Case Title: ALLMERICA FINANCIAL LIFE INS. v. Miller

Citation: 775 So. 2d 132

Docket Number: 1980529, 1980530

State: alabama

Court: Alabama Supreme Court

Date: 2000-06-23T00:00:00Z

Document:
775 So. 2d 132 (2000)
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
v.
William A. MILLER.
Nowlin & Associates
v.
William A. Miller.
1980529 and 1980530.

Supreme Court of Alabama.
June 23, 2000.
*133 James A. Kee, Jr., Michael L. Jackson, and Mark M. Hogewood of Wallace, Jordan, Ratliff & Brandt, L.L.C., Birmingham, for appellant Allmerica Financial Life Insurance and Annuity Company.
Kenneth O. Simon and Laura E. Proctor of Simon Borden, Birmingham, for appellant Nowlin & Associates.
David H. Marsh, Jeffrey C. Rickard, and Thomas M. Powell of Marsh, Rickard & Bryan, P.C., Birmingham, for appellee.
HOUSTON, Justice.[1]
William A. Miller was employed, through Nowlin & Associates, as an agent for Allmerica Financial Life Insurance and Annuity Company ("Allmerica").[2] Allmerica is a member of the National Association of Securities Dealers ("NASD"); Nowlin & Associates is not a member of NASD. Miller sued Allmerica and Nowlin & Associates, alleging various wrongs arising out of the terms of his employment. Specifically, Miller's complaint alleged that he had become a top seller of an insurance product called Payroll Exceptional Life ("PEL"); that he had been promised vested commissions for selling the PEL; that Allmerica had sold the PEL product line to American Hermitage Life Insurance Company; and that by selling the PEL product line Allmerica had severed Miller's vested commissions. These allegations constituted the factual basis of his seven-count complaint.[3]
Allmerica and Nowlin & Associates asked the trial court to compel arbitration of Miller's claims, pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq. The underlying arbitration agreement is found in the application Miller signed to become a registered securities agent; that application is styled "Uniform Application for Securities Industry Registration or Transfer" ("Form U-4"). Form U-4 requires Miller to arbitrate "any disputes, claim or controversy that may arise between me and my firm, or a customer, or any other person, that is required to be arbitrated under the rules, constitutions, or by-laws of [NASD]." However, § 10101 of the NASD Code of Arbitration[4] excepts from arbitration matters involving "the insurance business of any member who is also an insurance company." Relying on our decision in Ex parte Hagan, 721 So. 2d 167 (Ala.1998), the trial court refused to compel arbitration. In Hagan we held that a lawsuit filed by an insurance agent with claims factually similar to Miller's involved the "insurance business" and fell within the exception to § 10101.[5] By so holding, we overturned the trial court's order compelling arbitration.
The significant issues in these appeals are (1) whether the trial court correctly concluded that Miller's claims are excepted by § 10101 of the NASD Code, as defined in Hagan, and, if so, (2) whether Hagan should be overruled on the ground that it *134 makes too broad an interpretation of § 10101. Before we address those two issues, however, we must consider whether Allmerica and Nowlin & Associates have standing to enforce the arbitration clause found in Form U-4.
Nowlin & Associates is not a member of NASD.[6] To determine what legal effect its nonmembership has on its demand for arbitration, we must look to the NASD Code of Arbitration. Section 10101 of that Code, "Matters Eligible for Submission," provides for the arbitration of:
In Hagan, we considered whether a nonmember corporation, like Nowlin & Associates, could be a "person associated with a member":
Ex Parte Hagan, 721 So. 2d  at 169. Nowlin & Associates is not a member; it is not a person associated with a member; and it is not an associated person of a member; therefore, it does not have standing to compel arbitration. We affirm the trial court's refusal to compel arbitration of the dispute between Miller and Nowlin & Associates.
Unlike Nowlin & Associates, Allmerica is a registered member of NASD. Therefore, under the rules cited above, Allmerica has standing to enforce the arbitration agreement, provided the matter to be arbitrated does not fall within the exception found in § 10101. See SouthTrust Securities, Inc. v. McClellan, 730 So. 2d 620 (Ala.1999) (compelling arbitration under the FAA and the NASD Code of Arbitration when the plaintiff had signed a Form U-4).[7] This brings us to the first issue stated earlier: Is the underlying dispute a matter involving Allmerica's insurance business and thus excepted from the arbitration provision?
In Hagan, we answered a similar question by holding that the exception of § 10101 applies to members who are insurance companies. 721 So. 2d  at 171 (holding that the "exception applies because of Minnesota Mutual's status as an insurance *135 company"). We based this holding on the following rationale:
Ex parte Hagan, 721 So. 2d 167, at 171-73 (Ala.1998). (Footnotes omitted.) (Emphasis omitted.) Based on this Court's decision in Hagan, we hold that Miller's claims involve the insurance business of Allmerica; that the claims fall under the exception stated in § 10101; that the trial court correctly relied on precedent from this Court; and, therefore, that the judgment of the trial court is due to be affirmed.
Allmerica recognizes the precedent of Hagan, but asks us to overturn it, based upon the following cases: Mouton v. Metropolitan *137 Life Ins. Co., 147 F.3d 453 (5th Cir.1998); In re Prudential Ins. Co. of America Sales Practice Litigation All Agent Actions, 133 F.3d 225 (3d Cir.), cert. denied sub nom. Weaver v. Prudential Ins. Co. of America, 525 U.S. 817, 119 S. Ct. 55, 142 L. Ed. 2d 43 (1998); Armijo v. Prudential Ins. Co. of America, 72 F.3d 793 (10th Cir.1995); Kidd v. Equitable Life Assurance Soc'y of the United States, 32 F.3d 516 (11th Cir.1994); Paul Revere Variable Annuity Ins. Co. v. Zang, 81 F. Supp. 2d 227 (D.Mass.2000); Brannon v. Massachusetts Mut. Life Ins. Co., No. CIV A. 99-3497 (E.D.La., Jan. 31, 2000) (not published in F.Supp.); Paul Revere Variable Annuity Ins. Co. v. Thomas, 66 F. Supp. 2d 217 (D.Mass.1999); Palmer-Scopetta v. Metropolitan Life Ins. Co., 37 F. Supp. 2d 1364 (S.D.Fla.1999); Herko v. Metropolitan Life Ins. Co., 978 F. Supp. 141 (W.D.N.Y.1997); Battle v. Prudential Ins. Co., 973 F. Supp. 861 (D.Minn.1997); Jankauskas v. Prudential Ins. Co. of America, No. Civ. A. 97-985 (E.D.Pa. May 6, 1997) (not published in F.Supp.); Cular v. Metropolitan Life Ins. Co., 961 F. Supp. 550 (N.D.N.Y.1997); Neary v. Prudential Ins. Co. of America, No. 3:96CV1513 (D.Conn., Feb. 24, 1997) (not published in F.Supp.); Vitone v. Metropolitan Life Ins. Co., 943 F. Supp. 192 (D.R.I.1996); Weinstein v. Equitable Life Assurance Soc'y of the United States, No. CIV. A. 96-CV-3614 (E.D.La. Sept. 26, 1996) (not published in F.Supp.); Pitter v. Prudential Life Ins. Co., 906 F. Supp. 130 (E.D.N.Y.1995); Wojcik v. Aetna Life Ins. & Annuity Co., 901 F. Supp. 1282 (N.D.Ill.1995), clarified by 916 F. Supp. 729 (N.D.Ill.1996); Hall v. MetLife Resources, No. 94 Civ. 0358 (S.D.N.Y., May 3, 1995) (not published in F.Supp.); Trumbetta v. Metropolitan Life Ins. Co., Civ. A. No. 94-3275 (E.D.Pa., 1994) (not published in F.Supp.); Prudential Ins. Co. v. Shammas, 865 F. Supp. 429 (W.D.Mich.1993); Northwestern Mut. Life Ins. Co. v. Stinnett, 698 N.E.2d 339 (Ind. Ct.App.1998); Fastenberg v. Prudential Ins. Co. of America, 309 N.J.Super. 415, 707 A.2d 209 (App.Div.1998).
We are not persuaded that we should overrule Hagan.
AFFIRMED.
COOK, LYONS, BROWN, JOHNSTONE, and ENGLAND, JJ., concur.
HOOPER, C.J., and MADDOX and SEE, JJ., concur in part and dissent in part.
SEE, Justice (concurring in part and dissenting in part).
I concur in the affirmance of the trial court's order denying Nowlin & Associates' motion to compel arbitration. I dissent from the affirmance of the trial court's order denying Allmerica Financial Life Insurance and Annuity Company's motion to compel arbitration.
In denying Allmerica's motion to compel arbitration, the trial court relied on Ex parte Hagan, 721 So. 2d 167 (Ala.1998). In Hagan, this Court held that an employment dispute with an insurance company necessarily involves the insurance business of that company and therefore comes within the insurance business exception under § 10101 of the Code of Arbitration of the National Association of Securities Dealers. The holding of Hagan is contrary to the clear majority of cases, as cited in the main opinion.[8] I would overrule Hagan and, in accordance with the clear majority of authority, hold that plaintiff William A. Miller's employment dispute with Allmerica *138 does not involve the business of insurance and is therefore arbitrable. Accordingly, I dissent.
HOOPER, C.J., and MADDOX, J., concur.
[1]  This case was originally assigned to another Justice on this Court; it was reassigned to Justice Houston on April 21, 2000.
[2]  When Miller entered into the "Career Agent's Agreement," Allmerica was known as SMA Life Assurance Company.
[3]  Count 1 alleged breach of contract; Count 2 alleged deceit; Count 3 alleged misrepresentation or suppression; Count 4 alleged negligent, reckless, wanton, and/or wrongful behavior; Count 5 alleged fraudulent deceit; Count 6 alleged suppression of a material fact; and Count 7 alleged intentional interference with Miller's business.
[4]  This code was adopted by NASD pursuant to Art. VII, § 1(a)(3), of its bylaws.
[5]  In Hagan, the insurance agent's complaint alleged libel, fraud in the inducement, fraudulent concealment, and breach of contract against three companies that had hired him to sell insurance policies and that had subsequently terminated his employment.
[6]  Nowlin & Associates has never filed a Form U-4 to become a member of NASD. The record indicates that Charles Nowlin, as an individual, has filed a Form U-4, but that Nowlin & Associates, a separate legal entity, has not filed a Form U-4.
[7]  SouthTrust Securities did not involve the insurance exception.
[8]  As one of the authorities cited in the main opinion states: "The fact that [the defendant] is an insurance company does not automatically mean that a dispute involves its `insurance business.' To the contrary, courts have almost universally held that being employed by an insurance company is not enough to trigger the exception and instead examine the degree to which the pending claim is entangled with the company's insurance business." Paul Revere Variable Annuity Ins. Co. v. Thomas, 66 F. Supp. 2d 217, 228 (D.Mass.1999) (citations omitted).