Ex parte Greenstreet, Inc.

Summary

The Supreme Court of Alabama considered a petition for a writ of mandamus challenging a trial court order allowing discovery concerning the validity and enforceability of an arbitration provision. The court held that an opposing party seeking such discovery must provide a factually based predicate, while recognizing that discovery may be appropriate when necessary evidence is beyond that party’s knowledge. The court vacated the discovery order, directed the trial court to reconsider the motion to compel arbitration, and granted the petition in part and denied it in part.

Holdings

1. Once the movant makes a prima facie showing that an agreement to arbitrate exists in a contract involving a transaction substantially affecting interstate commerce, the burden of persuasion shifts to the party opposing arbitration. If the opposing party seeks discovery concerning matters that could invalidate the arbitration agreement, it must first present a factually based predicate for that discovery; at minimum, it must provide an affidavit describing known circumstances relevant to its claimed defenses.
2. The trial court clearly abused its discretion by allowing Hyde to conduct discovery concerning the validity and enforceability of the arbitration provision without requiring any factual specificity supporting the need for discovery.
3. Greenstreet was not entitled at that juncture to a writ directing the trial court to compel arbitration because the trial court had not yet ruled on the motion to compel arbitration.

Questions Presented

1. Whether the Walker Circuit Court clearly abused its discretion by allowing Hyde to conduct discovery concerning the validity and enforceability of the arbitration provision without first requiring a factual showing supporting the need for that discovery.
2. Whether Greenstreet was entitled to a writ directing the trial court to compel arbitration immediately.
3. What evidentiary showing a party opposing a properly supported motion to compel arbitration must make before obtaining discovery concerning defenses that could invalidate the arbitration agreement.

Disposition

other