Giles v. Hamilton Home Builders, LLC

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JACQUELINE ELIZABETH GILES, Plaintiff, v. HAMILTON HOME BUILDERS LLC, REGIONAL HOME CENTERS LLC d/b/a REGIONAL HOME CENTER OF MOBILE, and 21st MORTGAGE CORPORATION, Defendants.

Civil Action No. 23-00323-KD-MU

United States District Court, S.D. Alabama, Southern Division

December 1, 2023

ORDER

KRISTI K. DUBOSE, UNITED STATES DISTRICT JUDGE.

This matter is before the Court on two separate motions to compel arbitration. First, the Court considers Defendant Hamilton Home Builders, LLC's (“Hamilton”) Motion to Dismiss or Stay and Compel Arbitration, (Doc. 6), Plaintiff Jackie Giles's (“Plaintiff” or “Giles”) Response, (Doc. 19), and Hamilton's Reply, (Doc. 22). Next, the Court considers Defendant Regional Home Centers, LLC d/b/a/ Regional Home Center of Mobile's^[1] (“Regional”) Motion for Stay of Proceedings and to Compel Arbitration (Doc. 12) Giles's Response, (Doc. 23), and Regional's Reply. Upon consideration and for the reasons set forth herein, it is ORDERED that Hamilton's Motion to Dismiss or Stay and Compel Arbitration, (Doc. 6) is GRANTED and that the proceedings between Giles and Hamilton are hereby STAYED pending resolution of these claims in accordance with Hamilton's arbitration agreement with Giles. It is also ORDERED that Regional's Motion for Stay of Proceedings and to Compel Arbitration, (Doc. 12), is GRANTED and that the proceedings between Giles and Regional are hereby STAYED pending resolution of these claims in accordance with Regional's arbitration agreement with Giles.

I. BACKGROUND

A. The Manufactured Home

In August 2021, Plaintiff Giles purchased a new 2022 66-foot Hamilton Carolina C double-wide manufactured home (the “Manufactured Home” or “Home”). (Doc. 1-1 at 3; Doc. 19 at 3). Defendant Hamilton manufactured the Manufactured Home. (Doc. 6-1). Hamilton sold the Manufactured Home to a dealer in manufactured homes, Regional, in early August 2021. (Doc. 6-1 at 3-4; Doc. 6-2). Third-party transportation companies transported the Manufactured Home to Regional's lot in pieces. (Doc. 6-1 at 2-3). One of the sections of the Manufactured Home was transferred by Bennett Truck Transport, LLC, located in McDonough, Georgia, to Regional via the state and federal highway system. (Id.; Doc. 6-3). Hamilton used materials and supplies that were imported from various states to manufacture the Manufactured Home. (Doc. 6-1 at 4). Giles purchased the Manufactured Home from Regional, paying $155,460 and financing it through a loan with 21^st Mortgage Corporation (“21^st Mortgage”) and a cash down payment of $5,000. (Doc. 1-1 at 3; Doc. 19 at 3).

In connection with the sale of the Manufactured Home to Regional, Hamilton offered a Hamilton Home Builders, LLC Limited One Year Warranty and Arbitration Agreement (“Limited Warranty” and “Hamilton Arbitration Agreement”) for the ultimate purchaser of the Manufactured Home. (Doc. 6-1 at 4-5; Doc. 6-4). In connection with Giles's purchase of the Manufactured Home from Regional, Giles and Regional executed an arbitration agreement (the “Regional Arbitration Agreement”), separate and apart from the Hamilton Arbitration Agreement. (Doc. 12-1 at 2; Doc. 12-2 at 4).

Giles alleges that after purchase of the Manufactured Home but before its delivery, she noticed many problems with the home and “pointed them out to Regional's representatives.” (Doc. 1-1 at 4; Doc. 19 at 4). She asserts that the representatives “assured [her] that all of the problems would be fixed after the home was transported to the property.” (Id.). Giles alleges that when the water was turned on to the Manufactured Home the day before she was scheduled to take delivery in September 2021, a hole in the water supply plumbing caused a “massive amount of water” to enter the Home, flooding it. (Doc. 1-1 at 4-5; Doc. 19 at 4). After Giles contacted Regional, it allegedly told her that the issue causing the leak was fixed and that the home was thoroughly cleaned and dried. (Doc. 19 at 4). Giles claims that even though Regional made some repairs, the water problem persisted so that by August 2022, she noticed water leaking when it rained and mold growing in the master bedroom closet. (Id.; Doc. 1-1 at 5). Despite notifying both Regional and Hamilton, they allegedly failed to fix the problems with the Manufactured Home after promising to do so. (Doc. 1-1 at 5; Doc. 19 at 4).

Giles asserts that tests have confirmed the elevated presence of mold-generated toxins, including Chaetomium, in the Home. (Doc. 1-1 at 5; Doc. 19 at 5). Also, she and her children have experienced health issues, including headaches and respiratory problems, due to the mold exposure. (Id.). Giles allegedly notified Hamilton and Regional by letter dated November 15, 2022, that she revoked her acceptance of the Manufactured Home and requested a full refund, which was refused. (Doc. 1-1 at 6; Doc. 19 at 5).

B. Attempts to Arbitrate between Giles and Hamilton, Withdrawal, and Litigation

Under the Hamilton Arbitration Agreement, “any and all disputes, controversies or claims of any kind or nature which arise from or relate to the subject manufactured home . . . shall be governed by the Federal Arbitration Act.” (Doc. 6-4 at 3). If the claims cannot be resolved through direct discussions or negotiations, then the claims involving only a single claimant “shall first be mediated as administered by the American Arbitration Association (the “AAA”) under its Home Construction Arbitration Rules and Mediation Procedures [“Home Construction Rules”] . . . before resorting to binding arbitration.” (Id.). The Hamilton Arbitration Agreement goes on to say, “Thereafter, any unresolved claims shall be settled by binding arbitration administered by the AAA in accordance with its Home Construction Arbitration Rules or such other rules as may be applicable . . . .” (Id.) Giles and Hamilton do not dispute that after direct negotiations broke down, the parties made an unsuccessful attempt at mediation in accordance with the Hamilton Arbitration Agreement. (Doc. 6 at 5; Doc. 19 at 8).

On March 30, 2023, Giles initiated arbitration against Hamilton and Regional by filing a Statement of Claims and Demand for Arbitration with the AAA under its Consumer Arbitration Rules (“Consumer Rules”). (Doc. 6-6; Doc. 6-1 at 6-7). The initial filing fee for the Consumer Rules, which Hamilton claims she paid, is $207. (Doc. 19 at 9).

On May 1, 2023, Regional rejected Giles's Demand for Arbitration, stating its intention to proceed under the terms of the Regional Arbitration Agreement. (Doc. 6-8 at 3-4). That same day, Hamilton contacted the AAA and notified it that (1) it did not object to Regional insisting on a separate arbitration process pursuant to the Regional Arbitration Agreement; and (2) objected to an arbitration under the Consumer Rules. (Doc. 6-7 at 2) (“In accordance with the attached Limited Warranty, any arbitration involving Hamilton must be initiated and conducted in accordance with the Home Construction Arbitration Rules.”).

On May 15, Giles responded to Hamilton's objection by arguing that Rule R-1 of the Consumer Rules mandates application of the Consumer Rules in a “consumer agreement” even if other rules are designated in the arbitration agreement. (Doc. 19-5 at 2). Rule R-1 provides, “The parties shall have made these [Consumer Rules] a part of their arbitration agreement whenever they have provided for arbitration by the [AAA] and . . . the arbitration agreement is contained within a consumer agreement, as defined below, that specifies a particular set of rules other than the [Consumer Rules].” The AAA defines a “consumer agreement” as an

Agreement between an individual consumer and a business where the business has a standardized, systematic application of arbitration clauses with consumers and where the terms and conditions of the purchase of standardized, consumable goods or services are non-negotiable or primarily non-negotiable in most or all of its terms, conditions, features, or choices. The product or service must be for personal or household use. Examples of contracts that typically meet the criteria for application of these Rules, if the contract is for personal or household goods or services and has an arbitration provision, include, but are not limited to the following . . . automobile and manufactured home purchase contracts.

Rule R-1.

On May 30, counsel for Hamilton wrote to the AAA that shortly after the Home Construction Arbitration Rules were created, he checked with an AAA office regarding the application of the Home Construction Arbitration Rules to manufactured housing cases because he claims houses do not fit the definition of “standardized, consumable goods or services” under the Consumer Rules. (Doc. 19-6 at 1). Counsel for Hamilton indicated that for the last fifteen years, “the AAA has routinely allowed the use of the Home Construction Arbitration Rules for manufactured housing cases” and attached a copy of a 2009 letter confirming the use of the Home Construction Arbitration Rules “for claims under the old warranty where a designation of the rules to be utilized was not made.” (Id. at 2). On June 16, the AAA emailed counsel for all parties, saying, “After careful review of the parties' comments and the contracts submitted, all the agreements provided name the AAA's Home Construction Rules we'll have to proceed under the AAA's Home Construction Rules [sic].” (Doc. 6-9 at 2; Doc. 19-8). The initial filing fee for claims of $100,000 to less than $300,000 or for undetermined damages is $650. (Doc. 19-9 at 2).

On July 20, the AAA again emailed counsel for all parties, stating that the Construction Industry Arbitration Rules and Mediation Procedures (“Construction Industry Rules”) would apply to this matter, that the Home...