Opinion ID: 1931196
Heading Depth: 2
Heading Rank: 3

Heading: The Scope of the Arbitration Provision

Text: The Larkins alternatively contend that even if they are contractually bound by the arbitration clause in the termite agreement, they cannot be compelled to arbitrate their claims, which they say arose from actions related to the termite letter. The Larkins contend that their claims are not within the scope of the arbitration provision in the termite agreement Orkin initially issued to the Allisons and that the Larkins subsequently renewed. The United States Supreme Court has held that [s]tates may regulate contracts, including arbitration clauses, under general contract law principles and they may invalidate an arbitration clause `upon such grounds as exist at law or in equity for the revocation of any contract.' Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 281, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995) (quoting 9 U.S.C. § 2) (emphasis omitted). It is well established that the interpretation of an arbitration agreement within the scope of the [FAA] is governed by general state-law principles of contract interpretation. Volt Info. Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 475, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989). Agreements to arbitrate are essentially creatures of contract, and ordinary contract rules govern the interpretation of arbitration provisions. Blount Int'l, Ltd. v. James River-Pennington, Inc., 618 So.2d 1344, 1346 (Ala.1993). See also Kenworth of Dothan, Inc. v. Bruner-Wells Trucking, Inc., 745 So.2d 271, 275 (Ala.1999) (In reviewing arbitration provisions, we apply contract principles.); First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995). Applying general contract principles, we have compelled the arbitration of disputes arising out of a previous transaction when it was clear that the parties in a subsequently executed arbitration agreement intended to arbitrate such disputes based upon the broad scope of the arbitration clause at issue. [2] Compare Morris, supra, 782 So.2d at 253; Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Kirton, 719 So.2d 201 (Ala.1998) (the language of the arbitration provision indicated that disputes related to prior transactions were to be arbitrated); and Thompson Tractor Co. v. Fair Contracting Co., 757 So.2d 396, 399 (Ala.2000) (When an arbitration clause clearly indicates that disputes related to prior transactions are to be arbitrated, those disputes must be arbitrated when one of the parties to the transaction demands arbitration.), with Kenworth, supra, 745 So.2d at 275 (concluding that the language of the arbitration provision failed to indicate an intention of the parties to arbitrate a prior transaction), and Terminix Int'l Co. v. Jackson, 723 So.2d 555, 558 (Ala.1998) (concluding that the language of the arbitration clause did not encompass actions related to a termite letter issued before the document containing the arbitration clause was effective). The scope of the arbitration clause is a question of the intent of the parties. Kenworth, 745 So.2d at 275 (in reviewing an arbitration provision a court must determine whether there was a meeting of the minds). The United States Court of Appeals for the Eleventh Circuit has also allowed parties to arbitrate preexisting controversies when the language of the arbitration provision is sufficiently broad to encompass the prior claims. Belke v. Merrill Lynch, Pierce, Fenner & Smith, 693 F.2d 1023, 1028 (11th Cir.1982) (finding that the appellee's claims, which occurred before the arbitration agreement was executed, were arbitrable because [b]y its own terms the contract between the parties covers not only disputes arising out of the agreement, but in the disjunctive includes `any controversy between us arising out of your business') (emphasis in Belke omitted), overruled on other grounds, Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985). In salient part, the arbitration clause in the termite agreement provides: Any dispute arising out of or relating to this agreement or the services performed under this agreement or tort based claims for personal or bodily injury or damage to real or personal property shall be finally resolved by arbitration. ... (Emphasis added.) The Orkin defendants argue that the arbitration provision in the termite agreement is virtually identical to the arbitration clause we upheld in Morris, supra. In Morris, the Morrises received a termite letter from the defendant, Terminix, when they purchased a residence. 782 So.2d at 250. The Morrises later signed a termite agreement with Terminix; that agreement contained the following arbitration clause: `The Purchaser and Terminix agree that all matters in dispute between them, including but not limited to any controversy or claim between them arising out of or relating to this Agreement or to the identified property [i.e., the Morrises' home] in any way, whether by virtue of contract, tort or otherwise, shall be settled exclusively by arbitration.' 782 So.2d at 251 (bracketed language original; emphasis added). As did the Larkins, the Morrises discovered termite damage after they had purchased their residence, and they sued Terminix, alleging misrepresentation and negligence or wantonness based upon Terminix's conduct in issuing the termite letter. 782 So.2d at 251. In Morris, we acknowledged that `an arbitration provision will be enforced in Alabama to the extent that enforcement is required by federal law.' 782 So.2d at 253 (quoting Green Tree Fin. Corp. v. Shoemaker, 775 So.2d 149, 150 (Ala.2000)). We held that the Morrises' claims were matters in dispute that arose out of or that were related to the identified property, and that, thus, their claims arising out of the termite letter were subject to arbitration. 782 So.2d at 253. Whereas the arbitration agreement in Morris related to all matters of dispute involving the identified property ... by virtue of contract, tort or otherwise, 782 So.2d at 251, the arbitration provision in the termite agreement in this case covers  tort based claims for personal or bodily injury or damage to real or personal property.  782 So.2d at 253 (emphasis added). Therefore, at first blush it appears that just as the arbitration clause in Morris was sufficiently broad to compel arbitration of the Morrises' claims related to the termite letter, the arbitration provision in the present action is sufficiently broad to encompass, at a minimum, the Larkins' tort-based claims. However, the present action is distinguishable from the action in Morris as well as in other cases in which we have compelled arbitration of disputes arising from previous transactions based upon the broad scope of a later-executed arbitration clause. See, e.g., Kirton, supra, 719 So.2d at 204; Thompson, supra, 757 So.2d at 399-400.