Jason Blanks et al.
TDS Telecommunications LLC, Peoples Telephone Company, Inc., and Butler Telephone Company, Inc.
from Cherokee Circuit Court (CV-18-900097)
Blanks, Peggy Manley, Kimberly Lee, Nancy Watkins, Randall
Smith, Trenton Norton, Earl Kelly, Jennifer Scott, and
Alyshia Kilgore (hereinafter referred to collectively as
"the customers") appeal from the denial of a motion
to compel arbitration and a declaratory judgment entered in
an action brought by TDS Telecommunications LLC, and its two
affiliates, Peoples Telephone Company, Inc., and Butler
Telephone Company, Inc. (hereinafter referred to collectively
as "the Internet providers"). In the
declaratory-judgment action, the trial court ruled that the
Internet providers are not required to arbitrate disputes
with the customers. We reverse and remand.
customers subscribe to Internet service furnished by the
Internet providers; their relationship is governed by a
written "Terms of Service."
customers allege that the Internet service they have received
is slower than the Internet providers promised them. At the
time the customers learned that their Internet service was
allegedly deficient, the Terms of Service contained an
arbitration clause providing that "any controversy or
claim arising out of or relating to [the Terms of Service]
shall be resolved by binding arbitration at the request of
either party." The arbitration clause also incorporated
the commercial arbitration rules of the American Arbitration
Association ("the AAA"). The customers'
attorney notified the Internet providers that he intended to
initiate AAA arbitration proceedings with respect to the
dispute regarding Internet speed.
after the Internet providers learned of the customers'
plan to arbitrate, the Internet providers updated the Terms
of Service. As part of the update, the arbitration clause was
modified. Among other things, the clause now states that all
disputes arising out of or relating to the Terms of Service
must be submitted to "JAMS" for
arbitration.Also included in the updated Terms of
Service, however, is a provision expressly stating that the
arbitration clause "does not apply to customers who
receive services in Alabama or Georgia, and [the Internet
providers] expressly [do] not consent to
arbitration of any dispute, claim or controversy--regardless
of when the dispute, claim, or controversy arose--for
customers who receive services in Alabama or
prior Terms of Service stated that the Internet providers
could modify the terms at any time and in any manner, that
such a modification becomes effective upon notice of the
modification to the Internet providers' customers, and
that the continued use of the Internet service constitutes
acceptance of the modification. The customers do not dispute
that, on the day the Terms of Service was updated, the
Internet providers gave them notice of the update. They also
do not dispute that they continued to use their Internet
service after they received that notice.
the updated Terms of Service and its provision excluding the
customers from arbitration, the customers indicated that they
would continue to press for arbitration. Indeed, after the
Terms of Service was updated, the customers filed arbitration
demands with the AAA.
customers have taken the position that, if the Terms of
Service is construed as allowing the Internet providers to
modify the applicability of the arbitration clause to
disputes that arose before the modification, the agreement
would be rendered illusory and unenforceable. Thus, the
customers argue that the Terms of Service should be read as
allowing modification of the arbitration clause only as to
disputes that arise after the modification.
Internet providers refused to participate in the arbitration
proceedings. They also filed an action requesting the trial
court to enter a judgment declaring that the updated Terms of
Service is valid and applicable to the customers' claims
regarding Internet speed and that the customers therefore
cannot force the Internet providers to arbitrate those
claims. In response to the Internet providers' complaint,
the customers filed a motion to compel arbitration. In that
motion, the customers argued that an arbitrator, not the
trial court, should decide whether the arbitration exclusion
in the updated Terms of Service is valid and applicable to
their dispute and, therefore, whether the Internet providers
should be required to arbitrate that dispute. The customers
relied on precedent indicating that the incorporation of AAA
rules into an arbitration agreement demonstrates intent to
delegate gateway issues of "arbitrability" to an
trial court entered a judgment denying the motion to compel
arbitration and "further adjudg[ing] that the modified
Terms of Service [is] valid and enforceable as of [the date
it was updated and notice was provided]." This appeal
followed. The parties agree that this Court's standard of
review is de novo. See Elizabeth Homes, L.L.C. v.
Gantt, 882 So.2d 313, 315 (Ala. 2003) (de novo standard
of review applies to the denial of a motion to compel
arbitration). See also Raley v. Main, 987 So.2d 569,
575 (Ala. 2007) (de novo standard of review applied to a
declaratory judgment that was based on documentary evidence
and undisputed facts).
party seeking to compel arbitration has the initial burden of
presenting evidence of the existence of a contract calling
for arbitration ...." Auto Owners Ins., Inc. v.
Blackmon Ins. Agency, Inc., 99 So.3d 1193, 1195 (Ala.
2012). The customers point to the prior version of the Terms
of Service, which contained an arbitration clause applicable
to disputes with all the Internet providers' customers
and which, the customers say, delegated issues of
arbitrability to an arbitrator. The Internet providers, on
the other hand, argue that the prior version of the Terms of