Dell Webb Cmtys., Inc. v. Carlson, 15–1385.

• Decision Date: 28 March 2016
• Docket Number: No. 15–1385.,15–1385.
• Citation: 817 F.3d 867
• Parties: DELL WEBB COMMUNITIES, INC.; Pultegroup, Inc., Petitioners–Appellants, v. Roger F. CARLSON; Mary Jo Carlson, Respondents–Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

817 F.3d 867

DELL WEBB COMMUNITIES, INC.; Pultegroup, Inc., Petitioners–Appellants,

v.Roger F. CARLSON; Mary Jo Carlson, Respondents–Appellees.

No. 15–1385.

United States Court of Appeals, Fourth Circuit.

Argued: Dec. 9, 2015.

Decided: March 28, 2016.

ARGUED:Robert Leon Widener, McNair Law Firm, P.A., Columbia, South Carolina, for Appellants. Michael S. Seekings, Leath Bouch & Seekings, LLP, Charleston, South Carolina, for Appellees. ON BRIEF:A. Victor Rawl, Jr., Henry W. Frampton, IV, McNair Law Firm, P.A., Charleston, South Carolina, for Appellants. William Jefferson Leath, Jr., Leath Bouch & Seekings, LLP, Charleston, South Carolina; Phillip W. Segui, Jr., Amanda Morgan Blundy, Segui Law Firm, PC, Mount Pleasant, South Carolina, for Appellees.

Before TRAXLER, Chief Judge, GREGORY and DIAZ, Circuit Judges.

Reversed, vacated, and remanded by published opinion. Judge DIAZ

wrote the opinion, in which Chief Judge TRAXLER and Judge GREGORY joined.

DIAZ

, Circuit Judge:

Roger and Mary Jo Carlson signed a sales agreement with PulteGroup, Inc. and its subsidiary Del Webb Communities, Inc. (together, "Pulte") for the purchase of a lot and construction of a home in Hilton Head, South Carolina. The agreement contained an arbitration clause. This appeal stems from the Carlsons' attempt to arbitrate class-action claims against Pulte under the agreement, and Pulte's efforts to limit arbitration to the claims between the three parties. The district court held that the availability of class arbitration under an arbitration agreement is a procedural question for the arbitrator to decide, rather than a question for the court.

Because the primary goal in enforcing an arbitration agreement is to discern and honor party intent, and because of the fundamental differences between bilateral and class arbitration—which change the nature of arbitration altogether—we hold that whether parties agree to class arbitration is a gateway question for the court. Accordingly, we reverse the district court's order denying Pulte's motion for partial summary judgment, vacate the judgment dismissing Pulte's petition, and remand the case for the district court to determine whether the arbitration clause permits class arbitration.

I.

The relevant facts are not in dispute. The Carlsons signed the sales agreement at issue in March of 2002. Section 4.3 of the agreement contains an arbitration clause that, in relevant part, states:

Any controversy or claim arising out of or relating to this Agreement or Your purchase of the Property shall be finally settled by arbitration....

After Closing, every controversy or claim arising out of or relating to this Agreement, or the breach thereof shall be settled by binding arbitration as provided by the South Carolina Uniform Arbitration Act.... The rules of the American Arbitration Association (AAA), published for construction industry arbitrations, shall govern the arbitration proceeding and the method of appointment of the arbitrator.

....

Any party to this Agreement may bring action ... to compel arbitration....

J.A. 34–35.

In September 2008, the Carlsons filed suit in South Carolina state court against Pulte and two other parties. The complaint raised several claims, all regarding alleged construction defects. The Carlsons later moved to amend their complaint to add class-action allegations because their lawsuit was one of approximately 140 like cases pending against Pulte. The state court granted the motion over Pulte's objection.

Pulte then moved to dismiss the amended complaint, or in the alternative, to compel bilateral arbitration of the Carlsons' claims. The state court denied both motions, but the South Carolina Court of Appeals reversed, finding the Carlsons' claims subject to arbitration under the sales agreement with Pulte. Carlson v. S.C. State Plastering, LLC, 404 S.C. 250, 743 S.E.2d 868, 875 (S.C.Ct.App.2013)

.

The Carlsons subsequently filed a demand for arbitration with the American Arbitration Association (AAA). Their demand sought class arbitration and class certification, and set the claim amount at $75,000 "until such time as the Class is certified." J.A. 86. The class size, as identified in the demand for arbitration and attached amended complaint, accounts for approximately 2,000 homes—significantly more than the 140 or so similar claims pending against Pulte when the Carlsons moved to proceed as a class.

On May 6, 2014, the AAA manager held a conference call with the Carlsons and Pulte. During the call, the manager notified the parties that the arbitrator would decide whether the sales agreement permits class arbitration.

Three days later, Pulte filed in federal court a Petition and Complaint to Compel Bilateral Arbitration ("Petition") under § 4 of the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq.

As relevant here, Pulte argued that whether the sales agreement authorizes class arbitration is a question of arbitrability for the court to determine—not a procedural question for the arbitrator. Pulte sought a declaratory judgment that the parties did not agree to class arbitration.

Between May 2014 and March 2015, the parties filed several motions in the district court, including Pulte's motion for partial summary judgment that is the subject of this appeal. In the meantime, the arbitrator ruled that the sales agreement authorized class arbitration, but he stayed the matter for the resolution of the federal litigation. Subsequent motions in the district court and this court resulted in a stay of the arbitration proceedings pending this appeal.

The district court denied Pulte's partial summary judgment motion and dismissed the Petition. Relying on the Supreme Court's plurality decision in Green Tree Financial Corp. v. Bazzle, 539 U.S. 444, 123 S.Ct. 2402, 156 L.Ed.2d 414 (2003)

, and this court's unpublished decision in Davis v. ECPI College of Technology, L.C., 227 Fed.Appx. 250 (4th Cir.2007), the court reasoned that whether the arbitration clause permits class arbitration is a simple contract interpretation issue, and because the question "concerns the procedural arbitration mechanisms available to the Carlsons," the threshold inquiry is a question for the arbitrator rather than for the court. Del Webb Cmtys., Inc. v. Carlson, No. 9:14–cv–01877–SB, at 7 (D.S.C. Mar. 25, 2015).

This appeal followed.

II.

We review a district court's grant of summary judgment de novo. Thompson v. Aluminum Co. of Am., 276 F.3d 651, 656 (4th Cir.2002)

.

A.

We turn first to the Carlsons' contention that we should dismiss the appeal—and that the district court should have dismissed the Petition—for lack of subject-matter jurisdiction.

The Carlsons first challenge Pulte's assertion of diversity jurisdiction, contending that the amount-in-controversy requirement is not met and that the parties are not geographically diverse. We, however, are satisfied that the district court had diversity jurisdiction.¹ "In considering a suit to compel arbitration, the question of jurisdictional amount may be determined by reference to the possible award resulting from the requested arbitration." Delta Fin. Corp. v. Paul D. Comanduras & Assocs., 973 F.2d 301, 304 (4th Cir.1992)

. The Carlsons' amended complaint and demand for arbitration, together, provide that the value of their individual claim is $75,000, plus treble damages and attorneys' fees, which satisfies the statutory floor. See 28 U.S.C. § 1332(a) ; Francis v. Allstate Ins. Co., 709 F.3d 362, 368 (4th Cir.2013) (stating that attorneys' fees count towards the amount-in-controversy calculation when the contract provides for them); J.A. 40 (providing in sales agreement that award of attorneys' fees goes to the prevailing party). Moreover, the parties are completely diverse, as the Carlsons are South Carolina citizens, and the Pulte parties are Michigan and Arizona citizens. See 28 U.S.C. § 1332(a)(1) ; Home Buyers Warranty Corp. v. Hanna, 750 F.3d 427, 433 (4th Cir.2014).

The Carlsons, however, resist this conclusion on the ground that South Carolina State Plastering, LLC ("SCSP"), a defendant named in the original state court complaint, is a South Carolina citizen. But SCSP is not a party to the federal proceedings, and its citizenship is therefore irrelevant. Further, SCSP did not agree to arbitrate with the Carlsons and is not a party to the underlying arbitration. See Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 20, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)

(calling for piecemeal resolution in different forums of a dispute when the plaintiff has an arbitration agreement with some defendants and not others because "an arbitration agreement must be enforced notwithstanding the presence of other persons who are parties to the underlying dispute but not to the arbitration agreement").

We also conclude that the district court had jurisdiction under the Class Action Fairness Act of 2005 (CAFA), which provides that a district court has original jurisdiction over class actions with an amount in controversy greater than $5,000,000 and in which "any member of a class of plaintiffs is a citizen of a State different from any defendant." 28 U.S.C. § 1332(d)(2)(A)

. To determine federal jurisdiction over an FAA § 4 petition, the court "may ‘look through’ [the] petition to determine whether it is predicated on an action that ‘arises under’ federal law." Vaden v. Discover Bank, 556 U.S. 49, 62, 129 S.Ct. 1262, 173 L.Ed.2d 206 (2009) (determining jurisdiction over a petition to compel arbitration of class-action claims); see also 9 U.S.C. § 4 (providing that a petition to compel arbitration is proper in federal court when the court "would have jurisdiction under title 28 ... of a suit arising out of the controversy between the parties").

Jurisdiction under CAFA, then, depends on the underlying substantive controversy—here, the putative class action. And in "looking through" Pulte's FAA petition, we find federal jurisdiction would be proper. Vaden, 556 U.S. at 62, 129 S.Ct. 1262

. As discussed,...