July 17, 2019 Practice Points

Homeowner Must Arbitrate Roofing Dispute

An agent can bind a principal to an arbitration agreement just like any other contract.

By J. Kent Holland, Jr.

A homeowners’ class action lawsuit against a roofing-shingle manufacturer was subject to mandatory arbitration because the homeowners, through their roofer, had opened and used the shingles that clearly stated on their packaging that any disputes were to be arbitrated. The homeowners’ grant of express authority to their roofers to buy and install the shingles necessarily included the act of accepting purchase terms on the homeowners’ behalf, including terms re arbitration. Dye v. Tamko Building Products, 2018 WL 5729085, U.S. Court of Appeals, (11th Cir., 2018).

The homeowners contracted with a roofer to replace the shingles on their home. Their contract included delegating to the roofer the responsibility to buy shingles. A dispute about the shingles arose and the homeowners brought a class action against Tamko, the shingles manufacturer, who responded with a motion to compel arbitration, which the trial court granted. 

On appeal, two principal issues were considered by the Eleventh Circuit. The first was whether the arbitration provision printed on the shingles wrapper constituted an offer and acceptance creating a binding contract provision. The second was whether the homeowners could avoid the arbitration requirement since they themselves did not 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 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 specified that any action against Tamko must be arbitrated individually rather than as part of a consolidated or class action:

ANY ACTION BROUGHT BY YOU 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 had dismissed the lawsuit and required actions to be brought by individual homeowners through arbitration instead of by class action. The Eleventh Circuit affirmed, holding that the shingle wrappers conveyed a valid offer of contract terms, which was accepted by the homeowners when their authorized roofers opened the packages on their behalf and installed the shingles.

The Eleventh Circuit stated that the packaging provided conspicuous notice of the offer, something a reasonable, objective person would understand to be an invitation to contract. The court compared the packaging notice to “shrink wrap” 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. The court pointed out that Tamko’s terms were available not only on its packaging but also on its website and over the telephone, “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 made no difference to the applicability of the roofer’s terms. Because the homeowners expressly gave the roofer the task of purchasing the shingles, the roofer became an agent for the homeowners. The court stated that “An agent can bind a principal to an arbitration agreement just like any other contract.”

J. Kent Holland, Jr. is a construction lawyer and principal of ConstructionRisk, LLC in Tysons Corner, Virginia.


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