Krusch v. Tamko Bldg. Prods., Inc.

• Decision Date: 23 July 2014
• Docket Number: No. 1:14CV116.,1:14CV116.
• Citation: 34 F.Supp.3d 584
• Court: U.S. District Court — Middle District of North Carolina
• Parties: Edward KRUSCH, Plaintiff, v. TAMKO BUILDING PRODUCTS, INC., and Roofing Supply Group–Greensboro, LLC, Defendants.

34 F.Supp.3d 584

Edward KRUSCH, Plaintiff

v.TAMKO BUILDING PRODUCTS, INC., and Roofing Supply Group–Greensboro, LLC, Defendants.

No. 1:14CV116.

United States District Court, M.D. North Carolina.

Signed July 23, 2014.

Jeffrey S. Southerland, Sarah J. Hayward, Tuggle Duggins P.A., Greensboro, NC, for Plaintiff.

Richard H. Conner, III, McGuireWoods LLP, Charlotte, NC, for Defendants.

MEMORANDUM OPINION AND ORDER

THOMAS D. SCHROEDER, District Judge.

This is a suit for damages for allegedly defective roofing shingles manufactured by Defendant TAMKO Building Products, Inc. (“TAMKO”), and distributed by Defendant Roofing Supply Group–Greensboro, LLC (“RSG”). Plaintiff Edward Krusch alleges breach of an implied warranty of merchantability, breach of express warranty, unfair and deceptive trade practices, negligent misrepresentation, and violations of the Magnuson–Moss Warranty Act (“MMWA”), 15 U.S.C. § 2301 et seq. Before the court is Defendants' motion to stay the case based on an arbitration agreement, or to compel Krusch to arbitrate. (Doc. 14.) For the reasons set forth below, Defendants' motion will be granted.

I. BACKGROUND

The facts alleged in the amended complaint and accompanying exhibits are as follows:

Krusch purchased TAMKO Lamarite Slate Composite Shingles (“the Shingles”) from RSG for the roof of his personal residence in Greensboro, North Carolina. (Doc. 10 ¶ 9.) He bought one set on June 9, 2008, another on October 10, 2008, and additional ones on other dates. (Doc. 10–1 (RSG invoices attached to amended complaint); Doc. 10 ¶ 9 (alleging that Krusch placed “various orders” and that the two invoices attached “reflect[ ] certain of these orders”).) The Shingles were installed on Krusch's roof “at various times.” (Doc. 10 ¶ 10.)

“Soon after” the Shingles were installed,¹ they began to discolor and deteriorate. (Id. ¶ 11.) An express fifty-year limited warranty accompanied the Shingles, which Krusch alleges he did not know about until “later.” (Id. ¶ ¶ 11–13.) Krusch alleges that the Shingles are defective and are in breach of both an implied warranty of merchantability and the express limited warranty. (Id. ¶ 11.)

On May 18, 2012, Krusch sent TAMKO a warranty claim with accompanying documentation, pursuant to the express limited warranty. (Id. ¶ 14.) Six days later, TAMKO denied the claim, stating that Krusch's claims for “color variation and fading” were not covered by the limited warranty and suggesting that the coloration problems may “typically be removed by careful hand cleaning.” (Doc. 10–2 at 2; Doc. 10 ¶ 15.) Krusch asked TAMKO to reconsider its decision, but TAMKO refused. (Doc. 10 ¶ 16.)

On January 7, 2014, Krusch commenced the present lawsuit in Guilford County (North Carolina) Superior Court, alleging breach of an implied warranty of merchantability, breach of express warranty,² unfair and deceptive trade practices, and negligent misrepresentation against TAMKO and RSG. (Doc. 4.) Defendants timely removed the action to this court based on diversity jurisdiction under 28 U.S.C. § 1332.³ (Doc. 1.) Krusch then filed an amended complaint, adding claims against Defendants for violations of the MMWA. (Doc. 10.)

Defendants now move to stay the action based on an arbitration agreement or, alternatively, to compel arbitration. (Docs. 14, 15.) Krusch responded (Doc. 16), and Defendants replied (Doc. 17). The motion is now ripe for consideration.

II. ANALYSIS

A. FAA

The Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq., represents “a liberal federal policy favoring arbitration agreements.” Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). “When parties have entered into a valid and enforceable agreement to arbitrate their disputes and the dispute at issue falls within the scope of that agreement, the FAA requires federal courts to stay judicial proceedings, and compel arbitration in accordance with the agreement's terms.” Murray v. United Food & Commercial Workers Int'l Union, 289 F.3d 297, 301 (4th Cir.2002) (citations omitted).

The party seeking to compel arbitration must show (1) the existence of a dispute between the parties, (2) a written agreement that includes an arbitration provision purporting to cover the dispute that is enforceable under general principles of contract law, (3) the relationship of the transaction, as evidenced by the agreement, to interstate or foreign commerce, and (4) the failure, neglect, or refusal of a party to arbitrate the dispute. Am. Gen. Life & Accident Ins. Co. v. Wood, 429 F.3d 83, 87 (4th Cir.2005). In this case, there is no question that a dispute exists between Krusch and Defendants, the dispute falls within the terms of the arbitration provision of the limited warranty, Krusch has not made use of the arbitration procedure set forth in it, and the transactions involved interstate commerce. (Doc. 15 at 5; Doc. 16 at 3 (“Krusch does not contest that the [FAA] would apply in this case if the Court finds [mutual agreement] to arbitrate.”).) Krusch argues, however, that he cannot be compelled to arbitrate because he never agreed to the limited warranty as part of the sales transactions.

To determine whether the parties agreed to arbitrate a matter, courts apply relevant state law principles governing the formation of contracts. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995) ; see also Allied–Bruce Terminix Cos., Inc. v. Dobson, 513 U.S. 265, 281, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995) (“States may regulate contracts, including arbitration clauses, under general contract law principles and they may invalidate an arbitration clause upon such grounds as exist at law or in equity for the revocation of any contract.”) (citation omitted); Am. Gen. Life & Accident Ins. Co., 429 F.3d at 87 (“[G]enerally applicable contract defenses, such as fraud, duress, or unconscionability, may be applied to invalidate arbitration agreements without contravening [the FAA].”) (citation omitted). The parties agree that North Carolina law governs this question. (Doc. 16 at 4; Doc. 17 at 2–3 (citing North Carolina cases).) For a valid contract to exist under North Carolina law, the three elements of offer, acceptance, and consideration must be present. Burley v. U.S. Foods, Inc., ––– N.C.App. ––––, 756 S.E.2d 84, 89 (N.C.Ct.App.2014) ; see also Snyder v. Freeman, 300 N.C. 204, 266 S.E.2d 593, 602 (1980) (“[M]utual assent and the effectuation of the parties' intent is normally accomplished through the mechanism of offer and acceptance.”).

Here, TAMKO⁴ contends that Krusch agreed to the arbitration provision in the limited warranty, even though it is undisputed that neither Krusch nor anyone on his behalf ever signed it. (Doc. 15 at 11.) TAMKO asserts that agreements to arbitrate “need not be signed” to be accepted. (Id. (citing Collie v. Wehr Dissolution Corp., 345 F.Supp.2d 555, 558–59 (M.D.N.C.2004) ); Real Color Displays, Inc. v. Universal Applied Tech. Corp., 950 F.Supp. 714, 717–18 (E.D.N.C.1997).) TAMKO contends that Krusch agreed to the arbitration provision in the limited warranty because Krusch had notice of the warranty (both personally and through his contractor, Tom Parker), made repeated purchases of the Shingles, and subsequently sued TAMKO, alleging breach of the limited warranty. (Id. at 12–13.) Krusch, on the other hand, maintains that he never knew of the limited warranty until he noticed the deterioration of the Shingles, once installed. (Doc. 16–1 ¶ 6.) He contends that because he neither knew of nor signed the limited warranty, he is not bound by the arbitration provision within it. (Doc. 16 at 5–8.)

As a preliminary matter, the lack of Krusch's signature on the limited warranty is not dispositive of whether he agreed to it. Arbitration agreements must be in writing, 9 U.S.C. § 2, but they need not be signed to be enforceable. See Real Color, 950 F.Supp. at 717 (noting no requirement that a written arbitration agreement be signed by the party to be charged); Collie, 345 F.Supp.2d at 558–59 (concluding that lack of employer's signature did not defeat finding of mutual assent where employee signed agreement containing arbitration provision). The crucial question is whether Krusch agreed to the limited warranty, which included the arbitration provision.

TAMKO has produced evidence that RSG gave Parker, Krusch's contractor, a sample Shingle and accompanying product brochures when he came to RSG in 2008 inquiring about roofing shingles for Krusch's residence. (Doc. 14–6 ¶¶ 4–5.) It is unclear whether the limited warranty appeared in the product brochures, but it is uncontested that the following notice was molded onto each Shingle:

PURCHASE OF THIS PRODUCT IS SUBJECT TO THE TERMS, CONDITIONS AND LIMITATIONS OF A LIMITED WARRANTY WHICH IS INCORPORATED INTO THE PURCHASE TRANSACTION. THERE ARE NO OTHER WARRANTIES, EXPRESS OR IMPLIED FOR THIS PRODUCT. FOR A COPY OF THE LIMITED WARRANTY OR THE INSTALLATION INSTRUCTIONS, CONTACT YOUR TAMKO DISTRIBUTOR. CALL TAMKO AT 1–800–641–4691, OR VISIT WWW.TAMKO.COM .

(Doc. 14–1 ¶ 7.) After Parker's visit, Krusch purchased Shingles from RSG. (Doc. 14–6 ¶¶ 6–7.)

TAMKO contends that Parker acted as Krusch's agent during these transactions and that Krusch is therefore charged with what Parker knew. (Doc. 17 at 2; Doc. 14–6 ¶ 9.) An agent is one who acts with the authority, either express or implied, of a principal and over whom a principal exerts control. Holcomb v. Colonial Assocs., L.L.C., 358 N.C. 501, 597 S.E.2d 710, 716 (2004) (citation omitted). TAMKO has produced evidence that Parker identified himself as Krusch's building contractor to Scott Becraft, the general manager of RSG, and inquired about purchasing roofing shingles for use on Krusch's house, which Krusch himself purchased soon after. (Doc. 14–6 ¶¶ 4–7.) Becraft states that he understood Parker to be acting as Krusch's agent during the transaction. (Id. ¶ 9.) Krusch has not disputed that...