Title: ECS, INC. v. Goff Group, Inc.

State: alabama

Issuer: Alabama Supreme Court

Document:

880 So. 2d 1140 (2003)
ECS, INC., et al.
v.
GOFF GROUP, INC.
1021293.

Supreme Court of Alabama.
October 31, 2003.
*1141 G. Thomas Yearout of Duell, Yearout & Spina, P.C., Birmingham, for appellants.
Thomas T. Gallion III and Jamie Austin Johnston of Haskell, Slaughter, Young & Gallion, LLC, Montgomery, for appellee.
WOODALL, Justice.
ECS, Inc.; ECS Underwriting, Inc.; Jim Fowler, senior vice president of ECS Underwriting, Inc.; and Frank Longo (hereinafter collectively referred to as "ECS") appeal from an order denying their motion to compel arbitration of a dispute between ECS and Goff Group, Inc. ("Goff"). We reverse and remand.
This dispute arose out of the termination of a "Program Manager's Agreement" ("the agreement") executed in the spring of 2001 by Goff, Greenwich Insurance Company ("Greenwich"), and XL Specialty Insurance Company ("XL"). As "manager" under the agreement, Goff had authority to bind "insurance policies for insureds introduced to it by independent agents" in Alabama and several other southeastern states. Policies were underwritten by ECS Underwriting, Inc., and issued by Greenwich and XL.
The agreement authorized Goff to, among other things, "charge, collect, receive and receipt for all premiums ... due on all Policies bound or written [thereunder], *1142 and pay [Greenwich and XL]." It required Goff to "prepare and forward to [Greenwich and XL] on a monthly basis, within (15) days of the end of each calendar month, a detailed premium bordereau and statement of account for the period...." It further provided:
(Emphasis added.)
The agreement also contained an arbitration provision, which provided, in pertinent part:
(Emphasis added.)
Approximately a year after the execution of the agreement, Goff received a letter dated June 13, 2002, from Fowler. The letter stated:
(Emphasis added.)
Subsequently, Fowler sent Goff a letter dated June 28, 2002, purporting to terminate the agreement. Specifically, the letter stated:
(Capitalization original; emphasis added.)
On August 9, 2002, Goff sued ECS on theories of (1) fraud, (2) tortious interference with a contractual/business relationship, (3) the tort of outrage, (4) conspiracy, (5) unfair competition, (6) violation of trade secrets, (7) conversion, and (8) tortious training and supervision. These theories were based on the following factual averments of the complaint:
(Emphasis added; footnote omitted.)
In addition to compensatory and punitive damages, Goff sought equitable relief, including an order enjoining ECS from "soliciting, brokering, or marketing services or competing with [Goff's] rights under the Program Manager's Agreement," and from "interfering with the Program Manager's Agreement." In a separate action in the Montgomery Circuit Court, Goff also sued Greenwich and XL, alleging breach of contract. That action, originally styled Goff Group, Inc. v. Greenwich Insurance Company; XL Specialty Insurance Company, CV-2002-2199, was removed to the United States District Court for the Middle District of Alabama, which ultimately ordered the parties to proceed to arbitration.
ECS moved to compel arbitration of this dispute. The trial court denied the motion, and ECS appealed. The sole issue on appeal is whether ECS, which is not a signatory to the agreement, may, nevertheless, enforce the agreement's arbitration provision as to Goff's claims against it.
Both sides of this dispute acknowledge the general rule that the right to arbitrate is contractual, and that, therefore, a party may not be compelled to arbitrate a dispute, unless it has agreed to do so. Ex parte Cain, 838 So. 2d 1020, 1026 (Ala. 2002); Ex parte Lovejoy, 790 So. 2d 933, 937 (Ala.2000); A.G. Edwards & Sons, Inc. v. Clark, 558 So. 2d 358, 361 (Ala.1990). This Court, however, has recognized certain exceptions to that general rule whereby a nonsignatoryone who is not a party to the contract containing an arbitration provisionmay, nevertheless, compel a signatory to submit a dispute to arbitration. Ex parte Stamey, 776 So. 2d 85, 89 (Ala.2000). One such exception "arises from a third-party-beneficiary theory that affords the [nonsignatory] all the rights and benefits, as well as the burdens, of that contract, including those associated with arbitration." 776 So. 2d  at 89. The parties agree that this exception is not applicable to this case.
A second exception, which ECS contends applies here, is a variation on the theory of "equitable estoppel." Id. See *1146 also Ex parte Napier, 723 So. 2d 49, 53 (Ala.1998); Ex parte Isbell, 708 So. 2d 571, 574-76 (Ala.1997). Under certain circumstances, a signatory will be "`equitably estopped from contesting [the nonsignatory's] standing to invoke the [arbitration] clause.'" 708 So. 2d  at 576 (quoting Sunkist Soft Drinks, Inc. v. Sunkist Growers, Inc., 10 F.3d 753 (11th Cir.1993)(first bracketed language added)). At a minimum, estoppel requires that the "description of the parties subject to the arbitration agreement not be so restrictive as to preclude arbitration by the party seeking it." Ex parte Stamey, 776 So. 2d  at 89.
ECS contends that the agreement contains no exclusionary language limiting the application of the arbitration clause to the named signatories. In opposing arbitration, Goff argues that "the arbitration clause and other language ... expressly limit[ ] the arbitration provision to any and all claims between [Goff] and either Greenwich or XL." Goff's brief, at 16-17. In support of that argument, Goff cites a number of cases in which a nonsignatory attempted unsuccessfully to invoke an arbitration provision that was limited to signatories.[1] See, e.g., Ex parte Cox, 828 So. 2d 295 (Ala.2002); Monsanto Co. v. Benton Farm, 813 So. 2d 867 (Ala.2001); Parkway Dodge, Inc. v. Yarbrough, 779 So. 2d 1205 (Ala.2000); and Southern Energy Homes, Inc. v. Kennedy, 774 So. 2d 540 (Ala.2000).
We disagree with Goff. The cases it cites involved arbitration clauses fundamentally different from the one at issue. For example, the arbitration provision in Cox provided, in pertinent part: "`Any controversy or claim between or among you and I [sic] or our assignees arising out of or relating to this contract ... shall, if requested by either you or me, be determined by arbitration....'" 828 So. 2d  at 296 (emphasis added). In Monsanto, the arbitration provision stated, in part: "`You [the buyer], your agents, and any other persons having or claiming to have a claim against Seller relating to the goods sold agree that any controversy or claim arising out of or relating to this contract or the goods sold hereunder, . . . may be settled by arbitration. . . .'" 813 So. 2d  at 869 (emphasis added). Yarbrough involved an arbitration provision that stated, in part: "`The Dealer and Purchaser(s) mutually covenant .... that [as to] all disputes ... resulting from or arising out of the sale transaction entered into ... Dealer and the purchaser(s) agree to submit such dispute (s) to BINDING ARBITRATION.'" 779 So. 2d  at 1206 (capitalization original; emphasis added). Kennedy involved an arbitration clause that stated, in part: "`All disputes, controversies or claims ... between seller and buyer ... arising out of any transaction or relationship between seller and buyer or arising out of any prior or future dealings between seller and buyer, shall be... settled by arbitration.'" 774 So. 2d  at 542 (emphasis added).
In each of those cases, the language of the arbitration provision limited the clause's application to the parties, or to specifically described third parties. In this case, by contrast, the clause merely requires the arbitration of "any dispute arising out of [the] Agreement, including its formation, validity or applicability to *1147 the dispute." Its scope is not limited to the parties to the agreement, or to their agents or assignees. Thus, this clause is "not so restrictive as to preclude arbitration by [ECS]." Ex parte Stamey, 776 So. 2d  at 89.
Moreover, the claims against ECS arise out of the agreement. See Kennedy, 774 So. 2d  at 545 (claims arise out of the contract "`[w]hen each of a signatory's claims against a nonsignatory "makes reference to" or "presumes the existence of" the written agreement'"). In particular, Goff's theory of the case is that ECS suspended, and eventually terminated, the agreement in violation of the terms of the agreement. For example, paragraph 23 of the complaint avers that Fowler first suspended, and then terminated, the agreement. Paragraph 24 avers that the purported suspension violated the "clear language of the Program Manager's Agreement." Paragraph 26 contains a block quotation from Article XI of the agreement, which defines the circumstances authorizing suspension of the manager's authority. In paragraph 27, Goff invokes Article XII, which defines the circumstances authorizing termination of the agreement. In paragraph 29, Goff avers that "[t]he actions of Defendants Fowler and ECS are clearly outside the terms of the Agreement." (Emphasis added.) In paragraph 30, Goff avers that it "will continue to be damaged by the Defendants' unilateral and groundless suspension of [Goff's] authority." (Emphasis added.) Finally, Goff's prayer for relief sought, among other things, an order enjoining ECS from "competing with [Goff's] rights under the Program Manager's Agreement," and from "interfering with the Program Manager's Agreement."
To be sure, Goff has stated its claims in tort, rather than contract, language. "`[I]t is well established,'" however, "`that a party may not avoid broad language in an arbitration clause by attempting to cast its complaint in tort rather than contract.'" Beaver Constr. Co. v. Lakehouse, L.L.C., 742 So. 2d 159, 165 (Ala. 1999) (quoting McBro Planning & Dev. Co. v. Triangle Elec. Constr. Co., 741 F.2d 342, 344 (11th Cir.1984)). Whether stated in contract or tort, Goff's claims against ECS arise out of the tripartite Goff-Greenwich/XL-ECS relationship.
Although ECS was not technically a "party" to the agreement, its relationship with Goff was created, as well as defined, by the agreement. Goff's duties under Article III.Q. of the agreement included sending "order[s] to bind along with a signed [premium finance agreement] or copy of the pre-payment check to ECS on behalf of [Greenwich/XL]." That section also set forth the chronology for premium remittances to ECS. The agreement required that notice to Greenwich or XL, whenever required, be sent to ECS. In short, Goff's claims against ECS cannot be resolved without reference to, and interpretation of, the agreement.
Finally, Goff's claims against ECS are intertwined with its claims against Greenwich and XL, which will be resolved in arbitration, as ordered by the United States District Court. Although the record does not contain the complaint that was filed in case no. CV-2002-2199, it is clear that Goff's claims against those other signatories also arise out of the agreement.[2] Goff concedes that "ECS and ECS Underwriting were agents for XL and Greenwich." Goff's brief, at 1 (emphasis *1148 added). Apparently, it was in this capacity that Fowler, by letters dated June 13, 2002, and June 28, 2002, purported to suspend Goff's authority and to terminate the agreement, respectively. It was "on behalf of" Greenwich and XL that ECS received payments and "order[s] to bind." Under these facts, were we to allow Goff to litigate its claims against ECS, "`"the arbitration proceedings [between the two signatories] would be rendered meaningless and the federal policy in favor or arbitration effectively thwarted."'" Kennedy, 774 So. 2d  at 545 (quoting MS Dealer Serv. Corp. v. Franklin, 177 F.3d 942, 947 (11th Cir.1999)).
For these reasons, the trial court erred in denying ECS's motion to compel arbitration. That order is, therefore, reversed, and this case is remanded for the entry of an order directing the parties to proceed to arbitration.
REVERSED AND REMANDED.
HOUSTON, SEE, LYONS, and JOHNSTONE, JJ., concur.
[1]  A number of other cases on which Goff relies were postured conversely to this case, that is, the party resisting arbitration was a nonsignatory. See, e.g., SouthTrust Bank v. Ford, 835 So. 2d 990 (Ala.2002); Cook's Pest Control, Inc. v. Boykin, 807 So. 2d 524 (Ala. 2001); and Auvil v. Johnson, 806 So. 2d 343 (Ala.2001). This distinction is significant, because "the doctrine of estoppel is applicable only to estop a signatory from avoiding arbitration." Ford, 835 So. 2d  at 995.
[2]  Indeed, were it otherwise, the signatories would not have been ordered to resolve the dispute in the arbitral forum.