Hardee v. CMH Homes, Inc

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF LOUISIANA

THOMAS R. HARDEE CIVIL ACTION

VERSUS NO. 21-641

CMH HOMES, INC., ET AL. SECTION D (3)

ORDER AND REASONS

Before the Court is Defendants Southern Energy Homes, Inc.’s and CMH

Homes, Inc.’s Motion to Stay Pending Arbitration.1 No opposition to the Motion has

been filed. After careful review of the Motion and supporting memoranda, the record,

and the applicable law, the Court grants the Motion.

I. FACTUAL BACKGROUND

This dispute arises from the installation of a purportedly faulty roof on a -

manufactured home. The following facts are drawn from Plaintiff’s state-court

Petition.2

In June 2016, Thomas Hardee purchased a new manufactured from Southern

Colonel Homes of Laurel.3 He alleges that the home was manufactured by Southern

Energy Homes, Inc., which is a subsidiary of Clayton Homes (a/k/a/ CMH Homes,

Inc.).4 Over the next four years, Hardee had various issues with leaks in the

1 R. Doc. 8.

2 See R. Doc. 1-1.

3 R. Doc. 1-1 at 6 ¶ I.

4 Id. at 6 ¶ III.

manufactured home.5 After a particularly hard rain in 2020, Hardee filed a claim for

water damage with his insurance company, which determined that the water damage

was caused by improper installation of the roof.6 Plaintiff contacted the

manufacturer, CMH Homes, who said the roof was installed improperly, and that

Hardee should therefore contact Southern Colonel.7 Plaintiff obtained an

independent inspection which determined that the leaks were caused by poor

installation and workmanship of the roof.8 Hardee sued Southern Colonel Homes,

Southern Energy, CMH Homes, and others in Louisiana state court, alleging

violation of the New Manufactured Modular Home Warranty Act and various other

Louisiana laws.9

Southern Energy and CMH Homes now move to stay this action pending

arbitration.10 Defendants argue that when Hardee purchased his manufactured

home, he entered a binding arbitration agreement. That agreement stated:

You, We, and the Dealer (the “Parties”) agree to submit to

binding arbitration any and all claims and disputes

(including contract, tort, common law, statutory and

regulatory claims) arising from or relating to the Contract,

the Home, the sale of the Home, the design and

construction of the Home, the financing and insuring of the

Home, all warranties and service contracts offered with the

Home, and any other disputes among the Parties.11

5 Id. at 7 ¶¶ V-VI.

6 Id. at 7 ¶ VIII.

7 Id. at 7-8 ¶¶ VIII.

8 Id. at 8 ¶ IX.

9 See generally R. Doc. 1-1.

10 R. Doc. 8.

11 See R. Doc. 8-2 at 4.

Defendants argue that the agreement is valid and clearly covers the scope of

the dispute. Defendants further argue that no federal statute or policy renders

Hardee’s claims nonarbitrable, and that Hardee’s claims against CMH Homes are

arbitrable even though CMH Homes did not sign the arbitration agreement because

of the doctrine of equitable estoppel. Neither Hardee, nor any other party, has filed

a response to the Motion and, as such, the Motion is unopposed.

II. LEGAL STANDARD

The Federal Arbitration Act, 9 U.S.C. § 1, et seq. (the “FAA”), governs the

enforceability of arbitration agreements in federal court. The FAA provides that an

arbitration agreement in writing “shall be valid, irrevocable, and enforceable, save

upon such grounds as exist at law or in equity for the revocation of any contract.”12

Additionally, a party to an arbitration agreement “may petition any United States

district court . . . for an order directing that such arbitration proceed in the manner

provided for in such agreement.”13 “The underlying purpose of the FAA was to create

a policy in favor of arbitration, such that ‘any doubts concerning the scope of

arbitrable issues should be resolved in favor of arbitration.’”14 “By its terms, the Act

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.”15

12 9 U.S.C. § 2.

13 9 U.S.C. § 4.

14 Iheanacho v. Air Liquide Large Industries U.S. L.P., Civ. No. 19-532, 2020 WL 3451689, at *2 (M.D.

La. June 24, 2020) (quoting Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25,

(1983); Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 25 (1991); Primerica Life Ins. Co. v.

Brown, 304 F.3d 469, 471 (5th Cir. 2002); D.R. Horton, Inc. v. NLRB, 737 F.3d 344, 360 (5th Cir. 2013)).

15 Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985) (citation omitted).

Under Section 3 of the FAA, if a federal court finds the dispute is subject to

arbitration, the 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 . . . .” 16 The Fifth Circuit has construed this provision as providing for a

mandatory stay of litigation.17 This Court recently recognized, however, that the

Fifth Circuit has not provided clear guidance regarding whether claims should be

dismissed or stayed pending arbitration.18 In Alford v. Dean Witter Reynolds, Inc.,

the Fifth Circuit held that, “The weight of authority clearly supports dismissal of the

case when all of the issues raised in the district court must be submitted to

arbitration.”19 However, the Fifth Circuit subsequently clarified the language in the

Alford opinion, noting that, “Alford held merely that dismissal was not an abuse of

discretion,” but that it “did not hold that dismissal was required . . . much less that

failure to dismiss would have been an abuse of discretion.”20 Thus, district courts

have discretion to stay or dismiss a case when all of the claims asserted are subject

to arbitration.21

16 9 U.S.C. § 3.

17 Waste Management, Inc. v. Residuos Industriales Multiquim, S.A. de C.V., 372 F.3d 339, 342 (5th

Cir. 2004) (quoting 9 U.S.C. § 3).

18 Hanberry v. First Premier Bank, No. 2:19-CV-00898, 2019 WL 4415267, at *7 (E.D. La. Sept. 16,

2019).

19 Alford v. Dean Witter Reynolds, Inc., 975 F.2d 1161, 1164 (5th Cir. 1992) (citing Sea-Land Service,

Inc. v. Seal-Land of P.R., Inc., 636 F. Supp. 750, 757 (D. Puerto Rico 1986); Sparling v. Hoffman Const.

Co., Inc., 864 F.2d 635, 638 (9th Cir. 1988) (expressly holding that 9 U.S.C. § 3 does not preclude

dismissal); Hoffman v. Fidelity and Deposit Co. of Maryland, 734 F. Supp. 192, 195 (D.N.J. 1990);

Dancu v. Coopers & Lybrand, 778 F. Supp. 832, 835 (E.D. Pa. 1991)) (emphasis in original).

20 Apache Bohai Corp., LDC v. Texaco China, B.V., 330 F.3d 307, 311 n.9 (5th Cir. 2003) (citing Alford,

975 F.2d at 1164).

21 Alford, 975 F.2d at 1164; See Fedmet Corp. v. M/V BUYALYK, 194 F.3d 674, 676 (5th Cir. 1999)

(interpreting Alford to mean “district courts have discretion to dismiss cases in favor of arbitration”).

In determining whether a party should be compelled to arbitrate, the Court’s

inquiry consists of three steps.22 First, the Court must determine whether a valid

agreement to arbitrate exists between the parties.23 The Court must then determine

whether the dispute in question falls within the scope of the arbitration clause.24 If

the first two steps are answered affirmatively, the Court must determine “whether

any federal statute or policy renders the claims nonarbitrable.”25

III. ANALYSIS

The Court begins by determining whether there is a valid agreement to

arbitrate between the parties. Here, such an agreement plainly exists. Hardee

signed a detailed arbitration agreement.26 Such an agreement is a binding contract

under the Louisiana or Mississippi law.27 Under Louisiana law, the formation of a

valid contract requires: (1) capacity to contract; (2) mutual consent; (3) a certain

object; and (4) a lawful purpose.28 Each of those elements is present here, and neither

Hardee nor any other party has suggested that the contract is not valid. Although

22 Hill v. Hornbeck Offshore Services, Inc., 799 F. Supp. 2d 658, 661 (E.D. La. 2011) (citing Mitsubishi

Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985); Fleetwood Enters., Inc. v.

Gaskamp, 280 F.3d 1069, 1073 (5th Cir. 2002)).

23 JP Morgan Chase & Co. v. Conegie ex rel. Lee, 492 F.3d 596, 598 (5th Cir. 2007) (quoting Will–Drill

Res., Inc. v. Samson Res. Co., 352 F.3d 211, 214 (5th Cir. 2003)) (internal quotation marks omitted);

Hill, 799 F. Supp. 2d at 661 (citing Gaskamp, 280 F.3d at 1073).

24 Conegie ex rel. Lee, 492 F.3d at 597 (quoting Will–Drill Res., Inc., 352 F.3d at 214).

25 Hill, 799 F.3d at 661 (quoting Jones v. Halliburton Co., 583 F.3d 228, 234 (5th Cir. 2009)) (internal

quotation marks omitted); Washington Mut. Fin. v. Bailey, 364 F.3d 260, 263 (5th Cir. 2004).

26 R. Doc. 8-2 at 4-5.

27 The arbitration agreement does not contain a choice-of-law provision, and there is no analysis from

any party regarding the applicable choice of law for contract formation. Although Defendants cite

Louisiana law, the Court notes that Mississippi law may govern a contract formed in Mississippi

between a Louisiana citizen and a Mississippi company. Here, this distinction is inconsequential

because both Louisiana law and Mississippi law point to the same outcome. See Woodruff v. Thames,

143 So. 3d 546, 554 (Miss. 2014) (outlining elements of contract largely similar to those under

Louisiana law).

28 Wallace v. Shreve Memorial Library, 79 F.3d 427, 430 n.4 (5th Cir. 1996) (citing Keller v. Sisters of

Charity, 597 So.2d 1113, 1115 (La. App. 2 Cir. 1992); La. Civ. Code arts. 1918, 1927, 1966 & 1971).

CMH Homes did not sign the arbitration agreement, Plaintiff’s claims are

“allegations of substantially interdependent and concerted misconduct” against all

Defendants, and therefore equitable estoppel requires arbitration of Hardee’s

claims.29 Accordingly, the Court finds the first step to compel arbitration satisfied.

The Court next considers whether the dispute in question falls within the scope

of the arbitration clause. The arbitration clause here has a broad scope, requiring

arbitration of “any and all claims and disputes (including contract, tort, common law,

statutory and regulatory claims) arising from or relating to the Contract, the Home,

the sale of the Home, the design and construction of the Home. . .”30 The instant

dispute plainly falls within this broad language, as it is directly related to the

manufactured home, the sale of the home, and the design and construction of the

home. Accordingly, the Court finds the second step to compel arbitration satisfied.

Finally, the Court considers whether there is any federal statute or policy that

renders these claims nonarbitrable. No party has identified any federal statute or

policy which would prevent arbitration of these claims, nor has the Court determined

any such policy on the evidence before it. The Court finds the third and final step to

compel arbitration satisfied.

In sum, the Court finds that there was a binding arbitration agreement which

covers Plaintiff’s claims, and that no federal statute or policy prevents arbitration of

those claims. Accordingly, the Court must compel arbitration. Because Defendants

seek a stay of this action pending arbitration, rather than outright dismissal of

29 Grigson v. Creative Artists Agency, L.L.C., 210 F.3d 524, 527 (5th Cir. 2000).

30 R. Doc. 8-2 at 4.

Hardee’s claims, the Court will exercise its discretion to stay this action pending

arbitration.

IV. CONCLUSION

IT IS HEREBY ORDERED that the Motion to Stay Pending Arbitration is

GRANTED. In light ofthe Court’s decision to stay this matter pending arbitration,

Plaintiffs Hx Parte Motion for Voluntary Dismissal of Defendant Regional

Enterprises, LLC d/b/a/ Laurel Home Center?!is DENIED. Plaintiff may reurge this

Motion should this matter be reopened.

IT IS FURTHER ORDERED that the Clerk of Court CLOSE the above-

captioned civil case for administrative and statistical purposes, pending further order

from the Court. The Court shall retain jurisdiction and the case shall be restored to

the trial docket upon motion of a party if circumstances change, so that Plaintiff's

claims may be heard to final disposition.

New Orleans, Louisiana, May 28, 2021.

(lend B Vita

WENDY B. VITITER

UNITED STATES DISTRICT JUDGE

31R. Doc. 12.