Lemus v. CMH Homes, Inc.

Decision Date12 July 2011
Docket NumberCivil Action No. C–11–159.
Citation798 F.Supp.2d 853
PartiesJesus LEMUS, Plaintiff, v. CMH HOMES, INC., et al, Defendants.
CourtU.S. District Court — Southern District of Texas


David L. Rumley, Wigington Rumley Dunn, LLP, Corpus Christi, TX, Baldemar F. Gutierrez, J. Javier Gutierrez, The Gutierrez Law Firm, Inc., Alice, TX, for Plaintiff.

Patton G. Lochridge, Carlos R. Soltero, April E. Lucas, McGinnis, Lochridge & Kilgore, LLP, Austin, TX, Lee E. Bains, Jr., Thomas W. Thagard, III, Edward S. Sledge, IV, Maynard, Cooper & Gale, P.C., Birmingham, AL, W. Scott Simpson, Simpson, McMahan, Glick & Burford, PLLC, Birmingham, AL, for Defendants.


JANIS GRAHAM JACK, District Judge.

Pending before the Court are Defendants Vanderbilt Mortgage and Finance, Inc., CMH Homes, Inc., Clayton Homes, Inc., and Bruce Robin Moore's Joint Motion to Compel Arbitration. (D.E. 21, D.E. 27). For the reasons stated herein, Defendants' motion to compel arbitration is GRANTED.

All claims asserted by Plaintiff Jesus Lemus and all claims asserted by Intervenor Vickie Long are to be decided by binding arbitration. 9 U.S.C. § 4. The Defendants shall bear the cost of arbitration, and the venue for arbitration shall be Corpus Christi, Texas.

In addition, because the Court is satisfied that this lawsuit is referable to arbitration under the parties' agreement, the Court ORDERS that this action be STAYED pending the arbitration proceedings. 9 U.S.C. § 3.

I. Jurisdiction

The Court has subject matter jurisdiction over this action pursuant to 28 U.S.C. § 1331, federal question, because Intervenor Vickie Long brings claims under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961–1968 (RICO), and Intervention–Defendants CMH Homes, Inc., Vanderbilt Mortgage and Finance, Inc., and Clayton Homes, Inc. properly removed the case to this Court pursuant to 28 U.S.C. § 1441.

II. Background

On February 28, 2003, Intervenor Vickie Long executed a Retail Installment Contract (“RIC”) to purchase a manufactured home from Defendants CMH Homes, Inc. (CMH Homes) and Clayton Homes, Inc. (“CHI”), for which Defendant Vanderbilt Mortgage and Finance, Inc. (“Vanderbilt”) provided the financing. On March 5, 2003, a Deed of Trust (“DOT”) and Builder's and Mechanic's Lien Contract (“BML”) were executed, placing liens on the real property of her husband Plaintiff Jesus Lemus in order to secure Long's debt under the RIC. (D.E. 8, Ex. B; D.E. 24 at 2.)

In October 2005, after discovery of suspicious notary practices and alleged forgery at CMH Homes stores, the Defendants secretly filed hundreds of releases of DOT and BML contracts related to the mobile home purchases of customers across Texas, including the DOT and BML involved in this case. (D.E. 24 at 3.) The BML release states, in part, that CMH Homes has been “paid in full.” (D.E. 24, Ex. 19.) The DOT release states, in part, that Vanderbilt “does hereby release the lien of said deed of trust and/or mortgage.” (D.E. 24, Ex. 20.) According to Plaintiff and Intervenor, these releases released not only the liens on Lemus' real property, but also the debt Long incurred under the RIC. (D.E. 24 at 3–4.)

On February 3, 2010, Plaintiff Lemus filed suit in state court against Defendants CMH Homes, Vanderbilt, and CHI, and against Bruce Robin Moore, Jr. (collectively, Defendants). Lemus asserted several state-law claims arising from his allegation that Defendants forged his signature as well as other signatures on the DOT and BML placing liens on his property. (D.E. 24 at 3.)

On April 21, 2011, Long filed a plea in intervention, alleging that she was fraudulently induced to enter into the RIC, that her home was improperly foreclosed on, that she made payments on the home even after her debt under the RIC was “paid in full,” and that Defendants engaged in unfair debt collection practices by continuing to collect on a debt that was no longer owed. Long, unlike Lemus, asserts that Defendants violated R.I.C.O., 18 U.S.C. §§ 1961–1968. (D.E. 8, Ex. B.)

On May 10, 2011, Defendants timely removed the action to this Court alleging federal question jurisdiction based on Intervenor's R.I.C.O. claims. (D.E. 1.)

On June 1, 2011, the Defendants, with the exception of Moore, filed a Motion to Compel Arbitration. (D.E. 21.) Plaintiffs have timely responded. (D.E. 24.) On June 30, 2011, Moore joined in the motion to compel arbitration. (D.E. 27.) Defendants subsequently filed a reply in support of their joint motion to compel arbitration. (D.E. 31.)

III. DiscussionA. Motion to Compel Arbitration

The Federal Arbitration Act (“FAA”) permits an aggrieved party to file a motion to compel arbitration when an opposing party has failed, neglected, or refused to comply with an arbitration agreement.” American Bankers Ins. Co. of Florida v. Inman, 436 F.3d 490, 493 (5th Cir.2006) (quoting Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991)); see also 9 U.S.C. § 4.

FAA Section 4 provides that, when a party petitions the court to compel arbitration under a written arbitration agreement, [t]he court shall hear the parties, and upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement. The hearing and proceedings, under such agreement, shall be within the district in which the petition for an order directing such arbitration is filed.” 9 U.S.C. § 4.

The FAA “leaves no place for the exercise of discretion by a district court, but instead mandates that district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed. Thus, ... agreements to arbitrate must be enforced, absent a ground for revocation of the contractual agreement.” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985).

When considering a motion to compel arbitration under the FAA, a court employs a two-step analysis. “First, a court must determine whether the parties agreed to arbitrate the dispute in question. Second, a court must determine whether legal constraints external to the parties' agreement foreclosed the arbitration of those claims.” Tittle v. Enron Corp., 463 F.3d 410, 418 (5th Cir.2006) (internal citations and quotation marks omitted).

“The first step of the analysis—whether the parties agreed to arbitrate the dispute in question—consists of two separate determinations: (1) whether there is a valid agreement to arbitrate between the parties; and (2) whether the dispute in question falls within the scope of that arbitration agreement.’ Id.

B. Analysis

As said, the Court first must determine whether there is a valid agreement to arbitrate between the parties. See id. Defendants argue that this dispute is subject to the arbitration clause contained in the standard retail installment contract (“RIC”) used to purchase Clayton mobile homes. (D.E. 21.) 1 They allege that Long executed such a RIC on February 28, 2003, that she is bound by its terms to arbitrate this dispute, and that Lemus, though he did not sign the RIC, is also bound to arbitrate because he accepted the benefits of the contract. (D.E. 24 at 2; D.E. 21 at 3.)

The Court has already found in another action against Defendants based on the same events that an identical arbitration clause covers the dispute in question and is otherwise valid as against signatories of the RIC. See Hafer et al. v. Vanderbilt et al., 793 F.Supp.2d 987, 1010, 2011 WL 2523610, *20 (S.D.Tex.2011). The Court granted Defendants' motion to compel arbitration, finding all the issues raised by Plaintiffs' claims were referable to arbitration and that Defendants had not waived their right to compel arbitration. ( Id.) The Court is inclined to make the same findings in this case. However, there are three distinguishing features that the Court must address before granting Defendants' motion to compel arbitration.

1. Lemus, a Non–Signatory, Is Bound to Arbitrate

First, unlike in Hafer, where each Plaintiff signed a RIC containing an arbitration agreement, Lemus, whose land was used as collateral to secure Long's debt under the RIC, did not sign a RIC in any of the transactions related to Long's purchase of the mobile home. (D.E. 21 at 5.)

A non-signatory is not generally required to arbitrate unless he otherwise agreed to do so. See Fleetwood Enterprises, Inc. v. Gaskamp, 280 F.3d 1069, 1077 (5th Cir.2002) (applying Texas law, holding that the children of customers who signed a contract to purchase a mobile home were not bound to arbitrate, explaining that because the children “are not signatories to the sales contract, are not third-party beneficiaries of the agreement or contract, and are not suing on the basis of the contract, they are not bound by the arbitration agreement signed by their parents.”); see also Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468, 478–79, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989) (“Arbitration under the [FAA] is a matter of consent, not coercion....”).

However, in certain circumstances non-signatory plaintiffs may be compelled to arbitrate their claims. See In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 739–740 (Tex.2005) (explaining various circumstances under which Texas and federal courts compel arbitration of claims of non-signatories). In In re Weekley Homes, L.P., the Texas Supreme Court explained that [i]n some cases, a nonparty may be compelled to arbitrate if it deliberately seeks and obtains substantial benefits from the contract itself.” 180 S.W.3d 127, 132 (Tex.2005) (citing Astra Oil Co., Inc. v. Rover Navigation, Ltd., 344 F.3d 276, 281 (2d Cir.2003) (holding affiliate of signatories could enforce arbitration clause as opposing party treated affiliate as part of charter contract...

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