Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-alsd-1_07-cv-00318/USCOURTS-alsd-1_07-cv-00318-0/pdf.json

Nature of Suit Code: 371
Nature of Suit: Truth in Lending
Cause of Action: 15:1640 Truth in Lending

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IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF ALABAMA

SOUTHERN DIVISION

CATHERINE G. MCALEER, et al., )

 )

Plaintiffs, )

 )

v. ) CIVIL ACTION 07-0318-WS-M

 )

HOLIDAY ISLE, LLC, et al., )

 )

Defendants. )

ORDER

This matter is before the Court on the motion of defendant Holiday Isle, LLC

(“Holiday”) to compel arbitration and dismiss or stay. (Doc. 4). The parties have filed

briefs and evidentiary materials in support of their respective positions, (Docs. 5, 9, 10),

and the motion is ripe for resolution. After carefully considering the foregoing and other

relevant materials in the file, the Court concludes that the motion to compel arbitration

and to stay is due to be granted and the motion to dismiss denied.

The plaintiffs entered separate, preconstruction purchase and escrow agreements

(“the Agreements”) with Holiday concerning units at the Holiday Isle project. Count

One of the complaint alleges that Holiday violated the Interstate Land Sales Full

Disclosure Act (“ILSFDA”). Count Two alleges that Holiday breached the Agreements

in various ways.

The Agreements contain an arbitration clause providing in pertinent part as

follows:

Should any dispute arise between any of the parties whose rights or 

duties are affected or determined by this Purchase and Escrow Agreement, 

 ... such dispute shall be governed by the laws of the State of Alabama, and 

such dispute, disagreement, or question between the parties ... shall be submitted 

to arbitration .... The arbiter shall render a decision which shall be binding 

on all parties to the arbitration, based on a traditional and standard interpretation 

of the laws of the State of Alabama.

(Doc. 4, Exhibits A, B at 19, ¶ 20). 

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The Federal Arbitration Act (“FAA”) provides in pertinent part as follows:

A written provision in any ... contract evidencing a transaction involving

commerce to settle by arbitration a controversy thereafter arising out of 

such contract ... shall be valid, irrevocable, and enforceable, save upon 

such grounds as exist at law or in equity for the revocation of any contract.

9 U.S.C. § 2. 

The “involving commerce” requirement of the FAA is co-extensive with “the

broadest possible exercise of Congress’ Commerce Clause power.” Caley v. Gulfstream

Aerospace Corp., 428 F.3d 1359, 1370 (11th Cir. 2005) (internal quotes omitted). Thus, it

is satisfied “without showing any specific effect upon interstate commerce if in the

aggregate the economic activity in question would represent a general practice subject to

federal control.” Id. (internal quotes omitted). The affidavit of Carla Waters, (Doc. 5),

easily satisfies this requirement, and the plaintiffs do not argue otherwise. Instead, they

argue that arbitration is precluded for two reasons: (1) the arbitration clause is limited to

state-law claims, such that their ILSFDA claim is beyond its reach; and (2) Holiday’s

alleged failure to complete the purchased units within two years of the Agreements’

effective date rendered the Agreements null and void, precluding arbitration of either

claim. (Doc. 9).

“In the absence of an agreement to arbitrate, a court cannot compel the parties to

settle their dispute in an arbitral forum.” Klay v. All Defendants, 389 F.3d 1191, 1200

(11th Cir. 2004). Thus, in ruling on a motion to compel arbitration, “[t]he first step is to

determine whether the parties agreed to arbitrate the dispute,” id., which “is a matter of

contract interpretation.” Telecom Italia, S.P.A. v. Wholesale Telecom Corp., 248 F.3d

1109, 1114 (11th Cir. 2001). Thanks to a “liberal federal policy favoring arbitration

agreements,” Klay, 389 F.3d at 1200 (internal quotes omitted), “[a]ny doubts concerning

the scope of arbitrable issues should be resolved in favor of arbitration.” MONY

Securities Corp. v. Bornstein, 390 F.3d 1340, 1342 n.1 (11th Cir. 2004) (internal quotes

omitted); accord Volt Information Sciences, Inc. v. Board of Trustees, 489 U.S. 468, 476

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The language seized upon by the plaintiffs appears to operate as a contractual

choice-of-law provision, which provisions routinely identify a single state’s law as

controlling but which can scarcely be construed as precluding any party from bringing a

federal claim.

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(1989) (“[A]mbiguities as to the scope of the arbitration clause itself [must be] resolved in

favor of arbitration.”). Thus, it is only when the “clear intent of the parties” and the

“plain text of the contract” are inconsistent with arbitration of a dispute that a court will

rule that the dispute is not subject to the arbitration clause. Equal Employment

Opportunity Commission v. Waffle House, Inc., 534 U.S. 279, 294 (2002). 

The plaintiffs argue that, because the arbitration clause requires the arbitrator to

render a decision “based on ... the laws of the State of Alabama,” the clause provides for

arbitration of state-law claims, not federal claims. (Doc. 9 at 1-2, ¶¶, 2, 5). The problem

is that the clause also provides that, if “any dispute” arises, “such dispute ... shall be

submitted to arbitration,” language that encompasses federal as well as state claims. A

reasonable reconciliation of the two phrases is that, while all disputes are arbitrable, those

disputes governed by state law are to be governed by Alabama law, leaving federal

disputes to be governed by federal law.1

 At best, the clause is ambiguous as to whether

federal claims are arbitrable, and the ambiguity must be resolved in favor of arbitration. 

 The Agreements provide that, “[i]f the Unit herein purchased shall not be

completed within two(2) years of the effective date of this Agreement, this Agreement

shall be null and void ....” (Doc. 4, Exhibits A, B at 8, ¶ 6(B)). The plaintiffs admit that

the parties entered into a valid contract in 2005, (Doc. 9 at 2, ¶ 11), but they argue that

their units were not completed by the deadline and that the Agreement ceased to exist

pursuant to paragraph 6(B) on or about April 1, 2007. Thus, they conclude, the

arbitration clause ceased to exist as well. (Id., ¶¶ 8, 11).

While the termination of the ... agreement works an obvious change 

in the relationship between [the parties], it would have little impact on many 

of the considerations behind their decision to resolve their contractual 

differences through arbitration. ... Hence, there is little reason to construe 

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Holiday argues that the units were “completed” within the contemplation of

paragraph 6(B) and submits a certificate of occupancy in support. Because the Court’s

resolution of the motion to compel arbitration does not depend on whether the units were

completed, the plaintiffs’ motion to strike this exhibit, (Doc. 11), is denied as moot.

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this contract to mean that the parties intended their contractual duty to 

submit grievances and claims arising under the contract to terminate 

immediately on the termination of the contract; the alternative remedy 

of a lawsuit is the very remedy the arbitration clause was designed to avoid.

...

... In short, where the dispute is over a provision of the expired agreement, 

the presumptions favoring arbitrability must be negated by express or clear

implication. 

Nolde Brothers, Inc. v. Local No. 358, 430 U.S. 243, 254-55 (1977). The same principle

applies outside the collective bargaining context. E.g., Riley Manufacturing Co. v.

Anchor Glass Container Corp., 157 F.3d 775, 781 (10th Cir. 1998). The plaintiffs have

not attempted to overcome this presumption; the mere fact (if it be a fact) that the

Agreements ceased to exist on April 1, 2007 is legally insufficient to negate the

presumption that their claims remain subject to the arbitration clause.2

 

Holiday requests that the Court dismiss the action because the plaintiffs’ claims are

subject to arbitration. (Doc. 4 at 6; Doc. 10 at 3). 

If any suit or proceeding be brought ... upon any issue referable to

arbitration ..., the court in which such suit is pending, upon being satisfied 

that the issue involved in such suit or proceeding is referable to arbitration 

..., shall on application of one of the parties stay the trial of the action until 

such arbitration has been had ....

9 U.S.C. § 3 (emphasis added). While Holiday prefers dismissal, its motion is styled as

one to “dismiss or stay,” and the body of its principal brief requests a stay in the

alternative at least three times. (Doc. 4 at 1, 7). Holiday has thus made application for a

stay, and it has not attempted to show that the Court is not bound by Section 3 to honor

that request. 

For the reasons set forth above, Holiday’s motion to compel arbitration is granted,

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its motion to dismiss is denied, and its motion to stay is granted. This matter is stayed

pending the conclusion of arbitration. Holiday is ordered to file and serve, on or before

August 10, 2007, and on or before the tenth day of every second month thereafter, a status

report concerning the arbitration proceedings.

DONE and ORDERED this 20th day of July, 2007.

s/ WILLIAM H. STEELE

UNITED STATES DISTRICT JUDGE

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