Ryan's Family Steak Houses, Inc., and two of its managers, Randy Mullins and Scott Moats, are defendants in an action pending in the Cullman Circuit Court. (Hereinafter the defendants are referred to collectively as "Ryan's.") They appeal from an order denying their motion to compel arbitration. An appeal is the generally accepted method of review when a trial court denies a motion to compel arbitration. Nissan Motor Acceptance Corp. v. Ross, 703 So.2d 324 (Ala.1997). We reverse and remand.
Tammy Regelin, Lisa Vandergrift, Paula Price, Tina Jones, Windi Self, and Brandi Hunt, all of them employees of Ryan's, brought this action against Ryan's, seeking money damages for invasion of privacy, the tort of outrage, assault and battery, and negligent training and supervision; all the claims arose from sexually inappropriate conduct they say occurred in the workplace. Ryan's moved to dismiss or, in the alternative, to compel arbitration, based upon arbitration agreements that were executed by each of the plaintiffs when they were hired by Ryan's. The plaintiffs filed an amended complaint naming Employment Dispute Services, Inc. ("EDSI"), as a defendant; seeking damages for fraud in the inducement; and seeking to reform their contracts of employment. After a hearing on the motion to dismiss or to compel arbitration, the trial court denied the motion.
Each of the plaintiffs signed an application for employment that contained the following statement at the top:
Each of the plaintiffs, by signing the application, agreed to arbitrate employment-related disputes; the application they signed had attached to it a separate document (which they also signed) that contained the following provision:
Ryan's is a South Carolina-based multistate restaurant chain; it purchases food products, advertising, and many other products and services from vendors throughout the United States. (Affidavit, James Randolph Hart, vice president for human resources for Ryan's, filed in support of the motion to compel arbitration.) The plaintiffs were at-will employees of Ryan's at one of its restaurants in Alabama, where Ryan's does business pursuant to Ala.Code 1975, § 10-3A-170. Clearly, the operation of Ryan's was commerce in fact, because it involved a multistate company that obtained, from outside Alabama, supplies to achieve its business purposes. Allied-Bruce Terminix Cos., Inc. v. Dobson, 513 U.S. 265, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995).
9 U.S.C. § 2.
On July 1, 1998, the trial court set the motion to dismiss or to compel arbitration for a hearing on August 21, 1998. There is no record of the hearing before this Court. The case action summary, which is before us, does show that on August 24, 1998, "after hearing," the trial judge denied the motion to dismiss or to compel arbitration.
The plaintiffs' brief contains the following in its "statement of the case":
The following statement appears in the reply brief filed by Ryan's:
Therefore, when the trial court denied arbitration, the only evidence before the court was evidence that would have supported an order compelling arbitration: 1) Hart's affidavit; 2) the signed applications for employment; and 3) the arbitration forms signed by each employee.
This Court has written:
Jim Burke Automotive, Inc. v. Beavers, 674 So.2d 1260, 1265 (Ala.1995). (Citation omitted.) "[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, 674 So.2d at 1265 n. 1. The plaintiffs did not do this.
The trial court should have compelled arbitration. Therefore, the order denying arbitration is reversed, and the cause is remanded for the trial court to grant the motion to compel arbitration.
REVERSED AND REMANDED.
KENNEDY, COOK, and JOHNSTONE, JJ., dissent.
COOK, Justice (dissenting).
I join in Justice Johnstone's dissent inasmuch as it concludes that EDSI is a foreign corporation that was not licensed in Alabama at the time the contracts in question were entered into, and, therefore, that the contracts, purporting to provide for arbitration of these disputes, are void and unenforceable. Present in this case is the principle, ably addressed by Justice Johnstone, that the order of the trial court is due to be affirmed if it is right for any reason, including a reason not expressed by the trial court in the record. Nonetheless, barring an affirmance, no greater consequence should befall this case than for it to be remanded for the trial court to determine whether the present state of the record, regarding EDSI's status, is factual.
I write further to discuss National American Insurance Co. v. Boh Brothers Construction Co., 700 So.2d 1363 (Ala. 1997), and Boh Brothers Construction Co. v. Nelson, 730 So.2d 132 (Ala.1999); specifically, to point out that my proposed resolution of this case is not inconsistent with those two opinions. More specifically, those cases do not stand for the proposition that Ala.Code 1975, § 10-2B-15.02(a), the "door closing statute," is unconstitutional as violating the Commerce Clause, United States Const. art. I, § 8, cl. 3. Indeed, neither this Court—nor any other court—has ever held § 10-2B-15.02(a) to be unconstitutional, or its application barred by the Commerce Clause.
National American dealt with the right of National American Insurance Company ("National American")—a surety under a contract with Mike Mitchell & Associates, Ltd. ("MMA")—to be reimbursed for payments it had made under the surety contract to creditors of, and upon the default of, MMA. 700 So.2d at 1364-65. The trial court had held that National American was not entitled to subrogation, on the ground that MMA had not qualified to do business in Alabama, as required by the door-closing statute, and, consequently, that MMA could not itself have enforced its contracts
As an alternative holding, the Court stated: "[T]he Interstate Commerce Clause of the Federal Constitution prohibits the application of that door-closing statute in this case." 700 So.2d at 1367 (emphasis added). In support of that conclusion, the Court discussed the holding and rationale of Cornwall & Stevens Southeast, Inc. v. Stewart, 887 F.Supp. 1490 (M.D.Ala.1995).
Stewart involved an action by Cornwall & Stevens Southeast, Inc. ("Cornwall"), against Ralph Stewart, its former employee, to enforce a noncompetition provision in an employment contract. Id. at 1490-91. It was undisputed that Cornwall was a foreign corporation "not registered to do business in Alabama." Id. at 1491. Cornwall contended, however, that it was "exempt from the registration requirement by virtue of the fact that [it was] engaged in interstate commerce." Id. The court concluded that the action fell "within the interstate commerce exception to the Alabama door closing provisions." Id. at 1494 (emphasis added). The court explained that "[t]he nature of the plaintiffs' business, insurance sales across state lines, [was] interstate." Id. Also, the court explained:
Id. Thus, Cornwall held—not that the door-closing statute was unconstitutional— but that Cornwall's claims fell within a well-recognized exception to the statute's prohibition.
Cornwall's analysis followed a wellworn path, explaining that "pursuant to the Commerce Clause, ... Alabama courts have consistently recognized an exception to this preclusion for non-registrants engaged in interstate commerce. See, e.g.,... North Alabama Marine, Inc. v. Sea Ray Boats, Inc., 533 So.2d 598 (Ala. 1988)...." Id. at 1492 (emphasis added). Indeed, this Court, in North Alabama Marine, explained that well-recognized rule as follows:
533 So.2d at 600-01 (emphasis added).
Clearly, Cornwall cannot be read as invalidating our door-closing statute. On
Similarly, National American cannot be read as invalidating our door-closing statute. A careful reading of National American reveals that in that case—as in Cornwall— the Court was merely applying our well-settled rule to the facts before it, illustrated by the words "in this case." 700 So.2d at 1367 (emphasis added). I concurred specially in that case, however, to object to the consideration of the door-closing statute as a basis on which to reverse the judgment. Id. at 1369 (Cook, J., concurring in the result).
Boh Brothers Construction Co. v. Nelson, 730 So.2d 132 (Ala.1999), involved another installment in the National American litigation. That case raised four issues, including: "(1) whether Nelson's claims [were] barred by the doctrine of res judicata, based on the outcomes in [previous installments of that litigation]," and "(2) whether Nelson's claims [were] barred by [the door-closing statute]." 730 So.2d at 133. We held, among other things, that Nelson's claims were barred by the doctrine of res judicata and that the second issue, namely, the applicability of the door-closing statute, was "moot." Id. at 133. I concurred in that holding.
Despite this holding as to the mootness of the door-closing statute, the Court—as it did in National American, based on the same underlying facts—suggested that the door-closing statute did not bar the claims.
For these reasons, § 10-2B-15.02(a) is valid, constitutional, and, as Justice Johnstone aptly demonstrates, applicable in this case. Therefore, I respectfully dissent.
KENNEDY, J., concurs.
JOHNSTONE, Justice (dissenting).
The majority holds that the Hart affidavit proves the arbitration agreements at least to the extent of swearing to their identity and to the signatures of the plaintiffs on the agreements, and therefore we must reverse and remand the case with instructions to compel arbitration, because the plaintiffs made the mistake of thinking they could reserve their proof of fraud in the inducement for summary judgment motions or for the trial itself. Of course, any party resisting arbitration by claiming fraud in the inducement must present evidence in the form of affidavits, deposition testimony, exhibits, or the like once the party moving to compel arbitration has
However, the trial court is due to be affirmed if it is right for any reason, even one not contemplated by the trial judge. See Morrison v. Franklin, 655 So.2d 964 (Ala.1995). In other words, while the trial court cannot be held in error on any ground not asserted to the trial court, it may be affirmed on any ground supported by the facts of record, whether or not argued to or considered by the trial court. As Justice Houston aptly wrote in Smith v. Equifax Services, Inc., 537 So.2d 463, 465 (Ala.1988):
Notwithstanding the paucity of the record, the materials before us show that the trial court should be affirmed, not reversed.
The manifest unfitness of the arbitrator is ground for denying a motion to compel arbitration before that arbitrator. See Gaer Bros., Inc. v. Mott, 144 Conn. 303, 130 A.2d 804 (1957); Bole v. Nationwide Ins. Co., 475 Pa. 187, 379 A.2d 1346 (1977); Nadalen Full Fashion Knitting Mills, Inc. v. Barbizon Knitwear Corp., 206 Misc. 757, 134 N.Y.S.2d 612 (N.Y.Sup.Ct.1954); Bernard v. Hemisphere Hotel Management, Inc., 16 Mass.App.Ct. 261, 450 N.E.2d 1084 (1983). The record in this case, and notably the arbitration agreement form itself, quoted at some length by the majority, reveals the arbitrator organization itself to be unfit in two respects.
First, the record shows that the arbitrator organization, Employment Dispute Services, Inc. ("EDSI"), in collaboration with the employer, Ryan's Family Steak Houses, enlisted as its own clients or customers not only these plaintiff employees but also all other applicants for employment with Ryan's. The arbitration agreement form drafted, executed, and promoted by EDSI goes so far as to require each other contracting party to agree that "I absolutely must use the EDSI forum...." This solicitation is unseemly for a judge, as an arbitrator is supposed to be. The collaboration with Ryan's also creates an inescapable bias in favor of Ryan's.
Second, the arbitration agreement form in the context of the record shows that EDSI is collaborating with Ryan's in an elaborate ruse of mutual third-party-beneficiary contracts, with EDSI serving as the straw man in each contract—some with Ryan's and its managerial personnel as the other contracting parties, and others with the applicants for employment as the other contracting parties, and with the arbitration provisions binding and benefiting both sets of other contracting parties not only as such but as third-party beneficiaries of all the other contracts—all for the obvious purpose of giving Ryan's all of the benefits of an employment contract with arbitration provisions but without any of the burdens of a written employment contract. The following language in the arbitration agreement form is noteworthy in this regard:
The facts revealing the unfitness of EDSI to serve as arbitrator for these opposing parties appear in the record considered by the trial court and by the Supreme Court. Neither EDSI nor Ryan's can claim any benign comparison between EDSI and the American Arbitration Association ("AAA"), which is frequently chosen and named in arbitration agreements without any solicitation or collusion by the AAA.
Furthermore, without contradiction in the record and at all times pertinent to this inquiry, EDSI has been a foreign corporation doing business but not qualified to do business in Alabama,
Section 10-2B-15.02(a), Ala.Code 1975 (1998 Supp.), provides as follows:
Under the undisputed facts and the foregoing statutory law, the arbitration agreements between the plaintiffs and EDSI are void and unenforceable. See Delta Constr. Corp. v. Gooden, 714 So.2d 975 (Ala.1998).
Ryan's' reliance on the arbitration agreements signed by the plaintiffs is based upon Ryan's' standing as a third-party beneficiary of these agreements. "`The law is clear that a third party beneficiary is bound by the terms and conditions of the contract that it attempts to invoke. "The beneficiary cannot accept the benefits and avoid the burdens or limitations of a contract."'" Georgia Power Co. v. Partin, 727 So.2d 2 (Ala.1998) (quoting Interpool Ltd. v. Through Transport Mut. Ins. Ass'n Ltd., 635 F.Supp. 1503, 1505 (S.D.Fla.1985)) (quoting Trans-Bay Engineers & Builders, Inc. v. Hills, 551 F.2d 370, 378 (D.C.Cir.1976)). Thus the voidness of the contract under which Ryan's claims arbitration constitutes valid ground for the decision of the trial court to deny Ryan's' motion to compel arbitration; and this court should not reverse that ruling.
Because the unfitness of EDSI and the voidness of the arbitration agreements, appearing of record, severally support the ruling by the trial court, I would affirm.
Ryan's filed an "ANSWER OF DEFENDANTS" on June 26, 1998, seven days after the Employees' amended complaint was filed on June 19, 1998. In its answer, at paragraph no. 47, Ryan's asserted: "Defendants deny each and every allegation contained in the Complaint not specifically responded to herein." The allegation in the amended complaint that "EDSI is a foreign corporation that does not and has not during the times relevant hereto received a certificate of authority to transact business and has otherwise failed to meet the requirements of § 10-215.02 of the Code of Alabama (1975)" was "not specifically responded to" in the answer; therefore, that allegation was controverted. As Justice Johnstone concedes in his dissent, "controverted pleadings do not constitute evidence in a factual dispute." 735 So.2d at 462. (Emphasis omitted.) Therefore, considering the state of the record, the order of the trial court should be reversed if that court denied arbitration based upon Ala.Code 1975, § 10-2B-15.02(a).
Justice Johnstone states in a footnote that "No. 47" of the answer applies only to "Defenses to Count Four (Negligent Training and Supervision)." 735 So.2d at 462. This is not correct.
Count Four, "Negligent Training and Supervision," contained three numbered paragraphs—1, 2, and 3—and a "Wherefore, the plaintiffs demand judgment" paragraph. That was all that was alleged in Count Four. In the defense to Count Four, the defendants pleaded as follows (paragraph no. 42 was the last paragraph addressing Count Three): "43.
Therefore, by paragraph no. 46 of their answer, the defendants had responded to every paragraph and allegation in Count Four.
Immediately before the "FIRST AFFIRMATIVE DEFENSE," which appears as paragraph no. 48, the following general denial appears: "47.
The record is also clear that Ryan's made a prima facie showing that it was entitled to arbitrate the Employees' claims. The Employees failed to present any evidence tending to rebut that prima facie showing. No evidence in the record indicates that Ryan's and EDSI are engaged in any form of fraud or collusion. We cannot presume fraud or collusion under the facts of this case, for to do so would effectively nullify any arbitration agreement calling for the use of a particular arbitration organization (e.g., the American Arbitration Association).