Title: Raymond James Financial Services, Inc. and Bernard Michaud v. Kathryn L. Honea
Citation: N/A
Docket Number: 1081688
State: Alabama
Issuer: Alabama Supreme Court
Date: June 18, 2010

REL: 06/18/2010
Notice: This opinion is subject to formal revision before publication in the advance
sheets of Southern Reporter.  Readers are requested to notify the Reporter of Decisions,
Alabama Appellate Courts, 300 Dexter Avenue, Montgomery, Alabama 36104-3741 ((334) 229-
0649), of any typographical or other errors, in order that corrections may be made before
the opinion is printed in Southern Reporter.
SUPREME COURT OF ALABAMA
OCTOBER TERM, 2009-2010
____________________
1081688
____________________
Raymond James Financial Services, Inc., and Bernard Michaud
v.
Kathryn L. Honea
Appeal from Jefferson Circuit Court
(CV-06-1896)
STUART, Justice.
Raymond James Financial Services, Inc. ("Raymond James"),
and Bernard Michaud, a securities broker at Raymond James
(hereinafter referred to collectively as "RJFS"), appeal the
judgment 
of 
the 
Jefferson 
Circuit 
Court 
vacating 
an
1081688
2
arbitration award entered in their favor and against Kathryn
L. Honea, a former client.  We reverse and remand.
I.
Beginning in May 1997, Honea opened multiple investment
accounts at a branch office of Raymond James in Birmingham.
In conjunction with the opening of the accounts, Honea signed
a client agreement with Raymond James containing the following
provision, entitled "Arbitration and Dispute Resolution":
"(a) In a dispute or controversy, either arising in
the future or in existence now, between me and you
(including your officers, directors, employees or
agents and the introducing broker, if applicable) we
agree to first endeavor to settle the dispute in an
amicable manner by mediation at the request of
either party.  Thereafter, any unsettled dispute or
controversy 
will 
be 
resolved 
by 
arbitration
conducted before the New York Stock Exchange, Inc.,
the National Association of Securities Dealers,
Inc., or the American Stock Exchange, Inc., or other
self-regulatory organizations (SRO) subject to the
jurisdiction 
of 
the 
Securities 
and 
Exchange
Commission (SEC) pursuant to the arbitration rules
of the Exchange or SRO, and in accordance with the
United States Arbitration Act (Title 9 of the United
States Code).
"(b) 
We 
agree 
that 
in 
any 
arbitration 
the
arbitrators will resolve the dispute in accordance
with applicable law and will be required to furnish
us with a written decision which must explain the
reasons for their decision. ...
"(c) A court of competent jurisdiction may enter
judgment based on the award rendered by the
1081688
3
arbitrators.  We agree that both parties will have
a right to appeal the decision of the arbitrators if
the arbitrators award damages that exceed $100,000;
the arbitrators do not award damages and the amount
of my loss of principal exceeds $100,000; or the
arbitrators award punitive damages.  In each of the
foregoing cases, a court having jurisdiction will
conduct a 'de novo' review of the transcript and
exhibits of the arbitration hearing."
Honea alleges that, between May 1997 and 2000, she
deposited over $1,200,000 into her accounts and that the
accounts decreased in value by approximately $1,050,000.  On
March 30, 2006, Honea sued RJFS in the Jefferson Circuit
Court, alleging that her losses were the result of abusive
brokerage practices, which practices, she alleges, violated
the Alabama Securities Act, § 8-6-1 et seq., Ala. Code 1975,
and asserting claims of breach of contract, breach of
fiduciary duty, negligence, wantonness, and fraud.  RJFS
subsequently moved the trial court to compel arbitration
pursuant to the arbitration provision in the client agreement
Honea had signed, noting that the client agreement was "a
contract 
evidencing 
transactions 
involving 
interstate 
commerce
and [that those transactions] therefore are subject to the
provisions of the Federal Arbitration Act, 9 U.S.C. section 1,
1081688
4
et seq."  The trial court granted the motion, and Honea
thereafter pursued her claims in arbitration.
The final arbitration hearing was conducted over three
days beginning on December 18, 2007.  On January 3, 2008, the
three-member arbitration panel unanimously entered an award in
favor of RJFS, dismissing Honea's breach-of-fiduciary-duty,
negligence, wantonness, fraud, and Alabama Securities Act
claims with prejudice, and denying her breach-of-contract
claim based on the statute of limitations.  On January 14,
2008, Honea filed a motion in the Jefferson Circuit Court
seeking to vacate the decision of the arbitrators, i.e., the
arbitration award, arguing that the arbitrators had manifestly
disregarded the law and that one of the arbitrators was biased
in favor of RJFS, because, Honea alleged, his law firm did
substantial work for another financial institution alleged to
be in merger negotiations with Raymond James.  RJFS opposed
Honea's motion, arguing that the arbitration award was
supported by both the law and the evidence and that there was
no evidence of bias on the part of the one arbitrator because
the speculative allegation regarding merger negotiations was
wholly untrue.
1081688
5
The trial court originally scheduled a hearing for
Honea's motion to vacate the arbitration award for March 28,
2008; however, for reasons including the difficulty the
parties had in obtaining a transcript of the arbitration
proceedings, that hearing was repeatedly continued.  On
October 17, 2008, Honea filed an additional motion with the
trial court asking it to conduct a de novo review of the
arbitration award pursuant to paragraph (c) of the arbitration
provision in the client agreement, quoted supra, which
specifically authorized such a review by the trial court if
"the arbitrators do not award damages and the amount of [the
client's] loss of principal exceeds $100,000."  On October 31,
2008, RJFS filed its response, citing Hall Street Associates,
L.L.C. v. Mattel, Inc., 552 U.S. 576 (2008), for the
propositions (1) that manifest disregard of the law is not a
valid ground for seeking the vacatur of an arbitration award;
and (2) that the Federal Arbitration Act, 9 U.S.C. § 1 et seq.
("the FAA"), provides the exclusive grounds for seeking
judicial review of arbitration awards in Alabama and parties
may not expand those grounds by contract to provide for de
novo judicial review of such awards.  RJFS also repeated its
1081688
NASD is now known as the Financial Industry Regulation
1
Authority ("FINRA").  
6
argument that there was no evidence indicating that any of the
arbitrators were biased in favor of RJFS.  
On November 7, 2008, the trial court held a hearing on
Honea's motion to vacate the arbitration award.  At that
hearing, Honea reasserted the arguments she had previously
made and also argued that the arbitration award should be
vacated because, she alleged, the three-member arbitration
panel consisted of two "non-public" arbitrators, in violation
of the specific arbitration rules of the National Association
of Securities Dealers ("NASD"), which governed the arbitration
proceedings.   On July 20, 2009, the trial court issued an
1
order concluding that Honea was entitled to a de novo review
of the arbitration award and that the arbitration proceeding
had not been conducted pursuant to NASD rules.  The trial
court accordingly vacated the award that had been entered in
favor of RJFS and scheduled a future status conference for the
purpose of setting the matter for trial.  On August 27, 2009,
RJFS filed this appeal.  See Rule 71B(g), Ala. R. Civ. P.
II.
1081688
7
In Hereford v. D.R. Horton, Inc., 13 So. 3d 375, 378
(Ala. 2009), this Court described the standard of review
applicable to an order confirming or vacating an arbitration
award as follows:
"The standard by which an appellate court reviews a
trial court's order confirming [or vacating] an
arbitration award under the Federal Arbitration Act
is that questions of law are reviewed de novo and
findings of fact are reviewed only for clear error.
See Riccard v. Prudential Ins. Co., 307 F.3d 1277,
1289 (11th Cir. 2002)."
III.
The gravamen of RJFS's argument on appeal is that an
Alabama court can vacate an arbitration award deciding a
dispute involving interstate commerce and subject to the FAA
only if one of the following grounds for vacatur enumerated in
§ 10(a) of the FAA is clearly established:
"(1) where the award was procured by corruption,
fraud, or undue means; 
"(2) 
where 
there 
was 
evident 
partiality 
or
corruption in the arbitrators, or either of them; 
"(3) where the arbitrators were guilty of misconduct
in refusing to postpone the hearing, upon sufficient
cause shown, or in refusing to hear evidence
pertinent and material to the controversy; or of any
other misbehavior by which the rights of any party
have been prejudiced; or 
1081688
8
"(4) where the arbitrators exceeded their powers, or
so imperfectly executed them that a mutual, final,
and definite award upon the subject matter submitted
was not made."
In support of this argument, RJFS cites Hall Street, in which
the Supreme Court of the United States considered the issue
whether parties could, consistent with the FAA, expand by
contract the grounds for judicial review of an arbitration
award beyond those enumerated in § 10 of the FAA and answered
that question in the negative.  Honea, however, argues that
the holding of Hall Street does not apply to this case.
Hall Street involved a lease dispute between a landlord
and tenant.  While that dispute was being litigated in the
United States District Court for the District of Oregon, the
parties entered into an agreement to instead resolve their
dispute in arbitration, but, as part of that agreement, they
also agreed that the federal district court then hearing their
case could vacate the resulting arbitration award if it found
that the arbitrator's findings of fact were not supported by
substantial evidence or if the arbitrator's conclusions of law
were erroneous.  552 U.S. at 579.  After the arbitrator
entered an award in favor of the tenant, the landlord moved
the trial court to vacate the award, and the trial court did
1081688
Section 11 of the FAA provides for the modification or
2
correction of an arbitration award if there are mathematical
or clerical errors and correction is needed to "effect the
intent [of the award] and promote justice between the
parties."
9
so, citing legal error on the part of the arbitrator.  552
U.S. at 580.  After the case was returned to arbitration and
the arbitrator entered a new award in favor of the landlord,
and after the trial court denied the tenant's subsequent
request to modify the award, the tenant appealed to the United
States Court of Appeals for the Ninth Circuit, arguing that
the provision in the arbitration agreement for judicial review
in the event the conclusions of law were erroneous was
unenforceable.  552 U.S. at 580.  The Ninth Circuit Court of
Appeals agreed; it reversed the judgment of the trial court,
and the Supreme Court of the United States thereafter "granted
certiorari to decide whether the grounds for vacatur and
modification provided by §§ 10 and 11 of the FAA are
exclusive."  552 U.S. at 581.       
2
In deciding the case, the Supreme Court rejected the
landlord's argument that it should uphold the contractual
provision allowing for expanded judicial review of the
arbitration award because arbitration is itself a creature of
1081688
10
contract and because the FAA is "'motivated, first and
foremost, by a congressional desire to enforce agreements into
which parties ha[ve] entered.'"  552 U.S. at 585 (quoting Dean
Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 220 (1985)).  In
concluding that such provisions were unenforceable, the
Supreme Court stated:
"[The appellant] is certainly right that the FAA
lets parties tailor some, even many features of
arbitration 
by 
contract, 
including 
the 
way
arbitrators are chosen, what their qualifications
should be, which issues are arbitrable, along with
procedure and choice of substantive law.  But to
rest this case on the general policy of treating
arbitration agreements as enforceable as such would
be to beg the question, which is whether the FAA has
textual features at odds with enforcing a contract
to expand judicial review following the arbitration.
"To that particular question we think the answer
is yes, that the text compels a reading of the §§ 10
and 11 categories as exclusive.  To begin with, even
if we assumed §§ 10 and 11 could be supplemented to
some extent, it would stretch basic interpretive
principles to expand the stated grounds to the point
of evidentiary and legal review generally.  Sections
10 and 11, after all, address egregious departures
from 
the 
parties' 
agreed-upon 
arbitration:
'corruption,' 
'fraud,' 
'evident 
partiality,'
'misconduct,' 
'misbehavior,' 
'exceed[ing] 
...
powers,' 'evident material 
miscalculation,' 
'evident
material mistake,' 'award[s] upon a matter not
submitted;' the only ground with any softer focus is
'imperfect[ions],' and a court may correct those
only if they go to '[a] matter of form not affecting
the merits.'  Given this emphasis on extreme
arbitral conduct, the old rule of ejusdem generis
1081688
11
has an implicit lesson to teach here.  Under that
rule, when a statute sets out a series of specific
items ending with a general term, that general term
is confined to covering subjects comparable to the
specifics it follows.  Since a general term included
in the text is normally so limited, then surely a
statute with no textual hook for expansion cannot
authorize contracting parties to supplement review
for specific instances of outrageous conduct with
review for just any legal error.  'Fraud' and a
mistake of law are not cut from the same cloth.
"....
"Instead of fighting the text, it makes more
sense to see the three provisions, §§ 9-11, as
substantiating 
a 
national 
policy 
favoring
arbitration with just the limited review needed to
maintain arbitration's essential virtue of resolving
disputes straightaway.  Any other reading opens the
door to the full-bore legal and evidentiary appeals
that can 'rende[r] informal arbitration merely a
prelude to a more cumbersome and time-consuming
judicial review process,'  Kyocera [Corp. v.
Prudential-Bache Trade Servs., Inc.], 341 F.3d
[987,] 998 [(9th Cir. 2003)]; cf. Ethyl Corp. v.
United Steelworkers of America, 768 F.2d 180, 184
(7th Cir. 1985), and bring arbitration theory to
grief in post-arbitration process."
552 U.S. at 586-88. 
It is accordingly clear that, post-Hall Street, the
specific grounds enumerated in § 10 of the FAA are the only
grounds upon which an arbitration award may be vacated under
the FAA.  However, Honea argues that an arbitration award may
nevertheless be vacated upon grounds outside those enumerated
1081688
At least one state, New Jersey, has enacted a statute
3
specifically authorizing parties to expand the scope of
judicial review of an arbitration award by contract.  See N.J.
Stat. Ann. § 2A:23B-4(c) ("[N]othing in this act shall
preclude the parties from expanding the scope of judicial
review of an award by expressly providing for such expansion
in a record.").  
12
in § 10 of the FAA if those other grounds are authorized by
state statute or by common law.  The Supreme Court of the
United States expressly recognized this possibility in Hall
Street when it stated:
"In holding that §§ 10 and 11 provide exclusive
regimes for the review provided by the statute, we
do not purport to say that they exclude more
searching review based on authority outside the
statute as well.  The FAA is not the only way into
court for parties wanting review of arbitration
awards:  they may contemplate enforcement under
state statutory or common law, for example, where
judicial review of different scope is arguable.  But
here we speak only to the scope of the expeditious
judicial review under §§ 9, 10, and 11, deciding
nothing about other possible avenues for judicial
enforcement of arbitration awards."
552 U.S. at 590.   Honea accordingly argues that even though
3
agreements providing for the expanded judicial review of
arbitration awards may not be enforceable under the FAA, they
are nevertheless enforceable under Alabama common law because
Alabama courts have consistently held that general contract
law requires that arbitration agreements be enforced as
1081688
13
written.  This principle was explained by this Court in
Bowater Inc. v. Zager, 901 So. 2d 658, 667-68 (Ala. 2004):
"Section 3 of the FAA provides that, when a
party to pending litigation successfully moves to
compel arbitration, the trial court shall stay the
proceeding 'until such arbitration has been had in
accordance with the terms of the agreement.'
Section 4 of the FAA likewise provides, in a
situation where there is no pending litigation and
a party desiring to compel arbitration petitions a
court 'for an order directing that such arbitration
proceed in the manner provided for in [the]
agreement,' that 'the court shall make an order
directing the parties to proceed to arbitration in
accordance with the terms of the agreement.'
Section 5 provides that '[i]f in the agreement
provision be made for a method of naming or
appointing an arbitrator or arbitrators or an
umpire, such method shall be followed ....'
"'Arbitration under the [FAA] is a matter
of consent, not coercion, and parties are
generally 
free 
to 
structure 
their
arbitration agreements as they see fit.
Just as they may limit by contract the
issues which they will arbitrate, see
Mitsubishi 
[Motors 
Corp. 
v. 
Soler
Chrysler-Plymouth, Inc., 473 U.S. 614], at
628 [(1985)], so too may they specify by
contract 
the 
rules 
under 
which 
that
arbitration will be conducted....  By
permitting 
the 
courts 
to 
"rigorously
enforce" such agreements according to their
terms, see [Dean Witter Reynolds Inc. v.]
Byrd, [470 U.S. 213], at 221 [(1985)], we
give effect to the contractual rights and
expectations of the parties, without doing
violence to the policies behind ... the
FAA.'
1081688
14
"Volt Info. Sciences, Inc. v. Board of Trustees of
Leland Stanford Junior Univ., 489 U.S. 468, 479, 109
S.Ct. 1248, 103 L.Ed.2d 488 (1989).
"'Because "arbitration is a matter of
contract," AT&T Technologies, Inc. v.
Communications Workers of America, 475 U.S.
643, 648, 106 S.Ct. 1415, 1418, 89 L.Ed.2d
648 (1986), parties may determine by
contract the method under which arbitrators
for their disputes will be appointed,
Universal Reinsurance Corp. v. Allstate
Ins. Co., 16 F.3d 125, 128 (7th Cir.
199[3]); Szuts v. Dean Witter Reynolds,
Inc., 931 F.2d 830, 831 (11th Cir. 1991);
Avis Rent A Car System, Inc. v. Garage
Employees Union, 791 F.2d 22, 24 (2d Cir.
1986); 
ATSA 
of 
California, 
Inc. 
v.
Continental Ins. Co., 754 F.2d 1394,
1395-96 (9th Cir. 1985) (amending original
opinion reported at 702 F.2d 172, 175-76
(9th Cir. 1983)).  In fact, the Federal
Arbitration Act (FAA), 9 U.S.C. §§ 1-16,
expressly states in section 5 that if the
parties have provided in their contract "a
method 
of 
naming 
or 
appointing 
an
arbitrator or arbitrators ..., such method
shall be followed." 9 U.S.C. § 5.'
"Cargill 
Rice, 
Inc. 
v. 
Empresa 
Nicaraguense
Dealimentos Basicos, 25 F.3d 223, 225 (4th Cir.
1994)."
RJFS refutes Honea's argument on this point by arguing, first,
that the FAA –– not Alabama common law –– governs the review
of this arbitration award, and, second, that the common law
would nevertheless afford Honea no relief even if applied.  
1081688
15
RJFS supports its first argument by noting that the
arbitration provision itself stated that "any unsettled
dispute or controversy will be resolved by arbitration ... in
accordance with the [FAA]," and that its motion to compel
arbitration also specifically invoked the FAA.  Honea has
offered no reason, RJFS argues, why the common law should
apply instead of the FAA, other than the mere fact that the
Supreme Court of the United States said in Hall Street that
"parties wanting review of arbitration awards ... may
contemplate enforcement under state statutory or common law
...."  552 U.S. at 590.  Moreover, RJFS argues, there is no
evidence indicating that either it or Honea ever contemplated
review under the common law as opposed to the FAA.  See
Alafabco, Inc. v. Citizens Bank, 872 So. 2d 798, 801 (Ala.
2002) (overruled on other grounds) (stating that where there
is no evidence indicating that the parties wished to proceed
in arbitration pursuant to the Alabama Arbitration Act, § 6-6-
1 et seq., Ala. Code 1975 ("the AAA"), or the common law, "the
parties did not contemplate arbitration" under that authority
and the FAA must govern).  
1081688
16
RJFS further quotes Birmingham News Co. v. Horn, 901 So.
2d 27, 46 (Ala. 2004), in which we stated:  "This Court has
adopted 9 U.S.C. § 10 as applicable to an appeal of an
arbitration award in this state," and succeeding cases relying
upon Horn for the proposition that Alabama courts engaging in
the judicial review of arbitration awards may vacate such
awards only if one of the grounds in § 10 of the FAA is met,
regardless of whether that review is sought pursuant to the
FAA, the AAA, or the common law.  See also Horton Homes, Inc.
v. Shaner, 999 So. 2d 462, 467 n. 2 (Ala. 2008) ("We reiterate
that a party desiring judicial review of an arbitration award
in a proceeding subject to the [FAA] is limited to arguments
based on those grounds enumerated in 9 U.S.C. § 10.").
Moreover, RJFS argues that, even if this Court does
accept Honea's argument and apply the common law, the end
result would be the same.  Section 6-6-14, Ala. Code 1975,
provides that an arbitration award in Alabama is final unless
there is evidence of "fraud, partiality, or corruption in
making it," and this Court has declared that this statute "is
but declaratory of the common-law rule on the subject."
Fuerst v. Eichberger, 224 Ala. 31, 33, 138 So. 409, 410
1081688
17
(1931).   Thus, RJFS argues, courts reviewing arbitration
awards under Alabama common law or statute are limited to the
three grounds enumerated in § 6-6-14, which grounds it argues
are even more narrow than those in § 10 of the FAA, and, it
further argues, courts may not therefore engage in de novo
review even if the parties have contractually agreed to such
review.  It is therefore ultimately immaterial, RJFS argues,
whether the arbitration award in this case is reviewed
pursuant to the FAA, the AAA, or the common law.  For the
reasons that follow, we disagree.
In Horn, we made clear that Alabama courts should apply
§ 10 of the FAA when moved to vacate or to confirm arbitration
awards, even though § 10 was facially applicable only to
federal district courts.  901 So. 2d at 46.  However, we
refrained from holding that § 10 constituted substantive law
that we were required by the FAA to apply in state court
proceedings, stating that it was unnecessary to "stumble over
the distinction between substantive law and procedural law"
because we had already adopted § 10 "as applicable to an
appeal of an arbitration award in this state, and we see no
need to retreat from that position."  901 So. 2d at 46-47.
1081688
In Cable Connection, Inc. v. DIRECTV, Inc., 44 Cal.4th
4
1334, 1350-54, 190 P.3d 586, 597-99, 82 Cal.Rptr.3d 229, 242-
45 (2008), the Supreme Court of California likewise concluded
that § 10 was a procedural provision and that it accordingly
did not preempt California law governing the review of
arbitration awards.  That court further held that parties in
California may alter the usual scope of review applied to
arbitration 
awards 
by 
contract pursuant to California
statutory and common law, notwithstanding Hall Street.  44
Cal.4th at 1340, 190 P.3d at 589, 42 Cal.Rptr.3d at 233("The
California rule is that the parties may obtain judicial review
of the merits by express agreement.  There is a statutory as
well as a contractual basis for this rule; one of the grounds
for review of an arbitration award is that '[t]he arbitrators
exceeded their powers.' ([Cal. Code Civ. Proc.,] §§ 1286.2,
subd. (a)(4), 1286.6, subd. (b).)  Here, the parties agreed
that '[t]he arbitrators shall not have the power to commit
errors of law or legal reasoning, and the award may be vacated
or corrected on appeal to a court of competent jurisdiction
for any such error.'").
18
However, in Hall Street, the Supreme Court of the United
States acknowledged that state statutory or common law might
permit arbitration awards to be reviewed under standards
different from those enumerated in § 10, thus effectively
stating that § 10 represents procedural as opposed to
substantive law.   We are accordingly at liberty to decide
4
whether to apply § 10 in state court proceedings on motions to
vacate or to confirm an arbitration award.  We have heretofore
done so; however, this case presents us with the situation we
implicitly recognized in Horn in which there are good and
sufficient reasons "to retreat from that position."  901 So.
1081688
Although, in Hall Street the Supreme Court of the United
5
States did not agree with the appellant that the general
policy requiring that arbitration agreements be enforced as
they are written should trump the plain language of the FAA
indicating that the grounds enumerated in § 10 are the
exclusive grounds upon which an arbitration award may be
vacated, 552 U.S. at 585-86, it has, even post-Hall Street,
reiterated that courts and arbitrators must "'give effect to
the contractual rights and expectations of the parties.'"
Stolt-Nielsen S.A. v. Animal Feeds International Corp., ___
U.S. ___, ___, 130 S.Ct. 1758, 1774 (2010) (quoting Volt Info.
Sciences, Inc. v. Board of Trustees of Leland Stanford Junior
Univ., 489 U.S. 468, 479 (1989)).
19
2d at 46-47.  Under the Alabama common law, courts must
rigorously 
enforce 
contracts, 
including 
arbitration
agreements, according to their terms in order to give effect
to the contractual rights and expectations of the parties.
See, e.g., Bowater, supra.   Applying that principle in this
5
case requires us to give effect to the provision in the
arbitration agreement authorizing a court having jurisdiction
to conduct a de novo review of the award entered as a result
of arbitration proceedings conducted pursuant to that same
agreement.
Ironically, however, it is this same principle requiring
us to strictly enforce arbitration agreements according to
their terms that requires us to reverse the judgment entered
by the trial court in this case.  The relevant provision in
1081688
20
the arbitration agreement entered into by RJFS and Honea reads
as follows:
"(c) A court of competent jurisdiction may enter
judgment based on the award rendered by the
arbitrators.  We agree that both parties will have
a right to appeal the decision of the arbitrators if
the arbitrators award damages that exceed $100,000;
the arbitrators do not award damages and the amount
of my loss of principal exceeds $100,000; or the
arbitrators award punitive damages.  In each of the
foregoing cases, a court having jurisdiction will
conduct a 'de novo' review of the transcript and
exhibits of the arbitration hearing."
(Emphasis added.)  Citing this provision, the trial court
vacated the award entered by the arbitration panel for the
reasons cited in its order and ordered a trial.  However, as
RJFS argues, the arbitration provision does not authorize that
action; rather, it authorizes the trial court to "conduct a
'de novo' review of the transcript and exhibits of the
arbitration hearing."  It does not authorize the trial court
to preside over a trial and to take new evidence.  Presumably,
the trial court is to review the evidence presented at the
arbitration proceeding and make its own findings of fact and
conclusions of law and enter a judgment accordingly.  It is
without dispute that the trial court did not purport to
undertake such a review in this case because the transcript
1081688
21
and exhibits were apparently never submitted to the trial
court for consideration and are not a part of the record.
Indeed, at the hearing on the motion to vacate the arbitration
award, the parties indicated that the tape recordings of the
arbitration proceedings were mostly unintelligible and that
the transcript was largely useless.  Accordingly, the order
entered by the trial court vacating the arbitration award in
favor of RJFS must be reversed and the cause remanded for the
trial court to conduct the de novo review contemplated by the
arbitration provision.  As it appears a transcript is
effectively unavailable, the parties may follow the procedure
outlined in Rule 10(d), Ala. R. App. P., to create a
substitute.
IV.
The claims asserted by Honea against RJFS were decided in
arbitration pursuant to an arbitration provision in the client
agreement entered into by the parties.  The arbitrators
entered an award in favor of RJFS, but, on Honea's motion, the
trial court vacated that award.  RJFS argues that the trial
court's order should be reversed because the provision
authorizing de novo review of the arbitration award by the
1081688
22
trial court was effectively voided by the decision of the
Supreme Court of the United States in Hall Street and because
there were no valid grounds for vacating the arbitration award
under § 10 of the FAA.  However, because the holding of Hall
Street is applicable only in a federal court and because the
provision providing for de novo review of the arbitration
award by the trial court is enforceable under state law,
RJFS's argument fails.  However, because the trial court
vacated the arbitration award before conducting the de novo
review required by the arbitration provision and contemplated
by the parties, its judgment is nevertheless reversed and the
cause is remanded for the trial court to conduct a de novo
review of the transcript and exhibits of the arbitration
hearing and to enter a judgment based on that review.
REVERSED AND REMANDED.
Cobb, C.J., and Lyons, Woodall, Smith, Bolin, Parker, and
Shaw, JJ., concur.
Murdock, J., concurs specially.
1081688
23
MURDOCK, Justice (concurring specially).
Paragraph (c) of the arbitration agreement between the
parties contemplates a review of the merits of an arbitration
decision by way of the circuit court's de novo review of the
arbitration award based on the transcript of the arbitration
proceeding.  In accordance with that provision of the
arbitration agreement, the main opinion reverses the trial
court's judgment, reasoning that the trial court wrongly
vacated the arbitration award based on paragraph (c) without
first conducting such a review.  
I note that the trial court vacated the arbitration award
on two grounds, however:  on the merits, as contemplated by
paragraph (c), and also on the ground of a procedural
deficiency in the arbitration proceedings, namely a violation
of 
the 
panel-composition 
requirements 
imposed 
by 
paragraph 
(a)
of the arbitration agreement.  Just as they argue on appeal
that the trial court erred in vacating the arbitration award
based 
on 
paragraph 
(c), Raymond James Financial Services, 
Inc.
("RJFS"), and Bernard Michaud argue that the trial court
should not have vacated the arbitration award (and that we
should not affirm the trial court's vacatur of the arbitration
1081688
24
award) based on this alternative, procedural ground.  I agree
with RJFS and Michaud that any procedural deficiency of the
stated nature was waived by the plaintiff and therefore does
not serve as an alternative basis for affirming the trial
court's vacatur of the arbitration award.  Accordingly, I do
not find it necessary for us to consider, and I do not read
the main opinion as reaching, the issue of the appropriate
course of action or "remedy" in the event a vacatur were
appropriate on such a ground.