SCI Ala. Funeral Servs., LLC v. Hinton

260 So.3d 34

SCI ALABAMA FUNERAL SERVICES, LLC, d/b/a Elmwood Cemetery and Mausoleum, et al.

v.Johnnie HINTON

1161107

Supreme Court of Alabama.

March 30, 2018

William H. Brooks, William H. Morrow, and Jonathan R. Little of Lightfoot, Franklin & White, LLC, Birmingham, for appellants.

J. Brooks Leach of Frank S. Buck, P.C., Birmingham, for appellee.

BRYAN, Justice.

SCI Alabama Funeral Services, LLC, d/b/a Elmwood Cemetery and Mausoleum ("SCI"); Service Corporation International; SCI Funeral Services, LLC; Elmwood Cemetery Co.; Phyllis Pesseackey; and Jonathan Wheatley (hereinafter referred to collectively as "the defendants") appeal from an order denying their motion to compel arbitration. The circuit court denied the motion to compel because it concluded that the relevant arbitration provision is unconscionable and thus unenforceable. We conclude that the arbitration provision is not unconscionable, and we reverse and remand.

In 2004, Johnnie Hinton ("Johnnie") signed a contract with SCI to purchase the interment rights to two burial spaces in Elmwood Cemetery. The contract contains an arbitration provision stating that "any claim" that Johnnie "may have" against SCI must be resolved by arbitration. The arbitration provision further provides that it

"also applies to any claim or dispute between or among the seller, you as the purchaser, any person who claims to be a third party beneficiary of this agreement, any of the seller's employees or agents, any of the seller's parent, subsidiary, or affiliate corporations, and any of the employees or agents of those parent, subsidiary or affiliate corporations."

In August 2016, Johnnie's husband, Nathaniel Hinton, passed away. Johnnie began to make arrangements to have Nathaniel buried in one of the two burial spaces to which she had acquired interment rights in 2004. SCI then informed Johnnie that someone else had mistakenly been buried in Nathaniel's space. According to Johnnie's complaint, the space she acquired for Nathaniel is next to the space where her father is buried. At Johnnie's request, SCI disinterred the deceased who was buried in the space Johnnie had acquired and buried him elsewhere so that Nathaniel could be buried in the space; Nathaniel was subsequently buried there.

In September 2016, Johnnie sued SCI and the other defendants, alleging breach of contract and several other claims. Johnnie alleged that the corporate defendants were either owners, subsidiaries, or affiliates of each other and that the noncorporate defendants were employees at Elmwood Cemetery.

The defendants moved to compel arbitration, citing the arbitration provision in the contract. Johnnie argued that the arbitration provision is unenforceable because, she said, the contract does not evidence a transaction affecting interstate commerce and the arbitration provision is unconscionable. The circuit court denied the motion to compel, concluding that the arbitration provision is unconscionable. The circuit court based its denial of the motion to compel on the ground of unconscionability alone. The defendants appealed to this Court under Rule 4(d), Ala. R. App. P., which allows an appeal from an order granting or denying a motion to compel arbitration.

" ‘This Court's review of an order granting or denying a motion to compel arbitration is de novo. ...’

" United Wisconsin Life Ins. Co. v. Tankersley, 880 So.2d 385, 389 (Ala. 2003). Furthermore:

" ‘ "A motion to compel arbitration is analogous to a motion for 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 that contract evidences a transaction affecting interstate commerce. Id.‘After 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.’ "

" ‘ Fleetwood Enters., Inc. v. Bruno, 784 So.2d 277, 280 (Ala. 2000) (quoting Jim Burke Auto., Inc. v. Beavers, 674 So.2d 1260, 1265 n. 1 (Ala. 1995) (emphasis omitted) ).’

" Vann v. First Cmty. Credit Corp., 834 So.2d 751, 753 (Ala. 2002)."

Cartwright v. Maitland, 30 So.3d 405, 408–09 (Ala. 2009).

The defendants argue that the arbitration provision should be enforced because, they say, they met their two-part burden in moving to compel arbitration and the circuit court erred in concluding that the arbitration provision is unconscionable. Regarding the first part of the defendants' burden, there seems to be no dispute that a contract exists that calls for arbitration. However, before the circuit court, the two sides disputed whether that contract evidences a transaction that affects interstate commerce. The circuit court pretermitted consideration of this issue and instead focused on the unconscionability issue, which we will discuss below. We first address the defendants' argument that they met their burden of establishing that the contract evidences a transaction affecting interstate commerce.

The Federal Arbitration Act, 9 U.S.C. § 1 et seq. ("the FAA"), establishes a strong federal policy in favor of arbitration. Ocwen Loan Servicing, LLC v. Washington, 939 So.2d 6, 14 (Ala. 2006) (citing Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24–25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983) ). The FAA provides that written agreements to arbitrate disputes arising out of transactions involving interstate commerce "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. The United States Supreme Court has read the FAA broadly to "provide[ ] for ‘the enforcement of arbitration agreements within the full reach of the Commerce Clause.’ " Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 56, 123 S.Ct. 2037, 156 L.Ed.2d 46 (2003) (quoting Perry v. Thomas, 482 U.S. 483, 490, 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987) ). Congress's power to regulate interstate commerce is quite broad. "It is well established that Congress can regulate three broad categories of activity pursuant to its commerce power: (1) the use of the channels of interstate commerce; (2) the instrumentalities of interstate commerce or persons or things in interstate commerce; and (3) those general activities having a substantial effect on interstate commerce." Wolff Motor Co. v. White, 869 So.2d 1129, 1132 (Ala. 2003). " ‘ "As the decisions of the United States Supreme Court have made clear, there are few, if any, economic or commercial transactions that are beyond the reach of Congress's commerce power." ’ " SouthTrust Bank v. Bowen, 959 So.2d 624, 629 (Ala. 2006) (quoting Allied Williams Cos. v. Davis, 901 So.2d 696, 699 (Ala. 2004), quoting in turn Service Corp. Int'l v. Fulmer, 883 So.2d 621, 628 (Ala. 2003) ).

In support of their argument that the transaction here affects interstate commerce, the defendants submitted the affidavit testimony of Pesseackey, an SCI employee and the general manager of Elmwood Cemetery. Pesseackey, one of the defendants, testified that Service Corporation International, a Texas corporation and also a defendant, is the parent corporation of SCI. She further testified that Johnnie's contract was prepared and approved at the parent company's corporate headquarters in Houston, Texas. Pesseackey stated that Johnnie received a certificate of interment rights that was printed on a form Elmwood Cemetery received from the corporate headquarters in Houston. She further stated that the form contains a stamped number that corporate headquarters uses to track the number of certificates delivered to a particular location, including Elmwood Cemetery. According to Pesseackey, "Elmwood Cemetery routinely calls, emails and sends faxes to its Texas affiliates in order to carry out" contracts like Johnnie's. She further testified that the installment payments Johnnie made under the contract were placed in an account that is completely maintained, monitored, and controlled by the corporate headquarters in Houston. Johnnie presented no evidence in opposition to Pesseackey's testimony. Pesseackey's undisputed testimony is more than sufficient to establish that the contract evidences a transaction affecting interstate commerce. Accordingly, the defendants met their burden in moving to compel arbitration.

Once the defendants met their burden, the burden shifted to Johnnie to establish that the arbitration provision is invalid or that it does not apply to the dispute in question. Johnnie argued to the circuit court, as she does to this Court, that the arbitration provision is unconscionable and thus invalid. The circuit court agreed that the arbitration provision is unconscionable and, therefore, refused to enforce it.

"General contract defenses, such as fraud, duress, or unconscionability, may be applied to invalidate an arbitration agreement without contravening the FAA." Leeman v. Cook's Pest Control, Inc., 902 So.2d 641, 644 (Ala. 2004) (citing Allied–Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 281, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995) ). "Unconscionability is an affirmative defense, Green Tree Fin. Corp. v. Wampler, 749 So.2d 409, 415 (Ala. 1999), and the party asserting the defense bears the burden of proof. Ex parte Napier, 723 So.2d 49, 52–53 (Ala. 1998)." Fleetwood Enters., Inc. v. Bruno, 784 So.2d 277, 281 (Ala. 2000). "To avoid an arbitration provision on the ground of unconscionability, the party objecting to arbitration must show both procedural and substantive unconscionability." Blue Cross Blue Shield of Alabama v. Rigas, 923 So.2d 1077, 1087 (Ala. 2005) (emphasis added). In Rigas, this Court explained:

"Substantive unconscionability

" ‘ "relates to the substantive contract terms themselves and whether those terms are unreasonably favorable to the more powerful party, such as terms that impair the integrity of the

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