Title: Auto Owners Insurance, Inc. v. Blackmon Insurance Agency, Inc.
Citation: N/A
Docket Number: 1100769
State: Alabama
Issuer: Alabama Supreme Court
Date: March 2, 2012

REL: 3/2/12
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, 2011-2012
_________________________
1100769
_________________________
Auto Owners Insurance, Inc.
v.
Blackmon Insurance Agency, Inc.
Appeal from Baldwin Circuit Court
(CV-10-902245)
MALONE, Chief Justice.
Auto Owners Insurance, Inc. ("Auto Owners"), appeals the
denial by the Baldwin Circuit Court of its motion to dismiss
or, in the alternative, to compel arbitration in an action
1100769
2
against 
it 
filed 
by 
Blackmon 
Insurance 
Agency, 
Inc.
("Blackmon").  We reverse and remand.
Facts and Procedural History
The parties agree that in 1995 Blackmon, an Alabama
insurance agency, and Auto Owners, an insurance company
incorporated in Michigan, entered into an "agency agreement"
authorizing Blackmon to act as an agent for the sale of Auto
Owners' insurance in Alabama ("the 1995 agreement").  The 1995
agreement, among other things, authorized Blackmon "to solicit
and secure applications and to bind coverage, subject to [Auto
Owners'] rules and regulations, for the classes of insurance
for which a commission is specified in the attached state
commission schedule(s) ...."  The 1995 agreement also provided
that the commission schedule or schedules could be modified
from time to time and that "[Auto Owners] may from time to
time prescribe rules and regulations respecting the conduct of
business covered hereby ...."
The 1995 agreement included an arbitration provision.That
provision stated, in pertinent part:
"In the event of any dispute arising out of this
Contract, the parties agree to submit such dispute
to arbitration as follows[:]
1100769
3
"(a)
There shall be three arbitrators[:] one
shall be selected by [Blackmon], one shall
be selected by [Auto Owners], and a third
shall be selected by the two arbitrators.
If the two arbitrators cannot agree on the
selection of a third, a Judge of Circuit
Court for Eaton County, Michigan or the
County of [Blackmon's] residence, shall be
requested to appoint such third arbitrator.
"(b)
The arbitration shall be conducted in
accordance with the procedure of the
American 
Arbitration 
Association.[Blackmon]
and [Auto Owners] shall pay the cost of
their arbitrator and share equally in the
expense of the third arbitrator."
(Emphasis added.)
The status of another document in the record, ostensibly
executed in 2005, is hotly contested.  That document is
entitled "Letter of Instructions" and is subtitled "Agent's
Agreement Concerning Limitations on the Use of Power of
Attorney" ("the 2005 document"). Blackmon alleges that the
2005  document is a stand-alone agreement, independent of the
1995 agreement. Auto Owners, on the other hand, alleges that
the 
2005 
document 
constitutes 
"rules 
and 
regulations
'respecting the conduct of business,'" as contemplated by and
therefore incorporated into the 1995 agreement.  The 2005
document contains instructions governing the issuance of a
variety of bonds by an agency of Auto Owners, including
1100769
4
construction-performance bonds.  A copy of the 2005 document
is included in the record, but Blackmon insists the signature
denoting its assent is either forged or unauthorized. Also in
the record is a 2007 commission schedule that lists the types
of bonds discussed in the 2005 document among the insurance
classifications for which a commission is specified.  The 2005
document does not contain an arbitration provision and does
not expressly refer to or incorporate any agency agreement.
Auto Owners also alleges, and Blackmon disputes, that the
parties entered into a third agency agreement in 2009 ("the
2009 agreement").  Blackmon insists that its signature on the
2009 agreement is also either forged or unauthorized.  The
2009 agreement contains an arbitration provision that is
substantially identical to the arbitration provision in the
1995 agency agreement, except that the 2009 agreement provides
that venue for any arbitration will be in Eaton County,
Michigan.
On December 22, 2010, Blackmon filed a complaint in the
circuit court seeking a declaratory judgment as to the
arbitrability of a dispute between Blackmon and Auto Owners as
to which Auto Owners had already initiated arbitration
1100769
5
proceedings.  In its complaint, Blackmon alleged that Auto
Owners had initiated the arbitration proceedings against
Blackmon in Eaton County, Michigan. Blackmon also alleged that
in the Michigan arbitration proceeding Auto Owners bases its
claims on the 2005 document and 2009 agreement.
On January 21, 2011, Auto Owners filed in the Baldwin
Circuit Court a motion to dismiss Blackmon's declaratory-
judgment action or, in the alternative, to compel arbitration.
It argued that the arbitration proceedings it had initiated in
Michigan involved only disputes that were arbitrable under the
1995 agreement and that the circuit court did not have
subject-matter 
jurisdiction 
to 
adjudicate 
Blackmon's
declaratory-judgment action.
On January 24, 2011, the circuit court scheduled Auto
Owners' motion for a hearing on February 15, 2011.  On
February 14, Blackmon filed its brief in opposition to Auto
Owners' motion. After the hearing, the circuit court, on
February 17, 2011, denied Auto Owners' motion.  On March 16,
without having filed a motion seeking reconsideration of the
circuit court's ruling, Auto Owners filed a response to
Blackmon's February 14, 2011, brief, which the circuit court
1100769
The parties continued filing motions in the circuit court
1
after Auto Owners had filed its notice of appeal. On August
10, 2011,  Auto Owners finally filed a motion in the circuit
court to stay those proceedings, which the circuit court
granted on August 16. 
6
apparently treated as a motion to alter or amend its ruling.
On March 31, 2011, after another hearing held the same day,
the circuit court entered an amended order reaffirming its
order of February 17 denying Auto Owners' motion.  Auto Owners
filed its notice of appeal with this Court on March 31, 2011.1
Standard of Review
This Court's standard of review of a ruling on a motion
to compel arbitration is well settled.  Bowen v. Security Pest
Control, Inc., 879 So. 2d 1139, 1141 (Ala. 2003).  A direct
appeal is the proper procedure by which to seek review of such
an order, Rule 4(d), Ala. R. App. P., and this Court reviews
the  lower  court's order de novo.  Bowen,  879 So. 2d at
1141. The party seeking to compel arbitration has the initial
burden of presenting evidence of the existence of a contract
calling for arbitration and of proving that that contract
involves interstate commerce.  Polaris Sales, Inc. v. Heritage
Imports, Inc., 879 So. 2d 1129, 1132 (Ala. 2003).  Once the
moving party meets its initial burden, the party opposing
1100769
7
arbitration has the burden of presenting evidence tending to
show that the arbitration agreement is invalid or that it does
not apply to the dispute in question.  Bowen, 879 So. 2d at
1141.  See also Title Max of Birmingham, Inc. v. Edwards, 973
So. 2d 1050, 1052–53 (Ala. 2007).
Discussion
The Federal Arbitration Act, 9 U.S.C. § 1 et seq. ("the
FAA"), governs this case.  Section 2 of the FAA provides, in
pertinent part:
"A written provision in ... a contract evidencing a
transaction 
involving 
commerce 
to 
settle 
by
arbitration a controversy thereafter arising out of
such contract or transaction ... shall be valid,
irrevocable, and enforceable, save upon such grounds
as exist at law or in equity for the revocation of
any contract."
Neither party disputes that the 1995 agreement involves
interstate commerce.
"The federal policy favoring arbitration is so strong
that, as a matter of law, 'any doubts concerning the scope of
arbitrable 
issues 
should 
be 
resolved 
in 
favor 
of
arbitration....'  Ameriquest Mortg. Co. v. Bentley, 851 So. 2d
458, 463 (Ala. 2002) (quoting Moses H. Cone Mem'l Hosp. v.
Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983)).  This is so
1100769
8
"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."  Moses H. Cone Mem'l Hosp.,
460 U.S. at 25.  "[A] motion to compel arbitration should not
be denied 'unless it may be said with positive assurance that
the arbitration clause is not susceptible of an interpretation
that covers the asserted dispute.'"  Ex parte Colquitt, 808
So. 2d 1018, 1024 (Ala. 2001) (quoting United Steelworkers of
America v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582-83
(1960)).
In 
keeping 
with 
the 
federal 
policy 
in 
favor 
of
arbitration, this Court has stated further that the question
of arbitrability of a given dispute is not answered by
"whether the dispute arose from the contract containing the
arbitration clause but, rather, whether the dispute arose from
the relationship described in the arbitration clause."
Thompson Tractor Co. v. Fair Contracting Co., 757 So. 2d 396,
399 (Ala. 2000) (emphasis added).  The parties in Thompson
Tractor had entered into multiple agreements; some of those
agreements contained an arbitration provision and some did
not.  Fair Contracting Company, Inc., the plaintiff and the
1100769
9
party resisting arbitration, alleged that its dispute with
Thompson Tractor Company, Inc., arose from agreements that
predated any agreements containing the arbitration provision.
Noting that the later added arbitration provision specified
that disputes arising from "prior negotiations and dealings"
between the parties were to be arbitrated, this Court reversed
the trial court's order denying  Thompson Tractor's motion to
compel arbitration.  Thompson Tractor, 757 So. 2d at 399-400.
Likewise, in SouthTrust Securities, Inc. v. McClellan,
730 So. 2d 620 (Ala. 1999), this Court reversed a trial
court's order denying a motion to compel arbitration. In that
case, an employee alleged that his employer had made false
pre-employment statements to him during the hiring process
that induced him to leave his former employer.  The employment
agreement contained an arbitration clause, which, by its
terms, applied to any dispute "arising out of [the employee's]
employment" with SouthTrust.  230 So. 2d at 622. Construing
the clause "arising out of ... employment" to include events
occurring during the hiring process, this Court stated: "Such
a construction is consistent with the federal courts'
willingness in arbitration cases to look to the type of
1100769
We need not address Blackmon's contention that the
2
signatures of its representatives on the 2005 document and the
2009 agreement 
are 
forged 
or 
unauthorized. 
Blackmon's
arguments clearly require holding Auto Owners to the terms of
the 2005 agreement, the validity of which Auto Owners does not
oppose, and Blackmon admits entering into the 1995 agreement,
the arbitration provision in which is substantially identical
to the arbitration provision in the 2009 agreement.
10
relationship described in the arbitration clause without
limiting it to a contractual relationship."  730 So. 2d at 622
(citing Zink v. Merrill Lynch Pierce Fenner & Smith, Inc., 13
F.3d 330, 333 (10th Cir. 1993)).
Blackmon argues that the 2005 document, which does not
contain an arbitration provision, is a stand-alone contract
that neither incorporates nor is incorporated by the language
of the 1995 agreement into the 1995 agreement.   To evaluate
2
that assertion we begin with determining the scope of the
arbitration provision in the 1995 agreement and conclude with
interpreting the 2005 document to determine whether the
arbitration provision in the 1995 agreement encompasses the
2005 document.
Nowhere in the record does Blackmon raise any issue with
specific regard to the arbitration provision in the 1995
agreement; rather, Blackmon's arguments focus on the status of
the 2005 document and the 2009 agreement as against the 1995
1100769
11
agreement.  Moreover, the 1995 agreement, which Blackmon never
challenges, expressly incorporates the "procedure of the
American Arbitration Association" ("AAA"). The AAA Commercial
Arbitration Rules governing the 1995 agreement include Rule R-
7(a), which provides: "The arbitrator shall have the power to
rule on his or her own jurisdiction, including any objections
with respect to the existence, scope or validity of the
arbitration agreement."  (Emphasis added.)  Rule R-7(b) of the
AAA Commercial Arbitration Rules gives the arbitrator the
authority "to determine the existence or validity of a
contract of which an arbitration clause forms a part." Whether
any alleged breach by Blackmon under the disputed 2005
document is within the scope of the arbitration provision in
the 1995 agreement, and whether the 2005 document and the 2009
agreement are valid, are therefore questions for the
arbitrator under the AAA Commercial Arbitration Rules under
which Blackmon and Auto Owners agreed to operate in the 1995
agreement.  On the basis of pertinent federal authority, this
Court 
has 
held 
that 
"an 
arbitration 
provision 
that
incorporates rules that provide for the arbitrator to decide
issues of arbitrability clearly and unmistakably evidences the
1100769
12
parties' intent to arbitrate the scope of the arbitration
provision."  CitiFinancial Corp. v. Peoples, 973 So. 2d 332,
340 (Ala. 2007) (emphasis added).
As to "the relationship described in the arbitration
clause," Thompson Tractor, 757 So. 2d at 399, the arbitration
provision in the 1995 agreement requires Blackmon and Auto
Owners to arbitrate "any dispute arising out of this
Contract."  The arbitration provision thus directs the Court's
analysis to the remainder of the contract of which it is a
part.  The 1995 agreement expressly covers Blackmon's securing
applications and binding coverage for all classes of insurance
for which a commission is specified in certain commission
schedules incorporated into the agreement and as modified in
the future, such as the 2007 commission schedule; it expressly
contemplates that Auto Owners would in the future prescribe
"rules and regulations respecting the conduct of business"
between the parties to the 1995 agreement and that there would
be modifications of the commission schedules.  The 2005
document therefore is at least arguably contemplated by and
therefore incorporated into the 1995 agreement.
1100769
13
We do not decide whether the 2005 document is encompassed
by the arbitration provision in the 1995 agreement, however,
because the AAA Commercial Arbitration Rules, which the
parties in the 1995 agreement agreed to be bound by, require
the arbitrator to decide that question, and "doubts concerning
the scope of arbitrable issues should be resolved in favor of
arbitration." Moses H. Cone Mem'l Hosp., 460 U.S. at 24-25. We
merely note that the various documents at issue in this case
underscore that it cannot be said with "positive assurance,"
Ex parte Colquitt, 808 So. 2d at 1024, that the arbitration
provision in the 1995 agreement is not susceptible of an
interpretation that would include disputes arising from the
2005 document, nor can it be said at this juncture that the
dispute does not arise from the relationship described in the
arbitration provision of the 1995 agreement. 
In light of the authorities discussed above, the 1995
agreement, and the incorporation of the AAA Commercial
Arbitration Rules into that agreement, the task for the
circuit court was limited to determining merely whether it was
arguable that the 2005 document was encompassed by the 1995
1100769
The circuit court, as a court of general jurisdiction,
3
has the judicial power to determine questions of its own
jurisdiction.  Ex parte Board of Educ. of Blount Cnty., 264
Ala. 34, 37-38, 84 So. 2d 653, 656 (1956). 
Any ruling regarding arbitrability issued by the circuit
4
court prior to the arbitrator's ruling is prohibited by the
FAA, which provides that, when satisfied that it is faced with
an issue referable to arbitration, a court "shall stay the
trial of the action" until the arbitration has been completed.
9 U.S.C. § 3.
14
agreement.   Because that is an arguable question, it is the
3
arbitrator's task to decide whether the dispute in this case
is, or is not, subject to mandatory arbitration under the 1995
agreement.
 
Blackmon's contention before the circuit court that
Michigan is not a proper venue is also due to be resolved by
arbitration.  Rule R-10 of the AAA Commercial Arbitration
Rules provides for objections to venue.  Thus, all of
Blackmon's contentions in this case must be asserted before
the arbitrators pursuant to the description in the arbitration
provision of Blackmon's relationship with Auto Owners. Because
the parties agreed in the 1995 agreement to submit all issues
of arbitrability to arbitration, the circuit court should have
responded  
by 
granting 
Auto 
Owners' 
motion 
to 
compel
4
arbitration and either issuing a stay of the proceedings
1100769
Cf. Citifinancial Corp., 973 So. 2d at 341 ("On remand,
5
the trial court shall grant the motion to compel arbitration
and either issue a stay of these proceedings pending
arbitration or dismiss the case.").
15
pending arbitration or dismissing the case.   Because the 1995
5
agreement, by incorporating the AAA Commercial Arbitration
Rules and possibly the 2005 document and the 2009 agreement,
is dispositive of this case, we pretermit discussion of the
remaining issues raised by the parties on appeal.
Conclusion
Based on the above discussion and authorities, we
conclude that the circuit court erred in denying Auto Owners'
motion to compel arbitration.  We therefore reverse that order
and remand the case.  On remand, the circuit court shall grant
the motion to compel arbitration and either issue a stay of
these proceedings pending arbitration or dismiss the case.
REVERSED AND REMANDED WITH INSTRUCTIONS.
Stuart, Bolin, Main, and Wise, JJ., concur.  
Woodall and Parker, JJ., concur in the result.  
Murdock, J., dissents.
1100769
16
MURDOCK, Justice (dissenting).
The following might be said to be the "first principle"
of arbitration law with respect to contracts affecting
interstate commerce: "[A] party can be forced to arbitrate
only those issues it specifically has agreed to submit to
arbitration."  First Options of Chicago, Inc. v. Kaplan, 514
U.S. 938, 945 (1995).  See id. at 942 ("the arbitrability of
the merits of a dispute depends on whether the parties agreed
to arbitrate that dispute").  "Arbitration is simply a matter
of contract between the parties; it is a way to resolve those
disputes -- but only those disputes -- that the parties have
agreed to submit to arbitration." Id. at 943 (emphasis added).
If the foregoing is the "first principle" of arbitration
law, then, unavoidably, principle "1-A" is that a court must
decide whether a given issue is in fact one the parties
specifically have agreed to arbitrate. "Courts 'should
independently 
decide 
whether an arbitration panel has
jurisdiction over the merits of any particular dispute.'" Id.
at 941 (emphasis omitted; quoting with approval Kaplan v.
First Options of Chicago, Inc., 19 F.3d 1503, 1509 (3d Cir.
1994)).  "A disagreement about whether an arbitration clause
1100769
While affirming the general rule that "a disagreement
6
about whether an arbitration clause in a concededly binding
contract applies to a particular type of controversy is for
the court," the United States Supreme Court in Howsam, 537
U.S. 
at 
84, 
also 
recognized 
that 
there 
are 
certain
"'"procedural" questions which grow out of the dispute and
bear on its disposition' [that] are presumptively not for the
judge, but for an arbitrator, to decide."  537 U.S. at 84
(noting 
as 
examples 
of 
such 
"procedural 
questions"
"'allegation[s] 
of 
waiver, 
delay 
or 
like 
defense 
to
arbitrability'" (citing Moses H. Cone Mem'l Hosp. v. Mercury
Constr. Corp., 460 U.S. 1, 24-25 (1983))).  The issue in the
present case is not of the "procedural" variety described in
Howsam.  
17
in a concededly binding contract applies to a particular type
of controversy is for the court."  Howsam v. Dean Witter
Reynolds, Inc., 537 U.S. 79, 84 (2002).
Under these two principles, when a contract contains an
arbitration "clause" consisting of a single provision stating
simply that disputes falling within a certain "parameter" --
in this case, for example, the parameter of "dispute[s]
arising out of this Contract" -- will be arbitrated, the path
to resolution of an underlying 
dispute is relatively
straightforward.  A court need only decide whether the
underlying dispute falls within the stated parameter and, if
it does, refer that underlying dispute to arbitration for
decision on its merits.  
6
1100769
18
On the other hand, when a contract contains not only a
"first provision" of the nature described above, but also a
"second provision" that states that whether an underlying
dispute falls within the parameter described in the first
provision is, itself, a question to be resolved by the
arbitrator rather than by the court, things can get more
complicated -- much more complicated.
Justice Breyer, writing on behalf of the Court in First
Options, noted that a "second provision" of the nature
described above is, of course, a contractual agreement itself.
Accordingly, 
reasoned 
Justice 
Breyer, 
"[j]ust 
as 
the
arbitrability of the merits of a dispute depends upon whether
the parties agree to arbitrate that dispute [citations
omitted], so the question 'who has the primary power to decide
arbitrability' turns upon what the parties agreed about that
matter."  (First emphasis added.)  He went on to explain that
if "the parties agree[d] to submit the arbitrability question
itself to arbitration," then the arbitrator should decide it.
First Options, 514 U.S. at 943. 
"If, on the other hand, the parties did not agree to
submit 
the 
arbitrability 
question 
itself 
to
arbitration, then the court should decide that
question just as it would decide any other question
1100769
19
that the parties did not submit to arbitration,
namely independently.  These two answers flow
inexorably from the fact that arbitration is simply
a matter of contract between the parties; it is a
way to resolve those disputes -- but only those
disputes -- that the parties have agreed to submit
to arbitration." 
514 U.S. at 943.
It was a relatively easy thing to do in First Options to
declare that if, by its terms, a contract contained a "second
provision" stating that the parties agreed to submit the
arbitrability question itself to arbitration, then the
arbitrator should decide the arbitrability question.  After
all, there was no arbitration clause at all -- neither a so-
called "first provision" nor a "second provision" -- that had
been signed by the individuals seeking to avoid arbitration in
that case.  The Court in First Options did not have to analyze
the applicability, or workability, of its newly recognized
principle in relation to any particular "second provision";
the need for any such analysis was precluded by the fact that
there was no such provision to be analyzed.   
The present case, however, does involve a contract (the
so-called 1995 agreement) that contains an arbitration clause
signed by the party resisting arbitration.  It is, of course,
1100769
20
a clause with a "first provision," i.e., a provision that
consigns to arbitration the merits of underlying disputes that
fall within a certain parameter.  Specifically, the "first
provision" of the clause at issue in this case defines that
parameter as "dispute[s] arising out of this Contract."
The arbitration clause at issue in this case also
contains a "second provision," i.e., one that purports to
delegate to the arbitrator the additional, threshold task of
resolving disagreements as to whether an underlying dispute is
one that falls within the parameter -- "dispute[s] arising out
of this Contract" -- described in the first provision.  The
fact that this second provision exists, however, only begs a
question that itself must be addressed in the context of the
"first principles" identified at the outset of this writing:
How do we know that the parties intended this "second
provision" to apply to any given disagreement?  That is, we
have here a disagreement over whether the underlying dispute
is one that falls within the parameter prescribed in the
"first provision" of the arbitration clause.  How do we know
whether that disagreement is, itself, one the parties
specifically have agreed should be resolved by the arbitrator?
1100769
The "second provision" at issue here consists merely of
7
a statement incorporating by reference the procedural rules of
the AAA, which, as discussed in the text, contain a rule
providing for the arbitrability of the reach of the
arbitration clause.  The United States Supreme Court has
recognized 
the 
principle 
that 
"the 
'question 
of
arbitrability,' is 'an issue for judicial determination
[u]nless 
the 
parties clearly and unmistakably provide
otherwise,'" Howsam, 537 U.S. at 83 (emphasis omitted).  Cases
decided by this Court have accepted the notion that a general
incorporation by reference of AAA rules satisfies this
standard, see, e.g., CitiFinancial Corp., L.L.C. v. Peoples,
973 So. 2d 332, 339 (Ala. 2007), and we have not been asked to
revisit that notion in this case.
21
To answer that question, we must turn to the specific language
of the "second provision" because, as noted above, "the
question 'who has the primary power to decide arbitrability'"
"is simply a matter of contract between the parties" and
"turns upon what the parties agreed about that matter." First
Options, 514 U.S. at 943. 
In this case, the language in question is not explicitly
found in the 1995 agreement itself, but is incorporated by a
reference to the Commercial Arbitration Rules of the American
Arbitration Association ("the AAA").   Specifically, we are
7
called upon to apply the following language from Rule R-7(a)
of the AAA Commercial Arbitration Rules: "The arbitrator shall
have the power to rule on his or her own jurisdiction,
1100769
22
including any objections with respect to the existence, scope
or validity of the arbitration agreement." 
At this point, I pause for a moment to consider how much
more "sense" our situation would make if, instead of the
above-quoted language from Rule R-7(a), we had before us a
"second provision" that contained its own parameter, defining
some universe of disputes to which it would apply that was
broader than the universe of disputes to which the first
provision applies.  Consider, for example, the following
hypothetical second provision with the emphasized parameter:
"As to any dispute arising from any business relationship
between the parties, a disagreement as to whether that dispute
specifically 'arises out of this contract' for purposes of the
first provision of this paragraph will, itself, be decided by
the arbitrator."  Because this "second provision" would, by
its terms, apply to a broader universe of disputes than that
to which the "first provision" applies, it logically would
allow for separate fields of decision for the court and the
arbitrator.  That is, the court, consistent with the first
principle 
and 
principle 
1-A, 
would 
decide 
whether 
a
disagreement over who will decide whether the underlying
1100769
23
dispute is to be arbitrated is one that falls within the
parameter set out in the second provision.  Thus, the court
would decide whether this disagreement relates to an
underlying 
dispute 
that 
arises 
from 
some 
"business
relationship" of the parties.  If the court decides that this
disagreement does relate to a dispute that falls within this
broader "business relationship" parameter, then, under the
terms of the second provision, the court would send this
disagreement to the arbitrator for the arbitrator to resolve.
Then, but only then, would it fall to the arbitrator to decide
if the underlying dispute is one that falls within the
narrower universe of underlying disputes "arising from this
Contract."  
Unfortunately, the foregoing is not the type of second
provision we have here.  Instead, we have here a second
provision that sets no parameter on the types of disagreements
to which it applies beyond that set in the first provision. As
noted, it states only that "[t]he arbitrator shall have the
power to rule on his or her own jurisdiction, including any
objections with respect to the ... scope ... of the
arbitration agreement."  Thus, I submit, we meet ourselves
1100769
24
coming:  In order to decide whether such a second provision
applies to any particular disagreement, we, as a court, must
decide whether that disagreement relates to a dispute arising
out of the contract.  Once we have decided that, however,
there is nothing left for the arbitrator to decide insofar as
the second provision is concerned.  Paradoxically, a second
provision of this nature creates for itself no field of
operation.
The main opinion in effect circumvents this paradox by
adopting a rule of "arguability."  Under this approach, if a
disagreement pertains to a dispute that is "at least arguably
contemplated" by the first provision of the arbitration
clause, then the question whether it actually is contemplated
by the first provision is to be sent to the arbitrator. 
In reference to this newly adopted standard, I first find
myself compelled to ask whether we know what is meant by the
term "arguable."  Do we really mean "reasonably arguable"? The
main opinion provides no definition or standard for what is
meant by the term "arguable."  We are dealing here with issues
of law in relation to the intended reach of contractual
language and what is arguable (or even reasonably arguable) to
1100769
25
one judge may not be so to another, at least not without some
further definitional standard by which judges may more
precisely calculate where this new "arguability" parameter
lies.  In short, I suggest that "arguability" is an uncertain
and undefined standard and, accordingly, not a workable one.
More fundamentally, however, I question the legal basis
for the Court's adoption today of such a standard.  It is of
course fundamental that the contractual obligations of the
parties are to be a function only of their objective
manifestation of assent.   See Deeco, Inc. v. 3–M Co., 435 So.
2d 1260, 1262 (Ala. 1983) ("The existence vel non of a
contract is determined by reference to the reasonable meaning
of the parties' external and objective manifestations of
mutual assent.").  I see no reference to an arguability
standard in Rule R-7(a) of the AAA Commercial Arbitration
Rules -- the "second provision" at issue here.  That rule
merely provides that the arbitrator will decide whether a
given dispute is, or is not, within the arbitrator's
jurisdiction; the power of an arbitrator to decide whether a
dispute is, or is not, within the arbitrator's jurisdiction is
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I also note that this clear-and-unmistakable-evidence
8
standard by which we evaluate agreements to arbitrate the
question of arbitrability is in conflict with the manner in
which the main opinion makes use of what it refers to as a
"positive assurance" standard.  The latter standard is in fact
a standard announced by the United States Supreme Court not
with respect to the existence and extent of an agreement to
arbitrate the question of arbitrability (i.e., the reach of
so-called "second provisions"), but rather with respect to the
fundamental question whether the merits of the underlying
dispute, itself, were intended to be resolved by an arbitrator
(i.e., the extent of a so-called "first provision").  See
Ameriquest Mortgage Co. v. Bentley, 851 So. 2d 458, 463 (Ala.
2002) (quoting Moses H. Cone Memorial Hospital v. Mercury
Construction Corp., 460 U.S. 1, 24-25 (1983), for the basic
proposition that "[t]he federal policy favoring arbitration is
so strong that, as a matter of law, 'any doubts concerning the
scope of arbitrable issues should be resolved in favor of
arbitration ...'"); United Steel Workers of America v. Warrior
& Gulf Navigation Co., 363 U.S. 574, 582-83 (1960) (stating in
26
not, by the terms of Rule R-7(a), limited to those disputes
that are "arguably" within that jurisdiction.
The main opinion cites no precedent, and I have found
none, to support the judicial imputation of a limiting
standard in an arbitrability clause of this nature.  To the
contrary, my concern about the validity of judicially imputing
such a standard is heightened still further by the fact that
our doing so appears to conflict with the fundamental
principle that the parties' agreement to arbitrate the issue
of 
arbitrability 
must 
be 
a 
function 
of 
"clear 
and
unmistakeable" evidence.  First Options, 514 U.S. at 944.  
8
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relation to whether the merits of an underlying dispute should
be resolved by an arbitrator that a motion to compel
arbitration should not be denied "unless it may be said with
positive assurance that the arbitration clause is not
susceptible of an interpretation that covers the asserted
dispute").  In other words, the "positive assurance" standard
is part of the general, liberal policy favoring arbitration of
the merits of underlying disputes and, as such, stands in
contrast to the standard by which the question of who should
decide the arbitrability of an issue should be addressed.  As
the Supreme Court explained in Howsam: 
"Although the Court has also long recognized and
enforced 
a 
'liberal 
federal 
policy 
favoring
arbitration agreements,' ... it has made clear that
there is an exception to this policy: The question
whether the parties have submitted a particular
dispute to arbitration, i.e., the 'question of
arbitrability,' 
is 
'an 
issue 
for 
judicial
determination [u]nless the parties clearly and
unmistakably 
provide 
otherwise.' 
AT 
& 
T
Technologies, Inc. v. Communications Workers, 475
U.S. 643, 649 (1986) (emphasis added); First
Options, supra, at 944...."
Howsam,  537 U.S. at 83 (emphasis omitted; emphasis added).
27
Without the inclusion within the "second provision" of a
parameter defining some different, broader universe of
disagreements to which that provision was intended to apply,
and especially in light of the principle that agreements
relating to the delegation to arbitrators of disagreements
over the arbitrability of a dispute must be a function of
"clear and unmistakable" evidence, 
I cannot agree to
judicially impute to the "second provision" in this case some
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28
limitation on its reach not explicitly agreed to by the
parties, especially one as undefined as the "arguability"
standard adopted here.  Nor can I contemplate that the parties
intended for the arbitration clause in the 1995 agreement to
apply to any and all future disputes between them, no matter
how far removed in subject matter or in time from the
contractual arrangements evidenced by the 1995 agreement.
Obviously, there is no indication that the parties intended
such a far-reaching arrangement, and a question would exist as
to the enforceability of any such agreement.
Without the parties' having agreed to any other universe
of disagreements to which the second provision is intended to
be applicable, we, as a court, are left with no parameter for
its operation other than in respect to "dispute[s] arising out
of this Contract."  Thus, in order to decide that the second
provision applies in this case, we must decide that the
dispute at issue here is one that arises out of the 1995
agreement.  Obviously, in answering that question for purposes
of deciding the reach of the second provision, we will
necessarily be deciding the question at issue in regard to the
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For reasons subsumed by the foregoing analysis, I have
9
come to the conclusion that I erred in agreeing to send to
arbitration the disagreement over arbitrability addressed in
Part II of this Court's opinion in Custom Performance, Inc. v.
Dawson, 57 So. 3d 90 (Ala. 2010).  In Custom Performance, my
colleagues and I did not even bother to adopt an "arguability"
standard to define and limit the reach of the "second
provision" at issue in that case.  Even if we had, I cannot
think of any definitional parameter for the concept of
"arguability" within which the dispute over the helmet at
issue in that case would fall.  The arbitration clause at
issue in Custom Performance was found in, and clearly was
directed to disputes arising out of, a contract only for the
sale of tires for a motorcycle.  The injuries addressed in
Part II of that opinion related to the sale of a helmet that
was accomplished by way of an entirely separate contract
entered into some months following the sale of the tires.  The
helmet-sale 
contract 
related 
to 
an 
entirely 
separate
29
scope of the first provision.  Thus, the second provision in
this case is one that has no logical field of operation.  
In light of the foregoing, I would remand this case to
the trial court for it to decide whether the underlying
dispute in this case is one that arises under the 1995
agreement.  If the trial court were to conclude that it does,
then the proper course would be for the trial court to refer
that underlying dispute to arbitration.  Otherwise, the
underlying dispute would be one for decision on the merits by
the trial court itself.  Because the main opinion adopts a
different approach to the resolution of the matter before us,
I respectfully dissent.9
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transaction, contained no arbitration clause of its own
(neither the "first provision" nor a "second provision"), and
made no reference to the tire-sale contract or its arbitration
provisions.  Neither did the tire-sale contract contemplate,
much less make any reference to, any future helmet-sale
contracts.
30