Court: Supreme Court of Alabama; August 29, 1997; Alabama; State Supreme Court
Melvin Smith, Louise Pugh, Willie B. Johnson, and Joseph Collins petitioned for a writ of mandamus to vacate a circuit court order requiring arbitration of their claims against All Star Mobile Homes, Inc. The court granted the petition. The facts reveal that on July 30, 1993, the plaintiffs visited an All Star sales lot where they negotiated to purchase a mobile home, allegedly reserving it with a $300 down payment made by Johnson. Although a purchase agreement containing an arbitration clause was prepared, the plaintiffs did not sign it. They were later informed on August 15, 1993, that their credit application had been approved, prompting an additional down payment of $7,550 on August 16, despite their credit not being approved at that time. In September 1993, the mobile home they had reserved was sold to another customer without notification to the plaintiffs until October 16, 1993. They then selected a different model and were promised a refund of $2,850 from their earlier payment. However, after signing a new purchase agreement, which included an arbitration clause, All Star failed to deliver the mobile home and subsequently informed them that their credit application was rejected, refunding only part of their down payment. The plaintiffs filed suit against All Star on January 24, 1994, alleging fraud and conversion. After various discovery motions and depositions, All Star moved to compel arbitration on November 14, 1994, which the trial court granted. The plaintiffs contended that All Star had waived its right to compel arbitration. A writ of mandamus is recognized as the appropriate method to challenge such an order.
A party can waive its right to arbitration if it significantly engages in the litigation process, causing prejudice to the opposing party. The determination of waiver is case-specific and lacks a rigid rule. In this case, the plaintiffs contend that All Star delayed nearly 10 months before requesting arbitration, during which it actively engaged in discovery and depositions, including its own extensive deposition of Melvin Smith. Although All Star claims this deposition was solely to verify Smith's signature, the lengthy examination primarily supported Smith's claims.
All Star referenced previous cases where defendants' delays in seeking arbitration were not deemed waivers. For instance, in *Ex parte Merrill Lynch*, a delay over a year was acceptable due to concurrent litigation in federal court. In *Ex parte McKinney*, a two-year delay was justified because the claims in question were not arbitrable, and discovery was necessary for the plaintiff’s claims. However, All Star did not present evidence of similar justifying circumstances. Unlike the cases cited, there were no ongoing litigations in other forums or non-arbitrable claims. All Star appeared aware of its arbitration rights but chose to delay for its convenience while the plaintiffs incurred costs due to the ongoing litigation. Even after depositions, All Star postponed its motion for arbitration for an additional three months, exacerbating the plaintiffs' expenses.
All Star's delay in moving to compel arbitration resulted in the plaintiffs incurring additional legal expenses exceeding $1,400, which would not have been necessary had All Star acted promptly. This delay also extended the time required for the plaintiffs to oppose arbitration, unnecessarily prolonging their pursuit of relief. The court noted that such delays could discourage other consumers from exercising their rights against arbitration. Ultimately, the court found that All Star’s delay constituted a waiver of its right to arbitrate. Consequently, the petition for a writ of mandamus was granted, directing the circuit court to vacate its order compelling arbitration. The decision included a dissent from Chief Justice Hooper and Justices Maddox, Houston, and See.
