Lopez v. Home Buyers Warranty Corp.
Decision Date | 20 August 1993 |
Citation | 628 So.2d 361 |
Parties | Juliette G. LOPEZ, v. HOME BUYERS WARRANTY CORPORATION, et al. 1920330. |
Court | Alabama Supreme Court |
Jere L. Beasley and J. Cole Portis of Beasley, Wilson, Allen, Main & Crow, P.C., Montgomery, for appellant.
Philip S. Gidiere, Jr. of Carpenter & Gidiere, Montgomery, for appellees.
Juliette Lopez filed an "appeal" from an order of the Circuit Court of Montgomery County compelling her to arbitrate her claims against Home Buyers Warranty Corporation II ("Home Buyers"). The issue here is whether a claim based on a homeowner's warranty is subject to arbitration under the provisions of the Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 1-15.
Because "a petition for a writ of mandamus is the proper means to test a trial court's granting of a motion to arbitrate," Ex parte Alexander, 558 So.2d 364, 365 (Ala.1990), we treat Lopez's filing, although it was in the form of an appeal, as a petition for a writ of mandamus requiring the Montgomery Circuit Court to vacate its order compelling arbitration. See A.G. Edwards & Sons, Inc. v. Clarke, 558 So.2d 358, 360 (Ala.1990). We grant the writ.
Mrs. Lopez and her husband purchased a house in Montgomery, Alabama, from Mr. and Mrs. Glen Browder on August 31, 1989. The Browders had listed the house with, and the sale was conducted in part through agents of, Aronov Realty Company, Inc. ("Aronov"). The Lopezes executed the closing documents on the house while they were in Key West, Florida. 1 The house was covered by a Home Buyers warranty against specified defects. This warranty was issued in 1988 from the Home Buyers office in Denver, Colorado, to the Browders, as the original homeowners. Under the terms of the warranty, a Home Buyers representative was to inspect the house during its construction. The warranty coverage transferred to the Lopezes when they bought the house from the Browders.
Mrs. Lopez moved into the house in June 1990; shortly thereafter, she noticed cracks in the floors and noticed other structural defects. Her attorney notified Home Buyers' regional office in Tucker, Georgia, by letter dated March 1, 1991, of her potential claim under her Home Buyers warranty. A representative from Home Buyers' warranty service office in Denver, Colorado, wrote Mrs. Lopez on March 6, 1991, and informed her of the procedure for filing a claim for coverage of structural damage under her warranty. On April 19, 1991, Mrs. Lopez sued Home Buyers for recovery of the costs of structural repairs to her house. She also sued Aronov, alleging fraud in regard to the sale of the house.
Home Buyers moved to dismiss, or, in the alternative, to compel arbitration under the terms of the arbitration clause contained in the warranty. That arbitration clause states, in part:
On October 19, 1992, the trial court ordered Mrs. Lopez to submit her claims against Home Buyers to arbitration under the terms of the warranty contract. The claims against Aronov have been stayed pending our ruling on the enforceability of the arbitration clause. Although the trial court's order compelling arbitration purported to "dismiss" Mrs. Lopez's claims against Home Buyers, we understand that "dismissal" to be in reality a stay of the proceedings against Home Buyers pending arbitration.
Under Alabama law, the specific enforcement of a predispute arbitration agreement violates public policy unless federal law preempts state law. See § 8-1-41(3), Ala.Code 1975; Wells v. Mobile County Bd. of Realtors, Inc., 387 So.2d 140, 144 (Ala.1980); Bozeman v. Gilbert, 1 Ala. 90, 91 (1840). "The FAA applies to a transaction within this state if the contract involves interstate commerce and contains an arbitration clause voluntarily entered into by the parties." A.J. Taft Coal Co. v. Randolph, 602 So.2d 395, 397 (Ala.1992), citing Ex parte Alabama Oxygen Co., 452 So.2d 860 (Ala.1984). To determine whether federal law preempts our public policy against enforcement of predispute agreements to arbitrate, we must examine whether the warranty agreement containing the arbitration provision involves interstate commerce. Ex parte Jones, 628 So.2d 316 (Ala.1993).
Home Buyers argues that the warranty agreement involves interstate commerce, and, because this dispute arose out of the warranty agreement, that the FAA must apply. In so arguing, Home Buyers relies on the "slightest nexus" test of Ex parte Costa & Head (Atrium), Ltd., 486 So.2d 1272 (Ala.1986), wherein the existence of the slightest nexus between an agreement and interstate commerce would bring the agreement within the ambit of the FAA, thus allowing enforcement of a predispute arbitration provision within the agreement. Id. at 1275.
However, we have recently overruled the Costa & Head "slightest nexus" test in favor of the more reasoned approach of the "contemplation" test applied in Ex parte Warren, 548 So.2d 157 (Ala.), cert. denied sub nom. Jim Skinner Ford, Inc. v. Warren, 493 U.S. 998, 110 S.Ct. 554, 107 L.Ed.2d 550 (1989). Ex parte Jones, supra, 628 So.2d at 318. The Warren test examines whether the parties "contemplated substantial interstate activity" at the time they entered into the contract and accepted the arbitration clause. 2 Ex parte Warren, supra, at 160. Whether the parties contemplated substantial interstate commerce is, of course, to be determined by the facts and circumstances of each case.
The trial court applied the slightest nexus test when it compelled arbitration:
Mrs. Lopez contends that there is insufficient involvement with interstate commerce to require arbitration, because the house was built in Alabama by an Alabama builder for an Alabama resident and was listed for sale through an Alabama real estate agency. Home Buyers points to possible interstate activity by the Lopezes during their purchase and financing of the house, to support its contention that there was sufficient involvement with interstate commerce to require arbitration. "However, for the FAA to apply, the agreement that contains the predispute arbitration provision must involve interstate commerce." Ex parte Jones, supra, 628 So.2d at 317 (emphasis original). That agreement in this case is the Home Buyers warranty, not the contract for purchase of the house. The warranty does not involve "the production of articles to be shipped in interstate commerce," Continental Grain Co., supra, 628 So.2d at 323; nor does it require the use of specific materials made by and shipped from out-of-state manufacturers. Ex parte Brice Bldg. Co., 607 So.2d 132, 134 (Ala.1992); Maxus, Inc. v. Sciacca, 598 So.2d 1376, 1379 (Ala.1992).
Although Home Buyers contends that under the warranty Mrs. Lopez would have to file a claim in either Georgia or Colorado, we have determined that "[t]he mere use of the telephone and mail by persons in different states to communicate about activity that is purely local" is not a sufficient contact with interstate commerce to require application of the FAA. First Real Estate Corp. of Alabama v. Brown Marx Tower Ltd. Partnership, 620 So.2d 648 (Ala.1993). 3 Furthermore, it is the scope of the contract containing the arbitration clause, and not the place of performance, that determines the applicability of the FAA when using the "contemplation" test. Continental Grain Co., supra, citing Circle "S" Industries, Inc. v. Berryman, 613 So.2d 329, 331 (Ala.1993).
In this case, we find no evidence that the parties contemplated substantial interstate activity when they entered into the warranty contract. Therefore, the FAA does not apply. We hold that, under the "contemplation" test, Mrs. Lopez is not required to submit her warranty claims with Home Buyers to arbitration. See Ex parte Alexander, 558 So.2d 364, 366 (Ala.1990). The writ is due to be granted for the foregoing reasons.
WRIT GRANTED.
I disagree with the majority's use of the "contemplation" test for determining whether the particular transaction involves interstate commerce for purposes of the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq. Furthermore, I disagree...
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