Jimmy E. Nation et al.
Lydmar Revocable Trust
from Jefferson Circuit Court (CV-14-905312)
E. Nation, Oliver D. McCollum, James P. Pickle, James W.
Nation, Micah J. Nation, and Benjamin J. Chemeel II
(hereinafter collectively referred to as "the
defendants") appeal the Jefferson Circuit Court's
denial of their motion to compel arbitration of a
breach-of-contract claim filed against them by the Lydmar
Revocable Trust ("Lydmar").
and Procedural History
owned a 75% membership interest in Aldwych, LLC. On March 27,
2008, Lydmar and the defendants entered into an agreement
("the agreement") pursuant to which Lydmar agreed
to sell its membership interest in Aldwych, LLC, to the
defendants for a purchase price of $1, 550, 000. The
defendants paid Lydmar $900, 000 at the time the agreement
was executed and simultaneously executed two promissory notes
for the balance of the purchase price.
agreement contains a section entitled "Arbitration,
" which states:
"16.1 This Agreement provides for binding arbitration,
which is the final, exclusive and required forum for the
resolution of all disputes that may occur between the parties
... that are based on a 'legal claim.' If the dispute
cannot be resolved and the matter is based upon a legal
claim, the parties ... may initiate the arbitration process
at any time, even if suit has already been filed. A dispute
is based upon a 'legal claim' and is subject to this
agreement if it arises or involves a claim under any federal,
state or local statute, regulation, or common law doctrine.
"16.2 The rules and procedures to be used by the parties
are based on the rules of the American Arbitration
Association ('AAA'). The parties hereto reserve the
right to mutually agree to modify or expand these rules and
"16.3 The arbitrator shall follow the rules of law of
the State of Alabama, any applicable Federal law, any
applicable statute of limitations, and any rules stated in
the Agreement. The arbitrator shall have the authority to
grant any remedy or relief that the arbitrator deems just and
equitable and which is consistent with applicable law.
"16.4 The expenses of witnesses or experts for either
side shall be paid by the party requiring the presence of
such witnesses. Each side shall pay its own legal fees and
"16.5 To the fullest extent available under the law, the
parties ... hereby waive their right to a trial before a jury
for a legal claim, even if a court holds the other provisions
of this Agreement unenforceable."
the promissory notes contain nearly identical arbitration
provisions to the one in the agreement.
December 31, 2014, Lydmar sued the defendants asserting that
the defendants had breached the agreement and the
accompanying promissory notes. Specifically, Lydmar alleged
that the defendants had breached their promises to repay the
notes by failing to make the required payments. On March 5,
2015, the defendants filed an answer to Lydmar's
complaint and asserted counterclaims alleging fraud, breach
of contract and/or failure of consideration, fraudulent
transfer of assets, and constructive trust.
request of the parties, the circuit court delayed setting the
matter for a bench trial until they had an opportunity to
resolve the case without a trial. The parties' attempts
failed. Accordingly, on May 31, 2016, the defendants filed a
motion to compel arbitration of Lydmar's
breach-of-contract claim. Lydmar did not file a response to
the defendants' motion to compel arbitration.
7, 2016, the circuit court granted the defendants' motion
to compel arbitration. The circuit court's order states,
in pertinent part: "The cou[rt] finds a valid
arbitration agreement governs the promissory note issues of
[Lydmar's] claims and allegations. Further, the
written agreement involves interstate commerce and is within
the provisions of the Federal Arbitration Act." The
circuit court further ordered the clerk of the circuit court
to place the case on the circuit court's administrative
docket "pending further orders of this court."
after the circuit court ordered the arbitration of
Lydmar's claim, neither the defendants nor Lydmar
initiated the arbitration process. Accordingly, on February
6, 2017, the defendants filed with the circuit court a motion
to dismiss Lydmar's breach-of-contract claim; the motion
was based on Lydmar's failure to initiate the arbitration
proceedings. The defendants argued that it was Lydmar's
responsibility to initiate the arbitration process and that
Lydmar had failed to take any action toward fulfilling its
responsibility to do so. Accordingly, citing Rule 41(b), Ala.
R. Civ. P., the defendants requested that Lydmar's claim
be dismissed without prejudice. On March 2, 2017, Lydmar
filed a response to the defendants' motion to dismiss.
Lydmar did not contest the existence of the arbitration
provisions requiring arbitration of its claim, but argued
only that, under the Commercial Arbitration Rules of the
American Arbitration Association ("AAA"), the
defendants, and not Lydmar, had the responsibility to
initiate the arbitration process. Because the defendants
failed to do so in a reasonable time, Lydmar argued, the case
was due to be returned to the active docket of the circuit
court so that Lydmar could litigate its claim against the
defendants in that court.
March 15, 2017, the circuit court denied the defendants'
motion to dismiss. In the same order, the circuit court
ordered the clerk of the circuit court to return the case to
the active docket. Although not expressly stated in the
order, it appears that the circuit court, by returning the
case to the active docket, effectively reversed its own order
entered on July 7, 2016, granting the defendants' motion
to compel arbitration. On March 22, 2017, the circuit court
entered a scheduling order setting the case for a bench trial
to occur during the week of June 5, 2017. The defendants
standard of review of a ruling on a motion to compel
arbitration is well settled:
"'"This Court reviews de novo the denial of a
motion to compel arbitration. Parkway Dodge, Inc. v.
Yarbrough, 779 So.2d 1205 (Ala. 2000). A motion to
compel arbitration is analogous to a motion for a 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 the
contract evidences a transaction affecting interstate
commerce. Id. '[A]fter 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.' Jim Burke Automotive, Inc. v.
Beavers, 674 So.2d 1260, 1265 n. 1 (Ala. 1995) (opinion
on application for rehearing)."'"
Chris Myers Pontiac-GMC, Inc. v. Perot, 991 So.2d
1281, 1282-83 (Ala. 2008) (quoting Elizabeth Homes,
L.L.C. v. Gantt, 882 So.2d 313, 315 (Ala. 2003), quoting
in turn Fleetwood Enters., Inc. v. ...