Petition for Writ of Certiorari — Supervalu Inc. v. Discount Foods, Inc.

> Surnreme Court, U.S.

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O2 2046 ww 18 1998

SSS ree Or ME CLERK

IN THE

Supreme Court of the United States

OCTOBER TERM, 1997

SUPERVALU INC. and MorAN Foops, INC.

d/b/a SAveE-A-Lort, LTp.,

Petitioners,

¥.

DISCOUNT Foops, INC.,

Respondent.

On Petition for a Writ of Certiorari to the

Supreme Court of Alabama

PETITION FOR A WRIT OF CERTIORARI

JERE F. WHITE, JR.*

WILLIAM H. KING, III

MADELINE H. HAIKALA

LIGHTFOOT, FRANKLIN

& WHITE, L.L.C.

505 20th Street North

300 Financial Center

Birmingham, Alabama 35203

(205) 581-0700

Attorneys for Petitioners

* Counsel of Record

SSS SSS SSS ses SSCS

ER EI LR LIE LEER PERIOD RI AO

WILSON - Erpzs PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001

QUESTION PRESENTED

Section 2 of the Federal Arbitration Act, 9 U.S.C. § 2,

makes an agreement to arbitrate a controversy arising

out of “a contract evidencing a transaction involving com-

merce .. . valid, irrevocable, and enforceable, save upon

such grounds as exist at law or in equity for the revoca-

tion of any contract.” The question presented here is

as follows:

Whether the Alabama Supreme Court, following the

minority view, correctly held as a matter of state policy

that intentional tort claims may not be arbitrated even

though an arbitration agreement, when examined using

general principles of contract law, requires arbitration

of such a controversy.

(i)

il

PARTIES TO THE PROCEEDING

The parties to the Alabama Supreme Court proceeding

are listed below:

Discount Foods, Inc. (Plaintiff) ;

Supervalu Inc. (Defendant) ;

Moran Foods, Inc. d/b/a Save-A-Lot, Ltd. (Defend-

ant); and

Gregerson’s, Inc. (Defendant).

The parent companies and non-wholly owned subsid-

iaries of the two corporate petitioners are listed below:

Supervalu Inc.—No parent company

Non-wholly owned subsidiaries:

NAFTA Industries Consolidated, Inc.

Moran Foods, Inc. d/b/a Save-A-Lot, Ltd.

Parent company: Supervalu Operations, Inc.

No non-wholly owned subsidiaries.

Sina SAIS ERE iN icc

TABLE OF CONTENTS

QUESTION PRESTIGE q..20...cccccccccesccrscesecsccesesenesseees

PARTIES TO THE PROCEEDING ...........................

of SY Us eh Atyy >. sy). SISO nn Donen nSOnneeTOeD

I I cc pacrdnpnepsaicinacenscheaguniivaesenennte

SURISDICTION ............-........ Sai Saskigiice le Glstaea nasties Dihagcgeehalle

STATUTORY PROVISIONS INVOLVED ....................

STATEMENT

REASONS FOR GRANTING THE WRIT .......0000000........

I. THE DECISION BELOW VIOLATES SEC-

TION 2 OF THE FAA AND CONTRAVENES

FEDERAL POLICY FAVORING THE EN-

FORCEABILITY OF ARBITRATION AGREE-

| late cal Aigo cae A SORT AE I AR Boe EE SN ALSO

Il. THIS CASE PROVIDES AN OPPORTUNITY

FOR THE COURT TO MAKE CONSISTENT

FEDERAL LAW CONCERNING THE INTER-

PRETATION OF ARBITRATION AGREE-

MENTS ...........

CONCLUSION

(iii)

Page

YD Eee

iv k

TABLE OF AUTHORITIES é

CASES Page 5

Allied-Bruce Terminix Companies, Inc. v. Dobson,

3) Re | Ge: ) I rcmermmnppeeuenn 6, 8, 9, 11, 18, 15

Allied-Bruce Terminix Companies, Inc. v. Dobson,

ee ey Ge TOME EUs OED medscceeskeniscésevcsnecsnsscccscse 11

Aspero v. Shearson American Express, Inc., 768

F.2d 106 (6th Cir.), cert. denied, 474 U.S. 1026

PRIA RIRIRD NORE CD ee ee Orne A OTe OF 13

Barv/Nelson, Inc. v. Tonto’s Inc., 3836 N.W.2d 46

RR BOD ago peed cas dsc ke tah cans oid atanvan ib asdiea dea eieael 12

Doctor’s Associates, Inc. v. Casarotto, 517 U.S.

nda tioks 9,13

Federal Land Bank v. Terra Resources, Inc., 373

a: a Ps URE iincscecictic esses annlaseaibccins 11 ;

Genesco, Inc. v. T. Kakiuchi & Co., Ltd., 815 F.2d :

DOD SO Ce SO oe 8, 18, 14 ‘

Gregory v. Electro-Mechanical Corp., 88 F.3d 382

PRN Ga PIED a nikss secdoecccbudecceetecckbichihadactaaabecibad 8, 13, 14

J. J. Ryan & Sons, Inc. v. Rhone Poulenc Textile,

S.A., 868 F.2d 315 (4th Cir. 1988) .........00......... 8,18, 14

Mediterranean Enterprises, Inc. v. Ssangyong

Corp., 708 F.2d 1458 (9th Cir. 1983) .................. 8,15

Moses H. Cone Memorial Hosp. v. Mercury Constr.

iss SE Ans ED isiie’ lensed pinepeannc bec bliearnigansecs: 8,13

Perry v. Thomas, 482 U.S. 483 (1987) -................... 9,10

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

RE Sis Oe CRIED hss enictheccccinaee 9,10

Ryan Warranty Services, Inc. v. Welch, 694 So. 2d

Ren es BED citi rinaaidessvdis inane aeiduenicn: 11

Sweet Dreams Unlimited, Inc. v. Dial-A-Mattress

Int'l, Lid., 1 F.8d 689 (7th Cir. 1998) ............. i 14

Terminix Int'l Co. v. Stabbs, 9830 S.W.2d 345 Ark.

RO UEE is icici anceseaasc cca covtccbalocsincecina ainda Aas cseieieoaiane 8,15

Terry Cove North, Inc. v. Baldwin County Sewer

Authority, Inc., 480 So. 2d 1171 (Ala. 1985)...... 11

United Steel Workers of America v. Warrior Gulf

Navigation Co., 363 U.S. 574 (1960) ....00000000000... 10

Volt Information Sciences, Inc. v. Board of Trust-

ees of the Leland Stanford Junior University,

Ge Stes, RED cai tccichaereaa ed cians 9

.

TABLE OF AUTHORITIES—Continued

Page

Vukasin v. D. A. Davidson & Co., 785 P.2d 718

Gee. SEO? ec DME DOR MAT EE i, SOE 13

STATUTES

gs og Bo dS) eas ake Mean ORO aires tae eee 1

WR Nae WE cides te Co er een ae ee passim

Minn. Stat. Ann. § 549, 20 (West 1988) _ canna 12

RULES

i Eres OU re i ee iieiellitglh aban. 13

OTHER AUTHORITY CITED

H.R. Rep. No. 96, 68th Cong., Ist Sess. 1 (1924)... 9,11

IN THE

Supreme Court of the United States

OCTOBER TERM, 1997

No.

SUPERVALU INC. and MORAN Foops, INc.

d/b/a Save-A-Lor, LTD.,

Petitioners,

DiscounT Foops, INc.,

Respondent.

On Petition for a Writ of Certiorari to the

Supreme Court of Alabama

PETITION FOR A WRIT OF CERTIORARI

Petitioners respectfully request that a writ of certiorari

issue to review the decision of the Supreme Court of

Alabama in this case.

OPINIONS BELOW

The opinion of the Supreme Court of Alabama is not

yet reported. It is reprinted in the appendix to this peti-

tion at la-6a. The order of the Circuit Court of Calhoun

County, Alabama is not reported. It is reprinted in the

appendix to this petition at 7a-10a.

JURISDICTION

The judgment of the Supreme Court of Alabama was

entered on February 13, 1998. A timely petition for re-

hearing was denied on March 20, 1998. The jurisdiction

of this Court is invoked pursuant to 28 U.S.C. § 1257(a).

2

STATUTORY PROVISIONS INVOLVED

Section 2 of the Federal Arbitration Act, 9 U.S.C. § 2,

provides:

Validity, irrevocability, and enforcement of agree-

ments to arbitrate

A written provision in any maritime transaction or a

contract evidencing a transaction involving com-

merce to Settle by arbitration a controversy there-

after arising out of such contract or transaction, or

the refusal to perform the whole or any part thereof,

or an agreement in writing to submit to arbitration

an existing controversy arising out of such a con-

tract, transaction, or refusal, shall be valid, irrevo-

cable, and enforceable, save upon such grounds as

exist at law or in equity for the revocation of any

contract.

STATEMENT

This case involves the construction of Section 2 of

the Federal Arbitration Act (the “FAA” or “the Act’),

9 U.S.C. § 2. The Act requires that an arbitration agree-

ment in a “contract evidencing a transaction involving

commetce” be enforced as would any other term in the

contract containing the arbitration agreement. 9 U.S.C.

§ 2. Contrary to ordinary rules of contract interpretation,

the Alabama Supreme Court refused to enforce the broad

arbitration provision in this case on the grounds that the

clause could not encompass the intentional torts alleged

by Plaintiff. Pet. App. 4a.

The arbitration agreement at issue is located in a Re-

tailer’s Agreement between Plaintiff, Discount Foods, Inc.

(“Discount Foods” or “Plaintiff’), an Alabama corpora-

tion, and Defendant, Supervalu Inc. (“Supervalu”), a

Delaware corporation. Discount Foods operates grocery

stores in northern Alabama. The Retailer’s Agreement

creates numerous rights and obligations for both Discount

Foods and Supervalu. For instance, Supervalu must make

ooo |

3

available to Discount Foods product lines authorized by

Supervalu at the time of each Discount Foods order.’ The

Retailer’s Agreement also provides that Supervalu may

establish or supply other stores that may compete with

Discount Foods’ stores. Specifically, the agreement per-

mits Supervalu:

to enter into Retailer Agreements with other parties

at SUPERVALU’s sole choice and discretion, includ-

ing but not limited to SUPERVALU’s right to own,

operate, finance, serve or supply a store in competi-

tion with Retailer [Discount Foods] at any location.

Pet. App. 14a (emphasis added ).?

The arbitraiton clause in the Reiailer’s Agreement be-

tween the parties states that, “[a]ny controversy or claim

arising between the parties, including, but not limited te,

disputes relating to this Agreement, shall be resolved by

binding arbitration.” Pet. App. 16a. The arbitration

clause in the Retailer’s Agreement continues as follows:

This agreement to arbitrate shall continue in full

force and effect despite the expiration, rescission or

termination of this Agreement. All arbitration shall

be undertaken pursuant to the Federal Arbitration

Act, and the decision of the arbitrator(s) shall be

enforceable in any court of competent jurisdiction.

The parties knowingly and voluntarily waive their

rights to have their dispute tried and adjudicated by

a judge or jury. The arbitrator(s) shall apply the

1 Supervalu’s wholly owned subsidiary, Supervalu Holdings, Inc.

(“Supervalu Holdings”), operates a warehouse and deals with

numerous retailers including Plaintiff. The products which Super-

valu provides to retailers include goods manufactured across the

United States and shipped to the Supervalu Holdings’ warehouse in

Anniston, Alabama.

2 Discount Foods also acknowledged in the Retailer’s Agreement

that “the retail grocery business is highly competitive and a high

risk business and that SUPERVALU has not given and cannot give

any guaranty of the profitability, if any, of Retailer.” Pet. App.

15a-16a.

4

Law of the State of Minnesota, except as may be

modified by this Agreement. The arbitration shall

be held in Minneapolis, Minnesota.

Pet. App. 16a.

Despite the parties’ agreement to arbitrate any contro-

versy between them, Discount Foods brought suit against

Supervalu, Moran Foods, Inc. d/b/a Save-A-Lot, Ltd.

(“Save-A-Lot”), a Missouri corporation,*? and Greger-

on’s, Inc. (“Gregerson’s”), an Alabama corporation, in

the Circuit Court of Calhoun County, Alabama on May

7, 1996. The lawsuit arose out of Supervalu’s efforts to

establish a Sav-A-Lot grocery store across the street from

a Discount Foods store in Anniston, Alabama. Discount

Foods submitted a bid to the lessor for the retail location

so that Discount Foods could operate a Sav-A-Lot fran-

chise or relocate its store, but the lessor accepted Greger-

son’s bid. After Gregerson’s procured the lease, Super-

valu agreed to license Gregerson’s to operate a Save-

A-Lot store on the property.* In its Complaint, Plaintiff

alleged three causes of action against Supervalu and

Save-A-Lot: (1) tortious interference with contractual

and business relations; (2) unfair competition; and (3)

disclosure of trade secrets and restraint of trade.

Pursuant to the arbitration provision contained in the

Retailer's Agreement, Supervalu and Save-A-Lot filed in

the trial court a motion to compel arbitration of Dis-

count Foods’ tort claims and to stay litigation pending arbi-

tration. Supervalu and Save-A-Lot specifically relied on

and cited Section 2 of the FAA as support for their mo-

tion. On June 16, 1996, the Honorable Judge Malcolm

B. Street of the Circuit Court of Calhoun County, Ala-

3 Save-A-Lot is wholly owned by Supervalu Operations, Inc., a

wholly-owned subsidiary of Supervalu.

4 The lessor of the property is a New York corporation, unrelated

to any party and not a defendant in this action. Some of the nego-

tiations regarding the lease were held between New York and

Alabama.

|

3

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a

4

:

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a

5

bama granted petitioners’ Motion to Compel Arbitration.

Pet. App. 10a. The Circuit Court found that the arbi-

tration clause agreed to by the parties encompassed all

of the Plaintiff's claims, because the provision covers

“{aJny controversy or claim arising between the parties

including, but not limited to, disputes relating to this

Agreement.” Pet. App. 9a. The Court also held that

the claims against Supervalu and its subsidiary, Save-

A-Lot, were based on the same facts and were inherently

inseparable.> Accordingly, the Circuit Court ordered

Discount Foods to arbitrate its claims against Supervalu

and Save-A-Lot. Pet. App. 9a-10a.

On July 15, 1997, Discount Foods filed a motion to

reconsider the trial court order compelling arbitration of

its claims. Judge Street denied Plaintiff's Motion to Re-

consider on July 17, 1997. Pet. App. 11a.

Discount Foods then petitioned the Alabama Supreme

Court for a writ of mandamus to compel Judge Street to

withdraw his Order granting defendants’ Motion to Com-

pel Arbitration. Discount Foods argued that it did not

intend to arbitrate intentional torts, but it cited no evi-

dence to support its argument. In their opposition to

the writ petition, Supervalu and Save-A-Lot argued that

the arbitration clause at issue, which expressly is not

limited to contractual disputes, encompassed Discount

Foods’ tort claims. Supervalu and Save-A-Lot also drew

the state Supreme Court’s attention to the following por-

tion of the arbitration provision:

The arbitrator(s) shall have the authority to award

actual money damages . . . , but the arbitrator(s)

shall not have the authority to award exemplary,

punitive or consequential damages, and the parties

expressly waive any claimed right to such damages.

5 The Circuit Court observed that the Retailer’s Agreement in-

volved interstate commerce and was therefore governed by the FAA.

Pet. App. 9a.

6

Pet. App. 17a. Punitive damages typically are available

only for intentional torts. Judge Street also answered

the petition and explained the reasons for his decision.

Pet. App. 20a-25a.

On February 13, 1998, the Alabama Supreme Court

refused to enforce the arbitration agreement between the

parties and entered an Order granting Discount Foods’

petition for a writ of mandamus. While at least acknowl-

-edging this Court’s mandate regarding arbitration in

Allied-Bruce Terminix Companies, Inc. v. Dobson, 513

U.S. 265 (1995), the Alabama Supreme Court found

that (1) Plaintiff's claims did not relate to the parties’

contractual relations, and (2) the arbitration provision

was not broad enough to encompass arbitration of inten-

tional torts. Pet. App. 4a. Specifically, the Alabama

Supreme Court found that “the parties’ arbitration provi-

sion, although broad, cannot be construed to encompass

intentional torts of the parties that are separate and dis-

tinct from the dealings that gave rise to the signing of

the document containing the arbitration provision in the

first place.” Id. The state’s highest court reasoned that,

[tlo hold otherwise would allow persons signing

broad arbitration provisions to commit intentional

torts against one another, which torts are outside the

scope of their contemplated dealings, without con-

cern that they might have to answer for their actions

before a jury of their peers.

Id.

Supervalu and Save-A-Lot timely filed an Application

for Rehearing with the Alabama Supreme Court on

February 27, 1998. In addition to noting, once again,

the breadth and clarity of the arbitration clause, Super-

valu and Save-A-Lot explained that Discount Foods’

claims concerning the Defendants’ efforts to open a groc-

ery store across the street from a Discount Foods’ store

related to Supervalu’s contractual right to establish re-

tail stores that compete with Discount Foods’ stores. The

Alabama Supreme Court overruled the Application for

J

Rehearing without written opinion on March 20, 1998.

Pet. App. 12a.

REASONS FOR GRANTING THE WRIT

This case involves an important question concerning

the scope of Section 2 of the Federal Arbitration Act.

Section 2 requires courts to treat arbitration agreements

as “valid, irrevocable and enforceable” to the same extent

as any other term in the contract which contains the

arbitration clause. Although most courts have followed

the mandate of Section 2 and have applied general con-

tract principles when determining whether a particular

dispute falls within the scope of an arbitration clause,

the Alabama Supreme Court, as a matter of public pol-

icy, has rejected this procedure when the controversy be-

tween the contracting parties gives rise to an intentional

tort claim. Thus, contrary to the common law of Ala-

bama regarding the construction of contracts, the Ala-

bama Supreme Court held that the parties’ agreement to

arbitrate “any controversy or claim arising between [them],

including, but not limited to, disputes relating to this

agreement,” did not encompass the Plaintiff's intentional

tort claims because the arbitration provision, “although

broad, cannot be construed to encompass intentional torts

of the parties that are separate and distinct from the deal-

ings that gave rise to the signing of the document con-

taining the arbitration provision in the first place.” Pet.

App. 4a (emphasis added). According to the Alabama

court,

[tlo hold otherwise would allow persons signing

broad arbitration provisions to commit intentional

torts against one another, which torts are outside of

the scope of their contemplated dealings, without

concern that they might have to answer for their

actions before a jury of their peers.

Id.

Alabama’s highest court should not be permitted to

elevate the state’s aversion to predispute arbitration agree-

8

ments over the “liberal federal policy favoring arbitration

agreements” either by misconstruing the interstate com-

merce test for the application of the FAA ® or by ignor-

ing Section 2’s requirement that arbitration clauses be

interpreted according to state law rules of contractual

construction. Moses H. Cone Memorial Hosp. v. Mer-

cury Constr. Co., 460 U.S. 1, 24 (1983). The FAA

“makes any such state policy unlawful, for that kind of

policy would place arbitration clauses on unequal ‘foot-

ing,’ directly contrary to the Act’s language and Con-

gress’ intent.” Allied-Bruce Terminix Companies, Inc. v.

Dobson, 513 U.S. 265, 281 (1995). Congress provided

no special rules regarding the arbitration of intentional

tort claims, and there is nothing in the history of the

FAA which indicates that the omission is accidental.

The Alabama court is not alone in its refusal to per-

mit arbitration of intentional torts. Although most courts

have examined the factual allegations of a complaint,

rather than the labels assigned to causes of action, to

determine whether the parties intended to arbitrate a

particular controversy, see, e.g. Gregory v. Electro-

Mechanical Corp., 83 F.3d 382, 384 (11th Cir. 1996),

J. J. Ryan & Sons, Inc. v. Rhone Poulenc Textile, S.A..,

863 F.2d 315, 319 (4th Cir. 1988) and Genesco, Inc.

v. T. Kakiuchi & Co., Ltd., 815 F.2d 840, 846 (2d Cir.

1987), a few courts have joined Alabama in rejecting

parties’ efforts to arbitrate intentional tort claims, see,

e.g. Terminix Int'l Co. v. Stabbs, 930 S.W.2d 345 (Ark.

1996) and Mediterranean pete a Inc. v. Ssangyong

Corp., 708 F.2d 1458 (9th Cir. 1983). This conflict

between federal and state law and policy will not be

resolved without direction from this Court. The Con-

gressional intent underlying the FAA will be frustrated

until this Court confirms that contracting parties are free

to choose which controversies between them will be re-

solved in arbitration.

6 See, Allied-Bruce Terminix Cos., Inc. v. Dobson, 518 U.S. 265

(1995).

P

2

9

I. THE DECISION BELOW VIOLATES SECTION 2

OF THE FAA AND CONTRAVENES FEDERAL

POLICY FAVORING THE ENFORCEABILITY OF

ARBITRATION AGREEMENTS

“The basic purpose of the Federal Arbitration Act is

to overcome courts’ refusals to enforce agreements to

arbitrate.” Allied-Bruce Terminix Companies, Inc. v.

Dobson, 513 U.S. at 270 (1995). Congress enacted the

Arbitration Act in 1925 to preclude “States from singling

out arbitration clauses for suspect status.” Doctor's As-

sociates, Inc. v. Casarotto, 517 U.S. 681, 682 (1996).

Congress intended for courts to “place such agreements

‘upon the same footing as other contracts.’” Volt Infor-

mation Sciences, Inc. v. Board of Trustees of the Leland

Stanford Junior University, 489 U.S. 468, 474 (1989)

(quoting H.R. Rep. No. 96, 68th Cong., Ist Sess. 1

(1974)). “Arbitration agreements are purely matters of

contract, and the effect of the bill is simply to make the

contracting party live up to his agreement.” H.R. Rep.

No. 96, 68th Cong., Ist Sess. 1 (1924). Section 2

effectuates this intent by requiring courts to recognize ar-

bitration clauses as “valid, irrevocable, and enforceable,

save upon such grounds as exist at law or in equity for

the revocation of any contract.” 9 U.S.C. § 2 (emphasis

added).

The effect of Section 2 is simple and straightforward:

“{a] court may not, .. . in assessing the rights of litigants

to enforce an arbitration agreement, construe that agree-

ment in a manner different from that in which it construes

nonarbitration agreements under state law.” Perry v.

Thomas, 482 U.S. 483, 493 n.9 (1987). A court must

apply “general state-law principles of contract interpreta-

tion” to determine whether a dispute between parties to

a contract containing an arbitration clause is, in fact,

arbitrable. Volt Information Sciences, Inc., 489 U.S. at

475. The Alabama Supreme Court has chosen to dis-

regard the mandate of Section 2 when ordinary rules of

10

contract interpretation would require parties to arbitrate

an intentional tort.

This Court has not addressed the specific issue pre-

sented here, namely whether intentional tort claims may

be arbitrated if the language of an arbitration clause is

broad enough to encompass those claims;’ however, an

examination of the criteria which the Court previously

has reviewed in determining the import of Section 2 leads

to the conclusion that tort claims, even intentional tort

claims, may be arbitrated if the parties to the arbitration

provision agreed to do so. Section 2 uses the generic

term “controversy;” it does not specifically except tort

claims from the controversies which parties may agree to

submit to arbitration. In fact, Section 2’s distinction be-

tween controversies arising out of a contract or trans-

action and refusals to perform part or all of a contract

indicates that Congress contemplated that disputes other

than contract claims could be arbitrated. Congress

crafted the FAA to allow parties to choose the forum in

which disagreements between them would be resolved,

7 Although this issue has not been specifically presented to this

Court, Petitioners note that this Court has decided other issues in

arbitration cases, and the effect of the Court’s opinions was that

intentional torts were sent into arbitration. In United Steel Work-

ers of America v. Warrior Gulf Navigation Co., this Court stated

that “{a]part from matters that the parties specifically exclude,

all of the questions on which the parties disgaree must therefore

come within the scope of the grievance and arbitration provisions

of the collective agreement.” 863 U.S. 574, 581 (1960) (finding

labor dispute, involving allegations of intentional conduct, was not

excluded from arbitration) ; see also Prima Paint Corp. v. Flood &

Conklin Mfg. Co., 388 U.S. 395 (1967) (ordering arbitration of

fraud in the inducement claim). In addition, this Court has held

that state laws which prohibit the arbitration of certain types of

claims are preempted by the FAA. Perry v. Thomas, 482 U.S. at

491 (finding FAA preempted § 229 of the California Labor Code

which provided for the maintenance of actions for the collection of

wages without regard to an arbitration provision). Court-made

rules, like statutory provisions, which disregard arbitration provi-

sions and Congress’ mandate, must fall.

I PEN TERRY NMA EI EF

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nen

5) A ANGE CLES LANE LLORES MELONS TENT TE PI

1]

and there is nothing in the legislative history of the FAA

which suggests that Congress meant to preclude inten-

tional tort claims from arbitration. See H.R. Rep. No.

96 at 2 (recognizing the need for enforcement of arbitra-

tion agreements in light of the costliness and delays of

litigation).

The decision below disregards the plain requirements

of Section 2 and the strong federal policy favoring arbi-

tration agreements. The Alabama Supreme Court abdi-

cated state common law principles of contract interpreta-

tion for a state policy opposing arbitration of intentional

tort claims. Alabama’s rules of contract interpretation

provide that, “to ascertain the intention of the parties,

the plain and clear meaning of the instrument’s terms is

to be given effect, and the parties are presumed to have

intended what the terms clearly state.” Federal Land

Bank v. Terra Resources, Inc., 373 So. 2d 314, 319-20

(Ala. 1979); Terry Cove North, Inc. v. Baldwin County

Sewer Authority, Inc., 480 So. 2d 1171, 1173 (Ala.

1985); Allied-Bruce Terminix Cos., Inc. v. Dobson, 684

So. 2d 102, 110 (Ala. 1995) (“The answer to [the]

question [of whether an arbitration clause applies to a

plaintiff's claims] is a matter of contract interpretation,

which interpretation is guided by the intent of the parties,

and which intent, absent ambiguity in the clause, is evi-

denced by the plain language of the clause”). Further-

more, “terms should be construed in pari materia and

a construction adopted which gives effect to all the terms

used.” Federal Land Bank, 373 So. 2d at 320; see also,

Ryan Warranty Services, Inc. v. Welch, 694 So. 2d 1271,

1273 (Ala. 1997) (“a contract is to be construed in its

entirety and not solely on a single provision”).

The language of the arbitration agreement between

Discount Foods and Supervalu is plain and clear: “any

controversy or claim arising between [the parties], in-

cluding, but not limited to, disputes relating to this agree-

ment,” must be arbitrated. Thus, the arbitration clause

unambiguously encompasses Discount Foods’ intentional

12

tort claims against Supervalu, whether or not those claims

specifically relate to the contract between Supervalu and

Discount Foods.* Moreover, the arbitration clause pro-

hibits the arbitrator from awarding exemplary, punitive,

or consequential damages. Pet. App. 17a. Under Minne-

sota law, the state law which the parties agreed to apply

to all arbitration proceedings, punitive damages are not

available in simple contract actions; they only may be

awarded to punish defendants found guilty of intentional

torts. Minn. Stat. Ann. § 549.20 (West 1988); Barr/

Nelson, Inc. v. Tonto’s Inc., 336 N.W.2d 46, 52-53

(Minn. 1983). If the parties had not intended for in-

tentional tort claims to be arbitrated, then the punitive

damages language in the arbitration agreement would be

superfluous. Applying Alabama rules of contract inter-

pretation, it is clear that the parties intended to arbitrate

intentional tort claims such as the ones that Discount

Foods has asserted againt Supervalu.

Were there any doubt about the parties’ intent, the

Alabama Supreme Court should have resolved that doubt

in favor of arbitration.

The Arbitration Act established that, as a matter of

federal law, any doubts concerning the scope of ar-

8 The Alabama Supreme Court held that Discount Foods’ tort

claims did not relate to the contract between Supervalu and Dis-

count Foods, which the Court characterized as a retail agreement

“for the supply of groceries and other inventory items.” Pet. App.

2a. This factual finding is incorrect. As Supervalu pointed out to

the state court in the company’s opposition to Discount Foods’ writ

petition and in its application for rehearing, the contract between

Discount Foods and Supervalu governs many aspects of the rela-

tionship between the two parties and specifically permits Supervalu

to establish and supply retail stores that compete with Diseccunt

Foods stores. Therefore, Discount Foods’ tort claims for unfair

competition, intentional interference with contractual relations and

violation of trade secret and antitrust law arising out of Super-

valu’s alleged wrongful effort to help establish a competing grocery

store across the street from a Discount Foods’ store are related to

and intertwined with the terms of the contract in which the arbi-

tration clause at issue is located.

13

bitrable issues should be resolved in favor of arbitra-

tion, whether the problem at hand is the construc-

tion of the contract language itself or an allegation

of waiver, delay, or like defense of arbitrability.

Moses H. Cone Memorial Hosp. v. Mercury Constr.

Corp., 460 U.S. 1, 24-25 (1983). The Alabama Su-

preme Court selected its own policy against the use of

arbitration agreements over the federal policy favoring

them, contrary to this Court’s instruction in Allied-Bruce

Terminix, 513 U.S. at 272 (the FAA “seeks broadly to

overcome judicial hostility to arbitration agreements”);

see als, Doctor's Associats, Inc., 517 U.S. at 687 n.3

(“a court may not ‘rely on the uniqueness of an agree-

ment to arbitrate as a basis for a state-law holding that

enforcement would be unconscionable, for this would en-

able the court to effect what .. . the state legislature

cannot”) (quoting Perry v. Thomas, 482 U.S. at 492

n.9). Consequently, review by this Court is appropriate.

S. Ct. Rule 10(c).

II. THIS CASE PROVIDES AN OPPORTUNITY FOR

THE COURT TO MAKE CONSISTENT FEDERAL

LAW CONCERNING THE INTERPRETATION OF

ARBITRATION AGREEMENTS

The decision below departs from the holdings of the

majority of the Circuit Courts of Appeal and the few

state courts which have reviewed the application of the

FAA to intentional tort claims. Most courts, applying

ordinary rules of contract interpretation, have ordered

the arbitration of intentional tort claims where the lan-

guage of the arbitration clause at issue encompasses those

claims. See, e.g., Gregory v. Electro-Mechanical Corp.,

83 F.3d 382, 384 (11th Cir. 1996); Sweet Dreams Un-

limited, Inc. v. Dial-A-Mattress Int’l., Ltd., 1 F.3d 639,

642-43 (7th Cir. 1993); J.J. Ryan & Sons, Inc. v. Rhone

Poulenc Textile, §.A., 863 F.2d 315, 319-20 (4th Cir.

1988); Genesco, Inc. v. T. Kakiuchi & Co., Ltd., 815

F.2d 840, 847-56 (2d Cir. 1987); Aspero v. Shearson

American Express, Inc., 768 F.2d 106, 107-08 (6th

14

Cir.), cert. denied, 474 U.S. 1026 (1985); Vukasin v.

D.A. Davidson & Co., 785 P.2d 713, 718 (Mont.

1990).

In the Eleventh Circuit, “tort claims .. . are not auto-

matically excluded from a contractual arbitration clause.”

Gregory v. Electro-Mechanical Corp., 83 F.3d at 384.

That court of appeals held that claims of fraud, fraudu-

lent inducement, deceit, conversion, breach of good faith

and fair dealing and the intentional tort of outrage were ar-

bitrable under an arbitration clause which provided that,

“any dispute between any of the Parties which may arise

hereunder or under any agreement referred to as an ex-

hibit herein” was subject to arbitration. /d. at 383. The

court explained that, “{w]hether a claim falls within the

scope of an arbitration agreement turns on the factual alle-

gations in the complaint rather than the legal causes of

action asserted.” Jd. at 384. The Fourth and the Second

Circuits agree. Accordingly, the Fourth Circuit recog-

nized that the parties’ agreement to arbitrate “[aJll dis-

putes arising in connection with the present contract”

meant that plaintiff's claims for unfair trade practices,

intentional and tortious interference with contract and

conversion had to be arbitrated. J.J. Ryan & Sons, Inc.

v. Rhone Poulenc Textile, S.A., 863 F.2d at 318; see

also Genesco, Inc., 815 F.2d at 846. The Seventh Cir-

cuit found that a contractual provision which required

the parties to arbitrate “[a]ny disputes arising out of the

agreement,” was broad enough to include plaintiff's

claims for intentional interference with contractual ad-

vantage and fraud claims. Sweet Dreams Unlimited, Inc.

v. Dial-A-Mattress Int'l, Ltd., 1 F.3d at 641.9 “We find,

however, that ‘arising out of reaches all disputes having

their origin or genesis in the contract, whether or not

they implicate interpretation or performance of the con-

®The Alabama Supreme Court specifically rejected the Seventh

Cireuit’s opinion in Sweet Dreams Unlimited, Inc. v. Dial-A-

Mattress Int'l, Ltd. Old Republic Ins. v. Lanier, 644 So. 2d 1258,

1261 ( Ala. 1994).

a

15

tract per se. ... We note that contracting parties con-

trol their own fate when it comes to deciding which dis-

putes to consign to arbitration.” Jd. at 642-43.

Nevertheless, Alabama does not stand alone in its

refusal to permit arbitration of intentional tort claims.

For instance, in a decision which post-dates this Court’s

opinion in Allied-Bruce Terminix Cos., Inc. v. Dobson,

the Arkansas Supreme Court held that, “the Federal

Arbitration Act and the laws of other jurisdictions do

not restrict the scope of arbitration as we do in this

State. . . . Written agreements to arbitrate have no ap-

plication to tort matters.” Terminix Int'l Co. v. Stabbs,

930 S.W.2d 345, 346 (Ark. 1996). The Ninth Circuit

has held that claims of conspiracy to induce breach of

an agreement and conversion were not arbitrable under

contractual language which provided for arbitration of

“any dispute arising” under the contract. Mediterranean

Enterprises, Inc. v. Ssangyong Corp., 708 F.2d 1458 (9th

Cir. 1983).

Parties to a contract should have confidence that the

contract will be interpreted and enforced according to

settled contract principles, as Section 2 requires, rather

than according to the vagaries of state policies which

restrict the arbitration of tort claims. Otherwise, the

principle of freedom of contract, upon which Section 2

rests, is rendered meaningless; the policy underlying the

FAA favoring arbitration is emasculated; and parties to

a contract are forced to operate without the assurance

that the time and expense dedicated to negotiating an

arbitration agreement, in reliance upon the FAA, will

not be wasted. Direction from this Court on this im-

portant issue will restore to parties to arbitration agree-

ments certainty that their intent to arbitrate will be hon-

ored and enforced, as Congress direced in Section 2 of

the FAA.

16

CONCLUSION

The petition for writ of certiorari should be granted.

Respectfully submitted,

JERE F. WHITE, JR.*

WILLIAM H. KING, III

MADELINE H. HAIKALA

LIGHTFOOT, FRANKLIN

& WHITE, L.L.C.

505 20th Street North

300 Financial Center

Birmingham, Alabama 35203 4

(205) 581-0700 a

Attorneys for Petitioners

June 18, 1998 * Counsel of Record

APPENDIX

la

APPENDIX

[Released Feb. 13, 1998]

SUPREME COURT OF ALABAMA

OCTOBER TERM, 1997-98

1962052

Ex PARTE Discount Foops, INc.

PETITION FOR WRIT OF MANDAMUS

(Re: Discount Foods, Inc.

Vv.

SUPERVALU, et al.)

(Calhoun Circuit Court, CV-96-411)

KENNEDY, JUSTICE.

Discount Foods, Inc., the plaintiff in an action pending

in the Calhoun Circuit Court, petitions for a writ of

mandamus directing Judge Malcolm Street 1) to withdraw

his order granting the defendants’ motion to compel arbi-

tration and to stay the proceedings and 2) to enter an

order denying the defendants’ motion.

On May 7, 1996, Discount Foods sued several related

businesses (the Supervalu Company,! Save-a-lot, Ltd., and

1 The record indicates that several entities carry the name “Su-

pervalu,” “Supervalue Holdings,” or similar names. The name

“Supervalu” is spelled sometimes “SuperValu.”

2a

Gregorson’s Holdings, Inc. and various other fictitiously

named defendants. The complaint alleged that the defend-

ants had tortiously interfered with Discount Foods’ con-

tractual and business relations; unfair competition; and

violation of trade secret and antitrust law. with respect to

Discount Foods’ transaction with a third party to acquire

a lease of commercial real estate in Anniston. Before

trial, however, the named defendants moved to compel

arbitration, based on an arbitration provision contained in

retail agreements previously executed between Supervalu

and Discount Foods for the supply of groceries and other

inventory items to Discount Foods. The arbitration pro-

vision provided, in pertinent part:

“Any controversy or claim arising between the par-

ties, including, but not limited to, disputes relating

to this [a]greement, shall be resolved by binding arbi-

tration... .”

On June 16, 1997, the trial court granted the motion to

compel arbitration as to all claims stated against Supervalu

and its subsidiary, Save-A-Lot, and it stayed proceedings

in the action.

Discount Foods argues that the trial court erred in

compelling arbitration with regard to its present claims

against Supervalu and its subsidiary, Save-a-lot. Discount

Foods argues that the disputes involved in the present law-

suit are in no way associated with its contractual relations

with Supervalu. Moreover, Discount Foods contends that

the arbitration provision found in the retail agreements

between. Discount Foods and Supervalu was not intended

by the parties to force arbitration in regard to allegations

of intentional torts that are unrelated to their contractual

dealings. We agree.

2 The relationship of the defendant Gregorson’s Holdings, Inc.,

to the other defendants and to the arbitration issue presented by

this case is unclear. However, given our holding that the court

erred in compelling arbitration, we need not ascertain whether

Gregorson’s would have been subject to the arbitration order.

3a

In Allied-Bruce Terminix Companies v. Dobson, 513

U.S. 265 (1995), the United States Supreme Court heid

that the Federal Arbitration Act (“FAA”) governs all

contracts falling within Congress’s power under the Com-

merce Clause. Allied-Bruce Terminix substantially changed

the arbitration law of this State, which had previously been

declared in Ala. Code 1975, § 8-1-41(3) (“The following

obligations cannot be specifically enforced: . . . An agree-

ment to submit a controversy to arbitration{.]”). The

federal policy favoring arbitration was recognized by this

Court in Allied-Bruce Terminix Companies v. Dobson,

684 So. 2d 102 (Ala. 1995), on remand following the

United States Supreme Court’s Allied-Bruce Terminix de-

cision. In that opinion, this Court stated:

““The Arbitration Act establishes that, as a matter

of federal law, any doubts concerning the scope of

arbitratable issues should be resolved in favor of

arbitration, whether the problem at hand is the con-

struction of the contract language itself or an allega-

tion of waiver, delay, or like defense to arbitrability.’ ”

684 So. 2d 102, 107, quoting Moses H. Cone Memorial

Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25

(1983).

In Carl Gregory Chrysler-Plymouth, Inc. v. Barnes, {Ms.

1960182, June 27, 1997] So. 2d (Ala. 1997),

this Court noted that “[t]he first task of this Court, when

reviewing an arbitration provision, is to determine whether

the parties agreed to arbitrate the dispute at hand.” /d.

at . In noting that “[a] party cannot be required to

arbitrate a dispute that he or she did not agree to arbi-

trate,” this Court held that an arbitration provision, al-

though broad, did not extend to a dispute over the inten-

tional tort of a party to a contract when the tort did not

concern the negotiations, terms and provisions, or any

other aspect of the parties’ contractual dealings. Id. at

In the present case, Discount Foods alleges that

Supervalu and its subsidiary Save-a-lot, not unlike the de-

4a

fendant in Carl Gregory Chrysler-Plymouth, committed

an intentional tort, against Discount Foods. This inten-

tional tort of interference with business relations stemmed

not from the parties’ contractual dealings, but from an

alleged separate and distinct act by Supervalu and Save-

a-lot. Although the trial court found that the arbitration

provision contained in the retail agreements between the

parties was broad enough to compel arbitration of this

action, we cannot agree. The parties’ arbitration provision,

although broad, cannot be construed to encompass inten-

tional torts of the parties that are separate and distinct

from the dealings that gave rise to the signing of the

document containing the arbitration provision in the first

place. To hold otherwise would allow persons signing

broad arbitration provisions to commit intentional torts

against one another, which torts are outside the scope of

their contemplated dealings, without concern that they

might have to answer for their actions before a jury of

their peers. Discount Foods’ petition for the writ of man-

damus is, therefore, due to be granted.

The trial court is directed to vacate its order granting

the defendants’ motion to compel arbitration and staying

the proceedings, and to enter an order denying the defend-

ants’ motion to compel arbitration and for a stay of the

proceedings.

WRIT GRANTED.

Almon, Shores, and Cook, JJ., concur.

Butts, J., concurs in the result.

Hooper, C. J., and Maddox, Houston, and See, JJ.,

dissent.

5a

HOOPER, CHIEF JUSTICE (dissenting).

I must respectfully dissent. The main opinion concludes

that arbitration cannot be compelled, because, it con-

cludes, the arbitration clause is not broad enough to cover

a dispute involving an intentional tort. I disagree. The

arbitration clause reads: “Any controversy or claim aris-

ing between the parties, including, but not limited to, dis-

putes relating to this {[a]greement, shall be resolved by

binding arbitration. . . .”. (Emphasis added.) I believe

the clause is broad enough to include a dispute that does

not directly relate to the parties’ contract for the supply of

groceries. Given the extraordinary nature of a writ of

mandamus, I would hold that the trial judge had a ra-

tional basis for granting the motion to compel arbitration.

Therefore, I would deny the petition for the writ of

mandamus.

6a

HOUSTON, JUSTICE (dissenting).

I would affirm the order of the trial court; therefore, I

dissent.

I look to the arbitration provision, which states:

“Any controversy or claim arising between the par-

ties, including, but not limited to, disputes relating

to the [a]greement, shall be resolved by binding arbi-

tration. .. .”

I then look to see if the action involves a controversy

between the parties to the arbitration agreement. “Con-

troversy” is defined as “a discussion marked esp. by the

expression of opposing views: DISPUTE 2: QUARREL,

STRIFE.” Merriam Webster's Collegiate Dictionary (10th

ed. 1997).

The action pending in the Calhoun Circuit Court does

involve a controversy between the parties to the arbitra-

tion agreement. Therefore, by contract, the parties have

agreed to arbitrate that controversy.

Maddox and See, JJ., concur.

7a

[Filed Jun. 16, 1997]

IN THE CIRCUIT COURT

IN AND FOR CALHOUN COUNTY, ALABAMA

Civil Action No. 96-411

DisCOUNT Foops, INc.,

an Alabama Corporation,

Plaintiff,

V.

SUPERVALU

A Delaware Corporation;

Moran Foops, INc. d/b/a SAVE-A-LOT. LTD.,

A Missouri Corporation;

GREGERSON’S INC.,

an Alabama Corporation, et al.,

Defendants.

PROPOSED ORDER

This matter came before the Court on the Defendant

Supervalu’s Motion to Compel Arbitration. Based upon

the argument of counsel and authorities submitted, the

Court determined that the Motion is due to be granted.

As background, on February ~10, 1995, Plaintiff Dis- |

count Foods, Inc. (“Discount Foods” or “Plaintiff”’) en- |

tered into a Retailer’s Agreement with Defendant Super-

valu, Inc. (“Supervalu”). The agreement included a pro-

vision entitled “Arbitration” which requires Discount

Foods and Supervalu to submit to arbitration “{a]ny con-

troversy or claim arising between the parties, including,

but not limited to, disputes relating to this Agreement . . .”.

The agreement further states that “[t]his agreement to ar-

bitrate shall continue in full force and effect despite the

expiration, rescission or termination of this Agreement.”

i era came can ane acme

8a

On May 7, 1996, Discount Foods filed Civil Action No.

96-411 in Calhoun County Circuit Court against Super-

valu, Moran Foods, Inc. d/b/a Save-A-Lot, Ltd. (“Save-

A-Lot”) and Gregerson’s, Inc. The Complaint alleges,

among other things, tortious interference with contractual

and business relations, unfair competition and violation of

trade secrets and antitrust law in connection with the lease

of commercial property to be used by Discount Foods as

a retailer of Supervalu.

Under Alabama law, this Court is to determine (1)

whether the contract “involves interstate commerce;” and

(2) whether the arbitration clause is broad enough to en-

compass the claims at issue. Lorance v. Southern Health

Corp. of Hamilton, Inc., 669 So. 2d 890, 892 (Ala. 1995).

An arbitration clause is enforceable under the Federal Ar-

bitration Act if the agreement is contained in a contract

that involves interstate commerce, using a “commerce in

fact” test. Coastal Ford, Inc. v. Kidder, 1997 WL 187098

(Ala. 1997) (noting that previous cases where a court

found intrastate activity using the “contemplation of sub-

stantial interstate activity” test were rejected by the U. S.

Supreme Court in favor of “commerce in fact” test).

If the contract involves interstate commerce, the court

next determines:

“whether the language or ‘scope’ of the arbitration

clause is broad enough to encompass the claims

sought to be arbitrated.” Allied Bruce Terminix, 684

So. 2d at 103 (citation omitted). “Such a determina-

tion must begin with a recognition of the federal pol-

icy favoring arbitration .. .”. Id., 684 So. 2d at 104.

Coastal Ford, 1997 WL 187098 at *3. The question of

whether an arbitration clause requires arbitration of a

given dispute is a matter of contract interpretation guided

by the intent of the parties. 7d. Absent any ambiguity in

the arbitration provision, the parties’ intent is evidenced by

the plain language in the clause. /d.

9a

Finally, a nonsignatory to a contract may nonetheless

participate in the arbitration proceeding if the claim

against the nonsignatory is encompassed by the arbitra-

tion provision and the nonsignatory’s participation would

more nearly meet the ends of justice. Ex parte Gray, 686

So. 2d 251 (Ala. 1996), citing, Webber, Jackson & Cur-

tis, Inc. v. McNeal, 143 Ga. App. 579, 239 S.E. 2d 401

(1977) (nonsignatory to the contract containing the ar-

bitration agreement is entitled to the benefit of that agree-

ment). See also, Ex parte Gates, 675 So. 2d 371 (Ala.

1996).

In accordance with Lorance v. Southern Health Corp.

of Hamilton, Inc., 669 So. 2d 890, 892 (Ala. 1995), this

Court analyzed (1) whether the contract “involves inter-

State commerce;” and (2) whether the arbitration clause

is broad enough to encompass the claims at issue. Based

upon this analysis, this Court finds that the Agreement in-

volves interstate commerce. Under the Agreement at issue,

Supervalu makes available product lines of national manu-

facturers authorized for sale which the retailer orders

through Supervalu. Supervalu then arranges to have the

product shipped to its warehouse in Anniston, Alabama,

where it is then distributed to Discount Foods, Inc. The

Agreement therefore involves interstate commerce.

Pursuant to the rules of contract interpretation, this

Court further finds that the claims made by Plaintiff are

encompassed by the arbitration clause agreed to by the

parties. The provision covers “[a]ny controversy or claim

arising between the parties including, but not limited to,

disputes relating to this Agreement . . .”. This court fur-

ther finds that the claims against Supervalu and its sub-

sidiary, Save-A-Lot, are based on the same facts and are

inherently inseparable.

Accordingly, and based upon the foregoing, the Court,

having duly considered the Motion to Compel Arbitration

submitted by Supervalu, hereby ORDERS, ADJUDGES

AND DECREES as follows:

10a

1) The motion of Supervalu to compel arbitration of

Plaintiff's claims is hereby GRANTED;

2) All claims alleged in this action by Discount Foods

against Supervalu and Save-A-Lot are to be submitted to

arbitration in accordance with the Agreement to Arbitrate;

3) The findings of the arbitrator will be binding upon

Discount Foods, Supervalu and Save-A-Lot with respect

to any and all claims alleged in this action;

4) This matter is stayed.

DONE and ORDERED, this the 16th day of June,

1997.

/s/ Malcolm B. Street, Jr.

JUDGE MALCOLM B. STREET, JR.

lla

[Filed Jul. 21, 1997]

IN THE CIRCUIT COURT

OF CALHOUN COUNTY

Case 96-411

DisCouNT Foops, INC.,

Plaintiff

vs

SUPERVALU, et ai.,

Defendant(s)

ORDER

Upon consideration of the Plaintiff, Discount Foods,

Inc.’s Motion to Reconsider Opposition To Defendant’s

Motion To Compel Arbitration and for a Stay, the motion

is DENIED.

The Clerk is directed to forward a copy of this Order

to attorneys of record and/or parties pro se.

DONE AND ORDERED July 17, 1997.

/S/ Malcolm B. Street, Jr.

MALCOLM B. STREET, Jr.

Circuit Court Judge

12a

IN THE SUPREME COURT OF ALABAMA

March 20, 1998

1962052

Ex Parte Discount Foops, INC.

PETITION FOR WRIT OF MANDAMUS

(IN RE: Discount Foops, INc.

Vv.

SUPERVALU, et al.)

(Calhoun: CV-96-411)

NOTICE

The application for rehearing filed in this cause is over-

ruled. No opinion written on rehearing.

PER CURIAM—Almon, Shores, Kennedy and Cook,

JJ., concur; Butts, J., concurs in result; Hooper, CJ., Mad-

dox, Houston and See, JJ., dissent.

13a

RETAILER’S AGREEMENT

(without Store Identification )

SUPERVALU INC.

General Offices: PO Box 990, Minneapolis, MN 55440

AGREEMENT between SUPERVALU INC. (“SUPER-

VALU”) and the undersigned independent merchant (“Re-

tailer”): in consideration of the mutual promises herein,

SUPERVALU and Retailer agree as follows:

A. SUPERVALU WILL:

Make available to Retailer those product lines author-

ized for sale by SUPERVALU to Retailer at its applic-

able price and fee schedule in effect at the time Retailer

places each order for product. All product lines author-

ized for sale to Retailer are subject to prior approval by

SUPERVALU from time to time. SUPERVALU’s obliga-

tions under this paragraph are subject to the availability

of product; in cases of product shortage, SUPERVALU

reserves the right to allocate product at its discretion. All

prices, fees, freight, terms and conditions are subject to

change by SUPERVALU at any time and from time to

time. The Retailer’s price for each product purchase, in-

cluding any fees, freight F.O.B. SUPERVALU Ware-

house, and services, will be as stated on the sales docu-

ments, including invoices and weekly retailer statements,

delivered to Retailer.

B. THE RETAILER WILL:

1. Cooperate with SUPERVALU with respect to or-

dering and delivery procedures.

2. Pay to SUPERVALU the price for product, includ-

ing any fees and freight F.O.B. SUPERVALU Warehouse,

and services as stated on the sales documents delivered to

Retailer. Unless otherwise specified by SUPERVALYU, all

of Retailer’s orders will be accompanied by a signed blank

check written in ink and payable to the order of SUPER-

l4a

VALU INC. or prearranged authorization for payment by

electronic transfer of funds from Retailer’s account to

SUPERVALU. Notwithstanding any prior representation

or agreement to the contrary, SUPERVALU reserves the

right at any time to condition delivery of goods or services

to Retailer on Retailer's payment of cash on delivery or

Retailer’s prepayment by certified check, cashier’s check,

or wire transfer of funds.

3. Acknowledge SUPERVALU’s right to choose and

select its customers and retailers and to enter into Retailer

Agreements with other parties at SUPERVALU’s sole

choice and discretion, including but not limited to SUPER-

VALU’s right to own, operate, finance, serve or supply a

store in competition with Retailer at any location. Further

acknowledge that in the event of termination of this agree-

ment, SUPERVALU has no obligations to continue to sell

or supply merchandise or services of any kind to the Re-

tailer.

4. Either subscribe to SUPERVALU’s retail account-

ing service thereby furnishing SUPERVALU periodic cop-

ies of accounting and sales reports and statements, or

maintain its own similar adequate system of accounting

and furnish SUPERVALU periodic copies of accounting

and sales reports and statements as requested by SUPER-

VALU.

5. Hold in confidence and not disclose to any other

person all information obtained from SUPERVALU re-

garding price, cost, discounts, merchandising, equipment,

sales. and promotions.

6. Not question or contest during or subsequent to the

life of this Agreement the validity of SUPERVALU’s own-

ership, right or control of any Trade Name, including

trademark, trade name, trade dress, trade style, service

mark, medallion mark, emblem, insignia or colors.

15a

C. TERM AND TERMINATION:

This agreement shall become effective on the date ap-

pearing below, and shall continue in full force and effect

until] terminated by either party hereto upon seven (7)

days’ notice in writing with or without cause. This agree-

ment shall terminate automatically and immediately if

either SUPERVALU or Retailer becomes bankrupt or in-

solvent or makes an assignment for the benefit of creditors,

if a receiver is appointed with authority to take possession

of all or part of its assets, if Retailer fails to pay its ob-

ligations to SUPERVALU when due, or if Retailer be-

comes incapacitated or is dissolved.

The termination of the relationship between SUPER-

VALU and Retailer shall not affect the obligation of the

Retailer to pay all monies owed to SUPERVALU but un-

paid or unpayable at the time of termination.

D. RELATIONSHIP OF PARTIES:

The relationship of the parties is that of arm’s length

independent buyer and independent seller and not that of

partners, joint venturers, principal and agent, fiduciary

and beneficiary, franchisor and franchisee, employer and

employee, or of special trust and confidence. There shall

be no third party beneficiaries to this Agreement. SUPER-

VALU will not be liable in any manner whatsoever for the

debts, liabilities, or obligations incurred by Retailer in the

operation of Retailer’s business. Retailer shall indemnify

and hold SUPERVALU harmless from and agains: any

and all claims, damages, or losses made against or in-

curred by SUPERVALU, its officers, employees, or agents

arising out of the operation of Retailer’s business.

E. ACKNOWLEDGEMENT OF RISKS AND

RETAILER’S SOLE CONTROL OF ITS BUSINESS:

Retailer acknowledges that (i) the retail grocery busi-

ness is highely competitive and a high risk business and

that SUPERVALU has not given and cannot give any

16a

guaranty of the profitability, if any, of Retailer; (11) Re-

tailer may be unprofitable and that a part or the whole of

Retailer’s investment in the store may be lost in the event

that Retailer is unprofitable; (iii) the business and profit-

abiilty of Retailer may be affected by many causes includ-

ing, without limitation, Retailer’s sole control over its

methods of operation and business practices, competition,

economic conditions, varying availability and price of

product, any lack of consumer confidence, uncertainty as

to petroleum supplies, inflation, deflation, strikes, embar-

goes, national emergencies, fire or other casualty, acts of

nature and other like or similar causes; (iv) SUPER-

VALU has no intention or obligation in any way, directly

or indirectly, to provide any additional capital to Retailer

so as to refinance Retailer or to provide operating capital

to Retailer, or to assist Retailer to obtain further funds.

F. ARBITRATION:

Any controversy or claim arising between the parties,

including, but not limited to, disputes relating to this

Agreement, shall be resolved by binding arbitration. This

agreement to arbitrate shall continue in full force and ef-

fect despite the expiration, rescission or termination of this

Agreement. All arbitration shall be undertaken pursuant

to the Federal Arbitration Act, and the decision of the

arbitrator(s) shall be enforceable in any court of compe-

tent jurisdiction. The parties knowingly and voluntarily

waive their rights to have their dispute tried and adjudi-

cated by a judge or jury. The arbitrator(s) shall apply the

Law of the State of Minnesota, except as may be modified

by this Agreement. The arbitration shall be held in Minne-

apolis, Minnesota.

Any party may demand arbitration by sending written

notice to the other party. The arbitration and the selec-

tion of the arbitrator(s) shall be conducted in accordance

with such rules as may be agreed upon by the parties, or,

failing agreement within thirty (30) days after arbitration

|

17a

is demanded, under the Commercial Arbitration Rules of

the American Arbitration Association (“AAA”), as such

rules may be modified by this agreement. In any dispute

which involves more than $100,000 in damages, three ar-

bitrators shall be used. Unless the parties agree otherwise,

they shall be limited in their discovery to directly relevant

documents. Responses or objections to a document request

Shall be served twenty (20) days after receipt of the re-

quest. The arbitrator(s) shall resolve any discovery dis-

putes.

The arbitrator(s) shall have the authority to award ac-

tual money damages (with interest on unpaid amounts

from the date due), specific performance, and temporary

injunctive relief, but the arbitrator(s) shall not have the

authority to award exemplary, punitive or consequential

damages, and the parties expressly waive any claimed right

to such damages. The arbitration shall be of each party’s

individual claims only, and no claim of any other party

shall be subject to arbitration in such proceeding. The

costs of arbitration, but not the costs and expenses of the

parties, shall be shared equally by the parties. If a party

fails to proceed with arbitration, unsuccessfully challenges

the arbitration award, or fails to comply with the arbitra-

tion award, the other party is entitled to costs, including

reasonable attorney’s fees, for having to compel arbitration

or defend or enforce the award. Except as otherwise re-

quired by law, the parties and the arbitrator(s) agree to

maintain as confidential all information or documents ob-

tained during the arbitration process, including the resolu-

tion of the dispute.

Notwithstanding the above, the parties recognize that

certain business relationships could give rise to the need

for one or more of the parties to seek emergency, provi-

sional or summary relief to repossess and sell or otherwise

dispose of goods and/or fixtures, to prevent the sale or

transfer of goods and/or fixtures, to protect real or per-

sonal property from injury, or to obtain possession of real

18a

estate and terminate leasehold interests, and for temporary

injunctive relief. The parties agree that either shall be en-

titled to pursue such rights and remedies for emergency,

provisional, temporary injunctive or summary relief; how-

ever, each party agrees that, immediately following the

issuance of any emergency, provisional, temporary injunc-

tive or summary relief, it will consent to the stay of any

judicial proceedings pending arbitration of all underlying

claims between the parties.

G. MISCELLANEOUS:

This Agreement shall be binding upon and inure to the

benefit of the successors and assigns of the Retailer and

SUPERVALU; provided that neither this Agreement, nor

any right, title, interest or obligation hereunder may be

assigned or otherwise transferred by Retailer without the

prior written consent of SUPERVALU. Each party ac-

knowledges that it has not been induced to enter into this

Agreement by any representations or statements, oral or

written, not expressly contained herein. This Agreement

shall not be deemed or construed to be modified, amended,

rescinded, canceled or waived, in whole or in part, other

than by written instrument signed by the parties hereto. In

the event that any of the terms of this Agreement are in

conflict with any rule or law or statutory provision or

otherwise unenforceable under the laws or regulations of

any government or subdivision thereof, such terms shall be

deemed stricken from this Agreement, and this Agreement

shall continue in force, unless the invalidity or unenforce-

ability of any such provision thereof dues substantial vio-

lence to, or where the invalid or unenforceable provisions

comprise an integral part of or are otherwise inseparable

from, the remainder of this Agreement. No failure by any

party to take any action or assert any right hereunder

shall be deemed to be a waiver of such right in the event

of the continuation or repetition of the circumstances giv-

ing rise to such right. In executing this agreement, Re-

tailer completely and unconditionally acknowledges and

Le

19a

agrees that Retailer has had the opportunity to consult

with and receive the advice of Retailer’s independent at-

torney, has read and understood this Agreement and has

executed this agreement after independent investigation,

voluntarily and without fraud, duress or undue influence,

and not in reliance on any inducements, promises or rep-

resentations by SUPERVALU or its attorneys.

SUPERVALU INC. Store Name

By Isaiah Harris Store Address 21st Gault Ave.

Title Vice President

Fort Payne, AL

Date 2-24-95 Retailer’s Corporation Name

(if applicable) :

Discount Foods, Inc.

By By /s/ [Illegible]

(Retailer’s Authorized

Signature)

— Title President 4

Date — Date Feb. 10, 1995

Witness [Illegible]

20a

THE UNIFIED JUDICIAL SYSTEM

SUPREME COURT OF ALABAMA

No. 1962052

Ex PARTE DisCouNT Foops, INC.

Petitioner,

Re: DiIscouNT Foops, INC.,

“ Plaintiff,

SUPERVALU; et al.,

Defendants.

Circuit Court of Calhoun County, Alabama

CV-96-411

ANSWER OF RESPONDENT

MALCOLM B. STREET, Jr.

Circuit Judge

TABLE OF AUTHORITIES

CASES Page

Allied-Bruce Terminix Co., Inc. v. Dobson, 684

Poe, 2a ee Le BED oc

Coastal Ford, Inc. v. Kidder, 694 So. 2d 1285 (Ala.

yf REE RI re ea CRE TIO Rs Oe Wie mea

Dunn Constr. Co., Inc. v. Sugar Beach Condo,

Ass’n, Inc., 760 F. Supp. 1479 (S.D. Ala. 1991)..

Ex parte Alexander, 558 So. 2d 364 (Ala. 1990)....

Lorance v. Southern Health Corp. of Hamilton,

Inc., 669 So. 2d 890 (Ala. 1995) -.........................

McBro Planning and Development Co. v. Triangle

Electrical Constr. Co., Inc., 741 F.2d 342 (11th

2 SS reenter Sth: CTs Ren ret easten ieee Og kA TEC aS OO

Moses H. Cone Memorial Hosp. v. Mercury Constr.

Corp., 460 U.S. 1, 108 S.Ct. 927 (1988) ............

2la

REASONS WHY A WRIT OF MANDAMUS

SHOULD NOT ISSUE

In its petition for Writ of Mandamus, plaintiff Discount

Foods, Inc. (“Discount Foods”) contends that this Court

erred in granting the defendants’ motion to compel arbi-

tration. Plaintiff argues in its petition that the scope of

the arbitration clause in the contract at issue does not or

should not encompass tort claims such as the ones that

plaintiff has asserted in its complaint. Plaintiff also argues,

to a lesser extent, that the transaction about which it com-

plains does not involve interstate commerce so that the

Federal Arbitration Act should not apply in this case.

This Court did not abuse its discretion in granting the de-

fendants’ motion to compel arbitration; plaintiff’s claims

against the defendants fall within the scope of the arbitra-

tion clause, and the arbitration clause is located in a con-

tract that involves interstate commerce. Ex parte Alex-

ander, 558 So. 2d 364, 366 (Ala. 1990) (order graniing

motion to compel arbitration is reviewed for abuse of dis-

cretion).

With respect to the scope of the arbitration clause, the

Court had to determine whether the arbitration clause is

broad enough to encompass plaintiff’s tort claims. Allied-

Bruce Terminix Co., Inc. v. Dobson, 684 So. 2d 102, 107

(Ala. 1995) (“the preliminary duties of a court ruling on

a motion [to compel arbitration] may include determining

whether the language or ‘scope’ of the arbitration clause

is broad enough to encompass the claims sought to be

arbitrated”); Lorance v. Southern Health Corp. of Hamil-

ton, Inc., 669 So. 2d 890, 892 (Ala. 1995). In making

this decision, the Court was mindfui of the federal policy

favoring arbitration. Dobson, 684 So. 2d at 107.

The Arbitration Act established that, as a matter of

federal law, any doubts concerning the scope of arbi-

trable issues should be resolved in favor of arbitra-

tion, whether the problem at hand is the construction

of the contract language itself or an allegation oi

waiver, delay, or like defense of arbitrability.

22a

Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp.,

460 U.S. 1, 24-25, 103 S.Ct. 927, 941 (1983) (quoted

with approval in Dobson). The issue is governed by ordi-

nary rules of contract interpretation, and the Court could

not compel the parties to arbitrate claims that the parties

did not intend to arbitrate. Dobbs, 684 So. 2d at 107.

The parties’ intent, “absent ambiguity in the clause, is evi-

denced by the plain language of the [arbitration] clause.”

Id. at 110.

Applying these principles, the Court reviewed the arbi-

tration clause at issue which is, as the plaintiff points out,

very broad. The clause provides in pertinent part that,

[a]Jny controversy or claim arising between the par-

ties, including, but not limited to, disputes relating

to this Agreement, shall be resolved by binding arbi-

tration.

Petition for Writ of Mandamus, Exhibit A, 4 F (emphasis

added). Plaintiff has asserted claims against the defend-

ants Supervalu, Sav-A-Lot, Ltd. and Gregerson’s, Inc. for

tortious interference with contractual and business rela-

tions, unfair competition and violation of trade secrets and

antitrust law. Plaintiff's claims arise out of Gregorson’s

alleged effort, with the purported assistance of Supervalu,

to establish a competing Sav-A-Lot grocery store across

the street from the plaintiff's Discount Foods grocery.

Supervalu supplies groceries to both locations. Petition

for Writ of Mandamus, Exhibit B.

As the cases which the plaintiff cited to the Court point

out, a plaintiff's claims are not automatically excluded

from arbitration simply because they sound in tort rather

than in contract. McBro Planning and Development Co.

v. Triangle Flectrical Constr. Co., Inc., 741 F.2d 342,

344 (11th Cir. 1984) (“a party may not avoid broad

language in an arbitration clause by attempting to cast its

complaint in tort rather than contract”); Dunn Constr.

Co., Inc. v. Sugar Beach Condo. Ass’n, Inc., 760 F. Supp.

23a

1479, 1485 (S.D. Ala. 1991) (“claims need not be based

on breach of contract to be arbitrable. . . tort claims may

be subject to arbitration, provided that those claims fall

within the scope of the language of the involved arbitra-

tion clause”).’ The plain language of the arbitration

clause at issue encompasses tort claims. It specifically

States that it is not limited to disputes relating to the Re-

tail Agreement in which the arbitration clause appears.?

In any event, plaintiff's claims against the defendants

are not wholly divorced from the terms of the Retail

Agreement. Discount Foods contends that the defendants

interfered in Discount Food’s lease negotiations for a new

location for its Anniston grocery store so that the defend-

ants could establish a retail grocery store which would

compete directly with Discount Food’s existing store. Pe-

tition for Writ of Mandamus, Exhibit B. The agreement

in which the arbitration clause at issue is located also pro-

vides that Discount Foods,

[a]cknowledge[s] SUPERVALU’s right to choose and

select its customers and retailers and to enter into Re-

tailer Agreements with other parties at SUPER-

VALWU’s sole choice and discretion, including but not

limited to SUPERVALU’s right to own, operate, fi-

nance, serve or supply a store in competition with

Retailer at any location.

Retailer [i.e. plaintiff] acknowledges that (i) the re-

tail grocery business is highly competitive and a high

1See also H.L. Fuller Constr. v. Industrial Development Bd.,

590 So. 2d 218, 222 (Ala. 1991) (“there is authority that supports

the submission of fraud claims to arbitration’).

2 Plaintiff presented no evidence to the Court which in any way

suggested that the parties’ intent regarding the scope of the arbi-

tration clause was contrary to the plain language of the clause.

3 They are not, as plaintiff discusses in its extreme comparison,

tort claims relating to an assault by one of the defendants’ employee

upon one of the plaintiff’s employees.

OUBEINsemnacannvess Sve este ot aT SR METAS See NTE OTe

24a

risk business and that SUPERVALU has not given

and cannot give any guaranty of the profitability, if

any, of Retailer.

Petition for Writ of Mandamus, Exhibit 1, § B(3), E.

Thus, plaintiff's tort claims relating to the defendants’

alleged misconduct in establishing a competing retail gro-

cery are “intertwined with” these unambiguous contract

provisions. Dunn, 760 F. Supp. at 1485. Those tort

claims clearly fall withi= the scope of the arbitration

clause at issue.

‘ith respect to the pi __iiff’s interstate commerce argu-

ment, this Court properly held that an arbitration clause

is enforceable if the clause appears “in a cor‘raci that in-

volves interstate commerce, using a ‘commerce in fact’

test.” Petition for ‘Vrit of Mandamus, Exhibit 5, p. 2;

Coastal Ford, Inc. v. Kiduzr, 694 So. 2d 1285 (Ala.

1997). The cases upon u . the plaintiff relies in its

writ petition support this proposition. See, Dunn, 760

F. Supp. at 1482 (in deciding whether claim is subject to

arbitration clause, court must consider, in part, whether

arbitration clause appears in a “valid, written agreement

involving interstate commerce”); see also, Dobson, 684

So. 2d at 105.

The Retail Agreement which contains the arbitration

clause at issue clearly involves interstate commerce. The

contract is vetween a foreign corporation and an Alabama

corporation. It requires Supervalu to make available to

Discount Foods retail grocery items from national manu-

facturers. Those items travel in interstate commerce be-

fore they reach their final destination c plaintiff’s store.

Petition for \Vrit oc Mandamus, Exhibits 1-2. Discount

Foods would nave no claim against Gregorson’s, the party

that outbid Discou.it Foods tor the retail loc. on that

Discount Foods wanted, were it not for the faci that the

Sav-A-Lot franchise that Gree.rson’s established at the

location is related to Supervalu, an. Gregerson’s allegedly

was able to outbid Discouut Foods because Supervalu pur-

a ee cnc dreceimmemaraad

25a

portedly supplied to Gregersons information that Discount

Foods conveyed to Supervalu during the lease negotiations.

Additionally, the Court notes that even the lease nego-

tiations at issue touched upon interstate commerce. Ac-

cording to plaintiff's complaint, a New York entity leased

the property that the plaintiff wanted to acquire for a new

Store. A representative of the New York company trav-

elled to Alabama to negotiate with plaintiff's president for

a lease of the location. Discount Foods alleges that it

sent a letter to the lessor in New York to accept the terms

of the lease which the lessor purportedly offered to Dis-

count Foods at the Alabama meeting between the parties.

Petition for Writ of Mandamus, Exhibit 2. €€ 11-15. Had

a lease between Discount Foods and the New york entity

been finalized, the payments under the lease would have

been transmitted from Alabama to New York. During

these negotiations. Discount Foods also contends that it

talked to Supervalu, a foreign corporation, about the Possi-

bility of opening a Sav-A-Lot franchise at the new location

rather than a Discount Foods store, Id. at € 12. Therefore,

from any perspective, the transaction at issue involves in-

terstate commerce so that the FAA governs the defend-

ants’ motion to compel arbitration. Lorance, 669 So. 2d

at 891-92 (transaction did in fact involve interstate com-

merce where negotiations for contract were conducted be-

tween California resident and Georgia corporation, pay-

ments made under contract travelled from Georgia to

Alabama, and parties often communicated between Ala-

bama and Georgia about the contract).

Because this Court did not abuse its discretion in grant-

ing the defendants’ motion to compel arbitration. the

Court respectfully submits that the plaintiff’s Petition for

Writ of Mandamus should be DENIED.

‘S/ Malcolm B. Street, Jr.

MALCOLM B. STREET. Jr.

Circuit Court Judge