Bowater Inc. v. Zager

• Decision Date: 24 September 2004
• Citation: 901 So.2d 658
• Parties: BOWATER INCORPORATED v. Lisa ZAGER et al.
• Court: Alabama Supreme Court

901 So.2d 658

BOWATER INCORPORATED v. Lisa ZAGER et al.

1030202.

Supreme Court of Alabama.

September 24, 2004.

Rehearing Denied November 12, 2004.

Robert H. Rutherford and F.A. Flowers III of Burr & Forman, LLP, Birmingham, for appellant.

David C. Skinner and W. Eric Pitts of David C. Skinner, L.L.C., Birmingham; and James C. King and Robert O. Bryan of King, Bryan & Wiley, L.L.C., Jasper, for appellees.

HARWOOD, Justice.

Bowater Incorporated ("Bowater"), a defendant in an action pending in the Walker Circuit Court, appeals from an order granting its motion to compel arbitration of the disputes involved in that action, on the ground that the order impermissibly refused to follow the method for selecting the arbitrators contained in the arbitration agreement. We reverse and remand.

The plaintiffs, Lisa Zager, Page Hart, Joyce Marie Eidson, and HDJ Land Company, or their predecessors in interest, and Bowater are the lessors and lessee, respectively, under a long-term (66 years) timber lease executed on June 1, 1965 ("the lease").¹ The original lessee was Hiwassee Land Company, then a wholly owned subsidiary of Bowater Southern Paper Corporation. Through a series of intra-corporate mergers and name changes, Bowater succeeded to the interest of Hiwassee Land Company in the early 1980s. Accordingly, for more than 20 years, Bowater has occupied the status of the lessee under the lease. The plaintiffs assert in their action that they are the owners of real property located in six Alabama counties, including approximately 1,832 acres in Walker County; they claim that some of the Alabama property is covered by the lease but that other portions of it are not. Bowater takes the position that it has rights of entry on all of the property. According to the complaint, Bowater and the other 10 defendants (who are, variously, timber harvesters, logging companies, forest-management specialists, and foresters) have "all conducted timber harvesting, site preparation, road building, engineering, and other forestry land management and/or related activities on the Property and have done so in a negligent and/or wanton manner or have otherwise committed waste on the property." The complaint also alleges that the defendants have trespassed on and illegally removed timber from property not covered by the lease.

The complaint was filed on November 13, 2000, and on December 15, 2000, Bowater filed its answer, stating as its first defense that "[p]laintiffs' complaint and all claims alleged therein are subject to binding arbitration pursuant to an arbitration provision contained in the lease agreement in effect between the parties," and that the action should be stayed and the plaintiffs compelled to submit their claims to arbitration. On that same day, Bowater filed its motion to stay proceedings and to compel arbitration, explaining its succession as lessee under the lease and quoting from the lease the following arbitration provision:

"13. ARBITRATION

"13.1. In the event the parties are unable to agree with respect to any issue of fact arising under this lease in regard to their rights, duties, and liabilities hereunder, the dispute shall be submitted to arbitration. Lessee shall choose one arbitrator and Lessors shall choose another, both of whom shall be members of at least twenty (20) years standing in the Society of American Foresters. The two arbitrators shall choose a similarly qualified third member from said Society and the decision of a majority of the three arbitrators shall be final and binding and shall be adhered to immediately by both parties hereto. If the two arbitrators chosen by the parties are unable to agree upon a third, the third shall be chosen by the president of the Society from the members of such Society similarly qualified. All expenses arising from such arbitration shall be divided equally between Lessors and Lessee. In the event such Society is no longer in existence at such time, members of its successor organization, if any, shall be chosen in the same manner; otherwise, members of such organization shall be acceptable to the parties."

Bowater advised the court that it would "provide additional authority for its position herein through affidavits and a memorandum of law, all of which shall be filed shortly hereafter." Other of the defendants, although not signatories to the lease, moved to compel arbitration on the theory that the claims asserted against them were "intertwined" with the claims against Bowater. On November 20, 2001, the trial court ordered, among other things, that all defendants should "provide this Court a Memorandum Brief of all their facts in support of the Arbitration herein, along with a list of cases and citations of the Law in support of their contentions for their motion to compel in this case no later than February 1, 2002." The plaintiffs were ordered to respond with a similar memorandum by March 1, 2002. All of the motions to compel arbitration were to be heard on April 3, 2002. Bowater had already filed, on March 23, 2001, a memorandum in support of its motion to compel arbitration urging the court, for the reasons recited in the memorandum, to compel "the arbitration of plaintiffs' claims in accordance with the terms of the parties' arbitration agreement." In that memorandum, Bowater again quoted the arbitration agreement and pointed out that the Federal Arbitration Act ("the FAA"), codified as Title 9 U.S.C. § 1 et seq., provides in 9 U.S.C. § 4 that "the Court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement" if there has been a "failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration," and likewise provides in 9 U.S.C. § 3 that the Court "shall stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement." (Emphasis added by Bowater.)

On March 1, 2002, the plaintiffs filed their opposition to the various motions to compel arbitration, raising numerous objections and challenges to the proposed arbitration, including the contention that "the arbitration selection provision of the Lease is void" and "illegal, impossible or unconscionable." Specifically, the plaintiffs noted that the arbitration clause required that all of the arbitrators be "members of at least twenty (20) years standing in the Society of American Foresters" and that, according to the plaintiffs, Alabama law required arbitrators to be lawyers licensed to practice law in Alabama; they further noted that there were no 20-year members of the Society of American Foresters who were also licensed to practice law in Alabama. The plaintiffs explained their reasoning in concluding that only an Alabama lawyer could serve as an arbitrator in the case. Bowater filed a "reply memorandum" responding to the various objections and challenges raised by the plaintiffs and explaining, among other things, why Alabama law did not require that the arbitrators be lawyers.

On September 17, 2003, the trial judge entered the following order:

"The defendants having made a motion to Compel Arbitration, which as argued in Open Court by the attorneys for the respective parties, and taken under advisement by the Court, and the Court has reviewed the briefs of the parties and now the Court proceeds to enter an Order herein:

"There are legal, as well as, factual issues concerning the arbitrability of plaintiffs' claims, as well as, who is to arbitrate the same, and primarily, if the claim is to be submitted to binding Arbitration, does the law require the Arbitrators to be duly licensed Attorneys in Alabama or some other State? The Supreme Court of the United States held that `Arbitrators are Judges' in the case of Burchell v. Marsh, 58 U.S. 344, 349 (1854), and the Recompiled Code of Alabama, § 34-3-6, similarly defines serving as an Arbitrator as the practice of Law, and § 34-3-7, of said Alabama code, requires that an Arbitrator be a duly licensed Attorney in this State, the Alabama Constitution, Amendment 328, § 6.07 requires Judges to be duly licensed Alabama Attorneys. Consequently, upon consideration of the foregoing, the Court is of the opinion that defendant[s'] Motion to Compel Arbitration should be granted, and this Court is of the further opinion that the person or persons who should arbitrate this case, should be duly licensed Attorneys preferably in the State of Alabama, but most certainly duly licensed Attorneys in some State, and upon consideration thereof;

IT IS THEREFORE CONSIDERED, ORDERED, ADJUDGED,

AND DECREED BY THIS COURT AS FOLLOWS:

"1. That defendant[s'] Motion to Compel Arbitration be and it is hereby granted.

"2. That the Arbitrators to be appointed by each party are to be duly licensed Attorneys.

"3. That plaintiffs shall appoint, in writing, a duly licensed attorney, of their own choosing, to act as one of the Arbitrators in this case within a period of thirty days from the date of this Order.

"4. That defendants shall appoint, in writing, a duly licensed attorney, of their own choosing, to act as one of the Arbitrators in this case within a period of thirty days from the date of this Order.

"5. That after the appointment, by each party of the two Arbitrators as set out above, then both of the appointees shall meet and appoint a third duly licensed Attorney to act as the third Arbitrator in this case, said appointment to be made in writing and signed by both appointees within a period of sixty days from the date of this Order.

"6. That in the event the two Attorneys appointed by each side fail to agree upon the appointment of a third Attorney as Arbitrator, (within the sixty day period from the date of this Order) then within the following thirty days, the Court will appoint the third Attorney to act as an Arbitrator, and to assist the other two Arbitrators in the Arbitration of this matter in accordance with the Arbitration Agreement

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