Opinion ID: 1678650
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Heading: Applicability of the FAA Interstate Commerce

Text: The FAA applies only (1) if there is a written agreement calling for arbitration, Prudential Sec., Inc. v. Micro-Fab, Inc., 689 So.2d 829, 832 (Ala.1997); and (2) if the contract containing the arbitration provision substantially affects interstate commerce. Sisters of the Visitation v. Cochran Plastering Co., 775 So.2d 759, 766 (Ala.2000). Relying on Sisters, Branch and Reaves contend that their contracts do not affect interstate commerce sufficiently to invoke the applicability of the FAA. We disagree. Sisters involved a contract between the Sisters of the Visitation, operators of a monastery and spiritual retreat in Mobile, and Cochran Plastering Company, Inc. (Cochran), an Alabama corporation. Id. at 760. The contract required Cochran to repair cracks in the plaster in the ceilings and wall of the chapel, to cast and install plaster moldings, and to pin up all loose moldings with screws and washers. Id. at 760. The Sisters commenced arbitration proceedings on the basis of an arbitration clause in the contract. Cochran sought to enjoin the arbitration proceedings, arguing, among other things, that the transaction did not have a nexus with interstate commerce sufficient to invoke the FAA. This Court agreed with Cochran, holding that the contract did not substantially affect[ ] interstate commerce. Id. at 766. In so holding, we explained: The Sisters of the Visitation and Cochran are both Alabama residents, and the contract was to be performed in Alabama. The only affiliation of any of the parties with out-of-state entities is found in the relationship between the Sisters and the Roman Catholic Church. We are simply not prepared to recognize that relationship as commercial activity in interstate commerce, analogous to the network of Terminix franchises across the country. See [ Allied-Bruce Terminix Companies v. Dobson, 513 U.S. 265, 282, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995)]. Id. at 765. Regarding Cochran's use of tools and equipment, we said: One must assume that Cochran brought tools and equipment to the project site, but the record is silent as to whether they were leased or purchased specially for the project and, if so, whether they had moved in interstate commerce.... No substantial effect on interstate commerce can be developed based on Cochran's acquiring in interstate commerce any tool and equipment to be used in the performance of this contract. Id. at 766. Discussing the services and materials required by the contract, we said: We have no indication that Cochran employed out-of-state workers, so we assume that its workers were local. The contract apparently specified the use of plaster and washers that were required to be obtained from outside the State, and it called for insurance, which was obtained from an insurance company from outside the State. However, the record provides no information from which we can determine what portion of the amount the Sisters paid Cochran is allocable to the cost of local labor and overhead and what portion is allocable to materials or services specially purchased for use or consumption in performance of the contract. Id. at 766. Also, we noted that the object of the services provided by Cochran, that is, the chapel and its repairs, was incapable of subsequent movement across state lines or of otherwise having a subsequent substantial effect on interstate commerce. Id. at 765. Finally, we considered the extent to which the contract was connected with, or implicated, other contractual relationships. In that connection, we said: Cochran's contract is related to several other contracts, apparently also made directly with the Sisters, including a contract with the architect for the chapel project; contracts with workers in the various trades whose work was called for in the foregoing description of the scope of the work; and a contract with the Texas resident who prepared the specifications for the plaster work. The fact that several of the related contracts have a substantial effect on interstate commerce cannot be seriously disputed. Id. at 766-67 (emphasis added). We focused on the effect the subject contract would  in fact have on those other contracts. Id. at 767 (emphasis added). There was no evidenceor contention that the related contracts would be disrupt[ed], by delays or distraction associated with litigation. Id. at 767. We concluded that the FAA was inapplicable. In this case, however, Branch and Reaves concede that American General was incorporated in Alabama by American General, Inc., a large, multi-national corporation, for the purpose of doing business in Alabama. Brief of Appellee Branch, at 9 n. 1; Brief of Appellee Reaves, at 8 n. 1. The headquarters of American General, Inc., are in Indiana. Affidavit testimony in the record indicates that the money which [American General] provides as loans to its customers is made available to [American General] through an affiliated corporation, American General Finance Corporation (AGFC), an Indiana corporation also headquartered in Indiana. (Clerk's Record in Case 1990888, at 76.) The money is sent to [American General] ... from AGFC's bank account located outside Alabama, and when payments are made by customers to [American General], those funds are ultimately sent out of state to AGFC's bank accounts as repayment of the funds previously furnished to [American General]. Id. Merit, through which American General allegedly sold credit-life insurance to Branch, is an Indiana corporation headquartered in Indiana. Id. at 74. Yosemite, through which American General sold credit-disability and credit-property insurance to Branch, is incorporated in California and headquartered in Indiana. Id. at 75. Some of the employees who work at the [American General] branch offices are also licensed agents of Merit and Yosemite. Id. When a customer purchases credit insurance in connection with a loan from American General, he or she is issued a certificate of insurance from either Merit or Yosemite, which certificate had been previously sent to the American General offices in Alabama. Id. Information about each customer is gathered in the Alabama branch offices and then transmitted to Merit's or Yosemite's headquarters in Indiana, where it is stored in a computer data base. Id. Indeed, the corporate relationships involved here generate precisely the complex interstate commercial activity that we expressly noted was absent in Sisters. These cases are also diametrically opposed to Sisters in that there, the object of the servicesthe chapel and its repairs was incapable of subsequent movement across state lines or of otherwise having a subsequent substantial effect on interstate commerce. 775 So.2d at 765. Here, the object of the transactionthe loan proceedswas intrinsically mobile. In other words, the proceeds enabled Branch and Reaves subsequently to purchase goods and services that traveled in interstate commerce. We need not belabor the issue to conclude that these transactions substantially affected interstate commerce. See Staples v. Money Tree, Inc., 936 F.Supp. 856, 858 (M.D.Ala.1996) (loan transaction negotiated in Alabama involved interstate commerce where the lender was a Georgia corporation; loan proceeds were wired from Georgia and then disbursed ... in Alabama; all supplies for the Alabama Money Tree office were shipped from Georgia; and all loan documents were printed in Georgia). Indeed, Branch and Reaves have cited no case holding that loan transactions resembling those involved here did not affect interstate commerce for purposes of the FAA. Consequently, we conclude that these contracts invoke the FAA.