On October 13, 2017, the U.S. Court of Appeals for the Fourth Circuit ruled that the arbitration agreement between home purchasers and a national homebuilder does not permit the class arbitration. This decision is the culmination of nearly 10 years of litigation in which the purchasers attempted to bring a class action in arbitration on behalf of more than 2,000 purchasers. Gordon Rees Scully Mansukhani Charleston partner A. Victor Rawl, Jr. was lead counsel for the firm's client, Del Webb and Pulte, and Charleston Partner Henry W. Frampton, IV worked extensively on appellate issues in the case.
In 2008, home purchasers Roger and Mary Carlson filed a single-plaintiff construction defect action in South Carolina state court against national homebuilders Del Webb Communities, Inc. and Pulte Homes, Inc. (together, “Del Webb”). The Carlsons amended their complaint once to allege class allegations on a defined group of additional homeowners, and then moved to amend to add class allegations encompassing thousands of additional homeowners. Del Webb and Pulte moved to compel arbitration based on the arbitration clause in the Carlsons’ purchase agreement.
The state trial judge denied the motion to compel arbitration, and Del Webb appealed. In 2013, the South Carolina Court of Appeals reversed the trial judge and ordered that the case be compelled to arbitration.
In arbitration, the Carlsons again attempted to bring their claims as a class action on behalf of thousands of other homeowners. Del Webb promptly filed an action in federal court under the Federal Arbitration Act, arguing that the arbitration agreement did not authorize class arbitration, and that the Carlsons should be compelled to arbitrate on a bilateral—rather than class-wide—basis.
Both the district court and arbitrator ruled that the arbitrator, rather than the court, must decide whether the arbitration agreement permits class arbitration, and the arbitrator ruled that class arbitration was permissible. Del Webb appealed. In 2016, the U.S. Court of Appeals for the Fourth Circuit ruled in a precedential opinion that the court, not the arbitrator, must decide whether an arbitration agreement allows class arbitration. The Court therefore remanded the case to the district court to decide whether the class arbitration was permitted.
This time, the district court ruled in Del Webb’s favor, holding that the arbitration agreement did not authorize class arbitration and compelling the Carlsons to arbitrate on a bilateral basis. The Carlsons appealed. On October 13, 2017, the U.S. Court of Appeals for the Fourth Circuit affirmed the district court’s decision, effectively ending the Carlsons’ quest for class arbitration.