J. THOMAS MARTEN, Chief Judge.
Plaintiff Randy Howard, on behalf of himself and all others similarly situated, seeks damages against defendants Ferrellgas Partners, L.P.; Ferrellgas, L.P.; and Ferrellgas, Inc. (collectively "defendant") for allegedly engaging in unfair, unconscionable, deceptive, misleading, and unlawful conduct in connection with the marketing and sale of propane and related equipment and services. Pursuant to the Federal Arbitration Act ("FAA"), and at the direction of the Tenth Circuit, on November 12, 2014, this court conducted a summary trial to determine one basic, preliminary question: are the parties bound by an arbitration agreement, and therefore required to arbitrate, not litigate, the above-listed claims? Based on the evidence presented at trial and the applicable law, the court answers this question in the affirmative, as described below.
The parties' story is nothing new: customer needs a good, customer locates a supplier of said good, customer offers to buy the good from the supplier, and the supplier agrees to sell consumer the good. In fact, the parties agree that this is exactly what happened. Plaintiff, a resident of California, needed propane for his residential use. Dkt. 114, at 1-2. Having never been a consumer of residential propane before, plaintiff shopped around and ultimately decided on service from defendant, a nationwide provider of propane, propane services, and equipment. Dkt. 115, at 3.
This, however, is where the simplicity ends. What appears, at least on the surface, to be a simple consumer transaction, is currently embroiled in a game of "he said, they said" that has now spanned nearly five years. At the heart of this quagmire, at least for this court's purposes, is one significant question: does this case even belong in litigation? The parties clearly disagree as to the answer to this crucial question, as set forth below.
According to plaintiff, on that fateful day in August 2008, he entered into an oral contract with defendant not only for the tank rental and the First Fill, but also for all subsequent fills of propane thereafter. Plaintiff claims that he became a "keep full" customer, meaning that defendant promised to monitor the propane level in his tank from afar and refill as necessary, without any further request from plaintiff. Dkt. 114, at 2. Plaintiff alleges that he was not bound by any terms and conditions and never saw, let alone signed, any written document memorializing his relationship with defendant. Plaintiff claims that defendant's representative told him that, after the First Fill, which was assessed at a special introductory per-gallon rate, plaintiff would be charged at propane's current "market price."
Defendant's version of events is decidedly different. While it admits that there was, in fact, an Oral Contract, defendant argues that this Oral Contract governed only plaintiff's tank set and First Fill. The rest of plaintiff's propane fills were governed by a written Master Agreement, a document that contained, generally, defendant's terms and conditions of the consumer relationship and, more relevantly, arbitration and integration clauses. Defendant alleges that it mailed this Master Agreement to plaintiff on September 26, 2008, in conjunction with an entire Customer Packet that also contained a service letter describing the services and products plaintiff had purchased and the Ferrellgas Safety Plan, which set forth the mandated requirements and procedures for inspection and maintenance of propane and propane equipment. Dkt. 115, at 4-5. Plaintiff denies receiving this packet in September 2008.
This brings the court to the current issue of whether plaintiff's substantive
Trial Ex. 3, at 2, 8, 18. It also contained an integration clause:
Trial Ex. 3, at 18-21 (emphasis in original).
Over the course of two years, plaintiff received and accepted ten deliveries of propane from defendant:
Date Quantity Price Charged Price Paid August 27, 2008 50 $2.11 $2.11 September 5, 2008 167.6 $2.11 $2.11 December 3, 2008 57.8 $4.71 $2.85 January 27, 2009 79.9 $4.92 $2.95 March 12, 2009 53.2 $2.82 $2.82 May 20, 2009 28.4 $2.82 $2.82 October 14, 2009 473 $3.22 $2.25 December 17, 2009 76.8 $2.50 $2.50 January 22, 2010 67 $2.64 $2.64 March 9, 2010 74.6 $2.38 $2.38
Trial Ex. 34. On three occasions, December 3, 2008; January 27, 2009; and October 14, 2009; plaintiff called defendant to complain that the "price charged" for propane was well above the market price. Dkt. 115, at 7. In response to plaintiff's complaints, defendant lowered the price charged. Plaintiff terminated service with defendant in September 2010 when he sold his house. Dkt. 115, at 7.
On October 13, 2010, plaintiff filed this putative class action lawsuit against defendant alleging breach of an oral contract to supply propane at a "market price," breach of an implied covenant of good faith and fair dealing, violations of the Kansas Consumer Protection Act, K.S.A. § 50-623 et seq. ("KCPA"), as well as claims for promissory estoppel and unjust enrichment. Dkt. 1. Defendant moved to dismiss the Complaint on December 10, 2010. Dkt. 23. On August 1, 2011, the court sustained defendant's motion with respect to plaintiff's KCPA, promissory estoppel, and unjust enrichment claims, leaving only his claims for breach of an oral contract and breach of the implied covenant of good faith and fair dealing. Dkt. 32.
On September 6, 2011, defendant moved to compel arbitration of the remaining claims, alleging that plaintiff's dispute arose out of propane deliveries and charges that occurred after plaintiff allegedly received and consented to the Master Agreement. Dkt. 37. Plaintiff opposed defendant's motion to compel, arguing that he and defendant entered into a long-term oral contract for the supply of propane at market price during the August 21, 2008, telephone call. Dkt. 42. On August 27, 2012, the court deferred a final ruling on defendant's motion, determining that it did not have sufficient evidence of the scope of the alleged oral contract to sustain the
Following discovery, the court found "the situation to be as it was before," with a genuine dispute as to the scope of the Oral Contract. Dkt. 65, at 8. The court therefore declined to compel arbitration. Dkt. 65. Defendant appealed. Dkt. 66. The appellate court summarized the issues to be decided as follows:
Howard v. Ferrellgas Partners, L.P., 748 F.3d 975, 979 (10th Cir.2014) (emphasis in original). The appellate court therefore remanded the case to this court to conduct a summary trial as to the issue of arbitration, pursuant to § 4 of the FAA. Id. at 984.
This court conducted a summary bench trial on November 12, 2014. Dkt. 127. At the conclusion of the parties' presentation of evidence the court instructed both parties to submit written closing statements. See Dkts. 135, 136.
As a preliminary matter, this case raises choice of law issues. When deciding state law claims under diversity jurisdiction, as is the case here, a federal district court applies the choice of law rules of the state in which it sits. Koch v. Koch Indus., 2 F.Supp.2d 1416, 1420 (D.Kan.1998) (internal citations omitted). Kansas courts generally apply the First Restatement of Conflicts of Law to choice of law issues. See Enutroff, LLC v. Epic Emergent Energy, Inc., 2015 WL 419797, at *9 n. 74, 2015 U.S. Dist. LEXIS 11666, at *26 n. 74 (D.Kan. Feb. 2, 2015) (citing ARY Jewelers, LLC v. Krigel, 277 Kan. 464, 481, 85 P.3d 1151, 1161-62 (2004)). For purposes of contract claims, Kansas follows the rule of lex loci contractus, i.e., the law of the state where the contract is made governs. In re K.M.H., 285 Kan. 53, 60, 169 P.3d 1025, 1032 (Kan.2007) (citing
Plaintiff placed the August 21, 2008, phone call to defendant from his home in California. The customer service representative who answered the call did so from Washington. Therefore, under the doctrine of lex loci contractus, either California or Washington law could potentially govern the formation and scope of an oral contract between the parties. The parties seem to agree that the last act to form the oral contract occurred in Washington, when defendant accepted plaintiff's offer to purchase propane. The court agrees and finds that Washington state law governs the formation and scope of any dispute stemming from that telephone call.
However, "if the law of Kansas is not in conflict with any of the other jurisdictions connected to the suit, then there is no injury in applying the law of Kansas." Brenner v. Oppenheimer & Co., 273 Kan. 525, 535, 44 P.3d 364, 372 (Kan.2002) (quoting Shutts v. Phillips Petroleum Co., 240 Kan. 764, 767, 732 P.2d 1286 (Kan. 1987)). "In other words, if the outcome of this dispute would be the same under the law of [another state] as under the laws of Kansas, the case presents a `false conflict.'" Id. "Where there is no difference between the laws of the forum state and those of the foreign jurisdiction, there is a `false conflict' and the court need not decide the choice of law issue." Id. (quoting Lucker Mfg. v. Home Ins. Co., 23 F.3d 808, 813 (3d Cir.1994)). Here, it has been established, and the parties agree, that the court's findings would be the same whether it followed Kansas, Washington, or California law.
The first step in determining whether the parties must arbitrate or litigate their substantive claims is to determine the scope of the Oral Contract.
Under Kansas law, "[i]n an action based on contract, the plaintiff bears the burden of proving the existence of the contract alleged in the petition." Unified Sch. Dist. No. 446 v. Sandoval, 295 Kan. 278, 282, 286 P.3d 542, 546 (Kan.2012) (citing Steele v. Harrison, 220 Kan. 422, 428, 552 P.2d 957 (1976)); see also Steel Benders, Inc. v. H.R. Braner Eng'g, Inc.,
There is no dispute that plaintiff called defendant on August 21, 2008, and made a verbal offer to purchase propane. Or that defendant verbally accepted plaintiff's offer on that same date. Or that the parties orally agreed that plaintiff would lease defendant's propane tank and defendant would come out and initially fill that tank. Plaintiff would have this court believe that all of these definitive agreements somehow translate into the parties being bound, in perpetuity, not only for defendant's sale of propane to plaintiff but also by the "terms" discussed during that August 21, 2008, phone call.
This begs the question, then: what exactly were the terms discussed during that August 21st phone call? Unfortunately for plaintiff, he cannot remember. In his deposition, plaintiff stated as follows:
Dkt. 60-2, at 14-15. However, in that same deposition, plaintiff also testified that he had no recollection of what occurred during that phone call:
Dkt. 60-2, at 5.
Similarly, during his trial testimony, plaintiff testified as follows:
Tr. 213:19-214:20.
Based on plaintiff's own testimony, what defendant promised plaintiff is, at best, unclear, and, at worst, only what the parties have conceded: the tank rental price, the tank set, and the initial fill.
In an attempt to bolster his argument, plaintiff cites defendant's training "scripts" that he alleges were in use in 2008. These scripts, according to plaintiff, provided defendant's customer service representatives with a step-by-step intake process for handling new customer calls. Dkt. 135, at 11. Although defendant's representatives testified that these scripts were indeed in use in 2008 and were also used to assist customer service representatives, there is no indication that the script was used during plaintiff's August 21, 2008, telephone call. Even if it was, there is nothing in the training document that provides proof that plaintiff entered into a long-term contract with defendant at the time of the phone call.
The scripts are divided into several basic segments: greet, data collection, connection program review, promotions page review, added benefits, schedule a delivery, and close. Ex. 80, 81, 82.
Plaintiff alleges that the script is "probative of the contents of the Telephone Call and an objective manifestation of Ferrellgas's intentions" to enter into an oral contract governing not only the First Fill, but also all subsequent fills. Dkt. 135, at 14 n. 4. This court disagrees: plaintiff cannot definitively prove that the script was used during his telephone call. Even if he could, that still does not prove that defendant intended to, or in fact did, enter into an oral contract with plaintiff for all subsequent fills of propane. The scripts encourage the representative to describe to the customer both the "keep full" and "will call" plans and actually states that defendant has "two great plans to choose from...." Trial Ex. 80, 81, 82. In fact, defendant's notes from that August 21st phone call establish plaintiff as a "will call" customer:
Trial Ex. 29 (emphasis added). It was not until plaintiff's telephone call to defendant more than one year later, on October 26, 2009, complaining about the price per gallon, that there is any indication that plaintiff might have been a "keep full" customer. Case notes from the October 26th phone call read in relevant part as follows: "Cst. upset was charged 3.22pg 1st. Delivery, keep full net 30...." Trial Ex. 29. Furthermore, in the cover letter defendant mailed out in conjunction with the Master Agreement on September 25, 2008, plaintiff was described as a "will call" customer. Trial Ex. 1.
The evidence also shows that neither party believed that they were obligated after the initial fill. During his deposition testimony, Ray Galan, defendant's Division Sales Manager for the West Division, testified as follows:
Tr. 110:21-25. Plaintiff argues that the evidence unequivocally shows that he asked for an ongoing supply of propane "because [he] had never had propane before" and he "didn't know what to expect and [] didn't want to run out." Tr. 190:9-11. However, plaintiff admitted, during his deposition, that he never promised, during that initial phone call, to purchase any additional propane beyond that required for the First Fill:
Tr. 15:1-16:7. Likewise, at trial plaintiff testified as follows:
Tr. 214:21-217:4.
Plaintiff also repeatedly makes the argument that the long-term arrangement between the parties is implied by plaintiff's agreement to enter into a two-year rental agreement for the propane tank. However, the evidence is silent as to the actual duration of plaintiff's tank rental, aside from plaintiff's proffered belief. In the notes connected to the August 21, 2008, telephone call, Williams simply indicated that "tank rent-free first yr. 65.00/yr. after." Trial Ex. 29. There is no reference
Plaintiff also cites the minimum volume requirement contained in the Master Agreement as evidence that the Oral Contract governed more than just the First Fill. It is telling that plaintiff's only proof that a minimum volume requirement even exists is contained in the Master Agreement, the very document that he is arguing does not apply to the parties' relationship. Plaintiff cannot have it both ways: he cannot argue that he is not bound by the terms of the Master Agreement on one hand while simultaneously arguing the defendant had certain policies that were only contained within the Master Agreement on the other.
There is, indeed, a minimum volume requirement contained within the Master Agreement:
Trial Ex. 3. However, the evidence establishes that this Minimum Volume Requirement does not create an ongoing obligation to purchase propane. It simply means that defendant can charge a fee to the low volume customer. Galan confirmed this assessment in his trial testimony:
Tr. 140:11-141:25.
Based on the evidence presented, or rather, the lack thereof, at least on the part of plaintiff, this court concludes that it was merely plaintiff's subjective, internalized understanding that he reached a complete oral contract with defendant that governed not only the First Fill but also all subsequent fills. As noted above, "in order for parties to form a binding contract, the offer and acceptance must manifest
The court must now determine if the parties are bound by the Master Agreement.
Just as plaintiff had the burden of proving the existence and scope of the Oral Contract, defendant has the burden of proving the existence and scope of the Master Agreement, and, more specifically whether the parties are bound by the arbitration provision.
Although the interpretation of contracts, including arbitration agreements, is generally a matter of state law, the FAA "imposes certain rules beyond those normally found in state contract law." G.W. Van Keppel Co. v. Dobbs Imps., LLC, 2014 WL 5302974, at *2, 2014 U.S. Dist. LEXIS 146913, at *3-4 (D.Kan. Oct. 15, 2014) (citing Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662, 681, 130 S.Ct. 1758, 176 L.Ed.2d 605 (2010)). The FAA applies to written arbitration agreements in any contract "evidencing a transaction involving commerce." Id. at *2, 2014 U.S. Dist. LEXIS 146913 at *4 (quoting 9 U.S.C. § 2). "Congress designed the FAA to overrule the judiciary's longstanding refusal to enforce agreements to arbitrate and, by enacting the FAA, created a liberal federal policy favoring arbitration agreements." Id. (internal citations omitted). Under the FAA, a court should compel arbitration if it finds that: "(1) a valid arbitration agreement exists between the parties, and (2) the dispute before it falls within the scope of the agreement." Id. (citing 9 U.S.C. §§ 2, 3). "If a contract contains an arbitration provision, there is a presumption of arbitrability." Brookins v. Superior Mgmt. Group, 2013 WL 5819706, at *2, 2013 U.S. Dist. LEXIS 154629, at *4 (D.Kan. Oct. 29, 2013) (citing AT & T Techs., Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 650, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986)); see also Gratzer v. Yellow Corp., 316 F.Supp.2d 1099, 1103 (D.Kan.2004).
"Whether the parties agreed to arbitrate a dispute is an issue for judicial determination unless the parties clearly and unmistakably provide otherwise." Brookins, 2013 WL 5819706, at *2, 2013 U.S. Dist. LEXIS 154629, at *4 (internal citations omitted). "Whether there is an enforceable arbitration agreement is a matter of state contract law to be decided by the court." Id. (citing First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995)); see also Hill v. Ricoh Americas Corp., 603 F.3d 766, 777 (10th Cir.2010). "A defendant seeking to compel arbitration has the initial burden to show enough evidence of an enforceable agreement to arbitrate. If the defendant meets this burden, the plaintiff must show a genuine issue of material fact as to the validity of the agreement." Brookins, 2013 WL 5819706, at *2, 2013 U.S. Dist. LEXIS 154629, at *4 (citing SmartText Corp. v. Interland, Inc., 296 F.Supp.2d 1257,
However, despite its liberal policy, the FAA does not require a party "to submit to arbitration any dispute which he has not agreed so to submit." G.W. Van Keppel, 2014 WL 5302974, at *2, 2014 U.S. Dist. LEXIS 146913, at *4 (quoting Spahr v. Secco, 330 F.3d 1266, 1269 (10th Cir.2003)). "Instead, [the FAA] requires that courts enforce `agreements to arbitrate, like other contracts, in accordance with their terms.'" Id. (quoting Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Standford Junior Univ., 489 U.S. 468, 478, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989)). Therefore, "if a generally applicable state contract defense invalidates an arbitration agreement, or if grounds exist at law or equity that would call for the revocation of any contract," a court must not compel arbitration. Id. (citing Volt Info. Scis., Inc., 489 U.S. at 478, 109 S.Ct. 1248); see also Perry v. Thomas, 482 U.S. 483, 489, 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987).
G.W. Van Keppel Co., 2014 WL 5302974, at *2, 2014 U.S. Dist. LEXIS 146913, at *5 (quoting Volt Info. Scis., Inc., 489 U.S. at 478, 109 S.Ct. 1248).
Since this case's inception, plaintiff has argued that, because the relationship between the parties involved a sale of goods for more than $500, the Uniform Commercial Code ("UCC") applies. Defendant has never contested the use of the UCC.
The bulk (if not all) of plaintiff's argument concerning the UCC has, up until this point, focused on § 2-207, which restricts modifications to existing contracts governed by the UCC.
However, in its Reply to defendant's Post-Trial Brief, plaintiff asserts, for the first time, an enforceability argument, namely that the Master Agreement is invalid due to the provisions of § 2-201. This section governs the formal requirements of a contract under the UCC and deals also with the Statute of Frauds. It states, in relevant part:
U.C.C. § 2-201(1) (emphasis added). According to plaintiff, at least in his most recent argument, defendant must establish that the Master Agreement was signed in accordance with the statute of frauds. Dkt. 140, at 14. Plaintiff argues that defendant offers no evidence that the Master Agreement was signed by plaintiff or that the statute of frauds is somehow otherwise inapplicable. As a result, plaintiff cannot be bound by the Master Agreement and, more specifically, the arbitration provision. Dkt. 140, at 14.
What plaintiff seemingly fails to realize, however, is that his statute of frauds argument is a defense to the Master Agreement's enforceability, not its mere existence. And long-standing case law dictates that arbitration provisions embedded within contracts otherwise governed by the UCC are not subject to a statute of frauds analysis.
Arbitration provisions and agreements are governed by the FAA. Under the Act,
9 U.S.C. § 2. The FAA does not require arbitration agreements to be signed; rather, as is indicated in § 2, they need only to be in writing. See Bellman v. i3Carbon, LLC, 563 Fed.Appx. 608, 614 (10th Cir. 2014) (holding that "[w]hile the [FAA] requires a writing evidencing an agreement to arbitrate disputes, it is well-established that the FAA does not require signatures of the parties to be enforceable."); see also Rangel v. Hallmark Cards, Inc., 2010 WL 781722, at *6, 2010 U.S. Dist. LEXIS 19755, at *15 (D.Kan. Mar. 4, 2010) (quoting Med. Dev. Corp. v. Indus. Molding Corp., 479 F.2d 345, 348 (10th Cir.1973) ("it is not necessary that there be a simple integrated writing or that a party sign the writing containing the arbitration clause. All that is required is that the arbitration provision be in writing")); Perkins v. Rent-A-Center, Inc., 2004 WL 1047919, at *3, 2004 U.S. Dist. LEXIS 8203, at *8-9 (D.Kan. May 5, 2004) ("... the Federal Arbitration Act does not require arbitration agreements to be signed. It is immaterial whether a proper representative of Defendant signed the agreements.").
In an effort to somehow get around the fact that arbitration agreements need not be signed, plaintiff seemingly suggests that, because the Master Agreement concerns the sale of goods, and is therefore governed by the UCC, signature is required, as per the statute of frauds. However, plaintiff fails to take notice of decades of well-established Supreme Court precedent that states otherwise. Nearly fifty years ago, the Supreme Court declared that arbitration clauses are, as a matter of federal substantive law, separate from the contracts in which they are embedded. In Prima Paint Corporation v. Flood & Conklin Manufacturing Company, 388 U.S. 395, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967), the Court held that if the claim "goes to the `making' of the agreement to arbitrate — the federal court may proceed to adjudicate it. But the statutory language does not permit the federal court to consider [challenges to the contract] generally ... a federal court may
The reason for this can be summed up by Justice Scalia's reasoning in Buckeye Check Cashing, Inc. v. Cardegna:
546 U.S. 440, 448-49, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006) (emphasis added). In other words, in terms applicable to the case at hand, this court is permitted to consider issues relating to the parties' making of the agreement to arbitrate. In fact, that is the sole purpose of this order. Any challenges to the enforceability of the Master Agreement must be decided by the arbitrator.
The question then becomes whether challenges based on the statute of frauds deal with the making of the agreement to arbitrate. Courts have soundly held that the statute of frauds is a challenge to the enforceability of an otherwise formed agreement. See, e.g., Clements v. DIRECTV, LLC, 2014 WL 1266834, at *5, 2014 U.S. Dist. LEXIS 40055, at *16 (W.D.Ark. Mar. 26, 2014) ("Plaintiffs' [statute of frauds] arguments challenge the Customer Agreement as a whole. Accordingly, these arguments are for the arbitrator to consider, not this Court."); Nat'l City Golf Fin. v. Higher Ground Country Club Mgmt., 641 F.Supp.2d 196, 207 (S.D.N.Y.2009) ("Failure to satisfy the statute of frauds does not mean that no contract exists; that statute does not deprive the agreement of all effect, and it is still appropriate to refer to the agreement as a contract. Rather, a failure to satisfy the statute as to a party merely precludes enforcement of the agreement against that party."). See also D-J Eng'g Inc. v. UBS Fin. Servs., 2012 WL 171342, at *4-5, 2012 U.S. Dist. LEXIS 6678, at *12 (D.Kan. Jan. 20, 2012) (holding that deciding whether a contract is illusory is an issue for the arbitrator, not the court).
Here, plaintiff's own pleadings acknowledge that his statute of frauds argument concerns the enforceability of the Master Agreement as a whole. He states, "[t]he Master Agreement placed in evidence by Defendants was not signed in any way by Mr. Howard and there is no suggestion that Mr. However ever signed the Master Agreement. Accordingly, the Master Agreement, and the arbitration provision, is unenforceable against Mr. Howard." Dkt. 140, at 15 (emphasis in original). Whether the balance of the Master Agreement, aside from the arbitration provision, is enforceable against plaintiff is an interesting question; however, it is not one for this court to now decide. Therefore, the court finds that plaintiff's statute of frauds argument, as it pertains to the arbitration provision, is without merit.
As an aside, the court cannot help but note the late date at which plaintiff first made this argument. The general rule in the Tenth Circuit "is that a party waives issues and arguments raised for the first time in a reply brief." Reedy v. Werholtz, 660 F.3d 1270, 1274 (10th Cir. 2011) (quoting M.D. Mark, Inc. v. KerrMcGee
Plaintiff attacks the validity of the Master Agreement (with its arbitration provision) on the ground that it could only be seen as a proposal to modify the Oral Contract. Under UCC § 2-207, such a modification requires plaintiff's express consent, which plaintiff alleges he never gave. Dkt. 135, at 25-27. Based on its previous ruling as to the scope of the Oral Contract, the court disagrees.
Because plaintiff failed to establish that the Oral Contract governed all subsequent fills of propane beyond the First Fill, defendant's Master Agreement, which was admittedly not sent to plaintiff until after plaintiff received the First Fill, must be regarded as a new offer. This placed the ball in plaintiff's court to then accept or decline the new offer. Under the terms of the Master Agreement, plaintiff was deemed to have accepted the offer if he: (1) requested or accepted delivery of propane, service, or equipment from defendant; (2) paid for delivery of propane, service, or equipment from defendant; or (3) permitted the propane or equipment obtained from defendant to remain on his property for more than thirty (30) days after his receipt of the Master Agreement. Trial Ex. 3, at 1.
The evidence on this issue is very clear: plaintiff did indeed request and accept delivery of propane, services, and equipment from defendant after defendant mailed the Master Agreement. Defendant contends that it mailed the Agreement on September 24, 2008. Plaintiff subsequently received eight deliveries of propane over the next two years. Trial Ex. 34. By default, then, it is clear that plaintiff allowed the propane and equipment to remain on his property long after the thirty-day window of termination had expired. Moreover, the evidence shows that plaintiff paid for each and every one of these deliveries of propane. Therefore, by his own actions, plaintiff accepted the terms of the Master Agreement and was therefore bound by those terms for all subsequent fills.
Plaintiff attempts to show a genuine issue of material fact as to the validity of the Master Agreement by alleging that he never received the Agreement in September 2008 and that, in fact, he only received the Agreement after requesting it upon the suggestion of his attorneys in January 2010. However, plaintiff's physical receipt of the Master Agreement is not altogether necessary.
In general,
Fed. Kemper Life Assurance Co. v. Ellis, 1992 WL 280372, at *6, 1992 U.S. Dist. LEXIS 15449, at *18-19 (D.Kan. Sept. 21, 1992) (internal citations omitted). The burden is therefore on defendant to show that proper mailing occurred.
To establish proper mailing, defendant relies upon the testimony of its Marketing Manager, Brian Mater. At the time in question, Mater was a marketing analyst, whose responsibilities included providing support for the marketing team with new customer mailings. Tr. 48:19-20. Mater testified that all names and addresses of new customers (as well as things such their ownership, service level, and ID numbers) are exported from defendant's internal customer service database, PeopleSoft CRM, into an Excel spreadsheet. Tr. 57:13-16. This export occurs once per week. Tr. 58:16-18. These spreadsheets are then sent to defendant's "mail house," an external service provider that runs the spreadsheets through a CASS certification process. Tr. 60:11-61:1. Mater explained that the CASS certification process involves software provided by the United States Postal Service that adds a customer's zip code "plus four" and generally identifies records as being mailable or not. Tr. 60:18-23. The mail house then runs defendant's new customer packets through the presort process, meters the mail, and prepares all defendant's mail for mailing. Tr. 60:24-61:1. Once it is done with its process, the mail house provides defendant with a list of the CASS certified names and addresses. Tr. 65:7-10.
With regard to plaintiff's new customer packet mailing, Mater testified that plaintiff's name was on a list comprised of 1,961 names, dated August 21, 2008. Tr. 63:19-64:6. Mater explained that the list included all new customers from August 15 through 21, 2008. Tr. 72:2273:6. When asked if he could tell whether plaintiff's name went through the CASS certification process, Mater indicated that it had because the spreadsheet returned from the mail house contained plaintiff's address with his "zip plus four." Tr. 66:3-4. In fact, plaintiff's zip code was listed as XXXXX-0276. Trial Ex. 50, at 62; Tr. 66:5-7. The list that Mater sent to the mail house did not contain plaintiff's zip "plus four." Trial Ex. 5; Tr. 66:15-16.
On August 26, 2008, Mater requested that the mail house send addressed new customer packets (that contained the Master Agreement) to 1,961 customers. Records show that, on September 26, 2008, the mail house mailed 1,960 new customer packets in internal sequence number 9846.
Defendant was also able to establish that there was no record of plaintiff's new customer packet being returned as undeliverable. Mater testified that, in the regular course of business, whenever defendant received returned mail, a specifically designated customer service team, located in Liberty, Missouri, would create a record within the company's internal PeopleSoft CRM database. Tr. 84:21-85:5. The database has no record of plaintiff's mail being returned. Tr. 85:6-10.
Based on Mater's testimony about defendant's regular business practice regarding the mailing of new customer packets, which include the Master Agreement, defendant
Plaintiff's only response to defendant's claim that it mailed the Master Agreement in September 2008 is that he did not recall receiving it and could not locate it in his files. Tr. 197:25-198:3, 199:4-10, 206:24-207:13, 208:7-14; Dkt. 60-2, at 22-23, 24-25, 29, 33, 35-36. This simple denial of receipt is not enough to rebut the presumption that the Master Agreement was indeed mailed. "When mail is properly addressed, stamped and deposited in the mail system, there is a presumption it was received by the party to whom it was sent." Valley Chip Sales v. New Arts Tater Chip Co., 1996 WL 707028, 1996 U.S. Dist. LEXIS 18232 (D.Kan. Oct. 10, 1996) (citing In re Am. Props., Inc., 30 B.R. 235, 237 (D.Kan. 1983)). Once proper mailing is proved, as is the case here, "denial of receipt does not create an issue for the jury as to whether" the Master Agreement was mailed. Fed. Kemper Life Assurance Co. v. Ellis, 28 F.3d 1033, 1040 (10th Cir.1994); see also Valley Chip Sales, 1996 WL 707028, at *3, 1996 U.S. Dist. LEXIS 18232, at *10 ("When mail is properly addressed, stamped, and deposited in the mail system, there is a presumption it was received by the party to whom it was sent. Proper mailing, however, must be proved before the presumption is activated. Denial of receipt does not, as a matter of law, rebut the presumption, but rather creates a question of fact.").
Moreover, plaintiff admitted, both during his deposition and at trial, that it was possible that he received the Master Agreement in September or October 2008. During his deposition, plaintiff stated as follows:
Dkt. 60-2, at 23-24, 29 (emphasis added). Likewise, at trial, plaintiff testified that it was possible that he had received the Master Agreement:
Tr. 206:24-207:13, 208:7-14. When asked, plaintiff admitted that the address listed on the welcome packet mailed on September 24, 2008, was his correct mailing address and that he in fact received other mailings from defendant at this address. Tr. 209:6-15. The court therefore finds that plaintiff's mere denial of receipt of the Master Agreement in September or October 2008 is not sufficient to rebut the presumption that defendant did indeed mail the Agreement.
Plaintiff therefore had two choices: either opt-out of the Master Agreement by returning the equipment and terminating service or agree to the terms of the Master Agreement, including the arbitration provision, by keeping the equipment and continuing to accept deliveries of propane. The evidence clearly establishes that plaintiff chose the latter option. Plaintiff continued to receive deliveries of propane for more than two years after the September 24, 2008, mailing. Trial Ex. 34; Tr. 209:16-22, 201:25-202:6. Even more telling is that plaintiff received at least two deliveries of propane after January 2010, when he admitted that he definitely received the Master Agreement. Trial Ex. 34, Tr. 135:10-25, 212:5-24.
Plaintiff attempts to make some argument, drawing on case law from other circuits, that even if he is deemed to have received the Master Agreement in 2008, that "does not without more establish that he should know that the terms disclosed in the Master Agreement relate to a service in which he had previously enrolled and that a failure affirmatively to opt out of the service amounts to assent to those terms." Dkt. 135, at 32. In so arguing, plaintiff relies upon several decisions of the Second and Ninth Circuits that deal with browsewrap and shrinkwrap agreements. What plaintiff draws from these cases is the premise that because defendant's scripts state that there is no paperwork to fill out and the customer service representative allegedly made no reference to the Master Agreement, plaintiff could not possibly have been on notice that the Master Agreement would somehow govern all subsequent fills.
There are several problems with this argument. First, as established above, there is no proof that defendant's customer service representative used the scripts during plaintiff's August 21, 2008, telephone call. Second, plaintiff himself has testified repeatedly that he cannot remember exactly what was said during that telephone call. It is entirely possible that Williams did mention that written terms and conditions were forthcoming. Third, the court finds it interesting that at no time has plaintiff complained about the imposition of other terms, such as Hazmat fees and the like, that were allegedly never mentioned during the telephone call yet were later imposed. This certainly suggests that plaintiff had no difficulty accepting terms allegedly imposed after the Oral Contract. Finally, plaintiff admitted that, even after receiving the Master Agreement in January 2010, he did not actually read it until the day before his deposition in October 2012. This is a failure of plaintiff, not defendant.
In response to defendant's argument, plaintiff claims that his conduct could only amount to assent to the Master Agreement if he had notice of the existence of the terms and conditions and the consequences of his continued acceptance of propane, and a meaningful opportunity to opt out of the Master Agreement. Dkt. 135, at 31-34. With regard to notice, plaintiff relies on cases involving email notifications of additional terms and conditions as well as "shrinkwrap" and "browsewrap" agreements. According to plaintiff, it is defendant's "onus ... to put users on notice of the terms to which they wish to bind consumers." Dkt. 135, at 34 (quoting Nguyen v. Barnes & Noble, Inc., 763 F.3d 1171, 1179 (9th Cir.2014)). This means that defendant could have advised plaintiff, during that August 21st telephone call, that additional terms and conditions would be forthcoming or, in the alternative, included the Master Agreement with delivery and/or with plaintiff's initial bill.
Because there is virtually no Tenth Circuit law on point, plaintiff relies heavily on a Second Circuit case, Schnabel v. Trilegiant Corporation, 697 F.3d 110 (2d Cir. 2012), to support his claim. In Schnabel, the plaintiff consumers alleged that they were automatically enrolled in the defendant's online monthly subscription service by being re-routed from a third-party webpage on which they made a purchase. 697 F.3d at 114. The defendant's terms and conditions contained an arbitration provision. Id. at 116. Upon learning of the allegedly unknown automatic enrollment, the plaintiffs sought a return of the monthly fee charged by the defendant. Id. The plaintiffs filed suit and the district court, much like is the case here, was first required to determine whether the parties entered into a binding provision requiring them to arbitrate all issues. Similar to the case at hand, the defendant argued that the plaintiffs assented to the arbitration provision by enrolling in the monthly subscription service, receiving the emailed terms, and not cancelling their membership during the free trial period. Id. at 120. The plaintiffs disagreed. Id.
In its analysis, the Second Circuit first noted that in these types of cases,
Schnabel, 697 F.3d at 116. Based upon the facts of the case, the court held that an unsolicited email from an online consumer business did not put the plaintiffs on notice of the terms enclosed in that email. Id. at 123.
While Schnabel and the case now before this court are similar in that the later-supplied written contracts both provided an arbitration clause, they are wholly inconsistent otherwise. Schnabel involved a case whereby the plaintiffs did not truly know that they were enrolling in the defendant's services — they were merely redirected to the defendant's website from websites that they intentionally visited and made purchases from. Here, there is no dispute that plaintiff knew full well what he was purchasing and from whom he was purchasing it. Defendant did not bury the arbitration provision in a random email; rather, it included it in a document specifically mailed to plaintiff's documented mailing address. The plaintiffs in Schnabel
If anything, this case is most similar to a very recent case from the Southern District of New York, Valle v. ATM National, LLC, 2015 WL 413449, 2015 U.S. Dist. LEXIS 11788 (S.D.N.Y. Jan. 30, 2015). In that case, the plaintiff consumer opened a savings account at a particular bank which, at some point later, notified its customers that they could use the defendant's ATMs for free without being subject to ATM fees or surcharges. 2015 WL 413449, at *1, 2015 U.S. Dist. LEXIS 11788, at *3. The bank subsequently issued a disclosure and agreement explaining that it would become the operative agreement between itself and its customers. Id. at *1-2, 2015 U.S. Dist. LEXIS 11788 at *4. The amended agreement contained an arbitration provision and class action waiver. Id. The bank gave its customers the opportunity to reject the amended agreement by closing their account and withdrawing all funds within sixty days of the notice. Id. at *2, 2015 U.S. Dist. LEXIS 11788 at *5. It also specified that customers could opt out of the arbitration provision by mailing a signed rejection notice within forty-five days of receipt of the amended agreement. Id. The plaintiff took no affirmative action to reject either the agreement itself or the arbitration provision and continued to use her account. Id. She later alleged that, despite the defendant's assurances, she was charged an ATM fee. Valle, 2015 WL 413449, at *1-2, 2015 U.S. Dist. LEXIS 11788, at *3-4.
In determining whether the plaintiff was bound by the arbitration provision, the district court noted that, instead of burying its arbitration provision in an unexpected email, as was the case in Schnabel, the bank mailed the amended agreement to the address regularly used to communicate with the customer and highlighted the arbitration provision. Id. at *3, 2015 U.S. Dist. LEXIS 11788 at *9. Likewise, here, defendant mailed the Master Agreement to the address regularly used to communicate with plaintiff and highlighted the arbitration provision, as well as plaintiff's opportunity to opt-out of the agreement. Trial Ex. 3, at 17-18. The court therefore finds that the Master Agreement provided plaintiff adequate notice.
With regard to the second requirement, that plaintiff have a "meaningful opportunity" to opt-out of the Master Agreement, plaintiff argues that nowhere does the Master Agreement provide that the consumer can opt-out after he requests, accepts, or pays for delivery of propane. Dkt. 135, at 35-36. By the terms of the Master Agreement, this is untrue.
In the very first paragraph of the Master Agreement, in bolded font, is the following disclaimer: "If you do not wish to be bound by this Agreement, please contact Ferrellgas within thirty (30) days after your receipt of this Agreement and terminate service." Trial Ex. 3. Plaintiff argues that the Master Agreement "includes a plethora of costs and fees imposed on a customer terminating service, including the cost of the propane in the tank (which could amount to more than $1,000). Nowhere does the Master Agreement provide that the termination fees do not apply if you do not wish to be bound by this agreement and terminate service." Dkt. 135, at 35. As a result, in plaintiff's eyes, the opt-out provision was "so vague and ambiguous as to render it meaningless." Dkt. 135, at 36.
Therefore, the court finds that defendant gave plaintiff sufficient notice and opportunity to reject the Master Agreement, but plaintiff simply chose not to do so. This does not speak to the applicability of the Master Agreement; rather, it speaks only to plaintiff's inaction. This is bolstered by the fact that when plaintiff called and specifically requested a copy of the Master Agreement in 2010, he still chose not to opt-out. Instead, he ordered more propane on at least two, if not three, occasions. As such, plaintiff's failure to contact defendant and terminate service within thirty days constituted acceptance of the Master Agreement.
Consequently, and in sum, the court finds that plaintiff is bound by the Master Agreement and all of its terms, including the arbitration provision. Plaintiff failed to establish that the parties agreed, during the August 21, 2008, telephone call that the Oral Contract would govern not only the propane tank set and First Fill but also all subsequent fills. In contrast, defendant was able to carry its burden to show that it mailed plaintiff the Master Agreement which does govern all subsequent fills. By plaintiff's continued acceptance of defendant's goods, services, and equipment, he has bound himself to the terms of the Master Agreement and therefore must arbitrate his claims against defendant.
