Rollings v. Thermodyne Industries, Inc. , 67 O.B.A.J. 399 ( 1996 )

OP ALA, Justice,

with whom ALMA WILSON, Chief Justice, joins, concurring in result.

The court upholds — as free from state constitutional taint — a contractual provision which calls for the agreement’s signatories to settle through arbitration all disputes incidental to the contract’s performance. The court reasons the Uniform Arbitration Act, 15 O.S.1991 § 801 et seq.,¹ authorizes the parties to make a promissory waiver of their constitutional right of access to the courts.² Today’s pronouncement — rested on a construction of Art. 23, § 8, Okl. Const.,³ considered in conjunction with Art. 2, § 6, Okl. Const.⁴ — disregards the plain language of the § 8 infirmity-dealing text. A promise to give up a constitutional right not yet in existence is clearly within the § 8 interdiction. A party’s promise to submit future contractual disputes to arbitration operates to relinquish constitutionally safeguarded access to the courts for application of orderly forensic process.⁵ It is for this reason that the promise here in suit falls within the class of obligations made inefficacious by § 8.

While concurring in today’s result, I recede from the court’s entire pronouncement. This I must do because (1) Oklahoma’s fundamental law⁶ condemns contractual provisions that exact promissory waivers of constitutionally safeguarded access to the eourts;⁷ (2) the prudential bar of restraint commands that today’s principal issue — the state fundamental-law validity of a promise to arbitrate a yet-to-arise controversy — not be resolved in advance of strict necessity; and (3) since U.S. jurisprudence teaches that the Federal Arbitration Act⁸ [FAA] is intended to preempt state law if the latter interferes with the enforceability of arbitration clauses in contracts “involving commerce”,⁹ the Supremacy Clause of the U.S. Constitution¹⁰ commands that this court uphold the arbitration provision in suit and rest its decision on the FAA’s mandate rather than on its answer to whether the arbitration promise passes the § 8 muster.¹¹

I

ANATOMY OF LITIGATION

Rollings is the owner of an invention, covered by a U.S. patent, for the design of an industrial hot water heater. In 1991 Rollings and Thermodyne Industries, Inc. [Thermo-dyne] entered into a licensing agreement [the Agreement] which transferred the exclusive right to manufacture, market and sell industrial heaters using the patented design. Their Agreement¹² requires the signatories to arbitrate¹³ any dispute — present or future — that relates to the parties’ contractual performance.

Concerned about Thermodyne’s performance under the Agreement’s terms, Rollings sought to have the district court declare the contract terminated. Thermodyne moved for the dispute’s submission to arbitration. At nisi prius its motion met with an adverse ruling. The Court of Appeals reversed, holding that'under Art. 23, § 8, Okl. Const., a promise to arbitrate a yet-to-arise controversy is enforceable.¹⁴ We granted certiorari. Today’s pronouncement reverses the trial court’s decision for Rollings.

II

THE TERMS OF ART. 23, § 8 RENDER ABSOLUTELY VOID ROLLING’S EXECUTORY EX CONTRACTU WAIVER OF HIS CONSTITUTIONAL RIGHT OF ACCESS TO THE COURTS

A

The constitutional validity of Rollings’ ex-ecutory¹⁵ ex contractu (promissory) waiver of his fundamental-law right of access to courts must be tested by giving the key language in Art. 23, § 8 its commonly accepted and nontechnical meaning.¹⁶ The text to be considered states:

“Any provision of a contract, express or implied, made by any person, by which any of the benefits of this Constitution is sought to be waived, shall be null and void.” [Emphasis mine.]

Oklahoma’s extant jurisprudence defines “waiver” as the intentional relinquishment of known rights under circumstances showing that when the rights were surrendered, the waiving party had knowledge of its then existing rights and of the material facts upon which they depended.¹⁷ The language of § 8 interdicts only contractual, i.e., promise-based, waivers in the form of a pledge to surrender state constitutional benefits that may in the future become one’s due in the course of the parties’ contractual dealings.¹⁸ It does not proscribe one’s in praesenti relinquishment ¹⁹ of a fundamental-law right by a juristic act.²⁰

Agreements to arbitrate future disputes cannot meet the § 8 standards. By these agreements waivers can never be “knowingly” or “intelligently” made in advance. Unless one is shown to have had full knowledge of all the material facts that establish one’s right, an individual cannot be said to understand or appreciate the breadth of the applicable constitutional benefits being surrendered. No one may be held to have waived rights whose outer contours, in the setting in which they might arise, are still unknown.²¹

B

Recognized constitutional hermeneutics dictates that the words of Art. 28, § 8²² be interpreted in conformity with their ordinary significance in the English language, i.e., that they be given their commonly accepted and nontechnical meaning.²³ Fundamental-law provisions must be construed in a practical manner so that the plainly manifested intent of its drafters may be honored.²⁴

Fear of universal disapproval should not dissuade us today from giving § 8 its plainly intended meaning. Extant jurisprudence from elsewhere offers rich insight into what happens when fundamental law’s plain and ordinary meaning is judicially ignored or attempted to be written out of existence. The U.S. Supreme Court’s 1896 decision in Plessy v. Ferguson²⁵ serves as a most eloquent reminder. There the Court, perceiving shocHng consequences from an evenhanded exposition of the Equal Protection Clause, forged a separate-but-equal doctrine, which — though popular at the time — failed to pass muster scarcely six decades later when it was revisited in Brown v. Board of Education of Topeka, Shawnee County, Kan.²⁶

I will not travel the road chosen in Plessy. The text of Art. 23, § 8 is to be interpreted without resort to technical fabrications of its language. The plainly manifested purpose of the drafters must be upheld.²⁷ If, as I divine, both management and labor vigorously support the concept of arbitration, regarding its benefits as an indispensable tool for expeditious and inexpensive settling of disputes, their objective would be achieved with much greater security through an amendment of § 8 which would explicitly validate predis-pute arbitration agreements.

It is to be doubted that judges of succeeding generations would be willing to view the meaning of the § 8 command as the court does today. A likelihood of tomorrow’s less friendly response to the call for accommodation, not dissimilar from that in Brown,²⁸ is not to be discounted. Business and labor cannot rely for the badly needed security of their promises on today’s Plessy-like bandaid solution.

C

The court confines its decision to consideration of Art. 23, § 8 and Art. 2, § 6, OH. Const., giving the erroneous impression that the two sections are the only fundamental-law provisions pertinent to the issue. Not so. A promise to submit a future dispute to arbitration operates to relinquish more than just general access to the courts. It serves to give up the promisor’s constitutionally safeguarded mode of procedure that is embodied in Art. 2, § 6 (access to courts), Art. 2, § 7 (due process of law) and Art. 2, § 19 (right to trial by jury). Moreover, all these procedural strictures stand guaranteed by Art. 5, § 46.²⁹

By mandating uniformity of procedure, the terms of Art. 5, § 46 command that all citizens of the state shall have equal access to legal institutions for application of the generally applicable ordinary forensic process. Contract litigants comprise but a single class. By singling out persons who have executed predispute arbitration agreements for use of a deciding mechanism different from trial, a dichotomous division is created — contrary to Art. 5, § 46 — for a single class of litigating parties. While in the context of an existing dispute, litigants may waive the § 46 protection, with respect to future disputes, such waivers offend the provisions of Art. 23, § 8.

Ill

THE PRUDENTIAL BAR OF RESTRAINT COMMANDS THAT THE STATE CONSTITUTIONAL ISSUE BEFORE US NOT BE RESOLVED IN ADVANCE OF STRICT NECESSITY

The Court of Appeals erroneously concluded that it needed to reach Rollings’ constitutional challenge to Oklahoma’s Uniform Arbitration Act³⁰ to decide the principal issue in suit. A well-settled rule of federal law, discussed below,³¹ absolutely controls the arbi-trability of the Rollings/Thermodyne dispute. When, as here, the legal relief sought clearly may be afforded upon alternative grounds, consideration of constitutional challenges is inappropriate under the self-erected and time-honored “prudential bar” of restraint.³²

IV

THE FEDERAL ARBITRATION ACT PRE-EMPTS STATE LAW WHICH GOVERNS ARBITRATION CLAUSES IN CONTRACTS INVOLVING COMMERCE

Settled federal jurisprudence³³ teaches that when a contract (1) involves commerce³⁴ and (2) calls for arbitration, the arbitrability of both present and future disputes arising under its terms is to be determined solely by the Federal Arbitration Act.³⁵ The Rollings/Thermodyne contract clearly calls for arbitration and its object — the manufacture and sale of industrial heaters — plainly involves commerce when it is tested by the controlling federal-law norms. In short, the arbitration agreement in suit clearly is enforceable within the purview of the FAA.

Once a transaction in litigation is found to meet the FAA standards, i. e., “involve” commerce, state courts cannot apply state law that would invalidate its arbitration agreement.³⁶ In Mastrobuono v. Shearson Lehman Hutton³⁷ the Court explained:

“[T]he FAA not only ‘declared a national policy favoring arbitration,’ but also ‘withdrew the power of the states to require a judicial forum for the resolution of claims which the contracting parties agreed to resolve by arbitration’. ” [Emphasis mine.] [Citing Southland v. Keating.³⁸]

Settled federal jurisprudence absolutely commands that the provisions of Art. 23, § 8 — a state constitutional antiarbitration hurdle— yield to the provisions of the FAA.³⁹

y

SUMMARY

Were I called upon to measure today the validity of the arbitration clause in the Rollings/Thermodyne Agreement by the state constitution’s standards, my opinion would declare it violative of Art. 23, § 8. Rollings’ promise to arbitrate is an impermissible ex-ecutory waiver of his constitutionally safeguarded access to the courts. The text of § 8 explicitly prohibits promise-based waivers of fundamental-law rights.⁴⁰

The U.S. Constitution’s Supremacy Clause must control the resolution of the dispositive issue tendered by this cause. U.S. jurisprudence⁴¹ unequivocally holds that a contract, which (1) involves commerce and (2) contains a promise for arbitration of disputes to arise under its terms, is governed by federal law which controls over any state-law infirmity drawn from the State’s antiarbitration policy. The prudential bar of restraint demands that when, as here, legal relief clearly is affordable upon alternate grounds — which rest upon a firmly established principle of federal law — consideration of an unsettled state constitutional question would be inappropriate. The Rollings/Thermodyne contract is arbitra-ble under the provisions of the Federal Arbitration Act and the jurisprudence that governs that Act’s outer reach.

I hence concur in the result but recede from today’s Plessy-like escape from linguistic reality and from historicity revealed, if not indeed dictated, by the Populist roots of this State’s fundamental-law charter.⁴²

1 . The pertinent terms of 15 O.S.1991 § 802 are:

"A. This act shall apply to a written agreement to submit any existing controversy to arbitration or a provision in a written contract to submit to arbitration any controversy thereafter arising between the parties. Such agreements are valid, enforceable and irrevocable, except upon such grounds as exist at law or in equity for the revocation of any contract....” [Emphasis mine.]

2 . Today's pronouncement affords the promisor but one avenue of access to the courts — that of securing judicial vacation of the arbitrator’s award. Grounds for vacating such awards are statutorily confined to "fraud, bias, excess of power, or unfair procedure.” See 15 O.S.1991 § 812(A).

3 . Okl. Const. Art. 23, § 8 provides:

“Any provision of a contract, express or implied, made by any person, by which any of the benefits of this Constitution is sought to be waived, shall be null and void.” [Emphasis mine.]

4 . The pertinent terms of Okl. Const. Art. 2, § 6, are:

“The courts of justice of the State shall be open to every person, and speedy and certain remedy afforded for every wrong and for every injury to person, property, or reputation; and right and justice shall be administered without sale, denial, delay, or prejudice.”

5 . Today's construction of Art. 23, § 8 — which sanctions executory promise-based waivers of constitutional rights — implicates a much broader range of contracts than just arbitration agreements. See, e.g., Bank South v. Howard, 264 Ga. 339, 444 S.E.2d 799 (1994). In Howard the question to be decided was whether a promise (in a loan-guaraniy document) to waive a jury trial is enforceable when it is disconnected from a contract to arbitrate. The court refused to uphold, on state constitutional grounds, the guarantor’s waiver. Id. at 800. The Georgia constitution guarantees the right to a jury trial except when the parties fail to demand a jury or "where no issuable defense was filed.” Ga. Const., 1983, Art. I, § 1, ¶ 11. The Georgia court realized that the Howard condemnation ran counter to its earlier imprimatur placed upon the predispute waiver of court access in an arbitration agreement. Id. at 800. It was nonetheless unwilling to harmonize the clearly perceived conflict, preferring to leave its resolution to the General Assembly.

6 . For the pertinent terms of Okl. Const. Art. 23, § 8, see supra note 3.

7 . In addition to the open-courts clause in Art. 2, § 6, Okl. Const., constitutionally safeguarded access to judicial institutions for resort to orderly forensic process may be drawn from:

The terms of Art. 2, § 7, Okl. Const., which are:

"No person shall be deprived of life, liberty, or properly, without due process of law.”

The pertinent terms of Art. 2, § 19, Okl. Const., which are:

"The right of trial by jury shall be and remain inviolate...."

The pertinent terms of Art. 5, § 46, Okl. Const., which provide:

"The Legislature shall not, except as otherwise provided in this Constitution, pass any local or special law authorizing:

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Regulating the practice or jurisdiction of, or changing the rules of evidence in judicial proceedings or inquiry, before the courts, justices of the peace, sheriffs, commissioners, arbitrators, or other tribunals....

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For limitation of civil or criminal actions;

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Providing for change of venue in civil and criminal cases.”

The pertinence of the constitutional provisions set out in this note is discussed infra, section 11(C).

8 . 9 U.S.C. §§ 1 et seq.

9 . See the pertinent terms of 9 U.S.C. § 2, which provide:

"A written provision in any ... contract evidencing a transaction involving commerce to settle by arbitration a controversy ... arising out of such contract or transaction ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” [Emphasis mine.]

10 . U.S. Const., Art. VI, cl. 2.

11 . Although in its petition in error Thermodyne did not invoke the Federal Arbitration Act, it did press for its applicability at page 10 of the reply brief. For the rule that a timely-filed brief may supply a deficiency in the petition in error, see Markwell v. Whinery’s Real Estate, Inc., Okl., 869 P.2d 840, 843 (1994).

12 . The licensing Agreement's terms provided in clause 7:

"Remedies. In the event of any dispute between the parties hereto relating to this Agreement, the parties hereby agree to arbitrate such dispute under the rules, regulations and guidelines of the American Arbitration Association.” [Emphasis mine.]

13 . Arbitration is an ancient and accepted institution for settling disputes. It has been recognized by the common law at least since the early thirteenth century. See Powell, Settlement of Disputes by Arbitration in Fifteenth-Century England, 2 Law & Hist.Rev. 21, 25 (1984).

14 . For the pertinent language of Okl. Const. Art. 23, § 8, see supra note 3.

15 . "Executory” connotes an obligation or performance which is to be completed in the future. See Economy Roofing & Insulating Co. v. Zumaris, 538 N.W.2d 641, 650 (Iowa 1995); In re San Francisco Bay Exposition, 50 F.Supp. 344, 346 (N.D.Cal.1943).

16 . For an extensive discussion of my position on the applicability of Art. 23, § 8 to arbitration agreements, see Wiegand, Arbitration Clauses: The Good, the Bad, the Ugly, 47 Okla.L.R. 627-36 (1994).

17 . Faulkenberry v. Kansas City So. Railway Co., Okl. 602 P.2d 203, 206 (1979). See also Schneckloth v. Bustamonte, 412 U.S. 218, 234-35, 93 S.Ct. 2041, 2051-52, 36 L.Ed.2d 854 (1973); Johnson v. Zerbst, 304 U.S. 458, 464, 58 S.Ct. 1019, 1023, 82 L.Ed. 1461 (1938). In Schneckloth the Court holds that while knowledge is not a prerequisite for a voluntary consent, it is essential to an effective waiver that is defined as an intentional relinquishment of a known right or privilege. 412 U.S. at 235, 93 S.Ct. at 2052.

18 . See Faulkenberry, supra note 16 at 206-207; Raines v. Independent School Dist. No. 6, Okl., 796 P.2d 303, 305 (1990) (Opala, V.C.J., concurring).

19 . My writing does not concern itself with relinquishment of access to the courts to arbitrate an existing dispute. In praesenti waivers are not contracts; they are not promissory. By their very definition they do not fall within the purview of Art. 23, § 8. Stange v. United States, 282 U.S. 270, 276, 51 S.Ct. 145, 147, 75 L.Ed. 335 (1931); Bertelsen & Petersen Engineering Co. v. United States, 60 F.2d 745, 747 (1st Cir.1932).

20 . A juristic act is one designed to have a present legal effect. It is an act of a private individual directed to the origin, surrender or alteration of a right. See Gates v. P.F. Collier, Inc., 378 F.2d 888, 896 (9th Cir.1967); Evans v. Wilson, 776 S.W.2d 939, 940 (Tenn.1989).

21 . Berman v. Fraternities Health & Accident Assn., 107 Me. 368, 78 A. 462, 464 (1910); Enterprise Sheet Metal Works v. Schendel, 55 Mont. 42, 173 P. 1059, 1061 (1918); Danville Lumber & Mfg. Co. v. Gallivan Bldg. Co., 177 N.C. 103, 97 S.E. 718, 720 (1919); Michigan Automobile Ins. Co. v. Van Buskirk, 115 Ohio St. 598, 155 N.E. 186, 188 (1927).

22 . For the language of Art. 23, § 8, see supra note 3.

23 . Campbell v. White, Okl., 856 P.2d 255, 262 (1993); Wade v. Brown, Okl., 516 P.2d 526, 528 (1973); Sharpe v. State ex rel. Oklahoma Bar Association, Okl., 448 P.2d 301, 306 (1968); State ex rel. Ogden v. Hunt, Okl., 286 P.2d 1088 syls. 1, 2 (1955).

24 . The drafters of Oklahoma's constitution doubtless were aware of the then-extant jurisprudence which taught that while a person can waive constitutional rights in praesenti, no one may in advance "barter away [by agreement] his life or his freedom or his substantial rights.” See Insurance Company v. Morse, 87 U.S. (20 Wall.) 445, 451, 22 L.Ed. 365-368 (1874); see also Hartford Fire Ins. Co. v. Hon, 66 Neb. 555, 92 N.W. 746, 747 (1902); Wortman v. Montana Cent. Ry. Co., 22 Mont. 266, 56 P. 316, 320-21 (1899); Cupples v. Alamo Irr. & Mfg. Co., 7 Kan.App. 692, 51 P. 920 (1898); Baltimore & O.R. Co. v. Stankard, 56 Ohio St. 224, 46 N.E. 577, 578-79 (1897); Supreme Council of Order of Chosen Friends v. Forsinger, 125 Ind. 52, 25 N.E. 129, 130 (1890); Bauer v. Samson Lodge, No. 32, K. of P., 102 Ind. 262, 1 N.E. 571, 575 (1885).

See also R.L. Williams, The Constitution op Oklahoma pp 301-302 (1912), which ascribes as sources of Old. Const. Art. 23, § 8, the following pertinent constitutional provisions;

Colo. Const. Art. 15, § 15 (1876):

"It shall be unlawful for any person, company or corporation to require of its employés, as a condition of their employment or otherwise, any contract or agreement whereby such person, company, or corporation shall be released or discharged from liability or responsibility on account of personal injuries ... and such contract shall be null and void.”

Mont. Const. Art. 15, § 16 (1889);

"It shall be unlawful for any person, company or corporation to require of its employes, as a condition of their employment or otherwise, any contract or agreement whereby such person, company, or corporation shall be released or discharged from liability or responsibility on account of personal injuries ... and such contract shall be null and void.”

Wyo. Const. Art. 10, § 4 (1889):

"No law shall be enacted limiting the amount of damages to be recovered for causing the injury or death of any person. Any contract or agreement with any employe waiving any right to recover damages for causing the death or injury of any employe shall be void.”

25 .Plessy v. Ferguson, 163 U.S. 537, 16 S.Ct. 1138, 41 L.Ed. 256 (1896).

26 . 347 U.S. 483, 74 S.Ct. 686, 98 L.Ed. 873 (1954).

27 . Sharpe, supra note 23 at 304; Hines v. Winters, Okl., 320 P.2d 1114, 1118 (1958). See also Latting v. Cordell, 197 Okl. 369, 172 P.2d 397 syl. 1 (1946). There the court held:

"The object of construction, applied to a constitution, is to give effect to the intent of the framers, and of the people adopting it. This intent is to be found in the instrument itself; and when the text of a constitutional provision is not ambiguous, the courts ... are not at liberty to search for its meaning beyond the instrument.” [Emphasis mine.]

28 . See Brown, supra note 26.

29 . For the pertinent terms of Art. 5, § 46, see supra note 7. Predispute arbitration agreements violate the uniformity of procedure mandated by § 46 because § 8 will not allow their promisees to benefit from a different procedural regime than that which is generally accorded.

30 . 15 O.S.1991 §§ 801 etseq.

31 . See section IV, infra.

32 . I.N.S. v. Chadha, 462 U.S. 919, 103 S.Ct. 2764, 77 L.Ed.2d 317 (1983); Ashwander v. Tennessee Valley Authority, 297 U.S. 288, 347, 56 S.Ct. 466, 483, 80 L.Ed. 688 (1936) (Brandéis, J., concurring). See also Smith v. Westinghouse Elec. Corp., Okl., 732 P.2d 466, 467 n. 3 (1987); Schwartz v. Diehl, Okl., 568 P.2d 280, 283 (1977); Dablemont v. State Department of Public Safety, Okl., 543 P.2d 563, 564 (1975).

33 . Allied-Bruce Terminix Companies, Inc. v. Dobson, 513 U.S. -, -, 115 S.Ct. 834, 838-40, 130 L.Ed.2d 753 (1995); Perry v. Thomas, 482 U.S. 483, 489, 107 S.Ct. 2520, 2525, 96 L.Ed.2d 426 (1987); Southland v. Keating, 465 U.S. 1, 15-16, 104 S.Ct. 852, 860-61, 79 L.Ed.2d 1 (1984).

34 . See Allied-Bruce, supra note 33, where the Court holds that in its FAA meaning the word "involves” is broader than the often-found words of art “in commerce" and is “indeed the functional equivalent of ‘affecting’." 513 U.S. at -, 115 S.Ct. at 839-40. The Court describes the Act's [FAA] reach as coextensive with that of the Commerce Clause. Southland, supra note 33, 465 U.S. at 14-15, 104 S.Ct. at 860; Perry, supra note 33, 482 U.S. at 490, 107 S.Ct. at 2525. The test for determining whether a contract calling for arbitration falls within the FAA's purview is "[does] the 'transaction' in fact involve interstate commerce.” Allied-Bruce, supra note 33, 513 U.S. at -, 115 S.Ct. at 842. It is not even necessary that the parties contemplated an interstate commerce connection. Id. at 513 U.S. -, 115 S.Ct. at 843.

35 . 9 U.S.C. §§ 1 et seq. See supra note 9 for the applicable provisions of the FAA.

36 . Allied-Bruce Terminix, supra note 33, 513 U.S. at -, 115 S.Ct. at 842.

37 . 513 U.S. at -, -, 115 S.Ct. 1212, 1215-16, 131 L.Ed.2d 76 (1995).

38 . See Southland, supra note 33, 465 U.S. at 10; 104 S.Ct. at 858.

39 . The U.S. Supreme Court’s FAA jurisprudence is binding on us even though it has been severely criticized by several justices of that Court as according the Act too broad a compass, one that goes far beyond any discernible congressional intent. See Allied-Bruce Terminix, supra note 33, 513 U.S. at -, 115 S.Ct. at 844 (O'Connor, J., dissenting).

40 . Massey v. Farmers Ins. Group, Okl., 837 P.2d 880, 890 (1992) (Opala, C.J., concurring in result); Raines, supra note 18 at 304-305 (Opala, V.C.J., concurring); Dean Witter Reynolds, Inc. v. Shear, Okl., 796 P.2d 296, 298 (1990); Long v. DeGeer, Okl., 753 P.2d 1327, 1330 (1988) (Opala, J., concurring).

41 . See supra note 3 3.

42 . Oklahoma's constitution is steeped in Populist philosophy. See D. Goble, Progressive Oklahoma 156-58 (1980); J.C. Milligan, Oklahoma. A Regional History 148-51 (1985).