Title: Ex Parte Stewart

State: alabama

Issuer: Alabama Supreme Court

Document:

786 So. 2d 464 (2000)
Ex parte Hugh STEWART.
Ex parte Kameron Hyde.
(Re Hugh Stewart v. The Birmingham News Company; and Kameron Hyde v. The Birmingham News Company).
1990418 and 1990419.

Supreme Court of Alabama.
September 22, 2000.
Order Overruling Applications for Rehearing December 1, 2000.
*465 Leah O. Taylor of Taylor & Taylor, Birmingham (rehearing brief filed by Leah O. Taylor and Rhonda Pitts Chambers of Taylor & Taylor, Birmingham), for petitioners.
James P. Pewitt of Johnston, Barton, Proctor & Powell, L.L.P., Birmingham, for respondent.
PER CURIAM.
Hugh Stewart and Kameron Hyde, the plaintiffs in actions pending in the Jefferson County Circuit Court, have petitioned for a writ of mandamus directing the trial court to vacate its order compelling them to submit their claims to arbitration. We deny the writs.
The Birmingham News newspaper is published by The Birmingham News Company ("The News") and is sold through a mixed distribution system consisting of employees of The News and independent dealers ("Dealers") who are authorized to act as the exclusive distributors of the newspaper in specific geographical areas. The plaintiffs became Dealers by executing an "Independent News Dealer Agreement" (the "Agreement") with The NewsStewart in 1988 and Hyde in 1994. Pertinent portions of the Agreement read:
According to the plaintiffs, in 1997 The News made changes to its distribution system that adversely affected the Dealers' ability to function properly under the Independent News Dealer Agreement. For example, the plaintiffs contend that The News changed its customer-rating procedures in a way that caused Dealers to be held responsible for complaints about service problems over which they had no control. In 1998, The News notified the plaintiffs that their Agreements would not be renewed because, it said, complaints about their service "were at a totally unsatisfactory level."
Although the Agreement provided that either party could terminate it without cause by giving written notice 30 days before its expiration, the plaintiffs sued The News, each alleging that the Agreement obligated The News to act in good faith and to maintain a relationship with a Dealer as long the Dealer performed satisfactorily, and that the "unsatisfactory-performance" reason given for nonrenewal of their contracts was a pretext. The plaintiffs claimed that The News had engaged in a scheme designed to eliminate the Dealers and to obtain their distributorships (which, the plaintiffs allege, had become very profitable over the years), without compensation, in order to obtain the Dealers' profits and to establish a monopoly in the newspaper publishing and retaildistribution market. The plaintiffs alleged breach of contract, fraud, conspiracy, violation of Alabama's antitrust statute (Ala. Code 1975, § 6-5-60), unjust enrichment, tortious interference with a business relationship, and deceptive trade practices.
The News moved to stay the proceedings in the circuit court and to compel arbitration pursuant to Paragraph 10 of the Agreement. The plaintiffs opposed the motion. After a hearing on the motion, the trial court granted it and ordered *467 the parties to arbitrate. The plaintiffs now seek a writ of mandamus directing the trial court to vacate its order compelling arbitration of their claims against The News.
Mandamus is an extraordinary remedy and requires a showing of 1) a clear legal right in the petitioner to the order sought; 2) an imperative duty upon the respondent to perform, accompanied by a refusal to do so; 3) the lack of another adequate remedy; and 4) properly invoked jurisdiction of the court. When an appellate court engages in mandamus review of a trial court's order granting a motion to compel arbitration, the appellate court applies a de novo standard of review. See Ex parte Inverness Constr. Co., 775 So. 2d 153 (Ala.2000); Ex parte Stamey, 776 So. 2d 85 (Ala.2000); Ex parte Roberson, 749 So. 2d 441 (Ala.1999).
In Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 115 S. Ct. 834, 130 L. Ed. 2d 753 (1995), the United States Supreme Court held that the words "involving commerce" in the Federal Arbitration Act, 9 U.S.C. § 2 ("FAA"), are broader than the often-found words of art "in commerce." The Court held, therefore, that they cover more than only persons or activities within the flow of interstate commerce. See Gulf Oil Corp. v. Copp Paving Co., 419 U.S. 186, 195, 95 S. Ct. 392, 42 L. Ed. 2d 378 (1974) (defining "in commerce" as related to the "flow" and defining the "flow" to include "the practical, economic continuity in the generation of goods and services for interstate markets and their transport and distribution to the consumer"). The Court went on to hold that the word "involving" is the functional equivalent of the word "affecting," and that the phrase "affecting commerce" normally signals a congressional intent to exercise its Commerce Clause powers to the full. 419 U.S.  at 201, 95 S. Ct. 392.
The plaintiffs contend that nothing in the Agreement indicates that it involves interstate commerce within the meaning of the FAA; they further contend that an affidavit filed by The News in support of its motion merely established that The News engages in interstate commerce. The plaintiffs argue that the trial court erred by focusing, they say, on the "overall business" of The News rather than on the limited transactions evidenced by the Agreement.
The News bore the burden of proving to the trial court that the Agreement involved interstate commerce, so as to invoke the FAA and render enforceable the arbitration clause in the Agreement. Sisters of the Visitation v. Cochran Plastering Co., 775 So. 2d 759 (Ala.2000); Transouth Fin. Corp. v. Bell, 739 So. 2d 1110 (Ala.1999).
Attached to The News's motions to stay the civil actions and to compel arbitration were affidavits of Toby Pearson, the circulation director for The News. In his affidavits, Pearson acknowledged that the plaintiffs and The News had entered into the Agreement and that under the Agreement the plaintiffs bought complete newspapers from The News and distributed them to homes, newsstands, news racks, and other places within defined territories for the period of a year. Pearson affirmed:
The plaintiffs do not dispute this. Therefore, the Agreement required them to distribute advertising inserts designated by The News as part of the complete newspaper, which were prepared, printed, and shipped to The News in interstate commerce, and news content, designated as part of the complete newspaper by The News, that was obtained by The News in interstate commerce.
Did the flow of interstate commerce end when these inserts and this news content were delivered to The News? The plaintiffs contend it did, and the dissenting Justices agree. The plaintiffs cite the following cases to support their contention: United States v. American Bldg. Maintenance Indus., 422 U.S. 271, 95 S. Ct. 2150, 45 L. Ed. 2d 177 (1975); Walling v. Jacksonville Paper Co., 317 U.S. 564, 63 S. Ct. 332, 87 L. Ed. 460 (1943); Burke v. Ford, 377 F.2d 901 (10th Cir.1967); Page v. Work, 290 F.2d 323 (9th Cir.1961); Wirtz v. M & B Constr. Co., 216 F. Supp. 169 (S.D.Fla.1963); Ouendag v. Gibson, 49 F. Supp. 379 (W.D.Mich.1943); Hurst v. Tony Moore Imports, Inc., 699 So. 2d 1249 (Ala.1997).
The News contends that the plaintiffs were an integral part of a system for delivering commercial advertising distributed in interstate commerce, citing, among other cases, Lorain Journal Co. v. United States, 342 U.S. 143, 72 S. Ct. 181, 96 L. Ed. 162 (1951); and Evening News Publ'g Co. v. Allied Newspaper Carriers of New Jersey, 263 F.2d 715 (3d Cir.1959), cert. denied, 360 U.S. 929, 79 S. Ct. 1449, 3 L. Ed. 2d 1544 (1959).
In Lorain Journal, the United States Supreme Court analyzed the interstate activity of a daily newspaper located in Lorain, Ohio:
342 U.S.  at 152, 72 S. Ct. 181.
The United States Court of Appeals for the Third Circuit reached the same conclusion in Evening News, which involved a group of news dealers who tried to force a newspaper to eliminate home delivery of some of its newspapers by newsboys. The newspaper sued the dealers, alleging violations of §§ 1 and 2 of the Sherman Act (15 U.S.C. §§ 1 and 2). The dealers argued, as the plaintiffs argue here, that their relationship with the newspaper was intrastate in nature because they delivered newspapers only within their home state. The Third Circuit disagreed with the dealers:
263 F.2d  at 717.
The Third Circuit found that "home delivery of the News is an integral part of the interstate operation." 263 F.2d  at 717. We agree with the Third Circuit's application of Lorain, and we conclude that the cases of the plaintiffs now before us are not materially distinguishable from either Lorain or Evening News.[1]
The petitions for the writ of mandamus are due to be denied. The trial court properly directed arbitration pursuant to the arbitration clauses in the Agreement because the plaintiffs were integral and inseparable parts of the flow of interstate commerce. Lorain and Evening News.
1990418WRIT DENIED.
1990419WRIT DENIED.
HOOPER, C.J., and MADDOX, BROWN, and JOHNSTONE, JJ., concur.
HOUSTON, J., concurs specially.
COOK, LYONS, and ENGLAND, JJ., dissent.
SEE, J., recuses himself.
HOUSTON, Justice (concurring specially).
I go with the flow.
I concurred in Sisters of the Visitation v. Cochran Plastering Co., 775 So. 2d 759 (Ala.2000). If, as the dissenting Justices contend, Sisters of the Visitation is precedent for granting these mandamus petitions, then I misunderstood what I was voting on in Sisters of the Visitation and I should have concurred only in the result in that case. In my opinion, neither the words nor the reasoning of the majority opinion in Sisters of the Visitation has any precedential value in a case involving an activity in which the flow of commerce must continue in order to fulfill the purpose of the activity.
LYONS, Justice (dissenting).
I respectfully dissent. The per curiam opinion ignores Chief Justice Rehnquist's description in United States v. Lopez, 514 U.S. 549, 115 S. Ct. 1624, 131 L. Ed. 2d 626 (1995), of the three categories of regulation subject to the power of Congress under the Commerce Clause of the United States Constitution, and it fails to distinguish Sisters of the Visitation v. Cochran Plastering Co., 775 So. 2d 759 (Ala.2000).
Chief Justice Rehnquist in Lopez referred to the channels, instrumentalities, and activities having a substantial relation to commerce. We recognized these categories in Sisters of the Visitation.
The first category, regulation of the use of the channels of interstate commerce, involves management of the avenues of commerce and control over the items that might move through them, such as intoxicating liquors, convict-made goods, and *470 stolen goods. Lopez, 514 U.S.  at 558-59, 115 S. Ct. 1624. See, also, Gibbs v. Babbitt, 214 F.3d 483 (4th Cir.2000) ("The term `channel of interstate commerce' refers to, inter alia, `navigable rivers, lakes, and canals of the United States; the interstate railroad track system; the interstate highway system; ... interstate telephone and telegraph lines; air traffic routes; television and radio broadcast frequencies).'" 214 F.3d  at 490-91 (quoting United States v. Miles, 122 F.3d 235, 245 (5th Cir.1997), cert. denied, 523 U.S. 1011, 118 S. Ct. 1201, 140 L. Ed. 2d 329 (1998)).
The second category, regulation of the instrumentalities of interstate commerce, protects things in interstate commerce, for example, by regulating the safety of motor vehicles. Lopez, 514 U.S.  at 558-59, 115 S. Ct. 1624; Gibbs v. Babbitt, 214 F.3d  at 491. That an item may move in interstate commerce does not make it an instrumentality, or else the weapons shipped in interstate commerce giving rise to violations of the Gun Free School Zones Act of 1990 would have sufficed to place 18 U.S.C. § 922(q), which was before the Supreme Court in Lopez, in the category of regulation of instrumentalities of commerce.
Based upon the illustrations given in Lopez dealing with the three categories, I conclude that the delivery of newspapers is not a channel of interstate commerce or an instrumentality of interstate commerce. A contract is neither a channel nor an instrumentality, but suggests instead an activity. The Federal Arbitration Act requires arbitration of "a contract evidencing a transaction involving commerce," 9 U.S.C. § 2, and it defines "commerce" as "commerce among the several States or with foreign nations," 9 U.S.C. § 1. This case, therefore, falls in the third Lopez category, dealing with activities; therefore, as was held in Lopez, to be subject to regulation by the Congress, the activity must have a substantial effect on interstate commerce.
In order to decide the questions these plaintiffs present, we must, just as we did in Sisters of the Visitation, confront Wickard v. Filburn, 317 U.S. 111, 63 S. Ct. 82, 87 L. Ed. 122 (1942), where the Supreme Court upheld the constitutionality of regulation of homegrown wheat pursuant to an act of Congress controlling prices of wheat. In Lopez, the Court referred to Wickard as "perhaps the most far reaching example of Commerce Clause authority over intrastate activity." 514 U.S.  at 560, 115 S. Ct. 1624. Recently, in United States v. Morrison, 529 U.S. 598, 120 S. Ct. 1740, 146 L. Ed. 2d 658 (2000), the Court stated: "[I]n every case where we have sustained federal regulation under Wickard`s aggregation principle, the regulated activity was of an apparent commercial character." 529 U.S.  at 611 n. 4, 120 S. Ct.  at 1750 n. 4 (emphasis added). The Court's describing Wickard as "the most far reaching example" and its referring to "Wickard`s aggregation principle" suggest that Wickard is not a standard to be trotted out and applied willy-nilly whenever Congress attempts to regulate activities in interstate commerce. At stake in Wickard was Congress's attempt to control prices.
The aggregated effect of a determination that the activity in Wickard was wholly intrastate would have frustrated the Congressional purpose for controlling the price of wheat. In Lorain Journal Co. v. United States, 342 U.S. 143, 72 S. Ct. 181, 96 L. Ed. 162 (1951), and Evening News Publishing Co. v. Allied Newspaper Carriers of New Jersey, 263 F.2d 715 (3d Cir.), cert. denied, 360 U.S. 929, 79 S. Ct. 1449, 3 L. Ed. 2d 1544 (1959), the two antitrust cases relied on by the per curiam opinion, the relevant Congressional scheme was to prevent monopolies and restraints of trade. In Evening News, the United *471 States Court of Appeals for the Third Circuit observed:
263 F.2d  at 717-18 ("outlets" emphasized in Evening News; additional emphasis added).
We here deal with the Federal Arbitration Act, a statute requiring arbitration of contracts involving interstate commerce. I do not consider a statute whose purpose is to control wheat prices across the country or a statute whose purpose is to protect competition to be interchangeable with a statute authorizing arbitration. Both the FAA and the antitrust statute are grounded in the authority conferred upon Congress by the Commerce Clause, but the nexus between the applicability of the statute to local transactions and the fulfilment of the Congressional scheme is not nearly as direct or logical in the context of a statute calling for arbitration of disputes arising from contracts involving interstate commerce as it is in the context of a statute establishing price controls or regulating competition.[2] The case for applying "Wickard`s aggregation principle" is therefore not as compelling in regard to the FAA as it is in regard to statutes purporting to control prices or prevent monopolies.
How, then, do we strike a balance that respects Congress's authority and upholds the rights of states over local matters? The United States Court of Appeals for the Fourth Circuit discussed this issue in Gibbs v. Babbitt, dealing with the constitutionality of an act regulating the taking of red wolves on private land, as follows:
214 F.3d  at 491-92.
I would strike the balance by relying upon the standard we set in Sisters of the Visitation, a standard that allows us to focus intensely on the specific transaction before the Court. While that standard considers other interstate contracts of one of the parties that operate in proximity to the contract before the Court ("proximity contracts"), it avoids automatically concluding that proximity to interstate contracts alone warrants the conclusion that the subject contract substantially affects interstate commerce. We held in Sisters of the Visitation, after creating a hypothetical transaction involving a farmer mowing pasture lands, a transaction that lacked a substantial effect on interstate commerce, as follows:
775 So. 2d  at 765. In the situation of the plaintiffs now before us, we have no material deviation toward interstate commerce from the hypothetical transaction described above.
In each of the two cases before us, the parties to the transaction are local, but one party, The News, is engaged in an activity that involves numerous contracts between it and out-of-state entities that provide a range of materials and services, including comics, Parade magazine, advertising inserts, news content, photographs, paper, and ink. Some of the printed materials expressly solicit interstate business transactions between advertisers and subscribers. The Dealers purchase polyethylene bags and rubber bands from The News. The News obtains these products from outside the State of Alabama. We, therefore, have a deviation toward interstate commerce from the hypothetical transaction based upon the relationship of the parties to other contracts, to which I will return later.
The News makes no showing as to whether equipment, such as delivery trucks and other vehicles necessary to perform the distribution contracts, moved in interstate commerce to the Dealers or were acquired for performance of this contract and used solely in performance of the contract. We have no deviation toward interstate commerce from the hypothetical transaction based upon equipment necessary for the performance of the contract.
*473 The News makes no showing as to the breakdown between the cost of local labor versus the cost of materials of interstate origin, such as equipment and gasoline necessary to the performance of the contract. We have no deviation toward interstate commerce from the hypothetical transaction based upon the costs attributable to interstate, as opposed to local, activity.
The newspapers subject to the contract are delivered locally. Any subsequent entrance into interstate commerce as a result of a local subscriber's mailing a clipping to another state is too incidental to warrant further consideration. The subscriber could respond to a solicitation for sale of a product from outside Alabama. However, we have no evidence as to the extent of such activity. We have no deviation toward interstate commerce from the hypothetical transaction based upon subsequent effect on interstate commerce.
The aforementioned proximity contracts are not linked to a showing that litigation, as opposed to arbitration, in connection with The News's contract with the Dealers, would disrupt performance of those proximity contracts with third parties. Indeed, we have no basis on which to conclude that the parties or potential witnesses to these proximity contracts have anything to do with the contract between The News and the Dealers. We have no deviation toward interstate commerce from the hypothetical transaction based upon disruption of proximity contracts with third parties.
The most difficult portion of the test is determining the effect of the proximity contracts and the Dealers' purchases from The News of materials that it obtains from outside Alabama. The materials resulting from the proximity contracts come to rest in Alabama, where The News processes and assembles the completed product. The advertising inserts do not move directly between the Dealer and the merchant purchasing the advertising. While the contract requires the Dealers to deliver the inserts, that activity is local. The rubber bands and polyethylene bags sold by The News to the Dealers come to Alabama and then are resold by The News to the Dealers. However, there is no indication that the dispute between the parties relates to the sale of these products.
Unquestionably, The News substantially affects interstate commerce in the performance of its proximity contracts. However, the separate contract for the distribution of newspapers affects interstate commerce only to the extent that (a) the contract requires involvement by the Dealers in interstate commerce to perform the contract for distribution, or (b) the distribution itself causes subscribers to purchase goods or services directly from outside Alabama. Based on the absence of evidence to quantify interstate activity in these areas, I am unable to conclude that the performance of the contract between the Dealers and The News has the requisite substantiality of effect on interstate commerce to justify applying the Federal Arbitration Act. To hold otherwise would assume that the framers of the United States Constitution intended that Congress could require arbitration of a contract between a local newspaper and a young person in the neighborhood who throws papers from his or her bicycle.
I must dissent, lest we give too much weight to the interstate activity of The News and thereby disregard the proper focus on the contract between The News and the Dealers and the question whether that contract substantially affects interstate commerce.
COOK, J., concurs.
PER CURIAM.
APPLICATIONS OVERRULED.
HOOPER, C.J., and MADDOX, BROWN, and JOHNSTONE, JJ., concur.
HOUSTON, J., concurs specially.
COOK, LYONS, and ENGLAND, JJ., dissent
SEE, J., recuses himself.
HOUSTON, Justice (concurring specially).
In opposition to the applications for rehearing, the Birmingham News Company filed an excellent brief, which I quote from and adopt as part of my special concurrence:
*475 "Swift & Co. v. United States, 196 U.S. 375, 399, 25 S. Ct. 276, 49 L. Ed. 518 (1905) (emphasis added). In 1943, in an opinion by Justice Douglas, the United States Supreme Court again discussed the movement of goods in a `current' of interstate commerce and the authority of Congress to regulate it, as well as those who participate in it. Walling v. Jacksonville Paper Co., 317 U.S. 564, 63 S. Ct. 332, 87 L. Ed. 460 (1943). In Walling, the Court found that the flow of interstate commerce did not necessarily cease once goods were delivered to a wholesaler located in the state of destination:
* "The decisions of the United States Supreme Court in Lorain Journal Co. v. United States, 342 U.S. 143, 72 S. Ct. 181, 96 L. Ed. 162 (1951), and that of the [United States Court of Appeals for the] Third Circuit in Evening News Publishing Co. v. Allied Newspaper Carriers of New Jersey, 263 F.2d 715 (3d Cir.1959), cert. denied, 360 U.S. 929, 79 S. Ct. 1449, 3 L. Ed. 2d 1544 (1959), are hardly the *477 relics that Stewart and Hyde would have this Court believe."
[1]  We note that we have carefully examined all of the cases cited by the plaintiffs in support of their contention that the flow of interstate commerce ended when the inserts and the news were delivered to The News. We find those cases to be either distinguishable on their facts or otherwise consistent with the holdings in Lorain and Evening News.
[2]  Justice Houston's special concurrence attempts to distinguish Sisters of the Visitation on the ground that it has no applicability in a case "involving an activity in which the flow of commerce must continue in order to fulfill the purpose of the activity." 786 So. 2d  at 469. I respectfully submit that such reasoning erroneously conflates the purpose of the statute and the purpose of the activity.