A.G. Edwards & Sons, Inc. v. Clark

• Decision Date: 26 January 1990
• Citation: 558 So.2d 358
• Court: Alabama Supreme Court
• Parties: A.G. EDWARDS & SONS, INC. v. M. Brooks CLARK. Richard THOMPSON v. M. Brooks CLARK. Ex parte A.G. EDWARDS & SONS, INC., a corporation. (Re M. Brooks CLARK v. Richard THOMPSON, individually and A.G. Edwards & Sons, Inc., a corporation). Ex parte Richard THOMPSON. (Re M. Brooks CLARK v. Richard THOMPSON, individually and A.G. Edwards & Sons, Inc., a corporation). 88-1119, 88-1124, 88-1031 and 88-1135.

Page 358

558 So.2d 358

A.G. EDWARDS & SONS, INC. v. M. Brooks CLARK.

Richard THOMPSON v. M. Brooks CLARK.

Ex parte A.G. EDWARDS & SONS, INC., a corporation.

(Re M. Brooks CLARK v. Richard THOMPSON, individually and A.G. Edwards & Sons, Inc., a corporation).

Ex parte Richard THOMPSON.

(Re M. Brooks CLARK v. Richard THOMPSON, individually and A.G. Edwards & Sons, Inc., a corporation).

88-1119, 88-1124, 88-1031 and 88-1135.

Supreme Court of Alabama.

Jan. 26, 1990.

N. Lee Cooper and A. Inge Selden III of Maynard, Cooper, Frierson & Gale, Birmingham, for appellant/petitioner A.G. Edwards & Sons, Inc.

J. Victor Bowman and Richard H. Cater of Burnham, Klinefelter, Halsey, Jones & Cater, Anniston, for appellant/petitioner Richard Thompson.

Vernon L. Wells II and James E. Ferguson III of Cabaniss, Johnston, Gardner, Dumas & O'Neal, Birmingham, for appellee/respondent M. Brooks Clark.

MADDOX, Justice.

These cases present two issues:

1. Whether the defendants' appeals from orders denying arbitration of the plaintiff's defamation claim were required to be filed within 14 days or within 42 days under the provisions of Rule 4, A.R.App.P., and

2. Whether a tort claim for defamation was included within the scope of the parties' agreement to arbitrate.

M. Brooks Clark, a stockbroker, sued Richard Thompson, a fellow stockbroker, and A.G. Edwards & Sons, Inc., Thompson's employer, alleging defamation based upon comments made by Thompson and then repeated by A.G. Edwards in a newspaper advertisement. As a stockbroker, Clark had signed an agreement to arbitrate any dispute between him and another broker or firm. The defendants moved the trial court for a stay and for an order compelling Clark to submit to arbitration; the trial court denied the motion. Both defendants sought review. ¹

The allegedly defamatory remarks made by Thompson were to the effect that Clark had pleaded "nolo contendere" to criminal charges of securities fraud in Kentucky, that Clark had pleaded "no contest" to criminal charges involving bad tax-free investments in Kentucky, that as a result of such behavior, Clark had been "run out of the State of Kentucky," and that Clark was "a crook" and was "dishonest." These statements were allegedly made by Thompson to acquaintances of Clark and to some of Clark's clients during a breakfast at the Grace Episcopal Church in Anniston, Alabama; none of the people who heard these statements had solicited them from Thompson. Clark has never been employed by A.G. Edwards, and there have never been business dealings between Clark and Thompson. Clark demanded that Thompson retract these statements; Thompson never did. Clark sued Thompson on August 11, 1988. A.G. Edwards offered to issue a public retraction, and Clark agreed that a public retraction would be appropriate but warned A.G. Edwards not to do further damage to his reputation when making the retraction. A.G. Edwards then published a "retraction" in the Anniston Star on August 14, 15, and 19, 1988, which repeated the allegedly defamatory remarks, and which publication, Clark claimed, further damaged his reputation. On September 20, 1988, after the publication of its "retraction," Clark amended his complaint to include A.G. Edwards as a defendant.

When Clark associated with his employer, he signed a document, a "Form U-4," that included the following language:

"I agree to arbitrate any dispute, claim or controversy that may arise between me and my firm, or a customer, or any other person, that is required to be arbitrated under the rules, constitutions, or by-laws of the organizations with which I register, as indicated in Question 8."

Clark's response to Question 8 on that document was that he would be registered with the National Association of Securities Dealers ("NASD"). Section 8 of the NASD "Code of Arbitration Procedure" provides as follows:

"(a) Any dispute, claim or controversy eligible for submission under Part I of this Code between or among members and/or associated persons, and/or certain others, arising in connection with the business of such member(s) or in connection with the activities of such associated person(s), shall be arbitrated under this Code, at the instance of:

"(1) a member against another member;

"(2) a member against a person associated with a member or a person associated with a member against a member, and,

"(3) a person associated with a member against a person associated with a member."

Under Part I of the NASD Code, the section entitled "Matters Eligible for Submission" reads, in part, as follows:

"This Code of Arbitration Procedure is prescribed and adopted ... for the arbitration of any dispute, claim or controversy arising out of or in connection with the business of any member of the Association, with the exception of disputes involving the insurance business of any member which is also an insurance company:

"(1) between or among members "(2) between or among members and public customers, or others; and,

"(3) between or among members, registered clearing agencies with which the Association has entered into an agreement to utilize the Association's arbitration facilities and procedures, and participants, pledgees or other persons using the facilities of a registered clearing agency, as these terms are defined under the rules of such a registered clearing agency."

Thompson admitted, in deposition, that he and Clark had never had any business transactions between them and that there had never been any dispute between the two men about any securities transaction or any investment banking transaction.

I

Before we can address the merits, we must address a procedural issue, that is, whether the appeals were timely filed. All parties agree, as do we, that the defendants do indeed have a right to appeal the trial court's denial under 9 U.S.C. § 15, the recent amendment to the Federal Arbitration Act ("FAA"); but the parties stoutly dispute whether the appeals were timely filed. In fact, Clark has made a motion to dismiss the appeals on the ground that they were untimely, and to deny the writs of mandamus because the petitioners had a right to appeal (which, Clark argues, they forfeited) and mandamus, therefore, cannot be substituted therefor.

Under Rule 4, A.R.App.P., most appeals must be filed within 42 days, but appeals from interlocutory orders involving injunctions must be filed within 14 days. As a matter of policy, how should this Court treat appeals from a denial of a motion to compel arbitration? The question is one of first impression. An order refusing to stay a lawsuit pending arbitration is not a final judgment such as to trigger the 42-day time limit, yet it is also not an interlocutory injunction-related order, although it is in the nature of an interlocutory injunction-related order because it involves a request to compel a party to arbitrate. Both appeals clearly were filed within the 42-day period, but both clearly were filed beyond the 14-day period.

At one time, the federal courts treated orders denying arbitration as injunctions in order to allow a party to appeal under 28 U.S.C. § 1292(a)(1); this was known as the "Enelow- Ettelson doctrine," after the cases that set forth this rule, Enelow v. New Life Ins. Co., 293 U.S. 379, 55 S.Ct. 310, 79 L.Ed. 440 (1935), and Ettelson v. Metropolitan Life Ins. Co., 317 U.S. 188, 63 S.Ct. 163, 87 L.Ed. 176 (1942). In 1988, however, in Gulfstream Aerospace Corp. v. Mayacamas Corp., 485 U.S. 271, 108 S.Ct. 1133, 99 L.Ed.2d 296 (1988), the Supreme Court of the United States held that this legal fiction was no longer valid. Federal courts then ruled that neither a denial nor a grant of such a motion could be appealed. Congress then amended the FAA to add § 15 to allow an appeal, but only from a denial of a motion to compel arbitration; a grant of a motion to compel arbitration cannot be appealed, as Congress favors arbitration.

A.G. Edwards and Thompson have a right to appeal the denial of arbitration. 9 U.S.C. § 15 provides:

"(a) An appeal may be taken from--

"(1) an order--

"(A) refusing to stay any action under section 3 of this title,

"(B) denying a petition under section 4 of this title to order arbitration to proceed...."

After Ex parte Alabama Oxygen Co., 452 So.2d 860 (Ala.1984), this Court reviewed orders denying or granting motions to compel arbitration by way of petition for a writ of mandamus. See Ex parte Thompson McKinnon Sec., Inc., 517 So.2d 614 (Ala.1987), and Ex parte Warrior Basin Gas Co., 512 So.2d 1364 (Ala.1987). In cases where the FAA is applicable, § 15 now gives the right to appeal an order denying arbitration, and an appeal is now the proper procedure by which to challenge a denial of a motion to compel arbitration.

Because the appellants have an appeal as a matter of right, the question is whether this order denying arbitration is similar to an interlocutory order refusing an injunction for the purposes of determining the time within which an appeal must be filed. An order denying arbitration has always been considered an interlocutory order, and § 15 (the amendment to the FAA) does nothing to alter the nature of the order as non-final. Rule 4, A.R.App.P. allows 42 days for appeal to this Court "in all cases"--except as otherwise provided herein [i.e., in Rule 4]." There is no exception in Rule 4 for appeals from orders denying motions to compel arbitration. Because a denial of arbitration is not an interlocutory order regarding an injunction, and in light of the strong federal policy favoring arbitration, we hold that the 42-day time limit for an appeal is applicable to appeals from an order denying a motion to compel arbitration under 9 U.S.C. § 15. Thus, both defendants' appeals were timely. Since we hold that the appeals were timely, the petitions for writs of mandamus are moot.

II

In the trial court, Clark did not challenge the making of the agreement to arbitrate, rather he challenged the scope of that agreement....