Opinion ID: 1950999
Heading Depth: 1
Heading Rank: 2

Heading: Does the Home Warranty Agreement Mandate Arbitration?

Text: The Adcocks' argument under this heading can be summed up as follows: The language ... in the [home warranty agreement] does not state that arbitration is ` mandatory. ' The clear language of the contract states that arbitration ` may ' be requested  in fact, it appears that arbitration ` may ' be requested or conciliation ` may ' be requested. The contract language does not require the Adcocks (or Adams) to do both  conciliation or arbitration may be requested.... .... Bonded Builders chose the word `may' to use in the arbitration clause. The word `may' is not mandatory in nature, but rather is permissive. Adcocks' brief, at 20-21 (emphasis added). The Adcocks contend that, because the conciliation process has already been exhausted without success, they are now free to litigate their claims. Insisting that arbitration is mandatory, Adams and Bonded Builders rely on those portions of the home warranty agreement, namely, §§ V and VIII.C., providing that `[the dispute settlement] process ... shall be a condition precedent to the commencement of litigation by any party.' Bonded Builders' brief, at 9 (emphasis added). More specifically, Bonded Builders states: The provision specifically states that it shall be a condition precedent to litigation. The Adcocks would have the Court twist this meaning to allow them to escape arbitration, clearly not the intent of the contract.... Id. (emphasis in original). Adams and Bonded Builders also rely on Karl Storz Endoscopy-America, Inc. v. Integrated Medical Systems, Inc., 808 So.2d 999 (Ala.2001), in which this Court rejected an argument essentially identical to the Adcocks' argument. The issue in that case arose from provisions stating: `A. Except as otherwise specifically provided for herein, any dispute relating to whether a material breach of this agreement has occurred by any party ... shall initially be attempted to be resolved by the involved parties through non-binding mediation to be commenced within 30 days following expiration of the period for cure of a noticed breach.... `B. If within 30 days after the commencement of mediation, a resolution of the dispute has not been achieved, the dispute may thereafter be submitted by any party to binding arbitration under the commercial rules of the American Arbitration Association then in effect....' 808 So.2d at 1009-10 (emphasis in Karl Storz ). The arbitration opponent in that case argued that the contract's use of the word may rendered arbitration optional, rather than mandatory. This Court concluded that the argument was contrary to logic and to the weight of authority. 808 So.2d at 1010. In particular, we said: `[T]he use of the word may in an arbitration agreement does not imply that the parties to the agreement have the option of invoking some remedy other than arbitration.' 808 So.2d at 1011 (quoting Held v. National R.R. Passenger Corp., 101 F.R.D. 420, 424 (D.D.C.1984)). Indeed, `[i]f the parties to such an agreement intended for arbitration to be permissive, there would be no reason to include ... the arbitration provision in the contract, for the parties to an existing dispute could always voluntarily submit it to arbitration.' Id. (quoting Austin v. Owens-Brockway Glass Container, Inc., 78 F.3d 875, 879 (4th Cir.1996)) (emphasis added). To be sure, the resolution of Karl Storz turned on California law. Nevertheless, our analysis in that case essentially mirrored the analysis we applied one month earlier in Celtic Life Insurance Co. v. McLendon, 814 So.2d 222 (Ala.2001). The arbitration clause in Celtic Life provided: `Controversies ... may be resolved by arbitration,' id. at 224 (emphasis added), and the party opposing arbitration argued that the use of the word `may,' instead of the word `shall,' render[ed] the clause unenforceable if either party to the agreement object[ed] to arbitration. Id. Rejecting that argument, we quoted much of the same authority, and applied the same rule, that we did in Karl Storz. Thus, the rule in Alabama as to the significance of the word may in the arbitration context simply mirrors the rule we set forth in Karl Storz. Thus, in the context of an arbitration clause made specifically enforceable by the FAA, use of the word may does not render arbitration an optional means of dispute resolution. Moreover, the construction of that term urged by the Adcocks is inconsistent with other key provisions of the home warranty agreement, which unambiguously make arbitration mandatory. In two sections, the home warranty agreement states that the dispute settlement process  which includes arbitration  shall be a condition precedent to the commencement of litigation by any party. (Emphasis added.) A condition precedent is one which is to be performed before some right dependent thereon accrues, or some act dependent thereon is performed. Black's Law Dictionary 293 (6th ed.1990) (emphasis added). By definition, no right to litigate can accrue before the consummation of the arbitration procedure, where arbitration is requested by any party to the home warranty agreement. Arbitration in this case is, therefore, mandatory. It does not follow, however, that because arbitration is mandatory it is necessarily binding. [2] Thus, we next consider the Adcocks' argument that the home warranty agreement does not call for binding arbitration.