Always Read The Fine Print (PA)
In Apollo 1969 At Lloyds’s a/s/o Storage Development Inc. d/b/a Guardian Self-Storage v. Scalo Companies d/b/a Burns & Scalo Roofing, the United States District Court for the Western District of Pennsylvania ruled that a contractual arbitration clause was binding and enforceable where all parties involved had more than enough opportunities to review the contract and raise objections to its contents, but failed to do so.
This case arises from property damage caused by a water leak. Defendants Burns & Scalo completed roofing work at one of Storage Development Inc’s several Pittsburgh locations. Following a flood on the property, Storage Development Inc’s insurer, Apollo 1969 At Lloyd’s, paid for the damage. Apollo subsequently brought a subrogation claim against Burns & Scalo, seeking to recovery for breach of contract, negligence, and breach of warranty. Beyond arguing that the leak was caused by Storage Development Inc’s negligence, Burns & Scalo filed a motion to dismiss this action, or in the alternative, stay this action and compel arbitration in accordance with the arbitration clause contained in the contract entered into between Storage Development Inc and Burns & Scalo. Despite Apollo arguing that the arbitration clause was both invalid and unconscionable, the court granted Burns & Scalo’s motion to compel arbitration.
The court focused its analysis of the validity of the arbitration provision on two key factors: (1) whether there was an objective intent to be bound by the arbitration clause, and (2) whether the arbitration clause was unconscionable.
As it concerns an intent to be bound, both “parties disagree as to what level of familiarity signatories must have with individual provisions in the contact.” Apollo argued that a signature is required on every single page of a contract in order for the contents of every page to be enforceable. However, the Court quickly rejected this argument. The Court noted that “under Pennsylvania law, ‘a promise on the second page of a document is binding upon a promisor who signs the first page.’” Moreover, in this particular contract, immediately above the signature line was an explicit warning that “by your signature below, you also agree to all of the other terms and general conditions of this proposal.” The Court noted that Apollo had ample opportunities to review each and every page of the contract, but failed to do so, as testified to in the depositions of Storage Development Inc’s President.
As it concerns unconscionability, Apollo’s argument that the contact was essentially a contract of adhesion was also shot down by the Court. Apollo attempt to argue that the contract was procedurally unconscionable because there was a lack of meaningful choice. The Court rejected this argument, citing the existence of many other roofing companies in Pittsburgh that Storage Development, Inc. could have contracted with. Apollo also argued that the contract was substantively unconscionable, because the terms of the contract itself were outrageously unfair. Again, the Court was not convinced, as the arbitration clause in the contract wholly aligned with the standards set by the Construction Industry Arbitration Rules of the American Arbitration Association.
The takeaway from this case is short and sweet: read the fine print. When you sign the last page of a long contract, be prepared to be bound by its entirety, especially the arbitration clause.
Thanks to Brian Zappala for his contribution to this post. Please contact Heather Aquino with any questions.