Am. Family Mut. Ins. Co. v. Tamko Bldg. Prods., Inc.

178 F.Supp.3d 1121

American Family Mutual Insurance Company, a Wisconsin Corporation, Plaintiff,

v.Tamko Building Products, Inc., a Missouri Corporation, Defendant.

Civil Action No. 15-cv-02343-REB-NYW

United States District Court, D. Colorado.

Signed April 13, 2016

Brad W. Breslau, Cozen O'Connor, Denver, CO, for Plaintiff.

Jonathan M. Allen, Husch Blackwell LLP, Denver, CO, Tyler Jacob Scott, Jeffrey J. Simon, Judd McCune Treeman, Husch Blackwell LLP, Kansas City, MO, for Defendant.

ORDER GRANTING MOTION TO COMPEL ARBITRATION

Blackburn, United States District Judge

The matters before me are (1) Defendant TAMKO Building Products, Inc.'s Motion To Dismiss or Compel Arbitration [#14],¹ filed October 29, 2015; and (2) Defendant TAMKO Building Products, Inc.'s Motion for Stay Pending Ruling on Its Motion To Dismiss or Compel Arbitration [#29], filed January 27, 2016.² I grant the motion to compel arbitration and dismiss this action, mooting consideration of defendant's motion to stay.

I. JURISDICTION

I have putative jurisdiction over this matter under 28 U.S.C. §§ 1331 (federal question) and 1367 (supplemental jurisdiction).

II. STANDARD OF REVIEW

The decision whether to enforce an arbitration agreement involves a two-step inquiry. First, I must determine whether the parties agreed to arbitrate the dispute. Mitsubishi Motors Corp. v. Soler Chrysler – Plymouth , 473 U.S. 614, 626, 105 S.Ct. 3346, 3353, 87 L.Ed.2d 444 (1985) ; Williams v. Imhoff , 203 F.3d 758, 764 (10th Cir.2000). Second, I then must consider whether any statute or policy renders the claims non-arbitrable. Mitsubishi Motors Corp. , 105 S.Ct. at 3355 ; Williams , 203 F.3d at 764.

III. ANALYSIS

This case arises out of the installation of the roofs of two Aurora, Colorado, condominium complexes, referred to herein collectively as “the insureds.” After the roofs were damaged by hail in May 2014, the insureds elected to replace them with “impact resistant” shingles manufactured by defendant. The insureds hired a general contractor to do the work, who, in turn, subcontracted the work to Schall Construction, Inc. (“Schall”), which installed the shingles.

In September 2014, while the installation was still in progress, a second hail storm caused further damage to the roofs, both those portions that had been replaced with defendant's shingles and those that as yet had not. Thereafter, defendant's shingles were used to replace both the old roof and the new shingles damaged by the second storm.

At some point soon thereafter, the insureds became aware that defendant's shingles did not conform to their advertised “Class 4” impact rating. If they had, according to plaintiff, the damage from the September 2014 hail storm to the new shingles “should have been limited to shingles with unique support conditions such as those draped over ridges, hips and valleys.” (Compl. ¶ 8(b).) The insureds made a claim against their insurance policy for the costs of removing and replacing the shingles. Plaintiff, their insurer, paid those claims. It now brings this lawsuit as subrogee of the insureds and asserts claims sounding in negligence, strict liability, breach of express and implied warranties, and misrepresentation.

By this motion, defendant moves to compel arbitration of all plaintiffs' claims pursuant to an arbitration clause included in a Limited Warranty which was printed on the wrapper of each bundle of shingles. Printed on the wrapper is a prominent, horizontal text box which reads “IMPORTANT, READ CAREFULLY BEFORE OPENING BUNDLE.” Beneath this text is printed, relevantly, the following:

In this paragraph, “You” and “Your” refer to the installer of the shingles and the owner of the building on which these shingles will be installed. This is a legally binding agreement [between] You and TAMKO Building Products, Inc. (“TAMKO”). By opening this Bundle, You agree: (a) to the terms and conditions of the limited warranty in effect for these shingles, including the agreement to arbitrate any and all disputes between you and TAMKO;....

(Def. Motion App., Exh. A-1.) The paragraph concludes by advising, “[i]f you are not satisfied with the terms and conditions of this Limited Warranty, return all unopened marketable product to the original place of purchase for a refund.” (Id. )

The Limited Warranty itself is printed in five columns to the left of this text box. It includes the following clause:

MANDATORY BINDING ARBITRATION : EVERY CLAIM, CONTROVERSY, OR DISPUTE OF ANY KIND WHATSOEVER (EACH AN “ACTION”) BETWEEN YOU AND TAMKO (INCLUDING ANY OF TAMKO'S EMPLOYEES AND AGENTS) RELATING TO OR ARISING OUT OF THE PRODUCT SHALL BE RESOLVED BY FINAL AND BINDING ARBITRATION, REGARDLESS OF WHETHER THE ACTION SOUNDS IN WARRANTY, CONTRACT, STATUTE OR ANY OTHER LEGAL OR EQUITABLE THEORY. TO ARBITRATE AN ACTION AGAINST TAMKO, YOU MUST INITIATE THE ARBITRATION IN ACCORDANCE WITH THE APPLICABLE RULES OF ARBITRATION OF THE JUDICIAL ARBITRATION AND MEDIATION SERVICE OR OTHER ARBITRATION SERVICE AGREED TO IN WRITING BY TAMKO, AND PROVIDE WRITTEN NOTICE TO TAMKO BY CERTIFIED MAIL AT P.O. BOX 1404, JOPLIN, MISSOURI 64802 WITHIN ONE YEAR FOLLOWING THE DISCOVERY OF THE LEAK.

ANY ACTION BROUGHT BY YOU AGAINST TAMKO WILL BE ARBITRATED ...

LEGAL REMEDIES: REMEDIES FOR BREACH OF THIS LIMITED WARRANTY OR ANY IMPLIED WARRANTY ARE EXCLUSIVE AND REPRESENT THE SOLE REMEDIES AVAILABLE TO THE OWNER OR ANY OTHER PERSON OR ENTITY, INCLUDING ANY MORTGAGEE, INSURER, OR OTHER PARTY IN INTEREST. OBLIGATIONS CONTAINED IN THIS LIMITED WARRANTY ARE EXPRESSLY IN LIEU OF ANY OTHER OBLIGATIONS, GUARANTEES, WARRANTIES, AND CONDITIONS EXPRESSED OR IMPLIED, INCLUDING ANY IMPLIED WARRANTY OR CONDITION OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND OF ANY OTHER OBLIGATIONS OR LIABILITY ON THE PART OF TAMKO BUILDING PRODUCTS, INC.

(Id. (typeface and emphases original).) Defendant maintains that this provision is valid and enforceable and thus requires all claims in this lawsuit be dismissed and referred to arbitration. I concur, and thus grant the motion.

In considering an arbitration clause, the court first must address the question of arbitrability vel non . An arbitration agreement is enforceable if (1) there is a valid agreement to arbitrate; and (2) the dispute falls within the scope of that agreement. See National American Insurance Co. v. SCOR Reinsurance Co. , 362 F.3d 1288, 1290 (10th Cir.2004) ; Via Fone, Inc. v. Western Wireless Corp. , 106 F.Supp.2d 1147, 1150 (D.Kan.2000). Plaintiff challenges the arbitration provision on both these bases.

Whether the parties agreed to arbitrate “is a threshold matter,” Avedon Engineering, Inc. v. Seatex , 126 F.3d 1279, 1287 (10th Cir.1997), which is governed by state law, First Options of Chicago, Inc. v. Kaplan , 514 U.S. 938, 944, 115 S.Ct. 1920, 1924, 131 L.Ed.2d 985 (1995) ; Hardin v. First Cash Financial Services, Inc. , 465 F.3d 470, 475 (10th Cir.2006). Under Colorado law, a valid contract requires proof, inter alia , of a meeting of the minds as to all essential terms. Agritrack, Inc. v. DeJohn Housemoving, Inc ., 25 P.3d 1187, 1192 (Colo.2001), as modified on denial of reh'g (Colo. July 2, 2001); I.M.A., Inc. v. Rocky Mountain Ariways, Inc ., 713 P.2d 882, 888 (Colo.1986). Plaintiff argues that an essential element is lacking here because its insureds never saw any of the bundles of shingles to which the arbitration provision was affixed.

Neither party contests that it was the subcontractor, Schall, not plaintiff's insureds themselves, who opened the bundles. Nevertheless, it was the insureds who decided to purchase defendant's shingles (Compl. ¶ 5), and hired the general contractor to complete the work on their behalf (Plf. Resp. App., Exh 1 ¶ 6; Exh 2 ¶ 6). The general contractor thus became the insureds' special agent for purposes of completing the roofing project. See Mullin v. Hyatt Residential Group, Inc ., 82 F.Supp.3d 1248, 1258 (D.Colo.2015) (defining agency), as amended (Mar. 10, 2015). See also Stortroen v. Beneficial Financial Co. of Colorado , 736 P.2d 391, 395 (Colo.1987) (differentiating general from special agency). By delegating its duty to install the shingles to Schall, the general contractor created a subagency. See id. at 395–96 (“A subagent is a person appointed by an agent empowered to do so, to perform functions undertaken by the agent for the principal, but for whose conduct the agent agrees with the principal to be primarily responsible.”).³ Schall thus became an agent of both the general contractor and the insureds. See Mullin , 82 F.Supp.3d at 1258.

Because the insureds were principals of Schall, whether the insureds themselves actually consented to the arbitration clause is irrelevant. The wrapper affixed to each bundle of shingles specifically and conspicuously provided that opening the package would constitute acceptance of the terms of the Limited Warranty, including the arbitration clause, printed on the wrapper. By opening the bundles, Schall created a contract implied in fact.⁴ See Agritrack, Inc. , 25 P.3d at 1192 (“A contract implied in fact arises from the parties' conduct which evidences a mutual intention to enter into a contract.”). Not only is Schall's actual or constructive notice of the terms of the agreement imputable to the insureds as principals, see Mullin , 82 F.Supp.3d at 1258, but its acceptance of the terms of the offer by its conduct binds the insureds as principals to the contract, see Beneficial Financial Co. of Colorado v. Bach , 665 P.2d 1034, 1036 (Colo.App.1983). Because the insureds thus would be bound to arbitrate, plaintiff, as their subrogee, see American Family Mutual Insurance Co. v. DeWitt , 218 P.3d 318, 323 (Colo.2009), likewise is so bound.⁵ SeeStolt Tankers BV v. Allianz Seguros, S.A. , 2011 WL 2436662 at *2 (S.D.N.Y. June 16, 2011) (“[T]here is no valid basis in law or equity why an arbitration clause should not be enforced against a subrogee.”) (citation, internal quotation marks, and footnote...