Amicus Curiae Brief — Citizens Bank v. Alafabco, Inc.
Supreme Court brief2003
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No. 02-1295 |
SUPREME COURT OF THE UNITED STATES
Sf
THE CITIZENS BANK,
Petitioner,
VS.
ALAFABCO. INC., DONNIE COTTINGHAM,
JOANN BECK, AND WESTON BECK,
Respondents.
+
On Petition for Wnt of Certioran
to the Supreme Court of Alabama
¢
BRIEF FOR ALABAMA PEST CONTROL
ASSOCIATION AS AMICUS CURIAE IN SUPPORT
OF THE PETITION FOR WRIT OF CERTIORARI
+
ALGERT S. AGRICOLA, JR.
G.R. TRAWICK *
JASON J. BAIRD
SLATEN & O’CONNOR, P.C.
Winter Loeb Building
105 Tallapoosa St., Ste. 101
Montgomery, AL 36104
(334) 396-8882
April 4, 2003 *Counsel of record
a.
Il.
QUESTIONS PRESENTED
The Petition presents an important question of
federal law which should be resolved by this
Court; namely, should the effects of interstate
commerce be aggregated in considering whether
the Federal Arbitration Act, 9 U.S.C. §1 et seq.,
is applicable to an arbitration clause in a
commercial contract between two intrastate
actors?
Should this Court exercise its discretion to
correct a misinterpretation by the Alabama
Supreme Court of federal law, which is in
conflict with every other state and federal
circuit that has addressed the issue?
«
TABLE OF CONTENTS
Page
QUESTIONS PRESENTED ..... 1... cceccecees i
TABLE. OF CONTENTS oc ccnecdsuuseees eee ii
TABLE. OF AUTIOOUEUMSD oo csccscetuesceubees iv
INTEREST OF THE AMICUS CURIAE .......... 1
SUMMARY OF THE ARGUMENT .............. 3
REASONS FOR GRANTING THE PETITION ...... 5
I.
The effects of interstate commerce should be
aggregated in considering whether the Federal
Arbitration Act, 9 U.S.C. §1 et seq., is
applicable to an arbitration clause in a
commercial contract between two intrastate
rarer 5
A. Wickard/ Lopez Require Aggregation in
Cases Involving Economic Activities. 5
B. Alabama’s Supreme Court Has
Repeatedly Refused To Enforce
Arbitration Agreements. .......... 7
C. Allied-Bruce Terminix Mandates that
Pest Control Arbitration Agreements be
ewer 13
il
D. Alafabco and its Progeny Continue the
Alabama Supreme Court’s
DE ccbegeeccesccocecs 14
II. This Court should exercise its discretion to
correct a misinterpretation by the Alabama
Supreme Court of federal law, which is in
conflict with every other state and federal
circuit that has addressed the issue. .... 17
DT PEERS GE UCO Cee nee coecerceees 19
INDEX TO APPENDICES
APPENDIX A - Opinion of the Alabama Supreme
Court in Bowen v. Security Pest Control, Inc., No.
1010783, 2003 Ala. Lexis 64 (Ala. Feb. 28, 2003) la
TABLE OF AUTHORITIES
Page
Cases cited:
Alafabco, Inc. v. Citizens Bank,
No. 1010703, 2002 Ala. Lexis 249
(Ala. Aug. 30, 2002). ...... oor 2, 12-14
Allied-Bruce Terminix Companies, Inc. v. Dobson,
513 U.S. 265 (1995) ....... 8,9, 12-16, 19
Bowen v. Security Pest Control, Inc.,
No. 1010783, 2003 Ala. Lexis 64
GEE. FU. GI, BD co occ cccccepes 14-17
Brown v. Investors Mortgage Co.,
121 F.3d 472 (9th Cir. 1997) ........... 18
Dailey v. Veneman,
2002 U.S. App. Lexis 24623
SE ED. bows See C RR Oe NSEC eCEs 18
Durr v. Booker,
1997 U.S. App. Lexis 435
CG SUED coencearescanewaeees 18
Ex parte Alabama Oxygen Co.,
433 So.2d 1158 (Ala. 1983) ........... 7,8
Ex parte Alabama Oxygen Co.,
452 So.2d 860 (Ala. 1984) .............. 8
Ex parte Costa & Head (Atrium), Ltd.,
486 So.2d 1272 (Ala. 1986) ............. 8
iV
Ex parte Warren,
548 So.2d 157 (Ala. 1989) .............. 8
Freedom Baptist Church of Delaware County v.
Township of Middleton,
204 F.Supp.2d 587 (E.D.Pa. 2002) ...... 18
Fner v. Westinghouse Electric Corp.,
303 F.3d 176 (2d Cir. 2002) ........... 18
G.D.F. Realty Investments, Inc. v. Norton,
2003 U.S. App. Lexis 5818 (Sth Cir. 2003)
Se ee re Peer Pee ee Poly ay eee 18
Gibbs v. Babbitt, ‘
214 F.3d 483 (4th Cir. 2000)........... 18
Haeberlin Farms, Inc. v. .G.F. Insurance Co.,
641 N.W.2d 816 (lowa 2002) ........... 18
Hodel v. Virginia Surface Mining & Reclamation
Association, 452 U.S.264 (1981). ........ 7
Hurst v. Tony Moore Imports, Inc.,
699 So.2d 1249 (Ala. 1997) ............. 9
National Association of Homebuilders v. Babbitt,
130 F.3d 1041 (D.C. App. 1997) ........ 18
Perry v. Thomas,
ee ED -acensanddeeebonhes 5
Sisters of the Visitation v. Cochrane Plastering Co.,
Inc., 775 So.2d 759 (Ala. 2000) .... passim
United Property Owners Association v.
Borough of Belmar, 777 A.2d 950
a SED co ccncoscccecuvevses 18
United States v. Lopez,
514 U.S. 549 (1995) ............. passim
United States v. Morrison,
529 U.S. 598 (2000) .......... 6, 7,11, 12
University of South Alabama Foundation v. Walley,
2001 U.S. Dist. Lexis 2975 (S.D. Ala. 2001)
PR SGD Po a tae Sen Re ae Sank Aha Rs Ox 18
Wickard v. Filburn,
gg OT Peerrrrre tr passim
York International, et al. v. Alabama Oxygen Co., Inc.,
SD a is oe ced daue ds 7
Statutes cited:
Ala. Code 1975, § 8-1-41(3) ...............4.- 7
I ig in, os ieee wuss 10
EE cs cucivnccnewkenaveevusenenes 5
In the
SUPREME COURT OF THE UNITED STATES
o
THE CITIZENS BANK,
Petitioner,
vs.
ALAFABCO, INC., DONNIE COTTINGHAM,
JOANN BECK, AND WESTON BECK,
Respondents.
¢
BRIEF FOR ALABAMA PEST CONTROL
ASSOCIATION AS AMICUS CURIAE IN SUPPORT
OF THE PETITION FOR WRIT OF CERTIORARI
Amicus curae Alabama Pest’ Control
Association’ respectfully requests a Writ of Certiorari
be issued to review the opinion of the Alabama
Supreme Court in this case.
INTEREST OF THE AMICUS CURIAE
The Alabama Pest Control Association is a
nonprofit, voluntary-membership, trade association
' Pursuant to Supreme Court Rule 37.6, amicus curiae Alabama
Pest Control Association states that this brief was prepared in its
entirety by amicus curiae and its counsel. No monetary
contribution toward the preparation or submission of the brief was
made by any person other than amicus curiae, its members, and
its counsel.
organized to promote the interest of the pest control
operators in the State of Alabama. Its membership
includes not only pest control operators, but also
suppliers, manufacturers, and consultants. Many
members of the Alabama Pest Control Association are
pest control firms doing business in two or more
states. Each year Alabama pest control operators
purchase millions of dollars of equipment, supplies
and services from out of state manufacturers and
providers. These supplies are transported across state
lines and distributed within the State of Alabama as
part of interstate commerce. Many of the pest control
operators’ termite contracts contain arbitration
agreements. These arbitration agreements are
effectively rendered unenforceable by the Alabama
Supreme Court’s decision in Alafabco, Inc. v. Citizens
Bank, No. 1010703, 2002 Ala. Lexis 249 (Ala. Aug. 30,
2002).
This brief in support of Citizens Bank’s petition
for writ of certiorari is submitted to emphasize to this
Court that the standard set by Alabama state courts
for enforcing arbitration provisions effectively limits
the plenary power of Congress, contradicts the federal
policy favoring arbitration, defeats the primary
purpose of the Federal Arbitration Act (“FAA”) and
denies members of the Alabama Pest Control
Association their contracted-for right to arbitration.
Pursuant to Supreme Court Rule 37, both
petitioner Citizens Bank and respondent Alafabco, Inc.
’
'
granted the Alabama Pest Control Association leave to
file an amicus curiae brief supporting Citizens Bank's
petition for writ of certiorari. A copy of the letters
granting leave to file an amicus curiae brief is
submitted contemporaneously with this amicus curiae
brief.
SUMMARY OF THE ARGUMENT
This Court should grant the petition for
certiorari to resolve a compelling federal question:
Whether the Alabama Supreme Court can unilaterally
refuse to apply the aggregation principle found in
Wickard v. Filburn, 317 U.S. 111 (1942) and Wickard’s
progeny in determining the applicability of the FAA to
a commercial intrastate contract. This Court should
further grant the writ to resolve a split among the
states and between Alabama and the federal circuits
with respect to this same issue.
In Wickard, this Court held that even local
activities not generally regarded as commerce could be
reached by Congress power to regulate commerce if
the activity exerted a substantial economic effect on
interstate commerce. This Court further emphasized
that while that party’s own contribution to the demand
for wheat may be trivial by itself, that was “not enough
to remove him from the scope of federal regulation
where, as here, his contribution; taken together with
that of many others similarly situated, is far from
we
trivial.” Wickard, 317 U.S. at 127-28 (internal cites
omitted).
In Sisters of the Visitation v. Cochrane Plastering
Co., Inc., 775 So.2d 759 (Ala. 2000), the Alabama
Supreme Court held that in order to trigger the FAA,
the contract must substantially affect interstate
commerce. id. at 763. Since that decision, the
Alabama Supreme Court has released an ever-growing
body of decisions implicitly rejecting the aggregation
principle and has held that in order to enforce an
arbitration agreement in an intrastate contract, the
party seeking to invoke arbitration must demonstrate
that the contract involves a substantial effect upon
interstate commerce. Further, the Alabama Supreme
Court has refused to use the aggregation principle of
Wickard and its progeny in determining whether a
commercial activity has a substantial effect on
interstate commerce.
REASONS FOR GRANTING THE PETITION
I. The effects of interstate commerce should
be aggregated in considering whether the Federal
Arbitration Act, 9 U.S.C. §1 et seq., is applicable to
an arbitration clause in a commercial contract
between two intrastate actors.
A. Wickard/ Lopez Require Aggregation
in Cases Involving Economic
Activities.
The Alabama Supreme Court has misapplied
this Court’s holding in United States v. Lopez, 514 U.S.
549 (1995) to deny the rghts of thousands of
Alabama’s citizens to proceed to contracted-for
arbitration. |
Congress’ authority under the FAA is expansive,
and coincides with that granted under the Commerce
Clause. Perry v. Thomas, 482 U.S. 483, 490 (1987). In
Wickard v. Filburn, 317 U.S. 111 (1942), this Court
held that under the Commerce Clause, Congress had
the power to limit the production of wheat by a farmer
whose crop size was minimal. This Court held that in
determining the effects of an activity on interstate
commerce, courts are to consider the aggregate effect
of that type of activity on interstate commerce. /d. at
124-28. This Court further rejected the direct/indirect
effects analysis of earlier decisions:
Even if appellee’s activity be local and
though it may not be regarded as
commerce, it may still, whatever its
nature, be reached by Congress if it
exerts a substantial economic effect on
interstate commerce, and this
irrespective of whether such effect is
what might at some earlier time have
been defined as “direct” or “indirect.”
Wickard, 317 U.S. at 125.
This Court’s Wickard aggregation principle was
reaffirmed in United States v. Lopez, supra, where this
Court stated that for a federal statute which regulates
commercial transactions to be a valid exercise of
Congress’ commerce power, the aggregate nationwide
participation in that activity must substantially affect
interstate commerce. Lopez, 514 U.S. at 556. Indeed,
Lopez specifically requires that activities which arise
out of or are connected with a commercial transaction
are to be viewed in the aggregate to determine whether
they substantially affect interstate commerce. /d. at
561.
In the more recent case of United States v.
Morrison, 529 U.S. 598 (2000), this Court reaffirmed
that Wickard’s aggregation principle applies in cases
involving economic activity. Morrison, 529 U.S. at611,
n.4. This is in keeping with this Court’s longstanding
principle that even activity which is purely intrastate
in character may be regulated by Congress where the
6
activity, combined with like conduct by others
similarly situated, affects commerce among the States
or with foreign nations. Hodel v. Virginia Surface
Mining & Reclamation Association, 452 U.S.264 (1981).
This Court has therefore made it exceedingly
clear that in Commerce Clause analysis of cases
involving intrastate economic activity, the commercial
activity is to be examined under the aggregation
principle. Morrison, 529 U.S. at 611; Lopez, 514 U.S.
at 561; Hodel, 452 U.S. at 277; Wickard, 317U.S. at
124-28.
B. Alabama’s Supreme Court Has
Repeatedly Refused To Enforce
Arbitration Agreements.
In order to view this certiorari petition with the
proper perspective, it is necessary to provide a brief
background of the historical hostility of the Alabama
Supreme Court towards arbitration. Alabama
statutory law prohibits enforcement of an agreement to
submit a controversy to arbitration. Ala. Code 1975,
§ 8-1-41(3). In Ex parte Alabama Oxygen Co., 433
So.2d 1158 (Ala. 1983), the Alabama Supreme Court
held that the FAA was not applicable in state courts.
After this Court vacated the Alabama Supreme Court’s
judgment and remanded the case, York International,
et al. v. Alabama Oxygen Co., Inc., 465 U.S. 1016
(1984), the Alabama Supreme Court only grudgingly
acknowledged that the FAA applied to cases brought in
courts in the State of Alabama. See Ex parte Alabama
Oxygen Co., 452 So.2d 860, 861 (Ala. 1984).
Following the Ex parte Alabama Oxygen
opinions, the Alabama Supreme Court adopted the
“slightest-nexus” test for arbitration, holding that the
FAA applied in cases where the agreement had the
slightest nexus with interstate commerce. Ex parte
Costa & Head (Atrium), Ltd., 486 So.2d 1272 (Ala.
1986). However, the Alabama Supreme Court abruptly
rejected the “slightest-nexus” test in Ex parte Warren,
548 So.2d 157 (Ala. 1989). In Warren, the Alabama
Supreme Court adopted the “contemplated substantial
interstate activity” standard for determining whether
the FAA applied in Alabama state courts; that is,
whether the parties subjectively contemplated, at the
time of contracting, that the subject of the contract
would involve substantial interstate commerce. Id. at
159-60.
This Court specifically rejected this standard in
Allied-Bruce Terminix Companies, Inc. v. Dobson, 513
U.S. 265 (1995), holding “[w]je find the interpretive
choice difficult, but for several reasons we conclude
that the first interpretation (‘commerce in fact’) is more
faithful to the statute than the second (‘contemplation
of the parties).” Id. at 278. This Court further tated,
“The parties do not contest that the transaction in this
case, in fact, involved interstate commerce. In
addition to the multistate nature of Terminix and
Allied-Bruce, the termite-treating and hou se-repairing
material used by Allied-Bruce in its (allegedlv
inadequate) efforts to carry out the terms of the plan,
came from outside Alabama.” 513 U.S. at 282.
Following this Court’s Allied-Bruce Terminix
decision, the Alabama Supreme Court initially
interpreted that case to hold that even an intrastate
transaction involves interstate commerce if it has
virtually any tangible effect on the generation of goods
or services for interstate markets and their distribution
to the customer. Hurst v. Tony Moore Imports, Inc., 699
So.2d 1249, 1257 (Ala. 1997). Interestingly, Hurst also
stated, “However, we do not view Lopez as signaling a
retreat by the Supreme Court from its expansive
interpretation of ‘interstate commerce’ in cases clearly
involving commercial transactions.” Id. at 1257.”
However, this interpretation did not last.
In Sisters of the Visitation v. Cochrane Plastering
Co., Inc., 775 So.2d 759 (Ala. 2000), the Alabama
Supreme Court revised its opinion of the FAA’s scope
again. The Alabama Supreme Court held that in order
to trigger the FAA, the contract must “substantially
affect” interstate commerce. Id. at 763. The Alabama
Supreme Court based this revision upon language it
erroneously interpreted as dicta in United States v.
- The Alabama Supreme Court has not vet explained why its
interpretation of Lopez changed so markedly from 1997 to 2000.
9
Lopez, supra. The Sisters of the Visitation Court
established a five-part test for determining whether a
contract “substantially affects” interstate commerce to
such a degree as to trigger the FAA: (1) the citizenship
of the parties; (2) the orgin of any tools and
equipment; (3) the allocation of cost of services and
materials; (4) the subsequent movement across state
lines of the object of the services; and (5) the degree of
separability from other contracts. Sisters of the
Visitation, 775 So.2d at 765-67.
The Alabama Supreme Court mischaracterized
the language in Lopez as dictum to justify imposing
the more stringent “substantially affects” test, without
the Wickard/ Lopez aggregation principle, for employing
the FAA:
The Lopez Court referred to the
requirement of a substantial effect as
generally applicable to regulation of
economic activity. Id. at 560, 115 S.Ct.
1624. That broad reference, albeit
dictum, does not suggest that the
requirement of substantial effect would
not apply to the question whether a
particular contract is subject to the FAA.
Sisters of the Visitation, 775 So.2d at 761.
Lopez was a case involving 18 U.S.C. §922(q),
the Gun-Free School Zones Act of 1990, and was not
a true “commerce” case, a fact not lost upon the Lopez
10
Court. Lopez, 514 U.S. at 561 (“Section 922(q) is a
criminal statute that by its terms has nothing to do
with commerce or any sort of economic enterprise”).
As this Court noted in United States v. Morrison, 529
U.S. at 609, several significant considerations led to
this Court’s decision in Lopez. First, and most
important, the Morrison Court noted that Lopez
involved analysis of a criminal statute that by its terms
had nothing to do with commerce or any sort of
economic enterprise. Morrison, 529 U.S. at 610. As
Morrison explained:
Both petitioners and Justice Souter’s
dissent downplay the role that the
economic nature of the regulated activity
plays in our Commerce Clause analysis.
But a fair reading of Lopez shows that
the noneconomic, criminal nature of the
conduct at issue was central to our
decision in that case ... Lopez’s review of
Commerce Clause case law demonstrates
that in those cases where we have
sustained federal regulation of intrastate
activity based upon the activity’s
substantial effects on _ interstate
commerce, the activity in question has
been some sort of economic endeavor.
Morrison, 529 U.S. at 610-11. More importantly, the
Alabama Supreme Court simply ignored the
inconvenient fact that Lopez reaffirmed that Wickard’s
aggregation principle applies in cases involving
11
economic activity. Lopez, 514 U.S. at 561. See also
Mornson, 529 U.S. at 611, n.4.
Lopez was released approximately three months
after Allied-Bruce Terminix, and by its language did not
modify the holding in that case; however, in Sisters of
Visitation, released almost five years after Lopez, the
Alabama Supreme Court discerned a heretofore-
undiscovered requirement in Lopez that it must now
employ the “substantial effect” test in arbitration
cases. Since, the Sisters of the Visitation test looks at
each commercial transaction in isolation, it does not
employ the aggregation principle as plainly required by
Wickard and its progeny.
Thus, in Sisters of the Visitation, the Alabama
Supreme Court attempted to evade the United States
Supreme Court’s holding in Wickard so as to exclude
local or indirect effects on interstate commerce unless
the transaction, by itself, substantially affects
interstate commerce. In short, the Alabama Supreme
Court rejected, albeit sub _ silentio, Wickard’s
aggregation principle, a fact noted in dissents in
Sisters of the Visitation, 775 So.2d at 779 (Hooper, C.J.,
dissenting), and in Alafabco, 2002 Ala. Lexis at *30
(See, J., dissenting). This Court expressly commands
use of the aggregation principle in Wickard; indeed, in
Wickard this Court plainly stated “/t}]hat appellee’s own
contribution to the demand for wheat may be trivial by
itself is not enough to remove him from scope of
12
federal regulation, where, as here, his contribution,
taken together with that of many others similarly
situated, is far from trivial.” Wickard, 317 U.S. at 127-
28.
Cc. Allied-Bruce Terminix Mandates that
Pest Control Arbitration Agreements
be Enforced.
This Court’s decision in Allied-Bruce Terminix
Cos., Inc. v. Dobson, supra, succinctly summarized the
scope of Congressional power under the Commerce
Clause and established controlling principles regarding
arbitration which the Alabama Supreme Court has
ignored in Alafabco and its progeny. In Allied-Bruce
Terminix, this Court held that the basic purpose of the
FAA is to overcome court’s refusals to enforce
arbitration agreements and that the FAA’s reach is
expansive and coincides with that of the Commerce
Clause. Id. at 270, 274-75. Allied-Bruce Terminix
involved a pest control company which had an
arbitration agreement in its contract. This Court
reversed the Alabama Supreme Court’s decision
denying arbitration, finding that the case involved
interstate commerce because of the multi-state nature
of the defendants and because the termiticide and
house repair materials used by defendants came from
out of state. Allied-Bruce Terminix, 513 U.S. at 282. In ~
reliance upon this Court’s decision in Allied-Bruce
Terminix, Alabama pest control operators began
employing arbitration agreements in their customer
13
contracts. Contrary to the view of the Alabama
Supreme Court, these arbitration agreements are due
to be enforced under this Court’s precedents.
D. Alafabco and its Progeny Continue the
Alabama Supreme Court’s
Intransigence.
Sisters of the Visitation’s progeny have extended
and expanded the original error, and have jeopardized
the rights of Alabama’s pest control operators who
acted in reliance upon Allied-Bruce Terminix. In
Alafabco, No. 1010703, 2002 Ala. Lexis 249 (Ala. Aug.
30, 2002), the Alabama Supreme Court parsed a series
of individual transactions between the parties so as to
exclude indicia that Citizens Bank routinely conducts
business outside the State of Alabama, that Alafabco
owns and uses materials manufactured outside
Alabama, and that Alafabco operates its business with
funds borrowed from the Bank from consideration of
the applicability of the FAA to the transactions in
question. Alafabco, 2002 Ala. Lexis at *14.
The true absurdity of the Sisters of the Visitation
and Alafabco holdings was demonstrated when the
Alabama Supreme Court released its most recent
decision in this line of cases in Bowen v. Security Pest
Control, Inc., No. 1010783, 2003 Ala. Lexis 64 (Ala.
Feb. 28, 2003)(reproduced at App. la-28a). In Bowen,
the Alabama Supreme Court extrapolated Sisters of the
14
Visitation and Alafabco to reach a result that was
squarely at odds with this Court’s decision in Allied-
Bruce Terminix, supra.
In Bowen, the plaintiffs entered into a termite
control contract with Security Pest Control (SPC)
which contained an arbitration agreement. The
plaintiffs subsequently sued in state court, alleging
breach of contract and tort claims. SPC’s motion to
compel arbitration was granted by the trial court. The
Alabama Supreme Court, relying on the Sisters of the
Visitation factors, could not support arbitration unless
the records demonstrated that the tools and
equipment used by the pest control company were
purchased or leased specifically for the project. It
further held that in order to show a nexus with
interstate commerce, SPC had to prove that it
purchased the termiticide specifically for use on the
Plaintiffs’ house. Bowen, 2003 Ala. Lexis at *8-9.
Thus, Bowen refused to consider the aggregate
effect of Alabama pest control industry’s purchases of
termiticide, tools, and equipment from out of state, a
position squarely at odds with Wickard, Lopez, and
Allied-Bruce Terminix. The Bowen opinion failed to
reconcile its holding with the aggregation principle of
Wickard and Lopez, despite a strongly-worded dissent
raising Wickard’s aggregation principle. Bowen, 2003
Ala. Lexis at *15-18 (See, J. dissenting). Bowen
offered a weak distinction from the clearly
15
contradictory decision this Court issued in Allied-Bruce
Terminix, stating, “However, unlike this case, ‘the
parties [in Allied-Bruce Terminix] did not contest that
the transaction in [that] case ... involved interstate
commerce.’” Bowen, 2003 Ala. Lexis at *10, n.3.
This attempt to distinguish Bowen from Allied-
Bruce Terminix is disingenuous. First, this Court’s
decision in Allied-Bruce Terminix did not rest on the
fact that neither party disputed that the transaction in
that case affected interstate commerce; rather, the
dispute hinged on the parties’ subjective
contemplation of whether the contract would affect
interstate commerce. Allied-Bruce Terminix, 513 U.S.
at 278. Second, the parties in Bowen did not contest
that the case involved interstate commerce (plaintiffs
did not contest SPC’s affidavit that it purchased
equipment and supplies from out of state); rather, the
parties contested the extent of the contract’s effect
upon interstate commerce. Third, the Bowen opinion
itself acknowledges that the pest control company’s
termiticide was purchased outside the State of
Alabama. Bowen, 2003 Ala. Lexis at *8-9. This same
factor was a major reason for this Court’s finding that
the pest control contract in Allied-Bruce Terminix
affected interstate commerce. Allied-Bruce Terminix,
513 U.S. at 282. Plainly put, the Alabama Supreme
Court’s attempts in Bowen to distinguish the facts of
that case from those of Allied-Bruce Terminix are more
pretextual than substantive.
16
|
The holding in Bowen that SPC must
demonstrate that the tools, equipment and termiticide
used in treating the plaintiffs’ house were purchased
or leased specifically for that contract. Bowen, 2003
Ala. Lexis at *6-9, in order to prove a substantial effect
on interstate commerce sufficient to trigger the FAA is
defiantly contrary to this Court’s longstanding
aggregation principle in economic cases. It is not
possible to reconcile Bowen with this Court’s line of
cases applying the Wickard aggregation principle.
The effect of this new line of Alabama cases on
the Alabama pest control industry will be to eliminate
the possibility of arbitrating disputes arising out of
pest control contracts. Very few, if any, pest control
operators purchase equipment or supplies for each
individual contract.
II. This Court should exercise its discretion to
correct a misinterpretation by the Alabama
Supreme Court of federal law, which is in
conflict with every other state and federal
circuit that has addressed the issue.
Finally, amicus curiae Alabama Pest Control
Association urges this Court to grant certioran
because the issue discussed in Issue | is the subject of
a split among the states and circuits. The Alabama
Supreme Court’s holding regarding the aggregation
principle in Commerce Clause economic cases is in
conflict with the virtually every other court which has
addressed the question.
17
More particularly, the Sisters of the Visitation
holding is in conflict with the following decisions in
other states and circuits, all of which employ the
aggregation principle, either expressly or impliedly, in
determining the reach of the Commerce Clause in
intrastate commercial contracts. See, e.g., Frier v.
Westinghouse Electric Corp., 303 F.3d 176, 200-01 (2d
Cir. 2002); Gibbs v. Babbitt, 214 F.3d 483, 493 (4th
Cir. 2000); G.D.F. Realty Investments, Inc. v. Norton,
2003 U.S. App. Lexis 5818, *15-16 (Sth Cir. 2003);
Dailey v. Veneman, 2002 U.S. App. Lexis 24623, *12-
13 (6th Cir. 2002); Brown v. Investors Mortgage Co.,
121 F.3d 472, 476 (9th Cir. 1997); Durr v. Booker,
1997 U.S. App. Lexis 435, *4 (10th Cir. 1997); National
Association of Homebuilders v. Babbitt, 130 F.3d 1041,
1046 (D.C. App. 1997); University of South Alabama
Foundation v. Walley, 2001 U.S. Dist. Lexis 2975, *13-
14 (S.D. Ala. 2001); Freedom Baptist Church of
Delaware County v. Township of Middleton, 204
F.Supp.2d 587 (E.D.Pa. 2002); Haeberlin Farms, Inc. v.
.G.F. Insurance Co., 641 N.W.2d 816 (lowa 2002); and
United Property Owners Association v. Borough of
Belmar, 777 A.2d 950 (N.J. Sup. 2001).
All other jurisdictions follow this Court’s
requirement, as they must, that in determining
whether the Commerce Clause controls in economic
cases, the aggregation principle is used to determine
whether the activity has a substantial effect upon
interstate commerce. This Court should exercise its
18
discretion to bring Alabama into conformity with the
above-cited authorities and with the decisions in
Wickard and Lopez.
CONCLUSION
This Court should grant Citizens Bank’s petition
for certiorari to reaffirm its decisions in Wickard,
Allied-Bruce Terminix, and Lopez regarding the primacy
of the FAA in cases involving aggregated effects on
interstate commerce, and also to resolve the conflict
between the Alabama Supreme Court and other
jurisdictions (including this Court) which have
examined this issue.
The petition for writ of certiorari of Citizens
Bank should be granted.
Respectfully submitted,
ALGERT S. AGRICOLA, JR.
G.R. TRAWICK *
JASON J. BAIRD
SLATEN & O’CONNOR, P.C.
Winter Loeb Building
105 Tallapoosa St., Suite 101
Montgomery, AL 36104
(334) 396-8882 (P)
(334) 396-8880 (F)
April 4, 2003 Counsei of Record
19
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APPENDIX A
Michael Bowen and Britta Bowen v. Security Pest
Control, Inc.
1010783
SUPREME COURT OF ALABAMA
2003 Ala. LEXIS 64
February 28, 2003, Released
PRIOR HISTORY:
Appeal from Tallapoosa Circuit Court. (CV-01-093).
DISPOSITION: |
REVERSED AND REMANDED. :
JUDGES:
BROWN, Justice. Houston, Lyons, Johnstone,
Harwood, and Woodall, JJ., concur. Moore, C.J.,
concurs in the result. See, J., dissents.
OPINION BY:
BROWN
la
The plaintiffs, Michael Bowen and Britta Bowen,
appeal from an order of the Tallapoosa Circuit Court
compelling them to arbitrate their claims against
defendant Security Pest Control, Inc. ("SPC"). We
reverse and remand.
In April 1999, Michael Bowen entered into a termite
control agreement ("the contract”) with SPC pursuant
to which SPC agreed to treat the Bowens’ house for
termites. The contract indicated that the cost of the
treatment was $ 1,490, and it contained the following
arbitration provision:
"In the event of a dispute between [SPC] and/or its
employees and Customer with respect to interpretation
of the terms and conditions of this agreement,
including the making of this agreement, or breach of
any provision of this agreement, the parties hereby
expressly agree to submit their dispute to binding
arbitration for resolution in accordance with the rules
and requirements of the American Arbitration
Association. The parties acknowledge and understand
that by agreeing to submit their dispute to binding
arbitration they are effectively waiving their right to
trial by jury as a means of resolving disputes.
Furthermore, the parties acknowledge that they desire
to arbitrate any dispute arising from this agreement in
an effort to resolve such dispute(s) quickly and avoid
the costs of litigation. The parties further agree that
any arbitration proceedings shall take place in
Alexander City, Alabama.”
2a
SPC treated the Bowens’ house with a termiticide
called "Navigator TC.” The treatment process included
boring holes under the Bowens’ house with special
drilling equipment.
In June 2000, the Bowens discovered that termites
had damaged their house. Specifically, they allege that
termites had destroyed approximately 33 1/3% of the
entire structure of their house, and that it will cost $
50,000 to repair the damage. In May 2001, the Bowens
brought this action against SPC, asserting numerous
claims, including breach of contract, negligence, and
fraud. In August 2001, SPC moved the trial court to
compel arbitration. The trial court granted SPC's
motion, and the Bowens appeal.
Standard of Review
Our standard of review of an order compelling
arbitration is well settled:
"This Court's review of an order granting a motion
to compel arbitration is de novo. See W.D. Williams,
Inc. v. Ivey, 777 So. 2d 94 (Ala. 2000); Patrick Home
Ctr, Inc. v. Karr, 730 So. 2d 1171 (Ala. 1999).
Therefore, this Court must determine ‘whether the trial
judge erred on a factual or legal issue to the
substantial prejudice of the party seeking review. Ex
parte Roberson, 749 So. 2d 441, 446 (Ala. 1999)."
3a
BankAmerica Hous. Servs. v. Lee, 833 So. 2d 609, 617
(Ala. 2002). Furthermore:
"A motion to compel arbitration is analogous to a
motion for asummary 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 that contract evidences a
transaction affecting interstate commerce. Id. ‘After 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 n1 (Ala. 1995) (opinion on
application for rehearing.”
Fleetwood Enters., Inc. v. Bruno, 784 So. 2d 277, 280
(Ala. 2000).
Discussion
Federal law demands the enforcement of written
arbitration agreements that “substantially affect|]
interstate commerce.” Ballard Servs., Inc. v. Conner,
807 So. 2d 519, 521 (Ala. 2001) (quoting Sisters of the
Visitation v. Cochran Plastering Co., 775 So. 2d 759,
767 (Ala. 2000)); see also the Federal Arbitration Act,
9U.S.C.§ 1 et seq. ("the FAA"). Moreover, the burden
of proving that a transaction substantially affects
4a
interstate commerce is on the party attempting to
compel arbitration. Jim Burke Auto., Inc. v. McGrue,
826 So. 2d 122, 129 (Ala. 2002). If that party fails to
make such a showing, "the burden of proof does not
shift to the opposing party and the motion should be
denied.” Ex parte Greenstreet, Inc., 806 So. 2d 1203,
1207 (Ala. 2001).
In Sisters of the Visitation, this Court set out five
factors to be used in determining whether a
transaction substantially affected interstate commerce.
Those factors include: "(1) citizenship of the parties; (2)
where the tools and equipment originated: (3)
allocation of costs of services and materials; (4)
subsequent movement across state lines; and (5)
degree of separability from other contracts." Aronov
Realty Brokerage, Inc. v. Morris, [Ms. 1001292, April
26, 2002] __ So. 2d__,__, 2002 Ala. LEXIS ! 29 (Ala.
2002) (citing Sisters of the Visitation). Applying those
five factors to the particular facts of this case, we
conclude that SPC did not demonstrate that this
transaction had a substantial impact on «nterstate
commerce.
1. Citizenship of the Parties
It is undisputed that the Bowens are both citizens
of Alabama. Moreover, SPC is an Alabama corporation
with its principal place of business in Alexander City,
Alabama.
Sa
2. Origination of the Tools and Equipment
In an affidavit supporting the motion to compel
arbitration, Mike Booker, the owner of SPC, claims
that some of the tools and equipment used to treat the
Bowens’ house were purchased from out-of-state
companies. Specifically, Booker states that the drilling
equipment used to bore into the earth below the
Bowens house was purchased from Jim Simmons
Company, located in Nashville, Tennessee. Attached to
the affidavit are invoices from Jim Simmons Company
for the purchase of a drill bit, purchased in January
1999 for approximately $ 150; a rotary hammer,
purchased in February 1999 for approximately $ 500;
and an adapter, purchased in March 1999 for
approximately $ 126. Also, Booker indicates that the
company truck used during the treatment of the
Bowens’ house was purchased in Roswell, Georgia, in
April 1996.
The second factor--origination of the tools and
equipment--"cannot support arbitrability unless the
record demonstrates the extent to which tools and
equipment moving interstate were ‘leased or
purchased specially for the project.” Brookfield Constr.
Co. v. Van Wezel, [Ms. 1010353, June 28, 2002] __
So. 2d _., __, 2002 Ala. LEXIS 204 (Ala. 2002)
(quoting Sisters of the Visitation, 775 So. 2d at 766). It
is apparent that the truck used during the treatment
of the Bowens’ house was purchased three years
before the Bowens entered into the contract with SPC;
thus, it was most likely not purchased specially for
6a
treating the Bowens house. Furthermore, it is unclear
whether the drilling equipment, which was purchased
before the execution of the contract with the Bowens,
was purchased with that contract in mind. Because
the record is silent as to the extent the truck and the
drilling equipment were purchased specifically for the
performance of this contract, i.e., for treating the
Bowens’ house, "no substantial effect on interstate
commerce can be developed based on [SPC’'s] acquiring
in interstate commerce any tools and equipment to be
used in the performance of this contract.” Sisters of the
Visitation, 775 So. 2d at 766. See also Brookfield
Constr. Co.,___ So. 2d at ___, 2002 Ala. LEIXS 204 at
*4 (holding that the defendant failed to show the extent
to which a construction project affected interstate
commerce because, in part, the record “failed to show
the extent to which tools and equipment moving
interstate were ‘leased or purchased specially for the
project” (quoting Sisters of the Visitation, 775 So. 2d at
766)); Aronov Realty Brokerage, Inc., supra (same).
3. Allocation of Costs of Services and Materials
SPC claims that the termiticide used to treat the
Bowens’ house was purchased from an out-of-state
company and traveled in interstate commerce.
Specifically, Booker's affidavit indicates that the
Navigator TC used to treat the Bowens house was
manufactured in Brookfield, Connecticut. Booker also
claims that SPC orders the chemical through VoPak, a
national distributor of the product. The termuticide is
7a
shipped from Connecticut to Atlanta, Georgia, where
VoPak’s southeastern regional office is located. It is
then shipped to Birmingham before it is ultimately
delivered to SPC in Alexander City.
Instead of addressing whether the specific
Navigator TC used to treat the Bowens house was
purchased in this manner, Booker s affidavit gives only
the general procedure SPC uses for purchasing the
termiticide. It does not indicate whether the Navigator
TC used in treating the Bowens house was purchased
specifically for that project, or whether it was instead
purchased at a previous time for use in all contracts.
nl
nl The Bowens, in their brief to this Court,
argue that the Navigator TC "came-to-rest” in
Birmingham before it was purchased by SPC
from VoPak. See Ex parte Kampis, 826 So. 2d
819, 822 (Ala. 2002) (explaining that, under the
come-to-rest doctrine, when a product, which
has moved in interstate commerce, reaches
stores in Alabama, its flow in wmiQterstate
commerce has ceased). SPC, on the other hand,
argues that the Navigator TC stopped in
Birmingham merely for “distribution” purposes.
The record does not clearly indicate which is the
case.
Because "the record provides no information from
which we can determine what portion of the amount
[the Bowens] paid [SPC] is allocable to the cost of local
labor and overhead and what portion is allocable to
materials or services specifically purchased for use or
consumption in performance of the contract,” SPC has
not presented “sufficient evidence to justify the
conclusion that {the Bowens] contract substantially
affects interstate commerce by reason of dependence
upon materials and services moving in interstate
commerce.” Sisters of the Visitation, 775 So. 2d at 766.
See also Brookfield Constr. Co., supra; Aronov Realty
Brokerage, supra.
4. Subsequent Movement Across State Lines
As was the case in Sisters of the Visitation, the
object of the services provided by the contract in this
case, i.e., the Bowens’ house, is incapable of
movement across state lines. 775 So. 2d at 766.
Moreover, there is no allegation that the treatment of
the structure with termiticide is capable of movement
across state lines. Therefore, this factor is inapplicable
in this case. n2
n2 In their discussion of this factor, SPC
claims that because Navigator TC is regulated
under the Federal Insecticide, Fungicide, and
Rodenticide Act, 7 U.S.C. § 136 et seq., the use
of this chemical triggers application of the FAA.
9a
_—
However, the fact that the chemical used in
treating the house is regulated by the federal
government does not demonstrate how the
transaction is subject to subsequent movement
across state lines. Moreover, as we explained in
Alafabco, Inc. v. Citizens Bank, [Ms. 1010703,
August 30, 2002] __ So. 2d ___, __, 2002 Ala.
LEXIS 249 (Ala. 2002): “Holding that a
transaction is subject to the FAA simply by
virtue of ... Congressional regulation of some
aspect of one party's business|{] would effectively
transform every ‘local’ transaction into a
‘national’ one."
5. Degree of Separability From Other Contracts
This Court has stated that this factor “cannot
support arbitrability, unless the record demonstrates
the extent of the subject transaction’s ‘impact on other
contracts that do substantially affect interstate
commerce.” Brookfield Constr. Co., __ So. 2dat__,
2002 Ala. LEXIS 204 at *4 (quoting Sisters of the
Visitation, 775 So. 2d at 767; emphasis added in
Brookfield Constr. Co.). As SPC notes, this factor has
no impact in this case; thus, we need not address it.
Conclusion
We hold that the record in this case does not
demonstrate that the transaction at issue substantially
10a
affected interstate commerce under the test set forth
in Sisters of the Visitation. n3 Therefore, we reverse
the trial court's order compelling arbitration and
remand the case for proceedings consistent with this
opinion.
n3 We note that Allie 1-Bruce Terminix Cos. v.
Dobson, 513 U.S. 265, 130 L. Ed. 2d 753, 115%.
Ct. 834 (1995), is distinguishable from the
instant case. In Allied-Bruce, the United States
Supreme Court held that claims by homeowners
against a termite-control service provider were
enforceable under the FAA if the transaction to
which the contracts related involved interstate
commerce, regardless of the contemplation of the
parties. Id. at 281. However, unlike this case,
"the parties [in Allied-Bruce] did not contest that
the transaction in [that] case ... involved
interstate commerce.” 513 U.S. at 282.
REVERSED AND REMANDED.
Houston, Lyons, Johnstone, Harwood, and
Woodall, JJ., concur.
Moore, C.J., concurs in the result.
See, J., dissents.
DISSENT BY:
SEE
lla
DISSENT:
SEE, Justice (dissenting).
The main opinion states that under the five-part
test adopted in Sisters of the Visitation v. Cochran
Plastering Co., 775 So. 2d 759 (Ala. 2000), "we
conclude that Security Pest Control, Inc. ("SPC") did
not demonstrate that this transaction had a
substantial impact on interstate commerce." |
respectfully dissent.
Standard of Review
This Court reviews de novo a trial court's grant or
denial of a motion to compel arbitration. Parkway
Dodge, Inc. v. Hawkins, [Ms. 1010898, February 7,
2003] ___ So. 2d ____, 2003 Ala. LEXIS 30 (Ala. 2003);
Tefco Fin. Co. v. Green, 793 So. 2d 755 (Ala. 2001); see
also Rule 4(d), Ala. R. App. P. This Court has held that
"to prevail on an assertion of arbitrability, the moving
party is required to produce some evidence which
tends to establish its claim,” Jim Burke Auto., Inc. v.
Beavers, 674 So. 2d 1260, 1265 (Ala. 1995) (opinion on
rehearing) (quoting In re American Freight Sys., Inc.,
164 B.R. 341, 345 (D. Kan. 1994)), and “has the
burden of proving the existence of a contract calling for
arbitration and proving that that contract involves a
transaction affecting interstate commerce,” Tefco Fin.
Co. v. Green, 793 So. 2d at 758(quoting Ex parte Caver,
742 So. 2d 168, 172 n.4 (Ala. 1999)\(emphasis added).
12a
Commerce Clause Jurisprudence
In 1824, in Gibbons v. Ogden, 22 U.S.(9 Wheat.) 1, 6 L.
Ed. 23 (1824), the Supreme Court of the United States
addressed the scope of the Commerce Clause. The New
York Legislature had granted Ogden a monopoly "nght
to navigate waters” between Elizabethtown, New
Jersey, and New York, New York. Id. Gibbons had
infringed that right by operating two ships on the
Elizabethtown-New York route, and the New York
court had enjoined Gibbons's operation. The Supreme
Court of the United States reversed, finding that
navigation was commerce and that Congress's power
over commerce preempted New York's licensing
scheme. Chief Justice Marshall, writing for the Court,
stated:
"Commerce, undoubtedly, is traffic, but it is
something more: it is intercourse. ...
"The subject to which the power is next applied, is
to commerce ‘among the several States.’ The word
‘among’ means intermingled with. A thing which is
among others, is intermingled with them. Commerce
among the States, cannot stop at the external
boundary line of each State, but may be introduced
into the interior."
22 U.S. (9 Wheat.) at 189-94. Chief Justice Marshall
continued:
"It is not intended to say that these words
comprehend that commerce, which is completely
internal, which is carried on between man and man in
a State, or between different parts of the same State,
and which does not extend to or affect other States. ...
The genius and character of the whole
government seem to be, that its action is to be applied
to all the external concerns of the nation, and to those
internal concerns which affect the States generally;
but not to those which are completely within a
particular State, which do not affect other States, and
with which it is not necessary to interfere, for the
purpose of executing some of the general powers of the
government.”
22 U.S. (9 Wheat.) at 194-95.
Nonetheless, it was not until 1887 that the passage
of the Interstate Commerce Act, 15 US.C. § 1,
“ushered in a new era of federal regulation under the
commerce power.” United States v. Lopez, 514 U.S. 549,
554, 131 L. Ed. 2d 626, 115 S. Ct. 1624 (1995). Then,
in 1937, in response to the New Deal legislation, the
Supreme Court of the United States upheld the
National Labor Relations Act and the National Labor
Relations Board's decision to end the practice of
discharging employees for union activity. NLRB v.
Jones & Laughlin Steel Corp., 301 U.S. 1, 81 L. Ed. 893,
l4a
57 S. Ct. 615 (1937). n4 The Supreme Court held that
intrastate activities could “have such a close and
substantial relation to interstate commerce that their
control is essential or appropriate to protect that
commerce from burdens and obstructions ...." Jd. at
37.
n4 In NLRB v. Jones & Laughlin Steel Corp.,
the National Labor Relations Act was challenged
in its entirety as an attempt to regulate not only
commerce but all industry; however, the Court
addressed only the actions that burdened or
obstructed commerce.
Four years later, the Supreme Court upheld the
Fair Labor Standards Act, which regulated the hours
and wages of employees engaged in _ local
manufacturing and prohibited the shipment of goods
produced by manufacturers that were paying their
employees less than the prescribed minimum wage or
that were requiring more than the prescribed
maximum number of hours of work. United States v.
Darby, 312 U.S. 100, 85 L. Ed. 609, 61 S. Ct. 451
(1941). In Darby, the Court reaffirmed the notion that
substantial intrastate activities could affect interstate
commerce. Subsequently, the Supreme Court stated
that "activities that affected interstate commerce
directly were within Congress’ power; activities that
affected interstate commerce indirectly were beyond
lSa
Congress’ reach.” Lopez, 514 U.S. at 555, citing A.L.A.
Schechter Poultry Corp. v. United States, 295 U.S. 495,
546, 79 L. Ed. 1570, 55-S. Ct. 837 (1935\(emphasis
added).
In 1942, in Wickard v. Filburn, 317 U.S. 111, 87 L.
Ed. 122, 63 S. Ct. 82 (1942), the Supreme Court of the
United States held that, under the Commerce Clause,
Congress had the power to limit the production of
wheat by’a farmer who had sowed 23 acres of wheat
for consumption on his own farm. nS The Supreme
Court instructed, first, that in weighing the effect of an
activity on interstate commerce, courts are to consider
the aggregate effect of that type of activity on interstate
commerce. 317 U.S. at 124-28; see also Hodel v.
Virginia Surface Mining & Reclamation Ass'n, 452 U.S.
264, 277, 69 L. Ed. 2d 1, 101 S. Ct. 2352 (1981); Tefco
Fin. Co., 793 So. 2d at 759. Furthermore, the Wickard
Court expressly rejected the earlier "direct- /indirect-
effects" analysis of interstate commerce; thus, the
Court stated:
"Even if appellee's activity be local and though it
may not be regarded as commerce, it may still,
whatever its nature, be reached by Congress if it exerts
a substantial economic effect on interstate commerce,
and this irrespective of whether such effect is what
might at some earlier time have been defined as ‘direct’
or ‘indirect.'” n6 :
l6a
nS Filburn had challenged the
constitutionality of the Agricultural Adjustment
Act, which established a wheat-acreage allotment
of 11.1 acres and a normal yield of 20.1 bushels
of wheat per acre. Wickard, 317 U.S. at 114.
n6 In Sisters of the Visitation v. Cochran, 775
So. 2d 759, 764 (Ala. 2000), the case on which
the majority relies for its decision, a majority of
this Court, interpreting Wickard, stated:
“We conclude that the question whether the
actions of an individual, which actions standing
alone would be considered ‘local’ actions or
actions with only an ‘indirect’ influence on
interstate commerce, may be considered to have
a substantial influence on interstate commerce
is to be determined by considering how critical
the regulation of all similarly situated persons’
activity is to the accomplishment of the primary
purpose of a statute drawn to regulate an activity
clearly having a substantial effect on interstate
commerce."
Thus, in Sisters of the Visitation this Court
purported to modify the United States Supreme
Court's Wickard decision to exclude local or
indirect effects unless those effects are
sufficiently "critical" to the primary purpose of
the statute. In the language recited from
Wickard, the United States Supreme Court
17a
expressly rejected this kind of direct-indirect
analysis; it was rejected for good reason because
of the infinite malleability of the concept of
directness. Wickard, 317 U.S. at 125.
317 U.S. at 125. The Wickard Court noted that the
fact that Filburn's contribution to the demand for
wheat "may be trivial by itself is not enough to remove
him from the scope of federal regulation, where ... his
contribution, taken together with that of many others
similarly situated, is far from trivial." Id. at 127-28.
For over 50 years, following Wickard and up until
Lopez, 514 U.S. 549, 131 L. Ed. 2d 626, 115 S. Ct.
1624, the Supreme Court did not overturn a
congressional act on the basis that the act violated the
Commerce Clause. Then, in Lopez, the Supreme Court
found that the relationship between the Gun-Free
School Zones Act and interstate commerce was too
attenuated to find a substantial effect on commerce.
n7 Lopez was convicted of possession of a firearm in a
school zone in violation of the Gun-Free School Zones
Act. Reviewing several Commerce Clause cases, the
Court identified three categories of activity Congress
may regulate under its commerce power:
n7 Justice Kennedy, concurring specially,
and joined by Justice O'Connor, said that the
Gun-Free School Zones Act “upsets the federal
18a
balance to a degree that renders it an
unconstitutional assertion of the commerce
power ....” Lopez, 514 U.S. at 580 (Kennedy, J..,
concurring specially).
"First, Congress may regulate the use of the
channels of interstate commerce. ... Second, Congress
is empowered to regulate and protect the
instrumentalities of interstate commerce, or persons or
things in interstate commerce, even though the threat
may come only from intrastate activities. ... Finally,
Congress’ commerce authority includes the power to
regulate those activities having a substantial relation
to interstate commerce, ... i.e., those activities that
substantially affect interstate commerce.”
514 U.S. at 558-59.
The government had argued in Lopez that crime in
and around schools has a substantial effect on
interstate commerce because “the costs of violent
crime are substantial” and “violent crime reduces the
willingness of individuals to travel to areas within the
country that are perceived to be unsafe.” Jd. at 563-64.
The Supreme Court, however, refused to accept the
government's argument because, it reasoned, the Gun-
Free School Zones Act had “nothing to do with
‘commerce.” n8 Id. at 561. Lopez did not overrule
Wickard, but instead restricted the application of the
Commerce Clause power to matters of commerce. n9
19a
n8 The Court noted that if the Gun-Free
School Zones Act passed constitutional muster,
"it is difficult to perceive any limitation on federal
power ....” 514 U.S. at 564.
n9 In United States v. Ballinger, the United
States Court of Appeals for the Eleventh Circuit
discussed the Lopez restriction on the
application of the Commerce Clause, stating:
"The talismanic repetition over the years of
the phrase ‘fullest extent’ of congressional
commerce power has led some to confuse this
concept of the outer limits of congressional
authority for an independent grant of authority.
"Perhaps this confusion springs from a failure
to distinguish between regulation of economic as
opposed to non-economic activity. When the
regulated intrastate activity is a commercial or
economic one, the Constitution permits the
required substantial effect on interstate
commerce to be located in the aggregate impact
of the regulated activity upon interstate
commerce. Wickard v. Filburn, 317 U.S. 111, 63
S. Ct. 82, 87 L. Ed. 122 (1942). ... The
Constitution permits such aggregation of effects
to justify congressional regulation of purely
intrastate economic activity when the absence of
such regulation would undercut a larger
20a
regulatory scheme affecting interstate commerce.
Lopez, 514 U.S. at 561, 115 S. Ct. 1624.
"No such aggregation of local effects is
constitutionally permissible in reviewing
congressional regulation of intrastate, non-
economic activity. United States v. Morrison, 529
U.S. 598, 617, 120 S. Ct. 1740, 146 L. Ed. 2d 658
(2000) {striking down the Violence Against
Women Act as an unconstitutional federal
regulation of intrastate, non-economic, criminal
behavior].... No aggregation of local effects is
permissible to elevate a non-economic activity's
insubstantial effect on interstate commerce into
a substantial one in order to support federal
jurisdiction. {| Lopez, supraj.”
United States v. Ballinger, 312 F.3d 1264 (11th
Cir. 2002).
The Federal Arbitration Act
The Supreme Court of the United States held in
Marine Transit Corp. v. Dreyfus, 284 U.S. 263, 76 L. Ed.
282, 52 S. Ct. 166 (1932), that the Federal Arbitration
Act (‘the FAA") is a constitutional exercise of
Congress's power. The FAA provides:
"A written provision in any maritime transaction or
a contract evidencing a transaction involving
commerce to settle by arbitration a controversy
2la
thereafter arising out of such contract or transaction
... Shall be valid, irrevocable, and enforceable, save
upon such grounds as exist at law or in equity for the
revocation of any contract.”
9U.S.C. § 2. "The [FAA] preempts contrary state law
(specifically, contrary law based on Ala. Code 1975, §
8-]-41/3),,| nlO ] and public policy) and renders
enforceable a written predispute arbitration agreement
but only if that agreement appears in a contract
evidencing a transaction that ‘involves’ interstate
commerce.” Southern United Fire Ins. Co. v. Knight, 736
So. 2d 582, 585-86 (Ala. 1999); see Tefco Fin. Co. v.
Green, supra.
nl0 Alabama Code 1975, § 8-1-41(3), makes
void any agreement to arbitrate future, as
opposed to present, disputes.
The Supreme Court of the United States has
broadly interpreted the term “involving commerce” as
being the “functional equivalent" of the phrase
"affecting commerce.” Allied-Bruce Terminix Cos. v.
Dobson, 513 U.S. 265, 274, 130 L. Ed. 2d 753, 115S.
Ct. 834 (1995). Congress's use of the phrase “affecting
commerce” “normally signals Congress’ intent to
exercise its Commerce Clause powers to the full ...." Jd.
at 273.
In Sisters of the Visitation v. Cochran Plastering Co.,
775 So. 2d 759 (Ala. 2000), the Sisters of the Visitation
contracted with an in-state contractor to renovate a
chapel located in Alabama and owned by the Sisters.
Pursuant to an arbitration provision in the contract,
the Sisters sought arbitration of their dispute with the
contractor. In my dissent in that case, | noted that the
majority held that the FAA can apply to a contract only
if that "individual transaction ‘substantially affects’
interstate commerce.” 775 So. 2d at 782.
From the time of our decision in Sisters of the
Visitation in March 2000, this Court has routinely
denied a party the right to arbitration where that party
failed to prove that the individual transaction
substantially affected interstate commerce. See
McConnell Auto. Corp. v. Jackson, [Ms. 1010006,
November 1, 2002] __ So. 2d___, 2002 Ala. LEXIS 319
(Ala. 2002) (denying arbitration in an action brought
by a cash purchaser of a used car); Brookfield Constr.
Co. v. Van Wezel [Ms. 1010353, June 28, 2002] __ So.
2d __, 2002 Ala. LEXIS 204 (Ala. 2002) (denying
arbitration in an action brought by homeowners
against a construction company}; Alafabco, Inc. v.
Citizens Bank, [Ms. 1010703, August 30, 2002}__ So.
2d __, 2002 Ala: LEXIS 249 (Ala. 2002) (denying
arbitration in an action by a builder against the bank
that provided financing for the builder's projects);
Aronov Realty Brokerage, Inc. v. Morris, [Ms. 1001292,
April 26, 2002] ___ So. 2d __, 2002 Ala. LEXIS 129
(Ala. 2002) (denying arbitration in an action brought
23a
by a purchaser of a condominium unit against a real
estate brokerage, real estate agent, and condominium
association); Liberty Nat'l Life Ins. Co. v. Douglas, 826
So. 2d 806 (Ala. 2002) (refusing to compel arbitration
where an employee of an insurance company sued her
employer); Ex parte Kampis, 826 So. 2d 819 (Ala. 2002)
(denying arbitration in an action brought by a home
purchaser against a contractor); Alternative Fin.
Solutions, LLC v. Colburn, 821 So. 2d 98i (Ala. 2001)
(denying arbitration where borrowers brought an
action against lenders challenging the legality of
certain loans); Ex parte Learakos, 826 So. 2d 782 (Ala.
2001)denying arbitration in an action brought by a
home purchaser against a real estate company and its
agents).
The Supreme Court of the United States stated in
Lopez that in order for a federal statute that regulates
commercial transactions to be a valid exercise of
Congress's Commerce Clause power, the aggregate
nationwide participation in that activity -- not the
individual transaction in isolation -- must
“substantially affect" interstate commerce. Lopez, 514
U.S. 549 at 556, 131 L. Ed. 2d 626, 115 S. Ct. 1624.
This "substantial-effect” test -- used to determine the
constitutionality of a statute under the Commerce
Clause -- was not a new standard created in Lopez,
but has been the test of a statute's constitutionality
since the early twentieth century. Jd. at 555-57.
Once it has been determined that Congress acted
within its Commerce Clause power in enacting a
24a
a ee
'
ee tc te Ct”
statute, whether that statute reaches certain activities
does not depend on whether that individual act, when
considered separately from all similar acts, has a
substantial effect on commerce. As Wickard made
clear, Filburn's "trivial" wheat production could be
reached by the Agricultural Adjustment Act. The
standard established by the Supreme Court of the
United States is that “where a general regulatory
statute bears a substantial relation to commerce, the
de minimis character of individual instances arising
under that statute is of no consequence.” Lopez, 514
U.S. at 558 (quoting Maryland v. Wirtz, 392 U.S. 183,
197 n.27, 20 L. Ed. 2d 1020, 88 S. Ct. 2017 (1968)).
The standard for the application of the FAA to an
individual contract was made clear in Allied-Bruce
Terminix Cos. v. Dobson, 513 U.S. 265, 267, 130 L. Ed.
2d 753, 115 S. Ct. 834 (1995). The FAA provides in
pertinent part that "[a] written provision in ... a
contract evidencing a transaction involving commerce
... Shall be valid ...." 9 U.S.C. § 2 (emphasis added).
The Supreme Court of the United States held in Allied-
Bruce Terminix that the requirement in the FAA that
an individual contract involve interstate commerce
should be read in the broadest possible terms because
the word “involving” signals “an intent to exercise
Congress’ commerce power to the full.” 513 U.S. at
277. The Court also stated that to be subject to the
FAA a contract did not have to evidence a transaction
that was “'substantially’ interstate.” Jd. at 269.
25a
Thus, I believe this Court erred when it held in
Sisters of the Visitation that a particular contract, in
order to be enforceable under the FAA must, by itself,
have a substantial effect on interstate commerce, and
this Court errs again today by applying the Sisters of
the Visitation standard to this case.
The Supreme Court's analysis in Allied Bruce-
Terminix recognized the substantial impact that the
pest-control industry has upon interstate commerce.
The contract at issue in that case, much like the
contract between SPC and the Bowens in this case,
was between an Alabama homeowner and an Alabama
office of a pest-control company, and it involved an
agreement to initially treat the house and then to re-
treat it for as long as the contract remained in place.
In contrast to the present case, the parties in Allied-
Bruce Terminix "did not contest that the transaction in
[that] case, in fact, involved interstate commerce."
Allied Bruce-Terminix, 513 U.S. at 282. However, the
grounds upon which the Supreme Court found that
the contract did involve interstate commerce were that
"in addition to the multistate nature of Terminix and
Allied-Bruce, the termite-treating and house-repairing
material used by Allied-Bruce in its (allegedly
inadequate) efforts to carry out the terms of the
[Termite-Protection] Plan, came from _ outside
Alabama.” 513 U.S. at 282.
’
In Southern Energy Homes, Inc. v. McCray, 788 So. 2d
882, 883 (Ala. 2000), this Court also recognized that
26a
using materials acquired outside Alabama to complete
a project in Alabama can provide a link to interstate
commerce sufficient to invoke the FAA. This Court
held in that case that the purchase of a home
manufactured in Alabama _ involved interstate
commerce where the home was constructed from parts
acquired outside Alabama.
In this case, Booker, the owner of SPC, stated in
his affidavit that the "Navigator TC" termiticide used on
the Bowens’ house was manufactured in Connecticut
and that SPC ordered it from a business in Atlanta,
Georgia. Booker also stated in his affidavit that SPC
purchased the company truck used in treating the
Bowens’ house in Georgia and the tools used to bore
under the house to deliver the termiticide from
Tennessee. Additionally, Booker stated that SPC
maintains licenses to perform pest-control services in
Georgia. Therefore, although it is undisputed that the
contract for the pre-treatment of the Bowens’ home
and the continued pest-control treatment of the home
is activity that occurred within Alabama, SPC and
Booker have presented the requisite "'some evidence
which tends to establish [their] claim,’ Jim Burke
Auto., Inc. v. Beavers, 674 So. 2d at 1265 (opinion on
rehearing) (quoting Jn re American Freight Sys., Inc.,
164 B.R. at 345), that the pest-control contract
between SPC and the Bowens, considered in the
aggregate, substantially affects interstate commerce. .
SPC has shown that the contract provides for
binding arbitration and that Michael Bowen signed
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that contract. Although Britta Bowen did not sign the
pest-control contract, the arbitration provision is
nevertheless enforceable against her because she
alleges a breach of that contract. Ex parte Dyess, 709
So. 2d 447, 451 (Ala. 1997) (a party who seeks the
benefits of a contract is bound by all provisions of the
contract, not just those he or she chooses to enforce).
The trial court correctly enforced the written
arbitration agreement contained in the contract. |
would affirm the trial court's order granting the motion
to compel arbitration; therefore, | dissent.
28a
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.