S & H Contractors, Inc. v. A.J. Taft Coal Co., Inc.

• Citation: 906 F.2d 1507
• Decision Date: 30 July 1990
• Docket Number: Nos. 87-7028,88-8829,s. 87-7028
• Parties: S & H CONTRACTORS, INC., a corporation, Plaintiff-Appellant, v. A.J. TAFT COAL COMPANY, INC., a corporation, Defendant-Appellee. A.J. TAFT COAL COMPANY, INC., Plaintiff-Appellee, v. S & H CONTRACTORS, INC., Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (11th Circuit)

Page 1507

906 F.2d 1507

S & H CONTRACTORS, INC., a corporation, Plaintiff-Appellant, v. A.J. TAFT COAL COMPANY, INC., a corporation, Defendant-Appellee.

A.J. TAFT COAL COMPANY, INC., Plaintiff-Appellee, v. S & H CONTRACTORS, INC., Defendant-Appellant.

Nos. 87-7028, 88-8829.

United States Court of Appeals, Eleventh Circuit.

July 30, 1990.

Michael T. Thornton, Dennis & Corry, Atlanta, Ga., L. Graves Stiff, III, M. Clay Ragsdale, IV, William A. Davis, III, Starnes & Atchison, Birmingham, Ala., for appellant.

J. Kevin Buster, Freddie Ray Stone, Jr., King & Spalding, Atlanta, Ga., Edward R. Jackson, Tweedy, Jackson & Beech, Jasper, Ala., for appellee.

Appeal from the United States District Court for the Northern District of Alabama.

Appeal from the United States District Court for the Northern District of Georgia.

Before TJOFLAT, Chief Judge, CLARK, Circuit Judge, and SMITH ^*, Senior Circuit Judge.

TJOFLAT, Chief Judge:

S & H Contractors (S & H) appeals judgments entered, in two separate cases, by the District Court for the Northern District of Alabama and by the District Court for the Northern District of Georgia. The district court, in the first case, granted summary judgment in favor of A.J. Taft Coal Company (Taft) in a suit by S & H against Taft on a contract between those two parties. S & H appealed that judgment, but the appeal was stayed pending arbitration of the parties' dispute. The district court, in the second case, enjoined the arbitration proceedings, and S & H again appealed. The separate appeals were consolidated. We affirm both judgments.

I.

On May 23, 1984, Taft, an Alabama corporation, entered into a contract with Bucyrus-Erie Company, a Delaware corporation with its principal place of business in Wisconsin, for the purchase of a disassembled "walking dragline"--a large excavating machine used in the coal mining industry. Bucyrus-Erie agreed to transport the dragline parts to Alabama and to send several of its engineers to the assembly site to supervise the machine's assembly, but Taft remained primarily responsible for assembling the dragline.

After entering into the contract with Bucyrus-Erie for the purchase of the dragline, Taft decided to hire a contractor to assemble the dragline and entered into negotiations with S & H, a Kentucky corporation with its primary place of business in Kentucky. The negotiations culminated in a contract signed on December 6, 1984, ¹ under which S & H agreed to assemble the dragline under the supervision of the Bucyrus-Erie engineers. At the time of the contract's formation, S & H had not been qualified by Alabama's secretary of state to do business in Alabama. In fact, S & H did not qualify to do business in Alabama until February 3, 1986.

On March 12, 1986, S & H filed a complaint in the United States District Court for the Northern District of Alabama, alleging inter alia that it had substantially performed its responsibilities under the contract and that Taft had breached the contract by failing to pay the amounts due for substantial performance and for extra work done by S & H. On March 31, 1986, Taft moved to dismiss the complaint on the ground that, because S & H failed to qualify to do business in Alabama before entering into its contract with Taft, the contract was unenforceable under Alabama's forum- On February 3, 1987, Taft filed suit in the Northern District of Alabama to enjoin arbitration proceedings, arguing that the court had declared the entire contract void in its order dismissing S & H's suit on the contract. On April 17, 1987, the court granted Taft's prayer for relief and enjoined arbitration proceedings in Alabama. The court reasoned that, if the arbitration proceedings were conducted in Alabama, a federal district court in Alabama might be required to enforce the arbitrator's award and, in effect, to enforce the underlying contract. ² In the court's view, such a result would undermine Alabama's public policy as expressed in its forum-closing laws.

closing laws. See Ala. Const. art. XII, Sec. 232; Ala.Code Sec. 10-2A-247 (1975). The district court took no action on the motion to dismiss for several months, and, during that period, S & H engaged in fairly extensive pretrial discovery. Then, on November 14, 1986, S & H demanded that Taft arbitrate the dispute under the auspices of the American Arbitration Association as required by an arbitration clause in the contract. On December 12, 1986, the district court converted Taft's motion to dismiss to a motion for summary judgment and granted the motion, holding that S & H's failure to qualify to do business made its contract with Taft unenforceable under Alabama's forum-closing laws. The court therefore dismissed S & H's complaint with prejudice. S & H appealed, but the appeal (No. 87-7028) was stayed pending the outcome of arbitration.

S & H then petitioned the American Arbitration Association to transfer the arbitration proceedings to Atlanta, and the Association granted the petition. On March 29, 1988, Taft filed a complaint in the United States District Court for the Northern District of Georgia, requesting that court to enjoin the arbitration proceedings. Taft argued that the proceedings should be enjoined for two reasons: first, according to Taft, its contract with S & H was void for all purposes, and S & H could not demand arbitration under a void contract. Second, Taft argued that, by bringing suit on the contract in federal district court before demanding arbitration, S & H waived its right to demand arbitration. Taft then moved for summary judgment. The district court granted the motion and enjoined the arbitration proceedings. The court held that the contract was both unenforceable and void and thus the parties never agreed to submit to arbitration. The court declined to address the waiver issue. S & H again appealed, and that appeal (No. 88-8829) was consolidated with S & H's earlier appeal from the district court's dismissal of the contract action. We address each appeal in order.

II. S & H's Suit on the Contract

Alabama's constitution provides that, "[n]o foreign corporation shall do any business in this state without ... filing with the secretary of state a certified copy of its articles of incorporation or association." Ala. Const. art. XII, Sec. 232. This provision is enforced through the operation of Alabama's forum-closing statute, which states that

[a]ll contracts or agreements made or entered into in this state by foreign corporations which have not obtained a certificate of authority to transact business in this state shall be held void at the action of such foreign corporation or any person claiming through or under such foreign corporation by virtue of said void contract or agreement; but nothing in this section shall abrogate the equitable rule that he who seeks equity must do equity....

Ala.Code Sec. 10-2A-247(a) (1975).

In diversity cases, we apply a two-step analysis to determine whether Alabama's forum-closing statute bars a foreign corporation's contract claim. First, we determine whether Alabama courts, applying the statute, would refuse the foreign corporation's request to enforce the contract. See Aim Leasing Corp. v. Helicopter

Medical Evacuation, Inc., 687 F.2d 354, 357 (11th Cir.1982). If we conclude that Alabama courts would close their doors to the foreign corporation, then we must examine the burden such a closing would place on interstate commerce: we will not enforce the forum-closing statute if its enforcement in a particular case would unduly burden interstate commerce in violation of the federal commerce clause. Id. We address the state law and federal law questions in turn and hold that the district court properly refused to enforce S & H's contract with Taft.

A.

Alabama courts will not enforce a foreign corporation's contract if (1) at the time the contract was entered into, the foreign corporation had not been qualified by the secretary of state to do business in Alabama, and (2) the foreign corporation was doing business of an intrastate nature in Alabama pursuant to the contract. See Sanwa Business Credit Corp. v. G.B. "Boots" Smith Corp., 548 So.2d 1336, 1337 (Ala.1989). S & H does not dispute that it had failed to qualify to do business in Alabama at the time it entered into the contract with Taft. It does argue, however, that the district court erred in holding that S & H was doing intrastate business in Alabama. We consider the district court's holding on this issue to be sound.

The Alabama Supreme Court has held that a foreign corporation does business in Alabama, within the meaning of the forum-closing provisions, when the contract at issue must be performed by the foreign corporation in Alabama and the contract does not involve interstate commerce. See Sanjay, Inc. v. Duncan Constr. Co., 445 So.2d 876, 880 (Ala.1983). In other words, the foreign corporation's activities must be " 'intrastate in nature.' " Sanwa, 548 So.2d at 1337 (quoting Johnson v. MPL Leasing Corp., 441 So.2d 904, 905 (Ala.1983)). Thus, Alabama courts generally hold that a foreign corporation's sale and delivery of out-of-state goods is a transaction involving interstate commerce and enforce the contract underlying such a transaction. See, e.g., Loudonville Milling Co. v. Davis, 37 So.2d 659, 661 (Ala.1948).

The contract in this case, however, is not for the sale and delivery of goods; it is solely for the assembly of machinery in Alabama. The contract expressly provides that S & H must "completely erect and deliver [the dragline] to Taft ... at the place hereinafter called the 'erection site' " in Alabama. We conclude that this contract clearly provides for a transaction of an intrastate nature.

S & H would have us believe that, merely because the sale and delivery of the disassembled dragline was a transaction involving interstate commerce, the erection of the dragline must also be a transaction involving interstate commerce. S & H argues...