IN THE SUPREME COURT OF MISSISSIPPI

NO. 2002-IA-01081-SCT

PASS TERMITE AND PEST CONTROL, INC.

v.

JOE P. WALKER, JR. AND CAROLYN FAYE

WALKER

DATE OF JUDGMENT: 12/04/2001

TRIAL JUDGE: HON. HENRY L. LACKEY

COURT FROM WHICH APPEALED: LAFAYETTE COUNTY CIRCUIT COURT

ATTORNEY FOR APPELLANT: R. BRADLEY BEST

ATTORNEYS FOR APPELLEES: DAVID D. O'DONNELL

CLAYTON O’DONNELL WALSH

NATURE OF THE CASE: CIVIL - CONTRACT

DISPOSITION: AFFIRMED AND REMANDED - 12/09/2004

MOTION FOR REHEARING FILED:

MANDATE ISSUED:

EN BANC.

CARLSON, JUSTICE, FOR THE COURT:

¶1. We must determine today whether the Lafayette County Circuit Court erred in refusing

to enforce an arbitration clause contained in a Mississippi Official Wood Destr oying Insect

Report. The circuit judge denied a motion to compel arbitration. Although we affirm the

circuit judge’s ruling, we d o so for reasons different than those stated by the learned circuit

judge.1 Pass issued a termite report prior to the real estate closing, and then issued a second termite report

on February 11, 1999, incident to a refinancing of the original mortgage loan.

2 FACTS AND PROCEEDINGS IN THE CIRCUIT COURT

¶2. In Decem

ber of 1998, Joe D. Walker and Carolyn Faye Walker purchased a home near

Oxford from Thomas and Evelyn Baggett. The Walkers’ lender required that a termite

inspection be conducted on the home. Pass Termite and P est Control, Inc. (“Pass”) was hired

by the W alkers, and Pass thereafter performed the inspection and issued a report. In their

complaint, the Walkers asserted claims based on fraud and breach of contract, and they alleged

that they relied to their detriment on erroneous reports produced by Pass. 1

¶3. Pass was served with process on February 16, 2001, and on March 27, 2001, Pass filed

its answer to the complaint, but failed to affirmatively plead arbitration as a defense. In addition

to this omission, Pass demanded a jury trial and a judgment in its favor. On May 15, 2001, Pass

propounded its First Set of Interrogatories and Requests for P roduction of Documents. On or

about September 19, 2001, the Walkers r esponded to discovery. On October 11, 2001, Pass

filed its Motion to Com

pel Arbitration. Pass did not request leave to amend its answer in order

to asser t this affirmative defense. In their response to the motion to compel, the Walkers

argued that Pass had “wa ived its right to claim any entitlement to arbitration in this cause”

based on the fact that it failed to affirmativel y plead in its answer its right to arbitration.

Moreover, the Walkers argued that Pass could not claim any right to arbitration after it availed

itself of the discovery process afforded to litigants in a judicial forum.3

¶4. The Circuit Court of Lafayette County, Judge Henry L. Lackey presiding, heard

arguments on the motion to compel arbitration. On December 11, 2001, the circuit court

issued an order denying the motion to compel arbitration for three reasons:

That the termite contract produced by [Pass] which contained the arbitration

clause was not explicitly agreed to by the [Walkers].

That the termite contract as presented and the time it was presented, cr eated a

contract of adhesion; therefore , it is in the best interest of public policy that the

[Walkers] not be bound by the term of said contract.

That for the reasons of judicial economy and litigation simplicity that the all

(sic) claims against all parties be adjudicated in the same cause.

¶5. Upon a

motion filed by Pass, the circuit court certified this case for an interlocutory

appeal, and we thereafter granted the petition for interlocutory appeal. See M.R.A.P. 5.

STANDARD OF REVIEW

¶6. While the circuit court based it s decision to deny arbitration on reasons different from

ours, we may on

appeal affirm the decision of the trial court where the right result is reached,

even though we may disagree with the trial court’s reasons for reaching that result. Puckett

v. Stuckey

, 633 So.2d 978, 980 (Miss. 1993). The grant or denial of a motion to compel

arbitration is reviewed de novo. E ast Ford, Inc. v. Taylor

, 826 So.2d 709, 713 (Miss. 2002)

(citing Webb v. Investacorp. Inc. , 89 F.3d 252, 256 (5 th Cir. 1996)).

ANALYSIS

I. Whether the Trial Court Erred in Denying the Appellant ’s Motion

to Compel Arbitration?2 Miss. R.. Civ. P. 8 provides in pertinent part:

(c) Affirmative Defenses . In pleading to a preceding pleading, a party

shall set forth affirmatively accord and s atisfaction, a rbitration and

award

,... and any other matter constituting an avoidance o r affirmative

defense.

(emphasis added).

3 Of course, Miss. R. Civ. P. 15 provid es that after the service of the answer, a party may amend

such answer in circumstances where justice so requires and only with le ave from the trial court. Today’s

4 ¶7. Due to the aforementioned reason s submitted by the circuit judge in denying arbitration,

the parties understandably present to us various arguments regar ding the validity, scope and

enforc eability of the arbitration provision. However, inasmuch as today’s decision to uphold

the trial judge’s denial of arbitration is based on waiver, we need not address the other issues

raised. In so doing, we emphasize here that our decision today should in no way be interpreted

as a retreat from our prior cases upholding arbitration, which we again state is favored and is

firmly embedded in both our federal and state laws. Russell v. Performance Toyot a

, Inc.

, 826

So.2 d 719 (Miss. 2002); E ast Ford, Inc. v. Taylor

, 826 So.2d 709 (Miss. 2002); IP

Timberlands Operating Co. v. Denmiss Corp. , 726 So.2d 96 (Miss. 1998).

¶8. Instead, we today consider Miss. R. Civ. P. 8© and Pass’s failure to assert in its

Answer its right to arbitration

. 2 Although a strict application of Miss. R. Civ. P. 8© would

conceivably do violence

to our recent decisions on arbitration issues, we find that Pass’s

f ailure to assert its right to arbitration in its answer in contravention of Rule 8's provisions is

at least a factor we may consider along with the other facts existing in this case. 3 Here is aapplication of Rule 8 does not limit Rule 15. Parties remain free to seek leave to amend their answer.

5 brief time line: (1) February 14, 2001 – Complaint filed by the Walkers; (2) February 16,

2001

– Pass served with process; (3) March 27, 2001

– Pass filed i t s Answer and this Answer

contained no affirmative defense of arbitration and in fact Pass, in its Answer, demanded a jury

trial; (4) May 15, 2001

– Pass propounded its First Set of Interrogatories and Requests for

Production of Do cuments to the Walkers, who later responded to these discovery requests;

(5) October 11, 2001

– Pass, without request ing leave to amend its Answer, filed its motion

to compel arbitration.

¶9. Both termite reports were attached to the Complaint which was filed on February 14,

2001. Contained in both termite reports were identical arbitration clauses which stated:

ARBITRATION. The purchaser and the pest control operator agree that any

controversy

or claim between them arising out of or relating to this agreement

shall be settled exclusively by arbitration. Such arbitration shall be conducted

in accordance with the Comme rcial Arbitration Rules then in force of the

American Arbitration Association. The decision of the Arbitrator shall be a

final and binding resolution of the disagreement which may be entered as a

judgment by any Court of competent jurisdic tion. Neither party shall sue the

other where the basis of the suit is this agreement ot her than for enforcement

of the arbi

trator’s decision. In no event shall either party be liable for indirect,

special or consequential damages or loss of anticipated profits.

Thus, once Pass was served with a copy of the complaint and summons on Febru ary 16, 2001,

Pass was aware of the availability of the defense of arbitration. Instead of asserting this

defense, Pass answered the complaint, demanded a jury trial, and invoked the available

discovery procedures. In fact, when Pass fin ally decided to file a motion to compel arbitration,

some 237 days after it was served with a copy of the compl aint and summons, it filed such6

motion to compel arbit ration without seeking leave from the trial court to amend its original

answer.

¶10. The general rule is that affirmative defenses must be raised in a party’s answer. Miss.

R. Civ. P. 8©. S ee also Canizaro v. Mobile Communications Corp. of Am.

, 655 So.2d 25

(Miss. 1995) (The defense of statute of frauds is waived if not included in the an swer.); M artin

v. Estate of Mar

tin , 599 So.2d 966(Miss. 1992) (Maker of note who claims it is

unen forceable as against public policy must say so affirmatively by way of defense); Hertz

Commercial Leasing Div. v. Morrison

, 567 So.2d 832 (Miss. 1990) (Lessee was required

to a ffirmatively plead that the acceleration clause was punitive and thus unenforceable);

Wholey v. Cal-Maine Foods, Inc.

, 530 So.2d 136, 138 (Miss. 1988) (Res judi cata is an

affirmative defense which may not be raised on a motion to dismiss unless allega tions in a

prior pleading in the case demonstrates its existence.).

¶11. Notwithstanding our prior cases finding waiver for failure to plead affirmati ve defenses,

Pass urges us to follow case s from the Fifth Circuit in which similar or longer delays in

asserting the defense of arbitration were found not to constitute a waiver of the right to invoke

arbitration. Pass directs our attention to Tenneco R esins, Inc. v. Davy Int’l , 770 F.2d 416 (5 t h

Cir.1985). In T

enneco, the Fifth Circuit upheld an arbitration clause even though the defenda n t

waited eight months after the commencement of the lawsuit to invoke its right to arbitration.

However, in Tenneco

, the defendant timely responded to the complaint and i n its initial

responsive pleading, the defendant a sserted the defense of arbitration based on the contractual7

provisions. In Walker v. J. C. Br adford & Co. , 938 F.2d 575 (5 t h Cir. 1991), the court

likewise upheld an arbitration clause even though the defendant wa ited thirteen months after

suit was filed to invoke its right to arbitration. In W alker

, the plaintiffs commenced their suit

in state court only to have the defendant remov e the case to federal court, and once in federal

cour t, the defendant invoked discovery and more than ten months later, the defendant finally

answered the complaint. The W alker court cited Tenneco for the premise that the question

of whether arbitration has been waived depends on the facts of each case. Id . at 576.

¶12. In Mississippi, a party waives the right to arbitra te when it “actively participates in a

lawsuit or takes other action inconsistent with the right to arbitration.” C ox v. Howard, Weil,

LaBouisse, Frederichs, Inc.

, 619 So.2d 908, 913-14 (Miss. 1993). “Taking advantage of pretrial litigation such as answers, counterclaims, motions, requests, and discovery obviates the

ri ght to arbitration.” I

d

. at 914. In U nited Nursing Associates, PLLC v. Phillips

, 842 So.2d

1270, 1276-77 (Miss. 2003), although we found no waiver of arb itration, we again

acknowledged that a party attempting to invoke arbitration may effectively waive tha t right if

the party actively engages in litigation (citing Cox

, 619 So.2 d at 914). In Phillips

, the

defendant time ly answered the plaintiff’s initial pleading and included in such responsive

pleading the affirmative defense of arbitration. I d. at 1273. Likewise, in Philli ps , we

acknowledged tha t waiver could be found when the party seeking arbitration “substantially

invokes the judicial process to the detriment or prejudice of the other party.” I d. at 1278

(citing Subway Equip. Leasing Corp. v. Forte

, 169 F.3d 324, 326 (5 th Cir. 1999 ), and M iller8

Brewing Co. v. Fort Wort h Distrib. Co. , 781 F.2d 494, 497 (5 t h Cir. 1986)). Additionally, in

Phillips , this Court noted that one encyclopedia sheds light on the question of what

participatory activities constitute waiver:

Whet her participation in an action is a waiver of the right to arbitration depends

on whether the participation bespeaks an intention to abandon the right. ... It has

been held that the service of an an swer in an action on the contract does not

constitute waiver of the right to arbitration, even though the answer does not set

up the arbitration clauses as a defense.... The mere se rving of an answer and the

making of a motion to dismiss a complaint does not constitute a waiver.

842 So.2d at 1276 (citing 6 C.J.S. Arbitration § 37 (1975)).

¶13. Finally, in Phillips , we issued this caveat:

As a practice note, parties desiring to seek arbitration should prom ptly file and

present to the trial court a motion to stay proceedings and a motion to compel

arbitration.

842 So.2d at 1277.

¶14. In the instant case, Pass not only fa iled to file a motion to compel arbitration and failed

in its answer to allege the affirmative defense of arbitration, it went so far in its answer as to

request that the dispute be tried before a jury. A jury trial is characteristic of the judicial

pr ocess, not arbitration. That request is inconsistent with asserting a right to arbitration. This

coupled with the fact that Pass invoked the discovery process indicates it s intent to forgo its

right to arbitration.

¶15. We can comfortably distinguish the above cited Fifth Circuit cas es and our cases from

the case sub judice. The 237-day delay before invoking arbitration, coupled with the invocation

of the discove ry process after failing to raise the defense of arbitration in its initial pleading4 The policy of the Federal Arbitration Act (FAA) to providing favorable treatment to arbitration is

based on, inter alia, the desire to reduce expenses and delays suffered by those involved and to promote the

efficient resolution of disputes. See 9 U.S.C § 2.

9 bring us to our conclusi on that Pass has effectively waived its right to invoke arbitration.

Stated differently, when a party, with full knowledge of t he existence of an arbitration clause

in the contr act which is the subject matter of the litigation, makes a conscious decision to

proceed with responding to the lawsuit, demand ing a jury trial, and invoking discovery only to

thereafter invoke the arbitration clause, that party does so at its own peril, and prejudice to the

non-moving party will be presumed for fa ilure to comply with the provisions of Miss. R. Civ.

P. 8(c). In so holding, we are satisfied without doubt that today’s decision in no way does

violence to the federal law and our state law favoring arbitration.

¶16. This Court has ack nowledged and adopted the federal policy favoring arbitration. 4 See

generally McKenzie Check Advance of Miss., LLC v. Hardy

, 866 So. 2d 446 (Miss. 2004);

Sanderson Farms, Inc. v. Gatlin , 848 So.2d 828 (Miss. 2003); W ilson v. Greyhound Bus

Lines, Inc.

, 830 So.2d 1151 (Miss. 2001). It is well-settled that this Court adheres to federal

policy favoring arbitration.

¶17. However, there are several rationales behind today’s d ecision. Primarily, by making a

clear statemen

t as to when the right to arbitration ordinarily should be pled, we eliminate any

uncertainty that may plague future litigation. Certainty durin g litigation favors this Court’s

effort to ensure judicial efficiency and the expeditious resolution of disputes. Further, this

approach creates an incentive for parties to be more diligent in submitting defenses. The result5 Indeed, notice is the underlying purpose of Rule 8. Miss. R. Civ. P. 8 cmt. (“The purpose of Rule

8 is to give notice[.]”). S ee also 5 Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure:

Civil 3d § 1270 (2004).

10 of such an incentive is that the trend will now be that trial courts will learn early on in the life

of a civil case about the existence of arbitration agreements and be a ble to more quickly

dismiss disputes which our trial courts find to be controlled by arbitration clauses. 5

¶18. Again, we cannot over-emphasize the fact that today’s decision in no way restricts or

limits arbitration agreements or the ability of private parties to enter into such agreements.

This Court has recognized the right of contracting parties to agree in advance to arbitrate a

dispute. Russell v. Performance Toyota, Inc. , 826 So.2d 719, 722 (Miss. 2002). Proponents

of arbitration need not be concerned that today’s decision erodes the policy favoring

arbitration. Indeed, our ruling does not limit the validity, scope or enforceability of arbitration

agreements. It neither marks a shift in the substantive law nor limits existing agreements.

Simply stated, we appreciate the fact that litigants, lawyers and trial judges look to this Court

for guidance on the procedural conditions for asserting this right, and today we hopefully have

provided such guidance.

CONCLUSION

¶19. For the above reasons, we affirm the Lafayette County Circuit Court’s order denying

Pass’s motion to compel arbitration and we re mand this case to that court for further

proceedings consistent with this opinion.

¶20. AFFIRMED AND REMANDED

.11

SMITH, C.J., WALLER AND COBB, P.JJ., EASLEY AND DICKINSON, JJ.,

CONCUR. GRAVES AND RANDOLPH , JJ., CONCUR IN RESULT ONLY. DIAZ, J.,

NOT PARTICIPATING.