Opinion ID: 1780860
Heading Depth: 2
Heading Rank: 1

Heading: did the circuit court err in denying sanderson farms' motion to dismiss?

Text: ¶ 16. The Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq., provides that an agreement to submit any controversy to arbitration, where the underlying transaction involves interstate commerce, is enforceable subject only to any contract defense recognized under state law. The Federal Arbitration Act states, in relevant part, 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 (emphasis added). The FAA allows state courts to deny compulsion of arbitration upon a finding that law or equity demands revocation of the contract. [S]tate law, whether of legislative or judicial origin, is applicable if that law arose to govern issues concerning the validity, revocability, and enforceability of contracts generally. Perry v. Thomas, 482 U.S. 483, 492, 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987). Furthermore, Section 3 of the FAA provides a default exception whereby an individual is precluded from seeking enforcement of an arbitration provision if that individual is in default in proceeding with such arbitration. 9 U.S.C. § 3. ¶ 17. This Court in East Ford, summarized the policies of the FAA: The Federal Arbitration Act provides that arbitration agreements 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. The Act establishes a `federal policy favoring arbitration,'... requiring that `we rigorously enforce agreements to arbitrate.' Shearson/Am. Exp., Inc. v. McMahon, 482 U.S. 220, 226, 107 S.Ct. 2332, 2337, 96 L.Ed.2d 185 (1987) (citations omitted). Absent a well-founded claim that an arbitration agreement resulted from the sort of fraud or excessive economic power that `would provide grounds for the revocation of any contract,' the Arbitration Act `provides no basis for disfavoring agreements to arbitrate statutory claims by skewing the otherwise hospitable inquiry into arbitrability.' Id. (citations omitted). [Q]uestions of arbitrability must be addressed with a healthy regard for the federal policy favoring arbitration ... The Arbitration Act establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability. Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). This Court has adopted this preference for arbitration. See Smith Barney, Inc. v. Henry, 775 So.2d 722 (Miss.2001); I.P. Timberlands Operating Co. v. Denmiss Corp., 726 So.2d 96, 103-104 (Miss.1998); Hutto v. Jordan, 204 Miss. 30, 36 So.2d 809, 812 (1948). It has been recognized that in order to determine whether legal constraints exist which would preclude arbitration, courts generally ... should apply ordinary state-law principles that govern the formation of contracts. Bank One, N.A. v. Coates, 125 F.Supp.2d 819, 827 (S.D.Miss.2001) (quoting Webb v. Investacorp, Inc., 89 F.3d 252, 257 (5th Cir. 1996)). However, [c]ourts may not ... invalidate arbitration agreements under state laws applicable only to arbitration provisions. Doctor's Assocs., Inc. v. Casaroto, 517 U.S. at 687[702], 116 S.Ct. at 1665 (quoting Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 281, 115 S.Ct., 834, 843, 130 L.Ed.2d 753 (1995); Perry v. Thomas, 482 U.S. 483, 492 n. 9, 107 S.Ct. 2520, 2527 n. 9, 96 L.Ed.2d 426 (1987)). In other words, the usual defenses to a contract such as fraud, unconscionability, duress, and lack of consideration may be applied to invalidate an arbitration agreement, so long as the law under which the provision is invalidated is not applicable only to the arbitration provisions. 826 So.2d at 713-14.
¶ 18. Sanderson Farms argues that it did not breach the arbitration provision. It argues that its interpretation of the cost splitting portion of the provision is correct. Sanderson Farms asserts that its denial of payment of one-half the fees was not a breach of the arbitration agreement. Roy argues that indeed Sanderson Farms did breach the arbitration provision; and therefore, it is not entitled to its protections. [4] The arbitration provision provided in pertinent part that: The cost of such arbitration will be divided among the parties to the arbitration. Each party will bear the cost of their own expenses and attorney's fees, (emphasis added). The broiler contract does not define cost or expenses. Sanderson Farms, the drafter of the broiler contract, had the opportunity to clarify the meaning of these terms but did not. ¶ 19. When terms in a contract are not defined, we give the words in the document their commonly accepted meaning. Parkerson v. Smith, 817 So.2d 529, 541 (Miss.2002). Cost is defined as among or equivalent paid or charged for something; the outlay or expenditure (as of effort or sacrifice) made to achieve an object; loss or penalty incurred in gaining something; and expenses incurred in litigation. Webster's New Collegiate Dictionary 255 (1979). Also, expense is defined as the act or practice of expending money; the act or process of using up; something expended to secure a benefit or bring about a result. Id. at 399. Under these definitions, the filing and administrative fees charged by the American Arbitration Association are costs which by contract Sanderson Farms agreed to divide equally with Roy. Even applying the legal definitions to these terms leads to the same result. Cost is defined as the amount paid or charged for something; price or expenditure. Black's Law Dictionary 282 (7th ed.2000). Expense is defined as an expenditure of money, time, labor, or resources to accomplish a result. Id. at 473. Administration fees and filing fees are encompassed in the definition of cost for which Sanderson Farms contracted to divide equally among the parties. Additionally, if Sanderson Farms meant cost to include filing fees and administrative fees, then it could have specifically stated that in its contract. Furthermore, any ambiguity as to the definition of cost and expense are to be resolved in favor of Roy, since Sanderson Farms as the contracting party had the duty to make such terms unambiguous. Miss. Transp. Comm'n v. Ronald Adams Contractor, Inc., 753 So.2d 1077, 1085 (Miss.2000) (collecting authorities). ¶ 20. Sanderson Farms argues that what it meant by cost was actual costs of arbitration; specifically the arbitrator's compensation and expenses, reporting service costs, and hearing fees. We have repeatedly stated that our concern is not nearly so much what the parties may have intended as it is what they said, for the words employed are by far the best resource for ascertaining intent and assigning meaning with fairness and accuracy. IP Timberlands Operating Co. v. Denmiss Corp., 726 So.2d 96, 104 (Miss.1998) (quoting Whittington v. Whittington, 608 So.2d 1274, 1278 (Miss.1992); UHS-Qualicare v. Gulf Coast Cmty. Hosp., Inc., 525 So.2d 746, 754 (Miss.1987)). Since we are not concerned with what Sanderson Farms may have meant, but didn't say, we find this argument has no merit. ¶ 21. By refusing to pay one-half of the $2,750 cost which amounted to filing and administrative fees and/or the $8,250 cost of arbitration fees and compensation, Sanderson Farms breached the arbitration provision. Sanderson Farms' breach can be used to support the defense of waiver as will be discussed below.
¶ 22. Sanderson Farms argues that it at no time waived its right to arbitrate. It argues that since it did not breach the arbitration provision, it can not be found to have waived its right to arbitration. Roy argues that Sanderson Farms' breach of the arbitration provision supports a finding of waiver. He argues that since Sanderson Farms waived its right to arbitrate, it is not entitled to the provision's protection. ¶ 23. We recognize that there are strong federal policies in favor of arbitration and that waiver is not a favored finding. Russell v. Performance Toyota, Inc., 826 So.2d 719, 724 (Miss.2002) (collecting authorities). However, it is simple contract law that a party may waive the protections of any provision of a contract. [A] party to a contract may by words or conduct waive a right to which he would otherwise have been entitled Scott Addison Constr., Inc. v. Lauderdale County Sch. Sys., 789 So.2d 771, 775 (Miss.2001) (quoting Canizaro v. Mobile Communications Corp., 655 So.2d 25, 29 (Miss.1995) (citations omitted)). [W]aiver may be express or it may be implied when the party actively participates in litigation or acts inconsistently with its rights to proceed with arbitration. Siam Feather & Forest Prods. Co. v. Midwest Feather Co., 503 F.Supp. 239, 242 (S.D.Ohio 1980) (citing American Locomotive Co. v. Gyro Process Co., 185 F.2d 316 (6th Cir.1950), aff'd mem. 663 F.2d 1073 (6th Cir.1981)). See Cornell & Co. v. Barber & Ross Co., 360 F.2d 512, 513 (D.C.Cir.1966); Cox v. Howard Weil, Labouisse, Friedrichs, Inc., 619 So.2d 908, 914 (Miss.1993). [5] [W]aiver may be inferred from the actions and conduct of the parties. Brent Towing Co., Inc. v. Scott Petroleum Corp., 735 So.2d 355, 359 (Miss.1999) (quoting Mariana v. Hennington, 229 Miss. 212, 226, 90 So.2d 356, 362 (1956)). ¶ 24. Sanderson Farms waived its right to arbitration by refusing to pay its one-half of the costs associated with filing and administrative fees and/or the additional charges presented for payment one month before the scheduled arbitration hearing. This refusal amounts to an act inconsistent with the right to arbitrate. By waiving its right to arbitrate, Sanderson Farms has relinquished the right to seek the protections of the arbitration provision in the broiler contract. ¶ 25. Furthermore, the FAA itself provides that a party in default essentially waives his right or is precluded from invoking the arbitration agreement. Section 3 of the FAA provides that a party may compel arbitration and stay trial court proceedings if he is not in default in proceeding with such arbitration. 9 U.S.C. § 3. As discussed above, Sanderson Farms breached the arbitration agreement and is thereby in default. So even under the FAA's own rules, Sanderson Farms is precluded from seeking the protections of the provision.
¶ 26. Since we have already found Sanderson Farms in default under the arbitration provision and further found such default to support the defense of waiver, we need not address this issue.
¶ 27. Sanderson Farms argues that if this Court finds portions of the arbitration provision unenforceable due to unconscionability or waiver, then those portions should be severed from the provision and the rest of the arbitration provision or the broiler contract should be allowed to stand. Since we have already found that Sanderson Farms breached the arbitration agreement and thereby waived its protections, the only just outcome is to strike the entire arbitration agreement from the contract. We do however add that not only did Sanderson Farms default and waive the application of the arbitration provision, but also other provisions which are referenced therein which assert to limit damages.