Anderton v. Practice-Monroeville, P.C.

• Decision Date: 26 September 2014
• Docket Number: 1121417.
• Citation: 164 So.3d 1094
• Parties: Eric ANDERTON and Jackson Key Practice Solutions, LLC v. THE PRACTICE–MONROEVILLE, P.C.
• Court: Alabama Supreme Court

164 So.3d 1094

Eric ANDERTON and Jackson Key Practice Solutions, LLC

v.THE PRACTICE–MONROEVILLE, P.C.

1121417.

Supreme Court of Alabama.

Sept. 26, 2014.

Henry T. Morrissette and J. Craig Campbell of Hand Arendall LLC, Mobile, for appellants.

Max Cassady of Cassady & Cassady, P.C., Fairhope, for appellee.

Opinion

BRYAN, Justice.

Eric Anderton and Jackson Key Practice Solutions, LLC (“Jackson Key”), appeal from the Monroe Circuit Court's order denying their motion to compel arbitration. We reverse and remand.

The Practice–Monroeville, P.C. (“the Practice”), is a medical-practice group located in Monroeville. Allscripts Healthcare, LLC (“Allscripts”), sells health-care software to health-care providers. Allscripts is a North Carolina company and does not have an office in Alabama. Jackson Key is a certified “sales-and-service partner” of Allscripts, selling and servicing Allscripts software, and Anderton is an employee and partial owner of Jackson Key. In May 2011, the Practice and Allscripts entered into a written contract in which the Practice purchased health-care software called “MyWay” from Allscripts through Jackson Key (“the contract”). Although the contract was between the Practice and Allscripts, Jackson Key supported the transaction. The contract provides that “Allscripts may subcontract its obligations hereunder to a third party or affiliate.” An addendum to the contract further states that “Allscripts and [the Practice] agree that the Allscripts MyWay Software shall be hosted by Jackson Key[, and] that any backup, system performance, data recovery, [and] service levels will be the responsibility of [Jackson Key].”

The contract contains an arbitration provision, which states, in pertinent part: “Any dispute or claim arising out of, or in connection with, this Agreement shall be finally settled by binding arbitration in Raleigh, NC, in accordance with the then-current rules and procedures of the American Arbitration Association....”

The Practice became dissatisfied with the performance of the MyWay software and unsuccessfully attempted to cancel its contract with Allscripts. On September 12, 2011, the Practice sued Jackson Key and Anderton, but not Allscripts, in the circuit court. The Practice alleged that Jackson Key, pursuant to the addendum to the contract, had undertaken sole responsibility for “system performance” of the MyWay software that it had implemented for the Practice. The complaint further alleged that Jackson Key and Anderton were negligent in establishing the system performance of that software. On October 21, 2011, Jackson Key and Anderton moved to compel arbitration based on the arbitration provision in the contract.

In November 2011, Jackson Key, acting pro se, sued the Practice in the Monroe District Court. In that action, Jackson Key alleged that the Practice owed it money for Microsoft Word software that Jackson Key had purchased for the Practice. Following a trial, the district court entered a judgment in favor of the Practice on March 28, 2012. Jackson Key subsequently appealed that judgment to the Monroe Circuit Court. Over Jackson Key and Anderton's objection, the circuit court consolidated that appeal with the action initiated by the Practice regarding the contract.

The Practice opposed the motion to compel arbitration in the circuit court. The Practice argued that the circuit court—not the arbitrator—should decide the threshold issue of whether the dispute over the MyWay software is arbitrable. The Practice then argued that the circuit court should deny Jackson Key and Anderton's motion to compel arbitration because, it said, the dispute was not within the scope of the arbitration provision. Additionally, the Practice argued that Jackson Key and Anderton had waived any right to arbitrate by substantially invoking the litigation process in the district court.¹ On July 31, 2013, the circuit court denied the motion to compel, without stating a reason. Jackson Key and Anderton appealed pursuant to Rule 4(d), Ala. R.App. P., which authorizes an appeal from an order either granting or denying a motion to compel arbitration.

Standard of Review

“ ‘This Court's review of an order granting or denying a motion to compel arbitration is de novo....’

“United Wisconsin Life Ins. Co. v. Tankersley, 880 So.2d 385, 389 (Ala.2003). Furthermore:

“ ‘ “A motion to compel arbitration is analogous to a motion for summary judgment. TranSouth Fin. Corp. v. Bell, 739 So.2d 1110, 1114 (Ala.1999). The party seeking to compel arbitration has the burden of proving the existence of a contract calling for arbitration and proving that that contract evidences a transaction affecting interstate commerce. Id. ‘After a motion to compel arbitration has been made and supported, the burden is on the non-movant to present evidence that the supposed arbitration agreement is not valid or does not apply to the dispute in question.’ ”

“ ‘Fleetwood Enters., Inc. v. Bruno, 784 So.2d 277, 280 (Ala.2000) (quoting Jim Burke Auto., Inc. v. Beavers, 674 So.2d 1260, 1265 n. 1 (Ala.1995) (emphasis omitted)).’

“Vann v. First Cmty. Credit Corp., 834 So.2d 751, 753 (Ala.2002).”

Cartwright v. Maitland, 30 So.3d 405, 408–09 (Ala.2009).

Discussion

There is no dispute that a contract calling for arbitration exists in this case and that that contract evidences a transaction affecting interstate commerce. In the circuit court, the parties disputed whether Jackson Key and Anderton had waived any right they may have had to arbitration and whether the Practice's claim falls within the scope of the arbitration provision. The parties also disputed whether the circuit court or the arbitrator should decide the issue of arbitrability. The circuit court did not give a reason for denying Jackson Key and Anderton's motion to compel arbitration. We will examine the disputed issues to determine whether the circuit court could have properly denied the motion to compel.

I. Issues Relating to Waiver

We first address whether Jackson Key and Anderton waived any right they may have to arbitration by substantially invoking the litigation process in Jackson Key's action in the district court. As a threshold matter, we address whether the waiver issue is one for the circuit court or the arbitrator to decide. This Court has stated that “the issue whether a party has waived the right to arbitration by its conduct during litigation is a question for the court and not the arbitrator.” Ocwen Loan Servicing, LLC v. Washington, 939 So.2d 6, 14 (Ala.2006).² However, the general rule that the court and not the arbitrator decides whether a party has waived the right to arbitration has an exception: issues typically decided by the court will be decided by the arbitrator instead when there is “ ‘clear and unmistakable evidence’ ” of such an agreement in the arbitration provision. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995) (quoting AT & T Techs., Inc. v. Communications Workers of America, 475 U.S. 643, 649, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986) (alterations omitted)); see also Marie v. Allied Home Mortg. Corp., 402 F.3d 1, 14 (1st Cir.2005) (citing First Options ). In this case, Jackson Key and Anderton argue in their reply brief that the arbitration provision, by incorporating the rules and procedures of the American Arbitration Association (“the AAA”), clearly and unmistakably indicates that the arbitrator, not the court, should decide the waiver issue. However, Jackson Key and Anderton first make that argument in their reply brief. “We do not permit new matters to be raised for the first time in a reply brief.” Birmingham Bd. of Educ. v. Boyd, 877 So.2d 592, 594 (Ala.2003).

Although Jackson Key and Anderton argue in their principal brief that the relevant incorporated AAA rule provides for the arbitrator rather than the court to decide whether the dispute falls within the scope of the arbitration provision, see Part II, infra, they did not make a similar argument about waiver until they filed their reply brief. Further, the record on appeal does not indicate that Jackson Key and Anderton made such an argument about waiver before the circuit court. Rather, in a filing submitted below, they “agree[d] that the issue of waiver is for the Court to decide, but dispute[d] that there has been any waiver.” “This Court cannot consider arguments advanced for the purpose of reversing the judgment of a trial court when those arguments were never presented to the trial court for consideration....” State Farm Mut. Auto. Ins. Co. v. Motley, 909 So.2d 806, 821 (Ala.2005). For these reasons, we do not further discuss whether the AAA rule incorporated into the arbitration provision clearly and unmistakably indicates that the arbitrator instead of the court should decide the waiver issue.

We next discuss the merits of the waiver issue.

“It is well settled under Alabama law that a party may waive its right to arbitrate a dispute if it substantially invokes the litigation process and thereby substantially prejudices the party opposing arbitration. Whether a party's participation in an action amounts to an enforceable waiver of its right to arbitrate depends on whether the participation bespeaks an intention to abandon the right in favor of the judicial process, and, if so, whether the opposing party would be prejudiced by a subsequent order requiring it to submit to arbitration. No rigid rule exists for determining what constitutes a waiver of the right to arbitrate; the determination as to whether there has been a waiver must, instead, be based on the particular facts of each case.”

Companion Life Ins. Co. v. Whitesell Mfg., Inc., 670 So.2d 897, 899 (Ala.1995).

“In order to demonstrate that the right to arbitrate a dispute has been waived, the party opposing arbitration must demonstrate both (1) that the party seeking arbitration substantially invoked the litigation process, and (2) that the party opposing arbitration would be substantially prejudiced

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