1 The Honorable Byron R. White, Associate Justice of the

United States Supreme Court, (Ret.), sitting by designation

pursuant to 28 U.S.C. § 294(a).

1 United States Court of Appeals,

Fifth Circuit.

No. 94-30153.

Karen McKEE, Wife of/and Curtis K. Kilpatrick, PlaintiffsAppellants,

v.

HOME BUYERS WARRANTY CORPORATION II, Defendant-Appellee.

Feb. 27, 1995.

Appeal from the United States District Court Eastern District of

Louisiana.

Before WHITE 1

, Associate Justice (Ret.), BARK SDALE and PARKER,

Circuit Judges.

ROBERT M. PARKER, Circuit Judge:

Karen McKee, Wife of/and Curtis K . Kilpatrick (the

"Kilpatricks") filed this action against Home Buyers Warranty

Corporation II ("HBW") to recover for damage to their home which

they contend was covered under HBW's structural warranty. HBW

filed a motion for summary judgment, contending that the dispute

was conclusivel y resolved in a prior arbitration. The district

court granted the motion. The Kilpatricks now appeal, contending

that the arbitration was not binding. Because the district court

correctly determined that HBW was entitle d to summary judgment

based on the prior arbitration, we affirm.

I.

The Kilpatricks bought a house in 1985. The builder enrolled2

the house in HBW's limited ten-year structural warranty program.

The house suffered from excessive differential settlement and

the Kilpatricks filed a claim with HBW. HBW sent the Kilpatricks

a letter notifying them that it had denied their claim because HBW

had determined that the defect did not render the house "unsafe,

unsanitary, or otherwise unlivable" as required to invoke coverage

under the war ranty. HBW stated that arbitration was required

before any litigation and referred the Kilpatricks to the provision

in their warranty booklet requiring conciliation or arbitration as

a condition precedent to any attempted litigation.

The Kilpatricks requested through the ir attorney that the

matte r be submitted to arbitration with the American Arbitration

Ass ociation ("AAA") as provided in the warranty booklet. The

Kilpatricks' attorney reviewed the AAA rules and represented them

at the arbitration. The arbitrator determined that the problems

with the Kilpatricks' house were not covered by the warranty and

ruled in favor of HBW. The Kilpatricks did not appeal the

arbitrator's decision or file a proceeding in court to have it

vacated, modified, or corrected. Instead the Kilpatricks filed

suit on the contract in Louisiana state court, and HBW removed to

federal court based on diversity of citizenship.

Along with its answer, HBW fil ed a counterclaim for

confirmation of the earlier arbitration. HBW also filed a motion

for summary judgment based on arbitration and award. The district

court granted the motion and the arbitration award was confirmed.

II.2 The section of the warranty entitled "Conciliation and

Arbitration" provides:

"Should the Builder or Homebuyer(s) disagree with the

Insurer's decision to deny the claim as recommended by the

Service, the contesting party shall call for conciliation

with the Service or an arbitration to be conducted by the

American Arbitration Association (A.A.A.), or other mutually

agreeable arbitration service at the Service's expense....

The conciliation and/or arbitration process will be

conducted in accordance with the warranty conditions

described herein and the rules and regulations of the A.A.A.

or other mutually agreeable arbitration service. The

dispute settlement process shall precede any litigation

attempted by either party on items that are specifically

3 A.

We review a grant of sum mary judgment d e novo, viewing all

evidence in the light most favorable to the non-moving party.

E.g., Insurance Company of North America v. Dealy, 911 F.2d 1096

(5th Cir.1990). Our review of the district court's confirmation of

an arbitrator's award is likewise de novo. Executone Information

Systems, Inc. v. Davis, 26 F.3d 1314 (5th Cir.1994). We also

approach this case in the light of the "liberal federal policy

favoring arbitration." M oses H. Cone Memorial Hosp. v. Mercury

Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 941, 74 L.Ed.2d 765

(1983).

B.

The central issue in this case is whether the district court

correctl y determined that the parties agreed to binding

arbitration. The Kilpatricks contend that the warranty called for

non-binding arbitration based on a provision in the warranty that

" [t]he dispute resolution process shall precede any litigation

attempted by either party." 2 The Kilpatricks argue that the factincluded in this warranty.... The dispute will be resolved

or an award rendered by the arbitrator within 40 days from

the time the form is received by the arbitration service."

4 that the warranty makes arbitrati on a condition precedent to

litigation indicates that the arbitration is non-binding. We

disagree.

Numerous courts have held that arbitration is bi nding where

the rules under which the arbitration is conducted call for binding

arbitration. E.g., Rainwater v. National Home Ins. Co., 944 F.2d

190 (4th Cir.1991) (holding that an arbitration in accordance with

AAA rules is a binding arbitration); C ommonwealth Edison Co. v.

Gulf Oil Corp., 541 F.2d 1263, 1273 (7th Cir.1976) (holding that

incorporation of rules of arbitration in agre ement established

requisite consent to judgment); I /S Sta vborg (O.H. Meling,

Manager) v. National Meta l Converters, Inc., 500 F.2d 424 (2d

Cir.1974) (holding that agreement to be b ound by arbitration and

consent to judgment could be inferred by reference to rules which

provide for bindi ng arbitration); s ee also Varley v. Tarrytown

Associates, Inc., 477 F.2d 208, 210 (2d Cir.1973) (conceding that

agreement to bindin g arbitration could be expressed by

incorporating arbitration rules, but fi nding that AAA rules in

force at the time did not allow f or entry of judgment); c f.

Dowling v. Home Buyers Warranty Corp. II,

--- S.C. ----, 428 S.E.2d

709 (1993) (finding that there was no agreement to arbitrate where

the Arbitration Acknowledgement and correspondence from the

a rbitration agency stated that the arbitration would not be

binding). The decisions holding that reference to AAA rules as3 The American Arbitration Association Home Warranty

Arbitration Rules under which the arbitration was conducted

provide in Rule 26(c): "Unless the applicable law or warranty

program, the insurance policy, or another applicable document

provides otherwise, the parties to these rules shall be deemed to

have consented that judgment upon the arbitration award may be

entered in any federal or state court having jurisdiction

thereof."

5 permitting entry of judgment are longstanding. Consequently, all

parties are on notice that resort to AAA arbitration will be deemed

both binding and subject to entry of judgment unless the parties

expressly agree otherwise. Rainwater, 944 F.2d at 194.

In the instant case, it is undisputed that the warranty

provided that AAA rules would govern if the dispute were submitted

to AAA arbitration. The arbitration was conducted under AAA rules

and those rules provided for bindin g arbitration unless the

app licable law or the terms of the warranty specified otherwise. 3

We must therefore determine wheth er there is anything in the

warranty that specifies non-binding arbitration.

We fi nd the Kilpatricks contention that the "condition

precedent " language in the warranty calls for non-binding

arbitration unpersuasive. We agree with the Fourth Circuit's

treatment of this issue in Rainwater:

Though [t he Kilpatrick's] claim has some surface appeal, we

think that the "condition precedent" language cannot carry all

the weight [the Kilpatricks] wo u ld ascribe to it.

Traditionally, federal courts were hostile to arbitration

clauses since it was thought they could be avoided at the whim

of either party. S ee generally Continental Grain Co. v. Dant

& Russell, Inc., 1 18 F.2d 967 (9th Cir.1941) (arbitration

agreements could not be enforced in f ederal courts prior to

passage of FAA) . As a result, parties frequently included

"condition precedent" language to make certain that the

arbitration process ran its course before a fed eral court

could entertain a suit. See, e.g., Pettus v. Olga Coal Co.,6

137 W.Va. 492, 72 S.E.2d 881, 885 (1952) (holding that

" condition precedent" language did not oust court of

jurisdiction, something frowned upon at common law, but rather

made suit premature until the terms o f the contract were

fulfilled). Therefore, we read "condition precedent" to some

extent as an artifact left over from the days of hostility

toward arbitration. To the extent that the phrase has

meaning, we find that it does not undermine the binding nature

of arbitration, but instead applies to the confirmation

process permitted by 9 U.S.C. § 9, or to other litigation in

which the arbitration award would be final but just a sub-text

in some larger litigation context.

Rainwater, 944 F.2d at 194.

Because the Kilpatricks submitted the dispute to arbitration

under AAA rules that required binding arbit ration unless the

warranty provided for non-binding arbitration, and the warranty did

not provide for non-binding arbitration, the district court was

correct in determining that the arbitration was binding.

C.

The Kilpatricks assert that the threshold question of whether

the parties agreed to binding arbitration is purely a matter of

contract to be determined according to state law. The Kilpatricks

contend that if we construe the warranty according to Louisiana

law, the federa l policy favoring arbitration would not apply and

that a state policy requiring that ambiguities in a document be

resolved against the sophisticated drafte r would control. The

difficulty with this argument is that the Federal Arbitration Act

(FAA), 9 U.S.C. § 2, declares that written agreements to arbitrate

are enforceable when contained in a contract involving interstate

commerce, see Allied-Bruce Terminix Companies, Inc. v. Dobson,

---

U.S. ----, 115 S.Ct. 834,

--- L.Ed.2d

---- (1995), and the

Kilpatricks' warranty certainly falls within th is category. The7

Supreme Court has explained that, in construing an arbitration

agreement within the scope of the FAA, "as with any other contract,

the parties' intentions control, bu t those intentions are

generously construed as to issues of arbitrability." M itsubishi

Motors Co rp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626

105 S.Ct. 3346, 3 354, 87 L.Ed.2d 444 (1985). That is, the FAA

"create[s] a body of federal substantive law of arbitra bility,

applicable to any arbitration agreement within the coverage of the

Act," Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460

U.S. 1, 24, 103 S.Ct. 927, 941, 74 L.Ed.2d 765 (1983), and that

body of federal law requires that, "in applying general state-law

principles of contract interpretation to the interpretation of an

agreement within the scope of the Act,

... due regard must be given

to the federal policy favoring arbitration, and ambiguities as to

the scope of the arbitration clause itself resolved in favor of

arbitration." V olt Information Sciences, Inc. v. Stanford

University, 489 U.S. 468, 475-76, 109 S.Ct. 1248, 1254, 103 L.Ed.2d

488 (1989). We think that this "federal policy favoring

arbitration" covers more than simply the substantive scope of the

arbitration clause—i.e., whether the Kilpatricks' claims were

properly submitted to arbitration—and encompasses an expectation

that such procedures will be binding. As a matter of federal law,

the language of the warranty agreement is not sufficiently specific

to call for non-binding arbitration. Although this case is

controlle d by federal law, for the following reasons the

Kilpatricks' state law arguments net them nothing. First, the8

policy favoring arbitration is not exclusively federal; both

federal and s tate jurisprudence dictate that any doubt as to

whether a controversy is arbitrable should be resolved in favor of

arbitration. R ussellville Steel Co., Inc. v. A & R Excavating,

Inc., 624 So.2d 11, 14 (La.App. 5th Cir.199 3); W oodson

Construction Company, Inc. v. R.L. Abshire Construction Co., Inc.,

459 So.2d 566 (La .App. 3d Cir.1984). Second, if we construe the

warranty a ccording to Louisiana law, it unambiguously calls for

binding arbitration.

A comparison of the Louisiana Arbitration Law, LSA-R.S.

9 :4201, et seq., and the FAA reveals that the parties coul d not

have agreed to non-binding "arbitration" in a contract subject to

the Louisiana Arbitration Law because arbitration is by definition

a binding procedure under that law.

Arbitration is binding only if a court may enter judgment on

the award made pursuant to the arbitration. While the Louisiana

Arbitration Law generally parallels the FAA, there is a significant

di fference between the sections dealing with entry of judgment.

Disputes about whether arbitration is binding can arise under the

FAA because the FAA provides that a court may enter judgment on the

arbitration award only if the parties agreed that a court may enter

judgment. S ee 9 U.S.C. § 9. Such disputes do not arise under the

Louisiana Arbitration Law because the Louisiana law provides that

a court may enter judgment if the parties agreed to arbitration;

the Louisiana Law simply makes no provision for non-binding

arbitration. S ee LSA- R.S. 9:4209. Thus, under the Louisiana9

Arbitration Law, if the parties agreed to a non-binding procedure,

they did not agree to arbitration.

If the Court construe s the warranty according to Louisiana

law, we could find the dispute resolution provision in the warranty

ambiguous only if we determined that the "condition precedent"

language means that the parties did not really agree to arbitrate,

even though the warranty explicitly calls for arbitration. Such a

stretch is plainly contrary to the federal and state policies

favoring arbitrab ility. We are aware of no case in which a

Louisiana court has determined that such "con dition precedent"

language has any meaning other than that ascribed to it in

Rainw ater. On the contrary, in cases where it can be determined

that an arbitration clause contained "condition precedent" language

similar to that in the instant case, Louisiana courts have held

that the dispute was subject to arbitration without even taking

notice of the "condition precedent" language. E .g., Southern

Motels Investment Corporation v. Tower Contracting Co., I nc., of

Tex., 174 So.2d 852 (La.App. 1st Cir.1965) (holding that the claim

was subject to arbitration but defendant waived right to arbitrate

b y filing suit); L awton v. Cain, 172 So.2d 734 (La.App . 2d

Cir.1965) (holding that the claim was subject to arbitration but

plaintiff waived right to arbitrate by filing suit). We are

therefore unable to find that the warranty calls for anything other

than binding arbitration under Louisiana law.

D.

The Ki lpatricks next argue that even if the arbitration was10

binding, HBW should be equitably estopped from asserting its

defense of arbitration and award because HBW allegedly represented

to the Kilpatricks that the arbitration was non-binding. This

contention is based on the "condition precedent" language in a

letter from HBW's claim representative wh ich contained similar

language and referred them to the applicable section of the

warranty booklet and from the language in the warranty booklet

itself. The Kilpatricks maintain that if they had realized that

the arbitration would be binding, they wo uld have foregone

arbitration and filed a lawsuit initially.

Under Louisiana law, equitable estoppel applies if there is

representation by conduct or wor k, justifiable reliance on that

representation, and change of position to one's detriment as a

result of that reliance, although estoppel applies only as a last

resort and once t he ends of justice so demand. C hevron U.S.A.,

Inc. v. Traillour Oil Co., 987 F.2d 1138 (5th Cir.1993). The

Kilpatricks' estoppel argument fails because HBW did not represent

that the arbitration would be non-binding. HBW merely represented

t hat arbitration was a condition precedent to litigation. While

this language might be unartful and anachronistic, it does not

denote non-binding arbitration. Although the "condition precedent"

language might be misleading to a layman, we note that the

Kilpatricks reque sted AAA arbitration through their attorney who

reviewed the AAA rules and represented them at the arbitration

proceedings. Nor do the Kilpatricks suggest that they were induced

to take a cavalier attitude toward the arbitration or that they11

would have handled the arbitration more eff ectively if they

believed it was a binding proceeding. Under these circumstances,

the ends of justice do not demand estoppel.

E.

The Kilpatricks finally argue that the district court erred

in ruling on HBW's motion for summary judgment while discovery

requests were pending regarding changes to the dispute resolution

clause in later warranties issued by HBW. The Kilpatricks contend

the changes are relevant to HBW's understanding of whether the

dispute resolution clause called for binding arbitration. Because

we have determined that the arbitration provision in the warranty

is not ambiguous, we find no merit in this contention.

Under Louisiana law, the intent of the parties to a contract

may be construed from the face of the document, without considering

extrinsic evidence, and judgment entered as a matter of law if the

contract is unambiguo us. A merican Totalisator Co., Inc. v. Fair

Grounds Corp., 3 F.3d 810 (5th Cir.1993). When the words of the

contract are clear and unambiguous and lead to no absurd

consequence, no further inquiry m ay be made into the parties

intent. R utgers, State University v. Martin Woodlands Gas Co., 974

F.2d 659, 661 (5th Cir.1992). Because we have determined that the

arbitration clause in the Kilpatricks' warranty is not ambiguous,

the district court did not err in granting summary judgment without

considering changes to the arbitration provisions incorporated into

warranties issued subsequent to the Kilpatricks'.

F or the reasons stated above, the judgment of the district12

court is AFFIRMED.