R. Pepper Crutcher, Jr.

It is no secret that many Americans consider the law a black art, and lawyers its conjurers. Some of this derives from simple unfamiliarity with our method and jargon. But much of the blame for public cynicism must be borne by lawyers and judges who have engaged in the most transparent sophistries to serve our own commercial interests. The common law anti-arbitration doctrine is a prime example. In Mississippi, it has been expressed this way: mere "private persons cannot by a contract to arbitrate oust the jurisdiction of the legally constituted courts." McClendon v. Shutt, 115 So.2d 740, 741 (Miss. 1959). Mel Brooks provided an apt translation of this tautology when Governor LePetomaine announced to his cabinet in "Blazing Saddles," "Gentlemen! We must protect our phony baloney jobs!"

Alas, the common law is no joking matter. Mississippi common law ignored arbitration agreements for 180 years, from 1817 until 1998. For the reasons explained below, this effectively prevented employers and non-union employees from contracting reliably to resolve their disputes extrajudicially. On April 2, 1998, with little comment or fanfare, the Mississippi Supreme Court removed the bar, in IP Timberlands operation Company, Ltd. v. Denmiss Corporation, 726 So.2d 96 (Miss. 1998). By way of saying good riddance, this paper lays out the indelicate truth about the common-law anti-arbitration doctrine, and explains what is now feasible.
    I. Why Such Fear and Loathing of Arbitration at Common Law?

Before Denmiss, all published Mississippi Supreme Court opinions employed the logic that pre-dispute arbitration agreements are invalid because they divest our courts of jurisdiction. It’s clear, however, that Mississippi was, as late as the Roaring Twenties, in step with the times, and that the anti-arbitration rule has a long, if undistinguished, ancestry.

According to Mr. Justice Hunt’s majority opinion in Insurance Co. v. Morse, 87 U.S. 445, 452 (1874), the House of Lords unanimously reversed prior law to hold, in the maritime charter case of Thompson v. Charnock, 8 T. R. 139 (1799), that a right of action having accrued, "an agreement to refer all matters in difference to arbitration is not sufficient to oust the Courts of Law or Equity of their jurisdiction." This and many similarly oblique explanations may indicate that our professional forefathers reversed prior law and invalidated pre-dispute arbitration agreements in order to forestall insurers’ use of arbitration agreements to cut lawyers out of claims adjustment. Whether or not that’s so, jurists thereafter rarely deigned to explain the doctrine’s rationale, resorting instead to shorthand references to numerous, summarized authorities, with accompanying epithets, like "obnoxious to the law." The buzz words: arbitration would "oust courts of jurisdiction." Flaherty v. Metal Products Corp., 83 So.2d 9, 10 (Fla. 1955).

In the nineteenth century, Mr. Justice Story seems to have been alone in sensing the need to defend the anti-arbitration doctrine from higher ground. In his Commentaries On Equity Jurisprudence As Administered in England and America § 670 (3rd Ed., Little & Brown, Boston 1843), the Justice sought retroactively to ground the rule in judicial doubt "whether such [arbitration] tribunals possess adequate means of giving redress . . . ." Jurists, he said, rightly worry that the "regular administration of justice might be greatly impeded or interfered with by such stipulations if they were specifically enforced." See Morse, 87 U.S. at 452; Red Cross Line v. Atlantic Fruit Co., 264 U.S. 109, 121 (1924) (quoting and relying upon Justice Story’s treatise). "At all events, courts of justice are presumed to be better capable of administering and enforcing the real rights of the parties, than any mere private arbitrators, as well from their superior knowledge, as their superior means, of sifting the controversy to the very bottom." Justice Story wrote in an era when our courts required pleading by hyper-technical form and permitted trial by ambush. See generally George D. Warner, Warner’s Griffith Mississippi Chancery Practice (Rev. ed. 1991). How undue, relatively speaking, could the arbitration process have been?

In this century, the doctrine took on the trappings of substantive due process, adhesion and unconscionability jurisprudence, most famously expressed in Parsons v. Ambos, 48 S.E. 696, 697 (Ga. 1904):

    [t]he mere executory agreement to submit [a matter to arbitration] is generally revocable, otherwise nothing would be easier than for the more astute party to oust the courts of jurisdiction. By first making the contract, and then declaring who should construe it, the strong could oppress the weak, and in effect so nullify the law as to secure the enforcement of contracts usurious, illegal, immoral, or contrary to public policy.

Perhaps Justice Story did not attack along this line because he acknowledged courts’ settled authority to vacate clearly erroneous arbitration awards. But so did the Georgia Supreme Court. And the cases suggest that arbitration was used primarily to resolve realty and commercial disputes between people and organizations of roughly equal bargaining power. So why the nascent class warfare rhetoric? Your author reads this as populist political cover for attorneys’ "nekkid" self interest.

Until Denmiss, the Mississippi Supreme Court carried on the "oust the courts" tradition, even permitting a party to breach an arbitration agreement while keeping the consideration paid for his promise to arbitrate. Jones v. Harris, 59 Miss. 214, 215-16 (1881). See also Machine Products Co v. Prairie Local Lodge No. 1538, 94 So.2d 344, 348-50 (Miss. 1957) (affirming dismissal of union’s common law suit to enforce arbitration clause of collective bargaining agreement). We ignored scholars’ polite suggestions that the doctrine may be idiocy produced by professional inbreeding. As Yale Dean Wesley Sturges put it in his 1953 Mississippi Law Institute address, under Mississippi’s unadulterated form of the rule, a recalcitrant party to an arbitration agreement may "fish with hope for a favorable award in a common law arbitration, but when he comes to doubt that the arbitrator will go in his favor, he may, if he wishes to do so, revoke by the notice." Wesley A. Sturges, Arbitration and Award, 25 Miss. L.J. 181, 183 (1954). So, a doctrine probably designed to protect barristers’ turf in 18th century England ruled in Mississippi two centuries later. Trade unionists, it seems, are the second most fervent protectionists.

    II. Choice of Law Was the Only Clear Way Out.

Until Mississippi law was changed, Mississippians who wished to contract reliably to arbitrate their employment disputes had to choose other law. They could provide that another state’s law would govern their contract. Cox v. Howard, Weil, Labouisse, Friedrichs, Inc., 619 So.2d 908, 914-15 (Miss. 1993) (agreement, including arbitration clause, between Mississippian and corporation doing business here, properly designated New York law as governing for all substantive purposes, but party seeking arbitration waived that right by first litigating.). Alternatively, or in addition, they were best advised to draft their agreement with an eye toward enforcement under the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq. (1925).

In 1925, Congress passed the FAA to "reverse the longstanding judicial hostility to arbitration agreements that had existed at English common law and had been adopted by American courts, and to place arbitration agreements upon the same footing as other contracts." Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 25 (1991). Section 2 of the FAA declared that:

    [a] written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, 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. § 2 (1925). In doing so, Congress exercised the full extent of its power to regulate interstate commerce. Allied Bruce-Terminix Companies., Inc. v. Dobson, 115 S.Ct. 834, 841 (1995). Therefore, one hoping for FAA enforcement of an arbitration agreement has an easy first step. Almost every one is employed "in commerce." It is enough that the employment involves transmission of salary checks across state lines, or use of the U.S. Mail, or use of public telephone lines. See Arce v. Cotton Club of Greenville, Inc., 883 F. Supp. 117, 119-20 (N.D. Miss. 1995).

Until recently, the second step was a doozy. Section 1 of the Act broadly defines the "maritime transactions" and "commerce" to which the FAA applies, then ends with these words: "but nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." 9 U.S.C. § 1 (1925). Some courts read this as if the sentence ended with the word "employment," effectively barring FAA application to any employment contract containing an arbitration clause. Arce, 883 F. Supp. at 119-20. Some legislative history supports this view. In several cases, the Fifth Circuit Court of Appeals was able to avoid the issue because the arbitration agreement was collateral to, but not contained in, an employment agreement and, therefore, not subject to the Section 1 exclusion. See Alford v. Dean Witter Reynolds, Inc., 939 F.2d 229, 230 (5th Cir. 1991); Williams v. CIGNA Fin. Advisors, Inc., 56 F.3d 656, 659-60 (5th Cir. 1995). Then, in Rojas v. TK Communications, Inc., 87 F.3d 745, 748 (5th Cir. 1996) (ordering arbitration of Title VII claims), the Fifth Circuit held "that § 1 is to be given a narrow reading." To read it broadly, said the Court, is to delete by judicial fiat the illustration that employment contracts of seamen and railroad employees fall outside the FAA. Instead, the Court adopted the majority view that the FAA applies to all except those groups and others actually engaged in the movement of goods across state lines. Since Rojas, the Fifth Circuit has applied the same analysis to Title VII, ADA and ADEA claims. Miller v. Public Storage Management, Inc., 121 F.3d 215, 218 (5th Cir. 1997).

Some continue to advise employers that the question is sufficiently debatable that it may turn on who appointed the reviewing judge. When feasible, they continue to make employment dispute arbitration agreements collateral to, but not part of, employment contracts.

They will also note that the reviewing judge might not be appointed. He or she might be elected. This is because an FAA claim for enforcement of an arbitration agreement does not present a federal question over which a United States District Court has subject matter jurisdiction. Consequently, "a party seeking to enforce rights created by the FAA must do so in state court unless federal jurisdiction is independently established by the allegations of the plaintiff’s own complaint or unless the case is already in federal court." Prudential-Bache Sec., Inc. v. Fitch, 966 F.2d 981, 989 (5th Cir. 1992).

The FAA is binding in state courts, and pre-empts any inconsistent state law. Southland Corp. v. Keating, 465 U.S. 1, 14-17 (1984). But enforcement is an easier row to hoe in federal court. If a federal judge should deny a motion to enforce an arbitration agreement, an appeal of right would lie from his order, despite its interlocutory nature. 9 U.S.C. § 16 (1925); Turboff v. Merrill, Lynch, Pierce, Fenner & Smith, Inc., 867 F.2d 1518, 1520-21 (5th Cir. 1989). If a state court judge should ignore the FAA, the availability of an interlocutory appeal or writ of mandamus would depend on state appellate law. In Mississippi, it appears that a permissive interlocutory appeal would be the appropriate procedure. Miss. R. App. P. 5 & 12; See also Luther T. Munford, Mississippi Appellate Practice §§ 4 & 5 (1995); Craig v. Barber, 524 So.2d 974, 976 (1976) (Miss. 1988) (treating arbitrator’s petition for writ of prohibition as interlocutory appeal to overturn Circuit Court’s order that arbitrator explain his award.)

Finally, the draftsman should note that any effort to enforce a pre-dispute agreement to arbitrate employment disputes must survive allegations that the agreement is an unconscionable contract of adhesion by which the employer seeks to evade discovery, bar claims, and restrict the remedies of his oppressed employees. The burden of proof is on the party resisting arbitration. Graef v. Chemical Leaman Corp., 106 F.3d 112, 117 (5th Cir. 1997). And, the FAA requires arbitration of a claim of fraud in the inducement, adhesion or unconscionability directed to the employment contract which contains an arbitration clause. Rojas, 87 F.3d at 749. Nevertheless, litigants should recognize that the Gilmer line of cases favoring FAA enforcement of employment dispute arbitration agreements stands in stark contrast to the line of cases rejecting an employee’s obligation to try his civil rights claims through his union’s arbitration process. See Alexander v. Gardner-Denver Co., 415 U.S. 36, 51-57 (1974); Darby v. North Mississippi Rural Legal Services, Inc., 154 L.R.R.M. 3060, 3061-62 (N.D. Miss. 1997) (union-represented lawyer not required to arbitrate his ADA claim). The rationale of Gardner-Denver is that union-directed arbitration is not a trustworthy forum for resolving individual employees’ statutory claims. Employers should not expect enforcement of a process which appears untrustworthy or employer-dominated on its face. Thus, an employer may not use a private arbitration agreement to bar timely statutory claims as untimely under the agreement. Kramer v. Smith Barney, 80 F.3d 1080, 1084-85 (5th Cir. 1996). Nor will a court enforce a pro-employer award made in plain disregard of applicable law. Montes v. Shearson Lehman Brothers, Inc., 128 F.3d 1456, 1458-60 (11th Cir. 1997). However, the possible admission of hearsay will not bar enforcement. Graef, 106 F.3d at 117. And, the arbitration agreement need not comply with the Older Workers’ Benefit Protection Act in order to provide an appropriate forum for adjudication of federal age discrimination claims. Williams, 56 F.3d at 660-61. The arbitration agreement need not exclude claims which are deemed inappropriate for arbitration under state law. Miller, 121 F.3d at 218 (holding that FAA applies to arbitration of Texas workers’ compensation retaliation claim, contrary Texas law not withstanding).

The right to enforce an arbitration agreement is waivable, and waiver may be inferred from an apparent election to litigate a claim or defense in court. Williams, 56 F.3d at 661-62 (CIGNA did not waive right to arbitration by first moving therefor after removing action, filing motion to dismiss, moving to stay proceedings, answering, asserting counterclaim and exchanging discovery); Cox, 619 So.2d at 913 (waiver found where defendant, party to arbitration agreement, first sought arbitration eighteen months after suit was filed, as things began to go badly in pre-trial motions and discovery). A party to an arbitration agreement may not arbitrate some of his available claims and then litigate other claims which he could have asserted in the arbitral forum. Southern Constructors Group, Inc. v. Dynalectric Co., 2 F.3d 606, 610 (5th Cir. 1993) (rejecting what Judge Wiener called the "blind-hog-occasionally-finds-an-acorn" approach to litigation).

Absent waiver, 9 U.S.C. § 3 (1925) provides for a stay of pending litigation upon proof that the parties agreed to arbitrate the underlying claim or claims. However, dismissal is appropriate when the arbitration agreement so provides, or when all claims asserted in the litigation are subject to arbitration. See Alford v. Dean Witter Reynolds, Inc., 975 F.2d 1161, 1163-64 (5th Cir. 1992).

In short, the only significant obstacle to Mississippians’ ability to contract reliably for arbitration of employment disputes was, and still is, the prospect that Mississippi judges, harboring the common law’s hostility to arbitration generally, will ignore the FAA, and that permissive interlocutory appeals will prove unavailing. State law litigation of employment disputes is on the rise. Astute counsel for employment plaintiffs suing Mississippi employers often choose to abandon or recharacterize federal claims in order to avoid removal of actions filed in Mississippi courts. By doing so, they also keep any arbitration enforcement issues in the local forum. If that forum is hostile to arbitration, the law might prove a dead letter. This problem was not just theoretical, and Denmiss may yet be found inadequate solution, unless the Mississippi Supreme Court grants a mandamus petition or two to make the point.

    III. What Denmiss Did.

On October 25, 1945, Denkmann Lumber Company, which later assigned all rights to Denmiss Corporation, executed agreements with International Paper Corp. and Southern Kraft Timberland Corp.( a division of International Paper, which subsequently assigned its rights to IP, which then assigned its rights to IP Timberlands Operating Co.), in which Kraft leased approximately 140,000 acres of Mississippi land and 95,000 acres of Louisiana land. The Mississippi agreement stated that in consideration of $1,000,000 cash paid by Kraft, and a further sum of $1,250,000, Kraft would receive a ninety-nine year lease. The additional sum of $1,250,000 could be paid immediately in cash or a sum equal to the total price of the timber estimated to be on said lands by a cruise made in the manner provided in the agreement could be substituted. The agreement authorized the timber cruise to be made by a certain firm from Arkansas. If, however this firm was not available, the agreement provided for each party to nominate one arbitrator and then these arbitrators were to nominate a third arbitrator, and these three were to select another firm to complete the timber cruise. In addition, if the two original arbitrators were unable to agree upon the third arbitrator, then the agreement provided for one of the Judges of the United States District Court for the State of Mississippi to so designate.

Kraft paid the additional sum of $1,250,000, rather than to follow the above procedure. The agreement also contained rights for Kraft to exercise one of two purchase options for all of the leased Mississippi land. The first option was to be exercised on or before March 1, 1946, at a price of $3.50 an acre, which was slightly above its 1945 fair market value. The second option stated:

    At any time between January 1, 1986, and December 31, 1995, to purchase all of said lands, not theretofore released from it, at a price to be fixed by three arbitrators to be named at that time--one by Denkmann, it successors and assigns, one by Kraft, its successors and assigns, and the third by the two so named; or in case they shall be unable to agree upon said third arbitrator, said third arbitrator shall be named upon application by either party by one of the Judges of the United States District Courts for the State of Mississippi, after notification to the other party of intent to apply to such judge for such appointment, given in writing at least thirty (30) days in advance of such application, such amount so fixed to be paid upon execution and delivery of the deed conveying such lands, with warranty as in other instance.

In 1960, the Mississippi Legislature decided to create the Ross Barnett Reservoir and wanted to purchase 21,320 acres of the land leased to IP. At this time, Denkmann Lumber Co. shareholders, who were now shareholders in Denmiss Corp., received a letter revealing this information and reminding them that IP held these lands under a long term lease that still had eighty-five years to run. The letter further stated that the shareholders did hold a reversionary interest in the land at the end of the lease term. After some negotiation, these Denkmann distributees received $10 per share for their reversionary interests, and conveyed a warranty deed subject to the lease. Further, in a later letter, another agent for the distributees informed them that it would be impossible to establish a true value for the interests traded for stock since they were all reversionary. Several letters were written during this period that referred to the lease being "paid-up." One particular letter referred to IP’s right to exercise the purchase option between 1985-1995, and informed the distributees that IP would "be in the driver’s seat" with respect to the fact that IP would not be "offering" the current market value of the lands that it could have the use of through 2044.

On November 20, 1985, Denmiss sent IP a document titled "Notice of Default," in which Denmiss alleged numerous violations of the 1945 agreement, one of which was that the second purchase option, which was to begin on January 1, 1986, was unenforceable. IP originally filed suit in U.S. District Court, Middle District of Louisiana, on August 15, 1986 to confirm its property rights under the agreement, however a 1990 U.S. Supreme Court decision destroyed the diversity jurisdiction and the case was dismissed. Then on March 13, 1990 IP filed suit against Denmiss in the Leake County Chancery Court. On August 15, 1990, Denmiss filed suit against IP in Hinds County Circuit Court. Upon motion, the Leake County Chancery Court transferred suit to the Hinds County Chancery Court, which subsequently transferred to the Hinds County Circuit Court.

On March 31, 1992, IP exercised the purchase option under the Mississippi agreement and named Russell Milliken as its arbitrator pursuant to the purchase option to fix the purchase price. IP contended there was "no vagueness or uncertainty" about the meaning of the option, and performance of the option would terminate Denmiss’s claims for breach of contract. On September 3, 1992, the circuit court ruled that the purchase option was definite and would be enforced, and denied Denmiss’s motion to dismiss. On September 4, 1992, Denmiss agreed to proceed with the arbitration provision pursuant to the lease agreement, but declared that the agreement would not serve as a waiver of its earlier position. Denmiss named William C. Humphries as its arbitrator. IP subsequently filed a motion to compel arbitration that was denied by Judge James E. Graves, Jr. Judge Graves did not release the basis of his opinion, but stated that the provision in the purchase option concerning arbitrators was merely an appraisal provision that required appraisers to fix the value of the lands as of the time of the appraisal.

Thereafter a third arbitrator, James S. George, was designated by Chief Judge William Barbour. Both George and Humphries agreed that the current value of the 113,500 acres of land was $38,500,000. Milliken however disagreed and valued the property at $13,770,000. On November 1, 1995, IP filed a motion to set matters for jury trial. IP argued that, unlike an arbitration, which can be reviewed only on very narrowly defined grounds, an appraisal is reviewable both substantively and procedurally for mistakes of fact and to prevent injustice to either party. On December 14, 1995, Judge Graves entered an order and granted Denmiss’s motion for entry of judgment. Graves found:

    Upon additional evaluation of the contract clause in question and considerable examination of relevant case law and theory, this Court determines that arbitration has indeed been completed by way of the appraisal process. Three appraisers were chosen in compliance with the contract clause of the 1945 agreement and this Court’s previous orders. Two of the three appraisers agreed upon a fixed price of the lands in question and thus a price to exercise the option has been properly set. Defendants essentially contend that they were not given an opportunity to present evidence or challenge the decision of the appraisers in a hearing. Clearly, they viewed the process as an arbitration process as evidenced by the request for an evidentiary hearing.

Judge Graves concluded by holding that the purchase price of the property would be set at $38,500,000.

The Mississippi Supreme Court began its discussion by revisiting Mississippi’s common law anti-arbitration doctrine. The Court then acknowledged divergent views in Mississippi law since at least 1917, noted little reason to disturb an arbitration agreement between private contracting parties, respecting a matter of interest only to themselves, and pronounced:

    This Court hereby overturns the former line of case law that jealously guarded the court’s jurisdiction. Again, we expressly state that this Court will respect the right of an individual or an entity to agree in advance of a dispute to arbitration or other alternative dispute resolution.

Six justices joined in this decision; only two dissented. (Judge Waller did not participate.)

The Court first examined the purchase option contract language to determine whether the provision pertaining to arbitrators actually contemplated appraisal. Mississippi case law states that the meaning of the language and the intention of the parties in contract construction will be determined from the language used in the contract. Denmiss offered a line of pre-1945 cases holding that the language meant appraisal, and that use of the word "arbitration" did not make such a clause an arbitration clause. IP argued that the word "arbitration" meant "arbitration"even though the clause specified no rules to be followed, Mississippi has a general statute for post-dispute arbitration, and did not consent to entry of judgment on an award. The Court recognized the difference between appraisal and arbitration. Arbitration presupposes the existence of a dispute or controversy to be tried and determined in a quasi judicial manner, whereas appraisement is an agreed method of ascertaining value or amount of damage, stipulated in advance, generally as a mere auxiliary or incident feature of a contract, with the object of preventing future disputes, rather than of settling present ones. The Court then stated, ipse dixit:

    Mississippi case law has not construed an arbitration provision to have had contemplated appraisal. Arbitration provisions are now recognized to be valid even before a dispute arises.

The Court noted that arbitration was used in one other provision in the contract; the provision that allowed Kraft to pay either $1,250,000 or pay the value determined by a timber cruise conducted by the named firm or one chosen by three arbitrators. Under this provision of the agreement, the use of the term "arbitrators" cannot be reconciled with the use of "appraisers". Although, arbitrators often are not limited to such a narrow decision as choosing another firm of timber estimators, the selection of an impartial and fair firm of estimators would be important to both Denkmann and Kraft. Thus, the use of the term arbitrators in this provision suggested that the parties did, in fact, contemplate arbitration. These parties would not have chosen appraisers to choose an estimator. The term arbitrators inherently includes the investigation and procedures as applied by arbitrators. The Court concluded that it was possible that the parties intended that the three arbitrators conduct a hearing, hire an appraiser(s) if they wanted and then fix the price of the lands. Therefore, the Court held that the provisions in the contract unambiguously called for arbitrators in the truest sense of the word and that the agreement was an agreement to arbitrate.

The Court then addressed the issue of whether or not the Federal Arbitration Act applied to the contract at issue. The Court acknowledged that the Arbitration Act creates a body of substantive law that is applicable in both state and federal courts. Stating that doubts as to the availability of arbitration must be resolved in favor of arbitration, the Court determined that the timber industry meets the minimum threshold of affecting or bearing upon interstate commerce, and thus initiating the Federal Arbitration Act. After stating that Mississippi case law regarding arbitration and the Federal Arbitration Act are consistent with one another, the Court declined to disturb an agreement that knowledgeable and experienced parties freely had entered. The Court further held that under the Act, the sole function of courts is to determine whether the claim is referable to arbitration and, once that decision is made, the courts may not delve into the merits of the case.

Justice McRae, joined by Justice Sullivan, concurred with the majority’s decision to reverse and remand to the Circuit Court of Hinds County, but dissented with the decision that the Federal Arbitration Act was applicable. Justice McRae argued that the contract at issue did not involve interstate commerce, since the lease only included land in Mississippi counties. Agreeing that the 1945 contract did unambiguously call for arbitration, Justice McRae concluded that the arbitration provisions of Miss. Code Ann. §11-15-1 (1972) were applicable instead. Justice McRae further disagreed with the majority’s decision to overrule those cases which "jealously guarded the court’s jurisdiction" over arbitration cases.

Denmiss reached the Court with the FAA’s applicability undisputed, if the Court found that the agreement required arbitration, rather than apprisal. Nevertheless, and arguably by dicta, the Court used Denmiss to reverse Mississippi’s tradition of common law hostility to pre-dispute arbitration agreements. This suggests strong support for this alternative forum for civil disputes.

    IV. Since Denmiss

Since Denmiss, the Mississippi Supreme Court has taken two opportunities to extend or to clarify its strong support of arbitration agreements. In Americrete, Inc. v. West Alabama Lime Co., 758 So. 2d 415, 418 (Miss. 2000), the Court held to prior opinions that arbitrators have no duty, independent of an arbitration agreement, to explain their awards. However, a Chancellor reviewing an arbitration award has a duty to make findings and conclusions so as to provide a basis for appellate review. In Smith Barney, Inc. v. Henry, So. 2d , 2001 WL 26466 (Dkt. # 1998-CA-01218-SCT, January 11, 2001), the Court held that the beneficiaries of a deceased party to an arbitration agreement are bound thereby. As a matter of law, the Court ruled, death of a party does not extinguish the duty to arbitrate claims within the agreement’s scope. The agreement in question expressly bound "heirs, executors, successors, administrators . . . ."

The Fifth Circuit Court of Appeals has issued three significant arbitration opinions since Denmiss. In Subway Equipment Leasing Corporation v. Forte, 169 F.3d 324 (5th Cir. 1999), the Court ruled that a franchisor did not waive arbitration when (a) two of its corporate affiliates sued franchisees for breach of equipment and real estate leases, or (b) franchisor encouraged affiliates to file petitions for the franshisees’ involuntary bankruptcy. However, said the Court, the stay of litigation obtained by the franchisor in seeking to enforce the arbitration agreement also must stay the affiliates’ claims in litigation. In Williams v. CIGNA Financial Advisors Inc., 197 F.3d 752 (5th Cir. 1999), the Court held that an ADEA plaintiff did not prove, as required, that an adverse arbitration award showed "manifest disregard" for the applicable law. Nor did the plaintiff show, as alleged, that his obligation to pay half the costs of the arbitration had substantially prejudiced the prosecution of his claim. In Grigson v. Creative Artists Agency, L.L.C., 210 F.3d 524 (5th Cir. 2000), the Court affirmed the application of equitable estoppel to require arbitration of a tortious interference claim, because the claim required contract interpretation and the contract required that questions of interpretation and enforcement be resolved by arbitration. It mattered not, said that Court, that the litigant demanding arbitration was not a contract party.

Mississippi federal judges have published nine significant arbitration opinions since Denmiss. Mississippi Insurance Managers, Inc. v. Providence Washington Insurance Company, 72 F. Supp. 2d 689 (S.D. Miss. 1999) held that an arbitration clause in an agreement survives the agreement’s termination with respect to disputes which arose during the life of the agreement. Patterson v. Red Lobster, 81 F. Supp. 2d 681 (S.D. Miss. 1999) denied enforcement of an employer’s dispute arbitration policy because the dispute arose before the policy was implemented and the plaintiff employees had demonstrated that they did not intend to be bound thereby. American Family Life Assurance Company of Columbus v. Anderson, 77 F. Supp. 2d 759 (S.D. Miss. 1999), rev’d w’out pub. op., 228 F.2d 410 (5th Cir. 2000), applied the Colorado River discretionary abstention doctrine to dismiss an employer’s suit to enforce an arbitration agreement because the employer had first filed the same claim in Hinds Circuit Court, and that Court’s ruling was imminent. In Herrington v. Union Planters Bank, 113 F.Supp.2d 1026 (S.D. Miss. 2000), the Court enforced an arbitration requirement found in a credit card statement’s notice of amendment. Acceptance was implied from continued use of the card after receipt of the notice. Borrowers were required to arbitrate Real Estate Settlement Procedures Act (RESPA) claims against lenders and brokers in Blount v. National Lending Mortgage Corporation, Inc., 108 F. Supp. 2d 666 (S.D. Miss. 2000) and Smith v. Equifirst Corporation, 117 F. Supp. 2d 557 (S.D. Miss. 2000). In each case, the Court ruled that the borrowers had failed to demonstrate that the arbitration agreement or the arbitration process was procedurally or substantively unconscionable. The Court issued similar opinions in Bank One, N.A. v. Coates, 2001 WL 12866 (S.D. Miss. 3:00cv671LN, January 2, 2001) (installment purchase of home satellite system) and in Pridgen v. Green Tree Financial Servicing Corporation, 88 F. Supp.2d 655 (S.D. Miss. 2000) (installment purchase of mobile home). The result was the same in Raesly v. Grand Housing, Inc., 105 F. Supp. 2d 562 (S.D. Miss. 2000), with one exception: all claims were referred to arbitration except the written warranty claim arising under the Magnuson-Moss Warranty Act, because that Act expressly bars binding arbitration of such disputes.


Mississippi’s common law hostility to arbitration was an antiquated embarrassment which encouraged perverse lawyering and judging. Nevertheless, thanks to the Federal Arbitration Act, it was avoided in many cases by Mississippians who wished to contract reliably to resolve their employment disputes by arbitration. The Mississippi Supreme Court has now sided with the FAA, in substance. If the Court grants mandamus petitions to compel trial court respect for arbitration agreements, employers and their non-union employees may agree reliably to cut their lawyers’ take.


2003 The Federalist Society