Eickhoff Corp. v. Warrior Met Coal, LLC
Eickhoff Corp. v. Warrior Met Coal, LLC
Opinion of the Court
Warrior Met Coal, LLC ("Warrior Coal"), sued Eickhoff Corporation in the Tuscaloosa Circuit Court asserting that certain pieces of heavy mining equipment Eickhoff had manufactured and sold to Warrior Coal were defective. Eickhoff subsequently moved the trial court to compel Warrior Coal to arbitrate its claims pursuant to an arbitration provision in contracts executed after the sale of the equipment, not the original purchase-order contracts associated with the allegedly defective equipment. The trial court denied the motion to compel arbitration and Eickhoff appeals. We reverse and remand.
I.
In January 2014, Warrior Coal's predecessor in interest, Jim Walter Resources, Inc. ("JWR"), contracted to purchase two Eickhoff SL 750 longwall shearers-heavy equipment used in underground coal mining to separate slabs of coal from the coal seam or "longwall panel"-direct from Eickhoff at a price of $3.2 million each. The terms and conditions of the purchase-order contract provided JWR with certain warranty protection; the contract contained no arbitration provision, providing only that "venue for any legal proceeding will be in Birmingham, Alabama."
In November 2014, before either of the two ordered longwall shearers were delivered, JWR and Eickhoff executed another contract, referred to as "the SL750 shearer rebuild and life cycle service agreement," or, more simply, "the master service agreement,"
"the entire agreement between the parties in respect of its subject matter and supersedes all prior agreements, quotation requests, understandings, representations, warranties, promises, *218statements, negotiations, letters and documents in respect of its subject matter (if any) made or given prior to the commencement of the term."
Finally, the master service agreement contained an arbitration provision requiring the parties to submit "any dispute, controversy or claim arising out of or in connection with the agreement" to the American Arbitration Association ("the AAA") for binding arbitration conducted in accordance with the AAA's commercial arbitration rules if the parties were not otherwise able to resolve the dispute using all reasonable efforts.
The first of the longwall shearers ordered by JWR was put into service in May 2015. At approximately the same time, JWR and Eickhoff executed yet another contract, the consignment-parts agreement, pursuant to which Eickhoff agreed to provide a supply of spare parts for the longwall shearers, which JWR would store on-site and then pay for on a weekly basis as the parts were needed. The consignment-parts agreement did not contain an arbitration provision; rather, like the purchase-order contract, it provided only that venue for any legal proceeding would be in Birmingham. It also provided that it "constitute[d] the entire agreement between the parties, supersedes any previous agreements and may be amended or modified only by a writing signed by each of the parties."
The second longwall shearer was put into service by JWR in October 2015. That same month, JWR agreed to purchase yet a third SL 750 longwall shearer from Eickhoff for $3,295,000. The purchase-order contract for this transaction explicitly incorporated the terms and conditions of the January 2014 purchase-order contract; accordingly, there was no arbitration provision, and Birmingham was designated as the appropriate venue for any legal proceedings. The October 2015 purchase-order contract also had the same integration provision as did the January 2014 purchase-order contract, providing that "the [purchase order] comprises the entire agreement between [Eickhoff] and [JWR] and supersedes all other previous statements, representations, or agreements, whether written or oral."
During this period, JWR's parent company, Walter Energy, Inc., was involved in bankruptcy proceedings, and, in November 2015, Warrior Coal agreed to acquire substantially all of Walter Energy's and JWR's Alabama assets. Warrior Coal also ultimately agreed to assume various JWR contracts, including the November 2014 master service agreement. As a result of market conditions and the bankruptcy proceedings, mine no. 4-the mine where the two longwall shearers ordered from Eickhoff in January 2014 had been put into operation-was shut down from approximately January 2016 to August 2016. During this shutdown, the longwall shearers were idle.
In March 2016, Warrior Coal completed its purchase of Walter Energy's and JWR's assets. In May 2016, Eickhoff delivered the third longwall shearer to Warrior Coal, and, in June 2016, Warrior Coal's subsidiary executed another master service agreement with Eickhoff for this piece of equipment. This master service agreement was substantially similar to the November 2014 master service agreement and contained an identical arbitration provision. This third longwall shearer was placed into operation in Warrior Coal's mine no. 7 in October 2016.
On February 17, 2017, Warrior Coal notified Eickhoff that it was revoking its acceptance of all three longwall shearers, asserting that it had experienced continual problems with the equipment and that Eickhoff had been unable to satisfactorily *219remedy those problems. On March 9, 2017, Eickhoff formally notified Warrior Coal that it disputed the claim that the three longwall shearers were defective, set forth the remaining sums owed by Warrior Coal in connection with the purchase of the longwall shearers, and requested a meeting with Warrior Coal's designated dispute representative so that they could attempt to resolve the dispute. This final request was presumably made in accordance with the arbitration provision in the master service agreements, which required that such a step be taken before arbitration could be initiated.
On March 24, 2017, Warrior Coal sued Eickhoff, asserting breach-of-warranty, breach-of-contract, and products-liability claims. Warrior Coal specifically alleged that both the first and third longwall shearers delivered by Eickhoff had failed multiple times, that Eickhoff had been unable to repair them, that the failure of the two longwall shearers had impaired Warrior Coal's ability to produce and sell coal, leaving Warrior Coal no option but to remove the Eickhoff longwall shearers from its mines and to purchase replacement equipment from other sources. In total, Warrior Coal claimed damages in excess of $10 million. On April 2, 2017, Eickhoff filed a demand for arbitration with the AAA pursuant to the arbitration provision in the master service agreements, arguing that the longwall shearers delivered to Warrior Coal had performed in an exemplary fashion and that any problems Warrior Coal now claimed to have experienced with them were the result of insufficient maintenance, exacerbated by the time the machines were idle, as well as unique geological conditions at the Warrior Coal mines. Eickhoff also claimed that its own damages were in excess of $1,032,328. On May 2, 2017, Eickhoff followed up its demand for arbitration by moving the trial court to stay all proceedings related to the lawsuit filed by Warrior Coal and to compel arbitration pursuant to the arbitration provision in the master service agreements.
Warrior Coal thereafter opposed Eickhoff's motion to compel arbitration, arguing that the claims it had asserted against Eickhoff were based on the purchase of the three longwall shearers and were subject to the terms and conditions of the purchase-order contracts, which did not contain an arbitration provision and, in fact, provided that venue for any "legal proceedings" should be in Birmingham.
II.
Our standard of review of the denial of 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 compel 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,
III.
It is undisputed that in this case a contract calling for arbitration exists; both master service agreements contain an arbitration provision requiring the parties to arbitrate "any dispute, controversy, or claim arising out of or in connection with [those contracts]." Moreover, there is no dispute but that the master service agreements evidence transactions affecting interstate commerce inasmuch as they are between a Pennsylvania corporation and Alabama companies. Accordingly, the burden of proof is upon Warrior Coal to establish either that the arbitration provision in the master service agreements is invalid or that it does not apply to the instant dispute. On appeal, Warrior Coal pursues this second avenue, arguing that the master service agreements, and the arbitration provision therein, are irrelevant to its instant dispute with Eickhoff inasmuch as the gravamen of this dispute is whether Eickhoff actually delivered the ordered products-functional longwall shearers-and that issue, Warrior Coal argues, is governed by the purchase-order contracts, which contain no arbitration provision, not the master service agreements, which are primarily concerned with rebuilding the longwall shearers after the initial mining of a longwall panel is completed and which, by their own language, limit the operation of the arbitration provision to disputes "arising out of or in connection with [the master service agreements]."
Eickhoff disputes Warrior Coal's characterization of the master service agreements and argues that the instant dispute falls squarely within the reach of the arbitration provision in those contracts. Eickhoff also argues, however, that, to the extent the trial court even considered Warrior Coal's argument, it erred because the issue of arbitrability should have been decided by the arbitrator, not the trial court. We first address who is to decide the issue of arbitrability.
*221The arbitration provision in the master service agreements provides that "any dispute, controversy or claim arising out of or in connection with the [master service] agreement" that cannot otherwise be resolved by the parties must be submitted to the AAA for binding arbitration conducted in accordance with the AAA commercial arbitration rules. Those rules vest the arbitrator with 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.' " Reedstrom,
"In Smith v. Mark Dodge, Inc.,934 So.2d 375 , 379 (Ala. 2006), we stated:
" 'A threshold issue is which forum should decide the question of the scope of the arbitration agreement. In First Options of Chicago, Inc. v. Kaplan,514 U.S. 938 ,115 S.Ct. 1920 ,131 L.Ed.2d 985 (1995), the United States Supreme Court stated:
" ' "Just as the arbitrability of the merits of a dispute depends upon whether the parties agreed to arbitrate that dispute, see, e.g., Mastrobuono v. Shearson Lehman Hutton, Inc., [514 U.S. 52 , 57 (1995) ]; Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.,473 U.S. 614 , 626 (1985), so the question 'who has the primary power to decide arbitrability' turns upon what the parties agreed about that matter."
" ' 514 U.S. at 943,115 S.Ct. 1920 . However, the Court warned, "[c]ourts should not assume that the parties agreed to arbitrate arbitrability unless there is 'clea[r] and unmistakabl[e]' evidence that they did so." 514 U.S. at 944,115 S.Ct. 1920 (quoting AT & T Techs. v. Communications Workers,475 U.S. 643 , 649,106 S.Ct. 1415 ,89 L.Ed.2d 648 (1986) ). This Court has similarly required that trial courts order arbitration of the issue of arbitrability when the plain language of the agreement unquestionably shows that the parties agreed to arbitrate the issue of arbitrability. Polaris Sales, Inc. v. Heritage Imports, Inc.,879 So.2d 1129 , 1133-34 (Ala. 2003) ; and Ex parte Perry,744 So.2d 859 , 866-67 (Ala. 1999).'
"The question presented by this case is whether the arbitration provision clearly and unmistakably provides that *222the arbitrator shall decide arbitrability. The lenders argue that incorporation into the arbitration provision of the Commercial Rules of the American Arbitration Association, conferring authority to decide such issues on the arbitrator, evidences such an intent. This Court has not decided whether the incorporation of such rules is sufficient to show the parties' intent to delegate the issue of arbitrability to an arbitrator, but federal courts have so held. In Terminix International Co. v. Palmer Ranch Ltd. Partnership,432 F.3d 1327 , 1332 (11th Cir. 2005), the United States Court of Appeals for the Eleventh Circuit stated:
" '[T]he parties have agreed that the arbitrator will [decide the issue of arbitrability] by providing (in all three of the arbitration clauses at issue) that "arbitration shall be conducted in accordance with the Commercial Arbitration Rules then in force of the American Arbitration Association" (AAA). [The relevant AAA rule], in turn, provides 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." ... By incorporating the AAA Rules ... into their agreement, the parties clearly and unmistakably agreed that the arbitrator should decide whether the arbitration clause is valid. See, e.g., Contec Corp. v. Remote Solution, Co.,398 F.3d 205 , 208 (2d Cir. 2005) ("when ... parties explicitly incorporate rules that empower an arbitrator to decide issues of arbitrability, the incorporation serves as clear and unmistakable evidence of the parties' intent to delegate such issues to an arbitrator"); Apollo Computer, Inc. v. Berg,886 F.2d 469 , 473 (1st Cir. 1989) ("By contracting to have all disputes resolved according to the Rules of the ICC ..., Apollo agreed to be bound by Articles 8.3 and 8.4. These provisions clearly and unmistakably allow the arbitrator to determine her own jurisdiction when, as here, there exists a prima facie agreement to arbitrate whose continued existence and validity is being questioned.")....'
"We find the reasoning of the Eleventh Circuit and other Circuit Courts of Appeal that have addressed this issue persuasive and hold 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."
*223Regardless of any facts that might be unique to this case, at its simplest, this appeal still essentially amounts to one party asking us to examine multiple contracts between it and another party to hold that certain claims asserted by one of the parties arise under one of those contracts that does not contain an arbitration provision, as opposed to another one of those contracts that does contain an arbitration provision. In Blackmon, it was an insurance agent asking this Court to hold that an insurance company's claims were premised upon a 2005 document that did not contain an arbitration provision as opposed to a 1995 agreement that contained an arbitration provision that, much like the provision in the instant case, was limited to disputes "arising out of" the contract containing it.
"We do not decide whether the 2005 document is encompassed by the arbitration provision in the 1995 agreement, however, because the AAA Commercial Arbitration Rules, which the parties in the 1995 agreement agreed to be bound by, require the arbitrator to decide that question, and 'doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.' Moses H. Cone Mem'l Hosp. [v. Mercury Constr. Corp.], 460 U.S. [1,] 24-25 [ (1983) ]. We merely note that the various documents at issue in this case underscore that it cannot be said with 'positive assurance,' Ex parte Colquitt, 808 So.2d [1018,] 1024 [ (Ala. 2001) ], that the arbitration provision in the 1995 agreement is not susceptible of an interpretation that would include disputes arising from the 2005 document, nor can it be said at this juncture that the dispute does not arise from the relationship described in the arbitration provision of the 1995 agreement."
Similarly, in Bugs "R" Us, the plaintiff urged this Court to hold that her negligence claim against a pest-control company arose from an apparently erroneous inspection report upon which the plaintiff relied when deciding to purchase real property-which did not contain an arbitration provision-as opposed to a termite-service agreement entered into with the same pest-control company at the time she closed upon the property approximately seven weeks later.
Finally, Managed Health Care"involve[d] several contracts between various parties."
Thus, over the course of these cases, this Court has made it clear that, once it is established (1) that two parties to a dispute are bound by a valid contract containing an arbitration provision, (2) that that same contract contains a clear indication that the parties have agreed to arbitrate the issue of arbitrability, and (3) that the subject dispute is at least arguably within the scope of that contract, this Court will not entertain arguments that the dispute actually falls within the scope of some other contract binding the parties that does not contain an arbitration provision. Rather, those arguments should be directed to the arbitrator. See, e.g., Blackmon,
*225Warrior Coal has not distinguished its case from Managed Health Care, Blackmon, and the other cases cited herein, and the trial court accordingly erred by not granting Eickhoff's motion to compel arbitration.
IV.
Warrior Coal sued Eickhoff alleging that the longwall shearers Eickhoff manufactured and sold it were defective. Eickhoff thereafter moved the trial court to compel Warrior Coal to arbitrate its claims pursuant to an arbitration provision in the master service agreements-contracts between the parties outlining Eickhoff's obligation to rebuild the longwall shearers after their initial term of use and providing for an Eickhoff employee to be on-site with the longwall shearers to provide support for their operation. The breach-of-warranty, breach-of-contract, and products-liability claims asserted by Warrior Coal in its action against Eickhoff are at least arguably connected to the master service agreements inasmuch as those contracts addressed Eickhoff's obligation to provide an employee to assist with the maintenance and operation of the longwall shearers. Accordingly, because the parties also agreed in the master service agreements that the AAA commercial arbitration rules would govern any arbitration, and because those rules empower the arbitrator to decide questions of arbitrability, the trial court erred when it instead at least implicitly resolved the arbitrability issue in favor of Warrior Coal in its order denying Eickhoff's motion to compel. That order is accordingly reversed and the cause remanded for the trial court to enter an order granting Eickhoff's motion to compel arbitration and staying proceedings in the trial court during the pendency of the arbitration proceedings.
REVERSED AND REMANDED.
Bolin, Shaw, Main, Wise, and Sellers, JJ., concur.
Bryan and Mendheim, JJ., concur in the result.
Parker, J., dissents.
Throughout this litigation, Warrior Coal has objected to calling this contract "the master service agreement," instead referring to it by its full title, "the SL750 shearer rebuild and life cycle service agreement," or as simply the "rebuild agreement." However, we note that the contract by its own terms refers to itself as the "master service agreement" or, more simply, as "the agreement." For convenience and to differentiate it from the various other contracts and agreements executed by the parties in this case, we likewise refer to it as "the master service agreement."
Eickhoff notes for this Court that Warrior Coal's action was filed in the Tuscaloosa Circuit Court as opposed to the Jefferson Circuit Court, which operates in Birmingham. We further note that Eickhoff, although arguing that the term "legal proceeding" includes arbitration proceedings, requested in its demand for arbitration that the arbitration hearing be held in Atlanta.
Warrior Coal argues to this Court that Eickhoff waived its argument that the arbitrator must decide the arbitrability issue in this case because Eickhoff did not make that argument in its initial motion to compel arbitration. Eickhoff argues, however, that a party moving to compel arbitration cannot anticipate that the opposing party will seek to avoid an arbitration agreement, much less respond to every potential argument the party might make in that regard. We agree; Eickhoff promptly responded to Warrior Coal's objection, and the arbitrability issue was thoroughly briefed and argued by both sides before the trial court entered its ruling. See Locklear Auto. Grp., Inc. v. Hubbard,
Much like the arbitration provision in the instant case limited itself to any dispute "arising out of or in connection with the [master service] agreement[s]," both of the arbitration provisions identified in Managed Health Care were limited to disputes arising out of or relating to the contracts in which the arbitration provisions were found.
Dissenting Opinion
I dissent for the reasons set forth in Justice Murdock's dissent in Federal Insurance Co. v. Reedstrom,
Case-law data current through December 31, 2025. Source: CourtListener bulk data.