Missouri Takes a Strong Stance on Arbitration

Tamko Building Products, Inc. v. Hobbs is a big win for consumer protection. This case differs from others of its kind, as it provides consumers with protection from invasive arbitration agreements attached to a product’s packaging.

In 2005 and 2007 respectively, Lee Hobbs and the Jonesburg Methodist Church bought Heritage Series Shingles, which are manufactured by Tamko. On the outside of each bundle of shingles was a limited warranty that provided a remedy for damages caused by manufacturing defects and included a binding arbitration provision. Neither Hobbs nor Jonesburg saw the limited warranty or was made aware of the warranty.

Then, in 2013, the shingles they purchased started warping, curling, and beginning to fail.  In 2014, Hobbs and Jonesburg filed a class action complaint against Tamko alleging violations of the Missouri Merchandising Practices Act (MMPA), negligence, and entitlement to declaratory relief. Tamko responded with a motion to compel arbitration because of the binding arbitration provision slapped on to Tamko’s shingles packaging. The trial court denied Tamko’s motion, and Tamko appealed, arguing that the trial court erred because the parties had entered into a valid arbitration agreement. The court of appeals affirmed the judgment of the trial court, finding that the mere purchasing of the shingles did not create acceptance of the arbitration agreement; the plaintiffs had never signed any document agreeing to an arbitration clause. An appeal to the Missouri Supreme Court was denied, and a petition for certiorari is still pending before the Supreme Court of the United States.

First, Tamko argued that the plaintiffs accepted and agreed to the terms of the limited warranty because the plaintiffs kept and used the shingles. The court found this unpersuasive because there was no evidence that the consumers actually received the documentation; typically, shingles are a product that are not kept by the consumer after they are unbundled and used. Second, Tamko alleged that plaintiffs accepted the terms of the arbitration agreement by invoking their claims under the limited warranty. The court also rejected this argument; Hobbs and Jonesburg only became aware of the warranty after they had filed their claims with Tamko. The court took a firm stance: big business cannot bully consumers into arbitration.

As the law currently stands (and with the help of this case), the MMPA makes Missouri one of the most consumer friendly states in the nation. But, this is not the end of the story. A new bill, Senate Bill 5, was introduced in the Missouri legislature in the beginning of 2017. It amends the MMPA, stating that the MMPA does not apply to any business “regulated by the Federal Trade Commission or any other regulatory agency.” Passage of this bill would eliminate consumer protection in Missouri; almost every business is subject to regulation by the Federal Trade Commission or another regulatory agency. Consumers, unfortunately, would be left unprotected.

But as of now, Tamko provides some thread of hope for consumers who have been forced into arbitration clauses against their will. Simply attaching an arbitration agreement to a product’s packaging does not create a valid arbitration clause in Missouri. But Tamko still does not protect consumers who unknowingly enter into arbitration agreements in other contexts. The legislature, therefore, should be working to help all consumers fight back against abusive business practices rather than taking away the little protection they have now.

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