Mississippi ADR Update by Professor Bobby Harges
Loyola University New Orleans College of Law
7214 St. Charles Avenue, CB 901
New Orleans, Louisiana 70118
www.maps-adr.com
harges@loyno.edu
1. Entities Can Consent to an Arbitration Agreement
2. Arbitration Clause Invalid After Breaks in Employment
3. Arbitration Agreement is Enforceable Absent Mutuality of Obligation
4. An Incapacitated Nursing Home Resident Not Bound by the Arbitration Agreed to by
His Wife
5. The FAA Governs Nursing Home Admission Agreements
6. Arbitrator’s Award is Within the Essence of the CBA
7. Res Judicata Defense is an Arbitrable Issue
8. The Policy of Promoting Settlement Outweighs the Public’s Right of Access
9. Non-Payment of Arbitration Fees Insufficient to Withdraw from Arbitration
10. Arbitration Clause Insufficiently Spread upon a Board’s Minutes is Unenforceable
11. Arbitrator’s Ex Parte Call to a Potential Witness Did Not Prejudice Parties’ Rights
Entities Can Consent to an Arbitration Agreement
(1) Ruppert v. Mav6 Holdings, LLC, 185 So.3d 1033 (Miss. Ct.App. 2015).
Plaintiffs-Appellants, members of two LLCs, brought action against the LLCs and their
founders, contesting valuation of their interests in LLCs and asserting derivative claims on
grounds of fraud and misconduct. Using the two-prong test laid out in the Arbitration Act, the court of appeals confirmed the Appellee’s motion to compel arbitration. The court ruled that two considerations of the first prong, which were at issue here -- whether there is a valid arbitration agreement and whether the parties’ disputes are within the scope of the arbitration agreements -- were satisfied. Firstly, both the founders and (the managing partners on behalf of) the LLCs signed the operative agreement which included the arbitration provision and were listed as members to the agreement. And secondly, the alleged claims were associated with the LLC’s “business and management” thereby falling within the express language of the arbitration agreement.
Arbitration Clause Invalid After Breaks in Employment
(2) Walker v. Red Lobster Restaurants, LLC, No. 3:2014cv00449 (S.D. Miss. 2015), 2015 WL
3970917.
Defendants filed a motion to compel arbitration against the Plaintiff who, as a minor, signed and subjected himself to the dispute resolution provision when he first began working for the Defendants. In denying the Defendants’ motion to compel for being beyond the scope of the arbitration agreement, the court found that the Plaintiff had no duty to arbitrate his sexual harassment claims because – given several voluntary breaks in his employment – he never signed another agreement upon rehire and the initially signed agreement contained no terms providing for a duty to arbitrate even after a break or termination of employment.
Arbitration Agreement is Enforceable Absent Mutuality of Obligation
(3) Dismuke v. One Main Financial, Inc., No. 3:2014cv00947 (S.D. Miss. 2015), 2015 WL
4429280.
The court granted the Defendant’s motion to dismiss and compel arbitration against the Plaintiff, an African-American employee claiming race-based employment discrimination. The Plaintiff argued that the arbitration agreement was illusory and hence unenforceable because it endowed the Defendant with the power to unilaterally and at any time alter, amend, or even terminate agreement with 30 calendar days’ written notice. Since the termination provision required a written notice and applied only prospectively, the court held that the provision was not illusory. Additionally, the court emphasized that the mere one-sidedness and lack of mutuality of obligation in the arbitration agreement does not render the agreement unenforceable under Mississippi law as long as there is consideration – which, here, was a promise of the Plaintiff’s continued employment.
An Incapacitated Nursing Home Resident Not Bound by the Arbitration Agreement Signed by His Wife
(4) Hattiesburg Health & Rehab Center, LLC v. Brown, 176 So.3d 17 (Miss.2015), 2015 WL
4855774.
An arbitration provision included in the admission agreement was signed by a nursing home resident’s wife who brought a wrongful-death suit against the nursing home after her husband died upon discharge. The Supreme Court found that the parties did not agree to arbitrate and denied the Defendant’s motion to compel arbitration. Since the resident’s wife had no authority to contract on his behalf, the resident could not be a third-party beneficiary to a nonexistent contract and could not, thus, be bound by its arbitration provision. By strictly interpreting the surrogate statute, the Supreme Court further held that the resident’s wife was not his healthcare surrogate since the patient’s primary physician made no determination of a lack of the patient’s capacity. And, lastly, since the resident did not “knowingly” receive benefits from the Defendant and then tried to avoid his obligations, and since the wife’s claims were not directly dependent on the agreement (they were sound in tort,) the resident was not bound by the doctrine of direct-benefit estoppel.
The FAA Governs Nursing Home Admission Agreements
(5) NC Leasing, LLC v. Junker, 172 So.3d 155 (Miss.2015).
Defendant moved to compel arbitration after the Plaintiff sued a nursing home for fall-related injuries. The arbitration provision provided for arbitration pursuant to the procedural AAA rules and by a single arbitrator to be mutually chosen by the parties. The Plaintiff’s claim that the agreement did not make provision for an arbitrator in the event the parties could not agree failed because the agreement specifically stated that it was governed by the FAA, which empowers the court to appoint an arbitrator absent the parties’ agreement. Also, the Supreme Court found the Plaintiff’s forum-unavailability argument to have no bearing on the agreement’s validity because, even though the AAA ceased to administer healthcare-related arbitration without a post-dispute agreement, the parties had clearly contemplated the AAA’s refusal to arbitrate potential claims and had limited the AAA’s involvement. Since the issue of arbitrator selection was not
properly before the court, the Supreme Court reversed the circuit court’s finding and remanded for a determination of the arbitration agreement’s validity.
Arbitrator’s Award is Within the Essence of the CBA
(6) Teamsers Local Union 667 v. Coahoma Opportunities, Inc., No. 4:2014cv00038 (N.D.
Miss. 2015), 2015 WL 5554247.
The court granted Plaintiff’s motion for summary judgment requesting enforcement of the arbitrator award that ordered reinstatement of a Union member with back pay from the date of termination pursuant to the parties’ collective bargaining agreement (“CBA”). In dismissing the Defendant’s argument that the award should be set aside as it did not draw its essence from the CBA, the court stated that the arbitrator award placed the grievant “back in the place it would have been but for [the Defendant’s] contractual violation,” which is a direct application of the agreed upon CBA provision governing the scope of arbitrator’s authority to grant relief.
Res Judicata Defense is an Arbitrable Issue
(7) Hancock Fabrics, Inc. v. Rowdec, LLC, 126 F.Supp.3d 784 (N.D. Miss. 2015), 2015 WL
5089682.
The parties’ Consulting and Sales Agreement (“CSA”) included an arbitration clause, which was invoked by the Defendant when the parties began disagreeing on the calculation of royalties. The parties engaged in arbitration, the arbitrator issued an award which was confirmed by the court, and the Defendant then demanded a second arbitration. The Plaintiff consequently filed a motion to stay arbitration claiming that the Defendant is precluded from arbitrating its claims under the doctrines of waiver and res judicata. In denying the Plaintiff’s motion, the court stated that the Defendant did not substantially invoke judicial process such that the Plaintiff, who also availed itself of a judicial forum, was prejudiced and the Defendant, therefore, did not waive its right to arbitrate under the CSA. The court confirmed that, while waiver of the right to arbitrate is a matter for the court, res judicata is an arbitrable issue because the court’s scope of inquiry is so
narrow in comparison to a broad arbitration clause that an arbitrator would be best-equipped to determine whether the Defendant is precluded from bringing a second arbitration action.
The Policy of Promoting Settlement Outweighs the Public’s Right of Access
(8) Troupe v. Barbour, No. 3:10-cv-00153 (S.D. Miss. 2015), 2015 WL 5097209.
Following the Plaintiffs’ class action lawsuit against the State of Mississippi for its failure to
provide services for children with mental health needs, the DOJ and the State reached an
agreement whereby the State retained the Technical Assistance Collaborative (“TAC”) to assess the State’s existing mental health services. Arguing that the TAC Report was created to facilitate negotiation and settlement, the State successfully moved for an order protecting the TAC Report’s confidentiality at which time The Clarion Ledger – a daily newspaper – filed its motion to intervene and to vacate protective order. Since it met all the relevant requirements, the court granted The Clarion Ledger permission to intervene for the limited purpose of challenging the Protective Order. However, after carefully balancing the need for confidentiality of settlement-related documents, on one hand, and the public’s right of access, on the other, the court decided to maintain the protective order as the need for a fair and efficient resolution of such a complex
case outweighed the public’s interest in accessing the TAC Report at the time. Thus, the court denied The Clarion Ledger’s motion to the extent it sought that the protective order be modified or vacated, but the decision was without prejudice to The Clarion Ledger’s right to make the same request once settlement negotiations are concluded.
Non-Payment of Arbitration Fees Insufficient to Withdraw from Arbitration
(9) Burns v. Covenant Health & Rehab of Picayune, LLC, No. 1:15-cv-00378 (S.D. Miss.
2015), 2016 WL 660938.
Defendant moved to compel arbitration and stay proceedings in response to the Plaintiff’s notice to withdraw from arbitration. Since the Defendant was constantly late in delivering the documents requested by the Plaintiff’s counsel and in paying fees related to the JAMS arbitration consented to in the ADR agreement, the Plaintiff decided to withdraw from the arbitration alleging that the Defendant had waived its right to arbitration by systematic and unreasonable delays. The court disagreed with the Plaintiff and held that the Defendant did not substantially or constructively invoke the judicial process as it had not actively participated in any lawsuit and it had not, by its late payments, deprived the Plaintiff from proceeding with arbitration. Similarly, the court found that the Plaintiff was not substantially prejudiced by the Defendant’s conduct
since any hardship the Plaintiff experienced, though damaging for her financial situation, did not hurt her legal position such that she would be prejudiced going forward in the arbitration. Concluding that the Defendant was not in default on its obligation to pay retainer fees as of the date of its motion, the court granted the Defendant’s motion to compel and ordered the parties to proceed with the arbitration.
Arbitration Clause Insufficiently Spread upon a Board’s Minutes is Unenforceable
(10) Wellness, Inc. v. Pearl River County Hosp., 178 So.3d 1287 (Miss.2015).
Defendant unsuccessfully moved to compel mediation and arbitration after the Plaintiff sued for fraud, conspiracy, breach of contract, and other causes of action. Though the executed parties’ agreement contained an arbitration clause, the Plaintiff denied that there was ever an agreement to mediate or arbitrate. The Supreme Court agreed with the Plaintiff in finding no valid arbitration agreement between the parties because the minutes of the Plaintiff’s Board of Trustees did not include sufficient reference to the parties’ agreement, much less its arbitration clause. The Supreme Court also rejected the Defendant’s contention that the court should carve out an exception to the requirement that a contract be spread upon the minutes of a Board’s meeting. The Defendant’s failure to fulfill its duty to ensure that sufficient terms of its contract with the Plaintiff were spread upon the Board’s minutes did not entitle it to an exception from the enforcement of a well-established policy that allows the tax-paying public to know what had transpired as evidenced by the written memorial of a Board’s minutes.
Arbitrator’s Ex Parte Call to a Potential Witness Did Not Prejudice Parties’ Rights
(11) Painter v. Regions Ins., Inc., 181 So.3d 970 (Miss.2015).
Plaintiff brought an action against two former employees for violating the non-compete clause of their employment agreements. The claim was arbitrated and the Defendants moved to have the arbitrator award vacated, alleging the arbitrator exceeded his authority by awarding damages based on the previously agreed-upon formula the Defendants later perceived as specific performance -- an equitable remedy outside the scope of arbitration -- instead of one for liquidated damages, a legal remedy within the arbitrator’s power to award. The Supreme Court disagreed by holding that, although the award more closely resembled an equitable remedy than a legal one, the arbitrator had authority to award such as the Defendants agreed to it, they willfully and without objection participated in the arbitration of the dispute, and their own expert
agreed that the same formula would best calculate the damages. The Defendants also claimed that, by making an ex parte phone call to a potential witness who had previously served as a Defendant’s counsel, the arbitrator engaged in “undue means,” “misconduct,” or “misbehavior” that prejudiced their rights. By failing to show that the award was actually “procured by” undue means and that the phone call was substantial or material, the Supreme Court ruled that the Defendants’ rights were not prejudiced and accordingly denied the Defendants’ motion to vacate.
About Bobby Harges
Mr. Harges mediates cases in Mississippi and Louisiana. He is a tenured professor of law at Loyola University New Orleans College of Law. Prior to his arrival at Loyola, Mr. Harges
practiced law in New Orleans specializing in civil and construction litigation. He also taught at the University of Mississippi School Of Law. Before entering law school, he worked as an electrical engineer. Although he has mediated over one thousand cases of all types, his primary experience as a neutral includes the mediation and arbitration of personal injury, insurance, securities, construction, commercial, labor, and employment matters. Mr. Harges also serves as a special master and attorney-chair of medical review panels. He has also assisted several companies in designing in-house dispute resolution programs.
Education
B.S., Mississippi State University, 1982
J. D., University of Mississippi, 1986
LL.M., Harvard University, 1990
Memberships/Affiliations
Vice Chair – Mississippi Bar ADR Section; Member - Louisiana State Bar Association ADR
Section; Alliance for Good Government; principal trainer for Mediation Training Company