Rickard v. Teynor's Homes, Inc.

• Decision Date: 25 August 2003
• Docket Number: No. 3:03CV7018.,3:03CV7018.
• Citation: 279 F.Supp.2d 910
• Parties: Edith M. RICKARD, Plaintiff v. TEYNOR'S HOMES, INC. et al, Defendants
• Court: U.S. District Court — Northern District of Ohio

279 F.Supp.2d 910

Edith M. RICKARD, Plaintiff v. TEYNOR'S HOMES, INC. et al, Defendants

No. 3:03CV7018.

United States District Court, N.D. Ohio, Western Division.

August 25, 2003.

M. Angela Foraker, Twyman, Ten Brink, Harms & Sharp, Bowling Green, OH, Jeanne D. Johns, Advocates for Basic Legal Equality, Toledo, OH, for Edith M. Rickard, Plaintiff.

John Tarkowsky, Baran Piper Tarkowsky Fitzgerald & Theis, Mansfield, OH, for Teynor's Homes, Inc.

Damian M. Rodgers, Robert J. Gilmer, Jr., Eastman & Smith, Toledo, OH, for Fairmont Homes, Inc.

ORDER

CARR, District Judge.

This suit arises from the sale of a manufactured home by defendant Teynor's Homes, Inc. ("Teynor's") to plaintiff Edith M. Rickard. Plaintiff has also sued Fairmont Homes, Inc. ("Fairmont"), the home's manufacturer, and American Modem Home Insurance Company. Pending is Teynor's motion to dismiss or stay litigation and compel arbitration. This court has jurisdiction pursuant to 28 U.S.C. § § 1331 and 1367. For the following reasons, Teynor's motion to stay shall be denied.

BACKGROUND

In October, 1997, plaintiff and her late husband, Norman E. Rickard, entered into a contract to purchase a Fairmont modular home from Teynor's. In February, 1998, Teynor's delivered the home to plaintiff's place of residence in Cygnet, Ohio.

Plaintiff claims the house was negligently installed, and, after set up, the home began to "substantially deteriorate." First Amended Complt. at ¶¶ 22, 26. According to plaintiff, the problems with the house, "as designed and constructed, pose a structural danger to the house and further danger to the occupants of the house." Id. at 38. Plaintiff also claims that defendants conspired to breach their warranty obligations "through unlawful denials of claims, and fraudulent misrepresentations as to the terms and conditions of the warranties." Id. at 39.

Plaintiff's First Amended Complaint asserts eight causes of action, including breach of express and implied warranties, failure to warn of a defective product, breach of contract, civil conspiracy, fraud, unconscionability, and violations of the Ohio Consumer Sales Practices Act, O.R.C. § 1345.01 et seq. and the Magnuson-Moss Warranty Act ("MMWA"), 15 U.S.C. § 2301 et seq. Id. at ¶¶ 30-52.

Teynor's moves to dismiss or, in the alternative, to stay litigation and compel arbitration in reliance on the "Addendum to Sales Agreement/Consent to Binding Arbitration" ("Addendum"), signed by the Rickards. Under the terms of the Addendum, the Rickards voluntarily waived their ability to bring any cause of action in any court arising out of the sales transaction.

Plaintiff claims that the arbitration agreement is unenforceable because:

(1) there is no meeting of the minds or voluntary and mutual assent between the Rickards and Teynor to create a valid arbitration agreement; (2) the making of the Addendum to Sales Agreement/Consent to Binding Arbitration is unconscionable due to adhesion and unequal bargaining power between the parties; (3) the terms of the Addendum, regarding the rules of arbitration are unconscionable and inherently unfair to Mrs. Rickard and do not prove an adequate or accessible forum for her to redress her grievances; (4) the Magnuson-Moss Warranty Act provides that consumers retain full and unfettered access to the courts for resolution of their warranty disputes. And, the Addendum violates and destroys the purpose and intent of the Magnuson-Moss Warranty Act.

Doc. 23 at 10.

DISCUSSION

I. Federal Arbitration Policy

Through the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq., Congress has declared a national policy favoring arbitration. Southland Corp. v. Keating, 465 U.S. 1, 10, 104 S.Ct. 852, 79 L.Ed.2d 1 (1984). The FAA's purpose is "to reverse the longstanding judicial hostility to arbitration agreements ... and to place arbitration agreements upon the same footing as other contracts." Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991). Accordingly, "the [FAA] establishes that, as a matter of Federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration ...." Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983).

Notwithstanding this policy, "arbitration is a matter of contract and a party cannot be required to submit to arbitration [in] any dispute which he has not agreed so to submit." AT&T Techs. v. Communications Workers of America, 475 U.S. 643, 648, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986). Under § 2 of the FAA, an arbitration agreement is "valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2.

When considering a motion to stay proceedings and compel arbitration under the Act, a court has four tasks:

first, it must determine whether the parties agreed to arbitrate; second, it must determine the scope of that agreement; third, if federal statutory claims are asserted, it must consider whether Congress intended those claims to be nonarbitrable; and fourth, if the court concludes that some, but not all, of the claims in the action are subject to arbitration, it must determine whether to stay the remainder of the proceedings pending arbitration.

Stout v. J.D. Byrider, 228 F.3d 709, 714 (6th Cir.2000).

"In determining whether the parties have made a valid arbitration agreement, `state law may be applied if that law arose to govern issues concerning the validity, revocability, and enforceability' of contracts generally, although the FAA preempts `state laws applicable to only arbitration provisions.'" Great Earth Cos. v. Simons, 288 F.3d 878, 889 (6th Cir.2002) (quoting Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 686-87, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996)). Thus, "[s]tate law governs `generally applicable contract defenses [to an arbitration clause], such as fraud, duress, or unconscionability."' Id. at 889 (quoting Casarotto, 517 U.S. at 687, 116 S.Ct. 1652).

In this case, the question whether the Addendum is an enforceable arbitration agreement is resolved by basic, generally applicable precepts of Ohio contract law. However, the federal policy favoring arbitration is taken into consideration even in applying ordinary state law. Inland Bulk Transfer Co. v. Cummins Engine Co., 332 F.3d 1007, 1014 (6th Cir.2003) (quoting Great Earth, 288 F.3d at 887).¹ Whether Congress intended claims under the MMWA to be nonarbitrable is resolved by federal law.

I. Mutual Assent

Plaintiff argues the arbitration agreement is not enforceable because the Rickards did not voluntarily and mutually agree to arbitrate any dispute. Plaintiff contends that because the Addendum provides that disputes shall be resolved through "arbitration pursuant to the rules of the American Arbitration Association" ("AAA") and plaintiff did not receive a copy of the AAA rules, she did not have basic information regarding the arbitration process at the time of assent. Doc. 23 at 4-5. Teynor's did not, according to plaintiff, "equip the Rickards with the necessary information to knowingly surrender their right to hold Teynor accountable in a court of law." Doc. 23 at 4-5. The arbitration agreement is unenforceable, therefore, because there was no meeting of the minds. Id.

Under Ohio law and the FAA, arbitration cannot be forced on parties who do not consent to it. See Volt Info. Sciences, Inc. v. Bd. of Trs., 489 U.S. 468, 478, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989) (stating that "the FAA does not require parties to arbitrate when they have not agreed to do so"); Sweeney v. Grange Mut. Cas. Co., 146 Ohio App.3d 380, 766 N.E.2d 212 (2001) (noting that "`arbitration is a matter of contract and, in spite of the strong policy in its favor, a party cannot be compelled to arbitrate any dispute which he has not agreed to submit'") (citation omitted).

The law is equally clear, however, that a plaintiff cannot be excused from complying with an arbitration agreement if he or she simply fails properly to read the contract. See ABM Farms, Inc. v. Woods, 81 Ohio St.3d 498, 692 N.E.2d 574 (1998) ("`A person of ordinary mind cannot be heard to say that he was misled into signing a paper which was different from what he intended, when he could have known the truth by merely looking when he signed.'") (citation omitted).

Similarly, under general contract law, "`one who signs a contract which he has had an opportunity to read and understand, is bound by its provisions.'" Inland Bulk, 332 F.3d at 1007 (citing Stout, 228 F.3d at 715). As the court noted in Pippin v. M.A. Hauser Enters., Inc. 111 Ohio App.3d 557, 564, 676 N.E.2d 932 (1996), "[a] person who signs a contract without making a reasonable effort to know its contents cannot, in the absence of fraud or mutual mistake, avoid the effect of the contract." This rule is applicable even in cases where the person seeks to avoid the effect of the contract "by citing ignorance of the contract's contents or a failure to understand those contents." Id. (citations omitted).

The Sixth Circuit recently rejected an identical mutual assent defense in a federal employment dispute with similar facts. In Haskins v. Prudential Ins. Co. of Am., 230 F.3d 231 (6th Cir.2000), the plaintiff, when he signed his employment application, agreed to arbitrate any dispute with his employer according to the National Association of Securities Dealers ("NASD") Code. Id. at 232. After his termination, plaintiff brought a civil action against his former employer for race and age discrimination. His former employer moved to compel arbitration, arguing that the NASD Code required arbitration of any employment claim. The plaintiff countered that because he was not given a copy of the NASD Code and no agent of his employer familiarized him with the NASD Code, he should not be compelled to arbitrate. Id. at 233-234.

The Sixth Circuit...