RENDERED: SEPTEMBER 1, 2023; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2022-CA-1415-MR
PARKPLACE HOMES, LLC AND
AMIE HACKER APPELLANTS
APPEAL FROM PERRY CIRCUIT COURT
v. HONORABLE ALISON C. WELLS, JUDGE
ACTION NO. 21-CI-00096
CANDICE GAYHART; CHAMPION
HOME BUILDERS, INC.; AND
EDWARD GAYHART APPELLEES
OPINION
REVERSING AND REMANDING
** ** ** ** **
BEFORE: CETRULO, ECKERLE, AND GOODWINE, JUDGES.
GOODWINE, JUDGE: Parkplace Homes, LLC and Amie Hacker (collectively
“Parkplace”) appeal the Perry Circuit Court order denying their motion to dismiss
and compel arbitration. After careful review, we reverse and remand with
instructions to enter an order compelling arbitration.
BACKGROUND
On March 16, 2019, Candice and Edward Gayhart1 (“Gayhart”)
contracted with Parkplace to purchase a 2019 Champion double-wide mobile
home. Gayhart executed a series of purchase documents memorializing the terms
of the sale. The contract contains a document titled “Arbitration Agreement,” in
which she agreed to arbitrate all disputes arising from the home’s purchase
agreement, Record (R.) at 22. Gayhart signed and dated the arbitration agreement;
a notary attested her signature.
The arbitration agreement provides a detailed explanation of the
dispute resolution process. First, it states that Gayhart’s agreement to arbitrate
would be incorporated into the totality of the purchasing documents executed for
the purchase and delivery of the mobile home:
Buyer(s) and Seller/Assignee, their successors and
assigns, hereby agree that this Arbitration Addendum
shall become part of and applicable to all manufactured
home purchase documents, including but not limited to
the purchase agreement contract and/or mortgage and/or
promissory note (collectively “loan” hereafter).
R. at 22.
1
Edward Gayhart passed away in January of 2022, after the Complaint was filed but before
Parkplace was served. Candice did not join Edward’s estate and continued prosecuting the
lawsuit individually. Though they both executed the arbitration agreement and jointly filed suit,
we reference Candice (Gayhart) singularly for clarity.
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Second, the arbitration agreement stipulates three specific agreements
made by Gayhart in bold-faced type:
(1) That this purchase involves interstate commerce;
(2) that arbitration is a less expensive method of
dispute resolution that decreases servicing costs of
this purchase, ensuring to the benefit of buyer(s); and
(3) to resolve via binding arbitration all disputes,
claims, or other matters in question arising out of or
relating to this purchase, its interpretation, validity,
performance or the breach thereof. Subject to the
express exceptions listed below, the scope of
arbitrability is broad and includes, without limitation,
contractual, tort, statutory and caseless claims.
Id.
Third, the arbitration agreement defines applicable procedures and
laws:
Arbitration shall be by three arbitrators and shall be
governed by the Federal Arbitration Act, 9 U.S.C.[2] Sec.
1 [et] seq.
The arbitrators shall have full power to award all legal
and equitable [relief] including, but not limited to,
monetary damages, declaratory, and injunctive
relief. Judgement upon the arbitration award may be
entered in any court having jurisdiction.
Id.
2
United States Code.
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Finally, Gayhart signed and attested that she “read these terms and
agree to these terms and conditions of the Contract and its arbitration addendum.”
Id.
On April 8, 2021, Gayhart filed a complaint in the Perry Circuit Court
against Parkplace, the retail seller of the home; Hacker, Parkplace’s owner and
president; and Champion Builders, Inc. (“Champion”), the home’s manufacturer.
The complaint asserts various tort and contractual claims arising from purchasing
the mobile home, including defects in the mobile home Gayhart was unaware of
before purchasing it and fraudulent inducement to purchase the home.
Gayhart served Parkplace on July 18, 2022. In the interim, she did not
conduct any discovery, take any depositions, file motions, or take steps to
prosecute her claim.
On August 8, 2022, Parkplace moved to dismiss Gayhart’s claims
against it based on the arbitration agreement. Champion also moved to dismiss
based on its separate arbitration agreement with Gayhart. Champion withdrew its
motion on October 27, 2022. Though not stated in the record, Parkplace believes
Gayhart’s claims against Champion were settled entirely, and she is no longer
prosecuting those claims.
Gayhart opposed Parkplace’s motion arguing, “the Arbitration
Agreement could not be enforced as to the co-defendant Champion since
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Champion is not a party therefore obviating any possibility of apportionment of
fault by any Arbitrator between the co-defendant and the fact the Plaintiff has
alleged fraud in the inducement which has the effect of negating the entire contract
the defendant park place [sic] cannot meet its burden to compel arbitration.” R. at
38.
In reply, Parkplace argued that Gayhart does not dispute that she
signed the arbitration agreement or that the arbitration agreement covers her
claims. Parkplace argued that the agreement was binding and arbitration was
required.
On October 28, 2022, the circuit court heard arguments on
Parkplace’s motion. At the end of the hearing, the circuit court orally ruled that it
would deny the motion without providing any explanation. 3 On October 31, 2022,
the circuit court entered a one-sentence order stating, “IT IS HEREBY ORDERED
that the Motion to Dismiss and Compel Arbitration be, and the same hereby is
overruled.” R. at 119. The circuit court failed to include any written findings of
fact or conclusions of law in its order. This appeal followed.
On appeal, Parkplace argues: (1) the Federal Arbitration Act applies
to this transaction; (2) it established the existence of a binding arbitration
3
A video recording of the hearing on the motion to compel, if any, was not included in the
record on appeal. Thus, this Court does not know whether the circuit court issued oral findings.
Neither party has referenced any such findings.
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agreement that applies to Gayhart’s complaint; (3) the arbitration provision applies
to all claims in the complaint; (4) Gayhart failed to provide any viable presumption
to rebut the presumption of arbitrability.
STANDARD OF REVIEW
Though interlocutory orders are generally not appealable, “an order
denying a motion to compel arbitration is immediately appealable.” New
Meadowview Health and Rehabilitation Center, LLC v. Booker, 550 S.W.3d 56, 58
(Ky. App. 2018) (citing KRS4 417.220(1)). We apply the following standard in
reviewing a denial of a motion to dismiss and compel arbitration:
The enforcement and effect of an arbitration agreement is
governed by the Kentucky Uniform Arbitration Act
(KUAA), KRS 417.045 et seq., and the Federal
Arbitration Act, (FAA) 9 U.S.C. §§ 1 et seq. “Both Acts
evince a legislative policy favoring arbitration
agreements, or at least shielding them from disfavor.”
Ping v. Beverly Enterprises, Inc., 376 S.W.3d 581, 588
(Ky. 2012).
But under both Acts, a party seeking to compel
arbitration has the initial burden of establishing the
existence of a valid agreement to arbitrate. Id. at 589.
That question is controlled by state law rules of contract
formation. Id. at 590. The FAA does not preempt state
law contract principles, including matters concerning the
authority of an agent to enter into a contract and which
parties may be bound by that contract. Arthur Andersen
LLP v. Carlisle, 556 U.S. 624, 630-31, 129 S. Ct. 1896,
1902, 173 L. Ed. 2d 832 (2009). Since this matter is
entirely an issue of law, our standard of review is de
4
Kentucky Revised Statute.
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novo. [Conseco Financing Servicing Corp. v. Wilder, 47
S.W.3d 335, 340 (Ky. App. 2011).]
Id. (footnote omitted).
ANALYSIS
“Arbitration agreements, as with any other valid contract, are
generally enforceable. State courts must compel arbitration when there is a valid,
written arbitration agreement between the parties.” Jackson v. Legacy Health
Services, Inc., 640 S.W.3d 728, 732 (Ky. 2022) (citing 9 U.S.C. § 2). Under both
the Kentucky Uniform Arbitration Act5 (KUAA) and the Federal Arbitration Act6
(FAA), “a party seeking to compel arbitration has the initial burden of establishing
the existence of a valid agreement to arbitrate.” New Meadowview Health and
Rehabilitation Center, LLC, 550 S.W.3d at 58 (citing KRS 417.220(1)).
“[T]he existence of a binding agreement to arbitrate is necessarily a
threshold consideration for a trial court faced with a motion to compel arbitration.
Disposition of that issue, as both the United States Supreme Court and [the
Kentucky Supreme Court] have long recognized, implicates state law contract
principles.” Jackson, 640 S.W.3d at 732 (citations omitted).
5
KRS 417.045 et seq.
6
9 U.S.C. §§ 1-402.
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Nothing in the FAA modifies the basic principles of state contract law
regarding the scope of agreements and who is bound by them. Golden Gate Nat’l
Senior Care, LLC v. Rucker, 588 S.W.3d 868, 870 (Ky. App. 2019) (citations
omitted). Therefore, “[o]rdinary contract principles govern the validity of an
arbitration agreement.” GGNSC Stanford, LLC v. Rowe, 388 S.W.3d 117, 121
(Ky. App. 2012). Moreover, arbitration agreements “constitute a waiver of the
right to a trial by jury, which is a fundamental right.” Jackson, 640 S.W. 3d at 735
(citations omitted); see also KY. CONST. § 7. Here, the circuit court denied
Parkplace’s motion to compel without issuing written findings of fact or
conclusions of law.
We now review de novo the circuit court’s decision to deny the
motion to compel. First, Parkplace argues, the FAA applies to this transaction.
We agree. The FAA applies to any arbitration agreement executed in connection
with a transaction involving interstate commerce. See 9 U.S.C. § 2 (FAA applies
to a “contract evidencing a transaction involving commerce”). This transaction
involved interstate commerce. Gayhart, a Kentucky resident, purchased a home
manufactured by Champion Homes, a Michigan corporation, and delivered it to
Kentucky using components, parts, and labor from multiple other states. As stated
above, the KUAA, FAA, and state law contract principles apply in determining the
enforceability of an arbitration agreement.
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Second, Parkplace argues that it established the existence of a binding
arbitration agreement that applies to the claims in the complaint. We agree.
In ruling on a motion to compel arbitration, a circuit court must first
determine whether the “party seeking to compel arbitration has [met] the initial
burden of establishing the existence of a valid agreement to arbitrate.” Ping, 376
S.W.3d at 590. Then, “the burden of going forward with evidence to rebut the
presumption then shifts to the party seeking to avoid the agreement.” Dutschke v.
Jim Russell Realtors, Inc., 281 S.W.3d 817, 824 (Ky. App. 2008).
In assessing the validity of the arbitration agreement, the circuit
court’s role is not “to weigh the equities of the situation, to assess the merits of the
underlying controversy, or to determine whether litigation would or would not
‘irreparably harm’ the movant” or conversely harm the party opposing the motion.
North Fork Collieries, LLC v. Hall, 322 S.W.3d 98, 102 (Ky. 2010). Instead, the
circuit court’s task is “simply to decide under ordinary contract law whether the
asserted arbitration agreement actually exists between the parties and, if so,
whether it applies to the claim raised in the complaint. . . . If an arbitration
agreement is applicable, the motion to compel arbitration should be granted.” Id.
(citations omitted). The circuit court “may deem arbitration agreements invalid
due to ‘generally applicable contract defenses,’ but not because of ‘defenses that
apply only to arbitration or that derive their meaning from the fact that an
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agreement to arbitrate is at issue.’” Jackson, 640 S.W.3d at 732 (citation omitted).
Here, Parkplace met its burden of establishing a valid agreement to
arbitrate. In Kentucky, to form a valid and enforceable agreement, “there must be
voluntary and complete assent by parties having the capacity to contract.”
Cambridge Place Group, LLC v. Mundy, 617 S.W.3d 838, 840 (Ky. App. 2021)
(citation omitted). Gayhart does not dispute that Parkplace met its initial burden of
establishing the existence of a valid agreement. Gayhart signed the arbitration
agreement at issue. She does not deny that she read the agreement before signing
it, nor has she raised any defense for its validity. She does not dispute that she read
and was aware of the arbitration agreement. Instead, she argues that the mobile
home was delivered late and in poor condition. She claims that Parkplace
misrepresented the condition of the mobile home and delayed installation and
setup. Finally, she argues that Parkplace refused to fix the alleged defects, and the
agreement should not bind her. We disagree that the agreement should not bind
her.
Third, Parkplace argues that the arbitration agreement applies to all
claims asserted in the complaint. Parkplace notes that the circuit court should have
addressed this issue. “[A]ny doubts concerning the scope of arbitrable issues
should be resolved in favor of arbitration, whether the problem at hand is the
construction of the contract language itself or an allegation of waiver, delay, or a
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like defense to arbitrability.” Louisville Peterbilt, Inc. v. Cox, 132 S.W.3d 850,
855 (Ky. 2004) (quoting Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp.,
460 U.S. 1, 24-25, 103 S. Ct. 927, 941, 74 L. Ed. 2d 765 (1983)). We find that the
issues raised in the complaint fall within the scope of the arbitration agreement.
Finally, Parkplace argues that Gayhart failed to provide any viable
argument to rebut the presumption of arbitrability. Specifically, Parkplace argues
that Gayhart’s fraud in the inducement claim does not foreclose arbitration.
Gayhart claims the arbitration agreement is invalid because Parkplace fraudulently
induced her to agree. However, her contention is contrary to Kentucky and federal
case law. The Supreme Court of Kentucky has held:
While obviously, it is good public policy to disfavor
fraud, requiring parties to arbitrate such claims (if in fact
the arbitration agreement contemplates doing so, i.e., the
clause itself is broad enough in scope to encompass
claims such as fraudulent inducement) does not in any
way endorse a policy that is lax on fraud.
....
To read KRS 417.050 as requiring that any allegation
made with regards to the contract as a whole that would
be grounds for the “revocation of any contract” as lying
outside the scope of arbitration, would be in effect to
render the arbitration statutes meaningless. In fact, any
party seeking to avoid the agreement to arbitrate could
simply plead fraudulent inducement in the underlying
contract (rather than perhaps a more appropriate action
such as breach of warranty) in order to ensure that a court
and not an arbitrator heard its claim. [Saneii v. Roberts,
187 F. Supp. 2d 710, 714 (W.D. Ky. 2001).] “The
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resulting litigation would vitiate the primary benefit of
arbitration, the expeditious and inexpensive resolution of
disputes, and would effectively eviscerate the arbitration
statute.” Id.
Louisville Peterbilt, Inc., 132 S.W.3d at 855-56. No evidence in the record
supports Gayhart’s claim that she was fraudulently induced to sign the arbitration
agreement. However, even if there was, that evidence can and should be presented
to the arbitrator.
Additionally, Parkplace argues that the arbitration agreement is valid
and enforceable, notwithstanding Gayhart’s separate claims against Champion.
Though Gayhart argues that apportionment issues render the arbitration agreement
unenforceable, case law does not support their argument. “Under the Arbitration
Act, an arbitration agreement must be enforced notwithstanding the presence of
other persons who are parties to the underlying dispute but not to the arbitration
agreement.” Moses H. Cone Memorial Hosp., 460 U.S. at 20, 103 S. Ct. at 939.
“The Act has been interpreted to require that if a dispute presents multiple claims,
some arbitrable and some not, the former must be sent to arbitration even if this
will lead to piecemeal litigation.” KPMG LLP v. Cocchi, 565 U.S. 18, 19, 132 S.
Ct. 23, 24, 181 L. Ed. 323 (2011) (citation omitted).
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CONCLUSION
For the foregoing reasons, we reverse the order of the Perry Circuit
Court denying Parkplace’s motion to dismiss and compel arbitration and remand
with instructions to enter an order compelling arbitration.
ALL CONCUR.
BRIEFS FOR APPELLANT: BRIEF FOR APPELLEE CANDICE
GAYHART:
Gregory T. Dutton
Samuel W. Wardle John Hansen
Louisville, Kentucky Hazard, Kentucky
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