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Carmichael v. Hilton Head Island Development Co. LLC

United States District Court, D. South Carolina, Beaufort Division

August 30, 2016

John Carmichael and Susan Carmichael, Plaintiffs,
v.
Hilton Head Island Development Company, LLC, Sunrise Vacation Properties, Ltd., Jesse Bellamy, Sheldon Stanhope, and Sherri Smith, Defendants.

          ORDER

          PATRICK MICHAEL DTIFFY United States District Judge.

         This matter is before the Court on two defense motions to dismiss for lack of jurisdiction (ECF Nos. 5 & 14), [1] two defense motions to compel arbitration, (id.), and Plaintiffs' motion to strike the arbitration provision on which Defendants rely (ECF No. 17). For the reasons stated herein, the Court denies the motions to dismiss and the motion to strike, grants the motions to compel arbitration, and dismisses this case without prejudice.

         BACKGROUND AND PROCEDURAL HISTORY

         This case arises out of the marketing and sale of a timeshare interest on Hilton Head Island. In 2015, Plaintiffs John and Susan Carmichael purchased an interest in the Coral Sands Resort. The contract between the Carmichaels and the seller, Defendant Hilton Head Island Development Company, LLC, includes an arbitration paragraph that provides, in pertinent part, as follows:

Any dispute, claim or controversy arising out of or relating to this Agreement or the making, breach, termination, enforcement, interpretation or validity thereof shall be determined by arbitration in Beaufort County, South Carolina, or another location agreed to by the parties. . . . The arbitration shall be held before a sole arbitrator and shall be binding with no right of appeal. . . . The parties shall select an arbitrator by mutual agreement within thirty (30) calendar days of the date the Demand for Arbitration is filed and served . . . . If the parties are unable to agree on the selection of an arbitrator within such time, the parties shall petition the Beaufort County Court of Common Pleas to appoint a member of the Beaufort County Bar as an arbitrator.[2]

(Pls.' Mot. Strike Arbitration Provision, Ex. B, Contract, ECF No. 17-1, at 5.)

         The Carmichaels filed suit in this Court in May 2016, alleging Defendants violated several South Carolina statutes and committed a variety of common-law tort offenses during the marketing and sale of the Carmichaels' timeshare. Defendants filed motions asking the Court to, inter alia, either dismiss this case for lack of jurisdiction or dismiss after ordering arbitration. The Carmichaels filed a single response to both defense motions. They also filed a motion to strike the arbitration provision from their contract. Defendants then filed a joint response opposing the Carmichaels' motion and a joint reply in support of the motions to dismiss. All these motions are thus ripe for consideration.

         DISCUSSION

         As explained herein, the Court possesses subject matter jurisdiction over this case. Nevertheless, it will dismiss the case because the Carmichaels' claims are subject to arbitration.

         I. Subject Matter Jurisdiction

         Before the Court can address the arbitration provision's enforceability, it must first confirm it has jurisdiction over this matter. See Ness v. Dean Witter Reynolds, Inc., 677 F.Supp. 861, 865 (D.S.C. 1987) (“[T]his court must first have . . . an independent basis for federal jurisdiction before it may decide [an] arbitration issue.”). Defendants assert jurisdiction is lacking and have moved to dismiss under Federal Rule of Civil Procedure 12(b)(1).

         Because the Carmichaels assert only state-law claims, the Court must determine whether it has diversity jurisdiction under 28 U.S.C. § 1332. Generally, diversity jurisdiction exists when: (1) there is complete diversity of citizenship between the parties, and (2) the amount in controversy exceeds $75, 000.00. 28 U.S.C. § 1332(a). The diversity requirement is satisfied here. The Carmichaels are Maryland citizens, and Defendants do not dispute the complaint's allegations that they are all South Carolina citizens. As for the amount in controversy, Defendants contend the Carmichaels have not shown that their claims involve more than $75, 000.00.

         The Carmichaels allege they “are entitled to actual, incidental, consequential, treble, and punitive damages in an amount to be determined at trial, as well as attorneys' fees, costs, and expenses, in an amount exceeding $75, 000.00.” (Compl., ECF No. 1, at ¶ 60.) Nothing in the record suggests-and Defendants do not contend-that the Carmichaels made that allegation in bad faith. The Court therefore relies on it.[3] See Clifton v. Nationstar Mortg., LLC, No. 3:12-cv-2074-MBS, 2013 WL 789958, at *6 (D.S.C. Mar. 4, 2013) (rejecting motion to dismiss based on insufficient amount in controversy; plaintiff alleged his damages exceeded $75, 000.00, and in the absence of any defense accusation that plaintiff made the allegation in bad faith, court could rely on it); see also St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288 (1938) (“The rule governing dismissal for want of jurisdiction in cases brought in the federal court is that, unless the law gives a different rule, the sum claimed by the plaintiff controls if the claim is apparently made in good faith.”). The Court therefore denies Defendant's motions to dismiss for lack of subject matter jurisdiction.

         II. The ...


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