Opinion ID: 1780860
Heading Depth: 2
Heading Rank: 3

Heading: was the waiver of punitive damages unconscionable?

Text: ¶ 80. Because the AAA should have the opportunity to find that Mr. Gatlin does indeed merit a hardship diminution or waiver of his fees, such that they would not be unconscionable, it thus is necessary to address the additional contention that the parties' mutual waiver of punitive damages was unconscionable in itself. ¶ 81. The Agreement provided, under its arbitration clause, that [t]he arbitrators will have the authority to award actual money damages as provided in Section 15..., specific performance, and temporary injunctive relief, but the arbitrators shall not have the authority to award exemplary or punitive damages, and the parties expressly waive any claimed right to have such damages. Section 15 of the contract, cited in the arbitration clause, reads as follows: 15. LIMITATION OF DAMAGES. Sanderson will not be responsible for (i) damage or loss to the Grower or to any of the Grower's property; (ii) loss to the Grower for services rendered, or (iii) damage or loss to Grower resulting from Sanderson's failure or delay in the fulfillment or performance of this Agreement if any such loss or damages is caused, directly or indirectly, (x) by circumstances beyond the control of Sanderson... or (y) by the Grower's negligence. Sanderson will not be liable to Grower for, and Grower, as a part of the bargain of this Agreement, waives claims against Sanderson for punitive and exemplary damages. For any claim by Grower against Sanderson arising out of or relating to the terms of this Agreement, Sanderson will be liable only for contract damages and other damages relating directly to the breach, provided that such other damages are proved by clear and convincing evidence. For any claim by Grower against Sanderson that is not arising out of or relating to the terms of this Agreement, Sanderson will be liable for actual damages proximately caused by any wrongful conduct. Grower's liability to Sanderson for claims arising under or relating to this agreement will be limited to damages specifically set forth herein. For any claim by Sanderson against Grower that is not arising out of or relating to this Agreement, Grower will be liable for actual damages proximately caused by any wrongful conduct. ¶ 82. The Gatlins argue that arbitration must provide all of the types of relief that would otherwise be available in court. Cole, 105 F.3d at 1482. They cite the U.S. Supreme Court for the already-mentioned provision that [b]y agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute; it only submits to their resolution in an arbitral, rather than a judicial, forum. Mitsubishi 473 U.S. at 628, 105 S.Ct. 3346. ¶ 83. Sanderson Farms distinguishes the argument from Mitsubishi as relevant only where a statutory claim to punitive damages exists. It argues that, since there is no right to punitive damages in Mississippi, it cannot be unconscionable for Gatlin and Sanderson Farms mutually to waive the pursuit of punitive damages. See Choctaw Maid Farms, Inc. v. Hailey, 822 So.2d 911, 923 (Miss.2002) (no right to punitive damages). It further cites a recent federal district court decision which followed the Third Circuit in holding that a contractual waiver of punitive damages is irrelevant to the issue of whether the plaintiff's claims should be arbitrated. Herrington v. Union Planters Bank N.A., 113 F.Supp.2d 1026, 1032 (S.D.Miss.2000) (quoting Great W. Mortgage Corp. v. Peacock, 110 F.3d 222, 232 (3d Cir.1997)). The Third Circuit's reasoning is as follows: The availability of punitive damages is not relevant to the nature of the forum in which the complaint will be heard. Thus, availability of punitive damages cannot enter into a decision to compel arbitration. [The New Jersey Law Against Discrimination] provides that a victim of unlawful discrimination may be awarded punitive damages, but the issue of whether this right has been waived is separate and apart from the issue of whether an employee has agreed to an arbitral forum, and hence, is for the arbitrator to decide. Peacock, 110 F.3d at 232 (citations omitted). This reasoning is not persuasive. Whether a party has bound itself to unconscionable terms is relevant to the validity of the arbitration contract under § 2 of the FAA. ¶ 84. The Fifth Circuit has recently issued an opinion which, while not directly addressing the issue at hand, seems more persuasive, as well as suggesting that the above argument in Peacock has been implicitly overruled: The circuit courts are split on whether the enforceability of an arbitration clause should be adjudicated before arbitration when a party contends that public policy prevents the clause's waiver of certain remedies. Although the question is close, [citations to Peacock and other cases omitted], we conclude that appellate jurisdiction exists because Investment Partners seeks to void the entire arbitration clause on public policy grounds, albeit by means of attacking the remedy provision, and the Supreme Court disposed of a similar argument, without submitting the issue first to the arbitrators, in Green Tree Financial Corp. v. Randolph, 531 U.S. 79, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000). . . . . [P]unitive damages are awarded under notoriously open-ended legal standards and a broadly defined constitutional limit concerning the amount awarded. Treble damages, however, represent a mere mathematical expansion of the actual damages calculated by the arbitrator. While private parties might well exclude common law punitive damages, with all their uncertainty, from the arbitrator's authority, the riskiness of committing antitrust damages to the arbitrator is much smaller. Inv. Partners, L.P., v. Glamour Shots Licensing, Inc., 298 F.3d 314, 316, 317-18 (5th Cir.2002) (emphasis added). Apart from the persuasiveness of considering unconscionability up front, the Fifth Circuit's remarks on the motives for excluding punitive damages are also persuasive. It is not obviously contrary to sound business sense that parties would seek to avoid the specter of punitive damages. ¶ 85. The Supreme Court of Alabama has recently considered the waiver of punitive damages in an arbitration contract and found it unconscionable. Ex parte Thicklin, 824 So.2d 723, 733 (Ala.2002). However, the Thicklin decision was predicated upon state-law grounds that have no obvious parallel in Mississippi law or jurisprudence. I am not willing to interpret our Legislature as having established a public policy, favoring punitive damages, of such force as to negate private parties' efforts to mutually waive the opportunity to seek such damages from each other. Any such public policy limiting the freedom of contract should be announced by the Legislature in no uncertain terms. The present Agreement's arbitration clause, as opposed to Section 15 of the Agreement, creates a mutual waiver of punitive damages. Thus it is unnecessary to consider the situation in which the drafter of the contract immunizes itself from punitive damages while retaining for itself the option of seeking such damages. [16] ¶ 86. I would hold that parties are free to contract with each other to renounce any claim to punitive damages against each other. The claim of that clause's substantive unconscionability is therefore without merit. [17]