Dow Roofing Systems, LLC v. Great Commission Baptist Church and Chamberlin Dallas, LLC F/K/A Chamberlin Dallas, Ltd. D/B/A Chamberlin Roofing and Waterproofing F/K/A Chamberlin Roofing & Waterproofing, Ltd.
02-16-00395-CV
| Tex. App. | Aug 3, 2017Background
- Church contracted for construction of a building whose roof used a TPO membrane supplied by Stevens Roofing (later acquired by Dow Roofing). Chamberlin installed the roof under an Applicator Agreement with Stevens that contained an arbitration clause.
- Stevens/JPS issued the Church a ten-year Limited Warranty (signed by the Church) that included an arbitration provision; Dow later acquired Stevens and performed warranty repairs on multiple occasions.
- After repeated leaks and an insurer denial, the Church sued Chamberlin, Dow, and the builder; Chamberlin cross-claimed against Dow.
- Dow moved to compel arbitration based on (1) the Applicator Agreement (as to Chamberlin) and (2) the Limited Warranty (as to the Church); initial motions were granted, later set aside, and after briefing the trial court denied Dow’s renewed motion to compel arbitration.
- On appeal, the court reviewed de novo whether valid, enforceable arbitration agreements exist and whether defenses to arbitration were proven; it ultimately reversed the trial court and ordered arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability / scope of Applicator Agreement arbitration (Chamberlin) | Chamberlin: AAA rules incorporated but conflict with provision limiting arbitrator power; arbitrator cannot decide scope/unconscionability. | Dow: The clause incorporates AAA construction rules (including delegation) so arbitrability and unconscionability go to arbitrator. | Court: Delegation is clear and unmistakable; arbitrator must decide scope and unconscionability. Trial court abused discretion in denying arbitration. |
| Effect of Dow’s declaration that the Limited Warranty is “null and void” (Church) | Church: Dow’s nullification means the warranty (and its arbitration clause) never existed. | Dow: Even if Dow declared it null, the question of continuing validity is for the arbitrator. | Court: The termination clause is not a condition precedent to formation; the arbitrator decides effect of the "null and void" declaration. |
| Illusory contract / mutuality (Church) | Church: Limited Warranty is illusory because Dow could unilaterally nullify it, so no binding contract/arbitration clause. | Dow: Cancellation rights are limited to specified grounds and Dow performed under the warranty; not illusory. | Court: Warranty is not illusory; specified cancellation grounds and Dow’s performance supply consideration. |
| Unconscionability and scope of Limited Warranty arbitration (Church) | Church: Arbitration clause is procedurally and substantively unconscionable and does not cover pre-execution claims. | Dow: Clause incorporates AAA rules (including Rule 9 delegating arbitrability) so these defenses and scope issues go to arbitrator. | Court: Parties delegated arbitrability to arbitrator; unconscionability and scope questions belong to arbitrator; trial court erred denying arbitration. |
Key Cases Cited
- Brand FX, LLC v. Rhine, 458 S.W.3d 195 (Tex. App.—Fort Worth 2015) (standard: prove valid arbitration agreement to shift burden to resisting party)
- In re Morgan Stanley & Co., Inc., 293 S.W.3d 182 (Tex. 2009) (distinguishes challenges to formation, to the arbitration clause, and to contract validity)
- Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63 (U.S. 2010) (parties may agree to arbitrate gateway questions of arbitrability)
- Schlumberger Tech. Corp. v. Baker Hughes Inc., 355 S.W.3d 791 (Tex. App.—Houston [1st Dist.] 2011) (language incorporating AAA rules makes those rules part of the agreement)
- Douglas v. Regions Bank, 757 F.3d 460 (5th Cir. 2014) (delegation provisions require arbitrator to decide whether a dispute falls within arbitration)
- Burlington Res. Oil & Gas Co. LP v. San Juan Basin Royalty Tr., 249 S.W.3d 34 (Tex. App.—Houston [1st Dist.] 2007) (clear and unmistakable delegation of arbitrability when AAA rules are incorporated)
- J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (Tex. 2003) (note on illusory promises and mutuality)
- In re 24R, Inc., 324 S.W.3d 564 (Tex. 2010) (illusory-promise analysis can implicate contract formation)