Am. Gen. Fin. Servs. v. Jape

• Decision Date: 01 October 2012
• Docket Number: No. S12G0463.,S12G0463.
• Citation: 732 S.E.2d 746,291 Ga. 637
• Court: Georgia Supreme Court
• Parties: AMERICAN GENERAL FINANCIAL SERVICES v. JAPE.

291 Ga. 637

732 S.E.2d 746

AMERICAN GENERAL FINANCIAL SERVICES

v.JAPE.

No. S12G0463.

Supreme Court of Georgia.

Oct. 1, 2012.

Ashley Fillingim Cummings, Hunton & Williams LLP, Charlotte M. Ritz, Rhani Morris Lott, Atlanta, for appellant.

John T. Longino, Canton, for appellee.

THOMPSON, Presiding Justice.

We granted certiorari in this appeal to determine whether 9 USC § 16(a)(1)(B) of the Federal Arbitration Act, 9 USC § 1 et seq., (the “ FAA”), which grants federal litigants the right to directly appeal a trial court's order refusing to compel arbitration, preempts OCGA § 5–6–34(b), a statute which requires parties seeking to appeal from such an order in state courts to follow interlocutory appeal procedures. Because we conclude OCGA § 5–6–34(b) is a procedural statute not preempted by 9 USC § 16(a)(1)(B), the Court of Appeal's order dismissing the direct appeals' filed in this case is affirmed.

In September 2010, appellant American General filed an action against appellee Daniel Jape to recover monies he allegedly owed pursuant to a loan agreement between the parties. The agreement contains an arbitration provision authorizing either party to elect to resolve by binding arbitration claims and disputes arising thereunder. It further provides that the FAA applies to and governs the agreement.

Jape subsequently counterclaimed for breach of contract. Several months after the filing of the counterclaim, American General filed a motion under § 4 of the FAA to compel arbitration only of Jape's counterclaim. See 9 USC § 4 (authorizing parties to a written arbitration agreement to petition court of competent jurisdiction to compel arbitration). The trial court denied the motion to compel, finding that American General waived its right to compel arbitration by seeking judicial resolution of its arbitrable claim against Jape. See Taft v. Burttram, 254 Ga. 687, 688, 333 S.E.2d 585 (1985) (in choosing judicial forum rather than arbitration to sort out dispute, party waived right to compel arbitration); American Car Rentals v. Walden Leasing, 220 Ga.App. 314, 318, 469 S.E.2d 431 (1996) (party waived arbitration provision by taking actions inconsistent with arbitration clause). The trial court subsequently denied American General's motion for reconsideration and its request for a certificate of immediate review. See OCGA § 5–6–34(b). American General filed a direct appeal in the Court of Appeals. The Court of Appeals determined it did not have jurisdiction because American General failed to follow the interlocutory appeal procedures found in OCGA § 5–6–34(b) and dismissed the appeal. See Langfitt v. Jackson, 284 Ga.App. 628, 634(1), 644 S.E.2d 460 (2007) (order denying motion to compel arbitration not appealable except under interlocutory appeal provisions of OCGA § 5–6–34(b)). We granted American General's petition for certiorari.

1. As an initial matter, we must determine whether the FAA has any applicability to the parties' agreement to arbitrate. Section 2 of the FAA provides that arbitration agreements “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 USC § 2. The FAA applies in state and federal courts to all contracts containing an arbitration clause that involves or affects interstate commerce. Perry v. Thomas, 482 U.S. 483, 489, 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987). The contract between American General and Jape specifically states that the FAA applies to and governs their agreement to arbitrate and the parties do not dispute that the financial contract involves or affects interstate commerce. Accordingly, we conclude the FAA applies to the enforcement of the arbitration agreement at issue. The fact that the parties may have agreed to additional procedural rules not found in the FAA in the event they were required to arbitrate does not render the FAA inapplicable.

2. Having determined that the FAA is generally applicable to the contract between the parties, we turn to the issue of whether American General has a right to a direct appeal from the trial court's order denying its motion to compel arbitration. American General argues that a direct appeal is mandated by 9 USC § 16(a)(1)(B) of the FAA, which provides that an appeal may be taken from an order denying a motion to compel arbitration to proceed. ¹ Jape argues that under Georgia law, prior to final judgment an order denying a motion to compel arbitration is subject to the interlocutory appeal provisions of OCGA § 5–6–34(b). It is this apparent conflict in laws that forms the issue in this appeal.

Because the FAA contains no express preemptive provision and does not reflect a congressional intent to occupy the entire field of arbitration, its provisions will preempt state law only to the extent it “stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 85 L.Ed. 581 (1941). See Volt Information Sciences v. Board of Trustees of Leland Stanford Junior University, 489 U.S. 468, 477, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989); American Gen. Fin. Svcs. v. Vereen, 282 Ga.App. 663, 665–666, 639 S.E.2d 598 (2006). The purpose of the FAA was “ ‘to overrule the judiciary's longstanding refusal to enforce agreements to arbitrate,’ [Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 219–220, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985) ] and to place such agreements ‘upon the same footing as other contracts.’ [Cits.].” Volt, supra, 489 U.S. at 478, 109 S.Ct. 1248. The FAA thus requires courts, both federal and state, to enforce arbitration agreements in negotiated contracts involving interstate commerce in accordance with their terms. Southland Corp. v. Keating, 465 U.S. 1, 13, 104 S.Ct. 852, 79 L.Ed.2d 1 (1984), quoting Metro Industrial Painting Corp. v. Terminal Constr. Co., 287 F.2d 382, 387 (2d Cir.1961) (Lumbard, C.J., concurring) (“the purpose of the act was to assure those who desired arbitration and whose contracts related to interstate commerce that their expectations would not be undermined by federal judges, or ... by state courts or legislatures”).

Consistent with Congress' intent to ensure the enforceability of arbitration agreements, the United States Supreme Court has held the FAA preempts state laws requiring a judicial forum for the resolution of disputes pertaining to a particular subject matter or which require judicial resolution of a claim the parties have agreed to resolve by arbitration. See AT&T Mobility v. Concepcion, ––– U.S. –––– 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011) (state law prohibiting arbitrationof class action claims preempted by FAA); Preston v. Ferrer, 552 U.S. 346, 128 S.Ct. 978, 169 L.Ed.2d 917 (2008) (state law referring dispute initially to administrative agency preempted); Mastrobuono v. Shearson Lehman Hutton, 514 U.S. 52, 58, 115 S.Ct. 1212, 131 L.Ed.2d 76 (1995) (if parties agree punitive damages claim will be arbitrated, FAA ensures agreement will be enforced notwithstanding state law excluding such claims from arbitration); Perry, supra, 482 U.S. at 490–491, 107 S.Ct. 2520 (state statute requiring resolution of wage disputes in judicial forum preempted). In such cases, the United States Supreme Court predictably has held the FAA preempts the relevant state law because the law undermined the FAA's objective of enforcing arbitration agreements according to their terms. While recognizing in these cases that the FAA creates a body of federal substantive law of arbitrability applicable in both federal and state courts, the Supreme Court has not had the occasion to determine whether the FAA's procedural provisions are applicable in state courts. See Perry, supra, 482 U.S. at 489, 107 S.Ct. 2520 and Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 U.S. 1, 25, n. 32, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983) (recognizing FAA “creates a body of federal substantive law” applicable in state and federal courts); Southland Corp. v. Keating, 465 U.S. 1, 16, n. 10, 104 S.Ct. 852, 79 L.Ed.2d 1 (“In holding that the Arbitration Act preempts a state law that withdraws the power to enforce arbitration agreements, we do not hold that [the Act's procedural provisions] apply to proceedings in state courts”). It has acknowledged, however, that the procedural provisions found in §§ 3 and 4 of the Act appear to apply by their terms only in federal court.²Volt, supra, 489 U.S. at 477 n. 6, 109 S.Ct. 1248 (“we have never held that [the FAA's procedural provisions], which by their terms appear to apply only to proceedings in federal court, ... are nonetheless applicable in state court”). Moreover, the Court clearly has stated both that there is no federal policy favoring arbitration under a certain set of procedural rules and that the procedures to be used in an arbitration are not prescribed by the Act itself. Id. at 476, 478–479, 109 S.Ct. 1248;Southland Corp., supra, 465 U.S. at 11 n. 6, 104 S.Ct. 852.

Although the Supreme Court has not addressed the exact issue before us, our Court of Appeals has twice held that the FAA does not preempt OCGA § 5–6–34(b)'s jurisdictional requirements because the provision sets forth procedural rules which do not undermine the purposes and objectives of the FAA. Vereen, supra, 282 Ga.App. 663, 639 S.E.2d 598;Simmons Co. v. Deutsche Fin. Svcs. Corp., 243 Ga.App. 85, 532 S.E.2d 436 (2000). More specifically, the court concluded in Vereen that

because our procedural law permits a trial court to certify [an order denying a motion to compel arbitration] for immediate appeal pursuant to OCGA § 5–6–34(b), parties, such as those here, are provided with an avenue for seeking appellate review that is not inconsistent with the objectives of the FAA to enforce legitimate arbitration agreements. [Cit.] While the denial of an application for interlocutory appeal, as occurred here, may delay arbitration, such delay is not...