Terminix Intern. Co. Ltd. Partnership v. Jackson

• Decision Date: 03 November 1995
• Citation: 669 So.2d 893
• Parties: The TERMINIX INTERNATIONAL COMPANY LIMITED PARTNERSHIP and Allied-Bruce Terminix Companies, Inc., a corporation v. Mark JACKSON and Laurie Jackson. 1911842.
• Court: Alabama Supreme Court

Page 893

669 So.2d 893

The TERMINIX INTERNATIONAL COMPANY LIMITED PARTNERSHIP and Allied-Bruce Terminix Companies, Inc., a corporation v. Mark JACKSON and Laurie Jackson.

1911842.

Supreme Court of Alabama.

Nov. 3, 1995.

Robert E. Sasser and Dorothy Wells Littleton of Sasser & Littleton, P.C., Montgomery, for Appellants.

Ronald W. Wise of Manasco & Wise, Montgomery, for Appellees.

On Remand from the Supreme Court of the United States

ALMON, Justice.

The United States Supreme Court has vacated our original judgment, which was based on our opinion of August 13, 1993, and has remanded this case for further consideration in light of Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. ----, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995). See Terminix Int'l Co. Ltd. Partnership v. Jackson, 513 U.S. ----, 115 S.Ct. 930, 130 L.Ed.2d 876 (1995).

The original opinion of this Court is published at 628 So.2d 357. The essential facts of the case are set out in that opinion, as follows:

"The defendants, Terminix International Company Limited Partnership ... and Allied-Bruce Terminix Companies [hereinafter collectively 'Terminix'] ..., appeal from the trial court's order denying their motion to compel the plaintiffs, Mark and Laurie Jackson, to arbitrate the claims stated in certain counts in an action filed by the Jacksons. A single issue is presented: whether the contract between the parties--a termite bond--contains sufficient contacts with interstate commerce to bring it within the Federal Arbitration Act, 9 U.S.C. § 1 et seq.

"In March 1988, Mark and Laurie Jackson agreed to purchase a house in Montgomery, Alabama, from Tommy Geohagan. At the closing, Geohagan showed the Jacksons a Veterans' Administration ... form that had been prepared by Terminix Service. This form indicated that Terminix Service had inspected the house and had observed existing termite damage; a graph attached to the form specifically described the nature and extent of the damage. At the same time, Geohagan assigned to the Jacksons his rights in a termite bond that he had previously acquired from Terminix Service and Terminix International.* This bond contained a clause providing that any dispute arising out of or relating to the bond would be settled by arbitration.

"The Jacksons later discovered substantial termite damage to their house. They brought an action against Terminix Service and Terminix International, alleging that the defendants had defrauded them by misrepresenting the nature of the termite damage referenced on the V.A. form; the complaint also included a breach of contract count. Terminix Service and Terminix International subsequently moved to compel the Jacksons to arbitrate the breach of contract claim pursuant to the arbitration clause in the termite bond. The trial court denied the motion, and Terminix International and Terminix Service appeal from that order.

628 So.2d at 358.

This Court held that the Federal Arbitration Act was inapplicable, because, it held the connection between the termite bond and interstate commerce was too slight, in that the parties had not contemplated substantial interstate activity when they entered into the contract. 628 So.2d at 359. Thus, we affirmed the denial of the motion to compel arbitration of the Jacksons' contract claim and to stay litigation of other claims pending arbitration; our affirmance was based on § 8-1-41(3), Ala.Code 1975, which prohibits specific enforcement of "[a]n agreement to submit a controversy to arbitration."

The Supreme Court held in Allied-Bruce Terminix that the language of the Federal Arbitration Act making enforceable an arbitration provision in "a contract evidencing a transaction involving commerce" is applicable "to the limits of Congress' Commerce Clause power," and that, because the transaction in that case, in fact, involved interstate commerce, the Federal Arbitration Act was applicable and preempted state law. 513 U.S. at ----, 115 S.Ct. at 837; 9 U.S.C. § 2.

After the United States Supreme Court vacated this Court's judgment and remanded the cause, the Jacksons asked this Court to allow rebriefing concerning the effect the Supreme Court's ruling in Allied-Bruce Terminix might have on this Court's original decision. The Jacksons proposed to present the arguments that there was no evidence of interstate commerce presented in this case and that Terminix had waived any right to proceed under the arbitration clause in the termite bond. However, rebriefing is unnecessary, because the issues presented on remand were adequately addressed by the parties in their original briefs submitted to this Court. The cause has therefore been submitted on the order of remand and on the original briefs.

The Jacksons' complaint alleged, in count one, that Terminix fraudulently misrepresented and suppressed material facts in the termite letter and the accompanying inspection graph; in count two, that Terminix negligently failed to properly inspect the house before the sale; in count three, that Terminix breached the termite bond by failing to repair the Jacksons' home in accordance with the terms of the termite bond; and, in count four, that Terminix's fraudulent misrepresentations induced them to purchase the termite bond. We note, as a reiteration of the facts set out in our original opinion, that Terminix's motion to the circuit court was to compel arbitration of the Jacksons' breach of contract claim pursuant to the terms of the termite bond and pursuant to the Federal Arbitration Act, and to "stay litigation of all other claims ... pending conclusion of the arbitration proceedings." Terminix argued that resolution of the breach of contract claim by arbitration could either "dispose of the Plaintiffs' alternative fraud claim" or "narrow the issues to be tried" by the circuit court. Thus, there has been no argument that the Jacksons' tort claims arising from Terminix's inspection and its issuance of the termite letter are within the scope of the termite bond's arbitration clause. Cf. Allied-Bruce Terminix Cos. v. Dobson, [Ms. 1920473, November 3, 1995] --- So.2d ---- (Ala.1995) (decision on remand from the Supreme Court of the United States) (holding that tort claims similar to those stated by the Jacksons were not within the scope of an identical arbitration clause, but that the contract claims were within the scope of the clause).

Initially, we note that this contract "involv[es] commerce," as that statutory term was interpreted by the United States Supreme Court in Allied-Bruce Terminix. 9 U.S.C. § 2. Despite the Jacksons' assertion to the contrary, there was evidence that the termite bond involved interstate commerce. The original opinion of this Court stated:

"Terminix International and Terminix Service argue that the termite bond does have at least a slight nexus with interstate commerce, for the following reasons: Terminix International has no office in Alabama, but is a Delaware limited partnership with its principal office in Memphis, Tennessee; Terminix Service is an Arkansas corporation; and the bond, because it obligates both companies to retreat the home and repair any damage that results from the infestation of termites, contemplates that at least some of the products used to perform these services will be obtained from out-of-state sources."

628 So.2d at 359. These connections to interstate commerce are substantially similar to those presented by the contract in Allied-Bruce Terminix, wherein the Supreme Court found that the transaction, in fact, involved interstate commerce. 513 U.S. at ----, 115 S.Ct. at 843. Therefore, the Federal Arbitration Act is applicable to the arbitration clause contained in the termite bond in this case, and the clause is specifically enforceable, unless Terminix has waived the right to proceed under the clause. 9 U.S.C. § 2.

In cases before this Court to which the Federal Arbitration Act is applicable, the federal substantive law of arbitrability is to be applied. Ex parte Warrior Basin Gas Co., 512 So.2d 1364 (Ala.1987) (citing Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985)). Because there is a strong federal policy favoring arbitration, Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983), "the burden on one seeking to prove waiver is a heavy one." Ex parte Merrill Lynch, Pierce, Fenner & Smith, Inc., 494 So.2d 1, 2 (Ala.1986) (quoting American Dairy Queen Corp. v. Tantillo, 536 F.Supp. 718 (M.D.La.1982)). To establish waiver, the Jacksons must show that Terminix substantially participated in the litigation process and that, as a result, the Jacksons would be prejudiced if Terminix were now allowed to invoke the arbitration process. Ex parte McKinney, 515 So.2d 693 (Ala.1987); Ex parte Merrill Lynch, supra; Ex parte Costa & Head (Atrium), Ltd., 486 So.2d 1272 (Ala.1986). Factors tending to show prejudice may include the length of the party's delay in demanding arbitration and the expense incurred by the other party by participating in the litigation. S & H Contractors, Inc. v. A.J. Taft Coal Co., 906 F.2d 1507 (11th Cir.1990).

The Jacksons alleged in their response to Terminix's motion to compel arbitration and to stay litigation that Terminix had waived any right to seek arbitration, by participating in the litigation and thereby prejudicing the Jacksons. The Jacksons noted that Terminix did not move to compel arbitration until seven months after the action was brought; that Terminix filed requests for admissions, interrogatories, and requests for production of documents; that Terminix had taken two depositions, totaling over 100 pages; that the Jacksons had taken three depositions, totaling over 300 pages; and that the Jacksons had spent over $900.00 for deposition expenses.

We conclude that the Jacksons have not met the burden required to establish waiver. This Court has stated that "[t]he...