Raesly v. Grand Housing, Inc.

• Decision Date: 12 May 2000
• Docket Number: No. CIV.A.4:00CV29LN.,CIV.A.4:00CV29LN.
• Citation: 105 F.Supp.2d 562
• Parties: Ralph RAESLY and Sonya Raesly, Plaintiffs, v. GRAND HOUSING, INC. and Bombardier Capital, Inc., Defendants.
• Court: U.S. District Court — Southern District of Mississippi

105 F.Supp.2d 562

Ralph RAESLY and Sonya Raesly, Plaintiffs, v. GRAND HOUSING, INC. and Bombardier Capital, Inc., Defendants.

No. CIV.A.4:00CV29LN.

United States District Court, S.D. Mississippi, Eastern Division.

May 12, 2000.

Robert M. Logan, Jr., Jason Avery Mangum, Logan & May, Newton, MS, for Plaintiff.

Dorrance Aultman, Kelly Cash Lee, Aultman, Tyner, Ruffin & Yarborough, Ltd, Hattiesburg, MS, Lee N. Perry, Perry & Murr, Gulfport, MS, William H. Leech, Beth Orlansky, McGlinchey Stafford, Jackson, MS, for Defendants.

MEMORANDUM OPINION AND ORDER

TOM S. LEE, District Judge.

This cause is before the court on the motion of defendants Grand Housing, Inc. and Bombardier Capital, Inc. (Bombardier) to dismiss and compel arbitration. Plaintiffs Ralph and Sonya Raesly have responded in opposition to the motion and the court, having considered the memoranda of authorities, together with attachments, submitted by the parties, along with other pertinent authorities, concludes that defendants' motion should be granted in part and denied in part, as set forth herein.

Plaintiffs Ralph and Sonya Raesly filed this action in the Circuit Court of Lauderdale County, Mississippi against defendant Grand Housing, Inc. and Bombardier Capital, Inc., asserting claims for breach of implied and express warranties, including violation of the Magnuson-Moss Warranty-Trade Commission Improvement Act (Magnuson-Moss Warranty Act), 15 U.S.C. § 2301 et seq., all arising from their purchase of a mobile home from Grand Housing. Defendants Grand Housing and Bombardier, assignee of plaintiffs' installment contract with Grand Housing, removed the case to this court based on the court's jurisdiction under the Magnuson-Moss Warranty Act, 15 U.S.C. § 2310(d),¹ and have now moved to compel binding arbitration of plaintiffs' claims pursuant to the Federal Arbitration Act, 9 U.S.C. § 1 et seq., based on an arbitration agreement executed by plaintiffs in connection with their purchase of the subject mobile home.²

In August or September 1998,³ the Raeslys purchased a mobile home from defendant Grand Housing. Plaintiffs allege in this action that once the home was set up and they moved in, they discovered numerous defects.⁴ They state that although they reported these defects to the seller, Grand Housing, this defendant has been unable or unwilling to correct the defects. Plaintiffs have thus sued in count 1 of their complaint for alleged breach of the implied warranties of merchantability and of "fitness of its use as a residence" and for breach of express warranties, for which they demand recovery of the purchase price, all loan payments, insurance costs and incidental and consequential costs, and attorneys' fees and litigation expenses for breach of warranty under the Magnuson-Moss Warranty Act.⁵ In count 2 of the complaint, plaintiffs purport to state claims for "material misrepresentations, breach of contract and negligence" based on allegations that whereas Grand Housing's representative told them they could expect monthly utility bills of around $75 to $80, the actual bills have been substantially more, and based also on their averment that defendant's representative did not "hold" plaintiffs' check for a period of time as he had agreed and instead negotiated it prematurely, causing plaintiffs to incur overdraft charges, and to suffer embarrassment and inconvenience from bounced checks.

At the time of their purchase of the mobile home, plaintiffs signed three documents, a "Purchase Agreement," a "Manufactured Home Retail Installment Contract" and a document entitled simply "Arbitration," by the express terms of which they purportedly agreed to submit to binding arbitration "[a]ll disputes, claims or controversies arising from or relation [sic] to this Contract or the relationships which result from this Contract...."⁶ In their present motion, defendants submit that plaintiffs, by virtue of having signed this agreement to arbitrate in connection with and as part of their contract for the purchase and financing of the subject mobile home, are required to submit their claims in this action to binding arbitration and are therefore foreclosed from proceeding with the instant litigation. Accordingly, defendants request that the court dismiss this action with prejudice, and compel plaintiffs to submit their claims to arbitration.

Congress provided in the Federal Arbitration Act (FAA) that a written agreement to arbitrate in a contract involving interstate commerce "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. § 2.⁷ The effect of this section is "to create a body of federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the Act." Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). Section 3 of the FAA provides for the stay of proceedings in federal district courts when an issue in the proceedings is referable to arbitration, 9 U.S.C. § 3; and section 4 provides for orders compelling arbitration when one party has failed, neglected, or refused to comply with an arbitration agreement, 9 U.S.C. § 4. Under § 4, then, "if a party to an agreement refuses to arbitrate, the opposing party may bring an action to compel arbitration, and after hearing the parties the court `being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue,' shall direct the parties to arbitrate." If, on the other hand, "`the making of the arbitration agreement or the failure ... to perform the same be in issue, the court shall proceed summarily to the trial thereof.'" Id. (quoting § 4).

The Fifth Circuit has explained that,

[i]n adjudicating a motion to compel arbitration under the Federal Arbitration Act, courts generally conduct a two-step inquiry. The first step is to determine whether the parties agreed to arbitrate the dispute in question. This determination involves two considerations: (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.... The second step is to determine "whether legal constraints external to the parties' agreement foreclosed the arbitration of those claims."

Webb v. Investacorp, Inc., 89 F.3d 252, 257-58 (5th Cir.1996) (citations omitted).

When deciding the broader issue of whether the parties agreed to arbitrate the dispute in question, "the court must look to the body of federal arbitration law," Bhatia, 818 F.2d at 421, which recognizes that "the question of arbitrability [is to] be addressed with a `healthy regard for the federal policy favoring arbitration,' with doubts regarding the scope of the agreement resolved in favor of arbitration," id. (quoting Moses H. Cone, 460 U.S. at 24-25, 103 S.Ct. at 941).<sup>8</sup> As to the more specific issue of whether there is a valid agreement to arbitrate, "`courts generally ... should apply ordinary state-law principles that govern the formation of contracts'," Webb, 89 F.3d at 257 (quoting First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 115 S.Ct. 1920, 1924, 131 L.Ed.2d 985 (1995)), but in doing so, must give "due regard ... to the federal policy favoring arbitration," id. (quoting Volt Info. Sciences, Inc. v. Board of Trustees of Leland Stanford Jr. Univ., 489 U.S. 468, 475-76, 109 S.Ct. 1248, 1253-54, 103 L.Ed.2d 488 (1989)).

"[I]in construing an arbitration agreement within the scope of the FAA, `as with any other contract, the parties' intentions control, but those intentions are generously construed as to issues of arbitrability'." McKee v. Home Buyers Warranty Corp. II, 45 F.3d 981, 984 (5th Cir.1995) (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 627, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985)). At the same time, however, the court may grant relief to a party opposing arbitration where he presents "well supported claims that the agreement to arbitrate resulted from the sort of fraud or overwhelming economic power that would provide grounds `for the revocation of any contract'," Mitsubishi Motors, 473 U.S. at 627, 105 S.Ct. 3346, 87 L.Ed.2d 444 (quoting 9 U.S.C. § 2); see also Bhatia, 818 F.2d at 421 (court should at all times "remain keenly attuned to well-grounded claims that `the agreement to arbitrate resulted from the sort of fraud or overwhelming economic power that would provide grounds "for the revocation of any contract."'" (quoting 9 U.S.C. § 2)); Rhode v. E & T Investments, Inc., 6 F.Supp.2d 1322, 1326 (M.D.Ala.1998) ("[Section] 2 `gives States ... method[s] for protecting consumers against unfair pressure to agree to a contract with an unwarranted arbitration provision' both in equity and under principles of contract law." (quoting Allied-Bruce Terminix v. Dobson, 513 U.S. 265, 281, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995))).

In the case at bar, plaintiffs do not deny that they signed the document setting forth the arbitration agreement upon which defendants rely. They submit, however, that they nevertheless are not bound to arbitrate their claims for a number of reasons, including (1) that the arbitration agreement was not included in their purchase agreement itself but was presented as a separate document and as such, is not part of their contract; (2) that the arbitration agreement is unconscionable and should not be enforced against plaintiffs; (3) that mutuality is lacking in that the defendants did not sign and are not similarly bound by the arbitration agreement; (4) that even if plaintiffs are bound by the agreement they signed, that agreement, when considered together with the installment contract and purchase agreement, creates no unambiguous agreement to arbitrate anything; and finally, (5) that the arbitration agreement does not extend to plaintiffs' breach of warranty...