Ex parte Warren
| Decision Date | 10 July 1998 |
| Parties | Ex parte John W. WARREN and Debra A. Warren. (In re John W. WARREN and Debra A. Warren v. AMERICAN HOME PLACE, INC.). 1970645. |
| Court | Alabama Supreme Court |
John A. Tinney, Roanoke, for petitioners.
Amy J. Himmelwright of Samford, Denson, Horsley, Pettey & Martin, Opelika, for respondent.
John W. Warren and his wife Debra A. Warren petition this Court for a writ of mandamus directing the Randolph Circuit Court to vacate its order compelling arbitration of their claims against the defendant, American Home Place, Inc. We deny the writ.
In January 1996, John Warren and American Home Place, Inc. ("American Home"), entered into a contract for the construction of a house on a parcel of land owned by Warren. The contract included an arbitration clause that provided, in pertinent part:
(Emphasis added.) The contract identified John Warren as the "Owner" and American Home as the "Contractor," and it was signed only by John Warren and an agent for American Home. 1
American Home began constructing the house; however, the parties disagree as to whether it ever fully completed the construction. The Warrens ultimately sued American Home. Their complaint alleged that they both had entered into the construction contract with American Home and that American Home had breached the contract by causing numerous delays in the construction and numerous flaws in the house. They further made a claim of "statutory fraud," alleging, among other things, that American Home had misrepresented in the contract the amount of time it would take to complete the construction of the house.
American Home moved to compel arbitration of these claims, based upon the arbitration clause. The Warrens argued that the arbitration agreement could not be enforced because the arbitrator named therein, the National Academy of Conciliators, was no longer in existence. They further argued that even if the arbitration agreement could be enforced against Mr. Warren, it could not be enforced against Mrs. Warren, because she was not a signatory to the construction contract. The trial court ruled that the dissolution of the National Academy of Conciliators did not affect the validity of the arbitration clause, and that that clause was enforceable against both of the Warrens.
The Federal Arbitration Act, 9 U.S.C. § 2 et seq. ("FAA"), mandates arbitration of a claim if a written agreement calls for arbitration and that agreement appears in a contract evidencing a transaction involving interstate commerce. 2
The Warrens first argue that, because Mrs. Warren did not sign the construction contract, she cannot be compelled to submit her claims against American Home to arbitration. They emphasize that arbitration is a creature of contract and that a party cannot be required to submit to arbitration any dispute that he or she has not agreed so to submit. Ex parte Isbell, 708 So.2d 571 (Ala.1997). The Warrens point out that the arbitration clause specifically refers only to "Owner," identified as John Warren, and "Contractor," identified as American Home. The Warrens thus conclude that this arbitration clause is narrowly drawn and cannot be extended to include Mrs. Warren, who they say was not contemplated to come within its scope.
However, the Warrens' argument reveals a flaw that undercuts Mrs. Warren's right to maintain her claims and that renders this issue moot. The record shows that both of the claims are based upon the construction contract. 3 Although the Warrens brought their claims as co-parties to the contract, Mrs. Warren concedes in her brief that she is "not a party to the contract containing the arbitration agreement," Warren reply brief at 4, and that she is not a third-party beneficiary of that contract. Warren reply brief at 7. The record confirms that the contract does not name Mrs. Warren as a party and that it does not refer to her. In her efforts to avoid arbitration, 4 Mrs. Warren has conceded that she has no right to recover under the contract, by disavowing any status as a party to the contract or as a third-party beneficiary. Also, because she has disavowed any status as a party to the contract, she has no claim based on fraud in the inducement of that contract. Because Mrs. Warren has disclaimed any basis for recovery on her claims, any error in compelling arbitration of her claims would be harmless. She has failed to demonstrate a clear right to the relief she seeks; the mandamus petition is thus due to be denied as to her.
The Warrens next argue that the arbitration agreement is void because the arbitrator that it specifies, the National Academy of Conciliators, is no longer in existence. The Warrens again emphasize that arbitration is a creature of contract and that, like any other contract, an arbitration agreement must be enforced in accordance with its terms. Koullas v. Ramsey, 683 So.2d 415 (Ala.1996). The Warrens point out that American Home drafted the arbitration agreement, and they argue that it "cannot escape from the terms that it drafted simply because it now finds those terms inconvenient," quoting Crown Pontiac Inc. v. McCarrell, 695 So.2d 615, 618 (Ala.1997).
Under the Federal Arbitration Act, the fact that an arbitrator named in the arbitration agreement is unable to act as an arbitrator over the parties' controversy does not necessarily void the arbitration agreement. Section 5 of the FAA (9 U.S.C. § 5) provides:
"If in the agreement provision be made for a method of naming or appointing an arbitrator or arbitrators or an umpire, such method shall be followed; but if no method be provided therein, or if a method be provided and any party thereto shall fail to avail himself of such method, or if for any other reason there shall be a lapse in the naming of an arbitrator or arbitrators or umpire, or in filling a vacancy, then upon the application of either party to the controversy the court shall designate and appoint an arbitrator or arbitrators or umpire, as the case may require, who shall act under the said agreement with the same force and effect as if he or they had been specifically named therein; and unless otherwise provided in the agreement the arbitration shall be by a single arbitrator."
Based upon § 5, federal courts have established the general rule that, where the arbitrator named in the arbitration agreement cannot...
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