author: HARWOOD, Justice. BOLIN, Justice

text:
    Pete M. ROBBINS v. Terrill W. SANDERS, as administrator of the estate of Mary C. Bailey, deceased; and as administrator of the estate of James B. Bailey, deceased.
    1040437.
    Supreme Court of Alabama.
    Oct. 21, 2005.

      Barnes F. Lovelace, Jr., of Harris, Cad-dell & Shanks, P.C., Decatur, for appellant.
    Kay L. Cason of Gorham & Cason, Birmingham, for appellee.
   HARWOOD, Justice.

This is the second appeal resulting from an action brought by the respective personal representatives of the estates of the two minority stockholders in Corridor Enterprises, Inc., against Pete M. Robbins, the majority shareholder in the corporation. The plaintiffs asserted individual claims on behalf of the estates and shareholder-derivative claims on behalf of the corporation. For a full discussion of the factual and procedural history of the lawsuit, the details of the order of the Jefferson Circuit Court entered following a bench trial awarding damages to the shareholder estates and Corridor Enterprises against Robbins and the seven issues Robbins raised on his appeal, see our opinion in Robbins v. Sanders, 890 So.2d 998 (Ala.2004) (“Robbins I”). We will hereinafter discuss the facts and procedural events only as necessary for our discussion of the issues presented on this second appeal.

In Robbins I we agreed with Robbins that any tort claims the husband and wife minority stockholders, James B. Bailey and Mary C. Bailey, were entitled to assert against Robbins during their lifetime, but which were not the subject of any action filed by them during their lifetimes, were extinguished at the time of their deaths, pursuant to the “survival” provisions of § 6-5-462, Ala.Code 1975. We explained, however, that this case actually involved no such tort claims:

“[W]e do not read the complaint as stating a claim on behalf of James and Mary Bailey individually; we read the complaint as asserting those claims on behalf of the estates of James Bailey and Mary Bailey. When this action was filed, James Bailey and Mary Bailey were deceased; the estates of James Bailey and Mary Bailey were the minority shareholders in Corridor Enterprises. It is the estates that alleged that Robbins had breached the fiduciary duties owed them as minority shareholders in the corporation and that Robbins was hable for the tort of oppression and trying to squeeze them out of the corporation; therefore, § 6-5-462, Ala.Code 1975, does not bar the tort claims brought by those estates.”

890 So.2d at 1011.

We then noted:

“However, components of the damages awards described in the trial court’s order relate to activities that occurred before the decedents died. To the extent that those damages arise from tort injuries sustained by the individual decedents before their deaths and for which no action was commenced during their respective lives, those damages are not recoverable. As stated above, the tort claims of the decedents were extinguished upon their deaths because no action was then pending. § 6-5-462, Ala.Gode 1975. If the claims are extinguished, then all possibility of recovering damages for those claims is also extinguished. Thus, the trial court’s judgment insofar as it awards damages must be reversed and this cause remanded for a new determination of damages. On remand, we instruct the trial court to determine the extent, if any, to which any damages awarded to the corporation or to the estates in its order ... arose from tort injuries sustained by the individual decedents before their respective deaths and are, therefore, not recoverable in this action.”

890 So.2d at 1011-12.

Our opinion in Robbins I also disposed of Robbins’s contention that “the claims asserted by the estates that are not derivative claims are barred by the two-year statute of limitations found in § 6-2-38, Ala.Code 1975.” 890 So.2d at 1012. Robbins argued that the undisputed evidence revealed that the Baileys knew enough facts during their lifetimes, and more than two years before the action was filed, to trigger the running of the two-year statute of limitations. Quoting Jefferson County Truck Growers Ass’n v. Tanner, 341 So.2d 485, 488 (Ala.1977), Robbins argued that “the Baileys had ‘such knowledge ... sufficient to provoke inquiry in reasonable minds which would have led to the facts on which the claims in this action are based.’ ” 890 So.2d at 1012. We answered that contention as follows:

“As previously noted, James Bailey and Mary Bailey have not asserted personal claims against Robbins. The claims of breach of fiduciary duty and squeeze-out/oppression asserted in this action were asserted by the estate of James Bailey and the estate of Mary Bailey, not by James Bailey and Mary Bailey. Thus, the issue to be considered is when the minority shareholders had knowledge of, or had reason to know of, the activities that resulted in their alleged injuries.
“The estates of James Bailey and Mary Bailey became minority shareholders in Corridor Enterprises in 1997, after James and Mary died.”

890 So.2d at 1012.

We went on to explain that the evidence established that Robbins had engaged in tortious conduct toward the minority shareholders “after the estates became the minority shareholders in Corridor Enterprises.” Id.

“The minority shareholders filed their complaint on August 4, 1998, within approximately a year of becoming shareholders and in the same year that many of the above-described activities occurred. Therefore, the estates’ claims of breach of fiduciary duty and squeeze-out/oppression were not time-barred to the extent those claims sought to recover damages for injuries occurring to the estates and not to the decedents. However, as discussed above, the estates are not entitled to recover any damages based on claims that Robbins breached his fiduciary duty to the Baileys or on claims that Robbins attempted to squeeze out or oppress the Baileys while they were minority shareholders.”

890 So.2d at 1012-13.

We also addressed the “survivability” issue and the statute-of-limitations issue “in the context of the shareholder-derivative claim asserted by the estates on behalf of Corridor Enterprises.” 890 So.2d at 1013. Our analysis and determinations on those issues were as follows:

“That derivative claim was not defeated by the Baileys’ deaths, but any derivative claim that arose during the Baileys’ lives and asserted by the estates in this action must be one that the Baileys could have enforced, were they alive to do so.15 See § 6-5-464, Ala.Code 1975, providing for survival of unfiled equitable claims when ‘but for their [deceased persons’] death, [they] could have enforced such claims.’ ...
“In its order, the trial court does not specifically address whether the Baileys, during their lifetimes, had notice of all or some of the wrongful acts directed at the corporation and attributed to Robbins more than two years before they died. However, Robbins argued the limitations bar in support of his motion for a new trial; the trial court denied the motion. The trial court heard ore tenus evidence. Thus, any conflicting evidence as to the extent of the Baileys’ knowledge of Robbins’s activities during their lifetimes was resolved by the trial court in favor of the estates, as shareholders. The trial court was in the best position to weigh the evidence. Every presumption will be indulged in favor of the trial court’s findings; those findings were not palpably wrong, and they will not be disturbed on appeal. Jefferson County Truck Growers Ass’n v. Tanner, 341 So.2d 485, 490 (Ala.1977); Lockett v. Coleman, 293 Ala. 613, 308 So.2d 689 (1974).
“ 15Shareholder-derivative actions are historically equitable in nature. Finance, Inv. & Rediscount Co. v. Wells, 409 So.2d 1341, 1341 (Ala.1981). All equitable claims upon which no action has been filed survive in favor of the personal representative of a decedent who, but for death, could have enforced such claims. § 6-5-464, Ala.Code 1975. Therefore, the shareholder-derivative claim asserted by the estates in this action does not present a survivability problem.”

890 So.2d at 1013.

On another point, we agreed with Robbins’s contention that minority shareholders are not entitled to recover damages in a shareholder-derivative action. “[A]n award of damages directly to the minority shareholders on a shareholder-derivative claim is improper” because “the individual shareholders may not share in the corporation’s recovery on the shareholder-derivative claims.” 890 So.2d at 1014. Consequently, because “every award of damages as made by the trial court was ‘in favor of Corridor Enterprises, Inc. and the plaintiffs’ ” we held that “the manner in which the trial court structured its damages award is improper.” 890 So.2d at 1014.

“We are unable to determine whether the trial court intended all or some portion of the awards made ‘in favor of Corridor Enterprises, Inc. and the plaintiffs’ to represent a recovery for the estates on their claims or whether all of those awards were made on the basis of the shareholder-derivative claims. We point out that we find no error in the trial court’s determination that Robbins is hable on the shareholder-derivative claims and no error in the trial court’s determination that Robbins is liable for oppression and attempting to squeeze out the minority shareholders (the estates). We simply find that the trial court’s order, as it pertains to damages, is improper.
“As noted earlier, we reverse the judgment and remand this cause on the issue of damages. On remand, we instruct the trial court to clarify its order and, if necessary, to correct the amount of damages awarded. The trial court should consider whether awards should be made to the estates and Corridor Enterprises separately, or, alternatively, whether only the language of the order need be altered. We express no opinion on these issues; we simply point them out for the trial court’s consideration.”

890 So.2d at 1014.

Lastly, we declined to address on the merits Robbins’s contention that the punitive damages assessed against him in favor of Corridor Enterprises and the Baileys’ estates in the amount of $750,000 were excessive, because “one of the components required for our review of a punitive-damages award is a consideration of the ratio of the punitive damages to the compensatory damages,” and “the amount of compensatory damages or punitive damages or both, may change on remand.” 890 So.2d at 1016.

On remand, the Jefferson Circuit Court directed the parties to file written briefs stating their respective positions and on September 3, 2004, following receipt and consideration of those briefs, the trial court issued an order noting this Court’s instructions in Robbins I and undertaking to restate and restructure damages in accordance with the court’s understanding of those instructions, resulting in awards to the minority-shareholder estates, on the one hand, and to Corridor Enterprises, on the other hand, allocating between them the same total damages the court had awarded in the order that was the subject of Robbins I. In the process, the court stated its “specific determination ... that there were no damages requested by the minority shareholders, or ordered by this Court to the minority shareholders that arose prior to the decedents’ deaths.”

On this second appeal from that award, Robbins again raises seven issues, which he frames as follows:

“I. Whether the trial court improperly awarded damages to the minority shareholders for derivative claims?
“II. Whether the plaintiffs’ claims were barred by Section 6-5-462, [Ala.Code 1975,] in that certain claims asserted by the plaintiffs did not survive the deaths of the plaintiffs?
“III. Whether there was substantial evidence presented at the trial that would authorize the award of punitive damages to the plaintiffs and whether the amount of punitive damages awarded was excessive?
“IV. Whether the plaintiff estates can recover for the tort of squeeze-out and oppression since no claim for squeeze-out and oppression was pending at the time of the Baileysf] death?
“V. Whether the award of attorney’s fees based on the tort claim of squeeze-out and oppression was improper?
“VI. Whether the trial court properly allocated and awarded damages to the plaintiffs per [Robbins I ]?
“VII. Whether certain of the plaintiffs [sic] claims were barred by the applicable statute(s) of limitations?”

(Robbins’s brief, p. 11.)

A.

We first address Robbins’s issue V: “Whether the award of attorney’s fees based on the tort claim of squeeze-out and oppression was improper?”

In arguing this proposition, Robbins properly states that “[t]he trial Court’s September 3, 2004, Order continues to award plaintiffs’ attorney fees” in the same amount as did the January 24, 2003, order from which the appeal in Robbins I was taken. In its later order the trial court did not revisit the award of attorney fees, thus leaving the attorney-fee award unchanged by virtue of the concluding sentence of the order: “All other provisions of the Order entered by this Court on January 24, 2003,[] shall remain unaltered and in full force and effect.”.

The challenge Robbins now asserts to the attorney-fee award could just as well have been presented in Robbins I; the error he claims attends the attorney-fee award was then fully ripe for review and could have been addressed by this Court. Robbins did not raise it in any way on that occasion; consequently the issue is deemed to have been waived. Hitt v. State Pers. Bd., 873 So.2d 1080 (Ala.2003); Ex parte Handley, 494 So.2d 24 (Ala.1986); and Ex parte Army Aviation Ctr. Fed. Credit Union, 477 So.2d 379 (Ala.1985).

B.

We next address Robbins’s issues II and IV: “Whether the plaintiffs’ claims were barred by Section 6-5-462, [Ala.Code 1975,] in that certain claims asserted by the plaintiffs did not survive the deaths of the plaintiffs?” and “Whether the plaintiff estates can recover for the tort of squeeze-out and oppression since no claim for squeeze-out and oppression was pending at the time of the Baileysf] death?”

In arguing issue II Robbins references the fact that “any claim of squeeze-out and oppression asserted on behalf of the Baileys was extinguished at the time of their deaths,” citing Robbins I*'and asserts that, despite the trial court’s explicit declarations to the contrarys “[c]learly the trial court is here making an award for a tort damage sustained by the Baileys before their demise.” (Robbins’s brief, pp. 30-31.) As noted, the trial court made the specific determination in its September 3, 2004, order that the minority-shareholder estates had not requested, and the court had not ordered, any damages that accrued before the deaths of Mr. and Mrs. Bailey. In its order of November 12, 2004, denying Robbins’s postjudgment motions, the court reiterated that, “[a]s this Court has found that there were no tort damages requested by the minority shareholders, or ordered by this Court to the minority shareholders that arose prior to the decedents’ death, no damages were awarded inappropriately. Likewise, no tort damages belonging to the Baileys prior to their demise were the basis for any awards to the Corporation.” (Emphasis in original.) As also earlier noted, in Robbins I we instructed the trial court on remand “to determine the extent, if any, to which any damages awarded to the corporation or to the estates in its order of January 27, 2003, arose from tort injuries sustained by the individual decedents before their respective deaths and are, therefore, not recoverable in this action.” 890 So.2d at 1012 (emphasis supplied). Obviously, we recognized that the trial judge might determine that none of the damages awarded to the corporation or to the estates arose from tort injuries sustained by the Baileys before their deaths. We remanded the case for the trial court “to clarify its order and, if necessary, to correct the amount of damages awarded.” 890 So.2d at 1014. In -response to that instruction, the trial court has declared that none of the damages it had awarded related to injuries sustained by the Baileys individually during their lifetimes, and Robbins now. simply argues that because the tort claims asserted in the complaint referred to conduct by Robbins beginning in 1991, “there is only one conclusion that can be drawn from the language of the plaintiffs second amended complaint and the trial Court’s order: facts and injuries that occurred between 1991 and September 11, 1997, were taken into account when the trial court awarded various, tort damages in its January 24, 2003, September 3, 2004, and November 4, 2004, Orders.” (Robbins’s brief, pp. 33-34.) This .ad hoc argument is simply insufficient to discredit the trial court’s unequivocal statements to the contrary.

In essence, Robbins does not actually argue a survivability issue in connection with issue II, that issue having been resolved in Robbins I; he simply argues that the trial court must have included within its award damages that had accrued to the Baileys during their lifetimes but that were extinguished by their deaths.

In connection with issue IV, Robbins likewise simply argues thát because the trial court has now again determined that Robbins received excessive compensation from Corridor Enterprises hi the amount of $258,768.57, as determined by the trial court’s January 27, 2003, order but has determined that only $66,477.50 of that amount occurred after the estates became shareholders, the continuation of an award in the same total amount, even though $235,036.10 of the award is now allocated to the corporation, shows that “[cjlearly the trial Court is here making an award for a tort damage sustained by the Baileys before their demise.” Alternatively, Robbins argues that “the trial Court’s current Orders are drafted in such a poor form that making a determination whether any other awards included tort damages sustained by the Baileys before the deaths is impossible.” (Robbins’s brief, p. 42.) These generalized arguments again fail to demonstrate error in the face of the trial court’s explicit declarations to the contrary.

C.

We next address Robbins’s issue VII: “Whether certain of the plaintiffs [sic] claims were barred by the applicable statute(s) of limitations?”

In Robbins I, Robbins asserted as one of his issues that “[t]he plaintiffs’ tort and equitable claims are barred by the applicable two-year statute of limitations.” 890 So.2d at 1008. He now argues that “[t]hose claims that are either tort or equitable claims are barred by the applicable statute of limitations.” (Robbins’s brief, p. 47.) He also argues that the Baileys had sufficient knowledge more than two years before the filing of the action by their estates of certain acts allegedly committed by Robbins so as to cause their tort claims to accrue during their lifetime and to start the running of the statutory limitations period. Our discussion and determination of these issues in Robbins I foreclose their attempted resurrection by Robbins on this appeal, because of the bar created by the doctrine of the law of the case. See Lyons v. Walker Reg’l Med. Ctr., 868 So.2d 1071, 1077 (Ala.2003).

D.

We next address Robbins’s issues I and VI: “Whether the trial court improperly awarded damages to the minority shareholders for derivative claims?” and “Whether the trial court properly allocated and awarded damages to the plaintiffs per [Robbins I ]T’

The central theme of Robbins’s arguments in support of these issues is that the same conduct cannot serve as the basis for a derivative action, which asserts harm only as to the corporation, and also the basis for the tort claims of squeeze-out and oppression, which harm only the minority stockholders. (Robbins’s brief, p. 22.) We agree with Robbins that we so held in Robbins I and that was why we determined that “[b]ecause each award of damages was made jointly to the corporation and to the minority shareholders, the manner in which the trial court structured its damages award [was] improper.” 890 So.2d at 1014. As noted, we remanded for clarification, instructing the trial court to “consider whether an award should be made to the estates and Corridor Enterprises separately, or, alternatively, whether only the language of the order need be altered.” Id.

We now consider Robbins’s arguments, directed to the various claims and associated damages awards set out in the trial court’s order of September 3, 2004:

1. Excessive Compensation

The trial court awarded a total of $258,768.57 “for Robbins’s fraudulent taking of excessive salaries or compensation” over an extended period of time, both before and after the Baileys’ deaths. The court determined that the amount of excessive compensation Robbins received after September 1997 totaled $66,477.50 and of that amount awarded the minority-shareholder estates 35.7 percent, representing their percentage of stock ownership, for a total of $23,732.47. The remaining damages for excessive compensation, totaling $235,036.10, were awarded to Corridor Enterprises based on its derivative claim.

Robbins asserts that in their complaint the plaintiffs characterized their claim of excessive compensation “as a breach of fiduciary duty tort claim,” but he goes on to state only that the $66,477.50 identified as damages occurring after the estates became the minority stockholders “is more in line with this Court’s Opinion and may be due to be further reduced if awarded at all.” (Robbins’s brief, pp. 28-29.) Robbins does not otherwise discuss whether he could have obtained some of the compensation that was determined to have been excessive in a manner that might support recovery for minority stockholder squeeze-out or oppression, and he does not challenge the plaintiffs’ characterization of the claim as a tort claim as opposed to a derivative claim.

Robbins does not demonstrate that the excessive-compensation damages, awarded for fraudulent misconduct by Robbins extending over a number of years and involving various separate fraudulent actions and suppressions, represents “the same conduct.” It is the obligation of an appellant adequately to identify and to argue the nature of any asserted error, citing in the process relevant supporting legal authority. University of South Alabama v. Progressive Ins. Co., 904 So.2d 1242 (Ala.2004); Beachcroft Props., LLP v. City of Alabaster, 901 So.2d 708 (Ala.2004).

In this particular instance, Robbins has failed to identify reversible error affecting the trial court’s award of excessive-compensation damages for both a tort claim and a derivative claim. In Robbins I, we noted that a classic illustration of squeeze-out/oppression would be that the majority stockholder(s) could drain off the corporation’s earnings by paying exorbitant salaries and bonuses to the majority shareholder officers. 890 So.2d at 1015. Assuming that payment of excessive salaries or compensation would give rise to a claim of minority shareholder squeeze-out or oppression, Robbins does not demonstrate reversible error in the allocation of the bulk of the award of damages for excessive compensation to the corporation. “The party alleging error must not only establish error, but must also show that he was probably prejudiced by the error.” Johnson v. Langley, 495 So.2d 1061, 1065 (Ala.1986).

“No error ... in anything done or omitted by the court ... is ground for granting a new trial or for setting aside a verdict or for vacating, modifying, or otherwise disturbing a judgment or order, unless refusal to take such action appears to the court inconsistent with substantial justice. The court at every stage of the proceeding must disregard any error or defect in the proceeding which does not affect the substantial rights of the parties.”

Rule 61, Ala. R. Civ. P.

“No judgment may be reversed or set aside, nor any new trial granted in any civil or criminal case ... for error as to any matter or pleading or procedure, unless in the opinion of the court to which the appeal is taken ... after an examination of the entire cause, it should appear that the error complained of has probably injuriously affected substantial rights of the parties.”

Rule 45, Ala. R.App. P. “Before reversal of the judgment may be had it must appear to the court that the error complained of has probably ‘injuriously affected the substantial rights of the parties.’” Lakey v. State, 258 Ala. 116, 121-22, 61 So.2d 117, 122 (1952).

Robbins, as the owner of 64.3 percent of the stock of Corridor Enterprises, will be entitled to share, to the extent of his ownership interest, in the damages awarded Corridor Enterprises. Accordingly, he cannot show that any error associated with allocating damages to the corporation will probably injuriously affect his substantial rights; were those same damages to be awarded entirely to the minority-shareholder estates, he would not enjoy a similar right of participation. It is to be noted that Robbins does not contend that an award of $258,768.57 for excessive compensation is unsupported by the evidence or otherwise unwarranted, apart from his contention that the amount necessarily and improperly includes an award for tort damages for harm sustained by the Baileys before their deaths.

2. Conversion

In its September 3, 2004, order, the trial court awarded damages “for conversion of monies loaned to Corridor Enterprises in September 1998 in the amount of $119,005,” thus establishing that the damages awarded on the conversion claim did not relate to any tortious wrong done the Baileys during their lifetimes. The trial court identified these damages as being “due to the corporation on its derivative claims.” Nonetheless, the trial court concluded that “[t]his total amount [i.e., $119,005] can be allocated between the corporation and the minority shareholders based on the percentage of the corporation owned by the minority shareholders,” with the result that “[t]he minority shareholders are awarded 35.7% or $42,484.70 for their specific claims of oppression and squeeze-out. The remaining amount— $76,520.30 — is awarded to Corridor Enterprises based on its derivative claims against Robbins while acting in his fiduciary capacity for the corporation.”

Thus, the court split the damages awarded on the derivative claim of conversion purely on the basis of the percentage of shares in the corporation owned by the estates and those owned by Robbins, although the damages were being awarded for the same conduct. This is contrary to our mandate on remand in Robbins I, that the trial court conduct “further proceedings consistent with this opinion,” 890 So.2d at 1016, which opinion included our conclusions that “an award of damages directly to the minority shareholders on a shareholder-derivative claim is improper” and that “the individual shareholders may not share in the corporation’s recovery on the -shareholder-derivative claims.” 890 So.2d at 1014. Accordingly, we are obliged to reverse this portion of the trial court’s September 3, 2004, order but, given that there is no challenge as to the amount of the award and that the trial court acknowledges that the entire amount is due Corridor Enterprises as a recovery on the shareholder-derivative conversion claim, we need not again remand for a revision of this component of the total compensatory-damages award. Rather, we simply declare that the entire amount of $119,005 is awarded to Corridor Enterprises.

3. Tax Penalties

The trial court awarded damages in the amount of $111,180 for “penalties [which had] accrued as a result of Robbins’s failure to file corporate tax returns for capital gains that originated in 2001.” The best we can tell from the record, the tax penalties are solely the legal liability of Corridor Enterprises, and the minority-shareholder estates have no exposure with respect to those penalties. The ultimate payment of those tax penalties, will reduce the assets of the corporation; therefore, indirectly, that loss will ultimately be visited upon all of the shareholders, including the minority-shareholders’ estates, but, as we explained in James v. James, 768 So.2d 356, 358 (Ala.2000), a case we discussed in Robbins I, 890 So.2d at 1014:

“[I]t has also been held that when a plaintiffs status as a shareholder is essential to his claims for damages, including damages based on claims of suppression and oppression, the claims are derivative claims and must be brought on behalf of the corporation. Therefore, ‘a minority shareholder cannot parlay a wrong committed primarily against the corporation, which gives rise to a derivative claim only, into a personal recovery of damages under a squeeze-out theory by simply stating that the injury to the corporation is also “unfair” to him as well.’ Stallworth [v. AmSouth Bank of Alabama], 709 So.2d [458] at 467 [(Ala.1997)].”

In its order of September 3, 2004, the trial court concluded that Robbins’s breach of fiduciary duty by failing to file the corporate tax returns in question “resulted in lost revenue directly to the minority shareholders as well as the corporation. This total amount can be allocated between the corporation and the minority shareholders based on the percentage of the corporation owned by the minority shareholders.” Accordingly, the court allocated 35.7% of the award, $39,691.26, to the estates “for their specific claims of oppression and squeeze-out.” Given our analysis and mandate in Robbins I, we cannot countenance this splitting of what is manifestly a shareholder-derivative claim into a combined-but-dissected derivative claim and a claim for oppression and squeeze-out. Therefore, we again order allocated to Corridor Enterprises the entire amount of the award as damages for the tax penalties it incurred as a result of Robbins’s breach of fiduciary duty.

We are not unmindful of the fact that in James, supra, we approved an award by the trial court which placed a portion of the derivative-claim damages equal to the percentage of stock ownership of the minority shareholder in trust for the minority shareholder. 768 So.2d at 359. The justification for that approach in James was that, because shareholder-derivative claims are equitable in nature (see also Robbins I, 890 So.2d at 1013 n. 15) and “by the time the court entered its judgment [the corporation] had already been liquidated and [the minority shareholder] had already received value for his 41.5% interest,” 768 So.2d at 359, it would not be equitable to give the damages to the already liquidated corporate entity.

“In order to fashion an equitable remedy, the damages would need to be passed through [the corporation] directly to the shareholder.... In an equity proceeding, such as the present one, the judgment can be molded ‘so as to adjust the equities of all parties and to meet the obvious necessities of each situation.’ ”

768 So.2d at 359.

In the present ease the trial court has ordered Corridor Enterprises dissolved and has appointed a receiver to assist in that effort. Robbins I, 890 So.2d at 1008. As of the date of the compilation of the record in this present appeal and according to the parties’ briefs, the receiver has marshaled the assets of the corporation and is presently holding land-sale proceeds in excess of $900,000 and title to other land owned by the corporation for which a sale in the amount of $696,420 is pending. (Robbins’s reply brief, p. 20; Sanders’s brief, p. 38.) Accordingly, whatever moneys Corridor Enterprises may succeed in collecting from Robbins on its derivative-claim awards will simply join those moneys as assets currently being held by the receiver of the corporation and thus be available for ultimate distribution. Further, we are mindful of the fact that in its January 27, 2003, order the court ordered that the land-sale proceeds then being held by the receiver “be retained and applied toward the payment of this judgment or used for payment of reasonable expenses incurred in connection with the liquidation of the remaining assets of the corporation.”

L Loss of Rental Income; Diversion of Corporate Opportunities.

The only individualized treatment Robbins accords these claims in his brief is this statement in his principal brief: “The plaintiffs’ claims of loss of rental income and diversion of corporate opportunities are also tort claims filed by the plaintiffs’ [sic] in this case. Therefore, under this Court’s Opinion the plaintiffs should only recover for injuries sustained after September 11, 1997.” (Robbins’s brief, p. 29.) Robbins does not otherwise challenge any feature of these claims or the compensatory damages, awarded in connection with them and, as noted, the trial court has declared emphatically that the amounts awarded do not include any damages sustained before September 11, 1997. Because, as explained previously, Robbins suffers no prejudice with respect to any allocation to Corridor Enterprises of a portion of tort-claim damages that should go entirely to the minority-shareholder estates, he fails to demonstrate reversible error in connection with the trial court’s division of the damages awarded for these two claims between the minority-shareholder estates and the corporation.

5. Corporate Waste

Correctly recognizing that a claim of corporate waste is a derivative claim under Alabama law (see Galbreath v. Scott, 433 So.2d 454, 457 (Ala.1983)), the trial court allocated solely to Corridor Enterprises the entire award for this wrong in the amount of $1,830,400. We do not discern in Robbins’s briefs any challenge to this component of the trial court’s award.

With respect to this award, however, and the award for excessive compensation, Robbins also argues that the trial court’s order whereby, according to Robbins, the minority-shareholder estates “recover 35.7% of each award directly and will then receive an additional 35.7% of the remainder in the course of the dissolution of the corporation” allows “a double recovery.” (Robbins’s brief, p. 46.) Robbins cites no caselaw in that regard and does not otherwise elaborate upon the contention, except to state that a double recovery for the minority-shareholder estates would be the result under our holding in Robbins I. As explained above, we have transferred from the minority-shareholder estates to the corporation all of the damages allocated by the trial court to the minority-shareholder estates resulting from the claims of conversion and the payment of tax penalties, and we have explained why, given that Robbins chooses to characterize the claims of excessive compensation, loss of rental income, and diversion of corporate opportunities as tort claims accruing to the minority-shareholder estates, any error in the allocation of a portion of those damages to the corporation would be error without injury as far as Robbins is concerned. Finally, the damages awarded by the trial court for the remaining claim of corporate waste are assigned exclusively to the corporation. Thus, there remains no field of operation for Robbins “double recovery” assertion, even if the assertion would otherwise have merit.

E.

We next address Robbins’s issue III: “Whether there was substantial evidence presented at the trial that would authorize the award of punitive damages to the plaintiffs and whether the amount of punitive damages awarded was excessive?”

The trial court’s September 3, 2004, order awards the minority-shareholder estates. a total of $750,000 as punitive damages “to punish Robbins for his egregious, willful, wanton, and reckless behavior.” The trial court expressly found that Robbins’s behavior “was specifically aimed at oppressing and squeezing-out the minority-shareholders.”

Although Robbins phrases this issue so as to contest both the evidentiary sufficiency for an award of punitive damages and the amount of punitive damages awarded, nowhere in his briefs does he offer any argument in support of the proposition that there was not substantial evidence authorizing an award of punitive damages. Moreover, in Robbins I, he raised no question concerning this sufficiency of the evidence to warrant punitive damages, arguing only that punitive damages of $750,000 were excessive. Therefore, as previously explained, Robbins has waived any challenge to the sufficiency of the evidence to support an award of punitive damages. Finally, the facts recited in Robbins I are clearly sufficient to support an award of punitive damages.

Turning to Robbins’s contention that the amount of punitive damages is excessive, we are mindful of our duty to conduct a de novo review in assessing a trial court’s punitive-damages award to determine whether the punitive damages are unconstitutionally excessive. National Ins. Ass’n v. Sockwell, 829 So.2d 111 (Ala.2002). In conducting our de novo review, we consider the “guideposts” established in BMW of North America, Inc. v. Gore, 517 U.S. 559, 116 S.Ct. 1589, 184 L.Ed.2d 809 (1996), and the factors set out in Hammond v. City of Gadsden, 493 So.2d 1374 (Ala.1986), and Green Oil Co. v. Hornsby, 539 So.2d 218 (Ala.1989).

In arguing that the punitive damages are excessive, Robbins argues that any award of punitive damages, regardless of amount, would be excessive given that, considering the amount of compensatory damages assessed against him, he is left with a large negative net worth. We have upheld compensatory damages against Robbins in the amount of $3,269,125.91. Of that amount, $3,056,557.73 is now allocated to the corporation, and Robbins, as a shareholder of 64.3% of the stock of Corridor Enterprises, potentially could receive that percentage of the corporation’s net assets after all debts and expenses upon dissolution and distribution.

The parties argue different analyses of the documentary and testimonial evidence adduced during the nonjury trial that began on July 29, 2002, and during the March 31, 2003, hearing on Robbins’s motion for a new trial, but, even accepting the maximum asset valuations contended for by the plaintiffs, and the minimum valuations they assert for Robbins’s liabilities, it is clear that the compensatory damages assessed against Robbins dwarf the most generous calculation of his assets. In that regard, we do not disregard that the receiver for Corridor Enterprises holds some $900,000 for ultimate distribution, subject to decrease by additional expenses and that there is the potential for a sale of acreage still held by the corporation for some $696,000. Even assuming a “best case scenario” whereby Robbins might ultimately receive 64.3 percent of those sums, that would net him only slightly more than $1,000,000, out of which he must pay the $212,568.18 allotted to the estates for compensatory damages. Robbins must pay $3,056,557.73 to the corporation by virtue of the derivative-shareholder claim damages. Even assuming some arrangement whereby he would only have to pay the sum of $1,091,191 to the corporation, representing the minority-shareholder estates’ 35.7 percent of $3,056,557.73, there is no plausible analysis of the evidence under which he would be anything less than some $200,000 short of that amount, even after having received maximum corporate distributions under the most optimistic scenario projected by the plaintiffs. Under any reasonable analysis, Robbins’s assets, other than the value of his holdings in Corridor Enterprises, do not exceed $100,000. Combined with the maximum distribution he might ultimately receive in the dissolution of Corridor Enterprises, his assets will be overwhelmed by the compensatory damages he is obligated to pay in this case, and he was unemployed as of the March 31, 2003, hearing. Even if all of Robbins’s testimony concerning his assets is disregarded as unworthy of belief, as the trial judge was entitled to do, and the plaintiffs’ evidence and assumptions relating to Robbins’s assets accepted, Robbins simply does not have assets to pay the compensatory damages, much less any of the punitive damages.

In Central Alabama Electric Cooperative v. Tapley, 546 So.2d 371, 377 (Ala.1989), we stated: “In the rarest cases, involving the most egregious conduct, juries should be entitled to punish defendants so severely as to destroy them; justice demands that. But in the typical punitive damages case, the award should punish without destroying. That, in a nutshell, is the way punitive damages and the civil justice system coexist.” (Footnote omitted.) Tapley, however, antedates the more definitive pronouncements by the United States Supreme Court concerning considerations that must attend an assessment of the possible excessiveness of punitive damages, beginning with BMW of North America, Inc. v. Gore, 517 U.S. 559, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996). Additionally, this Court, developing its own jurisprudence and attempting to understand and apply the United States Supreme Court’s more recent opinions on point, has spoken more definitively on the subject. As the trial court accurately noted in Sheffield v. Andrews, 679 So.2d 1052, 1055 (Ala.1996), “‘[relatively few Alabama cases have considered the reduction of punitive damages against an individual defendant. Most of the reported decisions focus on the financial position of a corporate defendant.’ ” In BMW of North America, Inc. v. Gore, 701 So.2d 507 (Ala.1997), on remand from the United States Supreme Court, we “suggested” that following our remand the trial court “might consider whether a punitive damages award that exceeds 10% of the defendant’s net worth crosses the line from punishment to destruction, particularly where the defendant’s conduct is not highly reprehensible.” 701 So.2d at 514. In Hillcrest Center, Inc. v. Rone, 711 So.2d 901 (Ala.1997), we ordered further reduction of a punitive-damages award that represented approximately 60% of the combined net worth of the individual defendant and the corporate defendants. “While not reaching an amount that would destroy the defendants, the punitive damages award does, under these circumstances, exceed what is necessary to ‘punish.’ ” 711 So.2d at 909. In Patel v. Patel, 708 So.2d 159 (Ala.1998), we affirmed a punitive-damages award that constituted approximately 7.5% of the individual defendant’s net worth, being of the opinion that “payment of this award will certainly sting, but ... it will not cripple the defendant financially.” 708 So.2d at 163.

In Williams v. Williams, 786 So.2d 477 (Ala.2000), this Court upheld a $200,000 compensatory-damages award against’ the athletic director of Alabama State University (“ASU”) in an action against him by an individual whom the defendant had persuaded to leave the position of head basketball coach at a Georgia university to serve as head basketball coach at ASU, by fraudulently representing that the individual was guaranteed more than a one-year term as head basketball coach. This misrepresentation was made despite the athletic director’s knowledge that the individual was not guaranteed more than a one-year term and despite instructions to the athletic director by the president of ASU to retract the portion of the job offer dealing with employment in excess of a year. We concluded that the evidence supported the jury’s apparent finding of promissory fraud. 786 So.2d at 480. The athletic director was shown to have a net worth of $59,903 so that “[sjubtraction of the $200,000 compensatory-damages award would bring his net worth to a negative $140,000.” 786 So.2d at 483. Despite finding substantial evidence of reprehensibility on the part of the defendant, this Court concluded that “[b]y showing that he will have a negative net worth of $140,000 after paying the compensatory-damages award we are affirming, the defendant athletic director has shown that any award of punitive damages would be excessive.” 786 So.2d at 483 (emphasis in original). Consequently, we ordered “a remittitur of all punitive damages; otherwise, the judgment will be reversed and the case remanded for a new trial.” 786 So.2d at 485.

More recently, in Orkin Exterminating Co. v. Jeter, 832 So.2d 25 (Ala.2001), we held that a punitive-damages award of approximately 10% of the corporate defendant’s net worth, “from misconduct during a single transaction not involving loss of life or limb,” 832 So.2d at 42, weighed in favor of finding the award excessive.

As recounted in Robbins I, Robbins’s wrongful conduct was extremely reprehensible and extended over a long period. Even though his wrongful conduct directed toward the Baileys during their lifetimes cannot be directly considered in assessing the reprehensibility of his conduct toward their subsequently established estates, that earlier conduct is relevant in demonstrating an unbroken pattern of intentional wrongful conduct. We recognize that the United States Supreme Court has stated that the degree of reprehensibility is “the most important indicium of the reasonableness of a punitive damages award” and that it was important in that regard whether the harm resulted from intentional malice, trickery, or deceit, as opposed to mere accident. Gore, 517 U.S. at 575, 116 S.Ct. 1589; State Farm Mutual Auto. Ins. Co. v. Campbell, 538 U.S. 408, 419, 123 S.Ct. 1513, 155 L.Ed.2d 585 (2003).

Although, as noted, we expressed the opinion in Tapley that “[i]n the rarest cases involving the most egregious conduct, juries should be entitled to punish defendants so severely as to destroy them,” 546 So.2d at 377, we have never approved the application of that concept in an actual case and, in Williams, supra, despite the existence of reprehensible conduct, we concluded that a negative net worth resulting from the size of the compensatory-damages award necessitated the remittitur of all punitive damages. Payment in full of the compensatory damages in this case will destroy Robbins financially and, as we stated in Williams, 786 So.2d at 482, quoting Green Oil Co. v. Hornsby, 539 So.2d at 222, punitive damages “must not exceed an amount that would accomplish society’s goals of punishment and deterrence.”

Accordingly, as we did in Williams, we hold that because Robbins has shown that he will have a large negative net worth after payment of a substantial, but nonetheless incomplete, portion of the compensatory damages, he has shown that any award of punitive damages is excessive, and we are obliged to order a remittitur of all punitive damages; otherwise, the judgment will be reversed and the case remanded for a new trial.

Conclusion

We affirm the trial court’s judgment insofar as it awards attorney fees and awards compensatory damages based on excessive compensation, loss of rental income, diversion of corporate opportunities, and corporate waste. We reverse the judgment insofar as it awards damages for conversion and for the tax penalties incurred as a result of Robbins’s actions to the minority-shareholder estates, and we direct the trial court on remand to assign all of the damages awarded for conversion and tax penalties to Corridor Enterprises. Our affirmance is conditioned on the minority-shareholder estates filing with this Court, within 21 days of this opinion, a remittitur of all punitive damages. Otherwise, the judgment on the punitive-damages award will be reversed and the case remanded for a new trial on that issue. We remand this cause to the trial court for further proceedings consistent with this opinion.

AFFIRMED IN PART; AFFIRMED CONDITIONALLY IN PART; REVERSED IN PART; AND REMANDED WITH INSTRUCTIONS.

NABERS, C.J., and SEE, LYONS, and STUART, JJ., concur. .

BOLIN, J., recuses himself.

BOLIN, Justice

(statement of recusal).

At the inception of the original proceedings in this case in the trial court, I was serving as the Probate Judge of Jefferson County. In that capacity, I participated in the appointment of fiduciaries and/or successor fiduciaries who represent the minority-shareholder estates that are parties in this appeal. In doing so, I became aware of certain facts surrounding the litigation. Therefore, I have “personal knowledge of disputed evidentiary facts concerning the proceeding.... ” Canon 3.C.(l)(a), Canons of Judicial Ethics, and in accordance with those Canons, I respectfully recuse myself.

      . James Bailey died on February 9, 1997, at the age of 91, and Mary Bailey died on April 29, 1997, at the age of 85; administrators were appointed for their estates on September 27, 1997, and September 11, 1997, respectively. Robbins I, 890 So.2d at 1003.

      . The order was signed and endorsed “filed in open court” by the trial judge on January 24, 2003; it was stamped "filed in office” of the circuit clerk on January 27, 2003. The trial judge uses the first date in his later references to the order whereas this Court, as noted, identified the order in Robbins I by reference to the later date.

      . See 890 So.2d at 1008 for the list of issues Robbins raised in Robbins I.

      .This Court has granted Robbins’s motion requesting that the record on appeal, including the briefs of the parties, filed in Robbins I be incorporated in this appeal as a part of the record. Accordingly, we have available to us, and have reviewed where referenced by the parties or where otherwise appropriate, the record and appellate briefs filed in Robbins I.


source: Caselaw Access Project

author: SEE, Justice.

license: Public Domain

text:
    Ex parte BILL HEARD CHEVROLET, INC., and Chuck Berry. (In re Angela Dunlap v. Bill Heard Chevrolet, Inc., and Chuck Berry).
    1040546.
    Supreme Court of Alabama.
    Oct. 21, 2005.

      D. Edward Starnes III and Angela Holt of Lanier Ford Shaver & Payne, P.C., Huntsville, for petitioners.
    Jay E. Emerson, Jr., and Robert D. Lee of Higgs & Emerson, Huntsville, for respondent.

      . On March 9, 2005, this Court ordered answer and briefs on Bill Heard and Berry's petition for the writ of mandamus. In response to our order, the trial court placed Dunlap's action on its administrative docket.

   SEE, Justice.

Bill Heard Chevrolet, Inc., and Chuck Berry petition this Court for a writ of mandamus directing the trial court to vacate its order allowing discovery and to enter an order compelling arbitration. We grant the petition and issue the writ.

I.

On May 6, 2004,- Angela Dunlap negotiated with Bill Heard Chevrolet, Inc. (“Bill Heard”), to purchase a used Dodge Duran-go sport-utility vehicle. Dunlap arranged to pay for the Durango by trading in her Isuzu Rodeo sport-utility vehicle, the loan secured by which she had not paid off, and financing the balance. After filling out credit applications, Dunlap signed a “Retail Purchase Contract,” a “Bailment/Con-ditional Delivery Agreement,” and an arbitration agreement. Dunlap then left her Isuzu Rodeo with Bill Heard and took possession of the Durango.

Two weeks after she had left the dealership in the Durango, Bill Heard informed Dunlap that the trade-in value of her Rodeo and the price of the Durango needed to be adjusted so that she could qualify for financing. Dunlap returned to Bill Heard to sign a new series of documents, including a second “Retail Purchase Contract,” a second “Bailment/Conditional Delivery Agreement,” and a second arbitration agreement.

First Service Finance, Inc., which had financed Dunlap’s purchase of the Isuzu Rodeo, later repossessed Dunlap’s Rodeo from Bill Heard because of a lapse in payments on Dunlap’s loan secured by the Rodeo. Immediately after the Rodeo was repossessed, Bill Heard took the Durango back from Dunlap and told her that she did not qualify for financing.

Dunlap sued Bill Heard and its employee, Chuck Berry, alleging legal fraud, deceit, and conversion, as well as fraudulent, reckless, and negligent misrepresentation. Dunlap also alleged that Bill Heard and Berry had violated various provisions of the Truth-in-Lending Act and the Equal-CrediWOpportunity Act. In addition to seeking relief for herself, Dunlap asked the trial court to certify her lawsuit as a class action.

Bill Heard and Berry moved the trial court to stay the action and to compel Dunlap to submit her claims to arbitration. Citing the two arbitration agreements Dunlap signed, Bill Heard and Berry asserted the existence of a contract that calls for arbitration and that involves an interstate commercial transaction. In support of their motion, Bill Heard and Berry attached an affidavit from Edward D. Allen, the custodian of business records for Bill Heard. Allen’s affidavit states that Dunlap signed arbitration agreements in which she agreed to arbitrate any dispute between her, Bill Heard, and any of Bill Heard’s employees. Allen’s affidavit also attests that Chuck Berry was an employee of Bill Heard at the time of the transaction between Dunlap and Bill Heard.

Allen’s affidavit also states that the Du-rango had been registered as a lease vehicle in Oak Park, Michigan, until it was sold to a car dealer at an auction in Knoxville, Tennessee. Allen states that Bill Heard purchased the Durango from the car dealer in Tennessee and brought it to Alabama for the purpose of selling it. Allen attached 21 documents to his affidavit, including the two Retail Purchase Contracts, the two Bailment/Conditional Delivery Agreements, and the two arbitration agreements signed by Dunlap.

Dunlap responded by filing a brief in opposition to the motion to compel arbitration, which opposed Bill Heard and Berry’s motion on three grounds. First, Dunlap asserted that the contractual documents relating to the sale of the Durango were unenforceable because, she argued, the condition precedent in the contracts — financing — never occurred. Dunlap argued that the arbitration agreements were components of the Retail Purchase Contracts and were, therefore, also unenforceable. Second, Dunlap argued that “the entire transaction” was fraudulent and, as a result, the arbitration agreements are void. Third, Dunlap argued that the arbitration agreements do not cover her dispute because, she says, her claims are based on Bill Heard’s failure to pay off the loan on the Isuzu Rodeo that she had traded in on the Durango, not on the purchase of the Durango.

Dunlap asked the trial court to set a hearing on her request for class certification and to “permit the parties a reasonable period of time in which to submit evidence obtained through discovery pertinent to the determining factors.” Dunlap did not attach affidavits or any other supporting evidence to her brief to the trial court.

After hearing arguments and considering the briefs and accompanying evidentia-ry submissions, the trial court issued the following order on December 21, 2004:

“The Court is of the opinion that the Motion to Compel Arbitration is due to be STAYED pending limited discovery solely on the issue of whether the case should be compelled to arbitration. The Parties will have 120 days to conduct such discovery, after which the Court will reconvene to consider the Motion to Compel Arbitration.”

II.

Bill Heard and Berry ask this Court to vacate the trial court’s order allowing discovery and to direct the trial court to enter an order compelling Dunlap to arbitrate her claims. Bill Heard and Berry argue that they are entitled to an order compelling Dunlap to arbitrate her claims because, they say, she failed to introduce any evidence rebutting their pri-ma facie showing of the existence of a contract involving an interstate commercial transaction and calling for arbitration. Bill Heard and Berry also argue that the trial court exceeded its discretion by ordering a 120-day stay on the motion to compel arbitration because Dunlap never supplied evidence to support her claim that discovery on the issue of arbitration is necessary.

III.

A petition for a writ of mandamus is an appropriate means of challenging a trial court’s order continuing a motion to compel arbitration to allow discovery. Ex parte Walker Reg’l Med. Ctr., Inc., 825 So.2d 741, 744 (Ala.2001). However, a writ of mandamus is an extraordinary remedy. Ex parte Empire Fire & Marine Ins. Co., 720 So.2d 893, 894 (Ala.1998). Therefore, mandamus will not issue unless Bill Heard and Berry show: (1) a clear legal right to the relief sought; (2) an imperative duty upon the trial court to perform, accompanied by its refusal to do so; (3) the lack of another adequate remedy; and (4) the properly invoked jurisdiction of this Court. See Empire Fire & Marine Ins. Co., 720 So.2d at 894. Also, because Bill Heard and Berry seek to vacate a trial court’s discovery order, this Court will not issue the writ of mandamus unless it determines that “the trial court clearly exceeded its discretion.” Ex parte Ocwen Fed. Bank, FSB, 872 So.2d 810, 813 (Ala.2003).

Ex parte Greenstreet, Inc., 806 So.2d 1203 (Ala.2001), established the standard that applies when a party responds to a motion to compel arbitration by asking the trial court to delay ruling on the motion so that discovery can be conducted on the enforceability of the arbitration agreement:

“[I]f the party opposing a properly supported motion to compel arbitration desires discovery, that party must present a factually based predicate before a right to conduct discovery regarding matters that could invalidate the agreement to arbitrate arises. At a minimum, a party opposing a properly supported motion to compel arbitration and seeking discovery on issues that could invalidate the arbitration agreement must provide an affidavit describing the circumstances that are within its knowledge and that are relevant to its claimed defenses to arbitration.”

806 So.2d at 1209.

Thus, our inquiry into whether Bill Heard and Berry are entitled to the writ of mandamus consists of two components. This Court must first determine whether Bill Heard and Berry have “satisfied [their] burden of production by making a prima facie showing that an agreement to arbitrate exists in a contract relating to a transaction substantially affecting interstate commerce.” Greenstreet, Inc., 806 So.2d at 1209. If they satisfied their burden, “the burden of persuasion shift[ed] to the party opposing arbitration.” Green-street, Inc., 806 So.2d at 1209. Accordingly, we will then consider whether Dunlap presented evidence in opposition to the motion or presented a factually based predicate sufficient to invoke her right to conduct discovery.

IV.

A. Contract Calling for Arbitration

“ ‘ “[T]he party seeking to compel arbitration must prove ... the existence of a contract calling for arbitration.” ’ ” Brown v. Denson, 895 So.2d 882, 885 (Ala.2004)(quoting Owens v. Coosa Valley Health Care, Inc., 890 So.2d 983, 986 (Ala.2004)). When determining whether a contract calling for arbitration exists, this Court applies the “ ‘ordinary state-law principles that govern the formation of contracts.’ ” Oakwood, Mobile Homes, Inc. v. Barger, 773 So.2d 454, 459 (Ala.2000) (quoting First Options of Chicago, Inc., v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995)).

As support for their motion to compel arbitration, Bill Heard and Berry attached copies of the two arbitration agreements Dunlap signed in connection with the purchase of the Durango. Those agreements state in relevant part:

“[Dunlap] and [Bill Heard] agree that all claims, demands, disputes, or controversies of every kind or nature that may arise between them concerning any of the negotiations leading to the sale ... or financing of the vehicle, terms and provisions of the sale ... or financing agreement, arrangements for financing, ... or any other aspects of the vehicle and its sale ... or financing shall be settled by binding arbitration conducted pursuant to the provision of 9 U.S.C. Section 1 et seq. ... Without limiting the generality of the foregoing, it is the intention of [Dunlap] and [Bill Heard] to resolve by binding arbitration all disputes between them concerning the vehicle, its sale ... or financing, ... including disputes concerning the terms and conditions of the sale ... or financing, ... the terms and meaning of any documents signed or given in connection with negotiations for the sale ... or financing, any representations, promises or omissions made in connection with negotiations for the sale ... or financing of the vehicle. ...
“This Agreement is binding upon, and inures to the benefit of [Dunlap] and [Bill Heard] and the officers, employees, agents and affiliated entities of each of them. This Agreement will survive payment of [Dunlap’s] obligation and any termination, cancellation or performance of the transactions between [Dunlap] and [Bill Heard].”

Dunlap does not dispute that she signed the arbitration agreements, nor does she dispute that Berry, as an employee of Bill Heard, is included within the scope of those agreements. Instead, Dunlap argues that Bill Heard and Berry cannot prove that a contract calling for arbitration exists because, she argues, the arbitration agreements are components of the Retail Purchase Contracts, which she says were rendered unenforceable because of the nonoceurrence of a condition precedent to those contracts, namely, Dunlap’s qualifying for financing. Dunlap argues that Bill Heard and Berry cannot enforce arbitration agreements that are part of unenforceable contracts.

A provision in a contract “making the contract subject to the procurement of a loan to finance the purchase price is a valid condition precedent to performance.” Duncan v. Rossuck, 621 So.2d 1313, 1314 (Ala.1993). The law concerning the effect of a condition precedent is clear:

“ ‘[W]here the parties to a proposed contract have agreed that the contract is not to be effective or binding until certain conditions are performed or occur, no binding contract will arise until the conditions specified have occurred or been performed.’ ”

Ex parte Payne, 741 So.2d 398, 403 (Ala.1999) (quoting 17A Am.Jur.2d Contracts § 34 (1991)). Accordingly, when a contract makes securing financing a condition precedent to its performance, neither the contract nor any of its provisions become binding obligations unless and until financing is obtained. The Retail Purchase Contracts signed by Dunlap and Bill Heard in conjunction with the purchase of the Du-rango contain the following clause:

“[0]n a credit transaction the purchaser(s) [sic] offer is not accepted and the transaction is not consummated until (a) approval in writing by ... a responsible Bank or Finance Company.”

No valid contract can exist without the acceptance of an offer. Southern Energy Homes, Inc. v. Hennis, 776 So.2d 105 (Ala.2000). Thus, if the arbitration agreements signed by Dunlap and Bill Heard are to be considered a part of the Retail Purchase Contracts, the arbitration agreements are unenforceable. See Delta Constr. Corp. v. Gooden, 714 So.2d 975, 981 (Ala.1998) (“a person cannot merely pick and choose the provisions in a contract that he wants to apply”).

In arguing that the arbitration agreements are components of the Retail Purchase Contracts, Dunlap invites us to apply the principle this Court discussed in Weeden v. Asbury, 223 Ala. 687, 690, 138 So. 267, 270 (1931):

“[I]n the absence of anything to indicate a contrary intention, writings executed at the same time by the same parties for the same purpose, and in the course of the same transaction, are in the eye of the law one instrument, and will be received and construed together as constituting one contract and evidencing the intention of the parties.”

This contemporaneous-writing principle is a rule of construction this Court uses when it is “necessary to ascertain the intention of the parties.” Hunter-Benn & Co. v. Bassett Lumber Co., 224 Ala. 215, 218, 139 So. 348, 349 (1932). However, “[i]f a contract is unambiguous on its face, there is no room for construction and it must be enforced as written.” Southland Quality Homes, Inc. v. Williams, 781 So.2d 949, 953 (Ala.2000).

This Court takes note of the fact that the arbitration agreements and the Retail Purchase Contracts are part of a series of documents Dunlap and Bill Heard signed essentially contemporaneously. We also note that both sets of documents were executed for the same broad purpose: to govern Dunlap and Bill Heard’s obligations with respect to the sale of the Durango. However, the Retail Purchase Contracts Dunlap signed are not ambiguous when addressing the relationship of those contracts to the arbitration agreements:

“This contract expresses the entire agreement between the parties, all previous verbal or written communications between the parties with reference to the subject matter hereof, excluding [sic] Arbitration Agreement, are merged herein.”

The Retail Purchase Contracts expressly prohibit construing the arbitration agreements as part of the contracts. The Bailment/Conditional Delivery Agreement, also signed by Dunlap, stresses the independence of the arbitration agreement in even greater detail:

“The Arbitration Agreement remains effective and enforceable even if your offer is not accepted or credit is not approved, accepted, and funded. [F]unding of the Contract is not a condition precedent to enforceability of the Arbitration Agreement.”

In Lilley v. Gonzales, 417 So.2d 161, 163 (Ala.1982), we stated that, “where the parties express without ambiguity their intention, no court can alter the agreement, and no room for judicial construction is left.” Dunlap’s argument that the arbitration agreements are components of the Retail Purchase Contracts is contradicted by the unambiguous language in the documents she has signed. This Court cannot alter unambiguous language in a contract by applying a rule of construction that is contrary to the intentions of the parties. Lilley, 417 So.2d at 163 (“Where ... the language of the contract is unambiguous and plain in its expression, the court cannot alter the agreement by construction but rather must expound it as made by the parties.”). Thus, we hold that the arbitration agreements are not components of the Retail Purchase Contracts.

Accordingly, Dunlap incorrectly relies on Ex parte Payne, supra, and Ex parte Cobb, 781 So.2d 208 (Ala.2000), to argue that the nonoccurrence of the condition precedent — that she obtain financing — invalidates her agreement to arbitrate. In Payne, we held that the failure to satisfy the condition precedent rendered the arbitration clause unenforceable because the condition precedent and the arbitration clause were not only part of the same contract, but they both also appeared in a single document. Payne, 741 So.2d at 400. Thus, we stated that “in order for Jay Pontiac to compel arbitration of Payne’s counterclaims, the Retail Purchase Order containing the arbitration provision must be a binding contract.” Payne, 741 So.2d at 408.

Although Cobb held that a financing condition precedent in a retail buyer’s order rendered an arbitration provision in a separate lease agreement unenforceable, there was no evidence before this Court showing that the parties intended that the documents be treated as separate contracts. Instead, the evidence in the record showed that Serra Toyota viewed the Cobbs’ failure to obtain financing as having voided both agreements:

“[T]he record before this Court shows that, after the Cobbs’ financing request was rejected, Serra did not view the Lease Agreement as a binding contract. Attached to the Cobbs’ mandamus petition is a copy of the Lease Agreement containing the arbitration provision Serra seeks to enforce. Written across the first page of the Lease Agreement and across the first page of the Retail Buyer’s Order are the words ‘VOID’ and ‘TURNED DOWN.’ ”

Cobb, 781 So.2d at 211 (capitalization in original). Thus, Serra Toyota’s argument that the lease agreement containing the arbitration provision remained an enforceable contract was inconsistent with Serra Toyota’s own treatment of the Cobbs’ failure to satisfy the condition precedent in the retail buyer’s order. Accordingly, the documents were properly construed as a single contract that was invalidated by the Cobbs’ failure to qualify for financing. Dunlap has not introduced similar evidence in the present case. Thus, both Payne and Cobb are distinguishable.

Dunlap argues that, even if the arbitration agreements are not made unenforceable by the failure to meet the financing condition precedent in the Retail Purchase Contracts, Bill Heard and Berry still cannot prove the existence of a contract calling for arbitration because the arbitration agreements are not, by themselves, valid contracts. “The requisite elements of [a contract] include: an offer and an acceptance, consideration, and mutual assent to the terms essential to the formation of the contract.” Strength v. Alabama Dep’t of Fin., 622 So.2d 1283, 1289 (Ala.1993).

In the arbitration agreements, Bill Heard offered to disclaim its rights to pursue litigation in return for Dunlap’s promise to do the same. Dunlap accepted Bill Heard’s offer by signing the arbitration agreements. See Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Kilgore, 751 So.2d 8, 11 (Ala.1999) (“Conduct of one party to a contract from which the other may reasonably draw an inference of assent to an agreement is effective as acceptance.”).

Further, both Dunlap and Bill Heard forfeited their right to a jury trial by agreeing to pursue arbitration. The destruction of this legal right was sufficient consideration for the agreements. See Smoyer v. Birmingham Area Chamber of Commerce, 517 So.2d 585, 587 (Ala.1987)(“to constitute consideration for a promise, there must have been an act, a forbearance, a detriment, or a destruction of a legal right, or a return promise, bargained for and given in exchange for the promise”).

Finally, Dunlap does not dispute that the arbitration agreements bear both her signature and the signature of a representative from Bill Heard. In Crown Pontiac, Inc. v. McCarrell, 695 So.2d 615, 618 (Ala.1997), we noted that “[t]he purpose of a signature is to show ‘mutuality and assent,’ which are required for a contract to be binding.” Thus, because the arbitration agreements involve an offer, an acceptance, consideration, and mutual assent, they possess the requisite elements of a contract. Strength, 622 So.2d at 1289. Therefore, Dunlap is incorrect when she asserts that the arbitration agreements are not, standing alone, valid contracts.

Dunlap next argues that the arbitration agreements are not enforceable contracts because, she says, the entire underlying transaction was fraudulent. However, in Johnson Mobile Homes of Alabama v. Hathcock, 855 So.2d 1064 (Ala.2003), we held that fraud in the inducement—the misrepresentation of a material fact concerning the subject matter of the underlying transaction—is a matter to be considered in arbitration, not a basis for finding that an agreement to arbitrate is invalid. 855 So.2d at 1067. Accordingly, Dunlap’s argument is without merit.

Finally, Dunlap argues that the arbitration agreements that Bill Heard and Berry rely upon to prove that a contract calling for arbitration exists are not broad enough to cover the claims raised in her complaint. Yet Dunlap’s complaint asserts that the essence of her agreement with Bill Heard “was that [Dunlap] would trade in her 1999 Isuzu Rodeo; Bill Heard would pay off the remaining balance owed on the Rodeo; [and Dunlap] would purchase a 2002 Dodge Durango.”

In the arbitration agreements, Dunlap agreed “to resolve by binding arbitration all disputes between them concerning the vehicle, its sale ... or financing, ... including disputes concerning ... any representations, promises or omissions made in connection with negotiations for the sale ... or financing of the vehicle.” Dunlap’s promise to trade in her Rodeo, as well as Bill Heard’s promise to pay off any money she owed on the Rodeo, was part of the negotiations involved in the purchase and financing of the Durango. Thus, the language used in the arbitration agreements is broad enough to encompass Dunlap’s claims. Accordingly, Bill Heard and Berry have met their burden of proving the existence of a contract calling for the arbitration of Dunlap’s dispute.

B. Contract Involving an Interstate Commercial Transaction

In addition to demonstrating the existence of a contract calling for arbitration, Bill Heard and Berry are required to show “ ‘ “that the contract ‘is a “contract evidencing a transaction involving commerce” within the meaning of the Federal Arbitration Act.’ ” ’ ” Brown, 895 So.2d at 885 (quoting Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 53, 123 S.Ct. 2037, 156 L.Ed.2d 46 (2003), quoting in turn 9 U.S.C. § 2).

Dunlap filled out credit applications as part of the negotiations for obtaining financing to pay for the Durango. Allen’s affidavit states that Bill Heard used those applications to obtain Dunlap’s credit information from Equifax Services, Inc., a company based in Atlanta, Georgia. Allen’s affidavit also states that Bill Heard contacted five different out-of-state corporations in an attempt to obtain financing for Dunlap’s purchase of the Durango. Bill Heard also introduced evidence showing that the used Durango Dunlap negotiated to purchase had been bought and sold at auctions in Michigan and Tennessee.

Prior cases have held that evidence similar to that introduced here by Bill Heard and Berry was enough to show that a contract involved an interstate commercial transaction. See, e.g., Dan Wachtel Ford, Lincoln, Mercury, Inc. v. Modas, 891 So.2d 287, 292 (Ala.2004); Serra Toyota, Inc. v. Johnson, 876 So.2d 1125 (Ala.2003); Anniston Lincoln Mercury Dodge v. Conner, 720 So.2d 898 (Ala.1998). However, Dunlap argues that the present case is distinguishable from those cases because, she argues, without the sale of the Duran-go, “the arbitration agreement has no application to and no [e]ffeet on any transaction involving interstate commerce.”

The fact that the sale of the Durango was not completed is irrelevant to our inquiry. In the arbitration agreements, Dunlap, Bill Heard, and Berry agreed to arbitrate disputes concerning “any of the negotiations leading to the sale ... or financing of the vehicle.” Dunlap does not dispute that she filled out the credit applications as part of the negotiations to obtain financing nor does she dispute that those applications were forwarded to an out-of-state company in order for Bill Heard to obtain her credit information. Because this interstate transaction between Bill Heard and Equifax was undertaken in an effort to determine whether it would be possible for Dunlap to obtain financing to purchase the Durango, the transaction was part of the “negotiations leading to the sale or financing of the vehicle.” Accordingly, Bill Heard and Berry have met their burden of proving that the agreements involve an interstate commercial transaction.

V.

“[0]nce a moving party has satisfied its burden of production by making a prima facie showing that an agreement to arbitrate exists in a contract relating to a transaction substantially affecting interstate commerce, the burden of persuasion shifts to the party opposing arbitration.” Greenstreet, Inc., 806 So.2d at 1209. Thus, once Bill Heard and Berry made a prima facie showing of the existence of a contract that involved an interstate commercial transaction and that called for arbitration, the burden then shifted to Dunlap to present “ ‘substantial evidence’ of some defense to arbitration.” Ex parte Horton Family Housing, Inc., 882 So.2d 838, 841 (Ala.2003). Yet, the record reveals that Dunlap did not provide the trial court with any evidence in opposition to Bill Heard and Berry’s motion.

Ordinarily, a trial court is required to grant a motion to compel arbitration when the opposing party fails to introduce evidence in opposition. See, e.g., First Family Fin. Servs. v. Jackson, 786 So.2d 1121, 1130 (Ala.2000). However, this Court has recognized:

“Under certain circumstances, the evidence necessary to challenge the enforceability of an arbitration provision may be exclusively within the other party’s possession. Under those circumstances, the party opposing arbitration will be unable or virtually unable to obtain the necessary evidence except through discovery.”

Greenstreet, Inc., 806 So.2d at 1208. Thus, Greenstreet Inc., “fashioned an exception [to the general rule requiring a trial court to grant a properly supported motion to compel arbitration when it is not rebutted by substantial evidence] where substantial evidence to defeat the motion may exist, but the opposing party is kmable or virtually unable to obtain the necessary evidence except through discovery.’ ” Horton Family Housing, Inc., 882 So.2d at 841 (quoting Greenstreet, Inc., 806 So.2d at 1208).

However, a trial court’s discretion to delay ruling on a properly supported motion to compel arbitration to allow the opposing party to conduct discovery is not without restraints. “[I]n arbitration, ... ‘discovery is the exception and not the norm.’ ” Horton Family Housing, Inc., 882 So.2d at 841 (quoting Greenstreet, Inc., 806 So.2d at 1207). “[W]hile a showing of good cause is not ordinarily required in order to justify discovery in a civil action, in a case ostensibly subject to arbitration, as established by a properly supported motion to compel, to require a party to present some degree of factual specificity as to the necessity of the discovery does not impose an unreasonable burden.” Greenstreet, Inc., 806 So.2d at 1209. Accordingly:

“[a] party must present a factually based predicate before a right to conduct discovery regarding matters that could invalidate the agreement to arbitrate arises. At a minimum, a party opposing a properly supported motion to compel arbitration and seeking discovery on issues that could invalidate the arbitration agreement must provide an affidavit describing the circumstances that are within its knowledge and that are relevant to its claimed defenses to arbitration.”

Greenstreet, Inc., 806 So.2d at 1209 (citations omitted).

Dunlap failed to attach an affidavit to her response in opposition to Bill Heard and Berry’s motion to compel arbitration or to introduce any other evidence describing how the discovery she requested would relate to the issue whether the arbitration agreements are enforceable. Moreover, Dunlap’s brief in opposition to the motion to compel arbitration did not request discovery on issues regarding arbitration, but instead requested discovery on the factors relating to determining class certification. In an effort to defend the trial court’s ruling, Dunlap now makes the conclusory argument that the “same discovery that would seek evidence relevant to a fraudulent scheme perpetrated on Dunlap would be relevant to the issue of class certification.” However, our determination of whether the trial court exceeded its discretion in ruling on a discovery order is limited to examining the “facts that were before the trial court.” Greenstreet, Inc., 806 So.2d at 1206. Dunlap’s conclusory allegations are not sufficient.

“Under the factually-based-predicate standard ... it would be a clear abuse of the trial court’s discretion to allow ... discovery without a factual showing as to why that discovery was justified.” Greenstreet, Inc., 806 So.2d at 1210. Accordingly, Bill Heard and Berry have demonstrated that the trial court exceeded its discretion by allowing Dunlap to engage in discovery on the question of arbitrability-

VI.

“If [a] party presents no evidence in opposition to a properly supported motion to compel arbitration, then the trial court should grant the motion to compel arbitration.” Greenstreet, Inc., 806 So.2d at 1209. Bill Heard and Berry have proven that they have a clear legal right to an order compelling Dunlap to arbitrate her claims. Further, Dunlap failed to introduce any evidence that would allow the trial court to exercise its discretion by delaying a ruling on the motion to allow Dunlap to conduct discovery on the question of arbitrability. Therefore, we grant the petition for the writ of mandamus and direct the trial court to vacate its order allowing Dunlap to conduct discovery in this case and to enter an order granting Bill Heard and Berry’s motion to compel arbitration.

PETITION GRANTED; WRIT ISSUED.

NABERS, C.J., and STUART and BOLIN, JJ., concur.

HARWOOD, J., concurs in the result.

      . Moreover, "Congress’ Commerce Clause power 'may be exercised in individual cases without showing any specific effect upon interstate commerce' if in the aggregate the economic activity in question would represent 'a general practice ... subject to federal control.’ ” Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 56-57, 123 S.Ct. 2037, 156 L.Ed.2d 46 (2003)(quoting Mandeville Island Farms, Inc. v. American Crystal Sugar Co., 334 U.S. 219, 236, 68 S.Ct. 996, 92 L.Ed. 1328 (1948)). Thus, to prevail on their motion to compel arbitration under the Federal Arbitration Act, Bill Heard and Berry were not required to prove Dunlap’s direct involvement in a particular transaction affecting interstate commerce when a general practice associated with the contract between Bill Heard and Dunlap "bear[s] on interstate commerce in a substantial way.” Alafabco, Inc., 539 U.S. at 57, 123 S.Ct. 2037.


author: NABERS, Chief Justice.

text:
    Ex parte ALABAMA DEPARTMENT OF YOUTH SERVICES. (In re Amber Elizabeth Hoover et al. v. John Zeigler et al.)
    1040649.
    Supreme Court of Alabama.
    Oct. 21, 2005.

      H. Lewis Gillis, Frederic A. Bolling, and Michael E. Gurley of Thomas, Means, Gil-lis & Seay, P.C., Birmingham, for petitioner.
    David H. Marsh, Thomas M. Powell, and Alan B. Lasseter of Marsh, Rickard & Bryan, P.C., Birmingham, for respondents.
   NABERS, Chief Justice.

The Alabama Department of Youth Services (“DYS”) petitions for a writ of mandamus directing the Jefferson Circuit Court to vacate its order of January 25, 2005, compelling production of documents created during DYS’s investigation of alleged improprieties on its Chalkville campus. We grant the petition and issue the writ.

Facts

This petition arises from events relating to physical and sexual abuse that allegedly occurred in 2001 at the Chalkville campus. DYS first became aware of the allegations of misconduct at the Chalkville campus when a juvenile court judge in Calhoun County contacted Walter Wood, the executive director of DYS, on or about May 16, 2001. The affected detainees at Chalkville were all female minors, and the allegations made to the juvenile court judge, and conveyed through him to Wood, included allegations of physical abuse, sexual abuse, and sexual exploitation. Upon learning of these allegations Wood directed his staff to conduct an investigation, including on-site interviews with staff and detainees at the Chalkville campus. DYS’s chief of security, James Kent, directed the investigation. Among the directives given Kent regarding the investigation was a letter from general counsel for DYS, William Samford, dated May 17, 2001. Samford’s letter to Kent states, in part:

“As you know, there have been allegations made recently of misconduct by staff at the Chalkville facility. I anticipate that litigation will certainly arise as a result thereof. Therefore, I here by [sic] request that you investigate these allegations and this alleged misconduct for me, and report to me as soon as you complete this investigation. This report is confidential.”

Kent and other DYS investigators eventually took over 100 statements from detainees and staff at the Chalkville campus (the statements are referred to herein collectively as “investigative reports”).

The action underlying this petition is one of several that have arisen from the alleged incidents at the Chalkville campus. DYS is not a party to the action. The defendants are various present and former DYS employees, sued in their individual capacities. The plaintiffs were detainees at Chalkville during the time the incidents are alleged to have occurred. Most, if not all, of the defendants and plaintiffs were interviewed during Kent’s investigation. The plaintiffs requested that the trial court compel production of the investigative reports from DYS.

In response to the plaintiffs’ subpoena for production of the investigative reports, DYS sought a protective order from the trial court, asserting the attorney-client privilege and asserting further that the reports were attorney work-product. On October 8, 2002, Judge Edward Ramsey, who was then assigned to the case and who had reviewed the documents as to which production was sought in camera, issued a protective order finding that the invéstigative reports were work-product. Judge Ramsey, however, did require DYS to identify, by name and address, the persons from whom statements forming the basis of the investigative reports were taken. Judge Ramsey then recused himself from any further consideration of the case. The case was reassigned to Judge Caryl P. Privett.

Over two years later,, on January 7, 2005, DYS, in response to a second motion filed by the plaintiffs to compel production of the investigative reports, filed a second motion seeking a protective order. On January 25, 2005 Judge Privett issued an order granting the plaintiffs’ motion to compel, denying DYS’s motion for a protective order, and ordering production of the investigative reports. It is this order which DYS seeks to have set aside.

Standard of Review

It has long been the law of this State that trial courts are to be afforded wide discretion in discovery matters and that mandamus is the appropriate method by which to seek review of a court’s exercise of that discretion.- Iverson v. Xpert Tune, Inc., 553 So.2d 82 (Ala.1989); Ex parte Georgia Cas. & Sur. Co., 531 So.2d 838 (Ala.1988). Discovery orders will be reviewed in. certain limited circumstances, including those instances where a “privilege is disregarded.” Ex parte Ocwen Fed. Bank, FSB, 872 So.2d 810 (Ala.2003).

Analysis

The trial court’s January 25, 2005, order stated, in part:

“1. The 2001 investigation by James Kent was conducted for multiple reasons, including whether to take disciplinary action against DYS employees. Such an investigation is within the scope of Kent’s ordinary responsibilities.
“2. The 2001 investigation resulted in a number of witness statements, given to Kent; and
“3. Kent’s investigation results were utilized by DYS management officials to take personnel actions regarding one or more DYS employees.
“The investigative materials at issue contain statements which are analogous to the witness statements taken by district attorney investigators which have been determined not to be work product. Assured Investors Life Ins. Co. v. National Union Associates, Inc., 362 So.2d 228 (Ala.1978)....”

Judge Privett’s January 25 order relied on Assured Investors Life Insurance Co. v. National Union Associates, Inc., 362 So.2d 228 (Ala.1978). However, four months before Judge Privett issued her order, this Court overruled Assured Investors.

The plaintiffs argue that the investigative reports were prepared pursuant to DYS policy and in the normal course of DYS’s business and that the reports were made in anticipation of possible disciplinary action against DYS employees. The plaintiffs argue that the investigative reports were not prepared solely in anticipation of litigation and, therefore, that they are not protected work-product.

Ex parte Norfolk Southern Ry., 897 So.2d 290 (Ala.2004), addressed the issue whether statements taken in the ordinary course of business, and therefore not solely in anticipated litigation, are protected work-product. We held that a recorded statement taken by a claims agent was work-product where “[t]he claims agent testified that ... when a fatality or a serious injury occurs in a grade-crossing accident, there is likely to be litigation regarding the accident.” Norfolk Southern Ry., 897 So.2d at 295.

The question as to whether the investigative reports are work-product when there are several motivating causes, other than anticipated litigation, for preparing them turns on whether it was reasonable for DYS to assume, in light of the circumstances, that litigation could be expected. The gravity and extent of the accusations made by the detainees at the Chalkville campus, as well as the Samford letter, fully support DYS’s position that it anticipated litigation as a result of the alleged incidents, and that the anticipation of litigation was a significant factor in its decision to have the investigative reports prepared. In consideration of these factors, and guided by our holding in Norfolk Southern Ry., we find that when the investigative reports were prepared there was clearly a likelihood of litigation resulting from the alleged incidents and that, therefore, the trial court erred in failing to determine that the investigative reports were work-product prepared in anticipation of litigation.

DYS urges that, as a nonparty, it has the same rights as does a party to object to the discovery of privileged materials. Although DYS is not a party in this action, the record indicates that DYS is or has been a party in approximately six related civil actions arising from the alleged incidents at the Chalkville campus.

Rule 26(c), Ala. R. Civ. P., provides that nonparties subjected to discovery requests from parties in litigation are entitled to protection to prevent “annoyance, embarrassment, oppression, or undue burden or expense.” DYS filed a motion for a protective order pursuant to Rule 26(c), asserting that DYS had good cause for the protection requested. The fact that the investigative reports were in fact work-product and that DYS is a party in several related actions supported its demonstration of good cause.

The procedure by which parties, such as the plaintiffs, seeking discovery may overcome a claim of privilege is set forth in Rule 26(b)(3), which provides, in part:

“(3) Trial Preparation: Materials. Subject to the provisions of subdivision (b)(4) of this rule [concerning expert witnesses], a party may obtain discovery of documents and tangible things otherwise discoverable under subdivision (b)(1) of this rule and prepared in anticipation of litigation or for trial by or for another party or by or for that other party’s representative (including the other party’s attorney ...) only upon a showing that the party seeking discovery has substantial need of the materials in the preparation of the party’s case and that the party is unable without undue hardship to obtain the substantial equivalent of the materials by other means. In ordering discovery of such materials when the required showing has been made, the court shall protect against disclosure of the mental impressions, conclusions, opinions, or legal theories of an attorney or other representative of a party concerning the litigation.”

The party seeking discovery of attorney work-product or other privileged materials may obtain such discovery only upon showing “substantial need of the materials in the preparation of the party’s case” and that “the party is unable without undue hardship to obtain the substantial equivalent of the materials by other means.” Upon such a showing, the court may order discovery despite the claim of privilege.

Because the trial court found that the materials DYS sought to protect were not privileged, it never conducted the analysis set forth by Rule 26(b)(3) to determine whether, under the relevant facts, the plaintiffs can show the justification outlined by Rule 26(b)(3) for overcoming DYS’s assertion of the work-product privilege.

We grant the petition and issue the writ of mandamus. The trial court is ordered to set aside its order of January 25, 2005, compelling DYS to produce the investigative reports to the plaintiffs. We further order the trial court to conduct a hearing to allow the parties the opportunity to conduct the factual analysis outlined in Rule 26(b)(3) to determine whether the plaintiffs can establish a “substantial need of the materials in the preparation of [their] case” and whether they are unable without “undue hardship to obtain the substantial equivalent of the materials by other means.”

PETITION GRANTED; WRIT ISSUED.

SEE, LYONS, HARWOOD, WOODALL, STUART, SMITH, BOLIN, and PARKER, JJ., concur.

      . The plaintiffs contend that, as a result of his recusal, Judge Ramsey's order was a nullity. Nonetheless, the witness list, including the names and addresses of the persons interviewed during Kent's investigation, was produced to the plaintiffs in accordance with that order.

      . “Assured Investors Life Insurance Co. v. National Union Associates, Inc., 362 So.2d 228 (Ala.1978) ... is an incorrect statement of the law, which this Court has sufficiently disregarded over the years so as to lead to the conclusion that it has been overruled sub si-lentio." Ex parte Norfolk Southern Ry., 897 So.2d 290, 293 (Ala.2004).

      . The trial court did not specifically address this point in its order, although it did acknowledge DYS’s status as a nonparty.

      . “As recognized in Rule 26(b)(1), [Ala. R. Civ. P.], and in Rule 26(c), the right of discovery is not unlimited, and the trial court has the power to prevent its abuse by any party.” Ex parte Rudder, 507 So.2d 411, 414 (Ala.1987).

      . Although DYS is not a party in the underlying action and therefore Rule 26(b)(3) does not explicitly apply, its basic principles should be applied in determining whether a protective order should be issued pursuant to Rule 26(c). "Fortunately the courts need not be confined by a literal reading of [Federal] Rule 26(b)(3), and can continue to arrive at sensible decisions on this narrow point. To the extent that Rule 26(b)(3), literally read, seems to give insufficient protection to [nonparties for] material prepared in connection with some other litigation, the court can vindicate the purposes of the work-product rule by the issuance of a protective order under Rule 26(c).” Wright, Miller & Marcus, 8 Fed. Prac. & Proc. Civ.2d § 2024(2d ed. 1994). Rule 26, Fed.R.Civ.P., is identical to Rule 26, Ala. R. Civ. P.