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Sadiq Ali v. Williamson

Supreme Court of Alabama

November 22, 2019

Muhammad Wasim Sadiq Ali
v.
Mike Williamson

          Appeal from Jefferson Circuit Court (CV-14-900197)

          STEWART, Justice.

         This case challenges a default judgment entered by the Jefferson Circuit Court ("the trial court") against Muhammad Wasim Sadiq Ali and others in favor of Mike Williamson after a case ordered to private arbitration was remanded to the trial court. Ali contends that the default judgment is void because, he says, the trial court lacked personal jurisdiction over him. We agree, and we reverse and remand.

         Facts and Procedural History

         On January 10, 2014, Williamson filed a complaint in the trial court against RPM Cranes, LLC ("RPM"), asserting claims of breach of contract, unjust enrichment, conversion, unreasonable restraint of trade, and misrepresentation arising from his alleged ownership of, his employment with, and the termination of that employment with RPM.[1] The complaint contained the following factual allegations. Williamson, Patrick Watson, Ali, and others formed RPM, a regional supplier of rental cranes based in Birmingham, in 2008. Williamson was employed as RPM's general manager. Ali was the primary investor and majority owner of RPM, and Ali and Watson allegedly represented to Williamson at the time RPM was formed that Williamson would own a 12% share of the company. In 2012, Watson and Ali told Williamson that, in order to accrue his 12% equity interest in RPM at the end of his five-year employment term, he needed to pay $1, 000, 000, and that, if

          Williamson could not pay, his employment would be terminated unless he signed an employment agreement. On March 27, 2012, Williamson signed an employment agreement with RPM. The agreement contained an arbitration clause, which provided, in part, that "[a]ny disputes arising under or in connection with this Agreement will be resolved by final and binding arbitration in Birmingham, Alabama, in accordance with the rules and procedures of the American Arbitration Association." The employment agreement also contained a noncompetition clause that prohibited Williamson, for two years following the termination of his employment with RPM, from competing with RPM and from being employed by any business that is in competition with RPM. In 2013, a dispute between Williamson and RPM arose concerning Williamson's insurance coverage with respect to RPM vehicles, and Watson instructed Williamson to obtain an insurance policy in the amount of $5, 000, 000 naming RPM as an additional insured. On May 13, 2013, RPM terminated Williamson's employment "for cause," citing his failure to obtain an appropriate certificate of insurance. Ali and Watson were not named as defendants in Williamson's original complaint. On February 18, 2014, RPM filed a motion in the trial court to stay the proceedings and to compel arbitration of all claims asserted against it by Williamson. The trial court entered an order granting RPM's motion and staying the trial-court proceedings pending the outcome of the arbitration proceedings.

         On November 7, 2014, Williamson filed a document in the arbitration proceedings titled "amended claim," in which Williamson purported to add Ali and Watson as opposing parties in the arbitration proceedings and to assert the same claims against them that he asserted against RPM in the original complaint. RPM's attorney agreed to accept service of the amended claim in the arbitration proceedings on behalf of Ali and Watson. RPM, Ali, and Watson filed an answer in the arbitration proceedings, and they also filed a counterclaim in the arbitration proceedings against Williamson, asserting claims of breach of fiduciary duty, breach of contract, and tortious interference with business relations. On June 23, 2015, RPM filed in the trial court a notice of filing of bankruptcy, and the trial court later granted RPM's counsel's motion to withdraw as counsel. According to the submissions of the parties in the trial court, the United States Bankruptcy Court for the Northern District of Alabama dismissed RPM's bankruptcy petition on February 10, 2016, without granting RPM a discharge.

         On July 28, 2016, Williamson filed a motion in the arbitration proceedings requesting the arbitrator to dismiss the arbitration proceedings and to remand the case back to the trial court, stating that RPM, Ali, and Watson had abandoned the arbitration proceedings and had failed to defend the claims asserted against them. In that motion, Williamson stated that on April 13, 2016, the United States District Court for the Northern District of Alabama sentenced Ali to 36 months' incarceration in a federal penitentiary for an unrelated criminal conviction. On August 23, 2016, the arbitrator granted Williamson's motion, stating that "this arbitration proceeding is hereby dismissed for failure of [RPM, Ali, and Watson] to engage in the arbitration proceedings at the instance of [RPM]. This case is therefore remanded to the Circuit Court." The arbitrator's order was not filed with the trial court until it was submitted as an exhibit to a motion filed by Williamson on March 22, 2017.

         On February 15, 2017, Williamson filed a motion in the trial court for a default judgment against RPM, Ali, and Watson. Ali and Watson were not listed as defendants in the trial-court action when Williamson filed the motion. Nonetheless, Williamson asserted in his motion that,

"[s]ince the referral [to arbitration], [RPM, Ali, and Watson] have willfully failed to engage in the litigation process. Moreover, [RPM, Ali, and Watson] have made no effort to retain any new counsel to defend them in these proceedings. Finally, [RPM, Ali, and Watson] have failed to appear before this Court at any scheduled status conference hearing. Thus, it appears that [RPM, Ali, and Watson] do not intend to defend [Williamson's] claims in the instant proceedings. Accordingly, default judgment is due to be entered against [RPM, Ali, and Watson]."

         On March 21, 2017, the trial court entered a default judgment against RPM, Ali, and Watson and in favor of Williamson in the amount of $1, 000, 000. On the same day, the trial court entered an order vacating its default judgment without explanation.

         On March 22, 2017, Williamson filed a motion in the trial court seeking to "correct the circuit clerk's record in accordance with [the] remanded arbitration proceedings." In that motion, Williamson sought to add Ali and Watson as defendants in the trial-court proceedings on the grounds that Ali and Watson had been served with the amended claim in the arbitration proceedings and had appeared in the matter by filing an answer in the arbitration proceedings. On March 23, 2017, the trial court entered an order directing the circuit clerk to add Ali and Watson as defendants in the trial-court case. According to the case-action summary, the circuit-court clerk, pursuant to the trial court's order, added Ali and Watson as parties on March 24, 2017; however, in the party-information portion of the case-action summary, the address fields for Ali and Watson were left blank. Nothing in the record indicates that service of process was attempted on Ali or Watson after the entry of the trial court's March 23, 2017, order. On March 28, 2017, at 9:14 a.m., Williamson filed an amended complaint with the trial court adding Ali and Watson as defendants. The amended complaint mirrored the amended claim Williamson had filed in the arbitration proceedings in 2014. On the same day at 9:15 a.m., Williamson filed a motion in the trial court seeking permission to serve Ali and Watson with the amended complaint by publication pursuant to Rule 4.3, Ala. R. Civ. P. In support of the motion, Williamson attached the affidavit of his attorney, Joseph P. Schilleci, Jr., which included the following averments:

"1. Each of the defendants [was] originally served with process for the amended complaint filed against them in the prior arbitration proceedings of this case. Moreover, each of the defendants answered said amended claim at that time. However, since those events, the defendants have each refused to participate in this litigation both at arbitration and before this court.
"....
"3. In addition, in 2015, the United States government charged [Ali] with multiple charges that resulted in him pleading guilty and receiving a sentence of 36 months incarceration. [Ali] is currently an inmate in the ...

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