Dudley, Hopton-Jones, Sims & Freeman, PLLP v. Andrew J. Knight

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REL: 08/27/2010 Notice: T h i s o p i n i o n i s s u b j e c t t o formal r e v i s i o n b e f o r e p u b l i c a t i o n i n t h e advance s h e e t s o f Southern R e p o r t e r . R e a d e r s a r e r e q u e s t e d t o n o t i f y t h e R e p o r t e r o f D e c i s i o n s , A l a b a m a A p p e l l a t e C o u r t s , 300 D e x t e r A v e n u e , M o n t g o m e r y , A l a b a m a 3 6 1 0 4 - 3 7 4 1 ( ( 3 3 4 ) 2 2 9 ¬ 0 6 4 9 ) , o f a n y t y p o g r a p h i c a l o r o t h e r e r r o r s , i n o r d e r t h a t c o r r e c t i o n s may b e made b e f o r e t h e o p i n i o n i s p r i n t e d i n Southern R e p o r t e r . SUPREME COURT OF ALABAMA SPECIAL TERM, 2010 1090823 D u d l e y , H o p t o n - J o n e s , Sims & Freeman, PLLP v. Andrew J . K n i g h t Appeal STUART, Court ("DHSF"), Court f i r m D u d l e y , H o p t o n - J o n e s , Sims & Freeman, appeals dismissing with Knight, Jefferson Circuit (CV-10-84) Justice. The a c c o u n t i n g PLLP from from an o r d e r prejudice a former partner of theJefferson i t saction against i n DHSF. We r e v e r s e Circuit Andrew J . and remand. 1090823 I. K n i g h t b e c a m e a p a r t n e r i n DHSF i n 1 9 8 8 . agreement K n i g h t arbitration signed a t that time The p a r t n e r s h i p contained the following provision: "In the event c o n t r o v e r s y or c l a i m a r i s e s out of or r e l a t e s t o t h i s agreement c o n c e r n i n g t h e v a l u e o f property o r t h e amount of losses, profits or damages, i t s h a l l be s u b m i t t e d t o t h r e e a r b i t r a t o r s and s e t t l e d by a r b i t r a t i o n i n a c c o r d a n c e with the r u l e s , then o b t a i n i n g , of the American A r b i t r a t i o n Association." Knight DHSF not left DHSF i n A p r i l 2000 a n d , on A u g u s t i n the Jefferson C i r c u i t Court, p a i d h i m m o n e y he was e n t i t l e d agreement filing upon withdrawing from 30, 2001, sued alleging t o under that the partnership the partnership. a n a n s w e r , DHSF m o v e d t o c o m p e l a r b i t r a t i o n claim pursuant agreement, granted DHSF's parties to arbitrators; arbitration formally Without of Knight's to the a r b i t r a t i o n provision i n the partnership and, thereafter DHSF h a d on February motion and arbitrate." conferred however, with initiate 13, stayed 2002, t h e case I t appears regarding neither the "to permit that 2 the Knight and DHSF of the filed any o r g a n i z a t i o n o r o t h e r w i s e the a r b i t r a t i o n court selection the party circuit process. a demand f o r took steps to The c i r c u i t court 1090823 periodically reports 2009, held status on t h e a r b i t r a t i o n after initiated, arbitration the c i r c u i t conferences and proceeding; however, proceedings court requested still dismissed status on A u g u s t had 4, been action Knight's not with prejudice. Approximately DHSF initiated against Knight of Knight in action on by to the firm the partnership asserting against affected interstate In that that motion, commerce, that breach DHSF and t h a t argued the claims i t was arbitration provision i n the e a r l i e r transaction the c i r c u i t based upon action 29, 2010, t h e c i r c u i t provision DHSF the underlying arbitration On J a n u a r y alleging of contract, p r o v i s i o n encompassed Knight, complaint c o u r t t o s t a y t h e case and t o compelled 1 a misrepresentation. previously Knight. 11, 2010, pursuant to the a r b i t r a t i o n agreement. the a r b i t r a t i o n Court, f o rbreach moved t h e c i r c u i t January filing i n the Jefferson C i r c u i t i tto a r b i t r a t i o n that later, d u t i e s , and f r a u d u l e n t simultaneously refer months the present was l i a b l e fiduciary five court court had that initiated granted same by the DHSF a t t a c h e d as an e x h i b i t t o i t s m o t i o n t h e m o t i o n t o compel arbitration i t had f i l e d i n the e a r l i e r action i n i t i a t e d by Knight. 1 3 1090823 motion and stayed arbitration On of l i m i t a t i o n s 2001. filed counterclaims also 2010, to by Rule shall that dismiss, merit and decided by A l a . R. C i v . P. a response an that i n any arbitrator -- arbitration provision covering Knight's circuit 4, motion court granted particularity constituting those On M a r c h court motion 4 2, arguments lacked arguments Following Knight's or motion -- should because contained the asserted dismiss. fraud to Knight's the parties 2010, t h e c i r c u i t to in Knight ("In a l l a v e r m e n t s o f not the court between statutes to assert i t s the of Knight's event, agreement March the claims by failed i n opposition each to as particularity."). partnership On court the claims filed with the circumstances arguing that, DHSF claim be s t a t e d w i t h DHSF f i l e d that to assert i n the action argued 9(b), or mistake, mistake of the both by t h e a p p l i c a b l e fraudulent-misrepresentation fraud outcome moved t h e c i r c u i t a n d b y DHSF's f a i l u r e Knight required the by DHSF, a r g u i n g b y DHSF w e r e b a r r e d compulsory pending 3, 2010, Knight the complaint asserted case proceedings. February dismiss the a be the valid claims. held a hearing that hearing, and e n t e r e d on the a written 1090823 order of dismissing the DHSF's c o m p l a i n t arguments DHSF f i l e d made i t s notice by of with prejudice on in to Knight appeal to his motion the basis dismiss. this Court that same day. court erred in hearing and II. DHSF a r g u e s ruling DHSF on Knight's argues, context of a court, issues court's of We circuit to motion raised dispute dismiss falling p r o v i s i o n , must i t s complaint only within be issues the resolved that, scope by an because, of substantive L.L.C., explained arbitrability. novo. 35 the So. Brasfield 3d role motion to compel a r b i t r a t i o n 601, of the 604 We (Ala. trial the valid only -¬ on circuit L.L.C. v. Soho 2009). court in ruling as f o l l o w s i n B r a s f i e l d on a & Gorrie: "In ruling on a motion to stay judicial p r o c e e d i n g s f o l l o w i n g a request f o r a r b i t r a t i o n , the c o u r t i s r e q u i r e d to d e c i d e m a t t e r s of 'substantive arbitrability,' that is, (1) whether a valid agreement to arbitrate exists and, i f so, (2) whether the s p e c i f i c d i s p u t e f a l l s w i t h i n the scope of t h a t agreement. Dean W i t t e r [ R e y n o l d s , I n c . v. M c D o n a l d ] , 758 So. 2d [ 5 3 9 , ] 542 [(Ala. 1999)]. 'Procedural arbitrability,' on the other hand, i n v o l v e s q u e s t i o n s t h a t grow out of the d i s p u t e and b e a r on i t s f i n a l d i s p o s i t i o n , e . g . , defenses such as notice, laches, estoppel, and other similar 5 the arbitrator review & Gorrie, in a w h i c h i s empowered i n s u c h c a s e s t o r u l e j u d g m e n t de Partners, the motion that a arbitration not that 1090823 compliance defenses; such questions a r e f o r an arbitrator to decide. S e e Howsam v . D e a n W i t t e r R e y n o l d s , I n c . , 537 U.S. 7 9 , 8 4 , 123 S . C t . 5 8 8 , 154 L . E d . 2 d 491 ( 2 0 0 2 ) ( ' " ' p r o c e d u r a l ' q u e s t i o n s w h i c h grow o u t o f t h e d i s p u t e a n d b e a r on i t s f i n a l d i s p o s i t i o n are presumptively not f o r the judge, but f o r an a r b i t r a t o r , t o d e c i d e " ' ) ; J o h n W i l e y & S o n s , I n c . v . L i v i n g s t o n , 376 U.S. 5 4 3 , 84 S . C t . 9 0 9 , 11 L.Ed.2d 898 (1964) (holding that an arbitrator should decide whether the steps of a grievance procedure were completed, where those steps were prerequisites to arbitration)." 35 So. 3d at 604-05. considered DHSF's accompanying exhibits, staying the case against Knight. the record In motion so this to case, compel and i t i n i t i a l l y that DHSF could the arbitration granted there i s no dispute f a l l s compelling granting Knight's following the arbitration, grounds: five question but weeks a f t e r the c i r c u i t motion to dismiss that not and t h a t order a new order on t h e (1) t h a t a l l DHSF's c l a i m s w e r e b a r r e d b y a p p l i c a b l e s t a t u t e s of l i m i t a t i o n s ; were valid an complaint (2) t h a t c l a i m s were b a r r e d b e c a u s e t h e y were c o m p u l s o r y that a agreement. issuing court entered DHSF's motion, by t h e e v i d e n c e i n w i t h i n the scope of t h a t However, a p p r o x i m a t e l y the i t s claims a g r e e m e n t t o a r b i t r a t e e x i s t s b e t w e e n DHSF a n d K n i g h t the present court and the arbitrate That d e c i s i o n i s supported because circuit asserted in a 6 previous action a l l DHSF's counterclaims between the 1090823 parties; claim and (3) that was n o t p l e a d e d order effectively arbitration, DHSF's with vacated holding fraudulent-misrepresentation the required p a r t i c u l a r i t y . the previous instead that because he Knight submit to arbitration claims a s s e r t e d a g a i n s t h i m b y DHSF. in Brasfield empowered & Gorrie, a t r i a l only arbitrability.'" claims "to were b a r r e d of with the whether The i s s u e w h e t h e r substantive basis. dismiss claims falls those exists w i t h i n the scope arguments do a c t i o n between unrelated to or whether the of that implicate the c i r c u i t pleaded agreement; matters a r g u m e n t s a n d d i s m i s s i n g DHSF's c o m p l a i n t on r a i s e d by Knight to the ultimate -- n o t t o t h e a v a i l a b i l i t y 7 court of by relate and not DHSF's erred The a r g u m e n t s i n fact i s wholly to arbitrate arbitrability, c o n s i d e r i n g those that agreement dispute accordingly, particularity, i s limitations a s w e l l a s w h e t h e r DHSF's f r a u d c l a i m was a valid identified explained 'substantive by t h e a p p l i c a b l e s t a t u t e s o f required to to the i n such circumstances or b e c a u s e t h e y were n o t a s s e r t e d i n a p r e v i o u s the p a r t i e s , have defenses H o w e v e r , a s we matters 35 S o . 3 d a t 6 0 4 . compelling d i d not had v a l i d court decide order This i n h i s motion to viability of a r b i t r a t i o n of DHSF's -- a n d they 1090823 should accordingly arbitrators, Knight be n o t by t h e c i r c u i t right during to arbitrate the eight-year DHSF was DHSF argues issue is court i t s claims period that ( A l a . 2006), the like i s arbitrator." by this right litigation We by not p u r s u i n g i n which Knight's docket i t d i d not waive a l l the other f o r the arbitrators, waiver upon a to stated arbitration further pending issues for explained litigation-related by the that conduct, the l i t i g a t i o n Washington presumption allegations therefore process represents i n arbitration of waiver. " raised, 939 S o . 2 d 6, "whether a party i t s conduct court and not the party 939 has during " [ i ] n order the t o show opposing substantially So. 2d a t 14. to the general should decide Dean Witter arbitrators S e e , e . g . , Howsam 8 has the consider. an e x c e p t i o n law that against and t h a t a r b i t r a t i o n must d e m o n s t r a t e t h a t t h e movant h a s invoked claims arbitration. Knight to that DHSF w a i v e d action LLC v. W a s h i n g t o n , question the affirm the those i t s claims not the court, Court by court. on t h e a d m i n i s t r a t i v e of waiver, waived ruled b e c a u s e , he a r g u e s , I n Ocwen L o a n S e r v i c i n g , 14 and argues that t h i s Court can nevertheless judgment o f t h e c i r c u i t its considered v. 1090823 Reynolds, Mem'l Inc., Hosp. (1983)) decide 537 U.S. 7 9 , 84 ( 2 0 0 2 ) v. Mercury ("[T]he Constr. presumption 'allegation[s] Corp., i s that of waiver, ( q u o t i n g M o s e s H. C o n e 460 U.S. 1, 24-25 the arbitrator delay, or a l i k e should defense to arbitrability.'"). That because exception Knight arbitrate not apply i s not arguing i n this that Rather, arbitration Knight rights a timely based fashion. case, DHSF w a i v e d i t s c l a i m s by s u b s t a n t i a l l y process. in does i t s right to invoking the l i t i g a t i o n i s arguing that on i t s f a i l u r e See K n i g h t ' s however, DHSF waived i t s to pursue brief, p. 15 i t s claims ("[DHSF's] conduct in sitting on i t s h a n d s f o r almost a decade before seeking arbitration of i t s claims c o n s t i t u t e s a waiver of i t s right to arbitration. contractual right litigation dilatory falls subject issues they conduct."). An to the general judgment of the parties can a l s o waive allegation the exception of waiver as can waive t o a r b i t r a t i o n by s u b s t a n t i a l l y process, outside Just or delay; circuit of waiver articulated rule that such invoking the rights such 9 on this as basis. this and i s should a c c o r d i n g l y , we c a n n o t court through i n Washington arbitrators their decide affirm the See also 1090823 Brasfield whether & Gorrie, a party substantially the trial 35 S o . 3 d a t 6 0 6 - 0 7 n.1 has waived i t s right because invoking involves matters that occurred on other to invoking the l i t i g a t i o n process court such a waiver (explaining that the arbitration i s a matter f o r litigation under the t r i a l process court's watch; i s t h e r e f o r e d i s t i n g u i s h a b l e from a waiver f a c t o r s not i n v o l v i n g litigation by based conduct). III. DHSF's a c t i o n a g a i n s t Knight alleges breach of contract, b r e a c h o f f i d u c i a r y d u t i e s , and f r a u d u l e n t The circuit case court so t h a t arbitration into by vacated the DHSF c o u l d provision the defenses o f DHSF's c l a i m s circuit defenses. valid arbitrate but the and d i s m i s s e d asserted asserted granted DHSF's m o t i o n t o s t a y t h e i t s claims i n the partnership parties, that order defenses the initially by by Knight misrepresentation. circuit agreement court DHSF's c l a i m s concerned the ultimate erred by considering Because there i s no q u e s t i o n because the viability arbitrability, the merit but that the p a r t i e s to a r b i t r a t e 10 entered on t h e b a s i s o f However, court t o an subsequently Knight. and n o t i s s u e s o f s u b s t a n t i v e agreement between pursuant of those there was a claims such 1090823 as t h o s e a s s e r t e d b y DHSF, a r b i t r a t i o n was t h e p r o p e r f o r u m i n which asserted to consider Accordingly, DHSF's the and court so vacating i s reversed that DHSF can agreement between t h e p a r t i e s . A l l other R E V E R S E D AND Lyons, are accordingly Smith, J . , concurs Shaw, J . , c o n c u r s specially. i n the result. J . , recuses himself. 11 order remanded t o i t s claims partnership issues raised pretermitted. and P a r k e r , Cobb, C . J . , d i s s e n t s . Bolin, i n the Knight. dismissing REMANDED. Woodall, Murdock, by i t s earlier arbitrate provision on a p p e a l court and t h e cause the a r b i t r a t i o n parties to of the c i r c u i t implicitly arbitration circuit pursuant defenses t h e judgment claims compelling the J J . , concur. by t h e 1090823 MURDOCK, J u s t i c e I concur explain my i n the main my Cobb her in affirming rise dissent, the one a to res sense, t e r m has order assert 3d to a the the not come t o be a compulsory 543 (1964). are defenses may defeat that a "arbitrability" arise claim; of as (2) the as waiver as of they explain Justice a counterclaim obviously & Sons, I n c . v. main o p i n i o n state do to ground s t a t u t e of not law and per limitations (thus giving in issues as States Supreme that Livingston, suggests, that se 376 these ultimately address claim. "'Procedural arbitrability ... involves questions t h a t g r o w o u t o f t h e d i s p u t e a n d b e a r on i t s f i n a l d i s p o s i t i o n , e.g., d e f e n s e s s u c h as n o t i c e , l a c h e s , estoppel, and other similar compliance defenses; 12 for procedural arbitrability" under v. court. though the L.L.C. Chief does u n d e r s t o o d s i n c e the U n i t e d Rather, to "procedural Gorrie, , and of defenses C o u r t ' s d e c i s i o n i n John W i l e y U.S. at circuit "procedural & of (1) ( A l a . 2 0 0 9 ) , as q u o t e d i n embrace, defense separately concept 601 3d judicata bar), are the So. of note that failure to see I write Brasfield So. unwillingness I first and in L . L . C . , 35 opinion, further of referenced Soho P a r t n e r s , specially). main o p i n i o n . understanding arbitrability" the (concurring the 1090823 s u c h q u e s t i o n s a r e f o r an a r b i t r a t o r t o d e c i d e . See Howsam v . D e a n W i t t e r R e y n o l d s , I n c . , 5 37 U.S. 7 9, 84, 123 S.Ct. 588 , 154 L.Ed.2d 4 91 (2002 ) ('"'procedural' questions w h i c h grow o u t o f t h e dispute and bear on i t s f i n a l disposition are presumptively not f o r the judge, b u t f o r an a r b i t r a t o r , t o d e c i d e " ' ) ; John W i l e y & Sons, Inc. v. L i v i n g s t o n , 376 U.S. 5 4 3 , 84 S . C t . 9 0 9 , 11 L . E d . 2 d 898 ( 1 9 6 4 ) ( h o l d i n g t h a t a n a r b i t r a t o r s h o u l d d e c i d e whether the steps of a grievance procedure were completed, where t h o s e s t e p s were p r e r e q u i s i t e s t o arbitration)." Brasfield The & G o r r i e , 35 S o . 3 d a t 6 0 4 - 0 5 Court U.S. 7 9 , 84 i n Howsam (2002), v . Dean e x p l a i n e d as Witter (emphasis Reynolds, added). I n c . , 537 follows: "[T]he Court has found the phrase 'question of arbitrability' not a p p l i c a b l e i n other kinds of general circumstance where p a r t i e s would likely e x p e c t t h a t an a r b i t r a t o r w o u l d d e c i d e t h e g a t e w a y m a t t e r . Thus ' " p r o c e d u r a l " q u e s t i o n s w h i c h grow o u t o f t h e d i s p u t e a n d b e a r on i t s f i n a l disposition' are p r e s u m p t i v e l y not f o r the judge, b u t f o r an a r b i t r a t o r , t o d e c i d e . J o h n W i l e y [& S o n s , I n c . v . Livingston, 376 U.S. 5 4 3 , ] a t 5 5 7 , 84 S . C t . 909 [(1964)] ( h o l d i n g t h a t an a r b i t r a t o r s h o u l d d e c i d e w h e t h e r t h e f i r s t two s t e p s o f a g r i e v a n c e procedure were completed, where t h e s e s t e p s a r e p r e r e q u i s i t e s to a r b i t r a t i o n ) . So, t o o , t h e p r e s u m p t i o n i s that the arbitrator should decide 'allegation[s] of waiver, delay, or a l i k e defense t o a r b i t r a b i l i t y . ' M o s e s H. C o n e M e m o r i a l H o s p i t a l [ v . M e r c u r y C o n s t r . Corp., 460 U.S. 1,] a t 24-25, 103 S . C t . 927 [(1983)]. Indeed, the Revised Uniform Arbitration Act o f 2000 (RUAA), s e e k i n g to 'incorporate the h o l d i n g s o f t h e v a s t m a j o r i t y o f s t a t e c o u r t s and the law that has developed under the [Federal A r b i t r a t i o n A c t ] , ' s t a t e s t h a t an ' a r b i t r a t o r s h a l l decide whether a condition precedent to 13 1090823 a r b i t r a b i l i t y h a s b e e n f u l f i l l e d . ' RUAA § 6 ( c ) , a n d comment 2, 7 U.L.A. 1 2 - 1 3 ( S u p p . 2 0 0 2 ) . A n d t h e comments a d d t h a t ' i n t h e a b s e n c e o f an a g r e e m e n t t o the c o n t r a r y , i s s u e s o f s u b s t a n t i v e arbitrability ... are f o r a court to decide and i s s u e s of procedural arbitrability, i . e . , whether p r e r e q u i s i t e s such as t i m e l i m i t s , n o t i c e , l a c h e s , estoppel, and o t h e r conditions precedent t o an o b l i g a t i o n t o a r b i t r a t e have been met, a r e f o r t h e arbitrators to decide.' I d . , § 6, comment 2, 7 U.L.A., a t 1 3 . " (Emphasis omitted; Howsam g i v e s issue a failure emphasis a s an e x a m p l e o f a p r o c e d u r a l - a r b i t r a b i l i t y to follow collective-bargaining entitling the added.) a given agreement, aggrieved party procedure was to part that, of arbitrate under the limits, precedent The notice, of "conditions precedent i s to time the to the claim that would simply court, as limits, agreement precedent" "prerequisites" a estoppel, and o t h e r t o an o b l i g a t i o n t o a r b i t r a t e . " reference function laches, to to the itself. i s not intended defeat opposed notice, "such as conditions 537 U.S. a t 84. e t c . ,that arbitrate and arbitration, not That process i t s dispute. Howsam a l s o r e f e r s t o " p r e r e q u i s i t e s " t o a r b i t r a t i o n , time a are a thus conditions i s , the reference as a r e f e r e n c e are to to defenses t h e c l a i m as a m a t t e r o f s t a t e l a w i n to defeating 14 merely the ability to 1090823 arbitrate apt the claim. phrase" As one t r e a t i s e f o r "procedural p r o c e d u r a l i s s u e , " and t h i s institutional that rules" arbitrators "comparatively 92 Am. arbitrability" are "comparatively than of Facts is a "gateway i s i n t e n d e d as a r e f e r e n c e t o " t h e of the a r b i t r a t i o n better J u r . Proof e x p l a i n s i t , t h e "more judges 1, § 42 process more itself, expert to interpret (3d e d . 2 0 0 6 ) . about" and rules and apply." 2 The n o t i o n of a "gateway" i s t h a t o f a gateway t o t h e a r b i t r a t i o n p e r se, not a gateway state to a viable or federal law. claim under otherwise applicable 3 Obviously, an a r b i t r a t o r i s not "comparatively more expert" than a judge i n a p p l y i n g a t r a d i t i o n a l , s t a t u t e - o f l i m i t a t i o n s defense to a c l a i m or i n a p p l y i n g a defense that the c l a i m a n t failed t o a l l e g e t h e c l a i m as a c o m p u l s o r y counterclaim i n a prior proceeding or with sufficient p a r t i c u l a r i t y f o r p u r p o s e s o f R u l e 9 ( b ) , A l a . R. C i v . P. 2 3 "[T]he relevant question h e r e i s what kind of a r b i t r a t i o n p r o c e e d i n g the p a r t i e s agreed t o . That question does not concern a state statute or j u d i c i a l procedures, c f . V o l t Information Sciences, I n c . v. B o a r d o f T r u s t e e s o f L e l a n d S t a n f o r d J u n i o r U n i v . , 489 U.S. 4 6 8 , 4 7 4 - 4 7 6 ( 1 9 8 9 ) . I t concerns c o n t r a c t i n t e r p r e t a t i o n and a r b i t r a t i o n procedures. Arbitrators are well situated to answer that question. Given these c o n s i d e r a t i o n s , along w i t h the arbitration contracts' sweeping language c o n c e r n i n g the scope of the q u e s t i o n s committed t o a r b i t r a t i o n , t h i s matter of contract i n t e r p r e t a t i o n s h o u l d be f o r t h e a r b i t r a t o r , n o t t h e c o u r t s , t o decide. C f . Howsam, s u p r a , a t 8 3 , 123 S . C t . 588 i_ J j_ j_ J _ _ _ i J j_ i_ _ 15 j_ J _ _ 1090823 (finding f o r roughly similar arbitrator should determine a 'gateway m a t t e r ' ) . " reasons certain that the procedural G r e e n T r e e F i n . C o r p . v . B a z z l e , 5 3 9 U.S. 4 4 4 , 4 5 2 - 5 3 (2003). C o m p a r e M a s s a c h u s e t t s H i g h w a y D e p ' t v . P e r i n i C o r p . , 444 M a s s . 3 6 6 , 3 7 7 , 828 N . E . 2 d 34 , 42 ( 2 0 0 5 ) ( " [ T ] h e question i n v o l v e [ d ] t h e sequence o f p r e r e q u i s i t e s f o r t h e d i s p u t e ' s s u b m i s s i o n t o t h e b o a r d , a n d t h u s , p r e s e n t [ e d ] ... a n i s s u e o f procedural a r b i t r a b i l i t y similar t o 'time limits, notice, laches, estoppel, and o t h e r conditions precedent t o an obligation to arbitrate.'" (citation omitted)). _See g e n e r a l l y 13D C h a r l e s A l a n W r i g h t e t a l . , F e d e r a l P r a c t i c e & Procedure § 3569 (3d e d . 2 0 1 0 ) ( e m p h a s i s a d d e d ; c i t a t i o n s omitted) ("[T]he [Supreme] C o u r t has h e l d t h a t t h e f o l l o w i n g i s s u e s do n o t r a i s e q u e s t i o n s o f a r b i t r a b i l i t y a n d t h u s s h o u l d ( a b s e n t a g r e e m e n t t o t h e c o n t r a r y ) be d e c i d e d i n the f i r s t i n s t a n c e by t h e a r b i t r a t o r : whether a c l a i m i s b a r r e d by a t e m p o r a l l i m i t a t i o n c o n t a i n e d i n t h e a r b i t r a t i o n rules of the National Association of Securities Dealers, w h e t h e r an a r b i t r a t i o n a g r e e m e n t ' s l i m i t a t i o n on r e c o v e r y o f p u n i t i v e damages b a r r e d a c l a i m f o r t r e b l e damages u n d e r RICO, and whether an arbitration agreement forbids class a r b i t r a t i o n . G e n e r a l l y , q u e s t i o n s about a r b i t r a t i o n procedure s h o u l d be r e s o l v e d i n t h e f i r s t i n s t a n c e by t h e a r b i t r a t o r . " ) . In Southern United Fire Insurance C o . v . H o w a r d , 77 5 So. 2d 156, 163-64 ( A l a . 2000), this Court gave a nonexhaustive, but illustrative, list of issues that constitute "procedural arbitrability" issues: the rules governing the a r b i t r a t i o n proceeding; the arbitrators' fees and o t h e r c o s t s a s s o c i a t e d w i t h t h e a r b i t r a t i o n proceeding; which p a r t y i s r e s p o n s i b l e f o r paying costs other than the arbitrators' fees; what substantive law governs the a r b i t r a t o r s ' d e c i s i o n ; the q u a l i f i c a t i o n s of the a r b i t r a t o r s ; t h e p a r t i e s ' d i s c o v e r y r i g h t s ; w h e t h e r o r how a r e c o r d i s t o be made of the arbitration proceedings; whether the a r b i t r a t o r s a r e r e q u i r e d t o make a n y f i n d i n g s s u p p o r t i n g t h e i r d e c i s i o n ; and t h e p r o v i s i o n s f o r r e v i e w o r enforcement o f t h e 16 1090823 The state-law failure case do (i.e., do to p l e a d not they not of limitations and as a c o m p u l s o r y c o u n t e r c l a i m asserted in this to as circuit for the court's arbitrators' statute availability the "procedural main opinion t o a d d r e s s and ultimate v i a b i l i t y As of of arbitration " g a t e w a y s " t o a r b i t r a t i o n ) and constitute the a r b i t r a t o r "the the are not Nonetheless, for go defenses of DHSF's c l a i m s " willingness order on to decide the of the they issues. are issues because they themselves. dissent to a l t e r n a t i v e ground se accordingly arbitrability" concludes, per go 4 affirm of to waiver, the I decision. " [ M ] a t t e r s o f ' p r o c e d u r a l a r b i t r a b i l i t y , ' s u c h as w h e t h e r a party seeking arbitration has waived its right to a r b i t r a t i o n by f a i l i n g t o c o m p l y w i t h p r o c e d u r a l r e q u i r e m e n t s set f o r t h i n the a r b i t r a t i o n agreement, are f o r the a r b i t r a t o r to decide." Dean W i t t e r R e y n o l d s , I n c . v . M c D o n a l d , 758 So. 2 d 5 3 9 , 542 (Ala. 1999). As for the alleged failure to plead with the p a r t i c u l a r i t y r e q u i r e d b y R u l e 9 ( b ) , A l a . R. C i v . P., I do n o t understand the Alabama Rules of Civil Procedure to be a p p l i c a b l e i n an a r b i t r a t i o n p r o c e e d i n g . See 4 C h a r l e s A l a n W r i g h t & A r t h u r R. M i l l e r , F e d e r a l P r a c t i c e & P r o c e d u r e § 1015 (3d e d . 2 0 0 2 ) ( e x p l a i n i n g t h a t , w i t h c e r t a i n e x c e p t i o n s , the Federal Rules of Civil Procedure are not applicable to arbitration proceedings conducted under the Federal Arbitration Act.) Thus, i f p l e a d i n g fraud with certain s p e c i f i c i t y i s a "gateway" to a r b i t r a t i o n of a f r a u d c l a i m , i t i s so as a r e s u l t o f t h e c o n t r a c t u a l i n t e n t o f t h e p a r t i e s t o t h e a r b i t r a t i o n a g r e e m e n t a n d p r o p e r l y may be v i e w e d as an i s s u e of " p r o c e d u r a l arbitrability." 4 17 1090823 note that waiver determinations. Tech. i s a defense See, e.g., N u n n e l l e y Solutions-North America, App. 1999) waiver ("Generally, i s a question for this the circuit that reason, the issue given Knight legally, whether i f not others, i f waiver Nat'l Found., Capital there Info. (Ala.C i v . has been the opportunity was n o t r a i s e d i n of t h i s court's order. to address i tboth run a f o u l of the due-process 881 S o . 2 d 1 0 1 3 , 1020 affirm-on-any-valid-legal-ground Reliance exception rule. fails having to the See L i b e r t y Health ( A l a . 2003) "rule case f a c t u a l l y and I n s . Co. v . U n i v e r s i t y o f A l a b a m a P.C., a Accordingly, i n the context affirm-on-any-valid-legal-ground Life factual by t h i s C o u r t upon such a g r o u n d , w i t h o u t would general GE f o r the f i n d e r of f a c t . " ) . c o u r t , i tcannot serve stage v. 730 S o . 2 d 2 3 8 , 2 4 1 as a g r o u n d f o r a f f i r m i n g t h e c i r c u i t at t h i s entails Servs. (the general i n application o n l y w h e r e d u e - p r o c e s s c o n s t r a i n t s r e q u i r e some n o t i c e a t t h e trial level, otherwise omitted which support was an affirmative consideration, suffice omitted, of affirmance, defense the basis such might, to affirm a as i f that when a would totally available judgment"). 5 5 "On appeal, Bentley raises 18 f o r the f i r s t time for 1090823 I further appears to note be arbitrability" dispute limits and, as waiver perfect is specifically, is a by the ... and b e a r on notice, laches, such parties them. one as that their presented of a of are that for an the arbitrate a "'[p]rocedural grow i t s f i n a l d i s p o s i t i o n , e.g., questions of r i g h t to questions other out contractual above, and 6 the noted estoppel, here "procedural grows function on As involves issue example It between defenses; the question. arbitrability,' dispute a intended dispute that out of defenses similar a r b i t r a t o r to the such compliance decide." i s s u e s o f u n c o n s c i o n a b i l i t y . U n c o n s c i o n a b i l i t y i s an a f f i r m a t i v e d e f e n s e t h a t m u s t be s p e c i a l l y p l e a d e d . A m S o u t h B a n k v . D e e s , 847 So. 2d 923 (Ala. 2002). Bentley neither pleaded nor argued below u n c o n s c i o n a b i l i t y as a b a s i s f o r a v o i d a n c e o f the arbitration agreement at i s s u e . This Court can a f f i r m the judgment of a t r i a l court on a b a s i s d i f f e r e n t f r o m t h e one on w h i c h i t r u l e d , S m i t h v . Equifax, 537 So. 2d 4 63 (Ala. 1 98 8 ) , but the c o n s t r a i n t s of p r o c e d u r a l due process prevent us from e x t e n d i n g t h a t p r i n c i p l e to a t o t a l l y omitted affirmative defense. Accordingly, we reject B e n t l e y ' s u n c o n s c i o n a b i l i t y argument." A m e r i q u e s t M o r t g a g e Co. 2002). v. Bentley, 851 So. 2d 458, 465 (Ala. T h e a r g u m e n t p r e s e n t e d i s t h a t DHSF's d e l a y i n a s s e r t i n g i t s c l a i m a g a i n s t K n i g h t c o n s t i t u t e s a w a i v e r of i t s r i g h t to a r b i t r a t e t h a t c l a i m , not a w a i v e r of the c l a i m i t s e l f under g e n e r a l p r i n c i p l e s of s t a t e law. 6 19 1090823 Brasfield & Gorrie, therefore, i s one that 35 So. 3d at the a r b i t r a t o r , decide. 20 604. This not t h i s question, Court, must 1090823 COBB, C h i e f I Justice (dissenting). would DHSF's affirm claims compelling In time, Knight DHSF, agreement. of Knight's claims, DHSF that the parties but neither with that prejudice 2 0 1 0 , DHSF were because was were party The c i r c u i t Knight, compulsory the arose subject circuit to refer court granted on t h e c i r c u i t During to the c i r c u i t formal to court, agree steps that on an to initiate court dismissed Knight's claims of Knight's 2001 21 DHSF's m o t i o n DHSF 2001 agreement complaint. of i t s complaint, to arbitration. granted that, i n Knight's out of the p a r t n e r s h i p the case initially asserting counterclaims Contemporaneously with the f i l i n g court compel i n 2009. sued they to years. trying took of the court and t h e c i r c u i t f o reight concedes, action moved order dissent. breach a d m i n i s t r a t i v e docket the a r b i t r a t i o n p r o c e s s . the alleging the action languished arbitrator, In i t s prior Thereafter, stating dismissing I respectfully DHSF made p e r i o d i c s t a t u s r e p o r t s action judgment vacating Therefore, sued partnership that motion. court's implicitly arbitration. arbitration court's and 2001, parties' the c i r c u i t DHSF m o v e d Although the and s t a y e d t h e 1090823 case pending DHSF's arbitration, complaint the submission earlier DHSF and In h i s post-hearing the right DHSF's compulsory to counterclaims dismissed arbitrate have circuit court conduct in sitting on seeking arbitration of i t s claims concludes, i t s claims that by i t s asserted limitations i t s claims action. The as circuit DHSF's a c t i o n . main to argued and, f u r t h e r , t h a t i t s i n t h e 2001 The right Knight by t h e a p p l i c a b l e s t a t u t e s o f failure dismissed implicitly vacating i t s i n t h e 2001 a c t i o n were b a r r e d to later by t h e p a r t i e s and brief, conduct by court argument waived dilatory claims following oral court of post-hearing b r i e f s , order. had the c i r c u i t opinion was rejects authorized Knight's to i t s hands decide whether f o r almost that the "'[DHSF's] a decade before c o n s t i t u t e s a waiver of i t s a r b i t r a t i o n , '" So. Knight's of waiver allegation argument 3d at , because, does n o t f a l l i t within t h e r u l e a n n o u n c e d i n Ocwen L o a n S e r v i c i n g , L L C v . W a s h i n g t o n , 939 So. 2d 6 "whether a party conduct during the (Ala. 2006). has waived litigation arbitrator." I n Ocwen, this the right i s a question 939 S o . 2 d a t 1 4 . 22 Court stated that to a r b i t r a t i o n byi t s f o r the court and n o t Specifically, this Court 1090823 in Ocwen h e l d related " [ i ] n order conduct, demonstrate litigation our that, use the that the the explanation, the 35 rule waived So. 2d of waiver matters. Ocwen, & Gorrie, n.1 that is the In B r a s f i e l d this Soho of the whether court's the reason for party has the to later Partners, a ability solely and Court's invoking limited invoked litigation" L.L.C. v. decide must Notwithstanding (Ala. 2009), to not 14. during substantially demonstrates questions in court by at "conduct 607 the arbitration related substantially conduct" 601, allowing process has phrases 3d litigation- arbitration movant in Brasfield So. opposing 939 "litigation-related L.L.C., party process of t o show w a i v e r b y litigation to decide litigation- & Gorrie, t h i s Court explained: "In Alabama, the issue whether a party has substantially invoked the l i t i g a t i o n p r o c e s s i s a matter f o r the t r i a l c o u r t to decide. T h i s i s so because i n v o k i n g the litigation process involves m a t t e r s t h a t o c c u r r e d b e f o r e the c o u r t or under i t s watch." 35 So. 3d at [occurring] often not than 607 before not, mean t h a t Gorrie n.1 stated (emphasis added). the take they the court place must or i n the arise rationale under The of to "matters will, more litigation does context. more b r o a d l y 23 that i t s watch" context i n that fact Brasfield include & "matters 1090823 that occurred matters of which occurred trial before that the only litigation process party process." conduct with i s an the arbitrator. t h e i m p l i c a t i o n i n t h e main of the "substantially invoked the party's A substantially invoking the doing process o f t h e same occurring the dispute. than they matters issue within the purview When absolutely nothing f o r eight coin. years actually alleged judicial on a r b i t r a t i o n that conduct to involve Both i n the an i n t e n t n o t t o i n s i s t settling because and, t h e r e f o r e , and a p a r t y ' s two s i d e s by has knowledge has the a r b i t r a t i o n represent signals forum waiver a litigation waivers court I disagree i s whether initiate o r u n d e r i t s w a t c h " -- t h a t i s , i s b e t t e r s u i t e d to decide Accordingly, court the t r i a l i n the j u d i c i a l court opinion the court forum that a s t h e means o f occurs under the trial c o u r t ' s w a t c h , as i t d i d i n Ocwen, a n d as i t d i d i n t h i s case, the t r i a l decide whether It far has that t o o k no s t e p s exceeds tardiness, i s b e t t e r s u i t e d than the a r b i t r a t o r to a waiver s e e m s t o me the p a r t i e s so court or the even occurred. the eight-year to i n i t i a t e reasonable some willful 24 period during the a r b i t r a t i o n time during delay, could which process which still some be 1090823 consistent with arbitration the notion a s t h e means that t h e p a r t i e s were i n s i s t i n g of s e t t l i n g v i r t u a l l y d i c t a t e s the conclusion to arbitration. reach the circuit fides court, the conclusion which heard period DHSF's s t a t u s and had t h e o p p o r t u n i t y whether DHSF's that What i s i m p o r t a n t o f t h o s e r e p o r t s , was b e t t e r determine dispute that i t that they waived t h e i r on t h e f a c t s i s u n i m p o r t a n t . eight-year to Nevertheless, their reports to assess on right I might i s that over an t h e bona s u i t e d than the a r b i t r a t o r dilatory conduct amounted to a waiver. Because implicitly, I find of vacated when Knight's tort its earlier Knight asserted defenses. DHSF i tasserted order left DHSF; counterclaims limitations compelling court's that not for contracts and that albeit arbitration, considering acknowledges i t concedes are correctly, the merits compulsory- the contract i n t h e 2010 a c t i o n a c c r u e d i n 2000 i n t h e 2001 a c t i o n . claims court statutes-of-limitations claims compulsory the the c i r c u i t no e r r o r i n t h e c i r c u i t counterclaim and I believe barred could that those claims are have been, b u t were n o t , Nevertheless, DHSF c o n t e n d s that by the six-year statute of and the two-year statute of 25 1090823 limitations fortorts arbitration in limitations potential against the because, 2001 i t says, action tolled -- n o t o n l y f o r K n i g h t ' s but unasserted Knight counterclaims i n 2 0 0 1 -- u n t i l such run again statutes may time, Claims DHSF a s s e r t s , filed in a to a prior relation-back rule with prejudice. second action; when See i t s claims h i s complaint asserted back as K n i g h t ' s action, however, 2001 a c t i o n Ex p a r t e C i n c i n n a t i was the consequence counterclaim any other I respects; for failing affirm the 806 S o . the purpose compulsory-counterclaim to assert i s a bar against the assertion action"(emphasis would the cannot dismissed Ins. Cos., Rule C i v . P., Knight, the b e n e f i t of the of [ A l a . R. action i n 2001. 3 7 6 , 379 ( A l a . 2 0 0 1 ) ( s t a t i n g t h a t " [ t ] o e f f e c t 13, had " r e l a t e d back" t o the DHSF l o s t Knight's of t h e s t a t u t e s began t o 2d rule,] have a n d h a d n o t e x p i r e d i n 2 0 1 0 when DHSF s u e d that Knight relate DHSF time d i s m i s s e d i n 2 0 0 9 , w h e n , DHSF s a y s , time the compelling c l a i m s , b u t a l s o f o r any was at which the order a compulsory of that claim i n added)). circuit therefore, I dissent. 26 court's judgment in a l l

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