Karibu Home Builders, LLC v. D. Michael Keenum and Pamela A. Keenum (Appeal from Colbert Circuit Court: CV-23-900266).

Rel: December 20, 2024

Notice: This opinion is subject to formal revision before publication in the advance sheets of Southern
Reporter. Readers are requested to notify the Reporter of Decisions, Alabama Appellate Courts,
300 Dexter Avenue, Montgomery, Alabama 36104-3741 ((334) 229-0650), of any typographical or other
errors, in order that corrections may be made before the opinion is printed in Southern Reporter.

SUPREME COURT OF ALABAMA
OCTOBER TERM, 2024-2025

_________________________

SC-2024-0440
_________________________

Karibu Home Builders, LLC

v.

D. Michael Keenum and Pamela A. Keenum

Appeal from Colbert Circuit Court
(CV-23-900266)

SELLERS, Justice.

Karibu Home Builders, LLC, appeals from an order of the Colbert

Circuit Court ("the trial court") entering a summary judgment in favor of
SC-2024-0440

D. Michael Keenum and Pamela A. Keenum on Karibu's breach-of-

contract action and disposing of that action with prejudice. We reverse

and remand.

I. Facts

In January 2023, the Keenums and Karibu entered into a real-

estate sales contract ("the contract") pursuant to which the Keenums

agreed (1) to convey seven lots referred to as the "Colonial Heights" lots

to Karibu for a purchase price of $180,000 and (2) to construct a paved

road referred to as the "Colonial Heights Road" at least five days before

the contemplated closing date of March 1, 2023. The parties executed an

addendum to the contract, extending the closing date until March 31,

2023, or sooner. Karibu paid $1,000 earnest money to the listing broker

pending the closing of the sale. Relevant to this appeal, the contract

contains two separate paragraphs containing dispute-resolution

provisions.

Paragraph 2 of the contract states, in relevant part:

"2. EARNEST MONEY AND DEFAULT: The Seller(s)
authorize the listing broker to hold the earnest money
pending the closing of this sale. Should the Seller(s) fail to
carry out this contract in accordance with its provisions, the
Buyer(s) shall have the option of (1.) receiving a refund of
their earnest money, plus reimbursement from the Seller(s)
2
SC-2024-0440

of any sums expended by the Buyer(s) for a title opinion or
any other costs necessarily incurred by the Buyer(s) under
this contract and this contract shall be at an end, or (2[.]) The
Buyer(s) may, without demanding the return [of] their
earnest money, proceed with a suit against the Seller(s) for
specific performance of this contract."

(Capitalization and bold typeface in original; other emphasis
added.)

Paragraph 18 of the contract provides, in relevant part:

"18. Mediation and Arbitration: All claims, disputes or
other matters in question arising out of or relating in any way
to this Contract or the breach thereof, including claims
against any broker or sales associate, or relating to the
relationship involved with, created by or concerning this
Contract, including the involvement of any broker or Sales
associate ('Claim'), shall be submitted to mediation with a
mutually agreed upon mediator within forty-five (45) days of
notice of the Claim. In the event no mediated resolution is
reached within sixty (60) days of the party's notice of the
Claim, all Claims shall be resolved by binding arbitration by
a single arbitrator in Florence, Muscle Shoals, Tuscumbia, or
Sheffield, Alabama in accordance with the Commercial
Arbitration Rules of the American Arbitration Association
then in effect. Each party acknowledges that he or she is
knowingly waiving the right to a trial by jury relating to all
Claims. All disputes concerning the arbitrability of any Claim
or the enforceability or scope of this provision shall be subject
to the same binding arbitration."

(Bold typeface in original; other emphasis added.)

The Keenums ultimately did not complete the Colonial Heights

Road as agreed, nor did they appear for a closing. In December 2023,

3
SC-2024-0440

Karibu commenced an action against the Keenums for specific

performance of the contract and for damages ("the underlying action"),

alleging that they had breached the contract by failing to perform their

obligations thereunder. In its complaint, Karibu asserted that it had

performed its obligations and that it remained ready, willing, and able to

purchase the Colonial Heights lots pursuant to the contract. The

Keenums thereafter filed a motion for a summary judgment, arguing that

they were entitled to a judgment as a matter of law because, they

claimed, Karibu had not met its contractual obligations and the contract

was therefore "void." The Keenums asserted various reasons as to why

they claimed the contract was void, including that paragraph 18 of the

contract required mediation and/or arbitration of the underlying action

and neither had occurred. Karibu responded with a response in

opposition, arguing that the contract was valid and enforceable because,

it claimed, the mediation and arbitration provision in paragraph 18 was

inapplicable to the underlying action; rather, Karibu claimed, paragraph

2 of the contract concerning defaults of the parties governed the action.

Karibu further argued that, even assuming the mediation and

arbitration provision did govern the underlying action, the Keenums

4
SC-2024-0440

were barred from relying on that provision as a defense to the underlying

action because, it said, before commencing the underlying action, Karibu

had offered on multiple occasions to attend mediation and the Keenums

had refused. Finally, Karibu argued that, even assuming the mediation

and arbitration provision governed the underlying action, the

appropriate remedy was not to enter a summary judgment; rather,

Karibu claimed that the appropriate remedy would be for the trial court

to compel the parties to arbitrate. Following a hearing, the trial court

entered a summary judgment in favor of the Keenums, disposing of the

underlying action with prejudice. This appeal followed.

II. Standard of Review

On appeal, this Court reviews a summary judgment de novo,

without affording any presumption of correctness to the trial court's

ruling on questions of law. Seibert v. Stricklen, [Ms. SC-2023-0741, Apr.

26, 2024] ___ So. 3d ___ (Ala. 2024). Karibu suggests that the trial court

entered the summary judgment disposing of the underlying action with

prejudice based on a lack of subject-matter jurisdiction. We review de

novo whether the trial court had subject-matter jurisdiction. Monroe

Cnty. Comm'n v. Nettles, 288 So. 3d 452 (Ala. 2019).

5
SC-2024-0440

III. Analysis

The summary-judgment order disposing of the underlying action

with prejudice does not state a rationale for the trial court's ruling.

Karibu asserts that the transcript of the hearing demonstrates that the

trial court disposed of the underlying action with prejudice because, it

says, the court determined that the mediation and arbitration provision

divested it of subject-matter jurisdiction over the action. We agree with

Karibu's interpretation of the transcript; thus, we find the issue of

subject-matter jurisdiction dispositive. The transcript reveals the

following colloquy between the trial court and counsel:

"THE COURT: Look. I have read this contract so many times,
and I keep coming up with the same question, which tells me
that it's a problem. Where's my jurisdiction? I see a
jurisdictional defect. I don't believe this Court has
jurisdiction. …

"….

"[THE COURT:] Summary judgment is going to be in favor of
[the Keenums], and I will say this, I don't think there's any
question that … the contract is supposed to go to arbitration.
So[,] I suppose that's something that y'all have to shake out,
but I don't even see where I have -- I see a jurisdictional
defect."

It is clear from the transcript that the trial court disposed of the

underlying action with prejudice because it concluded that it had no
6
SC-2024-0440

subject-matter jurisdiction over the action, thus leaving the matter for

the parties to "shake" out or otherwise decide, but preventing Karibu

from utilizing the courts to pursue a remedy if a settlement could not be

reached. The trial court implied that Karibu was required to file its

breach-of-contract claim directly with the American Arbitration

Association, instead of in the trial court. We cannot agree that the trial

court lacked jurisdiction over the underlying action such that it had no

choice but to dispose of it with prejudice; such procedure would be an

injustice for Karibu.1 To begin, the parties and the trial court appear to

agree that the contract contains a valid mediation and arbitration

provision. The Keenums and Karibu disagree about whether the

1See, e.g., Porter v. Colonial Life & Accident Insurance Co., 828 So.

2d 907, 908 (Ala. 2002) ("We note a potential for injustice. If a plaintiff's
court action be dismissed to enforce an arbitration agreement, but,
through no fault of the plaintiff's, the arbitration be not concluded or
some of the plaintiff's claims be not arbitrated, a statute of limitations
could bar a refiling of the unarbitrated claims in court. Sometimes, for
instance, an arbitrator's first duty under an arbitration agreement is to
determine the arbitrability of a plaintiff's claims. In such a case, the
arbitrator could rule that some or all of the plaintiff's claims should be
litigated and not arbitrated. Moreover, a stay, as distinguished from a
dismissal, would likely better conserve the time and resources of the
parties and the trial court even in the event of a successful arbitration,
inasmuch as the winner commonly wants the arbitration award reduced
to a judgment.").
7
SC-2024-0440

underlying action falls within the scope of the mediation and arbitration

provision; that disagreement is the substance of this appeal. It is logical

that the trial court had jurisdiction to decide whether it or an arbitrator

had the initial task of determining threshold issues of arbitrability, such

as the validity and scope of the mediation and arbitration provision. See

First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995) ("When

deciding whether the parties agreed to arbitrate a certain matter

(including arbitrability), courts generally … should apply ordinary state-

law principles that govern the formation of contracts."). In Alabama, the

general rule is that matters of substantive arbitrability, such as the

validity and scope of an arbitration provision, are decided by the court.

Regions Bank v. Rice, 209 So. 3d 1108 (Ala. 2016). An exception applies

when the arbitration provision itself clearly and unmistakably delegates

issues of arbitrability to the arbitrator. Id. at 1110. This Court has held

that "an arbitration provision that incorporates rules that provide for the

arbitrator to decide issues of arbitrability clearly and unmistakably

evidences the parties' intent to arbitrate the scope of the arbitration

provision." CitiFinancial Corp. v. Peoples, 973 So. 2d 332, 340 (Ala.

2007). Thus, the trial court had a duty to interpret the contract to

8
SC-2024-0440

determine whether the court or an arbitrator had the power to decide the

threshold issue of arbitrability, including the scope of the mediation and

arbitration provision. Once the trial court decided that the contract

required the underlying action to be arbitrated, the court was still not

divested of jurisdiction. Rather, pursuant to appropriate procedure, the

trial court should have entered an order compelling arbitration. The root

of the problem here is that the Keenums did not ask the trial court to

compel arbitration. Critically, however, Karibu, the party seeking to

litigate the underlying action, should not be faulted for the Keenums'

failure to request arbitration. As previously indicated, in their motion for

a summary judgment, the Keenums relied on the mediation and

arbitration provision as a defense to the underlying action, arguing that

the contract was void because mediation and/or arbitration had not

occurred. Despite their reliance on the mediation and arbitration

provision as a defense, the Keenums never requested that the trial court

compel arbitration. Interestingly, the Keenums' position on appeal is

directly aimed at arbitration insofar as they assert that "[t]he real issue

[on appeal] is whether arbitration is binding" in Alabama and that "[t]his

court has repeatedly held that arbitration is binding." Keenums' brief at

9
SC-2024-0440

17. In fact, the Keenums cite multiple cases concerning whether a trial

court had erred in denying a motion to compel arbitration. Yet, as

emphasized, the Keenums failed to take the next step by filing a motion

to compel arbitration; thus, their motion for a summary judgment was

premature. The mediation and arbitration provision in paragraph 18 of

the contract did not divest the trial court of jurisdiction such that it was

required to enter a summary judgment in favor of the Keenums and

dispose of the underlying action with prejudice. The trial court had

jurisdiction and had available any number of options to assist the parties

in resolving the action; however, disposing of the action with prejudice

was error. We reverse the summary judgment and remand the case to

the trial court for proceedings consistent with this opinion.

IV. Conclusion

The summary judgment in favor of the Keenums is reversed, and

the cause is remanded for further proceedings consistent with this

opinion. Our opinion is not intended to speak to the merits of the

underling action, only the procedure by which it was disposed.

REVERSED AND REMANDED.

Parker, C.J., and Wise and Stewart, JJ., concur.

10
SC-2024-0440

Cook, J., concurs in the result, with opinion.

11
SC-2024-0440

COOK, Justice (concurring in the result).

I concur in the result. As explained in the main opinion, the Colbert

Circuit Court disposed of the underlying action via a summary judgment

in favor of the defendants, D. Michael Keenum and Pamela A. Keenum,

with prejudice, after concluding that a dispute-resolution clause

("Paragraph 18") in a real-estate sales contract between the Keenums

and the plaintiff, Karibu Home Builders, LLC ("Karibu"), divested it of

subject-matter jurisdiction.

I write separately (1) to emphasize that a trial court has jurisdiction

to rule upon dispute-resolution clauses like Paragraph 18 and (2) to

clarify the procedural nature of these dispute-resolution clauses.2

2Even if the trial court somehow lacked subject-matter jurisdiction

over the present action, it should not have disposed of the action with
prejudice because lacking jurisdiction to entertain the action also
necessarily means that a trial court lacks jurisdiction to resolve the
merits of the action. In defense of the trial court, however, I note that the
Keenums' three-page summary-judgment motion -- filed only one month
after service of the complaint -- was unclear about (1) whether it was
seeking to compel mediation or arbitration or (2) whether it was seeking
to have the trial court determine the merits of the action. Even so, in
their response brief on appeal, the Keenums have now made clear that
their primary argument is that arbitration should have occurred in this
case. Specifically, their brief states: "The central issue is the
enforceability of arbitration agreements, which Alabama courts have
consistently upheld." Keenums' brief at 7 (emphasis added).
12
SC-2024-0440

As explained in the main opinion, Paragraph 18 in the real-estate

sales contract between the parties requires the resolution of "[a]ll claims,

disputes or other matters in question arising out of or relating in any way

to this Contract or the breach thereof, including claims against any

broker or sales associate," through two procedural mechanisms --

mediation and arbitration.

First, Paragraph 18 requires that "[a]ll claims, disputes, or other

matters in question arising out of or relating to this Contract … be

submitted to mediation with a mutually agreed upon mediator within

forty-five (45) days of notice of the Claim." (Emphasis added.) The record

reflects that mediation did not occur in this case. Among other things,

Karibu asserts that this failure was due to the Keenums' refusal to

participate in the mediation process. If this is correct, then, on remand,

the trial court may conclude that the Keenums have waived their right

to insist upon mediation as a precondition to litigation in this case (or are

otherwise estopped from making such an assertion). See, generally,

Morrison Rests., Inc. v. Homestead Vill. of Fairhope, Ltd., 710 So. 2d 905,

907 (Ala. 1998) (holding that the defendant had waived its right to

mediation).

13
SC-2024-0440

If, however, on remand, the trial court determines that waiver or

estoppel does not apply, the trial court may compel mediation. 3 See § 6-

6-20(b)(1), Ala. Code 1975 (providing that mediation "is mandatory for all

parties … [a]t any time where all parties agree"); see also § 6-6-20(b)(3)

(providing that, "[i]n the event no party requests mediation, the trial

court may, on its own motion, order mediation").

In doing so, the trial court may stay (not dismiss) the proceedings

below while the parties participate in mediation. See Ex parte Morgan

Cnty. Comm'n, 6 So. 3d 1145, 1147 (Ala. 2008) (noting that a trial court

may stay proceedings during mediation). See also Rule 2, Ala. Civ. Ct.

Mediation R. (providing that, "[u]pon the entry of an order for mediation,

the proceedings as to the dispute in mediation may be stayed for such

time as set by the court in its order of mediation"). 4 Regardless of whether

3In an appropriate case, it might be possible to make other
procedural arguments against the trial court's ordering mediation (for
instance, that the arbitrator should make that decision), but I need not
consider such arguments to resolve this appeal.

4Perhaps, in an extreme circumstance, it might be appropriate for

a trial court to dismiss some, or all, of an action while mediation proceeds
as a precondition to litigation (such as the claims of particular plaintiffs
in a large multiplaintiff action). But even in such an extreme
circumstance, the dismissal would still be without prejudice.

14
SC-2024-0440

mediation has been waived or is due to be enforced in this case, there can

be no doubt that the trial court has jurisdiction to make those

determinations.

However, if, on remand, it turns out that mediation has been

waived or if it fails, Paragraph 18 then provides that "all Claims shall be

resolved by binding arbitration …." The Federal Arbitration Act, 9 U.S.C.

§ 1 et seq. ("the FAA"), " 'requires [trial] courts to enforce privately

negotiated agreements to arbitrate, like other contracts, in accordance

with their terms.' " UBS Fin. Servs., Inc. v. Johnson, 943 So. 2d 118, 121

(Ala. 2006) (quoting Volt Info. Scis., Inc. v. Board of Trs. of Leland

Stanford Junior Univ., 489 U.S. 468, 478 (1989)).

As the United States Supreme Court has recently recognized, an

arbitration clause is " 'a specialized kind of forum-selection clause that

posits not only the situs of [a] suit but also the procedure to be used in

resolving the dispute.' " Viking River Cruises, Inc. v. Moriana, 596 U.S.

639, 653 (2022) (quoting Scherk v. Alberto-Culver Co., 417 U.S. 506, 519

(1974)) (emphasis added). Thus, like mediation, arbitration is a

15
SC-2024-0440

procedural mechanism that the trial court may enforce. 5

Also like mediation, arbitration is a procedural mechanism that can

be waived. For instance, a plaintiff may file its complaint in court, thus

waiving its right to arbitration. Likewise, a defendant may waive

arbitration by failing to timely invoke it. 6

In the event that arbitration has not been waived, the United States

5I note briefly that, in this case, a portion of Paragraph 18 includes

what is often referred to as a "delegation clause," which is a clause that
states that the arbitrator (not the trial court) is responsible for ruling
upon, among other things, the validity and scope of the arbitration
clause. Specifically, that delegation clause states: "All disputes
concerning the arbitrability of any Claim or the enforceability or scope of
this provision shall be subject to the same binding arbitration."
(Emphasis added.) Given the apparent delegation intended by the parties
in Paragraph 18, on remand, the trial court should not attempt to rule
upon the "the arbitrability of any Claim or the enforceability or scope of
this provision" but should, instead, leave that issue for the arbitrator to
decide. See Regions Bank v. Rice, 209 So. 3d 1108, 1110 (Ala. 2016)
(noting that "disputes regarding the validity and scope of an arbitration
provision (like the dispute here) are issues of substantive arbitrability"
that may be delegated to the arbitrator if the delegation by the parties is
clear and unmistakable in the arbitration provision).

6Our Court has previously recognized that, barring the presence of

a delegation clause as discussed in note 5, supra, "in most cases," the trial
court decides whether arbitration has been waived. See, generally, Hales
v. ProEquities, Inc., 885 So. 2d 100, 105 (Ala. 2003) (recognizing that, "in
most cases, the trial court ... decides the waiver of the right to compel
arbitration on the submission of written evidentiary materials without
ore tenus testimony").
16
SC-2024-0440

Supreme Court has recently held that § 3 of the FAA states that, upon

request by a party, a trial court is required to stay -- not dismiss -- the

proceedings when compelling arbitration. See Smith v. Spizzirri, 601 U.S.

472, 474 (2024) (holding that § 3 of the FAA requires a trial court to stay,

not dismiss, the case when the dispute is subject to arbitration and a

party requests a stay pending arbitration); see also 9 U.S.C. § 3. In other

words, under the mandatory provisions of § 3 of the FAA, a trial court is

required to take action by staying the proceedings so that the parties can

arbitrate their dispute. 7

7I question whether the Supreme Court's decision in Spizzirri,
supra, may have, to some extent, overruled our own caselaw on this issue.
As noted above, in reaching its conclusion in Spizzirri, supra, the
Supreme Court relied on the text of § 3 of the FAA, which expressly states
that, "on application of one of the parties," the trial court must "stay the
trial of the action until such arbitration has been had in accordance with
the terms of the agreement." (Emphasis added.) In contrast, our caselaw
on this issue has consistently held that, after a party has moved to compel
arbitration, a trial court has the option of staying or dismissing an action.
See, e.g., Macon Cnty. Greyhound Park, Inc. v. Hoffman, 226 So. 3d 152,
157 (Ala. 2016) (recognizing that " ' "trial courts are required to stay or
dismiss proceedings and to compel arbitration when the parties have
entered into a valid contract containing an arbitration agreement …." ' "
(quoting American Fam. Life Assurance Co. of Columbus v. Parker, 92
So. 3d 58, 64 (Ala. 2012), quoting in turn Green Tree Fin. Corp. of
Alabama v. Vintson, 753 So. 2d 497, 502 (Ala. 1999))); CitiFinancial Corp.
v. Peoples, 973 So. 2d 332, 341 (Ala. 2007) (holding that, "[o]n remand,
the trial court shall grant the motion to compel arbitration and either
issue a stay of these proceedings pending arbitration or dismiss the
17
SC-2024-0440

Based on the foregoing, there can be no doubt that the trial court in

this case had jurisdiction to take action to enforce the parties' agreement

to resolve their dispute either through mediation or arbitration. It is for

this reason that I agree with the main opinion that the summary

judgment in favor of the Keenums, disposing of the action, with prejudice,

was erroneous and that this case must be remanded.

case"); and Ameriquest Mortg. Co. v. Bentley, 851 So. 2d 458, 462 (Ala.
2002) (recognizing that "[a] trial court is required to stay or dismiss
proceedings and to compel arbitration if the parties have entered into a
valid contract containing an arbitration agreement" (citing Ex parte
Colquitt, 808 So. 2d 1018, 1022 (Ala. 2001))).

It is unclear to me whether our line of cases might still have some
application if neither party has requested a stay. In that scenario, it is
possible that a trial court might still have some discretion to either
dismiss or stay an action. On the other hand, there are significant
prudential reasons for a stay rather than a dismissal of an action pending
the outcome of an arbitration proceeding, as explained by the Supreme
Court in Spizzirri. See 601 U.S. at 477-78.

Regardless, even if a trial court could properly dismiss an action
while arbitration is being conducted, such a dismissal would still be
without prejudice given that the entire point of compelling arbitration is
to allow the parties to receive a decision on the merits from the arbitrator.
18