HomeQuest Mortgage LLC v. HRB Tax Group, Inc.
2:14-cv-02008
D. Kan.Aug 5, 2014Background
- Plaintiffs HomeQuest Mortgage, LLC and two individual members hired HRB Tax Group for tax-preparation services, then initiated AAA arbitration alleging negligence, misrepresentation, and Kansas Consumer Protection Act violations.
- Arbitrator issued an award on June 19, 2013 denying plaintiffs’ claims and awarding defendant $300 in expenses. Plaintiffs received the award June 20, 2013.
- Plaintiffs filed a state-court “Petition” to vacate the award on Sept. 18, 2013 but did not serve defendant until Dec. 13, 2013; defendant removed the action to federal court Jan. 10, 2014.
- Defendant moved to confirm the award and opposed vacatur; plaintiffs moved to remand and to vacate.
- Court found diversity jurisdiction proper (complete diversity and amount in controversy) and held the Federal Arbitration Act (FAA) governs; it denied remand, held plaintiffs’ motion to vacate time-barred under FAA §12, and granted defendant’s motion to confirm the arbitration award.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Subject-matter jurisdiction (removal) — diversity | Kansas plaintiffs; removal improper; remand required | Parties are completely diverse (defendant is Missouri corp.); amount in controversy exceeds $75,000; removal timely | Diversity jurisdiction exists; motion to remand denied |
| Amount in controversy for diversity | Only seeking vacatur of $300 award, so amount < $75,000 | Look to stakes of underlying arbitration (claims for many KCPA violations carrying large statutory penalties) | Court applies a demand-based approach; amount in controversy exceeds $75,000 |
| Whether FAA or KUAA governs | Kansas law (KUAA) should control | FAA applies because arbitration "involves commerce" (national tax-prep services) | FAA governs the arbitration agreement |
| Timeliness of vacatur under FAA §12 | Motion to vacate filed Sept. 18, 2013 is timely | Service required within 3 months of award; plaintiffs served Dec. 13, 2013 (nearly 6 months) | Challenge forfeited for failure to serve within 3 months; motion to vacate denied |
Key Cases Cited
- Dutcher v. Matheson, 733 F.3d 980 (10th Cir. 2013) (removal party bears burden to establish federal jurisdiction)
- Symes v. Harris, 472 F.3d 754 (10th Cir. 2006) (requirements for diversity jurisdiction)
- Bad Ass Coffee Co. of Haw. v. Bad Ass Coffee Ltd. P’ship, [citation="25 F. App'x 738"] (10th Cir. 2001) (look to pecuniary effect of an adverse declaratory ruling when assessing amount in controversy)
- Pfannenstiel v. Merrill Lynch, Pierce, Fenner & Smith, 477 F.3d 1155 (10th Cir. 2007) (failure to timely serve FAA §12 notice forfeits judicial review)
- Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 U.S. 1 (1983) (FAA creates federal substantive law of arbitrability)
- Citizens Bank v. Alafabco, Inc., 539 U.S. 52 (2003) ("involving commerce" in FAA interpreted broadly to mean "affecting commerce")