Robert Frank McAlpine Architecture, Inc. v. Heilpern

• Decision Date: 27 March 1998
• Citation: 712 So.2d 738
• Parties: ROBERT FRANK McALPINE ARCHITECTURE, INC., and Robert Frank McAlpine v. William E. HEILPERN and Lauda Heilpern. 1961928.
• Court: Alabama Supreme Court

Page 738

712 So.2d 738

ROBERT FRANK McALPINE ARCHITECTURE, INC., and Robert Frank McAlpine v. William E. HEILPERN and Lauda Heilpern.

1961928.

Supreme Court of Alabama.

March 27, 1998.

Michael K. Beard and Bryan O. Balogh of

Starnes & Atchison, Birmingham, for appellants.

L. Landis Sexton of Beasley, Wilson, Allen, Crow & Methvin, P.C., Montgomery, for appellees.

HOUSTON, Justice.

The defendants, Robert Frank McAlpine and Robert Frank McAlpine Architecture, Inc., appeal from the trial court's order denying their motion to compel arbitration of the various contract and tort claims filed against them by the plaintiffs, William E. Heilpern and his wife Lauda Heilpern. We reverse and remand.

The facts pertinent to this appeal are undisputed. The Heilperns, who are Montgomery residents, hired Robert Frank McAlpine, a Montgomery architect, to provide architectural services in connection with the remodeling of their house. The Heilperns and McAlpine executed a contract entitled "Standard Form of Agreement Between Owner and Architect"; that contract contained the following predispute arbitration clause:

"Claims, disputes or other matters in question between the parties to this Agreement arising out of or relating to this Agreement or breach thereof shall be subject to and decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association currently in effect unless the parties mutually agree otherwise."

In the course of providing services to the Heilperns, McAlpine specified that certain items were to be used in the remodeling, such as appliances, plumbing fixtures, lighting fixtures, etc., that could be acquired only from out-of-state manufacturers. The contractor hired by the Heilperns to perform the remodeling work was, thus, required to purchase those items from out of state and to have them shipped into Alabama (e.g., from New York, Pennsylvania, Wisconsin, and Massachusetts). Ultimately, the Heilperns, dissatisfied with the work done on their house, sued McAlpine individually and his architectural firm vicariously, as well as the contractor and the contractor's firm, seeking damages based on allegations of breach of contract, fraud, conversion, and conspiracy. This appeal concerns only the trial court's denial of the McAlpine defendants' motion to compel arbitration. (Hereinafter, both McAlpine and his firm are referred to as "McAlpine.")

Under the Federal Arbitration Act, 9 U.S.C. §§ 1-16 ("FAA"), "[a] written provision in ... a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. The Heilperns do not dispute that their contract with McAlpine is one "involving commerce" within the meaning of § 2 of the FAA. Neither do the Heilperns dispute that the arbitration clause contained in the contract is broad enough in scope to encompass all of their claims. Rather, the Heilperns contend, and the trial court held, that § 1 of the FAA exempts their contract from the operation of federal arbitration law; therefore, they argue, federal law does not preempt Alabama statutory law and public policy prohibiting enforcement of predispute arbitration agreements. ¹

Section 1 of the FAA, in pertinent part, states that "nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." McAlpine contends that § 1 should be construed narrowly so as to exempt only employment contracts of workers directly engaged in the movement of goods in interstate commerce, i.e., in the transportation and distribution of goods in interstate commerce. McAlpine argues that, although his contract involved interstate commerce, for purposes of applying the FAA, he was not directly engaged in the movement of goods in interstate commerce during the time he worked for the Heilperns. The Heilperns contend that § 1 should be construed broadly so as to exempt from the provisions of § 2 all contracts of employment that facilitate or affect interstate commerce (even tangentially); therefore, the Heilperns maintain, the arbitration clause is not valid and enforceable under the FAA. McAlpine contends, in the alternative, that his contract with the Heilperns is not an employment contract within the meaning of § 1, but, instead, is one for an independent contractor's "services," and that a contract for such services is not covered by the exemption set out in § 1. The Heilperns argue that the contract is an employment contract within the meaning of § 1 and that, even if McAlpine is correct in his interpretation of the scope of the exemption, the contract would fall within the exemption because, they say, McAlpine was directly engaged in the movement of goods in interstate commerce.

Initially, we note that the record does not support the Heilperns' argument that McAlpine was engaged in the movement of goods in interstate commerce during the time he worked for them. In an affidavit filed in support of his motion to compel arbitration, McAlpine stated:

"The design work that we performed for Mr. and Mrs. Heilpern affected interstate commerce because, among other things, we were hired to design and specify particular items for the house such as appliances, plumbing fixtures, lighting fixtures and the like. A number of these items can only be acquired from manufacturers outside the State of Alabama and by specifying them, we, in effect, required the contractor to purchase items which come from other states and which were brought to Alabama to be installed in the Heilperns' home."

(Emphasis added.) This affidavit, which was not contradicted in the record, indicates that McAlpine's designs specified the use of certain items that had to be purchased from out of state, and that the Heilperns' contractor was responsible for purchasing and having those items shipped into Alabama. McAlpine did not transport goods in an interstate market while he was working for the Heilperns. Therefore, we proceed to what we believe to be the dispositive issue--whether the § 1 exemption should be broadly construed or should be narrowly construed. ²

This Court is not the first to consider the scope of the exclusion set out in § 1 of the FAA. In fact, it appears that the courts of appeals for 10 of the federal circuits have addressed this particular issue and that each of those courts has held that the exclusionary language in § 1 should be narrowly construed. In Asplundh Tree Expert Co. v. Bates, 71 F.3d 592, at 600-01 (6th Cir.1995), the United States Court of Appeals for the Sixth Circuit surveyed the law among the federal circuits and held that § 1 of the FAA "should be narrowly construed to apply to employment contracts of seamen, railroad workers, and any other class of workers actually engaged in the movement of goods in interstate commerce in the same way that seamen and railroad workers are." Because the opinion in Asplundh contains an extensive history of the construction that has been placed on § 1 by the courts of appeals for the federal circuits, we quote from it extensively, beginning at page 596:

"In [Willis v. Dean Witter Reynolds, Inc., 948 F.2d 305, 311 (6th Cir.1991) ], another panel of this court said:

" 'A review of the legislative history of the FAA confirms that the FAA was never meant to incorporate employment contracts with the requisite effects on interstate commerce within its scope.... Thus, although Congress passed the FAA to ensure that courts honor the contractual agreement of parties who choose to resolve their disputes by arbitration, it limited the scope of the Act by creating a category of contracts not subject to the Act's strictures. Among this category of excluded contracts are "contracts for employment." 9 U.S.C. § 1.'

"Relying on this pronouncement, Asplundh argues that the exclusionary clause contained in § 1 of the Arbitration Act covers all contracts of employment, and that accordingly, the arbitration clause in the second employment agreement is unenforceable. Although the district judge did not address this issue in her decision of March 30, 1994, she agreed with Asplundh in her order of June 8, 1994, when she concluded that Willis compelled a finding that the arbitration clause is unenforceable under § 1 of the Act.

"Willis involved a claim of sex discrimination by a registered securities representative against her brokerage firm. The registration form she was required to file with the various national securities exchanges contained an arbitration clause which covered any dispute, claim or controversy between herself, her firm, or a customer. As noted above, the Willis court devoted a section of its opinion to the scope of the exclusionary clause contained in § 1 of the Act, and further concluded that it should be broadly construed to extend to all contracts for employment within the scope of the commerce clause of the United States Constitution. Willis, 948 F.2d at 310-312. This [conclusion] was dicta, since the decision in Willis ultimately rested on a determination that the plaintiff's registration form was not an employment contract and thus not covered by the exclusionary language of § 1 of the Act. Id. at 312.

"We are not required to follow the dicta of Willis which opines that the exclusionary clause of § 1 of the Act applies to all contracts of employment within the scope of the commerce clause. United States v. Tucker, 28 F.3d 1420, 1425 (6th Cir.1994), cert. denied, 514 U.S. 1049, 115 S.Ct. 1426, 131 L.Ed.2d 308 (1995); United States v. Burroughs, 5 F.3d 192, 194 (6th Cir.1993) ('one panel of this court is not bound by dicta in a previously published panel opinion'); Begley v. Consolidation Coal Co., 826 F.2d 1512, 1517 n. 1 (6th...