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CMH Homes, Inc. v. Goodner

United States Court of Appeals, Eighth Circuit

September 5, 2013

CMH Homes, Inc.; Vanderbilt Mortgage & Finance, Inc., Plaintiffs - Appellants,
v.
Thomas R. Goodner; Linda Goodner, Defendants-Appellees.

Submitted: April 10, 2013

Appeal from United States District Court for the Western District of Arkansas - Hot Springs

Before COLLOTON and SHEPHERD, Circuit Judges, and ROSE, [1] District Judge.

COLLOTON, Circuit Judge.

Thomas and Linda Goodner sued Vanderbilt Mortgage & Finance, Inc., CMH Homes, Inc., and Clayton Homes, Inc., which owns Vanderbilt and CMH Homes, in state court in Arkansas. Vanderbilt and CMH Homes (together, "the companies") filed a petition in the United States District Court for the Western District of Arkansas, alleging that the Goodners' claims are subject to mandatory arbitration. The Goodners moved to dismiss the petition, arguing that the federal court lacked subject matter jurisdiction. The district court dismissed the petition. We vacate the district court's judgment and remand for further proceedings.

I.

In September 2007, the Goodners purchased a manufactured home from CMH Homes at a total cost of $101, 867.92. Vanderbilt provided financing for the purchase. Some time after the purchase, the Goodners joined a class action lawsuit filed against Clayton Homes and CMH Homes in the Circuit Court of Miller County, Arkansas, on behalf of approximately 120, 000 nationwide buyers of manufactured homes (the "Meredith suit"). See Compl., Meredith v. Clayton Homes, Inc., No. CV-2005-72-2 (Ark. Cir. Ct. Feb. 17, 2005). The plaintiffs in the Meredith suit alleged that the purchase price of their manufactured homes included the cost of the wheels and axles used to transport the structures, but that the defendant companies improperly kept the wheels and axles after delivery and resold them to recycling facilities.

On May 29, 2009, the state court approved a settlement in the Meredith suit. Final Order and Judgment Approving Settlement, Meredith v. Clayton Homes, Inc., No. CV-2005-72-2 (Ark. Cir. Ct. May 29, 2009). The state court plaintiffs valued the benefits made available to the class in the Meredith settlement between $77.4 million and $92.5 million. As part of the settlement, the class members agreed not to bring any future legal action against the released parties "based on, arising out of, or in any way relating or pertaining to, " inter alia, claims that "could have been asserted" in the Meredith class action.

On November 10, 2011, the Goodners filed a putative class action suit in Arkansas state court, claiming violations of the Arkansas Deceptive Trade Practices Act, Ark. Code Ann. § 4-88-101 et seq., and the Arkansas Unfair Practices Act, Ark. Code Ann. § 4-75-201 et seq., as well as unjust enrichment and constructive fraud. They alleged that CMH Homes referred buyers of its manufactured housing to Vanderbilt for financing without disclosing that CMH Homes received a "kickback" or "commission" from Vanderbilt totaling 4% of CMH Homes's gross profits on each home sale. The complaint disclaimed punitive damages, and the Goodners each signed sworn affidavits stipulating that they did not seek more than $75, 000 in damages individually or on behalf of any class member, and not more than $4, 999, 999 for the class, including attorney's fees, costs, and treble damages, as provided by statute. See Ark. Code Ann. §§ 4-75-211(b)(3), 4-88-113(f).

Clayton Homes, CMH Homes, and Vanderbilt removed the Goodners' suit to federal court pursuant to the Class Action Fairness Act, 28 U.S.C. § 1332(d), and federal question jurisdiction. 28 U.S.C. § 1331. Vanderbilt and CMH Homes also petitioned the district court to compel arbitration, pointing to an arbitration clause in the parties' home-purchase contract. The Goodners moved to remand the state court suit and to dismiss the arbitration petition for lack of subject matter jurisdiction. The district court granted the Goodners' motion to remand and dismissed the petition to compel arbitration, concluding that federal question jurisdiction did not exist and that the amount in controversy was capped short of the required minimum amount in controversy for diversity jurisdiction over the underlying action. See 9 U.S.C. § 4; 28 U.S.C. §§ 1331, 1332. This appeal concerns only the district court's ruling on the arbitration petition.

The district court determined the amount in controversy by applying the analysis set forth in Vaden v. Discover Bank, 556 U.S. 49 (2009), where the Supreme Court directed federal courts to "look through" an arbitration petition "to the parties' underlying substantive controversy" to determine whether federal jurisdiction is present. Id. at 62. The district court acknowledged that Vaden had addressed federal question jurisdiction, not diversity jurisdiction, but decided that the Vaden approach was nonetheless "the right one to use" to evaluate the amount in controversy. CMH Homes, Inc. v. Goodner, No. 6:12-cv-06007, 2012 WL 3961718, at *3 (W.D. Ark. Sept. 10, 2012). Examining "the whole controversy as framed by the parties" in the state court action, Vaden, 556 U.S. at 67, the district court concluded that it lacked jurisdiction, incorporating its decision in the Goodner removal case. There, the court had decided that the Goodners' stipulations limited their recovery in the state court action to not more than $75, 000 on behalf of any class member and not more than $5 million for the whole class. See 28 U.S.C. § 1332(a), (d). The court also determined that the case did not present a federal question, because the companies raised federal law only in defense against the Goodners' state law claims. CMH Homes, 2012 WL 3961718, at *2; see also Goodner v. Clayton Homes, Inc., No. 4:12-cv-04001, 2012 WL 3961306, at *7-8 (W.D. Ark. Sept. 10, 2012). The court therefore dismissed the petition for lack of subject matter jurisdiction. CMH Homes, 2012 WL 3961718, at *5.

On appeal, Vanderbilt and CMH Homes argue that the district court erred by concluding that it lacked diversity jurisdiction. Rather than apply Vaden, the companies urge, the district court should have followed this court's pre-Vaden decision in Advance America Servicing of Arkansas, Inc. v. McGinnis, 526 F.3d 1170 (8th Cir. 2008), a diversity case, and determined the amount in controversy by evaluating "the value at stake in the arbitration." Id. at 1174. The companies contend that it is legally possible that the value at stake in the arbitration will exceed $75, 000. The Goodners respond that the district court correctly concluded that Vaden required it to determine the amount in controversy by looking through to the underlying state court action. 556 U.S. at 66.

II.

The Federal Arbitration Act provides that a party aggrieved by the failure of another party to arbitrate under a written agreement may petition for an order compelling arbitration. 9 U.S.C. § 4. A district court may consider the petition if, "save for" the arbitration agreement, it would have jurisdiction under Title 28 in a civil action "of the subject matter of a suit arising out of the controversy between the parties." Id. The Act itself confers no federal jurisdiction, but instead requires "an independent jurisdictional basis." Hall St. Assocs., LLC v. Mattel, Inc., 552 U.S. 576, 581-82 (2008). Federal diversity jurisdiction, the source of ...


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