Boyd v. Homes of Legend, Inc.
| Decision Date | 01 October 1997 |
| Docket Number | Civil Action No. 97-T-152-N.,Civil Action No. 97-T-161-N.,Civil Action No. 97-T-142-E. |
| Citation | 981 F.Supp. 1423 |
| Parties | Toby BOYD, Plaintiff, v. HOMES OF LEGEND, INC., Defendant. Daniel R. FOSTER, Sharon Foster, and Myrtle Speaks, Plaintiffs, v. HOMES OF LEGEND, INC.; et al., Defendants. Kenneth M. BASS, Plaintiff, v. HOMES OF LEGEND, INC., Defendant. |
| Court | U.S. District Court — Middle District of Alabama |
G. Houston Howard, II, Howard, Dunn, Howard & Howard, Wetumpka, AL, for plaintiffs.
Algert S. Agricola, Jr., Wallace, Jordan, Ratliff & Brandt, L.L.C., Montgomery, AL, Charles B. Campbell, David L. Selby, II, Wallace, Jordan, Ratliff & Brandt, L.L.C., Birmingham, AL, for defendant.
These three lawsuits present three primary issues. The first is whether a manufacturer, who is a nonsignatory to contracts executed by purchasers and their dealers, may invoke arbitration clauses contained in those contracts to compel arbitration of the purchasers' claims pursuant to the Federal Arbitration Act, as amended, 9 U.S.C.A. §§ 1-16, commonly known as the FAA. The second is whether the arbitration clause in one of the contracts was secured by fraud and is therefore unenforceable by the dealer. The third, more novel, issue presents a question that was left unaddressed, and thus unresolved, in this court's recent decision in Wilson v. Waverlee Homes, Inc., 954 F.Supp. 1530 (M.D.Ala.1997), aff'd, 127 F.3d 40 (11th Cir. September 18, 1997) (table). In Waverlee Homes, this court held that the Magnuson-Moss Warranty-Trade Commission Improvement Act, 15 U.S.C.A. §§ 2301-2312, severely restricts the right of manufacturers to compel consumers to arbitrate their claims of breach of written warranties. Here, the related and unanswered question is whether the Magnuson-Moss Act similarly restricts the right of dealers to compel arbitration of consumer claims for breach of implied or statutory warranties, that is, non-written warranties.
In these actions, five plaintiffs have brought claims alleging breach of implied and express warranties, various theories sounding in tort, as well as violation of the Magnuson-Moss Act, against defendant Homes of Legend, a manufacturer of mobile homes. These claims stem from the five plaintiffs' purchases of mobile homes manufactured by Homes of Legend. Two of the five plaintiffs, Toby Boyd and Kenneth M. Bass, originally filed their lawsuits in the Circuit Court of Elmore County, Alabama. The dealers who sold the mobile homes to Boyd and Bass are not parties to these two suits. The three remaining plaintiffs, Daniel R. Foster, Sharon Foster, and Myrtle Speaks (collectively, the Foster plaintiffs), originally filed the third lawsuit addressed in this opinion in the Circuit Court of Lee County, Alabama. In addition to Homes of Legend, they named as defendants the dealer Hart's Mobile Home Sales, Inc., and its owners Jimmy and Judy Hart (collectively, the Hart defendants). With one exception, the Foster plaintiffs assert the same claims against both Homes of Legend and the Hart defendants: This one exception is that the Foster plaintiffs' warranty claims against Homes of Legend are based on both written and non-written warranties, whereas their claims against the Hart defendants are based on only non-written warranties. In addition, the Foster plaintiffs alleged further breach-of-non-written-warranty, tort, and Magnuson-Moss Act claims against the Hart defendants.
Homes of Legend and the Hart defendants removed all three lawsuits from state to federal court on the basis of this federal court's concurrent federal-question jurisdiction under 28 U.S.C.A. §§ 1331 and 1441(a), the Magnuson-Moss Act, 15 U.S.C.A. § 2310(d), and this court's discretionary supplemental jurisdiction over related state-law claims upon removal. 28 U.S.C.A. § 1441(c).
Pending before the court are (1) motions by Homes of Legend to dismiss all claims against it, or, in the alternative, to compel binding arbitration under the FAA and to stay judicial proceedings pending the outcome of arbitration; and (2) a motion by the Hart defendants to dismiss the claims against them and to compel arbitration. For the following reasons, Homes of Legend's motions will be denied, and the Hart defendants' motion will be granted.
In June 1995, the Foster plaintiffs purchased from the Hart defendants a mobile home manufactured by Homes of Legend.1 In February 1996, Bass purchased a mobile home from the Hart defendants that had also been manufactured by Homes of Legend. That same month, Boyd purchased a Homes of Legend mobile home from Stuttson, Inc. All three purchases were made pursuant to retail installment contract and security agreements — that is, purchase contracts — containing clauses for binding arbitration of disputes.2 In each case, the only party signatories to the purchase contracts were the purchaser-plaintiffs, the retailer and a third-party financing institution. Homes of Legend was not a party to any of these agreements.
In their complaints, all five plaintiffs allege that Homes of Legend provided them with express written warranties that it would remedy defects in materials or workmanship in the mobile homes for one year. Additionally, all five plaintiffs allege that a myriad of state and federal consumer warranties protect their homes, including implied and non-written warranties of merchantability, habitability, and freedom from substantial defect. The five plaintiffs contend that all three homes suffer from a large number of serious manufacturing defects, enumerated in detail in the complaints, which have allegedly persisted despite Homes of Legend's repair efforts. All five plaintiffs also allege that Homes of Legend's conduct regarding the mobile homes violates consumer-protective provisions of the Magnuson-Moss Act. In addition to these breach-of-warranty claims, all five plaintiffs allege that Homes of Legend fraudulently induced them to purchase defective homes by concealing material facts from them, and all plaintiffs include in their complaints allegations of wanton construction and wanton or negligent repair against Homes of Legend.
The Foster plaintiffs' complaint, in contrast to those of Boyd and Bass, names as defendants both Homes of Legend and the Hart defendants, and, with the exception mentioned above, includes the same claims brought by Boyd and Bass as well as other claims based on breach of non-written warranty, tort, and the Magnuson-Moss Act against the Hart defendants. Specifically, the Foster plaintiffs allege that the Hart defendants committed fraud by concealing the existence of the arbitration clause in the contract governing the mobile home purchase, and accuse the Hart defendants of fraudulent concealment and misrepresentations regarding the condition of the home and the Hart defendants' ability to repair it.3 The Foster plaintiffs' complaint, however, like those of Boyd and Bass, is devoid of any allegation that Homes of Legend and the Hart defendants acted together in a prearranged, collusive scheme to defraud them.
In the pending motions, Homes of Legend and the Hart defendants seek dismissal of all claims on the ground that the binding arbitration clauses found in the purchase contracts mandate that all of the plaintiffs' claims be adjudicated in binding arbitration governed by the FAA. In the alternative, Homes of Legend asks the court to stay judicial proceedings in these cases and compel arbitration pursuant to § 3 of the FAA. Because it is not persuaded by any of Homes of Legend's arguments regarding the claims against it, as explained more fully below, this court declines to dismiss or stay the proceedings on these claims. However, the court will grant the Hart defendants' motion with respect to the claims raised against them.
The outcome of the defendants' motions hinges, as stated earlier, on the resolution of three primary issues. These three issues, in an order slightly different from that given earlier, are as follows: First, this court must determine whether there exist any grounds, in law or in equity, which permit the warrantor Homes of Legend, a nonsignatory to the purchase contracts containing the arbitration clauses, to invoke the FAA and so seek to compel arbitration of the plaintiffs' claims against it.4 Second, the court must decide the novel question of whether the Magnuson-Moss Act prohibits the Hart defendants, who have not provided the Foster plaintiffs with a written warranty, but who are signatories to the purchase contracts containing the arbitration clauses, from compelling arbitration of the warranty-based claims raised against them by the Foster plaintiffs. And, third, the court must resolve whether the arbitration clause in one of the contracts was secured by fraud and is therefore unenforceable by the dealer.
The facts of the cases addressed in this opinion are strikingly similar to those presented in Waverlee Homes, which was recently decided by this court. In Waverlee Homes, the plaintiffs were disgruntled purchasers of mobile homes pursuant to retail installment and security contracts containing binding arbitration clauses. As in the cases at bar, the Waverlee Homes plaintiffs sought relief from the mobile home manufacturer, which was not a signatory to the purchase contracts. Despite its nonsignatory status, the mobile home manufacturer in Waverlee Homes moved to compel arbitration of the plaintiffs' claims on the basis of the arbitration clauses in the purchase contracts. This court rejected the manufacturer's arguments proffered in support of its right to compel arbitration, for reasons that are equally applicable to the cases at bar, as explained more fully below.
As noted in Waverlee Homes, "the `primary purpose' of the...
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