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The following is a summary of all Alabama Supreme Court decisions dealing
with arbitration from November 3, 1995 to June 5, 1998, in reverse chronological
order:
The issue before the court was the effect of a broadly-worded arbitration
provision on the scope of the arbitration. The court held that
the "any" and "all" controversies language in a 1995 customer agreement
between Merrill Lynch and an account holder was sufficiently broad to
cover any and all controversies between the two, regardless of the kind
of controversy or the date on which the controversy occurred.
The court compelled arbitration. The issue before the court was whether an arbitration clause is enforceable where the plaintiff claims she was fraudulently induced into signing the installment contract containing the clause. The plaintiff alleged that the fraudulent inducement lay in the fact that the defendants did not inform her that the contract contained an arbitration clause. The court held that an arbitration clause is enforceable as silence is fraudulent only where the defendants had a fiduciary duty to disclose. Furthermore, the front of the contract contained a clause stating, "Caution -- It is important that you thoroughly read the contract before you sign it." The court also held that if an arbitration clause is broad enough to encompass claims of fraud in the inducement, those claims are subject to arbitration. The court compelled arbitration.
The issue before the court was whether a medical insurance provider,
whose contract with the insured contained an arbitration provision,
waived its right to arbitrate a dispute by invoking judicial process.
The court held that the insurance carrier's filing of a motion to compel
arbitration and stay proceedings pending arbitration did not constitute
substantial invocation of the litigation process, nor did it substantially
prejudice the opposing party so as to waive its right to seek arbitration.
The court compelled arbitration. The issues before the court were: (1) Whether an arbitration provision contained in warranty booklets mailed to the home of purchasers several weeks after the purchasers closed on their respective homes was enforceable; (2) Whether defendants waived the right to seek arbitration where they waited over 2 1/2 years before seeking to compel arbitration and where they extensively participated in discovery, pretrial hearings, and other pretrial matters. The court held that the arbitration provision in the warranty booklets was unenforceable as no document signed by the purchasers contained an arbitration provision. The fact that language used in warranty clauses in the warranty applications referenced the warranty booklets was, for reasons of fundamental fairness, insufficient to incorporate the arbitration clauses. Furthermore, the defendants waived the right to arbitrate by substantially participating in pretrial process, and plaintiffs were prejudiced by the substantial delay. The court vacated the trial court's motion to compel arbitration.
At issue was the enforceability of an arbitration provision by a foreign corporation which failed to comply with Alabama's forum-closing statute, Ala. Code §10-2B-15.02(a)(1975). The court found that application of the forum-closing provision in effect at the time the contract between the parties was signed did not violate the Commerce Clause and that the forum-closing provision did apply to the foreign corporation because of the intrastate nature of the corporation's activities. The court, however, held that the clause was enforceable because the transaction involved interstate commerce so as to invoke Congress's regulatory power under the Commerce Clause via the FAA. And while the FAA does not relieve a foreign corporation from complying with Alabama's corporate qualification provisions, and while a corporation cannot invoke the aid of state courts to enforce an arbitration provision, a party seeking to recover for a corporation's breach of contract cannot pick and choose which provisions to apply. The court reversed the trial court's denial of motion to compel arbitration.
The issue before the court was whether arbitration is inappropriate
where the plaintiff's claims, though related to a prior contract that
did contain an arbitration clause, directly arise from a subsequent
contract which did not contain an arbitration clause. The court
vacated the trial court's order compelling arbitration. Crucial
to the court's determination of the issue was the fact that the subsequent
contract stated clearly that it constituted the "entire agreement" between
the parties. Absent such, the court stated that it would have
held that the claims were subject to the arbitration clause in the first
contract because of the close relation of subject matter of both contracts.
A title insurance policy contained an arbitration clause which stated:
"Unless prohibited by applicable law, either the Company or its insured
may demand arbitration . . . ." The issue before the court was
whether the words "applicable law" refer to both state and federal law
(thus making the FAA applicable) or only to state law (thus making the
clause unenforceable pursuant to Alabama's anti-arbitration law at Ala.
Code §8-1-41(3)(1975)). The court held that the words "applicable
law," taken in conjunction with the rest of the contract, show an intent
to apply either state or federal law, and that the title policy sufficiently
affects interstate commerce to invoke the FAA. The court declined
to address the issue of whether Jericho was prejudiced by Fidelity's
delay in seeking to arbitrate because Jericho failed to raise the issue
before the trial court. The issue before the court was whether §1 of the FAA, which states
that "nothing herein contained shall apply to contracts of employment
of seamen, railroad employees, or any other class of workers engaged
in foreign or interstate commerce," should be broadly construed so as
to exempt from the provisions of §2 all contracts of employment
that facilitate or affect interstate commerce, or whether §1 should
be narrowly construed so as to exempt only employment contracts of workers
directly engaged in the movement of goods in interstate commerce.
The court held, as have ten other U.S. Courts of Appeals, that the §1
exemption covers only those workers directly engaged in the movement
of goods in interstate commerce -- that is, those workers directly engaged
in the interstate transportation and distribution of goods. The
court based this holding on the language of the statute, Congressional
intent, legislative history, and the purpose of the FAA. Because
McApline was not engaged in the interstate transportation and distribution
of goods in interstate commerce in the performance of its contract with
the Heilperns, the contract did not fall within the §1 exemption,
and the FAA thus applied. The issue before the court was whether the trial court order compelling
arbitration was inappropriate where the arbitration clause was contained
in an employee handbook. The court vacated the trial court order.
In this case, Brookwood issued each employee, Beasley included, an employee
handbook which contained an arbitration agreement and required that
each employee acknowledge, by signature, receipt of the handbook.
The court held that because the handbook stated that "no written statement
or agreement in this handbook is binding," existence of a contract was
precluded. Also, the acknowledgment form signed by Beasley did
not contain the arbitration clause. The court stated that absent
Beasley's signature on an document containing a valid arbitration clause,
the clause could not be enforced. The issue before the court was whether a claim of fraud in the inducement
of an entire contract is to be resolved by the courts or by arbiters
where the contract contains an arbitration provision. Otherwise
stated, who determines questions of arbitability -- the court or the
arbiter? The court held that threshold issues of arbitability
are to be first determined by the court unless the contract clearly
gives the arbiter the right to decide arbitability. The court
thus denied the defendant's motion to compel arbitration. Hood signed an arbitration agreement with his employer. Upon
termination of his employment, Hood sued. The issue before the
court was whether the employer waived its right to enforce the arbitration
provision by substantially invoking the litigation process and thereby
prejudicing Hood's action. In vacating the trial court's order
staying judicial proceedings pending arbitration, the court held that
the employer waived his right to enforce arbitration by removing the
case to federal district court, adopting a scheduling plan, and then,
two months later, seeking instead to enforce the arbitration agreement.
Particularly important in the court's decision was Golden's removal
of the case to federal court, a significant factor in determining whether
a party has waived its right to enforce an arbitration provision.
The plaintiffs signed an application for insurance, and the insurance
company mailed to the plaintiffs a copy of the issued policy which included
the endorsement with an arbitration clause. The issues before
the court were: (1) Whether the plaintiffs agreed to an arbitration
clause contained in the insurance policy, but not found in the signed
application; (2) Whether the insurer substantially invoked the judicial
process so as to waive its right to enforce the arbitration provision.
The court affirmed the trial court's order compelling arbitration.
The court held that the arbitration clause contained in the endorsement
was a valid portion of the policy as it was attached to the policy and
referenced therein. The policy stated that the plaintiffs had
ten days to object to its terms. The plaintiffs did not do so,
and thus agreed to the terms of the policy. The court also held
that the insurer did not substantially invoke the litigation process
by filing an answer, one set of interrogatories, and two sets of requests
for production. Furthermore, the court held that the FAA applies
because the issuance of the policy involved interstate commerce, and
that language in the policy ("Any provision . . . in conflict with the
laws of the state . . . is amended to conform to the minimum requirements
of such laws") did not prevent the arbitration clause from being enforced
as the FAA preempts Ala. Code §8-1-41(3). The disposition of the case is somewhat complex. For the second
time, Terminix appealed the circuit court's denial of its motion to
compel arbitration of the plaintiff's claims. The first time,
the court reversed the trial court order as to the plaintiff's contract
claim. The issue before the court this second time, however, was
whether the trial court erred in denying Terminix's motion to compel
arbitration of the plaintiff's negligence and fraud claims. The
court held that because the only claim Terminix initially sought to
arbitrate was the contract claim and because Terminix did not file a
motion to arbitrate the fraud and negligence claims until the case had
been remanded upon the court's reversal of the trial court order denying
arbitration of the contract claim, Terminix had essentially conceded
that the fraud and negligence claims were nonarbitable and was thus
estopped from raising them. Furthermore, the trial court's refusal
to compel arbitration as to the fraud and negligence claims was entirely
proper as the trial court was merely following the court's mandate that
it reverse its order as to the contract claim and consider whether the
litigation of the fraud and negligence claims should be stayed pending
arbitration of the contract claim. The trial court was thus properly
following the mandate of the Supreme Court. The court therefore
affirmed the trial court's order denying Terminix's motion to compel
arbitration of the negligence and fraud claims. The plaintiff, Hagan, entered into an agent's contract with Minnesota
Mutual. Hagan was hired by Sizemore, owner of Paragon, to sell
insurance. Hagan sued Minnesota Mutual, Sizemore, and Paragon,
alleging fraudulent inducement, libel, and breach of contract.
Hagan's contract with Minnesota Mutual did not contain an arbitration
provision. The trial court granted the defendants' motion to compel
arbitration of Hagan's claims pursuant to an arbitration clause found
in an application made by Hagan for registration as a securities industry
agent for MIMLIC, a subsidiary of Minnesota Mutual. The issue
before the court was whether the dispute was within the scope of the
arbitration agreement. The court held that the arbitration agreement
signed by Hagan for the sake of selling securities for MIMLIC did not
apply to the dispute at hand. The court thus reversed the trial
court order compelling arbitration. The issue before the court was whether a party had waived its right
to have the case referred to mediation and arbitration. Homestead
and Morrison Restaurants entered into a food service contract which
contained an arbitration clause. The court held that the facts
indicate that Homestead waived its right to enforce arbitration.
Those facts were as follows: Homestead failed to seek arbitration in
its answer and response to summary judgment; Homestead first asserted
its right to arbitrate eight months after Morrison filed its complaint;
when the right was asserted, it was only after Homestead had suffered
an adverse ruling of summary judgment. The court vacated the trial
court order compelling arbitration. Dissent only published. The plaintiffs, husband and wife, entered into an installment sales
contract with the defendant, a car dealership. Both plaintiffs
signed the installment sales contract. Only the husband signed
the retail buyer's order, which contained the arbitration clause.
The plaintiffs alleged fraud, breach of contract, conversion, and wrongful
repossession. The trial court granted the defendant's motion to
compel arbitration. The court here reversed the trial court's
order in part, and affirmed in part. The court concluded that:
(1) The arbitration clause was broad enough to encompass the plaintiffs'
claims of conversion and wrongful repossession; (2) The defendant did
not waive its right to seek arbitration by engaging in self-help repossession
as such is not synonymous with invoking the judicial process; and (3)
Further discovery is not warranted where there is no factual issue with
regard to arbitability. The court also held, however, that the
claims of the wife were not subject to the arbitration clause as the
document containing the arbitration clause was signed only by the husband.
The fact that the car purchased under the contract was to be jointly
owned by husband and wife was not dispositive. The issue before the court was whether a broad arbitration provision
can be construed to encompass intentional torts that are separate from
the contractual dealings giving rise to the contract containing the
arbitration provision. The plaintiff, Discount Foods, and the
defendant, Supervalu, executed retail agreements containing an arbitration
provision. Discount Foods alleged tortious interference with contractual
and business relations. The court held that the alleged tort did
not stem from the parties' contractual dealings; therefore, the arbitration
clause could not be construed to encompass the plaintiff's claim.
The court vacated the trial court's order compelling arbitration.
In this case, a consumer loan company sued the defendant/insurer for
fraudulent suppression in connection with the settlement of a claim
on a policy sold by the loan company. The Reimbursement Agreement
executed by the parties contained a narrow arbitration provision, which
stated that "any dispute or disagreement between the parties as to the
meaning or interpretation of this agreement" is subject to arbitration.
The trial court denied the insurer's motion to compel arbitration, and
the court here affirmed. The court held that the fraudulent suppression
claim was not subject to the narrow arbitration clause found in the
contract. Dissent only published. Dissent only published.
Parties to a suit consented to refer the dispute to mediation and/or
arbitration. The defendants moved for entry of judgment in accordance
with the mediation/arbitration order. The issue before the court
was what legal effect to give to the mediator/arbitrator's order.
The defendants argued that the order was a binding arbitration order,
while the plaintiffs argued that the proceeding was a mediation and
that the order was not binding. The court held that though the
parties never fully agreed as to the nature of the process, i.e. whether
it was mediation or arbitration, the parties did agree that the arbitrator/mediator's
resolution was to be based upon a formulation of damages agreeable to
both parties. Because the parties never reached an agreement as
to the formula on which the arbitrator/mediator was to reach a decision,
the order was unenforceable. The purchaser of a mobile home sued the vendor alleging misrepresentation,
breach of contract, and breach of warranty. The purchase contract
contained a broad arbitration provision. The trial court denied
the vendor's motion to compel arbitration, and the court here affirmed.
The vendor argued that the broad language of the arbitration clause
encompassed all of the plaintiff's claims. The court held that
while, pursuant to the arbitration provision, the issue of fraud in
the inducement of the contract as a whole may be submitted to arbitration,
the trial court must first rule on any issue that goes to the making
or enforcement of the arbitration agreement itself. The court
noted that the vendor's argument was based upon a misinterpretation
of the trial court's order, i.e. the vendor interpreted the trial court
to have denied arbitration of the plaintiff's claims, while in reality
the trial court merely ordered further proceedings on the threshold
issue of whether there was a valid agreement to arbitrate those claims.
The issue before the court was whether an unsigned arbitration clause
was a binding term of the purchase contract. The plaintiff entered
into a purchase contract with an automobile dealer. The printed
purchase contract form contained numerous sections set off in boxes.
Each section contained a place for the purchaser's signature.
The only section left unsigned was that entitled "arbitration clause."
The court held that the unsigned arbitration clause did not become part
of the agreement between the parties. The trial court order compelling
arbitration was therefore vacated. The issue before the court was whether the arbitration clause contained
in a document titled "worksheet estimate" was enforceable. The
purchasers of a mobile home signed a document titled "worksheet estimate,"
which contained the following language: "This is merely an estimate
and there is no contractual obligation or right to buy . . . ."
The court held that the document was not a contract as it created no
obligation between the parties and none of the terms of the document
were expressly incorporated into any later document by which the parties
were contractually bound. Because there was no evidence that a
contract containing an arbitration agreement existed between the parties,
the court vacated the trial court's order compelling arbitration.
Trustee of the bankrupt estate of a mining company sought to recover
brokerage fees charged by a landowner for coal extraction performed
by the mining company. The contract between the company and landowner
providing for extraction of coal contained no provision for payment
of a brokerage fee, but did contain an arbitration clause. The
trial court compelled arbitration. The issue before the court
was whether the scope of the arbitration clause included the dispute
at hand. The court held that the language of the arbitration clause
and contract as a whole showed that the parties expressed no intention
to submit such a dispute to arbitration. The court reversed the
trial court order compelling arbitration. The plaintiff was involved in a car accident while driving a car dealership's
vehicle. The plaintiff sued the insurer, claiming benefits under
the uninsured motorist provision of the policy between the insurer and
dealership. The policy between the insurer and dealership called
for arbitration of claims arising under the policy. The court
held that the plaintiff, as third-party beneficiary of the policy, can
be compelled to arbitrate his claims even though he did not sign the
insurance policy. The court also held that the insurer's answering
of the plaintiff's complaint and the insurer's denial of coverage was
not sufficient to show that the insurer had substantially invoked the
litigation process so as to constitute waiver of its rights to demand
arbitration. Lastly, the court held the court held that the FAA
applied as the claims were based on an insurance agreement that involved
interstate commerce. (The insurer was an Indiana corporation; the dealership
was an Alabama corporation.) The court affirmed the trial court
order compelling arbitration. Fidelity issued a title insurance policy that was assigned to Jericho.
Jericho ultimately brought suit against Fidelity. Eighteen months
after the complaint was filed, Fidelity moved to compel arbitration.
A clause in the policy allowed either party to demand arbitration "unless
prohibited by applicable law." The issue before the court was
whether that phrase incorporates laws that prohibit arbitration agreements
but that might otherwise be preempted by the FAA. The court held
that, in light of the rules of construction, the phrase should be interpreted
to mean that the parties intended for Ala. Code §8-1-41(3) (1975)
to govern and to prohibit specific enforcement of the arbitration clause
in the policy. The court therefore affirmed the trial court's
denial of Fidelity's motion to compel arbitration. The plaintiffs executed a purchase contract with the defendant for
a mobile home. The purchase contract contained an arbitration
provision. The plaintiffs ultimately sued, alleging fraud in the
inducement, fraudulent suppression, and conversion. Ten months
expired between the time the plaintiffs filed their complaint and the
time the defendant requested that the trial court compel arbitration.
During that time, the defendant participated in discovery, answered
the complaint, and conducted depositions. The trial court compelled
arbitration. The issue before the court was whether the defendant
waived its right to compel arbitration by substantially invoking the
litigation process. The court held that the defendant's delay
constituted a waiver of its right to arbitrate. Purchasers of a mobile home sued the manufacturer, seller, and seller's
agent, alleging breach of contract, negligence and fraud. The
trial court granted the defendants' motion to compel arbitration based
on the arbitration provision found in the installment contract signed
by the purchasers and the seller's agent on behalf of the seller.
The issue before the court was whether the arbitration provision of
the contract was unconscionable or unenforceable, and whether the seller's
agent or manufacturer, as nonsignatories, had standing to enforce the
arbitration provision. The court held that a contract is not unconscionable
or unenforceable merely because it requires the purchasers to arbitrate
but allows the other party a judicial forum. As to the standing
issue, the court held that the seller's agent could enforce the arbitration
as he signed the contract on behalf of the dealership and was, in that
sense, a signatory. The court also held, however, that the manufacturer
had no standing to enforce the arbitration provision as it was not a
party to the contract. The manufacturer's argument that the purchaser's
claims were subject to arbitration by equitable estoppel was rejected
because the purchaser's cause of action arose out of warranties promulgated
by the manufacturer and having nothing to do with the purchase contract.
Furthermore, the court held that the manufacturer was estopped from
relying on the arbitration clause in the purchase contract because it
disclaimed the contract under its own warranty, and that the arbitration
clause was not broad enough to encompass the purchasers' claims against
the manufacturer. The court therefore vacated the trial court
order compelling arbitration insofar as the order compelled the purchasers
to arbitrate claims against the manufacturer. An automobile purchaser sued the dealer and automobile purchase finance
company, alleging misrepresentation. The purchaser signed a retail
buyer's order which contained an agreement to arbitrate "all disputes"
and specifically incorporated the retail sales contract, also signed
by the purchaser. The dealer then assigned the retail sales contract
to the finance company. The trial court granted the dealer's motion
to compel arbitration, but denied the motion of the finance company.
The issue before the court was whether through the assignment, the finance
company stepped into the shoes of the dealer and thus became entitled
to arbitration. The court held that the finance company stepped
into the shoes of the dealer through the dealer's assignment of the
sales contract to the finance company because an assignment gives an
assignee the same rights, benefits, and remedies the assignor possesses.
The company was thus entitled to arbitration under the arbitration provision
in the sales contract. The trial court order denying the finance
company's motion to compel was thus reversed. Purchaser of a used truck sued the dealership, alleging fraud and breach
of implied warranties. The purchaser had signed a buyers order
which contained an arbitration clause. The trial court granted
the dealership's motion to compel arbitration. The issue before
the court was whether the transaction was one involving interstate commerce
so as to trigger application of the FAA. The court's finding that
the sale of used motor vehicles involves interstate commerce was based
on Congress's authorization of federal agencies to regulate the sale
of used motor vehicles and the United States Supreme Court's expansive
interpretation of Congress's regulatory power under the Commerce Clause.
The court therefore affirmed the trial court order compelling arbitration.
The court also held that the trial court did not err in its dismissal
of all the plaintiff's claims as such is proper where all claims are
subject to arbitration. An automobile purchaser sued the dealership alleging that the dealership
had forged the purchaser's signature on an extended service contract.
The purchaser had executed a retail purchase contract, which contained
a broad arbitration clause. The issue before the court was whether
the arbitration clause in the purchase contract was sufficiently broad
to apply to the plaintiff's fraud claim. The court held that the
parties did not agree to arbitrate the dispute at hand. The fact
that the arbitration provision mentioned service contracts was not dispositive
as the alleged forgery of the agreement was the essence of the fraud
claim, and the very existence of the service contract was in dispute.
The court affirmed the trial court order denying arbitration.
Sellers of a radio station brought a breach of contract action against
the purchaser, alleging that the purchaser had failed to make monthly
payments pursuant to a noncompete agreement. The noncompete agreement
was attached to the sales contract, and a clause within the sales contract
which recited the covenant further stated: "All appendices attached
. . . shall be deemed part of this agreement." The trial court
denied the buyer's motion to compel arbitration based on the arbitration
clause in the sales contract. The court reversed the trial court's
denial of the motion to compel arbitration. The first issue before
the court was whether the noncompete covenant was separate from the
sales contract and therefore not subject to the arbitration provision
of the sales contract. The court held that the language of the
noncompete agreement showed that the sales contract and noncompete agreements
were not separate contracts. The second issue before the court
was whether the noncompete covenant was invalid for lack of mutuality.
The plaintiffs argued that the covenant lacked mutuality because it
gave the defendant a right to action in court while requiring the plaintiffs
to arbitrate any claim of breach of the agreement. The court held
that the arbitration clause should not be invalidated for lack of mutuality
of obligation because there was consideration for the contract as a
whole flowing from one party to the other. The court noted that
the arbitration clause was one provision in a larger contract, not a
separate contract to be supported by consideration. The court
continued that, in a case involving a contract of adhesion, a superior
party's motion to compel arbitration may be denied based on doctrines
of mutuality of remedy and adhesion. The court, however, found
no evidence that the contract at hand was a contract of adhesion.
Both parties were represented by counsel and had opportunity to negotiate.
An automobile purchaser signed a retail buyer's order form which contained
an arbitration clause. The purchaser later signed a second retail
buyer's order form which contained a merger clause as well as an arbitration
clause. Both contracts included separate signature blanks for
the arbitration clause and for the other provisions. In the second
contract, the purchaser did not sign the line below the arbitration
clause. The issue before the court was whether the first contract
was part of the overall agreement between the parties or whether it
was superseded by the second contract. The court held that the merger
clause in the second contract prevented the first contract from becoming
part of the parties' agreement and barred enforcement of any previous
agreement. Furthermore, the unsigned arbitration clause in the
second contract was not enforceable simply because it was included in
the form. The purchaser of a used automobile sued the seller, alleging misrepresentation
of mileage. The plaintiff had signed a purchase agreement which
contained an arbitration provision. The trial court denied the
seller's motion to stay proceedings pending arbitration. The issue
before the court was whether the arbitration clause was enforceable,
and whether the arbitration agreement covered the dispute at hand.
The court held that the FAA applied to the transaction at hand as it
involved interstate commerce, and that the fraud claim was within the
scope of the arbitration provision. The court therefore reversed
the trial court order denying the stay. In a transaction to invest in securities, the plaintiffs signed uncompleted
applications for a SouthTrust Securities account. The plaintiffs
allegedly signed on the understanding that the investment would not
be in mutual funds, but later discovered that it was. Plaintiffs
sued SouthTrust Bank, SouthTrust Securities, and the employee of SouthTrust
Securities who handled the transaction (Bembry). The issue before
the court was whether the arbitration provision found on the reverse
side of the applications should be held unenforceable, and whether the
defendants had standing to enforce the provision. The court held
that the provision was enforceable as it was clearly not inconspicuous
and the plaintiffs were competent and literate adults. As to the
standing issue, the court held that the language of the arbitration
provision, which expressly included employees of SouthTrust Securities,
was broad enough to include Bembry. The provision, however, did
not encompass claims against SouthTrust Bank, a nonsignatory to the
account agreement. The court reversed the trial court order compelling
arbitration insofar as it related to the plaintiffs' claims against
SouthTrust Bank, but affirmed the order insofar as it related to SouthTrust
Securities and Bembry. This case involved two actions, the first in which Eastern Dredging
was a defendant/ cross-claimant and the second in which Eastern Dredging
was a plaintiff. In the first action, the trial court initially
granted Eastern Dredging's motion to compel arbitration, but Eastern
Dredging failed to begin arbitration with in the thirty days stipulated
by the trial court order. The trial court thus rescinded the stay
and held that Eastern Dredging had waived its right to arbitration by
failing to comply with the trial court's order. Eastern Dredging
then filed a second action, virtually identical to the first, against
Parliament House, the same party which Eastern Dredging had cross-claimed
against in the first action and the party against which Eastern Dredging
had sought to compel arbitration. The issue before the court was
whether Eastern Dredging waived its right to compel arbitration in the
first action, and whether the trial court in the second action properly
held that Eastern Dredging had waived its claims in that action as well.
The court concluded that Eastern Dredging's delay in commencing arbitration
caused no prejudice to the opposing parties. However, the trial
judge acted in its discretion in managing the affairs of the court.
The court went on to hold that the court in the second action properly
held that Eastern District had waived its claims against Parliament
House pursuant to its failure to comply with the trial court order in
the first action. The court remanded the case for the lower court
to determine whether sanctions were appropriate against Eastern District
for filing the second action in an attempt to avoid the trial court's
finding of waiver in the first action. Coleman, sole shareholder of the plaintiff, Micro-Fab, opened an individual
investment account with the defendant, Prudential, and at that time
signed a "client's agreement," which contained an arbitration clause
compelling arbitration "with respect to all my accounts, in which I
have an interest alone or with others...." MicroFab later opened
a separate account with Prudential, but never signed an arbitration
agreement. The accounts were totally separate. Both Coleman
and MicroFab later sued Prudential alleging fraud. The issue before
the court was whether the arbitration agreement between Prudential and
Coleman encompassed controversies arising out of the relationship between
Prudential and MicroFab. The court held that MicroFab's claims
did not arise out of Prudential's agreement with Coleman or relate to
the same transaction and that, according to the language of the agreement
between Prudential and Coleman, the parties did not intend that the
agreement encompass the relationship between Prudential and MicroFab.
The court thus affirmed the trial court's denial of Prudential's motion
to compel arbitration. An employee brought suit against his employer upon termination of employment.
The employee argued, among other things unrelated to arbitration, that
the peer review panel, to which the employee had appealed his termination,
conducted an arbitration and that its ruling was to be given "substantial
deference." The court held that the panel was an internal grievance
procedure, not a form of arbitration. A mobile home purchaser sued the mobile home manufacturer, alleging
fraud. Subsequent to the trial court judgment based upon a jury
verdict for the purchaser, the manufacturer appealed, arguing, among
other things, that the trial court erred in denying its motion to compel
arbitration. Although no arbitration agreement existed between
the purchaser and manufacturer, the manufacturer contended that the
plaintiff's claims against the manufacturer should be subject to the
broad arbitration provision in the purchase agreement between the seller
and purchaser. In affirming the trial court's order, the court
held that the manufacturer had waived its right to compel arbitration
by waiting two years after the purchaser filed his complaint to request
arbitration and by, instead of appealing the trial court's denial of
its motion to compel, defended the claim at a jury trial. An investor sued his stockbroker, alleging fraudulent inducement.
In affirming the trial court's denial of the defendant's motion to compel
arbitration, the court noted that the plaintiff's claim stemmed from
a meeting between the parties that occurred prior to the plaintiff's
signing the agreement which contained the arbitration provision, and
the claim of fraudulent inducement did not relate to the provisions
of the contract. A vehicle owner sued the corporation from which she purchased a vehicle
mechanical repair service contract, which contained a narrow arbitration
clause applying only to disputes concerning "costs." The plaintiff's
claims were for breach of contract, bad faith and fraud in connection
with the corporation's refusal to pay a claim submitted by the plaintiff.
The issue before the court was whether the clause required arbitration
of the dispute at hand. The court assumed, even though the trial
court did not make specific findings of fact, that the trial court had
found that the parties did not intend for this particular dispute to
be covered by the arbitration provision. The court held that the
trial court order was thus not clearly erroneous. A customer of an automobile dealership sued the dealership and its
salesman. The contract between the customer and the dealership,
which contained an arbitration provision, was signed only by the customer
and the dealership. The court held, however, that the customer
was compelled to arbitrate its claims against both the dealership and
the salesman as the thrust of the plaintiff's complaint was that the
salesman, as agent of the dealership, falsely represented the condition
of the purchased vehicle. A computer system purchaser sued the seller for breach of contract,
negligence and fraud. The transaction involved a "master agreement,"
which contained an arbitration clause and various attachments, plus
a handwritten agreement which did not contain an arbitration clause.
The trial court denied the seller's motion to compel arbitration.
The purchaser argued that its claims were based solely on the handwritten
agreement and were unrelated to the master agreement. The court
found that the master agreement and handwritten agreement were executed
at the same time and were related to the same transaction. Because
the plaintiff's claims arose from the master agreement, the arbitration
clause therein was held to be enforceable. The court reversed
the trial court's denial of the seller's motion to compel arbitration.
Mobile home purchasers sued the mobile home manufacturer, seller, and
seller's agent for breach of warranty. The purchase contract between
the seller and purchasers contained an arbitration clause. Not
a party to the contract, the manufacturer sought to compel arbitration
pursuant to the arbitration clause. The limited warranty received
by the purchasers from the manufacturer stated, "[manufacturer] is not
liable for any agreement or commitment made by any employee, dealer,
or agent other than those expressly set forth in this warranty."
The warranty contained no reference to the contract between the purchasers
and the seller. The trial court compelled arbitration. The
issue before the supreme court was whether the arbitration provision
in the contract between the seller and purchaser included the claims
of the purchaser against the nonsigning manufacturer. The court
reversed the trial court order and held that the arbitration agreement
between the purchasers and seller was inapplicable to the manufacturer.
The court noted that nothing within the limited arbitration agreement
between the purchasers and the seller indicated that the scope of the
provision was intended to be so broad as to include claims related to
the contract against a nonsignatory. A minority shareholder brought an action against the majority shareholder
for conversion, usurpation of corporate opportunity, and breach of fiduciary
duty. The majority shareholder moved to compel arbitration pursuant
to an arbitration clause in a 1987 contract between the two shareholders
whereby the defendant had purchased shares from the plaintiff.
The trial court denied the defendant's motion, and the court here affirmed,
holding that the arbitration provision in the purchase contract did
not cover postclosing activities of the defendant. The court stated
that the relationship between the plaintiff's claims and the contract
containing the arbitration clause was so tangential that the claims
could not reasonably have been intended by the parties to be subject
to arbitration under the clause, which required arbitration of claims
"arising out of or related to" the contract. Borrowers sued their lender and insurer for breach of contract and
fraud. The trial court granted the defendant's motion to compel
arbitration pursuant to the arbitration clause contained in the loan
agreement. The insurance policy was a separate contract from the
loan agreement and was procured by the lender, not the borrowers.
The issue before the court was whether the trial court properly compelled
arbitration of the plaintiffs' claims against the insurer. The
court held that the plaintiffs' claims against the insurer were not
subject to the arbitration provision found in the loan agreement because
the insurer was not a party to that contract and thus had no standing
to enforce the provision. The trial court compelled arbitration of the plaintiff's claims against
the plaintiff's lender. The plaintiff argued that she did not
assent to her contract with the lender and its included arbitration
clause in that she lacked capacity to contract. The court ordered
the trial court to reconsider its order compelling arbitration in light
Allied-Bruce Terminix. The plaintiffs-homeowners entered into a contract with the defendant-homebuilder
for the construction of a house. The trial court compelled arbitration
pursuant to an arbitration provision in the contract. The arbitration
provision in the contract provided that notice of arbitration "shall
be made within reasonable time after the dispute has arisen."
The defendant waited five months after the dispute arose to give notice
to the plaintiffs of its intent to enforce the arbitration provision,
and the arbitration proceedings were not actually commenced until eleven
months after the dispute arose. During that time, the defendant
filed a lien against the plaintiffs' property, initiated foreclosure
proceedings, and filed an answer and counterclaim. The plaintiffs argued
that the defendant had waived its right to compel arbitration.
The court agreed, holding that the defendant had waived its right by
its failure to give notice in accordance with the terms of the arbitration
provision and through its actions evidencing an abandonment of its right
to compel arbitration. Parties to a dispute agreed to settle claims through arbitration.
The plaintiff refused to take action to submit the claims to arbitration.
The lower court dismissed the plaintiff's action with prejudice for
failure to prosecute. Three years later, the plaintiff filed an
action for relief from the court's dismissal as well as a motion to
compel arbitration. The circuit court granted the plaintiff's
Rule 60(b) motion because the parties continued to have a "live dispute."
The court here reversed, finding that no exceptional circumstances were
shown warranting granting of a Rule 60(b) motion and that three years
was not a reasonable delay. The circuit court denied the defendants' motion to compel arbitration in a purported class action against auto dealerships concerning sales of extended service plans. All defendants appealed the circuit court order. The court dismissed the appeals as the parties were not similarly situated and the issues brought were thus not ready for review by the court.
A borrower sued her lender in an action based on two loans and four
contracts to lend money. The first two contracts predated the
lawsuit and contained no arbitration clauses. The second two contracts
were entered into after the action was filed and did contain arbitration
provisions. The trial court based its denial of the lender's motion
to compel arbitration on a finding that the lender had waived its right
to arbitrate. The court found that the lender had not waived its
right to arbitrate by acting promptly to seek arbitration only after
Alabama law was changed by the United States Supreme Court in Allied-Bruce
Terminix. The contracts at issue, however, contained no agreement
to arbitrate, and the court therefore affirmed the trial court's denial
of the lender's motion to compel arbitration. Purchasers of a mobile home sued the mobile home manufacturer, seller,
and seller's salesman, alleging breach of warranty, fraud, and negligent
installation. The trial court compelled arbitration pursuant to
an arbitration clause found on the back of the installment contract.
The contract was signed by the purchasers and the salesman in his representative
capacity. In affirming the trial court's order, the court held
that the broad language of the arbitration clause encompassed the plaintiffs'
claims and that the FAA was applicable as the transaction was one involving
interstate commerce. An automobile purchaser sued the dealership, alleging fraudulent misrepresentation.
The purchase agreement contained an arbitration clause, and the trial
court compelled arbitration pursuant to that clause. The plaintiff
argued that the defendant waived its right to arbitrate by invoking
judicial process. The court noted that even though the defendant
waited thirty-six months after the plaintiff had sued to seek to compel
arbitration and even took steps to litigate the plaintiff's claims,
the defendant could have reasonably believed that such a motion would
prove fruitless under existing law. The then-existing law was
changed and the defendant moved to compel arbitration four months after
that change. The court therefore held that the trial court was
within its discretion in granting the defendant's motion to compel arbitration.
An insured sued its insurer. Subsequent to removal and remand,
the insurer sought to compel arbitration pursuant to an arbitration
clause found in the policy. The circuit court denied the insurer's
motion. The issue before the court was whether the insurer waived
its right to arbitrate by removing the case to federal court, by attempting
to have the plaintiff's claims disposed of under ERISA, and by invoking
the arbitration clause five months after the plaintiff filed the complaint
and only after an adverse ruling in federal court. The court held
that the facts indicate an intention on the part of the defendant to
forfeit its right of arbitration in favor of judicial process and that
the plaintiff was prejudiced thereby. The court affirmed the trial
court order denying the defendant's motion to compel arbitration.
The plaintiff-physician sued a health corporation under a professional
services contract which contained an arbitration provision. The
case came before the court on order of remand from the United State
Supreme Court for further consideration in light of the holding in Allied-Bruce
Terminix. The court had initially held that the FAA was inapplicable
as the parties did not contemplate substantial interstate activity.
The issue before the court on remand was whether the arbitration clause
was enforceable under the FAA. The court found that though the
evidence was insufficient to establish that the parties contemplated
interstate commerce, the evidence was sufficient to establish that the
transaction did, in fact, involve interstate commerce. The court
held that the FAA is therefore applicable, and denied the physician's
request for writ of mandamus directing the circuit court to set aside
its order compelling arbitration. The court also held that the
arbitration clause was broad enough to encompass the physician's claims
of fraud in the inducement. A home purchaser sued to recover costs under the homeowner's warranty
contract which was transferred to the purchaser when she bought the
house. The warranty contained an arbitration clause. This
court's initial holding, which reversed the trial court's order compelling
arbitration, was vacated by the United States Supreme Court and remanded
for further consideration in light of Allied-Bruce Terminix. The
issue before the court on remand was whether the FAA requires arbitration
of the claims at issue. The court held that the trial court properly
compelled arbitration of the plaintiff's claims as the facts indicate
that the transaction involved interstate commerce. The facts supporting
the court's concluding were as follows: The insurer was a Colorado corporation,
and the plaintiff was an Alabama resident; under the warranty contract,
the plaintiff was required to send application either to Georgia or
Colorado; the insurer's district office for the state of Alabama was
in Georgia; and the insurer's warranty office was in Colorado.
The seller of a home assigned his rights under a termite bond acquired from the defendant, Terminix, to the purchasers of the house. The bond contained an arbitration clause. The purchasers sued Terminix, alleging misrepresentation and breach of contract. The court initially affirmed the trial court's denial of Terminix's motion to compel arbitration of the plaintiffs' contract claims. The case came back to the court on remand after the United State Supreme Court vacated the court's holding that the FAA did not apply and ordered that the opinion be reconsidered in light of Allied-Bruce Terminix. The issue before the court was whether the contract between the parties contained sufficient contacts with interstate commerce to bring the plaintiff's claims within the FAA. The court held that the FAA was applicable as the facts evidence connections to interstate commerce. The court then addressed the question of whether Terminix had waived its right to enforce the arbitration clause by invoking the litigation process and thereby prejudicing the plaintiffs. The fact that the Terminix did not seek to compel arbitration until seven months after the plaintiffs filed their complaint and the fact that the defendant filed requests for admissions, requests for interrogatories, and requests for production of documents, and took depositions was insufficient to create waiver. The court reversed the trial court's denial of the defendant's motion to compel arbitration. The case was remanded to the circuit court for consideration of whether the motion to stay litigation of the nonarbitable fraud and negligence claims should be granted or denied.
This is a publication of Wallace, Jordan, Ratliff & Brandt, L.L.C. and should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general information only, and you are urged to consult an attorney concerning your own situation and any specific legal questions you may have. Rules of the Supreme Court of the State of Alabama may require this publication to be designated as advertising material and require us to advise you of such designation. "No representation is made that the quality of legal services performed is greater than the quality of legal service performed by other lawyers."
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