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09/23/94 GREGERSON'S FOODS INC. AN ALABAMA

September 23, 1994

GREGERSON'S FOODS, INC., AN ALABAMA CORPORATION


Appeal from Etowah Circuit Court. (CV-93-840). William H. Rhea III, TRIAL JUDGE.

Rehearing Denied November 4, 1994. Certiorari Denied March 10, 1995. Released for Publication June 30, 1995.

Holmes, Retired Appellate Judge

The opinion of the court was delivered by: Holmes

HOLMES, Retired Appellate Judge

Gregerson's Foods, Inc. (Gregerson's), filed the present action, wherein it requested that the trial court determine, under the terms of the agreement executed by the parties on June 15, 1992, whether the dispute between Gregerson's and FHL Capital Corporation (FHL) was subject to arbitration and whether FHL is entitled to compensation from Gregerson's.

FHL filed an answer, wherein it contended that the claims asserted by Gregerson's are subject to binding arbitration under the terms of the agreement between the parties and that FHL is entitled to compensation from Gregerson's. FHL also filed a motion to compel arbitration and a motion for an order staying the action pending arbitration. In addition, the affidavit of H. Jack Callaway IV, the managing director of FHL, was filed in support of the motion to compel arbitration, and the affidavit of Peter V. (Greg) Gregerson, Jr., the president of Gregerson's, was filed in opposition to the motion to compel arbitration.

The trial court held a hearing on the motion to compel arbitration. Thereafter, the trial court issued an order, compelling the parties to submit immediately to binding arbitration and staying further proceedings in the case pending arbitration.

Gregerson's filed a motion for reconsideration or, in the alternative, a motion for a new trial or, in the alternative, a motion to make the order a final appealable order pursuant to Rule 54(b), A.R. Civ. P. After a hearing, the trial court granted the motion to make the order a final appealable order pursuant to Rule 54(b) and denied the remaining motions.

Gregerson's appeals. This case is before this court pursuant to Ala. Code 1975, § 12-2-7(6).

The dispositive issue on appeal is whether the trial court erred when it issued its order compelling the parties to submit all claims arbitrable under the agreement executed on June 15, 1992, to binding arbitration.

On appeal Gregerson's contends that FHL waived its right to compel arbitration when it filed a cause of action in Jefferson County and that the trial court erred when it issued its order compelling arbitration because, according to Gregerson's, the parties did not contemplate substantial interstate commerce at the time that the agreement was executed.

In its first contention, Gregerson's is claiming that FHL waived its right to compel arbitration. In order to establish such a waiver, Gregerson's must meet a heavy burden. Ex parte McKinney, 515 So. 2d 693 (Ala. 1987). Gregerson's must prove not only that the litigation process was substantially invoked by FHL but also that this resulted in a substantial prejudice to Gregerson's. Ex parte McKinney, 515 So. 2d 693.

In its second contention, Gregerson's points out that under Alabama statutory and case law, predispute arbitration agreements are unenforceable unless federal law preempts state law. Ex parte Kent Corp., [Ms. 1930240, March 4, 1994] 641 So. 2d 242 (Ala. 1994). The Federal Arbitration Act (FAA) applies and preempts state law if the contract involved interstate commerce and contained an arbitration clause voluntarily executed by the parties. Ex parte Kent Corp., 641 So. 2d 242. In order to determine whether the FAA applies in a particular case, it must be determined whether the parties contemplated substantial interstate commerce at the time the agreement was executed. Ex parte Kent Corp., 641 So. 2d 242. Gregerson's contends that substantial interstate commerce was not contemplated by the parties at the time that the agreement was executed, while FHL contends that it was.

Our review of the record reveals the following pertinent facts: Gregerson's is a closely-held corporation, which operates several grocery stores in Alabama. FHL is an Alabama corporation designed to bring potential buyers and sellers of privately-owned businesses together. On June 15, 1992, ...


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