financing for a "brand new, brand name" computer with no credit check and at an affordable price, Ms. Ray called BlueHippo's toll-free number to discuss an order for a computer. During the call, the BlueHippo salesperson followed a sales script the same as or substantially similar to the one used in conversations between BlueHippo and other Plaintiffs and Class members. He asked Ms. Ray for her bank account information, and Ms. Ray disclosed the same. The salesperson then informed Ms. Ray that the payments for the computer would be $35 per week. Ms. Ray disclosed that she was disabled and living on a fixed income of $1,250 per month.

64. At no time during this telephone conversation did BlueHippo's salesperson disclose: (a) the purchase price of the computer; (b) the finance charge that Ms. Ray would pay if she purchased a computer; (c) the annual percentage rate for financing or even the fact that financing was involved; (d) the total dollar amount of pre-payments that BlueHippo would require before shipping a computer to Ms. Ray; (e) BlueHippo's intention of retaining a security interest in the computer after shipment; (f) the number of total payments Ms. Ray was required to make before owning the computer free from BlueHippo's security interest; and (g) the specific brand, manufacturer, and model of the computer that BlueHippo was offering to sell to Ms. Ray.

65. Following this telephone call, BlueHippo began on April 16, 2004 electronically to debit Ms. Ray's checking account in the amount of $71.98 every two weeks, and BlueHippo continued this practice until it had collected about $500. Despite repeated requests that BlueHippo stop debiting her account and refund her money, the debits did not stop until Ms. Ray demanded in or around August 2004 that her bank cease honoring the ACH requests from BlueHippo.

66. Despite BlueHippo's repeated ACH debits to her checking account, and despite her complaints to BlueHippo that she did not want BlueHippo to continue to debit her account, Ms. Ray received no communications or documentation from BlueHippo until after she complained to the Better Business Bureau of Greater Maryland in April 2005. She never received, signed or otherwise agreed to the terms contained in the "Terms and Conditions" document, which BlueHippo purports to govern the financing agreements with its customers. Nor did she receive from BlueHippo, or sign or otherwise agree to the terms contained in the "Shipping Verification Form." At no time did she provide written authorization for BlueHippo to debit her checking account.

67. BlueHippo debited Ms. Ray's checking account on a bi-weekly basis for about twenty weeks, but never sent her a computer or any other merchandise. Ms. Ray requested that BlueHippo refund the payments that it collected from her. BlueHippo refused to do so, citing its no refund policy as justification for this forfeiture of payments. BlueHippo retains Ms. Ray's property asserting legal entitlement to the property, and BlueHippo has converted the property to its own use.

H. BlueHippo's Transaction with Kelly Cannon.

68. On January 28, 2005, plaintiff Kelly Cannon viewed a BlueHippo television advertisement at her home in Stockton, California, that was the same as, or identical in every material respect to, the television advertisements described above. Ms. Cannon responded to the advertisement by calling BlueHippo's toll-free number and speaking with a BlueHippo sales representative, who followed the same or a substantially similar sales script as the one used in conversations with Plaintiffs and other Class members. In reliance on BlueHippo's representations that she would receive a "brand new, brand name" Gateway computer with no credit check at an affordable price and on legal terms, she placed her order. The sales representative told Ms. Cannon that BlueHippo would ship her a new Gateway computer immediately after Ms. Cannon had made the required pre-payments.

69. At no time during this telephone conversation did BlueHippo's salesperson disclose: (a) the purchase price of the computer; (b) the finance charge that Ms. Cannon would pay if she purchased a computer; (c) the annual percentage rate for financing or even the fact that financing was involved; (d) the total dollar amount of pre-payments that BlueHippo would require before shipping a computer to Ms. Cannon; (e) BlueHippo's intention of retaining a security interest in the computer after shipment; (f) the number of total payments Ms. Cannon was required to make before owning the computer free from BlueHippo's security interest; and (g) the specific model of the computer that BlueHippo was offering to sell to Ms. Cannon.

70. Approximately one week after she placed her telephone order, Ms. Cannon received a mailing from BlueHippo that contained a "Terms and Conditions" document and a "Shipping Verification Form", and that asked her to sign and return these documents by facsimile, along with a copy of her identification, a voided check and her latest pay stub. The accompanying form instructions explained that this information was required because "we extend credit to our customers. When you 'purchase a computer' from BlueHippo, you are actually agreeing to finance a computer - this is a loan . . ." The instructions advised Ms. Cannon that BlueHippo would not ship her computer until she returned the requested documents. The document also represented the brand of the computer as "Gateway".

71. The "Shipping Verification Form" listed a "Desktop 2004 E" computer for a price of $1,970.48 and an "Upgrade Pack 2" at $727.48, for a total of $2,697.96, minus a "Good Pay Discount" of $500, for a total net price of $2,197.96. The "Shipping Verification Form" included as "payment information" the representation, "You've agreed to a One-time Payment of $99.00 to be drafted on 1/31/2005, followed by bi-weekly payments of $99.96 beginning on Tuesday, February 1 and continuing until your balance is paid in full." The form also represented that this "purchase is eligible for our ACCELERATED SHIPMENT PROGRAM provided you continue to meet the conditions of your Revolving Account Agreement", but BlueHippo provided Ms. Cannon with no document entitled "Revolving Account Agreement" or anything similar. In huge, bold typeface, the bottom of the "Shipping verification Form" promised "GET YOUR COMPUTER FAST, SEND BACK ALL OF THE ITEMS LISTED ON THE FAX COVER CHECKLIST TODAY TO GET YOUR BRAND NEW COMPUTER FAST."

72. After receiving and attempting to make sense of these forms, Ms. Cannon contacted BlueHippo several times by telephone and electronic mail about the various BlueHippo misrepresentations in their advertising and sales practices. On February 23, 2005, a BlueHippo customer service representative advised Ms. Cannon that she must sign and return the documents she received or forfeit the money she had already paid. Faced with the threat of forfeiting all the money she had already paid, Ms. Cannon acceded to the demands of BlueHippo and signed and returned by facsimile to BlueHippo the documents BlueHippo requested, including the signed "Shipping Verification Form" and the signed "Terms and Conditions" document.

73. BlueHippo did not deliver a computer or any other merchandise to Ms. Cannon as it had represented. On March 31, 2005, Ms. Cannon faxed and sent by certified mail to a BlueHippo manager and to Joseph K. Rensin, the owner and President of the company, a letter informing BlueHippo that she was terminating her account and withdrawing any authorization for BlueHippo to continue withdrawing funds from her account. She also demanded a refund of all payments that BlueHippo collected from her.

74. BlueHippo collected $99.00 from Ms. Cannon's checking account on January 31, 2004. It collected bi-weekly payments of $99.96 on February 1, February 15, March 2, March 15, and March 29, 2005, for a total of around $600. BlueHippo has refused to refund money to Ms. Cannon, despite her complaints to the Governor of Maryland and to the Consumer Protection Division of the Maryland Attorney General's Office. BlueHippo refused to do so, citing its no refund policy as justification for this forfeiture of payments. BlueHippo retains Ms. Cannon's property asserting legal entitlement to the property, and BlueHippo has converted the property to its own use.

75. The computer system that BlueHippo purported to sell to Ms. Cannon for $1,970.48 was easily available directly from the manufacturer at the time for under $500.

I. Transactions with Other Plaintiffs.

76. The transactions between BlueHippo and each of the other Plaintiffs, and between BlueHippo and each member o f the Class, were the same as or substantially similar to those between BlueHippo and Roylene Ray and Kelly Cannon described above.

77. Plaintiffs Joan Hill-Rodriguez, Vincent Humphries, Regina Klein, Moses Sabb, Pedro Santiuste, and Sellenia White each viewed a BlueHippo television advertisement at their homes that was the same as, or identical in every material respect to, the television advertisement described above. The television advertisement provided a toll-free telephone number to call to order the advertised computer. In response to and in reliance on the representations in the television advertisement, each Plaintiff called BlueHippo's toll-free number to place an order for a computer. During each call, a BlueHippo salesperson followed a sales script the same or substantially the same as the sales script used in the conversations with each Plaintiff and each member of the Class. The BlueHippo salesperson asked for bank account information, and each Plaintiff disclosed their account information.

78. At no time during these telephone conversation did BlueHippo's salesperson disclose: (a) the purchase price of the computer separate from finance charge; (b) the finance charge that each plaintiff would pay if he or she purchased a computer; (c) the annual percentage rate for financing or even the fact that financing was involved; (d) the total dollar amount of pre-payments that BlueHippo would require before shipping a computer to each plaintiff; (e) BlueHippo's intention of retaining a security interest in the computer after shipment; (f) the number of total payments each plaintiff was required to make before owning the computer free from BlueHippo's security interest; or (g) the specific brand, manufacturer, and model of the computer that BlueHippo was offering to sell to each plaintiff.

79. Following each of these telephone calls by one or two business days, BlueHippo began electronically debiting each plaintiff's checking account, and continued to collect money from each plaintiff in this manner by repeating electronic transfers for various periods of time for each plaintiff.

80. BlueHippo repeatedly initiated ACH debits to their checking accounts despite the fact that Plaintiffs Vincent Humphries, Regina Klein, Moses Sabb, Pedro Santiuste, and Sellenia White and other members of the Class, like Plaintiff Roylene Ray, never signed or otherwise agreed to the terms contained in the "Terms and Conditions" or "Shipping Verification Form" documents, which BlueHippo purports to govern the financing agreements with its customers.

81. BlueHippo debited each plaintiff's checking account, but never sent any of them a computer or any other merchandise. Each plaintiff requested that BlueHippo refund the payments that it collected from him or her. BlueHippo refused to do so, citing its no refund policy as justification for this forfeiture of payments.

82. The computer system that BlueHippo purported to sell to each plaintiff for total amounts of over $1,800 was easily available directly from the manufacturers at the time of each transaction for under $500.

CLASS ACTION ALLEGATIONS.

83. Plaintiffs Roylene Ray, Kelly Cannon, Joan Hill-Rodriguez, Vincent Humphries, Regina Klein, Moses Sabb, Perdo Santiuste, and Serrenia White, bring this lawsuit as representatives of members of a Class of similarly situated persons pursuant to Rules 23(b)(2) and 23(b)(3) of the Federal Rules of Civil Procedure. The "Class" consists of all those persons from whom BlueHippo received money for merchandise but who never received their merchandise, from the time that BlueHippo began doing business to the present. Plaintiffs Roylene Ray and Kelly Cannon also bring this lawsuit as representatives of a Subclass of similarly situated persons pursuant to Rules 23(b)(2) and 23(b)(3) of the Federal Rules of Civil Procedure. The "California Subclass" consists of all those California residents from whom BlueHippo received money for merchandise but who never received their merchandise, from the time that BlueHippo began doing business in California to the present.

84. All members of the Class and the Subclass have been subjected to the same or substantially similar marketing, financing and sales schemes as Plaintiffs. BlueHippo has failed, moreover, to disclose to all members, either orally or in writing: (a) the purchase price of the computer; (b) the finance charge that consumers will pay if they purchase a computer; (c) the annual percentage rate for financing or even the fact that financing is involved; (d) the total dollar amount of pre-payments that BlueHippo requires before shipping a computer; (e) BlueHippo's intention of retaining a security interest in the computer after shipment; (f) the number of total payments consumers are required to make before owning the computer free from BlueHippo's security interest; and (g) the specific manufacturer and/or model of the computer that BlueHippo is offering to sell to consumers.

85. BlueHippo began debiting each Class member's bank account within a few days of their telephone order, and before providing the documents described above to any Class members. BlueHippo did not disclose the terms contained in its "Shipping Verification Form" or "Terms and Conditions" document in BlueHippo's advertising, or make those terms available to the public in any other form. BlueHippo imposes identical terms and conditions on each member of the Class, except for differences in due dates and amounts depending on the products ordered.

86. BlueHippo has collected money from each member of the Class in identical fashion and pursuant to the same unlawful scheme, and BlueHippo refuses to return that money despite having provided nothing of value in return.

87. Gateway has knowingly assisted BlueHippo in its unlawful marketing, sale and financing of computers to Plaintiffs and Class members in the same manner since mid-2004, and continues to knowingly provide that assistance. Gateway has also agreed to provide assistance to BlueHippo with knowledge of BlueHippo's unlawful practices in the same manner since mid-2004, and continues its agreement and taking overt acts in furtherance of the agreement. Gateway has received and retained funds from BlueHippo that it knows have been fraudulently obtained through BlueHippo's unlawful marketing, sales and financing practices in the same manner since mid-2004, and continues to receive and retain such funds. BlueHippo has acted as Gateway's actual or de facto or ostensible agent in the marketing, sales and financing of Gateway computers in the same manner since mid-2004, and continues its agreement and taking overt acts in furtherance of the agreement.

88. Capital Media has knowingly, recklessly and/or negligently assisted BlueHippo in its unlawful marketing of computers to Class members since late 2005 or early 2006, and continues to knowingly, recklessly or negligently provide that assistance.

89. Upon information and belief, the members of the Class number at least in the thousands, and are thus so numerous that joinder of all members of the Class is impracticable. The precise number of Class members is ascertainable from the business records of BlueHippo.

90. Plaintiffs' claims are typical of the claims of the Class for the following reasons:

BlueHippo and Capital Media directed the same or virtually identical false, misleading, and deceptive advertisements and representations to each Plaintiff and to each member of the Class, with the purpose of inducing them into ordering merchandise.
BlueHippo purported to impose the same or virtually identical unfair and unconscionable price, prepayment, electronic debit, financing, and forfeiture terms on each Plaintiff and on each member of the Class.
BlueHippo extracted money through the same or virtually identical automatic payment scheme from each Plaintiff and each member of the Class, and BlueHippo asserts the same no refund policy as the ground for its retention of the money paid by each Plaintiff and by each member of the Class while providing them nothing in return.
Gateway has played the same role and assisted BlueHippo in the same manner with respect to all transactions entered into between BlueHippo and Class members since Gateway appointed BlueHippo as a Reseller or Partner in mid- to late 2004.
Capital Media has assisted BlueHippo in its marketing in California in the same manner since Capital Media began working on behalf of BlueHippo in late 2005 or early 2006.

91. Plaintiffs are adequate representatives of the Class. Their interests do not conflict with the interests of the Class that they represent respectively. Plaintiffs are represented by counsel who are competent and experienced in Class actions, consumer protection, and complex litigation.

92. Common questions of law and fact exist, and predominate over questions that affect only individual members of the Class. These questions of law and fact include, but are not limited to, the following:

Whether the claims, assertions, representations, and promises that BlueHippo makes in its advertisements are unfair, unlawful, fraudulent, untrue or misleading, and whether BlueHippo and Capital Media know or have reasonable grounds to believe that their advertising claims, assertions and promises are unfair, deceptive, untrue or misleading;
Whether BlueHippo's representations that its computers are "brand name", "top-of-the-line", and "lightning fast"; that it has "relationships that let us offer the finest computers on the market, made by the most recognizable names in the industry"; and that it will arrange for immediate shipment of the computer once consumers have completed only 3 months of payments, constitute representations that the computers have characteristics or benefits that they do not possess in violation of the California Consumer Legal Remedies Act ("CLRA"), Cal. Civ. Code § 1770(a)(5), and/or constitute representations that the computers are of a particular standard, quality, grade, style, or model, in violation of § 1770(a)(7) of the Act, and/or constitute the advertisement of goods with the intent not to sell them as advertised in violation of § 1770(a)(9); and/or whether these representations violate the consumer protection laws of Maryland and/or the consumer protection laws of the fifty states;
Whether BlueHippo's representations that it provides financing; it is "approving" the consumer's worthiness for an extension of credit that potentially places BlueHippo at risk; and consumers can "build a short credit history" through its payment plan, constitute representations that its services have characteristics, uses, benefits, or qualities which they do not have in violation of § 1770(a)(5) of the Act; and/or whether these representations violate the consumer protection laws of Maryland and/or the consumer protection laws of the fifty states;
Whether BlueHippo's representations to each Plaintiff and to each member of the Class, regarding its no refund policy, which BlueHippo applies in a way that denies refunds to consumers who received nothing of value from BlueHippo and who cancel their orders and/or withdraw authorization for preauthorized electronic payments, constitute representations "that a transaction confers or involves rights, remedies, or obligations which it does not have or involve, or which are prohibited by law" in violation of CLRA § 1770(a)(14), and/or whether the inclusion of such a provision in consumer agreements constitutes an unconscionable term in violation of § 1770(a)(19), and/or whether these representations violate the consumer protection laws of Maryland and/or the consumer protection laws of the fifty states;
Whether BlueHippo's marketing, sales and financing transactions with plaintiffs and members of the Class are procedurally unconscionable in light of the following factors:
1. BlueHippo markets to low-income consumers such as Plaintiffs;
2. BlueHippo targets consumers who lack access to traditional and legitimate sources of credit and promises such consumers guaranteed credit approval;
3. BlueHippo targets consumers who lack sophistication in financial affairs;
4. BlueHippo targets consumers who lack knowledge about the products that BlueHippo markets;
5. BlueHippo insists on contracts of adhesion, imposing uniform and onerous contractual terms it drafts and presents on a take-it-or-leave-it basis to consumers who lack any meaningful bargaining power and who are not permitted to negotiate any terms;
6. BlueHippo conceals the brand name, model or manufacturer of the products it markets in its advertising, and conceals the particular model of computer from consumers even after the consumer has placed his or her order;
7. BlueHippo begins withdrawing money from consumers' accounts prior to providing them with any written record of the sales and/or financing transaction, without any written authorization for the electronic fund transfers, without informing consumers of the right to cancel authorization for electronic funds transfers with three days notice to their bank, and without informing consumers of their right to pay in a form other than electronic transfers, and BlueHippo is therefore able to impose additional terms on consumers under the threat of forfeiture;
8. BlueHippo's no refund policy constitutes an outrageous and atypical sales term that unfairly surprises consumers when they request a refund and BlueHippo responds that it has a contractual right to retain funds of customers for whom it has provided no merchandise or service.
Whether BlueHippo's marketing, sales and financing transactions with plaintiffs and members of the Class are substantively unconscionable, and therefore violate the CLRA § 1770(a)(19); and/or the common law of Maryland and/or the common law or consumer protection laws of the fifty states in the following ways:
1. The prices that BlueHippo charges Plaintiffs and each member of the Class, whereby consumers must pay several times the fair retail price for such products, are outrageous and shock the conscience;
2. Under the delayed shipment policy that BlueHippo imposes, consumers receive no benefit whatsoever from their transactions with BlueHippo;
3. BlueHippo's "no refund" policy operates as a unlawful forfeiture that bears no relationship to any possible damage that BlueHippo might have suffered and shocks the conscience;
4. The Class action waiver and mandatory individual arbitration provisions BlueHippo seeks to impose on customers are intended to and have the effect of allowing BlueHippo to cheat large numbers of low-income consumers out of relatively small amounts of money while leaving no effective legal redress for the consumers;
5. The provision that BlueHippo seeks to impose on customers purporting to grant BlueHippo up to 30 days before it must honor a customer's request to cease electronic debits of the customer's bank account, and the failure of BlueHippo to disclose to Plaintiffs and members of the Class that the customer can, on 3 days notice, terminate the electronic debits that BlueHippo initiates by notifying their banks to do so, is intended to and has the effect of permitting BlueHippo to extract additional payments from customers who wish to terminate their transaction with BlueHippo, and it is outrageous and shocking.
6. The "default" provisions that BlueHippo seeks to impose on customers whereby BlueHippo purports to reserve to itself broad rights to declare the consumer in default "if we deem ourselves in any way insecure" and with the consequence that "you give us permission to draft your checking or savings account in any amount at any time until your account balance is paid in full", is draconian and shocks the conscience.
Whether the forfeiture that BlueHippo imposed on each Plaintiff and on each member of the Class constitutes conversion of their property under the law of California, the law of Maryland, and/or the law of the fifty states;
Whether the purported agreements between BlueHippo and certain members of the Class, memorialized in the "Shipping Verification Form" and/or "Terms and Conditions", lack consideration in that BlueHippo reserves to itself the absolute right to terminate the agreement at any time, and whether those purported agreements are therefore not legally binding under the law of California, of Maryland, or of the fifty states;
Whether the purported agreements between BlueHippo and certain members of the Class, memorialized in the "Shipping Verification Form" and/or "Terms and Conditions" document, by their own terms do not apply because the conditions for initiating the agreement have not occurred;
Whether the purported agreements between BlueHippo and certain members of the Class, memorialized in the "Shipping Verification Form" and/or "Terms and Conditions" document, are not legally enforceable because they are, as a whole, so incomprehensible and internally contradictory as not to provide the basis for determining rights and obligations, and/or so one-sided, overreaching and draconian in the rights it purports to grant BlueHippo, that the agreement as a whole is unconscionable;
Whether BlueHippo has violated Truth in Lending Act, 15 U.S.C. § 1601 et seq., the Unruh Act, Cal. Civ. Code § 1801 et seq., and/or the Retail Installment Sales Acts of Maryland and/or of the fifty states by failing to disclose to plaintiffs and other members of the Class the terms required by those laws, including but not limited to: the credit nature of the transaction; the brand, model and manufacturer of the goods; the fact that the transaction is a retail installment sale; the amount of finance charges imposed for the extension of credit; the annual percentage rate of the financing; the purchase price of the products separate from finance charges; and the right of consumers to pay the outstanding balance of the purchase price and avoid further interest charges;
Whether BlueHippo violated the Electronic Funds Transfer Act, 15 U.S.C. § 1690 et seq. in its transactions with Plaintiffs and members of the Class by debiting their accounts without written authorization, by conditioning the extension of credit on repayment by preauthorized electronic funds transfers, and/or by representing to Plaintiffs and members of the Class that BlueHippo was entitled to continue making electronic debits to their accounts even after they requested that such d