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John L. Scott, Minnie L. Scott v. Lts Builders LLC

March 15, 2011


The opinion of the court was delivered by: William W. Caldwell United States District Judge


I. Introduction

This is a diversity action controlled by Pennsylvania law. We are considering whether we should grant the motion of defendant, LTS Builders LLC, to compel arbitration of the claims against it. We have decided that we must compel arbitration of those claims and stay this action as against the other defendants while the arbitration proceeds.

II. Background

Plaintiffs, John L. Scott, and Minnie L. Scott, filed this action against multiple defendants following the purchase of a lot in a real estate development in Pike County, Pennsylvania. Plaintiffs intended to build a retirement residence there. To that end, the plaintiff husband entered into a real estate sales agreement with defendant, LTS Realty Company, to purchase the lot and also entered into a construction agreement with defendant, LTS Builders LLC, to construct a house on the lot. Other "LTS defendants" are Rene Giombetti, an agent for LTS Realty Company, who sold the lot to Plaintiffs; Michael V. Gazza, a broker for LTS Realty Company; and Lawrence T. Simon, an officer and agent for both LTS Realty Company and LTS Builders. The remaining defendants are: Investors Abstract, Inc., and Steve Paugh and Lorie A. Lehman, agents for Investors Abstract; Albert C. Read, III, doing business as AC Read Appraisal Service; Alicia N. Johnson, who worked for Read; and M.D. Everett, the owner of the lot.

Plaintiffs allege that the defendants participated in a scheme to knowingly conceal from them the existence of an easement in favor of PPL Electric Utilities Corporation on the property and that, moreover, shortly after their purchase of the property PPL intended to expand its use of the easement. (Second Am. Compl. ¶¶ 49-52). The easement "rendered at least a third of the lot unbuildable." (Id. ¶ 27). Before the real estate sales agreement and the construction agreement were executed, Plaintiffs had "asked defendant Giombetti if there were any restrictions on building on the lot, and defendant said no." (Id. ¶ 25). Additionally, when Plaintiffs explained to Giombetti how they wanted to position the house so it would face out onto a scenic valley forest, he said "there would be no problem and that the entire parcel was available for improvement." (Id. ¶ 26). However, Plaintiffs' desired placement of the home would have actually put it on a portion of the PPL easement. (Id. ¶ 54). John L. Scott signed both contracts on March 15, 2008, a Saturday, the same day Plaintiffs saw the lot for the first time. Giombetti had represented that "valuable 'perks' for new home buyers would be ending that weekend and they would need to sign a sales agreement before they left the office to obtain those 'perks.'" (Id. ¶ 20).

The LTS defendants handled the arrangements for obtaining a loan, an abstract of title, a title policy and a survey endorsement. (Id. ¶ 41). Plaintiffs allege that the defendants knew that Plaintiffs were relying on them to guide them through the purchase of the lot and the new home. (Id. ¶ 64). Plaintiffs closed on the deal on May 8, 2008. Defendants induced Plaintiffs to enter in these transactions. (Id. ¶ 67).

Plaintiffs allege that the Investor Abstract defendants conducted a "deceptive, misleading and fraudulent title search" that "buried the easement in their [title] report," (id. ¶¶ 42-43), and affirmatively misrepresented that there were no "adverse easements." (Id. ¶ 57). Defendants Read and Johnson prepared "a deceptive, misleading and fraudulent appraisal." (Id. ¶ 45).

Plaintiffs make the following claims: (1) in Count I a claim against all defendants under Pennsylvania law for common-law fraud; (2) in Count II a claim against all defendants for a violation of the Pennsylvania Unfair Trade Practices and Consumer Protection law, 73 Pa. Con. Stat. Ann. §§ 201-1 to 201-9.3 (West 2008); (3) in Count III a claim against all defendants except Everett for negligent misrepresentation; and (4) in Count IV a claim for rescission against Everett and the LTS defendants.

The construction agreement between John L. Scott and LTS Builders contains the following arbitration provision, entitled "Dispute Resolution." LTS Builders is the "Contractor" and John L. Scott is the "Owner."

Contractor and Owner agree to submit any disputes arising under this Agreement or any Amendment thereto, to arbitration in Stroudsburg, Monroe County, Pennsylvania, in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association. The foregoing Rules are adopted for procedural purposes to govern the arbitration process. Notwithstanding their adoption, any arbitration hereunder shall be deemed to be statutory arbitration under the Pennsylvania Uniform Arbitration Act, 42 Pa.C.S.A. Sec. 7301, et seq., and the substantive rights of the parties shall be governed by the foregoing Act; however, Contractor reserves the right, at its sole option, to cause any claims, disputes, and other matters arising out of or relating to promissory notes, accounts receivable, mortgages or other financial claims by Contractor against Owner to be decided by litigation in the Court of Common Pleas of Monroe County, Pennsylvania. (Doc. 31-2, construction agreement, ¶ 19, Ex. B, Second Am. Compl., CM/ECF p. 5).

III. Discussion

Defendant, LTS Builders, moves to compel arbitration of the claims against it on the basis of the arbitration clause in the construction agreement.

This is a diversity case, and neither party asserts that interstate commerce is involved, so we will apply Pennsylvania law to determine whether the claims against LTS Builders should go to arbitration. See Eisenberger v. Chesapeake Appalachia, LLC, No. 09-1415, 2010 WL 457139, at *2 ...

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