Maldonado v. Firstservice Residential, Inc.

JOSE A. MALDONADO, et al., Plaintiff, v. FIRSTSERVICE RESIDENTIAL, INC., et al., Defendant.

CIVIL ACTION NO. H-20-1484

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION

March 15, 2021

MEMORANDUM AND ORDER

This is a dispute among neighbors and a neighborhood association. The issue is parking. Jose and Maria Maldonado want to park a Ford Transit van and trailer in their driveway. The defendants—FirstService Residential, Inc., Royal Brook Community Association, Inc., Friendswood Development Company, LLC, Natasha Brown, Jennifer McKenry, John H. Palamidy, Jr., Cynthia A. Hill, and Korie Herold—want to keep the van and trailer out of the subdivision. They allege that the Maldonados are violating deed restrictions by parking the van and trailer in the neighborhood and are threatening the Maldanados with fines and legal action. The Maldonados claim that the defendants are targeting them because they are Puerto Rican. The Maldonados sued, alleging discrimination based on race and national origin and seeking damages and injunctive relief. The court has previously addressed the request for an injunction, and the parties agreed on a temporary order.

Five of the defendants—FirstService, Royal Brook, Friendswood, Brown, and McKenry—moved to compel arbitration based on an arbitration clause in the subdivision's deed restrictions. The deed restrictions are clearly mentioned in the Maldonados' deed and chain of title. The arbitration clause, however, applies only to claims for damages, not injunctive relief.

Based on the pleadings, the motions and responses, and the relevant law, this court grants the defendants' motion to compel arbitration of the Maldonados' damages claims. The reasons are set out below.

I. Background

A. The Proceedings in Federal Court

In 2019, the Maldonados bought a house in the Royal Brook at Kingwood subdivision. (Docket Entry No. 28 at ¶ 15). In April 2020, the Maldonados sued two sets of defendants: the developer defendants, including Royal Brook, FirstService, the subdivision's managing agent, Friendswood, Jennifer McKenry, a Homeowners Association Board Member, and Natasha Brown, a FirstService employee, and their neighbors, Palamidy, Hill, and Herold. (Docket Entry No. 28 at ¶¶ 1-10). The Maldonados allege that the defendants conspired to discriminate and harass them through the "unequal application" of deed restrictions related to parking. (Docket Entry No. 28 at ¶ 59). They allege that Royal Brook does not apply these same deed restrictions to non-Latino residents. (Id.). The Maldonados brought a multitude of federal and state claims, including claims for race and national origin discrimination under 42 U.S.C. § 1981; discriminatory interference with property rights under 42 U.S.C. § 1982; conspiracy to discriminate under 42 U.S.C. § 1985; tortious interference; stalking; and intentional infliction of emotional distress. (Id. at ¶¶ 112-154). They also moved for a temporary restraining order and preliminary injunction to enjoin enforcement of the relevant deed restrictions. (Docket Entry No. 11).

In June 2020, the court held a temporary restraining order hearing and denied the Maldonados' application for a temporary restraining order. (Docket Entry No. 22). Royal Brook counterclaimed for statutory damages and injunctive relief against the Maldonados for deed-restriction violations. (Docket Entry No. 41). The developer defendants and neighbor defendants have filed motions to dismiss, which the court has not yet addressed. (Docket Entry No. 33).

In September 2020, the court held a hearing during which the parties agreed on a temporary injunction that the court later approved. (Docket Entry Nos. 68, 101). Three days after the hearing, the developer defendants moved to compel arbitration. (Docket Entry No. 69).

B. The Arbitration Clause

The Royal Brook subdivision is governed by the Royal Brook Declaration of Covenants, Conditions and Restrictions. (Docket Entry No. 28 at ¶ 5). The subdivision developer filed the Declaration in the Harris County property records. (Docket Entry No. 69-17). Additional filings in the property records refer to the Declaration. (Docket Entry No. 69-18).

The Maldonados' deed states that it is "given and accepted subject to all and singular the restrictions, covenants, conditions, limitations, easements and mineral reservations, if any, applicable to and enforceable against the . . . property as reflected by the records of the county in which it is located." (Docket Entry No. 69-19 at 1). The Maldonados' deed of trust also contains a planned unit development rider that states that the "Borrower's obligations" include the obligations in the "Declaration." (Docket Entry No. 69-20 at 15).

The Declaration states that "[a]ll Claims must be settled by binding arbitration." (Docket Entry No. 69-2 at § 13.07). "Claim" is defined as follows:

(i) Claims relating to the rights and/or duties of Declarant or the Association under the Restrictions.

(ii) Claims relating to the acts or omissions of the Declarant or Board members of the Association and any claim asserted against the Declarant or any appointed member of the ARC.

(iii) Claims relating to the design or construction of any Improvements by the Declarant.

(Id. at § 13.01.1).

"Declarant" is defined as "Friendswood Development Company, LLC and its successors and assigns." (Id. at § 1.09). "Claimant" is defined as "any Party having a Claim against any other Party." (Id. at § 13.01.2). "Party" is defined as "[t]he Association, the Owners, Declarant, all persons subject to this Declaration, and any person not otherwise subject to this Declaration who agrees to submit to this Article." (Id. at § 13.01). "Owner" is defined as "the record owner, whether one or more persons or entities, of the fee simple title to the surface estate in any Lot or Commercial Unit which is a part of the Property." (Id. at § 1.16).

Parties may enforce the arbitration clause by bringing "an action in court to compel arbitration." (Id. at § 13.07). The arbitration clause permits parties to "seek, use, and employ ancillary or preliminary remedies, judicial or otherwise, for the purposes of realizing upon, preserving, or protecting upon any property, real or personal, that is involved in a Claim." (Id. at § 13.08). The arbitration clause makes clear that the "institution and maintenance of an action for judicial relief or pursuit of provisional or ancillary remedies or exercise of self-help remedies shall not constitute a waiver of the right of any party to submit the Claim to arbitration." (Id.).

II. Legal Standards

The Federal Arbitration Act, 9 U.S.C. § 1, et seq., permits a party to move to compel arbitration when an opposing party refuses to arbitrate issues covered by a valid arbitrationagreement. Am. Bankers Ins. Co. Fla. v. Inman, 436 F.3d 490, 493 (5th Cir. 2006) (quoting Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24 (1991)); 9 U.S.C. §§ 3, 4. To rule on a motion to compel, a court must first decide if the dispute is arbitrable. See Papalote Creek II, LLC v. Lower Colo. River Auth., 918 F.3d 450, 454 (5th Cir. 2019). This requires deciding whether "(1) 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." Gross v. GGNSC Southaven, LLC, 817 F.3d 169, 176 (5th Cir. 2016) (quoting Tittle v. Enron Corp., 463 F.3d 410, 418 (5th Cir. 2006)).

The party moving to compel arbitration has the burden of showing an arbitration agreement under the applicable state contract law. See Halliburton Energy Servs., Inc. v. Ironshore Specialty Ins. Co., 921 F.3d 522, 530 (5th Cir. 2019) ("Under the FAA, ordinary principles of state contract law determine whether there is a valid agreement to arbitrate."); Huckaba v. Ref-Chem, LP, 892 F.3d 686, 688 (5th Cir. 2018) ("[T]he party moving to compel arbitration must show that the agreement meets all of the requisite contract elements."). The court follows the federal policy of resolving "ambiguities in favor of arbitration" in "determining the scope of a valid arbitration agreement." Klein v. Nabors Drilling USA LP, 710 F.3d 234, 237 (5th Cir. 2013); see also Huckaba, 892 F.3d at 688.

If there is an enforceable agreement to arbitrate the dispute, the court must then determine whether any federal statute or policy makes the claims nonarbitrable. Janvey v. Alguire, 847 F.3d 231, 240 (5th Cir. 2017). If not, the FAA requires district courts to order arbitration. See Pacheco v. PCM Const. Servs., LLC, 602 F. App'x 945, 947 (5th Cir. 2015) ("A district court must compel arbitration if there is an agreement for arbitration and a party has failed to comply with that agreement.").

III. Analysis

A. Valid Arbitration Agreement

Under Texas law, a party seeking to compel arbitration must show: (1) the existence of a valid agreement to arbitrate; and (2) that the claims asserted by the party attempting to compel arbitration are within the scope of the arbitration agreement. See Certain Underwriters at Lloyd's of London v. Celebrity, Inc., 950 S.W.2d 375, 377 (Tex. App.—Tyler 1996, writ dism'd w.o.j).

The Maldonados do not dispute that they have a binding arbitration agreement with Friendswood and Royal Brook. (Docket Entry No. 93 at 13). The Declaration, which contains an arbitration clause, is referred to in their deed and is recorded in their chain of title. (Docket Entry No. 28 at ¶ 5; Docket Entry Nos. 69-17, 69-18, 69-19). Instead, the Maldonados argue that they do not have a binding arbitration agreement with McKenry, because she is their neighbor, or with FirstService and Brown, neither of whom signed the Declaration. (Docket Entry No. 93 at 19).

McKenry may enforce the Declaration's arbitration clause against the Maldonados. The clause requires arbitration of claims "relating to the acts or omissions of the Declarant or Board members of the Association." (Docket Entry No. 69-2 at § 13.01.1)....