Communications Unlimited Contracting Services, Inc. v. Steve Clanton.

• Court: Supreme Court of Alabama
• Decided: December 16, 2022
• Docket: 1210120
• Status: Published

Opinion

Rel: December 16, 2022

Notice: This opinion is subject to formal revision before publication in the advance sheets of Southern Reporter. Readers are requested to notify the Reporter of Decisions, Alabama Appellate Courts, 300 Dexter Avenue, Montgomery, Alabama 36104-3741 ((334) 229-0650), of any typographical or other errors, in order that corrections may be made before the opinion is printed in Southern Reporter.

SUPREME COURT OF ALABAMA OCTOBER TERM, 2022-2023

_________________________

1210120 _________________________

Communications Unlimited Contracting Services, Inc.

v.

Steve Clanton

Appeal from Jefferson Circuit Court (CV-20-903926)

BOLIN, Justice.

Communications Unlimited Contracting Services, Inc. ("CUI"),

appeals from a judgment of the Jefferson Circuit Court granting a motion

filed by Steve Clanton to remand for clarification an arbitration award 1210120

issued by Judicial Arbitration and Mediation Services, Inc. ("JAMS"). We

reverse the judgment and remand the case.

Facts and Procedural History

Clanton and Martin Rocha had known each other for a number of

years before the events giving rise to this litigation. Clanton had formerly

worked for Rocha in Athens, Georgia installing cable systems on college

campuses, and Clanton and Rocha had remained in contact with each

other over the years. Rocha went on to found CUI, a Florida corporation

with its principal place of business in Homewood, Alabama. CUI has been

in business for more than 25 years and is a provider of cable-installation

services. Rocha is the sole owner of CUI.

In 2009, following Hurricane Ike, Clanton became involved in the

restoration industry. Clanton earned certifications in various areas of the

restoration industry and, in 2018, formed Steven Clanton, LLC, d/b/a SCI

Restoration Services, LLC ("SCI"), a Georgia limited-liability company

with its principal place of business in Jacksonville, North Carolina. SCI

quickly became successful, primarily providing storm-restoration

services, including water-mitigation services, mold-mitigation services,

and roofing repair, for residential and commercial customers.

2 1210120

In March 2019, Clanton contacted Rocha about the possibility of

Rocha's becoming involved in SCI. Rocha traveled to North Carolina and

spent time with Clanton and Luke Woodruff, Clanton's bank

representative, to study SCI and the restoration industry. Subsequently,

Clanton traveled to Birmingham to meet with Rocha and Joseph Miller,

CUI's president, to discuss a joint business venture. Clanton had

Woodruff submit bank statements and spreadsheets, which showed that

SCI had accounts receivable and contracts representing $18.7 million.

Within a few days, the parties had agreed to a nonbinding letter of intent.

Over the course of the next couple weeks, Clanton, Rocha and their

representatives renegotiated the terms of the nonbinding letter of intent.

On April 1, 2019, CUI and Clanton signed a revised nonbinding

letter of intent. That letter of intent contemplated that the parties would

form SCI Restorations, L.L.C., which would purchase all the assets of SCI

by paying to Clanton $2 million and 75% of the accounts receivable

collected each month. That letter of intent also provided that that CUI

would own 51% of SCI Restorations and SCI would own 49% of SCI

Restorations.

3 1210120

In April 2019, SCI registered to do business in Alabama. Clanton

and SCI moved into CUI's offices in Alabama and began expanding

operations to the Alabama market. CUI issued Clanton an American

Express credit card to pay for SCI's expenses, and Clanton started using

CUI employees to conduct administrative and marketing work for SCI.

On May 30, 2019, Andy Key, CUI's accountant, who had been

reviewing SCI's financial information that had been provided by Clanton,

issued a financial statement for SCI. The financial statement for SCI

showed that, as of March 31, 2019, SCI had total assets of $6,757,216,

which included $620,449 in cash; $2,388,194 in accounts receivable for

completed jobs; $2,790,723 in "costs and estimated earnings in excess of

billings" for jobs in progress; and $940,050 in vehicles, equipment, and

personal property. Not included in the total assets listed in the financial

statement were contracts that Clanton represented had been signed,

representing $3.3 million in expected income for jobs that had not yet

been started and for jobs in progress for which a portion of the work had

not yet been started.

In June 2019, SCI began working numerous jobs in the Alabama

market. At that time, CUI and Clanton decided not to form SCI

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Restorations for the purpose of purchasing SCI. Rather, they decided that

CUI would purchase a 50% interest in SCI directly from Clanton. Clanton

and CUI entered into a purchase agreement and assignment effective

July 1, 2019, whereby Clanton agreed to sell 50% of his interest in SCI to

CUI. Section 1.2 of the purchase agreement provided that CUI was to

transfer to Clanton 100% ownership interest in a house owned by Rocha

located in Hoover; that Clanton was to receive moneys collected on

certain accounts receivable held by SCI totaling approximately $2.4

million, conditioned upon SCI having at least $400,000 in cash on hand;

that Clanton was to receive any cash on hand from SCI above $200,000

as of the effective date of the agreement; that CUI was to pay Clanton

$200,000; and that Clanton was to receive a salary of $150,000 per year

from SCI.

Disputes between CUI and Clanton soon arose regarding CUI's

purchase of a 50% interest in SCI. Clanton claimed that the Hoover house

had not been transferred to him and that he never received the moneys

payable to him under the purchase agreement, specifically the moneys

collected on SCI's accounts receivable and any cash on hand in excess of

$200,000 as of the effective date of the purchase agreement. Clanton

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contended that he had fulfilled his obligations under the purchase

agreement by selling 50% of SCI to CUI. Clanton, after becoming "fed

up" with CUI's not fulfilling its obligations under the purchase

agreement, emailed Rocha on October 23, 2019, expressing his desire to

"unwind" the purchase agreement.

The dispute between Clanton and CUI arising from CUI's purchase

of a 50% interest in SCI was ultimately presented to arbitration before a

JAMS arbitrator. CUI sought approximately $969,000 that it alleged that

it had invested in SCI and the fair-market value of a 50% interest in SCI,

which it valued at $3,865,935. Clanton sought the fair-market value of

the house located in Hoover, which the parties agreed was valued at

$765,000; $2,388,194 in moneys allegedly owed from SCI's accounts

receivable; and $550,000, which represented the cash on hand above

$200,000 available to SCI on the effective date of the purchase

agreement. Following a five-day arbitration proceeding, the JAMS

arbitrator, on August 18, 2020, entered an arbitration award, awarding

CUI $889,443 and awarding Clanton $840,000. In reaching the

arbitration award, the arbitrator made it clear that she was resolving

only the monetary claims between the parties arising from their failed

6 1210120

contractual business arrangement, stating: "I do note that the decision to

unwind was made by Clanton unilaterally" and "I further note that both

parties now seek a proper accounting. Both CUI and Clanton have raised

the issues of who currently owes what to the other party to this

Arbitration. My job as Arbitrator is to rule on the parties' various claims

for monetary relief." The arbitrator made no finding regarding whether

any ownership interest CUI had in SCI should revert to Clanton or

whether Clanton owned SCI outright. The arbitrator also did not purport

to dissolve SCI.

Following the issuance of the arbitration award, CUI, on August 28,

2020, commenced a statutory dissolution action in the Superior Court of

Walton County, Georgia, seeking dissolution of SCI ("the dissolution

action").1 In commencing the dissolution action, CUI noted that, as a

result of the purchase agreement and assignment, CUI held a 50%

interest in SCI.

After the commencement of the dissolution action, Clanton, on

September 1, 2020, submitted a request for clarification of the arbitration

1The dissolution action was brought in Georgia because, as noted earlier, SCI is a Georgia limited-liability company. 7 1210120

award to JAMS, asking that the arbitrator issue a ruling on "the parties'

interest, or lack thereof, in [SCI]." On September 3, 2020, JAMS

responded that "the Arbitrator's jurisdiction is limited to timely requests

for correction pursuant to JAMS Streamlined Arbitration Rule 19(i),"

that Clanton's request did not fall into that category, that therefore

JAMS had no jurisdiction to consider Clanton's request, and that the

arbitration proceeding was closed and would remain closed. On

November 11, 2020, CUI filed in the Jefferson Circuit Court an

application for an order confirming the arbitration award.

Clanton filed a motion to dismiss the dissolution action. While that

motion was pending, Clanton, on August 5, 2021, again submitted a

request for clarification to JAMS. Clanton attached to the second request

for clarification a proposed order specifically requiring that the arbitrator

make certain new rulings, including, among other things, that "[a]ll

ownership interests in [SCI] reverted to Respondent Steve Clanton," that

"[t]he Parties' Purchase Agreement and Assignment were rendered null

and void," and that "Mr. Clanton was awarded ownership of the [Hoover

house] ... based on the equities of the case." On August 16, 2021, JAMS

rejected the second request for clarification, again stating that it had no

8 1210120

jurisdiction to consider the issues raised in Clanton's second request for

clarification and that the issues raised in the request should be addressed

by a court.

On September 1, 2021, the Georgia court presiding over the

dissolution action entered an order denying Clanton's motion to dismiss

that action. The Georgia court rejected Clanton's argument that the

arbitration award estopped or precluded CUI from pursuing the

dissolution action, stating:

"[T]he arbitration award nowhere makes any finding regarding 'unwinding the deal,' nor on the ownership of SCI. To the contrary, the arbitrator did order CUI to pay to Clanton the 'main consideration' for its ownership interest in SCI, which the Court finds is inconsistent with the transaction having been 'unwound.' The Court finds no ambiguity in the award as regards ownership of SCI. Because the arbitrator did not decide the ownership of SCI, collateral estoppel or preclusion does not apply."

Also on September 1, 2021, the Georgia court entered an order denying a

motion to stay the dissolution action that Clanton had filed during his

efforts to get the JAMS arbitrator to clarify the arbitration award. The

Georgia court reiterated that it found "no ambiguity in the award

requiring clarification" and that "there is no issue of ownership of SCI

involved in any arbitration." The Georgia court, citing 9 U.S.C. § 12, a

9 1210120

part of the Federal Arbitration Act ("the FAA"), 9 U.S.C. § 1 et seq.,

concluded that "the 'clarification' Clanton seeks, considering what he

would ask the arbitrator to declare, would be in the nature of a

modification of the award, and the time to seek a modification has long

since run."

On September 9, 2021, Clanton filed in the Jefferson Circuit Court

his answer to CUI's application for an order confirming the arbitration

award and a motion for clarification of the arbitration award, in which

he requested that the circuit court either clarify the award or remand the

award to the arbitrator for clarification. October 11, 2021, CUI filed its

response to Clanton's motion for clarification, arguing that JAMS had

already twice declined Clanton's requests for clarification of the

arbitration award; that the arbitration award is not ambiguous in what

it addressed (the monetary claims), as the Georgia court presiding over

the dissolution action had already held; and that, because the ownership

issue had not been addressed by the arbitrator, adding a ruling on that

issue would represent, and require, a modification, not a "clarification,"

of the arbitration award.

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On October 12, 2021, the circuit court entered an order styled

"Order Allowing a Clarification of the Arbitrator's Award" and directed

the parties to submit proposed orders to allow submission of an

additional request for clarification to the arbitrator. On October 15, 2021,

the parties submitted the proposed orders as directed by the circuit court.

CUI again took the position that no clarification was needed and that

Clanton was seeking an improper and untimely modification of the

arbitration award. Clanton's proposed order submitted to the circuit

court again illustrated that Clanton sought what he called a "global

clarification" and a declaration as to the parties' respective ownership

interests in SCI. On that same day, the circuit court entered an order

remanding the arbitration award to JAMS for clarification concerning

the parties' ownership interests in SCI. CUI appealed.

Standard of Review

This appeal presents a question of law -- namely, whether the

circuit court erred in remanding the arbitration award to JAMS for a

"clarification" -- which this Court reviews de novo. Ex parte Alabama

Rivers Alliance, 165 So. 3d 597 (Ala. 2014).

Discussion

11 1210120

CUI argues on appeal that the circuit court erred in remanding the

arbitration award to JAMS for a "clarification" because, it says, Clanton

seeks an untimely modification of the award that is prohibited by the

FAA.

"Judicial review of arbitration awards is 'narrowly limited,' and the

FAA presumes that arbitration awards will be confirmed." Gianelli

Money Purchase Plan & Trust v. ADM Inv. Servs., Inc., 146 F.3d 1309,

1312 (11th Cir. 1998) (quoting Davis v. Prudential Sec., Inc., 59 F.3d

1186, 1190 (11th Cir. 1995)); Maxus, Inc. v. Sciacca, 598 So. 2d 1376, 1380

(Ala. 1992) (stating that "the role of the courts in reviewing the

arbitration award is limited"). It is well established that, "[a]bsent a

timely motion to vacate [or modify], in most cases' the confirmation of an

arbitration award is a summary proceeding that makes what is already

a final arbitration award a judgment of the court.' " Domino Grp. Inc. v.

Charlie Parker Mem'l Found., 985 F.2d 417, 420 (8th Cir. 1993) (quoting

Florasynth, Inc. v. Pickholz, 750 F.2d 171, 176 (2d Cir. 1984)).

The FAA provides that "[n]otice of a motion to … modify ... an award

must be served upon the adverse party or his attorney within three

months after the award is filed or delivered." 9 U.S.C. § 12. The three-

12 1210120

month period is "not subject to extension." Barclays Cap., Inc. v. Hache,

No. 16 Civ. 315 (LGS), July 12, 2016 (S.D.N.Y. 2016) (not reported in

Federal Supplement). Once the three-month period for filing a motion to

vacate or modify has expired, a subsequent attempt to vacate or modify

an arbitration award cannot generally be made, even in opposition to a

later motion to confirm the award. Cullen v. Paine, Webber, Jackson &

Curtis, Inc., 863 F.2d 851, 853-854 (11th Cir. 1989). After the three-

month period has expired, the successful party has a right to obtain

confirmation of the award in a summary proceeding. Florasynth, Inc. v.

Pickholz, 750 F.2d at 175; see also Romero v. Citibank USA, Nat'l Ass'n,

551 F. Supp. 2d 1010, 1012 (E.D. Cal. 2008), and Popular Sec., Inc. v.

Colon, 59 F. Supp. 3d 316, 318 (D.P.R. 2014). Here, Clanton did not file a

motion to modify or vacate the arbitration award within the three-month

period provided in 9 U.S.C. § 12. Rather, Clanton filed a motion in the

circuit court seeking clarification of the arbitration award regarding the

parties' ownership interests in SCI.

Arbitration proceedings are " 'summary in nature to effectuate the

national policy favoring arbitration' " and remands of arbitration awards

are disfavored because they threaten to disrupt the FAA's policy "of

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expeditious arbitration." Raiford v. Merrill Lynch, Pierce, Fenner &

Smith, Inc., 903 F.2d 1410, 1413 (11th Cir. 1990) (quoting Legion Ins. Co.

v. Insurance Gen. Agency, Inc., 822 F.2d 541, 543 (5th Cir. 1987)); see

also, e.g., Rich v. Spartis, 516 F.3d 75, 81 (2d Cir. 2008)(noting "the

general rule that '[a]rbitration awards are subject to very limited review

in order to avoid undermining the twin goals of arbitration, namely,

settling disputes efficiently and avoiding long and expensive litigation' "

(quoting Willemijn Houdstermaatschappij, BV v. Standard Microsystems

Corp., 103 F.3d 9, 12 (2d Cir. 1997))); General Elec. Co. v. Anson

Stamping Co., 426 F. Supp. 2d 579, 599 (W.D. Ky. 2006) ("Remand [of an

award to the arbitrator] is a procedure ... that should be used sparingly.").

This Court has noted, "[a] key purpose of the Federal Arbitration Act ...

is to permit the speedy resolution of disputes ...." FMR Corp. v. Howard,

227 So. 3d 444, 448 (Ala. 2017). Whenever possible, "a court should avoid

remanding a decision to the arbitrator because of the interest in prompt

and final arbitration." Teamsters Local No. 579 v. B&M Transit, Inc.,

882 F.2d 274, 278 (7th Cir. 1989). Remand to the arbitrator is "an

exceptional remedy, 'a procedure to avoid if possible.' " Duke Energy Int'l

Peru Invs. No. 1 Ltd. v. Republic of Peru, 892 F. Supp. 2d 53, 57 (D.D.C.

14 1210120

2012) (quoting Ethyl Corp. v. United Steel Workers of Am., AFL-CIO, 768

F.2d 180, 188 (7th Cir. 1985)).

Although remand of an arbitration award is strongly disfavored,

courts have the authority to remand if the award itself is ambiguous or

fails to address a contingency that arises after the entry of the award.

Green v. Ameritech Corp., 200 F. 3d 967, 977 (6th Cir. 2000). Ambiguity,

however, requires something more substantial than a simple

disagreement between the parties. Rather, the arbitration award must

be "so ambiguous that a court is unable to discern how to enforce it,"

Telenor Mobile Commc'ns AS v. Storm LLC, 351 F. App'x 467, 469 (2d

Cir. 2009), with the arbitrator's intent "hopelessly difficult" to determine.

Ethyl Corp., 768 F.2d at 187; see also United States Energy Corp. v.

Nukem, Inc., 400 F.3d 822, 830 (10th Cir. 2005). Remand to clarify an

alleged ambiguity is not proper when the matter can be resolved from the

record. See, e.g., Flender Corp. v. Techna Quip Co., 953 F.2d 273, 280

(7th Cir. 1992).

CUI argues that Clanton is seeking an untimely modification of the

arbitration award under the guise of a motion for clarification. "[A] court

must be careful -- indeed, it is obliged -- to pierce the language of any

15 1210120

request to remand for clarification to assure that it is not a disguised

request for modification or vacatur of an award." Lanier v. Old Republic

Ins. Co., 936 F. Supp. 839, 850 (M.D. Ala. 1996). As discussed above, the

arbitrator expressly set forth the scope of her task: "My job as Arbitrator

is to rule on the parties' various claims for monetary relief." A cursory

look at the arbitration award shows that resolving the parties' competing

claims for monetary relief is precisely what the arbitrator did. The

arbitrator made no finding as to the issues upon which Clanton now seeks

a "clarification," i.e., issues relating to the ownership interests of the

parties in SCI. When the language of Clanton's motion is pierced and

compared to the language of the arbitration award -- which, as will be

discussed below, is unambiguous as to its scope and as to the monetary

amounts awarded to the parties -- it is clear that Clanton's motion for a

clarification was, in fact, a request for a modification of the arbitration

award. Lanier, 936 F. Supp. at 850.

This conclusion is supported by Clanton's own proposed orders that

he submitted both to JAMS and to the circuit court. In his proposed order

to JAMS, Clanton sought to require the arbitrator to make certain new

rulings, including that "[a]ll ownership interests in [SCI] reverted to

16 1210120

Respondent Steve Clanton," that "[t]he Parties' Purchase Agreement and

Assignment were rendered null and void," and that "Mr. Clanton was

awarded ownership of the [Hoover house] ... based on the equities of the

case." Any question as to whether such rulings would amount to

substantive additions to the arbitration award -- rather than being mere

clarifications of actual findings of the arbitrator -- is answered by Clanton

himself, who requested the insertion of those new rulings "in addition to

other rights and obligations explained in the Award." Such rulings would

be "in addition to" the arbitrator's findings and rulings in the arbitration

award, because the arbitrator made no findings or rulings on the relevant

matters. Indeed, such rulings would also be contrary to the arbitrator's

stated description of her job in the arbitration proceedings and, if

"added," would likely have required modification or vacatur of other parts

of the arbitration award. Based on the foregoing, we conclude that

Clanton's motion for "clarification" was, in fact, an untimely filed motion

for modification of the arbitration award.

CUI further argues not only that Clanton's motion for clarification

demonstrates that he sought relief well beyond what can be characterized

as a "clarification," but also that the arbitration award itself is simply not

17 1210120

ambiguous regarding what the arbitrator was intending to resolve, what

the arbitrator actually awarded, and to whom it made awards. CUI

argues that no remand is warranted in this case; instead, it says, under

the "summary proceeding" anticipated under the FAA when there has

been no timely motion to vacate or modify an arbitration award, the

circuit court should have simply confirmed the award as it is. Domino

Grp., 985 F.2d at 420. We agree.

On its face, the arbitration award is unambiguous, clearly stating

that the arbitrator was resolving only the monetary claims between the

parties, actually resolving only the monetary claims between the parties,

and awarding each party certain amounts as money damages. The

arbitrator made no determination as to the parties' ownership interests

in SCI. There is no ambiguity regarding the amounts awarded by the

arbitrator, regarding the party to whom those amounts were awarded, or

regarding the categories of damages that they represent. Clanton cannot

render the arbitration award ambiguous simply by claiming that, in

addition to ruling on the parties' claims for monetary relief, the arbitrator

should also address the nonmonetary issues that he now seeks to put

before the arbitrator. The arbitration award is not " 'so ambiguous that a

18 1210120

court is unable to discern how to enforce it,' ... with the arbitrator's intent

'hopelessly difficult' to determine," as is required for a remand for

clarification. Duke Energy, 892 F. Supp. 2d at 57. Because the awards of

money damages for each party were clearly stated and unambiguous in

amount and scope, the circuit court erred in remanding the arbitration

award to JAMS for clarification.

Conclusion

Based on the foregoing, we conclude that the circuit court erred in

remanding the arbitration award for clarification. We therefore reverse

its judgment and remand the case for further proceedings consistent with

this opinion.

REVERSED AND REMANDED.

Parker, C.J., and Wise, Sellers, and Stewart, JJ., concur.