Opinion · Supreme Court of Alabama
Ex Parte Perry
Ex Parte Perry, 744 So. 2d 859 (Ala. 1999)
- Type
- Opinion
- Court
- Supreme Court of Alabama
- Jurisdiction
- Alabama
- Date
- 1999-09-24
- Topic
- general
How later courts describe this case
- holding that a claim of fraudulent inducement to enter the contract would be resolved by an arbitrator
- finding that arbitration is the proper forum for challenges to the validity of the contract as a whole
- “It is the dilemma of the box within a box or, in the case of arbitration, the authority as to the decision as to the authority to make the decision.”
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UpLaw has not yet analyzed Ex Parte Perry. The absence of a flag is not a finding that it is good law.
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EX PARTE PERRY,744 So.2d 859(Ala. 1999)
Ex parte HELEN PERRY.
Re: Helen Perry v. Hyundai Motor America, Inc., et al.
No. 1970370.
Supreme Court of Alabama.
September 24, 1999.
Page 860
PETITION FOR WRIT OF MANDAMUSPage 861
William H. King III and William H. Morrow of Lightfoot, Franklin White, L.L.C., Birmingham, for respondent Hyundai Motor America, Inc.
John Martin Galese and Jeffrey L. Ingram of John Martin Galese, P.A., Birmingham, for respondent Jim Burke Motors, Inc.
Bruce J. McKee of Hare, Wynn, Newell Newton, Birmingham, for amicus curiae Alabama Trial Lawyers Ass'n, in support of the petitioner.
Mrs. Perry alleges that Jim Burke Motors, an automobile dealership, hurried her through the purchase of her new Hyundai automobile and did not give her an opportunity to read the purchase-agreement form before she signed it. That purchase-agreement form contained an alternative-dispute-resolution agreement that required the purchaser to arbitrate "all disputes and controversies" with the seller.
Mrs. Perry began experiencing electrical problems with the car shortly after she purchased it. She contends that the dealership was unable to repair the electrical problems, and that its failure to repair resulted in her suing Jim Burke Motors (the dealership) and Hyundai (the manufacturer). She alleged fraud and misrepresentation in the sale of the car; suppression of material facts regarding the car; negligence; wanton or willful misconduct on the part of employees of Jim Burke Motors, both during the sale of the car and during her subsequent attempts to get the car serviced and/or replaced; breach of warranty (her breach-of-warranty claim included a claim under the Magnuson-Moss Act,15 U.S.C. § 2301et seq.); violation of Ala. Code 1975, §8-20A-1et seq. (the "Alabama Lemon Law"); and the tort of outrage. Mrs. Perry claims that when she filed her action she was not aware of any arbitration agreement, but she later amended her complaint to allege fraud, misrepresentation, and/or suppression of material fact in regard to the formation of the arbitration agreement.
Jim Burke Motors and Hyundai Motors filed motions to compel arbitration. Judge Jack Carl held a hearing on the motions and then granted them.
Mrs. Perry challenges the validity of the arbitration clause because of the manner in which she signed the purchase contract. She alleges that she was rushed through the contracting process and that the arbitration agreement was entered into during the contracting process and, therefore, that the arbitration agreement is unenforceable.
This Court has stated many times that the writ of mandamus is an extraordinary remedy and that one seeking it must show "(1) a clear legal right in the petitioner to the order sought; (2) an imperative duty upon the respondent to perform, accompanied by a refusal to do so; (3) the lack of another adequate remedy; and (4) properly invoked jurisdiction of the court."Ex parte Alfab, Inc.,586 So.2d 889,891(Ala. 1991); see also,Martin v. Loeb Co.,349 So.2d 9(Ala. 1977);Ex parte Houston County,435 So.2d 1268(Ala. 1983);Ex parte Johnson,638 So.2d 772(Ala. 1994). "Mandamus is an extraordinary remedy and will lie to compel the exercise of discretion, but not to compel its exercise in a particular manner except where there is an abuse of discretion."State v. Cannon,369 So.2d 32,33(Ala. 1979).
The arbitration provision in Mrs. Perry's contract was styled "Dispute Resolution Agreement." It stated:
"Buyer hereby acknowledges and agrees that all disputes and controversies of every kind and nature between Buyer and Jim Burke Motors, Inc. arising out of or in connection with the purchase of this vehicle will be resolved by arbitration in accordance with the procedure set forth on the reverse side of the buyer's order."
Mrs. Perry seeks to avoid the arbitration agreement on the basis that the dealer did not adequately disclose to her the existence of that agreement.
Mrs. Perry argues that she was confused regarding her agreement to arbitrate. She alleges that her confusion regarding the arbitration agreement caused her to be confused as to the entire contract. The record indicates that Mrs. Perry was capable of reading and inquiring into the contents of the contract before shePage 863signed the agreement, and that she signed it voluntarily. The contract language was clear. The trial court correctly decided against Mrs. Perry on the question whether her confusion was so great as to entitle her to avoid the agreement. Mrs. Perry did not present in support of her fraud allegation evidence directed solely at the arbitration agreement. Therefore, as a matter of law, Mrs. Perry does not have a claim for fraud directed solely at the arbitration clause.PrimaPaint Corp. v. Flood Conklin Mfg Co.,388 U.S. 395(1967);Jones v.Merrill Lynch, Pierce, Fenner Smith, Inc.,604 So.2d 332(Ala. 1991).
Mrs. Perry, relying onAllstar Homes, Inc. v. Waters,711 So.2d 924(Ala. 1997), argues that when a party contends that an arbitration agreement was not formed "knowingly, willingly, and voluntarily," the question whether it was is to be answered by a jury and that no presumption favoring arbitration should be applied. Mrs. Perry contends that she presented the trial court substantial evidence indicating that she did not knowingly, willingly, and voluntarily agree to arbitrate any disputes arising from her purchase of the automobile. She claims that the trial court erroneously ignored this evidence and not only refused to grant a jury trial of the issues raised, but resolved all doubts in favor of the existence of the arbitration agreement. Mrs. Perry argues that the trial court's actions are contrary to the law announced by this Court inAllstar Homes.Allstar Homescontains language that could be construed to mean what Mrs. Perry argues. However, we disagree with that construction and offer a clarification of that part of this Court's 1997 opinion inAllstar Homesthat would lead a party to believe that merely alleging fraudulent inducement as to the arbitration clause in an agreement allows that party to avoid the arbitration agreement. A party must provide substantial evidence of fraud in the inducement, particularly related to the arbitration clause, in order to avoid arbitration.
The majority's analysis inAllstar Homesconfused the question of the validity of an arbitration clause and the question of fraud in the inducement of a contract containing an arbitration clause. The United States Supreme Court distinguished between these two questions in decisions rendered before this Court decidedAllstar Homes. We explain our perception of the United States Supreme Court's analysis and conclusions inPrima Paint, supra, andFirst Options of Chicago, Inc. v. Kaplan,514 U.S. 938(1995).
InPrima Paint, the Supreme Court held that in cases governed by the Federal Arbitration Act, 9 U.S.C. § 1-16, issues concerning fraud in the inducement of a contract in general should be decided by an arbitrator, while claims of fraud in the inducement of an arbitration agreement in particular should be decided by the trial court. Mrs. Perry presented insufficient evidence of fraud committed by Hyundai or Jim Burke Motors with respect to inducing her to agree to the specific clause requiring arbitration of disputes. She simply alleges that she did not take the time to read the entire contract and that Jim Burke Motors was under a duty to specifically point out the arbitration provision to her.
First, we note that one has no duty to disclose a specific provision of a contract, even if it deals with alternative dispute resolution. Second, Mrs. Perry was responsible for reading the contract, to which she committed herself when she signed. If she felt hurried, she could have slowed the process down or could have refused to sign the contract until she had had time to read it in its entirety. At the bottom of the "Buyer's Order" appears this precautionary statement: "Caution: it is important that you read this buyer's order thoroughly before you sign it."Page 864
To support its decision inAllstar, this Court expanded too broadly the rationale of the Supreme Court inFirst Options. The Supreme Court stated inFirst Options:
"The first question — the standard of review applied to an arbitrator's decision about arbitrability — is a narrow one. To understand just how narrow, consider three types of disagreement present in this case. First, the Kaplans and First Options disagree about whether the Kaplans are personally liable for MKI's debt to First Options. That disagreement makes up themeritsof the dispute. Second, they disagree about whether they agreed to arbitrate the merits. That disagreement is about thearbitrabilityof the dispute. Third, they disagree aboutwho shouldhave the primary power to decide the second matter. Does that power belong primarily to the arbitrators (because the court reviews their arbitrability decision deferentially) or to the court (because the court makes up its mind about arbitrability independently)? We consider here only this third question."514 U.S. at 942,115 S.Ct. 1920. The question inFirst Optionswas a narrow one, and it is not the question the Supreme Court addressed inPrima Paint.
The facts ofPrima Paintare distinguishable from the facts inFirstOptions. InFirst Options, the Court held that because one of the parties objecting to arbitration had not signed the arbitration portion of the contract, that party could not be compelled to arbitrate the dispute. Like Mrs. Perry's case,Prima Paintinvolved an allegation that the contract itself was not valid; in that case, Prima Paint Corporation claimed it had been fraudulently induced into signing the contract containing the arbitration clause. However, because the contract stated that all issues relating to disputes concerning the contract and the arbitration thereof were to be resolved through arbitration, the Supreme Court determined that arbitration was the appropriate forum for the dispute. Moreover, that Court's decision inFirst Optionssupports our conclusion in the present case. The Supreme Court stated:
"[A]rbitration is simply a matter of contract between the parties; it is a way to resolve those disputes — but only those disputes — that the parties have agreed to submit to arbitration."514 U.S. at 943,115 S.Ct. 1920.
In the present case, the contract contained an arbitration clause, which stated that all issues arising out of a dispute as to the contract itself were to be resolved by arbitration. Mrs. Perry signed this contract, and now, based on all the facts alleged in her complaint, she has alleged fraud in the inducement of the contract.1Consequently, because the arbitration clause specifies that disputes concerning the validity of the contract are to be resolved through arbitration, the appropriate forum for deciding questions regarding the validity of the arbitration clause is arbitration rather than a lawsuit.
Mrs. Perry has not presented to this Court a question like the question presented to the Supreme Court inFirst Options. That question was whether the parties had agreed to arbitrate the issue of "First Optionsarbitrability."2There is no statement in the contract between Mrs. Perry and Jim Burke Motors as to who decides the issue of "FirstOptionsarbitrability" —Page 865an arbitrator or a court. Neither Jim Burke Motors nor Hyundai has alleged that the contract contained such a provision. Therefore, the question presented inFirst Optionsdoes not arise in our review of Mrs. Perry's claim that arbitration is not appropriate. An issue like that addressed by the Supreme Court inFirst Optionswas before this Court inAllstarbecause, in that case, Allstar claimed its arbitration clause gave the arbitrator the duty to decide the question of "First Optionsarbitrability." However, this Court held against Allstar, stating that the contract lacked "clear and unmistakable evidence"3indicating that the parties had agreed to having an arbitrator determine "First Optionsarbitrability."
This Court's opinion inAllstarseems to confuse the two analyses — (1) which forum decides "First Optionsarbitrability" and (2) which forum determines whether there was fraud in the inducement. Those two questions involve very different analyses, both in timing and in standard of review. TheAllstarCourt misread the Supreme Court's analysis inFirst Options. InFirst Options, the Supreme Court stated:
"Courts should not assume that the parties agreed to arbitrate arbitrability unless there is `clea[r] and unmistakabl[e]' evidence that they did so."514 U.S. at 944,115 S.Ct. 1920.Allstarmisconstrued this statement to mean that even when the parties have validly entered a contract and have agreed to the provisions contained in the contract, including an arbitration clause, the court is to decide the question whether the issue of fraud in the inducement of the contract is subject to arbitration.
We do not disagree with the holding ofAllstar, because we believe in that case the Court correctly held that there was not "clear and unmistakable evidence" of an agreement to arbitrate "FirstOptionsarbitrability." However, language inAllstarshould be clarified. Instead of readingFirst Optionsnarrowly, as the Supreme Court stated it should be read, theAllstarCourt readPrima Paintnarrowly, relying on a federal case from the United States Court of Appeals for the Ninth Circuit,Three Valleys Municipal Water District v. E.F. Hutton Co.,925 F.2d 1136,1140-41(9th Cir. 1991) (quoted with approval inShearson Lehman Bros., Inc. v. Crisp,646 So.2d 613,616(Ala. 1994)).Three Valleysinvolved an arbitration agreement between a governmental entity and a securities corporation. The appellate court in that case addressed the question whether the individual that signed the contract containing the arbitration agreement was actually authorized to sign such a document for the governmental entity. Therefore, the question inThree Valleyswas whether there ever existed an agreement to arbitrate in the first place. TheThree Valleyscourt stated: "[A] party who contests the making of a contract containing an arbitration provision cannot be compelled to arbitrate the threshold issue of theexistenceof an agreement to arbitrate. Only a court can make that decision."Three Valleys, 925 F.2d at 1140-41. In other words, a trial court must determine the question whether the contract containing the arbitration agreement is void ab initio or merely voidable. In the case of a voidable contract, the arbitrator makes the decision. Neither the existence of the arbitration agreement nor the question whether the contract is void ab initio is an issue in Mrs. Perry's case, and neither was an issue inPrima PaintorAllstar.4Page 866Therefore, this Court should not have relied uponThree Valleysto justify the language of theAllstaropinion.
The language of theAllstarCourt, which confused a claim of fraud in the inducement of the contract in general and a claim alleging the nonexistence of an agreement to arbitrate, also seemed to merge the issue of the scope of the arbitration clause and the question of "First Optionsarbitrability," and it applied the "clear and unmistakable evidence" standard ofFirst Optionsto both issues, by defining the question of the enforcement of arbitration agreements as equivalent to the question of who determines "First Optionsarbitrability:"
"This view ofPrima Paintis the better means of reconciling the United States Supreme Court's `rule of severability,' which allows the enforcement of an arbitration agreement within an otherwise unenforceable contract, with § 3 and § 4 of the [Federal Arbitration Act], which require the court to rule on disputes concerning the making or enforcement of arbitration agreements, i.e., the `arbitrability' of claims, before such claims can be submitted to arbitration."
711 So.2d at 927. The narrow question of "First Optionsarbitrability," as admitted by the Supreme Court inFirst Options, is not the same as the question whether there exist "disputes concerning the making or enforcement of arbitration agreements." TheAllstarCourt apparently confused these two concepts, because it agreed with Justice Black's dissent inPrima Paint, which argued that the severability principle was unworkable. A dissent from an opinion of the United States Supreme Court cannot be more binding upon this Court than the majority opinion to which that dissenting opinion was directed. Therefore, one must conclude that the language quoted above fromAllstaris incorrect.5
A proper understanding of the application ofPrima PaintandFirst Optionsis as follows:6When there is evidencePage 867indicating that the parties entered into a contract providing for the arbitration of "First Optionsarbitrability," the trial court will determine whether there is "clear and unmistakable evidence" that the parties agreed to have an arbitrator decide that issue.7If there is "clear and unmistakable evidence" that the parties agreed to have an arbitrator decide "First Optionsarbitrability," then the arbitrator shall determine all issues involving arbitrability, e.g., waiver, enforceability, validity, scope of the arbitration agreement, etc. If the arbitrator determines that the trial court has the responsibility for determining an issue like scope or waiver, then the trial court will decide that issue. At the same time, the trial court will determine whether the party alleging fraud in the inducement solely of the arbitration agreement has presented sufficient evidence of such fraud. Otherwise, any issue arising from the formation of the contract, including fraud in the inducement of the contract or any provision contained within the contract (other than the arbitration provision) should be resolved through arbitration.
On the other hand, if the contract contains no evidence of an agreement to arbitrate "First Optionsarbitrability," or if the trial judge determines that the evidence of such an agreement is not "clear and unmistakable," then the trial judge follows traditional contract principles in determining whether there exists an arbitration agreement and whether the contract involves interstate commerce, to determine whether to compel arbitration. The trial court's analysis would include the analysis ofPrima Paintif fraud in the inducement of the arbitration clause in particular is alleged and that allegation is supported by substantial evidence.
This Court's opinion inAllstarsubtly undermined the United States Supreme Court's ruling inPrima Paintby redefining what kind of "arbitrability" the Supreme Court referred to inFirst Options. InAllstar, this Court stated:
"However, the Court [inFirst Options] emphasized that thepreliminaryquestion of arbitrability, i.e., whether the parties ever actually agreed to the arbitration clause itself, thereby relinquishing their right to a court's decision about the merits of a dispute, isnotsubject to a presumption favoring arbitration."Allstar, 711 So.2d at 928. This language inAllstarimpliedly reversed the principle of allowing arbitration of the issue of fraud in the inducement of the contract, as stated inPrima Paint. The question of "First Optionsarbitrability," as explained above, cannot be defined as "whether the parties ever actually agreed to the arbitration clause itself."
This Court, inInvestment Management Research, Inc. v. Hamilton,727 So.2d 71(Ala. 1999), further clarified the rule as to who — the court or the arbitratorPage 868— is to decide issues concerning arbitration when a party alleges fraud in the inducement. The Court stated:
"[W]hen a claim of fraud in the inducement is directed toward the arbitration clause itself, the issue is adjudicated by the court. On the other hand, when a claim of fraud in the inducement is directed toward the entire contract, as in this case, the issue is subject to arbitration."Id. at 78. Because Mrs. Perry claimed fraud in the inducement of the "entire contract," this issue must be resolved under the terms of the arbitration agreement contained in the contract. The resolution should follow the principle stated inPrima Paintand not the principle stated inFirst Options.
Mrs. Perry also contends that, underNorthcom, Ltd. v. James,694 So.2d 1329(Ala. 1997), the trial court's order compelling her to arbitrate her claims must be set aside on the ground of unconscionability and lack of mutuality of remedy. TheNorthcomlanguage she relies on is dictum. This Court rejected that dictum regarding the doctrine of unconscionability and mutuality of remedy, inEx parte McNaughton,728 So.2d 592(Ala. 1998). See alsoEx parte Napier,723 So.2d 49(Ala. 1998), andAmerican General Finance, Inc.v. Manley,729 So.2d 260(Ala. 1998).
Mrs. Perry's claim of fraud in the inducement of the arbitration clause in particular appears to be an ad hoc argument intended to avoid the arbitration agreement. In reality, Mrs. Perry challenges the contract as a whole, not just the arbitration agreement; therefore, arbitration is the appropriate forum for resolving her challenge. Mrs. Perry signed the contract, and her allegations that she was rushed through the purchase process are insufficient to prevent the conclusion that her signature was not induced by fraud in the inducement of the contract in general. More importantly, and analyzing the case under the rationale ofPrima Paint, one must conclude that her allegations are insufficient to prevent the conclusion that her signature was not induced by fraud in the inducement of the arbitration clause in particular.
Mrs. Perry also claims that the title of the arbitration provision in the contract, "Alternative Dispute Resolution," was a misleading characterization. We disagree. Binding arbitration is a form of alternative dispute resolution. In fact, the phrase "Alternative Dispute Resolution" actually provides more information to the reader than the word "arbitration." It lets the reader know that if a dispute arises, the contract may require an alternative means of resolving that dispute. Nevertheless, it was Mrs. Perry's responsibility to read the entire contract before she signed it, not just the subtitles of the paragraphs or provisions. We cannot accept the proposition that the phrase "Alternative Dispute Resolution" somehow fraudulently led Mrs. Perry not to read the contract.
Mrs. Perry has shown no abuse of discretion on the part of the Jefferson Circuit Court. The trial judge correctly granted the motions of Hyundai and Jim Burke Motors to compel arbitration
WRIT DENIED.
Maddox and See, JJ., concur.
Houston and Brown, JJ., concur in the result.
Cook, Lyons, and Johnstone, JJ., dissent.
Likewise, I cannot agree with Mrs. Perry's contention that the trial court's order is due to be set aside underNorthcom, Ltd. v. James,694 So.2d 1329(Ala. 1997), on the ground of unconscionability and lack of mutuality of remedy. SeeEx parte McNaughton,728 So.2d 592(Ala. 1998), rejecting theNorthcomdictum regarding the doctrine of unconscionability/mutuality of remedy. See alsoEx parte Napier723 So.2d 49(Ala. 1998), andAmerican General Finance, Inc. v. Manley,729 So.2d 260(Ala. 1998).
I also note that the record does not make it clear whether Mrs. Perry's claim under the Magnuson-Moss Warranty-Federal Trade Commission Improvement Act,15 U.S.C. § 1501et seq., is based on allegations of a breach of a written warranty, a breach of an unwritten warranty, or both. InSouthern Energy Homes, Inc. v. Lee,732 So.2d 994(Ala. 1999), this Court adopted the rationale of the United States district court inWilson v. Waverlee Homes, Inc.,954 F. Supp. 1530(M.D. Ala. 1997), affirmed, 127 F.3d 40 (11th Cir. 1997) (table), andBoyd v. Homesof Legend, Inc.,981 F. Supp. 1423(M.D. Ala. 1997). UnderWilsonandBoyd, Mrs. Perry's Magnuson-Moss Act claim may not be arbitrable; however, under this Court's stringent standard for reviewing mandamus petitions, I cannot hold, based on this record, that the trial court clearly erred in ordering Mrs. Perry to arbitrate her Magnuson-Moss Act claim.
What then does Alabama law say about generally applicable contract defenses that can be applied by analogy to Perry's claim that the defendants had a duty to point out the arbitration clause? The closest analogy I can find in Alabama contract law isPage 870the rule dealing with enforceability of a contractual waiver of a right to trial by jury. InThe Mall, Inc. v. Robbins,412 So.2d 1197(Ala. 1982), this Court, followingGaylord Department Stores of Alabama,Inc. v. Stephens,404 So.2d 586(Ala. 1981), listed three factors a court should consider in determining whether to enforce such a waiver: "(1) whether the waiver is buried deep in a long contract; (2) whether the bargaining power of the parties is equal; and (3) whether the waiver was intelligently and knowingly made." 412 So.2d at 1199. This Court inRobbinsthen upheld a contractual provision entitled "Waiver of Trial By Jury: Tenant Not to Counterclaim"; that provision had been entered into between two businessmen. This Court observed:
"Since the section is titled so as to call attention to the waiver of jury trial in the lease, the waiver is not inconspicuously buried deep in the contract."Id.
I have found only two cases in which this Court has dealt with the issue whether a contractual provision that waives the right to trial by jury is enforceable. Those cases strike me as dealing with a form of unconscionability, a defense available under the Supreme Court's construction of9 U.S.C. § 2inAllied-Bruce. Further, the holding of those two cases could not be suspect on the ground that they might have been motivated by a desire to frustrate enforcement of the FAA — they were decided long before the current litigious environment surrounding arbitration. I do not believe9 U.S.C. § 2preempts, in arbitration cases, principles of Alabama contract law strictly construing, but not forbidding, agreements in contracts that waive the right to a jury trial, based on Alabama public policy highly favoring jury trials.
Turning to Perry's claims, I am troubled by the not-too-subtle avoidance of the word "arbitration" in the boldface heading of the two portions of the "Buyer's Order" dealing with the subject. The phrases "Dispute Resolution Agreement" and "Dispute Resolution Process" head the two portions of the Buyer's Order dealing with arbitration. Would we uphold a contractual waiver of the right to trial by jury if it were captioned in similarly amorphous terms? Should we require more to protect a party from giving uninformed consent to a trial before a circuit judge, sitting without a jury, than we require for consent to have one's claims decided by an arbitrator? The main opinion describes the phrase "alternative dispute resolution" as more informative than the word "arbitration." However, the phrase "alternative dispute resolution" can describe nonbinding mediation, which, of course, does not result in a waiver of the right to trial by a jury, while arbitration is inconsistent with adjudication by a jury.
We are prohibited byCasarottoand the FAA from treating arbitration as a disfavored stepchild hidden in the back when company comes. I would apply to contracting parties who agree to arbitrate, the same standard that Alabama law applies to contracting parties who agree to a jury-trial waiver. If arbitration is to be the remedy agreed upon by contract, then the word "arbitration" should appear in a heading of the paragraph or provision in which the agreement or requirement to arbitrate is set out, or otherwise called attention to in a conspicuous manner. I would treat the use of the euphemism "alternative dispute resolution" as the equivalent of burying the arbitration provision in the contract, and I would remand this case for an evidentiary hearing dealing with the remaining standards set forth inGaylord.
I respectfully dissent.
Cook and Johnstone, JJ., concur.
First, I dissent for the reason stated by Justice Lyons in his dissent, which I join.
Second, the contract documents themselves constructively acknowledge arbitration to be an unfit forum, inasmuch as they reserve unto the dealership and its assigns the right to sue the plaintiff-petitioner in a court of law if she fails to make her car payments on time. We should not relegate the plaintiff-petitioner to an unfit forum. See my special concurrence inPatrick Home Center, Inc. v. Karr,730 So.2d 1171(Ala. 1999), and my dissent inEx parte Smith,736 So.2d 604(Ala. 1999).
Third and finally, the plaintiff-petitioner bases one of her claims on the Magnuson-Moss Act,15 U.S.C. § 2301et seq., which saves the plaintiff-petitioner's right to litigate in court from the requirements of the Federal Arbitration Act.Wilson v. Waverlee Homes, Inc.,954 F. Supp. 1530,1537-40(M.D. Ala. 1997),aff'd, 127 F.3d 40 (11th Cir. 1997) (table);Southern Energy Homes, Inc. v. Lee,732 So.2d 994(Ala. 1999). Thus, even absent Justice Lyons's concerns in his dissent and the constructive acknowledgement by the contract documents of the unfitness of arbitration as a forum, the claim under the Magnuson-Moss Act should not be relegated to arbitration.Id.
For the foregoing reasons, I respectfully submit that we should issue a writ of mandamus directing the trial judge to vacate his order granting the motions to compel arbitration.
- We have already determined, supra, that, as a matter of law, the trial court correctly determined that Mrs. Perry's allegation of fraud in the inducement of the arbitration clause, in particular, was invalid. See alsoJones v. Merrill Lynch, Pierce,Fenner Smith, Inc., supra, regardingad hocallegations of fraud in the inducement of an arbitration agreement. ↩
- We use the term "First Optionsarbitrability" to avoid the confusion we believe occurred inAllstarwhen it dealt with this same issue. Today, we clarify what was meant by the Supreme Court's use of the term "arbitrability" inFirst Options. ↩
- The evidentiary standard of "clear and unmistakable evidence" was adopted by the Supreme Court inFirst Optionsas the standard for determining whether the parties had agreed to arbitrate the "First Optionsarbitrability" question. The Supreme Court explained why: "A party often might not focus upon that question or upon the significance of having arbitrators decide the scope of their own powers."First Options,514 U.S. at 945(quoted inUnited Brotherhood of Carpenters Joiners of America,Local No. 1780 v. Desert Place, Inc.,94 F.3d 1308,1311(9th Cir. 1996)). ↩
- TheThree Valleyscourt, in a footnote to the sentence quoted above, made it clear thatPrima Paintdid not deal with the question addressed byThree Valleys:
"Shearson argues that this holding has been rejected by the majority inPrima Paint. Shearson notes that Justice Black in hisPrima Paintdissent made a similar argument with respect to the defense of fraudulent inducement, and it was rejected by the majority.388 U.S. at 407,87 S.Ct. at 1808. (Black, J., dissenting). But here Shearson seeks to applyPrima Paintone step further to a case where the plaintiffs contend that the parties have given the arbitrator no authority to hearanydispute. ThePrima Paintmajority did not address this question."
Three Valleys, 925 F.2d at 1141, n. 4. ↩ - The confusion of theAllstarCourt is understandable when one considers the terminology used. InFirst Options, the Supreme Court uses the term "arbitrability" in a very narrow context. Taking the term at face value and outside of that context, it would seem that the Supreme Court inFirst Optionsmay have overruledPrima Paint. However, to obtain the correct perspective, we must look at the term in light of the narrow context ofFirst Options.514 U.S. at 942. Only then can we understand the reversal of the presumption in favor of arbitration that the Supreme Court imposed inFirst Options. It is the dilemma of the box within a box or, in the case of arbitration, the authority as to the decision as to the authority to make the decision.
TheFirst Optionspresumption against arbitration and its accompanying requirement that there be "clear and unmistakable evidence" of an agreement to arbitrate arbitrability apply only in the context of a contract provision giving the decision of "arbitrability" to an arbitrator, a decision traditionally reserved to the courts. Such a presumption applies only to the narrow context addressed inFirst Options, a context that is not present in Mrs. Perry's case. ↩ - This Court clarifiedAllstarto some extent inInvestment ManagementResearch, Inc, v. Hamilton,727 So.2d 71(Ala. 1999):
"InFirst Options, the only document containing an arbitration provision was the one signed by MKI; the documents signed by the Kaplans did not contain an arbitration clause. Under the facts inFirst Options, where the contract between the parties did not address or decide who would decide the question of arbitrability, the dispute as to whether the Kaplans' individual claims were subject to arbitration was one for a court to decide.
"The facts of this present case, however, place it within the application of the principles announced inPrimaPaint. Hamilton did not assert a claim of fraud in the inducement as to the arbitration clause; rather, Hamilton challenged the IMR customer agreement as having been fraudulently induced. In other words, Hamilton did not contend that the execution of the arbitration provision itself (i.e., apart from the execution of the other provisions of the customer agreement) was induced by fraud."
727 So.2d at 77-78. ↩ - The United States Court of Appeals for the Eleventh Circuit has adopted the Fifth Circuit's test for determining this question:
"InChastain v. Robinson-Humphrey Co., [957 F.2d 851(11th Cir. 1992)], this Court applied the former Fifth Circuit's two-component test for determining whether the arbitrability question should first be litigated before the district court. The party seeking to avoid arbitration must unequivocally deny that an agreement to arbitrate was reached and must offer `some evidence' to substantiate the denial.Chastain, 957 F.2d at 854 (citingT R Enters. v.Continental Grain Co.,613 F.2d 1272,1278(5th Cir. 1980))."
Wheat, First Securities, Inc. v. Green,993 F.2d 814,817(11th Cir. 1993). ↩ - By historical development of the law, opposing parties must use different methods to obtain appellate review of trial court rulings on motions to compel arbitration. If the motion be denied, the movant may appeal. If the motion be granted, the dissatisfied party is relegated to a petition for writ of mandamus as the only method of review. Therefore, for this particular species of mandamus, a requirement that the petitioner, to prevail, must demonstrate an abuse of discretion by the trial judge would violate the Due Process Clauses of both the United States Constitution and the Alabama Constitution of 1901, the Equal Protection Clause of the United States Constitution, and the provisions of the Alabama Constitution in effect guaranteeing equal protection. Thus, in reviewing a trial court ruling on a motion to compel arbitration at the instance ofeither party, the standard of review should be simply whether the trial judge erred on a factual or legal issue to the substantial prejudice of the party seeking review. Of course, fact findings by the trial judge on any factual issues properly for the trial judge's determination would be accorded such presumptions of correctness as ordinarily attend the particular kind or kinds of fact findings. ↩