Opinion ID: 1600921
Heading Depth: 2
Heading Rank: 2

Heading: Dismissal of Johnson's Action

Text: After the trial court ordered Johnson to arbitrate her claims against JCRA and dismissed her action, Johnson moved the trial court to alter, amend, or vacate its order under Rule 59(e), Ala. R. Civ. P. In her motion, Johnson reasserted the arguments she had made in her brief opposing JCRA's motion to compel arbitration and also argued that the trial court should have stayed the action instead of dismissing it. The trial court denied her motion. Johnson now argues that, even if this Court determines that the trial court was correct in ordering Johnson to arbitrate her claims, the trial court exceeded its discretion when it refused to stay her action pending the outcome of arbitration. We agree.
Our standard of review for rulings on postjudgment motions is well settled. [10] `In general, whether to grant or to deny a posttrial motion is within the sound discretion of the trial court, and the exercise of that discretion will not be disturbed on appeal unless by its ruling the court abused some legal right and the record plainly shows that the trial court erred.' Hitt v. State of Alabama Pers. Bd., 873 So.2d 1080, 1085 (Ala.2003) (quoting Flagstar Enters., Inc. v. Foster, 779 So.2d 1220, 1221 (Ala.2000)).
Johnson argues that she is entitled to a stay as a matter of right under § 3 of the Federal Arbitration Act (the FAA) [11] or, alternatively, that even if she is not entitled to a mandatory stay, a stay is nonetheless warranted in this case. We pretermit discussion of whether Johnson is entitled to a mandatory stay under § 3 of the FAA because we conclude that, under Alabama law, the trial court exceeded its discretion when it failed to grant Johnson's postjudgment motion to stay the proceedings pending the outcome of arbitration. [12] Johnson argues that the trial court exceeded its discretion when it refused to grant her Rule 59(e), Ala. R. Civ. P., motion, requesting the trial court to stay her action pending the outcome of arbitration instead of dismissing it. Although this Court has not squarely addressed how trial courts should treat an action that has been compelled to arbitration, this Court has instructed trial courts either to stay or to dismiss an action in which the trial court has compelled arbitration. See CitiFinancial Corp., L.L.C. v. Peoples, 973 So.2d 332, 341 (Ala.2007) (On remand, the trial court shall grant the motion to compel arbitration and either issue a stay of these proceedings pending arbitration or dismiss the case.); Ameriquest Mortgage Co. v. Bentley, 851 So.2d 458, 462 (Ala.2002) (A trial court is required to stay or dismiss proceedings and to compel arbitration if the parties have entered into a valid contract containing an arbitration agreement. (citing Ex parte Colquitt, 808 So.2d 1018, 1022 (Ala.2001))). Our previous decisions thus give implicit support to the proposition that under Alabama law a trial court has discretion to determine whether an action compelled to arbitration should be stayed or dismissed, and today we so hold. Johnson asserts that a stay, rather than a dismissal, is warranted in this case because, she notes, the arbitrator may decline to hear the case if the arbitrator determines that a valid contract does not exist. Johnson's brief at 29. In support of this argument, she cites Lewis v. Oakley, 847 So.2d 307, 330 (Ala.2002), in which this Court recognized that where an arbitrator may decline to accept a case it is prudent that the trial court retain jurisdiction pending a decision by the [arbitrator] concerning whether it will accept this dispute for arbitration. Johnson also contends that a stay is justified in this case because an action under § 8-1-150 must be commenced within six months from the time of such payment or delivery. § 8-1-150(a), Ala. Code 1975. This short statute of limitations, Johnson argues, will make it difficult for absentee class members to pursue their claims in court even if the arbitrator declines jurisdiction. Johnson's brief at 30. She further contends: Because the statute of limitations as to the absent class members' claims will toll only while the action is pending ... even a short arbitration will foreclose the possibility of recovery.... Because the trial court dismissed the action instead [of] staying it, even if Ms. Johnson wins in arbitration, absentee class members may not be able to recover against the JCRA. Johnson's brief at 30. She directs our attention to Porter v. Colonial Life & Accident Insurance Co., 828 So.2d 907, 908 (Ala.2002), in which this Court stated: We note a potential for injustice. If a plaintiff's court action be dismissed to enforce an arbitration agreement, but, through no fault of the plaintiff's, the arbitration be not concluded or some of the plaintiff's claims be not arbitrated, a statute of limitations could bar a refiling of the unarbitrated claims in court. Sometimes, for instance, an arbitrator's first duty under an arbitration agreement is to determine the arbitrability of a plaintiff's claims. In such a case, the arbitrator could rule that some or all of the plaintiff's claims should be litigated and not arbitrated. Moreover, a stay, as distinguished from a dismissal, would likely better conserve the time and resources of the parties and the trial court even in the event of a successful arbitration, inasmuch as the winner commonly wants the arbitration award reduced to a judgment. [13] JCRA asserts that Johnson's argument is not that she herself would be harmed or prejudiced in any way by the trial court's dismissal of her case, but that other persons who she wishes to represent ... might be harmed if the arbitrator ultimately declined jurisdiction. JCRA's brief at 64. JCRA notes that no class has been certified in this action and that no notice of Johnson's putative class action suit was provided to any other MegaSweeps customers and thus no one has relied on her lawsuit to resolve any potential [MegaSweeps] claims. JCRA's brief at 64. Although no class has been certified, we recognize that in this case, as there was in Porter, there is a real potential for injustice. The statute of limitations in § 8-1-150(a), Ala.Code 1975, is a short one, and, if through no fault of [Johnson], the arbitration be not concluded or some of [Johnson's] claims be not arbitrated, a statute of limitations could bar a refiling of the unarbitrated claims in court. Porter, 828 So.2d at 908. In the case before us, an arbitrator may well decide that there is no valid contract containing an arbitration clause and decline jurisdiction. Then, because of the short statute-of-limitations period, both Johnson's claims and the claims of the prospective class could be time-barred. For these reasons, we hold that the trial court exceeded its discretion when it dismissed, rather than stayed, Johnson's claims. We, therefore, reverse the decision of the trial court and remand this case for the trial court to vacate its dismissal of Johnson's claims and to enter an order staying her action pending the outcome of the arbitration proceedings.