We are committed to sharing decisions and providing legal updates that may be beneficial to you and your teams. Included below are summaries of cases recently released by Alabama Appellate Courts. Please reach out to any member of our
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Alabama Appellate Opinions Released
March 30, 2018 and April 6, 2018
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Forum Selection Clause Violates Alabama Heavy Equipment Dealer Act
Ex parte Terex USA, LLC
Cowin Equipment Company, the plaintiff in the underlying action, entered into a distributorship agreement with Terex in August 2015. The agreement provided that Cowin would sell Terex heavy equipment in Alabama, Georgia, and Florida. The agreement also contained a forum selection clause, which dictated that the agreement would be governed by Georgia law, and all disputes arising from the agreement would be exclusively decided by the United States District Court for the Northern District of Georgia. Alternatively, and in the event that the federal district court would not have jurisdiction over the action, the dispute would be resolved by the Georgia state court in Atlanta. After Terex entered into a new distributorship agreement with Warrior Tractor & Equipment Company, Cowin filed an action in Jefferson County against Terex and Warrior, alleging a violation of the Alabama Heavy Equipment Dealer Act (“the Act”). Terex sought to enforce the forum selection clause, and have the complaint dismissed pursuant to Rule 12(b)(3), arguing that the forum selection clause would “violate a strong public policy” set forth in the Act. The trial court denied the motion to dismiss, and Terex appealed.
The Alabama Supreme Court dismissed Terex’s petition for mandamus relief. The Court held that although the Act did not expressly address forum selection clauses, the Legislature “has expressed a strong public policy against any provision in a dealer agreement that would foreclose a dealer’s right to seek redress under the [Act] in the State of Alabama.” The outbound forum selection clause would therefore undermine the protections and remedies the Legislature afforded to heavy equipment dealers under the Act. The Court also emphasized the fact that the distribution agreement between Cowin and Terex also contained a choice-of-law provision. Therefore, the Court denied Terex’s petition for mandamus relief.
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Refusal to Find Arbitration Provision “Unconscionable”
SCI Alabama Funeral Services, LLC d/b/a Elmwood Cemetery and Mausoleum, et al. v. Johnnie Hinton
In 2004, Hinton signed a contract with SCI to purchase interment rights to two burial spaces in Elmwood Cemetery. The contract contained an arbitration provision which required “any claim” that Hinton “may have” against SCI must be resolved by arbitration. After Hinton’s husband died in 2016, SCI informed Hinton that someone else had mistakenly been buried in her husband’s space. Shortly thereafter, Hinton initiated an action against SCI and other defendants. The defendants collectively moved to compel arbitration. The trial court denied the motion to compel arbitration, and based its ruling solely on its finding that the arbitration provision was unconscionable. The defendants appealed.
The Alabama Supreme Court reversed and remanded. The Court noted that both procedural and substantive unconscionability must be shown before the unconscionability defense to an arbitration clause would be recognized. However, the Court found that the arbitration clause was not substantively unconscionable. Hinton argued on appeal that the overbreadth of the arbitration provision rendered it substantively unconscionable. However, the Court cited a line of Alabama cases which stand for the proposition that overbreadth, standing alone, would not render an arbitration provision substantively unconscionable. Therefore, the Court reversed the decision of the trial court, and remanded the case for the circuit court to enter an order granting the defendants’ motion to compel arbitration.
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Discovery Proceedings Stayed During the Pendency of an Appeal of an Arbitration Issue
Ex parte Alfa Insurance Corporation et al.
R.G. Howell, Jr. and M. Stuart Jones were insurance agents for an Alfa insurance agency in Mississippi. Their agency agreements with Alfa included an arbitration provision, as well as a provision requiring Howell and Jones to purchase “errors and omissions” insurance coverage. In 2012, Alfa accused Howell and Jones of selling competing products in contravention of their agency agreements. On March 27, 2013, Howell and Jones invoked the arbitration provision in their agency agreements by initiating separate arbitration proceedings against Alfa, seeking post-separation benefits and damages. In March 2014, arbitrators awarded Howell and Jones post-separation benefits and arbitration fees.
On November 13, 2014, Howell and Jones filed a complaint in the Montgomery County Circuit Court asserting claims of bad faith, abuse of process, the tort of outrage, and conspiracy against Alfa. On May 6, 2015, Howell and Jones filed a motion to compel Alfa to answer and to respond to their initial discovery requests. Alfa argued all the requested documents were protected by the attorney client privilege, and also filed a 12(b)(6) motion to dismiss, arguing that Howell and Jones’s claims were barred by the doctrine of res judicata, having been resolved in arbitration. The court denied this motion.
Alfa subsequently filed a motion to compel arbitration, dismiss, and stay proceedings, which was also denied. After filing a notice of appeal challenging the denial of its motion to compel arbitration, Alfa filed a motion to stay all proceedings pending the appeal. The motion to stay was denied, and Howell and Jones’s motion to compel discovery was granted.
This Court noted the general rule is that discovery proceedings, with the exception of discovery seeking to determine whether a party agreed to participate in arbitration, are stayed during the pendency of an appeal of an arbitration issue. The discovery sought in Howell and Jones’s motions to compel concern the substantive merits of their claims rather than issues collateral to the appeal of the order denying the motion to compel arbitration. Thus, this Court found the circuit court exceeded its discretion by entering orders allowing discovery to proceed before this Court resolved the issue whether Howell and Jones must arbitrate their claims against Alfa. This Court issued Alfa’s writ of mandamus and directed the circuit court to vacate its prior orders.
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Alabama Court of Civil Appeals
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