Rare Claim Falls Outside Arbitration Agreement, Creates Piecemeal Litigation
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Because of the strong federal policy favoring arbitration, and cases providing that any doubt about the scope of an arbitration agreement must be resolved in favor of arbitration, it is uncommon to find a decision holding that the parties’ claims are not within the scope of their arbitration agreement. But, the Supreme Court of Alabama held exactly that in Porter v. Williamson, __ So.3d__, 2015 WL 403081 (Ala. Jan. 30, 2015).
Porter involves a family drama in which two brothers owned investment companies, hired their nephew to work for them, and then made him a shareholder. Twenty years later, they terminated the nephew and the litigation ensued. The nephew claimed: 1) specific performance of provisions of the shareholders agreement, requiring his uncles to buy his shares; 2) alternatively, rescission of the shareholders agreement; 3) misrepresentation; and 4) conversion. The shareholder agreement’s arbitration clause said “Except for items of specific performance referred to above, any controversy or claim arising out of, resulting from or relating to this agreement shall be settled by arbitration in Birmingham, Alabama, in accordance with the Commercial Arbitration Rules of the [AAA]….” The previous paragraph, entitled “specific performance,” allowed controversies “concerning the purchase or sale of” the shares of common stock to be heard in “a court of equity.”
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