OLIVER WINE COMPANY, INC. v. BALL METAL BEVERAGE CONTAINER CORP.

Filing 31

ORDER DENYING Ball's 18 Motion to Dismiss and GRANTING Ball's Motion to Compel Arbitration and Stay Proceedings. Signed by Judge Richard L. Young on 10/11/2013. (TMD)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
OLIVER WINE COMPANY, INC., d/b/a
OLIVER WINERY,
Plaintiff,
vs.
BALL METAL BEVERAGE
CONTAINER CORP.,
Defendant.

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1:13-cv-00062-RLY-TAB

ENTRY ON DEFENDANT’S MOTION TO DISMISS OR TO COMPEL
ARBITRATION AND STAY PROCEEDINGS
Defendant, Ball Metal Beverage Container Corp. (“Ball”), moves to dismiss this
action or, in the alternative, for an order compelling arbitration and staying all
proceedings pending completion of the arbitration. Plaintiff, Oliver Wine Company, Inc.,
d/b/a Oliver Winery (“Oliver Winery”), opposes the motion. For the reasons set forth
below, the court DENIES Ball’s Motion to Dismiss, and GRANTS Ball’s alternative
Motion to Compel Arbitration and Stay Proceedings.
I.

Background
Oliver Winery, an Indiana corporation, is Indiana’s oldest winery and one of the

largest wineries in the eastern United States. Ball, a Colorado corporation, is the largest
manufacturer of aluminum beverage cans in North America. On January 20, 2012,
Oliver Winery negotiated and entered into an agreement with Ball (“Agreement”) to
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purchase more than 1,300,000, 250 ml. aluminum cans and ends, which were later to be
filled by Oliver Winery with an alcoholic cider. (Compl. ¶¶ 7, 12; Defendant’s Ex. A).
Oliver Winery alleges that, shortly after it began selling the cider in the cans supplied by
Ball, it received complaints of a foul odor emanating from the cans when they were
opened. (Compl. ¶ 13). According to the Complaint, the odor was caused by a chemical
reaction from copper pitting in the cans, which produces hydrogen sulfide. (Id. ¶ 14). As
a result of the odor complaints, Oliver Winery issued a voluntary recall of the product,
allegedly incurring significant damages. (Id. ¶¶ 18-19).
The parties’ Agreement, signed by William M. Oliver on behalf of Oliver Winery,
contained a section entitled “Applicable Law” which reads, in relevant part:
BUYER and SELLER agree that this agreement bears a reasonable
relationship to the state from which SELLER’s invoices are issued and that
the laws of such state shall apply in the interpretation and enforcement of
this agreement, including, if applicable, its Uniform Commerical Code . . . .
Any disputes arising under this agreement shall be resolved in accordance
with SELLER’s Alternative Dispute Resolution Policy [“ADR Policy”],
which is incorporated herein by reference.
(Defendant’s Ex. A, § XVI.).
The prerequisites to requesting arbitration are provided in the preliminary
paragraphs of the ADR Policy:
The parties shall attempt to resolve between them in the normal course of
business any claim, controversy, dispute, or question arising out of or
relating to this agreement (identified in these alternative dispute resolution
provisions as “Agreement”) or the performance, interpretation or breach
thereof (a “dispute”); however, if the parties fail to do so, any such dispute
shall be finally settled as provided below.
(A)

Higher Level Negotiations
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If a dispute is not resolved in the normal course of business, and a party
wishes to pursue the matter further, it must provide the other party written
notice requesting “Higher Level Negotiations.” Specifically, employees of
each party who have authority to settle the dispute and are at least one
management level above the personnel who have been previously involved
in the dispute shall meet at a mutually agreeable time and place within
fifteen (15) calendar days after the receipt of such notice, and thereafter as
they together deem necessary, to attempt to resolve the dispute. If the
dispute is not resolved by Higher Level Negotiations within thirty (30)
calendar days after the receipt of notice and the claiming party wishes to
pursue the matter further, it shall provide the other party with written notice
requesting arbitration of the dispute.
(Defendant’s Ex. B at 1). Paragraph B of the ADR Policy contains the arbitration
provision:
(B)

Arbitration.

Should the parties fail to resolve the dispute in accordance with Paragraph
(A) above, any dispute shall be finally settled by arbitration administered
by the American Arbitration Association under its Commercial Arbitration
Rules. . . . The arbitration proceedings shall be governed by the Federal
Arbitration Act (Title 9 of the U.S. Code). The arbitration proceedings
shall be governed by the law governing the Agreement; however, if no law
is so specified, the arbitration shall be governed by the law of the State of
Colorado.
(Id.).
On December 6, 2012, Oliver Winery sued Ball in Indiana state court, asserting
claims for breach of contract, breach of express warranties, and breach of implied
warranties of fitness for a particular purpose, negligence, and product liability. On
January 10, 2013, Ball removed Oliver Winery’s claims to this court.
On May 21, 2013, the parties engaged in a settlement conference with the
Magistrate Judge. Prior to the settlement conference, counsel for Ball notified counsel
for Oliver Winery that the settlement conference would constitute a Higher Level
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Negotiation in accordance with the ADR Policy. (Affidavit of J. Stephen Bennett ¶ 2).
Oliver Winery claims this was the first it knew of the ADR Policy. (Affidavit of Julie
Adams ¶¶ 5-7). According to Oliver Winery, the parties never discussed an ADR
Policy; in fact, Oliver Winery claims the first time it had possession of the ADR Policy
was the day of the parties’ settlement conference, May 21, 2013. (Id. ¶¶ 5-6). The case
did not settle.
On June 7, 2013, Ball served a Demand for Arbitration and filed the same with the
American Arbitration Association.
II.

Discussion
The Federal Arbitration Act (“FAA”) provides that “[a] written provision in any

. . . contract evidencing a transaction involving commerce to settle by arbitration a
controversy thereafter arising out of such contract or transaction . . . shall be valid,
irrevocable, and enforceable . . .” 9 U.S.C. § 2. Section 3 of the FAA “also provides for
stays of proceedings in federal district courts when an issue in the proceeding is referable
to arbitration, § 3; and for orders compelling arbitration when one party has failed,
neglected, or refused to comply with an arbitration agreement, § 4.” Gilmer v.
Interstate/Johnson Lane Corp., 500 U.S. 20, 25 (1991) (citing 9 U.S.C. §§ 3, 4).
An arbitration agreement is a contract, the interpretation of which is a matter of
law. Allen v. Pacheco, 71 P.3d 375, 378 (Colo. 2003). Pursuant to the parties’
Agreement (and the ADR Policy), the court applies the law of the State of Colorado.
The purpose of contract interpretation is to ascertain the intent of the parties at the
time the contract was written by looking to the plain language of the agreement. Id. If
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the terms of the contract are unambiguous, the terms are conclusive of the parties’ intent.
Id. Thus, an arbitration agreement, like any contract, must be given effect according to
the plain and ordinary meaning of its terms. Id.
As noted above, the parties’ Agreement provides that any disputes arising under
the Agreement are subject to Ball’s ADR Policy, “which is incorporated herein by
reference.” (Defendant’s Ex. A, § XVI.). “Where a party seeks to enforce terms or
conditions incorporated by reference in a contract, ‘it must be clear that the parties to the
agreement had knowledge of and assented to the incorporated terms.’” Vernon v. Qwest
Commc’ns Int’l, Inc., 857 F.Supp.2d 1135, 1150 (D. Colo. 2012). Evidence of assent
may be gleaned by the totality of the circumstances and by the acts of the parties. Id. In
addition, a party may manifest assent to terms “by promising to perform or by actually
performing.” Id. at 1149.
Oliver Winery presents two arguments in opposition to the present motion. First,
it argues it never assented to the arbitration provision in the ADR Policy. According to
Oliver Winery, the parties never discussed arbitration and it was never given a copy of
the ADR Policy until the day of the May 21, 2013, settlement conference. Second, it
argues Ball has waived any right to assert the ADR Policy.
A.

Oliver Winery’s Assent

The plain and unambiguous language of the parties’ Agreement expressly
incorporated Ball’s ADR Policy by reference. William Oliver, on behalf of Oliver
Winery, signed the Agreement. Consequently, he is presumed under Colorado law to
have read and understood the terms of the Agreement, including the existence and
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incorporation of the ADR Policy into the Agreement. Barciak v. United of Omaha Life
Ins. Co., 777 F.Supp. 839, 843 (D. Colo. 1991) (“[O]ne who signs a contract is presumed
to have read and understood its terms.”). Oliver Winery’s uncommunicated, subjective
intent is immaterial. See Vernon, 857 F.Supp.2d at 1149 (“An objective manifestation of
assent is not rebutted by that same party’s uncommunicated, subjective intent.”).
The fact that Oliver Winery did not request a copy of the ADR Policy or otherwise
discuss the ADR Policy, does not prevent its enforceability. For example, in Vernon v.
Qwest Communications, supra., the Tenth Circuit held that the plaintiffs, customers of
Qwest Communication’s internet service, voluntarily accepted an arbitration clause in
Qwest’s Subscriber Agreement. Id. at 1152. Qwest customers were made aware of the
Subscriber Agreement through a Welcome Letter, a December 2005 letter to existing
customers explaining that high speed internet services would henceforth be governed by
the Subscriber Agreement, and an installation disc. Id. at 1150-51. They were also
informed they could access the Subscriber Agreement at www.quest.com/legal. Id. The
Court reasoned:
While the Subscriber Agreement and arbitration clause may not have been
physically presented to each Plaintiff and did not automatically appear on
the subscriber’s computer screen during the software installation process,
those terms and conditions were not hidden or difficult to find. Even if
Plaintiffs had only received the Welcome Letter, at that point they were
fully capable of finding the Subscriber Agreement and arbitration provision
on the Qwest website. . . .
Id. at 1151. The Court further found that the plaintiffs manifested their assent
by their continued use of Qwest’s high speed internet service for several months after
installing the necessary software and receiving a Welcome Letter. Id. at 1152. This case
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presents an even stronger case for enforceability, as the party objecting to the arbitration
agreement’s enforceability is not simply a customer, but a sophisticated commercial
entity.
Oliver Winery, by its President, William Oliver, voluntarily signed the Agreement.
The law presumes that by that action, he read and understood the Agreement, including
the “Applicable Law” section that incorporated Ball’s ADR Policy. Oliver Winery’s
argument that the ADR Policy was not publicly available is unpersuasive; all it had to do
was ask Ball for a copy. The court therefore finds that by signing the Agreement and
performing under its terms, Oliver Winery manifested its assent to the terms and
conditions of the Agreement, including the ADR Policy. The ADR Policy, incorporated
by reference into the Agreement, is valid and enforceable.
B.

Waiver

Oliver Winery argues that, even if a valid agreement to arbitrate existed, Ball
implicitly waived its contractual right to arbitrate by removing this action from state to
federal court, rather than filing a motion to arbitrate in the state court proceedings. In
support of this argument, Oliver Winery cites Cabinetree of Wisconsin, Inc. v. Kraftmaid
Cabinetry, Inc., 50 F.3d 388 (7th Cir. 1995). In that case, the defendant removed the
action from state to federal court, but did not seek to stay the action pending arbitration
until after thousands of documents had been exchanged in discovery, and a trial date had
been set. Id. at 389. By removing the case to federal court, “without at the same time
asking the district court for an order to arbitrate, it manifested an intention to resolve the
dispute through the processes of the federal court.” Id. at 390.
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In Halim v. Great Gatsby’s Auction Gallery, Inc., the Seventh Circuit clarified the
holding in Cabinetree, stating that the Court “has not found waiver where removal was
the only action taken by the party against whom the waiver was to be enforced.” 516
F.3d 557, 562 (7th Cir. 2008). Specifically, the defendant in Halim removed the action
from state to federal court and, before any other pleadings were filed, sought to dismiss
the case by invoking the arbitration clause. Id. “By doing so, [the defendant] asserted its
intent to resolve the dispute in arbitration and not litigation.” Id.
In the present case, Ball removed the action from state to federal court in a timely
manner. It asserted its right to arbitrate as an affirmative defense in its Answer.
Prior to the May 21, 2013, settlement conference, it notified counsel for Oliver Winery
that it intended to assert its right to arbitrate if the settlement conference was
unsuccessful. The settlement conference constituted Higher Level Negotiations pursuant
to its ADR Policy. At that point, Ball’s claims became arbitrable. Ball filed its Demand
for Arbitration seventeen (17) days later. Based on these facts, the court finds Ball did
not waive its contractual right to arbitrate Oliver Winery’s claims.
III.

Conclusion
For the reasons set forth above, the court DENIES Ball’s Motion to Dismiss and

GRANTS Ball’s Motion to Compel Arbitration and Stay Proceedings (Docket # 18).
SO ORDERED this 11th day of October 2013.

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__________________________________
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RICHARD L. YOUNG, CHIEF JUDGE
RICHARD L. YOUNG, CHIEF JUDGE
United States District Court
United States District Court
SouthernSouthern District of Indiana
District of Indiana

Distributed Electronically to Registered Counsel of Record.
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