LOCATION: Chicago District Court
DOCKET NO.: 93-1001
DECIDED BY: Rehnquist Court (1986-2005)
LOWER COURT: Supreme Court of Alabama
CITATION: 513 US 265 (1995)
ARGUED: Oct 04, 1994
DECIDED: Jan 18, 1995
Allan R. Chason - Argued the cause for the respondents
H. Bartow Farr, III - Argued the cause for the petitioners
Facts of the case
In 1987, Steven Gwin, a homeowner in Birmingham, Alabama, bought a lifetime "Termite Protection Plan" from a local office of Allied-Bruce Terminix Company. The termite prevention contract specified that any controversy would be settled exclusively by arbitration. After the Gwins sold their house and transferred their plan to the Dobsons, the Dobsons initiated suit against the Gwins, Allied-Bruce, and Terminix following a termite infestation. Allied- Bruce and Terminix asked for, but were denied, a stay to allow for arbitration under the contract and the Federal Arbitration Act. In affirming, the Alabama Supreme Court upheld the denial of the stay on the basis of a state statute making written, predispute arbitration agreements invalid and unenforceable. The court also found that the Federal Arbitration Act did not apply because the parties entering the contract contemplated transactions that were primarily local and not substantially interstate.
Should the Federal Arbitration Act, making an arbitration provision enforceable in contracts "evidencing a transaction involving commerce," be applied broadly?
Media for Allied-Bruce Terminix Co. v. DobsonAudio Transcription for Oral Argument - October 04, 1994 in Allied-Bruce Terminix Co. v. Dobson
Audio Transcription for Opinion Announcement - January 18, 1995 in Allied-Bruce Terminix Co. v. Dobson
William H. Rehnquist:
The opinion of the Court in number 93-1001 Allied-Bruce Terminix Companies versus Dobson will be announcement by Justice Breyer.
Stephen G. Breyer:
This case involves a local termite inspection contract made in Alabama.
The contract had a clause, requiring arbitration of disputes.
The respondent bought the house they found it swarming with termites.
So, they brought a law suit in State Court, and The Terminix asked for arbitration, but the Alabama Courts wouldn't send the case to arbitration because under Alabama law, arbitration clauses like this are invalid.
In section two of the Federal Arbitration Act, however, makes them valid.
So, the question was, does the federal law govern or the state law govern.
There were three parts to that question.
First part, the people who said the state law governs says that this court should overrule a case called Southland which held really that Federal Arbitration Act governs in state courts and these people said no, that shouldn't be so, the state law should govern in the state courts.
This court refuses to overrule Southland, and therefore, the Federal Arbitration Act is applicable in state courts.
The second question concerned the meaning of a word in that act, involving commerce, and if involving commerce has a broad interpretation, then this contract may fall within it.
We felt that it does have a broad interpretation, and the third question was whether or not the other words called a contract evidencing, like it has to evidence commerce and does that have a broad or a narrow interpretation, and basically we held that these words evidencing commerce have a broad interpretation, and basically what was an issue and functionally is some people argued that the broad interpretations might hurt consumers because a person who was a consumer who had a very large damage claim would not be able to get into the court.
They'd have to go to arbitration and we thought that probably the purpose of this statute thing to help people like consumers.
More often a broad interpretation would help them particularly if they had small claims where they want to go to arbitration rather than be in the state court.
So, on balance we felt that the broader interpretation of the words involving commerce was more consistent with the basic purposes of the Federal Arbitration Act and we held that, therefore, it governs.
Justice O'Conner thought not to dissent, but a concurring opinion and as well as joining the opinion.
There is that separate opinion and also Justice Scalia filed a dissent and Justice Thomas joined by Justice Scalia filed a dissent.