In this week’s Alabama Law Weekly Update, we present for your consideration two decisions released by the Alabama Court of Civil Appeals. In the first, the Court reviewed a dispute over the purchase price offered to a holder of a right of first refusal in connection with a transaction involving the subject asset as well as other assets not subject to the right. In the second, the Court addressed the extraterritorial application of the Alabama Workers’ Compensation Act.

P&N Kissimmee I, LLC, and Kent Lee Halloway v. Regions Bank, No. 2130405 (Ala. Civ. App. Nov. 7, 2014) (holding that reliance solely on allocation of purchase price in purchase agreement was not founded)

P&N Kissimmee I, LLC (“P&N”) and Regions Bank (“Regions”) entered into a loan agreement that provided P&N a limited right of first refusal (“ROFR”) to purchase the loan (“Loan”). Pursuant to the ROFR, Regions agreed to extend to a third party of P&N’s choosing the right to purchase the loan on the same terms Unfoundthat Regions deemed acceptable. About a year after entering into this agreement, LSREF2 Baron, LLC (“Baron”) offered to purchase a pool of assets owned by Regions, including the Loan. The offer triggered the ROFR and P&N designated Kent Lee Halloway (“Halloway”) as the third-party purchaser. Regions offered the loan to Halloway for about $8.25 million. Halloway requested additional information about the offer from Baron, which Regions would not provide. As such, Halloway declined to purchase the Loan. Subsequently, Regions sold the Loan (among other assets) to Baron. While the sales agreement allotted about $8.25 of the total purchase price to the Loan, in their lawsuit for breach of contract, misrepresentation and suppression of a material fact, Halloway and P&N alleged that Baron actually purchased the Loan for between $5.7 and $5.9 million. The trial court, relying on the allocation in the purchase agreement between Regions and Baron granted Regions’ motion for summary judgment.

On appeal, the Alabama Court of Civil Appeals briefly discussed the rights and obligations of parties to a right of first refusal. The Court noted that when a third party offers to purchase property that is subject to a right of first refusal as part of a larger transaction involving other property, the third party may allocate a bona fide price to the burdened property, establishing the amount that must be offered to the holder of the right of first refusal. The Court of Civil Appeals rejected the trial court’s total reliance on the purchase agreement between Regions and Baron as evidence of a bona fide price. P&N and Halloway presented evidence that Baron, under an underwriting model, valued the Loan at and paid approximately $5.7 to Regions. In addition, an internal document created by Regions indicated Regions applied only $6.54 million to the principal payment of the Loan. Based on this evidence, the Court of Civil Appeals reversed the trial court’s entry of summary judgment, finding that a dispute of material fact existed as to the bona fide purchase price for the Loan.

Ex parte Dalton Logistics, No. 2130892 (Ala. Civ. App. Nov. 7, 2014) (holding that trial court did not have jurisdiction over employees claim)

Ernest Harold Presley (“the employee”) contacted Dalton Logistics (“the employer”) about an open position with the employer in North Dakota. Necessary paperwork was sent to the employee’s Alabama residence via facsimile, which the employee completed and sent back to the secretary (in Texas) via facsimile. The employer then arranged for the employee to travel between Alabama and North Dakota throughout his employment, which consisted of 20 days working (in North Dakota) and 10 days off (in Alabama). While in North Dakota, the employee sustained an injury when his back struck a mud pump. The employee sought an award of benefits under the Alabama Workers’ Compensation Act, Ala. Code 1975, § 25-5-1 et seq. (“the Act”). The trial court rejected the employer’s assertion that the Act did not provide a legal remedy to the employee, and the employer filed a petition for a writ of mandamus directing the trial court to grant its motion for summary judgment. The sole issue raised by the petition was whether the Act applies to the employee’s claimed workplace injury in North Dakota. According to Alabama law, though an employee’s injury may have occurred outside Alabama, that fact alone will not disqualify him/her from benefits under the Act.

Under Alabama law, if an employee, while working outside of Alabama, suffers an injury that would have entitled him/her to benefits under the Act if sustained inside Alabama, that employee will be entitled to benefits under the Act provided that one of several alternative conditions has been fulfilled. Thus, the benefits under the Act would be payable if, at the time of injury, (1) the employee’s employment was principally localized in Alabama, or (2) the employee was working under an employment contract entered into in Alabama as to three types of employment: (a) employment principally localized in Alabama, (b) employment principally localized in another state but provided by an employer that was not subject to that state’s workers’ compensation law, and (c) employment outside the United States. The court then turned to the issue of where employment is “principally located.”

According to the Court of Civil Appeals, employment is “principally located” in a particular state when the employer has a place of business in the state and the employee regularly works at or from such place of business or if the employee is domiciled and spends a substantial part of his/her working time in the service of the employer in that state. Because the employee’s work was “principally localized” in North Dakota, the Court of Civil Appeals was required to determine whether the Act still had extraterritorial application under the final alternative condition: that provision applying to employment undertaken pursuant to a contract entered into in Alabama for work “principally localized” in another state in which the employer is not subject to the state’s workers’ compensation law. Assuming that the contract was formed in Alabama, the Court of Civil Appeals concluded that the employee had not shown the North Dakota’s workers’ compensation laws did not apply to the employer to support the trial court’s conclusion that it had jurisdiction under the Act to hear the case. As such, the Court granted the employer’s petition for writ of mandamus directing the trial court to enter summary judgment in favor of the employer.