Opinion ID: 1906999
Heading Depth: 2
Heading Rank: 1

Heading: Did the circuit court err in denying the Bank's motion to compel arbitration?

Text: ¶ 8. Our law requires this Court to accept the plain meaning of a contract as the intent of the parties if no ambiguity exists. I.P. Timberlands Operating Co. v. Denmiss Corp., 726 So.2d 96, 108 (Miss.1998). Furthermore, [c]ontracts are solemn obligations and the Court must give them effect as written. Id. We agree with the U.S. Supreme Court that, we do not override the clear intent of the parties, or reach a result inconsistent with the plain text of the contract, simply because the policy favoring arbitration is implicated. EEOC v. Waffle House, Inc., 534 U.S. 279, 294, 122 S.Ct. 754, 151 L.Ed.2d 755 (2002). Here, the language of the Broiler Growing Agreement does not include a single word or phrase which expresses an intent by the parties that the arbitration clause should be applied retroactively to conduct occurring prior to its execution. Au contraire, the plain language states otherwise. ¶ 9. The first paragraph of the Broiler Growing Agreement reads as follows: Effective for broiler flocks placed on GROWER'S farm on or after 2-5-1997 or after execution of this Agreement by GROWER and COMPANY whichever occurs later. (emphasis added). The Broiler Growing Agreement was executed by the grower, Wedgeworth, and the company, Rogers, on February 5, 1997. The Bank was neither a party to the contract, nor a signatory to the contract or any other related contract on that date. Furthermore, the plain language of section six clearly reads as follows: for a term of three years. [2] ¶ 10. The three-year term Broiler Growing Agreement contains no language revealing an intent by the parties to suggest, much less require, retroactive application of the arbitration clause to putative claims which arose prior to the date of the agreement. Of significance is the uncontested fact that during the years preceding and following the execution of the Broiler Growing Agreement, the Bank and Wedgeworth entered into a series of other contracts, not one of which contained an arbitration clause. This Court remains unconvinced, as the law requires, that Wedgeworth knowingly, intelligently, and voluntarily waived his fundamental right to a jury trial, when all contracts in effect at the time of the alleged tortious conduct, regardless of whether the contracts were between the Bank and Wedgeworth or Rogers and Wedgeworth, failed to contain arbitration clauses. See D.H. Overmyer Co. v. Frick Co., 405 U.S. 174, 184, 92 S.Ct. 775, 31 L.Ed.2d 124 (1972). The plain text of the contract between Rogers and Wedgeworth, upon which the Bank relies, contains no language evidencing Wedgeworth's intent to waive his fundamental right to a jury trial in a dispute with the Bank or Rogers for prior alleged wrongdoing. ¶ 11. Wedgeworth alleges that Rogers and/or the Bank tortiously interfered with a proposed sale of Wedgeworth's farm and forced and coerced Wedgeworth to make upgrades to his farm. The events as alleged in the complaint occurred in 1995-1996 when the contractual relationships between Rogers and Wedgeworth, and separately between Wedgeworth and the Bank were governed by contracts that did not have arbitration clauses. The U.S. Supreme Court has stated that, arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed to submit. AT & T Techs., Inc. v. Commun. Workers of Am., 475 U.S. 643, 648, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986). The Supreme Court has also said that,  § 4 of the FAA does not confer a right to compel arbitration of any dispute at any time; it confers only the right to obtain an order directing that ` arbitration proceed in the manner provided for in [the parties'] agreement. ' Volt Info. Scis., Inc. v. Bd. of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 474-75, 109 S.Ct. 1248, 1253, 103 L.Ed.2d 488 (1989) (quoting 9 U.S.C. § 4) (emphasis not in statute). Neither the February 5, 1997, agreement, nor the other agreements, provide for the arbitration of events which occurred before the contract sub judice was executed. ¶ 12. This appears to be the first time that this Court has considered the retroactive application of an arbitration clause. Prudence requires this Court to consider the precedents of other jurisdictions before undertaking such an invasive intrusion into the Bill of Rights and the Mississippi Constitution, by denying a party their constitutional right to a jury trial, absent the party voluntarily contracting away that right. ¶ 13. The text of the arbitration clause is narrow and limited in scope. The Fifth Circuit has made a distinction between narrow and broad arbitration clauses, classifying a clause as narrow when it limits arbitration to claims which arise under the contract. Pennzoil Exploration & Prod. Co. v. Ramco Energy Ltd., 139 F.3d 1061, 1067 (5th Cir.1998). The arbitration clause in the case sub judice is narrow, in that it requires arbitration of disputes or controversies arising under this agreement.  (emphasis added). This arbitration clause expressly states and is focused only on those disputes arising under the February 5, 1997, Broiler Growing Agreement. It does not include broader language that might be construed or interpreted to cover earlier disputes between the parties. See Sec. Watch, Inc. v. Sentinel Sys., Inc., 176 F.3d 369, 374 (6th Cir.1999) (where the court stated that, [h]ad the parties intended to apply the new ADR processes to disputes arising under the previous contracts, we believe they would have done so explicitly.). Furthermore, to interpret the arbitration clause to apply retroactively would cause Plaintiff to forego [his] vested right to litigate an accrued claim. Coffman v. Provost  Umphrey Law Firm, L.L.P., 161 F.Supp.2d 720, 727 (E.D.Tex. 2001), aff'd, 33 Fed.Appx. 705, 2002 WL 433003 (5th Cir.2002). ¶ 14. The Sixth Circuit further held in Security Watch that an arbitration clause in a 1994 dealer agreement did not cover disputes relating to products shipped under earlier agreements that did not contain arbitration provisions. 176 F.3d 369. In concluding that previous shipments were not included in the scope of the arbitration provision, the Sixth Circuit concluded that the scope of the arbitration provision did not extend over time. Id. at 372. The court found that the agreement specifically detailed the term of the agreement to be twelve months, and [did] not purport to reach disputes related to the pre-1994 agreement[s]. Id. at 372. The same can be said of the Broiler Growing Agreement here. It specifically provided for the effective dates of the agreement: beginning February 5, 1997 and extending for a term of three years; unless extended; no less, no more. Had the parties intended otherwise, they could easily have incorporated language to that effect. ¶ 15. Furthermore, the text of the arbitration clause reads it is effective, with respect to any controversy or dispute arising during the period of this agreement .... (Emphasis added). The period of this agreement is from February 5, 1997-February 5, 2000, as indicated by the plain unambiguous language of the contract and does not purport to extend to conduct which occurred prior to the execution of this agreement. ¶ 16. In Coffman, the district court held that claims arising while earlier agreements were in effect, which did not contain arbitration clauses, were not arbitrable, even though the most recent agreement contained an arbitration provision. In determining this, the court classified the arbitration clause as being narrow in scope. 161 F.Supp.2d at 725. ¶ 17. Here, the arbitration provision contained neither language that was broad enough to cover events which predated the contract's execution, nor language which would broaden its application by containing terms such as applies to all transactions occurring before or after execution or all transactions between us or all business with us. Where such a clause exists, a legal basis to apply the arbitration clause retroactively may exist. This is not the case here; however, as the arbitration clause referred to disputes or controversies arising under this agreement, and did not contain language or speak in terms of the parties' overall business relationship or overall business transactions. This narrow clause has a time specific limited scope, i.e., three years, and event specific limited scope, i.e. disputes or controversies arising under this agreement. Our law prohibits this Court from rewriting an unambiguous term of statement of intent and broadening an otherwise narrow arbitration clause, to grant nonnegotiated rights to one party, especially when the conduct predated the contract execution. ¶ 18. The Bank directs this Court to Beneficial National Bank, U.S.A. v. Payton, 214 F.Supp.2d 679 (S.D.Miss.2001), where the trial judge held that an arbitration provision was broad enough to apply retroactively to events which predated the amendment of the agreement. However, the arbitration provision in Payton is dissimilar to the provision presently before this Court and is therefore distinguishable. Furthermore, this Court cannot ignore the language of Payton stating that numerous courts have recognized the following: if [an] arbitration clause contains retroactive time-specific language, e.g., a phrase reading this agreement applies to all transactions occurring before or after this agreement, then [the court] may apply the arbitration provision to events relating to past events. Or, if the arbitration clause contains language stating that it applies to all transactions between us or all business with us, then [the court] may apply the arbitration clause retroactively. Id. at 688-89 (quoting Kenworth of Dothan, Inc. v. Bruner-Wells Trucking, Inc., 745 So.2d 271, 275 (Ala.1999) (internal footnote omitted)). No such language is found within the arbitration provision at issue here. ¶ 19. The dissent seeks refuge in the entire agreement clause to assert that the Broiler Growing Agreement governs disputes which arose while other prior non arbitrable contracts were in effect. The entire agreement clause in the Broiler Growing Agreement contained the following language: This Agreement constitutes the entire agreement between the parties hereto, replacing and superseding any and all prior oral or written agreements between the parties, and the same may not be altered, modified, in whole or in part, except in writing. This Agreement and all rights and obligations of the parties hereunder shall be governed under the laws of the State of Mississippi. This reliance is misplaced, because Wedgeworth has made no claim of breach of any contract, present or prior, between himself, Rogers, and the Bank. Indeed, his complaint does not allege non-performance or breach of any contract involving the Bank, and to succeed in his litigation, Wedgeworth is not required to show a breach of any contract. ¶ 20. The Sixth Circuit in Security Watch considered an entire agreement provision contained in a subsequently executed contract and found that it was inappropriate to read the merger clause as superseding the prior contracts and stated that, Merger clauses are routinely incorporated in agreements in order to signal to the courts that the parties agree that the contract is to be considered completely integrated. A completely integrated agreement must be interpreted on its face, and thus the purpose and effect of including a merger clause is to preclude the subsequent introduction of evidence of preliminary negotiations or of side agreements in a proceeding in which a court interprets the document. See 2 FARNSWORTH ON CONTRACTS § 7.3 at 215-25. 176 F.3d at 372. ¶ 21. Also, the court in Coffman found that the purpose of an integration clause is to trigger the parol evidence rule which precludes the enforcement of inconsistent or prior agreements in a finalized contract, and held that, In this case, the integration clause prevents provisions or obligations in the 1994 Partnership Agreement, the 1996 Partnership Agreement, or the 1996 Amendment No. 1 from being enforceable in the 1998 Partnership Agreement. However, the integration clause does not necessarily require the conclusion that Plaintiff's claims for breach of the 1994 and 1996 Partnership Agreements fall within the scope of the arbitration clause. 161 F.Supp.2d at 728. ¶ 22. Likewise, in the case sub judice, the integration clause prevents provisions or obligations in prior agreements from being enforceable in the February 1997 agreement, but it does not necessarily follow that it requires the conclusion that the plaintiff's claims which arose when other agreements were in effect, whether related or not to the prior broiler growing agreements, fall within the scope of an arbitration clause contained in a subsequently executed contract.
¶ 23. The arbitration clause does not cover events which precede the execution of the contract. In addition, the scope of the clause does not cover this dispute between Wedgeworth and the Bank. If the [arbitration] clause is narrow, the matter should not be referred to arbitration or the action stayed, unless the court determines that the dispute falls within the clause. Complaint of Hornbeck Offshore (1984) Corp., 981 F.2d 752, 754-55 (5th Cir.1993). The dispute in this case does not fall within the narrow language of the clause which states that only disputes arising under the agreement be arbitrated. The agreement is entitled, BROILER GROWING AGREEMENT and sets forth what the company agrees to do and what the grower agrees to do in terms of the broiler flocks that are placed on the grower's farm after a certain date and for a defined term of years. For example, the COMPANY agrees to [d]eliver a flock of baby chicks for GROWER to manage, care for and raise, and the GROWER agrees [t]o, properly house, care for, feed and administer medicine to the chickens.... The disputes relating to the alleged tortious conduct did not arise under this Broiler Growing Agreement. ¶ 24. As this Court has stated, [i]t is possible for the parties in the agreement to limit the scope of the arbitration in any way that is desired. Horne v. State Bldg. Comm'n, 222 Miss. 520, 76 So.2d 356, 359 (1954). The parties to the Broiler Growing Agreement limited the scope of the arbitration clause to: disputes arising under the agreement, which governed the Broiler Growing relationship between Rogers and Wedgeworth, and this Court should not rewrite and expand the Broiler Growing Agreement to govern relationships between Wedgeworth and the Bank when the Bank could have required a broad arbitration clause in its business relations with Wedgeworth, had it only chose to do so. ¶ 25. Wedgeworth's contractual relationship with the Bank was established and memorialized in six separate promissory notes, not one of which contained an arbitration clause. The Bank was engaged in business and contractual relationships with Wedgeworth throughout the time frame of the events complained, and at any time it could have insisted on including arbitration clauses as to all claims, but it did not.
¶ 26. Equitable estoppel is an extraordinary remedy and should only be invoked to prevent unconscionable results. Harrison Enters., Inc. v. Trilogy Commc'ns, Inc. 818 So.2d 1088, 1095 (Miss.2002). The doctrine of equitable estoppel should be applied cautiously and only when equity clearly requires it. Id. (quoting Bright v. Michel, 242 Miss. 738, 137 So.2d 155, 159 (1962)). ¶ 27. The dissent raises the doctrine of equitable estoppel as espoused in Grigson v. Creative Artists Agency, L.L.C., 210 F.3d 524 (5th Cir.2000), which although instructive, this Court is not bound to follow. Grigson discusses two scenarios where a party should be equitably estopped from denying an arbitration clause's applicability to a non-signatory. First, Grigson opines that equitable estoppel will allow a nonsignatory to compel arbitration, when the signatory to a written agreement containing an arbitration clause must rely on the terms of the written agreement in asserting its claims against a nonsignatory. Id. at 527. This situation is not before us, as Wedgeworth is not relying on the terms of the Broiler Growing Agreement in asserting his claims against the Bank. ¶ 28. Grigson next states that equitable estoppel will allow a nonsignatory to compel arbitration, when the signatory to the contract containing an arbitration clause raises allegations of substantially interdependent and concerted misconduct by both the nonsignatory and one or more of the signatories to the contract. Id. The dissent concludes that the Bank may compel arbitration because Wedgeworth raises allegations of substantially interdependent and concerted misconduct by both the non-signatory and one or more of the signatories to the contract. (¶ 48 infra). Therefore, our analysis will focus on the intertwined-claims test. ¶ 29. In Grigson the plaintiff's allegations were intertwined with, and dependent upon, the distribution agreement. Id. at 529 (emphasis added). Wedgeworth, however, does not rely upon the Broiler Growing Agreement in asserting his claims. Wedgeworth's claims, as discussed previously, are not even within the scope of the Broiler Growing Agreement. ¶ 30. Even though the plaintiff's allegations are not dependent upon an agreement, state law principles might provide for the arbitration of disputes between a nonsignatory and a signatory to a contract, where there are allegations of substantially interdependent and concerted misconduct. A non-signatory should have standing to compel arbitration where the non-signatory has a close legal relationship, such as, alter ego, parent/subsidiary, or agency relationship, with a signatory to the agreement. See Terminix Int'l, Inc. v. Rice, 904 So.2d 1051 (Miss.2004) quoting Washington Mut. Fin. Group, LLC v. Bailey, 364 F.3d 260, 267 (5th Cir.2004) (A nonsignatory party may be bound to an arbitration agreement if so dictated by the ordinary principles of contract and agency.). See also Sunkist Soft Drinks, Inc. v. Sunkist Growers, Inc., 10 F.3d 753, 757 (11th Cir.1993); J.J. Ryan & Sons, Inc. v. Rhone Poulenc Textile, S.A., 863 F.2d 315 (4th Cir.1988); Interocean Ship. Co. v. Nat'l Ship. & Trading Corp., 523 F.2d 527, 539 (2d Cir.1975). However, a third party who is a non-signatory to a contract should not be able to enforce an arbitration agreement, under the intertwined claims test, where there is no alter ego, parent/subsidiary, agency, or other form of close legal relationship alleged, and where the intertwined claims do not depend on the agreement, neither of which are present in this case. See Peach v. CIM Ins. Corp., 352 Ill.App.3d 691, 287 Ill.Dec. 701, 816 N.E.2d 668 (2004) (where the court held arbitration would not be compelled absent an agency relationship between a signatory and non-signatory). ¶ 31. Absent allegations of substantially interdependent and concerted misconduct between a non-signatory and a signatory who have a close legal relationship, the Mississippi law of equitable estoppel should first be examined to determine if conditions are present where equity should allow a non-signatory to compel arbitration. Other jurisdictions have declined to adopt the theory in situations similar to Grigson. See Ervin v. Nokia, Inc., 349 Ill.App.3d 508, 285 Ill.Dec. 714, 812 N.E.2d 534 (2004) (where the court declined to adopt the expanded interpretation of equitable estoppel). ¶ 32. Under Mississippi law, equitable estoppel exists where there is a(1) belief and reliance on some representation; (2) a change of position as a result thereof; and (3) detriment or prejudice caused by the change of position. Cothern v. Vickers, Inc., 759 So.2d 1241, 1249 (Miss.2000); Covington County v. Page, 456 So.2d 739, 741 (Miss.1984). ¶ 33. We must consider the traditional elements of equitable estoppel, as defined by this Court, before expanding its application to deny litigants their constitutional right to a jury trial. We are bound by our prior rulings which have defined equitable estoppel as follows: Equitable estoppel is `defined generally as the principle by which a party is precluded from denying any material fact, induced by his words or conduct upon which a person relied, whereby the person changed his position in such a way that injury would be suffered if such denial or contrary assertion was allowed.' Dubard v. Biloxi H.M.A., Inc., 778 So.2d 113, 114 (Miss.2000) (quoting Koval v. Koval, 576 So.2d 134, 137 (Miss.1991)). ¶ 34. The record before us fails to satisfy the requirements for the application of equitable estoppel as defined by our courts. It cannot be said that, when Wedgeworth signed the Broiler Growing Agreement with Rogers, the Bank (1) believed and relied on the representation (2) changed its position as a result of the Broiler Growing Agreement and finally that (3) it suffered detriment or prejudice as a result thereof. There is no proof that the Bank relied to its detriment that Wedgeworth would arbitrate any claim he had against the Bank. The absence of reliance is self evident by the Bank's failure to raise arbitration as an affirmative defense in its answer and then confirmed by its choice to litigate in court by invoking the jurisdiction of the court by filing its counterclaim, followed by discovery. ¶ 35. To expand the doctrine of equitable estoppel would unfairly deny Wedgeworth access to the courts and force him to arbitrate his claims against the Bank, in spite of the fact that the Bank was not a party to the Broiler Growing Agreement that Wedgeworth entered into with Rogers. ¶ 36. Equity comes to the aid of those who may not or can not protect themselves. Cole v. State, 608 So.2d 1313, 1324 (Miss.1992); Johnson v. Howell, 592 So.2d 998, 1001 (Miss.1991). The Bank had at least six opportunities to protect itself by inclusion of an arbitration clause in its contracts with Wedgeworth, as a result of its own business relationship with Wedgeworth. It chose to not do so and therefore should not be granted rights under a contract unrelated in scope or time to the events for which Wedgeworth makes claim.