34 F. Supp. 3d 584
M.D.N.C.2014Background
- Plaintiff Edward Krusch purchased TAMKO Lamarite Slate composite shingles from distributor RSG for his residence in 2008; shingles allegedly discolored and deteriorated after installation.
- Shingles included a molded notice referencing a fifty-year limited warranty that incorporated terms (including an arbitration clause) by reference and provided contact information for a copy of the warranty.
- Krusch submitted a warranty claim to TAMKO in May 2012; TAMKO denied coverage for color variation and fading. Krusch later sued in North Carolina state court alleging breach of implied and express warranty, UDTP, negligent misrepresentation, and MMWA violations; defendants removed to federal court.
- TAMKO moved to stay or compel arbitration under the arbitration provision in the limited warranty; RSG joined seeking a stay for judicial economy.
- Key factual dispute: Krusch says he never knew of or signed the warranty; TAMKO presents evidence that Krusch’s contractor (Tom Parker) received a sample shingle with the warranty notice and acted as Krusch’s agent.
- Court found constructive notice imputed via the contractor/agent, concluded Krusch agreed to the incorporated warranty containing the arbitration clause, and granted a stay pending arbitration; stayed claims against RSG as well.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Formation/enforceability of arbitration clause | Krusch: never knew of or signed the limited warranty; thus no mutual assent to arbitrate | TAMKO: signature not required; warranty incorporated by notice on shingle and contractor acted as agent so notice imputed to Krusch | Court: constructive notice via agent and incorporation by reference establish mutual assent; arbitration agreement enforceable |
| Applicability of FAA and arbitration-scope questions | Krusch did not contest FAA would apply if agreement exists but contends no agreement exists | TAMKO: FAA applies; dispute falls within warranty arbitration provision and involves interstate commerce | Court: FAA governs; prerequisites for compelling arbitration met once agreement found |
| Whether MMWA/FTC regs bar pre-dispute binding arbitration | Krusch: FTC regulations under MMWA prohibit enforcement of pre-dispute binding arbitration absent first using nonbinding mechanism | TAMKO: Congress did not intend to bar arbitration under MMWA; FAA presumption favors arbitration | Court: MMWA does not contain a contrary congressional command; FAA presumption controls; FTC regulation not given effect here — MMWA does not preclude pre-dispute binding arbitration |
| Stay of non-arbitrable claims (claims vs. RSG) | Krusch: does not oppose stay of entire action pending arbitration | RSG: not party to warranty but seeks stay for judicial economy and to avoid inconsistent results | Court: stay all claims (including those against RSG) pending arbitration to promote judicial economy; retain jurisdiction and require periodic joint arbitration reports |
Key Cases Cited
- Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983) (federal policy favoring arbitration and stay/compel standards)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995) (state contract law governs formation of arbitration agreements)
- Allied–Bruce Terminix Cos., Inc. v. Dobson, 513 U.S. 265 (1995) (general contract defenses may invalidate arbitration agreements)
- Chevron U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984) (two-step test for deference to agency interpretations)
- Shearson/American Express Inc. v. McMahon, 482 U.S. 220 (1987) (factors to decide whether statutory rights are arbitrable)
- Walton v. Rose Mobile Homes LLC, 298 F.3d 470 (5th Cir. 2002) (MMWA does not bar pre-dispute binding arbitration)
- Davis v. Southern Energy Homes, Inc., 305 F.3d 1268 (11th Cir. 2002) (MMWA does not prohibit binding arbitration; rejected FTC regulation)
- Kolev v. Euromotors W./The Auto Gallery, 658 F.3d 1024 (9th Cir. 2011) (deferred to FTC regulation and invalidated pre-dispute arbitration)
- Seney v. Rent‑A‑Center, Inc., 738 F.3d 631 (4th Cir. 2013) (discussed MMWA/FTC regs but held MMWA did not apply to lease warranty, avoided broader question)
- Murray v. United Food & Commercial Workers Int’l Union, 289 F.3d 297 (4th Cir. 2002) (procedure when valid arbitration agreement exists)
- Am. Gen. Life & Accident Ins. Co. v. Wood, 429 F.3d 83 (4th Cir. 2005) (elements required to compel arbitration)