In Alliance Investment
Company, LLC v. Omni Construction Company, Inc., the Alabama Supreme Court
was faced with analyzing who has the power to determine the location of an
arbitration proceeding –the arbitrator or the Madison Circuit Court. 2019 WL
1219416 (Ala. 2019).
In 2015, KPS, LLC (“Kroger”)
entered into a contract (the “prime contract”) with Omni Construction Company
(“Omni”) in which Omni agreed to build a grocery store for Kroger in Madison,
Alabama. Omni then entered into a subcontract (the “subcontract”) with Alliance
Investment Company, LLC (“Alliance”), in which Alliance agreed to perform concrete
work for the construction project. A dispute later arose regarding the payment
owed to Alliance for its work on the project, provoking Alliance to sue both
Kroger and Omni in Circuit Court. Kroger and Omni jointly filed a motion to
stay the Circuit Court proceedings and compel arbitration of Alliance’s claims.
Both the prime contract and the
subcontract contained an arbitration clause.
Alliance then filed a demand for arbitration with the American
Arbitration Association (“AAA”). A dispute then arose over where the
arbitration proceedings should be held.
Alliance, an Alabama company,
contended that the arbitration proceedings should be held in Alabama because the
prime contract required arbitration occur in Alabama. Kroger and Omni, which
are both based in Ohio, contended that the arbitration proceedings should be
held in Ohio, arguing that the dispute arose under a provision in the
subcontract which requires arbitration in Ohio.
On January 3, 2018, the AAA made
an administrative decision that the arbitration would be held in Alabama.
Kroger and Omni quickly filed an Emergency Motion to Clarify Order Compelling
Arbitration with the Circuit Court, arguing that the subcontract requires the
arbitration be held in Ohio, and that the prime contract’s requirement that arbitration
be held in Alabama is irrelevant. The Circuit Court then issued an order on
January 22, 2018, requiring the Parties to arbitration in Ohio.
Alliance appealed to the Supreme
Court of Alabama, arguing that the Circuit Court lacked authority to order the
parties to arbitrate in Ohio. Rule 9(a) of the Construction Industry Arbitration
Rules provides, “[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.”
The Alabama Supreme Court held
that, “which argument is correct is not for this Court or the circuit
court to decide; rather, that is an issue for the arbitrator to decide under
Rule 9(a) of the Construction Industry Arbitration Rules. The Circuit Court
lacked the authority to order that the arbitration proceedings be held in Ohio.”
The Alabama Supreme Court reversed the Circuit Court’s January 22, 2018 order
and remanded the case, directing that the arbitrator should choose the proper
forum.
