Court Opinion

ID: 2803428
Source: CourtListenerOpinion
Date Created: 2015-05-26 20:02:14.672152+00
Date Added: 2024-06-11T11:50:22.319277
License: Public Domain

Case: 13-14482   Date Filed: 05/26/2015   Page: 1 of 14

                                                        [DO NOT PUBLISH]

          IN THE UNITED STATES COURT OF APPEALS

                   FOR THE ELEVENTH CIRCUIT
                     ________________________

                           No. 13-14482
                     ________________________

                 D.C. Docket No. 7:13-cv-00506-LSC

THE HANOVER INSURANCE COMPANY,

                                             Plaintiff - Appellee,

versus

ATLANTIS DRYWALL & FRAMING LLC,
BAY MEADOWS CONSULTING LLC,
LAURENCE LAMPHERE,
CHRISTIN M. LAMPHERE, et al.,

                                             Defendants,

MARILOURDES DEYO,

                                             Defendant - Appellant.

                     ________________________

              Appeal from the United States District Court
                 for the Northern District of Alabama
                     ________________________

                            (May 26, 2015)

                  ON PETITION FOR REHEARING
               Case: 13-14482      Date Filed: 05/26/2015      Page: 2 of 14

Before MARCUS, ROSENBAUM and GINSBURG, * Circuit Judges.

PER CURIAM:

       This is an interlocutory appeal from an order denying a motion to compel

arbitration. For the following reasons, we affirm the district court’s order.

                                              I.

       In the summer of 2010, the University of Alabama approved a project to

construct a new student-housing complex on the University’s main campus in

Tuscaloosa, Alabama. The University retained Brice Building Company, LLC

(“Brice”), as the general contractor. On March 8, 2011, Brice retained Atlantis

Drywall and Framing, LLC (“Atlantis”), through a subcontract agreement

(“Subcontract”) to install drywall.         The Subcontract contained the following

arbitration provision:

              Paragraph CC. The parties acknowledge and agree that
              this Subcontract and the subject matter hereof is
              substantially connected with and involved with interstate
              commerce. In the event of a dispute(s), claim(s) or other
              matter(s) in question of any kind whatsoever between the
              parties (i) arising out of or related or collateral to the
              provisions and/or subject matter of this Subcontract or
              the breach thereof, or independent from the Subcontract
              or (ii) relating to any transaction or occurrence of any
              kind between the parties to this Subcontract or their
              officers, directors, agents and/or employees, it is agreed
              that the parties to this Subcontract will attempt to resolve
              such dispute(s), claim(s), or other matter(s) in question

       *
       Honorable Douglas H. Ginsburg, United States Circuit Judge for the District of
Columbia, sitting by designation.
                                              2
Case: 13-14482     Date Filed: 05/26/2015   Page: 3 of 14

amicably by informal discussions and negotiations within
a seven (7)-day period. Notwithstanding any conflicting
or contrary provisions contained within the General
Contract nor any provisions in this Subcontract that
incorporates herein the terms and conditions of the
General Contract by reference, all dispute(s), claim(s)
and other matter(s) in question which cannot be settled
by negotiation among the parties within such time shall at
the election of, the Contractor (but not otherwise), be
submitted by the parties to arbitration under the
Construction Industry Arbitration Rules of the American
Arbitration Association except as such rules may be
modified or restricted by any provision of this
Subcontract. The parties intend that the scope of this
arbitration clause shall be construed as broadly as
possible so as to include, but not be limited to, the
enforceability of this arbitration provision, the
arbitrability of a particular claim or dispute, as well as
any claims of misrepresentation, concealment of material
facts, or fraud among the parties whether occurring
before or after the execution of this agreement.

Notice of demand by Contractor for arbitration shall be
filed in writing with the other party or parties to this
Subcontract and with the American Arbitration
Association and shall be made within a reasonable time
after the dispute, claim or other matter in question has
arisen but in no event shall be made after the date when
institution of legal or equitable proceedings based on
such dispute, claim or other matter in question would be
barred by the applicable statute of limitations. . . . The
Subcontractor agrees that any arbitration instituted under
this paragraph shall, at Contractor’s election, be
consolidated with any other arbitration proceeding
involving a common question of fact or law between the
Contractor, the Owner, the Architect/Engineer or any of
their agents, consultants or other representatives, and/or
any other subcontractor(s) of any tier performing work in
connection with the Project.

                            3
              Case: 13-14482    Date Filed: 05/26/2015    Page: 4 of 14

      Because this was a public-works project, both Brice and Atlantis were

statutorily obligated to obtain performance and payment bonds. See Ala. Code §

39-1-1.   Atlantis sought to obtain these bonds from The Hanover Insurance

Company (“Hanover”). As Hanover was not willing to assume the sole risk that

any failure or default by Atlantis might result in a loss to it, Hanover required

indemnification by Atlantis and its principals: Bay Meadows Consulting, LLC,

(“Bay Meadows”), Marilourdes Deyo (“Deyo”), Laurence Lamphere and Christin

Lamphere (the “Lampheres”) (Atlantis’s principals are collectively referred to as

“Indemnitors”). On May 19, 2011, Hanover and the Indemnitors executed such an

agreement (“Indemnity Agreement”). The Indemnity Agreement did not contain

an arbitration provision. In relevant part, the Indemnity Agreement provided,

             The Hanover Insurance Company . . . has executed, or
             may in its discretion hereafter execute certain surety
             contracts, undertakings, and/or other instruments of
             guarantee of indemnity . . . .

      Pursuant to this provision, on June 30, 2011, Hanover executed the

statutorily required performance and payment bonds (the “Bonds”), which

provided that Hanover would perform Atlantis’s responsibilities under the

Subcontract if Atlantis defaulted on its obligations. The Bonds specifically and

expressly incorporated the Subcontract, stating in relevant part,

             WHEREAS, Principal [Atlantis] has by written
             agreement dated 3/8/11 entered into a subcontract with
             Obligee [Brice] for UA North Bluff Residential
                                          4
                Case: 13-14482       Date Filed: 05/26/2015       Page: 5 of 14

               Community (XXX-XX-XXXX), Drywall, Metal, Framing,
               Acoustical Ceilings . . . which subcontract is by reference
               made a part hereof, and is hereinafter referred to as the
               subcontract.

       To summarize, Atlantis was a party to all three agreements (the Subcontract,

the Indemnity Agreement, and the Bonds). Hanover was a party to the Indemnity

Agreement and the Bonds, and Brice was a party to the Subcontract and the Bonds.

But the Indemnitors were parties to the Indemnity Agreement only.

       Atlantis later defaulted on the Subcontract. Accordingly, Hanover made

payments under the Bonds and then sought indemnification pursuant to the

Indemnity Agreement.           Atlantis and the Indemnitors failed to comply with

Hanover’s request, so Hanover filed a complaint against Atlantis and the

Indemnitors 1 in the United States District Court of the Northern District of

Alabama seeking indemnification, exoneration and quia timet, specific

performance, and damages for breach of contract.               Atlantis, the Lampheres, Bay

Meadows, and Deyo each moved to compel arbitration under the Federal

Arbitration Act and to stay judicial proceedings, and in the alternative, to dismiss,

principally arguing that the Indemnity Agreement incorporated the Subcontract,

and therefore its arbitration clause.

       1
         The complaint also originally named Jeffrey D. Deyo as a defendant. Hanover and
Jeffrey Deyo jointly stipulated that all claims against him should be dismissed without prejudice,
and the court accepted the stipulation on January 10, 2014.
                                                5
                Case: 13-14482       Date Filed: 05/26/2015       Page: 6 of 14

       The district court denied the Lampheres’ motion on September 4, 2013, and

two weeks later, on September 18, 2013, denied both Bay Meadows’s and Deyo’s

motions.       On September 26, 2013, the Indemnitors timely filed a notice of

interlocutory appeal pursuant to 9 U.S.C. § 16(a).2

       On August 29, 2014, a panel of this Court vacated the district court’s order

and remanded the case with instructions to order arbitration.                     Hanover then

petitioned for rehearing. With leave, the Surety & Fidelity Association of America

filed an amicus curiae brief in support of Hanover’s petition. On October 29,

2014, the Court vacated its previous panel opinion and granted rehearing.

Thereafter, Hanover settled with Bay Meadows and the Lampheres. Deyo, the

lone remaining defendant-appellant, filed a motion on February 9, 2015, requesting

that she be excused from oral argument. The Court granted Deyo’s motion,

removed the case from the oral-argument calendar, and accepted submission on the

papers.

       After carefully considering the record and the submission of the parties’

briefs, we now affirm the district court’s order denying Deyo’s motion to compel

arbitration.

       2
         On October 7, 2013, the district court granted Atlantis’s motion to compel arbitration
against Hanover. The Arbitration Panel issued its award on June 9, 2014.
                                                6
                Case: 13-14482        Date Filed: 05/26/2015        Page: 7 of 14

                                                 II.

       “[This Court] review[s] de novo the district court’s denial of a motion to

compel arbitration.” Lawson v. Life of the S. Ins. Co., 648 F.3d 1166, 1170 (11th

Cir. 2011).      The Federal Arbitration Act codifies the “liberal federal policy

favoring arbitration agreements.” CompuCredit Corp. v. Greenwood, ___ U.S.

___, 132 S. Ct. 665, 669 (2012) (quoting Moses H. Cone Mem’l Hosp. v. Mercury

Constr. Corp., 460 U.S. 1, 24, 103 S. Ct. 927, 941 (1983)). Notwithstanding this

liberal policy, “a party cannot be required to submit to arbitration any dispute

which he has not agreed so to submit.” United Steelworkers of Am. v. Warrior &

Gulf Nav. Co., 363 U.S. 574, 582, 80 S. Ct. 1347, 1353 (1960). Even though

enforcement of this principle might result in “piecemeal litigation,” the court must

“rigorously enforce” the agreement of the parties. See Nobles v. Rural Cmty. Ins.

Servs., 122 F. Supp. 2d 1290, 1295 (M.D. Ala. 2000) (citing Dean Witter

Reynolds, Inc. v. Byrd, 470 U.S. 213, 218-21, 105 S. Ct. 1238, 1241-42 (1985)).

Whether an arbitration agreement exists is settled by state-law principles of

contract law. See Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior

Univ., 489 U.S. 468, 475, 109 S. Ct. 1248, 1254 (1989).3

       Under Alabama law,

       3
          Because the district court’s jurisdiction was invoked based on diversity of citizenship,
see 28 U.S.C. § 1332, the federal district court applies the substantive law of the state in which it
sits, which in this case was Alabama. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S. Ct. 817
(1938).
                                                  7
              Case: 13-14482    Date Filed: 05/26/2015    Page: 8 of 14

             [t]he party seeking to compel arbitration has the burden
             of proving the existence of a contract calling for
             arbitration and proving that that contract evidences a
             transaction affecting interstate commerce.          After a
             motion to compel arbitration has been made and
             supported, the burden is on the non-movant to present
             evidence that the supposed arbitration agreement is not
             valid or does not apply to the dispute in question.

Fleetwood Enters., Inc. v. Bruno, 784 So. 2d 277, 280 (Ala. 2000) (internal

alteration, citations and quotation marks omitted). Here, Deyo has pointed to the

Subcontract, which calls for arbitration, and Hanover acknowledges that the

Subcontract contains an arbitration provision. Additionally, both parties agree that

the   Subcontract   evidences    a   transaction   affecting interstate commerce.

Consequently, the burden shifts to Hanover to show that the arbitration provision

within the Subcontract is not valid or does not apply to the dispute in question. See

Green Tree-Al LLC v. White, 55 So. 3d 1186, 1189-90 (Ala. 2010).

      In evaluating whether Hanover has satisfied this burden, we note that neither

Hanover nor Deyo were parties to the Subcontract containing the arbitration

provision. But that fact alone is insufficient to show that the arbitration provision

does not apply to Hanover’s claims arising out of Deyo’s alleged breach of the

Indemnity Agreement since the ability to compel arbitration is “not necessarily

premised on the fact that both participants in the [proposed] arbitration proceedings

are signatories to a contract calling for arbitration.” Green Tree, 55 So. 3d at 1190.

                                          8
               Case: 13-14482    Date Filed: 05/26/2015    Page: 9 of 14

Indeed, the Alabama Supreme Court has held that, in certain situations, “one may

compel arbitration under a contract to which it is not a party, or . . . one who is not

a signatory to a contract calling for arbitration must nevertheless arbitrate his or her

claims.” Id.

      Specifically, a nonparty to an arbitration agreement may compel or be

compelled to arbitration under Alabama law in four situations. First, arbitration

may be compelled if the nonparty is a party to a contract that incorporates by

reference the contract containing the arbitration provision. McDougle v. Silvernell,

738 So. 2d 806, 808 (Ala. 1999) (explaining that a party may incorporate by

reference another document containing an arbitration provision); see Ex parte Dan

Tucker Auto Sales, Inc., 718 So. 2d 33, 36 (Ala. 1998) (“Parties to a contract are

bound by pertinent references therein to outside facts and documents.             Other

writings . . . which are referred to in a written contract may be regarded as

incorporated by the reference as a part of the contract and[,] therefore, may

properly be considered in the construction of the contract.”) (alteration in original,

citations and quotation marks omitted). A document incorporates by reference

another document through explicit language, see Dan Tucker, 718 So. 2d at 36, or

by “expressly refer[ring] to and sufficiently describ[ing]” the document to be

incorporated. Fid. & Deposit Co. of Md. v. Jefferson Cnty. Comm’n, 756 F. Supp.

2d 1329, 1337 (N.D. Ala. 2010) (citation omitted).

                                           9
             Case: 13-14482     Date Filed: 05/26/2015   Page: 10 of 14

      Second, a non-signatory to a contract containing an arbitration provision can

be compelled to arbitrate if another document that the party executed should be

read together with the document containing the arbitration provision because

together the documents memorialize the terms of a “single transaction.” See, e.g.,

Dan Wachtel Ford, Lincoln, Mercury, Inc. v. Modas, 891 So. 2d 287, 290-91 (Ala.

2004); Ingalls Iron Works Co. v. Ingalls, 53 So. 2d 847, 849 (Ala. 1951)

(“[D]ifferent writings, executed at the same time and relating to the same subject-

matter, will be construed as one instrument.” (internal citation and quotation

marks omitted)).       In this regard, “two or more instruments executed

contemporaneously by the same parties in reference to the same subject matter

constitute one contract.” Pac. Enters. Oil Co. (USA) v. Howell Petroleum Corp.,

614 So. 2d 409, 414 (Ala. 1993) (quoting Haddox v. First Ala. Bank of

Montgomery, N.A., 449 So. 2d 1226, 1229 (Ala. 1984)). But party privity is not a

requirement for various writings to be construed as one instrument under

Alabama’s single-transaction theory. Haddox, 449 So. 2d at 1229 (allowing the

integration of several documents, all signed by different parties, to be construed as

one contract to establish the terms of the contract).

      Third, Alabama will enforce an arbitration provision in a contract to which

the party moving for arbitration is not a signatory if the party is a third-party

beneficiary of the contract containing the arbitration provision. See Jenkins v.

                                          10
             Case: 13-14482    Date Filed: 05/26/2015   Page: 11 of 14

Atelier Homes, Inc., 62 So. 3d 504, 512 (Ala. 2010). “A party claiming to be a

third-party beneficiary must establish that the contracting parties intended, upon

execution of the contract, to bestow a direct, as opposed to an incidental, benefit

upon the third party.” Id. (citations and quotation marks omitted).

      Fourth, arbitration may be compelled where the doctrine of “intertwining” is

satisfied. As the Alabama Supreme Court has explained, “intertwining” applies

“where arbitrable and nonarbitrable claims are so closely related that the party to a

controversy subject to arbitration is equitably estopped to deny the arbitrability of

the related claim.” Jenkins, 62 So. 3d at 512 (quoting Fountain v. Ingram, 926 So.

2d 333, 335 (Ala. 2005)). Key to the doctrine of “intertwining,” however, is the

requirement that “the signatory to the arbitration agreement is or will be engaged in

an arbitration proceeding with the plaintiff.” Id. (quoting S. Energy Homes, Inc. v.

Kennedy, 774 So. 2d 540, 545 (Ala. 2000)). Where no arbitration is pending or

imminent, “intertwining” cannot apply. See id. at 513 (“‘[I]ntertwining’ requires at

least two threads to weave together—one cannot intertwine a single thread.”).

      Turning to the pending case, here, it matters not whether the Indemnity

Agreement expressly incorporated the Subcontract and Bonds or whether the

Indemnity Agreement, Subcontract, and Bonds constituted a single transaction.

Under the unique facts of this case, the answer to each of those inquiries makes no

difference to the determination of whether Deyo may compel arbitration. Even if

                                         11
             Case: 13-14482      Date Filed: 05/26/2015   Page: 12 of 14

the Indemnity Agreement expressly incorporated the Subcontract and Bonds or the

Subcontract, Bonds, and Indemnity Agreement were all part of a “single

transaction,” and therefore Hanover and Deyo could be viewed as parties to the

Subcontract containing the arbitration provision, the arbitration provision itself

does not permit Deyo to compel arbitration under the circumstances here. In

relevant part, the provision states,

             [A]ll dispute(s), claim(s) and other matter(s) in question
             which cannot be settled by negotiation among the parties
             within such time shall at the election of, the Contractor
             (but not otherwise), be submitted by the parties to
             arbitration under the Construction Industry Arbitration
             Rules of the American Arbitration Association except as
             such rules may be modified or restricted by any provision
             of this Subcontract.

Under the plain language of the arbitration provision, only Brice can compel

arbitration. And Brice has not done so here.

      While Brice did compel arbitration of a prior dispute related to the

Subcontract, see Hanover Ins. Co. v. Brice, 7:13-cv-00547-LSC (N.D. Ala. May

31, 2013), that arbitration ended in 2014. And nothing within the Subcontract’s

arbitration provision indicates that once Brice has elected to arbitrate a particular

dispute, it must arbitrate all subsequent, unrelated disputes.             In fact, the

Subcontract suggests the opposite: “The Subcontractor agrees that any arbitration

instituted under this paragraph shall, at Contractor’s election, be consolidated with

any other arbitration proceeding involving a common question of fact or law
                                          12
               Case: 13-14482       Date Filed: 05/26/2015       Page: 13 of 14

between the Contractor, the Owner, the Architect/Engineer or any of their agents,

consultants or other representatives, and/or any other subcontractor(s) of any tier

performing work in connection with the Project.” (Emphasis added). Therefore, it

is irrelevant that Brice previously compelled Hanover to arbitrate in a separate

action.    If Brice—the only party authorized to compel arbitration—need not

arbitrate all subsequent disputes under the contract, 4 no other party, including

Deyo, has the authority under the Subcontract to compel arbitration. In short, even

if the Subcontract and Bonds are incorporated into the Indemnity Agreement, or

the three documents are read together as a part of a single transaction, the

arbitration provision does not authorize Deyo to compel arbitration under the

circumstances of this case.

       Deyo similarly cannot rely upon the third-party-beneficiary theory in this

Court since she has never contended that she may enforce the arbitration clause

under that doctrine.5 Accordingly, under Alabama law, this argument does not

present a viable basis for compelling arbitration. Jenkins, 62 So. 3d at 512 (stating

that because the parties attempting to compel arbitration had not contended that

       4
         Assuming the viability of either or both the express-incorporation theory or the single-
transaction theory, if Brice became entangled in the litigation pending between Hanover and the
Indemnitors, Brice would have the ability to compel arbitration. That, however, is not the
current case.
       5
          Deyo has stated, “Alabama courts have long recognized that ‘arbitration agreements
may be enforced against a nonsignatory third party under either a third-party-beneficiary theory
or an intertwined-claims theory.’” Deyo’s entire argument, however, pertains only to the
intertwined-claims theory, which is addressed infra.
                                               13
             Case: 13-14482    Date Filed: 05/26/2015   Page: 14 of 14

they could enforce the arbitration provision under the third-party-beneficiary

theory, the theory provided no basis for allowing them to compel arbitration).

      Nor does the intertwining theory provide a basis for compelling arbitration.

As previously mentioned, none of the parties to the various contracts at issue

here—Brice, Atlantis, Hanover, and the Indemnitors—are currently engaged in

arbitration related to a dispute arising from the Subcontract or Bonds, nor does it

appear that any other arbitration proceeding will arise in the near future.

Accordingly, no arbitration proceeding exists with which to “intertwine”

Hanover’s claim. Jenkins, 62 So. 3d at 512-13.

      For the foregoing reasons, the district court’s order denying Deyo’s motion

to compel arbitration is AFFIRMED.

                                        14