Watts Water Technologies, Inc. ("Watts") appeals the trial court's order denying its motion to compel arbitration. Watts raises three issues which we consolidate and restate as whether the trial court erred in denying its motion. We affirm.
Facts and Procedural History
Watts and State Farm Fire & Casualty, Co. ("State Farm") were signatories to a Property Subrogation Arbitration Agreement (the "Arbitration Agreement"), which provided in part:
Appellant's Appendix at 41-42.
In November 2014, Arbitration Forums gave notice to the parties that it intended to amend the Arbitration Agreement. The notification stated:
Id. at 74.
Effective January 1, 2015, the amended Arbitration Agreement (the "Amended Arbitration Agreement") provided:
Id. at 72.
On July 23, 2015, State Farm a/s/o Richard Lucka filed a complaint against Watts alleging that Lucka purchased a water heater with a Watts brand connector and that the connector failed on November 30, 2014, causing water damage to Lucka's home and property. The complaint alleged: Count I, "Products Liability — Defective Manufacturing;" Count II, "Products Liability — Defective Design;" Count III, "Products Liability — Negligent Manufacturing;" Count IV, "Negligent Design;" and Count V, "Breach of Implied Merchantability." Id. at 11-13 (capitalization removed). State Farm alleged that it was subrogated to the rights of the insured, Lucka, to the extent of its payments to or for Lucka. On October 28, 2015, State Farm filed an amended complaint correcting the address where the incident occurred.
On December 17, 2015, Watts filed a Motion to Dismiss or, In the Alternative, to Stay Proceedings and Compel Arbitration. On March 22, 2016, the court denied Watts's motion. Specifically, the order states:
Id. at 7-9.
The issue is whether the trial court erred in denying Watts's motion to compel arbitration.
State Farm argues that Arbitration Forums, pursuant to the rule-making authority expressly granted to it by Watts, clearly made the date of filing determinative. State Farm contends that by carving out an exception for only claims which had been filed prior to January 1, 2015, the only reasonable construction of Arbitration Forums' amendment is that the exclusion would apply to all other unfiled claims, notwithstanding whether a party could have filed a claim in 2014 or earlier. It argues that to extend the Amended Arbitration Agreement to include product defect cases filed in 2015 would contradict the plain language of the rule and the intentions of Arbitration Forums and the signatories it represented as expressed in that language. It further contends that Watts's argument that Arbitration Forums' own rule is extrinsic evidence is mistaken because the Arbitration Agreement expressly authorized all rules and regulations issued by Arbitration Forums. State Farm also argues that Watts has no vested right to arbitration of any matter until a claim is formally filed and that Watts had only a contingent right to arbitrate claims based on the parties' mutual status as signatories. It states that the Amended Arbitration Agreement is not illusory because a disputed claim filed prior to a revision of the rules must be arbitrated with Arbitration Forums, and that it alleged a product liability claim subject to the product liability exclusion.
Our standard of review in this case is de novo. Showboat Marina Casino P'ship v. Tonn & Blank Constr., 790 N.E.2d 595, 597 (Ind.Ct.App.2003) (citing Mislenkov v. Accurate Metal Detinning, Inc., 743 N.E.2d 286, 290 (Ind.Ct. App.2001)). It is well settled that Indiana recognizes a strong policy favoring enforcement of arbitration agreements. Homes By Pate, Inc. v. DeHaan, 713 N.E.2d 303, 306 (Ind.Ct.App.1999). Nevertheless, arbitration is a matter of contract, and a party cannot be required to submit to arbitration unless the party has agreed to do so. Id.
Whether the parties agreed to arbitrate any disputes is a matter of contract interpretation, and most importantly, a matter of the parties' intent. MPACT Const. Grp., LLC v. Superior Concrete Constructors, Inc., 802 N.E.2d 901, 906 (Ind.2004). "Courts in Indiana have long recognized the freedom of parties to enter into contracts and have presumed that contracts represent the freely bargained agreement of the parties." Id. (quoting Trimble v. Ameritech Publ'g, Inc., 700 N.E.2d 1128, 1129 (Ind.1998)). Consequently, imposing on parties a policy favoring arbitration before determining whether they agreed to arbitrate could frustrate the parties' intent and their freedom to contract. Id. "The Supreme Court has made this clear — `arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.'" Id. (quoting AT & T Techs., Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 648, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986)).
To the extent Watts asserts that Arbitration Forums' notice regarding the amendment is extrinsic or that Arbitration Forums did not have the authority to amend the Arbitration Agreement to provide for the product liability exclusion, we disagree. Watts agreed to the terms of the Arbitration Agreement, and Article Fifth of the Arbitration Agreement stated that Arbitration Forums, "representing the signatory companies, is authorized to... make appropriate Rules and Regulations for the presentation and determination of controversies under this Agreement...." Appellant's Appendix at 42. We conclude that the notice and amendment fall within Arbitration Forums' authority.
As for Watts's argument that the language of the amendment did not remove the requirement of arbitration from State Farm's claim, we observe that the notice from Arbitration Forums regarding the amendment states: "While the use of the Property Program to resolve disputes involving product liability claims arising from an alleged defective product will no longer be compulsory as of January 1, 2015, cases filed prior to January 1, 2015, will remain in arbitration's jurisdiction and will be processed to hearing." Id.
Watts cites Homes by Pate, Inc. v. DeHaan, 713 N.E.2d 303 (Ind.Ct.App. 1999), Chesterfield Mgmt., Inc. v. Cook, 655 N.E.2d 98 (Ind.Ct.App.1995), reh'g denied, trans. denied, and Nolde Bros., Inc. v. Local No. 358, 430 U.S. 243, 97 S.Ct. 1067, 51 L.Ed.2d 300 (1977), for the assertion that State Farm's duty to arbitrate survived the amendment. The arbitration provisions addressed in those cases did not include language providing an entity with the authority to "make appropriate Rules and Regulations for the presentation and determination of controversies under this Agreement," language to which the parties in this case expressly agreed upon. Appellant's Appendix at 42, 73. Nor do those cases involve such an entity providing for a property liability exclusion similar to the language in the notice and Amended Arbitration Agreement. See Homes by Pate, Inc., 713 N.E.2d at 305-306, 309 (addressing a residential building contract and two-year warranty which required arbitration with respect to disputes as to whether particular repairs were covered by the warranty and holding that a logical reading of the warranty led to the conclusion that, so long as a defect occurred within the two-year period of warranty coverage, any dispute concerning that coverage must be arbitrated); Chesterfield Mgmt. Inc., 655 N.E.2d at 102 (addressing an arbitration provision in a lease and observing that the lease's arbitration clause provided in part that "[a]ny dispute under any of the paragraphs of this Lease shall be settled by arbitration"); Nolde Bros., Inc., 430 U.S. at 244, 252-254, 97 S.Ct. at 1068, 1072-1073 (addressing whether a party to a collective-bargaining contract may be required to arbitrate a contractual dispute over severance pay pursuant to an arbitration clause of that agreement even though the dispute, although governed by the contract, arose after its termination, noting that the parties drafted their broad arbitration clause against a backdrop of well-established federal labor policy favoring arbitration, and holding "even though the parties could have so provided, there is nothing in the arbitration clause that expressly excludes from its operation a dispute which arises under the contract, but which is based on events that occur after its termination. The contract's silence, of course, does not establish the parties' intent
With respect to Watts's argument that State Farm's duty to arbitrate is illusory, we observe that Watts does not argue that Arbitration Forums' duty under the Amended Arbitration Agreement is illusory. Article Sixth of the Agreement allows any signatory to withdraw from the Agreement by notice in writing to Arbitration Forums. In addition, other categories of damage to property remain subject to compulsory arbitration under the Amended Arbitration Agreement. The Amended Agreement and the notice require that State Farm arbitrate certain claims asserted before January 1, 2015. The fact that product liability claims are not subject to compulsory arbitration under the Amended Agreement does not render the agreement illusory. See Watts Regulator Co. (filed September 29, 2016), Ill.App.Ct., 407 Ill. Dec. at 388, 63 N.E.3d at 312 (rejecting Watts's argument that State Farm could avoid their obligations to arbitrate).
As for Watts's assertion that State Farm is collaterally estopped from relitigating the issue of whether the Arbitration Agreement in effect when its claim accrued governs the arbitrability of the claim, we note that issue preclusion, or collateral estoppel, bars subsequent relitigation of the same fact or issue where that fact or issue was necessarily adjudicated in a former lawsuit and that same fact or issue is presented in a subsequent suit. Nat'l Wine & Spirits, Inc. v. Ernst & Young, LLP, 976 N.E.2d 699, 704 (Ind. 2012) (citing Hayworth v. Schilli Leasing, Inc., 669 N.E.2d 165, 167 (Ind.1996)), reh'g denied, cert. denied, ___ U.S. ___, 133 S.Ct. 2780, 186 L.Ed.2d 219 (2013). Where, as here, a defendant seeks to prevent a plaintiff from asserting a claim that the plaintiff has previously litigated and lost, the use has been termed "defensive" collateral estoppel. Small v. Centocor, Inc., 731 N.E.2d 22, 28 (Ind.Ct.App.2000), reh'g denied, trans. denied. There are three requirements for the doctrine of collateral estoppel to apply: (1) a final judgment on the merits in a court of competent jurisdiction; (2) identity of the issues; and (3) the party to be estopped was a party or the privity of a party in the prior action. Nat'l Wine & Spirits, 976 N.E.2d at 704. Furthermore, two additional considerations are relevant in deciding whether the defensive use of collateral estoppel is appropriate: "whether the party against whom the judgment is pled had a full and fair opportunity to litigate the issue, and whether it would be otherwise unfair under the circumstances to permit the use of collateral estoppel." Id. (quoting Small, 731 N.E.2d at 28).
The parties cite to various trial court orders from multiple states. Some are in favor of Watts, and others favor State Farm. Specifically, Watts cites to trial court orders from Tennessee, Georgia, Nevada, and Utah. State Farm cites to trial court orders from Georgia, Massachusetts, and Minnesota. As these orders and decisions produce different results, and under the circumstances presented, we cannot say it would be fair to permit the use of collateral estoppel by Watts.
We next turn to Watts's argument that State Farm did not allege a product liability claim subject to the product liability exclusion. Watts cites to the Indiana Products Liability Act, Ind.Code §§ 34-20, and asserts that State Farm's claims do not constitute product liability claims because State Farm did not allege "physical harm" or "sudden, major damage"
State Farm argues that nowhere is a signatory required to comply with any particular state's pleading standard to meet the exception and that whether or not the claim is subject to dismissal under Indiana state law has no bearing upon the interpretation of the arbitration agreements. State Farm also argues that Watts failed to raise any of the alleged pleading deficiencies to the trial court and has waived this issue. In reply, Watts contends that the trial court expressly ruled that State Farm's claim was a product liability claim and that it did not waive the argument.
Even assuming that Watts did not waive this issue and that an examination of Indiana statutory law regarding products liability is necessary, we cannot say that reversal is warranted. Ind.Code § 34-20-1-1 governs the applicability of the article addressing product liability actions and provides:
Ind.Code § 34-6-2-105 provides that "`[p]hysical harm', for purposes of I.C. 34-20, means bodily injury, death, loss of services, and rights arising from any such injuries, as well as sudden, major damage to property," and "[t]he term does not include gradually evolving damage to property or economic losses from such damage."
Ind.Code § 34-20-2-1 is titled "Grounds," and addresses the grounds for a product liability action as follows:
State Farm alleged: Count I, "Products Liability — Defective Manufacturing;" Count II, "Products Liability — Defective Design;" Count III, "Products Liability — Negligent Manufacturing;" and Count IV, "Negligent Design." Appellant's Appendix at 18-20. State Farm's amended complaint also alleged that Watts
For the foregoing reasons, we affirm the trial court's order denying Watts's motion to compel arbitration.
ROBB, J., and MATHIAS, J., concur.