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Stowe v. Big Sky Vacation Rentals, Inc.

Supreme Court of Montana

December 17, 2019

JOHN STOWE and KATHARINE STOWE, Plaintiffs,
v.
BIG SKY VACATION RENTALS, INC., Defendant. and TUDOR INSURANCE COMPANY, as subrogee of JOHN AND KATHARINE STOWE, Intervening Plaintiff, BIG SKY VACATION RENTALS, INC., Third-Party Plaintiff and Appellee,
v.
POINTCENTRAL, LLC., Third-Party Defendant and Appellant.

          Submitted on Briefs: May 29, 2019

          APPEAL FROM: District Court of the Eighteenth Judicial District, In and For the County of Gallatin, Cause No. DV 17-303B Honorable Rienne McElyea, Presiding Judge.

          For Appellant: Lilia Norma Tyrrell, Jordan P. Helvie, Kasting, Kauffman & Mersen, P.C., Bozeman, Montana.

          For Appellee: Antonia P. Marra, Thomas A. Marra, Marra, Evenson & Levine, P.C., Great Falls, Montana.

          John H. Tarlow, Matthew A. Haus, Tarlow Stonecipher Weamer and Kelly, PLLC, Bozeman, Montana.

          OPINION

          DIRK M. SANDEFUR, JUSTICE.

         ¶1 PointCentral, LLC (PointCentral) appeals from the judgment of the Montana Eighteenth Judicial District Court, Gallatin County, denying its motion to dismiss the third-party claims of Big Sky Vacation Rentals, Inc. (BSVR) pursuant to M. R. Civ. P. 12(b). We address the following dispositive issues:

1. Whether the District Court erroneously concluded that the PointCentral/BSVR arbitration agreement was invalid or unenforceable due to lack of mutuality or equitable unconscionability?
2. Whether the PointCentral/BSVR arbitration agreement is illegal or unenforceable in contravention of § 27-1-703, MCA?

         ¶2 We reverse.

         PROCEDURAL AND FACTUAL BACKGROUND

         ¶3 BSVR is a Montana-based corporation engaged in the business of property management and vacation rentals in Big Sky, Montana. PointCentral is a Virginia-based technology company engaged in the business of providing home automation products and services that allow vacation rental and property managers to remotely control access, HVAC, and hot water systems in managed residential properties from desktop computers or mobile devices. PointCentral licenses its proprietary products, and related services, to property management companies for sale or provision to third-party property owners.

         ¶4 In 2013, John and Katharine Stowe (Stowes) executed a ten-page contract with BSVR for management and vacation rental of their Big Sky home.[1] On July 14, 2014, BSVR introduced to its clients a "Home Assurance Plan" touted as an "all-encompassing maintenance and security program" with various features including, inter alia, "24/7 [e]mergency response service for guests."[2] An included component of the Plan was a PointCentral system that would provide specified keyless entry, security, and energy management features. The e-mail announcement stated that the keyless entry component was mandatory to clients and would involve an initial installation fee (shared by BSVR and clients) with a recurring quarterly service fee.[3] The announcement described the component as a:

keyless monitoring system that allows us to issue unique codes to every person entering your property. Guests will be given a unique code vs. keys upon full payment of a reservation and will use this code to open the lock on the door. . . . Each property has a dashboard as shown in the attached PowerPoint that allows us to see when cleaning staff have entered, status of a property (occupied, unoccupied, clean in progress, etc.)[.] . . . In addition, should someone enter the home with a key without notifying us, the infrared camera will snap two photos which are immediately sent to our cell phones. This system does not replace the security system that an owner may already have, but rather enhances it's [sic] effectiveness and eliminates the possibility of keys being lost or misplaced. The lock-out feature allows us to remotely unlock the door via cell phone should an owner or guest forget their code and lock themselves out of the property.

         ¶5 Attached to the BSVR e-mail announcement was a referenced .pdf copy of a Microsoft PowerPoint presentation describing a PointCentral "Smart Home Control" system. The presentation was manifestly a marketing tool designed by PointCentral for marketing its products and services to BSVR. It described the PointCentral system as a "SmartHome Automation" system that would provide "[r]emote, web[-]enabled control and visibility of all properties including . . . [k]eyless access" and "[p]roperty status" monitoring via the cellular telephone network rather than the internet. (Ellipsis in original.) It stated that "PointCentral is the cloud-based service that gives [the property manager] the ability to control systems in [all] of your homes from any web-enabled device." (Emphasis omitted.) The presentation described various system access history logging, reporting, and alert/notification features. Using motion-sensor-triggered infrared cameras in door locksets, PointCentral designed the keyless access monitoring feature to log and photograph detected motion events around exterior doors and then send motion alerts and photographs to configured desktop and mobile devices. BSVR alleges that, in implementing the system, it purchased all recommended system components from PointCentral and installed them in client homes through a PointCentral approved third-party installer.

         ¶6 BSVR and PointCentral were engaged under a July 2014 dealer/licensing agreement (Agreement) authorizing BSVR to sell or provide "PointCentral-ready Products" and "PointCentral Services" to third-party clients.[4] The Agreement provided for PointCentral to provide various services to BSVR including, inter alia, enabling of data communication between installed residential systems and the PointCentral operations network, data hosting, remote access to hosted data, and remote control of installed residential systems via a user interface on the PointCentral website. The Agreement included an attached price quote to BSVR for contemplated PointCentral-ready products and services referenced as the "PointConnect System." The Agreement required PointCentral to provide technical support to BSVR, but specified that BSVR would "provide all customer service and technical support for the PointCentral Services and PointCentral-ready Products" to BSVR clients.

         ¶7 The Agreement also included reciprocal contract indemnification provisions and a broadly-worded arbitration agreement. Except for third-party claims within the scope of PointCentral's duty to indemnify BSVR, the Agreement required BSVR to indemnify PointCentral for contract and tort claims asserted by third parties against PointCentral as a result of, or "arising from," breaches of the Agreement or related tortious conduct by BSVR. Except for third-party claims within the scope of BSVR's duty to indemnify PointCentral, the Agreement similarly required PointCentral to indemnify BSVR for contract and tort claims asserted by third parties against BSVR as a result of, or "arising from," breaches of the Agreement or related tortious conduct by PointCentral.

         ¶8 Subject to two narrow exceptions, the arbitration agreement broadly required BSVR and PointCentral to arbitrate "[a]ny controversy or Claim" between them "arising out of or relating to" the Agreement or a "breach thereof." In the event of a third-party lawsuit against PointCentral within the actual or apparent scope of BSVR's contract indemnification duty, the first exception allowed PointCentral to join BSVR as a third-party defendant for the purpose of enforcing its contract right to indemnification from BSVR. Under the second exception, PointCentral further retained "the right to seek injunctive relief in any court of competent jurisdiction with respect to any breach" of the Agreement by BSVR regarding "PointCentral's intellectual property or proprietary rights or business reputation."[5]

         ¶9 Based on system activity logs and photographs, Stowes allege that, on February 12, 2016, at 2:27 a.m., their PointCentral keyless entry system detected a motion-based "intrusion" event and immediately generated two infrared photographs depicting electrical sparks flying in the home. They allege that the system immediately transmitted the intrusion alert and photographs to configured BSVR desktop(s) or mobile device(s). Stowes allege that an ensuing fire subsequently destroyed the home as a result of BSVR's failure to timely monitor, notice, and respond to the system-transmitted intrusion alert and photographs until hours later when it was too late to save the home. Based on those allegations, Stowes filed a District Court complaint in April 2017 asserting various contract and tort claims against BSVR, including breach of contract, negligence, and negligent misrepresentation. In August 2017, Stowes' homeowners insurance carrier (Tudor Insurance Company (Tudor)) intervened on leave of court to assert a subrogation claim against BSVR for recovery of insurance proceeds paid to Stowes as a result of the fire.

         ¶10 On leave of court eight months later, BSVR asserted third-party claims against PointCentral for contribution and indemnification regarding the Stowes and Tudor claims. BSVR's third-party complaint incorporated by reference all allegations set forth in the Stowes and Tudor complaints and further alleged that: (1) PointCentral produced the remote monitoring system and accompanying explanatory information provided to Stowes; (2) BSVR installed the system through a PointCentral-approved installer; and (3) the PointCentral system was the cause, or at least a contributing cause, of the damages claimed by Stowes and Tudor.

         ¶11 In June 2018, based on the arbitration agreement in their 2014 licensing Agreement, PointCentral filed a motion pursuant to M. R. Civ. P. 12(b)(1) or 12(b)(6) for dismissal of BSVR's third-party claims. The District Court denied the motion in October 2018 based on the fact that the agreement provided two exceptions to PointCentral not provided to BSVR. The court concluded that the agreement thus lacked mutual consideration and was therefore unenforceable as a matter of generally applicable contract law. PointCentral timely appeals.

         STANDARDS OF REVIEW

         ¶12 Rulings under M. R. Civ. P. 12(b)(1) and 12(b)(6) regarding subject matter jurisdiction or whether a complaint fails to state a claim for which relief may be granted are conclusions of law reviewed de novo for correctness. Harrington v. Energy W. Inc., 2015 MT 233, ¶ 7, 380 Mont. 298, 356 P.3d 441; Zempel v. Liberty, 2006 MT 220, ¶ 11, 333 Mont. 417, 143 P.3d 123; Powell v. Salvation Army, 287 Mont. 99, 102, 951 P.2d 1352, 1354 (1997). The focus of Rule 12(b)(1) motions to dismiss for lack of subject matter jurisdiction is whether the court has the threshold authority to hear and adjudicate the type of claim at issue on the facts pled. Harrington, ¶¶ 9, 13. The court must generally take all well-pled factual assertions as true in the light most favorable to the claimant and then dismiss only if it clearly lacks authority to hear and adjudicate the claim as pled. See Harrington, ¶¶ 9, 13.[6] In contrast, the focus of a Rule 12(b)(6) motion to dismiss is whether the complaint is facially sufficient to state a cognizable legal claim entitling the claimant to relief on the facts pled. Kleinhesselink v. Chevron, U.S.A., 277 Mont. 158, 161, 920 P.2d 108, 110 (1996); Fandrich v. Capital Ford Lincoln Mercury, 272 Mont. 425, 428-29, 901 P.2d 112, 114 (1995); Busch v. Kammerer, 200 Mont. 130, 131-32, 649 P.2d 1339, 1340 (1982).[7] The court must take all well-pled factual assertions as true in the light most favorable to the claimant. Willson v. Taylor, 194 Mont. 123, 126, 634 P.2d 1180, 1182 (1981).

         ¶13 We review rulings on motions to compel arbitration de novo for correctness under the governing standard of the Federal Arbitration Act (FAA), 9 U.S.C. § 1, et seq., or the Montana Uniform Arbitration Act (MUAA), § 27-5-111, MCA, et seq., as applicable.[8]Lenz v. FSC Sec. Corp., 2018 MT 67, ¶ 12, 391 Mont. 84, 414 P.3d 1262. Rulings on Rule 12(b) motions to dismiss a claim pursuant to an arbitration agreement similarly involve conclusions of law reviewed de novo for correctness under the applicable M. R. Civ. P. 12(b) standard and the governing arbitration Act. See Lenz, ¶ 12.

         DISCUSSION

         ¶14 "A party may assert the right to compel arbitration either by affirmative claim for relief or as an affirmative defense" to a claim. Bucy v. Edward Jones & Co., 2019 MT 173, ¶ 18, 396 Mont. 408, 445 P.3d 812 (citing 9 U.S.C. §§ 3-4, 6, 204; Am. Sugar Refining Co. v. Anaconda, 138 F.2d 765, 766-67 (5th Cir. 1943). Based on their June 2014 arbitration agreement, PointCentral moved for dismissal of BSVR's third-party contribution and indemnification claims pursuant to M. R. Civ. P. 12(b)(1) or 12(b)(6). Despite historical characterization of arbitration agreements as precluding or divesting courts of subject matter jurisdiction to adjudicate a matter within their scope, the more precise modern view is that arbitration agreements do not preclude or divest courts of subject matter jurisdiction but, rather, implicate the non-jurisdictional question of whether substantive judicial relief is available or may be granted as a threshold matter of law within the scope of a valid and enforceable arbitration agreement. See DiMercurio v. Sphere Drake Ins., PLC, 202 F.3d 71, 74-79 (1st Cir. 2000). Accordingly, we will review PointCentral's motion to dismiss as a Rule 12(b)(6) motion to dismiss rather than a Rule 12(b)(1) motion challenging subject matter jurisdiction.

         ¶15 In 1925, Congress enacted the FAA to offset "widespread judicial hostility to arbitration agreements," AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339, 131 S.Ct. 1740, 1745-46 (2011), and place them "on equal footing with all other contracts." Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 443-44, 126 S.Ct. 1204, 1207-08 (2006). Accord Thompson v. Lithia Chrysler Jeep Dodge of Great Falls, 2008 MT 175, ¶ 12, 343 Mont. 392, 185 P.3d 332. "The FAA encompasses a discrete body of substantive federal law mandating enforcement of arbitration agreements within its scope regardless of any contrary substantive or procedural state law." Peeler v. Rocky Mountain Log Homes Can., Inc., 2018 MT 297, ¶ 12, 393 Mont. 396, 431 P.3d 911 (citing Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 941 (1983)). The FAA governs agreements to arbitrate disputes "arising out of" or "involving" interstate commerce. 9 U.S.C. § 2; Southland Corp. v. Keating, 465 U.S. 1, 10-17, 104 S.Ct. 852, 858-61 (1984); Zigrang v. U.S. Bancorp Piper Jaffray, Inc., 2005 MT 282, ¶ 10, 329 Mont. 239, 123 P.3d 237.[9]

         ¶16 BSVR is a Montana-based company engaged in the property management and vacation rental business in Montana. BSVR's third-party complaint alleges that PointCentral is a Delaware corporation with its principal place of business in Virginia.[10]The manifest purpose and effect of the parties' Agreement is to license BSVR to sell and support PointCentral's internet-based PointConnect system as a component of the home property management and rental services sold to BSVR clients in Montana. ...


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