Collins v. D.R. Horton, Inc.

• Court: U.S. District Court — District of Arizona
• Writing for the Court: Silver
• Citation: Collins v. D.R. Horton, Inc., 361 F.Supp.2d 1085 (D. Ariz. 2005)
• Decision Date: 21 March 2005
• Docket Number: No. CV-99-0330-PHX-ROS.,CV-99-0330-PHX-ROS.
• Parties: Julie E. COLLINS, et al., Plaintiffs, v. D.R. HORTON, INC., Defendant.

361 F.Supp.2d 1085

Julie E. COLLINS, et al., Plaintiffs, v. D.R. HORTON, INC., Defendant.

No. CV-99-0330-PHX-ROS.

United States District Court, D. Arizona.

March 21, 2005.

COPYRIGHT MATERIAL OMITTED

Lawrence Allen Katz, Esq., Monica Linn Goebel, Esq., Steptoe & Johnson LLP, Phoenix, AZ, for Plaintiffs.

Lonnie J. Williams, Jr., Esq., Quarles & Brady Streich Lang LLP, Lisa Marie Coulter, Esq., Kristin Major Siciliano, Snell & Wilmer LLP, Phoenix, AZ, for Defendant.

William D. Holm, Esq., Ann Elizabeth Larimer, Jones Skelton & Hochuli PLC, Phoenix, AZ, for Intervenor.

ORDER

SILVER, District Judge.

Plaintiffs Julie E. Collins ("Collins") and Robert B. Ryan ("Ryan") move this Court pursuant to 9 U.S.C. §§ 9 and 10 for an order confirming in part and vacating in part an arbitration award issued on October 10, 2003. For the reasons stated below, the Motion to Confirm in Part is partially granted and partially denied. The Motion to Vacate in Part is denied.

BACKGROUND

Defendant D.R. Horton, Inc. ("Horton") is a homebuilding company with operations in several states. (Compl. ¶ 10 [Doc. # 1]). In 1997, the company signed a merger agreement with Continental Homes Holding Corporation ("Continental"), a company in the homebuilding and home mortgage business located in Scottsdale, Arizona. (Id. ¶¶ 7, 13.)

In anticipation of the merger, Continental decided to enter into employment agreements with certain of its employees. (Id. ¶ 18.) The agreements were designed to induce the employees to stay on with the merged company for at least a period of time sufficient to accomplish the merger and the related combination of operations. (Id.)

Among those who entered into employment agreements were Plaintiffs Collins and Ryan and nonparty W. Thomas Hickcox ("Hickcox"). (Id. ¶ 17, 38; Exh. A to Pl.'s Mot. [Doc. # 229].) Collins was Continental's Chief Financial Officer, Treasurer, and Secretary. (Compl.¶ 9.) Ryan was the Vice President of Management Information Systems and a member of the Board of Directors. (Id.) Hickcox was Continental's Chief Executive Officer. (Exh. A to Pl.'s Mot.)

Among other things, Plaintiffs' employment agreements set forth the severance payments Plaintiffs would receive in the event their employment was terminated with or without cause (Compl.¶¶ 19, 41.) The agreements also set forth the payments Plaintiffs would receive if they resigned during the term of the agreements for "good reason." (Id.) Hickcox's agreement contained similar provisions. (07/02/01 Order at 4 [Doc. # 170].)

As negotiations over the merger continued, an issue arose concerning whether Continental employees would be able to accelerate vesting of their stock options at the time of the merger. (Compl.¶ 66.) The proposed form of the merger did not allow for acceleration. (Id.) Plaintiffs allege that — to induce support for the merger — Horton verbally promised them and other Continental employees that it would give them 30,000 shares of its stock to offset the loss of their unvested options. (Id.)

The Continental-Horton merger became effective in April 1998. (Id. ¶ 13.) In November 1998, Horton notified Hickcox that it was terminating him without cause. (See 07/02/01 Order at 2.) Shortly thereafter, Collins and Ryan resigned their positions in the company, invoking the "for good reason" provision in their employment agreements. (Compl.¶¶ 34, 56.)

On February 22, 1999, Hickcox filed suit against Horton in this District, alleging breach of contract, failure to pay wages, promissory estoppel, and fraud. (Hickcox v. D.R. Horton, Inc., CV-99-239-PHX-SRB.) The lawsuit was assigned to Judge Earl H. Carroll and later transferred to Judge Susan R. Bolton. Hickcox claimed that Horton miscalculated the severance payments due under the provision of his employment agreement governing terminations without cause. (07/02/01 Order at 2.) He also claimed that Horton had refused to provide him with his portion of the 30,000 shares of stock it allegedly promised. (Id.)

That same day, Collins and Ryan jointly filed suit against D.R. Horton in this District, also alleging breach of contract, failure to pay wages, promissory estoppel, and fraud. This Court received the assignment. Collins and Horton claimed that they had resigned for "good reason" and that Horton had refused to pay them severance pay and benefits due under their employment agreements. (Compl.¶¶ 36, 58.) Like Hickcox, Collins and Ryan further claimed that Horton had reneged on its alleged 30,000-share promise. (Id. ¶¶ 66-70.)

On May 14, 1999, Horton moved in Hickcox to dismiss the plaintiff's claims and compel arbitration based on the compulsory arbitration provision in the parties' employment agreement. On May 27, 1999, however, the Ninth Circuit held that the Federal Arbitration Act ("FAA") does not apply to employment contracts and that compulsory arbitration provisions in such contracts were unenforceable. See Craft v. Campbell Soup Co., 177 F.3d 1083, 1093 (9th Cir.1998). The Hickcox court thus denied the motion to dismiss. Horton did not move to compel arbitration in Collins, but preserved the contractual agreement to arbitrate as an affirmative defense.

The Hickcox and Collins actions thereafter proceeded through discovery and to the dispositive motion phase. Collins and Ryan moved for partial summary judgment in Collins on July 31, 2000, and Horton cross-moved for partial summary judgment on August 2, 2000. On December 12, 2000, Hickcox and Horton each filed motions for partial summary judgment in Hickcox.

On December 27, 2000, Horton moved to consolidate the Hickcox and Collins actions, arguing, among other things, that both cases involved an alleged breach of a verbal promise to provide the plaintiffs with 30,000 shares of Horton stock. (Exh. A. to Pl.'s Mot. at 6.) Judge Bolton acknowledged that the contract and fraud claims arising out of the alleged promise presented a common issue, but denied the motion to consolidate based on differences in the parties wage claims. (07/02/01 Order at 5.)

In a decision entered on March 30, 2001 and in a written opinion entered on August 31, 2001, this Court denied the cross-motions for partial summary judgment filed in Collins. On July 23, 2001, Judge Bolton granted summary judgment in favor of Horton on some of the plaintiff's claims in Hickcox, but found the remaining claims survived summary judgment and required a trial. This Court scheduled a bench trial in Collins to begin on May 14, 2002. Judge Bolton scheduled a jury trial in Hickcox to begin on March 12, 2002.

In the meantime, on March 31, 2001, the United States Supreme Court issued its decision in Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 121 S.Ct. 1302, 149 L.Ed.2d 234 (2001), a case that had been appealed from the Ninth Circuit. The Supreme Court held that, contrary to the Ninth Circuit's reasoning in Craft, the FAA does apply to employment contracts (except contracts for employment of transportation workers) and that otherwise valid compulsory arbitration provisions were enforceable. On July 30, 2001, Horton moved to dismiss the Collins action and compel arbitration based on the ruling in Circuit City. The Court granted the Motion on March 29, 2002.

On March 28, 2002, the day before the Court entered its Order compelling arbitration, a jury returned a verdict in favor of the plaintiff in Hickcox on the contract and fraud claims related to Horton's alleged promise to transfer 30,000 shares. (See 03/05/03 Order at 2-3 [Doc. # 223].) The jury awarded Hickcox $87,500.00 in compensatory damages (representing the value of Hickcox's portion of the 30,000 shares as stipulated by the parties at trial) and $4,100,000.00 in punitive damages. (Id. at 3.) Judge Bolton later remitted the punitive damage award to $1,000,000.00 but rejected other efforts to overturn the verdict. (Id.)

On May 21, 2002, Collins and Ryan moved this Court to reconsider its Order compelling arbitration with respect to its claims arising out of the alleged 30,000-share promise. (03/05/03 Order at 3.) They argued that those claims were not arbitrable. (Id. at 4-7.) They further argued that collateral estoppel barred relitigation of issues relating to those claims and that the issue of collateral estoppel should be decided by a judge rather than an arbitrator. (Id. at 7-14.) The Court denied the motion on March 5, 2003, finding that both the claims and the question of collateral estoppel should be submitted to the arbitrators. (Id. at 15.)

Collins and Ryan arbitrated their claims before a panel of three arbitrators in May 2003. Before the evidentiary hearing, they asked the arbitrators to apply collateral estoppel to their contract and fraud claims involving Horton's alleged promise of 30,000 shares, based on the Hickcox judgment. (See Exh. F. to Pls.' Mot.) In an order dated April 9, 2003, the arbitrators refused to treat the Hickcox judgment as final because the judgment was on appeal. The relevant text of the order reads as follows:

"The arbitrators have considered all of the pleadings and documents that the parties have agreed might be considered in addressing the argument of Plaintiffs Collins and Ryan that collateral estoppel (issue preclusion) should be attributed in this arbitration to the resolution of various issues against Defendant D.R. Horton in the Hickcox case."

"Although the argument for collateral estoppel to at least some issues might be compelling if this were an appealable proceeding in a court of law, the arbitrators conclude that collateral estoppel should not be applied in this binding arbitration. The reason is that an appeal is pending in the Hickcox matter, an appeal that we gather will not be resolved until well beyond the projected end of the current proceeding. We recognize that the pendency of — and possible reversal in — an appeal would not necessarily deprive a judgment of preclusive effect in a collateral proceeding in a court of law. There, the availability...