Dakota Foundry, Inc. v. Tromley Industrial Holdings, Inc.
891 F. Supp. 2d 1088
D.S.D.2012Background
- Dakota Foundry, an SD iron foundry, purchased Kloster Tromley equipment for delivery/installation in SD; contract formation occurred in late 2009–early 2010.
- Kloster’s standard terms and arbitration clause were alleged to be part of the contract, but initial quotations in Dec. 2009 did not attach those terms.
- Dakota issued a single purchase order on Feb. 24, 2010 for both phases; the PO did not reference terms and conditions.
- A revised quotation, KFP-01228-2 (April 19, 2010), claimed to consolidate prior quotes, but it is unclear whether the cream-colored original containing Standard Terms was provided.
- Dakota received May–July 2010 addenda/emails attaching various Standard Terms from Dependable Foundry/Redford-Carver, entities Dakota had no business with, and these terms allegedly attempted to modify the contract.
- Dakota paid 80% of the purchase price by May–June 2010; Dakota later sued Tromley for breach of contract and warranties; Tromley moved to compel arbitration, which the court denied because no arbitration clause was formed or notice given.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether an arbitration clause was formed in the initial contract | Dakota did not receive Standard Terms with initial quotes; no mutual assent. | The May–July addenda and revised quotes incorporated arbitration terms. | No binding arbitration clause formed in initial contract. |
| Whether revised quotes/addenda validly incorporated arbitration terms by reference | Terms by reference were not clearly incorporated or communicated to Dakota. | Addenda indicated the same terms and conditions as original quotations and incorporated by reference. | Incorporation by reference not valid; terms not clearly part of contract. |
| Whether Dakota had notice/assent to arbitration terms | Dakota lacked notice and opportunity to reject arbitration terms. | Dakota benefited from the quotes and accepted the revised terms. | Dakota had no reasonable notice or assent to arbitration terms. |
| Which law governs interpretation and formation of the arbitration issue | SD law governs contract formation and interpretation. | Kornmann’s decision should govern under state law; FAA governs arbitration validity. | SD law applies to contract formation; FAA governs arbitration scope but not formation. |
Key Cases Cited
- Masteller v. Champion Home Builders Co., 723 N.W.2d 561 (S.D. 2006) (arbitration clause not implied by warranty or added terms where no notice or assent)
- Halbach v. Great-West Life & Annuity Ins. Co., 561 F.3d 872 (8th Cir. 2009) (incorporation by reference requires knowledge and assent to incorporated terms)
- Forge v. Smith, 580 N.W.2d 876 (Mich. 1998) (incorporation by reference must clearly evidence intent to be part of contract)
- OneBeacon Ins. Co. v. Crowley Marine Servs., Inc., 648 F.3d 258 (5th Cir. 2011) (notice and assent required for incorporated terms; reasonable notice standard)
- Huntington Int’l Corp. v. Armstrong World Indus., Inc., 981 F. Supp. 134 (E.D.N.Y. 1997) (courts differ where arbitration terms provided at contracting time or easily accessible)