Acuity Insurance Company v. Vivint Incorporated

Background

Gary Borchert signed a System Purchase and Service Agreement with Vivint in 2019 to obtain a thermostat, a doorbell camera, and related services. The agreement contained an arbitration clause requiring binding arbitration for disputes arising from or related to the agreement. It also included a class-action waiver and a one-year limit for bringing a lawsuit or other legal proceeding connected with the agreement.

Acuity Insurance, as the subrogee of Borchert and Zeina Abdallah, alleged that the thermostat was defective and caused extensive damage to their home. After paying for the damage under its insurance policy, Acuity sued Vivint, Radio Thermostat Company of America, Nortek Security & Control LLC doing business as 2GIG Technologies, and Genz-Ryan Plumbing and Heating Co. The complaint asserted negligence, breach of implied warranty, strict product liability based on design defect, strict product liability based on marketing defect, and breach of statutory warranty.

Motion and Arguments

Vivint moved to dismiss the complaint and compel arbitration. Acuity argued that no enforceable arbitration agreement existed because the arbitration provision was too small and buried in other text. Acuity also argued that Vivint had not shown that the agreement was communicated to Borchert or accepted by him. Acuity further argued that arbitration could create multiple or conflicting judgments and asked that, if arbitration were ordered, it apply to all parties.

Nortek did not take a position on the merits of Vivint’s motion. Nortek argued that it could not be required to arbitrate Acuity’s claims against Nortek and asked that the case be stayed if Acuity’s claims against Vivint were sent to arbitration.

Court’s Analysis

The court examined whether a valid agreement to arbitrate existed and whether Acuity’s dispute fell within that agreement. Applying Minnesota contract law, the court concluded that Borchert signed an agreement containing a valid and enforceable arbitration clause. The court emphasized that the clause used an underlined, all-capital heading warning that it affected legal rights, and that it required arbitration for a broad range of disputes, including negligence, fraud, breach of contract, breach of warranty, and product liability.

The court rejected Acuity’s argument that the provision was unreadable. Although the font was small and tightly spaced, it was the same size and style as the other terms on the second page, the text appeared against a light background, and the page had wide margins. The agreement also warned on the first page that its terms appeared on more than one page and told the customer to read them before signing. A second warning specifically directed the customer to review the arbitration clause carefully. The court also noted that Borchert did not use the agreement’s opt-out provision and that Acuity offered no facts showing that Borchert could not read the agreement on the iPad used to present it.

Because Acuity was asserting claims as Borchert’s subrogee, the court determined that the agreement’s terms applied to Acuity. The court concluded that the arbitration clause covered Acuity’s claims against Vivint. The opinion did not compel arbitration of Acuity’s claims against Nortek.

Disposition

The court granted in part and denied in part Vivint’s Motion to Dismiss Complaint and Compel Arbitration. It denied the motion to dismiss, granted the motion to compel arbitration as to Acuity’s claims against Vivint, declined to compel arbitration of Acuity’s claims against Nortek, and stayed the matter pending the outcome of arbitration. Judge Donovan W. Frank entered the order.