Opinion ID: 2642614
Heading Depth: 2
Heading Rank: 1

Heading: Bailey Brake’s Direct Appeal

Text: ¶12. As an initial matter, the plaintiffs attempt to persuade this Court that the contract contemplated an appraisal rather than arbitration. Citing IP Timberlands Operating Co. v. 5 Denmiss Corp., 726 So. 2d 96 (Miss. 1998), the plaintiffs claim that the arbitration provision of the Buy-Sell Stock Restriction Agreement simply established a valuation method and was not intended to result in a final, binding judgment. Therefore, according to the plaintiffs, the decision to adopt the valuation of the arbitrators was wholly within the chancellor’s discretion. ¶13. As the defendant correctly notes, in IP Timberlands, 726 So. 2d 96, this Court rejected the same argument that the plaintiffs now make. The contract in IP Timberlands called for a price to be fixed by “arbitrators.” Id. at 104. This Court explained that the terms “arbitration” and “appraisal” have distinct, well-defined meanings, and that the parties, described as “knowledgeable and experienced timber companies,” could have used the term “appraisers” had they intended an appraisal rather than binding arbitration. Id. at 106-07. The defendant also notes that, until now, the plaintiffs persistently pursued arbitration of their claims, not appraisement. Given the plaintiffs’ repeated pleas in the chancery court for arbitration, their claim is even less persuasive than the similar argument rejected in IP Timberlands. ¶14. Additionally, the plaintiffs have never argued that the arbitration provision was invalid under the law of contracts (e.g., that the arbitration provision was a result of unequal bargaining power). See Adams Cmty. Care Center, LLC v. Reed, 37 So. 3d 1155, 1158 (Miss. 2010) (“To determine whether there is a valid arbitration agreement, we apply the law of contracts.”) (citation omitted)); Marcoin, Inc. v. Hammond, 368 So. 2d 1257, 1259 (Miss. 1979) (“Where there is grossly disproportionate bargaining power, the principle of freedom to contract is nonexistent and unilateral terms result.”) (citation omitted)). Because the 6 valuation was an arbitration award, as contemplated by the legally valid and binding contract, it is binding on the parties absent very narrow circumstances which are prescribed by statute. Margerum v. Bud’s Mobile Homes, Inc., 823 So. 2d 1167, 1170 (Miss. 2002) (quoting Hutto v. Jordan, 204 Miss. 30, 39, 36 So. 2d 809, 810 (1948)); Miss. Code Ann. § 11-15-23 (Rev. 2004). This Court has long acknowledged that arbitration “might proceed altogether on views of what was right and just between the parties without following either the rules that would govern a court of law or equity in the circumstances.” Craig v. Barber, 524 So. 2d 974, 977 (Miss. 1988) (quoting Hutto, 36 So. 2d at 811; Jenkins v. Meagher, 46 Miss. 84 (1871)). Thus, when competent and fully informed parties expressly contract to arbitrate their disputes, their rights are “narrower than in judicial trials, for there is no review or correction of errors of the judgment, either upon the law or facts . . . .” Hutto, 36 So. 2d at 811 (quoting Jenkins, 46 Miss. 84). See also Adams Cmty. Care Center, 37 So. 3d at 1158; Marcoin, Inc, 368 So. 2d at 1259. ¶15. In this case, the chancellor held, without explanation, that the award was reached by “undue means,” and that the decision was incomplete as contemplated by Mississippi Code Section 11-15-23. The relevant portions of this statute provide: Any party complaining of an award may move the court to vacate the same upon any of the following grounds: (a) That such award was procured by corruption, fraud, or undue means; .... (d) That the arbitrators exceeded their powers, or that they so imperfectly executed them that a mutual, final, and definite award on the subject matter was not made. 7 Miss. Code Ann. §11-15-23 (Rev. 2004). Thus, although undue means and unresolved issues can be valid reasons for setting aside an arbitration award, the court’s order provided no basis for these findings. The order’s only analysis in this regard is as follows: The Court ordered that the stocks of the Plaintiffs be valuated by two arbiters. The two arbiters have submitted an incomplete decision on the valuation. Documents on which to base the valuation and submitted to the arbiters conflicted. The Court finds that the conflicting documents submitted for the valuation of the shares indicate the valuation to have been based on undue means. The remainder of the order outlined the chancellor’s valuation assessment, but did not articulate why the arbitrators’ decision was incomplete or what “undue means” were employed to procure the award. ¶16. The arbitrators’ written decision detailed the evidentiary basis and reasoning behind the decision. They concluded that one of the two appraisals submitted by the parties was more reliable, discounted the stock’s value based on limited marketability and minority interest, found that, on the date in question, there were sixteen stockholders, and followed the court’s previous order to deduct “dues” of $21,900 from each plaintiff’s share. Although the chancellor ultimately disagreed with all these findings, he failed to articulate any “undue means” utilized or any specific deficiencies with the arbitrators’ thorough analysis and valuation methods. ¶17. As for the chancellor’s finding that the arbitrators submitted an “incomplete decision,” we can but guess that he was referring to the arbitrators’ disagreement and indecision over what amounts of deductions were due to “assessments.” Yet, even if we did make such an 8 assumption, the final order explicitly stated that “[t]he Court will allow the Corporation to withdraw its submission of assessments.” With no dispute over assessments, nothing about the arbitrators’ decision was “incomplete.” ¶18. Bailey Brake gives several alternative reasons for reversal, but none is as compelling as the chancellor’s having exceeded the narrow authority that permits judicial review of arbitration awards. The chancellor’s order disregarded longstanding Mississippi jurisprudence that “every reasonable presumption will be indulged in favor of the validity of arbitration proceedings.” Craig, 524 So. 2d at 977 (quoting Hutto, 36 So. 2d at 811). We find that the chancellor incorrectly substituted his own judgment for the arbitration award and treated it as if it was a recommendation from a special master. Thus the chancellor erred in setting aside the arbitration award, and the arbitrators’ decision must be reinstated.