Allied-Bruce Terminix Companies, Inc. v. Dobson

Decision Date13 August 1993
Docket NumberALLIED-BRUCE
PartiesTERMINIX COMPANIES, INC., et al. v. G. Michael DOBSON, Wanda C. Dobson, Steven Gwin, and Jan Gwin. 1920473.
CourtAlabama Supreme Court

Joseph P. Jones, Jr. and T. Julian Motes of Sirote & Permutt, P.C., Mobile, and Robert A. Wills of Wills and Simon, Bay Minette, for appellants.

Alan R. Chason of Chason & Chason, P.C., Bay Minette, for appellees.

ALMON, Justice.

The defendants, Allied-Bruce Terminix Companies, Inc. ("Terminix Service"), and Terminix International Company ("Terminix International") appeal from an order of the trial court denying their motion to compel arbitration of the tort and breach of contract claims filed against them by Michael Dobson, Wanda Dobson, Steven Gwin, and Jan Gwin. The issue for our review is whether the arbitration clause contained in a termite bond is enforceable under the Federal Arbitration Act, 9 U.S.C. § 1 et seq. ("FAA").

In August 1987, Steven Gwin allowed the termite bond on his house in Fairhope, Alabama, to expire, and he purchased a replacement bond from Terminix Service. Terminix Service is an Arkansas corporation that does business in several states, including Alabama, Arkansas, Florida, Georgia, Mississippi, Louisiana, Oklahoma, and Texas. The bond was guaranteed by Terminix International, a limited partnership that has its principal place of business in Memphis, Tennessee.

In 1991, Steven and Jan Gwin agreed to sell the house to Michael and Wanda Dobson. The sales contract required the Gwins to provide written evidence from a licensed pest control company that the company had performed a visual inspection of the house and had observed no active infestation of termites or damage from active infestation. The contract also required that the termite bond be transferred to the Dobsons at the closing of the sale. Because of the existing bond on the house, Terminix Service agreed to perform the inspection and to issue the required statement. At the closing, the Gwins furnished Dobson with a standard Veterans' Administration ("VA") form; the V.A. form provided that Terminix Service had observed no visible evidence of active infestation during the inspection.

The Dobsons later discovered termite damage to the house, and they brought an action against the Gwins, alleging fraud, and against Terminix Service and Terminix International, alleging fraud in connection with the representations in the V.A. form, and alleging breach of contract. The Gwins cross-claimed against Terminix Service and Terminix International. Terminix Service and Terminix International moved to stay the proceedings and to compel the Dobsons and the Gwins to submit their claims to arbitration pursuant to an arbitration clause in the bond. The trial court denied this motion, and the defendants appeal.

Predispute arbitration agreements are unenforceable under Alabama law. Ala.Code 1975, § 8-1-41. However, if an arbitration agreement is voluntarily entered into and is contained in a contract that involves interstate commerce, then the FAA preempts state law and renders the agreement enforceable. A.G. Edwards & Sons, Inc. v. Syvrud, 597 So.2d 197 (Ala.1992). The Terminix companies contend that, because the United States Supreme Court has held in Southland Corp. v. Keating, 465 U.S. 1, 104 S.Ct. 852, 79 L.Ed.2d 1 (1984), that Congress's regulatory power under the FAA is co-extensive with its commerce power, this Court should apply the "slightest nexus" standard first enunciated in Ex parte Costa & Head (Atrium), Ltd., 486 So.2d 1272 (Ala.1986), to this situation. This standard provides that if the contract in question has the slightest nexus with interstate commerce, the FAA will apply. Costa & Head; Ex parte Brice Building Co., 607 So.2d 132 (Ala.1992). Terminix Service and Terminix International argue that, because they are out-of-state entities, and because some of the materials used in fulfilling their duties imposed by the termite bond were brought into Alabama from out-of-state, the bond has at least a "slight nexus" with interstate commerce.

We need not address this argument, however, in light of this Court's decision in Ex parte Jones, 628 So.2d 316 (Ala.1993). 1 In Jones, we explicitly rejected the Costa & Head "slightest nexus" standard in favor of the standard enunciated in Ex parte Warren, 548 So.2d 157 (Ala.1989), cert. denied, 493 U.S. 998, 110 S.Ct. 554, 107 L.Ed.2d 550 (1989). We held:

"To resolve any inconsistency or confusion generated by the existence of two different standards, and determining, as we now do, that Warren represents a more reasoned approach than the Costa standard, we overrule any case inconsistent with Warren, to the extent that it states a different standard for determining the involvement of interstate commerce."

628 So.2d at 318. The Warren standard, which was invoked in Warren to cover only the "narrow" circumstances in which Alabama residents had purchased an automobile for consumer purposes from an in-state dealership, was first set forth by Judge Lombard in a special concurrence in Metro Industrial Painting Corp. v. Terminal Constr. Co., 287 F.2d 382 (2d Cir.), cert. denied, 368 U.S. 817, 82 S.Ct. 31, 7 L.Ed.2d 24 (1961):

"The significant question, therefore [in determining whether a contract evidences a transaction involving commerce], is not whether, in carrying out the terms of the contract, the parties did cross state lines, but whether, at the time they entered into it and accepted the arbitration clause, they contemplated substantial interstate activity. Cogent evidence regarding their state of mind at the time would be the terms of the contract, and if it, on its face, evidences interstate traffic ... the contract should come within § 2 [of the FAA.] In addition, evidence as to how the parties expected the contract to be performed and how it was performed is relevant to whether substantial interstate activity was contemplated."

287 F.2d at 387 (emphasis in original).

Terminix Service and Terminix International argue that the bond involves interstate commerce even under the more restrictive Warren standard. In addition to the evidence cited above in support of their Costa & Head argument, the Terminix companies cite the following in support of their contention that at the time they entered into the contract the parties "contemplated substantial interstate activity": Steven Gwin's testimony that he allowed his bond with a local pest control company to expire so that he could "go with a national company like Terminix"; the fact that the bond instrument showed on its face that it was executed in Memphis, Tennessee; and the fact that the bond contained a statement that it was subject to federal regulation.

A brief survey of cases from other jurisdictions that have applied the standard will be useful in determining whether the parties contemplated substantial interstate...

To continue reading

Request your trial
19 cases
  • Allied-Bruce Terminix Cos. v. Dobson
    • United States
    • U.S. Supreme Court
    • October 4, 1994
    ...of a state statute, Ala. Code § 8-1-41(3) (1993), making written, predispute arbitration agreements invalid and "unenforceable." 628 So. 2d 354, 355 (1993). To reach this conclusion, the court had to find that the Federal Arbitration Act, which pre-empts conflicting state law, did not apply......
  • Jim Burke Automotive, Inc. v. Beavers
    • United States
    • Alabama Supreme Court
    • September 29, 1995
    ...of a state statute, [Ala.Code 1975, § 8-1-41(3) ], making written, predispute arbitration agreements invalid and 'unenforceable.' 628 So.2d 354, 355 (Ala.1993). To reach this conclusion, the court had to find that the Federal Arbitration Act, which pre-empts conflicting state law, did not a......
  • Southern Energy Homes, Inc. v. Lee
    • United States
    • Alabama Supreme Court
    • January 8, 1999
    ...Auto Sales, Inc., 718 So.2d 33, 38 (Ala. 1998): "I was one of the four Justices who concurred in the opinion in Allied-Bruce Terminix Cos. v. Dobson, 628 So.2d 354 (Ala.1993), which the United States Supreme Court reversed in Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 115 S.Ct. 834......
  • Allied-Bruce Terminix Companies, Inc. v. Dobson
    • United States
    • Alabama Supreme Court
    • November 3, 1995
    ...the Federal Arbitration Act ("the Act") requires arbitration of the claims at issue. The original opinion of this Court is published at 628 So.2d 354. The essential facts of the case are set out in that opinion, as "The defendants, Allied-Bruce Terminix Companies, Inc., ... and Terminix Int......
  • Request a trial to view additional results
5 books & journal articles
  • The Clash Between Federal and State Arbitration Law and the Appropriateness of Arbitration as a Dispute Resolution Process
    • United States
    • University of Nebraska - Lincoln Nebraska Law Review No. 77, 2021
    • Invalid date
    ...U.S.C. §2 (1994). 130. See Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 277 (1995). 131. See Allied-Bruce Terminix Cos. v. Dobson, 628 So. 2d 354 (Ala. 1993), rev'd, 513 U.S. 265 (1995). 132. See, e.g., Lacheney v. Profitkey Int'l, Inc., 818 F. Supp. 922, 924 (E.D. Va. 1993); R. J. P......
  • Arbitration and Unconscionability
    • United States
    • Georgia State University College of Law Georgia State Law Reviews No. 19-3, March 2003
    • Invalid date
    ...334, 339 (7th Cir. 1984)); see also Stout v. Byrider, 228 F.3d 709 (6th Cir. 2000). [68]. See supra note 62 and accompanying text. [69]. 628 So. 2d 354 (Ala. 1993). [70]. Id. at 354; see also Ala. Code Sec. 8-1-41(3) (1993). [71]. Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 282 (199......
  • Updating reinsurance law developments: the gloves are beginning to come off.
    • United States
    • Defense Counsel Journal Vol. 63 No. 2, April 1996
    • April 1, 1996
    ...94 C4957, N.D. Ill., reprinted in Mealey's Litig. Rep.: Reins., Vol. 5, No. 14 (Nov. 23, 1994), at A-1. (2.) 115 S.Ct. 834 (1995), rev'g 628 So.2d 354 (Ala. 1993). (3.) 115 S.Ct. 633 (1995), rev'g 20 F.2d 713 (7th Cir. 1994), which aff'd 812 F.Supp. 845 (N.D. Ill. 1993). (4.) 115 S.Ct. 634 ......
  • Reinsurance arbitration 2001: Will the new ways cripple "arbitration clause"?
    • United States
    • Defense Counsel Journal Vol. 68 No. 3, July 2001
    • July 1, 2001
    ...arbitration clause, there is presumption of arbitrability); Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 270 (1995), rev'g 628 So.2d 354 (Ala. 1993) (FAA was enacted to overcome corts' refusal to enforce agreements to arbitrate); Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT