Rel: August 21, 2026
Notice: This opinion is subject to formal revision before publication in the advance sheets of Southern Reporter. Readers are requested to notify the Reporter of Decisions, Alabama Appellate Courts, 300 Dexter Avenue, Montgomery, Alabama 36104-3741 ((334) 229-0650), of any typographical or other errors, in order that corrections may be made before the opinion is printed in Southern Reporter.
SUPREME COURT OF ALABAMA
SPECIAL TERM, 2026
SC-2025-0799
Ivy Fund Manager, LLC, d/b/a OC Ventures; Ivy Midtown GP,
LLC; and NDG Student Living, LLC, d/b/a Varsity Campus
v.
CDH Real Estate Investment Management Company, Ltd.; Cook
Summit Holding, LLC; and Cook Summit Investor, LLC
Appeal from Lee Circuit Court
(CV-23-900453)
MENDHEIM, Justice.
SC-2025-0799
Ivy Fund Manager, LLC, d/b/a OC Ventures; Ivy Midtown GP, LLC;
and NDG Student Living LLC, d/b/a Varsity Campus1 (collectively
referred to as "Ivy"), appeal from a default judgment entered by the Lee
Circuit Court in favor of CDH Real Estate Investment Management
Company, Ltd.; Cook Summit Holding, LLC; and Cook Summit Investor,
LLC (collectively referred to as "CDH"). We dismiss the appeal.
I. Facts
CDH is a real-estate investment firm based in China. Ivy is a
real-estate investment and management firm based in Singapore. In
October 2021, CDH and Ivy entered into a joint venture to own, develop,
and operate Midtown Auburn, a mixed-use residential property near
Auburn University. Under the agreements executed by CDH and Ivy,
CDH owns approximately an 80 % interest in the joint venture, and Ivy
holds approximately a 20 % interest and serves as the joint venture's
manager. Because Ivy is the manager, it has unlimited access to the joint
venture's bank accounts. The parties agree that the executed jointventure agreements provide for resolution of certain disputes via
1Originally, Ivy Midtown LP, LLC, also was an appellant in this
appeal. However, on December 19, 2025, this Court granted Ivy Midtown
LP's motion for a voluntary dismissal of its appeal.
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arbitration and that those agreements incorporate the American
Arbitration Association's rules of arbitration.
In its complaint, CDH alleged that Ivy had used its access to the
joint venture's bank accounts to make unauthorized transfers of funds to
separate Ivy accounts. CDH alleged that Ivy had stolen over $1 million
from those accounts and that, when CDH confronted Ivy about it,
Shangxuan Tan, Ivy's CEO, told CDH that Ivy had "a practice of shifting
monies between accounts to cover expenses of various properties within
[Ivy's] portfolio. ... Mr. Tan admitted the transfers were wrongful, and
promised CDH that the money would be repaid." However, according to
CDH, only a small portion of the funds was repaid, despite numerous
promises from Tan that Ivy would restore the funds to the joint venture's
accounts.
On November 22, 2023, CDH commenced an action against Ivy in
the Lee Circuit Court alleging that Ivy had stolen funds from CDH that
were intended to be used for the joint venture. The complaint alleged four
causes of action: (1) declaratory judgment to prevent Ivy from abusing
the "Deadlock" provision in the joint-venture agreements, (2) fraudulent
misrepresentation, (3) conversion, and (4) fraudulent suppression. CDH
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asserted that $935,000 in stolen funds still had not been repaid at the
time the complaint was filed.
On March 8, 2024, CDH filed an "Application for Entry of Default"
against Ivy on the ground that Ivy had been served with the complaint
but had not pleaded or otherwise defended against the complaint. On
March 15, 2024, CDH filed a "Motion for Judgment By Default" against
Ivy for having failed to respond to the complaint. CDH requested
$935,000 in damages. The trial court set a hearing concerning CDH's
motion for a default judgment to be held on June 20, 2024.
On June 19, 2024, Ivy filed its answer to CDH's complaint. Ivy did
not list arbitration among the affirmative defenses it asserted in its
answer. On the same date, Ivy filed a response in opposition to CDH's
motion for a default judgment. In that response, Ivy expressly stated that
it did "not dispute [its] current knowledge of this litigation and [is] willing
to move forward with litigation should settlement negotiations continue
to prove unsuccessful." As an explanation for the delay in responding to
the suit, Ivy stated that it had
"been attempting to negotiate the underlying circumstances
giving rise to this matter with [CDH] since August 2023.
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"8. Moreover, since that time, [Ivy has] apparently
repeatedly informed [CDH] that [it is] attempting to liquidate
property in order to acquire the funds necessary to effectuate
a settlement.
"....
"10. In fact, [Ivy is] under contract to liquidate[]
properties and the deals are expected to close within the next
ninety (90) days, and upon informing [CDH] of this
information, expected that this litigation would be dismissed
upon the entry of a settlement agreement or consent
judgment."
Based on the foregoing assertions, Ivy asked the trial court to deny the
motion for a default judgment. Ivy did not mention arbitration in its
response to CDH's motion for a default judgment. In response to Ivy's
filings, the trial court reset the hearing for August 22, 2024.
On August 13, 2024, CDH filed a motion to strike Ivy's answer to
the complaint. CDH contended that striking the answer and entering a
default judgment was warranted because, it said, Ivy's initial "failure to
answer was willful, knowing, and strategic." CDH also contended that
Ivy lacked a meritorious defense to the action because Ivy "stole money
from [CDH], plain and simple, and [its] criminal behavior cannot
reasonably be defended on any ground. Indeed, [Ivy has] acknowledged
such misconduct, repeatedly promising to pay [CDH] what [it] stole."
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CDH described Ivy's answer and its response to the motion for a default
judgment as "vague allusions to anticipated or potential repayment of
stolen funds via settlement [and] yet another attempt by [Ivy] to cover up
[its] criminal acts and avoid accountability for [its] crimes."
On September 6, 2024, the trial court denied CDH's motion for a
default judgment. The trial court ordered a status conference for the case
to be held on October 21, 2024. On October 25, 2024, CDH informed the
trial court that it had served interrogatories, requests for admission, and
requests for production upon Ivy. On November 25, 2024, the parties filed
a joint motion for a scheduling order. The proposed scheduling order
attached to that motion set the case for a jury trial to be held on March
3, 2025. On November 26, 2024, the trial court adopted the parties'
proposed scheduling order. On December 2, 2024, Ivy informed the trial
court that it had provided responses to CDH's propounded discovery. On
December 4, 2024, CDH informed the trial court that it had served
discovery requests seeking video depositions from Ivy, including the
deposition of Tan, who also served as the designated corporate
representative for Ivy.
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On December 6, 2024, Ivy filed a motion for a protective order in
which it stated that, "[f]ollowing this Court's adjudication of [CDH's]
motion for default judgment, [Ivy has] been engaged in the defense of this
litigation, the discovery process, and ongoing attempts to settle this
matter in good faith and will continue in those efforts until this matter is
resolved." Ivy sought a protective order concerning the manner in which
the deposition of Tan was to occur. Specifically, Ivy sought to have the
deposition occur via videoconferencing technology because Tan resides in
Singapore, but CDH had insisted that the deposition occur in person at
the offices of CDH's counsel in Montgomery.2 Ivy argued that the
accommodation of a videoconference deposition was necessary because
"Mr. Tan is not a U.S. citizen or permanent resident, but is
instead a visa holder with a business visa. Furthermore, it is
Mr. Tan's understanding that the applicable immigration
regulations would not allow him, as a business visa holder, to
stay in the United States for more than six months out of the
year, which he has already done during the calendar year
2024. Under these circumstances, it would be unreasonable
and unduly burdensome to require Mr. Tan to attempt to
travel to the United States to sit for these corporate
depositions, and in fact, it would be logistically impossible for
him to do so, given the limitations on Mr. Tan's visa
privileges, the impending expiration of fact discovery on
2In an August 22, 2024, hearing, Ivy's counsel related to the trial
court that Tan "is a Chinese national."
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December 13, 2024, and the fact that Rule 30(b)(6)[, Ala. R.
Civ. P.,] depositions have been scheduled for that same day."
On December 9, 2024, CDH filed a response to Ivy's motion for a
protective order in which CDH argued that Ivy had been "showing
nothing but contempt for the legal process in this state." More
specifically, CDH contended that "Mr. Tan provided no tangible evidence,
such as a copy of his passport/visa reflecting entry stamps documenting
passage into the United States, to support" his statement that he could
not reenter the United States during 2024. CDH stated that it was
willing to extend the deadline for scheduling deposition testimony,
assuming Tan could travel to the United States in January 2025. CDH
also argued that it was "critical" that Tan be deposed in person because
CDH had "no confidence that [Ivy] would conduct [itself] in good faith
during a remote deposition." The record does not indicate that the trial
court ever ruled on Ivy's motion for a protective order.
On December 17, 2024, CDH filed its second "Motion for Judgment
By Default." CDH argued that a default judgment should be entered
against Ivy because of Tan's failure to appear for depositions that were
properly noticed for December 13, 2024. CDH also complained that Ivy
had "failed to adequately respond to [CDH's] requests for written
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discovery responses." CDH noted that Ivy had "provided, on December
12, 2024, at 6:48 p.m., on the eve of [the] scheduled depositions, a 'revised'
set of discovery responses, [but] those revised responses did nothing to
ameliorate the substantive concerns identified by [CDH] ... that the
responses provided by [Ivy] were obfuscating and otherwise nonresponsive." The trial court set a hearing concerning CDH's second
motion for a default judgment for January 9, 2025.
On January 6, 2025, Ivy filed its response in opposition to CDH's
second motion for a default judgment. Ivy described CDH's request for a
default judgment based on "discovery disputes" as an "extreme remedy."
Ivy argued that CDH sought the default judgment under the wrong
Alabama Rule of Civil Procedure, i.e., that it sought the sanction under
Rule 55, Ala. R. Civ. P., but that the proper procedure for a discovery
sanction was under Rule 37, Ala. R. Civ. P., which required CDH to file
a motion to compel before seeking any other sanction. Ivy added that it
has
"been actively attempting to resolve this litigation with
[CDH's] counsel for some time now. Settlement offers have
been discussed, but the efforts have been unsuccessful. As
[CDH is] aware, [Ivy is] set to close on a transaction that
should generate sufficient funds for a settlement. The closing
date is January 9, 2025. [Ivy] informed [CDH] of this closing
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date and suggested to [CDH] that the upcoming hearing on
this Motion should be delayed such that the parties can
negotiate instead. [CDH] did not agree to a continuance. [Ivy
is] hopeful that a settlement can be reached by the end of the
month, regardless of the discovery disputes."
On January 8, 2025, CDH filed a reply to Ivy's response to the
second motion for a default judgment. CDH attempted to finesse the
differences between Rule 37 and Rule 55 and continued to insist that the
trial court had discretion to grant CDH's motion for a default judgment.
Following those filings, the trial court eventually reset the hearing
on CDH's second motion for a default judgment for February 19, 2025.
On February 19, 2025, the trial court ordered the parties "to agree, on or
before February 27, 2025, upon a date on which the disputed
deposition(s) [of Tan] will take place. Said deposition(s) will ideally take
place within 45 days of this date." The trial court permitted the
deposition to take place in Chicago if Ivy "choose[s]," but, if that was the
choice, then Ivy would be "responsible for [CDH's] counsel's travel
expenses." The order provided that the trial was set for June 9, 2025.
On March 31, 2025, CDH filed a "Renewed Motion for Judgment By
Default." In that motion, CDH related that it "re-noticed the deposition
of [Ivy's] corporate representative for March 27, 2025, at 9:00 a.m.
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Counsel for [Ivy] specifically agreed to this date. However, yet again, and
unsurprisingly, on May 27th, no corporate representative on behalf of
[Ivy] appeared." CDH thus concluded:
"Everything [Ivy does] in this litigation is for the
purpose of delay.[3] At this point, it is clear that neither a
corporate representative for [Ivy] (nor Mr. Tan himself), have
any intention of ever appearing in person for deposition. This
refusal to participate in the litigation process, as [CDH has]
argued before, entitles [CDH] to the Rule 37 and Rule 55
sanction of default judgment against [Ivy], for [its] willful
refusal to participate in the discovery process."
(Footnote omitted.)
On April 9, 2025, Ivy filed a response in opposition to CDH's
renewed motion for a default judgment. In its response, Ivy asserted that
Ivy's
"principal Mr. Tan sought to travel to the United States to
appear for those depositions, but was informed by the U.S.
3As part of its complaint about delay by Ivy, CDH related:
"[CDH] and [Ivy] even seemed to have reached a settlement
several weeks ago, with counsel for [Ivy] writing that 'Ivy is
generally agreeable to CDH's settlement position ...' It turns
out, however, that [Ivy's] purported acceptance was a farce, as
counsel for [Ivy] has now confirmed that there is an essential
term of the proposed settlement agreement to which it does
not agree. The parties appear to be at an impasse on this
critical issue; accordingly, settlement will not be possible."
(Footnote omitted.)
11
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Department of State several weeks before the scheduled
deposition date that his visa application had been denied.
[CDH's] counsel was informed by [Ivy's] counsel on March 11,
2025, well in advance of the scheduled deposition, of Mr. Tan's
unavailability to travel."
In support of that assertion, Ivy attached to its response a redacted
version of what it said was Tan's visa application, which indicated that it
had been refused. Based on the foregoing assertion, Ivy argued that the
motion should be denied because Ivy had not "willfully" failed to comply
with the deposition requests or the trial court's February 19, 2025, order.
Ivy also related that, because CDH had expressed the belief in its
renewed motion for a default judgment that a settlement was not
possible, Ivy would be "fil[ing] a motion to compel arbitration of some or
all of [CDH's] claims in this suit, as well as other applicable disputes
between the parties."
On April 11, 2025, CDH filed a reply to Ivy's response to the
renewed motion for a default judgment. In its reply, CDH accused Tan of
"working a fraud on the Court." In support of that accusation, CDH
asserted that "Mr. Tan's visa to travel to the United States was issued on
March 26, 2025." CDH included in its reply a screenshot of a page from
the United States Department of State's website seeming to show that
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Tan's visa was, in fact, issued. The website screenshot was supported by
an affidavit from a paralegal employed by CDH's counsel.
On April 18, 2025, Ivy filed a "Motion to Compel Arbitration and
Stay Proceedings." In that motion, Ivy asserted that the joint-venture
agreements executed by the parties contained binding arbitration
provisions that stated that the parties agreed to resolve any disputes
through "binding arbitration in accordance with the rules of the
American Arbitration Association ('AAA') as hereinafter provided in New
York, New York." In support of its motion, Ivy attached copies of two
contracts executed by certain parties to the dispute, along with a copy of
the "Commercial Arbitration Rules and Mediation Procedures" of the
American Arbitration Association ("the AAA rules").4 The two "Limited
Liability Company Agreement[s]" ("the LLC agreements") are essentially
identical with respect to addressing arbitration. Both LLC agreements
contain a provision that provides:
4One agreement -- the Limited Liability Company Agreement of
Auburn Midtown GP, LLC -- was executed by Cook Summit Investor,
LLC, and Ivy Midtown GP, LLC, and the other agreement -- the Limited
Liability Company Agreement of Auburn Midtown JV LP, LLC -- was
executed by Cook Summit Investor, LLC, and Ivy Midtown LP, LLC (see
note 1, supra).
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"10.3 Arbitration. Other than with respect to Deadlocks,
which shall be governed by the provisions of Section 10.1, the
parties hereto have agreed to submit disputes to mandatory
arbitration in accordance with the provisions of Schedule 10.3
attached hereto and made part hereof for all purposes. Each
of the Members waives the right to commence an action in
connection with this Agreement in any court and expressly
agrees to be bound by the decision of the arbitrator
determined in Schedule 10.3 attached hereto. The waiver of
this Section 10.3 will not prevent any Member from
commencing an action in any court for the sole purpose of
enforcing the obligation of the other party to submit to binding
arbitration or the enforcement of an award granted by
arbitration herein."
Schedule 10.3 of the LLC agreements contains the following two
paragraphs:
"1. General. Any dispute among the Members as to the
interpretation of any provision of this Agreement or the rights
and obligations of any party hereunder shall be resolved
through binding arbitration in accordance with the rules of
the American Arbitration Association ('AAA') as hereinafter
provided in New York, New York.
"....
"3. Rules of Arbitration. The Arbitrator selected
pursuant to Section 1(b) above shall use the rules of AAA for
commercial arbitration, [with] such modification of the rules,
if any, as mutually agreed in writing by the parties to the
arbitration."
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On April 25, 2025, Ivy filed a "Motion to Stay Discovery and Trial
Proceedings" in which it requested a stay based on its filing of the motion
to compel arbitration.
On May 2, 2025, CDH filed its response in opposition to Ivy's motion
to compel arbitration. In that response, CDH contended that Ivy had
"waived any right to arbitration by substantially invoking the litigation
process" and "ha[s] repeatedly abused it, including by committing fraud
upon the Court by misrepresenting the status of Mr. Tan's Visa." CDH
also argued that its claims are not subject to arbitration. CDH conceded
that "the joint venture agreements contain arbitration clauses and
involve interstate commerce and that the Federal Arbitration Act ('FAA')
is implicated." However, CDH insisted that Ivy had waived any right to
compel arbitration because it did not make an early determination to
proceed by arbitration. CDH also argued that the arbitration provisions'
references to the AAA rules did not encompass the issue of wavier of
arbitration by conduct.
On June 18, 2025, Ivy filed a reply to CDH's response in opposition
to the motion to compel arbitration. In its reply, Ivy argued that there
has been no "sea change in arbitration law" and that this Court continues
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to adhere to the notion that " 'any doubts concerning the scope of
arbitrable issues should be resolved in favor of arbitration, whether the
problem at hand is the construction of the contract language itself or an
allegation of waiver, delay, or a like defense to arbitrability.' " (Quoting
Women's Care Specialists, P.C. v. Potter, 385 So. 3d 928, 936 (Ala. 2023).)
Thus, Ivy continued to contend that the issue of waiver must be decided
by the arbitrator. Additionally, in its reply, Ivy finally responded to
CDH's accusation that Tan's visa application was actually approved by
the United States Department of State. Ivy stated:
"Concededly, Mr. Tan appealed his visa denial by the
State Department, and following the State Department's
review of that appeal, Mr. Tan's visa was issued on March 26[,
2025]. That issuance, however, came too late for Mr. Tan --who resides in Singapore -- to sit for deposition in Alabama
the next day. It is true that [Ivy's] counsel did not
contemporaneously learn that Mr. Tan's visa had been issued,
but [CDH's] assertion that this was due to 'conceal[ment]' by
Mr. Tan is unfounded. There was simply a failure of
communication between [Ivy's] Alabama-based counsel and
their Singapore-based client. That failure is worthy of
admonishment, perhaps -- but it certainly is not a fraud on
this Court."
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On June 23, 2025, the trial court held a hearing on CDH's renewed
motion for a default judgment.5 On September 4, 2025, the trial court
granted the motion and entered a default judgment in favor of CDH. The
judgment stated:
"This matter came before the Court for a hearing on
June 23, 2025, on the most recent renewal of [CDH's] motion
for default judgment. This was only the most recent in a series
of default judgment hearings. On each previous occasion,
counsel for all parties made clear that they were at all times
making their best efforts to move the case along and guide the
parties.
"At the hearing, [CDH's] counsel submitted the attached
timeline. While [Ivy] may or may not disagree with some or
all of it and the Court does not take it as 'gospel,' it does
illustrate the long and convoluted nature of the way in which
the parties (not their attorneys) have interacted with each
other.
"At the June 23, 2025, hearing, counsel expressed how,
prior to returning to court, the case had been on the brin[k] of
resolution, but that it faltered. [Ivy's] counsel expressed
optimism that, given 30 days, that resolution could be
achieved. During a subsequent conference call, the Court was
informed that it could not be achieved.
"Based on all the information presented to the Court,
encompassing the several pleadings filed and hearings held
on the topic, the Court hereby GRANTS default judgment in
5The Court notes that, in the June 23, 2025, hearing, counsel for Ivy
stated: "I'm embarrassed that our firm did not raise the arbitration issue
as early as we should have."
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favor of [CDH] and against [Ivy]. Counsel shall inform the
Court how long they anticipate a hearing on the damage[s] to
be awarded will likely take, at which time said hearing will
be set.
"Default judgment having been entered, the Court
considers the pending motion to compel arbitration to be
moot. If counsel thinks this should be handled in a different
procedural manner they may inform the Court."
(Capitalization in original; emphasis added.)
On October 16, 2025, Ivy appealed the trial court's judgment.
II. Analysis
Before we may address the parties' substantive arguments in this
appeal, we note that CDH has filed a motion to dismiss Ivy's appeal on
the ground that the appeal stems from a nonfinal judgment. As CDH
observes, the trial court's September 4, 2025, default judgment in favor
of CDH reserved the determination of damages for a subsequent hearing.
"Rule 55(b)(2)[, Ala. R. Civ. P.,] provides that where a default
has been entered, but 'in order to enable the court to enter
judgment ..., it is necessary to ... determine the amount of
damages ... the court may conduct such hearings ... as it
deems necessary and proper....' This Court has referred to the
interim 'judgment' entered in such a situation as 'an
interlocutory default judgment.' Ex parte Keith, 771 So. 2d
1018, 1019 (Ala. 1998). 'A judgment by default with leave to
prove damages is interlocutory and can be set aside at any
time until entry of judgment on assessment of damages. It
then becomes a final judgment.' Maddox v. Hunt, 281 Ala.
335, 339, 202 So. 2d 543, 545 (1967). 'A default judgment that
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reserves the assessment of damages is interlocutory and may
be set aside at any time; once the trial court assesses damages
on the default judgment, the judgment becomes final. Rule
55(c), Ala. R. Civ. P.; Maddox v. Hunt, 281 Ala. 335, 202 So.
2d 543 (1967).' Keith v. Moone, 771 So. 2d 1014, 1017 (Ala.
Civ. App. 1997), rev'd on other grounds, Ex parte Keith,
supra."
Ex parte Family Dollar Stores of Alabama, Inc., 906 So. 2d 892, 896 (Ala.
2005) (emphasis added). Because the trial court has not assessed
damages for Ivy's default, CDH argues that the September 4, 2025,
default judgment was a nonfinal judgment that cannot support an
appeal.
Ivy rejoins that, in that same September 4, 2025, judgment, the
trial court ruled that Ivy's pending motion to compel arbitration was
"moot." Ivy argues that the mootness ruling was the equivalent of
denying Ivy's motion to compel arbitration because, it says, " '[t]his Court
looks to the substance of a motion or order, rather than its form.'
Southland Quality Homes, Inc. v. Williams, 781 So. 2d 949, 952 (Ala.
2000)." Ivy's Memorandum in Opposition to CDH's Motion to Dismiss
Appeal, p. 6. Ivy notes that, under Rule 4(d), Ala. R. App. P., an order
granting or denying a motion to compel arbitration is immediately
appealable.
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"(d) Appeals From Orders Granting or Denying Motions
to Compel Arbitration. An order granting or denying a motion
to compel arbitration is appealable as a matter of right, and
any appeal from such an order must be taken within 42 days
(6 weeks) of the date of the entry of the order, or within the
time allowed by an extension pursuant to Rule 77(d), Alabama
Rules of Civil Procedure."
Rule 4(d). Ivy further asserts that, under Rule 4(d), if it had declined to
appeal the September 4, 2025, judgment, it would have lost the chance to
appeal the trial court's ruling on its motion to compel arbitration. See
Ivy's memorandum, p. 5 (stating that "this appeal represents Ivy's only
opportunity to challenge that ruling").
CDH counters by admitting that this Court has not encountered
"this exact procedural issue: whether an interlocutory order entering
default and mooting a motion to compel arbitration is appealable." CDH's
Motion to Dismiss, p. 8. Despite the dearth of binding authority, CDH
urges the Court to follow the reasoning of the South Carolina Supreme
Court in Palmetto Construction Group, LLC v. Restoration Specialists,
LLC, 432 S.C. 633, 856 S.E.2d 150 (2021). The facts in Palmetto
presented a similar procedural posture. A subcontractor, Palmetto
Construction Group, LLC, brought an action against a general
contractor, Restoration Specialists, LLC, and its managing members
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(collectively referred to as "Restoration Specialists"), for allegedly failing
to pay an amount owed under a construction contract that contained an
arbitration provision. See 432 S.C. at 635, 856 So. 2d at 151.
"The circuit court found [Restoration Specialists] in default
under Rule 55(a), [S. C. R. Civ. P.], and referred the case to
the master in equity pursuant to Rule 53(b), [S.C. R. Civ. P.].
[Restoration Specialists] filed a motion to set aside the entry
of default. The master denied the motion, and [Restoration
Specialists] appealed. The court of appeals held the master's
order was not immediately appealable and dismissed the
appeal. Palmetto Constr. Grp.[, LLC v. Restoration
Specialists, LLC], 428 S.C. [261,] 266, 834 S.E. 2d [204,] 206
[(Ct. App. 2019)]. The court of appeals found the fact the order
refusing to set aside the entry of default effectively precluded
[Restoration Specialists'] effort to compel arbitration did not
affect the immediate appealability of the order. 428 S.C. at
266-67, 834 S.E.2d at 207."
Id. (emphasis added). That rendition leaves out that Palmetto filed its
complaint on February 12, 2016. The circuit court entered a default on
April 20, 2016, and referred the case to "the master-in-equity" for a
determination of damages. See Palmetto Constr. Grp., LLC v.
Restoration Specialists, LLC, 428 S.C. 261, 264, 834 S.E.2d 204, 206 (Ct.
App. 2019). On June 5, 2016, Restoration Specialists filed a motion for a
continuance and a motion to be relieved from default. On July 11, 2016,
Restoration Specialists filed a motion to compel arbitration. "The master
issued an order on [July 14, 2016,] denying [Restoration Specialists']
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request for relief from default, ordering a damages hearing on October 4,
2016, and denying [Restoration Specialists'] motion to stay and compel
arbitration 'as [Restoration Specialists is] in [d]efault.' " 428 S.C. at 265,
834 S.E.2d at 206. Thus, no determination of damages was provided by
the "master-in-equity." The South Carolina Supreme Court granted
certiorari review to consider the issue of whether "the order [was]
immediately appealable because it had the effect of precluding
[Restoration Specialists'] motion to compel arbitration." 432 S.C. at 635,
856 So. 2d at 151. The South Carolina Supreme Court affirmed the
judgment of the South Carolina Court of Appeals concerning whether the
circuit court's ruling was immediately appealable.
The South Carolina Supreme Court began by explaining:
"A party in default has three primary options: (1) do
nothing pending the entry of judgment by default under Rule
55(b), [S.C. R. Civ. P.]; (2) file an appearance under Rule
55(b)(2), [S.C. R. Civ. P.], in an attempt to protect its interests
before the entry of judgment by default; or (3) request the
entry of default be set aside pursuant to Rule 55(c), [S.C. R.
Civ. P.]. Under either option, the party has no right of appeal
until after final judgment."
432 S.C. at 635-36, 856 So. 2d at 151. In other words, under South
Carolina law, the circuit court's ruling denying Restoration Specialists'
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motion to set aside the default judgment was not immediately appealable
because it was not a final judgment.
"[Restoration Specialists] contend[s] the law of
arbitration changes the immediate appealability of the
master's order. To support [its] contention, [it] rel[ies] on
language from the Supreme Court and this Court stating the
law 'favors' arbitration. See, e.g., Moses H. Cone Mem'l Hosp.
v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S. Ct. 927, 941,
74 L. Ed. 2d 765, 785 (1983) ('Section 2 [of the Federal
Arbitration Act] is a congressional declaration of a liberal
federal policy favoring arbitration agreements ....'); Zabinski
v. Bright Acres Assocs., 346 S.C. 580, 596, 553 S.E.2d 110, 118
(2001) ('The policy of the United States and South Carolina is
to favor arbitration of disputes.'). However, there is nothing
in the law of arbitration that affects the immediate
appealability of an order refusing to set aside an entry of
default. Specifically, the fact the order effectively precludes
the defaulting party's effort to arbitrate the claim does not
change whether the order may be immediately appealed.
"Our courts' statements that the law 'favors' arbitration
were never intended to elevate a contractual right of
arbitration above the procedural rules of the court or other
contractual provisions. See Richard Frankel, The Arbitration
Clause As Super Contract, 91 Wash. U. L. Rev. 531, 533
(2014) ('Much of this arbitration favoritism is attributable to
lower-court misinterpretation of thirty-year-old dicta ....'). ...
"....
"Neither the Supreme Court nor this Court, however,
meant to give the law of arbitration such a special status that
it would supplant state procedural law. Rather, these
statements must be read in the context in which the Courts
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made them: overruling a longstanding, policy-based rule that
arbitration agreements are unenforceable. In Volt
Information Sciences, Inc. v. Board of Trustees of Leland
Stanford Junior University, 489 U.S. 468, 109 S. Ct. 1248, 103
L. Ed. 2d 488 (1989), the Supreme Court explained, 'There is
no federal policy favoring arbitration under a certain set of
procedural rules; the federal policy is simply to ensure the
enforceability, according to their terms, of private agreements
to arbitrate.' 489 U.S. at 476, 109 S. Ct. at 1254, 103 L. Ed. 2d
at 498; see also Dean Witter Reynolds[, Inc. v. Byrd], 470 U.S.
[213,] 219-20, 105 S. Ct. [1238,] 1242, 84 L. Ed. 2d [158,] 164
[(1985)] ('The [Federal Arbitration] Act, after all, does not
mandate the arbitration of all claims, but merely the
enforcement ... of privately negotiated arbitration
agreements.'). Therefore, when considered in the proper
context, our statements that the law 'favors' arbitration mean
simply that courts must respect and enforce a contractual
provision to arbitrate as it respects and enforces all
contractual provisions. There is, however, no public policy --federal or state -- 'favoring' arbitration. See Toler's Cove
Homeowners Ass'n, Inc. v. Trident Const. Co., 355 S.C. 605,
611, 586 S.E.2d 581, 584 (2003) ('There is no federal policy
favoring arbitration under a certain set of procedural rules
and the federal policy is simply to ensure the enforceability of
private agreements to arbitrate.' (citing Volt Info. Scis., 489
U.S. at 476, 109 S. Ct. at 1254, 103 L. Ed. 2d. at 498)).
"In this case, the simple fact the master refused to set
aside the entry of default, thereby preventing [Restoration
Specialists] from requesting the court to compel arbitration,
does not mean the order was immediately appealable. In a
case like this, the circuit court should proceed to a
determination of damages and the entry of judgment under
Rule 55(b). From the final order of judgment, the aggrieved
party may file an appeal challenging the circuit court's finding
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there was not good cause to set aside the entry of default, and
may address any Rule 60, [S.C. R. Civ. P.], issue such as
whether the aggrieved party demonstrated excusable
neglect."
Palmetto Constr. Grp., 432 S.C. at 636-39, 856 S.E.2d at 151-53
(emphasis added). Thus, the South Carolina Supreme Court affirmed the
South Carolina Court of Appeals' conclusion that a default judgment that
did not determine damages was not appealable even though it had
prevented Restoration Specialists from immediately appealing the denial
of its motion to compel arbitration. However, the South Carolina
Supreme Court concluded that the South Carolina Court of Appeals had
erred
"in addressing [Restoration Specialists'] argument [it] did not
waive [its] right to arbitration. See Palmetto Constr. Grp., 428
S.C. at 267-70, 834 S.E.2d at 207-08. In the context of default,
the concept of waiver is bound up in the Rule 55(c)
determination of good cause and Rule 60(b) determinations
such as excusable neglect. On appeal from a final judgment,
[Restoration Specialists] may challenge any such
determinations, and if that challenge is successful, may claim
[it] did not in fact waive [its] contractual right to arbitration."
432 S.C. at 640, 856 S.E.2d at 153.
Ivy contends that Palmetto is not procedurally similar to this case
because, Ivy says, in South Carolina an order denying a motion compel
arbitration is interlocutory but immediately appealable by statute. See
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S.C. Codified Laws § 15-48-200(a)(1).6 In contrast, in Alabama, Ivy
argues, a ruling on a motion to compel arbitration is immediately
appealable because it is considered a final judgment. Ivy cites Bowater
Inc. v. Zager, 901 So. 2d 658, 666 (Ala. 2004), for that proposition; in
Bowater, this Court stated:
"[A]n order granting or denying arbitration is no longer
interlocutory in the sense that it remains 'within the breast of
the court' subject to revision at any time before final
judgment, because it is now established that unless an appeal
is timely taken from the order, the order is final."
Ivy contends that this difference matters because, "unlike in Palmetto, to
challenge the denial of its motion to compel arbitration, Ivy's only option
is to appeal now." Ivy's memorandum, p. 8. Ivy also emphasizes the fact
that, in Palmetto, Restoration Specialists did not file its motion to compel
arbitration until after a default had been entered against it. In contrast,
6Section 15-48-200(a)(1), S.C. Codified Laws, provides, in pertinent
part:
"(a) An appeal may be taken from:
"(1) An order denying an application to
compel arbitration made under [S.C. Codified
Laws] § 15-48-20 ...."
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Ivy filed its motion to compel arbitration before the trial court ruled on
CDH's motion for a default judgment.
In reply, CDH questions whether Ivy is correct in stating that an
order denying a motion to compel arbitration in South Carolina is
interlocutory but appealable. See CDH's Response in Favor of Motion to
Dismiss, p. 5. Regardless, CDH insists, the fact remains that in Palmetto
the South Carolina Supreme Court held that a ruling on a motion to
compel arbitration did not change the appealability of an interlocutory
order granting a motion for a default judgment, which is the same issue
presented here. See, e.g., Tri-State Delta Chems., Inc. v. Crow, 347 Ark.
255, 61 S.W.3d 172 (2001) (reaching essentially the same conclusion).
CDH admits that, unlike Restoration Specialists in Palmetto, Ivy moved
to compel arbitration before a default judgment had been entered.
However, CDH notes that, similar to the situation in Palmetto, Ivy did
not pursue arbitration until well after CDH had moved for a default
judgment and, "crucially, after the conduct warranting default had
occurred." CDH's response, p. 6.
Ivy's arguments tellingly do not attack the central reasoning of the
South Carolina Supreme Court in Palmetto, which was that "[n]either
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the [United States] Supreme Court nor this Court ... meant to give the
law of arbitration such a special status that it would supplant state
procedural law." Palmetto Constr. Grp., 432 S.C. at 639, 856 S.E.2d at
153. Indeed, if anything, that observation was reinforced by the United
States Supreme Court in Morgan v. Sundance, Inc., 596 U.S. 411 (2022),
in which that Court declared:
"[T]he [Federal Arbitration Act's] 'policy favoring arbitration'
does not authorize federal courts to invent special,
arbitration-preferring procedural rules. Moses H. Cone[
Mem'l Hosp. v. Mercury Constr. Corp.], 460 U.S. [1,] 24,
[(1983)]. ... The policy is to make 'arbitration agreements as
enforceable as other contracts, but not more so.' Prima Paint
Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404, n. 12
(1967). ... The federal policy is about treating arbitration
contracts like all others, not about fostering arbitration."
Id. at 418.
In this case, the trial court's September 4, 2025, default judgment
is clearly interlocutory because the trial court reserved the issue of the
amount of damages for a later determination. See, e.g., Ex parte Eustace,
291 So. 3d 33, 36 (Ala. 2019) (" 'That a judgment is not final when the
amount of damages has not been fixed by it is unquestionable.' " (quoting
"Automatic" Sprinkler Corp. of Am. v. B.F. Goodrich Co., 351 So. 2d 555,
557 (Ala. 1977))). Ivy essentially asks us to ignore that fact because, it
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says, the trial court's ruling on its motion to compel arbitration takes
priority under Rule 4(d), Ala. R. App. P.7 But Rule 4(d) says no such thing.
In fact, Rule 4(d) addresses "order[s] granting or denying a motion to
compel arbitration," not a judgment such as the one in this case, in which
the trial court primarily entered a default judgment based on Ivy's
conduct in litigation and secondarily declared that its ruling rendered the
motion to compel arbitration "moot." It is true that in certain cases we
have construed a trial court's ruling that a motion to compel arbitration
was moot to be tantamount to a denial of such a motion. See American
Bankers Ins. Co. of Florida v. Pickett, 424 So. 3d 920, 928 (Ala. 2025).
But, in this case, the trial court's conclusion that Ivy's motion to compel
arbitration was rendered moot by the default judgment carries
distinctive meaning. To see why, we must recall the procedural history
behind the trial court's September 4, 2025, judgment -- which is the
reason Part I of this opinion so carefully describes that history.
7"To allow a party to 'cr[y] arbitration' in order to undo the
consequences of its own errors would turn the rationale of arbitration on
its head. Menorah Ins. Co. v. INX Reins. Corp., 72 F.3d 218, 223 (1st Cir.
1995)." LaFrance Architect v. Point Five Dev. S. Burlington, LLC, 195
Vt. 543, 554, 91 A.3d 364, 372 (2013).
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Ivy did not answer CDH's complaint until June 19, 2024, one day
before the scheduled hearing on CDH's first motion for a default
judgment and seven months after CDH had filed its complaint. After the
trial court had denied that first motion for a default
judgment -- ostensibly because Ivy had been attempting to settle the
parties' dispute -- the trial court adopted a scheduling order based on a
joint motion of the parties on November 26, 2024. Discovery continued on
the basis of that scheduling order, but a dispute arose concerning
whether Tan should be deposed in person or via videoconferencing
technology. Tan repeatedly refused to sit for an in-person deposition,
contending that it was not feasible because he lived in Singapore. In the
wake of CDH's second motion for a default judgment, on February 19,
2025, the trial court expressly ordered Tan to sit for an in-person
deposition in the United States. Tan failed to obey that order. Attempting
to excuse that noncompliance, on April 9, 2025, Ivy's counsel expressly
represented to the trial court that Tan's visa application had been denied,
which was why he could not travel to the United States for the deposition.
However, on June 18, 2025, Ivy admitted that Tan's visa application had,
in fact, been approved on March 26, 2025, and Ivy tried to explain away
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the discrepancy in the information it had provided to the trial court as "a
failure of communication between [Ivy's] Alabama-based counsel and
their Singapore-based client." In a subsequent hearing on CDH's third
motion for a default judgment held on June 23, 2025, Ivy again attempted
to stave off a default judgment by claiming that a settlement was in the
offing, but the trial court later was informed that no settlement could be
achieved.
The procedural history makes it clear that the trial court entered a
default judgment in favor of CDH and against Ivy based on its belief that
Ivy, and particularly Tan, had displayed willfully noncompliant behavior
in this litigation. The trial court granted Ivy generous and repeated
reprieves for delays in the litigation and for noncompliance in discovery.
However, Tan then appeared to directly disobey a trial-court order and
seemingly attempted to excuse it by allowing Ivy's counsel to present
false information about the status of his visa. The trial court still tried to
give Ivy one more chance to resolve the litigation, but, after that failed,
the trial court entered the default judgment. In short, the trial court's
September 4, 2025, default judgment was based on a perception of
flagrant litigation misconduct, not on any issues related to arbitration.
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The trial court clearly had the power to enter a default judgment on that
basis.
"Rule 37(b)(2)(C), Ala. R. Civ. P., provides that, under
the appropriate circumstances, a trial court may enter '[a]n
order ... rendering a judgment by default against the
disobedient party.' ... Our Court has specifically held that
entry of a default judgment against a party who fails to
comply with a discovery order is an appropriate sanction
under that rule. See Ex parte Blake, 624 So. 2d 528, 532 (Ala.
1993) (recognizing that 'Rule 37(b)(2)(C), Ala. R. Civ. P.,
authorizes the trial court to enter a default judgment against
a party who fails to comply with a discovery order').
"....
"In addressing what level of conduct rises to the level of
'willfulness' in the context of discovery abuse, our Court has
explained that 'willfulness' might be found when ' "a party
intentionally or willfully fail[s] to attend a deposition" ' or does
' "not offer[] an explanation for his failure to comply [with
discovery requests]." ' Ex parte Seaman Timber Co., 850 So.
2d [246,]256 [(Ala. 2002)] (citations omitted)."
Mobile Invs., LLC v. Corporate Pharm. Servs., Inc., 415 So. 3d 1018, 1023
(Ala. 2024) (emphasis added). Cf. United States v. Shipp, 203 U.S. 563,
573 (1906) ("Until its judgment declining jurisdiction should be
announced, [the court] had authority, from the necessity of the case, to
make orders to preserve the existing conditions and the subject of the
petition ....).
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As CDH has noted, the litigation behavior upon which the default
judgment was granted occurred before Ivy filed its motion to compel
arbitration. Moreover, Ivy's alleged right to arbitration arises from the
joint-venture agreements, while the default judgment is based on party
conduct that is separate from the contractual dispute between the
parties. Thus, the trial court's decision with respect to the motion for a
default judgment was genuinely independent of its ruling on the motion
to compel arbitration. That is why a ruling of mootness, rather than a
denial, of the motion to compel arbitration was the legally correct
disposition of the motion. Accordingly, Rule 4(d), Ala. R. App. P., is not
implicated because Ivy's motion to compel arbitration was not denied. In
fact, because the default judgment rendered the motion to compel
arbitration moot, Ivy potentially could file a new motion to compel
arbitration should the default judgment be set aside by the trial court or
on appeal. See, e.g., Running Cars, LLC v. Miller, 333 So. 3d 1177, 1179
(Fla. Dist. Ct. App. 2022) ("Moving to set aside the default judgment was
necessary to pursue the right to arbitrate. The default judgment impeded
the arbitration right, and when that impediment was removed, the first
action taken was to compel arbitration."). But that eventuality could
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become possible only once the default judgment is a final judgment. As
we already have made clear, the trial court must assess damages before
there is a final, appealable judgment.
III. Conclusion
In sum, the fact that the trial court's September 4, 2025, default
judgment in favor of CDH included a ruling that Ivy's motion to compel
arbitration was moot does not alter the fact that the judgment was
interlocutory and not appealable. Ivy's decision to raise arbitration as an
issue in the midst of the ongoing litigation concerning a default judgment
did not change the procedural requirement that there must be a final
judgment before an appeal is viable given that the basis of the default
judgment was separate from the basis for the motion to compel
arbitration. The default judgment rendered Ivy's motion to compel
arbitration moot rather than being denied. That disposition means that
Rule 4(d), Ala. R. App. P., is not implicated in this case. Because Ivy has
appealed from an interlocutory judgment, CDH's motion to dismiss the
appeal is due to be, and hereby is, granted.
APPEAL DISMISSED.
Stewart, C.J., and Shaw, Bryan, and McCool, JJ., concur.
34