Allied Williams Companies, Inc. v. Davis
Allied Williams Companies, Inc. v. Davis
Opinion
Allied Williams Companies, Inc., f/k/a Allied-Bruce Terminix Companies, Inc., d/b/a Terminix Service ("Terminix"), and Gary Welch, defendants in a proceeding in the Houston Circuit Court, appeal from the trial court's order denying their motion to compel arbitration of the claims of the plaintiffs below, Thomas D. Davis and Grace Davis. We reverse and remand.
The purchase agreement required Stevenson, as the seller, to pay for a "termite certification" from a licensed pest-control provider to verify that the house was free from any active infestation by wood-destroying insects or fungus.1 Stevenson hired Terminix to perform the inspection and to prepare the appropriate certification. Welch, an employee of Terminix, inspected the house and prepared an "Official Alabama Wood Infestation Inspection Report." The report stated that there was no active infestation in the house, but that there was visible evidence of a previous termite infestation.
The Davises claim that they relied on Terminix's report in purchasing the house. However, following the closing of the purchase of the house, the Davises allegedly discovered that the house had been damaged by a previous powder post beetle infestation. On February 10, 2003, the Davises sued Terminix and Welch, alleging fraud, negligence, wantonness, and suppression.2 On July 21, 2003, Terminix and Welch filed a motion to compel arbitration of the Davises' claims. After a hearing, the trial court denied the motion to compel arbitration. Terminix and Welch appeal.
"A party seeking to compel arbitration has the burden of proving: (1) the existence of a contract containing an arbitration agreement and (2) that the underlying contract evidences a transaction affecting interstate commerce. Kenworth of Birmingham, Inc. v. Langley,Jim Walter Homes, Inc. v. Saxton,828 So.2d 288 ,290 (Ala. 2002). Once those two items have been shown, the burden shifts to the opposing party to present evidence either that the arbitration agreement is not valid or that it does not apply to the dispute in question. Id."
In determining whether a transaction "involves" interstate commerce, this Court looks to whether Congress's Commerce Clause3 power can reach the activity that is the basis of the transaction:
"The Supreme Court has acknowledged that the FAA is a constitutional exercise of Congress's Commerce Clause power. . . . [E]conomic or commercial transactions (such as, for example, the buying and selling of goods or services, contracting for employment, etc.), even one that is purely intrastate, are within the reach of the FAA if the `"general practice" those transactions represent' has, in the aggregate, a substantial effect on interstate commerce. Citizens Bank [v. Alafabco, Inc.,
539 U.S. 52 ,58 (2003)].". . . In a very real sense, an argument that a transaction does not `involve' commerce under the FAA is actually an argument that Congress does not have the constitutional power under the Commerce Clause to reach and regulate that type of transaction. As the decisions of the United States Supreme Court have made clear, there are few, if any, economic or commercial transactions that are beyond the reach of Congress's commerce power. Furthermore, virtually every kind of industry, small or large, is currently regulated by some sort of federal statute enacted pursuant to Congress's commerce power. . . .
". . . .
Service Corp. Int'l v. Fulmer,". . . While there can be no per se rule that would preclude a trial court's role in evaluating whether a contract `evidenc[es] a transaction involving commerce,' see [United States v.] Morrison [,
529 U.S. 598 ,614 (2000)], given the above, a trial court evaluating a contract connected to some economic or commercial activity would rarely, if ever, refuse to compel arbitration on the ground that the transactions lacked `involvement' in interstate commerce."
In deciding whether a contract calling for arbitration triggers the application of the FAA, this Court must determine whether the transaction "affected interstate commerce or if the economic activity in question represents a general practice subject to federal control. If either of these questions can be answered affirmatively, the FAA is triggered." Huntsville Utils. v.Consolidated Constr. Co.,
On appeal, Terminix and Welch contend that the transaction in this case affected interstate commerce because several parties involved in the sale of the house to the Davises were multistate corporations and to accomplish the sale funds were transferred across state lines. We agree. *Page 700
Several factors in this case establish the requisite impact on interstate commerce. First, two of the parties involved in the transaction were multistate corporations that engaged in business outside Alabama. According to the affidavit of Joseph P. Jones, vice president and general counsel of Terminix, Terminix is an Arkansas corporation that does business in eight states, including Alabama. Furthermore, the Davises' realtor, Wright Real Estate Company, Inc., d/b/a RE/MAX Real Estate Professionals ("RE/MAX"), which represented the Davises at the closing on the purchase of the house and which was paid $1,600 for its services, is a licensed franchise of RE/MAX International, Inc., a business that operates in all 50 states. See Bowen v. Security PestControl, Inc.,
The impact of these factors, standing alone, on interstate commerce is arguably de minimis. However,
Bowen,"[t]he application of the FAA is not defeated if the individual transaction at issue, taken alone, does not have a substantial effect on interstate commerce. Citizens Bank [v. Alafabco, Inc.], 539 U.S. [52] at 56, 123 S.Ct. [2037] at 2040,
156 L.Ed.2d 46 [(2003)]. Instead, `Congress' Commerce Clause power "may be exercised in individual cases without showing any specific effect upon interstate commerce" if in the aggregate the economic activity in question would represent "a general practice . . . subject to federal control."' Id. (quoting Mandeville Island Farms, Inc. v. American Crystal Sugar Co.,334 U.S. 219 ,236 ,68 S.Ct. 996 ,92 L.Ed. 1328 (1948))."
Normally, a party cannot be forced to submit a dispute to arbitration if the party has not first assented to do so. Exparte Stamey,
"Assent to arbitrate is usually to be manifested through a party's signature on the contract containing the arbitration provision. However, both Federal courts and Alabama courts have enforced exceptions to this rule, so as to allow a nonsignatory, and even one who is not a party, as to a particular contract, to enforce an arbitration provision within that same contract."
Stamey,"In order for a party to be equitably estopped from asserting that an arbitration agreement cannot be enforced by a nonparty, the arbitration provision itself must indicate that the party resisting arbitration has assented to the submission of claims against nonparties — claims that would otherwise fall within the scope of the arbitration provision — to arbitration. See Ex parte Napier, 723 So.2d [49,] 53 [(Ala. 1998)]. All that is required is (1) that the scope of the arbitration agreement signed by the party resisting arbitration be broad enough to encompass those claims made by that party against nonsignatories, or that those claims be `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) that the description of the parties subject to the arbitration agreement not be so restrictive as to preclude arbitration by the party seeking it. See Id."
The Davises argue that the scope of the arbitration provision in this case is too narrow to encompass their claims against Terminix and Welch and that the descriptions of the parties in the provision precludes its enforcement by nonparties. The arbitration provision in the purchase agreement states:
"Purchaser/s and Seller/s expressly agree that any dispute relating to this agreement[,] to any breach thereof, to the relationship created by this agreement, or to the payment of fees, shall be settled by arbitration. The parties hereto agree that this agreement substantially involves interstate commerce."
This Court has refused to apply the doctrine of equitable estoppel where the language of an arbitration provision limited arbitration to the signing parties. See, e.g., Med Ctr. Cars,Inc. v. Smith,
The arbitration provision at issue in Med Center Cars stated:
"BUYER HEREBY ACKNOWLEDGES AND AGREES THAT ALL DISPUTES AND CONTROVERSIES OF EVERY KIND AND NATURE BETWEEN BUYER AND SELLER ARISING OUT OF OR IN CONNECTION *Page 702 WITH THE PURCHASE OF THIS VEHICLE WILL BE RESOLVED BY ARBITRATION WITH THE PROCEDURE SET FORTH ON THE REVERSE SIDE OF THIS BUYER'S ORDER."
This Court has previously examined the ability of nonsignatories to enforce the same arbitration provision involved in this case. In Allied-Bruce Terminix Cos. v. Butler,
On appeal, a plurality of this Court held that the Ritzes were equitably estopped from asserting that Terminix and its agent could not compel arbitration under the arbitration provision.
The arbitration provision in this case is not limited to claims between the Davises and Stevenson. Instead, it provides that the "Purchaser/s," i.e., the Davises, agree that "any dispute" relating to the purchase agreement — not just disputes "between" the "Purchaser/s" and the "Seller/s" — would be submitted to arbitration. Moreover, the Davises' claims against Terminix and Welch arise out of a relationship created by the purchase agreement and an alleged breach of a duty the Davises say was created by the transaction and embodied in the purchase agreement. We therefore hold that the Davises are equitably estopped from asserting that Terminix and Welch cannot enforce the arbitration provision. See Butler,
REVERSED AND REMANDED.
NABERS, C.J., and SEE, HARWOOD, and STUART, JJ., concur.
Reference
- Full Case Name
- Allied Williams Companies, Inc., F/K/A Allied-Bruce Terminix Companies, Inc., D/B/A Terminix Service, and Gary Welch v. Thomas D. Davis and Grace Davis.
- Cited By
- 8 cases
- Status
- Published