Del Webb Communities, Inc. v. Roger Carlson
2016 U.S. App. LEXIS 5700
| 4th Cir. | 2016Background
- Roger and Mary Jo Carlson signed a March 2002 sales agreement with PulteGroup (Pulte) containing an arbitration clause governed by the South Carolina Uniform Arbitration Act and AAA construction-industry rules.
- The Carlsons sued in state court (2008) asserting construction-defect claims and later amended to seek class treatment; the state court allowed the class amendment over Pulte’s objection.
- South Carolina appellate court held the Carlsons’ claims were subject to arbitration under the sales agreement; the Carlsons then filed a demand with the AAA seeking class arbitration (approx. 2,000 homes identified).
- The AAA manager informed the parties the arbitrator would decide whether the contract permitted class arbitration; Pulte filed a §4 FAA petition in federal court seeking a declaratory ruling that the agreement does not authorize class arbitration.
- The district court dismissed Pulte’s petition and held the availability of class arbitration was a procedural question for the arbitrator; the Fourth Circuit reversed, holding that whether an agreement permits class arbitration is a gateway question for the court.
Issues
| Issue | Carlson's Argument | Pulte's Argument | Held |
|---|---|---|---|
| Who decides whether the arbitration clause permits class arbitration? | The question is procedural and therefore for the arbitrator. | It is a gateway question of arbitrability for the court to decide. | Court: Whether an agreement authorizes class arbitration is a gateway question for the court. |
| Does the federal court have subject-matter jurisdiction over Pulte’s §4 FAA petition? | Argues amount-in-controversy and diversity are lacking; raises Rooker–Feldman and FAA standing issues. | Diversity and CAFA jurisdiction exist; FAA petition proper; Pulte has statutory standing as an aggrieved party. | Court: Federal jurisdiction exists (diversity and CAFA apply); Rooker–Feldman and standing arguments fail. |
| Did the district court properly rely on Green Tree Financial Corp. v. Bazzle and related precedent to send the class question to the arbitrator? | Relied on Bazzle plurality and Fourth Circuit unpublished precedent to justify arbitrator decision. | Bazzle’s plurality is not controlling in light of later Supreme Court decisions; unpublished precedent pre-dates controlling authority. | Court: Bazzle plurality and pre-Stolt/Concepcion authorities do not control; district court erred. |
| Should the arbitrator’s prior ruling that the agreement permits class arbitration be enforced now? | Not directly argued to preclude court decision; Carlson points to arbitrator’s decision in proceeding. | Pulte seeks court determination despite arbitrator’s interim ruling. | Court: Remanded for district court to decide whether parties agreed to class arbitration; arbitrator’s ruling stayed pending resolution. |
Key Cases Cited
- Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (class arbitration changes the nature of arbitration; parties cannot be forced into class arbitration absent contractual basis)
- AT&T Techs., Inc. v. Communications Workers of America, 475 U.S. 643 (questions of arbitrability are for courts unless parties clearly and unmistakably provide otherwise)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (courts should not presume parties agreed to arbitrate arbitrability without clear and unmistakable evidence)
- Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (procedural questions about arbitration for arbitrator; distinctions between procedural issues and arbitrability)
- Green Tree Financial Corp. v. Bazzle, 539 U.S. 444 (plurality opinion that left open whether availability of class arbitration is for arbitrator)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (discusses costs and limitations of judicial review in arbitration and consequences for class arbitration)