One way to challenge the very existence of an agreement to arbitrate is to say that the parties’ contract said nothing about arbitration and did not validly incorporate any other document calling for arbitration. Oklahoma and Alabama have recently come out at opposite ends of the spectrum in terms of what kind of notice must be given a consumer to incorporate an arbitration agreement from a secondary document.
In Walker v. Builddirect.com Technologies, Inc., 2015 WL 3429364 (10th Cir. 2015), the federal appellate court refused to compel arbitration of a dispute, because under state law the arbitration provision was not incorporated by reference into the contract signed by the parties. That contract said it was subject to the seller’s “terms of sale,” but did not list those terms or direct the customer to the website where those terms could be found. The Tenth Circuit had certified the question of whether the website terms were incorporated by reference to the Oklahoma Supreme Court, which found they were not. For future drafters, the Oklahoma decision notes:
If BuildDirect intended to make the online “Terms of Sale” part of the parties’ agreement, BuildDirect could easily have accomplished that purpose by drafting the Contract employing words of express incorporation or clearly referencing, identifying and directing the Walkers to the document to be incorporated.
Reaching the opposite result, the Supreme Court of Alabama enforced arbitration agreements that were contained in insurance forms that the plaintiffs may never have received. American Bankers Ins. Co. of Fl. v. Tellis, __ So.3d __, 2015 WL 3935260 (Ala. 2015). The insurance policyholders had received their policies, which allegedly included two supplemental forms containing the arbitration agreement. The policyholders swore they never received those forms, and, although one form has a signature line, the insurer could not produce any signed versions of the form. However, because those forms were listed on the declarations page (by numerical code, not a descriptive title), the court found the policyholders had a duty to investigate the content of the forms. In support of compelling arbitration it held:
In sum, although the policyholders did not execute stand-alone arbitration agreements or necessarily even read or receive the insurance policies containing the arbitration provisions, they have nevertheless manifested their assent to those policies, and, necessarily, the arbitration provisions in them, by accepting and acting upon the policies, inasmuch as they all affirmatively renewed their policies and paid their premiums…
In an easier case, the high court in Maryland allowed an arbitration agreement in one document to require the parties to arbitrate disputes over a second document. Ford v. Antwerpen Motorcars, Ltd., __ A.3d__, 2015 WL 3937607 (Md. 2015). In that case, all the documents were signed “on the same day during the course of the purchase and financing of an automobile.” Although only the “Buyer’s Order” contained an arbitration agreement (the financing agreement did not), the court found the buyers’ claims over the financing must be decided in arbitration because the two documents must be construed together as the entire agreement between the parties.
What do these divergent results mean for drafters of arbitration agreements? As usual, err on the side of caution. If you comply with Oklahoma’s requirements of notice, which are not that onerous, you will most certainly be well-positioned in other states.