United States District Court, D. Delaware
REPORT AND RECOMMENDATION
R. Fallon United Slates District Judge.
present action concerns breach of warranty and alleged
construction defect claims arising under or related to the
warranty. The matter was arbitrated before the American
Arbitration Association ("AAA"), which resulted in
an Arbitration Order issued on May 10, 2017. Presently before
the court are cross-motions by the parties, wherein
Petitioners, Jason Jones and Amanda Jones (collectively
"the Joneses" or "Petitioners"), have
moved to vacate, modify, or correct the arbitration award,
Respondents, Home Buyers Warranty Corporation
("HBW") and National Home Insurance Company (A Risk
Retention Group) ("NHIC") (collectively
"Respondents"), have moved to confirm the
arbitration award. (D.I. 11; D.I. 28) For the following
reasons, I recommend denying Petitioners' motion and
granting Respondents' motion.
March 31, 2004, Petitioners signed a Sales Agreement
("Agreement") with BPG Residential Partners IV, LLC
("Seller" or "BPG
Partners") for the purchase of a new townhouse at 156
Christina Landing in Wilmington, Delaware ("the
Property"). (D.I. 27 at 2) Paragraph three of the
Agreement includes a "Sample Limited Warranty
Administered by Homebuyers." (D.I. 29 at 5) Paragraph
eight of the Agreement provides as follows:
LIMITED WARRANTY. Seller, a member of HOME BUYERS WARRANTY
("HBW"), has provided to Buyer a sample limited
warranty document containing the terms and conditions of a
limited warranty to be provided by Seller to Buyer at
closing, which Buyer has read and understands (the
"Limited Warranty"). The Limited Warranty is
intended to be administered by HBW and requires that all
disputes which arise under such Limited Warranty be submitted
to binding arbitration. Validation of the Limited Warranty by
HBW is not guaranteed by HBW, but, rather, is conditioned
upon the satisfactory completion of all required inspections,
Seller's compliance with all of HBW's enrollment
procedures, and Seller remaining a member in good standing of
the HBW Limited Warranty Program. Buyer understands and
agrees that, if the above Limited Warranty is validated by
HBW, it is provided by Seller in lieu of all other
warranties, oral agreements, or representations and
SELLER MAKES NO WARRANTY, EXPRESS OR IMPLIED AS TO
QUALITY. FITNESS FOR A PARTICULAR PURPOSE. MERCHANTABILITY.
HABITABILITY OR OTHERWISE, EXCEPT AS IS EXPRESSLY SET FORTH
IN THE LIMTIED WARRANTY PROGRAM. IN ANY EVENT. SELLER SHALL
NOT BE LIABLE FOR ANY PERSONAL INJURY OR OTHER CONSEQUENTIAL
OR SECONDARY DAMAGES AND/OR LOSSES WHICH MAY ARISE FROM OR
OUT OF ANY AND ALL DEFECTS.
(D.I. 1-1 A, Ex. 1 at ¶ 8) (emphasis in original)
Petitioners initialed each page and signed the Agreement.
(D.I. 1-1 A, Ex. 1) On September 21, 2005, Petitioners and
Seller signed a "Builder Application for Home
Enrollment" ("Enrollment Application") to
formally apply for the warranty specified in paragraph eight
of the Agreement. (D.I. 29 at 6) See also Home
Buyers Warranty Corporation v. Jones, C.A. No.
15-mc-324-RGA-MPT, 2016 WL 2350103, at *2 (D. Del. May 4,
2016). The Enrollment Application states, in relevant part:
BUYER'S ACKNOWLEDGMENT AND CONSENT Your
Builder is applying to enroll your home in the 2-10 HBW®
- insured warranty program. By signing below, you acknowledge
that you have read a sample copy of the Warranty Booklet, and
CONSENT TO THE TERMS OF THESE DOCUMENTS INCLUDING THE BINDING
ARBITRATION PROVISION contained therein. You further
understand that when the warranty issued on your new home, it
is an Express Limited Warranty and that all claims and
liabilities are limited to and by the terms and conditions of
the Express Limited Warranty as stated in the 2-10 HBW®
Home Buyers, C.A. No. 15-mc-324-RGA-MPT, 2016 WL
2350103, at *2 (emphasis in original). HBW then mailed
Petitioners a Certificate of Warranty Coverage and a copy of
the HBW Limited Warranty Booklet ("Warranty").
(D.I. 29, Ex. A; D.I. 27-1 A, Ex. 2).
October 15, 2015, Petitioners filed a class action in the
Delaware Superior Court against BPG Partners, BPGS, HBW, and
NHIC. (D.I. 27-1 A) On November 30, 2015,
Respondents filed a petition in the District Court of
Delaware to enforce the arbitration agreement in the
Warranty. (D.I. 29, Ex. B) On May 4, 2016, Chief Magistrate
Judge Thynge issued a Report and Recommendation, which
recommended granting the Respondents' petition. See
Home Buyers, C.A. No. 15-mc-324-RGA-MPT, 2016 WL
2350103. Judge Thynge's Report and Recommendation was
adopted by District Judge Andrews on June 21, 2016. See
Home Buyers Warranty Corporation v. Jones, C.A. No.
15-mc-324-RGA-MPT, 2016 WL 3457006 (D. Del. June 21, 2016).
The court enjoined prosecution of the class action against
Respondents pursuant to 28 U.S.C. § 2283, determined
that Petitioners were required to arbitrate, and left the
question of the arbitration agreement's validity to the
arbitrator. Id. at *2-3.
22, 2016, Petitioners commenced the arbitration proceeding
before the AAA against Respondents. (D.I. 27-1E) The sole
question before the arbitrator was whether the arbitration
agreement was valid, i.e., whether the arbitration provision
was enforceable and not unconscionable. Home Buyers,
C.A. No. 15-mc-324-RGA-MPT, 2016 WL 3457006, at *2. (See
also D.I. 27-1G at ¶ 9) On August 19, 2016,
Respondents asserted a counterclaim for attorney's fees,
arbitration costs, and interest. (D.I. 27-1F) On February 14,
2017, the arbitration evidentiary hearing was held, and
Howard D. Venzie (the "arbitrator") rendered his
decision on May 10, 2017 in his "Ruling and Order on
Enforecement [sic] of Arbitration Agreemnt
[sic]" (the "Arbitration
Order"). (D.I. 27 at 7; D.I. 27-1G) The Arbitration
Order concluded that the arbitration agreement was valid and
enforceable, and directed Petitioners to submit an amended
arbitration demand. (D.I. 27-1G at ¶¶ 11-12)
23, 2017, Petitioners informed the arbitrator that they were
appealing the Arbitration Order. (D.I. 29, Ex. D) The
arbitrator stayed all proceedings until the appeal was
completed. (D.I. 29 at 10) Respondents moved to dismiss the
appeal on June 6, 2017. (D.I. 29, Ex. E) On June 8, 2017, the
arbitrator lifted his suspension order and directed that the
Petitioners respond to the Respondents' motion to dismiss
the appeal and provide a copy of their appeal. (D.I. 29, Ex.
13, 2017, the Petitioners filed a petition in the Delaware
Chancery Court seeking to vacate the Arbitration Order. (D.I.
29, Ex. C) On June 16, 2017, the Respondents removed the
matter to this court. (D.I. 1) On July 12, 2017, the
Petitioners moved to remand, which the court denied in a
Report and Recommendation on May 29, 2018. (D.I. 6; D.I. 16)
The Report and Recommendation denying remand was adopted by
Judge Bataillon on August 21, 2018. (D.I. 22)
Petitioners submitted a copy of their Delaware Chancery Court
petition to the arbitrator as proof of their appeal. (D.I. 29
at 11) On July 25, 2017, the arbitrator denied the
Respondents' motion to dismiss the appeal and request for
judgment before suspending the proceeding, pending the
resolution of the present matter before the District Court.
(D.I. 29, Ex. H)
Federal Arbitration Act ("FAA") gives courts an
"extremely limited" role in reviewing arbitration
awards. See Sheet Metal Workers v. Ariz. Mech. &
Stainless, Inc., 863 F.2d 647, 653 (9th Cir. 1988).
"An application to confirm an award must be granted so
long as (1) the application is brought in the court specified
by the parties, if one is specified; (2) 'at any time
within one year after the award is made'; and (3) the
award is not 'vacated, modified, or corrected as
prescribed in sections 10 and 11' of the FAA."
Boston Scientific Corp. v. Acacia Research Group,
LLC, C.A. No. 17-1144-RGA, 2018 WL 3117549, at *2 (D.
Del. June 25, 2018) (quoting 9 U.S.C. § 9). "It is
irrelevant whether the courts agree with the arbitrator's
application and interpretation of the agreement."
Roberts & Schaefer Co. v. Local 1846, United Mine
Workers of America, 812 F.2d 883, 885 (3d Cir. 1987)
(quoting Arco-Polymers, Inc. v. Local 8-74, 671 F.2d
752, 755 (3d Cir. 1982)).
Supreme Court, in Oxford Health Plans LLC v. Sutter,
569 U.S. 564 (2013), articulated the heavy burden parties
challenging the validity of an arbitration award must carry:
A party seeking relief under [Section 10(a)(4) of the FAA]
bears a heavy burden. "It is not enough ... to show that
the [arbitrator] committed an error - or even a serious
error." Because the parties "bargained for the
arbitrator's construction of their agreement," an
arbitral decision "even arguably construing or applying
the contract" must stand, regardless of a court's
view of its (de)merits. Only if "the arbitrator act[s]
outside the scope of his contractually delegated
authority" -issuing an award that "simply
reflect[s] [his] own notions of [economic] justice"
rather than "draw[ing] its essence from the
contract" - may a court overturn his determination. So
the sole question for us is whether the arbitrator (even
arguably) interpreted the parties' contract, not whether
he got its meaning right or wrong.
Oxford, 569 U.S. at 569 (internal citations
omitted). An award is presumed "valid unless it is
proven otherwise." Wall St. Assocs., L.P. v. Becker
Paribas Inc.,27 F.3d 845, 848 (2d Cir. 1994).
"Under the FAA, the validity of an award is subject to
attack only on the grounds listed in § 10, and the
policy of the FAA requires that the award be enforced unless