Century 21 Maselle and Associates, Inc. v. Tony L. Smith ( 2005 )

IN THE SUPREME COURT OF MISSISSIPPI
NO. 2005-IA-01696-SCT
CONSOLIDATED WITH
NO. 2005-CA-01814
CENTURY 21 MASELLE AND ASSOCIATES, INC.,
AND CINDY SMITH
v.
TONY L. SMITH AND LINDA N. SMITH
DATE OF JUDGMENT: 08/17/2005
TRIAL JUDGE: HON. WINSTON L. KIDD
COURT FROM WHICH APPEALED: HINDS COUNTY CIRCUIT COURT
ATTORNEYS FOR APPELLANTS: JOE S. DEATON, III
TRAVIS MAC HAYNES
DAVID CHRISTOPHER DANIEL
ATTORNEY FOR APPELLEES: DONALD W. BOYKIN
NATURE OF THE CASE: CIVIL - OTHER
DISPOSITION: REVERSED AND REMANDED - 08/16/2007
MOTION FOR REHEARING FILED:
MANDATE ISSUED:
EN BANC.
RANDOLPH, JUSTICE, FOR THE COURT:
¶1. Once again, this Court is called upon to navigate the waters of arbitration. The Court
is nonplused by the continuous procession of disputes in an area of law which by now should
be well settled, as initial passage of a Federal Arbitration Act1 (“FAA”) occurred more than
eight decades ago. It is hoped that today’s decision will clarify what some claim to be
opaque waters by providing additional guidance to the courts and those who appear therein.
1
9 U.S.C. § 1, et seq.
But first, we encourage all affected parties to peruse and follow the mandates of the FAA,
which would eliminate a number of arbitration issues for both trial and appellate courts.
¶2. Aggrieved by the Circuit Court of the First Judicial District of Hinds County’s denial
of their motion to compel arbitration and motion to transfer venue pursuant to the provisions
of the “Real Estate Contract” (“Contract”), Century 21 Maselle and Associates, Inc.
(“Century 21") and its agent, Cindy Smith, appealed to this Court. Finding that this
arbitration clause is valid, enforceable, and was not waived, we reverse the judgment of the
circuit court and remand this case with directions to stay the proceedings as to Century 21
and Cindy Smith only, and direct that their dispute be referred to arbitration consistent with
the Contract.
FACTS
¶3. On November 9, 2003, John Hendon entered into the Contract to sell his home to
Tony L. Smith and Linda N. Smith (“Smiths”). Century 21 and its agent, Cindy Smith,
represented the Smiths. Cindy Smith signed the Contract as “[b]roker [a]ssociate.” The
Contract contained an arbitration clause, which stated:
38. MANDATORY ARBITRATION: Both Buyer and Seller {hereinafter
“parties”} acknowledge, understand and agree that: (1) any controversy, claim,
action or inaction arising out of, or relating to, the “purchase” set out herein,
as against the listing broker or selling broker and/or their agents or
representatives {hereinafter “company”} involved in this transaction, shall be
resolved by arbitration administered by the American Arbitration Association
in accordance with its arbitration rules; and (2) judgment of the award
rendered by the arbitrator(s) will be entered in the Circuit Court of Rankin
County; and (3) the arbitration proceeding shall be conducted within Rankin
County, Mississippi; and (4) any damages awarded must conform to the terms
and conditions of the “purchase”; and (5) this transaction involves interstate
commerce such that the Federal Arbitration Act, 9 U.S.C. Section 1 et seq.
(1947 as amended) shall govern the interpretation and enforcement of this
2
arbitration agreement along with all claims between or among any parties and
the company(ies) involved in this transaction; and (6) any action at law
regarding this agreement must be filed in the Circuit Court of Rankin County.
(Emphasis added).
¶4. On January 14, 2005, the Smiths filed their “First Amended Complaint” against “John
Hendon, Union Planters Bank, NA[,] First American Real Estate Solutions of Texas, L.P.,
Successor in Interest to First American Flood Data Services, Inc., Century 21 Maselle &
Assoc., Inc., Cindy Smith, Coldwell Banker Graham & Associates, Inc., Cindy Lai, Mark S.
Bounds Realty Partners, Inc., Donald Conn, Jr., [and] Wayne C. Williams” for alleged
negligence and/or fraudulent inducement in the purchase of their new home, in violation of
the Contract. On February 24, 2005, Century 21 and Cindy Smith filed separate answers and
affirmative defenses. Inserted beneath the caption of these pleadings, Century 21 and Cindy
Smith plead “Jury Trial Requested.” The first defense was entitled “Motion to Dismiss” and
averred that “this cause of action should be dismissed and arbitration compelled.” That same
day, Century 21 and Cindy Smith propounded written discovery, in the form of eighteen
interrogatories and fourteen requests for production of documents,2 for which responses were
never received. On March 16, 2005, both Century 21 and Cindy Smith noticed their motion
to compel arbitration and/or to transfer venue for a hearing. This occurred only sixty-one
days after the suit was filed by the Smiths and twenty days after Century 21 and Cindy Smith
2
According to Century 21 and Smith, “[t]his discovery was simply propounded in the
event that the arbitration clause was somehow determined to be invalid, which is denied, as
opposed to unenforceable.”
3
filed their separate answers and affirmative defenses. In the interim, litigation was not
advanced by these parties.3
¶5. Although a hearing was held on April 21, 2005,4 the circuit court did not enter an
order until August 17, 2005, denying both Century 21's and Cindy Smith’s motion to compel
arbitration and to transfer venue. Specifically, the circuit court found that:
3. Although the subject Real Estate Contract contained a mandatory
arbitration clause, the Court finds that the motion to compel arbitration and/or
transfer venue is without merit and will be denied for the following reasons:
a. The defendants have waived their right to enforce the arbitration clause.
b. All of the defendants have served discovery upon the plaintiffs.
c. Defendants [Century 21] and Cindy Smith requested a Jury Trial in their
Answer to the herein lawsuit. . . . This coupled with Century 21 and Smith’s
service of discovery upon plaintiffs clearly supports a waiver of the right to
enforce the arbitration clause.
(Emphasis added). Finding that the right to arbitration had been waived, the circuit court
refused to enforce the agreement to arbitrate. From that ruling proceeds this appeal.5 This
3
The Smiths did not respond to Century 21's and Cindy Smith’s motion to compel
arbitration until April 21, 2005. The response was untimely pursuant to U.R.C.C.C. 4.03.
The response was not included in the record presented to this Court.
4
A transcript of the hearing, if one was made, was not included in the record presented
to this Court.
5
On September 6, 2005, Century 21 and Cindy Smith timely filed a “Petition for
Permission to Appeal” with this Court, pursuant to Miss. R. App. P. 5. According to Miss.
R. App. P. 5(a):
[a]ppeal from such an order may be sought by filing a petition for permission
to appeal with the clerk of the Supreme Court within 21 days after the entry
of such order in the trial court with proof of service on the trial judge and all
other parties to the action in the trial court.
4
Court will consider whether the circuit court erred in denying the motion to compel
arbitration filed by Century 21 and Cindy Smith.
ANALYSIS
(1) Whether the circuit court erred in denying the motion to compel arbitration
filed by Century 21 and Cindy Smith.
¶6. “This Court reviews questions of law de novo.” Pre-Paid Legal Servs. v. Battle, 873
So. 2d 79, 82 (Miss. 2004) (citing Russell v. Performance Toyota, Inc., 826 So. 2d 719, 721
(Miss. 2002)). “[W]e have reviewed the grant or denial of a motion to compel arbitration
under the de novo standard of review.” Battle, 873 So. 2d at 82 (citing Tupelo Auto Sales,
Ltd. v. Scott, 844 So. 2d 1167, 1169 (Miss. 2003)).
Waiver
¶7. In Dean, Witter, Reynolds, Inc. v. Byrd, 470 U.S. 213, 105 S. Ct. 1238, 84 L. Ed. 2d
158 (1985), the United States Supreme Court noted that:
[t]he House Report accompanying the [FAA] makes clear that its purpose was
to place an arbitration agreement “upon the same footing as other contracts,
where it belongs,” H.R. Rep. No. 96, 68 th Cong., 1 st Sess., 1 (1924), and to
overrule the judiciary’s longstanding refusal to enforce agreements to arbitrate.
This is not to say that Congress was blind to the potential benefit of the
legislation for expedited resolution of disputes. Far from it, the House Report
expressly observed:
“It is practically appropriate that the action should be taken at
this time when there is so much agitation against the costliness
(Emphasis added). On September 19, 2005, the remaining defendants (Mark S. Bounds
Realty Partners, Inc., Wayne C. Williams, Coldwell Banker Graham & Associates, Inc.,
Cindy Lai, and Donald Conn, Jr.) filed for “Joinder in Defendants’ Petition for Interlocutory
Appeal.” Thereafter, the Smiths filed a motion to dismiss the appeals of the defendants
attempting joinder as untimely. On May 25, 2006, this Court entered an order granting the
Smiths’ motion.
5
and delays of litigation. These matters can be largely eliminated
by agreements for arbitration . . . .”
Nonetheless, passage of the [FAA] was motivated, first and foremost, by a
congressional desire to enforce agreements into which parties had entered,
and we must not overlook this principal objective when construing the statute,
or allow the fortuitous impact of the [FAA] on efficient dispute resolution to
overshadow the underlying motivation.
Byrd, 470 U.S. at 219-20 (emphasis added). Just two terms earlier, the United States
Supreme Court in Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460
U.S. 1, 103 S. Ct. 927, 74 L. Ed. 2d 765 (1983), offered explicit instruction on seeking
enforcement of an arbitration agreement by reference to the FAA itself, stating:
Congress’ clear intent, in the [FAA], [was] to move the parties to an arbitrable
dispute out of court and into arbitration as quickly and easily as possible. The
[FAA] provides two parallel devices for enforcing an arbitration agreement:
a stay of litigation in any case raising a dispute referable to arbitration, 9
U.S.C. § 3, and an affirmative order to engage in arbitration, § 4. Both of these
sections call for an expeditious and summary hearing . . . .
Moses H. Cone, 460 U.S. at 22 (emphasis added). Furthermore, the FAA “calls for a
summary and speedy disposition of motions or petitions to enforce arbitration clauses.” Id.
at 29. In considering such motions, there is a presumption in favor of arbitration. See id. at
24-25. Procedurally, it shall be no different in state court.
¶8. In Byrd, the United States Supreme Court stated that the FAA “leaves no place for the
exercise of discretion by a district court, but instead mandates that district courts shall direct
the parties to proceed to arbitration on issues as to which an arbitration agreement has been
signed . . . absent a ground for revocation of the contractual agreement.” Byrd, 470 U.S. at
218. This Court has held that arbitration can be waived where a party “actively participates
in a lawsuit or takes other action inconsistent with [the right to arbitration].” Cox v.
6
Howard, Weil, Labouisse, Friedrichs, Inc., 619 So. 2d 908, 914 (Miss. 1993) (quoting
Cornell & Co. v. Barber & Ross Co., 123 U.S. App. D.C. 378, 360 F.2d 512, 513 (D.C. Cir.
1966)) (emphasis added). In Cox, this Court found the right to arbitration was waived due
to “extensive” pre-trial litigation, where the party seeking to enforce arbitration had filed a
“summary judgment motion, requested two continuances, appealed to this Court based on
a pretrial ruling, and had requested various types of discovery.” Id. at 914. Ten years later,
this Court qualified the precepts of Cox, stating that arbitration may be waived where a party
“substantially invokes the judicial process to the detriment or prejudice of the other party.”
Univ. Nursing Assocs., PLLC v. Phillips, 842 So. 2d 1270, 1278 (Miss. 2003) (emphasis
added). That same year, in Sanderson Farms v. Gatlin, 848 So. 2d 828 (Miss. 2003), this
Court found that Sanderson Farms waived arbitration by refusing to pay one-half of
arbitration costs. See id. at 838. In Pass Termite and Pest Control v. Walker, 904 So. 2d
1030 (Miss. 2004), this Court found waiver where Pass Termite failed to allege the
affirmative defense of arbitration in its answer and requested a jury trial; propounded
interrogatories and requests for production of documents, which were subsequently
responded to; and also delayed 237 days before moving to compel arbitration. See id. at
1032, 1035. In MS Credit Center v. Horton, 926 So. 2d 167 (Miss. 2006), this Court once
again addressed waiver, stating:
[t]he record before us today clearly demonstrates that the Defendants asserted
their right to compel arbitration in their respective answers. However, rather
than proceeding within a reasonable time to file a motion to compel arbitration
and request a hearing on the motion, defendants proceeded to substantially
engage the litigation process by consenting to a scheduling order, engaging in
written discovery, and conducting Horton’s deposition.
7
Id. at 180. As in Horton, “we will not hesitate to find a waiver of the right to compel
arbitration” for a “delay in pursuing the right, coupled with active participation in the
litigation process.” Id. (emphasis added). In summary, either active participation or
substantial invocation of the litigation process which results in detriment or prejudice to the
other party, or engaging in conduct inconsistent with timely enforcing the arbitration
agreement, constitutes waiver. See Horton, 926 So. 2d at 180; Phillips, 842 So. 2d at 1278;
Cox, 619 So. 2d at 913-14. However, parties claiming waiver must offer sufficient evidence
at a hearing to overcome the presumption in favor of arbitration. See Moses H. Cone, 460
U.S. at 24-25. In the case sub judice, the Smiths failed to offer any evidence to defeat the
presumption.
(A) Request for Jury Trial
¶9. Century 21 and Cindy Smith simultaneously requested a jury trial and asserted a right
to arbitration in their answers and affirmative defenses, only forty-one days after the Smiths
filed their amended complaint. They noticed the same for a hearing a mere twenty days
thereafter. This act simply does not rise to the level of active participation in the lawsuit (see
Cox, 619 So. 2d at 913-14), substantial invocation of the judicial process (see Phillips, 842
So. 2d at 1278), or a “delay in pursuing the right.” Horton, 926 So. 2d at 180. Century 21
and Cindy Smith did request a jury trial, which “is characteristic of the judicial process.”
Walker, 904 So. 2d at 1035. We have held that it “is inconsistent with asserting a right to
arbitration.” Id. Such inconsistency is mitigated by the fact that the jury trial request was
filed simultaneously with the motion to compel arbitration. While a request for a jury trial
is inconsistent with asserting the right to arbitration, standing alone it does not constitute
8
waiver.6 Of greater import, the request for a jury trial did not delay resolution of the
controversy, did not add to the expense of litigation, and did not substantially invoke the
judicial process. Nor, for that matter, did it even constitute increased involvement in the
litigation process, as it is automatic, unless opted out of, in civil actions in Mississippi. See
Miss. R. Civ. P. 38.
(B) Discovery
¶10. Regarding discovery, this Court previously has stated that “[t]aking advantage of pre-
trial litigation such as answers, counterclaims, motions, requests, and discovery obviates the
right to arbitration.” Cox, 619 So. 2d at 914. In Phillips, this Court articulated that
arbitration is waived where a party “substantially invokes the judicial process to the
detriment or prejudice of the other party.” Phillips, 842 So. 2d at 1278 (emphasis added).
In Phillips, now-Presiding Justice Waller astutely included a practice note that “parties
desiring to seek arbitration should promptly file and present to the trial court a motion to stay
proceedings and a motion to compel arbitration.” Id. at 1277 (emphasis added).7 Clearly,
6
In Walker, this Court stated “[t]he 237-day delay before invoking arbitration,
coupled with the invocation of the discovery process after failing to raise the defense of
arbitration in its initial pleading bring us to our conclusion that Pass has effectively waived
its right to invoke arbitration.” Walker, 904 So. 2d at 1035. In that case, Pass Termite failed
to allege the affirmative defense of arbitration in its answer and requested a jury trial;
propounded interrogatories and requests for production of documents, which were
subsequently responded to; and only then, more than six months after filing its answer, filed
its motion to compel arbitration. See id. at 1032. Walker is clearly distinguishable from the
case sub judice where the answer requesting a jury trial included the motion to compel
arbitration; the discovery propounded was unanswered; and the motion to compel arbitration
was noticed for a hearing twenty days after the answer was filed.
7
In Walker, this Court referred to the Phillips “practice note” as a “caveat.” Walker,
904 So. 2d at 1035.
9
the FAA requires same, as announced by the United States Supreme Court.8 The FAA does
not provide for discovery. Therefore, pursuing discovery, a litigation tool, creates the danger
of incongruent determinations by lower courts regarding whether such action constitutes
active participation in, or substantial invocation of, the litigation process. From this day
forward, the advice of Phillips and caveat of Walker are the mandate of this Court, in accord
with the FAA. Parties seeking to enforce arbitration are to file a “Motion to Compel
Arbitration and to Stay Proceedings Pending Arbitration” immediately upon discovery that
the controversy or suit is subject to an arbitration agreement. All proceedings, including the
filing of responsive pleadings (answer or otherwise) and discovery, in prospective cases
involving an arbitration agreement shall be suspended upon the timely filing and notice of
a “Motion to Compel Arbitration and to Stay Proceedings Pending Arbitration.”
¶11. Century 21 and Cindy Smith posit that they merely “propounded routine written
discovery” to the Smiths. This Court notes that there is no such thing as “routine” discovery
8
9 U.S.C. § 3 states:
[i]f any suit or proceeding be brought in any of the courts of the United States
upon any issue referable to arbitration under an agreement in writing for such
arbitration, the court in which such suit is pending, upon being satisfied that
the issue involved in such suit or proceeding is referable to arbitration under
such an agreement, shall on application of one of the parties stay the trial of
the action until such arbitration has been had in accordance with the terms of
the agreement, providing the applicant for the stay is not in default in
proceeding with such arbitration.
9 U.S.C. § 3 (emphasis added). As the United States Supreme Court notes in Moses H.
Cone, “[t]he [FAA] provides two parallel devices for enforcing an arbitration agreement: a
stay of litigation in any case raising a dispute referable to arbitration, 9 U.S.C. § 3, and an
affirmative order to engage in arbitration, § 4. Both of these sections call for an expeditious
and summary hearing . . . .” Moses H. Cone, 460 U.S. at 22.
10
in arbitrable controversies. The “Order Adopting the Mississippi Rules of Civil Procedure”
provides “the rules attached hereto are adopted and promulgated as Rules of Practice and
Procedure in all Chancery, Circuit, and County Courts of this State in all civil actions . . . .”
(Emphasis added). See also Miss. R. Civ. P. 1 (“These rules govern procedure in the circuit
courts, chancery courts, and county courts in all suits of a civil nature . . . .”). The
Mississippi Rules of Civil Procedure address the subject of discovery in Rules 26-37. The
forum of arbitration is outside the scope of the Mississippi Rules of Civil Procedure, and
discovery in that forum is neither automatic nor guaranteed. Initiating discovery is
inapposite to seeking to compel arbitration.
¶12. Century 21 and Cindy Smith’s acts are precipitously close to satisfying the waiver
exception by initiating discovery. However, the Smiths offered no evidentiary basis for the
lower court to find detriment or prejudice either by incurred legal expense or procedural
delay, and the record reflects they failed to answer the discovery. See Phillips, 842 So. 2d
at 1278 (“[w]aiver will be found when the party seeking arbitration substantially invokes the
judicial process to the detriment or prejudice[9 ] of the other party.”) (emphasis added).
Given the presumption in favor of arbitration (see Moses H. Cone, 460 U.S. at 24-25), in the
absence of prejudice or invocation of the court’s jurisdiction for a purpose other than the
declaration of arbitrability vel non, the circuit court either clearly erred in denying the motion
to compel arbitration or, alternatively, the circuit court was provided with proof of detriment
9
“Prejudice . . . refers to the inherent unfairness – in terms of delay, expense, or
damage to a party’s legal position – that occurs when the party’s opponent forces it to litigate
an issue and later seeks to arbitrate that same issue.” Phillips, 842 So. 2d at 1278.
11
and/or prejudice, but the Smiths failed to provide this Court with a record to support such
finding. See Ditto v. Hinds County, 665 So. 2d 878, 880 (Miss. 1995) (quoting Shelton v.
Kindred, 279 So. 2d 642, 644 (Miss. 1973)) (“[t]his Court ‘may not act upon or consider
matters which do not appear in the record and must confine itself to what actually does
appear in the record’”). Litigants shall prospectively follow the procedure mandated by this
Court and separately file a “Motion to Compel Arbitration and to Stay Proceedings Pending
Arbitration[,]” 10 and then promptly schedule and notice a hearing on their motions.
Discovery, a procedural implement of the courts, should not be initiated as its use may be
deemed active participation in a court proceeding and inconsistent with the right to
arbitration.11
Unconscionability
¶13. This Court also notes that the subject arbitration clause is virtually identical to the
arbitration clause in Fradella v. Seaberry, Miss. 2007 LEXIS 184 (Miss. 2007). The Smiths
admit as much in their brief, stating:
[t]he case sub judice is also analogous to the facts in Fradella . . . . The
arbitration provision [in] their contract is identical[12 ] to the contract in the case
sub judice, except that the Fradella contract stated that any judgment would
be entered in any court of competent jurisdiction, whereas in the case sub
judice, the arbitration provision states that the judgment would have to be
entered in the Circuit Court of Rankin County.
10
Not a motion to dismiss.
11
Century 21 and Cindy Smith maintain that they propounded discovery out of
caution, in the event that the circuit court found the arbitration clause invalid.
12
Beyond the different venue requirements, the arbitration clauses are more accurately
described as virtually identical, as they include several non-substantive, linguistic
differences.
12
In Fradella, this Court found that the arbitration clause was not procedurally or substantively
unconscionable (see id. at *22), and created contractual “rights and responsibilities on the
part of” the real estate agent13 and her agency. See id. at * 28. In the case sub judice, the
circuit court’s order reflects the validity and enforceability of the arbitration clause, finding
that the clause was “mandatory.” Therefore, the argument presented by the Smiths to this
Court that the agreement is invalid or unenforceable for lack of mutuality of assent or
obligation, lack of standing, or unconscionability is untimely and unmerited, as no facts to
support the argument were presented to the circuit court, or made a part of this appeal. See
Ditto, 665 So. 2d at 880 (“this Court can only review matters on appeal as were considered
by the lower court.”).
CONCLUSION
¶14. Accordingly, we reverse the circuit court’s denial of Century 21 and Cindy Smith’s
motion to compel arbitration, and we remand this case with directions to compel the parties
(Century 21, Cindy Smith, Tony L. Smith, and Linda N. Smith) to submit to arbitration
consistent with the Contract. This action is stayed pending resolution of the arbitration
proceedings only as to the parties herein referred.
¶15. REVERSED AND REMANDED.
SMITH, C.J., EASLEY, CARLSON, DICKINSON AND LAMAR, JJ.,
CONCUR. DIAZ, P.J., CONCURS IN PART AND DISSENTS IN PART WITH
SEPARATE WRITTEN OPINION JOINED BY GRAVES, J. GRAVES, J.,
CONCURS IN PART AND DISSENTS IN PART WITH SEPARATE WRITTEN
OPINION JOINED BY DIAZ, P.J. WALLER, P.J., NOT PARTICIPATING.
13
Unlike in Fradella, Cindy Smith was a signatory to the Contract.
13
DIAZ, PRESIDING JUSTICE, CONCURRING IN PART AND DISSENTING
IN PART:
¶16. I agree with the majority regarding the analysis of waiver and its application to this
case. However, I remain committed to the ideal that arbitration contracts should be voided
when they involve overreaching, procedural or substantive unconscionability, or any other
grounds that would serve as a basis for invalidation under state statutory or common law.
Because the majority does not acknowledge that the failure to invalidate such contracts
infringes upon the constitutional rights afforded all Mississippians, I must respectfully
dissent in part. See Cleveland v. Mann, 942 So. 2d 108, 121-22 (Miss. 2006) (Diaz, J.,
dissenting).
¶17. Further, in some cases federal law simply does not apply, and accordingly I would not
be so quick to defer to federal law as the majority. In this case, the parties stipulated that the
contract affected interstate commerce, and I agree as a matter of sound contract law that
“[w]hen parties agree to arbitrate under the FAA, they are not required to establish that the
transaction at issue involves or affects interstate commerce.” In Re Choice Homes, Inc., 174
S.W.3d 408, 412 (Tex. App. 2005). Not all contracts involve interstate commerce or contain
express declarations of the applicability of the FAA; those contracts escape the federal
government’s predilection for arbitration. See Perry v. Thomas, 482 U.S. 483, 489, 107
S. Ct. 2520, 2525 (1987) (“Section 2 [of the FAA] . . . embodies a clear federal policy of
requiring arbitration unless the agreement to arbitrate is not part of a contract evidencing
interstate commerce or is revocable ‘upon such grounds as exist at law or in equity for the
revocation of any contract’”) (emphasis added, quoting 9 U.S.C. § 2). In those cases where
14
the agreement between the parties is silent as to the FAA or interstate commerce, “a party
seeking to compel arbitration must establish its right to arbitrate under the federal act.”
Stewart Title Guar. Co. v. Mack, 945 S.W.2d 330, 333 (Tex. App. 1997).
¶18. The majority’s automatic deferral to federal law also ignores that the U.S. Congress
built in an huge state law exception to the FAA. For “[a] written provision in . . . a contract”
for arbitration “shall be valid, irrevocable, and enforceable, save upon such grounds as exist
at law or in equity for the revocation of any contract.” 9 U.S.C.A. § 2 (emphasis added);
Perry, 482 U.S. at 489.
¶19. In other words, Congress and the U.S. Supreme Court acknowledge the primacy of
state statutory and common law protections against overreaching and fraud, as often
embodied in the doctrines of procedural and substantive unconscionability. We should not
be so quick to toss aside those tools meant to safeguard the rights of Mississippians.
GRAVES, J., JOINS THIS OPINION.
GRAVES, JUSTICE, CONCURRING IN PART AND DISSENTING IN PART:
¶20. I agree with the majority’s analysis on the issue of waiver and I agree with the
promulgation of guidelines with regard to the assertion of a right to arbitration. However,
I disagree on the issue of whether a non-party, nonsignatory to a contract has a right to
enforce an arbitration clause contained in that contract. Hence, I deem it unnecessary to
address the issue of waiver in this case. As a result, I would find that the issue regarding a
nonsignatory is dispositive and that the trial court should be affirmed. Therefore, I
respectfully concur in part and dissent in part.
15
¶21. Arbitration can only exist when created by a contract. The contract herein was
between the buyer and the seller. Cindy Smith is neither the buyer nor the seller. Cindy
Smith’s signature is on the contract merely pursuant to the following: “Subject to clearance
of any check, Broker acknowledges receipt of the above-mentioned earnest money and holds
same in trust subject to the terms of this contract.” Allowing a non-party, nonsignatory to
a contract to take advantage of a clause in a contract violates basic legal principles. See
Parkerson v. Smith, 817 So. 2d 529, 534-35(Miss. 2002). Nevertheless, some courts have
allowed this to happen. See Grigson v. Creative Artists Agency, LLC, 210 F.3d 524 (5 th Cir.
2000).
¶22. However, there is a view that this Court should not defer to the federal courts and the
Federal Arbitration Act, but that the Legislature and courts of Mississippi should regulate the
usage of arbitration within our state. Greater Canton Ford Mercury, Inc. v. Ables, So. 2d
(Miss. 2007) (Diaz, J., dissenting) (citing Allied-Bruce Terminix Companies, Inc. v.
Dobson, 513 U.S. 265, 285-97, 115 S. Ct. 834, 845-51, 130 L. Ed. 753 (1995) (Thomas, J.,
dissenting)).
¶23. Because the motions to compel arbitration and transfer venue were properly denied,
the trial court should be affirmed. Therefore, I respectfully concur in part and dissent in part.
DIAZ, P.J., JOINS THIS OPINION.
16