Sisters of Visitation v. COCHRAN PLASTERING CO. INC.

• Decision Date: 10 March 2000
• Parties: SISTERS OF the VISITATION v. COCHRAN PLASTERING COMPANY, INC.
• Court: Alabama Supreme Court

775 So.2d 759

SISTERS OF the VISITATION v. COCHRAN PLASTERING COMPANY, INC.

1981513.

Supreme Court of Alabama.

March 10, 2000.

Application for Rehearing Overruled May 26, 2000.

Thomas E. Sharp III of Vickers, Riis, Murray & Curran, L.L.C., Mobile, for appellant.

James P. Green and Thomas H. Nolan, Jr., of Brown, Hudgens, P.C., Mobile, for appellee. LYONS, Justice.

The Sisters of the Visitation (hereinafter usually "the Sisters") appeal from the trial court's order enjoining the arbitration proceeding initiated by the Sisters in a dispute with Cochran Plastering Company, Inc. (hereinafter "Cochran"). The Sisters of the Visitation is a Catholic religious order that owns and operates a monastery and spiritual retreat in Mobile. The Sisters began a restoration project to repair and restore the chapel at the Visitation Monastery. The Sisters engaged the services of Hall Baumhauer Architects, P.C., an Alabama company, and entered into contracts directly with contractors, from Alabama and several other states, within specific trades included in the scope of work for the project.

The Sisters entered into a contract with Cochran, an Alabama company, for Cochran to repair cracks in the plaster in the ceilings and wall of the chapel, to cast and install plaster moldings, and to pin up all loose moldings with screws and washers. This contract included an arbitration provision, pursuant to which the Sisters filed a demand for arbitration; in the demand for arbitration, the Sisters claimed that Cochran had negligently damaged decorative paintings on the surface of the chapel ceilings and wall and that Cochran had failed to complete its work. The Sisters claimed a total of $525,000 for restoration of paintings they claimed Cochran had damaged and $50,000 for the completion of the repair work.

Cochran filed an action in the circuit court for an injunction to stop the arbitration proceeding, claiming that the arbitration provision is unenforceable, pursuant to Ala.Code 1975, § 8-1-41(3), because, it argues, the contract between it and the Sisters did not involve interstate commerce. Cochran further contends that the Sisters' claims are precluded by the clause in the arbitration provision that specifically exempts from arbitration claims relating to "aesthetic effect."

The issues raised on appeal are: (1) whether the arbitration clause in the contract between the Sisters and Cochran is made enforceable by the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq., and (2) whether the claims made by the Sisters against Cochran constitute claims relating to "aesthetic effect," which are expressly excluded from the operation of the arbitration clause. Because we affirm the trial court's order enjoining the arbitration proceedings, we do not reach the second issue, concerning the scope of the arbitration agreement.

The FAA, at 9 U.S.C. § 1, defines "commerce," as that term is used within the FAA, as including "commerce among the several States or with foreign nations." Section 2 declares arbitration agreements in "a contract evidencing a transaction involving commerce" to be valid and enforceable, "save upon such grounds as exist at law or in equity for the revocation of any contract." In Allied-Bruce Terminix Companies v. Dobson, 513 U.S. 265, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995) ("Terminix"), the United States Supreme Court held that for an arbitration clause to be enforceable under the FAA the transaction to which the contract relates must turn out, in fact, to involve interstate commerce, regardless of the contemplation of the parties. Id. at 278, 115 S.Ct. 834.

The United States Supreme Court, in United States v. Lopez, 514 U.S. 549, 115 S.Ct. 1624, 131 L.Ed.2d 626 (1995), considered the extent of interstate involvement an activity must have in order for it to be within the bounds of Congress's authority under the Commerce Clause of the United States Constitution. The Supreme Court decided Lopez shortly after it had decided Terminix. In Lopez, the Court, for the first time in 60 years,¹ struck down an act of Congress (the Gun-Free School Zones Act²) on the basis that the act exceeded Congress's Commerce Clause authority. In Lopez, Chief Justice Rehnquist broke down the previous Commerce Clause cases into three categories of things that Congress has regulated under that clause: channels of interstate commerce (by laws freeing channels of commerce from discrimination, immoral activities, etc.); instrumentalities of interstate commerce (by laws regulating safety of vehicles used in interstate commerce); and activities having a substantial relation to commerce. Lopez, 514 U.S. at 558-59,115 S.Ct. 1624. After establishing those categories, the Chief Justice acknowledged an absence of clarity in the cases dealing with the question whether, for an activity to be subject to Congressional regulation under the Commerce Clause, the activity must "affect" or must "substantially affect" interstate commerce. Id. at 559, 115 S.Ct. 1624.

One attempting to clarify the area of the law in which that question arises must consider Wickard v. Filburn, 317 U.S. 111, 63 S.Ct. 82, 87 L.Ed. 122 (1942). In that case, an Ohio farmer raised wheat on 23 acres of land. He consumed most of the wheat on his farm, either by feeding it to livestock, making flour for personal use, or using it to produce seeds for future crops. The Secretary of Agriculture assessed a penalty against the farmer for exceeding by 12 acres his allotment under a federal statute regulating wheat production. The Supreme Court upheld the assessment, holding that the Congress's limitation of the farmer's wheat production was a valid exercise of its authority under the Commerce Clause to regulate interstate commerce. Unless Wickard is either overruled or read narrowly, very little that occurs in this country can be viewed as not having some involvement with interstate commerce. The Court in Lopez, after reviewing Wickard, acknowledged that it was inappropriate to make an excessively elastic application of the Commerce Clause. It stated that for an economic activity to come within Congress's authority under the Commerce Clause the activity must "substantially affect" interstate commerce. 514 U.S. at 559, 115 S.Ct. 1624.³

The Lopez Court referred to the requirement of a substantial effect as generally applicable to regulation of economic activity. Id. at 560, 115 S.Ct. 1624. That broad reference, albeit dictum, does not suggest that the requirement of a substantial effect would not apply to the question whether a particular contract is subject to the FAA. We have recently embraced the concept that the Lopez requirement of a substantial effect governs the question whether a particular contract has a sufficient connection with interstate commerce to be governed by the FAA.⁴ See Southern United Fire Ins. Co. v. Knight, 736 So.2d 582 (Ala.1999) (Houston, Kennedy, Lyons, Brown, and Johnstone, JJ., concurring; See, J., concurring specially; Cook, J., concurring in the result; and Hooper, C.J., and Maddox, J., dissenting); and Rogers Foundation Repair, Inc. v. Powell, 748 So.2d 869 (Ala.1999) (Hooper, C.J., and Maddox, Cook, Brown, Johnstone, and England, JJ., concurring; See, J., concurring specially; Lyons, J., concurring in two of the three cases addressed in that opinion and concurring in the result in the third; and Houston, J., concurring in two of the cases).

The Chief Justice, in his dissent, relies on a case decided December 2, 1999, In re L & L Kempwood Associates, L.P., 9 S.W.3d 125 (Tex.1999), as supporting his view that the Lopez requirement of a substantial effect on interstate commerce does not apply to arbitration cases arising under the FAA. The Chief Justice quotes that part of the L & L Kempwood opinion in which the Supreme Court of Texas states that "[t]he other courts to consider this issue of which we are aware have [agreed with the view that Lopez did not restrict the scope of the FAA]." 9 S.W.3d at 127 (quoted infra at 775 So.2d 771). The Texas Supreme Court's footnote to that statement cites just two cases. One was a case from the Texas Court of Appeals in Fort Worth, Palm Harbor Homes, Inc. v. McCoy, 944 S.W.2d 716 (Tex.App.-Fort Worth 1997, orig. proceeding); the other was this Court's four-Justice opinion in Hurst. It overlooks a case decided November 23, 1999, In re Turner Brothers Trucking Co., 8 S.W.3d 370 (Tex.App.-Texarkana 1999) (a case from another Texas Court of Appeals), which stated:

"The Texas courts of appeals have split on the issue of whether `affect' or `substantially affect' interstate commerce determines whether an arbitration agreement is subject to the federal or state statute. In Palm Harbor Homes, Inc. v. McCoy, 944 S.W.2d 716 (Tex.App.-Fort Worth 1997, orig. proceeding), the Fort Worth court held that the `affect commerce' language of Allied-Bruce Terminix was not changed by the subsequent Lopez decision:

"`The extent of Congress' power to legislate is not at issue here; unlike in Lopez, the Goldens have not challenged the constitutionality of the FAA. Thus, the only issue we must address is the [sic] how broad Congress intended the term "involving commerce" to be. We follow the Supreme Court in holding that a transaction involves commerce under the FAA if it "in fact" affects interstate commerce. Allied-Bruce, 513 U.S. at 268-70,115 S.Ct. 834....'

"[944 S.W.2d] at 720.

"On the other hand, the Corpus Christi court of appeals has determined that the language of Lopez specifically holds that Congress may regulate, under the Commerce Clause, only activities `substantially affecting' interstate commerce. L & L Kempwood Assocs. [v. Omega Builders, Inc.], 972 S.W.2d [819,] 821-22 [(Tex.App.-Corpus Christi 1998, no pet.)]; see also Ikon Office Solutions, Inc. v. Eifert, 2 S.W.3d 688 (Tex. App.-Houston [14th Dist.] 1999, orig. proceeding); Russ Berrie and Co. [v. Gantt], 998 S.W.2d [713,] 715 [(Tex.App.-El Paso 1999, no pet. h.)]. The L

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