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Electronic technicians can't compel church to arbitrate dispute over payments

A church (the plaintiff) and a company providing electronic repair services (the defendant) had a contract for the defendant to replace the church's damaged organ. The plaintiff sued the defendant because the plaintiff overpaid the defendant and the defendant refused to refund the overpayment. The plaintiff also sued on the basis that the defendant had merely repaired and refinished the organ, not replaced it. The defendant filed a motion to stay the lawsuit pending arbitration and a motion to compel arbitration.

At a hearing on the defendant's motion, the church maintained that the documents purporting to set out the arbitration agreement were forged. At the end of the hearing, the Etowah County Circuit Court allowed the parties 14 days to file briefs in support of their positions. The plaintiff's brief indicated the following:

  • The purported arbitration agreement was signed on the same day that the defendant had submitted a proposal to the church.
  • The church leadership had not approved the proposal until 2 days later.
  • There was evidence of forgery, in that handwritten sections of two documents were identical and that the signatures on the two documents were identical, even appearing at exactly the same place on the signature lines.
  • Two documents executed nearly 16 days apart could not have so many features identical and that one or both documents had been altered or copied from some other document.

In addition, the church's administrative assistant denied signing the arbitration agreement on behalf of the church, although he indicated that he may have signed such an agreement in the past in pursuing his individual business with the defendant.

The circuit court denied the defendant's motion to compel arbitration. The defendant appealed this decision to the Alabama Court of Civil Appeals. In its decision, the court explained the general law governing such circumstances. Once a party seeking a motion to compel arbitration establishes, in a preliminary fashion (prima facie case), the existence of a contract calling for arbitration, the party opposing arbitration can present evidence that there is no valid arbitration agreement. If the party opposing arbitration presents sufficient evidence to call into question the validity of the arbitration agreement, a court must first decide whether there is a valid arbitration agreement. (If one is a requested, a jury trial decides this issue.)

In its appeal, the defendant maintained that the circuit court should have made its decision after an evidentiary hearing. The appeals court rejected this argument because the defendant neither requested an evidentiary hearing nor objected to the circuit court's deciding the forgery issue on the basis of the briefs. Therefore, the appeals court affirmed the circuit court's decision to deny the motion to compel arbitration. See Oden Music, Inc. v. First Baptist Church of East Gadsden, decided on March 25, 2011.

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