Rel: 9/26/14
Notice: This opinion is subject to formal revision before publication in the advance
sheets of Southern Reporter. Readers are requested to notify the Reporter of Decisions,
Alabama Appellate Courts, 300 Dexter Avenue, Montgomery, Alabama 36104-3741 ((334) 229-
0649), of any typographical or other errors, in order that corrections may be made before
the opinion is printed in Southern Reporter.
SUPREME COURT OF ALABAMA
SPECIAL TERM, 2014
____________________
1121417
____________________
Eric Anderton and Jackson Key Practice Solutions, LLC
v.
The Practice-Monroeville, P.C.
Appeal from Monroe Circuit Court
(CV-11-900084)
BRYAN, Justice.
Eric Anderton and Jackson Key Practice Solutions, LLC
("Jackson Key"), appeal from the Monroe Circuit Court's order
denying their motion to compel arbitration. We reverse and
remand.
1121417
The Practice-Monroeville, P.C. ("the Practice"), is a
medical-practice group located in Monroeville. Allscripts
Healthcare, LLC ("Allscripts"), sells health-care software to
health-care providers. Allscripts is a North Carolina company
and does not have an office in Alabama. Jackson Key is a
certified "sales-and-service partner" of Allscripts, selling
and servicing Allscripts software, and Anderton is an employee
and partial owner of Jackson Key. In May 2011, the Practice
and Allscripts entered into a written contract in which the
Practice purchased health-care software called "MyWay" from
Allscripts through Jackson Key ("the contract"). Although the
contract was between the Practice and Allscripts, Jackson Key
supported the transaction. The contract provides that
"Allscripts may subcontract its obligations hereunder to a
third party or affiliate." An addendum to the contract
further states that "Allscripts and [the Practice] agree that
the Allscripts MyWay Software shall be hosted by Jackson Key[,
and] that any backup, system performance, data recovery, [and]
service levels will be the responsibility of [Jackson Key]."
The contract contains an arbitration provision, which
states, in pertinent part: "Any dispute or claim arising out
2
1121417
of, or in connection with, this Agreement shall be finally
settled by binding arbitration in Raleigh, NC, in accordance
with the then-current rules and procedures of the American
Arbitration Association ...."
The Practice became dissatisfied with the performance of
the MyWay software and unsuccessfully attempted to cancel its
contract with Allscripts. On September 12, 2011, the Practice
sued Jackson Key and Anderton, but not Allscripts, in the
circuit court. The Practice alleged that Jackson Key,
pursuant to the addendum to the contract, had undertaken sole
responsibility for "system performance" of the MyWay software
that it had implemented for the Practice. The complaint
further alleged that Jackson Key and Anderton were negligent
in establishing the system performance of that software. On
October 21, 2011, Jackson Key and Anderton moved to compel
arbitration based on the arbitration provision in the
contract.
In November 2011, Jackson Key, acting pro se, sued the
Practice in the Monroe District Court. In that action,
Jackson Key alleged that the Practice owed it money for
Microsoft Word software that Jackson Key had purchased for the
3
1121417
Practice. Following a trial, the district court entered a
judgment in favor of the Practice on March 28, 2012. Jackson
Key subsequently appealed that judgment to the Monroe Circuit
Court. Over Jackson Key and Anderton's objection, the circuit
court consolidated that appeal with the action initiated by
the Practice regarding the contract.
The Practice opposed the motion to compel arbitration in
the circuit court. The Practice argued that the circuit court
–– not the arbitrator –– should decide the threshold issue of
whether the dispute over the MyWay software is arbitrable.
The Practice then argued that the circuit court should deny
Jackson Key and Anderton's motion to compel arbitration
because, it said, the dispute was not within the scope of the
arbitration provision. Additionally, the Practice argued that
Jackson Key and Anderton had waived any right to arbitrate by
substantially invoking the litigation process in the district
court.1 On July 31, 2013, the circuit court denied the motion
1
Although most of the Practice's argument below regarding
the waiver issue was in reference to Jackson Key, at times the
Practice referred to the actions in the district court by the
circuit court "defendants," i.e., both Jackson Key and
Anderton. Thus, it appears that the Practice argued that both
Jackson Key and Anderton waived their alleged right to
arbitrate through their conduct in the district court.
4
1121417
to compel, without stating a reason. Jackson Key and Anderton
appealed pursuant to Rule 4(d), Ala. R. App. P., which
authorizes an appeal from an order either granting or denying
a motion to compel arbitration.
Standard of Review
"'This Court's review of an order
granting or denying a motion to compel
arbitration is de novo. ...'
"United Wisconsin Life Ins. Co. v. Tankersley, 880
So. 2d 385, 389 (Ala. 2003). Furthermore:
"'"A motion to compel arbitration
is analogous to a motion for
summary judgment. TranSouth Fin.
Corp. v. Bell, 739 So. 2d 1110,
1114 (Ala. 1999). The party
seeking to compel arbitration has
the burden of proving the
existence of a contract calling
for arbitration and proving that
that contract evidences a
transaction affecting interstate
commerce. Id. 'After a motion to
compel arbitration has been made
and supported, the burden is on
the non-movant to present
evidence that the supposed
arbitration agreement is not
valid or does not apply to the
dispute in question.'"
"'Fleetwood Enters., Inc. v. Bruno, 784 So.
2d 277, 280 (Ala. 2000) (quoting Jim Burke
Auto., Inc. v. Beavers, 674 So. 2d 1260,
1265 n. 1 (Ala. 1995) (emphasis omitted)).'
5
1121417
"Vann v. First Cmty. Credit Corp., 834 So. 2d 751,
753 (Ala. 2002)."
Cartwright v. Maitland, 30 So. 3d 405, 408–09 (Ala. 2009).
Discussion
There is no dispute that a contract calling for
arbitration exists in this case and that that contract
evidences a transaction affecting interstate commerce. In the
circuit court, the parties disputed whether Jackson Key and
Anderton had waived any right they may have had to arbitration
and whether the Practice's claim falls within the scope of the
arbitration provision. The parties also disputed whether the
circuit court or the arbitrator should decide the issue of
arbitrability. The circuit court did not give a reason for
denying Jackson Key and Anderton's motion to compel
arbitration. We will examine the disputed issues to determine
whether the circuit court could have properly denied the
motion to compel.
I. Issues Relating to Waiver
We first address whether Jackson Key and Anderton waived
any right they may have to arbitration by substantially
invoking the litigation process in Jackson Key's action in the
district court. As a threshold matter, we address whether the
6
1121417
waiver issue is one for the circuit court or the arbitrator to
decide. This Court has stated that "the issue whether a party
has waived the right to arbitration by its conduct during
litigation is a question for the court and not the
arbitrator." Ocwen Loan Servicing, LLC v. Washington, 939 So.
2d 6, 14 (Ala. 2006).2 However, the general rule that the
court and not the arbitrator decides whether a party has
waived the right to arbitration has an exception: issues
typically decided by the court will be decided by the
arbitrator instead when there is "'clear and unmistakable
evidence'" of such an agreement in the arbitration provision.
First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944
(1995) (quoting AT&T Techs., Inc. v. Communications Workers of
America, 475 U.S. 643, 649 (1986) (alterations omitted)); see
also Marie v. Allied Home Mortg. Corp., 402 F.3d 1, 14 (1st
2
In Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79,
84–85 (2002), the United States Supreme Court stated that "the
presumption is that the arbitrator should decide
'allegation[s] of waiver, delay, or a like defense to
arbitrability.'" (Quoting Moses H. Cone Mem'l Hosp. v. Mercury
Constr. Corp., 460 U.S. 1, 24-25 (1983).) However, this
Court and some other courts have concluded that Howsam did not
intend to disturb the traditional rule that the issue whether
a party has waived the right to arbitration by its conduct
during litigation is a question for the court and not the
arbitrator. See Ocwen, 939 So. 2d at 12-14 (thoroughly
discussing the matter).
7
1121417
Cir. 2005) (citing First Options). In this case, Jackson Key
and Anderton argue in their reply brief that the arbitration
provision, by incorporating the rules and procedures of the
American Arbitration Association ("the AAA"), clearly and
unmistakably indicates that the arbitrator, not the court,
should decide the waiver issue. However, Jackson Key and
Anderton first make that argument in their reply brief. "We
do not permit new matters to be raised for the first time in
a reply brief." Birmingham Bd. of Educ. v. Boyd, 877 So. 2d
592, 594 (Ala. 2003).
Although Jackson Key and Anderton argue in their
principal brief that the relevant incorporated AAA rule
provides for the arbitrator rather than the court to decide
whether the dispute falls within the scope of the arbitration
provision, see Part II, infra, they did not make a similar
argument about waiver until they filed their reply brief.
Further, the record on appeal does not indicate that Jackson
Key and Anderton made such an argument about waiver before the
circuit court. Rather, in a filing submitted below, they
"agree[d] that the issue of waiver is for the Court to decide,
but dispute[d] that there has been any waiver." "This Court
8
1121417
cannot consider arguments advanced for the purpose of
reversing the judgment of a trial court when those arguments
were never presented to the trial court for consideration
...." State Farm Mut. Auto. Ins. Co. v. Motley, 909 So. 2d
806, 821 (Ala. 2005). For these reasons, we do not further
discuss whether the AAA rule incorporated into the arbitration
provision clearly and unmistakably indicates that the
arbitrator instead of the court should decide the waiver
issue.
We next discuss the merits of the waiver issue.
"It is well settled under Alabama law that a
party may waive its right to arbitrate a dispute if
it substantially invokes the litigation process and
thereby substantially prejudices the party opposing
arbitration. Whether a party's participation in an
action amounts to an enforceable waiver of its right
to arbitrate depends on whether the participation
bespeaks an intention to abandon the right in favor
of the judicial process, and, if so, whether the
opposing party would be prejudiced by a subsequent
order requiring it to submit to arbitration. No
rigid rule exists for determining what constitutes
a waiver of the right to arbitrate; the
determination as to whether there has been a waiver
must, instead, be based on the particular facts of
each case."
Companion Life Ins. Co. v. Whitesell Mfg., Inc., 670 So. 2d
897, 899 (Ala. 1995).
9
1121417
"In order to demonstrate that the right to
arbitrate a dispute has been waived, the party
opposing arbitration must demonstrate both (1) that
the party seeking arbitration substantially invoked
the litigation process, and (2) that the party
opposing arbitration would be substantially
prejudiced by an order requiring it to submit to
arbitration."
SouthTrust Bank v. Bowen, 959 So. 2d 624, 633 (Ala. 2006)
(some emphasis omitted). "Because there is a strong federal
policy favoring arbitration, waiver of the right to compel
arbitration is not lightly inferred, and the party seeking to
prove waiver has a 'heavy burden.'" Aurora Healthcare, Inc.
v. Ramsey, 83 So. 3d 495, 500 (Ala. 2011) (quoting Paragon
Ltd. v. Boles, 987 So. 2d 561, 564 (Ala. 2007)).
"Additionally, as this Court has consistently noted: '[T]here
is a presumption against a court's finding that a party has
waived the right to compel arbitration.'" Bowen, 959 So. 2d
at 633 (quoting Eastern Dredging & Constr., Inc. v. Parliament
House, L.L.C., 698 So. 2d 102, 103 (Ala. 1997)).
Before the circuit court, the Practice argued that
Jackson Key and Anderton had waived any right to arbitration
by litigating the district court action seeking reimbursement
for the Practice's purchase of Microsoft Word programs. As an
initial matter, we note that Jackson Key was the only
10
1121417
plaintiff in the district court action; Anderton was not a
party in that action. Clearly, Anderton did not waive any
right he may have to arbitrate. After being sued in the
circuit court, Anderton's first action was to file, with
Jackson Key, a motion to compel arbitration. Merely filing a
motion to compel arbitration does not substantially invoke the
litigation process. See Ex parte Merrill Lynch, Pierce,
Fenner & Smith, Inc., 494 So. 2d 1, 3 (Ala. 1986) (concluding
that there was no waiver when the defendant merely filed a
motion to compel arbitration); and First Family Fin. Servs.
v. Jackson, 786 So. 2d 1121, 1128 (Ala. 2000) (same); see also
Kennamer v. Ford Motor Credit Co., [Ms. 1120689, February 28,
2014] ___ So. 3d ___ (Ala. 2014) (concluding that there was no
waiver of the right to arbitration when a car dealership
merely filed an answer and a motion to compel arbitration).
We also conclude that Jackson Key did not waive any right
it may have to arbitrate the MyWay dispute by litigating the
district court action. In the district court, Jackson Key
alleged that the Practice owed it money for Microsoft Word
software Jackson Key had sold to the Practice. At trial in
the district court, Albert Key, an employee of Jackson Key,
11
1121417
testified that, while Jackson Key was providing training to
the Practice's personnel on the MyWay software, the Practice
asked Jackson Key to purchase and install 10 copies of
Microsoft Word. Key testified that Jackson Key purchased and
installed the Microsoft software but that the Practice failed
to reimburse Jackson Key for the software. Key further stated
that the Microsoft Word transaction was separate from the
contract in which the Practice purchased the MyWay software
from Allscripts. The record does not contain an arbitration
provision addressing the purchase of the Microsoft software.
The district court action presented a distinct issue from
the Practice's claim in the circuit court, i.e., that Jackson
Key and Anderton were negligent in establishing the system
performance of the MyWay software the Practice had purchased
from Allscripts. "Only prior litigation of the same legal and
factual issues as those the party now wants to arbitrate
results in waiver of the right to arbitrate." Larry E.
Edmonson, Domke on Commercial Arbitration § 23:6 (3d ed.
2014). See also Doctor's Assocs., Inc. v. Distajo, 107 F.3d
126, 133 (2d Cir. 1997) (stating that precedent in that
circuit "support[s] the view that only prior litigation of the
12
1121417
same legal and factual issues as those the party now wants to
arbitrate results in waiver of the right to arbitrate" and
that "[o]ther circuits seem to agree that waiver can only
occur when a party has previously litigated the same claims it
now seeks to arbitrate"); Gingiss Int'l, Inc. v. Bormet, 58
F.3d 328, 330-32 (7th Cir. 1995) (stating that a franchisor
who brought an unlawful-detainer action against its franchisee
did not waive its right to arbitrate other claims brought by
the franchisee because the two suits involved different
issues); and Subway Equip. Leasing Corp. v. Forte, 169 F.3d
324, 328 (5th Cir. 1999) ("[A] party only invokes the judicial
process to the extent it litigates a specific claim it
subsequently seeks to arbitrate."). Compare Distajo, Gingiss,
and Subway with Kennamer, supra (concluding that, in an appeal
from a district court judgment to a circuit court, a credit
company had waived its right to arbitrate an issue after
litigating the same issue in the district court). Jackson
Key's conduct in pursuing its claim in the district court did
not constitute a waiver of any right it may have to arbitrate
a distinct claim brought against it in the circuit court.
Jackson Key's litigating its claim regarding Microsoft Word in
13
1121417
the district court did not indicate an "intention to abandon,"
Companion Life, 670 So. 2d at 899, its alleged right to
arbitrate the claim in the circuit court regarding the system
performance of the MyWay software.
Because Jackson Key and Anderton did not substantially
invoke the litigation process, we need not address the element
of substantial prejudice. We conclude that the circuit court
could not have properly denied the motion to compel
arbitration on the ground that Jackson Key and Anderton had
waived any right to arbitration they may have.
II. Issues Relating to the Scope of the Arbitration
Provision
These issues concerns whether Jackson Key and Anderton,
nonsignatories to the contract containing the arbitration
provision, can compel arbitration of the dispute over the
MyWay software. "[G]enerally, a nonsignatory cannot compel
arbitration." Ex parte Stripling, 694 So. 2d 1281, 1283-84
(Ala. 1997). However, there are exceptions to this general
rule. Jackson Key and Anderton argue that they satisfy one of
those exceptions –– the equitable-estoppel exception –– which
allows a nonsignatory to enforce an arbitration provision
under certain circumstances. See Ex parte Stamey, 776 So. 2d
14
1121417
85, 89 (Ala. 2000) (allowing nonsignatories to enforce an
arbitration provision if "(1) ... the scope of the arbitration
agreement signed by the party resisting arbitration [is] broad
enough to encompass those claims made by that party against
nonsignatories, or [if] those claims [are] 'intimately founded
in and intertwined with' the claims made by the party
resisting arbitration against an entity that is a party to the
contract, and (2) ... the description of the parties subject
to the arbitration agreement [is] not ... so restrictive as to
preclude arbitration by the party seeking it" (emphasis
omitted)).
As a threshold issue, Jackson Key and Anderton argue that
the arbitrator –– not the circuit court –– should decide
whether the arbitration provision may be used to compel
arbitration of the dispute here. This Court has explained
the threshold issue of "who decides" the issue of
"arbitrability":
"In ruling on a motion to stay judicial
proceedings following a request for arbitration, the
court is required to decide matters of 'substantive
arbitrability,' that is, (1) whether a valid
agreement to arbitrate exists and, if so, (2)
whether the specific dispute falls within the scope
of that agreement. Dean Witter[ Reynolds, Inc. v.
McDonald], 758 So. 2d [539,] 542 [(Ala. 1999)].
15
1121417
'Procedural arbitrability,' on the other hand,
involves questions that grow out of the dispute and
bear on its final disposition, e.g., defenses such
as notice, laches, estoppel, and other similar
compliance defenses; such questions are for an
arbitrator to decide. See Howsam v. Dean Witter
Reynolds, Inc., 537 U.S. 79, 84, 123 S. Ct. 588, 154
L. Ed. 2d 491 (2002) ('"'procedural' questions which
grow out of the dispute and bear on its final
disposition are presumptively not for the judge, but
for an arbitrator, to decide"'); John Wiley & Sons,
Inc. v. Livingston, 376 U.S. 543, 84 S. Ct. 909, 11
L. Ed. 2d 898 (1964)(holding that an arbitrator
should decide whether the steps of a grievance
procedure were completed, where those steps were
prerequisites to arbitration)."
Brasfield & Gorrie, L.L.C. v. Soho Partners, L.L.C., 35 So.
3d 601, 604-05 (Ala. 2009). To clarify, we note that the
United States Supreme Court has referred to questions of
"substantive arbitrability" as simply "questions of
arbitrability" and questions of "procedural arbitrability" as
"procedural questions." Howsam, 537 U.S. at 83. A court
decides issues of substantive arbitrability "[u]nless the
parties clearly and unmistakably provide otherwise." AT&T,
475 U.S. at 649.
The question whether an arbitration provision may be used
to compel arbitration of a dispute between a nonsignatory and
a signatory is a question of substantive arbitrability (or,
under the Supreme Court's terminology, simply
16
1121417
"arbitrability"). In First Options, 514 U.S. at 943-46, the
Supreme Court analyzed the question whether an arbitration
agreement binds a nonsignatory as a question of arbitrability.
See also Howsam, 537 U.S. at 84 (noting that in First Options
the Supreme Court held that the question "whether the
arbitration contract bound parties who did not sign the
agreement" is a question of arbitrability for a court to
decide). More recently, the United States Court of Appeals
for the Eighth Circuit succinctly addressed the threshold
issue before us. In Eckert/Wordell Architects, Inc. v. FJM
Properties of Willmar, LLC, 756 F.3d 1098 (8th Cir. 2014), a
nonsignatory sought to compel arbitration of a dispute with a
signatory, as in this case. The court stated:
"Whether a particular arbitration provision may
be used to compel arbitration between a signatory
and a nonsignatory is a threshold question of
arbitrability. See Howsam v. Dean Witter Reynolds,
Inc., 537 U.S. 79, 84–85, 123 S. Ct. 588, 154 L. Ed.
2d 491 (2002) (delineating potentially dispositive
threshold issues between 'questions of
arbitrability' and 'procedural questions'). We
presume threshold questions of arbitrability are for
a court to decide, unless there is clear and
unmistakable evidence the parties intended to commit
questions of arbitrability to an arbitrator. Id. at
83, 123 S. Ct. 588; Express Scripts, Inc. v. Aegon
Direct Mktg. Servs., Inc., 516 F.3d 695, 701 (8th
Cir. 2008). We have previously held the
incorporation of the AAA Rules into a contract
17
1121417
requiring arbitration to be a clear and unmistakable
indication the parties intended for the arbitrator
to decide threshold questions of arbitrability. ...
Eckert Wordell's drafting of the architectural
services contract here to incorporate the AAA Rules
requires the same result."
756 F.3d at 1100. See also Knowles v. Community Loans of
America, Inc., (No. 12-0464-WS-B, Nov. 20, 2012) (S.D. Ala.
2012) (not reported in F. Supp. 2d) ("A question as to
'whether the arbitration contract bound parties who did not
sign the agreement' is one that 'raises a "question of
arbitrability" for a court to decide.'" (quoting Howsam, 537
U.S. at 84)).
Like the Eighth Circuit, we have held "that an
arbitration provision that incorporates rules that provide for
the arbitrator to decide issues of arbitrability clearly and
unmistakably evidences the parties' intent to arbitrate the
scope of the arbitration provision." CitiFinancial Corp. v.
Peoples, 973 So. 2d 332, 340 (Ala. 2007). See also Joe Hudson
Collision Ctr. v. Dymond, 40 So. 3d 704, 710 (Ala. 2009)
(concluding that an arbitrator decides issues of substantive
arbitrability when the arbitration provision incorporated the
same AAA rule as in the present case); and Wells Fargo Bank,
N.A. v. Chapman, 90 So. 3d 774, 783 (Ala. Civ. App. 2012)
18
1121417
(same). The relevant AAA rule incorporated by the arbitration
provision provides: "The arbitrator shall have the power to
rule on his or her own jurisdiction, including any objections
with respect to the existence, scope or validity of the
arbitration agreement." Thus, although the question whether
an arbitration provision may be used to compel arbitration
between a signatory and a nonsignatory is a threshold question
of arbitrability usually decided by the court, here that
question has been delegated to the arbitrator. The
arbitrator, not the court, must decide that threshold issue.
Conclusion
Jackson Key and Anderton did not waive any right to
arbitration they may have. The question whether Jackson Key
and Anderton, as nonsignatories to the contract containing the
arbitration provision, can compel arbitration of the dispute
over the MyWay software is a question for the arbitrator, not
the court, pursuant to the arbitration provision in the
contract. The circuit court erred in denying Jackson Key and
Anderton's motion to compel arbitration. We therefore reverse
the order and remand the case for further proceedings
consistent with this opinion.
19
1121417
REVERSED AND REMANDED.
Stuart, Bolin, Main, and Wise, JJ., concur.
Shaw, J., concurs in part and concurs in the result.
Moore, C.J., and Parker and Murdock, JJ., dissent.
20
1121417
SHAW, Justice (concurring in part and concurring in the
result).
I concur as to Part I of the main opinion. As to Part
II, I concur in the result.
The Practice-Monroeville, P.C. ("the Practice"), agreed
that "any dispute or claim arising out of, or in connection
with," the contract it entered into with Allscripts
Healthcare, LLC ("Allscripts"), would be settled in
arbitration under the rules of the American Arbitration
Association. As part of that agreement, the Practice also
agreed that issues of arbitrability, which include whether a
nonsignatory to the contract can enforce the arbitration
provision included in the agreement, would be decided by an
arbitrator. See Eckert/Wordell Architects, Inc. v. FJM Props.
of Willmar, LLC, 756 F.3d 1098 (8th Cir. 2014).
Eric Anderton and Jackson Key Practice Solutions, LLC,
argue that their dispute with the Practice is a "dispute or
claim" under the Practice's contract with Allscripts. The
court must first perform a necessary "gate-keeping function"
before compelling arbitration: it must determine whether the
party resisting arbitration has agreed in its contract to
21
1121417
allow the arbitrator to decide whether a nonsignatory to the
contract can enforce its arbitration provision. Here, it is
the function of the court to determine whether the Practice
agreed that an arbitrator could decide whether Anderton and
Jackson Key could take their claims against the Practice to
arbitration. The Practice has the freedom to enter into a
contract that calls for the arbitrator, instead of the trial
court, to make this decision.
22
1121417
MURDOCK, Justice (dissenting).
It is axiomatic that, before a party to a dispute must
submit to the views of some arbitrator as to either the merits
of the dispute or whether the subject of the dispute falls
within the scope of disputes to be decided on the merits by
the arbitrator, a court must first determine whether that
arbitration agreement is in fact one that governs as between
that party and the opposing party to the dispute. By logic
and of necessity, only a court can play this gate-keeping
function.3 Were it otherwise, then, by logical extension, any
party to any dispute could insist on appearing before an
arbitrator, and the opposing party, even one who in fact has
never signed as a party to an arbitration agreement and who
3
See, e.g., Smith v. Mark Dodge, Inc., 934 So. 2d 375,
(Ala. 2006). Smith v. Mark Dodge was a case postured just
like the present case, i.e., where a nonsignatory sought to
force a signatory into arbitration under the terms of an
arbitration agreement containing a clause expressing an
"agree[ment] to arbitrate the arbitrability of any
controversy." This Court made the decision whether the
arbitration agreement governed as between two parties on the
basis of the same equitable-estoppel theory asserted in the
present case. 934 So. 2d at 379, 380-84. A separate dispute
as to whether the subject matter of the dispute fell within
the intended scope of the arbitration agreement was sent to
the arbitrator for decision under the same "arbitrate-the-
arbitrability" clause. Id. at 378-80.
23
1121417
otherwise is not properly governed by any arbitration
agreement under applicable legal principles, nonetheless will
be subjected to the decision of an arbitrator as to whether
this is in fact true or not. Until such a condition is
determined to be true, however, no party is, or should be,
under any obligation to appear before, or to subject himself
or herself to the authority of, some arbitrator, rather than
a court.4
4
If, as suggested by the main opinion, the recent decision
of the United States Court of Appeals for the Eighth Circuit
in Eckert/Wordell Architects, Inc. v. FJM Properties of
Willmar, LLC, 756 F.3d 1098, 1098 (8th Cir. 2014), is to the
contrary, then, in all logic and necessity, I respectfully
submit that it was decided in error. In point of fact, the
opinion in Eckert offers no meaningful exploration of the
issue before us. In a relatively short paragraph, a three-
judge panel limits the analysis in that case to the narrow
issue whether, as a matter of contractual form, the reference
to American Arbitration Association rules in an arbitration
agreement would satisfy the requirement announced by the
Supreme Court in Howsam v. Dean Witter Reynolds, Inc., 537
U.S. 79, 83 (2002), that there must be "a clear and
unmistakable indication" in the written contract containing
the arbitration provision that the arbitrator is to decide the
scope of the arbitration agreement. After identifying this as
the issue to be addressed by it, the panel cites a single
Eighth Circuit case as precedent for an affirmative answer and
then ends the opinion. 756 F.3d at 1100.
At least one law review article has highlighted why there
may be confusion on this issue: the use of the term
"arbitrability" for two separate ideas. As the author
explains:
24
1121417
"Whether a party is required to submit a
particular dispute to arbitration may contain within
it two completely distinct legal issues. First, a
party may be objecting to arbitration on the ground
that no valid, enforceable arbitration agreement
exists between the parties. Second, and
alternatively, a party may be arguing that the
particular dispute does not fall within the scope of
the arbitration agreement. The distinction between
these two objections to arbitration is critical,
because each is governed by its own separate set of
legal rules that govern 'who,' meaning which forum
-- the court or the arbitrator -- is to adjudicate
such objection to arbitration.
"Courts repeatedly recognize that the issue of
who has the jurisdiction to decide the 'question of
arbitrability' is a threshold issue. However, the
use of the term 'arbitrability' in the framing of
this question has introduced and is the source of
substantial confusion. This is because the term
'arbitrability,' as used by courts and commentators
alike, can refer to both of the two above-noted very
different objections to arbitration."
Steven H. Reisberg, The Rules Governing Who Decides
Jurisdictional Issues: First Options v. Kaplan Revisited, 20
Am. Rev. Int'l Arb. 159, 159 (2009).
One federal court not confused about the issue has put it
this way: "The existence of an agreement to arbitrate is
paramount. ... Once the existence of an agreement is
established, courts turn to the question of the 'scope' of the
arbitration agreement, unless the parties have 'clearly and
unmistakeably' delegated the issue of 'scope' to an
arbitrator." Sleeper Farms v. Agway, Inc., 211 F. Supp. 2d
197, 200 (D. Me. 2002) aff'd, 506 F.3d 98 (1st Cir. 2007).
"Thus, if the Court finds that an agreement to arbitrate
exists between the parties, it will leave the second
arbitrability question to an arbitrator." 211 F. Supp. 2d at
200 (emphasis added).
25
1121417
On an even more fundamental level, however, I would add
that today's case is a corollary and natural successor to this
Court's decision in Auto Owners Insurance, Inc. v. Blackmon
Insurance Agency, Inc., 99 So. 3d 1193 (Ala. 2012). The
comments in my dissent in that case, 99 So. 2d at 1199-1203,
are equally applicable to the similar question in this case,
and I incorporate them herein by this reference.
As I concluded in Auto Owners, this Court's approach to
"traditional" arbitrability cases, i.e., those concerning the
substantive scope of an arbitration clause, is "paradoxical."
99 So. 3d at 1201. Specifically, I considered the typical
case, by which I meant a case where the arbitration clause
does not describe a universe of types of disputes whose merits
are to be arbitrated that is any narrower than the universe of
types of disputes within which the arbitrator is to decide if
the particular dispute is of a type whose merits are to be
arbitrated. 99 So. 3d at 1201-02. In such cases, there
logically is no room for decision by the arbitrator -- or, as
I put it in Auto Owners, we "meet ourselves coming" -- on the
threshold question whether the arbitration agreement in
question governs as to the subject matter of the dispute (the
26
1121417
question in Auto Owners). It is the court that of necessity
must answer the threshold question of whether the dispute
falls within the universe of cases as to which the arbitrator
is to decide the question of arbitrability because, until the
court does so, and does so in the affirmative, it has no basis
to send the case to the arbitrator for any purpose. Once it
does so, however, the parameters of the universe of cases in
question have been decided and there logically is no room left
for the arbitrator to define this universe any differently.
Id. at 1201, 1203. "Paradoxically," if the arbitrator were to
take a more narrow view of the universe of cases subject to
arbitration on the merits so as, in turn, to find that the
particular dispute before the arbitrator does not fall within
that universe, then the arbitrator will have made a decision
that conflicts with the view of that universe held by the
court that sent the case to the arbitrator and of necessity
deprives the arbitrator of the authority to make that decision
in the first place. The same would be true in all cases in
which the threshold question is whether the arbitration
27
1121417
agreement is one that governs as between the parties in
question –- the question in the present case.5
5
Since this Court's decision in Auto Owners, it has come
to my attention that the views I expressed therein are
embodied in writings by other commentators and courts, some of
whom frame their criticism of the subject approach to
"arbitrability" in terms of a "circularity" of reasoning.
"[A]ttempts to find a source of arbitral power in
the rules of arbitral institutions alone must be
circular. For example, the [Interstate Commerce
Commission's] practice of referring cases to
arbitration once the Court of Arbitration is 'prima
facie satisfied' that an arbitration agreement 'may
exist' is undoubtedly 'a useful administrative line
for an institution's bureaucracy, but such a
standard in itself says nothing about the true
presence of consent.' Whatever may be the 'true
construction' of the institution's rules 'as they
stand without reference to any particular system of
law,' no rational regime of contract law could
countenance that an arbitrator arrogate to himself
the power to determine his own jurisdiction in the
absence of a valid agreement giving him the
authority to do so. A functional analysis is
possible in terms of our desire not to see a matter
entrusted to arbitrators whose own self-interest is
likely to skew the result. But the prevention of
bootstrapping alone provides an adequate account."
Alan Scott Rau, The Arbitrability Question Itself, 10 Am. Rev.
Int'l Arb. 287, 304-06 (1999) (footnotes omitted). See
Sphere Drake Ins. Ltd. v. All Am. Ins. Co., 256 F.3d 587, 591
(7th Cir. 2001) ("[A] person who has not consented ... can't
be packed off to a private forum. Courts have jurisdiction to
determine their jurisdiction not only out of necessity (how
else would jurisdictional disputes be resolved?) but also
because their authority depends on statutes rather than the
parties' permission. Arbitrators lack a comparable authority
to determine their own authority because there is a
28
1121417
non-circular alternative (the judiciary) and because the
parties do control the existence and limits of an arbitrator's
power. No contract, no power."). See also, e.g., China
Minmetals Materials Imp. & Exp. Co. v. Chi Mei Corp., 334 F.3d
274, 288 (3d Cir. 2003) (reasoning that "a contract cannot
give an arbitral body any power, much less the power to
determine its own jurisdiction, if the parties never entered
into it"). Cf. Matterhorn, Inc. v. NCR Corp., 763 F.2d 866,
869 (7th Cir. 1985) ("There would however be a severe problem
of bootstrapping if a party to a contract could be forced to
arbitrate the question whether he had been coerced or deceived
into agreeing to arbitrate disputes arising under the
contract.").
29