Opinion ID: 1600921
Heading Depth: 2
Heading Rank: 1

Heading: Order Compelling Arbitration

Text: Johnson argues that the trial court erred when it compelled her to arbitrate her claims against JCRA because, she says, the MegaSweeps contract is void ab initio and because, she argues, the arbitration clause itself is void.
We review the trial court's grant or denial of a motion to compel arbitration de novo. McKay Bldg. Co. v. Juliano, 949 So.2d 882, 884 (Ala.2006) (citing Bowen v. Security Pest Control, Inc., 879 So.2d 1139, 1141 (Ala.2003)). `Initially, the party seeking to compel arbitration must prove 1) the existence of a contract calling for arbitration, and 2) that the contract is `a contract evidencing a transaction involving commerce' within the meaning of the Federal Arbitration Act (FAA).' Owens v. Coosa Valley Health Care, Inc., 890 So.2d 983, 986 (Ala.2004) (quoting Hudson v. Outlet Rental Car Sales, Inc., 876 So.2d 455, 457 (Ala.2003), quoting in turn Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 53, 123 S.Ct. 2037, 156 L.Ed.2d 46 (2003), quoting in turn 9 U.S.C. § 2). The moving party `must `produce some evidence which tends to establish its claim.'' Edwards v. Costner, 979 So.2d 757, 761 (Ala.2007) (quoting Wolff Motor Co. v. White, 869 So.2d 1129, 1131 (Ala. 2003), quoting in turn Jim Burke Auto., Inc. v. Beavers, 674 So.2d 1260, 1265 (Ala. 1995), quoting in turn In re American Freight Sys., Inc., 164 B.R. 341, 345 (D.Kan.1994)). Finally, [o]nce the moving party has supported his or her motion to compel arbitration, the nonmovant then has the burden to present evidence tending to show that the arbitration agreement is invalid or inapplicable to the case. McKay, 949 So.2d at 884 (citing Polaris Sales, Inc. v. Heritage Imports, Inc., 879 So.2d 1129, 1132 (Ala.2003)).
Johnson argues that JCRA cannot meet its initial burden of demonstrating the existence of a contract calling for arbitration because, she argues, under this Court's unanimous decision in Barber [ v. Jefferson County Racing Ass'n, Inc., 960 So.2d 599 (Ala.2006)], the MegaSweeps contracts relied on by the JCRA are void ab initio. [4] Johnson's brief at 15 (emphasis in the original). Section 8-1-150(a), Ala.Code 1975, provides: All contracts founded in whole or in part on a gambling consideration are void. Any person who has paid any money or delivered any thing of value lost upon any game or wager may recover such money, thing, or its value by an action commenced within six months from the time of such payment or delivery. [5] Johnson contends that the MegaSweeps contract is void under § 8-1-150 because, she says, this Court in Barber held that, as a matter of Alabama law, playing the MegaSweeps involved the payment of consideration to gamble. Johnson's brief at 17. Johnson thus concludes that the arbitration clause in the MegaSweeps contract is unenforceable because, she argues, under Alabama law `when a contract is utterly void, it does not have any existence even for the protection of one who relied and acted upon it without notice of its infirmity.' Johnson's brief at 15 (quoting Metropolitan Life Ins. Co. v. Bramlett, 224 Ala. 473, 475, 140 So. 752, 753 (1932)). JCRA, however, argues that Johnson cannot avoid arbitration by challenging the validity or legality of the MegaSweeps contract as a whole, rather than the arbitration clause itself. JCRA is correct. Recently, in Paragon Ltd., Inc. v. Boles, 987 So.2d 561, 567 (Ala.2007), this Court rejected an argument similar to the one Johnson now makes. [6] In that case Emily Boles sued Paragon alleging that Paragon had breached a construction contract by failing to complete the construction of a house and overcharging Boles for the work it had completed. Paragon responded by arguing that the construction contract contained a valid and enforceable arbitration clause, which required that any dispute related to the contract be settled by arbitration. 987 So.2d at 562. Boles argued in response that, under § 34-14A-14, Ala.Code 1975,[ [7] ] Paragon [could] not maintain an action to enforce any provision of the contract, including the arbitration clause, because ... Paragon admitted [to the Alabama Home Builders Licensure Board] that it had engaged in the construction of Boles's residence without holding a required license. Paragon, 987 So.2d at 567. This Court first noted in Paragon that Boles's argument, like Johnson's argument in the case now before us, clearly attacks Paragon's ability to enforce the contract as a whole and does not specifically attack the arbitration clause within the contract. 987 So.2d at 567. This Court also stated that [i]t is well established that challenges to the validity of the contract as a whole and not specifically to the arbitration clause within the contract must go to the arbitrator, not a court. Paragon, 987 So.2d at 567; see also Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 403-04, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967) (Accordingly, if the claim is fraud in the inducement of the arbitration clause itselfan issue which goes to the `making' of the agreement to arbitratethe federal court may proceed to adjudicate it. But the statutory language does not permit the federal court to consider claims of fraud in the inducement of the contract generally. (footnotes omitted)). Relying on the United States Supreme Court decision in Buckeye Check Cashing, Inc. v. Cardegna , the same decision relied on by the trial court here, this Court in Paragon concluded that the arbitration clause in the contract between Paragon and Boles is enforceable, and it is irrelevant whether Paragon's actions render the contract as a whole void. That question is for the arbitrator to decide, not this Court. Paragon, 987 So.2d at 568; see also Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. at 445-46, 126 S.Ct. 1204 ( Prima Paint and Southland [ Corp. v. Keating, 465 U.S. 1, 104 S.Ct. 852, 79 L.Ed.2d 1 (1984)] ... establish[ed] three propositions. First, as a matter of substantive federal arbitration law, an arbitration provision is severable from the remainder of the contract. Second, unless the challenge is to the arbitration clause itself, the issue of the contract's validity is considered by the arbitrator in the first instance. Third, this arbitration law applies in state as well as federal courts.). [8] We concluded Paragon by stating that the arbitration clause is enforceable even if the contract as a whole is later found to be void. Paragon, 987 So.2d at 568-569. The case before us is closely analogous to Paragon. Johnson emphasizes that in this case there is no relevant determination to be made as to the validity of the MegaSweeps contracts under § 8-1-150(a) that has not already been finally established as a matter of Alabama law in Barber [ v. Jefferson County Racing Ass'n, Inc., 960 So.2d 599 (Ala.2006)]. Johnson's brief at 19. She further contends that [this] Court examined the MegaSweeps itself and determined that, as a matter of Alabama law, the MegaSweeps itself was illegal gambling and, more specifically, that it involved gambling consideration. And under § 8-1-150(a), the existence of gambling consideration is the only issue in the determination of whether the MegaSweeps contracts were void ab initio. Johnson's brief at 19 (emphasis in the original). Similarly, however, at the time Paragon asserted arbitration as a defense to litigation, it had entered into a consent agreement with the Alabama Home Builders Licensure Board in which Paragon admitted that it had engaged in the construction of Boles's residence without holding a required license. Paragon, 987 So.2d at 567. Thus, the sole question under § 34-14A-14 as to whether Paragon could bring or maintain any action to enforce the provisions of any contract for residential home building which he or she entered into was already answeredParagon did not have the license required. Nevertheless, we held in Paragon that arbitration was required. Applying our decision in Paragon to the facts of this case, we conclude that, like the construction contract in Paragon, the arbitration clause in the [MegaSweeps] contract between [JCRA] and [Johnson] is enforceable, and it is irrelevant whether [JCRA]'s actions render the contract as a whole void. That question is for the arbitrator to decide, not this Court. [9] Paragon, 987 So.2d at 568. Therefore the trial court did not err in determining that a contract calling for arbitration exists.
Johnson argues alternatively that the trial court erred when it compelled Johnson to arbitrate her claims against JCRA because the arbitration provision at issue is and always was void under its own terms. Johnson's brief at 21. The Supreme Court of the United States noted in Prima Paint that a federal district court may adjudicate an issue which goes to the `making' of the agreement to arbitrate, such as fraud in the inducement. 388 U.S. at 403-04, 87 S.Ct. 1801. As the Supreme Court made clear in Buckeye Check Cashing, unless the challenge is to the arbitration clause itself, the issue of the contract's validity is considered by the arbitrator. 546 U.S. at 445-46, 126 S.Ct. 1204. Johnson asserts that the first provision in the MegaSweeps Official Rules, which Johnson characterizes as a separate addendum to the MegaSweeps contracts, expressly provid[es] that the Rules are void and unenforceable if the MegaSweeps is `prohibited by law.' Johnson's brief at 21. Rule 1 of the Quincy's MegaSweeps Official Sweepstakes Rules provides: 1. No Purchase Necessary to Win. A purchase will not improve the chance of winning. Void where prohibited by law. Thus, Johnson argues that the void-where-prohibited-by-law language renders the arbitration clause itself void and unenforceable. JCRA responds, first, that the void-where-prohibited-by-law language should apply only to the rule in which it appears, i.e., Rule 1, and not to all the official rules as argued by Johnson. JCRA's brief at 48. Alternatively, JCRA argues that even if Rule 1 were applicable to all the official rules, the rules themselves constitute the MegaSweeps contract; thus, JCRA contends, this alternative argument does nothing more than rehash Johnson's original argument that the MegaSweeps contract as a whole is void. JCRA is correct. Even though Johnson characterizes the official rules as a separate addendum to the MegaSweeps contract allegedly available on the [I]nternet and posted at the MegaSweeps facility, Johnson provides no citation to the record to support this proposition, nor does she clarify what, if anything, is included in the MegaSweeps contract, other than the Official Rules. Moreover, as JCRA notes, Rule 1 does not refer directly to the arbitration provision contained in Rule 8. In fact, Rule 1 does not refer to any of the other rules, individually or collectively. Thus, it appears that if the void-where-prohibited-by-law language were to apply to anything outside Rule 1, it would appear to apply to the MegaSweeps contract as a whole. Johnson does not argue that she was unaware of the arbitration agreement, that she was fraudulently induced to enter into the arbitration agreement, that the arbitration agreement itself is unconscionable, or any other issue that goes to the `making' of the agreement to arbitrate. Prima Paint, 388 U.S. at 403-04, 87 S.Ct. 1801. Instead, Johnson in effect argues again that the contract containing the arbitration agreement is void. It is the role of the arbitrator, however, and not of the court, to determine whether the contract as a whole is void. Buckeye Check Cashing, supra. Therefore, the trial court did not err in ordering Johnson to arbitrate her claims.