Morris v. Serv. Experts Heating & Air Conditioning

1

GLORIA MORRIS, Plaintiff, v. SERVICE EXPERTS HEATING AND AIR CONDITIONING LLC, Defendant.

No. 3:23-cv-00642

United States District Court, M.D. Tennessee, Nashville Division

December 21, 2023

MEMORANDUM

ALETA A. TRAUGER UNITED STATES DISTRICT JUDGE

Before the court are (1) the Motion for Leave to Amend Answer and Assert Counterclaim Against Plaintiff Gloria Morris (“Motion to Amend”) (Doc. No. 6) and (2) Motion to Compel Arbitration (Doc. No. 9), both filed by defendant Service Experts Heating and Air Conditioning LLC (“Service Experts”). As set forth herein, the Motion to Amend will be granted, and the Motion to Compel Arbitration will be denied.

I. MOTION FOR LEAVE TO AMEND

A. Background

Plaintiff Gloria Morris initiated this lawsuit against Service Experts in the Circuit Court for Davidson County, Tennessee in May 2023, asserting claims for negligence, negligent misrepresentation, breach of express warranty, breach of implied warranty, breach of contract, and gross negligence against Service Experts, all related to the installation of an HVAC unit in the plaintiff's condominium in May 2020. (See Complaint, Doc. No. 1-1.) On June 23, 2023, Service Experts removed the case to this court on the grounds of diversity jurisdiction. It filed its original Answer the same day. The Answer does not assert a counterclaim, but it raises as an affirmative defense the existence of an arbitration agreement that “may” bar the plaintiff's lawsuit. (Doc. No. 3, at 6.)

On August 10, 2023, Service Experts filed its Motion to Amend and proposed Amended Answer and Counterclaim. (Doc. Nos. 6, 6-1.) The proposed Counterclaim asserts a single claim for breach of contract against Morris, arising out of her alleged breach of the agreement pertaining to the installation of the same HVAC unit that is the subject of Morris's claims. (Doc. No. 6-1, at 9-11.)

B. Discussion

The plaintiff's Response in opposition to the Motion to Amend (Doc. No. 7) is premised entirely upon Federal Rule of Civil Procedure 13(a) and two Ohio district court opinions predating the 2009 amendments to the Federal Rules of Civil Procedure, Hans v. Kevin O'Brien & Assocs. Co., CV 2-06-781, 2008 WL 222515, at *5 (S.D. Ohio Jan. 25, 2008), and Awada v. Fast Track Ventures, LLC, 3:04 CV 7318, 2005 WL 189707, at *3 (N.D. Ohio Jan. 28, 2005), which appear to hold that a compulsory counterclaim not raised in a defendant's initial responsive pleading is untimely and thus waived.^[1] The plaintiff does not reference Federal Rule of Civil Procedure 15, and she does not contend that she would be prejudiced in any way by the filing of the Amended Answer and Counterclaim.

The defendant's Motion to Amend is clearly governed by Fed. R. Civ. P 15(a)(2).^[2] Under Rule 15, a party may amend its pleading more than 21 days after serving the original pleading “only with the opposing party's written consent or the court's leave,” which the court “should freely give . . . when justice so requires.” Fed.R.Civ.P. 15(a)(2). This rule, which establishes a liberal policy in favor of granting amendments, “reinforce[s] the principle that cases ‘should be tried on their merits rather than the technicalities of the pleadings.'” Inge v. Rock Fin. Corp., 388 F.3d 930, 936 (6th Cir. 2004) (quoting Moore v. City of Paducah, 790 F.2d 557, 559 (6th Cir. 1986)). “Thus, the trial court enjoys broad discretion in deciding motions for leave to amend.” Ousley v. CG Consulting, LLC, 339 F.R.D. 455, 459 (S.D. Ohio 2021) (citing Gen. Elec. Co. v. Sargent & Lundy, 916 F.2d 1119, 1130 (6th Cir. 1990)). In exercising its discretion, the trial court may consider such factors as “undue delay, bad faith or dilatory motive on the part of a movant, repeated failures to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment and futility of the amendment.” Foman v. Davis, 371 U.S. 178, 182 (1962).

To be sure, Rule 13 states that a pleading “must” assert a compulsory counterclaim “at the time of its service,” Fed.R.Civ.P. 13(a), but this provision simply means that a “party's failure to plead a compulsory counterclaim forever bars that party from raising the claim in another action.” Bauman v. Bank of Am., N.A., 808 F.3d 1097, 1101 (6th Cir. 2015) (citation omitted). Indeed, for that reason, “[c]ourts are especially liberal in allowing leave to assert a compulsory counterclaim.” Croskey v. Union Sec. Ins. Co., No. 1:09-CV-400, 2009 WL 3401162, at *2 (W.D. Mich. Oct. 16, 2009).

The proposed amendment in this case was not unduly delayed; it was filed before entry of a scheduling order or the commencement of discovery. The plaintiff does not allege prejudice, nor does the court perceive any possibility of prejudice. None of the relevant factors weighs against amendment, and the fact that the counterclaim is apparently compulsory weighs strongly in favor. The defendant's Motion to Amend, therefore, will be granted.

II. MOTION TO COMPEL ARBITRATION

A. Background

The defendant asks the court to compel arbitration and stay or dismiss this case, under 9 U.S.C. § 3, based on a written arbitration agreement. It argues that federal law favors enforcement of valid arbitration agreements (Doc. No. 9-1, at 2 (citing Epic Sys. Corp. v. Lewis, 138 S.Ct. 1612, 1621 (2018))), and it asserts that it has not waived its right to compel arbitration under the agreement by acting “in a manner ‘completely inconsistent with any reliance on an arbitration agreement' or delay[ed] asserting arbitration ‘to such an extent that the opposing party incur[red] actual prejudice.'” Shy v. Navistar Int'l Corp., 781 F.3d 820, 827-28 (6th Cir. 2015) (quoting Hurley v. Deutsche Bank Tr. Co. Ams., 610 F.3d 334, 338 (6th Cir. 2010)). (See Doc. No. 9-1, at 2.)

The defendant filed the purported arbitration agreement with both its Motion to Amend and the Motion to Compel Arbitration. The primary agreement between Morris and Service Experts appears to be the Service Experts Advantage Program Agreement (“SEAPA”), a two-page document pursuant to which the plaintiff apparently agreed to pay Service Experts, doing business as Donelson Air, $15,112.50 for the privilege of leasing an HVAC system that otherwise would have cost $10,282. (Doc. No. 9-2, at 8.) On its face, the SEAPA required the plaintiff to pay $162.50 per month for 93 months, or 7 years and 9 months. (Id.) At the end of that period, the “lease” would terminate. The SEAPA specifically states that the plaintiff did “not have an option to purchase the leased property at the end of the term.” (Id.) The SEAPA directs the signatory to “[s]ee your Lease for additional information on early termination, purchase options and maintenance responsibilities, warranties, late and default charges, insurance, and any security interest.” (Id.) It does not appear that the SEAPA was accompanied by any document identified as a “lease.”

The plaintiff's electronic signature appears on page 2 of the SEAPA, just below this statement:

I HAVE READ AND UNDERSTAND THIS AGREEMENT, FEDERAL CONSUMER LEASING ACT DISCLOSURE, STATE SPECIFIC ADDENDUM, TERMS AND CONDITIONS PROVIDED ON THIS AGREEMENT AND I ACKNOWLEDGE THAT I HAVE BEEN PRESENTED WITH MULTIPLE OPTIONS INCLUDING AN OPTION TO PURCHASE THE EQUIPMENT.^[3]

(Id. at 9.) This page also contains a time stamp indicating that it was digitally signed by Service Experts on May 21, 2021, in conjunction with an “eDoc Consent Agreement” and “Terms and Conditions Agreement,” as follows:

Digitally signed by Service Experts LLC

Date 2020.05.2110:56:34 -06:00

Reason:

eDoc Consent Agreement: 5/21/2020 10:53:28 AM

Terms and Conditions Agreement: 5/21/2020 10:56:34 AM

Home Owner Identifier: 7705

CO-Home Owner Identifier (if present):

Sales Representative Initials: MW Location: [Plaintiff's home address]

(Id.)

Another document was purportedly attached to the SEAPA, entitled “Advantage HVAC Terms and Conditions.” (Doc. No. 9-2, at 1.) This document does not identify the plaintiff by name or give her address, and it is inconsistent in several respects with the SEAPA. In particular, it identifies the term of the agreement as 120 months (rather than 93 months). (Id. at 1 ¶ 2.) It also contains a “Termination Option,” which includes a purchase option (which the SEAPA expressly contradicts). (Id. at 7 ¶ 17.) Pursuant to this provision, the lessor could “terminate” the agreement and keep the HVAC unit for a “fee” based on the date of termination.^[4]

The Terms and Conditions incorporate a provision for “Mandatory Arbitration of Disputes.” (Id. at 6 ¶ 16.) This provision expressly requires arbitration of “[a]ny dispute, disagreement or claim between you and Service Experts arising out of or in connection with this Agreement^[5] . . . which cannot be amicably resolved.” (Id.) The arbitration is to be conducted in accordance with the Consumer Arbitration Rules of the American Arbitration Association at a location convenient to the consumer. (Id.)

The plaintiff filed a Response in Opposition to the Motion to Compel Arbitration in which she argues that she did not agree to “any portion of the document entitled Terms and Conditions,” that there was no mutual assent to those terms, and, therefore, that there is no valid contract incorporating those terms. (Doc. No. 12, at 3.) She points out that the SEAPA refers to the “terms and conditions provided on this agreement,” without specifically referencing or incorporating a separate document. (Id. at 4 (emphasis added).) In addition, the plaintiff also submitted an Affidavit, in which she specifically avers that she entered into an agreement with Service Expert for the installation of an HVAC unit in her condominium in May 2020, but the only document she was shown in...