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