Braggs et al v. Grayhawk Homes, Inc.
MEMORANDUM OPINION AND ORDER: it is ORDERED that dft's 9 motion to compel arbitration and to dismiss the claims against it without prejudice is GRANTED, as further set out in order. Signed by Honorable Judge Susan Russ Walker on 10/21/2015. (wcl, )
IN THE DISTRICT COURT OF THE UNITED STATES
FOR THE MIDDLE DISTRICT OF ALABAMA
SYLVIA BRAGGS and CHRIS BRAGGS, )
GRAYHAWK HOMES, INC.,
CIVIL ACTION NO. 3:15CV468-SRW
MEMORANDUM OF OPINION and ORDER
Plaintiffs Sylvia and Chris Braggs sue defendant Grayhawk Homes, Inc.
(“Grayhawk”), and fictitious defendants, asserting several state law claims arising from a
contract for the purchase of a new home. Grayhawk removed the action to this court from
the Circuit Court of Russell County, Alabama, pursuant to 28 U.S.C. §§ 1332 and 1441, on
the basis of diversity of citizenship. This action is presently before the court on defendant’s
motion to compel arbitration and to dismiss plaintiffs’ claims or, in the alternative, to stay
proceedings pending arbitration. (Doc. # 9). Although they were given an opportunity to do
so, plaintiffs have not responded to the motion. (See Doc. # 10). The parties have consented
to the jurisdiction of the undersigned Magistrate Judge to conduct all proceedings in this
action, including the entry of final judgment, pursuant to 28 U.S.C. § 636(c). (Docs. ## 11,
Upon consideration of defendant’s motion, the court concludes that the motion to
compel arbitration is due to be granted; that plaintiffs’ claims against Grayhawk Homes, Inc.,
are due to be dismissed without prejudice; and that plaintiffs’ claims against the fictitious
party defendants are due to be remanded to state court.
On April 19, 2013, plaintiffs entered into a “New Construction Purchase and Sale
Agreement” for the purchase of a new home from Grayhawk. (Exhibit B to Erickson aff.).
Plaintiffs allege that, with a few weeks of moving into their new home, they noticed several
construction defects that have greatly diminished the value of their home and that defendant
failed to cure the defects. (Complaint, ¶¶ 7-11). They bring claims against Grayhawk for
breach of contract, negligence, wantonness, and breach of warranty.1 Grayhawk contends
that plaintiffs signed arbitration agreements in connection with the transaction at issue that
bind them to submit the present dispute to arbitration.
The Federal Arbitration Act, Title 9 of the United States Code, provides that “[a]
written provision in . . . a contract evidencing a transaction involving commerce2 to settle by
Plaintiffs assert two claims against fictitious defendants A through Z (Counts VII and VIII)
but have filed no motion to substitute any named defendant for a fictitious party. Thus, Grayhawk
is the sole named defendant.
The United States Supreme Court has interpreted the term “involving commerce” in the
Federal Arbitration Act as providing for enforcement of arbitration agreements “‘within the full
reach of the Commerce Clause[.]’” Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 56 (2003)(citation
omitted). Defendant’s President, David Erickson, avers that “[a] great majority of materials used
in the construction of the subject home were purchased outside of the State of Alabama and
transported across state lines into Alabama,” that some of the subcontractors were from outside of
Alabama and traveled into Alabama to work on the home, and that Grayhawk employees from
Georgia also traveled into Alabama to supervise the construction. (Erickson aff., ¶¶ 5-6).
Defendant’s evidence is uncontroverted, and the court concludes that the “involving commerce”
arbitration a controversy thereafter arising out of such contract or transaction, or the refusal
to perform the whole or any part thereof . . . 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. Section 4 of the Act allows a party to an agreement containing an arbitration provision
to petition the court for an order compelling the other party to arbitrate. “[U]pon 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.” 9 U.S.C.§ 4. “Parties cannot be forced to
submit to arbitration if they have not agreed to do so.” Chastain v. Robinson-Humphrey Co.,
957 F.2d 851, 854 (11th Cir. 1992)(citations omitted). “Thus, ‘the first task of a court asked
to compel arbitration of a dispute is to determine whether the parties agreed to arbitrate that
dispute.’” Id. (quoting Mitsubishi Motors Corp. v. Soler Chrysler- Plymouth, Inc., 473 U.S.
614, 626 (1985)).
“When deciding whether the parties agreed to arbitrate a certain matter . courts
generally ... should apply ordinary state-law principles that govern the formation of
contracts.” First Options of Chicago v. Kaplan, 514 U.S. 938, 944 (1995); see also
Employers Insurance of Wausau v. Bright Metal Specialties, Inc., 251 F.3d 1316, 1322 (11th
Cir. 2001)(“Federal law establishes the enforceability of arbitration agreements, while state
law governs the interpretation and formation of such agreements.”). “[A]s with any other
requirement of the FAA is satisfied in this case.
contract, the parties’ intentions control, but those intentions are generously construed as to
issues of arbitrability.” Mitsubishi Motors Corp., supra, 473 U.S. at 626.
The Existence and Scope of an Agreement to Arbitrate
Defendant has provided copies of the “New Construction Purchase and Sale
Agreement” (“Agreement”) and an “Enrollment Form” executed by the parties to
consummate the transaction at issue. (Erickson affidavit, ¶¶ 3-4 and Exhibits B and C). The
Agreement is signed by Erickson and both plaintiffs. (Erickson aff., ¶ 3 and Exhibit B (Doc.
# 9-1 at p. 13)). The Agreement includes a paragraph entitled “Dispute Resolution,” which
provides as follows:
Buyer and Seller agree that any construction defect claim not resolved shall be
settled by arbitration through the services of an arbitrator mutually agreed
upon by the parties. The decision of the arbitrator shall be final and may be
enforced by any court having jurisdiction thereof. The arbitration shall be
conducted in accordance with Alabama Law. Notwithstanding the provisions
of this subparagraph, if Buyer is claiming under a warranty provided by the
Seller, the terms and procedures of that warranty shall first apply to the
resolution of the claim. In order for this paragraph to be part of this Agreement
it must be initialed by Buyer and Seller; if not initialed it shall be void and
(Exhibit B, ¶ 16). Each of the parties initialed the provision agreeing to arbitration, which
specifies that such arbitration would culminate in a final decision. (Id.).3
The “Enrollment Form” relates to a builder’s warranty provided by Grayhawk and
administered by Quality Builders Warranty Corporation (“QBW”). It also bears the parties’
Plaintiffs have not responded to the motion, as noted previously, and do not contend that
the signatures and initials on the exhibits attached to Erickson’s affidavit are not theirs.
signatures, immediately below a paragraph that includes the statement, “[b]y signing, the
purchaser acknowledges that he has read the attached Agreement and has received a copy of
this page and the Agreement itself.” (Erickson aff., ¶ 4 and Exhibit C (Enrollment Form,
Doc. # 9-3, p. 2)). The first paragraph of the Limited Warranty Agreement includes a section
that is emphasized in bold type; it advises that the agreement “includes a procedure for
informal settlement of disputes” and cautions homeowners to read the entire agreement
carefully. (Exhibit D (Doc. # 9-4, p. 3)). The “Complaint and Claim Procedure” is set forth
in section VI of the warranty agreement; the four-step procedure culminates in submission
of remaining disputed items to arbitration. (Doc. # 9-4, p. 17). The Limited Warranty
Agreement further provides that, “[i]n states where this arbitration can be legally binding on
all parties to the arbitration, then this arbitration is binding.” (Id.).
“[I]n Alabama, predispute arbitration provisions are enforceable so long as the party
moving to compel arbitration proves ‘the existence of a contract calling for arbitration and
... that contract evidences a transaction involving interstate commerce.’” Hereford v. D.R.
Horton, Inc., 13 So.3d 375, 379 (Ala. 2009) (citation omitted). Under Alabama law, “[t]he
elements of a valid contract include: an offer and an acceptance, consideration, and mutual
assent to terms essential to the formation of a contract.” Shaffer v. Regions Financial Corp.,
29 So.3d 872, 880 (Ala. 2009)(citations and internal quotation marks omitted).
The court concludes, upon review of the uncontested evidence of the parties’ written
agreements, that plaintiffs agreed to submit any express warranty claims not resolved in the
earlier steps of the QBW Limited Warranty Agreement, and any other construction defect
claims, to binding arbitration. Plaintiffs have not responded to the present motion and,
accordingly, do not present grounds for avoidance of the contracts. They do not argue that
their agreements to binding arbitration are unenforceable for any reason under state or federal
law,4 that Grayhawk lacks standing to enforce the agreements,5 or that any of their claims
against Grayhawk fall outside the scope of their agreements to arbitrate. Accordingly,
Grayhawk’s motion to compel arbitration is due to be granted.
Dismissal versus Stay
When all of the claims presented in a case are subject to binding arbitration, dismissal
with prejudice is appropriate. Alford v. Dean Witter Reynolds, Inc., 975 F.2d 1161, 1164 (5th
Cir. 1992)(concluding that 9 U.S.C. § 3 “was not intended to limit dismissal of a case in the
proper circumstances” and stating,“Given our ruling that all issues raised in this action are
arbitrable and must be submitted to arbitration, retaining jurisdiction and staying the action
will serve no purpose. Any post-arbitration remedies sought by the parties will not entail
renewed consideration and adjudication of the merits of the controversy but would be
See, e.g., Homes of Legend, Inc. v, McCullough, 776 So.2d 741 (Ala. 2000)(holding that
parties agreed to non-binding arbitration only, despite a provision purportedly requiring binding
arbitration, because the limitation of remedies provision conflicted with another provision in the
agreement that incorporated FTC regulations which prohibited binding arbitration).
See, e.g., Jenkins v. Atelier Homes, Inc., 62 So.3d 504 (Ala. 2010)(holding that the
defendant lacked standing to enforce an arbitration provision under either of the two legal theories
under which an arbitration agreement may be enforced at the behest of a non-signatory to the
circumscribed to a judicial review of the arbitrator’s award in the limited manner prescribed
by law.”)(citations omitted); Halford v. Deer Valley Home Builders, 2007 WL 1229339, 3-5
(M.D. Ala. Apr. 25, 2007); Clayton v. Woodmen of the World Life Ins. Society, 981 F. Supp.
1447, 1451 (M.D. Ala. 1997). Because plaintiffs have brought no claims against Grayhawk
that are not subject to binding arbitration, there is nothing for this court to decide on the
merits of plaintiffs’ claims after arbitration.
Accordingly, plaintiffs’ claims against
Grayhawk are due to be dismissed, rather than stayed. However, because Grayhawk’s
motion seeks dismissal without prejudice (Doc. # 9, pp. 10-12), the court will not dismiss the
claims with prejudice.
As noted previously, plaintiffs assert negligence and breach of implied warranty
claims against fictitious defendants, described as “those subcontractors or vendors to the
Defendants Grayhawk Homes, Inc., who designed or constructed the home, graded the
property or site, or whose negligent design, construction, or workmanship contributed in any
way to the losses complained of herein.” (Complaint, ¶ 3 and Counts VII and VIII). Outright
dismissal of the claims against the fictitious parties might prejudice the plaintiffs by denying
them the benefit of the filing date of the present complaint as to those claims. Harris v.
Beaulieu Group, LLC, 394 F.Supp.2d 1348 (M.D. Ala. 2005). However, plaintiffs’ claims
arise entirely under state law, and there is nothing in the record to suggest that any or all of
the fictitious parties that plaintiff may identify by amendment are citizens of states other than
Alabama so as to support the court’s continued exercise of jurisdiction. The substitution of
even one non-diverse defendant would destroy the court’s diversity jurisdiction and, absent
an amendment naming only defendants of diverse citizenship from the plaintiffs, the court
cannot conclude that it has an independent basis for exercising jurisdiction over Counts VII
and VIII. In view of the dismissal of plaintiffs’ claims against Grayhawk, the court can
discern no good reason for continuing to exercise supplemental jurisdiction over the pending
claims against fictitious defendants. See L.A. Draper & Son v. Wheelabrator-Frye, Inc., 735
F.2d 414 (11th Cir. 1984)(“If the federal claims are dismissed prior to trial, [United Mine
Workers v. Gibbs, 383 U.S. 715 (1966)] strongly encourages or even requires dismissal of
the state claims.”). Accordingly, the court will remand those remaining claims to the Circuit
Court of Russell County, Alabama, the forum in which the plaintiffs chose to commence this
The undisputed evidence before the court establishes that plaintiffs and defendant
entered into agreements that provide for binding arbitration, and that all of the claims that
plaintiffs assert against Grayhawk are within the scope of that agreement. Accordingly,
pursuant to 9 U.S.C. § 4, it is
ORDERED that defendant’s motion to compel arbitration and to dismiss the claims
against it without prejudice (Doc. # 9) is GRANTED.
Additionally, for the reasons set forth above, plaintiffs’ remaining claims against
fictitious parties will be remanded to the Circuit Court of Russell County, Alabama.
A separate judgment will be entered.
DONE, this 21st day of October, 2015.
/s/ Susan Russ Walker
SUSAN RUSS WALKER
CHIEF UNITED STATES MAGISTRATE JUDGE
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