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A homeowners’ class action lawsuit against a roofing-shingle manufacturer was subject to mandatory arbitration because the homeowners, through their roofers, had opened and used the shingles that were contained in wrappers that on their face clearly stated contract terms that included a requirement that any disputes must be submitted to binding arbitration. The homeowners’ grant of express authority to their roofers to buy and install the shingles necessarily included the act of accepting the purchase terms on the homeowners’ behalf, which included mandatory arbitration. Dye v. Tamko Building Products, 2018 WL 5729085, U.S. Court of Appeals, 11th Circuit (Florida, 2018).

The pertinent facts of this case are that homeowners contracted with a roofer to replace shingles on the roof of a house. The contract with the roofer included delegating to the roofers the responsibility for purchasing shingles from a manufacturer. The roofer thus was acting as an agent of the homeowners with regard to its contractual commitments made with the shingle supplier. The owners delegated this responsibility to the roofer.

Two principal issues were considered by the court. First, was whether the arbitration provision printed on the shingles wrapper constituted an offer and acceptance creating a binding contract provision, and second, was whether the homeowner avoid the arbitration requirement since they themselves didn’t purchase the shingles directly from the supplier.

Each package wrapper displayed the all-capped word “IMPORTANT” and warned the purchaser:

MANDATORY BINDING ARBITRATION: EVERY CLAIM, CONTROVERSY, OR DISPUTE OF ANY KIND WHATSOEVER (EACH AN “ACTION”) BETWEEN YOU AND TAMKO (INCLUDING ANY OF TAMKO’S [*4]  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.

The warranty further specifies that any action against Tamko must be arbitrated individually rather than as part of a consolidated or class action:

ANY ACTION BROUGHT BY USE AGAINST TAMKO WILL BE ARBITRATED (OR, IF ARBITRATION OF THE ACTION IS NOT PERMITTED BY LAW, LITIGATED) INDIVIDUALLY AND YOU WILL NOT CONSOLIDATE, OR SEEK CLASS TREATMENT FOR, ANY ACTION UNLESS PREVIOUSLY AGREED TO IN WRITING BY BOTH TAMKO AND YOU.

            The trial court granted summary judgment for the manufacturer, dismissing the lawsuit and requiring homeowner actions to be brought by individual homeowners through arbitration instead of by class action in a lawsuit. This was affirmed on appeal, with the appellate court finding the shingle wrappers conveyed a valid offer of contract terms (including the arbitration provision), which was accepted by the homeowners when their authorized roofers opened the packages on their behalf and installed the shingles.

The court found that the packaging provided conspicuous notice of the offer—something a reasonable, objective person would understand in an invitation to contract. “For the homeowners’ part, opening and retaining the shingles was the (quite ordinary, reasonable) conduct from which their assent can be ‘inferred’”.

A nice comparison of what the court calls “shrinkwrap” agreements, is provided by the court. These are agreements that bind a software (or small-electronics) purchaser to an inside-the-box contract if they open the product and retain it for some specified time. Case law applicable to those agreements was applied by the court here with regard to the binding impact of “assent” to the terms of the offer and conditions printed on the packaging. Here, the court pointed out that the shingle manufacturer’s terms were available not only on its packaging but also on its website and over the phone, “such that a diligent consumer could easily have discovered and reviewed them before or after purchase.”

            At the end of the day, the point is simply this: modern consumers are on notice that products come with warranties and other terms and conditions of purchase. And they are free to research (or not), request (or not), and read (or not) those terms before unwrapping their purchases. As to the case before us, Florida law makes clear that providing conspicuously printed product packaging is an OK way to convey purchase terms. Florida consumers who purchase, open, and retain a product are thus bound in accordance with warranty terms conspicuously printed on that product’s packaging, whether they actually take the time to read them or not.

The fact that it was the roofer, and not the homeowner, that actually opened the packaging and installed the shingles makes no difference to the applicability of the terms of the roofer’s conditions on the homeowner. Because the roofer was expressly delegated by the homeowners with the task of purchasing the shingles, the roofer became an agent for the homeowners and “An agent can bind a principal to an arbitration agreement just like any other contract.”

 

 

About the author: Article written by J. Kent Holland, Jr., a construction lawyer located in Tysons Corner, Virginia, with a national practice (formerly with Wickwire Gavin, P.C. and now with ConstructionRisk Counsel, PLLC) representing design professionals, contractors and project owners.  He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects.  He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932.  This article is published in ConstructionRisk.com Report, Vol. 21, No. 1 (Apr 2019).

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