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ARBITRATION - SELZER AUTOMOTIVE, L.P. V. CUMBERLAND PLASTICS SYSTEMS, LLC

In Selzer Automotive, L.P. v. Cumberland Plastics Systems, LLC [Ms. 1090068, Aug. 6, 2010],__So. 3d__Ala. 2010), the Alabama Supreme Court reversed a trial court order denying a motion to compel arbitration. Cumberland sold Selzer component parts that Selzer needed for products that Selzer manufactured. In February 2009, Cumberland filed a demand for arbitration alleging that Selzer owed over $600,000 in unpaid invoices. In March 2009, the International Centre for Dispute Resolution ("ICDR," the international division of the American Arbitration Association), wrote Cumberland a letter to inform it that it failed to meet all of the administrative requirements for initiating arbitration. ICDR informed Cumberland that the initial filing fee of $6,000 is payable in full by the filing party at the time of filing. The original contract between Selzer and Cumberland included an arbitration provision that required each party to pay one-half of the deposit required by the AAA. It also contained a provision that permitted filing a case in state court "should arbitration not be available." Selzer never paid its portion of the filing fee. ICDR informed Cumberland that it could advance Selzer's portion of the filing fee and add it to Cumberland's statement of claim. In April 2009, Cumberland abandoned the arbitration process and instead filed suit in Lee County Circuit Court. Selzer then filed a motion to compel arbitration. Cumberland argued that Selzer's failure to pay its portion of the filing fee "rendered [arbitration] unavailable" and argued that Selzer was "judicially estopped" from compelling arbitration. The Alabama Supreme Court disagreed. First, the Court held that "[t]he right to arbitration would be all but illusory if the process turned on the unqualified cooperation of both parties from the outset" (emphasis in original). Given that "there was no impediment to arbitration that was beyond the control of Cumberland itself," the Court held that "[t]he mere abandonment of [Cumberland's] claim before the ICDR does not afford Cumberland a basis upon which to claim that the arbitral forum is now not available to Selzer." The Court also observed that questions of "procedural arbitrability," including whether prerequisites to arbitration have been met, are for the arbitrator to decide. Second, the Court held that because arbitration proceedings were never successfully initiated, there was no "prior judicial proceeding" to trigger judicial estoppel.

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