Appeal
from Madison Circuit Court (CV-17-900803)
Bryan,
Justice.
This
appeal concerns who has the power to determine the location
of an arbitration proceeding -- an arbitrator or the Madison
Circuit Court. We conclude that, under the facts of this
case, the arbitrator has that power; thus, we reverse and
remand.
In
2015, KPS, LLC, a/k/a KP Sourcing, LLC ("Kroger"),
entered into a contract ("the prime contract") with
Omni Construction Company, Inc., a/k/a OCC, Inc.
("Omni"), in which Omni agreed to build a grocery
store for Kroger in Madison, Alabama. Omni then entered into
a subcontract ("the subcontract") with Alliance
Investment Company, LLC ("Alliance"), in which
Alliance agreed to perform concrete work on the construction
project. A dispute later arose regarding the payment owed
Alliance for its work on the project, and Alliance
subsequently sued both Kroger and Omni in the circuit court,
alleging several claims. Kroger and Omni jointly filed a
motion to stay the circuit-court proceedings and to compel
arbitration of Alliance's claims. The prime contract and
the subcontract each contain an arbitration provision; in
moving to compel arbitration, Kroger and Omni cited both
arbitration provisions. Alliance did not oppose the motion to
compel arbitration. On August 28, 2017, the circuit court
stayed the circuit-court proceedings and ordered the parties
to arbitrate the case "in accordance with the terms of
their agreements."
Alliance
subsequently filed a demand for arbitration with the American
Arbitration Association ("the AAA"). A dispute then
arose regarding where the arbitration proceedings should he
held. Alliance, an Alabama company, contended that the
arbitration proceedings should be held in Alabama, while
Kroger and Omni, which are both based in Ohio, contended that
the arbitration proceedings should be held in Cuyahoga
County, Ohio. Alliance argued that its claims are governed by
a section of the arbitration provision in the subcontract
regarding disputes that involve some aspect of the prime
contract. That section requires such disputes to be resolved
under the arbitration provision in the prime contract. The
prime contract in turn requires disputes to be arbitrated in
Alabama. However, Kroger and Omni argued that the claims are
governed by a separate section of the arbitration provision
in the subcontract that requires disputes to be arbitrated in
Cuyahoga County, Ohio. On January 3, 2018, the AAA made an
administrative determination that the arbitration would be
held in Alabama and provided the parties with a list of
potential arbitrators. Shortly thereafter, Kroger and Omni
asked the AAA to reconsider its decision. On January 10,
2018, the AAA informed the parties that its administrative
determination regarding the location of the arbitration
proceedings would be subject to review by the arbitrator.
However,
on January 11, 2018, before the case could proceed to an
arbitrator, Kroger and Omni filed in the circuit court a
motion titled "Emergency Motion to Clarify Order
Compelling Arbitration." In that motion, Kroger and Omni
argued that the subcontract requires that the claims be
arbitrated in Ohio. They further argued that the provision in
the prime contract requiring arbitration to be held in
Alabama is irrelevant. Accordingly, Kroger and Omni asked the
circuit court to order the parties to arbitrate in Ohio. On
January 22, 2018, the circuit court ordered that the
arbitration proceedings be held in Ohio. In that order, the
circuit court purported to amend its earlier order compelling
arbitration. Alliance then appealed to this Court.
This
Court reviews de novo an order granting or denying a motion
to compel arbitration. Cartwright v. Maitland, 30
So.3d 405, 408 (Ala. 2009). "'[A]rbitration is a
matter of contract and a party cannot be required to submit
to arbitration any dispute which he has not agreed so to
submit.'" AT & T Techs., Inc. v.
Communications Workers of America, 475 U.S. 643, 648
(1986) (quoting United Steelworkers of America
v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582
(1960)). "[A]rbitrators derive their authority to
resolve disputes only because the parties have agreed in
advance to submit such grievances to arbitration."
AT & T, 475 U.S. at 648-49.
On
appeal, Alliance argues that the circuit court lacked the
authority to order, in its order of January 22, 2018, that
the arbitration be held in Ohio. With respect to this
argument, it is useful to discuss the procedural
underpinnings of the circuit court's orders. Rule 4(d),
Ala. R. App. P., provides that an order granting or denying a
motion to compel arbitration is "appealable as a matter
of right." Thus, as this Court stated in Bowater,
Inc. v. Zager, 901 So.2d 658, 667 (Ala. 2004), an order
granting or denying a motion to compel arbitration is
"due recognition as a 'judgment' under Rule
54(a), Ala. R. Civ. P." Therefore, the circuit
court's order of August 28, 2017, compelling arbitration
is a judgment under the Alabama Rules of Civil Procedure. Of
course, the finality of judgments is important, and a circuit
court may revisit a final judgment only in accordance with
the proper procedures for doing so; Alliance contends that
those procedures were not followed here. Alliance argues that
Kroger and Omni's "Emergency Motion to Clarify Order
Compelling Arbitration" is in substance an untimely Rule
59(e), Ala. R. Civ. P., motion seeking to amend the August
28, 2017, judgment compelling arbitration. A Rule 59(e)
motion to alter, amend, or vacate a judgment must be filed no
later than 30 days after the entry of the judgment; Kroger
and Omni filed their motion 136 days after the entry of the
judgment compelling arbitration. Kroger and Omni counter that
their motion was not a Rule 59(e) motion; rather, they say,
it was a motion seeking a "clarification" of the
judgment compelling arbitration that would not be subject to
the 30-day time limit found in Rule 59(e). Although Kroger
and Omni argue that the circuit court had the authority
simply to clarify the order compelling arbitration, Alliance
argues that the circuit court impermissibly amended the order
compelling arbitration in response to an untimely Rule 59(e)
motion. See, e.g., George v. Sims,
888 So.2d 1224, 1227 (Ala. 2004) (discussing the limits of a
trial court's power to revisit a judgment and reversing a
circuit court's order purporting to modify a judgment
when the order was not entered in response to a timely
postjudgment motion).
However,
as Alliance further argues, regardless of how the order of
January 22, 2018, is characterized, the circuit court lacked
the authority to order the parties to arbitrate in Ohio for a
separate reason. It is undisputed that the AAA's
Construction Industry Arbitration Rules govern the
arbitration in this case. Both the prime contract and the
subcontract provide that disputes must be decided under the
Construction Industry Arbitration Rules. Rule 9(a) of the
Construction Industry Arbitration Rules provides 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." At its core, the dispute here concerns the
scope of the arbitration provisions in the prime contract and
the subcontract. In sum, Alliance argued to the AAA and later
to the circuit court that its claims are governed by a
section of the arbitration provision in the subcontract
regarding disputes that involve some aspect of the prime
contract. That section provides that the arbitration of such
disputes must be held pursuant to the arbitration provision
in the prime contract, which requires that the arbitration
proceedings be held in Alabama. Kroger and Omni, however,
maintained that the section cited by Alliance does not apply
and that Alliance's claims are actually governed by a
separate section of the arbitration provision in the
subcontract requiring that the arbitration proceedings be
held in Ohio. Which argument is correct is not for this Court
or the circuit court to decide; rather, that is an issue for
the arbitrator to decide under Rule 9(a) of the Construction
Industry Arbitration Rules. The circuit court lacked the
authority to order that the arbitration proceedings be held
in Ohio.
Kroger
and Omni argue that the circuit court's exercise of
authority in its January 22 order is supported by
Sterling Financial Investment Group, Inc. v. Hammer,
393 F.3d 1223 (11th Cir. 2004). In that case, agreements
between an employer and its employee contained provisions
that plainly required that arbitration of disputes be held in
Florida. After the employer fired the employee, the employee
initiated arbitration proceedings against the employer with
the National Association of Securities Dealers ("the
NASD"). Despite the arbitration provisions calling for
the arbitration proceedings to be held in Florida, the NASD
assigned the arbitration to a panel in Texas, at the
employee's request and over the employer's objection.
The employer then filed a motion in the federal district
court asking that court to compel arbitration in Florida,
pursuant to the terms of the arbitration provisions. The
district court granted the employer's motion, and the
employee appealed to the United States Court of Appeals for
the Eleventh Circuit. That court determined that the NASD had
disregarded the requirement in the arbitration provisions
that the arbitration proceedings be held in Florida.
Accordingly, the court concluded that the arbitration must be
held in Florida.
We note
that this Court addressed Sterling Financial in
Ex parte Johnson, 993 So.2d 875 (Ala. 2008). The
relevant issue in Johnson was whether an arbitrator
or a court should determine the availability of class-wide
arbitration. After mobile-home owners initiated arbitration
proceedings before the AAA against mobile-home companies, the
companies filed declaratory-judgment actions asking a circuit
court to determine whether class-wide arbitration was
available under the terms of the arbitration agreements. In
arguing to this Court that the circuit court could make that
decision, the companies cited Sterling Financial. In
response, this Court first noted that it "was not bound
by the decisions of the United States Courts of Appeals or
the United States District Courts." Johnson,
993 So.2d at 886. This Court then briefly distinguished the
facts of Johnson from the facts of Sterling
Financial. Id.[1]
Similarly,
we again note that we are not bound by Sterling
Financial. Moreover, this case is distinguishable from
Sterling Financial. In Sterling Financial,
the employee contended that, because both parties had agreed
that arbitration was appropriate, all decisions should be
made by an arbitrator. The federal district court in
Sterling Financial noted that the employee's
argument was bolstered by a rule of the NASD's Code of
Arbitration Procedure, which contained the governing rules in
that case. The relevant rule stated: "'The Director
shall determine the time and place of the first meeting of
the arbitration panel and the parties'" and
"'[t]he arbitrators shall determine the time and
place for all subsequent meetings.'" 393 F.3d at
1225. However, there was no reference in Sterling
Financial to an arbitration rule similar to the
controlling rule in this case -- Rule 9(a) of the AAA's
Construction Industry Arbitration Rules. Rule 9(a) broadly
grants the arbitrator "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." That rule is distinct from any rule
discussed in Sterling Financial in that it gives the
arbitrator the power to decide which provision controls
Alliance's claims, which in turn will determine whether
the arbitration will be held in Alabama or Ohio. We do not
find Sterling Financial to be persuasive.
Accordingly,
we reverse the circuit court's order of January 22, ...