Petition for Writ of Certiorari — Jim Skinner Ford, Inc. v. Warren

89-567 0 | HEED

oct 4 1888

F. SPANIOL, JR.

CLERK

=

No. 89-

IN THE

Supreme Court Of Che United States

October Term, 1989

JIM SKINNER FORD, INC.,

Petitioner, :

v. -

JACK D. WARREN and JUANITA WARREN, |

Respondents.

PETITION FOR WRIT OF CERTIORARI

TO THE ALABAMA SUPREME COURT

WALTER J. SEARS, III

Counsel of Record

MICHAEL R. PENNINGTON

Bradley, Arant, Rose & White

1400 Park Place Tower

Birmingham, Alabama 35203

(205) 521-8000

JOHN M. GALESE

Galese & Moore

3058 Independence Drive

Birmingham, Alabama 35253

(205) 870-0663

i

QUESTION PRESENTED FOR REVIEW

Given this Court’s express holding in Perry v. Thomas, 482

U.S. 483, 490 (1987), that the Federal Arbitration Act

provides “for the enforcement of arbitration agreements

within the full reach of the Commerce Clause,” and given

that the Commerce Clause enables Congress to regulate

intrastate sales of cars, can the Alabama Supreme Court

refuse to enforce an arbitration agreement between a new

car dealer and a buyer on the ground that the Act does not

preempt state anti-arbitration law unless the parties actually

“contemplated substantial interstate activity”?

PARTIES TO THE PROCEEDINGS BELOW

AND LISTING OF PARENT CORPORATIONS,

SUBSIDIARIES AND AFFILIATES

Plaintiffs

Jack D. Warren

Juanita Warren

Defendants

Jim Skinner Ford, Inc.

Ford Motor Company

First Alabama Bank of Birmingham

Only Petitioner Jim Skinner Ford, Inc. and Respondents

Jack D. Warren and Juanita Warren have a direct interest in

the outcome of this Petition, since they were the only parties

to the arbitration agreement at issue. Jim Skinner Ford, Inc.

has no parent corporations, subsidiary corporations, or af-

filiated corporations.

TABLE OF CONTENTS

Page

~ QUESTION PRESENTED FOR REVIEW.......... i

PARTIES TO THE PROCEEDINGS BELOW

AND LISTING OF PARENT CORPORATIONS,

SUBSIDIARIES AND AFFILIATES ............... ll

PR gg 6 6) ESS lil

TABLE OF AUTHORITIES ...................... iV

CO EE cc ccc ewer ccncccccnccens 2

RGM SG aoe bes ece sss scccccsccccce 2

CONSTITUTIONAL PROVISIONS

AND STATUTES INVOLVED ................... 2

STATEMENT OF THE CASE .................... 2

REASONS FOR GRANTING THE WRIT ......... 6

A. This Case Represents Another Attempt By

The Alabama Supreme Court To Limit The

Application Of The FAA In Alabama In Dis-

regard Of Congressional Intent And Of Prior

Decisions Of This Court ..................... 6

B. The Ruling Below Has Important Implications

To The Public And To The Uniform Applica-

tion Of Federal Law ..................0.. ae 7

C. The Alabama Supreme Court’s Holding That

The Sale Of A New Car By A Dealer To A

Purchaser Located Within The Same State

Does Not Affect Interstate Commerce Con-

flicts With Numerous Federal Statttes That

Regulate Such Sales ............... Cannan dare 9

es oaks sh wnc esc scensecuccees 11

PER Ruins eaidine vies vnc seen eccsconsess A-1

Opinion of Alabama Supreme Court ............. A-1

- Order of Circuit Court for St. Clair

EER ee A-11

Transcript of February 11, 1988 Hearing......... A-13

Federal Arbitration Act, 9 U.S.C. § 1, et seg. ....... A-28

Be er eee A-35

aya

iV

TABLE OF AUTHORITIES

Cases: 3 Page

Burke County Public Schools Board of Education v. Shaver,

305 N.C. 408, 279 BE. BA (TIGA) nose 00 sep ccwerece. 7

Cahoon v. Ziman, 298 S.E.2d 729 (N.C. App. 1983),

review denied, 301 S.E.2d 388 (N.C. 1983) ............. 7

Ex parte Alabama Oxygen, 433 So.2d 1158 (Ala. 1983),

vacated and remanded, 465 U.S. 1016 (1984) ......... 6, 7

Katzenback v. McClung, 379 U.S. 294 (1964) ............. 9

Metro Industriai Painting Corp. v. Terminal

Construction Co., 287 F.2d 382 (2d Cir. 1961),

cert. demsed, SOB US. GET (ISBT) oa oss occ ep cee cnc c aces 4

Moses H. Cone Memorial Hospital v. Mercury Construction —

Conn, SL BiB a tinh waka ha ag one case 8,9

Paramore v. Inter-Regional Financial Leasing Co.,

316 S.E.2d 90 (N.C. 1984) .......... 0. cece eee eee 7

Perry v. Thomas, 482 U.S. 483 (1987) ............ 1, 7-9, 11

Prima Paint Corp. v. Flood & Conklin Mfg. Co.,

ee a er ho ea beau )

~ Robert Lawrence Co. v. Devonshire Fabrics, Inc.,

271 F.2d 402 (2d Cir. 1959), cert. dismissed,

re ce eenswnee 7

Snyder v. Smith, 736 F.2d 409 (7th Cir. 1984),

cert. denied, 469 U.S. 1037 (1984) .................... 7

Southland Corp. v. Keating, 465 U.S. 1 (1984)..... 1, 5-9, 11

Tenney Engineering, Inc. v. United Electrical

Radio &§ Machine Workers of America, Local 437,

oe, eee 7

Wells v. Mobile County Board of Realtors,

ee Ee SP RG IG As his ding oxen csceaesewar’ 6

Wickard v. Filburn, 317 U.S. 111 (1942) ........2.....4.. 9

Vv

TABLE OF AUTHORITIES — (Continued)

Statutes: ’ ; Page

so ook waa eatabdoemaw ae’ 1

ME PIED oon c dccccccccccacvacccues 1,5

Consumer Credit Protection Act

es iiss owes ney beveveseat 10

Consumer Product Safety Act,

Pe I hk Sic reecccescesnccevens 10

Federal Arbitration Act.

po errr eee eee eee ied ance ae passim

Magnuson-Moss Warranty-Federal Trade

Commission Improvements Act,

Tere e eee e eee Tere 2, 10

Motor Vehicle Information and Cost Savings Act,

Bee Re ROE 6 Wis deca bs ohencses acces 9, 10

National Traffic and Motor Vehicle Safety Act,

ee eeeeerrrcrrerr er Tre reree 10

Constitutional Provisions:

Supremacy Clause of Art. VI

of the United States Constitution .................... ]

The Commerce Clause of Art. I, Sec. 8

of the United States Constitution ................ passim

No. 89-

IN THE

Supreme Court Of The United States

October Term, 1989

JIM SKINNER FORD, INC.,

Petitioner,

¥.

JACK D. WARREN and JUANITA WARREN,

Respondents.

PETITION FOR WRIT OF CERTIORARI

TO THE ALABAMA SUPREME COURT

Petitioner Jim Skinner Ford, Inc. respectfully requests this

Court to issue a writ of certiorari to review the judgment of

the Alabama Supreme Court entered in this action on July 7,

1989.

Petitioner submits that the decision of the Court below

may be summarily reversed on authority of Perry v. Thomas,

482 U.S. 483 (1987), and Southland Corp. v. Keating, 465 U.S.

1 (1984).

2

OPINIONS BELOW

The opinion of the Alabama Supreme Court below has not

yet been reported and is set forth in the Appendix to this

Petition. (App. at A-1-10). The opinion of the Circuit Court

of Si. Clair County, Alabama is unreported and is set forth in

the Appendix to this Petition. (App. at A-11-13).

JURISDICTION

The opinion of the Alabama Supreme Court was filed on

July 7, 1989. (App. at A-1-10). This Court has jurisdiction to

consider this Petition pursuant to 28 U.S.C. §§ 1257(a).!

CONSTITUTIONAL PROVISIONS

AND STATUTES INVOLVES

The constitutional provisions and statutes involved are:

The Commerce Clause of Art. 1, Sec. 8 of the United States

Constitution; the Supremacy Clause of Art. VI of the United

States Constitution; the Federal Arbitration Act, 9 U.S.C. § 1,

et seq.; and the Alabama statute prohibiting specific en-

forcement of pre-dispute arbitration agreements, Ala. Code

(1975) § 8-1-41(3). Both the Federal! Arbitration Act and Ala.

Code (1975) § 8-1-41 have been reproduced in the Appendix

to this Petition (App. at A-28-34).

STATEMENT OF THE CASE

On May 27, 1987, Respondents Jack D. Warren and

Juanita Warren purchased a new Ford automobile from

Petitioner Jim Skinner Ford, Inc. The contract of sale

contained the following arbitration clause:

*This Court has held that judgments of state courts which refuse to

enforce arbitration agreements sought to be enforced under 9 U.S.C. § 1,

et seq., are reviewable as final orders pursuant to 28 U.S.C. § 1257. See, e.g.,

Southland Corp. v. Keating, 465 U.S. 1, 6-8 (1984).

3

F. The undersigned purchaser and Jim Skinner

Ford, Inc. further agree as follows:

1. That the motor vehicle described in this sale

document has been heretofore traveling in in-

terstate commerce and has an impact upon in-

terstate commerce.

2. That in the event any dispute(s) arise under

the terms of this contract of sale (including but not

limited to the terms of the agreement, the condition

of the motor vehicle sold, the conformity of the

motor vehicle sold to the contract, the representa-

tions, promises, undertakings or covenants made by

Jim Skinner Ford, Inc. in connection with the sale of

the motor vehicle, or otherwise dealing with the

motor vehicle, any terms of financing in connection

therewith, or any terms of any credit life and/or

disability insurance purchased simultaneously

herewith, or extended service or maintenance

agreements), that Jim Skinner Ford, Inc. and the

purchaser agree to submit such dispute(s) to bind-

ing arbitration pursuant to the provisions of 9

U.S.C. § 1, et seq. and according to the commercial

rules of the American Arbitration Association then

existing in Birmingham, Alabama.

On August 20, 1987, the Warrens filed suit in Alabama

state court against Jim Skinner Ford, Ford Motor Company,

and First Alabama Bank of Birmingham (the bank which

financed the Warrens’ purchase of the vehicle). The Warrens

asserted claims for breach of contract, breach of warranty,

and violation of the Magnuson-Moss Warranty-Federal

Trade Commission Improvement Act (“Magnuson-Moss

Warranty Act”), 15 U.S.C. §§ 2301-12. Jim Skinner Ford

immediately filed a motion to stay the action pending arbi-

tration pursuant to the Federal Arbitration Act, 9 U.S.C.

§§ 1, et seg. (“the FAA”). The trial court granted the motion

on October 29, 1987.

The Warrens then filed a motion to alter or amend the

trial court’s stay and order. At a February 11, 1988, hearing

on this motion, counsel for the Warrens and counsel for Jim

Skinner Ford stipulated in open court that the Warrens were

4

residents of St. Clair County, Alabama; that Jim Skinner

Ford, Inc. was a Delaware corporation with its sole place of

business in Jefferson County, Alabama; that the automobile

at issue was manufactured outside the State of Alabama by

Ford Motor Company, a corporation located in Detroit,

Michigan; and that the automobilé was delivered by Ford to

Jim Skinner Ford for retail sale and was thereafter purch-

ased by the Warrens from Jim Skinner in Alabama. (App. at

A-13-15).?

On June 29, 1988, the trial court denied the Warrens’

motion to alter or amend and affirmed its previous order’

staying the action pending arbitration. (App. at A-11): On

July 5, 1988, the Warrens filed a petition for a writ of; /

mandamus with the Alabama Supreme Court.

On July 7, 1989, the Alabama Supreme Court issued an

opinion granting the writ of mandamus. (App. at A-1-10).

The court recognized that the sole issue was whether the

contract was one “involving interstate commerce” so as to

bring it within the coverage of the FAA, 9 U.S.C. § 2, but

concluded that the retail sale of a new automobile manufac-

tured outside Alabama to an Alabama resident by an

Alabama dealer incorporated in Delaware is not a “transac-

tion involving interstate commerce” within the meaning of

the FAA. (App. at A-1-5).

The Alabama Supreme Court sought to justify its position

by stating:

We hold that the appropriate standard for mak-

ing this determination is set forth in a special

opinion in Metro Industrial Painting Corp. v. Terminal

Construction Co., 287 F.2d 382 (2d Cir. 1961), cert.

denied, 368 U.S. 817 (1961):

In its opinion below, the Alabama Supreme Court incorrectly stated

that the parties had also stipulated that “all obligations antiapated from

the sales contract were to be performed solely within the State of

Alabama.” (App. at A-1-10). As shown by the transcript of the February

11, 1988, hearing (App. at A-13-27), there was no such stipulation.

Moreover, although the opinion below shows the purported stipulations in

quotes, the language used by the Court to frame the stipulations was taken

from the Warrens’ brief below and not from the transcript of the hearing

itself. (See App. at A-13-15).

5

“[W]hether at the time [the parties] entered

into [the contract] and accepted the arbitration

clause, they contemplated substantial interstate

activity.”

287 F.2d at 387 (Lumbard, Chief Judge, concur-

ring) (emphasis original).

Therefore, the standard here applicable is not the

“regulating standard” of “affecting interstate com-

merce”; rather the test for determining whether the

transaction involves interstate commerce is a distinct

standard unique to the application of the FAA .

(App. at A-4) (emphasis in_ original) (citations as In

the instant case, the court held that Jim Skinner Ford and

the Warrens had not actually contemplated substantial in-

terstate activity at the time the car was purchased:

The contract in the present case served to trans-

fer title to an automobile, already located in Ala-

bama, to a resident consumer. Even using the

(“slightest nexus with interstate commerce”] stan-

dard ...., we must conclude that such a transaction

does not have a sufficient nexus with interstate

commerce activity to bring the contract within the

FAA.

(App. at A-5). The court then reversed the order staying the

action pending arbitration based upon the following princi-

ples of Alabama law:

“The enforcement of predispute arbitration

agreements, while approved in the federal court

system ..., is specifically prohibited by Ala. Code

(1975) § 8-1-4168)? This federal policy does not

preempt the differing Alabama policy in the pres-

ent case because an issue of purely state law is in

question .... “The public policy of this state ...

*Ala. Code (1975) § 8-1-41(3) provides that “An agreement to submit a

controversy to arbitration . . . cannot be specifically enforced”, whereas the

FAA, 9 U.S.C. § 2, provides that arbitration agreements must be specifii-

cally enforced as a matter of federal substantive law. See Perry v. Thomas,

482 U.S. 483 (1987); Southland Corp. v. Keating, 465 U.S. 1 (1984).

6

holds void an agreement in advance to oust or

defeat the jurisdiction of the courts... .’.”

(App. at A-4) (quoting Wells v. Mobile County Board of Realtors,

387 So.2d 140, 144 (Ala. 1980) ).

Petitioner herein seeks a writ of certiorari to the Alabama

Supreme Court and a summary reversal of the ruling below.

REASONS FOR GRANTING THE WRIT

A. This Case Represents Another Attempt By The Alabama Su-

preme Court To Limit The Application Of The FAA In Alabama

In Disregard Of Congressional Intent And Of Prior Decisions

Of This Court. —

This Court has recently observed Alabama’s historical

hostility toward arbitration and the FAA in Ex parte Alabama

Oxygen, 433 So.2d 1158 (Ala. 1983), vacated and remanded, 465

U.S. 1016 (1984). There, the Alabama Supreme Court held

that the FAA did not preempt state law; that the FAA

applied only in federal courts; and that in any event the FAA

“does not reach activity which merely ‘affects’ interstate

commerce,” but only activity that “has a substantial effect on

that commerce.” 433 So.2d at 1163 (emphasis in original).

This Court summarily vacated these holdings and remanded

Ex parte Alabama Oxygen for disposition in accordance with

Southland Corp. v. Keating, 465 U.S. 1, 10-16 (1984) (holding

that the FAA does preempt state law and that in enacting the

FAA, “Congress intended to foreclose state legislative at-

tempts to undercut the enforceability of arbitration agree-

ments.”). :

Having failed in its earlier attempt to limit the reach of the

FAA in Ex parte Alabama Oxygen, the Alabama Supreme

Court now holds that “the test for determining whether the

transaction involves interstate commerce is a distinct stan-

dard unique to the application of the FAA.” (App. at A-4).

(emphasis supplied). In other words, in the FAA Congress

did not intend to use the full reach of its power to regulate

interstate commerce, but only intended to enforce arbitra-

tion agreements in those contracts with respect to which the

i 7

parties actually “contemplated substantial interstate activity.”

This standard is virtually identical to the “substantial effect

on commerce” standard rejected by this Court in Ex parie

Alabama Oxygen, and it conflicts directly with decisions of this

Court.

In Southland Corp. v. Keating, this Court held that the FAA

is an exercise of “Congress’ broad power to fashion substan-

tive rules under the Commerce Clause.” 465 U.S. at 10, 11.

In Perry v. Thomas, 482 U.S. 483, 490 (1987), this Court held

that the FAA is a statute of “general applicability” which

“embodies Congress’ intent to provide for the enforcement

of arbitration agreements within the full reach of the Com-

merce Clause.” Congress itself, in passing the FAA, em-

phasized that the act “reaches not only the actual physical

interstate shipment of goods but also contracts relating to

interstate commerce.” H. R. Rep. No. 96, 68th Cong., Ist

Sess., 1-2 (1924). Thus, the decision below erects a substantial

barrier to arbitration never intended by Congress or this

Court. oo

B. The Ruling Below Has Important Implications For The Public

And For The Uniform Application Of Federal Law.

If the Alabama Supreme Court’s ruling is allowed to stand,

the federal law of arbitration will be frustrated and ignored

in the state courts of Alabama and in any other state that tries

to revive the common law hostility toward arbitration. In

fact, the Alabama Supreme Court is apparently not alone in

purporting to limit the FAA to contracts as to which the

parties specifically “contemplate substantial interstate activ-

ity.” The court below relied upon Burke County Public Schools

Board of Education v. Shaver, 303 N.C. 408, 279 S.E.2d 816,

822 (1981), which endorsed the same standard.‘ This stan-

dard conflicts not only with this Court’s holdings in Southland

and Perry v. Thomas, but also with decisions of several federal

*The North Carolina Supreme Court has continued to apply the Burke

standard in subsequent cases. See, e.g., Cahoon v. Ziman, 298 S.E.2d 729,

730 (N.C. App. 1983), review denied, 301 S.E.2d 388 (N.C. 1983); Paramore

v. Inter-Regional Financial Leasing Co., 316 S.E.2d 90, 92 (N.C. 1984).

8

appellate courts which have held that the FAA extends to the

full reach of Congress’ power under the Commerce Clause.°®

While the federal district courts in Alabama and any other

state following the standard adopted below would apply the

FAA in accordance with the broad principles announced by

this Court, the trial courts of those states will now apply the

FAA only if the parties contemplated substantial interstate

activity in the performance of their contract. Thus, forum-

shopping could well determine whether a party is entitled to

assert his federal arbitration rights. Such a result is what

Congress sought to avoid through the FAA. Southland Corp.

v. Keating, 465 U.S. 1, 14-16 (1984); Moses H. Cone Memorial

Hospital v. Mercury Construction Corp., 460 U.S. 1, 26, n.34

(1983).

In addition, the standard adopted below is purely subjec-

tive. It requires an analysis of the contracting parties’ subjec-

tive intent — whether they contemplated substantial inter-

state activity — rather than the objective analysis of whether

the contract evidences a transaction within the broad reach

of the Commerce Clause. 9 U.S.C. § 2; Perry v. Thomas, 482

U.S. 483, 490 (1987). This subjective analysis poses a signifi-

cant danger of drastically reducing the reach of the FAA and

of defeating the congressional declaration of a “national

policy favoring arbitration and withdrawing the power of the

states to require a judicial forum for the resolution of clairns

which the contracting parties agreed to resolve by arbitra-

tion.” Southland, 465 U.S. at 10.

The obvious factual disputes and difficulties inherent in

such a subjective analysis also undermine the very policies

arbitration is intended to promote — simpler, speedier, and

less costly resolution of contract disputes. See H. R. Rep. No.

96, 68th Cong., Ist Sess., 1-2 (1924) (FAA is intended to

reduce congestion in courts and to avoid “the costliness and

*See, e.g., Robert Lawrence Co. v. Devonshire Fabrics, Inc., 271 F.2d 402, 406

(2d Cir. 1959), cert. dismissed, 364 U.S. 801 (1960); Tenney Engineering, Inc.

v. United Electrical Radio & Machine Workers of America, Local 437, 207 F.2d

450, 454 (3d Cir. 1953); Snyder v. Smith, 736 F.2d 409, 417-19 (7th Cir.

1984) (dicta), cert. denied, 469 U.S. 1037 (1984).

9

delays of litigation” through enforcement of arbitration

agreements). See also Prima Paint Corp. v. Flood & Conklin Mfg.

Co., 388 U.S. 395, 404 (1967); Moses H. Cone Memorial

Hospital v. Mercury Construction Corp., 460 U.S. 1, 22} 29

(1983); Southland Corp. v. Keating, 465 U.S. 1, 7 (1984)

_ (accord).

C. The Alabama Supreme Court’s Holding That The Sale Of A

New Car By A Dealer To A Purchaser Located Within The

Same State Does Not Affect Interstate Commerce Confficts With

Numerous Federal Statutes That Regulate Such Sales.

The power of Congress to regulate interstate commerce is

“plenary,” extending even to the regulation of a farmer's

crop of wheat for his own personal consumption. Wickard v.

Filburn, 317 U.S. 111 (1942). Accord, Southland Corp. v.

Keating, 465 U.S. 1, 11 (1984). Congress has “broad and

sweeping” power under the Commerce Clause to regulate

any activity that may affect interstate commerce, whether

directly or indirectly. Wickard v. Filburn, 317 U.S. at 120-25;

Katzenback v. McClung, 379 U.S. 294 (1964). Moreover, even

if the transaction or activity of one individual has no impact

on interstate commerce standing alone, that transaction or

activity may nevertheless be regulated by Congress under its

commerce power if the cumulative effect of others engaging

in the same type of activity or transaction could have an

impact upon interstate commerce. Wickard v. Filburn, 317

U.S. at 127-28. ‘

There is perhaps no type of consumer transaction that

triggers the applicability of more Congressional regulation

under the Commerce Clause than a contract for the sale of a

motor vehicle. For example, in the Motor Vehicle Informa-

tion and Cost Savings Act (i.e., the “Odometer Act”), 15

U.S.C. §§ 1981, et seg., Congress found that “motor vehicles

move in the current of interstate and foreign commerce or

affect such commerce....” 15 U.S.C. § 1981. In that Act,

Congress prohibited false odometer readings or representa-

tions by any person selling a new or used automobile, with no

limitation on whether the buyer and seller reside in the same

or different states. 15 U.S.C. § 1981, et seg.

10

Similarly, under the Magnuson-Moss Warranty Act, 15

U.S.C. §§ 2301, et seq., Congress has regulated the warranty

obligations arising out of the typical sale of a car by an instate

dealer to an instate buyer, such as the transaction in this case.

15 U.S.C. § 2301(1),(3),(5),(13),(14). The Act also authorizes

the establishment of informal dispute settlement procedures

that can apply to a car dealer and a buyer. 15 U.S.C.

§ 2310(a). Other examples of Congressional regulation of

intrastate motor vehicle sales include the National Traffic

and Motor Vehicle Safety Act, 15 U.S.C. §§ 1381, et seq.; and

the Consumer Credit Protection Act, 15 U.S.C. §§ 1601, et

seq. |

Of course, virtually every new car buyer would normally

be expected to purchase his automobile from a dealership

located in his own state. If Congress can reach into such a

transaction and regulate odometer readings, warranty obli-

gations and informal dispute settlement procedures, then

Congress, in exercising the full reach of the Commerce

Clause under the FAA, can surely render enforceable arbi- -

tration agreements entered into as part of the same transac-

tion. Ironically, in this very case, the Warrens seek recovery

under the Magnuson-Moss Warranty Act, but contend that

Congress’ exercise of its commerce power in the enactment

of the FAA does not reach the contract of sale which forms

the basis of their Magnuson-Moss claim.

After’/holding that Congress in the FAA did not intend to

utilize the full reach of its Commerce Clause power, the

Alabama Supreme Court then held that even if the FAA

applied whenever there is the “slightest nexus with interstate

commerce,” the sale of an automobile by a dealer to a

purchaser located within the same state “does not have a

sufficient nexus with interstate commerce activity to bring

the contract within the coverage of the FAA.” (App. at A-5).

Under that rationale, it logically follows that Congress did

not have the Commerce Clause power to extend the applica-

tion of the Odometer Act, the Magnuson-Moss Warranty

Act, and the other federal statutes discussed above to auto-

mobile sales between dealers and purchasers where both are

11

located in the same state. Such a conclusion is bizarre, but it

flows directly from the anti-arbitration stance of the court

below.

CONCLUSION

For the reasons set forth above, this Court should grant a

writ of certiorari to review the judgment of the Alabama

Supreme Court on these important issues of federal and

constitutional law. Petitioner respectfully submits that this

matter may best be disposed of by summary reversal on the

authority of Perry v. Thomas, 482 U.S. 483 (1987), and

Southland Corp. v. Keating, 465 U.S. 1 (1984).

Respectfully Submitted,

Walter J. Sears, III

Counsel of Record

Michael R. Pennington

BRADLEY, ARANT, Rose & WHITE

1400 Park Place Tower

Birmingham, Alabama 35203

(205) 521-8000

John M. Galese

GALESE & MOORE

3058 Independence Drive

Birmingham, Alabama 35253

(205) 870-0663

Se ee ae eee ae

APPENDIX

A-1

THE STATE OF ALABAMA

JUDICIAL DEPARTMENT

THE SUPREME COURT OF ALABAMA

SPECIAL TERM, 1989

Ex Parte Jack D. Warren and Juanita Warren

87-1179 PETITION FOR WRIT OF MANDAMUS

(In Re: Jack D. Warren and Juanita Warren

v.

Jim Skinner Ford, Inc., a Corporation, et al.)

‘CV-87-126)

PER CURIAM.

Jack D. Warren and Juanita Warren petitioned this Court

for a writ of mandamus directed to the Honorable H. E.

Holladay of the Circuit Court for St. Clair County, Alabama.

The writ is due to be granted.

On May 27, 1987, the Warrens, residents of St. Clair

County, purchased a vehicle from Jim Skinner Ford, Inc.

(“Jim Skinner”), a corporation organized in the State of

Delaware and having its sole place of business in Jefferson

County, Alabama. The sale of the vehicle was solicited,

transacted, and executed wholly within the State of Alabama.

The sales contract contained an arbitration clause, which is

set out here verbatim:

“F. The undersigned purchaser and Jim Skinner

Ford Inc. further agree as follows

“1. That the motor vehicle described in this sale

document has been heretofore traveling in in-

terstate commerce and has an impact upon in-

terstate commerce.

“2. That in the event any dispute(s) under the

terms of this contract of arise (including but not

limited to the terms of the agreement, the condition

of the motor vehicle sold, the conformity of the

motor vehicle sold, to the contract, the representa-

tions, promises, undertakings or covenants made by

Jim Skinner Ford, Inc., in connection with the sale

of the motor vehicle, or otherwise dealing with the

A-2

motor vehicle, any terms of financing in connection

therewith, or any terms of any credit life and/or

disability insurance purchased simultaneously

herewith, or extended service or maintenance

agreements), that Jim Skinner Ford Inc. and the

purchaser agree to submit such dispute(s) to bind-

ing arbitration, pursuant to the provisions of 9 USC

§ 1, et seq. and according to the commercial rules of

the American Arbitration Association then existing

in Birmingham, Alabama.”

After the sale, the Warrens experienced numerous prob- ~

lems with the vehicle and they filed a breach of contract and

warranties action pursuant to state law and the Magnuson-

Moss Warranty — Federal Trade Commision Improvement

Act, 15 U.S.C. §§ 2301-12, in St. Clair Circuit Court, naming

Jim Skinner, Ford Motor Company (“Ford”), and First

Alabama Bank of Birmingham as defendants. Jim Skinner

filed a motion to stay the action pending arbitration pursuant

to the Federal Arbitration Act, 9 U.S.C. §§ 1 through 4 (the

“FAA”), which the trial court granted. The Warrens then

filed a motion to alter or amend the court’s order. Oral

argument was heard on this motion on February 11, 1988,

after which Ford filed a motion to stay the proceedings

pending arbitration. The trial court on June 29, 1988,

denied the Warrens’ motion to alter or amend and affirmed

its previous order staying the action pending arbitration.

The Warrens, on July 5, 1988, filed their petition with this

Court for a writ of mandamus.

During the February 11, 1988, hearing, the following facts

were stipulated by the parties:

“1. The Warrens are residents of St. Clair County,

Alabama.

“2. Jim Skinner is a Delaware Corporation with its

sole and principal place of business in the State of

Alabama.

“3. The sale of the vehicle which is the subject of

this action occurred within the State of Alabama.

“4. The vehicle which is the subject of this action

was previously owned by Jim Skinner and [was] sold

ee ee

et: A-3

to the Warrens pursuant to a contract entered into

and executed in the State of Alabama. re

“5. All obligations anticipated from the sales con-

tract were to be performed solely within the State of

Alabama.”

The threshold inquiry in the present case is whether the

sale of a motor vehicle manufactured outside of Alabama to

an Alabama resident, who is buying it as a consumer and not

for commercial purposes, is a contract involving “interstate

commerce,” as that term is used in the Federal Arbitration

Act, where the seller has its only place of business in

Alabama, the vehicle is delivered to the buyer in Alabama,

and all obligations arising out of the contract of sale are to be

performed in Alabama.

Alabama employs a two-pronged test to determine

whether the FAA applies to a transaction within the state.

This standard was announced by Justice Maddox’s dissenting

opinion in Ex parte Alabama Oxygen Co., 433 So.2d 1158 (Ala.

1983), and was later adopted by this Court at 452 So.2d 860

(Ala. 1984). That standard is that the FAA applies to a

contract if: 1) the contact (sic) was one involving interstate

commerce; and 2) the contract contained an arbitration

agreement voluntarily entered into by the parties.

It is undisputed that there was an arbitration clause in the

contract involved in this case; therefore, the only question is

whether the contract was one involving interstate commerce.

In discussing the commerce requirement of the FAA, this

Court has stated:

“The requirement of the FAA that an arbitration

agreement ‘involve commerce’ has been construed

very broadly so that the slightest nexus of the

agreement with interstate commerce will bring the

agreement within the ambit of the FAA.”

Ex parte Costa & Head (Atrium), Ltd., 486 So.2d 1272, 1275

(Ala. 1986).

Although we note that the language quoted from Ex parte

Costa & Head is very broad, we find, nonetheless, that, under

the particular facts of this case, the transaction in question

A-4

does not involve interstate commerce, as contemplated by the

FAA; and, therefore, we hold that the provisions of the

federal legislation are not controlling.

We hold that the appropriate standard for making this

determination is set forth in a special opinion in Metro

Industrial Painting Corp. v. Terminal Construction Co., 287 F.2d

382 (2d Cir. 1961), cert. denied, 368 U.S. 817 (1961):

“[W)hether at the time [the parties] entered into

[the contract} and accepted the arbitration clause,

they contemplated substantial interstate activity.”

287 F.2d at 387 (Lumbard, Chief Judge, concurring) (em-

phasis original). See, also, Burke County Public Schools Board

of Education v. Shaver, 303 N.C. 408, 279 S.E.2d 816, 822

(1981) (applying the Metro Industrial test).

Therefore, the standard here applicable is not the “reg-

ulating standard” of “affecting interstate commerce”; rather

the test for determining whether the transaction involves

interstate commerce is a distinct standard unique to the

application of the FAA. See Burke, supra, at 822 (footnote 11).

Applying the FAA standard to the facts of this case, we

perforce must conclude that the parties did not contemplate

substantial interstate activity. Indeed, the stipulation of fact

precludes, beyond any doubt, a finding that any interstate:

commercial activity would arise from the retail sale of the

automobile.

Having determined that the FAA does not apply in the

present case, we must next look to state law to determine

what effect should be given to the contractual provision

calling for arbitration. The enforcement of predispute arbi-

tration agreements, while approved in the federal court

system (see Shearson/American Express, Inc. v. McMahon, 482

U.S. 220, 107 S.Ct. 2332, 96 L.Ed.2d 185 (1987) ), is specifi-

cally prohibited by Ala. Code 1975, § 8-1-41(3). This federal

policy does not preempt the differing Alabama policy in the

present case, because an issue of purely state law is in

question. See International Longshoremen’s Ass'n, AFL-CIO v.

Davis, 476 U.S. 380, 106 S.Ct. 1904, 90 L.Ed.2d 389 (1986);

see, also, Riverfront Properties, LTD. v. Max Factor III, 460

So.2d 948, 953 (Fla. 1984).

eS eee ae a ee eae ee ee epee ee ee Se! ae ee, ee eg ee ee eee ee ee ee

4) , s .

A-5

In discussing the policy behind Alabama’s nonenforce-

ment of predispute arbitration clauses, this Court has stated:

“The public policy of this state is to encourage

arbitration and amicable settlements of differences

between parties; but public policy also holds void an

agreement in advance to oust or defeat the jurisdic-

tion of all courts, as to all differences between the

parties.”

Wells v. Mobile County Bd. of Realtors, 387 So.2d 140, 144 (Ala.

1980). :

The contract in the present case served to transfer title to

an automobile, already located in Alabama, to a resident

consumer. Even using the broad interstate commerce stan-

dard found in Ex parte Costa & Head, we must conclude that

such a transaction does not have a sufficient nexus with

interstate commerce activity to bring the contract within the

coverage of the FAA. Thus, we hold that, under the narrow

factual context of this case, there is no basis for invoking the

FAA, and the arbitration clause contained in the contract

cannot be enforced under Alabama law. The writ of man-

damus, therefore, is due to be granted.

WRIT OF MANDAMUS GRANTED.

Hornsby, C. J., znd Jones, Almon, Shores, Houston,

Steagall, and Kennedy, JJ., concur.

Maddox and Adams, JJ., dissent.

Ex parte Jack D. Warren and Juanita Warren

MADDOX, JUSTICE (Dissenting).

The majority finds that “under the particular facts of this

case, the transaction in question does not involve interstate

commerce, as contemplated by the FAA; and, therefore, the

provisions of the federal legislation are not controlling.” In

my opinion, the question is not whether “interstate com-

merce” was involved — clearly it was, and the parties so

A-6.

stated in the sales agreement;' the real question, however, is

whether Congress intended to preempt the field where the

contract containing an agreement to arbitrate is one involv-

ing the retail sale of an automobile. The majority is of the

opinion that Congress did not intend to cover such a con-

tract. 1 cannot come to that conclusion, because I cannot

make a distinction between a contract to buy stock? and a

contract to buy an automobile, and I find myself having to

dissent once again, as I did in Ex parte Alabama Oxygen Co.,

433 So.2d 1158 (Ala. 1983). In short, I believe that this

transaction sufficiently involves interstate commerce so as to

be controlled by the Federal Arbitration Act; therefore, I

must respectfully dissent, as 1 have before.

The issue addressed in this case is whether the sale of a

motor vehicle by a Delaware corporation from its sole place

of business which is in the State of Alabama, to consumer/

residents of Alabama is a transaction controlled by the FAA.

Alabama employs a two-pronged test to determine

whether the Act applies to transactions within the state. This

standard was announced in my dissent in Ex parte Alabama

Oxygen Co., 433 So.2d 1158 (Ala. 1983), and later adopted by

the Court at 452 So.2d 860 (Ala. 1984), after, of course, the

Supreme Court of the United States had vacated our judg-

ment and remanded the cause to this Court for further

consideration in light of Southland Corp. v. Keating, 465 U.S.

1, 104 S.Ct. 852, 79 L.Ed.2d 1 (1984). That standard is:

1. That the contract was one involving interstate com-

merce; and 4s

2. That the contract contained an arbitration agreement

voluntarily entered into by the parties.

'The sales agreement for the automobile itself states:

“F. The undersigned purchaser and Jim Skinner Ford Inc. further

agree as follows

“1. That the motor vehicle described in this sale document has been

heretofore traveling in interstate commerce and has an impact upon

interstate commerce.”

? Arbitration clauses contained in contracts involving stock purchases are

enforceable. Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 107

S.Ct. 2332, 96 L-Ed-2d- 185 (1987).

(tats v~ 7 - [ere Pe Pre Maat peak

A-7

The Warrens first argue that the appropriate standard for

determining what constitutes a “transaction involving in-

terstate commerce” as contemplated in the Act is whether the

contract is one in which substantial interstate activity was

contemplated by the parties as they entered into the contract

that included the arbitration clause. They cite in support of

this contention the following cases: Metro Industrial Painting

Corp. v. Terminal Construction Co., 287 F.2d 382 (2d Cir.

1961), cert. denied, 368 U.S. 817 (1961); Burke County Public

Schools Bd. of Ed. v. Shaver Partnership, 303 N.C. 408, 279

S.E.2d 816, 822 (1981); Ex parte Alabama Oxygen Co., supra,

at 1175.

The Warrens argue that substantial interstate activity was

clearly not contemplated, because:

1. The contract was solicited and executed in the State

of Alabama.

2. The vehicle was not shipped to Alabama from an-

other state as part of the contract of sale, and all activity in

the performance of the sales contract was anticipated to be

__ performed in Alabama.

The Warrens concede that Jim Skinner acquired the vehicle

from out-of-state, but argue that the contract contemplated a

sale of a vehicle located on the lot.

Conversely, Jim Skinner urges the application of the test

announced in Ex parte Costa S Head (Atrium) Lid., 486 So.2d

1272 (Ala. 1986), which is:

“The requirement of the FAA that an arbitration

agreement ‘involve commerce’ has been construed

very broadly so that the slightest nexus of the

agreement with interstate commerce will bring the-

agreement within the ambit of the FAA.”

486 So.2d at 1275.

Jim Skinner cites Mesa Operating Limited Partnership v.

Louisiana Intrastate Gas Corp., 797 F.2d 238 (5th Cir. 1986), in

support of the trial court’s order. In Mesa Operating, the court

held that citizens of different states engaged in the perform-

ance of contractual operations in one of those states are

engaged in a contract under the Act. Jim Skinner points out

A-8

that the United States Congress has enacted laws that regu-

late the effects of the manufacture, distribution, financing,

warranty, and sale of motor vehicles in interstate commerce,

and it directs our attention to the following: the Motor

Vehicle Information and Cost Savings Act, 15 U.S.C. § 2051

et seq.; the Magnuson-Moss Warranty Act, 15 U.S.C. § 2301

et seq.; the Automobile Dealers Suits Against Manufacturers

Act, 15 U.S.C. § 1221 et seq.; the National Traffic and Motor

Vehicle Safety Act, 15 U.S.C. § 1381 et seq.; and the Con-

sumer Credit Protection Act, 15 U.S.C. § 1601 et seq.

The petitioners attempt to distinguish Ex parte Costa &

Head (Atrium) Ltd. from the facts of the present case. They

argue that in Costa & Head, 1) there existed a limited

partnership with partners from several states; 2) one party to

the contract had an out-of-state principal place of business

and was obligated under the contract to perform work in this

state; 3) out-of-state workmen were employed to perform

the contract; 4) materials incorporated into the project in this

state were manufactured and transported into this state from

out-of-state as part of the actual performance of the contract.

Also, in Costa & Head, petitioners contend, the transactions

were all of a commercial nature between businessmen of

equal bargaining strength, whereas in this case, petitioners

argue, the purchasers are ordinary consumers contracting

with a large corporation to purchase a consumer good for

family use. I am not persuaded that Congress intended the

application of the provisions of the Act to be determined on a

case by case basis because of the bargaining power of the

parties.

In Costa & Head, this Court held that the Act will be

applied in regard to any agreement that has the “slightest

nexus” with interstate commerce. Applying this standard, it

is inconceivable to me that this particular contract did not

meet that test. In fact, the parties expressly stated that it did

in the contract itself. Unquestionably, the subject vehicle was

not manufactured in Alabama, but was manufactured out-

side the state and shipped into the state for sale within the

State.

A-9

I agree with Jim Skinner’s assertion that motor vehicles

have an inherent effect on interstate commerce, as

exemplified by the great volume of federal legislation re-

garding motor vehicles. I am not persuaded by the Warrens’

argument that all of the parties are residents of the State of

Alabama and that that is the controlling factor. In the recent

decision of Ex parte McKinney, 515 So.2d 693 (Ala. 1987), this

Court held that Alabama resident citizens who purchased

annuities from an Alabama stock brokerage firm and pyr-

suant to that transaction signed agreements containing arbi-

tration clauses were bound by those arbitration clauses.

I think the trial court ruled correctly. The Warrens pre-

sent no evidence that they were fraudulently induced to

enter into this agreement to arbitrate, nor is there any

evidence that they were coerced or that they were ignorant of

the provisions of the contract upon entering into it. In short,

there is substantial evidence to support the judgment of the

trial court that this arbitration agreement was voluntarily

entered into. The majority is of the opinion that the public

policy and statutory law of this state, which refuse to enforce

pre-dispute agreements to arbitrate, should prevail. If there

were no conflicting provisions of federal law, state policy and

statutory law in this respect would have to be honored. In

this case, the majority bottoms its decision upon a finding

that this contract does not involve “interstate commerce.”

The decision cannot rest on this premise.* The automobile

industry is one of the most highly regulated industries in the

country. I believe Congress intended to make contracts for

the retail sale of automobiles containing arbitration clauses

subject to the provisions of the Act, and, there being no

evidence to show that the agreement was not voluntarily

entered into, I would not find it contrary to the public policy

or statutory law of this state.

*Logically extended, the result of this holding, that the retail sale of an

automobile by a dealer who is a resident of this state to a resident of this

state does not involve interstate commerce, would mean that the myriad of

cases authorizing Alabama residents to sue out-of-state manufacturers and

hale them into Alabama courts may need to be reexamined.

A-10

This court, Ex parte Warrior Basin Gas Co., 512 So.2d 1364

(Ala. 1987), quoted from Seaboard Coast Line R. R. v. Trailer

Train Co., 690 F.2d 1343 (11th Cir. 1982), the statement that

“[a] determination by a trial court of what was intended by

the parties in their agreement is a question of fact, not to be

disturbed by this court unless clearly erroneous.”

1 am of the opinion that Judge Holladay’s findings of fact

are not clearly erroneous and that he has correctly applied

federal law’as it relates to the subject contract. I would deny

the writ of-mandamus.

A-11

IN THE CIRCUIT COURT OF ST. CLAIR COUNTY

ALABAMA

SOUTHERN JUDICIAL DIVISION AT PELL CITY

JACK D. WARREN and JUANITA

WARREN

Plaintiffs

Vs. Case No.

CV87-126

JIM SKINNER FORD, INC.,

corporation, FORD MOT OR

COMPANY, a corporation, and

FIRST ALABAMA BANK OF

BIRMINGHAM, a corporation

*eee###e#te##&t&#t&€ & &@ &@ OF

Defendants

Re: Motion to Dismiss or in the Alternative to Stay — filed

February 19, 1988

Motion for hearing on Motion to Reconsider — filed

March 11, 1988

Motion for hearing on Motion to Reconsider — filed

April 20, 1988

Defendant Jim Skinner's Motion for Ruling — filed

June 24, 1988

ORDER

This Court has considered all of the above styled motions.

This Court has previously conducted a hearing on Motion

for Reconsideration of the court’s order staying prosecution

under the Federal Arbitration Act and has had the matter

under advisement pending the filing of briefs and consider-

ation thereof by this Court. This Court can see no reason for

having any additional hearing with regard to Motion for

Reconsideration. This Court has found ample authority, in

the opinion of this Court, to substantiate the ruling hereto-

fore entered by this Court on 10-29-87.

A-12

Therefore, be it ORDERED that Motion for Reconsidera-

tion is hereby denied and the Plaintiff and Defendant shall

submit the matters to arbitration under the authority of the

Federal Arbitration Act, 9 U.S.C. § 1.

Dated this the 29th day of June, 1988

/s/ H. E. Holladay

CIRCUIT JUDGE

A-13

JACK D. WARREN, et als., IN THE CIRCUIT COURT

ST. CLAIR COUNTY,

ALABAMA

Plaintiffs, PELL CITY

VS. CIVIL ACTION NO:

CV-87-126

JIM SKINNER FORD,

INC., et als.,

Defendants. Notice of Appeal:

Motion in the above-styled cause being heard before the

HON. H. E. HOLLADAY, Circuit Judge, 30th Judicial

Circuit, at the St. Clair County Courthouse, Pell City,

Alabama beginning on February 11, 1988.

APPEARANCES:

HON. WM. TRUSSELL, Attorney of Record for the

plaintiffs, Pell City, Alabama.

HON. JOHN GALESE, Attorney of Record for the de-

fendants, Birmingham, Alabama. ;

HON. STEVE ROE, Attorney for First Alabama Bank,

Birmingham, Alabama.

THE COURT: Court come to order.

MR. TRUSSELL: Mr. Galese advised me that he forwarded a

brief to the Court. I haven’t received a brief. There are a

couple of stipulations that we have discussed dealing

with the residence of the parties of the transaction.

MR. GALESE: Yes, sir. We can stipulate that the plaintiffs

are now and were at the time of the transaction residents

of this County.

MR. TRUSSELL: And in addition, Jim Skinner’s dealership

where this automobile was purchased is located in Jef-

ferson County, Alabama, Birmingham.

MR. GALESE: Well, Jim Skinner Ford is a Delaware Corpo-

ration located in Jefferson County, Alabama.

nO. ek a Pees are, pee se a ER Re re Raat ee wed a on Re Ae a a ke ka a

A-14

MR. TRUSSELL: I understand that they are incorporated in

the State of Delaware. We can stipulate to that, and, also,

that the dealership where Mr. Warren bought this

vehicle is located in Jefferson County, Alabama.

MR. GALESE: There is a problem with that because when

this matter was under motion to transfer, it was your

decision that the transaction was consummated in this

County, so we are not going to back off that. The

dealership is located solely within Jefferson County.

MR. TRUSSELL: That is all I was getting at.

MR. GALESE: And the Ford came from Detroit.

MR. TRUSSELL: The Ford from Detroit, yes.

MR. GALESE: And the car was manufactured outside the

State of Alabama.

MR. TRUSSELL: We can stipulate the car was manufactured

outside the State of Alabama, and the Ford Motor

Company is located in Detroit, Michigan, and that Jim

Skinner Ford is a Delaware Corporation, and the dealer-

ship where this particular automobile was purchased is

; located in Jefferson County, and the plaintiffs were

residents of St. Clair County.

THE COURT: What about the stipulation that the defen-

dant was doing business in St. Clair County?

MR. TRUSSELL: Well, that issue is not before the Court.

There was a motion, a venue motion, which we —

THE COURT: Has that been ruled on?

MR. TRUSSELL: That was ruled on by agreement.

MR. GALESEF: Yes, sir.

THE COURT: Okay.

MR. GALESE: As I understand it, Judge, the only issue

under the Federal Arbitration Act is, No. 1, whether

there was an agreement to arbitrate, and, No. 2, whether

or not the contract has an impact upon, or effect upon

interstate commerce. If it is, Alabama law and the

Federal law says the action is to be arbitrated. And Your

Honor has already ruled that and granted the motion to

arbitrate.

THE COURT: All right. Are you ready to proceed?

MR. TRUSSELL: Yes, sir, Your Honor.

A-15

THE COURT: All right.

MR. TRUSSELL: I think that we can probably agree in this

motion that, really, the issue before the Court is whether

this particular transaction is governed by the Federal

Arbitration Act. Of course, it is governed by the State

Arbitration Law. The State Arbitration Law prohibits the

specific enforcement of an arbitration contract. The

Federal law is different. The Federal law, the courts can

specifically enforce an arbitration agreement under the

Federal Arbitration Act. However, I have submitted to

the Court three cases which, I think, are squarely on

point in this case. Shearson Hayden Stone versus Liang,

493 Fed 2nd — excuse me — Fed. Supp. 104. Morse

versus Swank Incornorated, 493 F. Supp. 110. Bryant-

Durham Electric Company, Inc. versus Durham

Durham County Hospital Corporation, 256 Southeast-

ern 2nd 529. And Paramore versus Inter-Regional Bank

through the leasing company, 316 Southeastern 2nd 90.

Your Honor, each of these cases hold that in order to

determine whether a particular transaction is governed

by the Federal Arbitration Law, you have to look at the

transaction itself and determine whether the transaction

involves interstate commerce. Each of these cases held

that, basically, you look to the purchase of the transac-

tion, my clients bought this vehicle in Jefferson County,

Alabama. The place of incorporation of the defendant

has absolutely nothing to do with whether or not the

transaction involves interstate commerce. It has to do

with where the purchase was made and where the order

for the purchase was made. You look at that sort of thing

to determine whether you have a transaction involving

interstate commerce. These cases hold that, and they are

very similar cases. Basically, when a transaction does not

involve interstate commerce, you can’t contract Federal

‘intervention you can’t put in your document and say this

is going to be governed by Federal Law. It, in fact, has to

involve interstate coinmerce. If it does, then, you can’t

obviously rely on the Federal Arbitration Law. I know

Mr. Galese is going to make a big point that he is

A-16 -

incorporated in a foreign state, therefore, that makes

people who go down to Birmingham and buy a car from

——- Jim Skinner somehow impact.interstate commerce, and

that is just not the law. It also is not the law that part of

. the transaction you paid Ford Motor Credit, or someone

else outside the State, that doesn’t make the transaction

interstate commerce. One of these cases deals squarely

on that. In fact, it is a lease contract, a lease payment was

being made out of state to some financial company

located out of state. I think the law is quite clear that you

do look to the transaction. The purpose of stipulating

stipulations here, as I wanted it in the record, without

any debate or argument that this transaction occurred in

Birmingham, Alabama, that is, my client went down —

excuse me — that’s not what happened here. Actually,

this particular transaction was consummated in St. Clair

County, that is why we did have a problem with venue.

But the purchase was from a dealership, which is located

- in Jefferson County, Alabama, Jim Skinner Ford. The

actual consummation of the contract occurred within the

State of Alabama, that is, St. Clair County. There is

nothing to impact interstate commerce as far as this

transaction is concerned, and therefore, it is governed

by State Law. Under the State Law, arbitration is not

specifically enforced. That is basically what those three

cases hold.

THE COURT: Have you furnished Mr. Galese with these?

MR. TRUSSELL: Yes, sir.

MR. GALESE: May it please the Court. I did have a chance

to read the cases he submitted about a week or so ago.

Your Honor has correctly ruled in this case already.

Alabama has changed its posture regarding the applica-

bility of the Federal Arbitration Act in matters arising

within the State, and that happened as the result of a

case of Ex parte Alabama Oxygen, which I know that

Your Honor is familiar with. The Alabama Supreme

Court refused to enforce the Federal Arbitration Act in

that case.

THE COURT: Which one?

A-17_

~ ~

MR. GALESE: It’s in the brief, Ex parte Alabama Oxygen.

That was the first case in Alabama under the Federal

Arbitration Act. Historically and statutorily, Alabama

has encouraged arbitration, but has found as void pre

judgment dispute arbitration agreements. In Ex parte

Alabama Oxygen, the Supreme Court again refused to

enforce an arbitration agreement under the FAA. That

went up to the United States Supreme Court, and the

United States Supreme Court said that irrespective of

any State laws to the contrary, the Federal Arbitration

Act precmpts all state statutes and state common law in

connection with claims that arise under the act. The case

law since Ex parte Alabama Oxygen in this State is

without contradiction. Every case without exception that

has been presented to the Supreme Court of Alabama

since Ex parte Alabama Oxygen — there have been six

of them through yesterday's date — I ran that back up

on West aw to see — without exception all six cases in

Alabama that are cited in the brief all say that the

Federal Arbitration Act, No. 1, has deliberately con-

strued in favor of arbitration, and, No. 2, preempts state

law so that the arbitration agréement is given full faith

and full force. Now, as I understand it, the only issue

presented today by Mr. Trussell isn’t that, in fact, there

is a written contract, but it is only whether or not the

contract has impact upon or affects interstate commerce.

Because if it doesn’t have an impact upon interstate

commerce, then the Federal Government can’t regulate

it under the Federal Arbitration Act. I don’t dispute

that. As I understand, that is the only issue presented.

First of all, Jim Skinner Ford is a foreign corporation.

Ford Motor Company, a defendant in this case, is a

foreign corporat.on. The vehicle was manufactured in a

different state. It was transported to this State. It was

sold and it traveled on interstate highways. If there ever

has been an industry that is regulated by the Federal

- Government under the strength of the commerce

clause, it is the automobile industry. They regulate —

they being the U.S. Government through the Federal

A-18

Statutes — regulate every aspect of a motor vehicle

transaction from its design, its manufacture, its assem-

bly, its transportation across interstate highways, its sale

by the selling dealer, its financing charge, the odometer

certification, every aspect of a motor vehicle sale is

regulated by Federal Statute under the powers that

Congress has in connection with matters effecting in-

terstate commerce. Now, the cases cited by Mr. Trussell,

first of all, two of the three cases are North Carolina

Civil Court of Appeals cases, not even the highest

jurisdictional court of that state. Those cases say that in

viewing whether or not a transaction involves, affects or

deals with interstate commerce, the Court takes a strict

and narrow view. That is contradictory of Alabama Law.

In the case that is cited to Your Honor, the case of Ex

parte Costa and Head (Atrium) (Ltd) a Birmingham

Organization, the Alabama Supreme Court in 1986 says

the requirement of the Federal Arbitration Act that the

agreement involved commerce has been construed very

broadly so that the slightest nexus of the agreement with

interstate commerce will bring you within the Federal

Arbitration Act. Mr. Trussell would rather, Your

Honor, take North Carolina’s view back in 1980, or ’83,

that you have to strictly determine whether the contract

affects commerce. I submit to you that the Alabama

Supreme Court in Ex parte Costa and Head said just the

contrary. We abandon the strict view, and we take the

broad view so that if the Court finds the slightest nexus,

and I am quoting the Supreme Court, the slightest

nexus under the agreement with interstate commerce,

the Court then must bring it within the ambit of the

Federal Arbitration Act. To suggest that the sale of a

new motor vehicle, manufactured out of state by a

foreign corporation, doesn’t involve in some fashion

commerce would be to ignore about eleven Federal

Statutes that regulate my client’s business and industry

in connection with the sale of vehicles. In light of the

Supreme Court’s determination and direction to Your

Honor that you should take the most broad view to

A-19

enforce the Federal Arbitration Act and find only the

slightest nexus to do so, Your Honor has to come to the

conclusion realistically that Your Honor’s first decision

in this case was well thought out, sound, and proper.

And for that reason, we submit that his motion to

reconsider should be overruled.

THE COURT: The Alabama Oxygen Ex parte, what was

involved in that as far as factual situation?

MR. GALESE: It was a contract that dealt with canisters, as I

recall, dealt with canisters of oxygen that were sold

within the State of Alabama, but in fact had come across

State lines. That reminds me of one thing, the classic

case we studied in law school, Catsenback (sic) versus

McClone. They held Ollie’s Restaurant in compliance —

THE COURT: That is what I was about to say, the old Ollie’s

MR. GALESE: Like bread and toilet paper that was sold and

used in their restaurant was sufficient to uphold —

THE COURT: That case involved the fact that the product

of food was shipped across the State line.

MR. GALESE: Yes, sir, that’s all it involved. And they said

that that is a contract effecting interstate commerce.

And, of course, we stipulated, and there is no question

that the vehicle involved in this case was manufactured

by Ford Motor Company in a different state, shipped in

here, and sold as a — never having previously been sold

vehicle. Even if it wasn’t for the Catsenback case, Your

Honor has to know that there is more legislation affect-

ing the sale of motor vehicles than probably any other

single product. And it could only have been done by

Congress under the guise of and strength of the Com-

merce Laws.

MR. TRUSSELL: Your Honor, I would like to respond to

two or three points. There is no question that the car was

manufactured outside the State and shipped to Ala-

bama. As far as I know, they don’t have any Ford plants

located in the State of Alabama. Mr. Galese is correct

about that. There is also no doubt that a dispute arose

between the dealer who bought the car and the man-

A-20

ufacturer who sold the dealer the car. If the contract

provides for Federal Arbitration of disputes arising

under that contract, I don’t think there would be any

question that the Arbitration Law would apply. This is

not a sale by Ford of Detroit to Mr. Warren. This is a sale

by Jim Skinner. Now, what is the slightest nexus he is

referring to? He is talking about manufacturer of the

vehicle. Well, that has nothing to do with that vehicle

being manufactured out of state then brought into

Alabama and then it is resold in Alabama. So I submit to

you that the manufacturer of a vehicle that is shipped

into Alabama, this all occurred prior to this transaction

in connection with the purchase by Jim Skinner, is

irrelevant. Now, the second thing I point out, there are a

line of cases, in fact, I think almost all of them distin-

guish the interpretation of commerce under this statute

from the commerce in civil rights cases. There is no

question in civil rights cases that they look for the

slightest nexus, but there is a lot of authority, and I think

the prevailing view is, that commerce is not quite so

broad, either. If Mr. Galese has his way, then every

contract, almost, the purchase of any goods, if I go down

to TG&Y and purchase a fork, that little fork was

probably manufactured in Korea or something, and

they can put in their contract, in their little bill of sale

document to me, this is going to be governed by the

Federal Arbitration Law. The import of what he is

saying is that we can take 80 or 90 percent of the sale

cases out of this court, or out of Alabama law in any

event, and make Federal questions out of them. I feel

like that — well, I just don’t think there is any question

that the transaction here involved was an intrastate

transaction. The purchase by a St. Clair County indi-

vidual of an automobile from a dealership located in

Birmingham is an intrastate transaction. I don’t think

there is any slightest nexus with any interstate com-

merce. Therefore, I think the motion is due to be —

THE COURT: Have you read the Ex parte Alabama Oxygen

Company?

A-21

MR. TRUSSELL: First of all, Your Honor, I haven’t received

Mr. Galese’s brief until this morning. Secondly, I didn’t

understand Mr. Galese to say that that case held that

Federal Law controlled. I thought he said, and I may be

mistaken of what he said, but I thought he said that the

Supreme Court in that case held-hat Alabama Law.

MR. GALESE: That is what the Alabama Supreme Court

held, and it was appealed to the U. S. Supreme Court,

and they reversed the Alabama Supreme Court.

MR. TRUSSELL: Let me say this. You have to look at the

fact situation. If this involved the purchase of canisters

outside the State of Alabama by someone in the State of

Alabama, then I don’t have any doubt that the Federal

Arbitration Law. What you are going to have to do is

look at some transaction itself and each specific fact

situation.

THE COURT: What was the last statement you made about

you were having problems with?

MR. TRUSSELL: If somebody sold canisters that were out of

state through the mail, or shipped them into the State of

Alabama to an Alabama resident, then I have no doubt

that if in those contracted documents, you could prob-

ably contract that Federal Law applies. My point is that it

turns on fact situations. Where was the contract entered

into? Where was the seller located? Where was the buyer

located? A bunch of cases that my research indicated --

THE COURT: In other words, you are distinguishing there

that on the basis that the product in the Oxygen Com-

pany case was sold through interstate commerce to an

Alabama purchaser?

MR. TRUSSELL: Yes, sir.

‘THE COURT: Shipped in here to the purchaser?

MR. TRUSSELL: That’s the whole key.

THE COURT: If that be the case, I have not read this case at

this time, then it would be distinguished from the

Warren Case.

MR. GALESE: Well, Judge, | wouldn’t want you to think that

1 am relying solely on the Ex parte. Costa and Head is

the case that —

A-22

THE COURT: I take that because you cited a lot of other

cases here, this ’84 case that has been decided since then.

MR. GALESE: Yes, sir. The first case in Alabama upholding

Federal Arbitration came in the Ex parte Alabama

Oxygen as a result of the U. S. Supreme Court so

holding. Subsequent to that, 100 percent of the appel-

late decisions in Alabama have upheld the Federal

Arbitration. And all of them say exactly what Costa and

Head said, that you must interpret broadly so that it is

enforced, and you only must find the slightest nexus.

THE COURT: What was the fact situation in the Costa and

Head case?

MR. GAEESE: Costa and Head was a dispute between a

contractor and a sub-contractor for the construction of

some improvements on the old Lovemans’ building

downtown Birmingham, that’s all. It didn’t involve con-

tractors across state lines.

THE COURT: The contractor and sub-contractors were

residents of Alabama?

MR. GALESE: Yes, sir.

THE COURT: And the work was done in Alabama?

MR. GALESE: Yes, sir.

THE COURT: What was the factual situation that brought it

under the Arbitration?

MR. GALESE: There was a contract that said the parties

were to arbitrate under that Act. And the Court found

that because an aspect of the contract was involved, the

use of materials —

THE COURT: The contract itself provided?

MR. GALESE: Yes, sir. The contract in this case provides it.

We have a written contract that has been attached to the

motion in which the parties agree to submit —

THE COURT: One of the basis of originally granting your

motion —

MR. GALESE: — was the written contract. Let me answer

something Mr. Trussell said. He said where is the

slightest nexus in this case? Even if there was no Federal

Law regulating the sale of motor vehicles to retail

purchasers, and there is, the Federal Odometer Act. His

A-23

client got an odometer statement pursuant to that Act.

The fact is, he sued Ford Motor Company in this case.

He sued them under a Federal Statute, the Magnuson-

Moss Act. He sued them for breach of warranty in

connection with the vehicle. He even, irrespective of all

the other law, has created that which could be consid-

ered as the slightest nexus in the case. There is much

more than a slight nexus in the case.

MR. TRUSSELL: Now, he is submitting that by filing my

lawsuit, some allegation made in my lawsuit, invokes

interstate commerce, Your Honor, that ridiculous.

MR. GALESE: That’s not what I said at all. The point is that

he brings claim in this action against a foreign corpora-

tion, which is Ford Motor Company, who extend the

warrant. He brings claim under the Magnuson-Moss

Act, which is an Act that was passed because of the

impact of interstate commerce of goods that travel

interstate commerce. Mr. Trussell would like to have it

both ways.

MR. TRUSSELL: Your Honor, Magnuson-Moss provides —

Mr. Galese knows that he would remove this case to

Federal Court in a minute if he could. So there is no

question that the Federal jurisdiction is not invoked here.

MR. GALESE: We are not talking about Federal jurisdiction.

MR. TRUSSELL: We are talking about —

MR. GALESE: Excuse me. I didn’t interrupt you, did I?

MR. TRUSSELL: Excuse me.

MR. GALESE: Judge, we are not talking about Federal

jurisdiction. We are talking about whether or not this

contract has any slightest nexus to interstate commerce.

That is the only issue. The Magnuson-Moss Act does

provide a forum in the State or Federal Court, but that

Act was passed by the Federal Government on the

strength that the sale of consumer goods flowed to

interstate commerce. The very precise issue we are

talking about, Judge.

MR. TRUSSELL: One last question, and I will shut up and

you can talk.

A-24

Your Honor, if Mr. Galese is correct in this case, from

now on, we won'thave to worry about any automobile cases

in the State court, because he has come up with a way,

and I will promise you this, I haven't read his cases, but

this will be the first time in the history of the Alabama

courts that an Alabama State Court has held that an

arbitration agreement involving the sale of an auto-

mobile is specifically enforced. If he is correct, then he is

changing the law of this State. And I’m sure all of the

automobile dealers in this State will be glad to hear it,

because they are all going to put this provision in their

contracts. But it will be a novel point, and we will just

have to see what the Appellate Court says about it.

MR. GALESE: Wel, I’m not — Judge, I don’t represent all

the dealers. I represent a lot. And I can tell you Judge

Cook in Bessemer has upheld this on at least ten

occasions, the precise same language, involving the

document. Judge Bryan has upheld it in connection with

other car clients I represent, Eastwood Ford and others.

I have had it upheld in two other counties. I’m not

saying that you should even consider that, but I’m

responding to what he said. I didn’t create this law, the

Government did. I didn’t interpret it, the Alabama

Supreme Court did. They are the ones that say intrastate

transactions that have any impact at all on interstate

commerce, if there is a contract to arbitration under the

FAA, it must be arbitrated. It sounds like he has me out

here on the point, and if you agree with me, you are out

here on the point, and he is threatening this great

appeal.

MR. TRUSSELL: I’m not —

MR. GALESE: Excuse me. I didn’t interrupt you, Bill.

MR. TRUSSELL: Yes, you did interrupt me, and I’m going

to interrupt you now. I didn’t threaten any appeal. I’m

just saying that is a novel point. If this Court rules that, I

am not aware of any written opinion issued by any

appellate court in the State of Alabama that would

require specific arbitration in products automobile cases.

A-25

THE COURT: Assuming that the fact situation in the

Oxygen Company case, and also in the Costa and Head

are as he states, what distinguishing factors as far as the

product is concerned, what difference does it make

whether it is an automobile or an oxygen tank or —

MR. TRUSSELL: I would say this, Your Honor, and I

haven’t read Mr. Galese’s cases, but I would go out on a

limb and say that there is no case that he cited that held

that a pure intrastate purchase by a local seller and local

buyer is governed by the Federal Arbitration Law,

without even reading those cases. If those cases hold

what he says they hold, then I think that the Court will

have to follow that, but I am confident that they don’t.

MR. ROE: Your Honor, I was sitting here reading the cases

while we were arguing. I’m Steve Roe for First Alabama

Bank. We support his motion by the way. One of the

cases that he cited was McKinley versus E. F. Hutton

where the plaintiffs were customers of E. F. Hutton in

Mobile. Their account executive was a person in Mobile,

and they lived in Mobile, and they purchased a product,

in this case, a single premium deferred annuity. They

went over to their broker and bought something. And

the annuity was issued by E. F. Hutton on some com-

pany that later turned out to be a bad company. They

sued E. F. Hutton. They sued their broker in Mobile.

They went into a brokerage house in Mobile, and they

bought a product in Mobile. They didn’t like the prod-

uct. They didn’t sue the person that issued the product.

They sued the person who sold it to them, the salesman

in Mobile. There was an arbitration clause in the con-

tract they had with E. F. Hutton, and the Supreme Court

said that’s controlled by arbitration. There is one exam-

ple of something that is between two people in Alabama

over something they bought that they didn’t like. The

Supreme Court held that that was subject to arbitration.

In another one, Shamrock Food Services versus Bir-

mingham — in re Shamrock Food Services involved a

contract between Shamrock Food Services —

THE COURT: Is that cited in the brief?

A-26

MR. GALESE: Yes, sir.

MR. ROE: I am sure we could provide Your Honor with a

copy. :

MR. TRUSSELL: I would like to be provided with copies of

it, too, since I feel at somewhat a disadvantage having to

MR. ROE: That one involved a dispute between Birming-

ham Southern and Shamrock Food Services, Inc. over a

contract between them for the providing of food services

by Shamrock to Birmingham Southern. Although the

case is somewhat cryptic in what happened, it doesn’t say

anything about where the services were provided. I have

to assume it was Birmingham Southern, which is located

in Birmingham, that it arose in Birmingham. They make

the statement that the Federal Arbitration Act was

intended to reverse centuries of judicial hostility to

arbitration agreements. While I as a lawyer might hate to

see the day coming where all these things are going to be

arbitrated, that seems clearly the way the Supreme

Court is headed.

‘ MR. TRUSSELL: May I respond to the Hutton case, Your

Honor. Hutton was selling a broker. You can, of course,

sue a broker directly without suing the person he is

selling for. This was to purchase insurance from an

out-of-state company through a broker. The broker not

being the owner, but sued the broker. I think negli-

gence, malpractice and misrepresentation. But the point

is that the item being sued, the subject of the contract,

was something coming from out of state. This is a pure

intrastate transaction. The only, quote, nexus is the fact

that it was manufactured and previously came in from

out of state. But it was owned in Alabama and sold to

someone else in Alabama. Now, if the nexus is the fact

that it was manufactured way back in its history and sent

into Alabama, then it is going to take — the Federal Law

would assume the State law in this matter. Almost all

items sold in Alabama, 99 percent, I would hazard a

guess, are manufactured elsewhere.

A-27

THE COURT: What is your response to the factual provi-

sions in the contract that would be submitted for arbi-

tration?

MR. TRUSSELL: Unless the transaction effects intrastate

commerce, and I think we are all in agreement in this,

the contract provision is not binding. It has to effect

interstate commerce to be governed by Federal Law.

Once it is governed by Federal Law, you look to the

contract. And the Federal Law is that arbitration is

specific enforcement. But if it is not a transaction

involving interstate commerce, then you never get to the

point of applying Federal Law, you apply Alabama law.

Alabama law says it is not specific enforcement. The

issue here in this case is whether this specific fact

situation, if this transaction involved or effects interstate

commerce. There are a gillion cases, and I would like to

see —

THE COURT: I think the Federal Court can bring in the

commerce provision — I mean involve interstate com-

merce. It’s been pointed out always, I thirik right after I

got out of law school, in the Ollie Barbecue case, which I

thought at that time was ridiculous. Still, as you say, it

was a Civil rights question, but still, that is what the courts

held at that time that it involved — interstate commerce

was one of the last things that Ollie Barbecue at that time

ever imagined would be brought into Federal Court.

Gentlemen, I think I understand the issues clearly enough.

I will take this under advisement. I will be frank with

you, I have not read your cases, Mr. Galese, that you

cited in the brief, which did not arrive until late yester-

day afternoon.

' MR. GALESE: Judge, these are not yet published opinions of

the Alabama Supreme Court. I will be happy to give you

copies.

AK KK KK *

A-28

Federal Arbitration Act, 9 U.S.C. §§ 1-13

§ 1. “Maritime transactions” and “commerce” defined; ex-

ceptions to operation of title

“Maritime transactions”, as herein defined, means charter

parties, bills of lading of water carriers, agreements relating

to wharfage, supplies furnished vessels or repairs to vessels,

collisions, or any other matters in foreign commerce which, if

the subject of controversy, would be embraced within admi-

ralty jurisdiction; “commerce”, as herein defined, means

commerce among the several States or with fureign nations,

or in any Territory of the United States or in the District of

Columbia, or between any such Territory and another, or

between any such Territory and any State or foreign nation,

or between the District of Columbia and any State or

Territory or foreign nation, but nothing herein contained

shall apply to contracts of employment of seamen, railroad

employees, or any other class of workers engaged in foreign

or interstate commerce.

§ 2. Validity, irrevocability, and enforcement of agreements

to arbitrate

A written provision in any maritime transaction or a contract

evidencing a transaction involving commerce to settle by

arbitration a controversy thereafter arising out of such

contract or transaction, or the refusal to perform the whole

or any part thereof, of an agreement in writing to submit to

arbitration an existing controversy arising out of such a

contract, transaction, or refusal, shall be valid, irrevocable,

and enforceable, save upon such grounds as exist at law or in

equity for the revocation of anv contract.

§ 3. Stay of proceedings where issue therein referable to

arbitration

If any suit or proceeding be brought in any of the courts of

the United States upon any issue referable to arbitration

under an agreement in writing for such arbitration, the court

in which such suit is pending, upon being satisfied that the

A-29

issue involved in such suit or proceeding is referable to

arbitration under such an agreement, shall on application of

one of the parties stay the trial of the action until such

arbitration has been had in accordance with the terms of the

agreement, providing the applicant for the stay is not in

default in proceeding with such arbitration.

§ 4. Failure to arbitrate under agreement; petitionto United

States court having jurisdiction tor order to compel arbitra-

tion; notice and service thereof; hearing and determination

A party aggrieved by the alleged failure, neglect, or refusal

of another to arbitrate under a written agreement for

arbitration may petition any United States district court

which, save for such agreement, would have jurisdiction

under Title 28 [28 USCS], in a civil action or in admiralty of

the subject matter of a suit arising out of the controversy

between the parties, for an order directing that such arbitra-

tion proceed in the manner provided for in such agreement.

Five days’ notice in writing of such application shall be served

upon the party in default. Service thereof shall be made in

the manner provided by the Federal Rules of Civil Procedure

[USCS Rules of Civil Procedure]. The court shall hear the

parties, and upon being satisfied that the making of the

agreement for arbitration or the failure to comply therewith

is not in issue, the court shall make an order directing the

parties to proceed to arbitration in accordance with the terms

of the agreement. The hearing and proceedings, under such

agreement, shall be within the district in which the petition

for an order directing such arbitration is filed. If the making

of the arbitration agreement or the failure, neglect, or

refusal to perform the same be in issue, the court shall

proceed summarily to the trial thereof. If no jury trial be

demanded by the party alleged to be in default, or if the

matter in dispute is within admiralty jurisdiction, the court

shall hear and determine such issue. Where such issue is

raised, the party alleged to be in default may, except in cases

of admiralty, on or before the return day of the notice of

application, demand a jury trial of such issue, and upon such

demand the court shall make an order referring the issue or |

A-30

issues to a jury in the manner provided by the Federal Rules

of Civil Procedure [USCS Rules of Civil Procedure], or may

specially call a jury for that purpose. If the jury find that no

agreement in writing for arbitration was made or that there

is no default in proceeding thereunder, the proceeding shall

be dismissed. If the jury find that an agreement for arbitra-

tion was made in writing and that there is a default in

proceeding thereunder, the court shall make an order sum-

marily directing the parties to proceed with the arbitration in

accordance with the terms thereof.

-§ 5. Appointment of arbitrators or umpire

If in the agreement provision be made for a method of

naming or appointing an arbitrator or arbitrators or an

umpire, such method shall be followed; but if no method be

provided therein, or if a method be provided and any party

thereto shall fail to avail himself of such method, or if for any

other reason there shall be a lapse in the naming of an

arbitrator or arbitrators or umpire, or in filling a vacancy,

then upon the application of either party to the controversy

the court shall designate and appoint an arbitrator or arbi-

trators or umpire, as the case may require, who shall act

under the said agreement with the same force and effect as if

he or they had been specifically named therein; and unless

otherwise provided in the agreement the arbitration shall be

by a single arbitrator.

§ 6. Application heard as motion

Any application to the court hereunder shall be made and

heard in the manner provided by law for the making and

hearing of motions, except as otherwise herein expressly

provided.

§ 7. Witnesses before arbitrators; fees; compelling atten-

dance

The arbitrators selected eithe. as prescribed in this title or

otherwise, or a majority of them, may summon in writing any

person to attend before them or any of them as a witness and

A-31

in a proper case to bring with him or them any book, record,

document, or paper which may be deemed material as

evidence in the case. The fees for such attendance shall be

the same as the fees of witnesses before masters of the United

States courts. Said summons shall issue in the name of the

arbitrator or arbitrators, or a majority of them, and shall be

signed by the arbitrators, or a majority of them, and shall be

directed to the said person and shall be served in the same

manner as subpoenas to appear and testify before the court;

if any person or persons so summoned to testify shall refuse

or neglect to obey said summons, upon petition the United

States district court for the district in which such arbitrators,

or a majority of them, are sitting may compel the attendance

of such person or persons before said arbitrator or arbi-

trators, or punish said person or persons for contempt in the

same manner provided by law for securing the attendance of

witnesses or their punishment for neglect or refusal to attend

in the courts of the United States.

§ 8. Proceedings begun by libel in admiralty and seizure of

vessel or property

If the basis of jurisdiction be a cause of action otherwise

justiciable in admiralty, then, notwithstanding anything

herein to the contrary, the party claiming to be aggrieved

may begin his proceeding hereunder by libel and seizure of

the vessel or other property of the other party according to

the usual course of admiralty proceedings, and the court

shall then have jurisdiction to direct the parties to proceed

with the arbitration and shall retain jurisdiction to enter its

decree upon the award.

§ 9. Award of arbitrators; confirmation; jurisdiction; proce-

dure

If the parties in their agreement have agreed that a judg-

ment of the court shall be that a judgment of the court shall

be entered upon the award made pursuant to the arbitration,

and shall specify the court, then at any time within one year

after the award is made any party to the arbitration may

A-32

apply to the court so specified for an order confirming the

award, and thereupon the court must grant such an order

unless the award is vacated, modified, or corrected as pre-

scribed in sections 10 and 11 of this title. If no court is

specified in the agreement of the parties, then such applica-

tion may be made to the United States court in and for the

district within which such award was made. Notice of the

application shall be served upon the adverse party, and

thereupon the court shall have jurisdiction of such party as

though he had appeared generally in the proceeding. If the

adverse party is a resident of the district within which the

award is made, such service shall be made upon the adverse

party or his attorney as prescribed by law for service of notice

of motion in an action in the same court. If the adverse party

shall be a nonresident, then the notice of the application shall

be served by the marshal of any district within which the

adverse party may be found in like manner as other process

of the court.

§ 10. Same, vacation; grounds; rehearing

In either of the following cases the United States court in and

for the district wherein the award was made may make an

order vacating the award upon the application of any party

to the arbitration —

(a) Where the award was procured by corruption, fraud,

or undue means.

(b) Where there was evident partiality or corruption in the

arbitrators, or either of them.

(c) Where the arbitrators were guilty of misconduct in

refusing to postpone the hearing, upon sufficient cause

shown, or in refusing to hear evidence pertinent and

material to the controversy; or of any other misbehavior by

which the rights of any party have been prejudiced.

(d) Where the arbitrators exceeded their powers, or so

imperfectly executed them that a mutual, final, and defi-

nite award upon the subject matter submitted was not

made.

A-33

(e) Where an award is vacated and the time within which

the agreement required the award to be made has not

expired the court may, in its discretion, direct a rehearing

by the arbitrators.

§ 11. Same; modification or correction; grounds; order

In either of the following cases the United States court in and

for the district wherein the award was made may make an

order modifying or correcting the award upon the applica-

tion of any party to the arbitration —

(a) Where there was an evident material miscalculation of

figures or an evident material mistake in the description of

any person, thing, or property referred to in the award.

(b) Where the arbitrators have awarded upon a matter not

submitted to them, unless it is a matter not affecting the

merits of the decision upon the matter submitted.

(c) Where the award is imperfect in the matter of form not

affecting the merits of the controversy.

The order may modify and correct the award, so as to effect

the intent thereof and promote justice between the parties.

§ 12. Notice of motions to vacate or modify; service; stay of

proceedings

Notice of a motion to vacate, modify, or correct an award

must be served upon the adverse party or his attorney within

three months after the award is filed or delivered. If the

adverse party is a resident of the district within which the

award was made, such service shall be made upon the

adverse party or his attorney as prescribed by law for service

of notice of motion in an action in the same court. If the

adverse party shall be a nonresident then the notice of the

application shall be served by the marshal of any district

within which the adverse party may be found in like manner

as other process of the court. For the purposes of the motion

any judge who might make an order to stay the proceedings

in an action brought in the same court may make an order, to

be served with the notice of motion, staying the proceedings

of the adverse party to enforce the award.

A-34

§ 13. Papers filed with order on motions; judgment; dock-

eting; force and effect; enforcement

The party moving for an order confirming, modifying, or

correcting an award shall, at the time such order is filed with

the clerk for the entry of judgment thereon, also file the

following papers with the clerk:

(a) The agreement; the selection or appointment, if any,

of an additional arbitrator or umpire; and each written

extension of the time, if any, within which to make the

award.

(b) The award.

(c) Each notice, affidavit, or other paper used upon an

application to confirm, modify, or correct the award, and a

copy of each order of the court upon such an application.

The judgment shall be docketed as if it was rendered in an

action.

The judgment so entered shall have the same force and

effect, in all respects, as, and be subject to all the provisions

of law relating to, a judgment in an action; and it may be

enforced as if it had been rendered in an action in the court

in which it is entered.

A-35

Ala. Code (1975) § 8-1-41

§ 8-1-41. Obligations which cannot be specifically enforced.

The following obligations cannot be specifically enforced:

(1) An obligation to render personal service;

(2) An obligation to employ another in personal service;

(3) An agreement to submit a controversy to arbitra-

tion;

(4)An agreement to perforin an act which the party has

not power lawfully to perform when required to do so;

(5) An agreement to procure the act or consent of the

wife of the contracting party or of any other third persons;

or

(6) An agreement, the terms of which are not suffi-

ciently certain to make the precise act which is to be done

clearly ascertainable.