Wellness, Inc. v. Pearl River County Hospital and Nursing Home ( 2015 )


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  •                     IN THE SUPREME COURT OF MISSISSIPPI
    NO. 2014-CA-01696-SCT
    WELLNESS, INC., d/b/a WELLNESS
    ENVIRONMENTS
    v.
    PEARL RIVER COUNTY HOSPITAL
    DATE OF JUDGMENT:                           11/25/2014
    TRIAL JUDGE:                                HON. PRENTISS GREENE HARRELL
    COURT FROM WHICH APPEALED:                  PEARL RIVER COUNTY CIRCUIT COURT
    ATTORNEYS FOR APPELLANT:                    J. TUCKER MITCHELL
    STEPHEN DEAN STAMBOULIEH
    ATTORNEYS FOR APPELLEE:                     THOMAS L. KIRKLAND, JR.
    ALLISON CARTER SIMPSON
    ANDY LOWRY
    NATURE OF THE CASE:                         CIVIL - CONTRACT
    DISPOSITION:                                AFFIRMED AND REMANDED - 11/19/2015
    MOTION FOR REHEARING FILED:
    MANDATE ISSUED:
    BEFORE RANDOLPH, P.J., PIERCE AND COLEMAN, JJ.
    COLEMAN, JUSTICE, FOR THE COURT:
    ¶1.    The administrator of the Pearl River County Hospital, Michael Boleware, entered into
    a contract with Wellness, Inc., for Wellness to provide furnishings, fixtures, equipment, and
    systems for the Hospital’s renovation. The Hospital subsequently sued Wellness and other
    defendants not party to the instant appeal, alleging fraud, conspiracy, breach of contract, and
    other causes of action. Before trial commenced, Wellness moved to compel mediation and
    arbitration and to stay proceedings. After a hearing on the motion, the circuit court denied
    the motion in its entirety. Aggrieved, Wellness appeals. Finding no error, we affirm.
    FACTUAL BACKGROUND
    ¶2.    Pearl River Community Hospital is a community hospital in Poplarville, Mississippi;
    a Board of Trustees governs the hospital. In June 2010, the Hospital employed Michael
    Boleware as its Chief Executive Officer. Boleware and another individual, Hope Thomley,
    began to engage with outside companies, not party to the instant appeal, for various projects
    around the Hospital. On September 14, 2011, Boleware executed an Agreement for
    Furniture, Furnishings, Fixtures, Equipment and Systems with Wellness (the “Wellness
    Agreement”). The Agreement concerned the renovation of twelve rooms within the hospital,
    and work on the rooms began promptly after the agreement was executed. The minutes of
    the Board of Trustees through 2011 and 2012 mention Wellness Environments and financing
    the renovation Wellness was carrying out, but the Wellness Agreement itself and its terms
    are never discussed.
    ¶3.    In November 2013, the Hospital sued Wellness and other defendants, alleging fraud,
    conspiracy, and other causes of action. Defendants removed the case to federal court in
    December 2013, but the federal court decided in September 2014 that removal had been
    improper. The case was then remanded to state court: specifically, the Pearl River County
    Circuit Court. Pearl River County Hospital v. Walters, No. 1:13-CV-00447-HSO-RHW
    (S.D. Miss. Sept. 12, 2014). The Hospital’s suit was then consolidated with other suits
    brought by parties separate from the appeal. The Wellness Agreement contains an arbitration
    2
    clause within a section entitled “Standard Terms and Conditions,” so Wellness filed a Motion
    to Compel Mediation and (if Necessary) Arbitration and to Stay Proceedings on October 24,
    2014. The Hospital denied then, as it does now, that there was any agreement at all to
    mediate or arbitrate. After a hearing, the trial court denied the motion. Wellness filed an
    appeal on December 1, 2014, arguing that the trial court erred in denying its motion to
    compel mediation and arbitration. See Tupelo Auto Sales, Ltd. v. Scott, 
    844 So. 2d 1167
    ,
    1170 (¶ 10) (Miss. 2003) (“Adopting the procedure of the Federal Arbitration Act and
    following the lead of other jurisdictions, we find an appeal may be taken from an order
    denying a motion to compel arbitration.”)         We granted Wellness’s Motion To Stay
    Proceedings in the trial court pending the outcome of the appeal on January 14, 2014.
    ISSUES
    ¶4.    In order to determine the ultimate issue of whether the trial court erred in denying the
    Motion to Compel Mediation and (If Necessary) Arbitration and to Stay the Proceedings, the
    Court must address the following issues:
    I.     Whether the Wellness Agreement was sufficiently spread upon the
    Board’s minutes such that the Hospital can be said to have agreed
    to mediate or arbitrate any disputes with Wellness.
    II.    Whether the facts prove that the Court should carve out an
    exception to the minutes requirement for Wellness.
    STANDARD OF REVIEW
    ¶5.    When reviewing a trial court’s disposition of a motion to compel arbitration, the Court
    applies a de novo standard of review. Caplin Enters., Inc. v. Arrington, 
    145 So. 3d 608
    , 612
    3
    (¶7) (Miss. 2014); Compere’s Nursing Home, Inc. v. Estate of Farish ex rel. Lewis, 
    982 So. 2d
    382, 383 (Miss. 2008) (citing Sullivan v. Mounger, 
    882 So. 2d 129
    , 132 (Miss. 2004)).
    ANALYSIS
    ¶6.    The trial court did not err by denying the Motion to Compel Mediation and (If
    Necessary) Arbitration and to Stay the Proceedings.
    I.     A valid arbitration agreement between the Hospital and Wellness
    does not exist because the Board’s minutes do not include sufficient
    reference to liabilities and obligations to mediate or arbitrate.
    ¶7.    “Arbitration is a matter of contract and a party cannot be required to submit to
    arbitration any dispute which he has not agreed so to submit.” AT&T Techs. v. Commc’ns
    Workers of America, 
    475 U.S. 643
    , 776 (1986) (quoting United Steelworkers of America
    v. Warrior & Gulf Navigation Co., 
    363 U.S. 574
    , 582, 
    80 S. Ct. 1347
    , 
    4 L. Ed. 2d 1409
    (1960)). As such, the Court must first determine if there is a contract between the Hospital
    and Wellness within which the parties agreed to mediate or arbitrate their claims.
    [T]he courts must first determine whether the parties have agreed to arbitration
    of the dispute and if it is determined that they have, then a determination must
    be made as to “whether legal constraints external to the parties’ agreement
    foreclosed arbitration of those claims.” . . . As we have noted on prior
    occasions, this first prong has two sub-factors: “(1) whether there is a valid
    arbitration agreement and (2) whether the parties’ dispute is within the scope
    of the arbitration agreement.”
    Smith ex rel. Smith v. Captain D’s, LLC, 
    963 So. 2d 1116
    , 1119-20 (Miss. 2007) (quoting
    Rogers-Dabbs Chevrolet-Hummer v. Blakeny, 
    950 So. 2d 170
    , 173 (Miss. 2007)).
    ¶8.    Wellness asserts that a valid contract exists because the Wellness Agreement was
    executed by Boleware, the Administrator and CEO of the Hospital, and Franklin Jarman, the
    4
    CEO of Wellness Environments. The Hospital responds that a valid contract does not exist,
    even though its Administrator/CEO executed the Wellness Agreement, because the terms of
    the Wellness Agreement are not sufficiently spread upon the minutes of the Board of
    Trustees.
    ¶9.    Mississippi Code Section 41-13-35(3) (Rev. 2013) requires a board of trustees of a
    community hospital to “keep minutes of its official business[.]” A community hospital board
    of trustees, as does any public board in the State of Mississippi, speaks and acts only through
    its minutes. Thompson v. Jones Cty. Cmty. Hosp., 
    352 So. 2d 795
    , 796 (Miss. 1977); see
    also Coast Materials v. Harrison Cty. Dev. Comm’n, 
    730 So. 2d 1128
    , 1132 (Miss. 1998);
    Nichols v. Patterson, 
    678 So. 2d 673
    , 677 (Miss. 1996). And where a public board engages
    in business with another entity, “[n]o contract can be implied or presumed, it must be stated
    in express terms and recorded on the official minutes and the action of the board[.]” Burt v.
    Calhoun, 
    231 So. 2d 496
    , 499 (Miss. 1970).
    ¶10.   However, the entire contract need not be placed on the minutes. Instead, it may be
    enforced where “enough of the terms and conditions of the contract are contained in the
    minutes for determination of the liabilities and obligations of the contracting parties without
    the necessity of resorting to other evidence.” 
    Thompson, 352 So. 2d at 797
    . However, it is
    the responsibility of the entity contracting with the Board, not the responsibility of the Board
    itself, to ensure that “the contract is legal and properly recorded on the minutes of the board.”
    
    Id. (citing Burt
    v. 
    Calhoun, 231 So. 2d at 499
    ).
    5
    ¶11.   In Thompson, the Court considered a claim for unpaid salary by a former employee
    of Jones County Community Hospital. 
    Thompson, 352 So. 2d at 795
    . The trial court had
    granted a motion to dismiss because the employment contract itself never had been entered
    upon the minutes of the board of trustees, nor had “enough of the substance of the contract”
    been contained therein. 
    Id. The minutes
    had stated only that a four-year contract as
    executive director of the hospital had been granted to the plaintiff and that its acceptance had
    been unanimous after “appropriate discussions.” 
    Id. at 795-96.
    The Court stated that
    because the minutes contained “no reference to the salary to be paid plaintiff for his services,
    . . . the Court may not determine the amount of the salary.” 
    Id. at 797-798.
    ¶12.   By contrast, in Cheatham v. Smith, 
    92 So. 2d 203
    (Miss. 1957), superceded by
    statute, Ella Smith’s teaching employment contract was enforced, despite it not having been
    attached to the minutes associated with it or included in the minutes in its entirety. The
    Thompson Court cited Cheatham for the premise that it is not, in fact, “necessary for the
    entire contract to be placed upon the minutes of a public board.” 
    Thompson, 352 So. 2d at 797
    . In Cheatham, the Board of Education’s minutes showed that Ella Smith’s name had
    been included in a list of teachers who had been selected and approved by the Board, and her
    salary had been listed in the minutes as $1,800 per year. The Board’s minutes showed that
    the seconded motion to approve the superintendent’s authority to create the teaching
    contracts had not expressly been approved by the Board, but the Court held that the omission
    was “clerical error” and that Smith indeed had a valid teaching contract. Cheatham, 
    92 So. 2d
    at 208.
    6
    ¶13.    In the instant case, the minutes from the Board of Trustees’ meetings do not set forth
    sufficient terms to establish the liabilities and obligations of the parties, and thus the court
    cannot enforce the contract, much less the mediation or arbitration clauses therein. In
    September 2011, the Board discussed the reduction in a financing rate, and that Wellness
    would renovate twelve rooms “for a cost of less than $5,000.00 per room.” The Board also
    discussed a time frame for the renovation and the cost per room at a second meeting in
    September 2011, and the Board carried a motion to continue with the renovation of four
    rooms at a time. On May 31, 2012, Trustee Jones “tendered a motion to accept Wellness
    Environment’s representation that it is a SINGLE/SOLE SOURCE provider for the materials
    and things” in the Kingsbridge Lease and Contract that had been discussed at a previous
    Board meeting. The motion was seconded and carried unanimously. A second motion was
    tendered “to authorize the Chair of the Board of Trustees to approve for payment the
    Wellness Environment invoice in the sum of $146,357.00 and to forward the approved
    invoice to Kingsbridge for payment.” The second motion, too, was seconded and carried
    unanimously. The above-described motions constitute the sole mentions of any contract
    between the Board of Trustees for Pearl River Community Hospital and Wellness.
    ¶14.   The Court will not draw an enforceable arbitration clause from such general,
    imprecise language. Unlike Smith in Cheatham, whose name and salary were clearly
    displayed upon the Board of Education’s minutes, the specific Wellness Agreement, much
    less its arbitration clause, is not mentioned by the Board at all. The omission brings
    Wellness’s situation more in line with that of the plaintiff in Thompson, whose employment
    7
    contract that he sought to have enforced was referenced in broad strokes by his employer, but
    with so little detail as to its terms that the Court refused to do so. “This Court has held that
    ‘[a]rbitration is a matter of contract and a party cannot be required to submit to arbitration
    any dispute which he has not agreed so to submit.’” Trinity Mission Health & Rehab. of
    Holly Springs v. Lawrence, 
    19 So. 3d 647
    , 651 (¶ 14) (Miss. 2009) (quoting Pre-Paid Legal
    Servs., Inc. v. Battle, 
    873 So. 2d 79
    , 83 (Miss. 2004)). The burden of establishing the
    existence of an arbitration agreement, in line with the burden of establishing the existence
    of a contract, rests on the party seeking to invoke it. Trinity 
    Mission, 19 So. 3d at 651-52
    (quoting Marinder Healthcare, Inc. v. Green, 
    2006 WL 162581
    (N.D. Miss. Jun. 7, 2006)).
    We find that Wellness has not carried its burden of proof, so the trial court did not err in
    denying the Motion to Compel Mediation and (If Necessary) Arbitration.
    II.    Stare decisis and public policy forbid the Court from carving out
    a Wellness exception.
    ¶15.   Wellness argues that, even if the Court finds that the Agreement was not sufficiently
    spread upon the minutes, the Court should create a “Wellness exception” to the requirement
    that a contract be spread upon the minutes of a Board’s meeting. We decline to do so.
    ¶16.   In support of its request, Wellness cites Community Extended Care Centers, Inc. v.
    Board of Supervisors for Humphrey’s County, 
    756 So. 2d 798
    , 800 (¶ 6) (Miss. Ct. App.
    1999), which states that the reasoning behind requiring contracts to be spread upon the
    minutes is that the minutes rule “protect[s] the board from being bound by the unauthorized
    acts of individual members of the board or an agent thereof.” Indeed, by enforcing the
    minutes rule, the Court has recognized the importance of recorded, express consent by all
    8
    board members to board actions, as board members are elected officials charged with the
    protection of the public’s funds. Butler v. Bd. of Supervisors for Hinds County, 
    659 So. 2d 578
    , 579 (Miss. 1995).
    ¶17.   However, Butler goes further, revealing the broader purpose of the minutes
    requirement. The Butler Court went on to state that if the board were not required to make
    the entries onto its minutes,
    an individual member of the board or agent thereof would be capable of
    binding the board and expending the public taxpayer’s money without the
    benefit of the consent of the board as a whole which was elected and
    responsible for such purposes. In sum, the policy of protecting the public’s
    funds for use and for the public is paramount to other individual rights which
    may also be involved.
    
    Id. at 579.
    Thus, the minutes requirement has two major functions:
    (1) That when authority is conferred upon a board, the public is entitled to the
    judgment of the board after an examination of a proposal and a discussion of
    it among the members to the end that the result reached will represent the
    wisdom of the majority rather than the opinion or preference of some
    individual member; and (2) that the decision or order when made shall not be
    subject to the uncertainties of the recollection of individual witnesses of what
    transpired, but that the action taken will be evidenced by a written memorial
    entered upon the minutes at the time, and to which the public may have access
    to see what was actually done.
    Lee County v. James, 
    174 So. 76
    , 77 (Miss. 1937).
    ¶18.   Wellness argues that, because the Board discussed the Agreement on the minutes
    multiple times; because the Board members testified at depositions that the Agreement was
    ultimately approved; and because Wellness received payments from the Board, that the Board
    clearly intended to ratify the Wellness Agreement, and so Wellness is entitled to an exception
    from the minutes requirement. We disagree. Wellness had a clear and well-established duty
    9
    to ensure that sufficient terms of its contract with the hospital were spread upon the Board’s
    minutes. Its failure to fulfill its own duty does not entitle it to an exception from the
    enforcement of a well-established policy that allows members of the tax-paying public to
    consult a Board’s minutes to “see what was actually done.” Lee 
    County, 174 So. at 77
    .
    “[T]he importance of the public policy involved will be the overriding factor in such disputes
    even when the rule may work an apparent injustice.” 
    Butler, 659 So. 2d at 582
    .
    CONCLUSION
    ¶19.   Under Thompson and Cheatham, the Court cannot enforce an arbitration clause from
    a contract that is not sufficiently spread upon a Board’s minutes. The duty belonged to
    Wellness to ensure that sufficient terms and liabilities of the Wellness Agreement were
    spread upon the minutes of the Board of Trustees before asking the courts to enforce that
    Agreement. Wellness failed to fulfill that responsibility. Accordingly, the Circuit Court of
    Pearl River County did not err in denying Wellness’s Motion to Compel Mediation and (if
    Necessary) Arbitration and to Stay Proceedings. The judgment of the circuit court is
    affirmed and the case is remanded for further proceedings.
    ¶20.   AFFIRMED AND REMANDED.
    RANDOLPH, P.J., LAMAR, KITCHENS, CHANDLER, PIERCE AND KING,
    JJ., CONCUR. WALLER, C.J., AND DICKINSON, P.J., NOT PARTICIPATING.
    10