DBGS, LLC v. KORMANIK Et Al.
333 Ga. App. 33
Ga. Ct. App.2015Background
- Chris and Mary Kormanik (Georgia residents) entered a DirectBuy membership agreement on March 17, 2012 and bought ~90% of renovation materials through DirectBuy.
- DirectBuy, a South Carolina company, provided a list of discounted contractors to members; the Kormaniks selected one of those contractors.
- The contractor’s work was unsatisfactory; the Kormaniks sued the contractor and DirectBuy for negligent misrepresentation, alleging DirectBuy negligently represented the contractor’s qualifications.
- DirectBuy moved to compel arbitration under the membership agreement, which required arbitration of unresolved disputes “with your Membership or with any order you place through DirectBuy.”
- The trial court denied the motion, ruling the negligent-misrepresentation claim did not fall within the arbitration clause; DirectBuy appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the negligent-misrepresentation claim is arbitrable (scope of arbitration clause) | Kormaniks: “membership” refers only to membership benefits/privileges and not to contractor recommendations; claim outside arbitration clause | DirectBuy: contractor recommendation is an added membership benefit/value and thus disputes touching membership fall within the clause | Court: Reversed — allegations touch matters covered by the membership and must be arbitrated; doubts resolved in favor of arbitration |
| Applicability of federal arbitration principles (including FAA) | Kormaniks: relied on state-law construction limiting scope | DirectBuy: FAA/federal precedent applies and supports liberal construction of arbitration clauses | Court: Applied Georgia arbitration law informed by federal law; resolved scope doubts in favor of arbitration |
Key Cases Cited
- Order Homes, LLC v. Iverson, 300 Ga. App. 332 (Ga. Ct. App.) (discussing judicial determination of arbitrability and Georgia policy favoring arbitration)
- Wedemeyer v. Gulfstream Aerospace Corp., 324 Ga. App. 47 (Ga. Ct. App.) (arbitration clause construction follows ordinary contract rules)
- Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (U.S. Supreme Court) (doubts concerning scope of arbitrable issues resolved in favor of arbitration)
- AT&T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643 (U.S. Supreme Court) (arbitration should not be denied unless clause cannot reasonably cover the dispute)
- Genesco, Inc. v. T. Kakiuchi & Co., Ltd., 815 F.2d 840 (2d Cir.) (focus on factual allegations to determine whether claims "touch matters" covered by the arbitration agreement)
- American Gen. Financial Svcs. v. Jape, 291 Ga. 637 (Ga.) (Federal Arbitration Act applies when contract involves interstate commerce)