Reference no: EM133276100

Question: Bruce, a franchisee of Terminix International Company. The plan provided that Allied-Bruce would "protect" Gwin's house against termite infestation, reinspect periodically, provide additional treatment if necessary, and repair damage caused by new termite infestations. Terminix International guaranteed the fulfillment of these contractual provisions. The plan also provided that all disputes arising out of the contract would be settled exclusively by arbitration. Four years later, Gwin had Allied-Bruce reinspect the house in anticipation of selling it. Allied-Bruce gave the house a "clean bill of health." Gwin then sold the house and transferred the Termite Protection Plan to Dobson. Shortly thereafter, Dobson found the house to be infested with termites. Allied-Bruce attempted to treat and· repair the house, using materials from out of state, but these efforts failed to satisfy Dobson. Dobson then sued Gwin, Allied-Bruce, and Terminix International in an Alabama state court. Allied Bruce and Terminix International asked for a stay of these proceedings until arbitration could be carried out as stipulated in the contract. The trial court refused to grant the stay. The Alabama Supreme Court upheld that ruling, citing a state statute that makes predispute arbitration agreements unenforceable.

The court found that the Federal Arbitration Act, which preempts conflicting state law, did not apply to this contract because its connection to interstate commerce was too slight. Was the Alabama Supreme Court correct? Explain.