American Family Mutual Insurance Company v. TAMKO Building Products, Inc.
ORDER granting 16 Defendant TAMKO Building Products, Inc.'s Motion To Dismiss or Compel Arbitration; denying as moot 29 Defendant TAMKO Building Products, Inc.'s Motion for Stay Pending Ruling on Its Motion To Dismiss or Compel Arbitration. All claims for relief and causes of action brought by plaintiff against defendant in this lawsuit are dismissed; and this case is closed. By Judge Robert E. Blackburn on 4/13/16. (kfinn)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Robert E. Blackburn
Civil Action No. 15-cv-02343-REB-NYW
AMERICAN FAMILY MUTUAL INSURANCE COMPANY, a Wisconsin Corporation,
TAMKO BUILDING PRODUCTS, INC.,a Missouri Corporation,
ORDER GRANTING MOTION TO COMPEL ARBITRATION
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 have putative jurisdiction over this matter under 28 U.S.C. §§ 1331 (federal
question) and 1367 (supplemental jurisdiction).
“[#14]” is an example of the convention I use to identify the docket number assigned to a
specific paper by the court’s electronic case filing and management system (CM/ECF). I use this
convention throughout this order.
With the consent of the magistrate judge, the previous Order of Reference [#30], filed January
27, 2016, is withdrawn so that this court may dispose of the motion directly.
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
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
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
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
Although plaintiff takes pains to suggest that Schall was an independent contractor, the mere
affixing of the label is of no moment. “An agency relationship need not be contractual, and may exist even
though the parties do not call it an agency and do not subjectively intend that legal consequences flow
from their relation.” Mullin., 82 F.Supp.3d at 1258 (citation and internal quotation marks omitted)). “What
is critical is that the parties materially agree to enter into a particular relation to which the law attaches the
legal consequences of agency, even though those consequences might not have been within the
contemplation of the parties at the time of their agreement.” Stortroen, 736 P.2d at 395.
That the arbitration provision was imposed after the shingles had already been purchased is not
determinative. This method of providing arbitration terms is similar to the “shrinkwrap licenses” that
accompany purchases of computer software, which have been found enforceable. See Hoekman v.
TAMKO Building Products, Inc., 2015 WL 9591471 at *5 & n.5 (E.D. Cal. Aug. 26, 2015) (citing cases).
See also ProCD, Inc. v. Zeidenberg, 86 F.3d 1447, 1451-52 (7th Cir. 1996) (noting that “[t]ransactions in
which the exchange of money precedes the communication of detailed terms are common,” citing as
examples insurance contracts, airline and concert tickets, boxed consumer electronic goods, and
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 See Stolt 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 omitted).6
Contrary to plaintiff’s argument, there is nothing unconscionable in this result.
Arbitration agreements are subject to the same defenses that apply to contracts
generally, including unconscionability. Rent-A-Center, West, Inc. v. Jackson, 561
U.S. 63, 130 S.Ct. 2772, 2776, 177 L.Ed.2d 403 (2010). See also 9 U.S.C. § 2. Under
Colorado law, several considerations inform the court’s analysis of this issue, including
whether there is evidence of
This court is not the first to consider the enforceability vel non of this specific arbitration clause,
and I acknowledge that one state appellate court concluded that the plaintiffs’ claims were not arbitrable
because the plaintiffs had not personally seen the Limited Warranty. See Hobbs v. TAMKO Building
Products, Inc., 479 S.W.2d 147, 149 (Mo. App. 2015). This decision appears to be based on the
particular requirements of Missouri law, which of course has no bearing on the case here. To the extent it
is not, I find the analysis of the decision superficial and thus simply unpersuasive.
My determination instead tracks those of the federal district courts which have found this specific
arbitration clause valid and enforceable, which decisions I find persuasive. See Hoekman, 2015 WL
9591471; Overlook Terraces, Ltd. v. TAMKO Building Products, Inc., 2015 WL 9906298 (W.D. Ky.
May 21, 2015); Krusch v. TAMKO Building Products, Inc., 34 F.Supp.3d 584 (M.D.N.C. 2014).
Because the contract is valid and enforceable against plaintiff, I need not consider defendant’s
alternative argument that plaintiff is estopped from avoiding arbitration because its claims necessarily rely
on the terms of the Limited Warranty.
(1) a standardized agreement executed by parties of
unequal bargaining power; (2) lack of opportunity to read or
become familiar with the document before signing it; (3) use
of fine print in the portion of the contract containing the
provision; (4) absence of evidence that the provision was
commercially reasonable; (5) the terms of the contract; (6)
the relationship of the parties, including factors of assent,
unfair surprise, and notice; and (7) all the circumstances
surrounding the formation of the contract.
Vernon v. Qwest Commcations International, Inc., 925 F.Supp.2d 1185, 1194 (D.
Colo. 2013) (quoting Davis v. M.L.G. Corp., 712 P.2d 985, 991 (Colo.1986)).
Plaintiff’s argument in this regard is rather superficial and underdeveloped, which
in itself would absolve the court of the obligation to address it substantively. See
Center for Biological Diversity v. Pizarchik, 858 F.Supp.2d 1221, 1230 n.11 (D. Colo.
2012) (court does not consider “cursory, unsupported, or otherwise inadequately briefed
arguments”) (citation and internal quotation marks omitted). Moreover, by addressing
only the second, third, and sixth factors cited above, plaintiff’s arguments are premised
entirely on issues of procedural unconscionability. See Cook v. PenSa, Inc., 2014 WL
3809409 at *11 (D. Colo. Aug. 1, 2014). Because plaintiff cannot prevail unless it
demonstrates both procedural and substantive unconscionability, Vernon, 925
F.Supp.2d at 1194-95, its argument is essentially a non-starter.
Nevertheless, even when considered substantively, plaintiff’s suggestion of
unconscionability does not bear scrutiny. The second factor does not suggest that the
arbitration agreement is unconscionable because, as already discussed, the insureds’
lack of opportunity to read the Limited Warranty is irrelevant where their subagent
accepted the terms thereof by his actions within the scope of his agency on their behalf.
See Hoekman v. TAMKO Building Products, Inc., 2015 WL 9591471 at *6 (E.D. Cal.
Aug. 26, 2015). For the same reason, the fact that the insureds were “two steps
removed” from Schall does not convince the court that there was undue surprise. See
id. Such a claim might have more traction had Schall unilaterally chosen the shingles
without input from the insureds, but the complaint specifically alleges that the insureds
themselves chose to purchase defendant’s shingles particularly.7 Accordingly, the sixth
factor does not suggest unconscionability, either.
Finally, regarding the third factor, although the Limited Warranty is indeed printed
in small type, the printing is of the same size as the majority of the other printing on the
packaging. See Rocky Mountain Chocolate Factory, Inc. v. SDMS, Inc., 2007 WL
4268962 at *7 (D. Colo. Nov. 30, 2007) (provision “in normal print consistent with other
clauses in the contract” not inconspicuous). In addition, and unlike much of the other
printing on the wrapper, the arbitration clause itself is printed entirely in capital letters,
employs bold-face type for emphasis, and is specifically pointed out by the prominent
text box just to its right, which itself both warns the user of the consequences of opening
the package and specifically references the arbitration provision. I cannot find the
agreement unconscionable given these circumstances.
Accordingly, the arbitration agreement is valid and enforceable. The only
remaining question, therefore, is whether the claims raised in this lawsuit are within the
scope of that agreement. National American Insurance Co., 362 F.3d at 1290.
Although plaintiff argues that its claims do not come within the scope of the arbitration
agreement, I find and conclude that issue must be resolved by the arbitrator.
This case thus falls somewhere between Hoekman, in which the plaintiffs personally shopped
for and purchased the shingles, and the facts of Overlook Terraces and Krusch, in which there was no
suggestion that the plaintiffs themselves chose defendant’s shingles. See Hoekman, 2015 WL 9591471
The agreement provides that arbitration will be conducted according to the rules
of the Judicial Arbitration and Mediation Service (“JAMS”). Rule 11(b) of the JAMS
Comprehensive Arbitration Rules and Procedures provides that “[j]urisdictional and
arbitrability disputes, including disputes over the . . . scope of the agreement under
which Arbitration is sought . . . shall be submitted to and ruled on by the Arbitrator.”
Rule 11(b), JAMS Comprehensive Arbitration Rules & Procedures (emphasis
added) (available at http://www.jamsadr.com/rules-comprehensive-arbitration/#Rule11)
(last accessed April 13, 2016). District courts in this circuit have found similar
provisions invoking the rules of the American Arbitration Association evidence “clearly
and unmistakably” the parties’ “intent to arbitrate all matters, including the question of
arbitrability.” Getzelman v. Trustwave Holdings, Inc., 2014 WL 3809736 at *3 (D.
Colo. Aug. 1, 2014) (citing cases; citation and internal quotation marks omitted). This
same result has been reached by all the federal circuit courts to have considered the
issue as well. See, e.g., Awuah v. Coverall North America, Inc., 554 F.3d 7, 11-12
(1st Cir. 2009); Agere Systems, Inc. v. Samsung Electric Ltd., 560 F.3d 337, 339-40
(5th Cir. 2009); Fallo v. High-Tech Institute, 559 F.3d 874, 877-78 (8th Cir. 2009);
Qualcomm Inc. v. Nokia Corp., 466 F.3d 1366, 1372-73 (Fed. Cir. 2006); Terminix
International Co., LP v. Palmer Ranch Ltd., 432 F.3d 1327, 1332-33 (11th Cir. 2005);
Contec Corp. v. Remote Solution Co., 398 F.3d 205, 208 (2nd Cir. 2005).
Accordingly, matters going to the scope of the arbitration clause are not for this court,
but for the arbitrator.8
Even if it were proper to consider whether plaintiff’s claims are within the scope of the arbitration
agreement, given the substantial breadth of the arbitration clause here, I would be inclined to resolve any
doubt as to the scope of the agreement in favor of arbitration. See Sanchez v. Nitro-Lift Techs., L.L.C.,
762 F.3d 1139, 1147 (10th Cir. 2014) (arbitration clauses applying to disputes “arising under” or “in
connection with” agreement constitute broad arbitration clauses, and citing cases that so find despite
existence of other, potentially limiting, language).
For these reasons, plaintiff’s claims are referable to arbitration. Defendant
requests an outright dismissal, rather than a stay. Despite the seemingly mandatory
language of section 3 of the FAA in this regard,9 the majority of federal courts hold that
a case may be dismissed, rather than stayed, when all claims therein are arbitrable.
See, e.g., Choice Hotels International, Inc. v. BSR Tropicana Resort, Inc., 252 F.3d
707, 709-10 (4th Cir. 2001); Green v. Ameritech Corp., 200 F.3d 967, 973 (6th Cir.
2000); Fedmet Corp. v. M/V BUYALYK, 194 F.3d 674, 678 (5th Cir. 1999); Bercovitch
v. Baldwin School, Inc., 133 F.3d 151, 156 & n.21 (1st Cir. 1998); Sparling v.
Hoffman Construction Co., 864 F.2d 635, 638 (9th Cir. 1988); Black and Veatch
International Co. v. Wartsila NSD North America, Inc., 1998 WL 953966 at *4 (D.
Kan. Dec. 17, 1998). But see Lloyd v. Hovensa, LLC, 369 F.3d 263, 269-71 (3rd Cir.
Although the Tenth Circuit has not addressed this issue directly, it has intimated
that a district court may dismiss when all claims are arbitrable and the movant
specifically requests dismissal rather than a stay. See Armijo v. Prudential Insurance
Co. v. America, 72 F.3d 793, 796-97 (10th Cir. 1995) (finding appellate jurisdiction over
order dismissing case in which all claims referred to arbitration; distinguishing Adair
Bus Sales, Inc. v. Blue Bird Corp., 25 F.3d 953, 954–55 (10th Cir. 1994), because
defendant had not requested dismissal). Those two prerequisites are satisfied here. I
therefore find it proper to dismiss plaintiff’s claims and this action.
Section 3 provides, in pertinent part,
If any suit or proceeding be brought in any of the courts of the United
States upon any issue referable to arbitration under an agreement in
writing for such arbitration, the court in which the suit is pending . . . shall
on application of one of the parties stay the trial of the action . . .
9 U.S.C. § 3.
THEREFORE, IT IS ORDERED as follows:
1. That Defendant TAMKO Building Products, Inc.’s Motion To Dismiss or
Compel Arbitration [#16], filed October 30, 2015, is granted;
2. That, with the consent of the magistrate judge, the Order of Reference [#30],
filed January 27, 2016, is withdrawn, and Defendant TAMKO Building Products,
Inc.’s Motion for Stay Pending Ruling on Its Motion To Dismiss or Compel
Arbitration [#29], filed January 27, 2016, is denied as moot;
3. That the parties shall proceed to arbitrate plaintiff’s claims against defendant
as provided by the arbitration clause of the Limited Warranty;
4. That all pending pretrial deadlines are vacated;
5. That the combined Final Pretrial Conference/Trial Preparation Conference
scheduled for February 3, 2017 at 11:00 a.m., and the trial scheduled to commence on
February 27, 2017, are vacated;
6. That all claims for relief and causes of action brought by plaintiff against
defendant in this lawsuit are dismissed; and
7. That this case is closed.
Dated April 13, 2016, at Denver, Colorado.
BY THE COURT:
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