Alabama Confirms Arbitrators’ Grant of Judgment As A Matter of Law
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Just as SCOTUS held its nose and confirmed an arbitration award it thought stunk in Sutter, the Supreme Court of Alabama has confirmed an arbitration award made after only the claimant presented evidence and grounded in a possible misunderstanding of Alabama law. Tucker v. Ernst & Young, __ So.3d__, 2014 WL 2619860 (Ala. June 13, 2014).
In Tucker, shareholders of HealthSouth Corporation (in the name of the company) asserted claims against HealthSouth’s accountants, Ernst & Young, alleging that E&Y should have discovered accounting fraud at HealthSouth. The shareholders’ case-in-chief took almost two years. They presented testimony from 14 live witnesses and 61 video witnesses over the course of 81 days, plus thousands of pages of exhibits. At least five months before the shareholders rested their case, E&Y sought and received permission to file a dispositive motion based on E&Y’s affirmative defenses at the end of the shareholders’ evidence. The panel allowed the shareholders to add any relevant evidence and witnesses they wanted to their case-in-chief to address the affirmative defenses.
After the shareholders rested, and the panel heard arguments on the motion, the panel granted E&Y’s motion, dismissing all claims. The gist of the motion was this: the fraud at HealthSouth was widespread and knowledge of it must be imputed to the company, therefore the company should not be allowed to blame others for its own misconduct. The panel cited Alabama common law (the Hinkle rule), as well as the doctrines of in pari delicto and contributory negligence to support the dismissal.
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