Court Opinion

ID: 2671655
Source: CourtListenerOpinion
Date Created: 2014-04-30 00:01:27.437979+00
Date Added: 2024-06-11T15:48:36.986352
License: Public Domain

PUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT

                           No. 13-1834

HOME BUYERS WARRANTY CORPORATION, a Colorado corporation;
NATIONAL HOME INSURANCE COMPANY (a Risk Retention Group), a
Colorado corporation; NEW HOME WARRANTY INSURANCE COMPANY (a
Risk Retention Group), a Colorado corporation,

               Petitioners – Appellants,

          v.

LOIS HANNA,

               Respondent – Appellee.

Appeal from the United States District Court for the Southern
District of West Virginia, at Charleston.  Joseph R. Goodwin,
District Judge. (2:13-cv-01859)

Argued:   March 18, 2014                   Decided:   April 29, 2014

Before WILKINSON, MOTZ, and DIAZ, Circuit Judges.

Remanded with directions by published opinion.    Judge Wilkinson
wrote the opinion, in which Judge Motz and Judge Diaz joined.

ARGUED: Carlos Victor Yguico, GEMMILL BALDRIDGE & YGUICO, Los
Angeles, California, for Appellants.     Christopher Brinkley,
MASTERS LAW FIRM, LC, Charleston, West Virginia, for Appellee.
ON BRIEF: James W. Marshall, BAILEY & WYANT, PLLC, Charleston,
West Virginia, for Appellants.
WILKINSON, Circuit Judge:

      Lois Hanna filed a lawsuit in state court against multiple

defendants alleging various construction defects in her recently

completed home.        Petitioners are a subset of defendants in the

state court suit because of a warranty they issued on Hanna’s

home.      They    subsequently         filed       in   federal      district      court   a

petition to compel Hanna to arbitrate her claims against them

based on an arbitration clause in the warranty.                                Petitioners

predicated subject matter jurisdiction on complete diversity of

the     parties    under     28       U.S.C.       § 1332.           Hanna    argues    that

petitioners failed to join necessary and indispensable parties,

some of which are non-diverse from Hanna, under Rule 19 of the

Federal Rules of Civil Procedure.                    We agree, and remand to the

district court with directions to dismiss the petition for want

of subject matter jurisdiction.

                                           I.

                                           A.

      On   August    1,     2009,      Hanna       signed    a   contract      with    Clark

Lamp II      and      Innovative           Design           &    Construction,           LLC

(“Innovative”),       for    the      construction          of   a    new     home.     Lamp

provided     Hanna    with        a    Builder’s         Warranty       and    Certificate

(“Builder’s       Warranty”)      that    covered        workmanship         and   materials

for one year, mechanical systems and appliances for two years,

                                               2
and the structure of the house for ten years.                           The Builder’s

Warranty named Lamp as the “Warrantor,” but it did not indicate

that he would enroll Hanna’s house in a warranty offered by a

third party, nor did it authorize him to take such an action.

It also provided that:

       This Warranty shall be in addition to, and in no way
       reduce, all other rights and privileges which Owners
       may have in law or in equity or under any other
       instrument, and shall be binding on the Warrantor
       notwithstanding   any   provision  to  the   contrary
       contained in the contract of purchase or any other
       instrument executed by the Owners.

J.A.   136.        Lamp,     Innovative,     and     several    subcontractors      and

engineers (collectively “the Builders”), designed and built the

house.      Hanna moved into the structure in September 2010 and

closed on the home purchase that December.

       At   some     point    before   the        closing,    Lamp    and   Innovative

enrolled Hanna’s home in a 2-10 Home Owners Warranty (the “2-10

Warranty”) offered by the Home Buyers Warranty Corporation, the

National      Home    Insurance     Company,        and   the   New    Home   Warranty

Insurance Company (collectively “the Warranty Companies”).                          The

2-10     Warranty     offered       nearly        identical     protection    as    the

Builder’s     Warranty:       one   year     on    the    home’s     workmanship,   two

years on its systems, and ten years on its structure.                         The 2-10

Warranty also contained something that the Builder’s Warranty

did not: an arbitration clause.              It stated, in relevant part:

                                             3
      Any and all claims, disputes and controversies by or
      between the owner, the Builder/Seller, the Warranty
      Insurer and/or [Home Buyers Warranty Corporation], or
      any combination of the foregoing, arising from or
      related to this Warranty, shall be settled by binding
      arbitration. . . . Any person in contractual privity
      with the Builder/Seller whom the Home owner contends
      is responsible for any construction defect in the Home
      shall   be   entitled  to  enforce   this   arbitration
      agreement. . . . The decision of the arbitrator shall
      be final and binding and may be entered as a judgment
      in   any   State   or  Federal   court   of   competent
      jurisdiction.

J.A. 17 (boldface type omitted).

      The 2-10 Warranty states that it was issued pursuant to a

“Builder Application for Home Enrollment,” a document Hanna had

purportedly    “signed      with   [her]      Builder.”            J.A.    143.   Hanna

contends that she signed no such document and no application for

enrollment appears in the present record.                          Additionally, the

record   contains     no    evidence   that         Hanna     authorized      Lamp   and

Innovative    to   enroll    her   home       in    the     2-10   Warranty.      Hanna

admits that she first heard that her home had been enrolled in

the 2-10 Warranty in the fall of 2010, but contends that she did

not   learn   about   the    arbitration           clause    until    documents      were

mailed to her in February 2011, after the closing on her new

house.

                                       B.

      Hanna came to believe that her home contained a number of

defects and notified Lamp and Innovative, who then filed a claim

with the Warranty Companies in November 2011.                             Hanna was not

                                          4
satisfied with the response of Lamp, Innovative, the Warranty

Companies,     or     the    two     additional        entities      involved       in       the

adjustment     of     her    warranty     claims       (the    “Claims      Adjusters”).

Therefore, on November 27, 2012, she filed suit in West Virginia

state court against the Builders, Warranty Companies, and Claims

Adjusters.     See Hanna v. Innovative Design & Construction, LLC,

Circuit Court of Kanawha County, West Virginia, Case No. 12-C-

2358.      Hanna currently advances seven counts in that suit: “(1)

negligence in the construction of the home; (2) breach of the

construction contract, addenda, covenants and builder’s warranty

associated     with    the    construction        of    the    home;      (3)    breach       of

implied     warranties       of     habitability       and     merchantability;              (4)

breach of the [2-10 Warranty]; (5) bad faith denial of Hanna’s

benefits      under         the      [2-10       Warranty];         (6)         fraud        and

misrepresentation with respect to the [2-10 Warranty]; and (7)

punitive damages.”            J.A. 321.          All of her claims arise from

state law.

      Furthermore, Hanna contends that the arbitration provision

in   the    2-10    Warranty       is   unenforceable         on   various       state       law

grounds.      The     Warranty       Companies     indicated         in   their     federal

petition     that     they        intended   to     “plead         arbitration          as    an

affirmative defense” to Hanna’s state court claims, J.A. 8, and

their counsel confirmed at oral argument before this court that

they have done so.

                                             5
                                             C.

      On   February    1,     2013,         the   Warranty      Companies     filed     a

Petition to Compel Arbitration before the U.S. District Court

for the Southern District of West Virginia.                        In the petition

they asked the district court to order Hanna to arbitrate her

claims against them based on the arbitration clause in the 2-10

Warranty and to stay the state court proceedings against them

while   the    arbitration       was    pending.          The   Warranty      Companies

predicated     their   petition        on    diversity     jurisdiction       under    28

U.S.C. § 1332.      None of the Builders were joined as parties.

      Hanna filed a Motion to Dismiss on April 5, arguing that

the district court lacked subject matter jurisdiction because

the   entire     controversy     underlying        the    petition     included    non-

diverse parties.       In the alternative, she argued that the case

had to be dismissed because those same non-diverse parties were

necessary and indispensable parties that the Warranty Companies

failed to join under Rule 19 of the Federal Rules of Civil

Procedure.       Hanna noted that, although the Warranty Companies

are foreign corporations for diversity purposes, she shared West

Virginia citizenship with Lamp, Innovative, and at least three

of the other Builders.

      The Warranty Companies contended that the parties to the

petition   were     diverse      and    that      the    Federal   Arbitration        Act

(“FAA”)    and     Moses    H.    Cone        Memorial      Hospital     v.    Mercury

                                             6
Construction Corp., 460 U.S. 1 (1983), established that the co-

defendants       in   the    state     court       action   need     not    be       joined   as

parties.        They also requested that the district court exercise

its   power      under      28   U.S.C.     § 2283     to     halt    the       state    court

proceedings against them.

      On June 10, the district court abstained under Colorado

River Water Conservation District v. United States, 424 U.S. 800

(1976), from ruling on the merits of the petition to compel

arbitration.          The district court weighed the various Colorado

River    factors      bearing      upon     abstention,       ultimately          concluding

that it had “no reason to doubt the petitioners’ ability to

pursue their rights in the state court system” and that it could

not   “find      that    the     arbitration        issue     can    only       be    resolved

efficiently in this court.”                J.A. 325.        The lower court did not

address the parties’ arguments on subject matter jurisdiction

and     simply    ordered        the   petition        dismissed.           The       Warranty

Companies thereafter filed this timely appeal.

                                            II.

      We first consider the threshold issue of subject matter

jurisdiction.         The Warranty Companies contend that the district

court     has    subject         matter    jurisdiction,           that     it       erred    in

declining to exercise jurisdiction over their petition under the

Colorado    River       abstention        doctrine,     and    that       the    arbitration

                                               7
clause     is       enforceable         against          Hanna.          We    do     not    reach    the

questions of abstention or enforceability because we find that

the district court lacked subject matter jurisdiction.                                            Because

it   is    a    question          of    law,       we     review        de     novo    whether       such

jurisdiction exists.                   Trans Energy, Inc. v. EQT Prod. Co., 743

F.3d 895, 900 (4th Cir. 2014).

      Fundamental to our federal system is the principle that

“[f]ederal courts are courts of limited jurisdiction.”                                         Kokkonen

v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994).

District       courts       may    only       hear       a    case      when    they       possess    the

“power authorized by Constitution and statute.”                                            Exxon Mobil

Corp.     v.    Allapattah         Servs.,         Inc.,          545    U.S.       546,    552    (2005)

(internal quotation marks omitted).                                 When a party desires to

proceed        in     a     federal       court,             it    “must       allege       and,     when

challenged,          must    demonstrate           the       federal         court’s       jurisdiction

over the matter.”             Strawn v. AT & T Mobility LLC, 530 F.3d 293,

296 (4th Cir. 2008).                    For if Congress has not empowered the

federal        judiciary      to       hear    a     matter,         then      the     case    must    be

dismissed.

      The Warranty Companies argue that the district court has

subject        matter       jurisdiction             on       two       grounds:       diversity      of

citizenship under 28 U.S.C. § 1332 and the FAA, 9 U.S.C. § 4.

It   is    well       established             that       § 4      does        not    create       federal

jurisdiction, but applies only when “diversity of citizenship or

                                                     8
some other independent basis for federal jurisdiction” exists.

Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1,

25   n.   32    (1983).          Thus,   the    only    potential    source    of

jurisdiction         for   the   Warranty      Companies’   petition    is    the

diversity of the parties.

     And of course under § 1332 that diversity must be complete

“such that the state of citizenship of each plaintiff must be

different from that of each defendant.”                Athena Automotive, Inc.

v. DiGregorio, 166 F.3d 288, 290 (4th Cir. 1999).                   Hanna, as a

citizen of West Virginia, does not dispute that the Warranty

Companies      are     completely    diverse     from    her.       Rather,   she

maintains that the Warranty Companies have failed to include as

necessary and indispensable parties the Builders, some of which

are also citizens of West Virginia.              See Northport Health Servs.

of Ark., LLC v. Rutherford, 605 F.3d 483, 486 (8th Cir. 2010)

(“[D]iversity of citizenship is determined by reference to the

parties named in the proceeding before the district court, as

well as any indispensable parties who must be joined pursuant to

Rule 19.”) (internal quotation marks omitted). 1

     1
       Hanna also argues that under Vaden v. Discover Bank, 556
U.S. 49, 62 (2009), we may “look through” the petition to compel
arbitration to the underlying dispute in state court to
ascertain whether it contains non-diverse parties.    Because we
determine that the Builders are necessary and indispensable
parties under Rule 19, we need not address whether Vaden applies
to petitions predicated on diversity jurisdiction.

                                         9
                                        A.

       Rule 19 of the Federal Rules of Civil Procedure sets forth

a two-step inquiry for courts to determine whether a party is

“necessary” and “indispensable.”             The first question under Rule

19(a) is “whether a party is necessary to a proceeding because

of     its   relationship     to     the     matter    under     consideration.”

Teamsters Local Union No. 171 v. Keal Driveaway Co., 173 F.3d

915, 917 (4th Cir. 1999).           Second, if the party is necessary but

joining it to the action would destroy complete diversity, the

court must decide under Rule 19(b) “whether the proceeding can

continue in that party’s absence.”            Id. at 917-18.

       Rule 19 is not to be applied as a “procedural formula.”

Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S.

102, 119 n. 16 (1968).          Decisions “must be made pragmatically,

in the context of the ‘substance’ of each case,” id., and courts

must take into account the possible prejudice “to all parties,

including those not before it,” Owens-Illinois, Inc. v. Meade,

186 F.3d 435, 441 (4th Cir. 1999).                While the dismissal of a

case    is   a   “drastic    remedy    [that]     should    be    employed   only

sparingly,” it is required if a non-joined party to the dispute

is both necessary and indispensable.            Keal, 173 F.3d at 918.

       Here, as indicated in Owens-Illinois, 186 F.3d at 441-42,

the relevant dispute (and hence the primary focus of necessary

and     indispensable       party     analysis)       is   the    dispute    over

                                        10
arbitrability      and     the    need     generated       by     the          2-10   Warranty

arbitration clause for the Builders to be in the courtroom.                                See

also Doctor’s Assocs., Inc. v. Distajo, 66 F.3d 438, 446 (2d

Cir. 1995). 2

                                             1.

     The first stage of our inquiry focuses on whether there

were necessary parties not joined in the petition.                                    A party

might be necessary under either Rule 19(a)(1)(A) or (B).                                    We

begin here with Rule 19(a)(1)(B), which provides that a non-

joined party is necessary to an adjudication if it “claims an

interest relating to the subject of the action” and its absence

would     either     conflict       with     its       “ability       to        protect    the

interest,”      Rule   19(a)(1)(B)(i),            or    “leave       an    existing       party

subject    to    substantial      risk     of     incurring      .    .    .     inconsistent

obligations       because    of    the     interest,”       Rule          19(a)(1)(B)(ii).

Each of these criteria requires that we attempt to forecast the

future course of this litigation, which of course is no simple

matter.         However,    there      are      enough    potentially             prejudicial

outcomes     under     either     of     these         standards          to    warrant    the

conclusion that the Builders are necessary parties.

     2
       We do not read Owens-Illinois as in tension with Ranger
Fuel Corp. v. Youghiogheny & Ohio Coal Co., 677 F.2d 378 (4th
Cir. 1982), which, while discussing the merits dispute, avoided
any definitive resolution of the question.

                                             11
       Rule   19(a)(1)(B)(i)         directs       us    to    consider         a     non-joined

party’s ability to protect its own interests.                          The Builders have

a   direct    pecuniary      interest      in     the    dispute       through         the    2-10

Warranty; indeed, they are actively contesting their liability

in state court with respect to Hanna’s claims against them under

that   contract.        The       Warranty      Companies          seek    arbitration          of

identical claims.            Hanna is also suing the Builders in tort;

several of her tort claims likewise reference the 2-10 Warranty

provisions.         Although       joint    tortfeasors            from    a     state       court

proceeding are not automatically necessary parties to a federal

case under Rule 19, Northport, 605 F.3d at 490-91, the Builders’

interest in this case extends even beyond the possibility of

tort    liability.          The    2-10    Warranty           obligates         the    Warranty

Companies     to    insure    the    Builders’          liability         for    construction

defects      like   those    alleged       by     Hanna,      giving       the      Builders    a

natural      interest   in    any     adjudication            of    the    terms        of    that

contract.       See Ranger Fuel Corp. v. Youghiogheny & Ohio Coal

Co., 677 F.2d 378, 379 (4th Cir. 1982).

       Furthermore,     Lamp        and    Innovative          are     critical         to     the

question of whether or not the arbitration clause is enforceable

in the first place.           Hanna alleges that she did not consent to

arbitration and never authorized Lamp and Innovative to agree to

an arbitration clause on her behalf.                     See Stolt-Nielsen S.A. v.

AnimalFeeds Int’l Corp., 559 U.S. 662, 684 (2010) (holding that

                                             12
a “foundational FAA principle [is] that arbitration is a matter

of consent”).         Thus, the outcome of the petition could very well

turn    on    a     determination     of   whether      Lamp’s   and      Innovative’s

enrollment of Hanna’s home in the 2-10 Warranty was consensual

and    legally      binding     on   Hanna.     Such    a   ruling     could   have   a

significant impact on the Builders’ potential liability before

the state court.          While the Warranty Companies contend that Lamp

and Innovative could simply serve as fact witnesses, fairness

requires that Lamp and Innovative be joined as necessary parties

to protect their own interests in the determination of the legal

significance of their actions.                See Nat’l Union Fire Ins. Co. v.

Rite Aid of S.C., Inc., 210 F.3d 246, 251-52 (4th Cir. 2000).

       Rule 19(a)(1)(B)(ii) is a separate basis for finding a non-

joined party necessary and protects the existing parties to the

action from “incurring . . . otherwise inconsistent obligations

because of the [non-joined party’s] interest.”                     The existence of

two concurrent proceedings here creates a “high likelihood” that

one    or    more    of   the   parties    will    be    subject     to   conflicting

obligations.         Owens-Illinois, 186 F.3d at 441.              If the Warranty

Companies’ petition is allowed to proceed, the district court

will be required to determine whether the arbitration clause is

enforceable and, because the Builders are entitled to demand

arbitration under the provision, the state court may be faced

with the same task.              One court could enforce the arbitration

                                           13
clause while another finds it unenforceable.                            See id. (holding

that risk of inconsistent interpretations of arbitration clause

by    different        tribunals     merited       adjudication         of     entire      case

before one court).

       Unlike in this petition, the Builders (and all others) are

present as parties before the state court.                            That court is thus

better positioned to take into account the Builders’ interests.

Moreover, it is undeniable that adding a federal court, and any

arbitration panel it might compel, to the equation multiplies

the tribunals adjudicating the dispute and thereby increases the

likelihood of contradictory rulings.                     Where possible, law should

be utilized to streamline and simplify.                          We decline to impose

added expense and complexity upon these litigants, when there

are     no    good     reasons      sounding       in     the      fair       or    efficient

administration of justice to do so.                      See Ranger Fuel, 677 F.2d

at    380    (rejecting      district   court’s          order    that       had   effect    of

“multiplying          procedures      that        might     lead        to     inconsistent

results”).

       Finally,       Rule     19(a)(1)(A)        sets    forth       another       necessity

standard, stating that a non-joined party is necessary when “the

court       cannot    accord     complete    relief       among       existing      parties.”

The    above        discussion     concerning       the    “overarching            legal    and

factual issues” makes it clear that any tribunal to address this

matter       must    have    the   Builders       present        as    parties      to     fully

                                             14
resolve     the    dispute      arising     from     the    alleged   construction

defects in Hanna’s home.              Schlumberger Indus., Inc. v. Nat’l

Sur. Corp., 36 F.3d 1274, 1287 (4th Cir. 1994).                       If Hanna is

entitled to full recovery on the defects in her house, then it

is crucial that all of the defendants be bound to the burdens of

a common judgment.             See id. at 1286 (finding prejudicial that

failure    to     join     insurers   as   parties     would    potentially    cause

existing party to “wind up with less than full coverage even

though    it    was   legally     entitled      to   full   coverage”)    (emphasis

omitted).       Therefore, the Builders are necessary parties under

the criteria of Rule 19.

                                           2.

     Several of the Builders are citizens of West Virginia and

would destroy complete diversity if joined.                    We must thus decide

whether they are “indispensable” to the proceeding.                      Rule 19(b)

provides    that      if   a   necessary   party     cannot    be   joined   without

destroying jurisdiction “the court must determine whether, in

equity and good conscience, the action should proceed among the

existing parties or should be dismissed.”                   In light of the four

factors contained in Rule 19(b), we conclude that the Builders

are indispensable parties.

     The first factor addresses “the extent to which a judgment

rendered in the [non-joined party’s] absence might prejudice the

parties.”       Owens-Illinois, 186 F.3d at 441.               This factor speaks

                                           15
to many of the same concerns addressed by the necessity analysis

under Rule 19(a)(1)(B).              Keal, 173 F.3d at 919.                  As discussed

above, there is a high probability of prejudice to the Builders

if the petition advances.             That is especially true for Lamp and

Innovative,      as    they    are    allegedly        responsible          for   enrolling

Hanna in the 2-10 Warranty.                See Nat’l Union, 210 F.3d at 252-53

(finding under first factor that prejudice to non-joined party

was “particularly strong given that [it] negotiated and entered

into    the    [insurance]         policy,       and   this    suit     concerns       [its]

conduct”).       Hanna also has a powerful interest in having all of

the    defendants      together      and     adjudicating        all    of    her     claims

before one tribunal.

       The second factor considers the extent to which protective

measures can be taken to lessen or avoid the prejudicial impact

of proceeding in the non-joined party’s absence.                              Here, it is

not    clear    how    the    district       court     could     do    so.        Different

tribunals      might    be    required      to    rule   on    the     validity       of   the

arbitration provision and each must address the existence and

extent   of    construction         defects       in   Hanna’s      home,     which    could

result in inconsistent judgments and conflicting obligations on

the parties.           The Warranty Companies do not suggest how the

court    might    head       off    such     confusion,       and     the    prospect      of

prejudice from parallel proceedings is thus substantial.                                   See

Keal, 173 F.3d at 919.

                                             16
       The   third    factor      addresses       the     adequacy        of     a    judgment

rendered in the non-joining party’s absence, which focuses on

“the    interest      of   the     courts        and    the    public       in       complete,

consistent,       and      efficient        settlement              of    controversies.”

Provident Bank, 390 U.S. at 111.                  Here the parallel proceedings

could produce just the opposite: incomplete, inconsistent, and

inefficient      rulings.         Thus    this     factor       also      points       to    the

Builders as indispensable parties in the proceedings.                                See Nat’l

Union, 210 F.3d at 253.

       Under the fourth factor we consider whether the petitioners

“would have an adequate remedy if the action were dismissed for

nonjoinder.”       Fed. R. Civ. P. 19(b)(4).                   Of course they would.

The    state     court     is    entirely        capable      of     adjudicating           this

dispute.       All of the necessary parties are joined in that forum.

The suit arises wholly from state law and, in the event it goes

to trial, the witnesses and exhibits common to Hanna’s claims

against all the co-defendants are readily available.                                    Owens-

Illinois, 186 F.3d at 442.               Furthermore, Hanna and the Warranty

Companies      have   already     begun     to    address       the      validity      of    the

arbitration      clause    in    the   state      court       and    “[u]nder        the    FAA,

state courts as well as federal courts are obliged to honor and

enforce agreements to arbitrate.”                      Vaden v. Discover Bank, 556

U.S. 49, 71 (2009).             “[W]e see no reason why the Circuit Court

of Kanawha County, West Virginia will not provide an adequate

                                            17
remedy for the parties in this case.”                    Owens-Illinois, 186 F.3d

at 442.

       All four Rule 19(b) factors point to the Builders being

indispensable to the petition.                   Because the Builders are both

necessary and indispensable, the petition must be dismissed for

lack of subject matter jurisdiction.

                                            B.

       A    final       point,     however,      is    critical.          The     Warranty

Companies argue that the FAA’s policy in favor of arbitration

agreements        means     they    are    due     a    federal     forum       for   their

arbitrability claim.             While the strong federal policy favoring

enforcement        of    arbitration      agreements      is     clear,    it    does   not

establish subject matter jurisdiction here.

       The FAA was adopted by Congress in 1925 in an effort to

“shift [courts] from an attitude of inveterate hostility toward

arbitration agreements to one strongly favoring arbitration and

encouraging         the     rigorous      enforcement          of   all     arbitration

agreements.”         Glass v. Kidder Peabody & Co., 114 F.3d 446, 451

(4th       Cir.     1997).          The    Supreme       Court      recognized          this

transformation in Moses H. Cone when it applied the “liberal

federal policy favoring arbitration agreements” to overturn a

district          court’s     decision        to       abstain      from        exercising

jurisdiction over a case under the Colorado River doctrine.                              460

U.S. 1, 24, 29 (1983).

                                            18
      The Warranty Companies contend that Moses H. Cone requires

the district court to take subject matter jurisdiction over this

petition.         But    unlike      in      the    case           before      us,    there    was    no

question     in     Moses       H.      Cone        that           all        the    necessary       and

indispensable       parties       were       joined           in    the       petition    to    compel

arbitration.       Moses H. Cone thus did not address subject matter

jurisdiction or Rule 19 joinder; instead, it applied only to a

federal court’s decision to abstain from exercising pre-existing

jurisdiction.           Id. at 25-26 (“[W]e emphasize that our task in

cases such as this is not to find some substantial reason for

the   exercise      of    federal         jurisdiction              by    the       district   court;

rather,     the     task      is        to     ascertain                 whether       there     exist

‘exceptional’ circumstances, the ‘clearest of justifications,’

that can suffice under Colorado River to justify the surrender

of that jurisdiction.”).                Indeed, Moses H. Cone reaffirmed that

the FAA does not provide an independent basis of subject matter

jurisdiction.       Id. at 25 n. 32.                    And while federal courts have a

“virtually     unflagging            obligation               .     .     .     to    exercise       the

jurisdiction given them,” that does not imply a federal court

may   assert       jurisdiction            where          it        is    not        congressionally

authorized.       Id. at 15 (internal quotation marks omitted).

      This makes perfect sense.                         The FAA applies with as much

force in state courts as in federal.                               Id. at 25; see also KPMG

LLP   v.    Cocchi,       132      S.        Ct.        23,        24    (2011)       (per     curiam)

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(recognizing that arbitration agreements “within the scope and

coverage” of the FAA “must be enforced in state and federal

courts”).    That is not to say, of course, that federal courts

lack    jurisdiction   for    all    petitions        under     § 4    of    the     FAA

whenever they involve a subset of diverse parties to a state

court proceeding that also includes non-diverse parties.                       All it

means is that, although the FAA clearly favors the enforcement

of   arbitration    agreements      as    a     general     matter,    there    is   no

obvious reason why that policy must be vindicated in a federal

over a state forum.     Moses H. Cone, 460 U.S. at 25 n. 32 (noting

that “enforcement of the [FAA] is left in large part to the

state   courts”).      In    sum,   Moses       H.   Cone    and   the      undisputed

interest    in   honoring    arbitration         agreements     does     nothing      to

undermine   our    conclusion    that      subject    matter       jurisdiction       is

lacking here.

                                         III.

       For the foregoing reasons we hold that the petition of the

Warranty Companies cannot proceed in federal court because the

joinder of necessary and indispensable parties would extinguish

the power of the court to hear the case.                  The petition is hereby

remanded to the district court with directions to dismiss it for

want of subject matter jurisdiction.

                                                      REMANDED WITH DIRECTIONS

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