Opinion ID: 1705657
Heading Depth: 2
Heading Rank: 2

Heading: Who Is Authorized to Decide Arbitrability

Text: The lenders argue that the trial court also erred when it determined that Peoples's claims were not covered by arbitration. They contend that the arbitration provision clearly reflects the parties' intention to arbitrate the question of arbitrability, and, therefore, that that question must be submitted to arbitration. In Smith v. Mark Dodge, Inc., 934 So.2d 375, 379 (Ala. 2006), we stated: A threshold issue is which forum should decide the question of the scope of the arbitration agreement. In First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995), the United States Supreme Court stated: `Just as the arbitrability of the merits of a dispute depends upon whether the parties agreed to arbitrate that dispute, see, e.g., Mastrobuono v. Shearson Lehman Hutton, Inc., [514 U.S. 52, 57 (1995)]; Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985), so the question who has the primary power to decide arbitrability turns upon what the parties agreed about that matter.' 514 U.S. at 943, 115 S.Ct. 1920. However, the Court warned, `[c]ourts should not assume that the parties agreed to arbitrate arbitrability unless there is clea[r] and unmistakabl[e] evidence that they did so.' 514 U.S. at 944, 115 S.Ct. 1920 (quoting AT & T Techs. v. Communications Workers, 475 U.S. 643, 649, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986)). This Court has similarly required that trial courts order arbitration of the issue of arbitrability when the plain language of the agreement unquestionably shows that the parties agreed to arbitrate the issue of arbitrability. Polaris Sales, Inc. v. Heritage Imports, Inc., 879 So.2d 1129, 1133-34 (Ala.2003); and Ex parte Perry, 744 So.2d 859, 866-67 (Ala.1999). The question presented by this case is whether the arbitration provision clearly and unmistakably provides that the arbitrator shall decide arbitrability. The lenders argue that incorporation into the arbitration provision of the Commercial Rules of the American Arbitration Association, conferring authority to decide such issues on the arbitrator, evidences such an intent. This Court has not decided whether the incorporation of such rules is sufficient to show the parties' intent to delegate the issue of arbitrability to an arbitrator, but federal courts have so held. In Terminix International Co. v. Palmer Ranch Ltd. Partnership, 432 F.3d 1327, 1332 (11th Cir.2005), the United States Court of Appeals for the Eleventh Circuit stated: [T]he parties have agreed that the arbitrator will [decide the issue of arbitrability] by providing (in all three of the arbitration clauses at issue) that `arbitration shall be conducted in accordance with the Commercial Arbitration Rules then in force of the American Arbitration Association' (AAA). AAA Rule 8(a), [1] in turn, provides that `[t]he 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.' Am. Arbitration Ass'n, Commercial Arbitration Rules, http:// www.adr.org/sp.asp?id=22173#Toc 13029601. [2] By incorporating the AAA Rules, including Rule 8, [3] into their agreement, the parties clearly and unmistakably agreed that the arbitrator should decide whether the arbitration clause is valid. See, e.g., Contec Corp. v. Remote Solution, Co., 398 F.3d 205, 208 (2d Cir.2005) (`when . . . parties explicitly incorporate rules that empower an arbitrator to decide issues of arbitrability, the incorporation serves as clear and unmistakable evidence of the parties' intent to delegate such issues to an arbitrator'); Apollo Computer, Inc. v. Berg, 886 F.2d 469, 473 (1st Cir.1989) (`By contracting to have all disputes resolved according to the Rules of the ICC . . ., Apollo agreed to be bound by Articles 8.3 and 8.4. These provisions clearly and unmistakably allow the arbitrator to determine her own jurisdiction when, as here, there exists a prima facie agreement to arbitrate whose continued existence and validity is being questioned.'). . . .  We find the reasoning of the Eleventh Circuit and other Circuit Courts of Appeal that have addressed this issue persuasive and hold that an arbitration provision that incorporates rules that provide for the arbitrator to decide issues of arbitrability clearly and unmistakably evidences the parties' intent to arbitrate the scope of the arbitration provision. We therefore conclude that under the arbitration provision Peoples executed, issues of arbitrability are to be decided by the arbitrator.