Articles Posted in Contracts

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Daphne Automotive, LLC, and its employee, Robin Sanders appealed a circuit court order denying their motion to compel arbitration of the claims filed against them by Eastern Shore Neurology Clinic, Inc. ("Eastern Shore"), and Rassan Tarabein. Tarabein owned Eastern Shore and another company, Infotec, Inc. Tarabein hired his nephew, Mohamad Tarbin, as an employee of Infotec. As part of the nephew's compensation, Tarabein agreed to provide him with the use of a vehicle for as long as he was employed with Infotec. Accordingly, Tarabein purchased, through Eastern Shore, a vehicle from Daphne Automotive. Tarabein, the nephew, and the dealership agreed that the dealership would arrange for the vehicle to be titled in the nephew's name, but that Eastern Shore would be listed on the title as lienholder. In conjunction with the sale, the nephew signed the sales contract, which contained an arbitration clause. Tarabein executed only the documents to establish Eastern Shore as lienholder on the title for the vehicle. In January 2014, the Department of Revenue issued an original certificate of title for the vehicle that listed no lienholders to the nephew. A few months later, the nephew was terminated from his job with Infotec, and Tarabein attempted to take back the vehicle, but the nephew refused. According to Tarabein, the dealership never informed him that it had failed to list Eastern Shore as a lienholder on the application for the certificate of title. As a result, the nephew held title to the vehicle free and clear, and Eastern Shore held a reissued certificate of title for the same vehicle, listing it as lienholder. Eastern Short attempted to repossess the vehicle; the nephew avoided being arrested by producing the free-and-clear title to the vehicle. According to Tarabein, he became aware of the existence of the second certificate of title after the attempted arrest. Tarabein thereafter sued the dealership for a variety of claims; the dealer moved to compel arbitration. The Alabama Supreme Court concluded the dealership failed to meet its burden of proving the existence of a contract calling for arbitration: the sales contract was limited in its scope with respect to disputes arising to parties to the contract and the agreements, here, between the nephew and the dealership. Accordingly, the Court found the trial court did not err in denying the dealership’s motion to compel arbitration. View "Daphne Automotive, LLC v. Eastern Shore Neurology Clinic, Inc." on Justia Law

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In case no. 1130590, Kathryn L. Honea appealed the denial of her motion to vacate an arbitration award entered in favor of Raymond James Financial Services, Inc. ("Raymond James"), and Bernard Michaud, an employee of Raymond James (collectively, "RJFS"). In case no. 1130655, RJFS appealed the trial court's denial of its motion to dismiss for lack of jurisdiction; that appeal was dismissed. Honea opened several investment accounts with Raymond James. Honea and Raymond James executed a "client agreement" that included an arbitration provision. Honea filed a complaint in the Jefferson Circuit Court asserting that she had opened four accounts with Raymond James and that Michaud had acted as her financial advisor as to those accounts. She alleged that RJFS engaged in "abusive brokerage practices" in that her investments were not diversified, "were far too risky," and "were of poor quality." The arbitration panel dismissed Honea's breach-of-fiduciary-duty, negligence, wantonness, fraud, and Alabama Securities Act claims and proceeded to hear the breach-of-contract claims. An arbitration panel entered an award in favor of RJFS. The arbitration panel found that "Michaud did not sufficiently know his client nor make sufficient inquiry to attempt to know his client, her holdings, and/or her investment experience. These failures contributed to losses in [Honea's] account." However, the arbitration panel "denied" Honea's breach-of-contract claims, stating that they were "barred by the applicable statutes of limitations." Although the Alabama Supreme Court found one contract appeared to govern this case and that RJFS breached its duties by failing to properly understand Honea's investment knowledge before March 2000, Honea contended that allegedly improper transactions--the excessive use of margin and overly aggressive, high-risk trading occurring after March 2000--represented independent breaches of the FINRA rules. Those claims accrued within the six-year limitations period before her complaint was filed. Further, any knowledge by Honea of her losses did not mean that the trading activity was proper. Thus, to the extent that any transactions after March 2000 would be considered separate breaches of contract unrelated to the failure to properly know Honea, her holdings, or her investment experience, or setting up an "unsuitable" account, the Court found Honea demonstrated probable merit--for purposes of a Rule 59(g) hearing--that those claims would not be barred by the statute of limitations. Honea demonstrated that, in relation to the certain breach-of-contract claims, she was entitled to a Rule 59(g) hearing on her motion to vacate the arbitration award. View "Honea v. Raymond James Financial Services, Inc." on Justia Law

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Jewels by Park Lane, Inc. ("JBPL"), and Kathy Cassidy, the national director for JBPL, sought a writ of mandamus compelling the Circuit Court to vacate its order denying their motion to dismiss an action against them on the ground of improper venue arising out of a forum-selection clause, and to enter an order dismissing the case. JBPL was a multilevel marketing company that sold jewelry through independent contractors who host parties offering JBPL's jewelry line for sale. Jennifer Miller became a “director” for LBPL. Miller sued JBPL and Cassidy, alleging JBPL promised to employ her for a 12-month period and to pay her $4,000 a month for that period. Miller set out claims alleging account stated, open account, breach of contract, and fraud. Miller sought compensatory damages, punitive damages, and attorney fees. The employment agreement contained a “forum selection clause” in which any disputes between the parties would be settled in accordance with the laws of Illinois. Miller admitted that the director agreement contained a forum selection clause but argued that she would not have entered into the agreement but for the fraud perpetuated by JBPL and Cassidy. The Alabama Supreme Court concluded JBPL and Cassidy have shown a clear legal right to have the action against them dismissed on the basis that venue in the Tallapoosa Circuit Court was, by application of the outbound forum-selection clause, improper. The trial court exceeded its discretion in denying their motion to dismiss Miller's action. View "Ex parte Jewels by Park Lane, Inc." on Justia Law

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In 2015, RPM Cranes and its owner Muhammad Wasim Ali sued the defendants CraneWorks, Inc. and its owners, David Upton ("David") and Steve Upton ("Steve"), and Russell Brooks, Rick Yates, and Casey Markos, alleging that Brooks, Yates, and Markos had violated their employment agreements by going to work for CraneWorks and that CraneWorks' hiring of Brooks, Yates, and Markos likewise violated those employment agreements. David and Steve were named as defendants by virtue of their ownership of CraneWorks. RPM and Ali sought monetary damages and injunctive relief. The trial court entered a permanent injunction in favor of RPM and Ali and against the defendants. The Alabama Supreme Court found the injunction at issue in defendants' appeal was not specific in its scope: the order stated that the defendants were "permanently restrained and enjoined from contacting, in any way, whatsoever, any of those clients which are now clients of RPM Cranes." The order failed, however, to specify which clients were included in the injunction. RPM and Ali introduced no evidence as to who RPM's clients were or whether it had developed any clients of its own that Yates and Brooks did not bring onboard as a result of their previous jobs with other entities. In other words, the injunction was broad and vague rather than "specific in [its] terms." The Court reversed the trial court's order and remanded for further proceedings. View "Brooks v. RPM Cranes, LLC" on Justia Law

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Rainbow Cinemas, LLC ("Rainbow"), Ambarish Keshani, and Harshit Thakker (collectively, "the defendants") appealed a circuit court order denying their motion to compel arbitration of a contract dispute with Consolidated Construction Company of Alabama ("CCC"). In the contract at issue here, CCC agreed to provide specified services in constructing a movie theater for Rainbow. The parties signed the American Institute of Architects "Document A101-2007 -- Standard Form of Agreement Between Owner and Contractor where the basis of payment is a Stipulated Sum" ("the agreement"). The agreement incorporated by reference American Institute of Architects "Document A201-2007 -- General Conditions of the Contract for Construction" ("the general conditions"). In 2016, after having already initiated the arbitration process, CCC sued the defendants. Among other things, CCC alleged that the defendants had fraudulently induced it into entering into the contract. Specifically, CCC alleged that the defendants knew that the contract required an initial decision maker and that the defendants also "knew they had not contracted for [initial-decision-maker] services from the [initial decision maker]." CCC alleged that the defendants "failed to inform CCC ... that Rainbow had not contracted with [architect Hay] Buchanan to act as [the initial decision maker]." The Alabama Supreme Court reversed and remanded, finding that the contract incorporated the AAA's Construction Industry Arbitration Rules, which state that "[t]he arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement." Although the question whether an arbitration provision may be used to compel arbitration between a signatory and a nonsignatory is a threshold question of arbitrability usually decided by the court, here that question was delegated to the arbitrator. The arbitrator, not the court, had to decide that threshold issue. View "Rainbow Cinemas, LLC v. Consolidated Construction Company of Alabama" on Justia Law

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Rochester-Mobile, LLC, and Salzman-Mobile, LLC ("Rochester-Salzman"), appealed a judgment entered against them in a declaratory-judgment action relating to the validity of a 25-year sublease between Rochester-Salzman and Southern Family Markets of Mobile South University BLVD, LLC ("SFM"), and C&S Wholesale Grocers, Inc. ("C&S"). The trial court concluded that because the sublease was not recorded pursuant to section 35-4-6, Ala. Code 1975, the sublease was void for the remainder of the term extending beyond 20 years. After review, the Alabama Supreme Court held that the sublease in this case was not void under the provisions of section 35-4-6. Accordingly, the trial court erred in entering a judgment on the pleadings in favor of SFM and C&S and against Rochester-Salzman. Given this holding, the Court pretermitted discussion of the issue whether the sublease contained separate agreements that are independently enforceable, regardless of the validity of the sublease. View "Rochester-Mobile, LLC v. C&S Wholesale Grocers, Inc." on Justia Law

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Family Security Credit Union ("FSCU") appealed the trial court's denial of its motions to compel arbitration in eight separate but closely related cases. Action Auto Sales ("Action Auto") was a car-financing group that financed the vehicle inventory of Pine City Auto ("Pine City"), a used-car dealership. Action Auto held titles to the vehicles in inventory, and released a title only when a vehicle was sold, and Pine City paid off a proportional amount of the inventory financing. Pine City eventually went out of business without paying off the inventory financing on some of the vehicles it had sold. Action Auto sued Pine City and the purchasers of eight vehicles who had purchased vehicles from Pine City and financed those purchases through FSCU. Action Auto sought possession of the vehicles and money damages. The purchasers each filed counterclaims and cross-claims against Action Auto and Pine City and third-party claims against FSCU, alleging negligence, wantonness, and conspiracy. The purchasers' third-party claims against FSCU were based on FSCU's alleged failure to perfect its security interest in the vehicles before financing the purchasers of the vehicles. FSCU moved for each of those third-party claims to be submitted to arbitration. The purchasers opposed the motions to compel arbitration, but they did not submit any evidence. After review, the Alabama Supreme Court concluded the trial court erred in denying FSCU's motions to compel arbitration in each of the eight cases, and remanded all for further proceedings. View "Family Security Credit Union v. Etheredge" on Justia Law

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Lamar Ragland appeals the dismissal of his bad-faith claim against State Farm Mutual Automobile Insurance Company. Ragland sought punitive damages from State Farm based on State Farm's alleged bad-faith failure to pay and related failure to subject his claim for underinsured-motorist ("UIM") benefits to a cognitive review. State Farm moved to dismiss Ragland's claims, because Ragland had filed a separate civil action in 2014 that had not yet been resolved. After review, the Alabama Supreme Court dismissed Ragland's claim as being from a nonfinal judgment. View "Ragland v. State Farm Mutual Automobile Ins. Co." on Justia Law

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Julie Gerstenecker borrowed money from her mother-in-law Janice Gerstenecker, for help in repaying her student loans. According to Janice, Janice agreed to repay Julie's student loans and Julie agreed to repay Janice by "pay[ing] [Janice] $700 a month until [Julie and Adam's child] turned one. And then the payments would rise to $1,000." Janice testified that the terms of the agreement between her and Julie were not reduced to writing. Julie testified that she had never borrowed money from Janice and that she does not recall Janice telling her that Janice would lend her money to repay her student loans. Adam Gerstenecker, Janice's son and Julie's husband, also testified at trial; his testimony supported his mother's version of the agreement. Adam and Julie would eventually divorce. Some repayments were made, but ultimately Janice sued Julie for the balance owed. The trial court found Julie breached the agreement she had with Janice. However, the Alabama Supreme Court found the trial court erred in reading an acceleration-of-payments clause into the agreement between Janice and Julie. The Supreme Court reversed the trial court's damages award and remanded this case for the trial court to determine the amount owed based on the accrued payments as of the date of the judgment and not the full amount of the outstanding loan balance. View "Gerstenecker v. Gerstenecker" on Justia Law

Posted in: Contracts

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Three matters consolidated for review resulted from separate automobile accidents between either an Allstate or a GEICO insured with Underinsured-Motorist (UIM) coverage and allegedly underinsured tortfeasors. In each case, it was undisputed that the applicable insurance policy contained a "consent-to-settle" clause requiring the provision of notice to, and the consent of, the affected insurer prior to the insured's settlement of any claims against the alleged underinsured tortfeasors and/or a release of the tortfeasors' liability. After review of the specific facts of each case, the Alabama Supreme Court concluded that because the insurers, in following the express directives of the Court, were deprived of their contractual rights as well as the benefit of the procedures set forth in the controlling case law, the insurers demonstrated a clear legal right to their requested relief. In case no. 1150511 and 1151266, the Court directed the applicable circuit court to vacate its respective orders purporting both to "enforce" the pro tanto settlement agreements against the insurer's consent and to dismiss the tortfeasors. In case no. 1150269, the Court dismissed the petition. View "Ex parte GEICO Indemnity Company." on Justia Law