Lauzon et al v. Pulte Homes, Inc. et al

Filing 21

ORDER GRANTING 3 Motion to Compel Arbitration and Plaintiffs' claims against Centex are DISMISSED without prejudice. Signed by Judge Xavier Rodriguez. (tr1)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
SAN ANTONIO DIVISION
JONATHAN LAUZON, et al.,

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Plaintiffs,
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v.
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PULTE HOMES, INC., PULTE HOMES OF §
TEXAS, L.P., and CENTEX HOMES, INC., §
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Defendants.

Civil Action No. SA-12-CV-177-XR

ORDER
On this date the Court considered Defendant Centex‟s Motion to Compel Arbitration
(Doc. No. 3) and the parties‟ briefs in support and opposition thereof. For the following
reasons, the Court GRANTS the motion.
I. Background
A. Factual Background
Plaintiffs in this case are owners of homes in the Hills of Rivermist residential
subdivision in Bexar County, Texas. Defendants Pulte Homes of Texas, L.P. (“Pulte Homes”),
and Centex Homes, Inc. (“Centex”), are the developers of the subdivision and are wholly
owned subsidiaries of Pulte Group, Inc. (formerly known as Pulte Homes, Inc.). 1 On January
24, 2010, a retaining wall in the subdivision collapsed and a landslide ensued. Plaintiffs allege
that the failure of the retaining wall put their homes in “great danger of physical damage” and
diminished the value of their properties “tremendously.” (Pls.‟ Orig. Pet. 4, Doc. No. 1, Ex.
A).
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Pulte Homes, Inc., was originally a defendant in this case but was dismissed on June 18, 2012, for lack of
personal jurisdiction. (Doc. No. 16).

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B. Procedural Background
Plaintiffs brought suit against Defendants in state court alleging negligence, negligence
per se, gross negligence, nuisance, fraud in real estate transaction, fraud, deceptive trade
practices, breach of contract, and breach of implied warranty. Centex timely removed the case
to this Court on February 24, 2012, based on diversity jurisdiction. On March 13, 2012,
Centex filed this motion to compel arbitration, alleging that Plaintiffs all agreed to submit
disputes to binding arbitration when they bought their homes from Centex and signed New
Home Sale Agreements that contain arbitration clauses. (Def.‟s Mot. Compel Arb. 2, Doc. No.
3). Plaintiffs concede that the contracts contain arbitration clauses but argue that the arbitration
agreements are not enforceable because not all Plaintiffs bought homes directly from Centex
and, moreover, because Centex has waived its right to arbitration. (Pls.‟ Resp. 2, Doc. No. 8).
II. Legal Standard for Ruling on a Motion to Compel Arbitration
The Federal Arbitration Act (FAA) requires courts to enforce arbitration agreements. 9
U.S.C. § 2. “There is a two-step inquiry to determine whether a party should be compelled to
arbitrate.” JP Morgan Chase & Co. v. Conegie ex rel. Lee, 492 F.3d 596, 598 (5th Cir. 2007).
First, the court must “ascertain whether the parties agreed to arbitrate the dispute.” Id. If the
court finds that the parties agreed to arbitrate, it must then determine if “any federal statute or
policy renders the claims nonarbitrable.” Sherer v. Green Tree Servicing LLC, 548 F.3d 379,
381 (5th Cir. 2008) (quoting JP Morgan Chase & Co., 492 F.3d at 598).
Since neither party in this case suggests that any federal statute or policy renders the
claims nonarbitrable, the Court will limit its analysis to the first inquiry.
III. Analysis

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A. Did the Parties Agree to Arbitrate?
In determining whether the parties agreed to arbitrate, the court must conduct two
inquiries: “(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.” JP
Morgan Chase & Co., 492 F.3d at 598 (quoting Will-Drill Res., Inc. v. Samson Res. Co., 352
F.3d 211, 214 (5th Cir. 2003)). “Generally, principles of state contract law govern the question
of whether the parties formed a valid agreement to arbitrate.” Id.; see also Wash. Mut. Fin.
Group, LLC v. Bailey, 364 F.3d 260, 264 (5th Cir. 2004) (“[I]n determining whether the
parties agreed to arbitrate a certain matter, courts apply the contract law of the particular state
that governs the agreement.”).
1. Are there Valid Arbitration Agreements?
It is undisputed that nine out of the ten homes owned by Plaintiffs were purchased
directly from Centex and are subject to arbitration clauses. (See Pls.‟ Resp. ¶¶ 2-3, Doc. No.
8). Nonetheless, Plaintiffs‟ counsel argues that the arbitration agreements are unenforceable
for two reasons. First, Plaintiffs‟ counsel contends that one homeowner, Clarice Yamamoto,
did not purchase the home directly from Centex and thus is not bound by an arbitration
agreement. Second, counsel contends that Centex waived its right to enforce all of the
arbitration agreements it entered into with Plaintiffs. The Court considers each argument in
turn.
a. Did Plaintiff Yamamoto Enter into a Contract with Centex that Contains an
Arbitration Clause?

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“[T]he FAA does not require parties to arbitrate when they have not agreed to do so.”
Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468, 478, 109 S.
Ct. 1248, 103 L. Ed. 2d. 488 (1989). “Who is actually bound by an arbitration agreement is a
function of the intent of the parties, as expressed in the terms of the agreement.” Sherer, 548
F.3d at 381 (quoting Bridas S.A.P.I.C. v. Gov’t of Turkm., 345 F.3d 347, 355 (5th Cir. 2003)).
As held by the Texas Supreme Court, “arbitration is simply a matter of contract between the
parties,” and Texas law ensures that “men of full age and competent understanding shall have
the utmost liberty of contracting, and that their contracts when entered into freely and
voluntarily shall be held sacred and shall be enforced.” Nafta Traders, Inc. v. Quinn, 339
S.W.3d 84, 87, 95-96 (Tex. 2011) (citations omitted).
Plaintiff Yamamoto argues that she is not bound by the arbitration clause because she
did not purchase a home directly from Centex. (Pls.‟ Resp. ¶ 2, Doc. No. 8). Although she
offers no further elaboration, the Court infers that since she, allegedly, did not purchase a
home from Centex, she therefore contends that she never entered into an agreement with
Centex to be bound by arbitration.
However, as Centex points out, the record before the Court contains a “New Home
Sale Agreement” between Yamamoto and Centex. (Doc. No. 1, Ex. E1-3). The agreement
contains an arbitration clause that is nearly identical to the arbitration clauses in the other
Plaintiffs‟ contracts. Importantly, the arbitration clause in Yamamoto‟s contract with Centex
provides that all disputes between Yamamoto and Centex will be resolved by binding
arbitration. Yamamoto‟s handwritten initials appear at the bottom of the page that contains the
arbitration clause. Additionally, signatures of both Yamamoto and a representative of Centex

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appear at the end of the contract. Consequently, there is sufficient evidence on the record for
the Court to find that Yamamoto and Centex entered into a contract that contains an arbitration
clause.
Yamamoto has not offered any evidence demonstrating that she did not validly enter
into the contract. For example, she has not shown, or even suggested, that she was
incompetent, that she was forced to enter the contract involuntarily, or that her signature was
forged. Therefore, in light of the uncontradicted evidence on the record, the Court finds that
Plaintiff Yamamoto has validly entered into a contract with Centex that contains an arbitration
clause, as have the other Plaintiffs.
b. Has Centex Waived its Right to Enforce the Arbitration Agreements?
Having determined that all Plaintiffs entered into arbitration agreements with Centex,
the Court must now address Plaintiffs‟ second argument and determine if the arbitration
agreements have been waived.
Plaintiffs argue that Centex has waived its right to arbitration in two ways. First,
Plaintiffs allege that Centex waived its right to rely on the arbitration agreements by filing a
lawsuit in federal court against Arias & Associates, Inc. (“Arias”), and Gravity Walls, Ltd.
(“Gravity Walls”), two companies involved in designing and constructing the retaining wall
that collapsed, despite having entered into contracts with the two companies that contain
arbitration clauses “similar” to the clauses at issue in this case. (See Pls.‟ Resp. ¶ 5, Doc. No.
8). Second, Plaintiffs argue that Centex waived its right to arbitration by publicly advising
residents that the arbitration agreements with Centex could be avoided by filing a lawsuit

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against Arias and Gravity Walls. Id. ¶ 6. As explained herein, the Court finds both arguments
unpersuasive.
i. Legal Standard for Waiver
“Waiver will be found when the party seeking arbitration substantially invokes the
judicial process to the detriment or prejudice of the other party.” In re Mirant Corp., 613 F.3d
584, 588 (5th Cir. 2010). “A party generally invokes the judicial process by initially pursuing
litigation of claims then reversing course and attempting to arbitrate those claims.” Nicholas v.
KBR, Inc., 565 F.3d 904, 907 (5th Cir. 2009). “To invoke the judicial process, a „party must, at
the very least, engage in some overt act in court that evinces a desire to resolve the arbitrable
dispute through litigation rather than arbitration.‟” In re Mirant Corp., 613 F.3d at 589
(quoting Subway Equip. Leasing Corp. v. Forte, 169 F.3d 324, 329 (5th Cir. 1999)). The
question of whether a party has waived its right to arbitration “depends on the facts of each
case.” Id. (quoting Tenneco Resins, Inc. v. Davy Int’l, AG, 770 F.2d 416, 420 (5th Cir. 1985)).
The Texas Supreme Court has recognized the same standards for evaluating waiver as
the Fifth Circuit. See Perry Homes v. Cull, 258 S.W.3d 580, 589-91 (Tex. 2008) (holding that
a party “waives an arbitration clause by substantially invoking the judicial process to the other
party‟s detriment or prejudice” and that waiver must be decided on a “case-by-case basis”).
Under Texas law, the burden of proving that an arbitration clause is unenforceable “falls on
the party opposing the contract.” In re Poly-America, L.P., 262 S.W.3d 337, 348 (Tex. 2008).
ii. Analysis
Centex filed this motion to compel arbitration on March 13, 2012, just several weeks
after it removed the case to federal court. Once the case was removed to federal court, Centex

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did not file any motions or pleadings before it filed its motion to compel arbitration. 2 To this
date, Centex has still not filed a motion to dismiss or a motion for summary judgment, nor has
Centex engaged in discovery. To the contrary, Centex has attempted to “prevent the
expenditure of unnecessary time and expense” by filing a motion to stay the case until the
Court rules on this motion to compel arbitration. (Mot. Stay Disc. 3, Doc. No. 15). Moreover,
Centex has consistently maintained its position that it intends to resolve the dispute with
Plaintiffs through arbitration rather than through litigation in federal court. (See Agreed Mot.
Stay Disc. 1, Doc. No. 17; Resp. Pls.‟ Mot. Leave 6 n.2, Doc. No. 20). Therefore, the Court
finds that Centex has not invoked the judicial system to the detriment of Plaintiffs, and thus
has not waived its right to compel arbitration.
The Court overrules Plaintiffs‟ argument that Centex waived its right to compel
arbitration by filing suit against Arias and Gravity Walls in federal court rather than by
resolving its claims against them through arbitration. Both Fifth Circuit and Texas case law are
clear that, to waive one‟s right to arbitration, a party must invoke the judicial process to the
detriment of the other party. Plaintiffs were not parties to the other lawsuit. Therefore, Centex
never invoked the judicial process against them. The Court cannot find, no matter how similar
the arbitration clauses are to the ones at issue here, that Centex waived its right to arbitrate this
dispute with Plaintiffs because of Centex‟s decision to assert claims in federal court against
different parties, in a different case, concerning different contracts.
Likewise, the Court does not find that Centex waived its right to arbitration by, as
Plaintiffs contend, “tak[ing] the very public position that anyone with a complaint about the
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The only filing, other than its notice of removal and corresponding attachments, that Centex submitted to this
Court before filing its motion to compel arbitration was a notice to correct the title of the Pulte Homes employee
who had signed a declaration in support of removal. (Doc. No. 2).

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wall collapse can file suit against [Arias and Gravity Walls] and avoid the arbitration clause
with Centex.” (Pls.‟ Resp. ¶ 6, Doc. No. 8). Plaintiffs argue that the following statement
constitutes waiver:
In regards [sic] to the binding arbitration:
Binding arbitration is included in the sales agreement and signed by both the buyer
and the builder as a means to help facilitate a resolution much faster than within
the judicial system. Should a resident want to pursue additional legal action, the
binding arbitration language contained within our agreements does not prevent the
homeowner from pursuing a lawsuit in a San Antonio court against another party,
including a contractor.
(Pls.‟ Resp., Doc. No. 8, Ex. 1). Nothing in this statement suggests that Centex waived its
arbitration agreements with Plaintiffs. On the contrary, the plain language of the statement
emphasizes that residents who signed the New Home Sale Agreements are bound by
arbitration agreements if they pursue claims against Centex because, as the statement points
out, the sale agreements include binding arbitration clauses. Nor does the Court find that
Centex‟s statement somehow encourages residents to “avoid” the arbitration agreements with
Centex by bringing claims against third parties. Rather, the statement merely apprises
residents of their legal right to pursue additional litigation against third parties in a forum of
the residents‟ choice. Consequently, the Court finds that Centex has not waived its right to
arbitration by issuing this statement.
2. Do Plaintiffs’ Claims Against Centex Fall within the Scope of the Arbitration
Agreements?
When addressing whether or not a question falls within an arbitration agreement‟s
scope, courts apply the “federal policy favoring arbitration.” Sherer, 548 F.3d at 381. “[D]ue
regard must be given to the federal policy favoring arbitration, and ambiguities as to the scope
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of the arbitration clause itself resolved in favor of arbitration.” Volt Info. Scis, 489 U.S. at 479,
109 S. Ct. 1248.
The arbitration clauses at issue in this case are very broad. They purport to cover “all
disputes” between Centex and the homeowner. (See Doc. No. 1, Exs. E1-1-3). The only
apparent limitation on the scope of the arbitration agreements is an exception allowing minor
disputes to be resolved in small claims court. Id. Since Plaintiffs seek to recover the market
value of their homes, the small claims exception is clearly inapplicable to this case.
Furthermore, neither party contends that any of Plaintiffs‟ claims against Centex fall outside
the scope of the arbitration agreements. Therefore, given the broad scope of the arbitration
clauses and the federal policy favoring arbitration, the Court finds that all of Plaintiffs‟ claims
against Centex fall with the scope of the arbitration agreements.
IV. Dismissal or Stay?
Upon finding arbitrable issues in a case, the Fifth Circuit has held that district courts
have discretion to either dismiss the case or stay the case. Fedmet Corp. v. M/V BUYALYK,
194 F.3d 674, 678 (5th Cir. 1999). Dismissal may be appropriate “when all of the issues raised
in the district court must be submitted to arbitration.” Alford v. Dean Witter Reynolds, Inc.,
975 F.2d 1161, 1164 (5th Cir. 1992) (emphasis in original). Dismissal is within the district
court‟s discretion if the “post-arbitration remedies sought by the parties will not entail renewed
consideration and adjudication of the merits of the controversy but would be circumscribed to
a judicial review of the arbitrator's award in the limited manner prescribed by law.” Id.
(citation omitted). The Fifth Circuit “encourages” district courts to dismiss cases in instances
where “staying the action serves no purpose.” Armstrong v. Assocs. Intern. Holdings Corp.,

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242 F. App‟x 955, 959 (5th Cir. 2007) (unpublished per curiam opinion) (quoting Alford, 975
F.2d at 1164)). An entry of a stay, on the other hand, may be appropriate when “the district
court perceives that it might have more to do than execute the judgment once arbitration has
been completed.” Apache Bohai Corp., LDC v. Texaco China, B.V., 330 F.3d 307, 309 (5th
Cir. 2003) (citation omitted). Likewise, the Fifth Circuit has interpreted the language of 9
U.S.C. § 3 to mean that “the district court cannot deny a stay when one is properly requested.”
Fedmet Corp., 194 F.3d at 678.
Neither party has indicated a preference as to whether they would prefer, in the event
that the Court compels arbitration, the Court to stay or dismiss Plaintiffs‟ case against Centex.
Nor has either party filed a motion to stay the case in the event that the Court grants the
motion to compel arbitration. The Court therefore has the discretion to employ either
mechanism. As discussed supra, the Court finds that all of Plaintiffs‟ claims against Centex
are covered by the arbitration agreements. Therefore, all of Plaintiffs‟ claims against Centex
are arbitrable and, once arbitration is complete, this Court will have nothing more to do other
than conduct a limited judicial review and execute final judgment. While this Court will
maintain jurisdiction over Plaintiffs‟ claims against Pulte Homes, the Court finds that
maintaining jurisdiction over Plaintiffs‟ claims against Centex would serve no purpose.
Accordingly, the Court finds that it is appropriate to dismiss Plaintiffs‟ claims against Centex
without prejudice.
V. Conclusion
In light of the foregoing analysis, the Court finds that Plaintiffs all entered into binding
arbitration agreements with Centex and that Centex has not waived its right to arbitration. The

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Court also finds that all of Plaintiffs‟ claims fall within the scope of the arbitration agreements.
Accordingly, Defendant Centex‟s Motion to Compel Arbitration (Doc. No. 3) is GRANTED.
Plaintiffs‟ claims against Centex are DISMISSED without prejudice.
It is so ORDERED.
SIGNED this 24th day of September, 2012.

XAVIER RODRIGUEZ
UNITED STATES DISTRICT JUDGE

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