Key Points

  • The Georgia Court of Appeals reversed a trial court order compelling a homeowner to arbitrate his claims against the restoration contractor that repaired his water-damaged home and two of its agents.
  • The contractor did not dispute that the Georgia Arbitration Code's consumer-transaction exclusion, OCGA § 9-9-2(c)(7), barred enforcement of the clause under state law, and argued only that the Federal Arbitration Act preempted it.
  • The panel held that the party seeking arbitration bears the burden of proof and that receipts showing Georgia store purchases, Georgia subcontractors, and an unfiled affidavit about a Toyota Tundra did not show the contract involved interstate commerce.
  • The court described as 'arguably dicta' its statement in Wise v. Tidal Construction Co. that virtually any construction activity involves interstate commerce, and held that the record must still show an interstate connection.

The Georgia Court of Appeals on Tuesday reversed an order forcing a homeowner to arbitrate his dispute with the contractor he hired to repair his storm-damaged house. The court held that the contractor offered only speculation that the job involved interstate commerce, and so it could not use federal arbitration law to override a Georgia statute that excludes consumer contracts from arbitration.

Judge Gobeil wrote for the three-judge panel, and Presiding Judge Dillard and Judge Pipkin concurred. The decision sets aside a trial court order that required Roger Rumbaugh to arbitrate his claims against Meridian Restoration Inc. and two of its agents, Ronald Keith Brumbelow and Henry Shugart, and that stayed his lawsuit pending arbitration.

The ruling turns on the Federal Arbitration Act, the federal statute that governs "an arbitration clause that involves or affects interstate commerce." When the act applies, it overrides state laws that reserve certain disputes for the courts. The panel held that the company seeking arbitration must put evidence of an interstate connection in the record. The court declined to treat its own earlier statement that virtually all construction involves interstate commerce as a substitute for that proof.

According to the opinion, Rumbaugh's home suffered substantial water damage in a storm. His insurer, United Services Automobile Association, gave him a list of approved vendors and promised to warrant their work. Rumbaugh hired Meridian, a vendor USAA specifically recommended. He alleged that Meridian made several attempts at repairs, failed to fix the problems, and "attempted to abandon their customer ... as well as their duties and obligations" to him.

Rumbaugh sued Meridian, Brumbelow, Shugart and USAA on May 2, 2025, asserting claims for breach of contract, negligent construction, negligence per se and negligent supervision, among others. Meridian counterclaimed for breach of contract and quantum meruit. The three Meridian defendants also moved to compel arbitration under a clause in the remediation contract that called for binding arbitration under American Arbitration Association rules. The opinion noted that their motion did not invoke the federal act or assert that the contract involved interstate commerce.

Rumbaugh opposed the motion under the Georgia Arbitration Code, which excludes "[a]ny contract involving ... consumer transactions" as Georgia's Fair Business Practices Act defines that term. That act's definition includes purchases of "services ... primarily for ... household purposes." The Meridian defendants did not dispute that the exclusion applied. They argued instead that the federal act preempted it.

In their reply brief, the Meridian defendants offered three grounds for an interstate link. They said a Toyota Tundra hauled lumber to the house. They said they bought supplies from Sherwin Williams, a paint company incorporated in Ohio. And they said other materials were of a type commonly made outside Georgia or abroad. About two and a half weeks later, they filed invoices and receipts for the job. The trial court granted the motion "[f]or the reasons outlined in [their] briefing" and certified its order for immediate review, and the Court of Appeals granted Rumbaugh's application for interlocutory review.

On appeal, Rumbaugh argued that every party to the contract was a Georgia resident or Georgia corporation and that the house was in Georgia. He also argued that the receipts were unauthenticated and showed only purchases at Georgia stores and work by Georgia subcontractors. The panel held that the trial court could consider the documents. Even so, Judge Gobeil wrote, "the Meridian defendants have failed to produce evidence sufficient to invoke FAA preemption."

The opinion went through the record item by item. The paint came from Sherwin Williams stores located in Georgia. The subcontractors all appeared to be Georgia businesses. And the Meridian defendants said they could "provide more than an affidavit stating that a Toyota Tundra was used to transport lumber to [Rumbaugh's] residence," but they never provided one, "much less provide proof that any vehicles used to transport materials to Rumbaugh's home were manufactured out of state."

The panel contrasted the record with earlier Georgia construction cases that found an interstate link. In a 2004 case, Krut v. Whitecap Housing Group, the defendant provided an affidavit showing that it used materials made outside Georgia, that subcontractors employed out-of-state laborers, and that it used vehicles manufactured elsewhere. In a 1986 case, McCormick-Morgan Inc. v. Whitehead Electric Co., one contractor and the materials came from out of state.

The panel wrote that the Meridian defendants "all but acknowledge this lack of proof of interstate commerce on appeal" by arguing that the materials "almost certainly originat[ed] outside the State of Georgia." The court allowed that the defendants might be right about the materials. "Indeed, there is a strong possibility that in fact, that is the case. But strong possibilities are not enough," Judge Gobeil wrote.

The Meridian defendants relied heavily on Wise v. Tidal Construction Co., a 2003 decision in which the court said that "[h]ome construction generally involves interstate commerce." In a footnote, the panel described a related statement in Wise as "arguably dicta," meaning a remark not essential to the decision. Even if true, the court wrote, the observation "still does not eliminate the necessity that we examine the record to determine" whether a transaction in fact involved interstate commerce.

"Our Commerce Clause jurisprudence—for better or worse—sets the bar very low. But, the bar is not nonexistent and we decline to assume facts not in the record to clear it," Judge Gobeil wrote. Quoting a 1990 decision, the panel concluded that "the trial court erred in finding that arbitration was mandated thereunder."

The opinion addressed only whether the federal act applied, because the Meridian defendants did not contest that Georgia law barred enforcement of the clause. A footnote states that USAA did not oppose arbitration between Rumbaugh and Meridian but did not agree to participate in any arbitration, because it was not a party to the clause. A notice on the opinion states that motions for reconsideration must be received by 4:30 p.m. on the 10th day after the decision.