92 F. Supp. 3d 1115
D. Kan.2015Background
- Howard (Calif. consumer) called Ferrellgas (nationwide propane supplier) on Aug 21, 2008; parties agree oral agreement was made for a tank set and an initial fill (the "Oral Contract").
- Ferrellgas installed a 250-gallon tank and performed the First Fill on Sept 5, 2008; thereafter Ferrellgas mailed a Master Agreement (with arbitration and integration clauses) in late Sept. 2008 as part of a customer packet (plaintiff disputes receipt).
- Howard received multiple subsequent propane deliveries between 2008–2010, paid for them, and on some occasions disputed charged prices; he terminated service in Sept. 2010.
- Howard sued in 2010 asserting breach of oral contract (and other claims later dismissed); district court originally found factual disputes about whether the oral contract governed all future fills and declined to compel arbitration; Tenth Circuit remanded for an FAA §4 summary trial to decide arbitrability.
- At the November 12, 2014 summary trial the court found (1) Howard failed to prove the Oral Contract covered more than the tank set and First Fill, and (2) Ferrellgas proved it mailed the Master Agreement and Howard manifested assent by continuing to accept deliveries and pay after the mailing, so the arbitration clause binds Howard.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope of Oral Contract | Howard says the Aug 21 call created a continuing "keep full" contract covering all subsequent fills at market price | Ferrellgas says the oral deal covered only tank set and First Fill; later service governed by mailed Master Agreement | Court: Oral Contract limited to tank set and First Fill; no objective meeting of the minds for ongoing supply |
| Validity/enforceability of Master Agreement (arbitration clause) | Howard argues Master Agreement is unenforceable under UCC statute of frauds (no signed writing) and that he never received/assented to it | Ferrellgas argues FAA governs arbitration clauses (writing, not signature, suffices) and that mailing + continued acceptance/payments constituted assent and opt-out period lapsed | Court: FAA separate-supply-of-arbitration-rule applies; signature not required; Howard bound by Master Agreement and arbitration clause |
| Receipt/notice and opt-out adequacy | Howard claims lack of actual receipt/notice and inadequate opportunity to opt out (and that mailed terms shouldn’t bind absent clearer notice) | Ferrellgas produced business-mailing evidence (mail house procedures, CASS verification, no returned mail) and Master Agreement included 30-day opt-out instruction | Court: Presumption of receipt triggered by proof of proper mailing; Howard’s mere denial insufficient; 30‑day opt-out provided meaningful opportunity, Howard did not opt out |
| Applicability of UCC §2-207 / rolling-contract theory | Howard contends UCC §2-207 limits modification of an existing contract without express consent | Ferrellgas treats the Master Agreement as a new offer accepted by Howard’s later conduct; court need not resolve rolling-contract controversy here | Court: §2-207 not applicable because Oral Contract did not cover later fills; Master Agreement was an offer accepted by conduct (deliveries/payments) |
Key Cases Cited
- Howard v. Ferrellgas Partners, L.P., 748 F.3d 975 (10th Cir. 2014) (remanding to decide arbitrability by summary trial under FAA §4)
- Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967) (arbitration clause separable; challenges to entire contract generally for arbitrator)
- Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006) (challenges to contract as a whole go to arbitrator; arbitration clause enforceable separately)
- AT&T Techs., Inc. v. Communications Workers, 475 U.S. 643 (1986) (presumption of arbitrability and jurisdictional division between court and arbitrator)
- Granite Rock Co. v. International Brotherhood of Teamsters, 561 U.S. 287 (2010) (ambiguities resolved in favor of arbitration and limited court review)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995) (arbitration-agreement scope is for courts to decide absent clear delegation)
- Schnabel v. Trilegiant Corp., 697 F.3d 110 (2d Cir. 2012) (email/enrollment notice cases; inquiry-notice concept for passive assent)