Court Opinion

ID: 3182595
Source: CourtListenerOpinion
Date Created: 2016-03-03 22:23:02.204701+00
Date Added: 2024-06-11T14:35:42.675665
License: Public Domain

IN THE COURT OF APPEALS OF THE STATE OF MISSISSIPPI

                               NO. 2014-CA-01312-COA

BHARAT B. PATEL, NEW VISION BRANDON                                     APPELLANTS
PLAZA, LLC, AND JAGDISH A. BAROT

v.

BANCORPSOUTH BANK                                                          APPELLEE

DATE OF JUDGMENT:                        08/14/2014
TRIAL JUDGE:                             HON. THOMAS J. GARDNER III
COURT FROM WHICH APPEALED:               LEE COUNTY CIRCUIT COURT
ATTORNEYS FOR APPELLANTS:                B. WAYNE WILLIAMS
                                         LAWRENCE M. COCO III
                                         NORMA CARR RUFF
                                         DAN W. WEBB
                                         R. PATRICK MCCRANEY
                                         ANDREW WALKER ALDERMAN
ATTORNEYS FOR APPELLEE:                  LES ALVIS
                                         J. CHASE BRYAN
                                         KEVIN B. SMITH
NATURE OF THE CASE:                      CIVIL - CONTRACT
TRIAL COURT DISPOSITION:                 NEW VISION AND BAROT’S MOTION TO
                                         DISMISS AND COMPEL ARBITRATION
                                         DENIED; PATEL’S MOTION TO DISMISS
                                         AND TRANSFER DENIED
DISPOSITION:                             REVERSED, RENDERED, AND
                                         REMANDED – 03/03/2016
MOTION FOR REHEARING FILED:
MANDATE ISSUED:

      EN BANC.

      IRVING, P. J., FOR THE COURT:

¶1.    Bharat B. Patel, New Vision Brandon Plaza LLC, and Jagdish A. Barot (collectively

“the Defendants,” unless the context dictates otherwise) appeal a Lee County Circuit Court
judgment in favor of BancorpSouth that denied Patel’s motion to compel arbitration.

Finding that the circuit court misapplied the law, we reverse and render the judgment of the

circuit court and remand this case with directions to dismiss BancorpSouth’s lawsuit, and

send the case to binding arbitration.

           PROCEDURAL HISTORY AND STATEMENT OF THE FACTS

¶2.    In 2009, BancorpSouth held a deed of trust on a parcel of undeveloped commercial

property of approximately thirty-five acres located in Rankin County, Mississippi. In March

2009, the property was facing foreclosure. The Defendants purchased the property before

the foreclosure sale, but would later claim that they had been fraudulently induced to

purchase it based on a bid amount, set by BancorpSouth, of $5.3 million and that

BancorpSouth had failed to disclose that the property contained wetlands that required

remediation.

¶3.    At the time of purchase, New Vision executed a promissory note (the Note) and a deed

of trust. By separate, individual agreements (the Guaranties), Barot and Patel guaranteed

payment of the Note. The Note and the Guaranties contained similar, but not identical,

arbitration provisions. Section 29 of the Note states:

       Any and all claims, disputes[,] or controversies . . . by either Borrower or
       Lender . . . arising from or relating to (a) this Note . . . shall be resolved upon
       the election of Borrower or Lender or said third parties, by binding arbitration
       pursuant to this Section 29 and the code of procedure of the entity which is the
       Arbitration Organization at the time the Claim is filed.

(Emphasis in original). Section 22 of the Guaranties similarly states:

                                               2
       Any claim, dispute[,] or controversy . . . by either Borrower, Guarantor[,] or
       Bank . . . arising from or relating to (a) any of the Obligations [of the
       Guaranty] . . . SHALL BE resolved upon the election of Guarantor or Bank .
       . . by BINDING ARBITRATION pursuant to this Arbitration Provision and
       the Code of Procedure of the Arbitration Organization in effect at the time the
       Claim is filed and all Claims shall be filed at any Arbitration Organization
       office.

(Emphasis in original).

¶4.    On September 5, 2012, BancorpSouth filed suit against the Defendants in the Lee

County Circuit Court (the Lee County Action) to collect the unpaid balance of the loan. On

September 20, 2012, before answering the Lee County Action,1 the Defendants filed a

lawsuit in the Rankin County Circuit Court (Rankin County Action) to rescind and avoid the

Note and Guaranties, demanding a jury trial and claiming they were fraudulently induced by

BancorpSouth to buy the property. The Defendants also claimed that they had defaulted on

the loan, with an unpaid balance of $4,926,116.39, because they could not develop the

property due to the fact that it contained wetlands.

¶5.    On October 24, 2012, BancorpSouth filed a motion to dismiss the Rankin County

Action under the first-to-file rule2 or, alternatively, to transfer the case to Lee County.

       1
         The docket contained in the record reflects that summonses were issued on
September 5, 2012, for the Defendants, but it does not show that the any of the summonses
were ever served. Additionally, the record reflects that on October 31, 2012, a lawyer
entered an appearance on behalf of Patel only.
       2
         The first-to-file rule is well established in Mississippi: “[W]here two suits between
the same parties over the same controversy are brought in courts of concurrent jurisdiction,
the court which first acquires jurisdiction retains jurisdiction over the whole controversy to
the exclusion or abatement of the second suit.” Issaquena Warren Ctys. Land Co. v. Warren
Cty., 996 So. 2d 747, 750 (¶8) (Miss. 2008) (quoting RAS Family Partners LP v. Onnam

                                               3
¶6.    On November 19, 2012, New Vision and Barot filed, in the Lee County Action, a joint

answer, a compulsory counterclaim, and a motion to dismiss and compel arbitration. The

fifth defense in their answer affirmatively asserted their right to arbitration as specified in

both the Note and Guaranties. The counterclaim was asserted “without waiving and

expressly preserving [New Vision and Barot’s] right to arbitration.” On the same day, Patel

separately answered the Lee County Action. He raised forty-six affirmative defenses in his

answer, but did not raise arbitration. However, in a separately filed motion to dismiss, Patel,

by reference, adopted Barot and New Vision’s motion to dismiss and compel arbitration. He

also filed a motion to transfer the case to the Rankin County Circuit Court.

¶7.    The Rankin County Circuit Court heard BancorpSouth’s motion to dismiss in April

2013, one week before the hearing in the Lee County Action on New Vision and Barot’s

motion to compel arbitration. On April 29, 2013, the Rankin County Chancery Court

dismissed the Rankin County Action under the first-to-file rule, and on August 15, 2014, the

Lee County Circuit Court denied New Vision and Barot’s motion to dismiss and compel

arbitration, as well as Patel’s motion to dismiss and/or to transfer the case to Rankin County.

The trial court found that the Defendants had waived their contractual right to arbitration by

engaging in conduct inconsistent with arbitration (filing the Rankin County Action). The

Defendants have timely appealed.

                                       DISCUSSION

Biloxi LLC, 968 So. 2d 926, 929 (¶16) (Miss. 2007)).

                                              4
¶8.    On appeal, the grant or denial of a motion to compel arbitration is reviewed de novo.

Nutt v. Wyatt, 107 So. 3d 989, 993 (¶10) (Miss. 2013) (quoting Scruggs v. Wyatt, 60 So. 3d

758, 766 (¶16) (Miss. 2011)). We also note that so far as we can tell, there is no Mississippi

precedent addressing the unique facts presented in today’s case—whether a defendant who

is obligated to arbitrate a matter waives that right by initiating litigation concerning that

matter in a separate lawsuit.

¶9.    The circuit court, in denying the Defendants’ motion to dismiss and compel arbitration

in the Lee County Action, found that the Defendants had waived their contractual right to

arbitrate by initiating the Rankin County Action. In support, the circuit court cited Century

21 Maselle & Associates v. Smith, 965 So. 2d 1031 (Miss. 2007). Century 21 promulgated

the test that arbitration can be waived by a party through “either active participation or

substantial invocation of the litigation process which results in detriment or prejudice to the

other party, or engaging in conduct inconsistent with timely enforcing the arbitration

agreement . . . .” Id. at 1036 (¶8). The circuit court applied the second alternative of the test,

stating that the Defendants had engaged in “conduct [(the filing of the Rankin County

Action)] inconsistent” with enforcing the arbitration agreement; thus, arbitration was

waived.3

       3
          The trial court further found the compulsory counterclaim by New Vision, Barot,
and Patel in the Lee County Action, and Patel’s seeking to transfer this cause to Rankin
County, were also inconsistent with requesting arbitration, and confirmed the waiver of
arbitration.

                                                5
¶10.   “[P]arties claiming waiver must offer sufficient evidence at a hearing to overcome the

presumption in favor of arbitration.” Id. The parties here agree that Century 21 is binding,

and that the second alternative of the test—“engaging in conduct inconsistent with timely

enforcing the arbitration agreement”—is applicable. BancorpSouth claims this test is

applicable to New Vision, Barot, and Patel as plaintiffs in the Rankin County Action. We

agree, but they are not seeking to arbitrate matters in that action. And, as we discuss below,

what they did as plaintiffs in the Rankin County Action is material to that action, and what

the defendants did, or failed to do, in the Lee County Action is material to that action.

¶11.   In support of their argument that their filing of the Rankin County Action does not

constitute waiver or preclude arbitration in the Lee County Action, the Defendants point to

the Mississippi Supreme Court’s pronouncement in Mississippi Credit Center Inc. v. Horton,

926 So. 2d 167 (Miss. 2006):

       [N]either delay in pursuing the right to compel arbitration nor participation in
       the judicial process, standing alone, will constitute a waiver. That is to say, a
       party who invokes the right to compel arbitration and pursues that right will
       not ordinarily waive the right simply because of involvement in the litigation
       process . . . .

Id. at 180 (¶41). The Defendants argue that their right to arbitrate was timely asserted

approximately two and one-half months after the Lee County Action was filed; thus,

according to Horton, waiver of arbitration was precluded. By this argument, it appears that

the Defendants tacitly agree that their actions, as plaintiffs, in the Rankin County Action are

relevant to the Lee County Action, where they are defendants. If that is what the Defendants

                                              6
are asserting, we disagree with that part of their argument. However, we agree that the

Defendants timely asserted their right to arbitrate in the Lee County Action, as the record

reveals that they asserted that right in their initial filings.

¶12.   Since none of the parties assert that the actions undertaken by the Defendants in the

Lee County Action to compel arbitration were untimely, we will not discuss this issue any

further. The heart of BancorpSouth’s argument is not the timeliness of the Defendants’

assertion of their right to arbitrate within the Lee County Action, but the Defendants’ filing

of the Rankin County Action and its impact on their right to compel arbitration in the Lee

County Action.

¶13.   While we agree that Century 21 is controlling, we find that the circuit court

misapplied it. In a lawsuit brought by a plaintiff, the right to compel arbitration of the issues

contained in the plaintiff’s lawsuit belongs to the defendant if there exists an arbitration

agreement, executed by the plaintiff and defendant, that covers the matters addressed in the

lawsuit. Therefore, it seems obvious that by initiating the Rankin County Action, the

Defendants, who were plaintiffs in that action, waived their right to arbitrate the matters

contained in that lawsuit because the filing of the action itself is inconsistent with a desire

to take advantage of the right to arbitrate. So had the Rankin County Action been initiated

first and remained viable, the Defendants, who were plaintiffs there, would not have been

able at some point later to change their minds and seek arbitration. By the same token, it can

be legitimately argued that by initiating the Lee County Action, BancorpSouth waived its

                                                 7
right to arbitrate the issues contained in that suit, but the same cannot be said about Patel,

New Vision, and Barot because they are the defendants in the Lee County Action.

¶14.   The Defendants argue that Nutt is dispositive. Nutt involved two suits over the

amount of attorney fees owed to Derek Wyatt as a result of work he performed in connection

with litigation on behalf of Hurricane Katrina insureds. Nutt, 107 So. 3d at 991-92 (¶¶3-5).

It was not disputed that David H. Nutt and others entered into a contract with Wyatt whereby

Nutt and others engaged Wyatt’s services. The dispute was over the nature of the agreement.

Wyatt insisted that he was part of the Katrina Joint Venture (KJV) that Scruggs Law Firm

Inc., Nutt & McAlister PLLC, and others formed to represent Hurricane Katrina insureds and

that he was entitled to a minimum ten percent fee-sharing interest in the KJV cases. Id. On

the other hand, Nutt and the others’ position was that they orally agreed to pay Wyatt an

annual salary plus a bonus based on ten percent of the net fees that Nutt received from cases

on which Wyatt provided substantial services to clients. Id.

¶15.   The first suit was filed by Nutt in the Chancery Court of Madison County, which the

supreme court described as follows:

       Nutt, et al., filed a “Verified Petition for Replevin and Complaint for
       Declaratory Judgment to Adjudicate Amount Owed by Nutt & McAlister,
       PLLC to Wyatt, or Amount Owed by Wyatt to Nutt & McAlister, PLLC”. . .
       . In that action, Nutt, et al., sought a declaration of obligations related to the
       oral employment contract with Wyatt; their complaint did not refer to the KJV,
       and they did not aver that Wyatt was a party to the KJV.

Id. at 991 (¶4). The second suit was filed by Wyatt in the Lafayette Circuit Court (Lafayette

County Case) against Scruggs, Nutt, and others. That suit claimed that he had been “denied

                                               8
his share of KJV attorney fees as agreed upon by Nutt and McAlister.” Id. at 991-92 (¶5).

Nutt and others filed a motion to transfer the Lafayette County Case to Madison County or

to stay the proceedings in the Lafayette County Case pending a final judgment in the

Madison County proceedings. The trial court denied the motion. Id. at 992 (¶6). Scruggs

then filed a motion to compel arbitration in the Lafayette County Case, “seeking to compel

Wyatt to arbitrate his claims against them under the arbitration provision in the [Katrina Joint

Venture Agreement (KJVA)].” Id. at (¶7). The circuit court denied the motion but stayed

the proceedings pending an appeal by Scruggs. Id.

¶16.   On appeal, the supreme court found that the KJVA arbitration provision was valid and

that it applied to Wyatt’s claims against Scruggs under the “direct-benefit rule” even though

Wyatt was not a signatory to the KJVA. Id. at (¶8). Therefore, the supreme court reversed

and remanded the Lafayette County Case.

¶17.   Immediately after remand, Nutt “filed a motion to remove the earlier stay granted by

the [circuit court] and to compel arbitration of Wyatt’s claim.” Id. at 993 (¶9). The circuit

court denied Nutt’s motion even though it found, based on the supreme court’s ruling in the

Scruggs appeal, that the arbitration provision was also applicable to the Nutt defendants. Id.

The circuit court explained that

       Nutt [and others] had waived their right to compel arbitration by: (1) filing a
       motion to transfer venue prior to filing their motion to compel arbitration; (2)
       delaying 595 days before filing their motion to compel arbitration; and (3)
       filing a prior action in Madison County Chancery Court seeking declaratory
       judgment regarding Wyatt’s rights under the oral employment contract.

                                               9
Id. Nutt appealed.

¶18.   On appeal, although the supreme court discussed Nutt’s prior filing in the Madison

County Chancery Court and the nature of that filing being different than the basis asserted

by Wyatt in the Lafayette County Case, it is clear from any objective reading of Nutt that the

supreme court’s holding was premised solely on Nutt’s action in the Lafayette County Case

where he was a defendant, not what he did prior to being made a defendant. Here is what the

supreme court said:

       In their first responsive pleading, before this [c]ourt’s decision that the Katrina
       JVA applied to Wyatt’s claims, Nutt, et al., preserved their right in the
       alternative to compel arbitration, in the event of a judicial determination that
       the Katrina JVA applied to Wyatt’s claims. When we declared that the Katrina
       JVA did apply, they timely filed a motion to compel arbitration, within one
       week of the mandate. We find that the conduct of Nutt, et al., was consistent
       with timely seeking to compel arbitration, once this [c]ourt held that Wyatt’s
       claims were related to the Katrina JVA. Accordingly, we conclude that Nutt,
       et al., did not waive their right to enforce the provision.

Id. at 994-95 (¶14). At another point in the opinion, the supreme court said this:

       We find that Nutt, et al., did not actively participate in litigation or
       substantially invoke the litigation process in this case before seeking to
       enforce the provision, nor did they conduct themselves inconsistently with
       timely enforcing the provisions. The trial court erred by finding that Nutt, et
       al., waived their right to compel arbitration by participating in litigation and
       delaying filing a motion to compel arbitration.

Id. at 996 (¶19) (emphasis added). It is clear that the ultimate matter in dispute in both the

Madison County Case and the Lafayette County Case was attorney fees, if any, owed to

Wyatt, although the parties pursued different theories or avenues to get to a determination

in that regard. So while our case is not factually on all-fours with Nutt, we nevertheless

                                               10
believe it is instructive on the law to be applied here.

¶19.    The dissent apparently concludes that the reason the supreme court held in Nutt that

Nutt’s prior filing of the Madison County lawsuit had not waived his right to arbitrate

Wyatt’s claim against it in the Lafayette County Case is because the two actions dealt with

very different matters—an employment agreement and a joint-venture agreement. That is

not an entirely accurate characterization of the lawsuits. There was only one agreement,

which was an oral employment agreement. The dispute was over whether that oral

agreement fell within the parameters of the arbitration provision of the KJVA even though

Wyatt was not a signatory to it. As stated, Nutt, taking the position that the KJVA was

inapplicable—though not directly litigating that issue in the Madison County Case—sought

instead in the Madison County Case a declaration of obligations related to the oral

employment contract with Wyatt. It is not reasonably debatable that the Nutt decision

declared that one of the obligations related to the oral employment contract is that it was

subject to the arbitration provision of the KJVA, which was the subject matter of Lafayette

County Case. So it is clear that the two lawsuits were related but employed procedurally

different mechanisms to resolve the attorney’s fee dispute between the antagonists in the

lawsuits. In any event, there is nothing in Nutt warranting the extrapolation that if the

pleadings in Nutt’s Madison County Case had mentioned the KJVA, the result would have

been a finding that he waived his right to arbitrate Wyatt’s claim in the Lafayette County

Case.

                                              11
¶20.   We also find the dissent’s and BancorpSouth’s reliance on United States ex rel. Frank

A. Trucco & Sons Co. v. Bregman Construction Corp., 256 F.2d 851, 852 (7th Cir. 1958),

unavailing in light of the Nutt decision. Even so, we will briefly discuss the Trucco decision.

There, Bregman Construction (Bregman) initially sued Frank A. Trucco & Sons’ (Trucco)

surety in the state of New York for Trucco’s breach of a public-works subcontract that

contained an arbitration provision. Id. Trucco then sued Bregman in Indiana for breach of

the same subcontract, and Bregman tried to invoke the arbitration provision. Id. The district

court ruled that Bregman waived its right to arbitrate because of its filing suit in New York.

Id. The United States Court of Appeals for the Seventh Circuit stated:

       [T]he district court properly determined this matter. To hold otherwise would
       place Bregman in the unique and untenable position of demanding the right to
       litigate one phase of its dispute with Trucco while at the same time insisting
       upon arbitration of another phase of its dispute, all of such controversy arising
       out of its sub-contract with the other disputants.

                                           ****

       We hold, in the instant case, that Bregman, by filing its New York action,
       repudiated its own promise to arbitrate as set out in its sub-contract with
       Trucco. This repudiation gave use-plaintiff the election of arbitration which
       it did not exercise in the New York action. By filing its complaint under the
       Miller Act in this court use-plaintiff then made its election not to arbitrate.
       Thus, each party elected not to arbitrate, the one by filing an action in New
       York for alleged failures on a performance bond, and the other by bringing suit
       in Indiana for money alleged due for labor and materials under a payment
       bond, both actions arising out of the same sub-contract. We hold that Bregman
       thereby conclusively waived its right to arbitration in the instant case.

Id. at 853-54.

¶21.   We acknowledge that the facts in Trucco are somewhat comparable to our facts, but

                                              12
point out that they are different in a significant aspect in that in Trucco, Bregman, the party

seeking to compel arbitration, apparently was not precluded from continuing his pursuit of

the separate litigation that he had initiated.4 Here, the Defendants were unable to pursue the

Rankin County Action because of the first-to-file rule. That was not the case in Trucco;

otherwise Trucco would not have been able to maintain its lawsuit. Further, had Bergman’s

separate lawsuit been dismissed at the time of the hearing on its motion in Trucco to compel

arbitration, there would have been no reason for the Seventh Circuit’s finding that Bregman

was “demanding the right to litigate one phase of its dispute with Trucco while at the same

time insisting upon arbitration of another phase of its dispute.” Here, at the time that the Lee

County circuit judge denied the Defendants’ motion to compel, more than four months had

passed since the Defendants’ Rankin County Action had been dismissed. So here, unlike

Bergman’s position in Trucco, the Defendants’ position was not untenable as they were not

attempting to have their dispute with BancorpSouth resolved by both a jury panel and an

arbitration panel. The most that they did was seek a transfer of the Lee County Action to

Rankin County.

¶22.   We also agree with Patel’s argument that the Rankin County Action could not

constitute a waiver of arbitration because that court lacked subject-matter jurisdiction. Under

the priority-jurisdiction rule, jurisdiction was established in Lee County before the

       4
      The Trucco decision does not inform us as to the time proximity of the filing of
Bregman’s lawsuit and the filing of Trucco’s lawsuit.

                                              13
Defendants filed their Rankin County Action. Therefore, it seems logical to us that the

Rankin County Action had no ability to impact the rights of any party and could not support

waiver.

¶23.   For the reasons discussed, we find that the circuit court erred in refusing to grant the

Defendants’ motion to compel. Consequently, we reverse and render the judgment of the

circuit court and remand this case for proceedings consistent with this opinion.

¶24. THE JUDGMENT OF THE CIRCUIT COURT OF LEE COUNTY IS
REVERSED AND RENDERED, AND THIS CASE IS REMANDED WITH
DIRECTIONS TO DISMISS BANCORPSOUTH’S LAWSUIT AND SEND THIS
CASE TO BINDING ARBITRATION. ALL COSTS OF THIS APPEAL ARE
ASSESSED TO THE APPELLANTS.

    LEE, C.J., CARLTON, FAIR AND JAMES, JJ., CONCUR. WILSON, J.,
CONCURS IN RESULT ONLY WITHOUT SEPARATE WRITTEN OPINION.
BARNES, J., DISSENTS WITH SEPARATE WRITTEN OPINION, JOINED BY
GRIFFIS, P.J., ISHEE AND GREENLEE, JJ.

       BARNES, J., DISSENTING:

¶25.   I respectfully dissent. The trial court properly found Defendants’ filing suit in Rankin

Count constituted an act inconsistent with arbitration. Therefore, I would affirm the trial

court’s denial of Defendants’ motion to dismiss and compel arbitration.

¶26.   This case involves the unique situation where Defendants requested arbitration on

repayment of the Note and Guaranties in this suit after filing suit in another county “arising

from or relating to” the same documents. The trial court, in denying Defendants’ motion to

dismiss and compel arbitration, found that Defendants waived their contractual right to

arbitrate, citing in support Century 21 Maselle & Associates v. Smith, 965 So. 2d 1031 (Miss.

                                             14
2007). Century 21 promulgated the test that arbitration can be waived by a party through

“either active participation or substantial invocation of the litigation process which results

in detriment or prejudice to the other party, or engaging in conduct inconsistent with timely

enforcing the arbitration agreement . . . .” Id. at 1036 (¶8). The trial court correctly applied

the second alternative of the test, stating that the filing of the Rankin County Action

constituted “conduct inconsistent” with enforcing the arbitration agreement; thus, arbitration

was waived.5

¶27.   While “waiver of arbitration is not a favored finding,” Mississippi does “recognize

waiver when the party seeking arbitration takes actions inconsistent with enforcing

arbitration . . . .” Nutt v. Wyatt, 107 So. 3d 989, 993 (¶11) (Miss. 2013). “[P]arties claiming

waiver must offer sufficient evidence at a hearing to overcome the presumption in favor of

arbitration.” Century 21, 965 So. 2d at 1036 (¶8). The parties agree that Century 21 is

binding, and the second alternative of the test – “engaging in conduct inconsistent with

timely enforcing the arbitration agreement” – is applicable. BancorpSouth claims this test

       5
          The trial court further found the compulsory counterclaim by New Vision, Barot,
and Patel in the Lee County Action, and Patel’s seeking to transfer this cause to Rankin
County, were also inconsistent with requesting arbitration, and confirmed the waiver of
arbitration. Since the counterclaim was compulsory under Mississippi Rule of Civil
Procedure 13(a), however, I disagree with the trial court that the counterclaim contributed
to the waiver of arbitration. Had the compulsory counterclaim not been asserted, New Vision
and Barot would have been subject to a claim of waiver. See M.R.C.P. 13(a) Advisory
Committee Notes (Subject to the exceptions, “counterclaims are compulsory if they arise out
of the same transaction or occurrence that is the subject matter of the opposing party’s
claim”; generally, compulsory counterclaims are asserted in pending litigation to avoid
waiver.).

                                              15
is applicable to New Vision, Barot, and Patel as plaintiffs in the Rankin County Action,

because they commenced the Rankin County Action before they filed an answer or any other

pleading in the Lee County Action. Defendants insist that the filing of the Rankin County

Action in no way impacted their right to arbitrate in the Lee County Action. I agree with the

trial court that although in Century 21 the test was applied to defendants, it can properly be

applied to plaintiffs as well.

¶28.   Defendants claim that mere involvement in the litigation or judicial process does not

constitute waiver, citing Mississippi Credit Center Inc. v. Horton, 926 So. 2d 167, 180 (¶41)

(Miss. 2006):6

       [N]either delay in pursuing the right to compel arbitration nor participation in
       the judicial process, standing alone, will constitute a waiver. That is to say, a
       party who invokes the right to compel arbitration and pursues that right will
       not ordinarily waive the right simply because of involvement in the litigation
       process . . . .

They argue their right to arbitrate was timely asserted approximately two and one-half

months after the Lee County Action was filed; thus, according to Horton, waiver of

arbitration was precluded.

¶29.   However, Defendants ignore the fact that this case deals with two separately filed

suits, unlike Horton and numerous other cases Defendants cite. This case is unique in that

       6
         In Horton, while the defendants timely asserted their right to compel arbitration in
their answers, they did not file a motion to compel arbitration in a reasonable time, and
“proceeded to substantially engage the litigation process” for eight months. Horton, 926 So.
2d at 180 (¶¶41, 43). Because of both delay and engaging in the litigation process, the
supreme court found the defendants’ right to arbitration was waived. Id. at 181 (¶¶45-46).

                                              16
it deals with the interaction of two separate cases and waiver of the contractual right to

arbitrate. It is not the timeliness of asserting the right to arbitrate within the Lee County

Action that is at issue, but the filing of the Rankin County Action, and its impact on

Defendants’ right to compel arbitration of the Lee County Action. The proper time to raise

arbitration is at the time the party first advances arbitrable issues. Galion Iron Works & Mfg.

v. J.D. Adams Mfg., 128 F.2d 411, 414 (7th Cir. 1942). New Vision, Barot, and Patel made

the strategic decision to file a lawsuit demanding a jury trial in Rankin County concerning

the same issues that they later raised in their Lee County counterclaim. It is obvious that

Defendants wanted to litigate; they just did not want to litigate in Lee County. As admitted

by Defendants in oral argument, they filed a compulsory counterclaim, but only wanted to

arbitrate BancorpSouth’s claim for repayment. They wanted a jury trial in Rankin County

on their claims against BancorpSouth. They contended, as they did below, that the Rankin

County Action would only be arbitrated if BancorpSouth demanded arbitration.7 This

       7
           At the trial court hearing, counsel for New Vision and Barot stated:

       Your Honor, if I might respond to one thing that [BancorpSouth’s counsel] just
       said . . . I want to make sure that I’m clear in terms of the nature of the Rankin
       County case versus the nature of this case. The Rankin County case, again, is
       our claims against BancorpSouth. And it may be that we have waived the right
       to arbitrate our claims against them. Now it’s up to them [as] to whether or not
       they want to arbitrate those.

       But as it relates to their claims against us which are pending here, we have
       invoked our right to arbitration. So there is a distinction there that they want
       to somehow merge together, but they are distinct claims.

                                              17
rationale, however, ignores the contractual language that “any and all claims, disputes and

controversies . . . arising from or relating to” the Note are to be resolved by arbitration at the

election of the borrower or lender. There is no contractual provision for splitting a cause of

action between arbitration and litigation.

¶30.   Under Century 21, prosecuting the Rankin County Action is inconsistent with

arbitration and constitutes waiver. At the time New Vision and Barot invoked arbitration in

the Lee County Action, they were seeking to litigate their claims against BancorpSouth in

Rankin County. It was only because BancorpSouth had “beaten them to the courthouse” that

arbitration even became an issue.8 Defendants also argue that BancorpSouth has shown no

prejudice by the filing of the Rankin County Action. However, under the second alternative

of the Century 21 waiver rule, there is no requirement of prejudice to the other party.

Century 21, 965 So. 2d at 1036 (¶8).

¶31.   Defendants rely on Nutt as dispositive. Nutt involved two suits, and held that a

plaintiff bringing a court action seeking limited relief does not waive the plaintiff’s right to

arbitrate other issues. Nutt, 107 So. 3d at 995 (¶14). In Nutt, the plaintiff, David Nutt, filed

a lawsuit in Madison County Chancery Court on an employment agreement seeking replevin

and a declaratory judgment from Derek Wyatt. Id. at 991 (¶4). Then, Wyatt sued Nutt in

       8
          Similarly, Patel was the co-plaintiff in the Rankin County Action, and did not raise
arbitration as an affirmative defense when he filed his answer in the Lee County Action.
Further, Patel filed a motion to transfer venue of the Lee County Action to Rankin County,
not a motion to compel arbitration. These actions confirm Patel’s desire to litigate, not
arbitrate.

                                               18
Lafayette County Circuit Court for attorney’s fees claimed under a joint-venture agreement.

Id. at 991-92 (¶5). Nutt invoked arbitration in the second suit, and the trial court denied it

as waived. Id. at 993 (¶9). The supreme court reversed the trial court’s judgment, however,

holding that Nutt’s filing of the first suit in Madison County was not a waiver of the right to

arbitrate Wyatt’s claims in Lafayette County because the two actions dealt with very different

matters – an employment agreement and a joint-venture agreement. Id. at 993, 996 (¶¶9, 18).

Here, New Vision and Barot’s compulsory counterclaim in the Lee County Action and their

earlier-filed Rankin County Action both clearly “aris[e] from or relat[e] to” the contractual

documents that formed the basis for BancorpSouth’s Lee County complaint. Whether

Defendants owe BancorpSouth repayment on the Note and Guaranties is central to both

suits.9 Thus, Nutt is distinguishable.

¶32.   I find United States ex rel. Frank A. Trucco & Sons Co. v. Bregman Construction

Corp., 256 F.2d 851, 852 (7th Cir. 1958), cited by BancorpSouth, instructive. Bregman

initially sued Trucco’s surety in the state of New York for Trucco’s breach of a public-works

subcontract that contained an arbitration provision. Id. Trucco then sued Bregman in

Indiana for breach of the same subcontract, and Bregman tried to invoke the arbitration

provision. Id. The district court ruled that Bregman waived its right to arbitrate because of

its filing suit in New York. Id. The United States Court of Appeals for the Seventh Circuit

       9
          BancorpSouth’s Lee County Action seeks enforcement of the Note and two
Guaranties. As noted by the Lee County Circuit Court, the Lee County counterclaim was
“almost identical” to the allegations of the Rankin County complaint.

                                              19
held:

        [T]he district court properly determined this matter. To hold otherwise would
        place Bregman in the unique and untenable position of demanding the right to
        litigate one phase of its dispute with Trucco while at the same time insisting
        upon arbitration of another phase of its dispute, all of such controversy arising
        out of its sub-contract with the other disputants.

Id. at 853.

¶33.    Here, New Vision and Barot were demanding the right to litigate their claims against

BancorpSouth in Rankin County while insisting upon arbitration of BancorpSouth’s claims.

I agree with the Seventh Circuit that this would be an “untenable position.” The trial court

did not err in finding Defendants’ act of filing suit in Rankin County “inconsistent with

arbitration.”

¶34.    Patel filed supplemental authority under Mississippi Rule of Appellate Procedure

28(k), claiming the Rankin County Action could not constitute waiver of arbitration because

that court lacked subject-matter jurisdiction. Patel states, under the priority-jurisdiction rule,

jurisdiction was established in Lee County, and Rankin County was without subject-matter

jurisdiction. Since the Rankin County Action lacked subject-matter jurisdiction, and thus

was dismissed without prejudice and not on the merits, Patel argues the Rankin County

Action had no ability to impact the rights of any party, and could not support waiver. I do

not find this argument persuasive; the suit was filed and prosecuted with the intent to litigate,

which are acts inconsistent with waiver.

¶35.    Defendants further argue that BancorpSouth has “contracted away [its] right to claim

                                               20
waiver.” Both the Note and Guaranties provide: “IF ARBITRATION IS NOT CHOSEN

BY EITHER PARTY AT ANY STAGE OF AN ACTION OR PROCEEDING IN COURT,

BOTH BORROWER AND LENDER HEREBY WAIVE ALL RIGHTS TO TRIAL BY

JURY.” (Emphasis in original). New Vision and Barot interpret this to mean that they may

assert arbitration at any time. I do not. As BancorpSouth notes, this provision is located

under a separate heading: “WAIVER OF JURY TRIAL.” In context, the provision indicates

that no party will have the right to a jury trial even if the dispute is not arbitrated; it does not

mean the parties can raise arbitration at any time.10

¶36.   Lastly, at oral argument, New Vision and Barot claimed the following language from

the Note means that the act of instituting a lawsuit is not a waiver of arbitration: “THE

INITIATION OF A CLASS ACTION OR AN ACTION IN WHICH BORROWER IS ONE

OF TWO OR MORE PLAINTIFFS SHALL NOT RELIEVE EITHER PARTY FROM THE

OBLIGATIONS OF ARBITRATION CONTEMPLATED BY THIS SECTION 29.” New

Vision and Barot, however, read the provision out of context. The full third paragraph of

Section 29 of the Note provides:

       IN THE EVENT BORROWER INITIATES AN ACTION AT LAW OR IN
       EQUITY AGAINST LENDER EITHER AS A MULTI-PLAINTIFF
       LAWSUIT OR IN A CLASS ACTION LAWSUIT, THE PROVISIONS OF

       10
          Patel relatedly argues that BancorpSouth breached the arbitration provisions by
taking the position that Defendants waived the right to arbitrate. I am not persuaded by this
argument. BancorpSouth’s assertion of waiver does not breach the arbitration agreement any
more than Defendants breached the agreement by demanding a jury trial in the Rankin
County Action in violation of the Note and Guaranties.

                                                21
       THIS SECTION 29 SHALL APPLY TO BORROWER, ALONE OR AS AN
       INDIVIDUAL AND SHALL NOT APPLY SO AS TO REQUIRE
       ARBITRATION FOR A PLAINTIFF CLASS OR FOR A GROUP OF
       PLAINTIFFS, BORROWER BEING INDIVIDUALLY AND SEPARATELY
       BOUND BY THE TERMS OF THIS SECTION 29 RATHER THAN AS A
       CLASS REPRESENTATIVE OR GROUP.         MOREOVER, THE
       INITIATION OF A CLASS ACTION OR AN ACTION IN WHICH
       BORROWER IS ONE OF TWO OR MORE PLAINTIFFS SHALL NOT
       RELIEVE EITHER PARTY FROM THE OBLIGATIONS OF
       ARBITRATION CONTEMPLATED BY THIS SECTION 29.

¶37.   The paragraph clearly addresses two separate situations. The first part concerns class

arbitration. See generally Thomas H. Oehmke, Oehmke Commercial Arbitration § 16:9

(Defenses to class arbitration – Prohibition on class arbitration); § 16:13 (Defenses to class

arbitration – Waiver of class arbitration) (3rd ed. 2015). In the event the borrower (New

Vision) initiates a class action (or multi-party action) against BancorpSouth, the arbitration

provisions only apply to the individual borrower, and election by BancorpSouth to arbitrate

will not require arbitration for a plaintiff class or group of plaintiffs. The second concerns

the rights of the unwilling class members or “involuntary plaintiffs.” See In re Piper Funds

Inc., 71 F.3d 298, 303-04 (8th Cir. 1995) (contractual right to arbitrate “may not be sacrificed

on the altar of efficient class action management”; “unwilling class member’s right to

arbitrate may not be held hostage . . . .”); M.R.C.P. 19(a) (joinder of parties; involuntary

plaintiffs). The last sentence, written in the passive, versus active, voice, provides that if a

class or multi-party action is filed and the borrower is one of the plaintiffs, that alone will not

prevent the borrower from exercising its right to arbitrate. This situation applies if the

lawsuit is initiated and the borrower is a plaintiff; it does not state that the borrower can

                                                22
initiate the action and still demand arbitration. Had the parties intended that result, the

provision would have been written in the same manner as the first sentence: “[I]n the event

borrower initiates an action at law or in equity against lender . . . .” It was not. Further, it

would make no sense for the contract to provide that a party could not be found to have

waived arbitration if it filed a lawsuit on behalf of two or more plaintiffs without a

corresponding provision regarding filing as a singular plaintiff. Lastly, this paragraph

concerning class action and multi-plaintiff lawsuits is found only in the Note but not the

Guaranties; therefore, if New Vision’s interpretation is correct, the result would mean that

New Vision had not waived arbitration by filing the Rankin County Action but, having no

similar provision in the Guaranties, Barot and Patel would have waived their rights to

arbitrate. I do not accept New Vision and Barot’s interpretation of this last sentence.

¶38.   Based on the foregoing, I find the trial court correctly determined that Defendants

waived their right to arbitrate by filing the Rankin County Action. Accordingly, I would

affirm the trial court’s denial of Defendants’ motion to dismiss and compel arbitration.

        GRIFFIS, P.J., ISHEE AND GREENLEE, JJ., JOIN THIS OPINION.

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