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Jacks v. CMH Homes, Inc.

United States Court of Appeals, Tenth Circuit

May 17, 2017

JACQUELYNN (JACKIE) L. JACKS; STUART L. REES, Wife and Husband; HARLEY J. JACKS; JACQUELYNN (JACKIE) L. JACKS, as Next Friend for T.J.M., a minor, and A.J.J., a minor, Plaintiffs - Appellees,
CMH HOMES, INC., d/b/a Oakwood Homes Oklahoma City, and d/b/a Clayton Manufactured Homes; CMH MANUFACTURING, INC., a/k/a Karsten Homes, Defendants-Appellants, and VANDERBILT MORTGAGE AND FINANCE, INC., Defendant.


          W. Scott Simpson of Simpson, McMahan, Glick & Burford, PLLC, Birmingham, Alabama (Jonathan E. Beling of Simpson, McMahan, Glick & Burford, PLLC, Birmingham, Alabama, and Joseph R. Farris, Sarah Buchan, and Brynna Schellbar of Franden, Farris, Quillin, Goodnight Roberts, Tulsa, Oklahoma, with him on the briefs) for Defendants-Appellants.

          Michael M. Reynolds of DeBois, Sherrill & Reynolds, Duncan, Oklahoma, for Plaintiffs- Appellees.

          Before MATHESON, McKAY, and MORITZ, Circuit Judges.

          McKAY, Circuit Judge.

         In 2009, Jacquelyn Jacks bought a manufactured home from CMH Homes, Inc., on installment. The purchase was financed through CMH Homes under a manufactured-home retail installment contract. The contract contains an arbitration agreement, which provides that all disputes arising from, or relating to, the contract would be resolved by binding arbitration. By its terms, "[t]his Arbitration Agreement also covers all co-signors and guarantors who sign this Contract and any occupants of the manufactured Home (as intended beneficiaries of this Arbitration Agreement)." (Appellants' App. at 31.) Ms. Jacks was the only "buyer" to sign the contract; there were no cosigners or guarantors. Ms. Jacks, along with her husband and their children, moved into the manufactured home soon after it was delivered and installed by CMH Homes.

         About five years later, Ms. Jacks and her family brought suit in state court against CMH Homes and CMH Manufacturing, which had manufactured the home, and Vanderbilt Mortgage and Finance, which is not a party to this appeal. They claimed: (1) CMH negligently installed and repaired the manufactured home's water system, which caused toxic mold to grow; (2) the manufactured home was unreasonably dangerous at the time it left the control of CMH; (3) the manufactured home was not fit for habitation. Ms. Jacks also sought to rescind her purchase of the manufactured home, along with her agreement to pay Vanderbilt Mortgage and Finance the indebtedness incurred to purchase the home.

         The CMH defendants removed the case from state to federal court and moved to compel arbitration and stay the court proceedings. Defendants argued that Ms. Jacks, having signed the contract, was barred by the arbitration agreement from pursuing her claims in court. The district court agreed and granted the motion to compel as to the claims of Ms. Jacks.

         The district court denied the motion as to the remaining plaintiffs who were not parties to the installment contract. Defendants had argued that Ms. Jacks' husband and their children were likewise bound by the arbitration agreement, even though they never signed the contract. Because "all Plaintiffs were occupants of the Home and intended third party beneficiaries to the Arbitration Agreement, " Defendants maintained below, "a valid agreement to arbitrate exists between all Plaintiffs and CMH Homes under Oklahoma contract law." (Id. at 18.)

         The district court did not agree. It held that "the single sentence in the Arbitration Agreement generically referencing 'any occupants of the Manufactured Home (as intended beneficiaries of this Arbitration Agreement)' is not sufficient to make the non-signatory plaintiffs, who are occupants of the home, third party beneficiaries of the Arbitration Agreement and subject to being compelled to arbitration." (Id. at 83.)

         The district court also rejected Defendants' contention that the nonsignatory plaintiffs were "bound to arbitrate their claims" under "the doctrine of equitable estoppel" (id. at 24), holding that "Defendants have not satisfied any of the elements of equitable estoppel, " (id. at 84):

There have been no false representations or concealment of facts by the non-signatory plaintiffs. Further, the Court finds no equitable reason why the non-signatory plaintiffs should be bound by the Arbitration Agreement; the non-signatory plaintiffs have engaged in no conduct which would equitably warrant that they be bound by the Arbitration Agreement.

(Id. at 84.)

         Defendants timely appealed the district court's partial denial of their motion to stay and to compel arbitration. We have jurisdiction under the Federal Arbitration Act, which authorizes an interlocutory appeal of an order "refusing a stay of any action under section 3 of this title" or "denying a petition under section 4 of this ...

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