Title: Ex Parte Scrushy
Citation: 940 So. 2d 290
Docket Number: 1050574
State: Alabama
Issuer: Alabama Supreme Court
Date: April 12, 2006

940 So. 2d 290 (2006)
Ex parte Richard M. SCRUSHY.
(In re Richard M. Scrushy
v.
HealthSouth Corporation).
1050574.

Supreme Court of Alabama.
April 12, 2006.
*291 C. Neal Pope and Teresa Pike Tomlinson of Pope, McGlamry, Kilpatrick, Morrison &amp; Norwood, LLP, Columbus, Georgia; and Kile T. Turner and Matthew W. Robinett of Norman, Wood, Kendrick &amp; Turner, Birmingham, for petitioner.
Julia Boaz Cooper, W.H. Albritton IV, and Marc James Ayers of Bradley Arant Rose &amp; White, LLP, Birmingham, for respondent.
LYONS, Justice.
Richard M. Scrushy has filed a petition for a writ of prohibition or, in the alternative, for a writ of mandamus challenging the circuit court's order requiring him to dismiss a pending arbitration proceeding that he had initiated. We grant the petition and issue the writ of mandamus.
Currently pending in the Jefferson Circuit Court is Richard M. Scrushy v. HealthSouth Corporation, No. CV-05-7364. Scrushy, the petitioner here, filed this breach-of-contract action on December 9, 2005, alleging that HealthSouth improperly terminated his "employment" and seeking termination benefits pursuant to a September 17, 2002, employment contract between Scrushy and HealthSouth. Scrushy was both the Chief Executive Officer ("CEO") and the Chairman of the Board of Directors of HealthSouth until March 2003.
On April 14, 1994, Scrushy and HealthSouth entered into an indemnity agreement that recites that "[HealthSouth] must provide [Scrushy] with adequate protection through insurance and indemnification against inordinate risks of claims and actions against [him] arising out of [his] service to and activities on behalf of [HealthSouth]." The indemnity agreement contains the following arbitration provision:
(Emphasis added.)
On December 19, 2005, Scrushy filed a demand for arbitration with the American Arbitration Association ("AAA") pursuant to the indemnity agreement in which he sought reimbursement for his expenses associated with mounting a successful defense in an asset-freeze proceeding and in a criminal proceeding, both of which arose from his employment as CEO and Chairman of the Board of HealthSouth. According to Scrushy, paragraph 5 of the indemnity agreement expressly and absolutely entitles him to indemnification and reimbursement for those expenses. Scrushy thus contends that there is no substantive defense to his claim and that the only defense possible is one addressing the reasonableness of the incurred expenses. On the other hand, HealthSouth points to paragraph 2(b) of the indemnity agreement, which provides that no indemnification *292 would be paid "on account of conduct of the Indemnitee which is finally adjudged by a court of competent jurisdiction to have been knowingly fraudulent or to constitute willful misconduct."
Scrushy's action in the circuit court does not seek relief based upon the indemnity agreement. Nevertheless, on December 28, 2005, HealthSouth filed a counterclaim in the Jefferson Circuit Court action requesting the circuit court to terminate Scrushy's arbitration proceeding and to order him to refile the claims asserted in the arbitration proceeding in the breach-of-contract/termination-benefits case pending in the circuit court "for the sake of efficiency and convenience" and seeking to have the circuit court rule on the validity of HealthSouth's defenses to the arbitration provision in the indemnity agreement. HealthSouth also moved to stay and enjoin Scrushy's arbitration proceeding. HealthSouth claimed that it had "defenses" to that proceeding that gave the circuit court the authority to supersede the arbitration proceeding. HealthSouth also claimed that Scrushy had waived the right to arbitration (1) by filing requests for advancement of litigation costs in two successfully resolved proceedingsan action in Delaware state court and an insurance proceeding in federal court (not brought under the indemnity agreement), and (2) by breaching his fiduciary duty to HealthSouth.
On January 4, 2006, after an AAA scheduling conference in which the AAA set deadlines and issued administrative directives to the parties, the circuit court held a hearing on HealthSouth's motion to stay and enjoin the arbitration proceeding. At the conclusion of the hearing, the circuit court suggested that the parties attempt to reach what the court referred to as a "standstill agreement" allowing a 16-day extension of the 60-day contractual arbitration period so that the court could consider a jurisdictional issue "without mooting HealthSouth's motion." The parties, through counsel, then apparently reached such an agreement. On January 5, the AAA issued a notice indicating that HealthSouth had not filed counterclaims or objected to administrative directives in the arbitration proceeding regarding the place of arbitration and the selection of an arbitrator. Thereafter, on January 9, the circuit court entered an order that stated, in pertinent part:
Scrushy contends that the temporary stay has caused, and that an indefinite stay will cause, him irreparable and continuing harm. Further, says Scrushy, although the temporary stay expired on January 20, HealthSouth has not filed counterclaims or objections in the arbitration proceeding.
On February 1, the circuit court entered an order regarding HealthSouth's motion to stay, noting that "HEALTHSOUTH is contractually estopped from contesting SCRUSHY'S right to seek arbitration regarding these indemnification claims" and quoting that portion of the indemnity agreement that provided, "The Company shall not oppose the Indemnitee's right to seek any such adjudication or award in arbitration or any other claim." The circuit court noted that HealthSouth had presented "substantial evidence" in support of its defenses to arbitration based upon waiver by litigation. However, the circuit court expressly disavowed having made any decision on that issue. Nevertheless, invoking its "inherent power and authority to manage the litigation pending herein" and its commitment to cooperate with the federal court involved in related litigation, and citing the need to manage pretrial discovery in a way that is "fair and equitable to all parties," the circuit court concluded that HealthSouth was "entitled to pursue and establish any defenses that it may have concerning the merits of SCRUSHY'S claim for indemnification" without the arbitration proceeding coming to a conclusion. Consequently, the circuit court stayed the arbitration "until such time as this Court determines that the arbitration may recommence." The circuit court further ordered Scrushy "to terminate the arbitration and withdraw his demand for arbitration, all without prejudice to his right to commence arbitration on further order of this Court." Finally, the circuit court granted Scrushy the right to petition it to lift the stay "after pretrial discovery has occurred so that arbitration is appropriate."
*294 Ex parte Sealy, L.L.C., 904 So. 2d 1230, 1232-33 (Ala.2004). We conclude that under the facts of this case a writ of mandamus is the appropriate remedy by which to order a vacatur of the circuit court's void order. Because we have no basis to conclude that the circuit court will not comply with our mandate, we decline to issue the alternative writ of prohibition.
Scrushy's petition for the writ of prohibition or, in the alternative, for the writ of mandamus relies upon the strong policy in favor of arbitration, citing Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24-25, 103 S. Ct. 927, 74 L. Ed. 2d 765 (1983). While Scrushy does not specifically invoke the Federal Arbitration Act, 9 U.S.C. § 1 et seq. ("the FAA"), the reference to Moses H. Cone, which construes the FAA, suffices for our purposes to bring into play the implications of the FAA. As we very recently noted in Ocwen Loan Servicing, LLC v. Washington, 939 So. 2d 6, 14 (Ala.2006):
For purposes of the present proceeding, we focus upon the strong federal policy relating to construction of the contract language itself. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944, 115 S. Ct. 1920, 131 L. Ed. 2d 985 (1995).
As previously noted, the circuit court did not pass on the question of waiver by litigation, concluding instead that HealthSouth was "contractually estopped" from arguing that Scrushy waived the right to arbitrate his indemnity claims. The circuit court relied upon that provision of the indemnity agreement stating, "The Company shall not oppose the Indemnitee's right to seek any such adjudication or award in arbitration or any other claim." The circuit court concluded that HealthSouth was therefore estopped from contesting Scrushy's right to seek indemnity in arbitration. In its response to Scrushy's petition, HealthSouth does not offer any argument as to the invalidity of that conclusion. Based on the United States Supreme Court's holding in Moses H. Cone, requiring that any doubts either as to the construction of the language of a contract or as to claims of waiver be resolved in favor of arbitration, we cannot affirm the circuit court's stay of the arbitration proceeding based on a rejection of the circuit court's finding of estoppel, assuming that by doing so we would also find that Scrushy waived his right to arbitration by substantially invoking the litigation process to the detriment of HealthSouth.
The arbitration provision appears in an indemnity agreement negotiated by two highly sophisticated business parties. One of the attributes of arbitration is the availability of only as much discovery as the arbitrator sees fit to permit. See H &amp; S Homes, L.L.C. v. McDonald, 910 So. 2d 79, 85 (Ala.2004). Nevertheless, the circuit court has found that resolution of the issues made the basis of the arbitration proceeding without discovery is inconsistent with its view of the orderly administration of the case before it. In so doing, the circuit court has impermissibly rewritten *295 the indemnity agreement between the parties. The arbitrator is the appropriate entity to decide the issues of how much discovery is appropriate and the interrelationship between paragraph 2(b) and paragraph 5 of the indemnity agreement. That the requirement of paragraph 10 of the indemnity agreement calling for an award to be made within 60 days following the filing of the demand for arbitration may be impractical under the circumstances here presented is no occasion to rewrite the indemnity agreement to suit the present pleasure of one of the parties. Such activity flouts settled principles of Alabama contract law. See, e.g., Mutual Sav. Life Ins. Co. v. James River Corp. of Virginia, 716 So. 2d 1172, 1178 (Ala.1998) ("A broader interpretation of the transaction would effectively rewrite the contract to give the investors more than they bargained for in an arm's-length transaction between sophisticated parties."); and Ex parte Associates Commercial Corp., 423 So. 2d 195, 200 (Ala.1982) ("The pivotal rule that lies at the core of this case is that which says no court can rewrite the terms of a plain and unambiguous contract."). We cannot apply unique rules of contract law applicable only to arbitration agreements. Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 687, 116 S. Ct. 1652, 134 L. Ed. 2d 902 (1996).
HealthSouth urges this Court to uphold the circuit court's order based upon Art. VI, § 142(b) of the Alabama Constitution of 1901, which provides that a circuit court "shall have authority to issue such writs as may be necessary or appropriate to effectuate its powers." HealthSouth cites no authority to support the availability of state law to overcome the provisions of the FAA. In fact, we cannot permit state-law-based concepts of inconvenience or inconsistency with preferred standards for the administration of justice to countenance refusal to enforce the provisions of an agreement to arbitrate without running afoul of 9 U.S.C. § 2 (written arbitration agreements "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract"). As this Court stated in Leeman v. Cook's Pest Control, Inc., 902 So. 2d 641, 644-45 (Ala.2004):
The "suspect status" of the arbitration agreement in this case can be the only justification for the circuit court's revision of the terms of the indemnity agreement, inconsistent with the aforementioned general principles of Alabama contract law, to accommodate the current interests of HealthSouth.
This Court faced the opposite of the factual scenario presented in this case in Ex parte Tony's Towing, Inc., 825 So. 2d 96 (Ala.2002), in which all defendants except Tony's Towing moved to compel arbitration. The plaintiff and the other defendants *296 then asked the trial court to compel Tony's Towing to participate in arbitration with them. This Court's previous cases had addressed the intertwining of claims in situations where a nonsignatory to an arbitration agreement sought arbitration over the objection of a signatory. In Tony's Towing, signatories to the arbitration agreement sought arbitration over the objection of a nonsignatory. Because Tony's Towing had not contracted to arbitrate, we concluded that it could not be compelled to arbitrate its claims, despite the fact that litigation and arbitration would proceed simultaneously. We concluded that although "[t]he trial court exhibited laudable concern for judicial economy and for avoiding inconsistent verdicts[,]. . . . we [could not] address those concerns without rewriting or, indeed, creating a contract calling for arbitration where none exists." 825 So. 2d  at 99.
In the case before us, despite the circuit court's commendable efforts to coordinate this litigation with other cases pending before it and in the federal court, as well as its efforts to manage pretrial discovery, because any attempt to deter the arbitration process contemplated by the indemnity agreement rewrites that agreement, the circuit court's order staying the arbitration proceeding and directing Scrushy to terminate the arbitration proceeding is void and must be vacated. When presented with similar situations, the United States Supreme Court has also concluded that concepts of judicial economy are secondary to the strong federal policy favoring arbitration. In Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 217, 105 S. Ct. 1238, 84 L. Ed. 2d 158 (1985), the Supreme Court stated:
(Footnote omitted.) See also Moses H. Cone, 460 U.S.  at 20, 103 S. Ct. 927 (The FAA "requires piecemeal resolution when necessary to give effect to an arbitration agreement." (footnote omitted)).
Although we commend the circuit court for its laudable concerns as to the efficient management of complex litigation, for the reasons previously stated we grant Scrushy's petition for a writ of mandamus asking this Court to vacate the trial court's order of February 1, 2006.
PETITION GRANTED; WRIT ISSUED.
NABERS, C.J., and SEE, HARWOOD, WOODALL, STUART, SMITH, BOLIN, and PARKER, JJ., concur.