451 P.3d 146
Okla.2019Background
- In June 2007 contractors installed TAMKO shingles on Daniel and Barbara Williams' home; by April 2016 the shingles were failing and causing damage.
- Homeowners submitted a warranty claim to TAMKO; TAMKO offered limited replacement and a $100 installation credit.
- Homeowners sued in state court asserting product-liability, negligent design/manufacture, and failure-to-warn tort claims.
- TAMKO moved to stay proceedings and compel arbitration based on an arbitration clause printed on the disposable wrapper of each bundle of shingles.
- Trial court compelled arbitration, concluding homeowners were charged with knowledge of the clause (or that their contractors’ knowledge was imputed), TAMKO had not waived arbitration, and the clause was not unconscionable.
- Oklahoma Supreme Court reversed: homeowners never had actual notice or knowingly consented; contractor agents lacked authority to waive jury trial; clause was an adhesive, unconscionable attempt to waive a constitutional right printed on disposable packaging.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether homeowners knowingly consented to arbitration printed on shingle wrapper | Williams: never saw or received the wrapper or notice; no opportunity to read or consent | TAMKO: purchase/installation and warranty claim show consent; buyer is charged with unread terms | No — homeowners had no actual knowledge or opportunity to read the arbitration clause; no mutual assent |
| Whether contractors’ knowledge binds homeowners (agency/imputed knowledge) | Williams: contractors lacked authority to waive homeowners’ constitutional jury-trial right | TAMKO: contractors who opened packaging were agents and their knowledge/implied assent binds homeowners | No — implied agency for purchase/installation did not encompass waiving constitutional jury-trial rights; contractor lacked authority to bind homeowners to arbitration |
| Whether homeowners, as third-party beneficiaries of the limited warranty, are estopped from avoiding arbitration after filing a warranty claim | Williams: claims are tort-based, not attempts to enforce the limited warranty; they lacked knowledge to ratify or estop | TAMKO: homeowners pursued warranty remedies and thus invoked the warranty containing arbitration | No — plaintiffs’ claims arise in tort, not contract enforcement; filing a claim did not ratify or estop challenge to arbitration given lack of notice |
| Whether the arbitration clause is unconscionable/adhesive | Williams: clause is one-sided, printed on disposable packaging not provided to owner, unfair surprise and oppression | TAMKO: clause is a valid contractual term of the limited warranty included with the product | Yes — clause is adhesive and unconscionable in context (printed on material destined to be discarded, deprives owner of knowing waiver of jury trial); unenforceable |
Key Cases Cited
- Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (arbitration agreements enforceable like other contracts; not more)
- Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Jr. Univ., 489 U.S. 468 (FAA does not preempt all state procedural rules; state law may apply unless it conflicts with FAA)
- Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213 (FAA’s purpose is to enforce private arbitration agreements, not to mandate arbitration for all claims)
- Arthur Andersen LLP v. Carlisle, 556 U.S. 624 (FAA does not displace generally applicable state contract and agency principles)
- Rogers v. Dell Computer Corp., 138 P.3d 826 (Oklahoma: FAA governs but OUAA supplies enforcement procedure)
- Oklahoma Oncology & Hematology P.C. v. US Oncology, Inc., 160 P.3d 936 (Oklahoma: order compelling arbitration and staying proceedings is appealable)
- Borden v. Day, 168 P.2d 646 (buyer with opportunity to read a contract may be bound by unread terms)
- Wilkinson v. Dean Witter Reynolds, Inc., 933 P.2d 878 (state-law principles govern formation and consent for arbitration agreements)