Allied-Bruce Terminix Cos. v. Dobson
In Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265 (1995), an Alabama homeowner hired a local franchise of Terminix International Company, Allied-Bruce, to inspect his home for termites before selling it, and Terminix incorrectly reported that there was no termite problem.
The new homeowners immediately brought suit against the homeowner, Allied-Bruce, and Terminix; Terminix argued the claims should be arbitrated pursuant to a clause in the written contract.
The Supreme Court of Alabama found the arbitration clause was inapplicable under state law.
On appeal, the United States Supreme Court found the transaction involved interstate commerce because of the multistate nature of Terminix coupled with Allied-Bruce's procurement of treatment materials outside Alabama. Allied-Bruce, 513 U.S. at 282.
The high court reiterated that theme: "States may regulate contracts, including arbitration clauses, under general contract law principles and they may invalidate an arbitration clause 'upon such grounds as exist at law or in equity for the revocation of any contract.' What States may not do is decide that a contract is fair enough to enforce all its basic terms (price, service, credit), but not fair enough to enforce its arbitration clause.
The FAA makes any such state policy unlawful, for that kind of policy would place arbitration clauses on an unequal 'footing,' directly contrary to the FAA's language and Congress' intent." ( Allied, supra, 513 U.S. at p. 281.)
The Court set out the proper test to be applied in cases involving the application of the FAA. In construing the scope of the FAA, the Court addressed the question what commercial activity would be included within the coverage of the FAA's provisions, and it concluded that the wording used by Congress "signals an intent to exercise Congress' commerce power to the full." 513 U.S. at 277.
The United States Supreme Court held that the Federal Arbitration Act ("FAA") governs all contracts falling within Congress's power to regulate under the Commerce Clause. We have since recognized that an arbitration provision will be enforced in Alabama to the extent that enforcement is required by federal law. See, Allied-Bruce Terminix Cos. v. Dobson, 684 So. 2d 102 (Ala. 1995).