Pirtek U.S., LLC v. Whitehead

• Decision Date: 11 June 2010
• Docket Number: 1071570 and 1071571.
• Citation: 51 So.3d 291
• Parties: PIRTEK USA, LLC v. Michael WHITEHEAD and Fluid Services, Inc. Pirtek USA, LLC v. Michael Whitehead and Fluid Services, Inc.
• Court: Alabama Supreme Court

51 So.3d 291

PIRTEK USA, LLC

v.Michael WHITEHEAD and Fluid Services, Inc.

Pirtek USA, LLC

v.Michael Whitehead and Fluid Services, Inc.

1071570 and 1071571.

Supreme Court of Alabama.

June 11, 2010.

Robin G. Laurie and Kelly F. Pate of Balch & Bingham LLP, Montgomery, for appellant.

James B. Pittman, Jr., and Jennifer L. Evans of James B. Pittman, Jr., P.C., Daphne, for appellees.

PER CURIAM.

Pirtek USA, LLC ("Pirtek"), filed two separate actions in the Mobile Circuit Court against Michael Whitehead and Fluid Services, Inc., of which Whitehead was the sole owner (hereinafter collectively referred to as "FSI"), seeking domestication of a foreign judgment entered in Brevard County, Florida. The circuit court consolidated the actions and ultimately refused to domesticate the Florida judgment. Pirtek filed a motion to alter, amend, or vacate the circuit court's judgment or, alternatively, to confirm part of the Florida judgment. The circuit court denied Pirtek's postjudgment motion, and Pirtek appealed. The appeals have been consolidated for purposes of issuing one opinion. We reverse and remand.

Facts and Procedural History

On November 2, 1998, Fluid Services entered into a franchise agreement with Pirtek ("the franchise agreement"), pursuant to which Fluid Services was to sell, assemble, and install Pirtek's line of industrial and hydraulic hoses, fixed tube assemblies, fittings and related components, and other distinctive Pirtek products. The franchise agreement contains a noncompetition provision, Section 12.C, which states:

"Noncompetition. Franchisee (including specifically Principal Owner and Personal Guarantors) may not engage ... in any business within 15 miles of Franchisee's Territory or any Promotional Zone that sells products and services similar to the products and services sold by a 'Pirtek' business for a period of two (2) years after expiration or termination of this Agreement. .... Franchisee expressly agrees that the two (2) year period and 15 mile radius are the reasonable and necessary time and distance needed to protect Franchisor if the Agreement expires or is terminated for any reason."

On January 21, 2005, Pirtek terminated the franchise agreement. Immediately following the termination of the franchise agreement, FSI and other current and former Pirtek franchisees commenced an arbitration proceeding against Pirtek in Orlando, Florida, pursuant to Section 13.A of the franchise agreement ("the arbitration proceeding"). In the arbitration proceeding, FSI alleged that Pirtek had breached the franchise agreement and had violated Florida's Deceptive and Unfair Trade Practices Act. In response, Pirtek asserted counterclaims against FSI for past-due licensing fees and product purchases, enforcement of the noncompetition provision, and an award of attorney fees and costs pursuant to Section 13.C of the franchise agreement.

It is undisputed that in April 2005 Pirtek filed in the United States District Court for the Southern District of Alabama a motion requesting a restraining order anda preliminary injunction against FSI in a dispute arising out of the franchise agreement, which dispute was simultaneously being arbitrated in the arbitration proceeding. United States District Court Judge Callie Granade denied Pirtek's requests on the ground that the proper forum for Pirtek to request a temporary restraining order and a preliminary injunction was before the arbitration panel in conjunction with the arbitration proceeding. Pirtek never requested that the arbitration panel issue a temporary restraining order or a preliminary injunction against FSI.

On July 27, 2006, the arbitration panel issued an interim award, and on November 27, 2006, the arbitration panel issued a final award, which incorporated the interim award. The arbitration panel awarded Pirtek damages against FSI, as follows:

"Pirtek is awarded $345,872.88 from [FSI] for money owed as determined in the panel's Interim Award ($156,394.42) plus fees in connection with this proceeding ($189,671.44 = $193,735.44 to Pirtek as the prevailing party less 2 x $2,032, i.e., $4,064, against Pirtek as the non-prevailing party)." ¹

The arbitration panel also ruled that FSI be permanently enjoined from violating Section 12.C of the franchise agreement, the noncompetition provision, as follows:

"The [arbitration] panel permanently enjoins [FSI] from violating the terms of § 12.C, the non-compete provision, of their respective franchise agreement."

On January 12, 2007, Pirtek sought to have the arbitration award confirmed by filing in the Circuit Court of Brevard County, Florida ("the Florida court"), an application to confirm the arbitration award. Pirtek also filed the affidavit of its attorney, Craig Miller, in support of the application to confirm the award.

Whitehead acknowledged that the application and Miller's affidavit were properly served on Whitehead and Fluid Services by a private process server at their correct addresses and that such service put them on notice of the proceedings in the Florida court to have the arbitration award confirmed. Whitehead also acknowledges that, after seeking advice from counsel, FSI chose not to participate in the confirmation proceedings.

On March 14, 2007, Pirtek filed with the Florida court a memorandum of law in support of its application to confirm the arbitration award and a notice of hearing, indicating that a hearing on Pirtek's application to confirm was scheduled for April 23, 2007. Whitehead testified that FSI was not served with the memorandum of law or notice of the April 23, 2007, hearing. David Dyer, Pirtek's attorney in the confirmation proceedings, filed an affidavit stating that he had served FSI with the memorandum of law in support of Pirtek's application to confirm and the notice of the hearing that was to occur on April 23, 2007; Pirtek did, in fact, file the documents with the Florida court. It is undisputed that Pirtek used an incorrect mailing address in its attempt to serve FSI with the documents by first-class mail through the United States Postal Service.

On April 23, 2007, a hearing on the application to confirm the arbitration award was held; FSI did not appear. On May 1, 2007, Pirtek submitted a proposed order to the Florida court, adopting the arbitration panel's final award. Dyer also claims to have properly served the proposedorder on FSI. FSI contends that it was never served with the proposed order.

On May 8, 2007, the Florida court entered the proposed order, which adopted the arbitration panel's interim and final awards ("the Florida judgment"). The Florida judgment provided:

"[F]or a period of two years from the date of November 27, 2006, which is when the Arbitration Award was issued, defendants Michael Whitehead and Fluid Services, Inc., together with their agents, servants, employees, attorneys and those persons acting in concert or participation with them, shall not engage as an owner, partner, director, officer, franchisee, employee, consultant, agent or in any other capacity in any business that sells products and services similar to the products and services sold by a PIRTEK^® business within 15 miles of the territory consisting of the counties of Mobile and Baldwin in the State of Alabama, the counties of Escambia, Santa Rosa and Okaloosa in the State of Florida and the county of Harrison in the State of Mississippi or within 15 miles of any promotional zone of any other PIRTEK^® Center. In addition, for the same two year period, Michael Whitehead and Fluid Services, Inc., may not employ or seek to employ any person who is at that time employed by any other PIRTEK^® franchise or center or otherwise directly or indirectly induce such person to leave his or her employment."

On May 24, 2007, pursuant to Alabama's Uniform Enforcement of Foreign Judgments Act ("UEFJA"), § 6-9-230 et seq., Ala.Code 1975, Pirtek filed the Florida judgment in the Mobile Circuit Court, seeking to domesticate the Florida judgment. On June 1, 2007, the Mobile Circuit Court served both Whitehead and Fluid Services with notices of the filing of Pirtek's domestication petition.

On August 9, 2007, FSI filed a "Motion for Relief" pursuant to Rule 60(b), Ala. R. Civ. P., in the Mobile Circuit Court. In its Rule 60(b) motion, FSI argued that the Florida judgment was defective. The circuit court held a hearing on FSI's motion on October 3, 2007. FSI argued that the Florida judgment modified the arbitration award by ordering that the two-year noncompetition period began on the date the arbitration award was issued, i.e., November 27, 2006, rather than on the date the franchise agreement was terminated, i.e., January 21, 2005. FSI argued that the Florida court did not have subject-matter jurisdiction to modify the arbitration award because Pirtek never filed a motion to modify, and thus, FSI argued, the Florida judgment was defective. FSI also alleged that the Florida judgment was defective because, it said, FSI was denied due process by Pirtek's failure to provide notice of its intention to modify the arbitration award by failing to serve FSI with the pertinent documents. On February 28, 2008, the circuit court granted FSI's Rule 60(b) motion, refusing to domesticate the Florida judgment and holding: (1) that the Florida court did not have subject-matter jurisdiction to modify the arbitration award; and (2) that FSI was not afforded its due-process rights in that it did not receive notice "that Pirtek sought to have the Florida Court provide different relief than that set out in the Arbitration Award."

On March 28, 2008, Pirtek filed in the Mobile Circuit Court a Rule 59, Ala. R. Civ. P., motion to alter, amend, or vacate the judgment or, alternatively, to confirm the arbitration award. Pirtek requested that the circuit court reverse its judgment granting FSI's Rule 60(b) motion, reinstate Pirtek's action to domesticate theFlorida judgment, or domesticate only the monetary portion of the Florida judgment. Pirtek...