Vickery Transportation, Inc. and Grammer Industries, Inc. v. Hepaco, Inc.

IN THE COURT OF APPEALS OF TENNESSEE
AT JACKSON
APRIL 21, 2004 Session
VICKERY TRANSPORTATION, INC. and GRAMMER INDUSTRIES,
INC. v. HEPACO, INC.
Direct Appeal from the Chancery Court for Haywood County
No. 12522 George R. Ellis, Chancellor
No. W2003-01512-COA-R3-CV - October 4, 2004
This case arises out of an action seeking declaratory relief concerning the validity of an arbitration
clause in a contract between the parties. Appellee filed a complaint in the Chancery Court at
Haywood County for a determination of whether a contract, and, therefore, the arbitration clause in
the contract, were invalid because the contract was one of adhesion or executed under duress. The
trial court, upon Appellees’ motion to stay arbitration, ordered that the arbitration proceedings should
be stayed because there was no agreement to arbitrate. Appellant filed its appeal to this Court, and,
for the following reasons, we reverse and remand this case for further proceedings consistent with
this opinion.
Tenn. R. App. P. 3; Appeal as of Right; Judgment of the Chancery Court Reversed and
Remanded
ALAN E. HIGHERS, J., delivered the opinion of the court, in which W. FRANK CRAWFORD , P.J., W.S.,
and HOLLY M. KIRBY , J., joined.
Robert D. Flynn,Memphis, TN; Steele B. Windle, III, David Hill Bashford, Charlotte, NC, for
Appellant
Carl K. Wyatt, Tim Edwards, Memphis, TN, for Appellees
OPINION
Facts and Procedural History
The facts of this case, gathered from the pleadings of the proceedings below,1 are as follows.
Vickery Transportation, Inc. (“Vickery”) and Grammer Industries, Inc. (“Grammer” or collectively
with Vickery, “Appellees”) are two corporations organized under the laws of Ohio and Indiana,
respectively. Appellees are in the business of transporting hazardous waste materials. Vickery was
contacted about the transportation of hazardous waste materials from Helena, Arkansas, to Vickery,
Ohio. On May 21, 2002, while transporting the waste materials on Interstate 40, the driver of the
Vickery truck pulled over in Haywood County, Tennessee.
After pulling over, the driver of the truck noticed that the hazardous waste materials were
beginning to react, causing the chemicals to spill out of the truck and on the ground. Vickery
contacted a company named Spill Center (“Spill Center”), who maintains a list of companies that
specialize in hazardous waste material clean-ups. HEPACO, Inc. (“HEPACO” or “Appellant”)
appeared on Spill Center’s list and had an outdated service agreement with a schedule of charges on
file with Spill Center. As a result, Spill Center contacted Appellant and requested its services to
clean up the hazardous waste materials leaking from Vickery’s truck.
At approximately 11:15 p.m., Mark Cooley (“Cooley”), a terminal manager for Vickery,
contacted a representative at HEPACO, inquiring about the possibility of beginning a clean-up
operation. Subsequently, on May 22, 2002, Cooley was advised by another HEPACO representative
that, although a clean-up team was almost at the spill site, Cooley, or another Vickery representative,
was required to execute HEPACO’s Blanket Rapid Response Services Agreement (“Agreement”)
before HEPACO performed any work. On May 22, 2002, at 12:18 a.m., HEPACO faxed a copy of
the Agreement to Cooley, who executed the Agreement. After Cooley signed the Agreement,
HEPACO began work on the clean-up operation. During this delay in the HEPACO team’s arrival,
representatives with the fire department and the Tennessee Emergency Management Agency
(“TEMA”) insisted that someone immediately arrive on the site to assess and control the hazardous
waste material spill. After HEPACO commenced the clean-up operation, Vickery believed that
HEPACO’s methodology was unsound and unsafe. Therefore, after HEPACO refused Vickery’s
request for an indemnity agreement, Vickery terminated the Agreement with HEPACO.
On September 19, 2002, Appellant filed a demand for arbitration, pursuant to the provisions
of the Agreement signed by Cooley, against Vickery for breach of contract. On October 4, 2002,
Appellees filed a complaint for declaratory judgment in the Haywood County Chancery Court,
seeking a declaration that the Agreement is unenforceable as a contract of adhesion or a product of
duress. Appellant filed a motion to stay litigation pending arbitration, and, in response, Appellees
1
The trial court made scant findings of fact in its order on the motion to stay the arbitration proceedings.
Additionally, after our review of the transcript of the hearing on the motion to stay arbitration, we note that the trial court
made no findings of fact after the hearing on such motion.
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filed a motion to stay arbitration and compel litigation. After a hearing on March 27, 2003, the trial
court issued an order granting Appellees’ motion to stay arbitration and compel litigation and
denying Appellant’s motion to stay litigation pending arbitration.2 Appellant timely appealed to this
Court and presents the following issues, as we perceive them,3 for our review:
I. Whether the trial court erred when it determined that the Appellees were subjected
to duress or economic duress such that the Agreement and the arbitration clause were
invalid; and
II. Whether the trial court erred when it determined that the Agreement between
Appellant and Appellees was a contract of adhesion and that the arbitration clause
was unenforceable.
For the following reasons, we reverse the decision of the trial court and remand for any further
proceedings.
Standard of Review
Our review of a trial court’s findings of fact in a civil action without a jury is de novo upon
the record, affording the trial court a presumption of correctness unless the evidence preponderates
otherwise. Tenn. R. App. P. 13(d). When a trial court makes no findings of fact, “there is nothing
in [the] record upon which the presumption of correctness contained in Tenn. R. App. P. 13(d) can
attach.” Kelly v. Kelly, 679 S.W.2d 458, 460 (Tenn. Ct. App. 1984). Therefore, our review, for such
scenario, is de novo upon the record with no presumption of correctness given to the trial court. Id.
All questions of law are reviewed by this Court de novo with no presumption of correctness given
to the trial court. Union Carbide Corp. v. Huddleston, 854 S.W.2d 87, 91 (Tenn. 1993).
Duress
Appellant first argues that the trial court erred when it invalidated the arbitration clause on
the basis that such clause was agreed to under duress or economic duress. Specifically, Appellant
asserts that, because it was not responsible for the spilling of hazardous waste materials and
Appellees had other companies available for a clean-up operation, Appellees should not be able to
defend against enforcement of the Agreement on the basis of duress or economic duress.
2
The trial court’s order does not specify on which ground it decided that there was no agreement to
arbitrate, and, therefore, we presume, from its statements at the hearing on the motions, that the trial court determined
the arbitration clause did not apply because it was part of a contract of adhesion and the product of duress.
3
Appellant raises the issue that the trial court erred when it considered the dated agreement on file with
Spill Center. Given our disposition of the issues of whether the Agreement was a contract of adhesion or the product
of duress, we need not address this issue. Additionally, Appellant raises the issue that the trial court erred when it
determined the Agreement and arbitration clause were not executed at “arm’s length.” Again, because of our disposition
of the other issues in this case, we need not address this question.
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“‘Duress’ may be defined as an unlawful restraint, intimidation, or compulsion of another
to such an extent and degree as to induce such other person to do or perform some act which he is
not legally bound to do, contrary to his will and inclination.” Johnson v. Ford, 245 S.W. 531, 538
(Tenn. 1922) (quoting First Nat’l Bank v. Sargeant, 91 N.W. 595, 601 (Neb. 1902)). Duress “‘exists
when one, by the unlawful act of another, is induced to make a contract or perform some other act
under circumstances which deprives him of the exercise of free will.’” Id. (quoting Sargeant, 91
N.W. at 601 (quoting Hackley v. Headley, 8 N.W. 511, 512-13 (Mich. 1881))). This Court has
adopted the following definition for “economic duress”:
[I]mposition, oppression, undue influence, or the taking of undue advantage of the
business or financial stress or extreme necessities or weaknesses of another; the
theory under which relief is granted being that the party profiting thereby has
received money, property or other advantage, which in equity and good conscience
he ought not to be permitted to retain.
Crocker v. Schneider, 683 S.W.2d 335, 338-39 (Tenn. Ct. App. 1984) (quoting Johnson, 245 S.W.
at 539 (quoting Rees v. Schmits, 164 Ill. App. 250, 258 (Ill. App. Ct. 1911))); Moman v. Walden, 719
S.W.2d 531, 534 (Tenn. Ct. App. 1986).
Though this case concerned the clean-up of hazardous waste materials, after our review of
the record, we cannot say that Appellees proved the existence of duress or economic duress. In the
instant case, Appellees argue that Appellant subjected Appellees to duress when Appellant waited
until right before beginning the clean-up operation to notify Appellees that the Agreement would
need to be executed before Appellant began work. This action, coupled with the exigent
circumstances intrinsic to a hazardous waste material spill, Appellees argue, resulted in the
Agreement being a product of duress or economic duress. We disagree. Appellant’s insisting on
the execution of a contract for services before beginning an operation is not unlawful, wrongful, or
coercive. See Flynt Eng’g Co. v. Cox, 99 S.W.3d 99 (Tenn. Ct. App. 2002). From the record, it
appears that such operation was rather involved and required a great deal of time and resources.
Appellees have mistaken prudence for coercion. Additionally, we note that Appellant was not
responsible for the spill of hazardous waste materials. See 28 Samuel Williston, Treatise on the Law
of Contracts § 71:23, at 522-23 (Richard A. Lord ed., 4th ed. 2003) (stating that “[i]t is not duress
or undue influence when a party is constrained to enter into a transaction by mere vexation and
annoyance or by the pressure or force of circumstances for which the other party is not responsible”).
We believe the insistence on executing a contract for services alone is not taking undue advantage
of any extreme necessity or weakness of Appellees’ position. See Flynt Eng’g Co. v. Cox, 99
S.W.3d 99 (Tenn. Ct. App. 2002). Because we hold that Appellees failed to prove the existence of
duress or economic duress, we must reverse the decision of the trial court, staying arbitration and
compelling litigation.
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Contract of Adhesion
Next, Appellant argues that the trial court erred when it determined that the arbitration clause
was unenforceable for being a contract of adhesion. For this analysis, we must determine (1)
whether the Agreement is a contract of adhesion, and (2) if so, whether the Agreement contains
unconscionable or oppressive terms to render the arbitration clause unenforceable. Buraczynski v.
Eyring, 919 S.W.2d 314, 320 (Tenn. 1996). In Buraczynski v. Eyring, the Tennessee Supreme Court
adopted the following definition for a contract of adhesion:
[A] standardized contract form offered to consumers of goods and services on
essentially a “take it or leave it” basis, without affording the consumer a realistic
opportunity to bargain and under such conditions that the consumer cannot obtain the
desired product or service except by acquiescing to the form of the contract.
Id. (quoting Black’s Law Dictionary 40 (6th ed. 1990); citing Broemmer v. Abortion Servs. of
Phoenix, Ltd., 840 P.2d 1013 (Ariz. 1992)).
After our review of the record, we cannot say that the contract at issue was a contract of
adhesion. Though the evidence in the record shows that Appellant would not commence work until
the contract was signed (i.e. on a “take it or leave it” basis) and counsel for Appellant admitted that
the contract was a standard form contract, the Agreement was not a contract of adhesion. In his
affidavit, Cooley states that attempts were made to acquire the services of a clean up team at Du
Pont. Additionally, Cooley and Thomas Moses (“Moses”), president of Spill Center, stated that Spill
Center maintained, in Moses’ words, a “computer data base with a number of contractors, who
specialize in providing services to transportation companies in the event of a hazardous materials
release.” (TR vol. 1, p. 60, 72). Though Appellees argue that the conditions were such that action
was required immediately and that there was no time to wait for another clean-up team to arrive, the
only evidence of such conditions are the conclusory statements by Cooley and Moses, who were not
present at the accident scene. After reviewing the record, we cannot say that the Appellees
sufficiently proved that the Agreement was a contract of adhesion because there is insufficient
evidence that Appellees had no alternative to executing the Agreement. Therefore, we reverse the
order of the trial court on this basis.4
4
Because we find that the Agreement was not a contract of adhesion, we need not address whether the
arbitration clause was an unenforceable provision.
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Conclusion
For the foregoing reasons, we reverse the order of the trial court, staying arbitration and
compelling litigation. We remand this case for any further proceedings consistent with this opinion.
Costs of this appeal are taxed to Appellees, Vickery Transportation, Inc., and Grammer Industries,
Inc., for which execution may issue if necessary.
___________________________________
ALAN E. HIGHERS, JUDGE
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