Whitehill v. Atlantic Building Systems, LLC

District Court, D. Colorado·Decided February 10, 2023·No. 1:22-cv-01118·Unknown

Opinion

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Judge William J. Martínez Civil Action No. 22-cv-1118-WJM-KLM CHRISTOPHER WHITEHILL, KIM HERB, ERIC HERB, LAURIE JACOBS, DAVID JACOBS, JARED MARTINEZ, SHELLY RICHARDSON, LOUIS RICHARDSON, MICHAEL GILLIS, LILY FAIRCHILD, DEBORAH HARRY, JOEL HARRY, ROBERT BALDAUFF, SHELLEY BALDAUFF, MICHAEL J. KEY, LIZ TORRES, ADAM MACKE, SCHUYLER JOSEPH VREEMAN, BRANDON ANDERSON, JESSICA ANDERSON, CHARLES GIBSON, GARY VINOVICH, DAN MERCER, ROGER S. APPLEWHITE, HEDIEH POURNIK, KURT WITHERS, LINETE APARICIO-CHAGOLLA, and ADAM CHENY, individually and on behalf of themselves and all those similarly situated, Plaintiffs, v. ATLANTIC BUILDING SYSTEMS, LLC, d/b/a ARMSTRONG STEEL CORPORATION, Defendant. ORDER GRANTING IN PART MOTION TO COMPEL ARBITRATION AND STAY PROCEEDINGS

Twenty-eight Plaintiffs filed this putative class action against Defendant Atlantic Building Systems, LLC, a Delaware limited liability company doing business as Armstrong Steel Corporation with its principal place of business in Colorado. (ECF No. 1.) Plaintiffs seek to represent a nationwide class and assert claims breach of contract, breach of the duty of good faith and fair dealing, unjust enrichment, advertising of goods not available, and violation of the Colorado Consumer Protection Act, Colo. Rev. Stat. § 6-1-101 et seq. (Id.) Plaintiffs assert jurisdiction under the Class Action Fairness Act of 2005, 28 U.S.C. § 1332(d). (Id. ¶ 28.) Plaintiffs allege that Defendant engaged in a scheme of falsely advertising its

“Metal Building System” to induce customers to place orders and submit 25% deposits, despite its inability to meet demand and deliver the building systems approximately 120 days from purchase, as advertised. (Id. ¶¶ 1–4.) In addition, Plaintiffs allege Defendant consistently demanded payments in excess of the contract price before delivering the building systems and refused to repay deposits to customers unwilling to pay these additional amounts. (Id. at ¶¶ 5–6.) Before the Court is Defendant’s Motion to Compel Arbitration and Stay Proceedings (“Motion”) (ECF No. 18). For the reasons stated below, the Motion is granted. I. LEGAL STANDARD

Pursuant to § 2 of the Federal Arbitration Act (“FAA”), a written agreement to submit a controversy to arbitration “shall be valid, irrevocable, and enforceable.” 9 U.S.C. § 2. Congress enacted the FAA to enshrine a “liberal federal policy favoring arbitration” in response to judicial hostility to arbitration agreements. AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011); see also Hall Street Assocs. LLC v. Mattel, Inc., 552 U.S. 576, 581 (2008). An arbitration agreement stands on equal footing with other

contracts, and a court is required to enforce such an agreement according to its terms. Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63, 67 (2010). Such an agreement is generally enforced as written, “save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. Grounds for invalidation of an arbitration agreement include contract defenses, such as fraud, duress, or unconscionability. Rent- A-Center, 561 U.S. at 68. The Court looks to Colorado contract law to determine whether an arbitration agreement is enforceable. THI of New Mexico at Hobbs Center, LLC v. Patton, 741 F.3d 1162, 1167 (10th Cir. 2014). Challenges to an arbitration agreement must specifically contest the formation of

the arbitration clause; a challenge to the contract as a whole is insufficient. Rent-A- Center, 561 U.S. at 72 (“[U]nless [plaintiff] challenged the delegation provision specifically, we must treat it as valid under § 2, and must enforce it under §§ 3 and 4, leaving any challenge to the validity of the Agreement as a whole for the arbitrator.”); Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404 (1967). If the party opposing arbitration does not specifically challenge the validity of the arbitration provision and the contract contains a savings clause, the agreement to arbitrate may be severed from the remainder of an otherwise-unenforceable contract. Rent-A-Center, 561 U.S. at 70–71; see Santich v. VCG Holding Corp., 2017 WL 4251944 (D. Colo. Sept. 26, 2017). “[D]oubts are to be resolved in favor of arbitrability.” Coors Brewing Co. v. Molson Breweries, 51 F.3d 1511, 1514 (10th Cir. 1995). In addition to considering contract defenses, a court must also evaluate whether arbitration will allow for effective vindication of a party’s statutory claims. Nesbitt v. FCHN, Inc., 811 F.3d 371, 376–77 (10th Cir. 2016); Sanchez v. Nitro-Lift Techs, L.L.C.,

762 F.3d 1139, 1149 (10th Cir. 2014). If the terms of the arbitration clause would prevent a party’s effective vindication of its statutory claims, a court may strike the portion which prevents effective vindication and compel arbitration on the remaining terms. Pollard v. ETS PC, Inc., 186 F. Supp. 3d 1166, 1176–78 (D. Colo. 2016). If the party resisting arbitration argues that the cost of arbitration would prevent effective vindication, that party has the burden to show that arbitration would be “prohibitively expensive.” Sanchez, 762 F.3d at 1149. II. BACKGROUND Plaintiffs each entered into separate contracts with Defendant to purchase its

“Metal Building System.” (ECF No. 18 at 2.) These contracts took the form of “Purchase Orders,” setting out, among other things, custom specifications, the delivery address, deposit, and balance due on delivery for the Plaintiffs’ orders. (See, e.g., ECF No. 18-1.) Between this information and the signature lines, the Purchase Order contains additional terms (“Terms and Conditions”). (See, e.g., id.) Among these terms is the following provision, written in capital letters: “THIS PURCHASE ORDER IS SUBJECT TO AND INCLUDES THE TERMS AND CONDITIONS SET FORTH AT www.armstrongsteel.com/terms WHICH BUYER HEREBY ACKNOWLEDGES RECEIVING AND REVIEWING.” (Id.) There is also a separate line, in capital letters and requiring the buyer’s initials, that reads: “BY INITIALING HERE, BUYER ACKNOWLEDGES THAT HE/SHE HAS REVIEWED AND, AFTER REVIEW, AGREED TO THE TERMS AND CONDITIONS APPEARING AT WWW.ARMSTRONGSTEEL.COM/terms/.” (Id.) The Terms and Conditions incorporated by reference into the Purchase Orders

were periodically amended, and Plaintiffs’ contracts are subject to three different versions of those Terms and Conditions (ECF No. 18 at 3); however, the provisions relating to mandatory arbitration, delegating questions of arbitrability to the arbitrator, and application of the FAA are “identical” across all three versions of the Terms and Conditions (“Arbitration Clause”) (Id.). The Arbitration Clause contained in the Terms and Conditions read, in relevant part: JURISDICTION, MANDATORY VENUE AND WAIVER OF JURY TRIAL – The terms of this PO shall be . . . shall be governed by and construed in accordance with the laws of the State of Colorado.

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