Ex parte Dyess

• Decision Date: 24 October 1997
• Citation: 709 So.2d 447
• Parties: Ex parte Elton G. DYESS, Jr., and Susie Dyess. (In re Elton G. DYESS, Jr., and Susie Dyess v. AMERICAN HARDWARE INSURANCE GROUP, INC.). 1960585.
• Court: Alabama Supreme Court

Page 447

709 So.2d 447

Ex parte Elton G. DYESS, Jr., and Susie Dyess (In re Elton G. DYESS, Jr., and Susie Dyess v. AMERICAN HARDWARE INSURANCE GROUP, INC.).

1960585.

Supreme Court of Alabama.

Oct. 24, 1997.

Rehearing Denied Jan. 16, 1998.

John T. Alley, Jr., of Alley & Waters, P.C., Montgomery, for petitioners.

Robert C. Black, Jr., of Hill, Hill, Carter, Franco, Cole & Black, P.C., Birmingham, for respondent.

HOOPER, Chief Justice.

Elton G. Dyess and his wife Susie Dyess petition for a writ of mandamus ordering Judge Charles Price of the Montgomery Circuit Court to vacate his order compelling them to arbitrate claims they brought in a lawsuit against American Hardware Insurance Group, Inc. ("American Hardware"). An insurance policy between Jack Ingram Motors, Inc., and American Hardware calls for arbitration of certain claims. The Dyesses claim that they cannot be compelled to arbitrate their claims because they did not sign the insurance policy, or any agreement that required them to arbitrate. The trial court granted American Hardware's motion to compel arbitration. We deny the Dyesses' petition.

Elton Dyess went to Jack Ingram Motors, an automobile dealership, to purchase a car. While he was test-driving an automobile belonging to Jack Ingram Motors, he was involved in an accident; Dyess says the accident was caused by an unknown motorist who, Dyess says, turned left in front of him and caused him to go left of the center line and strike another car. Dyess was injured in the accident. Because of this accident, Dyess sued American Hardware, claiming benefits under the uninsured motorist provision of its policy with Jack Ingram Motors.

Susie Dyess joined her husband's lawsuit, making a claim for loss of consortium against a fictitiously named defendant (the unknown driver of the car that turned left in front of Elton Dyess). The trial judge's order compelling arbitration directs both Elton and Susie Dyess to arbitrate their claims. Susie Dyess has made no claim against American Hardware; therefore, she has no claim now pending that may be the subject of an order compelling arbitration. We do not know what Susie Dyess would arbitrate with American Hardware, given that she has made no claim against American Hardware. Susie Dyess's claim is separate from her husband's claim, but it is also derivative. Weekley v. State Farm Mut. Auto. Ins. Co., 537 So.2d 477 (Ala.1989). ¹ Insofar as damages are concerned, her loss of consortium claim is independent of her husband's claim; however, as to the question whether she in fact has a claim, it is derivative. If her husband cannot sustain a claim against the fictitiously named defendant, then she cannot either. However, as to the uninsured motorist provision of the American Hardware policy, her claimed loss of consortium would not be compensable as a bodily injury. Weekley, supra, at 479-80. This Court does not have the policy before it; therefore, we must assume that Susie Dyess, recognizing her claim as a separate one not covered by the American Hardware policy, decided to ask for no relief in the mandamus petition. The mandamus petition makes no mention of this distinction and does not request relief as to that portion of the trial court's order purporting to compel Susie Dyess to arbitrate her claim. Because Susie Dyess has no claim against American Hardware, that portion of the trial court's order compelling arbitration would seem to have no effect as to her.

Jack Ingram Motors is the insured under a policy with American Hardware. The policy contains an uninsured motorist provision, which contains an arbitration clause. This clause reads:

"(1) If we and an 'insured' disagree whether the 'insured' is legally entitled to recover damages from the owner or driver of an 'uninsured motor vehicle' or do not agree as to the amount of damages that are recoverable by that 'insured', then the matter may be arbitrated. However, disputes concerning coverage under this endorsement may not be arbitrated. Either party may make a written demand for arbitration. ...

"(2) This arbitration provision will not apply if legal action has been commenced by the 'insured' against the owner or operator of an 'uninsured motor vehicle'."

Dyess did not sign this provision calling for the arbitration of claims under the policy. Initially, the adjuster for American Hardware, Tonya Roberts, denied coverage for Elton Dyess. She claimed that Dyess was not an "insured" under the liability portion of the policy. Later, American Hardware recognized that this denial was a mistake, because Roberts had failed to realize that Dyess was covered under the "medical pay" and the "uninsured motorist" portions of the policy.

After Dyess was denied coverage, he sued American Hardware, alleging breach of contract, bad faith, fraud, and the tort of outrage. The parties had attempted to resolve the dispute before Dyess invoked the litigation process. In response to a discovery request, American Hardware produced for Dyess a copy of the policy issued to Jack Ingram Motors. Dyess demanded payment of the policy limit of $120,000 and provided copies of his medical bills. American Hardware responded by asking for copies of Dyess's medical records so that it could verify the kind of treatment Dyess had received. American Hardware subsequently answered, but it continued to express an interest in resolving the dispute outside the litigation process. Robert Black, the attorney for American Hardware, signed an affidavit stating that he had informed counsel for Elton Dyess that the fact that American Hardware was filing the answer did not mean that American Hardware was no longer interested in continuing to try to resolve the matter. He also stated that he informed counsel for Dyess that he filed an answer only to get his name on the record so that he would receive court notices and the like.

Dyess moved to compel responses to discovery requests he had filed with the complaint. At that point, American Hardware filed a "Motion to Stay Judicial Proceedings and to Compel Arbitration." Dyess responded to this motion; the trial judge entered an order staying the proceedings and requiring the Dyesses to arbitrate their claims. The Dyesses then filed this petition for the writ of mandamus, seeking to have the order vacated.

Elton Dyess argues that he should not be required to arbitrate because he had signed no agreement with American Hardware and, therefore, he says, is not subject to the arbitration clause. Dyess also argues that, even if he otherwise should be subject to the arbitration clause, then, by its own terms, the clause should not apply to his claims. Dyess also argues that his claims based on fraud, the tort of outrage, and bad faith should not be arbitrated because, he argues, the arbitration clause applies only to a dispute concerning the amount of damages or a dispute as to whether an insured is legally entitled to damages. In other words, he claims that the clause contains exceptions in which arbitration would not apply and that his case comes within one of those exceptions. Dyess also claims that American Hardware, before it asked for arbitration, had substantially invoked the litigation process and, therefore, had waived any right to compel arbitration. Dyess also argues that the arbitration clause in this case is unenforceable because, he says, it appears in a contract, or is being applied to a claim, that did not involve interstate commerce.

A petition for a writ of mandamus is the appropriate means by which to challenge a trial court's order compelling arbitration. Ex parte Gates, 675 So.2d 371, 374 (Ala.1996). "Mandamus is an extraordinary remedy and requires a showing that there is: '(1) a clear right in the petitioner to the order sought; (2) an imperative duty upon the respondent to perform, accompanied by a refusal to do so; (3) the lack of another adequate remedy; and (4) properly invoked jurisdiction of the court.' " Id.

Under traditional principles of Alabama contract law and federal contract law, Dyess could be considered a third-party beneficiary of the policy. As a third-party beneficiary, he would be subject to the arbitration clause even though he did not sign the policy. He may not pick and choose the provisions of the policy that he wants to follow. His case does not clearly fall within any of the exceptions set out within the arbitration clause. American Hardware did not waive its right to demand arbitration by substantially invoking the litigation process. Finally, this transaction--i.e., the transaction by which American Hardware provided insurance to Jack Ingram Motors--involved interstate commerce. Given the extraordinary nature of the writ of mandamus, we cannot say that Judge Price improperly compelled Elton Dyess to arbitrate even though he is a nonsignatory as to the contract in which the arbitration clause appears. Therefore, we deny the petition for the writ of mandamus.

I. The Federal Arbitration Act applies to this case because interstate commerce is involved.

Before we address Dyess's claims, we must first determine whether the Federal Arbitration Act could apply. Dyess argues that it does not apply because, he says, his claims do not involve interstate commerce and are not based on a transaction that involved interstate commerce. We disagree; his claims clearly involve or are based on an insurance agreement that involved, interstate commerce. American Hardware is an Indiana corporation and Jack Ingram Motors is an Alabama corporation.

In Allied-Bruce Terminix Companies v. Dobson, 513 U.S. 265, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995), the United States Supreme Court analyzed § 2 of the Federal Arbitration Act, 9 U.S.C. § 2, which addresses the "commerce" requirement. Section 2 provides:

"A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such...