Lead Opinion
Fеderal Insurance Company appeals the order of the Márshall Circuit Court denying its motion to compel arbitration of the breach-of-contract claim asserted against it by Kert Reedstrom. We reverse and remand.
I.
In 2008, Reedstrom entered into a written employment agreement with Marshall-Jackson Mental Health Board, Inc., d/b/a Mountain Lakes Behavioral Healthcare (“MLBHC”), to begin serving as its executive director in Gúntersville. During the course of Reedstrom’s employment with MLBHC, MLBHC held an executive-liability, entity-liability, and employment-prac
“Any dispute between any insured and [Federal Insurance] based upon, arising from, or in consequence of any actual or alleged coverage under this' coveragé section, or the validity, termination or breach of this coverage section, including but not limited to any dispute sounding in contract or tort, shall' be submitted to binding arbitration.
“[MLBHC], however, shall first have the option’to resolve the disputé by nonbinding mediation pursuant to such rules and procedures, and using such mediator, as the parties may agree. If' the parties cannot so agree, the mediation shall be administered by the American Arbitration Association pursuant to its then prevailing commerciаl mediation rules.
“If the parties cannot resolve the dispute by non-binding mediation, the parties shall submit the dispute to binding arbitration pursuant to the then-prevailing commercial arbitration rules of the American Arbitration Association, except that the arbitration panel shall consist of, one arbitrator selected by the insureds, one arbitrator selected by [Federal Insurance], and a third arbitrator selected by the first two arbitrators.”
A separate endorsement to the Federal Insurance policy further highlighted the arbitration provision and explained that its effect was that any disagreement related to coverage would be resolved by arbitration and not in a court of law.
In July 2010, MLBHC terminated Reedstrom’s employment and, in December 2010, Reedstrom sued MLBHC in the Marshall Circuit Court alleging that MLBHC’s termination of his employment constituted a breach of his employment contract. Subsequently, MLBHC asserted various counterclaims against Reedstrom based on his alleged misconduct while serving as executive director. Thereafter, Reedstrom gave Federal Insurance notice of the claims. asserted against him and requested coverage under the terms of the Federal Insurance policy. Federal Insurance ultimately denied his claim, however,' and refused to provide him with counsel to defend against MLBHC’s claims.
•In May 2014, Reedstrom and MLBHC’s claims were the subject of a jury trial, at the conclusion of which the jury returned a verdict awarding Reedstrom $150,000 on his claim against MLBHC and awarding-MLBHC $60,000 on its claims against Reedstrom. Consistent with its previous denial of his request for coverage, Federal Insurance refused Reedstrom’s request to satisfy the judgment entered against him.
On September 17⅜ 2014, Reedstrom sued Federal Insurance, asserting one claim of breach of contract and seeking $72,000 in damages — $60,000 based on the judgment entered against him and $12,000 for the attorney fees he incurred in defending those claims. On November 7, 2014, Federal Insurance moved the trial court to compel the arbitration of Reedstrom’s claim based on the arbitration provision in the Federal Insurance policy that Reedst-rom was alleging had been breached. Reedstrom opposed the motion and, on May 20, 2015, the trial court сonducted a hearing to consider the parties’ arguments relating to arbitration. On June 16, 2015, the trial court denied Federal- Insurance’s
II.
Our standard of review of a ruling denying a motion to compel arbitration is well settled:
“ ‘This Court reviews de novo the denial of a motion to compel arbitration. Parkway Dodge, Inc. v. Yarbrough, 779 So.2d 1205 (Ala.2000). A motion to compel arbitration is analogous to a motion for a summary judgment. TranSouth Fin. Corp. v. Bell,739 So.2d 1110 , 1114 (Ala.1999). The party seeking to' comрel arbitration has the burden of proving the existence of a contract calling for arbitration and proving that the contract evidences a transaction affecting interstate commerce. Id, “[A]fter 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.” Jim Burke Automotive, Inc. v. Beavers,674 So.2d 1260 , 1265 n. 1 (Ala.1995) (opinion on application for rehearing).’”
Elizabeth Homes, L.L.C. v. Gantt,
m.
It is undisputed that there exists a contraсt calling for arbitration — the Federal Insurance policy — and that that contract evidences a transaction affecting interstate commerce. Inasmuch as Federal Insurance established these undisputed facts when moving the trial court to compel arbitration, the burden of proof shifted to Reedstrom to establish that the arbitration provision in the Federal Insurance policy was either invalid or did not apply to his dispute with Federal Insurance. The trial court did not, in its order denying Federal Insurance’s motion to compel аrbitration, articulate the rationale for that denial; however, Reedstrom argues to this Court that the denial was proper because (1) Federal Insurance allegedly waived its right to invoke the arbitration provision in the Federal Insurance policy and (2) Reedstrom was not a signatory to the Federal Insurance policy. Federal Insurance argues that there is no merit to either of those arguments; however, it also argues that, to the extent the trial court even considered those arguments, the trial court erred because, рursuant to the arbitration provision in the Federal Insurance policy, issues of arbitrability were to be decided by the arbitrators, not a trial court.
In Anderton v. Practice-Monroeville, P.C.,
“As a threshold matter, we address whether the 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). However, the general rule that the court and not the arbitratordecides 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 , 944,115 S.Ct. 1920 ,.131 L.Ed.2d 985 (1995) (quoting AT & T Techs., Inc. v. Communications Workers of America,475 U.S. 643 , 649,106 S.Ct. 1415 ,89 L.Ed.2d 648 (1986) (alterations omitted)); see also Marie v. Allied Home Mortg. Corp.,402 F.3d 1 , 14 (1st Cir. 2005) (citing First Options).”
Anderton,
“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 ‘arbitrability5). In First Options [of Chicago, Inc. v. Kaplan], 514 U.S. [938,] 943-46 [(1995)], the Supreme Court analyzed the question whether an arbitration agreement binds a nonsignatory as a question of arbitrability. See also Howsam [v. Dean Witter Reynolds], 537 U.S. [79,] 84 [(2002)] (noting that in First Options the Supreme Court held that the question Vhether the arbitratiоn 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) (dеlineating potentially disposi-tive threshold issues betweén “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 arbi-trability to án 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 [American Arbitration Association] Rules into a contract requiring arbitration to be a clear and unmistakable indication the parties intended for the arbitrator to decide threshold quеstions '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 “taises 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 partiеs’ 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) (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.”
Like the arbitration agreement in Anderton, the аrbitration provision in this case provides that any arbitration proceedings will be conducted “pursuant to the then-prevailing commercial arbitration rules of the American Arbitration Association.” The relevant commercial arbitration rule, Rule 7(a), expressly provides, in its current form, that “[t]he 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 or to the arbitrability of any claim or counterclaim.” See Chris Myers Pontiac-GMC, Inc. v. Perot,
IV.
Federal Insurance has appealed the order of the trial court denying its motion to
REVERSED AND REMANDED.
Notes
. Although this Court in Anderton held that an arbitrator should decide whether a party has waived its right to arbitration if the arbitration provision clearly and unmistakably indicates that the parties agreed that the arbitrator should make that decision, the Anderton Court ultimately declined to consider whether the parties in that case had made such an agreement because the appellants had failed to raise that issue in a timely manner.
. It is unnecessary for us to consider whether ■ the trial court correctly resolved the waiver and nonsignatory issues because it was error for the court to consider those issues at all. Accordingly, we express no opinion on the ultimate merits of Reedstrom’s arguments opposing the motion to compel arbitration; that determination is for the arbitrators to make.
Dissenting Opinion
(dissenting).
I respectfully dissent. The Seventh Amendment to the United States Constitution provides: “In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved — ” Likewise, Article I, § 11, Ala. Const.1901,. provides: “[T]he right of trial by jury shall remain inviolatе.” Because of these constitutional safeguards, this Court once held to the following rule regarding the waiver of jury trials through arbitration agreements:
“We must emphasize that any arbitration agreement is a waiver of a party’s right under Amendment VII of the United States Constitution to. a trial by jury and, regardless of the federal courts’ policy favoring arbitration, we find nothing in the [Federal Arbitration Act] that would permit such a waiver -unless it is made knoimngly, willingly, and voluntarily.”
Allstar Homes, Inc. v. Waters,
In contrast, I believe that the Court’s decision in this ease, like another recent decision of this Court, is a far departure from Allstar’s requirement that a waiver be made knowingly, willingly, and voluntarily. In this Court’s recent decision of American Bankers Insurance Co. of Florida v, Tellis,
.Like the Court’s .decision in American Bankers, the Court’s decision in the present case makes it easier, instead of more
Furthermore, as to the specific issue whether to arbitrate arbitrability, I believe that the Court’s decision is inconsistent with the precedent of the United States Supreme Court. As to the issue of arbi-trability, the United States Supreme Court has held: “Courts should not assume that the parties agreed to arbitrate arbitrability unless there is ‘clea[r] and unmistakable]’ evidence that they did so.” First Options of Chicago, Inc. v. Kaplan,
“In this manner-the law treats silence or ambiguity about'the question ‘who (primarily) should decide arbitrability’ differently from the way it treats silence or ambiguity about the question ‘whether a particular merits-related dispute is arbi-trable because it is within the scope of a valid arbitration agreement’ — for in respect to this latter question the law reverses the presumption.”
However, in this case, the Court holds that it is for the arbitrator, not the court, to decide the issue of arbitrability. The Court reasons that, under Anderton v. Practice-Monroeville, P.C.,
I believe that today’s decision is the result of following the crooked path of precedent. See Lorence v. Hospital Bd. of Morgan Cnty.,
I respectfully dissent.
. The Court later held that some matters of arbitrability, called "procedural arbitrability,” are for the arbitrator, not for the court, to decide. Howsam v. Dean Witter Reynolds, Inc.,
Dissenting Opinion
(dissenting).
I respectfully dissent.
The main opinion notes that the general rule is that questions of “arbitrability” are to be decided by the court, not the arbitrator.
The Federal Insurance Company policy underlying this dispute contains the following provision:' “If the parties cannot resolve the dispute by non-binding mediation, the parties shall submit the dispute to binding arbitration рursuant to the then-prevailing commercial arbitration rules of the American Arbitration Association,” i.e., the Commercial Rules of the American Arbitration Association (“the AAA”). Following this provision is a statement describing agreed-upon .variations from the particular procedures that would otherwise be prescribed by the AAA rules for the selection of the arbitrators.
In my view, the aforesaid language referencing the use of the AAA’s rules of procedure is sufficient to prescribe the rules of procedure to be used when a matter otherwise falls within the categories of disputes the parties have agreed to arbitrate.. (As set out in an earlier provision in the policy, those categories are disputes “based upon, arising from, or in consequence of any actual or alleged [insurance] coverage under this coverage section, .or the validity, termination or breach of this coverage section.”). I cannot agree,
It might be argued that the foregoing analysis is not applicable to the issue of waiver referenced in the main opinion because “waiver” was identified in Howsam v. Dean Witter Reynolds, Inc.,
PARKER, J., concurs.
. I concurred in Ex parte Johnson,
Since this Court issued its opinion in Johnson, federal courts have indicated that the issue of class certification is more properly considered a matter of substantive arbitrability. See, e.g., Reed Elsevier, Inc, v. Crockett,
. In Howsam, the United States Supreme Court explained that the "general rule” discussed above and the issue of "arbitrability” to which it relates are concerned with what might be called “substantive arbitrability” issues, rather than questions of "procedural arbitrability.” The Court explained:
"Linguistically speaking, one might call any potentially dispositive gateway question a 'question of arbitrability,' for its answer will determine whether the underlying controversy will proceed to arbitration on the merits. The Court’s case law, however, makes clear that, for purposes of applying the interpretive rule, the phrase ‘question of arbitrability' has a far more limited scope. See514 U.S. at 942 ,115 S.Ct. 1920 .. The Court has found the phrase applicable in the kind of narrow circumstance where contracting parties would likely have expected a court to have decided the gateway matter, where they are not likely to have thought that they had agreed that аn arbitrator would do so, and, consequently, where reference of the gateway dispute1 to the court avoids the risk of forcing parties to arbitrate a matter that they may well not have agreed to arbitrate.
"Thus, a gateway dispute about whether the parties are bound by a given arbitration clause raises a 'question of arbitrability’ for a court to decide. See id. at 943-946 (holding that a court should decide whether the arbitration contract bound parties who'did not sign the agreement); John Wiley & Sons, Inc. v. Livingston,376 U.S. 543 , 546-547 (1964) (holding that a court should decide whether an arbitration agreement survived a corporate merger and bound the resulting corporation). Similarly, a disagreement about whether an arbitration clause in a concededly binding contract applies to a particular type of controversy is for the court. See, e.g,, AT & T Technologies,[ Inc.v. Communcations Workers of America, 475 U.S. 643 ,] 651-652 [ (1986) ] (holding that a court should decide whether a labor-management layoff controversy falls within the arbitration clause of a collective-bargaining agreement); Atkinson v. Sinclair Refining Co.,370 U.S. 238 , 241-243 (1962) (holding that a court should decide whether a clause providing for arbitration of various ‘grievances’ covers claims for damages for breach of а no-strike agreement).
"At the same time the Court has found the phrase 'question of arbitrability' not applicable in other kinds of general circumstance where parties would likely expect that an arbitrator would decide the gateway matter. Thus ‘ "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, supra, at 557 (holding that an arbitrator should decide whether the first two steps of a grievance procedure were completed, where these steps are prerequisites to arbitration). So, too, the presumption is that the arbitrator should decide ‘allegationfs] of waiver, delay, or a like defense to arbitrability.’ Moses H. Cone Memorial Hospital[v. Mercury Constr. Corp.,460 U.S. 1 ,] 24-25[ (1982) ].”