Jerry M. Sullivan, Jr. v. William M. Mounger, II ( 2002 )

IN THE SUPREME COURT OF MISSISSIPPI
NO. 2002-IA-01463-SCT
JERRY M. SULLIVAN, JR.
v.
WILLIAM M. MOUNGER, II, E. B. MARTIN, JR.
AND TRITEL, INC.
DATE OF JUDGMENT: 5/14/2002
TRIAL JUDGE: HON. L. BRELAND HILBURN
COURT FROM WHICH APPEALED: HINDS COUNTY CIRCUIT COURT
ATTORNEYS FOR APPELLANT: DANA E. KELLY
WILLIAM I. GAULT, JR.
C. YORK CRAIG
RICKY G. LUKE
ATTORNEYS FOR APPELLEES: GLENN GATES TAYLOR
DONALD JAMES BLACKWOOD, JR.
PHILLIP SAMUEL SYKES
CONSTANCE SLAUGHTER HARVEY
NATURE OF THE CASE: CIVIL - CONTRACT
DISPOSITION: AFFIRMED AND REMANDED - 07/01/2004
MOTION FOR REHEARING FILED:
MANDATE ISSUED:
BEFORE SMITH, C.J., CARLSON AND DICKINSON, JJ.
DICKINSON, JUSTICE, FOR THE COURT:
¶1. This is an interlocutory appeal of a circuit court order requiring Jerry M. Sullivan, Jr. to arbitrate
his claims against William M. Mounger, II, E. B. Martin, Jr., and Tritel, Inc. We affirm.
BACKGROUND FACTS
¶2. Mounger, Martin and Sullivan were founders of various entities that ultimately became Tritel, which
built and operated a wireless telephone network. On May 20, 1998, Mounger, Martin, Sullivan, AT&T
Wireless Services, Inc. and other investors executed a Securities Purchase Agreement which established
the framework culminating in the transfer of Personal Communications System (“PCS”) licenses into Tritel
and the capitalization and funding of the company necessary to construct and operate a PCS system.
Mounger, Martin and Sullivan received ownership interests in, and on January 7, 1999 entered employment
agreements with, Tritel. A disagreement arose and on May 14, 1999, Sullivan was relieved of his
responsibilities for the construction of Tritel’s wireless network. Within a few weeks, Sullivan and Tritel
each hired attorneys and agreed to mediate their disputes.
¶3. During late May, June and part of July, 1999, the parties and their attorneys, working with the
mediator, negotiated a global settlement agreement which allegedly resolved Sullivan’s employment status
with Tritel, his ownership of stock in the company, and various other issues.
¶4. On July 21, 1999, the parties entered into an agreement titled “Summary Term Sheet Jerry M.
Sullivan Agreement” which contained the principal terms of their agreement, including an arbitration
provision. After the execution of this document, the respective attorneys worked to prepare the
“Transaction Documents” needed to fully set out the terms of their agreement. The documentation included
the following:
1) Stock Purchase Agreement (Tritel);
2) Membership Purchase Agreement (Tritel Management);
3) Stock Purchase Agreement (MSM);
4) Second Amendment to Stockholders’ Agreement;
5) First Amendment to Management Agreement;
6) Amended and Restated Employment Agreement; and
7) Mutual Release and Termination Agreement.
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¶5. These documents are consistently referred to collectively, throughout the documentation, as the
“Transaction Documents.”
¶6. Under the terms of the Amended and Restated Employment Agreement, Sullivan would receive
an annual salary of $225,000, and an annual bonus of $112,500.00, for three years. He would also receive
an annual $100,000 business expenditure/expense budget, for two years. These amounts, which exceeded
$1.2 million, were to be paid to Sullivan, whether or not he performed any work.
¶7. Under the terms of the Stock Purchase Agreement (Tritel), Tritel repurchased 3,186.92 of
Sullivan’s 7,686.92 shares of common stock for one cent ($.01) per share, $31.90, and Sullivan’s three
shares of voting preference stock, for the total sum of $10.00.
¶8. On November 4, 1999, Sullivan signed the Transaction Documents. Fifteen days later, Tritel
announced that it intended an initial public offering of its stock, and on December 13, 1999, Tritel offered
its stock to the public for $18.00 per share.
¶9. On December 3, 2001, Sullivan filed suit against Mounger, Martin and Tritel, alleging that they
fraudulently induced him to enter into the Stock Purchase Agreement (Tritel), and the Mutual Release and
Termination Agreement. The defendants responded by filing a Motion to Dismiss or Stay Pending Binding
Arbitration and Other Relief.
¶10. On May 14, 2002, the trial court entered its order granting defendants’ motion and ordering
Sullivan to submit his claims to binding arbitration before the American Arbitration Association (“AAA”).
Sullivan responded by filing a petition for interlocutory appeal. The trial court entered its order granting
certification for interlocutory appeal, and the petition requesting an interlocutory appeal was then filed here.
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¶11. While the interlocutory appeal was pending before this Court, the parties proceeded to conduct
discovery for the arbitration. Sullivan did not request a stay of the arbitration proceedings, and his claims
were heard before a panel of three AAA arbitrators. The arbitration concluded on January 10, 2003, and
the panel of arbitrators took the matter under advisement.
¶12. On February 8, 2003, while the arbitration was under advisement, this Court granted Sullivan’s
Petition for Interlocutory Appeal. See M.R.A.P. 5. Thereafter, on March 21, 2003, the panel of
arbitrators rendered its decision, finding in favor of defendants, but awarding Sullivan certain expenses he
incurred during the arbitration proceeding.
¶13. Sullivan now seeks to have us hold the arbitration void and allow him to proceed to trial in the
circuit court. This we decline to do.
STANDARD OF REVIEW
¶14. This Court conducts de novo review on both motions to dismiss and motions to compel arbitration.
East Ford, Inc. v. Taylor, 826 So. 2d 709, 713 (Miss. 2002). `“In determining the validity of a motion
to compel arbitration under the Federal Arbitration Act, courts generally conduct a two-pronged inquiry.
The first prong has two considerations: (1) whether there is a valid arbitration agreement and (2) whether
the parties’ dispute is within the scope of the arbitration agreement.” Id. The second prong considers
“whether legal constraints external to the parties’ agreement foreclosed arbitration of those claims.” Id.
DISCUSSION
¶15. The issue on interlocutory appeal is whether the circuit court erred by compelling arbitration based
on an arbitration provision contained in one of the Transaction Documents which is not complained of in
Sullivan’s lawsuit.
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¶16. In its order granting certification for interlocutory appeal, the trial court certified the question of law:
“Whether the arbitration provision relied upon by the defendants is enforceable and applicable to the claims
of Plaintiff.” To answer the question, we turn to the test followed in East Ford.
Did the parties enter a valid arbitration agreement?
¶17. Sullivan’s Complaint is based on the Stock Purchase Agreement (Tritel) and the Mutual Release
and Termination Agreement, neither of which contained an arbitration provision. However, all parties agree
that both documents were part of the Transaction Documents.
¶18. The arbitration provision at issue was included in the Amended and Restated Employment
Agreement. The provision, entitled “Resolution of Disputes,” states in pertinent part:
All disputes, controversies and claims arising in connection with this Agreement that are
not settled by agreement between the parties shall be finally settled under the Commercial
Arbitration Rules of the American Arbitration Association (“AAA”) in effect from time to
time. . . . The award of the arbitrator shall be final and binding and judgment thereon may
be entered in any court having jurisdiction. . . .
¶19. Sullivanargues that the Amended and Restated Employment Agreement clearly and unambiguously
provides that only disputes arising in connection therewith are subject to arbitration. Sullivan claims that
disputes arising under the Stock Purchase Agreement (Tritel) and the Mutual Release and Termination
Agreement are not subject to the arbitration provision.
¶20. Sullivan relies on Carro Rivera v. Parade of Toys, Inc., 950 F. Supp. 449 (D. P.R. 1996),
in support of his argument. In Carro, the Plaintiff sued for breach of a Distributor Agreement, containing
an arbitration clause which limited it application to disputes arising out of “this Purchase Order”. The court
held that the clause did not apply to the Distributor Agreement and stated:
Although the arbitration clause is contained in the Distributor Agreement, it appears to refer
to disputes arising under a separate document–signed on the same day as the Distributor
Agreement–entitled “Product Order Form”. . . . The Court finds that the arbitration
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clause’s reference to “this Purchase Order” reflects an agreement to arbitrate disputes
“arising under” the Product Order Form, no the Distributor Agreement.
Id. at 452. The court further stated that “[s]ince these claims do not ‘arise under’ the Purchase Order, they
are not subject to arbitration.” Id. at 453. Similarly, Sullivan asserts that since his claims do not arise under
the Amended and Restated Employment Agreement, they are not subject to arbitration.
¶21. Sullivan also argues that the term “Transaction Documents” is given a specific definition and if the
defendants intended to arbitrate disputes arising under the Transaction Documents, they could have easily
drafted the arbitration provision to include all disputes in connection with this Agreement and the
Transaction Documents.
¶22. Defendants, on the other hand, argue that the plain language of the agreements establishes that the
parties intended and agreed to submit to arbitration any and all disputes arising under any of the Transaction
Documents. Defendants point out that an “Integrated Transaction” provision was included in some of the
“Transaction Documents,” including the Mutual Release and Termination Agreement, which states:
The provisions of this Agreement are an integral part of, and are necessary consideration
for, the Transaction Documents and the settlement of existing disputes between and among
the parties. Any breach of, or default under, this Agreement or any of the Transaction
Documents shall constitute a breach of, and a default under, each of this Agreement and
the Transaction Documents.
¶23. An “Entire Agreement and Amendment” provision was also included in some of the “Transaction
Documents,” including the Stock Purchase Agreement (Tritel), which states:
This Agreement and the Transaction Documents set forth all, and supersede and replace
all prior covenants, promises, agreements, conditions and understandings between the
parties concerning the transactions contemplated hereby, and there are no oral or written,
express or implied, covenants, promises agreements, conditions or understandings,
between and among the parties except as contained in this Agreement and the Transaction
Documents.
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¶24. Defendants assert that the Integrated Transaction provision and the Entire Agreement and
Amendment provision have the legal effect of making the terms of each of the Transaction Documents “an
integral part of” and integrated into all of the Transaction Documents, producing one global settlement
agreement.
¶25. Sullivan concedes that the Amended and Restated Employment Agreement contains the arbitration
provision, and he further concedes that some of the documents do contain an integration provision, but he
denies that the provision integrated the arbitration provision into all the Transaction Documents.
Is the parties’ dispute within the scope of the arbitration agreement?
¶26. The Stock Purchase Agreement (Tritel) entered into between Sullivan and Tritel does not contain
the Integrated Transaction provision but the Mutual Release and Termination Agreement entered into
between Sullivan, Tritel and other “undersigned parties” does contain said provision.
¶27. Defendants cite Russell v. Performance Toyota, Inc., 826 So. 2d 719 (Miss. 2002), in
support of their argument that the arbitration provision was an integral part of and integrated into the other
Transaction Documents. In Russell, there were two contracts - a Retail Buyer’s Order and the
Purchaser’s Agreement Concerning Trade In. The Retail Buyer’s Order contained an arbitration clause.
Russell argued that “because the ‘Purchaser’s Agreement Concerning Trade In’ does not contain an
arbitration clause, any claims that involve the trade-in agreement are not subject to arbitration.” Id. at 723.
The Retail Buyer’s Order specifically stated: “The attached Purchaser’s Agreement Concerning Trade In
hereby is incorporated into this contract.” Id. This Court affirmed the trial court’s referral of the case to
arbitration.
¶28. Defendants also citePersonal Security & Safety Systems, Inc. v. Motorola Inc., 297 F.3d
388 (5th Cir. 2002) and Neal v. Hardee’s Food Systems, Inc., 918 F.2d 34 (5th Cir. 1990) in
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support of their argument. In Personal Security & Safety Systems, Inc., PSSI and Motorola
executed three agreements in connection with their investment: a Stock Purchase Agreement, a
Shareholders Agreement and a Product Development and License Agreement. The Product Development
and License Agreement contained a broad arbitration clause. The court held that “the licensing agreement’s
arbitration provision governs claims arising out of the stock purchase agreement because the agreements
were executed together as part of the same overall transaction and therefore are properly construed
together.” Personal Security & Safety Systems, Inc. 297 F.3d at 390.
¶29. In Neal, Hardee’s and Neal entered into a Purchase Agreement which expressly provided that
Neal would contemporaneously enter into License Agreements with Hardee’s. Neal, 918 F.2d at 36.
The License Agreements contained a broad arbitration clause. Id. Neal filed a complaint against Hardee’s
for claims arising under the Purchase Agreement, which did not contain an arbitration clause. Id. The
court, however, held that “[a]lthough the parties used multiple agreements to delineate their relationship,
each agreement was dependant upon the entire transaction. . . . The individual agreements were integral
and interrelated parts of the one deal.” Id.
¶30. Here, both the Amended and Restated Employment Agreement which contained the arbitration
provision, and the Stock Purchase Agreement (Tritel), were signed by Sullivan and Tritel, Inc.; and the
Mutual Release and Termination Agreement was signed by Sullivan, Tritel and other parties, which
included Mounger and Martin among other individuals and entities. Therefore, Sullivan and Tritel were
parties to all three documents.
¶31. The Integrated Transaction provision states in part, “The provisions of this Agreement are an
integral part of, and are necessary consideration for, the Transaction Documents and the settlement
of existing disputes between and among the parties.” (emphasis added). As was the case in Neal, there
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is no question in the case sub judice that all the individual documents were integral and interrelated parts
of a single, global settlement transaction.
¶32. Sullivan relies on expressio unius est exclusio alterius, a rule of contract interpretation which
is defined as “expression of one thing is the exclusion of another.” Miss. Milk Comm’n v. Winn-Dixie
La., Inc., 235 So. 2d 684, 689 (Miss. 1970). Sullivan argues that when the parties expressly included
an arbitration provision in the Amended and Restated Employment Agreement, they clearly excluded
arbitration of claims arising in connection with other agreements. However, in Neal, the court stated:
“Under general principles of contract law, separate agreements executed contemporaneously by the same
parties, for the same purposes, and as part of the same transaction, are to be construed together.” Neal,
918 F.2d at 37 (emphasis added). In other words, when separate documents are executed at the same
time, by the same parties, as part of the same transaction, they may be construed as one instrument.
¶33. Furthermore, it is clear that Sullivan and Tritel intended that any and all disputes, controversies and
claims arising in connection with the Amended and Restated Employment Agreement would be arbitrated,
and the law is clear that when documents are "executed contemporaneously by the same parties, for the
same purposes, and as part of the same transaction" they are to be construed together.
¶34. The case sub judice is an action filed by Sullivan against Mounger, Martin and Tritel. The
Amended and Restated Employment Agreement, which contained the arbitration provision, was entered
into between Sullivan and Tritel and the Mutual Release and Termination Agreement was entered into
between Sullivan, Tritel and other undersigned parties, which included Mounger and Martin. Sullivan
signed the Amended and Restated Employment Agreement and agreed to the arbitration provision
contained therein.
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¶35. Sullivan’s claims arising under the Stock Purchase Agreement and the Mutual Release and
Termination Agreement fall within the arbitration provision contained in the Amended and Restated
Employment Agreement, and the claims were arbitrable.
CONCLUSION
¶36. For the foregoing reasons, and pursuant to the above cited case law and authorities, this Court finds
that Sullivan’s claims were subject to the agreement to arbitrate. The trial court's order granting the
defendants' motion to compel arbitration is affirmed, and this case is remanded to the trial court for any
necessary further proceedings consistent with this opinion.
¶37. AFFIRMED AND REMANDED.
SMITH, C.J., COBB, P.J., EASLEY, CARLSON AND RANDOLPH, JJ.,
CONCUR. GRAVES, J., CONCURS IN RESULT ONLY. WALLER, P.J., AND DIAZ,
J., NOT PARTICIPATING.
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