United States District Court, D. South Carolina, Greenville Division
NATIONAL HOME INSURANCE COMPANY, a Risk Retention Group, Petitioner,
RUTH BRIDGES; BONNIE JEAN HARDIN; KIMBERLY GOLEN; and JEFFREY K. BRIDGES, Respondents
National Home Insurance Company, a Risk Retention Group,
Petitioner: William Richard Warnock, Jr, LEAD ATTORNEY,
Womble Carlyle Sandridge and Rice, Charleston, SC.
Ruth Bridges, Bonnie Jean Hardin, Kimberly Golen, Jeffrey K
Bridges, Respondents: Wendell L Hawkins, LEAD ATTORNEY,
Wendell L Hawkins, Greer, SC.
MEMORANDUM OPINION AND ORDER GRANTING
PETITIONER'S MOTION TO COMPEL ARBITRATION AND DENYING
PETITIONER'S MOTION TO STAY THE STATE COURT
GEIGER LEWIS, UNITED STATES DISTRICT JUDGE.
case was filed pursuant to 9 U.S.C. § 4 and 28 U.S.C.
§ 2283. The Court has jurisdiction pursuant to 28 U.S.C.
§ 1332. Pending before the Court is Petitioner National
Home Insurance Company's Amended Motion to Compel
Arbitration and Amended Motion to Stay the State Court
Action. At issue, under the facts of this case, is (1)
whether the Federal Arbitration Act, 9 U.S.C. § §
1-16, grants the Court the authority to compel Respondents to
arbitrate their claims against Petitioner, and (2) whether 28
U.S.C. § 2283 provides the Court the power to enjoin
Respondents from prosecuting their claims against Petitioner
in state court while their claims are arbitrated. Having
carefully considered the motions, the response, the reply,
the record, and the applicable law, it is the judgment of the
Court that Petitioner's motion to compel arbitration will
be granted, but Petitioner's motion to stay the state
court action will be denied.
FACTUAL AND PROCEDURAL HISTORY
Buyers Warranty Corporation (HBW) administers a nationwide
new home warranty program (HBW Program) from its offices in
Colorado. ECF No. 7 at 2. Petitioner is a Colorado
corporation created and operating under the Federal Liability
Risk Retention Act, 15 U.S.C. § § 3901-3906, and is
the warranty insurer
for South Carolina home builders who enroll homes in the HBW
Program. ECF No. 7 at 2. The builder's contractual
liability under an HBW Warranty is insured by Petitioner
pursuant to the Risk Retention Act. Id.
2004, RMC, Inc. (Builder) constructed and sold Respondent
Ruth Bridges the house at issue in the underlying lawsuit
located at 926 E. Emerald Springs Drive, Spartanburg, South
Carolina (Home). Id. at 4. Concurrently, on April
13, 2004, Respondent Bridges applied to obtain a Home Buyers
Warranty policy with Petitioner concerning the Home.
Id. ; ECF No. 10 at 1. Builder and Respondent
Bridges signed the application, which Builder then sent from
South Carolina to HBW's district office in Tucker,
Georgia. ECF No. 7 at 4; ECF No. 10 at 1. Subsequently, HBW
accepted the Home for enrollment in the HBW Program and
mailed Respondent Bridges a Certificate of Warranty Coverage
and a non-sample copy of the Operative HBW Warranty Booklet.
ECF No. 7 at 5. The effective date of the policy was April
13, 2004. ECF No. 10 at 1. On September 5, 2008, Respondent
Bridges conveyed her interest in the Home to her three
children, Respondents Bonnie Jean Hardin, Kimberly Golden,
and Jeffrey K. Bridges, while reserving a Life Estate
Interest in the same. ECF No. 7-8 at 7.
Warranty at issue contains a one-year warranty against the
occurrence of workmanship defects, a two-year warranty
against the occurrence of system defects, and a ten-year
warranty against the occurrence of structural defects. ECF
No. 7 at 2; ECF No. 10 at 1. The HBW Warranty requires the
builder or warranty insurer " to repair, replace, or pay
the homeowner the reasonable cost of repair of any covered
Structural Defect." ECF No. 7 at 3 (internal quotation
marks omitted). The Colorado offices of HBW and Petitioner
adjust claims arising under the HBW Warranty. Id.
Warranty mandates that any claim, dispute, or controversy
between the homeowner and Petitioner shall be submitted to
arbitration. Id. To be more specific, the HBW
Warranty contains an arbitration agreement clause stating
that " [t]he parties expressly agree that this
arbitration provision involves and concerns interstate
commerce and [is] governed by the provisions of the Federal
Arbitration Act . . . to the exclusion of any different or
inconsistent state or local law, ordinance or judicial
rule." Id. at 3-4 (internal quotation marks
omitted). Further, the application stipulates that Respondent
Bridges consents to the binding arbitration provision
contained in the HBW Warranty. Id. at 4.
the terms of the HBW Warranty and prior to its expiration,
Respondent Bridges contacted Petitioner to file a claim due
to an alleged structural defect in the Home. ECF No. 10 at
1-2. Petitioner denied payment on the claim, and on February
18, 2015, Respondents filed an action against Petitioner in
the Spartanburg County Court of Common Pleas. Id. at
2; ECF No. 7 at 5; see Ruth Bridges v. Nat'l Home
Ins. Co., C.A. No. 2015-CP-42-701 (S.C. Ct. Com. Pl. 7th
Jud. Cir. Feb. 18, 2015). In the Complaint, Respondents pled
causes of action against Petitioner for bad faith refusal to
pay a claim, conspiracy, and a violation of the South
Carolina Unfair Trade Practices Act. ECF No. 10 at 2; ECF No.
7 at 5. Petitioner filed an Answer pleading in part that
Respondents' claims are subject to arbitration, ECF No. 7
at 5, and subsequently filed its Amended Motion to Compel
Arbitration and Amended Motion to Stay the State Court Action
with this Court. Respondents filed a Response in Opposition
to the Motions, and Petitioner then filed a Reply. On
29, 2015, the Court ordered Petitioner to respond to several
interrogatories regarding the Court's power to order
arbitration and stay the pending state court litigation, ECF
No. 13, and Petitioner answered the interrogatories on
October 1, 2015. ECF No. 15. The issues are thus ripe for
decision by this Court.
STANDARD OF REVIEW
Federal Arbitration Act (FAA) provides a federal district
court with the authority to enforce an arbitration agreement
by compelling parties to arbitrate their dispute. 9 U.S.C.
§ 4 (" A party aggrieved by the alleged failure,
neglect, or refusal of another to arbitrate under a written
agreement for arbitration may petition any United States
district court which, save for such agreement, would have
jurisdiction under Title 28 . . . for an order directing that
such arbitration proceed in the manner provided for in such
agreement." ). States are vested with the same
authority. SeeMoses H. Cone Mem'l Hosp. v.
Mercury Constr. Corp., 460 U.S. 1, 25, 103 S.Ct. 927, 74
L.Ed.2d 765 (1983). Section 2 of the FAA applies to any
" contract evidencing a transaction involving commerce
to settle by arbitration a controversy thereafter arising out
of such contract," and it provides that the written
agreements to arbitrate contained in such contracts "
shall be valid, irrevocable, and enforceable, save ...