Court Opinion

ID: 9710630
Source: CourtListenerOpinion
Date Created: 2023-08-26 04:13:43.682864+00
Date Added: 2024-06-11T18:22:58.632124
License: Public Domain

Dooley, J.,
dissenting. Based on the facts and history described in the majority opinion, its conclusion looks fair: defendant went through arbitration and lost and is now trying to raise by counterclaim the same issues he lost in arbitration. If the majority had fully described the events and the position of defendant, I would have agreed with it. This is, however, a case in which context is everything, and the key points of the context are missing from the opinion. Once the context is understood, I believe defendant should be allowed to pursue his counterclaim; thus, I dissent from the majority opinion affirming its dismissal.
There are three items missing from the majority analysis. The first, and most important, is the full scope of the dispute-resolution part of the contract and its significance for the applicable law. The contract provided not only that any dispute over the milking equipment would be decided in a New York forum, but also that New York law would govern the dispute. The choice-of-law question is particularly important to this case because the laws of Vermont and New York are different with respect to contractual waivers of consequential damage *320claims arising out of a breach of warranty. Under Vermont law, provisions that exclude or modify remedies for breach of certain warranties are unenforceable with respect to the sales of new consumer goods, 9A V.S.A. § 2-316(5), and the definition of “consumer” extends to farmers who purchase goods for the operation of a farm for business purposes. 9 V.S.A. § 2451a(a); see 9A V.S.A. § 2-316(5) (referring to 9 V.S.A. § 2451 for definition of “consumer”). In New York, such exclusions are valid. See N.Y. U.C.C. § 2-316(4) (McKinney 1993).
The difference in the law of modification of warranties is critical to this case. Plaintiff sold defendant a defective milking parlor. Under Vermont law, defendant does not have to pay full retail value for the parlor and can recover for any lost milk production as a result of the defective parlor, irrespective of any contractual provision that attempts to limit defendant’s remedies. Under New York law, defendant does not have to pay full retail value for the parlor, but cannot recover any damages caused by the defective parlor. Since the sums claimed for consequential damages far exceed the value of the parlor, the applicability of New York law greatly restricts defendant’s remedy.
The designation of a New York dispute resolution forum and the use of New York law is contained in contract boilerplate about which there is no negotiation. Although the sale was consummated in Vermont, the goods were delivered in Vermont and the parlor was used in Vermont, New York was chosen apparently because the main office of plaintiff is in Syracuse, New York. If this dispute were to reach the merits, I think it likely we would hold that the forum selection clause was unreasonable under the circumstances and unenforceable. See Chase Commercial Corp. v. Barton, 153 Vt. 457, 460, 571 A.2d 682, 685 (1990). For similar reasons, I believe we would not enforce a contractual requirement that New York law governs this dispute. See Restatement (Second) of Conflict of Laws § 187 cmt. b (1971); see generally E. Scoles & E Hay, Conflict of Laws § 18.5, at 640 (1982) (noting that choice of law provisions in adhesion contracts generally “will be ignored only if its application would be to the detriment of a weaker party” and collecting cases). The Vermont Legislature’s decision to protect farmers by ensuring that they have full warranty protection when they buy .goods is illusory if, by boilerplate,- the seller can contractually limit the warranties and declare that the law of another state, where the contractual limit is valid, applies to any contract dispute.
Second, defendant intentionally removed the claim stated in his counterclaim from the jurisdiction of the New York arbitrator. Under *321the rules of the American Arbitration Association, counterclaims are permissive, but a party asserting a counterclaim must pay a filing fee based on the amount of the claim. For defendant’s counterclaim the amount of the filing fee would have been $1,500. After learning of the fee, defendant abandoned his plan to assert a counterclaim before the arbitrator. The arbitrator’s initial award stated that he had resolved defendant’s counterclaim against him. Defendant’s counsel sent the arbitrator a letter requesting that the statement be deleted:
The Respondent . . . never filed any counterclaim for damages in the arbitration proceeding and, in fact, made an express decision not to do so to prevent possible res judicata problems should the respondent seek to litigate damage claims in the future.
There was evidence of damage suffered by the respondent introduced at the arbitration hearing. That evidence, however, was introduced as a defense to the Petitioner’s claim for the price of the milking parlor, not as evidence in support of any counterclaim.
The arbitrator then issued an amended award deleting any reference to a counterclaim.
Counterclaims are also permissive in New York courts. See N.Y. Civ. Prac. L. & R. 3019, Practice Commentary 3019:2 (McKinney 1991). Thus, defendant was under no obligation to present the counterclaim to the New York court when plaintiff moved to confirm the arbitration award.
Third, the arbitrator never considered the claims that defendant raises in his counterclaim. In response to arguments made by defendant, the arbitrator ruled that the clause limiting damages was part of the basic agreement between the parties and that “[t]he proof does not support [the] contention” that it was only part of separate documents used to identify the items supplied and the price. Further, the arbitrator found that the warranty had not “failed of its essential purpose” so that consequential damages for breach thereof were not available under UCC § 2-719(2). The arbitrator never found that defendant did not suffer consequential damages or rule on the validity of the contractual prohibition on the recovery of such damages. I cannot agree with the majority’s statement that the arbitrator “found no merit to Gray’s claim for consequential damages.”
At the beginning of this dissent, I summarized the way the case should be viewed from the majority’s perspective. Let me now suggest an alternative view:
*322A farmer, whose business has been greatly damaged by a defective milking machine sold by plaintiff, faces a demand for payment for the machine and a collection action in a distant forum where he cannot effectively seek damages for his real losses. He tries to minimize plaintiff’s claims, but states that he reserves the right to bring a claim for his losses in a forum where it can be heard. He waits until the case reaches Vermont, where the law supports his claim for damages and brings his claim at the earliest possible opportunity in response to plaintiff’s enforcement of judgment action.
We can say, of course, that defendant had alternatives. He could have refused to participate in the New York arbitration and instead brought an action here seeking to challenge the forum and law-selection clauses, as well as the contractual limit on warranty damage claims. That would have been an expensive, and I think unnecessary, alternative. Plaintiff has used the arbitration proceeding to obtain a judgment, and that judgment is not in issue. It makes little difference whether we intervene now or in the beginning of this dispute.
As the majority states, the issue before us is whether defendant had a full and fair opportunity to litigate his claim for consequential damages as a result of plaintiff’s breach of warranty. Dragged to an inconvenient forum and forced to litigate under substantive rules that virtually prohibited his claim, I believe defendant had no full and fair ability to litigate his claim for consequential damages. Moreover, he appeared in fora where counterclaims were not compulsory so his failure to raise a' counterclaim there should not preclude him from doing so here. See Restatement (Second) of Judgments § 22(1) (1982). Nor is this one of the limited circumstances where the relationship between the counterclaim and plaintiff’s claim is such that the counterclaim would nullify the initial judgment or would impair rights established in the initial action. See id. § 22(2)(b) cmt. f; Rowland v. Harrison, 577 A.2d 51, 57 (Md. 1990) (“[W]here the same facts may be asserted as either a defense or a counterclaim, and the issue raised by the defense is not litigated and determined so as to be precluded by collateral estoppel, the defendant in the previous action is not barred by res judicata from subsequently maintaining an action on the counterclaim.”). Irrespective of the result of the counterclaim, plaintiff still has its judgment and may enforce it.
*323I would reverse the grant of summary judgment and allow defendant to go forward with his counterclaim.* I am authorized to say that Justice Gibson joins in this dissent.

 Plaintiff has not argued that defendant’s counterclaim, if it survives, must be presented to arbitration, an issue that is intertwined with the forum location and choice-of-law questions. To the extent it remains in the case, it should be resolved in the first instance by the superior court.