Opinion ID: 1843443
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Heading: Mutuality of Remedy

Text: The doctrine of mutuality of remedy originally held that a party to a contract may not obtain specific performance of the other party's obligation under the contract if the party seeking specific performance cannot be compelled to specifically perform. This Court, in a 1931 exposition of the doctrine, relied largely on Pomeroy's Equity Jurisprudence: Appellant further invokes the doctrine of mutuality of equitable remedy. All that this doctrine (of mutuality of equitable remedy) requires is that the situation of the parties be such that the court, in decreeing specific performance by the respondent, will have the physical power and ability to compel the complainant to perform his obligation and not be involved in complicated business affairs or operations. That is to say, `In equity, however, where it is sought to secure a decree for the specific performance of a contract, the right to such relief depends upon the existence in the defendant of the right to similar relief. Generally, if this remedy is not mutual, the court, in the exercise of its discretionary powers, will refuse to assume jurisdiction to grant relief of this character to either party....' 333 Ill. 494, 165 N.E. 131, 65 A.L.R. page 45. .... In his work on Equity Jurisprudence, Mr. Pomeroy noted the confusion resulting from misapprehension of the meaning of the doctrine of mutuality and expounded that doctrine in unambiguous terms (volume 5, §§ 2191 to 2194); and in section 2191, he makes the following statement in his notes: `The rule as to mutuality is not a rule of reciprocity that relief will be denied unless defendant, if he had seen fit to sue instead of the plaintiff suing, would have succeeded in his suit; but, so far as it can be justified at all, is merely designed to secure performance on the plaintiff's part of his executory promise by the one decree in equity.' ... And thus he states the rule (5 Pom. Eq. Jur. pp. 4923, 4924, § 2191): `Equity will not compel specific performance by a defendant, if after performance the common-law remedy of damages would be his sole security for the performance of the plaintiff's side of the contract. 3 Columbia Law Rev. 1, by Professor J.B. Ames. The court will not grant specific performance to plaintiff and at the same time leave defendant to the legal remedy of damages for possible future breaches on plaintiff's part. This rule, it is believed, covers the circumstances in equity where, according to the weight of authority, the court refuses its aid for lack of mutuality.' General Securities Corp. v. Welton, 223 Ala. 299, 305-06, 135 So. 329, 334-35 (1931). The Court similarly applied a limited version of the doctrine of mutuality of remedy in Pierce v. Watson, 252 Ala. 15, 39 So.2d 220 (1949). After discussing criticisms of and limitations on the rule, the Court stated: We think it may be said as a general proposition that the rule of mutuality is satisfied if the decree of specific performance operates effectively against both parties and gives each the benefit of a mutual obligation. 252 Ala. at 18, 39 So.2d at 222. This version of the doctrine of mutuality of remedy is essentially the one advocated by Professor Corbin: The primary rule that the decisions will now sustain, in lieu of the broken-down requirement of mutuality of remedy, is this: the court may properly refuse specific enforcement if some substantial part of the agreed exchange for the defendant's performance has not yet been rendered and its performance is not sufficiently assured to the satisfaction of the court. 5A Corbin on Contracts, § 1183 (1964). Corbin discusses the subject in detail in §§ 1178 through 1204. See also 11 Williston on Contracts, §§ 1433-1440 (3d ed.1968). Having considered these authorities, we conclude that the rule of mutuality of remedy, while severely limited, is not entirely obsolete. It may still be applied to disallow specific performance where the party who seeks specific performance will thereafter have an ongoing obligation to the other party but the other party will not have an adequate remedy for securing the performance of that obligation. How does this apply in the context of arbitration? To the extent that the question concerns specific performance, it is certainly applicable, because a motion or an action to compel arbitration seeks specific performance of an arbitration clause in a contract. Indeed, Alabama's policy against arbitration is stated in the Code article on specific performance, in a section listing contracts that cannot be specifically enforced. Title 8, Chapter 1, Article 3, § 8-1-41(3), Ala.Code 1975. The specific question arises when one party ( A ) is bound to arbitrate but the other ( B ) is not. B seeks to compel arbitration of a claim made by A. After such an arbitration, another dispute may potentially arise, and B may file an action against A. If such a later dispute arises, A will not be able to take the claim to arbitration. [4] Is there such a lack of mutuality of remedy here as to justify denying B `s motion to compel arbitration of the first claim? This question is peculiar because the remedy to be obtained by specific performance is not performance under the contract, but only access to a remedyarbitration versus adjudicationfor the alleged breach of contract. We can, however, envision a situation in which a court, addressing a motion to compel arbitration, may invoke principles of equity to deny the motion. Such a situation could arise where a consumer contract is one of adhesion, and the party in the superior bargaining position has given itself a choice of arbitration or litigation, but has reserved a right to compel the weaker party to submit to arbitration. Indeed, such a rationale was expressed in one of the New York cases decided before Sablosky: [W]e commence with a basic premise that arbitration is consensual in nature. The fundamental assumption of arbitration is that it may be invoked as an alternative to the settlement of disputes through the judicial process `solely by reason of an exercise of choice of (all) parties'.... Such agreement to arbitrate has been held to be enforceable if it had been openly and fairly entered into. In determining whether plaintiff in this case entered into such agreement, the principles governing enforcement of contracts of adhesion must be considered. Adhesion contracts refer to a standardized contract form offered to consumers of goods and services essentially on a `take it or leave it' basis, without affording the consumer a realistic opportunity to bargain, and under such conditions that the consumer cannot obtain the desired product or services except by acquiescing to the form of the contract.... .... The defendant doctor is a college, medical and dental school graduate. The nurses employed by him are graduates of nursing schools. Counterposed to these educated people is the plaintiff who attended school but completed an eleventh grade education. To contrast this limited educational background against that of a professional doctor and his nursing staff could be unreasonable and unconscionable. The doctrine of unconscionability is not new to American jurisprudence. (See, e.g., Scott v. United States, 79 U.S. 443, 12 Wall. 443, 20 L.Ed. 438 (1870); Hume v. United States, 132 U.S. 406, 10 S.Ct. 134, 33 L.Ed. 393 (1889)). .... An arbitration agreement will not be enforced unless it is `mutually binding'. Where an arbitration clause is not mutually binding, but rather grants one party a unilateral right to arbitrate, the court will not enforce such agreement.... The agreement to arbitrate in this matter purports to be an exchange of promises to arbitrate with each promise serving as consideration for the other. In return for the patient's consent to arbitrate all claims arising out of the medical relationship, the doctor agreed to arbitrate all claims except claims of money due for services rendered. In a doctor-patient relationship, the only possible claim the doctor would have is a claim of money for services rendered. This claim is specifically reserved by the doctor and excluded from the agreement. .... The court finds the contract was unconscionable and unilateral. The motion to compel arbitration and dismiss the complaint is denied. Miner v. Walden, 101 Misc.2d 814, 816-19, 422 N.Y.S.2d 335, 337-40 (Sup.Ct.1979). Of course, the portion of this reasoning that requires mutuality of obligation was overruled by Sablosky, but the remaining portionsstating that arbitration is consensual in nature, that in a contract of adhesion consent may not be truly present, and that in such a situation the doctrine of unconscionability may applywe find to be persuasive on the question of mutuality of remedy. Those concepts are applicable as general principles of law, not principles specific to and disfavoring arbitration. As well as expressing a strong policy against specific enforcement of arbitration contracts, the Alabama legislature has also adopted a strong version of the doctrine of mutuality of remedy, also found in the Code article on specific performance: Neither party to an obligation can be compelled specifically to perform it unless the other party thereto has performed or is compelled specifically to perform everything to which the former is entitled under the same obligation, either completely or nearly so, with full compensation for any want of entire performance. Ala.Code 1975, § 8-1-43 (emphasis added). The few cases citing this section have applied the judicially adopted limitations on and exceptions to the doctrine of mutuality of remedy. Kennedy v. Herring, 270 Ala. 73, 116 So.2d 596 (1959); Moss v. Cogle, 267 Ala. 208, 101 So.2d 314 (1958); Downing v. Williams, 238 Ala. 551, 191 So. 221 (1939). [5] Nevertheless, the Code section still stands in the books and in strong language expresses a policy favoring mutuality of remedy. Therefore, we hold that, in a case involving a contract of adhesion, if it is not shown that the party in an inferior bargaining position had a meaningful choice of agreeing to arbitration or not, and if the superior party has reserved to itself the choice of arbitration or litigation, a court may deny the superior party's motion to compel arbitration based on the doctrines of mutuality of remedy and unconscionability. We express this principle specifically as to arbitration only because that is the issue presented here. The principle is equally true as to any unconscionable term of a contract of adhesion. [6] Cf. Doctor's Associates, Inc. v. Casarotto, supra . The element of unconscionability in the context of an arbitration clause is supplied by the fact that, by agreeing to arbitrate, a party waives his right to a remedy by due process of law, Ala. Const.1901, § 13, and his right of trial by jury, Ala. Const.1901, § 11, and U.S. Const. Amend. VII. To allow such a waiver in an adhesion contract without a showing that it was voluntarily made might well be unconscionable. Moreover, a court in this state that is asked to enforce an arbitration clause is asked to rule contrary to the prohibition in Section 10 of our Constitution That no person shall be barred from prosecuting or defending before any tribunal in this state, by himself or counsel, any civil cause to which he is a party, Ala. Const.1901, § 10. To enter such a ruling, a state court is entitled to require a clear showing of preemption of state law under the Supremacy Clause of the United States Constitution and a clear showing that enforcement of the arbitration clause would not be unconscionable. As shown above, the contract requires Creative Broadcasting and its stockholders to submit any disputes they have with Northcom to arbitration, but allows Northcom in the principal situations in which it might seek reliefa failure by Creative Broadcasting to convey as agreed or a breach by its stockholders of the covenant not to competeto bring an action for equitable relief or damages. However, there is no indication that this contract is a contract of adhesion. On the contrary, both the sellers and the buyers were represented by counsel and at least had the opportunity to negotiate the terms of the contract. Under these circumstances, there is not such a showing of lack of voluntary agreement to support a holding of unconscionability of the arbitration clause based on the lack of mutuality of remedy. For the reasons stated, the denial of the motion to compel arbitration is reversed, and the cause is remanded. OPINION OF JANUARY 10, 1997, WITHDRAWN; OPINION SUBSTITUTED; APPLICATION GRANTED; REVERSED AND REMANDED. SHORES, J., concurs. HOOPER, C.J., and MADDOX, HOUSTON, and SEE, JJ., concur in the result.