Stanley-Bostitch, Inc. v. Regenerative Environmental Equipment Co., Inc.

• Decision Date: 30 June 1997
• Docket Number: INC,STANLEY-BOSTITC,No. 95-462-A,95-462-A
• Parties: 35 UCC Rep.Serv.2d 828 v. REGENERATIVE ENVIRONMENTAL EQUIPMENT CO., INC., et al. ppeal.
• Court: Rhode Island Supreme Court

Page 323

697 A.2d 323

35 UCC Rep.Serv.2d 828

STANLEY-BOSTITCH, INC. v. REGENERATIVE ENVIRONMENTAL EQUIPMENT CO., INC., et al.

No. 95-462-Appeal.

Supreme Court of Rhode Island.

June 30, 1997.

Richard W. MacAdams, Providence, for Plaintiff.

Douglas A. Giron, Cranston, for Defendant.

Before WEISBERGER, C.J., and LEDERBERG, BOURCIER, FLANDERS, and GOLDBERG, JJ.

OPINION

WEISBERGER, Chief Justice.

This case comes before us on appeal by Stanley-Bostitch, Inc. (plaintiff or SBI), from a grant of summary judgment entered in Superior Court in favor of James Mueller (defendant) compelling the plaintiff to arbitrate in New Jersey disputes arising out of the purchase and sale of environmental equipment. The issue presented is whether a clearly written and expressed agreement to arbitrate exists between the parties. We conclude that there is not, and for the reasons set forth below, we vacate the judgment of the Superior Court. The undisputed facts surrounding this appeal are as follows.

On August 7, 1987, Regenerative Environmental Equipment Company, Inc. (REECO), sent plaintiff a proposal to engineer, fabricate, and install a re-therm thermal-oxidation system (the re-therm system) for its manufacturing plant in East Greenwich, Rhode Island. The proposal comprised several pages. One page, entitled "Price Quotation," set forth the costs of two different models of re-therm units. The reverse side of that page embodied boilerplate provisions in fine print delineating the terms and conditions of sale. One provision required that controversies arising out of or relating to the sale of the re-therm system "shall be settled by arbitration in the City of Morristown, County of Morris, New Jersey in accordance with the rules and procedures * * * of the American Arbitration Association." The subsequent paragraph stated that the agreement shall be governed by and construed under the laws of the State of New Jersey. The following page contained a price-adjustment clause. By its own terms the August 7 proposal expired if not accepted by plaintiff within sixty days.

On August 11, 1987, REECO sent plaintiff a quotation for the cost of engineering services relating to one of the two re-therm models described in REECO's August 7 proposal. The next day plaintiff sent REECO a purchase order in the amount of $64,000 for "engineering services only." The reverse side of the order listed the terms and conditions of sale, including a provision entitled "Governing Law." That provision directed that any contract resulting from the purchase order would be construed according to the law of the State of Rhode Island and that any controversy arising thereunder would be determined, at the buyer's option, by the courts of the State of Rhode Island.

In response, REECO sent plaintiff a letter acknowledging its purchase of "engineering services only." The letter, dated August 18, 1987, also instructed plaintiff that the terms written on the reverse side of its August 7 quotation page would apply to the sale rather than the terms and conditions specified on the reverse side of plaintiff's August 12 purchase order. Then REECO asked plaintiff to sign and return the confirmation letter. On August 28, 1987, an authorized agent of plaintiff accepted and signed REECO's letter.

On November 9, 1987, plaintiff sent REECO a purchase order in the amount of $1,094,000 for the re-therm system "as described on [REECO's August 7 proposal]." The purchase order referred the seller to the reverse side of the form for "additional terms and conditions of purchase." The terms of the sale, like those in plaintiff's previous order, specified that any resulting contract shall be construed according to the laws of the State of Rhode Island and that any controversy arising thereunder would be determined, at the buyer's option, by the courts of the State of Rhode Island. ¹

As before, REECO sent plaintiff a letter confirming plaintiff's purchase. That letter, dated December 1, 1987, stated in pertinent part:

"[I]n lieu of the 'TERMS' noted on the reverse side of your purchase order, please refer to the 'TERMS AND CONDITIONS OF SALE' on the reverse side of the price quotation page of our [August 7] proposal. Although the intent is similar, we believe those noted in our proposal to be more applicable to the nature of the equipment to be supplied under this order and will, therefore, apply."

The letter then instructed plaintiff to sign and return a copy of the document. The plaintiff, however, did not sign or return the document. Subsequently REECO fabricated the re-therm system and in May of 1988 began shipping the equipment to plaintiff's East Greenwich facility. The plaintiff, in turn, paid REECO $1,094,000.

In May of 1989, REECO sent plaintiff an invoice in the amount of $99,266 for additional compensation allegedly owed it pursuant to the price-adjustment clause contained in its August 7 proposal. The plaintiff refused to pay the sum, contending that the proposal's price-adjustment clause never became part of the contract between the parties.

Subsequently REECO assigned its remaining rights and interest in the contract to James Mueller (Mueller or defendant). On May 27, 1992, Mueller filed a demand for arbitration in the State of New Jersey on the basis of the arbitration clause written on the reverse of REECO's August 7 quotation page. In response SBI filed suit in Superior Court, seeking injunctive relief and a declaration that the price-adjustment dispute is not arbitrable. In conjunction therewith, SBI asked the court to determine whether any sum is owed Mueller under the contract.

The parties filed cross-motions for summary judgment. Following a hearing on the matter the trial justice concluded that the provision to arbitrate contained on the reverse of REECO's August 7 quotation page was clearly expressed. The provision, the trial justice determined, was incorporated by reference into REECO's letter of confirmation dated December 1, 1987. The trial justice reasoned that pursuant to G.L.1956 § 6A-2-207 of the Rhode Island Uniform Commercial Code the arbitration provision became part of the contract between the parties when SBI failed to respond to REECO's confirmation letter. Accordingly the trial justice entered summary judgment in favor of defendant. The plaintiff appealed that judgment to this court. ²

On appeal, SBI contends that no clearly written and expressed agreement to arbitrate exists between the parties as mandated by G.L.1956 § 10-3-2. It also claims that under the Rhode Island Uniform Commercial Code, the provision to arbitrate was an additional and conflicting term that never became part of the contract.

I Is the Arbitration Provision a Part of the Agreement between the Parties?

In reviewing the propriety of an order granting summary judgment, this court, like the trial court, must examine the pleadings and other submitted material in a light most favorable to the party opposing the motion. The moving party is entitled to judgment as a matter of law only if there are no genuine issues of material fact to be decided. Super. R. Civ. P. 56; O'Hara v. John Hancock Mutual Life Insurance Co., 574 A.2d 135, 136 (R.I.1990). In the present case both parties agree that SBI and REECO contracted for the purchase and sale of environmental equipment. They disagree, however, about whether the ensuing contract included a binding-arbitration provision. Whether a party has agreed to be bound by arbitration is a question of law subject to this court's de novo review. Providence Teachers' Union v. Providence School Committee, 433 A.2d 202, 205 (R.I.1981).

We begin our analysis of the issue with a brief review of the historical treatment of arbitration agreements in this jurisdiction. This court has previously noted the efficacy of arbitration as an alternate method of dispute resolution. See Pepin v. American Universal Insurance Co., 540 A.2d 21, 22 (R.I.1988); Soprano v. American Hardware Mutual Insurance Co., 491 A.2d 1008, 1011 (R.I.1985). At common law, however, such agreements were unenforceable because of the prevailing belief that they operated to deprive parties of their right to seek recourse in the courts. Donahue v. Associated Indemnity Corp., 101 R.I. 741, 745, 227 A.2d 187, 189 (1967); Pepin v. Societe St. Jean Baptiste, 23 R.I. 81, 82-84, 49 A. 387, 388 (1901). The Legislature created a statutory right to binding arbitration, however, when it enacted G.L.1956, chapter 3 of title 10, the Rhode Island Arbitration Act (the act). See Pepin v. American Universal Insurance Co., 540 A.2d at 22. However, under early versions of the act enforcement of a provision to arbitrate turned upon its proper placement within a contract, see, e.g., Calore Rigging Corp. v. Sterling Engineering & Construction Co., 106 R.I. 290, 292, 259 A.2d 123, 124 (1969); Donahue, 101 R.I. at 745-47, 227 A.2d at 189-90, rather than on the parties' intent to submit subsequent controversies to arbitration, see, e.g., A.C. Beals Co. v. Rhode Island Hospital, 110 R.I. 275, 284, 292 A.2d 865, 870 (1972).

The most recent amendment to § 10-3-2 of the act eliminated this requirement for most contracts but conspicuously left unaffected the statutory mandate that agreements to arbitrate be "clearly written and expressed." ³ General Laws 1956 § 10-3-2, as amended by P.L.1976, ch. 342, § 1. Indeed, this court has specifically stated that "[n]o one is under a duty to arbitrate unless with clear language he [or she] has agreed to do so." Bush v. Nationwide Mutual Insurance Co., 448 A.2d 782, 784 (R.I.1982). The Supreme Court has held, "arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he [or she] has not agreed so to submit." United Steelworkers of America v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582, 80 S.Ct. 1347, 1353, 4 L.Ed.2d 1409, 1417 (1960); see also McCarthy v. Azure, 22 F.3d 351, 355 (1st Cir.1994) ("a person may,...