The Alabama Supreme Court has followed the Eighth Circuit’s lead, concluding that when the parties agree to arbitrate pursuant to the AAA Rules, they have clearly and unmistakably authorized the arbitrator to determine who is bound by that arbitration agreement. Federal Ins. Co. v. Reedstrom, __ So. 3d __, 2015 WL 9264282 (Ala. Dec. 18, 2015).
The dispute in Reedstrom centered on whether an executive liability insurance policy covered a judgment against a former executive for misconduct. The executive sued the insurance company for breach of contract, and the company moved to compel arbitration. The trial court denied the motion without any rationale.
The Alabama Supreme Court reversed. On appeal, two key issues were analyzed: whether the insurance company could compel arbitration with the executive, even though he did not sign the insurance policy (his former employer did); and whether the insurance company had waived its right to arbitrate. The court noted that the default rule is that courts generally decide both those issues, unless the arbitration provision “clearly and unmistakably” delegates them to the arbitrator. And in this case, the majority found the arbitration provision did exactly that by agreeing to arbitrate pursuant to the current AAA commercial rules, which allow the arbitrator to rule on his or her own jurisdiction.
Three justices dissented from the opinion, generally concluding that incorporating the AAA rules is not enough, by itself, to constitute clear and unmistakable evidence that parties intend to submit arbitrability to an arbitrator.