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.
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. Its
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 Hunts 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 thats so, jurists thereafter
rarely deigned to explain the doctrines 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 Storys
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, Warners 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
[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 unions 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 Mississippis
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
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 states 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 plaintiffs
own complaint or unless the case is already in federal court."
Prudential-Bache Sec., Inc. v. Fitch, 966 F.2d 981, 989 (5th
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 arbitrators petition for writ of prohibition
as interlocutory appeal to overturn Circuit Courts 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 employees
obligation to try his civil rights claims through his unions
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.
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 laws 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.
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 IPs
right to exercise the purchase option between 1985-1995, and informed
the distributees that IP would "be in the drivers 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 Denmisss
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 Denmisss 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 Denmisss motion for entry of judgment.
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 Courts 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
Mississippis 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:
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:
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 majoritys
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
majoritys decision to overrule those cases which "jealously
guarded the courts jurisdiction" over arbitration cases.
Denmiss reached the Court with the FAAs 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 Mississippis tradition of common
law hostility to pre-dispute arbitration agreements. This suggests
strong support for this alternative forum for civil disputes.
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 agreements 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 agreements 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 employers 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), revd wout
pub. op., 228 F.2d 410 (5th Cir. 2000), applied the
Colorado River discretionary abstention doctrine to dismiss
an employers suit to enforce an arbitration agreement because
the employer had first filed the same claim in Hinds Circuit Court,
and that Courts 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 statements
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.
Mississippis 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.