Marroquin v. Dan Ryan Builders Mid-Atl., LLC

• Decision Date: 11 March 2020
• Docket Number: Civil Action No.: 5:19-cv-00083
• Court: U.S. District Court — Western District of Virginia
• Parties: OSCAR A. MARROQUIN and OLGA Y. MARROQUIN, Plaintiffs, v. DAN RYAN BUILDERS MID-ATLANTIC, LLC, Defendant.

OSCAR A. MARROQUIN and OLGA Y. MARROQUIN, Plaintiffs, v. DAN RYAN BUILDERS MID-ATLANTIC, LLC, Defendant.

Civil Action No.: 5:19-cv-00083

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF VIRGINIA HARRISONBURG DIVISION

March 11, 2020

By: Elizabeth K. Dillon United States District Judge

MEMORANDUM OPINION

Oscar and Olga Marroquin contracted with Dan Ryan Builders Mid-Atlantic, LLC (Dan Ryan) to build a house. The Marroquins bring claims against Dan Ryan for breach of warranty. Dan Ryan removed this case from Frederick County Circuit Court¹ and now moves to compel arbitration pursuant to the Federal Arbitration Act (FAA), 9 U.S.C. §§ 1-16. The court held oral argument on this motion on March 4, 2020. For the reasons stated below, the motion to compel arbitration will be granted.

I. BACKGROUND

The parties executed an Agreement of Sale on September 23, 2017. (Compl. Ex. A, Dkt. No. 1-3.) Pursuant to this agreement, Dan Ryan agreed to sell a residential home located on Lot 00.0195 in Old Dominion Greens Subdivision with a street address of 105 Reedville Court, Stephens City, VA 22655. Plaintiffs also signed a Limited Warranty Agreement issued by Quality Builders Warranty (QBW) Corporation. The Limited Warranty Agreement was attachedto the Agreement of Sale. (Id. Ex. B.)

Plaintiffs allege that they took possession of the Property on or about October 31, 2017. (Compl. ¶ 6.) Plaintiffs contend that the dwelling as delivered was not free from structural defects, would not pass without objection in the trade, was not constructed in a workmanlike manner, and was not fit for habitation. (Id. ¶¶ 7-9.) Between February 23, 2018, and May 3, 2018, the Frederick County Inspections Department issued a series of Correction Orders to Dan Ryan concerning issues with the construction of the plaintiffs' home. (Id. ¶ 10, Ex. C.) In April 2018, Oscar Marroquin emailed Donald Brown, an employee of Dan Ryan, with a list of issues related to the house. (Id. ¶ 11, Ex. D.) On July 10, 2018, a building code official sent a certified letter to Dan Ryan detailing some of the ongoing issues relating to the home. (Id. ¶ 12, Ex. E.) On September 12, 2018, October 15, 2018, and August 1, 2019, counsel for the Marroquins sent letters detailing issues related to the dwelling. (Id. ¶¶ 13-16, Ex. F, G, H.) Plaintiffs allege that some of the issues have been addressed, but the issues in the August 1, 2019 letter remain unfixed. (Id. ¶ 17.) Plaintiffs bring claims for breach of statutory warranty, Virginia Code § 55.1-357, and breach of the Limited Warranty Agreement.

The Sales Agreement has a section titled "Disclaimer of Warranty and Dispute Resolution." It states:

Any dispute arising under or pursuant to this Agreement, or in any way related to the Property and/or with respect to any claims arising by virtue of any representations alleged to have been made by Us, or any agents and/or employees thereof . . . which We and You do not resolve by mutual agreement and which does not fall within the scope and jurisdiction of the Limited Warranty Agreement for whatever reason . . . shall be settled and finally determined by arbitration and not in a court of law, irrespective of whether or not such claim arises prior to or after Settlement hereunder.

(Compl. Ex. A ¶ 19(b).) At the bottom of this section, the Agreement states (in bold, capitalletters): "PURCHASER ACKNOWLEDGES THAT THIS AGREEMENT IS SUBJECT TO MANDATORY BINDING ARBITRATION." Plaintiffs initialed their acknowledgement of this statement. (Id.)

The Limited Warranty Agreement also has a mandatory arbitration provision. It sets forth a Complaint and Claim Procedure for faults or defects. (Id. Ex. B. ¶ VI.) If items are still disputed following a four-step dispute resolution process,

disputed items shall be submitted for binding arbitration by QBW to Construction Arbitration Program, administered by DeMars & Associates Limited (CAP-Home), or such other independent arbitration service as may be designated by QBW, for resolution in accordance with the rules and regulations for home warranty disputes of CAP-Home or such other service.

(Id. Ex. B ¶ VI, D.)

II. ANALYSIS

A. Standard of Review

When addressing a motion to compel arbitration under the FAA, courts apply a standard that is "akin to the burden on summary judgment." Galloway v. Santander Consumer USA, Inc., 819 F.3d 79, 85 n.3 (4th Cir. 2016). "If the party seeking arbitration has substantiated the entitlement by a showing of evidentiary facts, the party opposing may not rest on a denial but must submit evidentiary facts showing that there is a dispute of fact to be tried." Oppenheimer & Co. v. Neidhardt, 56 F.3d 352, 358 (2d Cir. 1995), cited with approval in Chorley Enters., Inc. v. Dickey's Barbecue Rests., Inc., 807 F.3d 553, 564 (4th Cir. 2015). "Where the party 'show[s] genuine issues of material fact regarding the existence of an agreement to arbitrate,' . . . that party is entitled to a jury trial on the issue." Galloway, 819 F.3d at 91 (quoting Chorley Enters., 807 F.3d at 564).

B. FAA

The FAA reflects a "liberal federal policy favoring arbitration agreements." Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 91 (2000). The FAA provides that:

A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

9 U.S.C. § 2. Upon a finding that an issue is "referable to arbitration under such an agreement," a court "shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement." Id. § 3; Murray v. UFCW Int'l Union, 289 F.3d 297, 301 (4th Cir. 2002) ("When parties have entered into a valid and enforceable agreement to arbitrate their disputes and the dispute at issue falls within the scope of that agreement, the FAA requires federal courts to stay judicial proceedings . . . and compel arbitration in accordance with the agreement's terms.").

A litigant may compel arbitration under the FAA upon the demonstration of: (1) the existence of a dispute between the parties; (2) a written agreement that includes an arbitration provision that purports to cover the dispute; (3) the relationship of the transaction, which is evidenced by the agreement, to interstate or foreign commerce; and (4) the failure, neglect, or refusal of the other party to arbitrate the dispute. Whiteside v. Teltech Corp., 940 F.2d 99, 102 (4th Cir. 1991); Adkins v. Labor Ready, Inc., 303 F.3d 496, 500-01 (4th Cir. 2002). "The party seeking to compel arbitration bears the burden of establishing the existence of an arbitrationprovision that purports to cover the dispute." Lovelady v. Five Star Quality Care-VA, LLC, No. 4:18-cv-18, 2018 WL 3580768, at *7 (E.D. Va. July 25, 2018). "If the party makes this evidentiary showing, the party opposing arbitration must come forward with sufficient facts to place the entitlement to arbitration in dispute." Id. (citing Chorley Enters., 807 F.3d at 564).

Arbitration is a matter of contract, and courts "must put arbitration agreements on equal footing with other contracts and enforce them according to their terms." AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011). Whether a contract is enforceable is governed by the contract formation and interpretation principles of the forum state. Cara's Notions, Inc. v. Hallmark Cards, Inc., 140 F.3d 566, 569 (4th Cir. 1998). When determining the scope of a valid arbitration clause, however, federal courts apply the "federal substantive law of arbitrability." Int'l Paper Co. v. Schwabedissen Maschinen & Anlagen GMBH, 206 F.3d 411, 417 n.4 (4th Cir. 2000) (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)).

C. Plaintiffs' Claims are Subject to Arbitration

Under the four factors listed above, the existence of a dispute between the parties (factor one) and plaintiffs' refusal to arbitrate (factor four) are not at issue and are undisputed. The third factor, which considers the relationship of the transaction to interstate commerce, is also satisfied. The FAA defines "commerce" as "commerce among the several States or with foreign nations, or in any Territory of the United States or in the District of Columbia." 9 U.S.C. § 1. Congress exercised "the broadest permissible exercise" of its Commerce Clause power, and "it is perfectly clear that the FAA encompasses a wider range of transactions than those actually 'in commerce'—that is, 'within the flow of interstate commerce.'" Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 56 (2003) (quoting Allied-Bruce Terminix Cos. v. Dodson, 513 U.S. 265, 273 (1995)); Rota-McLarty v. Santander Consumer USA, Inc., 700 F.3d 690, 697 (4th Cir. 2012)("[T]he reach of the [FAA] statute is broad . . . . The Supreme Court has interpreted this provision as exercising the full scope of Congress's commerce-clause power."). Diverse citizenship by itself is not enough to determine the nature of the transaction. Rota-McLarty, 700 F.3d at 697. Even so, this case involves a Maryland company contracting to build a house in Virginia. The interstate nature of the transaction is apparent. See, e.g., Stinson v. Am. Home Place, Inc., 108 F. Supp. 2d 1278, 1281 (M.D. Ala. 2000) ("The requirement of interstate commerce is met here because AHP, a Georgia corporation, contracted with Stinson, an Alabama resident, to build a home for Stinson in Alabama, and because the materials used in the construction of the home traveled in interstate commerce.").²

The second factor—the existence of a written agreement that covers the...