Ex parte Greenstreet, Inc.

• Decision Date: 15 June 2001
• Parties: Ex parte GREENSTREET, INC. (Re Nella Dean Hyde v. Checks Are Us; Cash Zone; Greenstreet, Inc.; Quick Cash, Inc.; Check Into Cash; and Bill's Pawn, Inc.)
• Court: Alabama Supreme Court

806 So.2d 1203

Ex parte GREENSTREET, INC.

(Re Nella Dean Hyde v. Checks Are Us; Cash Zone; Greenstreet, Inc.; Quick Cash, Inc.; Check Into Cash; and Bill's Pawn, Inc.)

1992282.

Supreme Court of Alabama.

June 15, 2001.

G. Bartley Loftin III and Walter A. Dodgen of Balch & Bingham, L.L.P., Huntsville, for petitioner.

Garve Ivey, Jr., of Ivey & Ragsdale, Jasper, for respondent.

STUART, Justice.

Greenstreet, Inc., is a defendant in an action filed by Nella Dean Hyde in the Walker Circuit Court. Greenstreet has filed a petition for the writ of mandamus, challenging the correctness of the trial court's order in which it continued Greenstreet's motion to compel arbitration, in order for the plaintiff to conduct discovery "into any area which under Alabama law would operate to revoke or invalidate the arbitration provision." We grant Greenstreet's petition in part and deny it in part.

Facts

Hyde, a 64-year-old woman claiming to have a monthly income of $739, borrowed money from Greenstreet on numerous occasions, beginning July 10, 1998. In connection with several of those transactions, Hyde executed "Deferred Presentment Services Agreements" containing the following arbitration agreement:

"ARBITRATION: I hereby acknowledge and agree that the transaction that I am entering herein with Greenstreet, Inc., and all past transactions which I have entered into with Greenstreet, Inc. involve, affect or otherwise have a direct impact on interstate commerce. I further agree that all claims, demands, disputes, or controversy of every kind or nature between me and Greenstreet, Inc. which arise from, concern or relate to any of the negotiations involved in all transactions between me and Greenstreet, Inc., the terms of the transactions or the interpretation of any documents related to the transactions or otherwise related arise from or relate to the transactions between me and Greenstreet, Inc. shall be settled by binding arbitration conducted pursuant to the Rules of the American Arbitration Association [sic]. The parties to this agreement understand that by entering into this agreement the parties are waiving their rights to a jury trial and that arbitration shall be the sole method of resolving any and all disputes between the parties. The parties further agree that any question or issue regarding whether a particular controversy or matter arises out of or relates to or is otherwise subject to this arbitration agreement shall be decided by the arbitrator. The parties further understand that they are waiving their right for the Court or a jury to make a determination as to whether such controversies or disputes arise out of or relate to the transactions between the parties to this agreement."¹

Hyde filed a putative class action on December 10, 1999, alleging that Greenstreet and other defendants had assessed finance charges at an annual percentage rate in excess of that allowed under Alabama law, with annual percentage rates exceeding 200% and with some as high as 522%. She alleges violations of the Alabama Mini-Code and seeks relief under theories of negligence, the tort of outrage, theft by deception, unjust enrichment, and money had and received.

Greenstreet filed a motion to compel arbitration and made an evidentiary submission in support of that motion. Hyde filed no formal response or opposition to that motion, but instead sought discovery on issues related to

"those which go to the proof of contract defenses under Alabama law for any contract, including, but not limited to, unconscionability; consideration; mistakes of law or fact; fraud as it relates to the arbitration provision; the object and legality of the object of the contract; the capacity of the parties; relative sophistication of the parties; and whether there was a meeting of the minds sufficient to create a valid, binding and enforceable contract."

Hyde filed a motion to continue the motion to compel arbitration, and, on July 10, 2000, the trial court granted her motion. The order granting Hyde's motion allowed discovery into "any area which, under Alabama law, would operate to revoke or invalidate the arbitration provision" and provided that "[d]iscovery shall not be allowed on any issue other than the validity and enforceability of the arbitration provision." Hyde was allowed 120 days in which to complete this discovery.

Citing Ex parte Dickinson, 711 So.2d 984 (Ala.1998), and First Family Financial Services, Inc. v. Jackson, 786 So.2d 1121 (Ala.2000), Greenstreet seeks mandamus relief, asserting that, in order to establish a right to conduct discovery, Hyde was required to indicate specifically what facts she intended to uncover during discovery. Greenstreet asserts in its petition that, "[h]aving failed to meet her burden of adducing specific facts on the issue of arbitrability, plaintiff is not entitled to the discovery sought."

Greenstreet also asserts that, based on the language of the arbitration agreement, the parties have agreed to have an arbitrator decide all issues of arbitrability, and, thus, that the trial court's order allowing discovery invades the province of the arbitrator. Finally, Greenstreet asserts that discovery is either not allowed or is severely restricted as to claims subject to an arbitration agreement and that the trial court's order allowing discovery is antithetical to the very purpose of arbitration. Greenstreet asks this Court to vacate the trial court's order allowing discovery and to direct the trial court to enter an order compelling Hyde to arbitrate her claims.

Appropriate Standards

"`Mandamus is an extraordinary remedy and requires a showing that there is: "(1) a clear legal 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."'"

Ex parte Inverness Constr. Co., 775 So.2d 153, 156 (Ala.2000) (citations omitted). A petition for the writ of mandamus is the appropriate vehicle for challenging a trial court's ruling on a discovery motion. The writ will not issue, however, unless the appellate court determines that, based upon all the facts that were before the trial court, that court clearly abused its discretion. Ex parte Steiner, 730 So.2d 599 (Ala.1998); Ex parte Toyokuni & Co., Ltd., 715 So.2d 786 (Ala.1998).

Analysis

The primary issue presented by this petition is whether the trial court clearly abused its discretion in allowing Hyde to conduct discovery on the issue of the validity and enforceability of the arbitration provision. We hold that the trial court abused its discretion in allowing Hyde to conduct discovery without first making a factual showing as to why that discovery was justified. Therefore, we grant, in part, Greenstreet's petition. However, for the reasons set forth below, we also find it inappropriate, at this juncture, to grant that portion of Greenstreet's petition seeking a writ directing the trial court to compel arbitration of Hyde's claims. Accordingly, we deny that portion of Greenstreet's petition.

We have repeatedly analogized a trial court's duty in ruling on a motion to compel arbitration to its duty in ruling on a motion for a summary judgment. See Southern Energy Homes, Inc. v. Harcus, 754 So.2d 622, 625-26 (Ala.1999), citing Allied-Bruce Terminix Cos. v. Dobson, 684 So.2d 102, 108 (Ala.1995); First Family Fin. Servs. v. Jackson, supra; Fleetwood Enters. v. Bruno, 784 So.2d 277 (Ala. 2000); Premiere Auto. Group, Inc. v. Welch, 794 So.2d 1078 (Ala.2001). Resolution of the issue presented by this petition requires us to further refine our application, by analogy, of the practice under Rule 56, Ala. R. Civ. P., dealing with a motion for summary judgment, to a motion to compel arbitration. While the summary-judgment procedure is not a perfect matrix for dealing with arbitration, many aspects of it are useful. The difficulty here lies in harmonizing the practice under Rule 56, where hearings without adequate time for discovery are inappropriate, with demands for arbitration, a method of dispute resolution where discovery is the exception and not the norm.

At a trial on the issue whether a dispute is subject to arbitration, the party moving for arbitration has the burden of proving the existence of a contract containing an arbitration clause, in a transaction that substantially affects interstate commerce. See Sisters of the Visitation v. Cochran Plastering Co., 775 So.2d 759, 765 (Ala.2000). If the party moving to compel arbitration fails to make such a showing, the burden of proof does not shift to the opposing party and the motion should be denied. See Ex parte General Motors Corp., 769 So.2d 903 (Ala.1999) (holding that burden-shifting depends upon the movant's ultimate burden at trial).

Greenstreet moved to compel arbitration of every claim asserted against it by Hyde. Rather than responding to the merits of the motion to compel, Hyde sought discovery on the issue of contract defenses applicable to the entire agreement, as well as discovery on those contract defenses applicable solely to the arbitration agreement. The trial court allowed discovery, but only on those contract defenses applicable to the arbitration agreement, obviously deferring its consideration of the motion to compel arbitration until limited discovery had been completed.

In First Family Financial Services, supra, this Court addressed a claim substantially similar to the one presented to the trial court in the instant case. In First Family Financial Services, the defendant moved to compel arbitration, and Jackson, the plaintiff, sought discovery to prove that the arbitration agreement was unconscionable. However, Jackson presented no evidence in opposition to the motion to compel arbitration. The trial court denied the motion to compel arbitration; this Court reversed.

Justice Lyons, writing for the Court, stated:

"The

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