Rel: December 16, 2022
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,
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SUPREME COURT OF ALABAMA
OCTOBER TERM, 2022-2023
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1210120
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Communications Unlimited Contracting Services, Inc.
v.
Steve Clanton
Appeal from Jefferson Circuit Court
(CV-20-903926)
BOLIN, Justice.
Communications Unlimited Contracting Services, Inc. ("CUI"),
appeals from a judgment of the Jefferson Circuit Court granting a motion
filed by Steve Clanton to remand for clarification an arbitration award
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issued by Judicial Arbitration and Mediation Services, Inc. ("JAMS"). We
reverse the judgment and remand the case.
Facts and Procedural History
Clanton and Martin Rocha had known each other for a number of
years before the events giving rise to this litigation. Clanton had formerly
worked for Rocha in Athens, Georgia installing cable systems on college
campuses, and Clanton and Rocha had remained in contact with each
other over the years. Rocha went on to found CUI, a Florida corporation
with its principal place of business in Homewood, Alabama. CUI has been
in business for more than 25 years and is a provider of cable-installation
services. Rocha is the sole owner of CUI.
In 2009, following Hurricane Ike, Clanton became involved in the
restoration industry. Clanton earned certifications in various areas of the
restoration industry and, in 2018, formed Steven Clanton, LLC, d/b/a SCI
Restoration Services, LLC ("SCI"), a Georgia limited-liability company
with its principal place of business in Jacksonville, North Carolina. SCI
quickly became successful, primarily providing storm-restoration
services, including water-mitigation services, mold-mitigation services,
and roofing repair, for residential and commercial customers.
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In March 2019, Clanton contacted Rocha about the possibility of
Rocha's becoming involved in SCI. Rocha traveled to North Carolina and
spent time with Clanton and Luke Woodruff, Clanton's bank
representative, to study SCI and the restoration industry. Subsequently,
Clanton traveled to Birmingham to meet with Rocha and Joseph Miller,
CUI's president, to discuss a joint business venture. Clanton had
Woodruff submit bank statements and spreadsheets, which showed that
SCI had accounts receivable and contracts representing $18.7 million.
Within a few days, the parties had agreed to a nonbinding letter of intent.
Over the course of the next couple weeks, Clanton, Rocha and their
representatives renegotiated the terms of the nonbinding letter of intent.
On April 1, 2019, CUI and Clanton signed a revised nonbinding
letter of intent. That letter of intent contemplated that the parties would
form SCI Restorations, L.L.C., which would purchase all the assets of SCI
by paying to Clanton $2 million and 75% of the accounts receivable
collected each month. That letter of intent also provided that that CUI
would own 51% of SCI Restorations and SCI would own 49% of SCI
Restorations.
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In April 2019, SCI registered to do business in Alabama. Clanton
and SCI moved into CUI's offices in Alabama and began expanding
operations to the Alabama market. CUI issued Clanton an American
Express credit card to pay for SCI's expenses, and Clanton started using
CUI employees to conduct administrative and marketing work for SCI.
On May 30, 2019, Andy Key, CUI's accountant, who had been
reviewing SCI's financial information that had been provided by Clanton,
issued a financial statement for SCI. The financial statement for SCI
showed that, as of March 31, 2019, SCI had total assets of $6,757,216,
which included $620,449 in cash; $2,388,194 in accounts receivable for
completed jobs; $2,790,723 in "costs and estimated earnings in excess of
billings" for jobs in progress; and $940,050 in vehicles, equipment, and
personal property. Not included in the total assets listed in the financial
statement were contracts that Clanton represented had been signed,
representing $3.3 million in expected income for jobs that had not yet
been started and for jobs in progress for which a portion of the work had
not yet been started.
In June 2019, SCI began working numerous jobs in the Alabama
market. At that time, CUI and Clanton decided not to form SCI
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Restorations for the purpose of purchasing SCI. Rather, they decided that
CUI would purchase a 50% interest in SCI directly from Clanton. Clanton
and CUI entered into a purchase agreement and assignment effective
July 1, 2019, whereby Clanton agreed to sell 50% of his interest in SCI to
CUI. Section 1.2 of the purchase agreement provided that CUI was to
transfer to Clanton 100% ownership interest in a house owned by Rocha
located in Hoover; that Clanton was to receive moneys collected on
certain accounts receivable held by SCI totaling approximately $2.4
million, conditioned upon SCI having at least $400,000 in cash on hand;
that Clanton was to receive any cash on hand from SCI above $200,000
as of the effective date of the agreement; that CUI was to pay Clanton
$200,000; and that Clanton was to receive a salary of $150,000 per year
from SCI.
Disputes between CUI and Clanton soon arose regarding CUI's
purchase of a 50% interest in SCI. Clanton claimed that the Hoover house
had not been transferred to him and that he never received the moneys
payable to him under the purchase agreement, specifically the moneys
collected on SCI's accounts receivable and any cash on hand in excess of
$200,000 as of the effective date of the purchase agreement. Clanton
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contended that he had fulfilled his obligations under the purchase
agreement by selling 50% of SCI to CUI. Clanton, after becoming "fed
up" with CUI's not fulfilling its obligations under the purchase
agreement, emailed Rocha on October 23, 2019, expressing his desire to
"unwind" the purchase agreement.
The dispute between Clanton and CUI arising from CUI's purchase
of a 50% interest in SCI was ultimately presented to arbitration before a
JAMS arbitrator. CUI sought approximately $969,000 that it alleged that
it had invested in SCI and the fair-market value of a 50% interest in SCI,
which it valued at $3,865,935. Clanton sought the fair-market value of
the house located in Hoover, which the parties agreed was valued at
$765,000; $2,388,194 in moneys allegedly owed from SCI's accounts
receivable; and $550,000, which represented the cash on hand above
$200,000 available to SCI on the effective date of the purchase
agreement. Following a five-day arbitration proceeding, the JAMS
arbitrator, on August 18, 2020, entered an arbitration award, awarding
CUI $889,443 and awarding Clanton $840,000. In reaching the
arbitration award, the arbitrator made it clear that she was resolving
only the monetary claims between the parties arising from their failed
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contractual business arrangement, stating: "I do note that the decision to
unwind was made by Clanton unilaterally" and "I further note that both
parties now seek a proper accounting. Both CUI and Clanton have raised
the issues of who currently owes what to the other party to this
Arbitration. My job as Arbitrator is to rule on the parties' various claims
for monetary relief." The arbitrator made no finding regarding whether
any ownership interest CUI had in SCI should revert to Clanton or
whether Clanton owned SCI outright. The arbitrator also did not purport
to dissolve SCI.
Following the issuance of the arbitration award, CUI, on August 28,
2020, commenced a statutory dissolution action in the Superior Court of
Walton County, Georgia, seeking dissolution of SCI ("the dissolution
action").1 In commencing the dissolution action, CUI noted that, as a
result of the purchase agreement and assignment, CUI held a 50%
interest in SCI.
After the commencement of the dissolution action, Clanton, on
September 1, 2020, submitted a request for clarification of the arbitration
1The dissolution action was brought in Georgia because, as noted
earlier, SCI is a Georgia limited-liability company.
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award to JAMS, asking that the arbitrator issue a ruling on "the parties'
interest, or lack thereof, in [SCI]." On September 3, 2020, JAMS
responded that "the Arbitrator's jurisdiction is limited to timely requests
for correction pursuant to JAMS Streamlined Arbitration Rule 19(i),"
that Clanton's request did not fall into that category, that therefore
JAMS had no jurisdiction to consider Clanton's request, and that the
arbitration proceeding was closed and would remain closed. On
November 11, 2020, CUI filed in the Jefferson Circuit Court an
application for an order confirming the arbitration award.
Clanton filed a motion to dismiss the dissolution action. While that
motion was pending, Clanton, on August 5, 2021, again submitted a
request for clarification to JAMS. Clanton attached to the second request
for clarification a proposed order specifically requiring that the arbitrator
make certain new rulings, including, among other things, that "[a]ll
ownership interests in [SCI] reverted to Respondent Steve Clanton," that
"[t]he Parties' Purchase Agreement and Assignment were rendered null
and void," and that "Mr. Clanton was awarded ownership of the [Hoover
house] ... based on the equities of the case." On August 16, 2021, JAMS
rejected the second request for clarification, again stating that it had no
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jurisdiction to consider the issues raised in Clanton's second request for
clarification and that the issues raised in the request should be addressed
by a court.
On September 1, 2021, the Georgia court presiding over the
dissolution action entered an order denying Clanton's motion to dismiss
that action. The Georgia court rejected Clanton's argument that the
arbitration award estopped or precluded CUI from pursuing the
dissolution action, stating:
"[T]he arbitration award nowhere makes any finding
regarding 'unwinding the deal,' nor on the ownership of SCI.
To the contrary, the arbitrator did order CUI to pay to Clanton
the 'main consideration' for its ownership interest in SCI,
which the Court finds is inconsistent with the transaction
having been 'unwound.' The Court finds no ambiguity in the
award as regards ownership of SCI. Because the arbitrator
did not decide the ownership of SCI, collateral estoppel or
preclusion does not apply."
Also on September 1, 2021, the Georgia court entered an order denying a
motion to stay the dissolution action that Clanton had filed during his
efforts to get the JAMS arbitrator to clarify the arbitration award. The
Georgia court reiterated that it found "no ambiguity in the award
requiring clarification" and that "there is no issue of ownership of SCI
involved in any arbitration." The Georgia court, citing 9 U.S.C. § 12, a
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part of the Federal Arbitration Act ("the FAA"), 9 U.S.C. § 1 et seq.,
concluded that "the 'clarification' Clanton seeks, considering what he
would ask the arbitrator to declare, would be in the nature of a
modification of the award, and the time to seek a modification has long
since run."
On September 9, 2021, Clanton filed in the Jefferson Circuit Court
his answer to CUI's application for an order confirming the arbitration
award and a motion for clarification of the arbitration award, in which
he requested that the circuit court either clarify the award or remand the
award to the arbitrator for clarification. October 11, 2021, CUI filed its
response to Clanton's motion for clarification, arguing that JAMS had
already twice declined Clanton's requests for clarification of the
arbitration award; that the arbitration award is not ambiguous in what
it addressed (the monetary claims), as the Georgia court presiding over
the dissolution action had already held; and that, because the ownership
issue had not been addressed by the arbitrator, adding a ruling on that
issue would represent, and require, a modification, not a "clarification,"
of the arbitration award.
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On October 12, 2021, the circuit court entered an order styled
"Order Allowing a Clarification of the Arbitrator's Award" and directed
the parties to submit proposed orders to allow submission of an
additional request for clarification to the arbitrator. On October 15, 2021,
the parties submitted the proposed orders as directed by the circuit court.
CUI again took the position that no clarification was needed and that
Clanton was seeking an improper and untimely modification of the
arbitration award. Clanton's proposed order submitted to the circuit
court again illustrated that Clanton sought what he called a "global
clarification" and a declaration as to the parties' respective ownership
interests in SCI. On that same day, the circuit court entered an order
remanding the arbitration award to JAMS for clarification concerning
the parties' ownership interests in SCI. CUI appealed.
Standard of Review
This appeal presents a question of law -- namely, whether the
circuit court erred in remanding the arbitration award to JAMS for a
"clarification" -- which this Court reviews de novo. Ex parte Alabama
Rivers Alliance, 165 So. 3d 597 (Ala. 2014).
Discussion
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CUI argues on appeal that the circuit court erred in remanding the
arbitration award to JAMS for a "clarification" because, it says, Clanton
seeks an untimely modification of the award that is prohibited by the
FAA.
"Judicial review of arbitration awards is 'narrowly limited,' and the
FAA presumes that arbitration awards will be confirmed." Gianelli
Money Purchase Plan & Trust v. ADM Inv. Servs., Inc., 146 F.3d 1309,
1312 (11th Cir. 1998) (quoting Davis v. Prudential Sec., Inc., 59 F.3d
1186, 1190 (11th Cir. 1995)); Maxus, Inc. v. Sciacca, 598 So. 2d 1376, 1380
(Ala. 1992) (stating that "the role of the courts in reviewing the
arbitration award is limited"). It is well established that, "[a]bsent a
timely motion to vacate [or modify], in most cases' the confirmation of an
arbitration award is a summary proceeding that makes what is already
a final arbitration award a judgment of the court.' " Domino Grp. Inc. v.
Charlie Parker Mem'l Found., 985 F.2d 417, 420 (8th Cir. 1993) (quoting
Florasynth, Inc. v. Pickholz, 750 F.2d 171, 176 (2d Cir. 1984)).
The FAA provides that "[n]otice of a motion to … modify ... an award
must be served upon the adverse party or his attorney within three
months after the award is filed or delivered." 9 U.S.C. § 12. The three-
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month period is "not subject to extension." Barclays Cap., Inc. v. Hache,
No. 16 Civ. 315 (LGS), July 12, 2016 (S.D.N.Y. 2016) (not reported in
Federal Supplement). Once the three-month period for filing a motion to
vacate or modify has expired, a subsequent attempt to vacate or modify
an arbitration award cannot generally be made, even in opposition to a
later motion to confirm the award. Cullen v. Paine, Webber, Jackson &
Curtis, Inc., 863 F.2d 851, 853-854 (11th Cir. 1989). After the three-
month period has expired, the successful party has a right to obtain
confirmation of the award in a summary proceeding. Florasynth, Inc. v.
Pickholz, 750 F.2d at 175; see also Romero v. Citibank USA, Nat'l Ass'n,
551 F. Supp. 2d 1010, 1012 (E.D. Cal. 2008), and Popular Sec., Inc. v.
Colon, 59 F. Supp. 3d 316, 318 (D.P.R. 2014). Here, Clanton did not file a
motion to modify or vacate the arbitration award within the three-month
period provided in 9 U.S.C. § 12. Rather, Clanton filed a motion in the
circuit court seeking clarification of the arbitration award regarding the
parties' ownership interests in SCI.
Arbitration proceedings are " 'summary in nature to effectuate the
national policy favoring arbitration' " and remands of arbitration awards
are disfavored because they threaten to disrupt the FAA's policy "of
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expeditious arbitration." Raiford v. Merrill Lynch, Pierce, Fenner &
Smith, Inc., 903 F.2d 1410, 1413 (11th Cir. 1990) (quoting Legion Ins. Co.
v. Insurance Gen. Agency, Inc., 822 F.2d 541, 543 (5th Cir. 1987)); see
also, e.g., Rich v. Spartis, 516 F.3d 75, 81 (2d Cir. 2008)(noting "the
general rule that '[a]rbitration awards are subject to very limited review
in order to avoid undermining the twin goals of arbitration, namely,
settling disputes efficiently and avoiding long and expensive litigation' "
(quoting Willemijn Houdstermaatschappij, BV v. Standard Microsystems
Corp., 103 F.3d 9, 12 (2d Cir. 1997))); General Elec. Co. v. Anson
Stamping Co., 426 F. Supp. 2d 579, 599 (W.D. Ky. 2006) ("Remand [of an
award to the arbitrator] is a procedure ... that should be used sparingly.").
This Court has noted, "[a] key purpose of the Federal Arbitration Act ...
is to permit the speedy resolution of disputes ...." FMR Corp. v. Howard,
227 So. 3d 444, 448 (Ala. 2017). Whenever possible, "a court should avoid
remanding a decision to the arbitrator because of the interest in prompt
and final arbitration." Teamsters Local No. 579 v. B&M Transit, Inc.,
882 F.2d 274, 278 (7th Cir. 1989). Remand to the arbitrator is "an
exceptional remedy, 'a procedure to avoid if possible.' " Duke Energy Int'l
Peru Invs. No. 1 Ltd. v. Republic of Peru, 892 F. Supp. 2d 53, 57 (D.D.C.
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2012) (quoting Ethyl Corp. v. United Steel Workers of Am., AFL-CIO, 768
F.2d 180, 188 (7th Cir. 1985)).
Although remand of an arbitration award is strongly disfavored,
courts have the authority to remand if the award itself is ambiguous or
fails to address a contingency that arises after the entry of the award.
Green v. Ameritech Corp., 200 F. 3d 967, 977 (6th Cir. 2000). Ambiguity,
however, requires something more substantial than a simple
disagreement between the parties. Rather, the arbitration award must
be "so ambiguous that a court is unable to discern how to enforce it,"
Telenor Mobile Commc'ns AS v. Storm LLC, 351 F. App'x 467, 469 (2d
Cir. 2009), with the arbitrator's intent "hopelessly difficult" to determine.
Ethyl Corp., 768 F.2d at 187; see also United States Energy Corp. v.
Nukem, Inc., 400 F.3d 822, 830 (10th Cir. 2005). Remand to clarify an
alleged ambiguity is not proper when the matter can be resolved from the
record. See, e.g., Flender Corp. v. Techna Quip Co., 953 F.2d 273, 280
(7th Cir. 1992).
CUI argues that Clanton is seeking an untimely modification of the
arbitration award under the guise of a motion for clarification. "[A] court
must be careful -- indeed, it is obliged -- to pierce the language of any
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request to remand for clarification to assure that it is not a disguised
request for modification or vacatur of an award." Lanier v. Old Republic
Ins. Co., 936 F. Supp. 839, 850 (M.D. Ala. 1996). As discussed above, the
arbitrator expressly set forth the scope of her task: "My job as Arbitrator
is to rule on the parties' various claims for monetary relief." A cursory
look at the arbitration award shows that resolving the parties' competing
claims for monetary relief is precisely what the arbitrator did. The
arbitrator made no finding as to the issues upon which Clanton now seeks
a "clarification," i.e., issues relating to the ownership interests of the
parties in SCI. When the language of Clanton's motion is pierced and
compared to the language of the arbitration award -- which, as will be
discussed below, is unambiguous as to its scope and as to the monetary
amounts awarded to the parties -- it is clear that Clanton's motion for a
clarification was, in fact, a request for a modification of the arbitration
award. Lanier, 936 F. Supp. at 850.
This conclusion is supported by Clanton's own proposed orders that
he submitted both to JAMS and to the circuit court. In his proposed order
to JAMS, Clanton sought to require the arbitrator to make certain new
rulings, including that "[a]ll ownership interests in [SCI] reverted to
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Respondent Steve Clanton," that "[t]he Parties' Purchase Agreement and
Assignment were rendered null and void," and that "Mr. Clanton was
awarded ownership of the [Hoover house] ... based on the equities of the
case." Any question as to whether such rulings would amount to
substantive additions to the arbitration award -- rather than being mere
clarifications of actual findings of the arbitrator -- is answered by Clanton
himself, who requested the insertion of those new rulings "in addition to
other rights and obligations explained in the Award." Such rulings would
be "in addition to" the arbitrator's findings and rulings in the arbitration
award, because the arbitrator made no findings or rulings on the relevant
matters. Indeed, such rulings would also be contrary to the arbitrator's
stated description of her job in the arbitration proceedings and, if
"added," would likely have required modification or vacatur of other parts
of the arbitration award. Based on the foregoing, we conclude that
Clanton's motion for "clarification" was, in fact, an untimely filed motion
for modification of the arbitration award.
CUI further argues not only that Clanton's motion for clarification
demonstrates that he sought relief well beyond what can be characterized
as a "clarification," but also that the arbitration award itself is simply not
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ambiguous regarding what the arbitrator was intending to resolve, what
the arbitrator actually awarded, and to whom it made awards. CUI
argues that no remand is warranted in this case; instead, it says, under
the "summary proceeding" anticipated under the FAA when there has
been no timely motion to vacate or modify an arbitration award, the
circuit court should have simply confirmed the award as it is. Domino
Grp., 985 F.2d at 420. We agree.
On its face, the arbitration award is unambiguous, clearly stating
that the arbitrator was resolving only the monetary claims between the
parties, actually resolving only the monetary claims between the parties,
and awarding each party certain amounts as money damages. The
arbitrator made no determination as to the parties' ownership interests
in SCI. There is no ambiguity regarding the amounts awarded by the
arbitrator, regarding the party to whom those amounts were awarded, or
regarding the categories of damages that they represent. Clanton cannot
render the arbitration award ambiguous simply by claiming that, in
addition to ruling on the parties' claims for monetary relief, the arbitrator
should also address the nonmonetary issues that he now seeks to put
before the arbitrator. The arbitration award is not " 'so ambiguous that a
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court is unable to discern how to enforce it,' ... with the arbitrator's intent
'hopelessly difficult' to determine," as is required for a remand for
clarification. Duke Energy, 892 F. Supp. 2d at 57. Because the awards of
money damages for each party were clearly stated and unambiguous in
amount and scope, the circuit court erred in remanding the arbitration
award to JAMS for clarification.
Conclusion
Based on the foregoing, we conclude that the circuit court erred in
remanding the arbitration award for clarification. We therefore reverse
its judgment and remand the case for further proceedings consistent with
this opinion.
REVERSED AND REMANDED.
Parker, C.J., and Wise, Sellers, and Stewart, JJ., concur.
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