Rel: May 23, 2025
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 published in Southern Reporter.
ALABAMA COURT OF CIVIL APPEALS OCTOBER TERM, 2024-2025 _________________________
CL-2024-0792 _________________________
West Alabama Bank and Trust
v.
Perry County Board of Education
Appeal from Perry Circuit Court (CV-24-900004)
EDWARDS, Judge.
In February 2024, the Perry County Board of Education ("the
PCBOE") filed a complaint in the Perry Circuit Court ("the trial court")
seeking $26,000 in damages from West Alabama Bank and Trust ("the
bank") based on the bank's alleged negligence in honoring two fraudulent CL-2024-0792
checks drawn on the PCBOE's bank account with the bank. In April
2024, the bank answered the complaint and asserted a counterclaim
against the PCBOE for breach of the account agreement based on the
PCBOE's alleged failure to properly examine its statement and to report
to the bank the unauthorized checks within the 60 days required by the
account agreement; the bank attached to its answer and counterclaim a
copy of the account agreement, a copy of the two allegedly fraudulent
checks, and a copy of the July 2023 bank statement for the PCBOE's
account with the bank. In the counterclaim's prayer for relief, the bank
sought only an award of attorney fees, the court costs, and the expenses
associated with defending the PCBOE's action.
In April 2024, the bank served on the PCBOE requests for
admission. In May 2024, the PCBOE filed a reply to the counterclaim
that it amended on July 1, 2024, to contend that the account agreement
was void for a lack of consideration and a lack of mutuality, was
unconscionable, and was against public policy. On July 2, 2024, the
PCBOE responded to the bank's requests for admission. On July 15,
2024, the bank filed requests for production and indicated its intent to
notice the depositions of two persons. On July 24, 2024, the trial court
2 CL-2024-0792
set the case for a trial to take place in December 2024, set out a
scheduling order, and referred the parties to mediation. On July 30,
2024, the PCBOE amended its complaint to add claims of money had and
received and of conversion.
On August 20, 2024, the bank filed a motion to compel arbitration
of the parties' dispute based on various arbitration agreements that had
been executed by representatives of the PCBOE.1 In its motion to compel
arbitration, the bank set out the procedural history of the action, stated
that it had propounded 15 requests for admission, and explained that,
although it had noticed two depositions with accompanying requests for
production, those depositions had been canceled when the PCBOE
amended its complaint in July 2024. To support its motion to compel
arbitration, the bank attached the account agreement; various
arbitration agreements that had been signed by representatives of the
PCBOE over several years, including, most recently, in 2022; an affidavit
of the president of the bank, Andrew C. Wade, Jr.; and certain bank
statements, including canceled checks, that, based on Wade's affidavit
1Each of the several arbitration agreements were separate documents from the account agreement. 3 CL-2024-0792
testimony, indicated that the PCBOE had engaged in interstate
commerce by using the bank account to pay money to certain persons or
entities in other states, including Georgia, California, Illinois, Indiana,
Louisiana, Maryland, Massachusetts, New York, Virginia, Tennessee,
and Texas. The PCBOE opposed the motion to compel arbitration,
arguing that the parties had not entered into a valid contract, that the
motion to compel arbitration had not been timely filed, that the action
involved tort claims, and that "[the bank's] documents in their entirety
are overly broad and unconscionable."
On October 8, 2024, the trial court entered an order denying the
bank's motion to compel arbitration without stating its rationale. The
bank filed a notice of appeal. See Rule 4(d), Ala. R. App. P. (providing, in
pertinent part, that "[a]n order granting or denying a motion to compel
arbitration is appealable as a matter of right, and any appeal from such
an order must be taken within 42 days (6 weeks) of the date of the entry
of the order"). On the bank's motion, the trial court stayed the proceeding
pending resolution of the bank's appeal.
On appeal, the bank argues that the trial court erred by denying its
motion to compel arbitration. The bank contends that the arbitration
4 CL-2024-0792
agreements are valid, that the PCBOE has engaged in interstate
commerce through the use of its bank account with the bank, and that
the bank's actions during the litigation were not sufficient to have waived
its intent to arbitrate. We agree.
"In reviewing a trial court's refusal to compel arbitration, [the appellate court's] review is de novo. … [A] trial court's ruling on a question of law is not within the trial court's discretionary function; therefore, rulings on these motions are subject to de novo review. A de novo review is a review without any assumption of correctness."
Kenworth of Dothan, Inc. v. Bruner-Wells Trucking, Inc., 745 So. 2d 271,
273 (Ala. 1999).
" ' [An appellate court] reviews de novo the denial of a motion to compel arbitration. Parkway Dodge, Inc. v. Yarbrough, 779 So. 2d 1205 (Ala. 2000). A motion to compel arbitration is analogous to a motion for a summary judgment. TranSouth Fin. Corp. v. Bell, 739 So. 2d 1110, 1114 (Ala. 1999). The party seeking to compel arbitration has the burden of proving the existence of a contract calling for arbitration and proving that the contract evidences a transaction affecting interstate commerce. Id. "[A]fter 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." Jim Burke Automotive, Inc. v. Beavers, 674 So. 2d 1260, 1265 n.1 (Ala. 1995) (opinion on application for rehearing).' "
Elizabeth Homes, L.L.C. v. Gantt, 882 So. 2d 313, 315 (Ala. 2003)
(quoting Fleetwood Enters., Inc. v. Bruno, 784 So. 2d 277, 280 (Ala.
5 CL-2024-0792
2000)). " 'If the party opposing arbitration presents sufficient evidence to
create a fact question as to the existence of a valid arbitration agreement,
then the issue must be resolved by the trial court or by a jury, if one is
requested.' " SSC Selma Operating Co. v. Gordon, 56 So. 3d 598, 603 (Ala.
2010) (quoting Ex parte Caver, 742 So. 2d 168, 172 n.4 (Ala. 1999)); see
also Oden Music, Inc. v. First Baptist Church of East Gadsden, 72 So. 3d
1238, 1241 (Ala. Civ. App. 2011). Our supreme court has stated that "[i]f
[the] party [opposing arbitration] presents no evidence in opposition to a
properly supported motion to compel arbitration, then the trial court
should grant the motion to compel arbitration." Ex parte Greenstreet,
Inc., 806 So. 2d 1203, 1209 (Ala. 2001).
As noted, in support of its motion to compel arbitration, the bank
presented the most recent arbitration agreement signed by
representatives of the PCBOE in 2022 ("the 2022 arbitration
agreement"). The 2022 arbitration agreement recites that, "[i]n
consideration of the loans, benefits, agreements, deposit accounts, or
other services received directly or indirectly by the undersigned, as
evidenced by previous, concurrent, or future documents, loans, accounts,
or other services ('Bank Documents') from [the bank], [the PCBOE and
6 CL-2024-0792
the bank] enter into [the 2022 arbitration agreement]." The 2022
arbitration agreement states that the terms
" 'Claim' or 'Claims' shall have the broadest definition possible, and include initial claims, counterclaims, cross- claims, and third-party claims based upon, but not limited to, the application of [the 2022 arbitration agreement], contract, tort, consumer rights, fraud, other intentional torts, constitution, statute, regulation, ordinance, common law, and any other matter at law or equity between [the PCBOE and the bank]."
In addition, the 2022 arbitration agreement specifies that the terms
" 'Dispute' and 'Disputes' shall refer to all disputes, Claims (as defined above), actions, breaches, disagreements, or controversies arising out of, or related to, or based upon any prior, current, or future agreement, Bank Documents, loan, account, service, activity, contract, transaction (proposed or actual), event, or occurrence, whether individual or joint."
As required, the bank also presented in support of its motion to
compel arbitration evidence tending to establish that the business
relationship between the PCBOE and the bank involved a transaction or
transactions affecting interstate commerce. Wade averred in his
affidavit that the PCBOE had written checks to persons or entities in
various other states, including Georgia, Tennessee, Texas, and New
York. The PCBOE did not challenge Wade's averments or present
contradictory evidence relating to whether the business relationship
7 CL-2024-0792
between it and the bank affected interstate commerce either before the
trial court or in its brief on appeal. Thus, we will consider the PCBOE
to have conceded that its business relationship with the bank that is
memorialized in the account agreement affects interstate commerce.
In its response in opposition to the motion to compel arbitration,
the PCBOE made several cursory arguments. The PCBOE first argued
that the 2022 arbitration agreement was void because the essential
elements of a contract, including consideration, were lacking, and it cited
Ex Parte Grant, 711 So. 2d 464 (1997), in support of its argument.
Relying on Armada Coal Export, Inc. v. Interbulk, Ltd., 726 F.2d 1566
(11th Cir. 1984), the PCBOE then argued that the 2022 arbitration
agreement did not apply to the action because the PCBOE's claims
against the bank sounded in tort. Next, citing Wells v. Mobile County
Board of Realtors, 387 So. 2d 140 (Ala. 1980), the PCBOE contended that
the 2022 arbitration agreement was unconscionable and overly broad. In
addition, the PCBOE also stated in its response in opposition to the
motion to compel arbitration that the "[p]ublic policy of this state holds
void any agreement in advance to oust or defeat jurisdiction of all courts
as to all differings between the parties." Finally, the PCBOE contended
8 CL-2024-0792
that the bank's motion to compel arbitration had been "untimely filed"
and that the bank had "substantially invoked the jurisdiction of this
court." The PCBOE presented no evidence in support of its response in
opposition to the bank's motion to compel arbitration.
The PCBOE failed to present any evidence or legal argument to
establish the facts necessary to support its contention that the elements
of a contract -- offer, acceptance, consideration, and mutual consent --
were lacking and, thus, that the 2022 arbitration agreement was invalid.
The PCBOE's reliance on Ex parte Grant is misplaced. In Ex parte
Grant, our supreme court determined that a document entitled
" 'Worksheet-Estimate' [that] specifically state[d] that it creates 'no
contractual obligation or right to buy,' [was] not a contract" and,
therefore, it said, the parties had not agreed to arbitrate any claims and
the arbitration provision contained in the "Worksheet-Estimate" could
not be enforced. 711 So. 2d at 464. The PCBOE presented no evidence
or argument indicating that the PCBOE had not accepted an offer to
enter into the 2022 arbitration agreement or that the 2022 arbitration
agreement lacked consideration; nor did the PCBOE establish that the
2022 arbitration agreement indicated that it was not intended to form a
9 CL-2024-0792
valid contract between the parties. The trial court did not have any
evidence before it to support the conclusion that the 2022 arbitration
agreement was not a valid contract.
Similarly, the PCBOE did not present to the trial court any factual
evidence that would have bearing on its undeveloped argument that the
2022 arbitration agreement was unconscionable. See Fleetwood Enters.,
Inc. v. Bruno, 784 So. 2d 277, 281 (Ala. 2000) (stating that "the party
asserting [the defense of unconscionability] bears the burden of proof" on
that issue); Ex parte Napier, 723 So. 2d 49, 53 (Ala. 1998) ("Under general
principles of law, the party asserting the defense of unconscionability has
the burden of proving unconscionability."). The mere assertion of the
defenses of invalidity or unconscionability by the PCBOE was not
sufficient to create a fact question regarding the validity of the 2022
arbitration agreement. As previously noted, our supreme court has
indicated that the failure of the party opposing arbitration to present
evidence requires that a trial court grant the motion to compel
arbitration. See Ex parte Greenstreet, Inc., 806 So. 2d at 1209; see also
First Family Fin. Servs., Inc. v. Jackson, 786 So. 2d 1121, 1131 (Ala.
2000) ("A party must submit evidence in some form in order to preserve
10 CL-2024-0792
for appellate review that party's contention of unconscionability as a
defense to the enforcement of an arbitration agreement."). The trial
court therefore could not have properly denied the bank's motion to
compel arbitration on the ground that the 2022 arbitration agreement is
unconscionable.
In addition, we reject the assertion by the PCBOE in its response
in opposition to the motion to compel arbitration that tort claims are not
subject to the arbitration agreement. The authority upon which the
PCBOE relied in the trial court -- Interbulk -- is inapposite. Certainly,
the United States Court of Appeals for the Eleventh Circuit concluded in
Interbulk that the tort claims asserted by Armada Coal Export, Inc.
("Armada"), against Interbulk, Ltd., were not subject to arbitration.
However, its holding was not so broad as to support the conclusion that
no tort claims may be subject to an arbitration agreement.
Interbulk and Armada had entered into a charter-party agreement
pursuant to which Armada would load coal onto Interbulk's ship.
Armada did not timely load the coal as required by the charter-party
agreement, and Interbulk sued Armada in the United States District
Court for the Southern District of Alabama ("the federal district court").
11 CL-2024-0792
When Interbulk sued Armada, it believed that Armada was not present
in the southern district of Alabama, so Interbulk also sought and
obtained a writ of foreign attachment of the coal that had been the subject
of the charter-party agreement between the parties. Armada sought to
quash the writ, stating that it, in fact, had been within the district.
Armada deposited $750,000 in cash with the clerk of the federal district
court in order to secure the return of the coal, offered a letter of credit to
Interbulk, and requested that the writ of foreign attachment be quashed.
The federal district court quashed the writ, but Interbulk refused to
return the letter of credit to Armada.
Armada then sued Interbulk in an Alabama state court, seeking
damages for wrongful and unlawful attachment of Armada's coal and for
conversion of Armada's letter of credit. Interbulk removed Armada's
state-court action to the federal district court and then moved to compel
arbitration under the terms of the charter-party agreement; the federal
district court granted that motion. Armada sought appellate review of
the grant of Interbulk's request to compel arbitration, and the Eleventh
Circuit Court of Appeals determined that, although the charter-party
agreement had contained an expansive arbitration clause stating that
12 CL-2024-0792
" '[a]ny dispute arising during the execution of the Charter Party shall be
settled by arbitration,' " Armada's claims of wrongful attachment and
conversion were essentially outside the scope of the arbitration
agreement because, the court said, the "connection [between the business
dealings memorialized by the charter-party agreement and the action
seeking damages for unlawful attachment and conversion] is not
sufficiently close to constitute a dispute arising during the execution, or
performance, of the charter-party [agreement] itself." 726 F.2d at 1568.
By its terms, the 2022 arbitration agreement clearly applies to tort
claims that arise out of an "account, service, activity, contract,
transaction" involving the PCBOE's relationship with the bank. The
PCBOE seeks damages from the bank based on the bank's allegedly
honoring fraudulent checks and the resulting loss of funds from the
PCBOE's bank account. Thus, the PCBOE's complaint seeks damages
for the bank's handling of funds on deposit in the PCBOE's bank account
and the bank's alleged negligence in performing the service of honoring
fraudulent checks in transactions between the bank and the presenting
entity or entities. We conclude, therefore, that the PCBOE's claims are
clearly within the scope of the 2022 arbitration agreement.
13 CL-2024-0792
We turn now to the PCBOE's allegation that the bank waived its
right to enforce the 2022 arbitration agreement by substantially invoking
the litigation process. Although at the time of the entry of the trial court's
October 2024 order denying the bank's motion to compel arbitration the
PCBOE was required to prove both that the bank "substantially invoked
the litigation process and that [the PCBOE] suffered prejudice as a
result," 2 Ex parte Merrill Lynch, Pierce, Fenner & Smith, Inc., 494 So. 2d
1, 3 (Ala. 1986), our supreme court recently restated the test for
establishing a waiver of the right to arbitration. In CNU of Alabama,
LLC v. Shakeena Cox, [Ms. SC-2024-0060, Nov. 8, 2024] ___ So. 3d ___
(Ala. 2024), our supreme court explained that a showing of prejudice
2We note that the PCBOE did not mention the word "prejudice" in
its response in opposition to the motion to compel arbitration, much less make "a showing of prejudice," and, thus, under the former standard applicable to establishing waiver of the right to arbitrate, the trial court's October 2024 order would be due to be reversed because, "even if we were to assume that [the bank's] filing responsive pleadings and its conducting discovery constitute 'substantial invocation of the litigation process,' [the PCBOE has] alleged no specific prejudice occasioned by [the bank's] activities in this litigation before it asserted the right to proceed under the [2022] arbitration [agreement]." Allied-Bruce Terminix Cos. v. Dobson, 684 So. 2d 102, 109-10 (Ala. 1995).
14 CL-2024-0792
would no longer be required to establish that a party has waived the right
to arbitration. Our supreme court stated:
"Going forward, our standard for considering waiver in the arbitration context now asks, ' " 'whether the party's actions as a whole have substantially invoked the litigation process.' " ' Key [v. Warren Averett, LLC], 372 So. 3d [1132,] 1137 [(Ala. 2022)] (citations omitted). We will no longer require a party arguing waiver of an arbitration provision to meet a 'heavy' burden, just an ordinary one."
Cox, ___ So. 3d at ___.
In its response in opposition to the bank's motion to compel, the
PCBOE asserted that "[t]he substantial activities of [the bank] in this
action completes a waiver of any rights it may have to have this matter
arbitrated." As recounted above, the bank's participation in the litigation
before filing its motion to compel arbitration included filing an answer
and a counterclaim in April 2024 and engaging in limited discovery -- i.e.,
propounding requests for admission, noticing (but not conducting) two
depositions, and filing requests for production in furtherance of the
canceled depositions. The bank filed its motion to compel arbitration just
over six months after the complaint was filed and four months after it
filed its answer to the complaint. With those facts in mind, we must
determine whether the bank's "actions as a whole have substantially
15 CL-2024-0792
invoked the litigation process." Cox, ___ So. 3d at ___ (internal quotation
marks and citations omitted).
In its brief, the PCBOE states that
"[the bank] fully participated in discovery, filed motions, participated in pre-trial conferences, and filed a counterclaim seeking an award of attorney fees and damages.[3] [The bank] objected to mediation[4] and sought arbitration only after participating in at least fourteen documented court filings, court hearings, and receiving a trial setting.[5] All of its actions were consistent with its intent to follow the legal process and abandon its right to arbitrate."
" 'Whether participation in an action is a waiver of the right to
arbitration depends on whether the participation bespeaks an intention
to abandon the right....' " Ex parte Merrill Lynch, Pierce, Fenner &
Smith, 494 So. 2d at 3 (quoting 6 C.J.S. Arbitration § 37 (1975)). The law
3In its counterclaim, the bank did not seek an award of damages.
4The record contains no document indicating that the bank objected
to the trial court's order that the parties submit their controversy to mediation.
5The record reflects that the bank filed four documents in the trial
court: a notice of appearance, an answer and counterclaim, a notice of service of the requests for admission, and a notice of service of the deposition notices and associated requests for production. The record does not contain any indication that the bank requested a trial setting or what hearings, other than the motion hearing relating to the motion to compel arbitration, might have been held. 16 CL-2024-0792
is well settled that the actions of answering a complaint and filing a
counterclaim are not sufficient to amount to a substantial invocation of
the litigation process. Voyager Life Ins. Co. v. Hughes, 841 So. 2d 1216,
1219 (Ala. 2001) (quoting Mutual Assurance, Inc. v. Wilson, 716 So. 2d
1160, 1164 (Ala. 1998), quoting in turn Ex parte Merrill Lynch, Pierce,
Fenner, & Smith, 494 So. 2d at 3, quoting in turn Clar Prods., Ltd. v.
Isram Motion Pictures, 529 F. Supp. 381, 383 (S.D.N.Y. 1982)) (stating
that " ' " ' "[m]erely answering on the merits, asserting a counterclaim (or
cross-claim) or participating in discovery, without more, will not
constitute a waiver [of the right to arbitrate]" ' " ' "); see also Bridgestone
Americas Tire Operations, LLC v. Adams, 264 So. 3d 833, 840 (Ala. 2018);
Hoover Gen. Contractors-Homewood, 201 So. 3d 550, 554 (Ala. 2016).
Our caselaw further provides that engaging in limited discovery is not
typically considered sufficient to support a conclusion that a party has
waived the right to arbitration. African Methodist Episcopal Church, Inc.
v. Smith, 217 So. 3d 816, 835 (Ala. 2016) ("[A] party's mere participation
in discovery is an insufficient basis upon which to conclude that that
party has substantially invoked the litigation process."); Ex parte Merrill
Lynch, Pierce, Fenner & Smith, 494 So. 2d at 3. In Ex parte Costa &
17 CL-2024-0792
Head (Atrium), Ltd., 486 So. 2d 1272, 1277 (Ala. 1986), our supreme
court, quoting Gavlik Construction Co. v. H.F. Campbell Co., 526 F.2d
777, 783 (3d Cir. 1975), stated that " '[r]ecent cases have only found
waiver where the demand for arbitration came long after the suit
commenced and when both parties had engaged in extensive discovery.' "
See also Smith, 217 So. 3d at 835. In addition, our supreme court has
indicated that when a movant had engaged in "limited discovery" and
only a "relatively short time [had] elapsed" between the service of the
complaint and the filing of the motion to compel arbitration, the movant
"had not substantially invoked the litigation process." 6 Ex parte Rager,
712 So. 2d 333, 336 (Ala. 1998) (declining to find waiver of the right to
compel arbitration based on a four-month delay between receipt of
service of the complaint and the filing of the motion to compel
arbitration); see also Ex parte Merrill Lynch, Pierce, Fenner & Smith,
494 So. 2d at 3 (declining to find waiver of the right to compel arbitration
where the motion to compel arbitration had been filed less than three
6We recognize that, in African Methodist Episcopal Church, Inc. v.
Smith, 217 So. 3d 816, 836 (Ala. 2016), our supreme court indicated that "delay in moving for arbitration is of only minimal, if any, relevance to our consideration of … whether the [party moving to compel arbitration has] substantially invoked the litigation process." 18 CL-2024-0792
months after the plaintiff had opted out of a federal action such that the
need to proceed in the state court was triggered).
Under the facts of this particular case, we cannot conclude that the
bank substantially invoked the litigation process such that its conduct
"manifest[ed] an intent to abandon the right to proceed in arbitration."
Smith, 217 So. 3d at 835. The bank's answer and counterclaim and its
limited participation in discovery, most of which was never completed,
simply does not " 'bespeak[] an intention to abandon the right' " to
arbitrate. Ex parte Merrill Lynch, Pierce, Fenner & Smith, 494 So. 2d at
3 (quoting 6 C.J.S. Arbitration § 37 (1975)). Accordingly, we reverse the
October 2024 order of the trial court denying the bank's motion to compel
arbitration, and we remand the case to the trial court for the entry of an
order granting that motion.
REVERSED AND REMANDED WITH INSTRUCTIONS.
Moore, P.J., and Hanson, J., concur.