Auvil v. Johnson

• Decision Date: 08 June 2001
• Parties: Jimmy D. AUVIL v. Amy M. JOHNSON.
• Court: Alabama Supreme Court

806 So.2d 343

Jimmy D. AUVIL v. Amy M. JOHNSON.

1980145.

Supreme Court of Alabama.

June 8, 2001.

Dennis R. Bailey, T. Kent Garrett, and William H. Webster of Rushton, Stakely, Johnston & Garrett, P.A., Montgomery, for appellant.

Jere L. Beasley, W. Daniel "Dee" Miles III, and Scott T. McArdle of Beasley, Allen, Crow, Methvin, Portis & Miles, P.C., Montgomery, for appellee.

JOHNSTONE, Justice.

Jimmy D. Auvil—a defendant in a case pending in the Montgomery County Circuit Court—appeals from the trial court's order denying his motion to compel arbitration of the plaintiff Amy M. Johnson's claims. We affirm.

Pursuant to an application dated May 26, 1997, plaintiff Amy M. Johnson and her husband, Duane Johnson, purchased a "variable universal life insurance policy" from American National Insurance Company (ANIC) through its agent, Auvil. The application, completed and signed by Duane and Amy, listed Duane as the proposed insured and Amy as the additional proposed insured.

Several weeks before Duane and Amy completed and signed the application, Duane alone had completed and signed a document dated April 30, 1997 and entitled "Purchaser Suitability Form/New Account Information & Arbitration Agreement," which, at the end of the second page, contains this language:

"PURCHASER AGREEMENT TO ARBITRATION

"THIS SECTION IS NOT APPLICABLE TO MISSOURI RESIDENTS!

"The following conditions are agreed to by all parties to this agreement.

"Arbitration is final and binding on the parties.

"The parties are waiving their right to seek remedies in court, including the right to jury trial.

"Pre-arbitration discovery is generally more limited and different from court proceedings.

"The arbitrators' award is not required to include factual findings or legal reasoning and any party's right to appeal or to seek modification of rulings by arbitrators is strictly limited.

"The panel of arbitrators will typically include a minority of arbitrators who were or are affiliated with the securities industry.

"By signature below, I(we) understand that I(we) have the right to any dispute between us arising under the federal securities laws to be resolved through litigation in the courts. In lieu of using the courts, I(we) may agree, after any such dispute has arisen, to settle it by arbitration before an appropriate group of arbitrators. However, I(we) understand that any other dispute between us arising out of any transaction or this agreement shall be settled by arbitration before the National Association of Securities Dealers, Inc., which must be commenced by a written notice of intent to arbitrate. Judgment upon any award rendered may be entered in any appropriate court.

"I (we) further understand that we may not bring a punitive [sic] or certified class action to arbitration, nor seek to enforce any pre-dispute arbitration agreement against anyone who has initiated in court a punitive [sic] class action; or who is a member of a punitive [sic] class action until (1) the class action certification is denied; or (2) the class is decertified; or (3) I(we) are excluded from the class action by the court. Such forbearance to enforce an agreement to arbitrate shall not constitute a waiver of any rights under this agreement except to the extent stated herein."

Auvil himself did not sign the arbitration agreement; and none of the text of the agreement or the document containing it constitutes Auvil either a party to, or a beneficiary or a third-party beneficiary of, the agreement.

The "Purchaser Suitability Form/New Account Information & Arbitration Agreement," which contains the arbitration agreement, contains only two possible references to the insurance later to be purchased by Duane and Amy. They appear on the first page, over Auvil's signature but not over Duane's or Amy's. The first reference reads:

"This form must accompany all applications to establish new accounts in American National's Variable products, American National Investment Accounts, Inc., Variable Products Fund and Variable Insurance Products Fund II."

The second reference is a checked blank indicating the notation: "Application Attached." A similarly checked blank indicates adoption of the statement, "Signed Arbitration Agreement," an apparent reference to the arbitration agreement at the end of the same document. The form contains entries of information about Duane's investment resources and goals. The record does not contain any affidavit or other proof that the form containing the arbitration agreement did, in fact, "accompany" the application or that the application was, in fact, "attached" to the form.

Likewise, in the application Duane and Amy signed to obtain the insurance policy, the only reference to other documents, such as the one containing the arbitration agreement previously signed by Duane, reads: "Both of the undersigned declare for themselves, and all interested parties, that all of the answers in the three pages of this application and any attachments to it are full, complete and true to the best of their knowledge and belief." The insurance policy itself does not contain any arbitration provisions.

Duane sued ANIC and Auvil, and asserted, among other theories, claims of fraudulent misrepresentation and fraudulent suppression. Duane then voluntarily dismissed his lawsuit, and Amy alone sued ANIC and Auvil for fraudulent misrepresentation; fraudulent suppression; negligent hiring, training, and supervision; and wanton hiring, training, and supervision. She claimed that Auvil and ANIC "misrepresented and suppressed the true nature, terms, and performance of the variable universal life insurance policy."

Auvil moved to compel arbitration and to dismiss or, in the alternative, to stay proceedings. ANIC joined in Auvil's motion to compel arbitration. On four theories Amy timely responded to the motion. First, because she was a nonsignatory to the arbitration agreement, she could not be compelled to arbitrate her claims. Second, because the business of insurance is not subject to arbitration under the guidelines of the National Association of Securities Dealers, Inc. (NASD), it could not serve as arbitrator as required by the arbitration agreement. Third, the McCarran-Ferguson Act, 15 U.S.C. § 1011-12, saves §§ 27-14-22 and 8-1-41(3), Ala.Code 1975, from preemption by the Federal Arbitration Act; and these state Code sections prohibit specific enforcement of arbitration clauses in contracts of insurance. And, fourth, specific enforcement of the arbitration agreement would deny Amy's right to a jury trial as guaranteed by the Alabama Constitution of 1901 and the United States Constitution. Following oral arguments of counsel, the trial court denied Auvil and ANIC's motion to compel arbitration on the following grounds: (1) Amy did not sign the arbitration agreement; (2) Ex parte Hagan, 721 So.2d 167 (Ala.1998), holds the business of insurance not subject to arbitration under the arbitration guidelines of NASD; (3) the McCarran-Ferguson Act saves §§ 27-14-22 and 8-1-41(3), which prohibit specific enforcement of arbitration clauses in contracts of insurance; and (4) specific enforcement of the arbitration agreement would deny Amy's right to trial by jury guaranteed by Art. I, §§ 10, 11, and 13, Alabama Constitution of 1901, and by the Seventh Amendment to the United States Constitution.

Only Auvil appeals. ANIC has not appealed from the denial of the motion to compel arbitration.

On appeal, Auvil contends that: (1) the trial court erred in determining that Amy's "failure to sign the arbitration agreement precludes [Auvil] from compelling arbitration of her claims," (2) the trial court erred in determining that Amy's claims involve the business of insurance, which cannot be arbitrated under NASD arbitration guidelines, and (3) the trial court erred in determining that the McCarran-Ferguson Act allows Alabama law to prohibit arbitration of Amy's claims.

As we will explain, we conclude that the denial of Auvil's motion to compel arbitration was valid for the first reason cited by the trial court: that Amy's not signing the arbitration agreement precludes Auvil from compelling her to arbitrate her claims. As we will further explain, we further conclude that the denial of Auvil's motion to compel arbitration was valid for a reason not cited by the trial court but fully supported by the materials considered by the trial court: that Auvil, as a nonsignatory to the arbitration agreement, was without standing to enforce it under the circumstances of this case. Our conclusions to this effect pretermit any discussion of Auvil's challenges to the other reasons cited by the trial court for its denial of Auvil's motion to compel arbitration.

I. Amy Was Not Bound By The Arbitration Agreement

"`[A]rbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.'" AT & T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 648, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986) (quoting United Steelworkers of America v. Warrior & Gulf Navig. Co., 363 U.S. 574, 582, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960)). On the one hand, Amy's alleged damages, though sought on tort theories, depend on her status either as a party to the insurance contract or as a beneficiary or third-party beneficiary of it. On the other hand, neither the insurance policy nor the application Amy signed with Duane to obtain the policy contains any arbitration provision, and Amy did not sign the "Purchaser Suitability Form/New Account Information & Arbitration Agreement" which does contain the arbitration provisions.

We hold that the application did not incorporate by reference the form containing the arbitration agreement previously signed by Duane and that the arbitration agreement does not bind Amy, who did not sign the document containing it and who does not base her claims or her damages on that document. Therefore, ...