Koullas v. Ramsey
| Decision Date | 18 October 1996 |
| Docket Number | 1951452. |
| Parties | Chris KOULLAS and Fashion Rite, Inc. v. Hazel RAMSEY, et al. |
| Court | Alabama Supreme Court |
Samuel H. Franklin and E. Glenn Waldrop, Jr., of Lightfoot, Franklin & White, L.L.C., Birmingham, for Appellants.
John I. Cottle III of Bowles & Cottle, Tallassee, for Appellees.
Chris Koullas and Fashion Rite, Inc., appeal from the trial court's denial of their motions to compel arbitration and to stay proceedings pending arbitration of claims brought against them by Hazel Ramsey and Apparel Creations of America, Inc.
Hazel Ramsey incorporated Apparel Creations of America, Inc. ("Apparel Creations"), in October 1987, and all of its 100 shares of stock were issued to her. Shortly thereafter, she entered into a contract to sell and transfer 60% of her Apparel Creations stock to Chris Koullas. The contract included a clause providing that disputes between the parties arising under the contract would be determined by arbitration. The sale and transfer of stock were completed according to the terms of the contract in 1987.
In 1988, Koullas became a director of Apparel Creations and served in that capacity for the next eight years. In 1996, Hazel Ramsey and Apparel Creations (hereinafter collectively referred to as "Ramsey") filed this action against him, alleging conversion, usurpation of corporation opportunity, and breach of fiduciary duty, all arising from his activities as a corporate director of Apparel Creations. Ramsey claimed that Koullas had siphoned off substantially all the profits of the corporation and had converted them for his personal gain, thereby oppressing Hazel Ramsey's right as a minority shareholder to receive dividends. Ramsey further claimed that Koullas usurped Apparel Creations' corporate opportunities by using a large portion of its profits to establish and develop a separate corporation, Fashion Rite, Inc., in which he was the sole shareholder; Ramsey included Fashion Rite, Inc., as a defendant in regard to this claim. Ramsey also alleged that Koullas had breached his fiduciary duty as a corporate director by structuring business dealings that placed the interests of Fashion Rite and himself over those of Apparel Creations and Hazel Ramsey as its minority stockholder.
Koullas and Fashion Rite moved to compel arbitration of Ramsey's claims pursuant to the arbitration clause contained within the 1987 contract under which Hazel Ramsey had sold and transferred 60% of the stock of Apparel Creations to Koullas. Ramsey opposed the motion, arguing that these claims did not arise under the terms of that contract and were therefore not subject to the arbitration clause contained therein. After a hearing, the trial court denied the defendants' arbitration motions.
The Federal Arbitration Act, 9 U.S.C. § 2 et seq., mandates arbitration of a claim where a contract contains a written agreement calling for arbitration and where the contract evidences a transaction involving interstate commerce. The parties stipulate that the contract for the sale of stock— between Hazel Ramsey, an Alabama resident, and Chris Koullas, a Georgia resident— involved interstate commerce. The issue here is whether the arbitration clause contained within that contract applies to claims based upon Koullas's alleged activities as an Apparel Creations corporate director.
The strong federal policy favoring the enforceability of arbitration contracts is designed to place arbitration agreements on the same footing as any other contract. Allied-Bruce Terminix Companies v. Dobson, 513 U.S. 265, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995). Like any other contract, an arbitration agreement must be enforced in accordance with its terms; both federal and state courts have consistently recognized that the duty to arbitrate is a contractual obligation and that a party cannot be required to arbitrate any dispute that he or she has not agreed to arbitrate. AT & T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986); A.G. Edwards & Sons v. Clark, 558 So.2d 358 (Ala.1990). Whether an arbitration agreement applies to a dispute between the parties is to be determined by the language of the contract entered into by the parties. Blount Int'l, Ltd. v. James River-Pennington, Inc., 618 So.2d 1344 (Ala.1993).
In the event of an ambiguity or uncertainty over the applicability of an arbitration clause, federal policy dictates that it be resolved in favor of arbitration. Allied-Bruce. However, this Court will not stretch the language of a contract to apply to matters that were not contemplated by the parties when they entered the contract. Seaboard Coast Line R.R. v. Trailer Train Co., 690 F.2d 1343 (11th Cir.1982). To determine whether the arbitration clause applies to this dispute, we must consider the intent of the parties, as it is expressed in the language of the capital stock sales contract.
It is undisputed that the contract was intended to be the instrument for Hazel Ramsey's sale of capital stock in Apparel Creations to Koullas. It was entitled "Agreement for Sale and Transfer of Capital Stock," and it stated:
After this statement of intent, the contract set out the purchase price of the stock and the method of its payment. It then recited a number of warranties reflecting that, at that time, Apparel Creations was a properly organized corporation whose shares were free of liens. It reflected certain assets and liabilities of the company and contained detailed provisions requiring Hazel Ramsey to indemnify Koullas, and/or Apparel Creations, for any loss caused by any undisclosed indebtedness of the corporation, prior to the sale of stock. The contract also verified that Koullas...
To continue reading
Request your trial
-
Matthews v. At & T Operations Inc.
...‘arising under’ in an arbitration agreement contemplates a narrow scope of operation.” Cato, 968 So.2d at 7 (citing Koullas v. Ramsey, 683 So.2d 415, 416 (Ala.1996)). The RSA's arbitration provision applies to “claims arising out of ... any aspect of the relationship between us,” which is i......
-
Mikey's Houses LLC v. Bank of America, N.A.
...and could be maintained without reference to the contract."); see also Cupps, 782 So.2d at 776 (citing holding in Koullas v. Ramsey, 683 So.2d 415, 418 (Ala.1996), that for dispute to be characterized as arising out of or relating to the subject matter of the contract, it must at very least......
-
AmSouth Bank v. Dees
...Line was just the vehicle used by AmSouth to wrongfully change the terms of the Dees/AmSouth First Mortgage." They cite Koullas v. Ramsey, 683 So.2d 415, 417 (Ala.1996), for the proposition that "this Court will not stretch the language of a contract to apply to matters that were not contem......
-
Campbell v. Verizon Wireless, LLC
...be said to arise out of or relate to those agreements, and arbitration is required. 14. In so doing, he relies on Koullas v. Ramsey, 683 So.2d 415, 418 (Ala. 1996), while overlooking more recent Alabama Supreme Court decisions that distance themselves from the rationale of Koullas and const......