Title: ROBERT FRANK McALPINE ARCH., INC. v. Heilpern

State: alabama

Issuer: Alabama Supreme Court

Document:

712 So. 2d 738 (1998)
ROBERT FRANK McALPINE ARCHITECTURE, INC., and Robert Frank McAlpine
v.
William E. HEILPERN and Lauda Heilpern.
1961928.

Supreme Court of Alabama.
March 27, 1998.
Michael K. Beard and Bryan O. Balogh of *739 Starnes & Atchison, Birmingham, for appellants.
L. Landis Sexton of Beasley, Wilson, Allen, Crow & Methvin, P.C., Montgomery, for appellees.
HOUSTON, Justice.
The defendants, Robert Frank McAlpine and Robert Frank McAlpine Architecture, Inc., appeal from the trial court's order denying their motion to compel arbitration of the various contract and tort claims filed against them by the plaintiffs, William E. Heilpern and his wife Lauda Heilpern. We reverse and remand.
The facts pertinent to this appeal are undisputed. The Heilperns, who are Montgomery residents, hired Robert Frank McAlpine, a Montgomery architect, to provide architectural services in connection with the remodeling of their house. The Heilperns and McAlpine executed a contract entitled "Standard Form of Agreement Between Owner and Architect"; that contract contained the following predispute arbitration clause:
In the course of providing services to the Heilperns, McAlpine specified that certain items were to be used in the remodeling, such as appliances, plumbing fixtures, lighting fixtures, etc., that could be acquired only from out-of-state manufacturers. The contractor hired by the Heilperns to perform the remodeling work was, thus, required to purchase those items from out of state and to have them shipped into Alabama (e.g., from New York, Pennsylvania, Wisconsin, and Massachusetts). Ultimately, the Heilperns, dissatisfied with the work done on their house, sued McAlpine individually and his architectural firm vicariously, as well as the contractor and the contractor's firm, seeking damages based on allegations of breach of contract, fraud, conversion, and conspiracy. This appeal concerns only the trial court's denial of the McAlpine defendants' motion to compel arbitration. (Hereinafter, both McAlpine and his firm are referred to as "McAlpine.")
Under the Federal Arbitration Act, 9 U.S.C. §§ 1-16 ("FAA"), "[a] written provision in ... a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. The Heilperns do not dispute that their contract with McAlpine is one "involving commerce" within the meaning of § 2 of the FAA. Neither do the Heilperns dispute that the arbitration clause contained in the contract is broad enough in scope to encompass all of their claims. Rather, the Heilperns contend, and the trial court held, that § 1 of the FAA exempts their contract from the operation of federal arbitration law; therefore, they argue, federal law does not preempt Alabama statutory law and public policy prohibiting enforcement of predispute arbitration agreements.[1]
Section 1 of the FAA, in pertinent part, states that "nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." McAlpine contends that § 1 should be construed narrowly so as to exempt only employment contracts of workers directly engaged in the movement of goods in interstate commerce, i.e., in the transportation *740 and distribution of goods in interstate commerce. McAlpine argues that, although his contract involved interstate commerce, for purposes of applying the FAA, he was not directly engaged in the movement of goods in interstate commerce during the time he worked for the Heilperns. The Heilperns contend that § 1 should be construed broadly so as to exempt from the provisions of § 2 all contracts of employment that facilitate or affect interstate commerce (even tangentially); therefore, the Heilperns maintain, the arbitration clause is not valid and enforceable under the FAA. McAlpine contends, in the alternative, that his contract with the Heilperns is not an employment contract within the meaning of § 1, but, instead, is one for an independent contractor's "services," and that a contract for such services is not covered by the exemption set out in § 1. The Heilperns argue that the contract is an employment contract within the meaning of § 1 and that, even if McAlpine is correct in his interpretation of the scope of the exemption, the contract would fall within the exemption because, they say, McAlpine was directly engaged in the movement of goods in interstate commerce.
Initially, we note that the record does not support the Heilperns' argument that McAlpine was engaged in the movement of goods in interstate commerce during the time he worked for them. In an affidavit filed in support of his motion to compel arbitration, McAlpine stated:
This Court is not the first to consider the scope of the exclusion set out in § 1 of the FAA. In fact, it appears that the courts of appeals for 10 of the federal circuits have addressed this particular issue and that each of those courts has held that the exclusionary language in § 1 should be narrowly construed. In Asplundh Tree Expert Co. v. Bates, 71 F.3d 592, at 600-01 (6th Cir.1995), the United States Court of Appeals for the Sixth Circuit surveyed the law among the federal circuits and held that § 1 of the FAA "should be narrowly construed to apply to employment contracts of seamen, railroad workers, and any other class of workers actually engaged in the movement of goods in interstate commerce in the same way that seamen and railroad workers are." Because the opinion in Asplundh contains an extensive history of the construction that has been placed on § 1 by the courts of appeals for the federal circuits, we quote from it extensively, beginning at page 596:
*"Senator Walsh's questions in the hearing of January 31, 1923, reflect his understanding that the literal language of the Act would cover individual employment contracts, insurance contracts, building contracts and shipping contracts, not just commercial disputes between merchants. Senator Walsh seemed to suggest that, in order to overcome his objections, the proposed Act should be amended to cover only commercial disputes between merchants the kind of disputes described by the subcommittee's first witness, Mr. Bernheimer as illustrated by the senator's comment: `Mr. Piatt, perhaps you could think of some way by which that objection could be obviated. I really believe that in the class of cases that Mr. Bernheimer has in mind, it would be a very useful thing, and I would be disposed to favor it[.]' Hearing on S. 4213 and S. 4214 before a Subcommittee of the Senate Committee on the Judiciary, 67th Cong., 4th Sess., 11 (1923). Of course, no such amendment was made."
71 F.3d  at 596-602.
Since the Sixth Circuit decided Asplundh, the Court of Appeals for the Fifth Circuit, in Rojas v. T.K. Communications, Inc., 87 F.3d 745 (5th Cir.1996);[4] the Court of Appeals for the District of Columbia, in Cole v. Burns International Security Services, 105 F.3d 1465 (D.C.Cir.1997); the Court of Appeals for the Eighth Circuit, in Patterson v. Tenet Healthcare, Inc., 113 F.3d 832 (8th Cir.1997); and the Court of Appeals for the Eleventh Circuit, in Paladino v. Avnet Computer Technologies, Inc., 134 F.3d 1054 (11th Cir. 1998),[5] have adopted the rationale of the *747 First, Second, Third, Sixth, and Seventh Circuits and have narrowly construed § 1 so as to foster a broader application of the FAA. The court in Cole made the following pertinent observations:
105 F.3d  at 1471-72. In addition, the Court of Appeals for the Fourth Circuit, in O'Neil v. Hilton Head Hospital, 115 F.3d 272, 274 (4th Cir.1997), recently joined the other courts of appeals that have addressed the issue, by holding that a respiratory therapist employed by a hospital was not included in the § 1 exemption because, the court said, she "was not engaged in the interstate transportation of goods." In so holding, the court noted that its previous decision in United Electrical, Radio & Machine Workers v. Miller Metal Products, Inc., 215 F.2d 221 (4th Cir.1954), which was discussed and questioned in Asplundh, supra, was no longer controlling with respect to the issue of the construction to be placed on § 1. The court stated that it agreed with the uniform body of precedent from the federal courts of appeals, and it noted:
115 F.3d  at 274, n. 1.[6]
In addition, we note that the Court of Appeals for the Third Circuit recently reaffirmed its holding in Tenney. See Great Western Mortgage Corp. v. Peacock, 110 F.3d 222 (3d Cir.1997), cert. denied, ___ U.S. ___, 118 S. Ct. 299, 139 L. Ed. 2d 230 (1997) (rejecting the argument that Pritzker v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 7 F.3d 1110 (3d Cir.1993), had changed the law in the Third Circuit). See, also, Farmland Dairies, Inc. v. Milk Drivers & Dairy Employees Union Local 680, Int'l Brotherhood of Teamsters, AFL-CIO, 956 F. Supp. 1190 (D.N.J.1997) (following Tenney); and Nieves v. Individualized Shirts, 961 F. Supp. 782 (n. 3) (D.N.J. 1997) (providing additional history and noting the majority trend of narrowly construing § 1). It is also significant, we think, that even though the Ninth and Tenth Circuits have apparently not directly spoken to this issue, some federal district courts within those circuits have followed the majority of the federal courts of appeals that have *749 spoken to the issue. See Golenia v. Bob Baker Toyota, 915 F. Supp. 201 (S.D.Cal. 1996), wherein the district court concluded that there was no binding precedent in the Ninth Circuit and followed the majority of the federal circuits, refusing to be bound by the "one-line dictum" to the contrary in Herring v. Delta Air Lines, Inc., 894 F.2d 1020, 1023 (9th Cir.1989), cert. denied, 494 U.S. 1016, 110 S. Ct. 1319, 108 L. Ed. 2d 495 (1990), which, the court stated, lacked analysis and supporting citation to authority. But see Mittendorf v. Stone Lumber Co., 874 F. Supp. 292 (D.Or.1994). Also, in Durkin v. CIGNA Property & Casualty Corp., 942 F. Supp. 481 (D.Kan.1996), the federal district court, questioning the holding in Mercury Oil Refining Co. v. Oil Workers International Union, CIO, 187 F.2d 980 (10th Cir.1951), concluded that the question of the proper construction to be placed on § 1 had not been resolved in the Tenth Circuit and followed Tenney and Asplundh. See, also, McWilliams v. Logicon, Inc., (No. 95-2500, D.Kan., July 9, 1996) (not published in Federal Supplement) (following Asplundh). Our research has also revealed that at least two state courts presented with the issue have followed the trend of the federal courts of appeals in construing § 1 narrowly. Addressing the issue for the first time, the Supreme Court of Hawaii, in Brown v. KFC National Management Co., 82 Haw. 226, 921 P.2d 146 (1996), reconsideration denied, 82 Haw. 360, 922 P.2d 973 (1996), noted the district court's holding in Golenia and followed the majority of the federal circuits. See, also, Freeman v. Minolta Business Systems, Inc., 699 So. 2d 1182 (La.App.1997).
After carefully considering the record and the briefs, we are persuaded by the considerable body of federal court of appeals decisions that has developed with respect to this issue. We are particularly persuaded by the observation that a narrow interpretation of § 1 is supported by the Supreme Court's decision in Allied-Bruce Terminix Companies v. Dobson, supra. The Supreme Court specifically held in Allied-Bruce Terminix that the words "involving commerce," as used in § 2 of the FAA, were intended by Congress to be broader in scope than the "often found words of art `in commerce.'" 513 U.S.  at 273, 115 S. Ct.  at 839. The Court stated that the words "in commerce" (the words used in § 1 of the FAA) covered only persons or activities within the flow of interstate commerce and that the word "flow" included the generation of goods and services for interstate markets and their transport and distribution to the consumer. 513 U.S.  at 273, 115 S. Ct.  at 839. We also agree with the conclusion reached by the courts of appeals for the various circuits that Congress's specific reference to seamen and railroad workers reflects an intent to limit the scope of the exemption to workers directly engaged in the transportation of goods in an interstate market, as opposed to workers involved in the generation of goods and services for interstate markets. Therefore, we hold, as 10 United States Courts of Appealsthose for the First, Second, Third, Fourth, Fifth, Sixth, Seventh, Eighth, and Eleventh Circuits and the District of Columbiahave held: that the § 1 exemption of "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce" covers only those workers directly engaged in the movement of goods in interstate commerce, i.e., those workers directly engaged in the interstate transportation and distribution of goods. We conclude, as all of the federal courts of appeals that have considered the issue have apparently concluded, that the § 1 exemption was included by Congress as a concession to organized labor, specifically the Seamen's Union, and that, consistent with Congressional intent that the FAA be broad in scope, the exemption was intended to be a narrow one, not applying to employment contracts across the board, but, instead, to the employment contracts of those workers directly engaged in the movement of goods in interstate commerce. See American Postal Workers Union, AFL-CIO v. United States Postal Service, 823 F.2d 466, 470, 473 (11th Cir.1987), wherein the Court of Appeals for the Eleventh Circuit, although finding it unnecessary to reach this issue in that case, nonetheless noted:
823 F.2d  at 470-71.
Therefore, because McAlpine, in the performance of his contract with the Heilperns, was not engaged in the transportation and distribution of goods in interstate commerce, the contract does not fall within the § 1 exemption, and the FAA applies. The trial court's order denying McAlpine's motion to compel arbitration is reversed, and the cause is remanded for further proceedings.
REVERSED AND REMANDED.
HOOPER, C.J., and MADDOX and SEE, JJ., concur.
ALMON, J., concurs in the result.
[1]  The specific enforcement of a predispute arbitration agreement is barred by both Alabama's statutory law and its public policy, unless federal law preempts them. Lopez v. Home Buyers Warranty Corp., 670 So. 2d 35 (Ala.1995). But see Article IV, § 84, Constitution of Alabama of 1901 (called to the author's attention on March 24, 1998, by Associate Justice Champ Lyons). The FAA preempts contrary state law and, thus, renders enforceable a predispute arbitration agreement contained in a contract that "involves" interstate commerce. Jim Burke Automotive, Inc. v. Beavers, 674 So. 2d 1260 (Ala.1995), citing Allied-Bruce Terminix Companies v. Dobson, 513 U.S. 265, 115 S. Ct. 834, 130 L. Ed. 2d 753 (1995). For an in-depth discussion of the breadth of Congress's regulatory power under the Commerce Clause (in the arbitration context), see Hurst v. Tony Moore Imports, Inc., 699 So. 2d 1249 (Ala.1997).
[2]  In light of our specific holding in this case, we pretermit any discussion of McAlpine's alternative argumentthat § 1 does not exempt contracts for the performance of independent architectural services.
[3]  The Court in Tenney also observed:

"It must be remembered that the Arbitration Act of 1925 was drawn and passed at a time when the concept of Congressional power over individuals whose activities affected interstate commerce had not developed to the extent to which it was expanded in the succeeding years. The area in which Congress then generally legislated is illustrated by the Federal Employers' Liability Act of 1908 which applied to a railroad employee injured `while he is employed by such carrier [by railroad] in such [interstate or foreign] commerce.' This language had been construed by the Supreme Court to include only employees engaged in interstate transportation or in work so closely related to it as to be practically a part of it. In incorporating almost exactly the same phraseology into the Arbitration Act of 1925 its draftsmen and the Congress which enacted it must have had in mind this current construction of the language which they used.
"Moreover when Congress later proceeded to exercise power under the commerce clause in the expanded area, to which we have referred, it continued to use the phrase `engaged in commerce' in the narrower sense while using other and more precise language to include activities merely affecting commerce. Thus Congress made the Fair Labor Standards Act applicable not only to employees `engaged in commerce' but also to those engaged `in the production of goods for commerce.' Congress, as the Supreme Court pointed out in McLeod v. Threlkeld, 1943, 319 U.S. 491, 63 S. Ct. 1248, 87 L. Ed. 1538, has thus used precise language in this field to carry out its intentions. We think it did so in the Arbitration Act of 1925."
207 F.2d  at 453.
[4]  We note the Heilperns' reference to Arce v. Cotton Club of Greenville, Inc., 883 F. Supp. 117 (N.D.Miss.1995), in which a Mississippi federal district court ruled that § 1 exempted all employment contracts from the operation of the FAA. That decision was announced on April 28, 1995. The Rojas decision was announced on July 11, 1996. The Arce decision is, therefore, not the law in the Fifth Circuit.
[5]  Paladino was decided on February 4, 1998, by a three-judge panel composed of Chief Judge Hatchett and Judges Cox and Tjoflat. We note that Chief Judge Hatchett, in a separate opinion (which on its face appears to be the lead opinion in the case), at n. 1, did not reach the question concerning the scope of § 1:

"It is assumed that the exception contained in section 1 of the FAA for `contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce' does not apply to the agreement at issue here. It is best not to decide this issue because it is unclear that the district court fully considered it, and because Paladino failed to adequately develop the record with respect to her actual responsibilities as a Regional Technical Sales Consultant for the Southeastern United States. Although a majority of the circuits that have addressed the section 1 exception have construed it narrowly, see Cole v. Burns Int'l Sec. Servs., 105 F.3d 1465, 1470-72 (D.C.Cir.1997) (listing cases and adopting narrow construction of section 1's scope), a considerable body of scholarly opinion suggests that those circuits' view of section 1 is incorrect. See generally Joseph R. Grodin, Arbitration of Employment Discrimination Claims: Doctrine and Policy in the Wake of Gilmer, 14 Hofstra Lab. L.J. 1 (1996); Matthew W. Finkin, `Workers' Contracts' Under the United States Arbitration Act: An Essay in Historical Clarification, 17 Berkeley J. Emp. & Lab. L. 282 (1996). The issue of section 1's scope was raised, but not decided, in the Supreme Court's Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 111 S. Ct. 1647, 114 L. Ed. 2d 26 (1991), decision."
134 F.3d  at 1057.
However, Judge Cox, joined by Judge Tjoflat, specifically addressed the issue, stating:
"Furthermore, the appearance of the arbitration clause in an employment contract does not exempt the clause from the FAA under that Act's first section. All but one of the other circuits to have addressed the issue have held that the FAA § 1's exemption [sic] of `contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce,' 9 U.S.C. § 1, includes only employees actually engaged in transportation of goods in commerce. [Citations omitted.] This construction accords with the statute's text and history. [Citation omitted.] Although the district court may not have addressed this issue (we have no opinion in the record to tell us), the issue is presented in this case, and we join these other circuits.
"According to the allegations of the complaintthe only facts we have at present Paladino provided technical support to computer system salespeople. There is no evidence that this required her to move goods in interstate commerce. The employment contract therefore does not fall within § 1's exclusion."
134 F.3d  at 1060-61. See, also, Albert v. National Cash Register Co., 874 F. Supp. 1324 (S.D.Fla. 1994), in which a Florida federal district court came to the same conclusion in 1994.
[6]  See, also, Rudolph v. Alamo Rent A Car, Inc., 952 F. Supp. 311 (E.D.Va.1997), which questioned the vitality of Miller Metal Products and foretold the decision of the Fourth Circuit in O'Neil.