Fairhope Piggly Wiggly, Inc. et al v. PS 2 LED, Inc.

Filing 41

Order on non-jury trial. It is ordered that Plaintiffs' First Cause of Action seeking a Declaratory Judgment is GRANTED such that a DECLARATORY JUDGMENT is entered in favor of Plaintiffs and against Defendants that Plaintiffs are not obligated to resolve this matter in arbitration. This case is referred to the Magistrate Judge for entry of a scheduling order. Signed by Chief Judge Kristi K. DuBose on 7/5/2017. (cmj)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
FAIRHOPE PIGGLY WIGGLY-INC.,
and THOMAS EUGENE CAIN,
Plaintiffs,
v.
PS 2 LED, INC., a Texas corporation, and
PINNACLE LED SOLUTIONS, LLC,
Defendants.

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CIVIL ACTION: 17-00031-KD-N

ORDER
This matter is before the Court for a non-jury trial1 on the request for Declaratory
Judgment wherein Plaintiffs seek a declaration that they are not bound to arbitrate their dispute
with Defendants.
I.

Findings of Fact
This case concerns a dispute regarding an LED lighting project at Plaintiffs’ Fairhope

grocery store. (Doc. 22).

That dispute is secondary to the dispute over whether the parties are

contractually bound to resolve their dispute in arbitration -- the basis for Plaintiffs’ declaratory
judgment claim (First Cause of Action).

(Doc. 22 at 4 at ¶¶20-24).

In the relevant time period, 2014-1016, Thomas Eugene Cain (Cain) owned several
businesses including T. Cain Grocery, Inc., Piggly Wiggly Spanish Fort, Inc. (P.W. Spanish
Fort), Piggly Wiggly-Loxley, Inc. (P.W. Loxley), Piggly Wiggly-Fairhope, Inc. (P.W. Fairhope)
and Piggly Wiggly-Foley Inc. (P.W. Foley). The first contact Cain had with Defendant PS 2
1 Due to issues of material fact, Defendants’ motion to compel arbitration was denied and the matter was
set for non-jury trial. “If the making of the arbitration agreement or the failure, neglect, or refusal to perform the
same be in issue, the court shall proceed summarily to the trial...If no jury trial be demanded by the party alleged to
be in default...the court shall hear and determine such issue….” 9 U.S.C. § 4.

1

LED, Inc. (Pinnacle) was in relation to P.W. Fairhope.

Cain wanted to put new lights in the

P.W. Fairhope store and selected Pinnacle for the project.

Pinnacle conducted an audit of the

P.W. Fairhope store in November 2014 to assess the lighting needs and then submitted a
proposal for the installation of LED lighting to Cain on June 11, 2015.

(Def’s Tr. Ex. L).

Also during this time period, Pinnacle assisted Cain in applying for a grant from the United
States Department of Agriculture (USDA) to help fund the transition to LED lighting in the P.W.
Fairhope location, as well as other locations.
Sometime in June 2015, Cain asked that the P.W. Fairhope project be put on hold and
that Pinnacle install LED lighting in the new Spanish Fort location – the P.W. Spanish Fort.
For the P.W. Spanish Fort project, a thirteen page “Turnkey Agreement for Piggly Wiggly
Spanish Fort” (Turnkey Agreement) was signed in November 2015.

(Def’s Tr. Ex. A).

The

Agreement was executed among Pinnacle Solutions, Bay Shore Electric, and Piggly Wiggly
Spanish Fort, Inc. (“Buyer”) and is signed by Cain for Piggly Wiggly Spanish Fort, Inc.
1).

(Id. at

The Turnkey Agreement is the standard agreement Pinnacle uses for all of its projects, with

the exception of an added provision found at 2.10 concerning “additional worksites.” (Id. at 2
at ¶2.10).

Provision 2.10 provides:

2.10 Worksite or Site: “Worksite” or “Site” means the physical addresses where
Products are to be shipped and Services to be performed: 315 Spanish Fort Blvd., Spanish
Fort, Alabama 36527. Buyer may add additional Worksites by issuing an Order to
Pinnacle for Products. All such additional Orders and Worksites shall be subject to this
Agreement…..
(Id.)

The Turnkey Agreement defines Order as “such purchase order or paper or electronic

records as Buyer may send to Pinnacle for the purpose of ordering Products hereunder at a
particular Site of Buyer, including but not limited to Letters of Intent.”
2

(Id. at 1 at ¶2.5).

The

Turnkey Agreement also contains Pinnacle’s standard arbitration provision: “…[a]ny dispute,
controversy, or claim relating to this Agreement or breach thereof, shall be submitted to
arbitration….[t]his arbitration provision is intended to be construed as broadly as permitted by
law.” (Id. at 4 at ¶5.2).
At trial Bill Lane (Lane), Vice President of Business Development for Pinnacle, testified
that provision 2.10 of the Turnkey Agreement was added to make it easier for Cain to request
that LED lighting be installed in his other grocery store locations.

However, Lane did not

discuss this provision with Cain, and Lane was not aware of whether any other employee of
Pinnacle discussed this provision with Cain.

For Cain’s part, he admitted at trial that he may

not have read provision 2.10 and certainly did not pay any attention to it if he did read it.
After the P.W. Spanish Fort project was completed, on March 24, 2016, Cain signed a
one page Letter of Acceptance for LED lighting to be installed at the P.W. Fairhope.

(Def’s Tr.

Ex. B). The Letter of Acceptance was an acceptance of an offer by Pinnacle to install LED
lighting for a certain price and under certain terms. The Letter of Acceptance, which was drafted
by Pinnacle, was executed between “Pinnacle Solutions” and “Cain’s Grocery2.” (Id.) Lane
testified that the Letter of Intent was only one page because it was Pinnacle’s intent for the 2015
Turnkey Agreement to govern the installation of the LED lighting in P.W. Fairhope.
nothing in the Letter of Acceptance indicates this intent.

However,

Lane also testified that Pinnacle did

not know that for each of Cain’s grocery store locations, a separate legal entity operates each
business.
After the installation of LED lighting in P.W. Fairhope, Pinnacle invoiced P.W. Fairhope
by sending an August 17, 2016 invoice for $148,031.79 to the bank financing the P.W. Fairhope
2 Cain testified that “Cain’s Grocery” is not a legal entity.

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project.

(Def’s Tr. Ex. D). P.W. Fairhope had previously designated the bank as its agent for

the payment of invoices on this particular project.3 The invoice included a statement providing
that by accepting delivery of the products, P.W. Fairhope agreed to the terms of Pinnacle’s
Purchase Agreement. (Def’s Tr. Ex. D). The Purchase Agreement referenced in the invoice
included the same arbitration provision found in the 2015 Turnkey Agreement.
After the invoice was sent, a dispute developed about the total and final amount owed by
P.W. Fairhope.

P.W. Fairhope made a partial payment on the invoice to Pinnacle (paying

$136,231.02, leaving a balance of $11,800.77).
On November 22, 2016, Pinnacle filed an arbitration demand against P.W. Fairhope
before the American Arbitration Association (AAA) for breach of contract and unjust
enrichment.

An arbitrator was appointed and the parties were scheduled to have a preliminary

hearing conference with the arbitrator, but Plaintiffs disputed the matter is subject to arbitration
and raised an objection to the proceeding.
On December 15, 2016, Plaintiffs filed a five (5) count complaint against “Defendant
PS2 LED, Inc. d/b/a Pinnacle LED Solutions, LLC” in the Baldwin County Circuit Court,
Alabama (05-CV-2016-901424.00), seeking declaratory and equitable relief and damages for
breach of contract and fraud stemming from its performance with regard to the Fairhope Piggly
Wiggly 2016 contract. (Doc. 1-1).
II.

The case was removed to this court.

Applicable Law & Burdens of Proof
A party seeking to compel or invoke arbitration bears the initial evidentiary burden to

prove that it may enforce the agreement.

Hanover Ins. Co. v. Atlantis Drywall & Framing

3 Neither party was certain whether the invoice was also sent to the address listed on the invoice. This is
irrelevant since the evidence is clear that the bank was acting as a payment agent for P.W. Fairhope on the project.

4

LLC, 611 Fed. Appx. 585, 588-589 (11th Cir. 2015) (in Alabama, “[t]he party seeking to compel
arbitration has the burden of proving the existence of a contract calling for arbitration and
proving that that contract evidences a transaction affecting interstate commerce[]”); USHealth
Group, Inc. v. South, 636 Fed. Appx. 194, 201 (5th Cir. 2015) (“[s]ee, e.g., In re Weekley Homes,
180 S.W.3d at 131–32; Carr, 337 S.W.3d at 498–99; In re Merrill Lynch, 195 S.W.3d at 817
(noting that under Texas law, the party seeking to compel arbitration has the evidentiary burden
to prove it may enforce the agreement)[]”).

If Pinnacle satisfies that burden, the burden shifts

to Cain and P.W. Fairhope to present evidence that the arbitration agreement is not valid or is
inapplicable.

Hanover, 611 Fed. Appx. at 589 (“[a]fter a motion…has been made and

supported, the burden is on the non-movant to present evidence that the supposed arbitration
agreement is not valid or does not apply to the dispute in question. Fleetwood Enters., Inc. v.
Bruno, 784 So.2d 277, 280 (Ala. 2000) (internal alteration, citations and quotation marks
omitted)).

See also generally Campbell v. Pilot Catastrophe Servs., Inc., 2010 WL 3306935,

*2-4 (S.D. Ala. Aug. 19, 2010) (discussing arbitration burdens of proof).
As summarized by this Court in Campbell, 2010 WL 3306935 at *2-3:
“The FAA reflects the fundamental principle that arbitration is a matter of contract” and
“places arbitration agreements on an equal footing with other contracts.” Rent–A–Center,
West, Inc. v. Jackson…130 S.Ct. 2772, 2776…(2010). Accordingly, in construing
arbitration agreements, courts apply state-law principles relating to ordinary contract
formation and interpretation, viewed through the lens of the federal policy favoring
arbitration. See Caley, 428 F.3d at 1368 (“in determining whether a binding agreement
arose between the parties, courts apply the contract law of the particular state that
governs the formation of contracts,” taking into account the federal policy favoring
arbitration).
Under Alabama law, “[a]rbitration provisions are to be treated like any other contractual
provision.” ….
Additionally, this Court exercises diversity-of-citizenship jurisdiction over this case such
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that the choice of law principles of Alabama, the forum state, apply.

Klaxon Co. v. Stentor

Electric Mfg. Co., 313 U.S. 487, 496 (1941); Fioretti v. Mass. Gen. Life Ins. Co., 53 F.3d 1228,
1235 (11th Cir. 1995).

Alabama applies the law of the state where the contract was formed (lex

loci contractus), unless a provision in a contract specifies the governing law. Cherokee Ins. Co.
v. Sanches, 975 So.2d 287, 292 (Ala. 2007).
governed by the laws of the State of Texas.

The contracts Pinnacle seeks to enforce are

(Def’s Tr. Ex. A at ¶10.1; Def’s Tr. Ex. E at ¶10.1).

Plaintiffs assert that the laws of the State of Alabama apply however, because they are not parties
to the 2015 Agreement for the P.W. Spanish Fort and never agreed to Pinnacle’s Purchase
Agreement.

The Court need not decide as it appears that there is no conflict between these

states’ laws in the area of contract formation and construction.
III.

Conclusions of Law
There is no dispute that the 2015 Agreement for P.W. Spanish Fort contains an arbitration

provision and/or that interstate commerce is involved.

The dispute is whether the P.W.

Fairhope project is an “additional worksite” under the P.W. Spanish Fort Agreement such that its
arbitration provision applies to P.W. Fairhope dispute.
Pinnacle contends that the 2015 Turnkey Agreement is applicable to the P.W. Fairhope
project because the Turnkey Agreement clearly contemplated “additional worksites” via
“additional Orders”, i.e., the Letter of Acceptance.

Per Pinnacle, because P.W. Fairhope is an

“additional worksite” stemming from the Turnkey Agreement, it is subject to the Turnkey
Agreement including its requirement to resolve any disputes via arbitration.
It appears to have been the intent of Pinnacle that “additional worksites” (i.e., P.W.
Fairhope) be subject to the 2015 Agreement.

However, as explained in Millard Refrig. Servs.,
6

Inc. v. Darville, 2016 WL 8232237, *4 (S.D. Ala. Jan. 29, 2016):
…Under applicable law, courts must enforce unambiguous contract language as written
by giving effect to the clear, plain meaning of the contract terms and not rewriting the
agreement. See, e.g., City of Gadsden v. Boman, 143 So.3d 695, 704 (Ala. 2013) (“Where
there is no indication that the terms of the contract are used in a special or technical
sense, they will be given their ordinary, plain, and natural meaning. If the court
determines that the terms are unambiguous (susceptible of only one reasonable meaning),
then the court will presume that the parties intended what they stated and will enforce the
contract as written.”) (citations omitted)….
Thus, the intent of the parties only becomes relevant when a contract is ambiguous.4
The 2015 Agreement provides that the “Buyer” may add “additional worksites.” The
“Buyer” is defined as “Piggly Wiggly Spanish Fort, Inc.” P.W. Fairhope is not the “Buyer” and
it is not a party to, or signatory of, the Agreement.

This is not ambiguous.

As such, neither

the intent of Pinnacle to bind P.W. Fairhope, nor the fact that Pinnacle assumed that its dealings
with just one entity (P.W. Spanish Fort) covered or would cover any and all such grocery store
lighting projects (such as P.W. Fairhope) is relevant. 5 Groover v. Michelin N.A., Inc., 90
F.Supp.2d 1236, 1246 (M.D. Ala. 2000) (“If the court determines that the language of the
contract is not ambiguous then parole evidence is not admissible to show the understanding of
4 See, e.g., Branch Banking and Trust Co. v. Maclay Const., Inc., 2016 WL 1118455, *8 (S.D. Ala. Mar.
22, 2016) (citing Peppertree Apts. LTD v Peppertree Apts., 631 So.2d 873, 878 (Ala. 1993) (providing that “[t]he
intention of the parties controls…and that intention is to be derived from the provisions of the contract, if the
language is plain and unambiguous[]”); Outokumpu Stainless, LLC v. Siemens Indus., Inc., 2015 WL 6966150, *6
(S.D. Ala. Oct. 20, 2015) (“traditional contract-interpretation principles call for construing a contract by looking to
the intent of the parties as derived from the objective meaning of the words of the contract….“[e]xtrinsic evidence of
the parties' subjective understanding is not consulted unless the contract is ambiguous[]”); WM Mobile Bay
Environ. Ctr., Inc. v. City of Mobile Solid Waste Auth., 2014 WL 7336095, *5 (S.D. Ala. Dec. 22, 2014) (in
Alabama “‘the circumstances surrounding the contract are considered only where the terms are ambiguous’ and the
Court need ‘not consider evidence of the parties' intentions or course of dealing’ unless there is an ambiguity…
[w]hether a contract is ambiguous is a question of law for the trial court to determine[]”); Alabama Title Loans, Inc.
v. White, 80 So.3d 887, 893 (Ala. 2011) (“Where contract terms are unambiguous, we do not look beyond the plain
language of the contract to second-guess the intentions of the parties; nor will we speculate about what may have
been the subjective expectations of the parties.”) (citations omitted); Plains Exploration & Prod. Co. v. Torch
Energy Advisors Inc., 473 S.W.3d 296, 305 (Tex. 2015) (a contract is ambiguous when it is “subject to two or more
reasonable interpretations,” which creates “a fact issue regarding the parties' intent).
5 There was no evidence presented at trial that Cain mislead Pinnacle as to the entities involved.

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either party as to the meaning of the document. Insurance Concepts, Inc. v. Western Life Ins. Co.,
639 F.2d 1108, 1110 (5th Cir. 1981)[]”); Anderson v. McAllister Towing and Transp. Co., Inc.,
17 F.Supp.2d 1280, 1288 (S.D. Ala. 1998) (“[p]arties to a contract ‘are entitled to have
their...contracts enforced as written…and the fact that different parties contend for different
constructions does not mean that the disputed language is ambiguous.’ Gregory v. Western World
Ins. Co., 481 So.2d 878, 881 (Ala.1985) (citation omitted). As these provisions are not in
conflict, and as such are not ambiguous, no further analysis is necessary[]”); GFT Capital Corp.
v. Nelson, 2001 WL 946815, *1 (Tex. App.-Dallas Aug. 22, 2001) (“[a]ll of GFT's contentions
in support of this argument are based upon GFT's own testimony about its subjective
understanding of the contract terms and its intent in executing the contract. Such evidence cannot
create an ambiguity in a contract which is otherwise unambiguous[]”).
The Letter of Acceptance for the P.W. Fairhope project is signed by Cain, but on behalf
of “Cain’s Grocery” However, since signatory “Cain’s Grocery” is not an operating/existing
entity, an ambiguity exists.

From the evidence presented at trial, a reasonable conclusion is that

“Piggly Wiggly Fairhope-Inc.” and/or T. Cain Grocery, Inc. were/was intended to be a party to
the Letter of Acceptance.

However, no reasonable interpretation of the intent of the parties

would allow for the conclusion that “Piggly Wiggly Spanish Fort, Inc.” is a party to the Letter of
Acceptance.

Thus, it cannot be said that the “Buyer” – “Piggly Wiggly Spanish Fort, Inc.” --

designated P.W. Fairhope as an “additional worksite,” which would in turn make the P.W.
Fairhope project subject to the 2015 Turnkey Agreement and its arbitration provision.
The Court is satisfied by the evidence at trial that a contract was formed between
Pinnacle and P.W. Fairhope for the P.W. Fairhope project via the March 24, 2016 Letter of
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Acceptance.

“The elements of a valid contract include an offer and acceptance, consideration,

and mutual assent or a meeting of the minds as to the terms essential to the formation of the
contract. Ex parte Grant, 711 So. 2d 464, 464 (Ala. 1997) (quoting Strength v. Ala. Dep't of Fin.,
Div. of Risk Mgmt., 622 So.2d 1283, 1289 (Ala. 1993)).” Univalor Trust, SA v. Columbia
Petroleum, LLC, 2017 WL 2303999, *9 (S.D. Ala. May 25, 2017). See also e.g., Innova Hosp.
San Antonio, L.P. v. Blue Cross and Blue Shield of Ga., Inc., 995 F. Supp.2d 587, 609 at note 11
(N.D. Tex. 2014) (discussing the same contract formation elements for Texas).

Thus, “any and

all terms essential to the contract must be both defined and agreed-upon.” Mims v. Bogan, 2015
WL 4605700, *2 (M.D. Ala. Jul. 30, 2015) (citing Browning v. Peyton, 918 F.2d 1516, 1521
(11th Cir. 1990)). “Assent must be manifested by something. Ordinarily, it is manifested by a
signature. See Commercial Credit Corp. v. Leggett, 744 So.2d 890, 895-96 (Ala. 1999); Premiere
Chevrolet, Inc. v. Headrick, 748 So.2d 891, 893 (Ala. 1999); Crown Pontiac, Inc. v. McCarrell,
695 So.2d 615, 618 (Ala. 1997).” Oncology Specialties P.C. v. McKesson Specialty Care
Distribution Corp., 2017 WL 2265891, *4 (N.D. Ala. May 24, 2017).
Pinnacle offered to perform the P.W. Fairhope lighting project, Cain accepted Pinnacle’s
offer on behalf of P.W. Fairhope, and a down payment of $70,134.48 was paid as consideration,
as evidenced on the face of the Acceptance.

(Def’s Tr. Ex. B). The Letter of Acceptance

contains no arbitration provision and makes no reference to, or incorporation of, Pinnacle’s
Purchase Agreement (which contains an arbitration provision).

At trial, Cain testified, and

Pinnacle did not dispute, that he never discussed arbitration with Pinnacle in connection with the
P.W. Fairhope project. Moreover, the Letter of Acceptance states that “[p]lease sign and accept
this as your letter of intent. This form should be signed by an authorized company official
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agreeing to the terms below authorizing work to be completed as specified…” (emphasis
added).

Thus a contract was formed with the terms agreed to included in the Letter of

Acceptance.
Nevertheless, Pinnacle contends that an invoice issued to P.W. Fairhope almost four
months later on August 17, 2016 (Def’s Tr. Ex. D) for final payment on the P.W. Fairhope
project (after substantial completion of the work and long after the lighting products had been
delivered) makes the arbitration provision part of the contract. The August 2016 Invoice
provides: “[b]y accepting delivery of the products in this Invoice, customers agrees to the terms
of Pinnacle’s Purchase Agreement, which can be found at: http://pinnacleledsolutions.com/legal.
If you do not agree with the terms of the agreement, you may return products within 10 days of
delivery.”

(Def’s Tr. Ex. D).

Pinnacle asserts that this Invoice binds P.W. Fairhope to

arbitration because the Invoice incorporates by reference Pinnacle’s Purchase Agreement (which
contains an arbitration provision) and P.W. Fairhope made partial payment in response.
The Court disagrees.

The evidence at trial indicates that Plaintiffs were never presented

with any arbitration provision or agreement, much less assented to same as part of their
contractual dealings with Pinnacle for the P.W. Fairhope project.

Pinnacle cannot unilaterally

add to or change the terms of a contract, via invoice or otherwise.6 See, Karlson v. Red Door
Homes, LLC, 18 F.Supp.3d 1301, 1310 and note 8 (N.D. Ala. 2014) (“the Eleventh Circuit has
also cited to Texas cases for support for [the proposition that an invoice cannot change the terms
of a contract]. In re Charter Co., 913 F.2d 1575, 1580 (11th Cir.1990) (quoting Preston Farm,
625 S.W.2d 295, 299 (Tex.1982)) (finding that invoices…can only serve “as billing [statement]
6 Moreover, by the time the Invoice issued, the LED lights had already been delivered and installed in the
P.W. Fairhope project. Thus, to “reject” or “object” to same “within 10 days of delivery” as the Invoice provides,
Plaintiffs would have had to do so before they even saw the Invoice instructing them how to “reject” or “object.”

10

to show...the total amount owed[;] [t]he basic contract….had already been formed and
executed.”). Alabama case law does not imply otherwise, namely that a party can unilaterally
change contract terms in a billing statement for work completed[]”).
Pinnacle also asserts that Plaintiffs’ 92% payment on the August 2016 Invoice evidences
acceptance of the legal terms and conditions of the Purchase Agreement, which was incorporated
in the Invoice, including its arbitration provision.

Again, the Court disagrees.

Plaintiffs’

payment was an effort to perform on its financial obligations under the Acceptance (the
contract); to pay for the lights as installed by Pinnacle. No caselaw submitted by Pinnacle
supports a contrary conclusion.

And in contrast, as explained in Stewart & Stevenson, LLC v.

Galveston Party Boats, Inc., 2009 WL 3673823, *7-9 (Tex. App.-Houston (1st Dist.) Nov. 5,
2009) (internal citations omitted), discussing Texas law (which Pinnacle seeks to have the Court
apply):
Stewart & Stevenson refers to its invoices, which contained an arbitration clause printed
on the back….and argues that GPB’s payment of the invoices constituted acceptance of
the written agreement containing the arbitration clause. GPB argues that it never reached
a meeting of the minds with Stewart & Stevenson regarding an agreement to arbitrate…
***
The agreement contained all terms necessary to a valid and binding contract…..The
agreement did not contain an arbitration provision.
The only mention of an arbitration provision is included in the invoices sent….pursuant
to its already existing agreement to provide goods and services…Under the facts
presented here, these invoices were not individual contracts in and of themselves-they
were acknowledgments detailing that portion of the goods and services provided….in
performance of its already existing contract... This is not enough to show a meeting of the
minds….on the arbitration agreement contained on the back of the invoices….
IV.

Conclusion
Upon consideration, it is ORDERED that Plaintiffs’ First Cause of Action seeking a

Declaratory Judgment is GRANTED such that a DECLARATORY JUDGMENT is entered in
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favor of Plaintiffs and against Defendants that Plaintiffs are not obligated to resolve this matter
in arbitration.

This case is REFERRED to the assigned U.S. Magistrate Judge for entry of the

appropriate scheduling order.
DONE and ORDERED this the 5th day of July 2017.
/s/ Kristi K. DuBose
KRISTI K. DuBOSE
CHIEF UNITED STATES DISTRICT JUDGE

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