Title: IBI Group, Michigan, LLC v. Outokumpu Stainless USA, LLC
Citation: N/A
Docket Number: 1131456
State: Alabama
Issuer: Alabama Supreme Court
Date: May 8, 2015

REL: 05/08/2015
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, 2014-2015
____________________
1131456
____________________
IBI Group, Michigan, LLC, f/k/a Giffels, LLC
v.
Outokumpu Stainless USA, LLC, f/k/a ThyssenKrupp Stainless
USA, LLC, and ThyssenKrupp Steel USA, LLC, f/k/a
ThyssenKrupp Steel and Stainless USA, LLC
Appeal from Mobile Circuit Court
(CV-13-902002)
STUART, Justice.
IBI Group, Michigan, LLC, f/k/a Giffels, LLC ("Giffels"),
appeals the order of the Mobile Circuit Court ordering it to
arbitrate its claims against Outokumpu Stainless USA, LLC,
1131456
f/k/a 
ThyssenKrupp 
Stainless 
USA, 
LLC 
("OTK"), 
and
ThyssenKrupp Steel USA, LLC, f/k/a ThyssenKrupp Steel and
Stainless USA, LLC ("TK Steel") (OTK and TK Steel are
hereinafter 
referred 
to 
collectively 
as 
"the 
steel
companies"), pursuant to an arbitration provision in the
contracts at the center of this dispute.  We affirm.
I.
On September 5, 2007, Giffels and TK Steel entered into
a contract pursuant to which Giffels agreed to provide
architectural and engineering services to TK Steel in
association with the construction of the cold rolling mill at
a steel-processing facility in Calvert.  Approximately 10
months later, on June 27, 2008, Giffels entered into another
contract with OTK's 
predecessor to provide similar 
services 
in
association with the construction of a melt shop at the same
facility.  Both contracts contained identical provisions
regarding the resolution of any disputes that might arise from
the contracts, which stated:  "Any dispute arising out of or
related to the contract[s] shall be subject to mediation,
arbitration or the institution of legal or equitable
proceedings at the sole discretion of [the steel companies]." 
2
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The contracts contained further provisions outlining certain
guidelines that would apply to mediation, arbitration, and
legal 
proceedings, 
including 
the 
following 
provision: 
 
"Unless
otherwise agreed by the parties, during the arbitration
proceedings discovery shall be available and shall be
conducted in accordance with the rules of discovery set forth
in the U.S. Federal Rules of Civil Procedure in effect at such
time."  
Thereafter, disputes arose between Giffels and the steel
companies regarding the work performed by Giffels under both
contracts, and, on March 14, 2012, the steel companies sued
Giffels in the United States District Court for the Southern
District of Alabama ("the federal district court") alleging
two counts of breach of contract and seeking compensatory
damages in excess of $7.5 million.  On March 29, 2012, and
June 13, 2012, the steel companies filed amended complaints
asserting additional claims.  Giffels subsequently filed its
answer to the steel companies' complaint and asserted its own
counterclaims alleging that the steel companies owed it money
for work performed under the two contracts.  Giffels also
moved to strike the steel companies' jury demand on the basis
3
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of a provision in the contracts expressly waiving the right to
a jury trial in any litigation stemming from the contracts. 
Thereafter, the steel companies filed an answer to Giffels's
counterclaims and withdrew their jury demand. 
On August 24, 2012, the steel companies and Giffels held
the 
discovery-planning 
conference 
required 
by 
Rule 
26(f), 
Fed.
R. Civ. P.  On September 10, 2012, the federal district court
conducted a scheduling conference, and the parties then
commenced discovery, with each party serving discovery
requests upon the other.  Giffels asserts that it incurred
over $80,000 in expenses just in preparing the initial
disclosures required by Rule 26(a)(1), Fed. R. Civ. P.
On June 4, 2013, the federal district court, sua sponte,
entered an order questioning whether federal jurisdiction was
proper in this case.  The steel companies responded by filing
an amended complaint in which they further described their
basis for claiming that federal jurisdiction was appropriate
under 28 U.S.C. § 1332 based on the parties' alleged complete
diversity of citizenship; Giffels subsequently filed an
amended answer in which it asserted that both its sole member
and the sole member of OTK's predecessor were incorporated in
4
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Delaware, which fact, if true, would defeat diversity
jurisdiction.   See, e.g., Rolling Greens MHP, L.P. v. Comcast
1
SCH Holdings L.L.C., 374 F.3d 1020, 1022 (11th Cir. 2004)
("[A] limited liability company is a citizen of any state of
which a member of the company is a citizen.").  The steel
companies moved to strike Giffels's amended answer, arguing
that Giffels's claim that its sole member was incorporated in
Delaware was contradicted by publicly available records
maintained by the Michigan Secretary of State; however, after
Giffels 
filed 
a 
response 
again 
indicating 
that,
notwithstanding any other records the steel companies might
have, its sole member was a Delaware corporation, the federal
district court ordered Giffels to file documentation of its
jurisdictional claim.  Giffels filed the requested proof on
July 29, 2013.  
On July 31, 2013, the steel companies moved the federal
district court to stay the litigation, noting that it had
initiated 
arbitration 
proceedings 
with 
the 
American
"[F]or 
purposes 
of 
determining 
the 
existence 
of 
diversity
1
jurisdiction, the citizenship of the parties is to be
determined with reference to the facts as they existed at the
time of filing."  Grupo Dataflux v. Atlas Global Grp., L.P.,
541 U.S. 567, 569-70 (2004).
5
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Arbitration Association that same day pursuant to the
provisions in the contracts stating that disputes regarding
those contracts were subject to arbitration at the sole
discretion of the steel companies.  However, that same day,
Giffels filed a complaint in the Mobile Circuit Court ("the
trial court") asserting as state-law claims the same
counterclaims it had asserted in the federal district court. 
On August 5, 2013, the steel companies filed an answer and
counterclaims in the state-court action while simultaneously
moving the state court to stay the state-court proceedings and
compel arbitration.  On August 7, 2013, the federal district
court formally dismissed the federal action for lack of
subject-matter jurisdiction without ruling on the steel
companies' request to stay the federal-court action pending
the completion of arbitration proceedings.
Thereafter, Giffels notified the trial court that it
opposed the steel companies' attempt to compel arbitration,
arguing that the contracts afforded the steel companies no
right to select arbitration once they had made an initial
choice to attempt to resolve their claims via litigation or,
in the alternative, that the steel 
companies 
had 
substantially
6
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invoked the litigation process to the prejudice of Giffels,
thus waiving any right they may have had to arbitration under
the contracts.  The parties subsequently filed multiple
additional briefs with the trial court regarding those 
issues,
and, on September 20, 2013, the trial court conducted a
hearing on the issues.  The parties continued to file briefs
on the issues following the hearing, and it was not until July
7, 2014, that the trial court entered an order granting the
steel companies' motion to compel arbitration and 
ordering 
the
parties to complete arbitration by May 1, 2015.  The parties
then jointly moved the trial court to alter, amend, or vacate
its order only to the extent it set a deadline for the
completion of arbitration inasmuch as they were continuing to
negotiate regarding ongoing operational difficulties at the
Calvert facility and it was possible those negotiations might
eventually lead to the resolution of some of the claims
asserted in this action.   On August 12, 2014, the trial court
2
Giffels noted in the joint motion to alter, amend, or
2
vacate that it was not conceding that the trial court's order
granting the steel companies' motion to stay the action and
compel arbitration was proper, or waiving its right to
subsequently appeal that order.
7
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revised its order as the parties requested, and, on September
16, 2014, Giffels filed its notice of appeal to this Court.
II.
The trial court's order granting the steel companies'
motion to stay the state-court litigation pending the
completion of arbitration effectively compelled Giffels to
resolve its claims against the steel companies, and the steel
companies' 
counterclaims 
against 
it, 
in 
arbitration 
as 
opposed
to state court.  The standard of review we apply to an order
granting a motion to compel arbitration is well settled:
"We conduct a de novo review of a trial court's
order compelling arbitration.  Smith v. Mark Dodge,
Inc., 934 So. 2d 375, 378 (Ala. 2006).
"'The party seeking to compel arbitration
must first prove both that a contract
calling for arbitration exists and that the
contract evidences a transaction involving
interstate commerce....  Once this showing
has been made, the burden then shifts to
the nonmovant to show that the contract is
either invalid or inapplicable to the
circumstances presented.'
"Smith, 934 So. 2d at 378."
Ritter v. Grady Auto. Grp., Inc., 973 So. 2d 1058, 1060-61
(Ala. 2007).  All parties agree that the governing contracts
involve interstate commerce; the only issue before this Court
8
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is whether the arbitration provisions in those contracts
allowing the steel companies to decide, at their "sole
discretion," whether a dispute arising out of or related to
those contracts would be subject to mediation, 
arbitration, 
or
litigation were rendered "'inapplicable to the circumstances
presented,'" Ritter, 973 So. 2d at 1061, once the steel
companies initially elected to resolve the dispute in
litigation and subsequently, Giffels alleges, substantially
invoked the litigation process, thereby prejudicing Giffels.
III.
Giffels's first argument is that, although its contracts
with the steel companies allowed the steel companies to
unilaterally decide whether any dispute between them and
Giffels would be resolved via arbitration or litigation, once
the steel companies made that decision, the decision was
irrevocable.  We note that Giffels is not arguing that any
time a party initiates litigation that party is barred from
thereafter exercising a contractual right to arbitrate, as
this Court has previously indicated otherwise.  See, e.g.,
Conseco Fin. Corp.–Alabama v. Salter, 846 So. 2d 1077, 1081
(Ala. 2002) ("Conseco initiated this action; however, 
the 
mere
9
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filing of a pleading does not constitute a waiver of the right
to compel arbitration.").  Rather, Giffels is arguing that the
specific terms of the arbitration provisions in this case
prevent the steel companies from selecting arbitration after
initially selecting litigation as a means of resolving a
dispute.  Giffels articulates this argument as follows in its
brief:
"[The steel companies] initiat[ed] a legal
proceeding in federal district court, thereby
exercising [their] right and selecting litigation as
the chosen vehicle for dispute resolution.  Nothing
in the contract allowed [the steel companies] to
later alter [their] selection.  Once [the steel
companies] selected litigation, the express language
of the contract provided that litigation would be
the method of dispute resolution for the case.  [The
steel companies] thereby waived any right to compel
arbitration 
by 
exercising 
[their] 
contractual
discretion to initiate litigation."
Giffels's brief, p. 16.  The steel companies argue that the
language of the arbitration provisions does not limit their
right to select how disputes will be resolved and that, in
fact, the clear language of the provisions indicates that they
might utilize more than one of the three listed methods to
resolve any dispute.
In resolving a dispute regarding the meaning of an
arbitration provision, "this Court applies the ordinary
10
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state-law principles governing contracts."  Title Max of
Birmingham, Inc. v. Edwards, 973 So. 2d 1050, 1054 (Ala.
2007).  Accordingly, we must interpret the terms of the
provisions according to their clear and plain meaning.  Id. 
The arbitration provisions at issue in this case provide that
"[a]ny dispute arising out of or related to the contract[s]
shall be subject to mediation, arbitration or the institution
of legal or equitable proceedings at the sole discretion of
[the steel companies]."  Giffels argues that the use of the
disjunctive "or" in the provisions indicates that the steel
companies' choice is mutually exclusive, that is, the steel
companies can choose either arbitration or litigation 
and 
once
they choose one the other is no longer an option.  The steel
companies, however, argue that "or" is not always used as a
disjunctive, but is sometimes used as a conjunctive as well,
and that Giffels is effectively reading the word "either" into
the arbitration provisions when that word does not appear in
those provisions.  In Smith v. Hutson, 262 Ala. 352, 78 So. 2d
923 (1955), this Court addressed the meaning of the word "or,"
stating:
"Our decision must turn on the meaning and
effect of the word 'or' ....  Numerous decisions
11
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from the courts of this country have dealt with this
word.  30 Words and Phrases 33.  From them we find
that it has three common usages: (1) as a
disjunctive, (2) as a conjunctive, (3) as an
introductory or connective word to an appositive,
e.g., 'a fiddle or violin.'  But we note that in the
best considered opinions the primary use of the word
is deemed to be as a disjunctive.  30 Words and
Phrases 63, 67.  Most cases which construe 'or' to
mean 'and' do so to reconcile an ambiguity, rectify
an obvious mistake, or carry out the clear meaning
of the party or parties who used the word.  30 Words
and Phrases 39.  See Harris v. Parker, 41 Ala. 604,
615 [(1868)].  Some confusion exists in the cases
where courts apparently think that the mere use of
the word 'or' creates an ambiguity, so they change
it to 'and' to clarify matters.  The practice
creates 
more 
confusion 
in 
the 
law 
than 
it
alleviates.
"....
"We are moved to hold that the word 'or' is a
disjunctive unless the context in which it was used
shows clearly that the contrary was intended and
that the petition was not subject to the asserted
demurrer."
262 Ala. at 352, 78 So. 2d at 923-24 (emphasis added).  In
this case, it is apparent from the context that the term "or"
was not intended as a disjunctive, but rather as a
conjunctive.  Importantly, the arbitration provisions here
authorized the steel companies to choose between three
options:  "mediation, arbitration or the institution of legal
12
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... proceedings."  As the steel companies explain in their
brief, the inclusion of mediation as an option is meaningful:
"Here, a construction under which [the steel
companies] ha[ve] a single and irrevocable choice of
the dispute resolution method –– either mediation or
arbitration or litigation –– is untenable.  This
becomes clear when considering the ramifications of
that construction should [the steel companies]
choose mediation.  Resolution of a dispute in
mediation is inherently voluntary; parties are not
bound to settle a dispute in mediation.  See Black's
Law Dictionary 841 (9th ed. 2009) (defining
mediation as '[a] method of nonbinding dispute
resolution involving a neutral third party who tries
to help the disputing parties reach a mutually
agreeable solution').  Giffels's construction makes
no sense because, if [the steel companies] were to
elect mediation, Giffels could simply refuse to
settle the dispute at mediation.  If [the steel
companies] could not then elect a new method of
dispute resolution, [they] would have no ability to
seek any relief at all.
"Therefore, the only reasonable construction is
that [the steel companies] could select mediation
and, if mediation failed, select again between
arbitration and litigation.  Based on the plain
language of the contract, there is no principled
reason 
to 
treat 
litigation 
or 
arbitration
differently.  If [the steel companies] can select
mediation and then 'change [their] mind,' [they] can
also select litigation and then 'change [their]
mind.'
"[The steel companies'] initial election to
subject 
these 
disputes 
to 
a 
failed 
federal
litigation is directly analogous to a failed
mediation.  [The steel companies'] first election of
litigation in a federal forum was thwarted when it
became clear that the federal district court lacked
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subject-matter jurisdiction.  Thus, just as [they]
could have done had [they] elected mediation and
that mediation failed, [the steel companies] elected
an alternative method to resolve the parties'
disputes:  arbitration."
The steel companies' brief, pp. 31-32.  
We agree that the language of the arbitration provisions
does not preclude the steel companies from now seeking to
resolve their dispute with Giffels in arbitration.  That
language contemplates the availability of multiple dispute-
resolution methods, and, when the steel companies' initial
choice for resolving this dispute failed, they were permitted
to make another choice.  Certainly, no one would argue that,
had the steel companies initially selected mediation and had
mediation failed, the parties would be required to commence
new mediation proceedings in a different forum ad infinitum
until 
mediation 
was 
successful, 
and 
the 
arbitration 
provisions
provide no basis upon which to treat arbitration or litigation
differently 
from 
mediation. 
 
Thus, 
this 
case 
is
distinguishable 
from 
Triarch 
Industries, 
Inc. 
v. 
Crabtree, 
158
S.W.3d 772, 777 (Mo. 2005), the case Giffels primarily relies
upon, in which the Supreme Court of Missouri concluded that,
"[h]aving elected to commence litigation, [a party] no longer
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had a contractual right to compel arbitration."  The
arbitration provision in Crabtree provided:
"Any controversy or claim arising out of this
contract or the breach thereof may, at Seller's
option, be referred to non-binding mediation under
rules of Seller's choice.  If mediation does not
result in settlement of the dispute, (or if Seller
does not elect to pursue mediation), Seller shall
have the right to refer the dispute to binding
arbitration under rules of its choice, or to
commence litigation."
158 S.W.3d at 773.  This provision expressly stated that, when
mediation was not pursued (and it was not in that case), the
seller could choose to refer the dispute to arbitration "or"
to commence litigation.  Presented with this simple binary
choice, the Missouri court correctly held "or" to be 
disjunctive.   Unlike in the instant case, there was no
3
context indicating otherwise.  See Smith, 262 Ala. at 352, 78
So. 2d at 924 ("[T]he word 'or' is a disjunctive unless the
The Supreme Court of Missouri further noted that the
3
party seeking arbitration in Triarch, "[o]nce faced with [the
defendant's] 
counterclaim 
and 
discovery 
requests, 
...
apparently regretted that choice [to litigate] and wanted to
refer the dispute to binding arbitration instead."  158 S.W.3d
at 777.  In contrast, the steel companies elected to pursue
arbitration only after it became clear that the federal
district court lacked subject-matter jurisdiction to hear the
steel companies' dispute with Giffels and would be dismissing
the action.
15
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context in which it was used shows clearly that the contrary
was intended ....").  
The other cases cited by Giffels in support of its
argument that the steel companies had no right to select
arbitration 
once 
they 
initiated 
litigation 
are 
also
distinguishable based on the specific language used in the
arbitration provisions in those cases.  In DVI Capital Co. v.
Zelph (No. 232732, July 22, 2003) (Mich. Ct. App. 2003) (not
selected for publication in the Northwestern Reporter), the
Court of Appeals of Michigan held that a plaintiff could not
select arbitration after initiating litigation, reasoning:
"The guaranties at issue give plaintiff the
'option' to resolve claims arising out of the
guaranties 'either (a) by arbitration ... or (b) in
any state or federal court in the State of
Michigan.'  We conclude that the trial court's
construction of the choice of forum clause violates
the express terms of the contract by giving
plaintiff the right to  make one selection and make
another selection.  The terms 'either ... or' do not
mean 'and' or 'both' and do not imply limitless
choices.  The terms denote a selection of one
alternative."
(Footnotes omitted.)  The inclusion of the word "either" in
the arbitration provision was crucial to the Michigan court's
analysis, and it cited the following definition of that term
from Random House Webster's College Dictionary (1995):
16
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"'Either' is defined as 'one or the other of two.'  It is also
defined as 'a coordinating conjunction that, when used with
or, indicates a choice.'"  (Note 7.)  Of course, the word
"either" is absent from the arbitration provisions 
agreed 
upon 
by the steel companies and Giffels.  
Moreover, in Satcom International Group PLC v. Orbcomm
International Partners, L.P., 49 F. Supp. 2d 331, 338
(S.D.N.Y. 1999), the other case cited by Giffels, the United
States District Court for the Southern District of New York
held that a plaintiff could not move a dispute to arbitration
after commencing litigation because the contract did not
"permit a party to make the choice between litigation and
arbitration a second time for the same dispute, or to jump
back and forth between the two options for dispute resolution
at its whim or when it meets with an adverse ruling." 
However, the arbitration provision in Satcom was structured
differently from the ones in this case, and it lacked any
context that might allow such a choice.  Moreover, it bears
repeating that the steel companies are not attempting to
remove a case to arbitration on a whim or after receiving an
adverse ruling in a court action; rather, the steel companies
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are now seeking to resolve their dispute with Giffels in
arbitration only after the federal district court indicated
that it would not decide the matter because it lacked 
subject-matter jurisdiction –– the dispute must move to a new
forum regardless of anything the steel companies did.   The
4
clear language of the arbitration provisions agreed to by the
steel companies and Giffels indicates that the provisions
intended to endow the steel companies with the power to decide
in what forum disputes arising out of the contracts would be
resolved; accordingly, we conclude that the steel companies'
contractual right to select arbitration was still effective
when it became necessary to select a new forum.
IV.
Giffels next argues that, even if its contracts with the
steel companies gave the steel companies the right to select
arbitration following the dismissal of its action by the
federal district court, they nevertheless have waived that
We further note that any concern that a party will abuse
4
a contractual right to select arbitration by exercising it
only when it becomes displeased with the course of litigation
is generally mitigated by the principle, discussed infra, 
that
a party waives its right to arbitration by substantially
invoking the litigation process to the detriment of the
opposing party.
18
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right by substantially invoking the litigation process and
thereby prejudicing Giffels.  This Court has stated:
"'It is well settled under Alabama law
that a party may waive its right to
arbitrate a dispute if it substantially
invokes the litigation process and thereby
substantially 
prejudices 
the 
party 
opposing
arbitration. 
 
Whether 
a 
party's
participation in an action amounts to an
enforceable 
waiver 
of 
its 
right 
to
arbitrate 
depends 
on 
whether 
the
participation bespeaks an intention to
abandon the right in favor of the judicial
process, and, if so, whether the opposing
party would be prejudiced by a subsequent
order 
requiring 
it 
to 
submit 
to
arbitration. No rigid rule exists for
determining what constitutes a waiver of
the right to arbitrate; the determination
as to whether there has been a waiver must,
instead, be based on the particular facts
of each case.'
"Companion Life Ins. Co. v. Whitesell Mfg., Inc.,
670 So. 2d 897, 899 (Ala. 1995). 
"'In order to demonstrate that the
right to arbitrate a dispute has been
waived, 
the 
party 
opposing 
arbitration 
must
demonstrate both (1) that the party seeking
arbitration 
substantially 
invoked 
the
litigation process, and (2) that the party
opposing 
arbitration 
would 
be 
substantially
prejudiced by an order requiring it to
submit to arbitration.'
"SouthTrust Bank v. Bowen, 959 So. 2d 624, 633 (Ala.
2006) (some emphasis omitted).  'Because there is a
strong federal policy favoring arbitration, waiver
of the right to compel arbitration is not lightly
19
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inferred, and the party seeking to prove waiver has
a "heavy burden."'  Aurora Healthcare, Inc. v.
Ramsey, 83 So. 3d 495, 500 (Ala. 2011) (quoting
Paragon Ltd. v. Boles, 987 So. 2d 561, 564 (Ala.
2007)). 
 
'Additionally, 
as 
this 
Court 
has
consistently noted: "[T]here is a presumption
against a court's finding that a party has waived
the right to compel arbitration."'  Bowen, 959 So.
2d at 633 (quoting Eastern Dredging & Constr., Inc.
v. Parliament House, L.L.C., 698 So. 2d 102, 103
(Ala. 1997))."
Anderton 
v. 
Practice-Monroeville, 
P.C., 
[Ms. 
1121417,
September 26, 2014] ___ So. 3d ___, ___ (Ala. 2014).  As an
initial matter, we note that the parties disagree with regard
to what extent the steel companies actually invoked the
litigation process.  Giffels argues that all the actions taken
by the steel companies in the federal-district-court action
are relevant; the steel companies argue that the instant
state-court action 
is 
a different proceeding entirely and that
in this action they have filed only pleadings and motions
regarding their right to arbitrate the underlying dispute. 
However, it is ultimately unnecessary for us to address this
issue because Giffels, as the party attempting to establish
waiver, has the burden of establishing both that the steel
companies substantially invoked the litigation process and
that Giffels would be substantially prejudiced by now being
20
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required to submit to arbitration.  As explained below,
Giffels has not demonstrated the required prejudice, and we
accordingly hold, on that basis, that there has been no waiver
of the right to arbitrate even if we were to assume that the
steel companies had substantially invoked the litigation
process.
In its brief to this Court, Giffels summarized its
argument that it would be substantially prejudiced if it were
now required to submit to arbitration:
"As a result of these actions, [i.e., the steel
companies' actions in the federal district court,]
Giffels was substantially prejudiced.  First, the
institution of legal proceedings required Giffels to
file its compulsory counterclaim in federal court. 
Further, in order to comply with the exacting time
limits for disclosures in federal court, Giffels
expended over $80,000 for document production. 
Giffels was also required to expend time and money
in responding to more than one complaint, and to
fight the jurisdictional issue in opposition to [the
steel companies'] tenacious assertion of federal
court jurisdiction.
"All 
of 
these 
actions 
resulted 
in 
the
expenditure of time and money that would not have
occurred, or would have at least been substantially
lessened if [the steel companies] had not first
initiated litigation, pursued it for over a year and
a half, and then, despite Giffels's opposition,
filed 
a 
demand 
for 
arbitration. 
[The 
steel
companies'] actions have gone so far as to force
Giffels to respond to both the litigation and the
arbitration filed by [the steel companies], as
21
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despite 
Giffels's 
objections 
the 
arbitration
proceeding has moved forward."
Giffels's brief, p. 40.  Thus, Giffels argues generally that
it expended a great deal of time and money with regard to the
pleadings filed in the federal district court and additional
filings necessary to address the jurisdictional issue raised
by that court, as well as additional time and money in
association with the ongoing arbitration and the dispute over
whether arbitration was proper.  It further specifically
argues that it expended over $80,000 in order to comply with
the 
initial 
discovery 
requirements 
applicable 
in 
federal 
court
by virtue of Fed. R. Civ. P. 26(a)(1).  
In Aurora Healthcare, Inc. v. Ramsey, 83 So. 3d 495, 500-
02 (Ala. 2011), this Court considered similar arguments made
by a party attempting to establish the substantial-prejudice
prong of the arbitration-waiver test:
"Beginning 
our 
analysis 
with 
the 
second 
question
–– whether the opposing party would be substantially
prejudiced –– we conclude that [the appellee] has
failed to carry her 'heavy burden' of establishing
substantial prejudice caused by the defendants'
belated invocation of the arbitration agreement. 
[The appellee] stated in her opposition to the
defendants' motion to compel arbitration that she
had 
'incurred 
considerable 
attorney 
fees 
and
expenses 
as 
a 
result 
of 
the 
Defendants'
participation in the litigation process.'  [The
22
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appellee] stated that her counsel's activities
included 'preparing discovery and responses to
discovery, ... legal research, ... phone conferences
and making court appearances in Wilcox and Jefferson
County Circuit Courts.'
"The circuit court's June 23, 2010, order
likewise states that [the appellee] had conducted
'legal 
research; 
argument 
in 
opposition 
to
transferring venue; preparing and filing a petition
for writ of mandamus with the Alabama Supreme Court
[related solely to venue]; responding to several
motions to dismiss and strike; preparing and filing
an Amended Complaint; preparing discovery and
responding to discovery; participating in phone
conferences; and ... making court appearances.' 
These assertions are not supported by any factual
evidence in the record.
"In Hales v. ProEquities, Inc., 885 So. 2d 100
(Ala. 2003), this Court stated the factors most
significant 
in 
determining 
whether 
the 
party
opposing arbitration will be prejudiced if ordered
to arbitrate.  One factor is whether '"the party
seeking arbitration allows the opposing party to
undergo the types of litigation expenses that
arbitration was designed to alleviate."'  885 So. 2d
at 105–06 (quoting Morewitz v. West of England Ship
Owners Mut. Prot. & Indem. Ass'n, 62 F.3d 1356, 1366
(11th Cir. 1995)).  Another is whether the party
seeking arbitration '"took advantage of judicial
discovery procedures not available in arbitration."' 
Hales, 885 So. 2d at 106 (quoting Carcich v. Rederi
A/B Nordie, 389 F.2d 692, 696 n. 7 (2d Cir. 1968)).
"In its June 23, 2010, order, the circuit court
reproduced a timeline of events that was initially
produced by [the appellee] in her filing in
opposition to the motion to compel arbitration.  The
timeline purportedly demonstrates the extent to
which the defendants substantially invoked the
litigation process.  The timeline shows that much of
23
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[the appellee's] costs were incurred litigating the
issue of venue.  The incurring of those costs,
however, cannot constitute prejudice in light of
this Court's holding that '[a] defendant has the
right to have the proper venue established before it
has any obligation to move to compel arbitration.' 
Thompson v. Skipper Real Estate Co., 729 So. 2d 287,
292 (Ala. 1999).
"The litigation activities conducted between
April 2006, when the case was transferred to the
Jefferson Circuit Court, and November 2006, when the
motion to compel arbitration was filed, were
primarily discovery oriented.  The Code of Procedure
of 
the 
National 
Arbitration 
Forum, 
expressly
incorporated 
into 
the 
arbitration 
agreement
allegedly executed by [the appellee] ..., at Rule 6
requires arbitrating parties to submit available
documents in support of, or in opposition to, all
claims.  Little, if any, discovery appears to have
been conducted of the sort that suggests that the
defendants '"took advantage of judicial discovery
procedures not available in arbitration."'  Hales,
885 So. 2d at 106 (quoting Carcich, 389 F.2d at 696
n. 7).  See also Ryan's Family Steakhouse, Inc. v.
Kilpatric, 966 So. 2d 273, 284 (Ala. Civ. App. 2006)
(noting that participating in discovery permitted
under rules specified in the arbitration agreement
between the parties does not constitute prejudice). 
...
"The 
record 
reflects 
that 
much 
of 
[the
appellee]'s time expended in litigation after
November 2006 was devoted to opposing arbitration. 
Expenses incurred by the party opposing arbitration
are not considered prejudicial.  A holding to the
contrary would result in the absurdity that every
party opposing arbitration can immediately allege
prejudice on the mere ground that the party opposed
it.
24
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"[The appellee's] motion in opposition to
arbitration presented only conclusory assertions
that she had incurred litigation costs.  Her motion
was not accompanied by an affidavit or by any other
evidence in support of the allegation that she would
be prejudiced by being compelled to arbitrate her
claims.  [The appellee] did not even allege how many
hours her counsel had spent in litigation matters or
the amount of fees or expenses incurred in such
matters.  Alabama caselaw shows that a party
alleging prejudice is unlikely to prevail without
presenting 
supporting 
evidence. 
 
See, 
e.g.,
SouthTrust Bank v. Bowen, 959 So. 2d [624,] 633
[(Ala. 2006)] (holding that the plaintiff opposing
arbitration failed to meet his 'heavy burden' when
he provided no evidence supporting his allegation
that he would be prejudiced by being compelled to
arbitrate).  See also Ex parte Greenstreet, Inc.,
806 So. 2d 1203, 1209 (Ala. 2001) ('If [a] party
presents no evidence in opposition to a properly
supported motion to compel arbitration, then the
trial court should grant the motion to compel
arbitration.').   Thus, in Ryan's Family Steakhouse,
Inc. v. Kilpatric, 966 So. 2d at 284, the court
found no prejudice where the record contained no
evidence 
supporting 
the 
allegations 
of 
the
plaintiff, who opposed arbitration, that she had
expended significant time and resources responding
to discovery propounded by the party seeking
arbitration."
(Footnotes omitted.)  Like the appellee in Aurora Healthcare,
Giffels has made general assertions that it expended time and
money on litigation activities; however, with one exception,
it has failed to quantify or submit specific evidence of that
time and expense.  "Alabama caselaw shows that a party
alleging prejudice is unlikely to prevail without presenting
25
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supporting evidence."  83 So. 3d at 501.  Moreover, to the
extent Giffels urges us to consider as evidence of prejudice
the time and expense that were presumably spent litigating the
jurisdictional and arbitration issues, Aurora Healthcare and
the cases cited therein indicate that incurring costs in
association with litigating the issue of proper venue or the
issue of arbitration itself cannot constitute prejudice that
would support an ultimate finding of waiver.  Id.
The only specific evidence submitted by Giffels to
support its claim of prejudice is an affidavit and invoices
establishing that Giffels incurred approximately $80,000 in
expenses to digitize and copy records that were part of its
initial disclosure to the steel companies in the federal
action pursuant to Rule 26(a)(1), Fed. R. Civ. P.  Indeed, it
is apparent that Giffels's claim of prejudice relies almost
entirely on this evidence.   At the hearing held by the trial
5
Giffels has also made a general argument that it has been
5
prejudiced by the 
steel 
companies' delayed invocation of their
right to compel arbitration based simply on the time that has
elapsed since litigation of the dispute began.  However,
Giffels fails to explain how the passage of time alone has
prejudiced it.  We further note that this Court has previously
affirmed orders compelling arbitration in which the parties
engaged in litigation for a longer period than in this case. 
See, e.g., Jericho Mgmt., Inc. v. Fidelity Nat'l Title Ins.
Co. of Tennessee, 811 So. 2d 514, 515 (Ala. 2001) (affirming
26
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court on the steel companies' motion to stay the litigation
and compel arbitration proceedings, Giffels's attorney
effectively stated as much, saying:
"Now, [the steel companies' attorney] talked
about the second factor that is to be addressed is
the prejudice argument.  Judge, the prejudice here
is very clear.  And we have discussed in our brief
that it is Giffels's contention that the prejudice
actually arises from complying with the initial
disclosure requirement of the federal rules."
In its reply brief filed with this Court, Giffels also
referred to this $80,000 expense as "the one overwhelming cost
to Giffels that occurred in this case [that] cannot be
minimized."  Giffels's reply brief, p. 32.  However, while
$80,000 may be a substantial expense, it is not clear that
Giffels would be prejudiced in any way if now forced to submit
to arbitration, because the disclosures required by the
Federal Rules of Civil Procedure would presumably still be
required in arbitration based on the provision in the
contracts stating that, "[u]nless otherwise agreed by the
parties, 
during 
the 
arbitration 
proceedings 
discovery 
shall 
be
available and shall be conducted in accordance with the rules
order compelling arbitration in which appellee did not move to
compel arbitration until 19 months after commencement of
litigation).
27
1131456
of discovery set forth in the U.S. Federal Rules of Civil
Procedure in effect at such time."  Aurora Healthcare, 83 So.
3d at 501, and Ryan's Family Steakhouse, Inc. v. Kilpatric,
966 So. 2d 273, 284 (Ala. Civ. App. 2006), clearly indicate
that time and money expended on discovery while in litigation
will not be considered evidence of prejudice if that same
discovery would be permitted in arbitration based on rules
specified in the relevant arbitration provision.  That is
precisely the case here –- discovery completed in both the
federal-district-court action and the arbitration proceedings
was/is governed by the Federal Rules of Civil Procedure.   
6
Citing Paw Paw's Camper City, Inc. v. Hayman, 973 So. 2d
344 (Ala. 2007), Giffels nevertheless argues that it is
possible that an arbitrator would have modified the discovery
requirements and that its expenses might have accordingly 
been
lessened if the steel companies had moved to compel
One might argue that Giffels would suffer more prejudice
6
if this dispute is resolved in the trial court, because the
Alabama Rules of Civil Procedure do not contain an initial-
disclosure requirement equivalent to Rule 26(a)(1), Fed. R.
Civ. P.  Thus, if this dispute is ultimately tried in the
trial court, the identified $80,000 might have been spent in
vain.
28
1131456
arbitration earlier.  In Paw Paw's Camper City, this Court
stated:
"Having found that there has been a substantial
invocation of the litigation process, we now address
the issue of prejudice.  The [plaintiffs] point out
that '[t]he pure cost to the plaintiffs, just for
the [four] depositions, has been more than $1650.' 
The sellers criticize the [plaintiffs'] statement
that they have expended $9,400 in this litigation
for 
its 
lack 
of 
specificity 
in 
identifying
additional costs that would not have been incurred
in arbitration.  The sellers hypothesize in their
brief to this Court that 'the minimal discovery
which was conducted prior to [the sellers'] seeking
to compel arbitration would also have been conducted
in arbitration.'  The sellers offer no authority for
the proposition that we may take judicial notice of
their speculation that an arbitrator in this
proceeding would have allowed the same degree of
discovery that took place in the Mobile Circuit
Court before the sellers filed their motion to
compel arbitration, and we decline to do so.  For
all that appears, the arbitrator would have
exercised its discretion in favor of allowing no
discovery."
973 So. 2d at 349.  Thus, the Paw Paw's Camper City Court
declined to speculate that an arbitrator would allow the same
discovery the trial court had allowed, and Giffels urges us to
do the same now.  However, Giffels fails to recognize a
crucial difference in the instant case; namely, that the
arbitrator is required by the terms of the arbitration
provisions to manage discovery pursuant to the Federal Rules
29
1131456
of Civil Procedure –– just as was the federal district court
in the previous litigation.  Indeed, the contracts agreed to
by Giffels and the steel companies provide that "[a]ny refusal
to allow such discovery [i.e., discovery permitted by the
Federal Rules of Civil Procedure,] shall be specifically
enforceable in court by the aggrieved party, and the
arbitration proceeding shall be stayed pending resolution of
the court proceeding."  Thus, we do not need to speculate
whether the arbitrator in this case would have required the
initial disclosures as the federal district court did because
the Federal Rules of Civil Procedure that required those
disclosures would guide the process in both forums, in marked
contrast to the arbitrator in Paw Paw's Camper City, who
apparently was not bound by any guidelines and accordingly had
discretion to declare there would be no discovery at all. 
This case is therefore clearly more akin to Aurora Healthcare,
83 So. 23 at 501, in which the discovery conducted in pre-
arbitration litigation was essentially the same as would be
permitted by the applicable National Arbitration Forum's Code
of Procedure, and Ryan's Family Steakhouse, 966 So. 2d at 284,
in 
which 
the 
discovery 
conducted 
in 
pre-arbitration 
litigation
30
1131456
was also specifically allowed under rules set forth in the
arbitration agreement.  In sum, it is clear that the steel
companies have not taken advantage of discovery procedures in
litigation that would not have been available to them in
arbitration and that Giffels's expenses related to 
the 
initial
disclosures are not the type of litigation expenses that
arbitration would have alleviated.  See Hales v. ProEquities,
Inc., 885 So. 2d 10, 105-06 (Ala. 2003) (noting that
sufficient prejudice to infer waiver has been found when
parties avail themselves of judicial discovery procedures not
available in arbitration or when opposing parties have been
forced to incur litigation expenses that arbitration was
designed to avoid).  
This Court has previously stated that "[i]n interpreting
an arbitration provision, 'any doubts concerning the scope of
arbitrable issues should be resolved in favor of arbitration,
whether the problem at hand is the construction of the
contract language itself or an allegation of waiver, delay, or
a like defense to arbitrability.'"  Dunes of GP, L.L.C. v.
Bradford, 966 So. 2d 924, 927 (Ala. 2007) (quoting Moses H.
Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25
31
1131456
(1983) (emphasis omitted; emphasis added)).  In light of this
principle and the heavy burden borne by Giffels, we cannot
conclude, even assuming for the sake of argument that the
steel companies substantially invoked the litigation process
by commencing litigation in the federal district court and
seeking arbitration only after it became clear that the
federal district court lacked subject-matter jurisdiction,
that Giffels would be substantially prejudiced if required to
proceed in arbitration.  Accordingly, we hold that the steel
companies have not waived their right to arbitration and that
the trial court's order staying the action until arbitration
was completed was proper.
V.
Giffels initiated this action in the trial court after
the steel companies commenced arbitration proceedings once it
became apparent that the action the steel companies had
initiated in the federal district court involving the same
contractual dispute would be dismissed for lack of subject-
matter jurisdiction.  The trial court thereafter granted the
steel companies' motion to stay the action pending the
completion 
of 
arbitration, 
and 
Giffels 
appealed, 
arguing 
that,
32
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under the circumstances, the steel companies either had no
right to compel arbitration or had waived that right. 
However, the language of the arbitration provisions in the
contracts executed by the parties gave the steel companies the
broad right to select arbitration as a method to resolve any
disputes based on those contracts, and, because Giffels has
failed to demonstrate substantial prejudice as a result of the
steel companies' actions, we hold that the steel companies did
not waive their right to proceed in arbitration.  Accordingly,
the order of the trial court sending the case to arbitration
and staying all proceedings pending the completion of the
arbitration of the claims presented in this action is
affirmed.
AFFIRMED.
Bolin, Parker, Main, Wise, and Bryan, JJ., concur.
Murdock and Shaw, JJ., concur in the result.
Moore, C.J., dissents.
33
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MURDOCK, Justice (concurring in the result).
I cannot agree that the term "or" was not intended to
have its plain and ordinary meaning as a disjunctive.  The
steel companies could select only one method of resolving a
dispute at a time.  
Nonetheless, I concur in the result simply because
nothing in the arbitration provisions prevented the steel
companies from altering their choice of dispute resolution,
provided that their previous choice and actions had not
constituted a waiver of their right to do so.  No such waiver
occurred in this case.  As the main opinion notes, the
standard for such a waiver is "'"whether the participation
bespeaks an intention to abandon the right in favor of the
judicial process, and, if so, whether the opposing party would
be prejudiced by a subsequent order requiring it to submit to
arbitration."'"  ___ So. 3d at ___ (quoting Anderton v.
Practice-Monroeville, P.C., [Ms. 1121417, Sept. 26, 2014] ___
So. 3d ___, ___ (Ala. 2014), quoting in turn Companion Life
Ins. Co. v. Whitesell Mfg., Inc., 670 So. 2d 897, 899 (Ala.
1995)).  Particularly in light of the contractual agreement
that, even in arbitration, the parties would be entitled to
34
1131456
engage in conventional discovery consistent with the Federal
Rules of Civil Procedure, the discovery undertaken in this
case in no way bespeaks an intention to forever abandon any
resort to an arbitration process and certainly did not subject
the other party to any delays, expenses, or efforts to which
it would not have otherwise been subjected (i.e., there was no
"prejudice").  
35