### IN THE COURT OF APPEALS OF TENNESSEE AT NASHVILLE NOVE MBER 5, 2002 Session RONNIE E. ERWIN v. MOON PRODUCTS, INC.
Direct Appeal from the Chancery Court for Marshall County No. 11240 Honorable J. B. Cox, Chancellor

No. M2002-00877-COA-R9-CV - Filed August 5, 2003

This is an appe al from a

denial of an applic ation tocompel arbitration. For the following

reasons , we affirm the court below.

Tenn. R. App. P. 9; Judgment of the Chancery Court Affirmed and Remanded

A LAN E. H IGHERS , J., delivered the opinion of the cour t, in w hich W. F RANK C RAWFORD , P.J., W.S., and D AVID R. F ARMER , J., joined.
Jay S. Bowen, Timothy

L. Warnock, Amy

C. Martin, Nashville, TN, for Appellant
William T. Ramsey, Michael G. Mason, Nashville, TN, for Appellee

OPINION
Facts and Procedural History

O n Apr il 30, 1998, Ronnie E. Erwin (“Mr. Erwin”) entered into a “Membe rs Agreement (Members Agreement or Membership Ag reement)” with Moon Inve stors, LLC. While the Members Agreement

covere d a host of

issues, we will mention only those per tinent to th

is appea l. Mr. Erw in
was designated as the sole “Employ ee Member.” Paragra

ph 5 of the agreement is titled “Termination of Employment” and def

ines “cause ,” “ter

mination f

or cause ,” and “ involunta

ry terminat ion.” The se definitions are applied in the sections following the definitions outlining the procedure that would be used for

the L LC to pu rchase Mr. Erwin ’s intere st

in the event that Mr. Erwin’s employ ment was te rmina ted. The Members Agreement also conta ined an arbitration provision that mandated the arbitration of “any

controversy or

claim arising out of or relating to this Agreement.”

Ther e after, on May

1, 1998, th

e partie s entere d into an “ Employ ment Ag reemen t” (Employment

Agree ment) which pr

ovided tha

t Mr . Erwin

was to serve as President and CEO of Moon Products for

five yea rs. The Employment Agr eement provided for the salary and benefits of1 Note: As di scuss ed in the Law and Analy sis secti on, we do not think t his is the proper procedure for the

appeal of a denial of a motion to compel arbitrati on.
-2- Mr. Erwin. In parag

raph 5 of the a

greem ent, entitled “Termination and Continuation of Salary ,” the Employment

Agree ment provided that

“[i]n the ev ent C ompan y shall terminate Employ ee’s employment

during the term of this Agreement, Employ ee shall be entitled to a continuation of the monthly salary pa yments . . . until the expiration of the term of the Agreement.” The

Employment Agreement did not contain an arbitration clause

.
On May 5, 1999, Moon

Products n otified Mr . Erwin th at his “contract was being terminated for ca use.” After

being advised that he would receive no fur ther compensation because he was terminatedfor cause, Mr. Erwin filed suit in the Chancery Court on October 25, 1999 based on the Employment Agr

eement. On October 16, 2001, Moon Products served Mr. Erwin with a Demand for Arbitration based on the Mem bers Agree

ment, ask ing Mr. E rwin to sta

y the trial of

the case pending arbitration. Mr. Erwin refused this demand and after a hearing on the matter, the trial court ruled that t

he a rbitration clause in the Members Agreeme nt did not apply to the Employ ment Agree ment. Moon Produ cts then filed for permission to appeal under Rule 9 of the Tennessee Rules of Appella te Procedure and that permission was granted. 1 Moon Products presents the following two issues for our review:

I. Whether

the lower court erred in deny ing Moon Products’ Motion to Staythis Case and to Compel Arbitration? II. Whether

the parties agreed, at the time they entered into the “E m ployment Agreement,” that a disp

ute involving “cause” for termination of employment would be subject to arbitration?

Standard of Review The findings of fact made by a trial court are given a

presumption of correctness that will not be overturned unless the evidence preponder ates against those findings. See T ENN

. R. A PP

. P. 13(d);
see also Bank/First Citizens v. Citizens and Assoc. , 82 S.W.3d 259, 262 (Tenn. 2002). A trial court’s ruling on a matter of

law, however, will be reviewed “‘unde r a pure de novo standard. . . according
no deference to the conclusions of law made by the lower court[].’” Bank/First Citizens , 82 S.W.3d at 727 (q uoti ng Southern Constructors, Inc. v. Loudon County Bd. of Educ. , 58 S.W.3d 706, 710 (Tenn. 2001)). With respect to issues relating to the interpretation of a contract, “[t]he interpretation of a written agreement is a matter o f l aw and not of fact, therefore, our review is de novo on the record with no presumption of the correctness of the tri al court ’s conclusions of law.” Inscoe v. Kemper , No. M1999 -007 41-CO A-R3 -CV, 2000 W L 1657844, at *2 (Tenn. Ct. App. Nov. 6, 2000) (citing Union Planter’s Nat’l Bank v. American Home Assurance Co. , 865 S.W.2d 907, 912 (Tenn. Ct. App. 1993)). Law and Analysis This case is presented to us as an interlocutory appe al under Rule 9 of the Tennessee Rules of Civil Proce dure. I

n the Ag reed Or der gr anting t his Rule 9 a

ppeal, the court

below stated that “the Court’s legal basis for granting Defendant’s motion to seek a n interloc utory appeal i s set fort

h in Tenn. Cod

e Ann. § 29 -5-319( a)(1). This sect ion statesin pertine

nt part:-3-

(a) An a ppeal ma y be taken fr om: (1) An order deny

ing an application to compel arbitration made under § 29-5- 303;

. . . . (b) The appe al shall be

taken in the manner and to the same extent as from orders or judgments in a civil action. We have pr

eviously stated tha

t:
Ge ne ra ll y, an appealto this Court is permissible only from a final judgment adjudicating all the cl aims, rights and liabilities of all parties. T ENN

. R.A PP

. P. 3(a). The Uniform A

rbitration Act ("UAA") as adopte d in Tennessee and codified at sections 29-5-301 to -320 of the Tennessee Code, howeve r, creates limited exceptions to this rule. T.R. Mills Contra ctors, In c. v. W RH Enterp rises, LLC , 93 S.W.3d 861, 864-65 (Tenn. Ct. A pp. 2002)

Becau se there is a statutory ba sis for an appeal taken from an order de nying a n application to compel arbitration, we think the discretion of this Court andof the court below in granting a Rule 9 appe al is removed by the statute a nd that the proper avenue for appeal is an appe al as of r

ight unde r Rule 3 of the Tennessee Rules of Appellate Procedure. See Promus Hotels, Inc. v. Martin, Cole, Dando & Robertson, Inc. , No. W2002- 01028-CO A-R3-CV, 2003 Tenn . App. L EXIS 95, at *4 ( Tenn. Ct. App. February

3, 2003) (“under

T.C.A. § 29-5-319(a)(1), an appeal of r ight may be

taken from an order denying an applicat ion to compel arbitra tion made

pursuant to T.C.A. § 29-5-303 ”). This appeal w as certified and accepted under Rule 9, and we will decide it as suc h, but we think the correct procedure would be to b ring such an appeal in the same manner as any other appeal as of right under Tennessee Rule of Appellate Proc edure 3.

Moon Products contends that the trial court’s finding that “the employ ment contract of

the Plaintiff does not include an arbitration clause and that the ‘m embers hip agreement’ arbitration clause was not inc luded in

the employment ag

reement when the parties had opportunity to include the langua

ge of th e member ship agr

eement in to the emp loyment ag

reemen t” is in error. Alth ough Moon Products presents two issues for our review, we think that the two issues presented involve the same analy sis and we will therefore decide them toge ther.

Moon Products c ontends th at the ce ntral issu e in the c urrent d ispute as evidenc ed by

Mr

. Erwin’s complaint is whether or not Mr. Erwin was terminated “for cause.” Moon Products argues that the defi nition of “ cause” agreed to by the part ies is con tained in th e M embersh

ip Agreement. Moon Produ cts argues that we should construe the Membership Agreement and the Employ ment Agreement

together as part of one transaction defining Mr. Erwin’s e mploy ment rela tionship with Moon Products, and thus r ead the t wo agr eements together. Moon Products supports its argument with Hinson v. Midland Bank and Trust Co. , No. 85-187-II , 1986 Tenn. App. LEXI S 3190, at *11 (Tenn. Ct. App. July 30, 1986) which stated that “[i]f a single transaction is embodied in more than
one written instrument, all instruments should be read togethe r and con strued wi

th reference to each-4-

other.” Moon Products a

rgues t hat the pa rties ag reed on t he defin ition of “c ause” in

the Membe

rship Agreement

and therefore

did not put a duplicate definition in the Employment Ag reement signed the next day . Moon Prod

ucts cite s T.R. Mills Contractors v. W RH Enterpris es, LLC , 93 S.W.3d 861 (Tenn. Ct. App. 20 02) whic h states “ [w]hen ther e is a clear relationship between a written agreement containing an arbitration clause and a written supplemental agreement that does not conta in such a clause, disputes a

risi ng u nder the supplemental agreement will be subjec t to arbitration under the
or iginal agreement.” Moon Products further notes tha t there is no integration clause in the Employ ment Ag reemen t.

Mr. Erwin asserts that

the Membership Agreement and the Employ ment Agreement are two separa te agreements and should not be read tog eth er. Mr. Erwin argues that the Employ ment Agreement

could have contained an ar bitration clause o

r incorp orated t

he arbit ration c lause
con tained in t he Membe

rship Ag reemen t. Mr. Erwin notes th at one por tion of the

Members hip Agree ment, a non-compete provision, was expressly incorporated

into the Em

ploy ment Ag reemen t. Mr. Erwin argues this would not have been nece ssary had the parties intended the two agree ments to be part of

one transaction rather than two separate agreements. Mr. Erwin points us to Rainey
v. Stansel l , 836 S.W.2 d 186, 191 (Tenn. Ct. App. 1992) which states that this Court “does not attempt to ascertain the parties’ state of mind at the time of the contract was executed, but rather their intentions as actually e

mbodied and expressed in the contract as written.” Mr. Erwin furthe r argues that by its own ter

ms the Membership Agreement does not apply to the Employ

ment Ag reemen t. Mr. Erwin poi nts to the integrationclause in the Membership Agreement, and to the a ctual wording of the arbitration c lause in th e Member ship Agr

eement w

hich stated that it applied to “a ny controve rsy or claim arising out of o r relat ing t o this Agree ment.” ( emphasis added). Mr. Erwin asserts that since the Employment Ag reement did not exist at the time the parties entered into the Members Agree

ment, the only agreement that the integra tion clause and arbitrationclause could be applied t o was the Members Agree

ment. We have st

ated tha t: In deciding whether

parties agreed to arbitrate a particular

issue, courts shoul d apply ordinary state law principles. [ Frizzell Constr. Co. v. Gatlinbur

g, L.L.C. , 9 S.W.3d] at 85. The co ur t s ho ul d a sc er ta in th e i nt en ti on of th e p ar ti es "b y a

fair construction of the terms and provisions of the contract, by the subject ma

tte r to which it has reference, by the circumstanc es of the particular transact ion giving rise to the question, and by the construction placedon the agreement by the parties in carry

ing outits t erms. " Id. (quo ting Penske Truck Lea sing C o. v. Huddleston , 795 S.W.2d 669, 671 (Tenn. 1990)). T.R. Mills Co ntractors

v. W RH Enterp rises, LLC , 93 S.W.3d 861, 870 (Tenn. Ct. App. 2002) We have recently ma

de the following statement of the “ordinary state law principles” regar din g contract interpretation:

The inter pr etation of a written contract is a matter of law, and thus, no presum pti on of correctness in its interpretation exists. NSA DBA Benefit Plan, v. Connecticut

Gen. Life Ins. Co. , 968 S.W.2d 791 (Tenn. Ct. App.1997). The cardinal-5-

rulein th e constr

ucti on of contracts is to ascertain the intent of the parties. West v. LaminitePlastics Mfg. Co. , 674 S.W.2d 3 10 (Tenn . Ct. App.1984). If th e contra ct is plain and unambiguous, the meaning thereof is a question of law, and it is the Court 's function to inter pret the

contract as writte

n accor ding to it s plain ter

ms. Petty v. Sloan , 197 Tenn. 630, 277 S.W.2d 355 (Tenn. 1955). The language used in a c ontract must be taken and understood in its plain, ordinary , and popular sense. Bob Pears all Motors, Inc. v. R egal Chry sler--P lymouth

, Inc. , 521 S. W. 2d 5 78 ( Ten n.1 975 ). In construing contracts, the words expressing the parties' intentions should be given the usual, nat ur al, and ordinary meaning. Ballard v. North Amer ican Life &

Casualty Co. , 667 S .W.2 d 79 (T enn. C t. App .1983 ). If the l anguage of a writte n instrume

nt is unambig uous, the Court must interpret it as written ratherthan according to the unexpress ed intent

ion of one

of the pa rties. Sutton v. First Nat. Ba nk of Crossv ille , 620 S.W.2d 526 (Tenn. Ct. App.1981). Courts cannot make contracts for parties but
can only enfor ce the contract which the parties themselves have made. McKee v. Continental Ins. Co. , 191 Tenn. 413, 234 S.W.2d 830 (Tenn. 1950). Promus Hotels, Inc. v. Ma rtin , Cole, Dando & Robe rtson, Inc. , No. W2002-01028-COA-R3-CV, 2003 Tenn. App. LEXI S 95, at *6-7 (Tenn. Ct. App. February 3, 2003). With these p

rinciple s in mind, we

will examine

the Membe

rship Agreement

first, followed by the Employment

Agreement. The Members Ag reement was entered into on April 30, 1998. It’s stated purpose i s t o “assure the closely -held nature of the LL C; to assure effective manageme nt of the Company in which th

e LL C is being formed to invest; an d to enter into an agreement on certain other matters.” The pertinent portions of the disputed Section 5 of the Members Agreemen t read as follows: 5. Termination of Employment (a) Definitions . F or th e p ur po se s o f t hi s S ec ti on 5, th e fol lo wi ng de fi ni ti on s a pp ly: (i) “Cause” shall mean (A) when an Em ployee Member engages in conduct wh ic h involves personal dishonesty, willful misconduct or a br each of a fiduciary duty involving persona

l profi t, or wh ich constitutes a criminal offense (other than traffic violations or similar offenses), the willful violation of any other law

or statute or habitually abuse s alcohol or d rugs andthe Board of Directors of the Company makes a good f

aith de termination that such conduct has occurre d and that such conduct materially impairs such person’s ability to carry

out its d uties to t he Company; or (B) when the Board of Directors of the Company makes a good faith determination, af te r providing notice to the employee in questio n and pro viding th e employ ee in question an oppor

tunity to meet with the Board of Directors of the Company concerning such conduct and to cure such conduct, that the person in question has breached any

mater ial pr ovision of

this Agr eement, or has fa

iled to perform in any material r

espect the duties as signed t o him by the Company consistent with the job responsibilities that such person has as of the date of this Agreement or a willful breac h of the policies described in Section 9(b) hereof.-6- . . . . (iv) “Termination for Cause ” shall me an if a pe rson’s employment relation ship with the Company is terminated by the Company for Cause. (b) Option to Purcha se In the event the employme nt of an Employee Me

mber with the Company termin at es (such Employee Member being hereinafter c alled the “Terminating M ember,” which defined term includes, where applicable, the personal representativeof the Employee Me mber, in the event of his death, and permitted Tran sferees), the L

LC sha ll have the option to

purchas e, all of

the Term

inati n g Member’s In terests. Such option shall be e

xercisab le in the ma

nner and upon th e terms specified in Section 6.

(c) Purchase

Price . The Purchase Price for L LC Inte rests purchased by

the LL C pursuant to Section 5 s hall be determined under Section 6 usinga value f or such L LC I nterest equal to: (I ) in the c ase of a terminat ion for Ca

use, an a mount equal t o the Terminated

Member’s Cap ital Acco unt; and (ii) in all other cases, the Fair Market Value (as hereinafter def

ined).

Section11 of

the Members Agreement contains the following two subsections relevant to the current dispute: (f) Complete

Agreement . This Ag

reemen t, the app endicesand exhibit s annexed h ereto and agre ements, instruments, documents, schedules and certificates ref er red to herei n contain the entire agreement among the p arties with respect to the transactions contem plated herein, when tak en toge ther with the L LC Ag reemen t and th e Investment Agreement.

. . . . (j) Arbitration . Any

controve rsy or claim arising out of

or rela ting to th is Agre ement,
or the breach

thereof, shall be settled

by arbitration in Chicag o, Illinois, in accordance withthe rules then in effect of the American Arbitration Association, and judgment upon the award rendered may be entered in any

court having jurisdiction thereof.

The Employ

ment Ag reemen t w as entered i nto by

the part ies on May

1, 1998. Th

is Agreement terminated

the agreement that Mr. Erwin was working under with Moon Products and set a term of employme

ntfrom May 1, 1998 to April 30, 1998. It contains no arbitration or any other dispute resolution clause. It has its own section concerning termination of employment, and a s stated above specific ally

incorpor ates the non-comp ete portion of the Members Agreement, but makes no other mention of any othe r part of that agreement.-7-

We find that t

he Membe

rs A greement quoted above is a separ ate agreement from the Employment

Agreement. The Members Agreement contains an integ

ration c lause tha

t specifi cally mentions other documents including the LL C Agreement

and the Investment Ag

reement, but

does notmention the

Employ ment Ag reemen t. We must give this clause its stated effect. Section 5 of the Members Agreement is used by Moon Products to reach the arbitration clause in Section 11 by arguing that the d

efinition of cause containe d in Sectio n 5 was the basis for the termination of Mr. Erwin’s em ployment. We cannot ag ree. Section 5 presents definitions “for purposes of this Section.” (emphasis added). T he p urpose of Section 5 is not to define the terms of Mr. Erwin’s employment

or the te rmination thereof . The pla in purpose

of Section 5 is to define the rights and responsibilities of the me mbers should Mr. Er

win be no l onger

employ ed by Moon Produ cts in regards to the purchase of Mr. Erwin’s interest in the L LC by the remai ning members. The definition of “cau se” cont ained in Section 5 is sp ecifica lly a pplied in Section 5 to

determine the price that the remaining members w ould pay to buy out Mr. Er

win’s inte rest in the compa

ny - in the ca se of a termination for cause, an amount equal to Mr. Erwin’s Capital Account and in other cases, the fair mar ket value of Mr. Er

win’s inte rest.

As for th e Em ploy

ment Contr

act, it do es not expr

essly or implied

ly in corpora te the who le of the Membership Agreement. The only mention of the Mem bers Agreement to be found in the Employ ment Ag reemen t is found in

Section 6 o f that Ag

reemen t which sta

tes: Non-Competitive Clause . The provisions of Section 8 of the Members Agreement among Moon Inve stors, L

LC, Em ploy ee, Compa

ny a nd othersare inc orporat

ed here in by refer ence asif fully set forth here

in. As stated a

bove, it is not for this Court to make a contract for the parties, but we ar e to enforce the contract as it is written. Furthermore, “ we of course do not determine what the state of mind was of the part ies at the time the c ontract

was exec uted but r

ather wh at their intention w as as a ctually embodied and expressed in the instrument as written.” Petty v. Sloan , 277 S.W.2d 355, 360 (Tenn. 1955). We conclude that the Members Agreeme nt and the Employment Ag reement are not

part of the same transaction. The record shows that the two ag reements were

signed on separ ate occ asions. They deal with different subject matter. The Members Agreeme nt contains an integration

clause that makes specific

refer ence to other documents but does not include the Employment Agr eement. The Employment

Agree ment expre ssly

incorpor ates the n on-compete provision of the Members Agree ment, butno other portions of that agreement. We have found tha t Section 5 of the Members Agreement

l imits its de finitions to “this Section.” Thus, we find that the two agreements are separa te and distinct agreements and therefor e, the arbitration clause found in t he Members Agree ment does not apply

to the Empl oym

ent Agr eement.-8- Conclusion For the foregoing reasons, we affirm the co urt below in i ts denial o f Moon Prod ucts’ moti on to compel arbitration and remand this case for fur ther pro ceeding s consiste

nt with this opinion. Co sts of this appeal are taxed to Moon Products an d i ts su re ty f or wh ic h e xe cu ti on ma y is su e i f n ec es sa ry.

___________________________________ ALAN E. HI

GHERS, JUDGE