CONTINUING LEGAL EDUCATION SEMINAR
NOVEMBER 19, 1999
DAVID G. WIRTES, JR.
GEORGE M. DENT
CUNNINGHAM, BOUNDS, YANCE, CROWDER AND BROWN, LLC
ALABAMA SUPREME COURT ARBITRATION OPINIONS
NOVEMBER 5, 1999 - JUNE 1998
Commercial Credit Corp. v. Leggett, 1971799, 10/1/99. J. Cook, with C.J. Hooper and JJ. See, Lyons, and Brown concurring; JJ. Maddox and Houston concurring in part and concurring in the result in part. After excluding herself from a class action, Plaintiff sued a lender and an insurer, alleging fraudulent inducement to purchase credit life insurance and other causes of action. The Supreme Court reverses the circuit court's denial of the defendants' motions to compel arbitration. Held: 1. The contract is ambiguous whether the court or an arbitrator decides whether the dispute in question is arbitrable (see First Options v. Kaplan, 514 U.S. 938 (1995)), so the court decides. 2. This dispute is within the scope of the arbitration clause. p says only that she did not read the K, but the arbitration clause is prominent and signed. 3. The arbitration clause is not unconscionable either (a) because the commercial parties can sue instead of arbitrating or (b) because of the costs of arbitration. As to (a), the Court notes that the clause exempts actions for less than $20,000 from the arbitration provision, so that the borrower/insured can bring an action at law for that amount. As to (b), the Court says that the arbitration provision obligates the insurer and the lender to pay the expenses of arbitration up to the costs of a one-day hearing (except for a $125 filing fee paid by the p), and the losing party pays expenses beyond that.
Green Tree Financial Corp. of Ala. v. Vintson, 1972191, 10/1/99. J. See, with C.J. Hooper and JJ. Maddox, Houston, and Brown concurring; J. Lyons concurring specially; J. Cook concurring in the result; and J. Johnstone dissenting. The Vintsons sued Green Tree, alleging fraud, violation of the Mini-Code, and breach of contract regarding the sale of a mobile home. The Supreme Court reverses the circuit court's denial of Green Tree's motion to compel arbitration. Held: 1. ps had notice of the arbitration provision whether they read the contract or not. 2. The arbitration provision gave the buyers sufficient information to intelligently waive their right to jury trial and to make an informed choice to arbitrate. 3. The arbitration clause is not unconscionable for lack of mutuality of remedy or for lack of a meaningful choice.
First American Title Ins. Corp. v. Silvernell, 1980394, 10/1/99. Per Curiam, with JJ. Houston, See, Lyons, and Brown concurring; C.J. Hooper and J. Maddox concurring as to Part I (First American) but dissenting as to Part II (the real estate agents); JJ. Cook and Johnston concurring as to Part II but dissenting as to Part I. This appeal is from the same action as, and concerns the Ds who were not appellants in, McDougle v. Silvernell, 1972204, April 9, 1999, infra. The Supreme Court reverses the circuit court's denial of First American's motion to compel arbitration, on the authority of McDougle. The other appellants are the real estate agents involved in the transaction. Because the arbitration clause in the title policy applies only to disputes between the title company and its insureds, the Silvernells, the real estate defendants do not have standing to invoke the arbitration clause. The Court cites the test of whether the claims against non-signatories are "inextricably intertwined" with claims against signatories, but finds this clause to be narrow, and the allegations of the complaint to be more like those of Med Center Cars v. Smith, 727 So.2d 9 (Ala. 1998) (conspiracy allegations did not require arbitration) than like Ex parte Napier, 723 So.2d 49 (Ala. 1998) (all Ds had standing to arbitrate because, inter alia, of conspiracy allegations)
Ex parte Crisona, 1971986, 9/17/99. J. See, with C.J. Hooper and JJ. Maddox, Houston, Cook, Lyons, and Brown concurring. This is a dispute between three doctors and a P.C. for which they had agreed to work exclusively for two years. The Supreme Court denies the doctors' mandamus petition seeking to set aside the circuit court's grant of the P.C.'s motion to compel arbitration. The Court holds that, even if the restraint-of-trade provision in the contract is void, that provision is severable, both under the terms of severability provision of the contract and under the terms of § 8-1-1(a), Ala. Code 1975, which voids a contract restraining trade only "to that extent." The P.C. may therefore invoke the arbitration provision in its contract claim against the doctors.
Ex parte Payne, 1980062, 9/10/99. J. See, with C.J. Hooper and JJ. Maddos, Houston, cook, Lyons, Brown, and Johnstone concurring. The Court grants mandamus, ordering the circuit court to set aside its order compelling arbitration. Held: if a condition precedent is not met, there is no contract, and therefore no agreement to arbitrate. The Retail Purchase Order that p signed was contingent on financing. p traded in her car and drove away in the car she bought from D dealership. The next day, the D was informed that p's credit was not approved. The dealership filed a detinue action to recover the car, and Mrs. Payne filed a counterclaim (herein treated as a complaint), alleging conversion, fraud, etc. D sought arbitration, and the circuit court granted it. The Supreme Court holds that, because D denied that a contract had been formed, it could not rely on the arbitration clause.
Green Tree Financial Corp. v. Wampler, 1970983, 8/27/99. J. Lyons, with C.J. Hooper and JJ. Maddox, Houston, Cook, See, and Brown concurring. The holdings are not new: arguments to fraud in the inducement of the contract as a whole are for the arbitrator, and it is not unconscionable for one party to reserve the right to litigate while requiring the other party to litigate. These ps were an elderly couple on Social Security who were pushed into buying a mobile home with high-pressure sales tactics, weren't given the contracts to read, and generally alleged unfair treatment.
Ex parte Caver, 1981070, 8/27/99. J. Houston, with C.J. Hooper and JJ. Maddox, Cook, See, Lyons, and Brown concurring. The p did not have a copy of the insurance policy, and Liberty National could produce only a computer-generated facsimile. Nevertheless, the trial court did not err in holding that Liberty National sufficiently proved that the p's policy had an arbitration clause. Further, there was no clear error in holding that there was no fraudulent inducement to agree to arbitrate. The Court expressly notes that p did not argue that the McCarran-Ferguson Act applies.
Ex parte Foster, 1972306, 8/20/99. Per Curiam, with C.J. Hooper and JJ. Maddox, See, and Brown concurring, JJ. Houston, Cook, and Johnstone dissenting, and J. Lyons recused. Relying on American Bankers Ins. Co. of Florida v. Crawford, Ms. 1972246, July 30, four Justices again say that the McCarran-Ferguson Act does not prohibit arbitration clauses in insurance contracts.
Beaver Constr. Co. v. Lakehouse, L.L.C., 1971829, 8/6/99. J. Cook, with C.J. Hooper and JJ. Maddox, Houston, See, Lyons, and Brown concurring; JJ. Cook [sic] and Johnstone concurring specially. This is a commercial construction contract between sophisticated parties. Out of a number of documents, an arbitration clause was contained only in the American Institute of Architects Document A202, the "General Conditions of the Contract for Construction." The Court rejects arguments that (1) disputes over performance under one of the other documents are not subject to the arbitration clause in the AIA document, (2) the tort claims fall outside the scope of the arbitration clause, (3) specific terms of the contract allow the parties to choose between arbitration and litigation, (4) the claims of individual members of the L.L.C. are not subject to the arbitration clause, and (5) the choice-of-law clause chooses Alabama law over the Federal Arbitration Act. The Court reverses a denial of the defendant contractor's motion to compel arbitration.
Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Kilgore, 1971506, 8/6/99. J. Cook, with C.J. Hooper and JJ. Maddox, Houston, See, Lyons, and Brown concurring; J. Johnstone dissenting. Kilgore signed a Cash Management Account (CMA) agreement with an arbitration clause in it. He sued Merrill Lynch for fraud, etc.; the trial court denied Merrill Lynch's motion to compel arbitration. The Supreme Court reverses, rejecting Kilgore's arguments that the arbitration clause is not binding because Merrill Lynch did not sign the CMA and because the suit alleges fraud in the inducement. No new law here, just one more in the tally of pro-arbitration decisions.
American Bankers Ins. Co. of Florida v. Crawford, 1972246, July 30. INSURANCE POLICIES MAY INCLUDE ARBITRATION CLAUSES. J Maddox, with C.J. Hooper and JJ. See and Brown concurring; JJ. Houston and Cook concurring in part and dissenting in part; J. Johnstone dissenting; and J. Lyons recused). The Court rejects the argument that the McCarran-Ferguson Act prevents application of the Federal Arbitration Act because state insurance law prohibits arbitration. First, in Part I, the Court holds that Crawford agreed to arbitrate disputes with American Bankers, even though the insurance was force- placed by Crawford's mortgagee, because Crawford did not return the policy when it was sent to him but, instead, paid two annual premiums on it. JJ. Houston and Cook concur with this portion of the opinion. In Part II, the Court rejects the McCarran-Ferguson argument. Note: this is a plurality result with J. Lyons recused and J. Kennedy's seat vacant. The argument is this: (1) The McCarran-Ferguson Act, 15 U.S.C. 1012, provides that "No Act of Congress shall ... supersede any law enacted by any State for the purpose of regulating the business of insurance, ... unless such Act specifically relates to the business of insurance." (2) Ala. Code 1975, § 27-14-22, provides: "All contracts of insurance, the application for which is taken within this state, shall be ... subject to the laws thereof." (3) The laws of Alabama include § 8-1-41(3), which prohibits specific enforcement of arbitration clauses. (4) The FAA does not supersede § 27-14-22 and therefore does not supersede § 8-1-41(3) to the extent that the latter section, by way of the former, prohibits specific enforcement of arbitration clauses in insurance contracts. However, the plurality rejects this argument. J. Houston makes a good case for it in his dissent.
Kenworth of Dothan, Inc. v. Bruner-Wells Trucking, Inc., 1980396, 7/9/99. C. J. Hooper, with JJ. Maddox, Houston, Cook, See, Lyons, Brown, and Johnstone concurring. p Bruner-Wells bought a used truck from Kenworth, with no arbitration clause in the contract. Among the problems discovered was the fact that the truck did not meet D.O.T. regulations for lack of reflectors. When p bought the reflectors from Kenworth, the invoice included an arbitration clause. After p sued for fraud, Kenworth moved for arbitration, and then appealed from the denial of its motion. The Supreme Court held that the arbitration clause in the reflector invoice would not be applied retroactively to the dispute over the sale of the truck. It rejected Kenworth's reliance on language that the arbitration clause would apply to all disputes "relating in any fashion to the purchase or sale of equipment, parts or service thereon," holding: "Arguably, the dispute related in some fashion to the purchase of the reflectors, but we must draw a line somewhere in order to prevent the definition of the word 'related' from being stretched beyond all legal recognition." Ms. p. 10.
American Bankers Life Assurance Co. v. Rice Acceptance Co., 1980833. 6/25/99. J. Houston, with JJ. Cook, Lyons, Brown, and Johnstone concurring; C. J. Hooper and JJ. Maddox and See concurring in the result. The arbitration clause was limited to disputes "as to the meaning or interpretation of this Agreement." In an earlier appeal the Court affirmed a holding that the fraud claim at issue was not within the scope of the arbitration agreement. On remand, the p sought pattern and practice discovery, and the D renewed its motion for arbitration, contending that the p had "brought disputed contract issues into the action." The Court affirmed a denial of the renewed motion to compel arbitration, citing a recent holding that BMW v. Gore "increased the necessity for a plaintiff alleging fraud and seeking punitive damages to seek pretrial discovery of similar alleged acts of misconduct by the defendant." Thus, p's discovery of pattern and practice evidence did not introduce arbitrable issues into the action. Also, the arbitration clause provided that a dispute "may be put to arbitration ... subject to applicable provisions of the statutes of the state ..." (emphasis by the Court). Notably, the Court cited § 6-6-1 et seq., as allowing arbitration "only if all parties to the controversy consent to arbitration." This is noteworthy because some Justices had attempted to cite the arbitration provisions in § 6-6-1 et seq. as providing a policy in favor of arbitration, unlike the policy expressed in § 8-1-41(3), which prohibits specific performance of pre-dispute arbitration clauses. Section 6-6-1 et seq. apply only to post-dispute arbitration clauses. Trial court's denial of arbitration motion affirmed.
Chazen v. Parton, 1980364. 6/25/99. J. Houston, with C.J. Hooper and JJ. Maddox, Cook, See, Lyons, Brown, and Johnstone, concurring; J. See files statement of nonrecusal (citing Archer Daniels Midland v. Seven Up, supra). The 7 ps and 1 D, as shareholders, sold a corporation (Knox Metals) to another corporation (Philip Metals). The sales agreement contained an arbitration clause that the Court construes to apply only to disputes between the sellers and the buyer, not to disputes, such as this one, among the sellers. The D, Chazen, negotiated the sale, and his fellow shareholders sue him for fraud and breach of fiduciary duty. Trial court's denial of arbitration motion affirmed.
TranSouth Financial Corp. v. Bell, 1971442. 6/25/99. J. Houston, with C. J. Hooper and JJ. Maddox, Cook, See, Lyons, Brown, and Johnstone concurring. This opinion quotes a very long and detailed arbitration clause. The p, in response to the arbitration motion, asserted that he had been fraudulently induced to sign the agreement with the arbitration clause. However, the record did not show that the p had submitted an affidavit in support of his fraud defense to the arbitration motion, so the Court held that "the record contains no evidence rebutting the defendants' prima facie showing of arbitrability." The Court reversed the trial court's denial of arbitration. J. Johnstone, writing separately, noted that the record was not sufficiently developed to support the p's argument "that the McCarran-Ferguson Act saves Alabama statutory law barring the two insurance company defendants from specifically enforcing the arbitration agreement."
Jim Burke Automotive, Inc. v. Murphy, 1980051. 6/25/99. J. See, with C. J. Hooper and JJ. Maddox, Houston, Lyons, Brown, and Johnstone concurring; J. Cook concurring specially. p did not present evidence to support a finding of unconscionability. J. See cites the unconscionability factors that J. Lyons had set out in Ex parte Napier, 723 So. 2d 49, 52 (Ala. 1998). The p did not have transportation and would have had to walk home if he had not bought the car, but the majority, and J. Cook, concurring specially, find this insufficient evidence of unconscionability. The Supreme Court reversed the trial court's denial of arbitration.
Ex parte Shelton, 1970816. 6/11/99. Per Curiam, with C.J. Hooper and JJ. Maddox, Houston, and See concurring; JJ. Cook and Brown concurring in the result; JJ. Kennedy and Johnstone dissenting; and J. Lyons recused. Blue Cross amended its policy to add an arbitration clause. In support of its motion to compel, it presented evidence that it had mailed the amended policy to the p; the Court holds that, because the p did not rebut this evidence, the p had not shown "a clear legal right to have the trial judge's arbitration order set aside." The Court adds and interesting caveat: "The method adopted by BCBS to obtain the waiver of a policyholder's constitutional right to a jury trial does cause us some concern, however. If the evidence had presented a fact question as to whether Clark had been notified of the amendment; or ... whether ... she would have been able to understand ...; or had suggested fraud in the inducement, duress, or unconscionability, then ... the issue of arbitrability would be determined by a jury." p. 10. The opinion also declines to decide whether the McCarran-Ferguson Act, 15 U.S.C. §§ 1011-1012 prevents the Federal Arbitration Act from preempting state law regulating insurance. Justice Kennedy's dissent cites, among other things, two 1972 U.S. Supreme Court cases regarding waiver of due process rights (in the civil context).
Ex parte Smith, 1972238. 6/4/99. J. Maddox, with C.J. Hooper and JJ. Houston, See, Lyons, and Brown concurring; J. Cook concurring in the result; and J. Johnstone dissenting. The Court denies mandamus, upholding an order compelling arbitration. (1.) The mandamus petition is timely, being filed within a reasonable time. NOTE: the Court mentions that it is considering an amendment to Rule 21, Ala.R.App.P., to require the filing of a mandamus petition within 42 days after the order to be reviewed. (2.) There was no waiver of arbitration by those seeking to compel it. The arbitration clause gave the seller and its assignees the right to file an action for nonpayment and yet to compel arbitration of any counterclaim, which they did. No one but J. Johnstone even questions this aspect. The arbitration clause also gave the seller and its assignees the right to select an arbitrator, with approval by the buyer. After the trial court compelled arbitration, the sellers did not select an arbitrator. The Court holds that this is not a waiver, esp. since the buyer was trying to find a new lawyer during this period. (3.) All of these matters favorable to the seller were not shown by the plaintiff to be unconscionable.
Crimson Industries, Inc. v. Kirkland, 1972202. 6/4/99. Per Curiam, with C.J. Hooper and JJ. Maddox, Houston, Cook, See, and Brown concurring; J. Lyons concurring in part in the rationale but dissenting from the judgment; and JJ. Kennedy and Johnstone dissenting. Mobile home manufacturer allowed to invoke arbitration clause executed 3 months after contract, without consideration.. Plaintiffs bought a mobile home in October 1996, and it was set up on their property in November 1997. In January 1997 there was a closing of the sale (the delay is not explained). At that closing, Mr. Kirkland signed a document purporting to be a separate agreement to arbitrate, and which gave both the seller and the manufacturer, which was not a party to the contract, the right to compel arbitration. After the buyers sued, the circuit court granted the manufacturer's motion to compel arbitration as to claims arising after the execution of that agreement, but denied it as to claims arising before. The manufacturer appealed from the partial denial. The Court holds that the plaintiff cannot argue lack of consideration because he did not take a cross appeal. J. Lyons points out that relief from a grant of arbitration is by mandamus, so the Court is requiring the plaintiff to seek extraordinary relief just to argue the correctness of the portion of the judgment subject to the defendant's appeal He says he would consider the plaintiff's argument as appellee, and would affirm, because there was no consideration for the belated "arbitration agreement" the parties were already bound by the sales contract. No mention is made herein of Wilson v. Waverlee Homes, Inc., 954 F.Supp. 1530 (M.D.Ala.1997), aff'd, 127 F.3d 40 (11th Cir.1997) (table), which holds that a manufacturer may not invoke an arbitration clause in a sales contract to force arbitration of a warranty claim against the manufacturer, because the Magnuson-Moss Act precludes arbitration clauses in warranties, and the procedure here would allow warrantors to circumvent that law.
NationsBanc Investments, Inc. v. Parramore, 1971534, 5/21/99. Per Curiam, with C.J. Hooper and JJ. Maddox, Houston, Cook, See, Lyons, and Brown concurring, and JJ. Kennedy and Johnstone dissenting. A challenge to a contract as merely voidable is a question for an arbitrator, but a challenge to the very existence of a contract must be decided by the court before referring a matter to arbitration. Plaintiff is a minor who received a wrongful death settlement for the death of her mother. Her father created an investment account with an arbitration clause and the proceeds were depleted. She sued the investment company for conspiracy, and it invoked the arbitration clause. She argued (1) that her father lacked the education to understand the contract or the arbitration clause; (2) that by entering into the contract he created a conflict between his personal interests and his fiduciary responsibilities, and that the contract was therefore voidable; and (3) that the probate order creating the conservatorship limited his authority and did not authorize him to enter into a contract such as this one. The Court held that the first two arguments were arguments for voidability and the third went to the existence of a contract. The court remanded for the circuit court to specify which ground it relied on in denying arbitration, but J. Johnstone said the Court should simply affirm on the third ground.
Colonial Sales-Lease-Rental, Inc. v. Target Auction & Land Co., Inc., 1970641, 5/14/99. J. Lyons, with C.J. Hooper and JJ. Maddox, Houston, Cook, See, Brown, and Johnstone concurring. Colonial sold a motor home to Target Auction & Land Co. and/or Jim Hughes. Target and Hughes sued, and the trial court granted Colonial's motion to compel arbitration as against Hughes, who apparently had signed the contract, but denied the motion as to Target, based on the trial court's conclusion that the contract did not include a legal signature on behalf of that corporation. The Court pretermitted whether Hughes had signed in a representative capacity, holding that even if Target was a non- signatory, it "benefitted from the contract by acquiring the motor home" because it was the "titled owner of the motor home," and thus was bound by the arbitration clause in the contract.
Woodmen of the World Life Ins. Soc. v. Harris, 1980395. 5/7/99. J. Houston, with C.J. Hooper and JJ. Maddox, See, and Brown, concurring; JJ. Kennedy, Cook, and Johnstone, dissenting. Based on statutes that are unique to fraternal benefit societies, the Court reversed a denial of WoW's motion to compel arbitration of a fraud claim against it. The Court rejected p's constitutional arguments as being based on the argument (rejected elsewhere in the opinion) that the p had not in fact agreed to arbitration. Footnote 8, pp. 11-12, concludes: "We further note that this opinion does not decide whether the McCarran-Ferguson Act applies in other contexts so as to preclude application of the FAA to insurance contracts involving entities other than fraternal benefits societies."
Ryan's Family Steak Houses, Inc. v. Regelin, 1980186. 4/30/99. J. Houston, with C.J. Hooper and JJ. Maddox, See, Lyons, and Brown concurring; JJ. Kennedy, Cook, and Johnstone, dissenting. Ryan's contracted with Employment Dispute Services, Inc. ("EDSI") for EDSI to take applications for employment at Ryan's. Ryan's contract with EDSI had an arbitration clause, and EDSI contracted with each applicant, including an arbitration clause. Ryan's was expressly made a beneficiary of the EDSI contract with applicants, so that the employees, through their contract with the entity processing their applications, had to arbitrate disputes with their employer. Thus, Ryan's still has employees at will, but it binds them to arbitration. The trial court denied Ryan's' motion to compel arbitration, but the Supreme Court reversed, saying that the motion was properly supported and the ps did not present anything to defeat it. Among several good points made in dissent were that EDSI set itself up as the arbitrator, and, under the circumstances, could not be considered neutral, and that the supposed contracts should not be enforced because EDSI had not qualified to do business in Alabama. The majority rejects the latter point by holding that Ryan's had controverted the ps' assertion that EDSI had not qualified and therefore had put the burden on the ps to put forth evidence that it had not.
Selma Medical Center, Inc. v. Manayan, 1971845. 4/23/99. J. Cook, with C.J. Hooper and JJ. Houston, See, Lyons, and Brown, JJ., concurring; J. Maddox concurring specially; and J. Johnstone dissenting (w/out opinion). The arbitration clause applied to any dispute that "shall arise concerning any aspect of this Agreement." The p argued that a claim of fraud in the inducement was outside the scope of the arbitration clause, but the Court held that the emphasized language was broad enough to include allegations of fraud in the inducement.
McDougle v. Silvernell, 1972204. 4/9/99. J. Houston, with C.J. Hooper and JJ. Maddox, See, Lyons, and Brown, concurring; JJ. Kennedy, Cook, and Johnstone, dissenting. Suit on a title insurance policy. McDougle, the closing attorney, signed as agent of the title insurer, was sued for title defects, and invoked the arbitration clause in the policy. The question decided is incorporation by reference: the title binder did not mention arbitration, but said that liability under the policy would be subject to conditions and stipulations therein. The policy, issued after the closing, included an arbitration clause. The Court, holding that the arbitration clause is enforceable and that McDougle may invoke it, reverses a denial of a motion to compel arbitration. J. Cook focuses on the after-the-fact inclusion of an arbitration clause. J. Johnstone says that a principal case on which the majority relies expressly limited incorporation by reference to terms "which are 'reasonable and in contemplation of the parties to [the] contract.'" p. 12.
Nissan Motor Acceptance Corp. v. Jackson, 1980075. 4/9/99. J. Houston, with C.J. Hooper and JJ. Cook, See, Lyons, and Brown, concurring; J. Johnstone concurring specially; J. Kennedy concurring in the result; and J. Maddox dissenting. Fraud in sale of a car; the Court holds that NMAC, the finance company/assignee, is not within the terms of the arbitration clause, which is specifically limited to the dealer. The Court says, however, that any finding by arbitrators in favor of the dealer's employee, Morris Rivers, will exonerate NMAC, because the only allegations against NMAC are through the acts of Rivers. J. Johnstone questions why the majority did not say that an arbitrator's finding against Rivers would bind NMAC and writes generally about res judicata and collateral estoppel as between arbitration awards and trial court judgments, saying that the question should be reserved until presented. J. Johnstone says, inter alia: "Many defendants have lost faith in the court trial system, and many plaintiffs have lost faith (or never acquired it) in the arbitration system."
Southern United Fire Ins. Co. v. Knight, 1971559. 4/2/99. J. Houston, with JJ. Kennedy, Lyons, Brown, and Johnstone concurring; J. See concurring specially; J. Cook concurring in the result; and C.J. Hooper and J. Maddox dissenting. The majority holds that an automobile insurance policy issued by an Alabama corporation does not "substantially affect" interstate commerce, citing United States v. Lopez, 514 U.S. 549 (1995), as "recognizing that there is an outer limit to Congress's power under the Commerce Clause," p. 8. J. See discusses Lopez and concurs based on the limited evidence; J. Maddox thinks that interstate commerce exists because the policy would have covered Knight outside Alabama.
SouthTrust Securities, Inc. v. McClellan, 1971503. 4/2/99 J. See, with C.J. Hooper and JJ. Maddox, Houston, Lyons, and Brown concurring. JJ. Kennedy and Johnstone dissented, without opinion. McClellan alleged that SouthTrust fraudulently induced him to leave a position at Morgan Keegan. McClellan signed a "Uniform Application for Securities Industry Registration or Transfer," which included a clause calling for arbitration of disputes "arising out of [his] employment with SouthTrust." McClellan said the dispute concerned matters occurring before he was employed, but the Court held that the clause pertains also to the hiring process.
Gold Kist, Inc. v. Baker, 1971422. 3/26/99. J. Maddox, with C.J. Hooper and JJ. See, Lyons, and Brown concurring; JJ. Houston, Kennedy, Cook, and Johnstone dissenting. The FAA exempts "workers engaged in foreign or interstate commerce." Plaintiff was loading chicken parts onto trucks for shipment in interstate commerce, hurt his back, was fired, and sued under § 25-5-11.1 (termination for filing a worker's comp. claim). He had signed an "arbitration agreement" when he came to work. The majority holds that the exemption does not apply because p "did not directly participate in the transportation of the goods," p. 4. The majority pretermits whether the piece of paper p signed was a "contract of employment," but if it wasn't, there's nothing for the FAA to apply to. The dissenters, J. Houston writing, think p was "engaged in the movement of goods in interstate commerce." The majority's rationale (but not necessarily its holding on these facts) is consistent with Federal cases on point: The FAA applies because the contract of employment "evidenc[es] a transaction involving [interstate] commerce," 9 U.S.C. § 2, but the exemption in 9 U.S.C. § 1, quoted above, does not apply because the worker is not "engaged in ... interstate commerce."
Patrick Home Center, Inc. v. Karr, 1971953. 3/26/99. J. Maddox, with C.J. Hooper and JJ. Houston, See, and Brown concurring; JJ. Lyons and Johnstone concurring specially; and JJ. Kennedy and Cook concurring in the result. Review of a denial of a motion to compel arbitration is de novo. The Court reversed the denial. J. Lyons continues to say that unconscionability is available if an evidentiary showing is made, and that lack of mutuality can serve as such evidence. J. Johnstone says that the lack of mutuality shows that the seller thinks arbitration is an unfit forum and that, with any evidence that the buyers did not understand the arbitration agreement or that the defendant had refused to sell without an arbitration clause, he would vote to affirm the denial.
Ex parte Rush, 1980328. 3/26/99. J. Houston, with C.J. Hooper and JJ. Maddox, See, Lyons, and Brown concurring; J. Cook concurring in part and dissenting in part; and J. Kennedy dissenting. Fraud and wantonness claims against Terminix. Held: Even though the homeowners did not sign the "termite protection plan" with the arbitration clause in it, they are bound by it. They expressed agreement to the contract by renewing it for 9 years, by making a claim on it, etc. J. Cook would not enforce the clause against the wife, who was not listed as a party to the termite protection plan.
Quality Truck and Auto Sales, Inc. v. Yassine, 1971088. 3/26/99. J. See, with C.J. Hooper and JJ. Maddox, Houston, Cook, Lyons, and Brown concurring; J. Johnstone, concurring specially, and J. Kennedy concurring in the result. D car dealer can invoke its arbitration clause even though it did not sign the contract. J. Johnstone notes the plaintiff's argument that she was fraudulently induced to sign the arbitration agreement because she had earlier refused to sign a specific, separate arbitration agreement, but says that no evidence to support this argument was in the record. He also distinguishes fraud in the execution from fraud in the inducement, and says that no case has addressed the former in the arbitration context.
Universal Underwriters Life Ins. Co. v. Dutton, 1971279; General Motors Corp. v. Dutton, 1971286; Premier Finance Co. of Birmingham, Inc. v. Dutton, 1971693; Ex parte Edwards Chevrolet Co., 1971316. 3/19/99. J. Houston, with JJ. Kennedy, Cook, Lyons and Brown concurring; C.J. Hooper and JJ. Maddox and See concurring in part and dissenting in part. Arbitration clause in a car sales contract specifically included the dealer and the assignee of the dealer. The question of whether Premier, the assignee, had waived the right to invoke the arbitration clause by substantially engaging in litigation is a question reserved for the arbitrator under the terms of the arbitration clause. The trial court granted the dealer's motion to compel arbitration but denied motions by Premier, the finance company, by Universal, the credit life insurer, and by GM, which provided an extended service contract. The Court reversed as to Premier, but affirmed as to the denial of arbitration motions by Universal and GM, holding that the arbitration clause did not include claims against those parties. The Court also reversed the trial court's holdings that the dealer was the initiator of arbitration and would therefore be required to pay the arbitration costs. See Ex parte Dan Tucker Auto Sales, Inc.., 718 So.2d 33 (Ala. 1998).
First Family Financial Services, Inc. v. Rogers, 1972163; American Security Ins. Co. and Union Security Life Ins. Co. v. Rogers, 1972171. 3/19/99. J. Houston, with JJ. Cook, Lyons and Brown concurring, J. Maddox concurring specially, J. See concurring in the result and C.J. Hooper concurring in part and dissenting in part. The plaintiff obtained loans from First Family, with credit property insurance from American Security and credit life and credit disability insurance from Union Security. The loan document had an arbitration clause and the only argument by the plaintiff that the trial court correctly denied First Family's motion to compel was that the plaintiffs had not read or understood the very long arbitration clause in this document. The Court rejected that argument, holding that the plaintiff had not presented evidence that she was denied the opportunity to read the arbitration clause. However, the Court affirmed the denial of motions to compel by American Security and Union Security, holding that the terms of the arbitration clause were not broad enough to include the plaintiffs' claims against those two defendants.
Ex parte Foster, 1972306. 3/19/99 J. Houston with C.J. Hooper and JJ. Maddox, Kennedy and Brown concurring; J. Lyons recused. The plaintiff argued that the McCarran- Ferguson Act, 15 U.S.C. §§ 1011-1012, precludes application of the Federal Arbitration Act to policies of insurance, and she also made an unconscionability argument. The opinion of the Court cites I. Macneil et al., Federal Arbitration Law (1995), as containing a good discussion of contract defenses under the FAA. The Court held that these two defenses to the defendant's motion to compel arbitration were to be submitted to the arbitrator under the terms of the arbitration clause. Note: On March 26, 1999, the Court, ex mero moto, placed this case on rehearing and withdrew the opinion released on March 19.
Ex parte Waites, 1971963, 2/26/99. Per Curiam. C. J. Hooper and JJ. Maddox, Houston, Lyons, and Brown, concurring; J. See concurring in the result; J. Cook dissenting. Arbitration of invasion of privacy claim; mandamus denied. p Waites recommended a friend to a car dealer; dealer said to the friend, "If Waites can qualify for financing, anyone can." The Court holds that, under the arbitration clause in Waites's contract, the preliminary question of whether this claim is arbitrable is itself subject to arbitration. Thus, an arbitrator will decide whether the claim is within the scope of the arbitration clause. The Court again refuses a broad reading of First Options v. Kaplan, as it did in Brilliant Homes, Ltd. v. Lind, 1970153, Sept. 18, 1998.
Thompson v. Skipper Real Estate Co., 1971767, 1/15/99. J. Houston, with C. J. Hooper and JJ. Maddox and Lyons concurring; J. See concurring in the result w/out writing; JJ. Shores, Kennedy and Cook dissenting, but only J. Cook wrote, and the others did not join him. J. Almon did not vote. Sale of house is interstate commerce; motion to change venue is not a waiver of arbitration. The Court holds first that the sale was a contract in interstate commerce because an Arizona corporation financed the sale and a California corporation insured the title. J. Cook, dissenting, notes that a contract of sale merges into a deed. He would hold that, with no contract to enforce, there is no arbitration agreement to enforce; J. Houston says the plaintiff made no such argument, so there is no basis for reversal on the ground of merger. Next the Court holds that a motion to change venue from Mobile County to Baldwin County, and discovery thereon, was not a substantial invocation of the litigation process that constituted a waiver of the right to compel arbitration. J. Cook's dissent says why move for a change of venue if you intend to arbitrate?
Ex parte Hopper, 1970259, 1/15/99. J. Kennedy, with JJ. Almon and Shores concurring; JJ. Cook and Lyons concurring in Part II and expressing no opinion as to Part I; J. Houston concurring in the result; J. Maddox joining C. J. Hooper's dissent; and J. See dissenting w/out writing. Woodmen of the World Life Insurance Society's certificate of insurance reserved the right for an amendment to the society's constitution to automatically amend the terms of the policy. In Part II of the opinion, the Court held that an amendment adding arbitration did not take effect before the Hoppers filed this action and so did not affect it. The Court granted mandamus to set aside an order compelling arbitration. Part I, written by J. Kennedy and concurred in by JJ. Almon and Shores, contains language on pp. 6-7 from U.S.S.Ct. cases re presumptions against waivers of constitutional rights and the requirement that they be clear.
Southern Energy Homes, Inc. v. Lee, 1970105, 1/8/99. Almon, J.; Shores, Kennedy, and Cook, JJ., concur; Houston, J., concurs specially; Hooper, C.J., and Maddox, See, and Lyons, JJ., dissent. The Court held that the Magnuson-Moss Act, 15 U.S.C. section 1501 et seq., bars the inclusion of a binding arbitration agreement in a written warranty on a consumer product. The Court followed the Fed. Trade Comm'n and several cases from the Middle District of Alabama in this holding. The opinion distinguishes U.S. Supreme Court cases holding that claims under the Securities Acts, the Sherman Act, the RICO Act, and the Age Discrimination in Employment Act are not excepted from the Federal Arbitration Act. In four consolidated appeals, the Court affirmed the circuit courts' denials of arbitration motions filed by Southern Energy Homes, a mobile home manufacturer, based on the arbitration clause in its warranty.
Investment Management & Research, Inc. v. Hamilton, 1960138, 1/8/99. J. Cook with C.J. Hooper and JJ. Houston, See, and Lyons concurring, J. Maddox concurring in the result, and J. Almon dissenting without opinion. Rejects the argument that First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995), limited the holding of Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967). Prima Paint held that a claim of fraud in the inducement of a contract must be submitted to arbitration; only if the party opposing arbitration asserts that the arbitration clause itself was fraudulently induced may a court decide the question of fraudulent inducement. The Hamilton Court relied upon Prima Paint and reversed the circuit court's denial of the defendant's motion to compel arbitration.
Value Auto Credit, Inc. v. Talley, 1970953, 1/8/99. J. Cook, with C.J. Hooper and JJ. Maddox, Shores, Houston, Kennedy, See, and Lyons, concurring. A minor may not disaffirm only an arbitration clause; he may avoid the entire contract, but may not pick and choose among provisions.
Infiniti of Mobile, Inc. v. Office, 1971565, 1/8/99. J. Houston, with C.J. Hooper and JJ. Cook and Lyons concurring, JJ. Maddox and See concurring in the result, and JJ. Shores and Kennedy dissenting. Husband and wife purchased a vehicle; only the husband signed the contract and the arbitration clause. The Court held that the wife was compelled to arbitrate, because she was suing as a third-party beneficiary of the husband's contract and so could not avoid the arbitration agreement in that contract. The Court reversed a denial of motion to compel arbitration. Discrepancies in contract documents held immaterial.
American General Finance, Inc. v. Manley, Ms. 1970386, 11/20/98. Relying on Ex parte McNaughton, infra, the Court reversed a denial of a motion to compel arbitration where the only defense was that the arbitration clause was unenforceable for lack of mutuality.
Ex parte Napier, Ms. 1961828, 11/06/98. The Court grants mandamus setting aside a denial of arbitration where the defenses were unconscionability, lack of mutuality, and that some of the defendants were not signatories to the arbitration agreement.
Tom Williams Motors v. Thompson, Ms. 1970348, 9/25/98. The Court affirmed without opinion, but there are special writings: Justice Houston concurring specially, Justice Lyons concurring in the result, on the question of non-signatories.
Brilliant Homes, Limited v. Lind , Ms. 1970153, 9/11/98. The Court reverses the denial of a motion to compel arbitration stating that the arbitration provision is clear and in unmistakable terms states that the parties agreed to submit the issue of arbitrability to arbitration.
Med Center Cars, Inc. v. Smith, Ms. 1960214, 9/4/98. This opinion addressed seven appeals from denials of motions to compel arbitration. The Court affirmed in part and reversed in part. It addresses several specific issues pertaining to the facts of the different cases. The Court did not allow non-signatory defendants to invoke the arbitration clauses that some of the other defendants had in their contracts even though there were conspiracy allegations against all of the defendants. The Court holds that class-wide arbitration should not be permitted in this case.
Georgia Power Company v. Partin, Ms. 1961192, 9/4/98. A worker sued the premises owner alleging among other things that he was a third-party beneficiary to the contract between the premises owner and his employer. Because that contract contained an arbitration clause, the Court held that the worker's claims against the premises owner were subject to arbitration. The Court also held that the wife's loss of consortium claim was subject to arbitration because it was derivative of the worker's claim.
Ex parte McNaughton, Ms. 1961708, 8/28/98. The Court holds that an arbitration clause in an employee handbook is enforceable as to a claim by the employee against the employer even though the employee handbook expressly disclaims that any contract is created by the handbook other than in the arbitration clause. The Court also rejects the defense to arbitration that the arbitration clause is unconscionable because of lack of mutuality of remedy. In this portion of the opinion the court disapproves of language in Northcom Ltd. v. James, 694 So. 2d 1329 (Ala. 1997) which had said that such a lack-of-mutuality defense might be available in opposition to a motion to compel arbitration.
Anderson Brothers Chrysler Plymouth Dodge, Inc. v. Hadley, Ms. 1961143, 7/31/98. The Court rejects an argument that the defendant had not signed the arbitration clause in the contract and reverses a denial of a motion to compel arbitration.
Anniston Lincoln Mercury Dodge v. Conner, Ms. 1970074, 7/31/98. The Court reverses a denial of a motion to compel arbitration, relying upon Prima Paint and holding that Conner's allegation that she was unable to understand English bears upon the entire agreement, not just upon the arbitration clause. Thus the Court says her argument that she didn't understand the agreement and there was no meeting of the minds is a question for an arbitrator, not for a court.
Ex parte Bentford, Ms. 1961675, 4/4/98; modified on 7/17/98 when Justice Lyons modified his special writing. The plurality opinion says that warranty booklets mailed to the plaintiffs after the purchase of their homes did not create binding arbitration agreements. The plurality opinion also holds that the defendants waived the right to compel arbitration by substantially invoking the litigation process. Justice Houston and Justice Lyons concurred in the result, Justice Lyons noting that the defendants failed to demand arbitration until after a trial date had been set and a continuance had been granted.
Ex parte Warren, Ms. 1970645, 7/10/98. The wife was not a signatory to the contract so she sought to avoid the arbitration clause. The Court holds that, by disavowing any status as a party to the contract or a third party beneficiary, she has disclaimed any basis for recovery. Therefore, any error in compelling arbitration of her claims. would be harmless. The arbitration clause refers to the National Academy of Conciliators, which has gone out of existence. The Court holds that the fact that an arbitrator named in the arbitration agreement is unable to act as an arbitrator does not necessarily void the arbitration agreement. The Court holds that there was no evidence that the choice of an arbitrator was an essential term of the contract and that therefore the trial court correctly held that the failure of this choice does not void the arbitration agreement.
Ex parte Dan Tucker Auto Sales, Ms. 1951866, 7/02/98. The Court holds that the plaintiff is the claimant and the initiating party for purposes of the Commercial Arbitration Rules of the American Arbitration Association because the plaintiff has filed a complaint in circuit court. The arbitration rules require the claimant or the initiating party to pay the arbitration fees. The Court holds that this language applies to the plaintiff, and the plaintiff is required to pre-pay the costs of arbitration when a defendant's motion to compel arbitration is granted.
Merrill Lynch Pierce Fenner & Smith, Inc. v. Cobb, Ms. 1961773, 6/19/98. The Court holds that an appeal from a denial of a motion to compel arbitration must be filed within 42 days after that denial. The Court dismisses an untimely appeal.
Green Tree Agency, Inc. v. White, 1962094, 6/5/98. Failure to mention an arbitration clause on the back of a contract does not constitute a suppression that would allow the plaintiff to avoid the arbitration clause. Claims of fraud in the inducement are subject to arbitration under the rule of Prima Paint.
Merrill Lynch Pierce Fenner & Smith, Inc. v. Kirton, 1970152, 6/5/98. Ms. Kirton signed an arbitration clause in a joint account with her mother in 1995. The Court held that the arbitration clause applied to disputes between Ms.. Kirton and Merrill Lynch arising out of other accounts before the signing of the arbitration clause in 1995.
Ex parte GreenTree Financial Corp., Ms. 1962148, 7/31/98. The Court granted mandamus ordering the circuit court to set aside an order certifying a nationwide class of plaintiffs and an Alabama subclass. The plaintiffs alleged that Green Tree had improperly force placed insurance on the plaintiffs' mobile homes and that the amount of the policy was excessive. The Court held that the plaintiffs had not properly supported their class allegations and that the trial court's conditional certification order did not contain sufficient findings on the Rule 23 factors, especially Rule 23(b)(3)'s requirement that common questions predominate and that a class action is superior to other available methods. Among the factors that the Court looked at in holding that there was an insufficient showing of predominance and superiority were the fact that the nationwide class might require proof of the law of all 50 states, that as to at least some of the claims subjective questions such as reliance might overwhelm the class issues, and that some of the plaintiffs had signed arbitration clauses.
