UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Robert Sheridan and Gabriele Meyer

v. Civil No. 18-cv-449-LM Opinion No.

Leroy Page, et al

O R D E R

This suit arises out of plaintiffs’ purchase of a log home

kit from defendant, Southland Log Homes, Inc. (“Southland”).1

Before the court is Southland’s motion to dismiss or stay

plaintiffs’ claims against it pending mandatory arbitration.

Doc. nos. 13, 13-1. Plaintiffs object. Doc. no. 17. For the

following reasons, Southland’s motion is granted.

STANDARD OF REVIEW

The First Circuit has yet to address the proper standard of

review for a motion to dismiss or stay pending mandatory

arbitration. See Pla-Fit Franchise, LLC v. Patricko, Inc., No.

13-CV-489-PB,

, at *3 (D.N.H. May 20, 2014);

Boulet v. Bangor Sec. Inc.,

(D. Me.

2004). Neither party addressed the appropriate standard of

1 Plaintiffs also bring claims against the following defendants: Leroy Page; United Walls Systems, LLC d/b/a UWS Construction Group (“UWS”); and Home Buyers Warranty Corporation d/b/a 2-10 Home Buyers Warranty (“Home Buyers”). review in their pleadings.2 Some authority suggests that such

motions should be reviewed under the Rule 12(b)(6) standard, see

Palcko v. Airborne Express, Inc.,

(3d Cir.

2004), while other courts have applied the summary judgment

standard, see Bensadoun v. Jobe-Riat,

(2d Cir.

2003).

Several district courts in the First Circuit have taken a

third approach: determining on a case-by-case basis which of

these two standards apply based upon whether, in order to

resolve the dispute, the court must look beyond the complaint

and materials the court may ordinarily consider in resolving a

Rule 12(b)(6) motion. See Johnson & Johnson Int’l v. Puerto

Rico Hosp. Supply, Inc.,

(D.P.R. 2017)

(applying summary judgment standard where both parties relied

upon exhibits filed in the record outside of the complaint and

the court intended to reference those materials in assessing the

scope of the arbitration clause); Somerset Consulting, LLC v.

United Capital Lenders, LLC,

(E.D. Pa.

2011) (applying Rule 12(b)(6) standard where defendants’ motion

to stay relied upon arbitration clause in parties’ consulting

2 Although Southland did not mention a particular standard of review, it recited the facts in separately numbered paragraphs under a heading entitled, “concise statement of undisputed material facts.” Doc. no. 13-1 at 3-6.

2 agreement and that same agreement was attached to complaint and

formed basis of plaintiffs’ claims).

Here, Southland submitted two affidavits from its Chief

Financial Officer, see doc. nos. 13-2 and 21-1, and two

exhibits, see doc. no. 13-2, Exhs. 1 (sales contract) & 2 (list

of builders). Plaintiffs concede that the two exhibits are

“true” copies of the sales contract and list of builders. Doc.

no. 17 at 2. The court does not intend to rely upon the facts

attested to in the affidavits, but will rely upon the sales

contract and list of builders. These documents are appropriate

for consideration on a Rule 12(b)(6) motion as they are

incorporated by reference in the complaint, and their

authenticity is not disputed by the parties. Rivera v. Centro

Medico de Turabo, Inc.,

(1st Cir. 2009).

The court will, therefore, resolve this motion using the

Rule 12(b)(6) standard. Accordingly, the court will accept the

factual allegations in the complaint as true, and draw all

reasonable inferences from those facts in plaintiffs’ favor.

See Wilson v. HSBC Mortg. Servs., Inc.,

(1st Cir.

2014)(describing Rule 12(b)(6) standard). A summary of those

facts follows.

3 BACKGROUND

Southland has its principal place of business in South

Carolina, where it manufactures log home kits. In January 2017,

Southland executed a sales contract with plaintiffs, who are

residents of Florida, for the sale of a log home kit to be

delivered to New Hampshire. Doc. no. 13-2, Exh. 1. On the

first page of the sales contract, and directly above the heading

“Sales Contract,” the following language appears: “NOTICE: ANY

CLAIMS ARISING UNDER THIS CONTRACT SHALL BE RESOLVED BY

ARBITRATION PURSUANT TO PROVISIONS OF THE UNIFORM ARBITRATION

ACT § 15-48-10 ET SEQ S.C. CODE.”3 Doc. no. 13-2 at 4.

Similarly, the sales contract provides under the heading, “Terms

of Our Agreement”: “Any claims arising under this contract shall

be resolved by arbitration pursuant to provisions of the South

Carolina Uniform Arbitration Act . . . .” Id. at 9. Under the

subheading “Arbitration, Venue and Governing Law,” the sales

contract states: “This is a South Carolina contract. . . . Any

dispute must be settled by arbitration.” Id. at 11. Then, it

continues:

This Sales Contract is executed in and shall be governed by and construed in accordance with the laws of the State of South Carolina. Any claims or

3 This notice appears on the first page of the sales contract that defendants provided to the court, which is marked “Page 2 of 9.” Doc. no. 13-2 at 4. Plaintiffs concede that this copy of the sales contract is a “true copy.” Doc. no. 17 at 2.

4 disputes, whether in contract, tort, statutory, or otherwise, arising out of, relating to, or in connection with, the Sales Contract shall be resolved without resort to any form of class action by arbitration in Richland County, South Carolina in accordance with the rules of the American Arbitration Association.

Id.

After execution of the sales contract, Southland assigned

plaintiffs a project manager, who sent them a list of builders,

doc. no. 13-2, Exh. 2, approved by an accreditation business,

Home Buyers. The sales contract contains a reference to such a

list:

Construction: You are solely responsible for construction of your home. This includes the selection, contracting and supervision of the builder for your home. We do not build your home and strongly recommend that you have a written contract with your builder. If you ask, we will provide a list of builders, but it is our recommendation and your responsibility to review their work. We do not recommend, warrant nor approve any builder.

Doc. no. 13-2 at 9 (emphasis added). Plaintiffs selected a

builder, Leroy Page, from this list to construct their log home

in New Hampshire. Plaintiffs allege that Page and UWS breached

their contract with plaintiffs by constructing the log home in

an unworkmanlike manner.

As to Southland, plaintiffs allege two claims: negligent

misrepresentation (Count 4) and negligent infliction of

emotional distress (Count 5). To support their negligent

misrepresentation claim, plaintiffs allege that Southland

5 represented that it would “introduce plaintiffs to qualified,

license[d] and bonded Southland Preferred builders in

plaintiffs’ area.” Doc. no. 1 at ¶ 50. Plaintiffs also allege

that, in addition to providing them with a list of builders,

Southland told them that the builders on the list “were highly

recommended, and that it was required to use a builder on the

list.” Id. at ¶ 53. Plaintiffs claim that this representation

was false, i.e. that Page was not a qualified builder, and that

they relied on Southland’s representations to their detriment.

Plaintiffs base their claim of negligent infliction of

emotional distress against Southland on alleged emotional

distress suffered by Meyers due to the deficient construction.

The facts supporting the negligent infliction of emotional

distress claim appear to be the same as those underlying the

negligent misrepresentation claim.

DISCUSSION

In deciding a motion to compel arbitration, “a court must

ascertain whether: (i) there exists a written agreement to

arbitrate, (ii) the dispute falls within the scope of that

arbitration agreement, and (iii) the party seeking an arbitral

forum has not waived its right to arbitration.” Gove v. Career

Systems Dev. Corp.,

(1st Cir. 2012) (internal

quotation marks omitted).

6 Arbitration is “a matter of contract.”

(internal

quotation marks omitted). For that reason, “principles of state

contract law control the determination of whether a valid

agreement to arbitrate exists.”

(internal quotation marks

omitted).

Here, the parties do not dispute the first and third

prongs: that there is a valid arbitration agreement and that

Southland has not waived its right to arbitrate. The only

dispute in this case concerns the second prong: whether the

dispute falls within the scope of the arbitration agreement.

Whether applying the law of New Hampshire (forum state), South

Carolina (sales contract’s choice of law) or the Federal

Arbitration Act (“FAA”), the answer to that question is the

same: this dispute falls within the scope of the parties’

arbitration agreement.

I. Scope of Arbitration Clauses

To ascertain whether a specific claim falls within the

scope of the parties’ arbitration agreement, courts examine the

factual allegations underlying the claim, rather than the legal

label assigned to it. See Genesco, Inc. v. T. Kakiuchi & Co.,

Ltd,

(2d Cir. 1987); Zabinski v. Bright Acres

Assocs.,

(S.C. 2001); J. Dunn & Sons, Inc.

v. Paragon Homes of New England, Inc.,

(1970).

7 And, under the FAA, South Carolina, and New Hampshire law, any

doubts concerning the scope of an arbitration clause are

resolved in favor of arbitration. See Granite Rock Co. Int’l

Broth. Of Teamsters,

, 298 (2010); Zabinski,

; Lebanon Hanger Assoc., Ltd. v. City of Lebanon,

(2012).

Here, the sales contract contains several arbitration

clauses. The first clause appears on the first page of the

sales contract as follows: “ANY CLAIMS ARISING UNDER THIS

CONTRACT SHALL BE RESOLVED BY ARBITRATION PURSUANT TO [SOUTH

CAROLINA LAW].” Doc. 13-2 at 4. This same language is repeated

on page seven of the contract. The portion of the sales

contract entitled “Arbitration, Venue, and Governing Law,”

begins by stating that it is a South Carolina contract and that

“[a]ny dispute must be settled by arbitration.” Id. at 11. It

elaborates as follows:

Any claims or disputes, whether in contract, tort, statutory, or otherwise, arising out of, relating to, or in connection with, the Sales Contract shall be resolved . . . by arbitration in Richland County, South Carolina . . . .

Id.

The above clause therefore expands the scope of arbitrable

claims by including “[a]ny claims or disputes, whether in

contract, tort, statutory, or otherwise, . . . relating to, or

in connection with, the Sales Contract.” Id. Whether under the

8 FAA, South Carolina, or New Hampshire law, such language is

“broad” and encompasses a wide range of disputes. See Prima

Paint Corp. v. Flood & Conklin Mfg. Co.,

(1967)(describing as “broad” clause that required arbitration of

“[a]ny controversy or claim arising out of or relating to this

Agreement”); Aiken v. World Fin. Corp. of S.C.,

(S.C. 2007) (characterizing arbitration agreements that

govern disputes “arising out of or related to” the underlying

contract between the parties as “broad arbitration clauses

encompassing a wide range of issues” (internal quotations

omitted)); State v. Philip Morris USA, Inc.,

, 604-

05 (2007)(describing as “broad” arbitration clause that

encompassed “any dispute, controversy, or claim arising out of

or relating to” calculations performed or determinations made by

an independent auditor).

In this case, plaintiffs’ claims against Southland stem

from factual allegations “relating to” or “in connection with”

the sales contract. Both claims allege that Southland caused

plaintiffs to select an unqualified builder, Leroy Page, from a

list provided to them by Southland after execution of the sales

contract. The sales contract contains an express reference to

Southland’s willingness to provide a list of builders. See doc.

no. 13-2 at 9 (“If you ask, we will provide a list of builders .

. . .”). Southland does not dispute that, after execution of

9 the sales contract, it provided plaintiffs with such a list of

builders. See id. at 13. This list—and oral assertions

Southland made to plaintiffs about the list—are at the heart of

plaintiffs’ two claims against Southland. Thus, there is little

question that plaintiffs’ claims are factually related to the

sales contract.

Given the broad language of the arbitration clauses and the

policy favoring arbitration under federal, South Carolina, and

New Hampshire law, the court concludes that both of plaintiffs’

claims against Southland fall within the scope of the

arbitration clauses in the sales contract. This is the case

whether applying the FAA, or the law of either South Carolina or

New Hampshire. Consequently, the court must compel the

arbitration of plaintiffs’ claims against Southland. See 9

U.S.C § 3;

(a);

.

II. Remaining Claims in Lawsuit

As the court has determined that plaintiffs’ claims against

Southland are arbitrable, the court grants Southland’s request

to stay those claims pending arbitration. The question remains

whether the court should stay the entire action pending

arbitration. See, e.g., Crawford v. W. Jersey Health Sys.

(Voorhees Div.),

(D.N.J. 1994)

10 (collecting cases decided under federal law supporting

proposition that “[w]here significant overlap exists between

parties and issues, courts generally stay the entire action

pending arbitration”). The court defers ruling on whether to

stay the entire action until the parties have an opportunity to

address the issue. On or before December 10, 2018, defendants

Leroy Page, UWS, and Home Buyers shall file briefs (not more

than 10 pages in length) addressing whether the court should

stay this entire action. Plaintiffs shall file a response on or

before December 20, 2018. No reply briefs will be permitted.

CONCLUSION

For the foregoing reasons, Southland’s motion to dismiss or

stay pending mandatory arbitration (doc. no. 13) is granted to

the extent it requests a stay with respect to plaintiffs’ claims

against Southland.

SO ORDERED.

__________________________ Landya McCafferty United States District Judge

November 28, 2018

cc: Counsel of Record

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