Wiggins v. Warren Averett, LLC

• Decision Date: 07 February 2020
• Docket Number: 1170943
• Citation: 307 So.3d 519
• Parties: Warner W. WIGGINS v. WARREN AVERETT, LLC
• Court: Alabama Supreme Court

307 So.3d 519

Warner W. WIGGINS

v.WARREN AVERETT, LLC

1170943

Supreme Court of Alabama.

February 7, 2020

Rehearing Denied April 24, 2020

Peter F. Burns and Troy T. Schwant of Burns, Cunningham & Mackey, P.C., Mobile, for appellant.

H. Thomas Wells III of Starnes Davis Florie LLP, Birmingham; and John Peter Crook McCall of Starnes Davis Florie LLP, Mobile, for appellee.

SHAW, Justice.¹

The plaintiff below, Warner W. Wiggins, appeals from the Baldwin Circuit Court's order compelling him to arbitrate his claims against the defendant, Warren Averett, LLC ("Warren Averett"). We affirm.

Facts and Procedural History

Warren Averett is an accounting firm. Eastern Shore Children's Clinic, P.C. ("Eastern Shore"), a pediatric medical practice, was a client of Warren Averett. Specifically, in September 2010, while Wiggins, who is a medical doctor, was a shareholder and employee of Eastern Shore, Warren Averett and Eastern Shore entered an agreement pursuant to which Warren Averett was to provide accounting services to Eastern Shore ("the contract"). The contract provided, among other things, for the preparation of individual income-tax returns for the five physicians employed there, including Wiggins. The contract included, among other provisions, an arbitration clause that stated:

"DISPUTE RESOLUTION: By signing this agreement, Eastern Shore Children's Clinic agrees that any controversies, issues, disputes or claims (‘Disputes’) asserted or brought by or on behalf of Eastern Shore Children's Clinic shall be RESOLVED EXCLUSIVELY BY BINDING ARBITRATION administered by the American Arbitration Association (the ‘AAA’) in accordance with the Commercial Arbitration Rules of the AAA then in effect...."

(Capitalization in original.)

Thereafter, Wiggins and Warren Averett became involved in a billing dispute related to the preparation of Wiggins's personal income-tax returns. In 2017, Wiggins filed in the trial court a single-count complaint alleging "accounting malpractice" against Warren Averett. More specifically, Wiggins alleged that Warren Averett had breached the applicable standard of care in connection with its preparation of Wiggins's personal tax returns by wrongfully disclosing his "personal confidential financial information" to Eastern Shore, which allegedly resulted in Wiggins's being ousted as a shareholder/employee.

Warren Averett filed an answer to Wiggins's complaint, asserting, among other things, that Wiggins's claims were based on the contract and were thus subject to the arbitration clause. Warren Averett later filed a motion seeking to stay and/or dismiss Wiggins's action and to compel arbitration, arguing that the contract involved interstate commerce and further asserting that Wiggins was a third-party beneficiary to the contract and was, therefore, subject to its terms, including the arbitration clause. The motion was supported by, among other exhibits, an affidavit from an employee of Warren Averett and by a copy of the contract. In his response, Wiggins conceded that the contract involved interstate commerce but argued that it applied only to claims made by or on behalf of Eastern Shore against Warren Averett and not to personal claims of Eastern Shore's shareholders, individually, against Warren Averett. His response also included, as evidentiary support, a copy of the contract and an amended complaint.

The trial court subsequently granted Warren Averett's motion and compelled the parties to arbitrate; Wiggins appeals.²

Standard of Review

" ‘ "[T]he standard of review of a trial court's ruling on a motion to compel arbitration at the instance of eitherparty is a denovo determination of whether the trial judge erred on a factual or legal issue to the substantial prejudice of the party seeking review." Ex parte Roberson, 749 So. 2d 441, 446 (Ala. 1999). Furthermore:

" ‘ "A motion to compel arbitration is analogous to a motion for summary judgment. TranSouth Fin. Corp. v. Bell, 739 So. 2d 1110, 1114 (Ala. 1999). The party seeking to compel arbitration has the burden of proving the existence of a contract calling for arbitration and proving that that contract evidences a transaction affecting interstate commerce. Id. ‘After a motion to compel arbitration has been made and supported, the burden is on the non-movant to present evidence that the supposed arbitration agreement is not valid or does not apply to the dispute in question.’ "

" ‘ Fleetwood Enters., Inc. v. Bruno, 784 So. 2d 277, 280 (Ala. 2000) (quoting Jim Burke Auto., Inc. v. Beavers, 674 So. 2d 1260, 1265 n. 1 (Ala. 1995) (emphasis omitted)).’ " Vann v. First Cmty. Credit Corp., 834 So. 2d 751, 752–53 (Ala. 2002)."

Elizabeth Homes, L.L.C. v. Cato, 968 So. 2d 1, 3 (Ala. 2007).

Discussion

On appeal, Wiggins concedes that he is a third-party beneficiary to the contract but reasserts his argument that the language of the arbitration clause is narrow and its application is restricted to claims "by or on behalf of Eastern Shore," thus excluding from its scope his own dispute with Warren Averett. Warren Averett argues, on the other hand, that, because of the incorporation into the arbitration clause of the Commercial Arbitration Rules of the American Arbitration Association ("the AAA rules"), a determination of whether the arbitration clause applies to Wiggins's claims is for an arbitrator--and not the court--to decide. Thus, according to Warren Averett, the trial court properly compelled arbitration.³ We agree.

Wiggins's argument involves an issue of "substantive arbitrability." Substantive arbitrability, or simply "arbitrability," includes issues regarding the "scope" of an arbitration provision. Regions Bank v. Rice, 209 So. 3d 1108, 1110 (Ala. 2016) ("[D]isputes regarding the ... scope of an arbitration provision ... are issues of substantive arbitrability ...."). The "scope" of an arbitration provision includes whether a particular claim or dispute falls within the language of what the provision requires to be arbitrated. See, e.g., Eickhoff Corp. v. Warrior Met Coal, LLC, 265 So. 3d 216, 225 (Ala. 2018) (holding that the issue whether a dispute over defective mining equipment was included under the terms of an arbitration provision was an issue of arbitrability), and Regions Bank, 209 So. 3d at 1109 (holding that whether the plaintiff's slip-and-fall claim was within the scope of an arbitration provision was a question of arbitrability). Additionally, our caselaw holds that whether the scope of an arbitration provision applies to nonparties or nonsignatories to an arbitration provision is also a question of arbitrability. See, e.g., Anderton v. The Practice-Monroeville, P.C., 164 So. 3d 1094, 1101 (Ala. 2014) ("The question whether an arbitration provision may be used to compel arbitration of a dispute between a nonsignatory and a signatory is a question of substantive arbitrability ...."), and MTA, Inc. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 114 So. 3d 27, 32 (Ala. 2012) (describing whether the language of an arbitration provision was limited to signatories as an issue of the "scope" of the provision). Thus, we have held, "substantive arbitrability addresses both whether the nonsignatories ... can enforce the agreement to arbitrate and whether the claims at issue are encompassed by the arbitration provision." Carroll v. Castellanos, 281 So. 3d 365, 370 (Ala. 2019).

A court generally makes the "threshold" or "gateway" determination of arbitrability; however, there is an exception when the arbitration provision itself requires that the arbitrator make the decision:

"[D]isputes regarding the validity and scope of an arbitration provision ... are issues of substantive arbitrability, and generally such issues are decided by a court. However, there is an important exception to that general rule. Gateway questions of substantive arbitrability may be delegated to the arbitrator if the delegation is clear and unmistakable."

Regions Bank, 209 So. 3d at 1110. Who decides issues of substantive arbitrability--the court or the arbitrator--must necessarily be decided before the actual issue of arbitrability, such as a challenge to the scope of the arbitration provision, is determined.

When an arbitration provision indicates that the AAA rules will apply to the arbitration proceedings, we have held that it is "clear and unmistakable" that substantive-arbitrability decisions are to be made by the arbitrator; this includes the decision whether the arbitration provision may be enforced against a nonsignatory to the contract:

"[T]he arbitration provision in this case provides that any arbitration proceedings will be conducted ‘pursuant to the then-prevailing commercial arbitration rules of the American Arbitration Association.’ The relevant commercial arbitration rule, Rule 7(a), expressly provides, in its current form, that ‘[t]he arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement or to the arbitrability of any claim or counterclaim.’ See Chris Myers Pontiac–GMC, Inc. v. Perot, 991 So. 2d 1281, 1284 (Ala. 2008) (noting that we may take judicial notice of the commercial arbitration rules of the American Arbitration Association even when they do not appear in the record). Thus, pursuant to Rule 7(a), ... the question of whether the arbitration provision may be enforced against a nonsignatory ... ha[s] been delegated to the arbitrators, and the arbitrators, not the trial court, must decide those threshold issues."

Federal Ins. Co. v. Reedstrom, 197 So. 3d 971, 976 (Ala. 2015). See also Eickhoff, 265 So. 3d at 222 ; Managed Health Care Admin., Inc. v. Blue Cross & Blue Shield of Alabama, 249 So. 3d 486, 493 (Ala. 2017) ; Bugs "R" Us, LLC v. McCants, 223 So. 3d 913, 919 (Ala. 2016) ; Anderton, 164 So. 3d at 1102 ; and CitiFinancial Corp., L.L.C. v. Peoples, 973 So. 2d 332, 340 (Ala. 2007).

Wiggins is undisputedly a third-party beneficiary of the...