In this week’s Alabama Law Weekly Update, we report on two cases. In the first case summarized below, the Alabama Supreme Court issued an opinion concerning the ability of parties to a contract to require an arbitrator to determine the enforceability of an arbitration agreement to specific issues or disputes that may arise between the parties. In the second case, the Alabama Court of Civil Appeals issued an opinion concerning when the Alabama Workers’ Compensation Act applies to employees’ injuries that occur outside the State of Alabama.

Regions Bank v. Neighbors, No. 1130219 (Ala. November 14, 2014) (holding that arbitrator, and not court, charged with determining scope of arbitration agreement).

The plaintiff borrower executed a dispute resolution agreement as part of a loan transaction which provided for the resolution of a broad range of disputes between the plaintiff and the defendant lender through arbitration. The dispute resolution agreement further provided that even the scope of the agreement (i.e. whether any specific issues or disputes between the parties were included in the dispute resolution agreement) was to be determined by an arbitrator. A number of years later, the plaintiff signed a loan modification agreement with the lender, and this loan modification agreement also contained an arbitration provision.

In 2013, the plaintiff sued the lender in state circuit court, alleging that the lender had negligently and wantonly allowed an imposter to forge the plaintiff’s signature on the loan modification agreement. Relying on the dispute resolution agreement, the defendant lender moved to compel arbitration of the plaintiff’s claims. Following a hearing, the trial court denied the lender’s motion to compel without offering any explanation.

On appeal, although there was no dispute regarding the existence of the dispute resolution agreement, the parties disagreed about whether the plaintiff’s claims were covered by the agreement. The lender argued that the scope of the dispute resolution agreement encompassed the claims, and also that an arbitrator should make this determination under the terms of the agreement. The plaintiff argued that because the dispute involved an alleged forgery, it could not be subject to the provisions of the dispute resolution agreement.

The Alabama Supreme Court noted that although a court decides issues of arbitrability, “unless the parties clearly and unmistakably provide otherwise”, in this case the dispute resolution agreement between the parties did in fact contain clear and unmistakable language that an arbitrator, not a court, should decide all issues of arbitrability. In reversing the trial court’s order denying the lender’s motion to compel arbitration, the Court found that an arbitrator, and not the trial court, was required to decide whether the plaintiff’s claims fell within the scope of the dispute resolution agreement.

Ex parte Lost River Oilfield Services, LLC, No. 2131069 (Ala. Civ. App. November 14, 2014) (discussing the prerequisites for the Alabama Workers’ Compensation Act to apply to an injury that occurs outside the State of Alabama).

An employee filed a claim seeking workers’ compensation benefits under the Alabama Workers’ Compensation Act in Alabama state court following a back injury he received in a work-related accident while working at the employer’s place of business in Texas. The employer filed a motion to dismiss the employee’s claim on the basis that the Alabama trial court lacked subject-matter jurisdiction.

The employee filed a response in opposition to the employer’s motion to dismiss. In his response, the employee argued that although his injury occurred in Texas, the events leading up to his hiring (learning about the job opening, sending resume, filling out a job application, conducting a phone interview, completing a drug screen, and completing a required certification) all took place while the employee was residing in Alabama. The trial court eventually held a hearing on the employer’s motion to dismiss and subsequently issued an order denying the motion. The employer filed a petition for a writ of mandamus directing the trial court to dismiss the worker’s compensation claim on the basis of lack of subject-matter jurisdiction.

At issue before the Alabama Court of Civil Appeals was whether the Alabama Workers’ Compensation Act applied to the employee’s work related injury notwithstanding the fact it occurred outside in Texas and not in Alabama. Under the Act, there are three situations in which the Act can be determined to apply to an employee who has an out-of-state injury: (1) even though the injury occurred outside Alabama, the employee’s employment was principally localized in Alabama; (2) the employee was working under a contract made in Alabama in employment not principally localized in any state; or (3) the employee was working under a contract made in Alabama in employment principally localized in another state whose workers’ compensation law was not applicable to his employer.

Because the employer does not engage in business in Alabama, and because the employee did not allege that the workers’ compensation laws of Texas do not apply to his injury, the only issue before the Alabama Court of Civil Appeals was whether the Alabama Workers’ Compensation Act applied to the employee because he was working under a contract made in Alabama in employment not principally localized in any state.

The employee was regularly working in Texas at the time of his injury. He lived in a trailer provided by the employer at that work site, his work days began and ended at the site, and the injury itself occurred on the site. Aside from arguing that the events leading up to the employee’s entering into an employment contract with the employer occurred while he was in Alabama, the employee failed to offer any evidence to indicate that his employment was not localized in Texas at the time of his injury.

The Alabama Court of Civil Appeals granted the employer’s petition and dismissed the employee’s claim for workers’ compensation benefits. In so doing, the Court held that the employee’s employment at the time of the injury was principally localized in Texas and therefore, the Alabama Workers’ Compensation Act did not apply to his workers’ compensation claim and the trial court lacked subject-matter jurisdiction to hear his claim.