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Scope of Arbitration Agreement - Equitable Estoppel

Wayne Farms v. Primus Builders, Inc. and Steam-Co, LLC, [Ms. 1190533, Dec. 31, 2020], ___ So. 3d ___ (Ala. 2020). The Court (Bolin, J.; Wise, Sellers, Mendheim, and Stewart, JJ., concur; Parker, C.J., and Bryan, J., concur in the result; Shaw and Mitchell, JJ., dissent) reverses the Houston Circuit Court’s order compelling Wayne Farms to arbitrate claims against Primus Builders, Inc. (“Primus”) arising from destruction of Wayne Farms’ condenser unit during passivation of the unit’s stainless steel.

The Court first rejects Primus’s argument that Primus was equitably estopped to compel arbitration and explains

A party raising the defense of equitable estoppel must show the following:

“(1) That ‘[t]he person against whom estoppel is asserted, who usually must have knowledge of the facts, communicates something in a misleading way, either by words, conduct, or silence, with the intention that the communication will be acted on;’

“(2) That ‘the person seeking to assert estoppel, who lacks knowledge of the facts, relies upon [the] communication;’ and

“(3) That ‘the person relying would be harmed materially if the actor is later permitted to assert a claim inconsistent with his earlier conduct.’”

Lambert v. Mail Handlers Benefit Plan, 682 So. 2d 61,64 (Ala. 1996)(quoting General Elect. Credit Corp. v. Strickland Div. of Rebel Lumber Co., 437 So. 2d 1240, 1243 (Ala. 1983)). Primus has presented no evidence or argument that would satisfy those essential elements of the defense of equitable estoppel so as to prevent Wayne Farms from pursuing its claims in court rather than in arbitration proceedings.

Ms. **13-14.

The Court concludes Wayne Farms’ claims were not within the arbitration provision:

Although Primus was obligated under the Design/Build Agreement with Wayne Farms to perform the installation of the refrigeration unit, it is clear that performance of the passivation work was not an obligation contemplated by Wayne Farms or Primus with respect to the installation of the refrigeration unit under the Design/Build Agreement. Because Wayne Farms and Primus agreed to arbitrate only those disputes arising between them regarding their obligations or performance under the Design/Build Agreement, Wayne Farms cannot be compelled to arbitrate with Primus a dispute arising from the performance of passivation work ....

Ms. *18.

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