Pirone v. CMH Homes Incorporated

• Court: District Court, D. Arizona
• Decided: August 26, 2019
• Docket: 3:19-cv-08130
• Status: Unknown

Opinion

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA

9 Christopher Pirone, et al., No. CV-19-08130-PCT-JJT

10 Plaintiffs, ORDER

11 v.

12 CMH Homes Incorporated, et al.,

13 Defendants. 14 15 At issue is Defendant CMH Homes Inc.’s Motion to Compel Arbitration and Motion 16 to Dismiss (Doc. 6, Mot.), to which Plaintiffs Christopher and Christine Pirone filed a 17 Response (Doc. 7, Resp.) and Defendant filed a Reply (Doc. 8, Reply). 18 In the Complaint (Doc. 1-3, Compl.), Plaintiffs raise a claim of consumer fraud 19 against Defendant on the basis of representations Defendant allegedly made with respect 20 to a home Plaintiffs purchased from Defendant. Defendant now moves to compel 21 arbitration of Plaintiffs’ claim under an arbitration agreement between Defendant and 22 Plaintiffs. 23 To resolve a motion to compel arbitration under the Federal Arbitration Act 24 (“FAA”), 9 U.S.C. § 1 et seq., a district court must determine (1) whether the parties entered 25 into a valid agreement to arbitrate, and (2) whether the arbitration agreement encompasses 26 the dispute at issue. Lifescan, Inc. v. Premier Diabetic Servs., Inc., 363 F.3d 1010, 1012 27 (9th Cir. 2004). If the district court finds that both elements are met, the FAA requires the 28 court to enforce the arbitration agreement. Id. 1 The Binding Dispute Resolution Agreement proffered by Defendant states that 2 claims related to a home sold by Defendant must be resolved by mediation or, if that proves 3 unsuccessful, by mandatory, binding arbitration. (Mot. Ex. B. Ex. 2.) Plaintiffs do not 4 dispute that they entered into the Agreement, but they contend that the Agreement contains 5 an exception for a consumer fraud claim such as the one they have raised in this lawsuit. 6 Specifically, the Agreement states that, “[t]he Parties expressly agree not to arbitrate any 7 Claims as a class action, a representative action, or a private-attorney general action,” and 8 Plaintiffs argue that a consumer fraud claim constitutes a private attorney general action. 9 Under Arizona law, there is a private right of action under the Consumer Fraud Act, 10 A.R.S. § 44-1521 et seq. Sellinger v. Freeway Mobile Home Sales, Inc., 521 P.2d 1119, 11 1122 (Ariz. 1974). But not all consumer fraud claims are private attorney general actions. 12 In setting forth the “private attorney general doctrine” in the context of attorneys’ fees 13 awards, Arizona courts describe a private attorney general action as one that seeks to 14 vindicate a right that “1) benefits a large number of people; 2) requires private enforcement 15 and 3) is of societal importance.” Yes on Prop 200 v. Napolitano, 160 P.3d 1216, 1229–30 16 (Ariz. Ct. App. 2007). A Consumer Fraud Act claim may seek to eliminate unlawful 17 practices—such as false advertising or misleading pricing—on behalf of the public and 18 thus benefit a large number of people. E.g., State ex rel. Horne v. Autozone, Inc., 275 P.3d 19 1278, 1279–80 (Ariz. 2012). But when a Consumer Fraud Act claim simply provides an 20 individual consumer “a remedy to counteract the disproportionate bargaining power often 21 present in consumer transactions,” Shaw v. CTVT Motors, Inc., 300 P.3d 907, 908–09 22 (Ariz. Ct. App. 2013) (internal quotation omitted), it does not benefit a large number of 23 people and thus does not act as a private attorney general action. 24 Construing a private attorney general action as one benefitting a large number of 25 people is consistent with the text of the Agreement itself, in which the parties agreed not 26 to arbitrate “a class action, a representative action, or a private-attorney general action” 27 claim. To the extent that Plaintiffs argue that a private attorney general action contemplates 28 a consumer fraud claim benefitting only an individual, the canon of construction of noscitur 1 a sociis—that a “term is interpreted in the context of the accompanying words”—teaches 2 otherwise. See Estate of Braden ex rel. Gabaldon v. State, 266 P.3d 349, 352 (Ariz. 2011). 3 The distinguishing feature of a class or representative action is that they benefit a large 4 number of people, and because the arbitration exception in the Agreement includes “a 5 private attorney general action” together with class and representative actions, the intent of 6 the exception must have been to address actions benefitting a large number or people. 7 Here, Plaintiffs seek individual redress for Defendant’s alleged misrepresentations 8 specific to the purchase of their home. (E.g., Compl. ¶ 11 & Ex. 2.) Because Plaintiffs’ 9 claim does not seek to benefit a large number of people, this is not “a private attorney 10 general action” as contemplated by the arbitration exception in the Agreement. Plaintiffs 11 raise no other defense to the validity and enforceability of the Agreement, and the Court 12 thus finds the Binding Dispute Resolution Agreement between Plaintiffs and Defendant is 13 a valid agreement encompassing the dispute in this lawsuit. Accordingly, under the FAA, 14 the Court must compel the parties to arbitrate their dispute. This conclusion does not leave 15 Plaintiffs without a remedy for their fraud claim, but rather provides for a different venue 16 for the resolution of that claim. 17 Section 3 of the FAA provides that the Court “shall on application of one of the 18 parties stay the trial of the action until such arbitration has been had in accordance with the 19 terms of the agreement.” Here, Plaintiffs have asked the Court to stay this action. (Resp. at 20 3.) Thus, in compelling arbitration, the Court will stay this lawsuit pending the results of 21 the arbitration. See Meritage Homes Corp. v. Hancock, 522 F. Supp. 2d 1203, 1211 (D. 22 Ariz. 2007); see also AT&T Mobility, LLC v. Concepcion, 563 U.S. 333, 344 (2011) 23 (stating that, upon a party’s request, the FAA requires a court to stay litigation of claims 24 subject to arbitration pending the outcome of the arbitration of those claims under the terms 25 of the arbitration agreement). 26 IT IS THEREFORE ORDERED granting in part Defendant’s Motion to Compel 27 Arbitration and Motion to Dismiss (Doc. 6). The parties are directed to promptly submit 28 1 || this matter to arbitration consistent with the terms of their Binding Dispute Resolution 2 || Agreement and the provisions of the Federal Arbitration Act. 3 IT IS FURTHER ORDERED denying Defendant’s request to dismiss this action 4|| and instead staying Plaintiffs’ claim against Defendant in this matter pending a decision by 5 || the arbitrator. The parties shall file a joint status report within one week of the arbitrator’s || decision or by February 21, 2020, whichever is sooner. 7 Dated this 26th day of August, 2019. CN

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