Arizona Court Rejects Propane Arbitration Clause

Many propane distributors include arbitration clauses in their customer agreements. These clauses are designed to have a private arbitration panel — rather than the court and jury system — resolve disputes or claims that are raised by customers.

Some courts have tended to be skeptical of such clauses in consumer agreements. A good example is a recent Arizona federal court decision that refused to enforce an arbitration clause in a standard propane service agreement. The case is CSAA Affinity Insurance vs. AmeriGas Propane.

Property Damage

The case arose from an incident in which the water pipes in the home of Vincent and Carmen Kasarkis in Pinetop, Arizona, froze due to a lack of heat in the home. CSAA Affinity Insurance was the property insurance carrier for the Kasarkises and it paid almost $250,000 for the damage to the property.

Propane had been supplied to the Kasarkis home by AmeriGas Propane, and the propane apparently was used to provide heat to the home. Under a doctrine known as subrogation, CSAA filed a lawsuit against AmeriGas seeking to recover the amount it paid the Kasarkises. It alleged that AmeriGas’ negligence resulted in the lack of heat in the home and consequent freezing of the water pipes.

Missing Pages

AmeriGas filed a motion to stay the court proceedings and compel arbitration of the claim. It argued that arbitration was mandated by its written contract with Vincent Kasarkis. In support of its motion, AmeriGas presented two pages from an agreement that was signed by Kasarkis and returned to AmeriGas.

The first page was labeled “Page 1 of 3” and contained Kasarkis’ name, contact information and address. The second page was labeled “Page 4 of 4” and included the signatures of Kasarkis and an AmeriGas employee, who signed on behalf of Graves Propane, which was the name under which AmeriGas transacted business in Pinetop. Neither page contained an arbitration clause.

AmeriGas also provided the written declaration of its employee, Robert Cassidy. This was accompanied by four pages, which Cassidy indicated was the form of the complete agreement that had been signed by Kasarkis. The first three pages of this document were labeled “Page 1 of 3,” “Page 2 of 3” and “Page 3 of 3” respectively. The fourth page was labeled “Page 4 of 4.” The page that was labeled “Page 3 of 3” contained an arbitration clause.

No Recollection

In his declaration, Cassidy indicated that AmeriGas customers often return only the signature page of an agreement. Since agreements are updated periodically, he said, it was AmeriGas’ practice to label them with a revision number on the signature page. This would allow AmeriGas to determine which version of the agreement had been signed by the customer. The revision number of the four-page form agreement was the same as the revision number on the page actually signed by Kasarkis.

CSAA responded that the two-page document signed by Kasarkis simply did not contain an arbitration clause. This was accompanied by a written statement from Kasarkis that he did not recall receiving anything from AmeriGas besides the two pages that he reviewed, signed and returned to AmeriGas. AmeriGas responded that Kasarkis could have obtained the full agreement at any time upon request, and that its online terms and conditions included an arbitration clause.

Common Practice

The court held an evidentiary hearing, at which both Kasarkis and Cassidy testified. Cassidy testified that AmeriGas would typically email a blank agreement to a new customer, who would fill it in, sign it and return it to AmeriGas. He didn’t know why only the first and fourth pages of the agreement were in the Kasarkis file but said that it was “fairly common” for customers to return only the first page (which they filled out) and the fourth page (which they signed).

Cassidy did not know how many pages of the agreement were actually sent to Kasarkis, and he said that any emails between Kasarkis and AmeriGas no longer remained in the AmeriGas system. He said that nothing required a customer to visit the AmeriGas website or to click on or view the terms and conditions set forth there. Customers are notified on their invoices that the website terms and conditions are periodically updated and can be viewed on the website.

Not 100%

Kasarkis testified that his normal practice would be to return all pages that were sent to him. However, he could not be “100%” about that in this case. He said that AmeriGas never asked him to send back additional pages. He also had not retained the emails between himself and AmeriGas regarding the agreement.

The court issued its ruling on June 11, 2021. It denied the AmeriGas motion to stay proceedings and compel arbitration. It said:

“[AmeriGas has] not met [its] burden of establishing that [Kasarkis] entered into an agreement containing an arbitration clause. Although [AmeriGas asserts] that the terms of service sent to [Kasarkis] … contained an arbitration clause per [its] usual practice, [it] has not established that the specific agreement accepted by [Kasarkis] contained an arbitration clause.”

Website Provisions

The court rejected the idea that Kasarkis would be bound by updated terms and conditions on the company website:

“Although [AmeriGas] assert[s] that the website terms and conditions bind customers, [it] provide[s] no legal basis for the claim that AmeriGas can unilaterally alter its contract with customers to incorporate terms and conditions on its website. Customers’ obligations to AmeriGas remain the same and they are not given the opportunity to opt out of the updated terms without discontinuing service. The court cannot find that the terms were incorporated into the [Kasarkis] agreement.”

On Dec. 13, 2021, AmeriGas filed a motion to reconsider the court’s ruling. The company presented newly discovered evidence in the form of a statement from its former employee, who was responsible for mailing out contracts to customers in Pinetop at the time of the Kasarkis agreement.

She said that she always sent out the full agreement and would never send out only the first and last pages. However, the court ruled that her statement did not meet the proper standard for presentation of newly discovered evidence.

The court added that this new statement, even if considered by the court, would not change the result. AmeriGas still had no direct evidence that the agreement signed by Kasarkis contained all four pages. AmeriGas also presented additional authority in support of its position that its website provisions regarding arbitration were incorporated into the Kasarkis agreement. This new authority, the court held, was insufficient to change the original ruling.

The case is now in discovery and remains pending in the trial court.