164 So. 3d 1094
Ala.2014Background
- The Practice-Monroeville, P.C. bought MyWay software from Allscripts under a written contract that included an arbitration clause mandating AAA arbitration in Raleigh, NC; the contract allowed Allscripts to subcontract and an addendum stated Jackson Key would host and handle system performance.
- Jackson Key (a certified Allscripts partner) and Eric Anderton (Jackson Key employee/owner) supported the transaction though neither signed the contract containing the arbitration clause.
- The Practice sued Jackson Key and Anderton in Monroe Circuit Court alleging negligence in implementing system performance of the MyWay software; Allscripts was not sued.
- Jackson Key and Anderton moved to compel arbitration under the Allscripts–Practice contract; the circuit court denied the motion without stating reasons.
- Jackson Key had separately sued the Practice in district court over unpaid Microsoft Word purchases and appealed that adverse district-court judgment; the Practice argued this prior litigation showed waiver of arbitration.
- The Alabama Supreme Court reversed the circuit court, holding (1) no waiver occurred and (2) the question whether nonsignatories could compel arbitration was delegated to the arbitrator by incorporation of the AAA rules.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Jackson Key/Anderton waived the right to arbitrate by litigating in district court | Practice: Jackson Key’s district-court suit and appeal show substantial invocation of litigation and prejudice, so arbitration waived | Jackson Key/Anderton: district-court claim was distinct (Microsoft Word reimbursement); Anderton did not litigate; filing motion to compel is not waiver | No waiver — district-court litigation involved different issues; Anderton did not litigate there; mere motion to compel is not waiver |
| Whether nonsignatories (Jackson Key/Anderton) can compel arbitration under the Practice–Allscripts agreement | Practice: a nonsignatory generally cannot compel arbitration; arbitration clause doesn’t bind nonsignatories here | Jackson Key/Anderton: equitable estoppel and the breadth of the arbitration clause allow nonsignatories to invoke arbitration | Delegated to arbitrator — the contract’s incorporation of AAA rules shows clear-and-unmistakable intent to have arbitrator decide threshold arbitrability, including signatory/nonsignatory question |
| Who decides arbitrability (court or arbitrator) as to whether a nonsignatory may compel arbitration | Practice: court must decide whether a nonsignatory is bound before sending dispute to arbitration | Jackson Key/Anderton: the contract delegates threshold arbitrability questions to the arbitrator via AAA rules | Arbitrator decides — incorporation of AAA Rule giving arbitrator power over jurisdictional/scope questions is clear and unmistakable delegation |
| Whether the arbitration agreement exists and affects interstate commerce (threshold for compelling arbitration) | (Not disputed) Practice acknowledged contract and commerce nexus not lacking | Jackson Key/Anderton: contract exists and affects interstate commerce | Contract exists and affects interstate commerce; prerequisite satisfied |
Key Cases Cited
- United Wisconsin Life Ins. Co. v. Tankersley, 880 So.2d 385 (Ala. 2003) (standard of de novo review for orders on motions to compel arbitration)
- TranSouth Fin. Corp. v. Bell, 739 So.2d 1110 (Ala. 1999) (motion to compel analogous to summary judgment; movant bears initial burden)
- Companion Life Ins. Co. v. Whitesell Mfg., Inc., 670 So.2d 897 (Ala. 1995) (test for waiver by substantially invoking litigation and prejudice)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (U.S. 1995) (party intent to delegate arbitrability must be clear and unmistakable)
- Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (U.S. 2002) (distinguishes substantive arbitrability for courts from procedural arbitrability for arbitrators)
- AT&T Techs., Inc. v. Communications Workers, 475 U.S. 643 (U.S. 1986) (arbitrator–court allocation principles)
- Ex parte Stripling, 694 So.2d 1281 (Ala. 1997) (general rule that nonsignatory cannot compel arbitration and recognition of exceptions)
- CitiFinancial Corp. v. Peoples, 973 So.2d 332 (Ala. 2007) (incorporation of AAA rules can constitute clear-and-unmistakable delegation of arbitrability to arbitrator)
- Eckert/Wordell Architects, Inc. v. FJM Props. of Willmar, LLC, 756 F.3d 1098 (8th Cir. 2014) (incorporation of AAA rules held to delegate threshold arbitrability questions to arbitrator)