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Alabama Supreme Court Dismisses Appeal Brought By Contractor Due To Unresolved Counterclaims

Builder Sys., LLC v. Klamer, No. 1200433, 2021 WL 4472047 (Ala. Sept. 30, 2021) concerned a  contractor’s appeal from an order enforcing an arbitration award in favor of the homeowners. The Klamers purchased a home built with defective drywall. In 2011, they joined a class action against the manufacturer of the drywall. The class action settled, and, as part of the settlement, the plaintiffs chose to renovate their home, including replacing the defective drywall, some fixtures, and their HVAC unit.

In 2013, the Klamers entered a renovation agreement with Builder Systems. The renovation agreement contained an arbitration provision. When disputes arose over the renovations, the parties submitted to arbitration. The arbitration proceedings ended with an award in favor of the Klamers.

Following arbitration, the Klamers attempted to work with Builder Systems to identify the renovation work that needed to be completed on the drywall in the house. Builder Systems inspected the home in 2015, but failed to respond to the Klamers’ request for a list of work that needed to be completed. Because of Builder Systems’ unresponsiveness, the Klamers sought a modification of the arbitration award.

After the arbitration award was modified, Builder Systems still did not perform satisfactory work. The Klamers then resorted to filing a notice to the arbitrator that Builder Systems was in breach of the arbitration award and requested an inspection of the home. The arbitrator denied the Klamers’ request and informed the Klamers that they needed to go to court if they were unhappy with the arbitration award. Builder Systems never completed the renovation work on the Klamers’ home. Eventually, the Klamers hired another contractor to finish the renovation.

In 2017, the Klamers sued Builder Systems, seeking to enforce the arbitration award and additional money damaged incurred from Builder Systems’ nonperformance. Builder Systems filed a counterclaim against the Klamers for unjust enrichment and quantum meruit for the work it had performed prior to arbitration. After a bench trial, the trial court entered an order against Builder Systems for failing to perform its obligations under the arbitration award and awarded the Klamers liquidated damages. The order did not address Builder Systems’ counterclaims.

In 2019, shortly after the trial court entered its order, Builder Systems moved the trial court to reconsider. In 2020, the trial court granted the motion to reconsider and reduced the award to the Klamers as requested. Again, the amended order did not mention Builder Systems’ claims alleging unjust enrichment and quantum meruit. The Klamers moved for this order to be certified as final pursuant to Alabama Rules of Civil Procedure, Rule 54(b).

In 2021, the trial court entered a second amended order, granting the Klamers’ motion and certifying the order as final pursuant to Rule 54(b). The second amended order still did not adjudicate Builder Systems’ counterclaims. Builder Systems appealed the second amended order. Builder Systems argued, among other things, that the trial court improperly certified the second amended order as final because its counterclaims were still pending.

The Alabama Supreme Court held that the second amended order was improperly certified as final. The Court reasoned that the unadjudicated counterclaims were closely related to the Klamers’ claims, which had been adjudicated. Both the Klamers’ and Builder Systems’ claims arose under the parties’ obligations to perform under the arbitration award. Therefore, resolution of the counterclaims required resolution of issues that are common to those resolved by the second amended order, which only addressed the Klamers’ claims. Because these issues were intertwined, the Court concluded that the trial court exceeded it discretion by certifying the second amended order as final. Accordingly, the Court dismissed Builder Systems’ appeal as arising from a non-final judgment.