Earlier this month, the United States Court of Appeals for the Eleventh Circuit issued a decision that could make it easier for manufacturers to force consumers into arbitration via “shrinkwrap” agreements—packaged contracts which bind consumers by merely opening and keeping a product. In Dye v. Tamko Building Products, Inc., Case No. 17-14052 (11th Cir. Nov. 2, 2018), the Eleventh Circuit considered an appeal of a district court’s order compelling arbitration and dismissing a lawsuit by Florida homeowners against the manufacturer of allegedly defective roofing shingles. The packaging of the shingles displayed the manufacturer’s entire product-purchase agreement, including a mandatory arbitration provision. In taking up the case, the Eleventh Circuit considered not only whether this shrinkwrap agreement was enforceable under Florida law, but also whether the homeowners were bound to arbitration because their hired roofers ordered, opened, and installed the shingles.
The Eleventh Circuit answered affirmatively on both issues.
The Eleventh Circuit determined that the roofers, by opening and installing the shingles, had bound the homeowners to arbitration even though the consumers never saw the arbitration provision on the packaging.
Noting strong Florida precedent recognizing the enforceability of shrinkwrap contracts, the court concluded that the packaging conveyed a valid offer from the manufacturer, which could be accepted by opening and keeping the shingles. Central to this conclusion was the Eleventh Circuit’s contention that consumers “in the age of Amazon Prime” should be aware of shrinkwrap agreements and the approve-or-return model of sale. Further, the Eleventh Circuit determined that the roofers, by opening and installing the shingles, had bound the homeowners to arbitration; the roofers’ acceptance of the agreement, including the arbitration provision, was reasonably necessary to install the shingles, and principles of agency law imputed such acceptance to the homeowners. Accordingly, the Eleventh Circuit affirmed the order compelling arbitration and dismissing the case.
Dye is a boon to manufacturers and vendors, as well as a potential pitfall for consumers. The Eleventh Circuit not only blessed the increased use of shrinkwrap agreements, but also indicated that consumers can be bound to arbitration by agreements they have never had an opportunity to personally review. As a result of this decision, manufacturers and vendors operating in the Eleventh Circuit, and particularly in Florida, should maximize their use of shrinkwrap agreements to limit litigation. Conversely, consumers must be aware that their contractors and agents could subject them to “hidden” shrinkwrap agreements, and should require that their contractors and agents apprise them of the existence of such agreements and their terms wherever possible.