Court Opinion

ID: 9620237
Source: CourtListenerOpinion
Date Created: 2023-08-22 05:40:07.169758+00
Date Added: 2024-06-11T18:03:32.934082
License: Public Domain

Josephine Linker Hart, Judge, dissenting. This case is like an onion — the issues have several layers. I submit that one’s conclusion to either affirm or reverse depends on how deeply you probe these layers. If you stop at the thin, brittle outer shell, i.e., analyze the case superficially, you will conclude that the trial judge erred and it should be reversed. However, if you delve deeper into the issues, and acquire a better understanding of the law and facts, you will inevitably conclude that the trial court’s finding that the Arkansas Uniform Arbitration Act (AUAA), not the Federal Arbitration Act (FAA), was the governing law in this case and its decision not to compel arbitration should be affirmed. I find no merit in Terminix’s argument that, because the parties agreed to apply the FAA as the governing law in the arbitration agreement, the circuit court erred as a matter of law in denying the motion to compel arbitration. I am mindful that it is settled law that arbitration is a matter of contract between the parties, and the same rules of construction and interpretation apply to arbitration clauses as apply to agreements generally. Hart v. McChristian, 344 Ark. 656, 42 S.W.3d 552 (2001). The construction and legal effect of a written contract to arbitrate are to be determined by the court as a matter of law, and we must give effect to the parties’ intent as evidenced by the arbitration agreement itself. Id. I am also aware that our supreme court has stated that in light of the policy favoring arbitration, such agreements will not be construed strictly but will be read to include subjects within the spirit of the parties’ agreement and that any doubts and ambiguities of coverage will be resolved in favor of arbitration. Id. The agreement to arbitrate, however, is merely the starting point. It appears in a provision styled “Agreement to Mediate and Arbitrate,” which is paragraph 5 of the Employment Agreement. It states: The Employer and Employee agree that, to the fullest extent permitted by law, any and all disputes between them will be submitted to mediation upon terms mutually agreeable to both parties. In the event the parties do not resolve such controversies through mediation, Employer and Employee agree that, to the fullest extent permitted by law, any and all controversies between them will be submitted for resolution to binding arbitration in accordance with the attached Arbitration Agreement, which is incorporated herein by reference. The parties understand and agree that in the event that mediation is unsuccessful, then arbitration will be the exclusive forum for resolving disputes between them, including statutory claims and all disputes arising out of the employment relationship and the termination of such relationship. The Employee and Employer expressly waive their entitlement, if any, to have controversies between them decided by a court or jury. The attached Arbitration Agreement is incorporated herein. The first rule of construction requires that the court read the words as written and give them their plain and ordinary meaning. Coleman v. Regions Bank, 364 Ark. 59, 216 S.W.3d 569 (2005). Accordingly, while the agreement to submit to alternative dispute resolution is obviously quite broad, it is limited by the phrase “to the fullest extent permitted by law.” This phrase is of paramount importance in this case because the AUAA has an express provision proscribing arbitration of tort claims. Ark. Code Ann. § 16-108-201(b) (2) (Repl. 2006). The courts of this state will not enforce contracts that violate our statutes. See, e.g., Williams v. Johnson Custom Homes, 374 Ark. 457, 288 S.W.3d 607 (2008) (declaring void and unenforceable a choice oflaw provision in an employment contract where an Arkansas worker agreed to be bound by the Workers’ Compensation laws of the state of Ohio). Terminix favors the application of the FAA in this case because the FAA has no express provision that proscribes the arbitration of tort claims. I am mindful that the parties have apparently made a choice-of-law agreement in the appended Arbitration Agreement. It states, “Governing Law. This Agreement will be governed and construed in accordance with the Federal Arbitration Act.” Flowever, as in Williams v. Johnson Custom Homes, that should not end our analysis. First, because our legislature unequivocally declared in the AUAA that tort claims are not subject to arbitration, this fact would support a holding that the offending portion of the Ter-minix employment contract is void and unenforceable. But even without this court declaring the contract provision void, this would not mean that the trial court erred because the facts and circumstances of this case fail to establish that the FAA applies, notwithstanding the agreement. The FAA expressly states that for an arbitration agreement to be valid and enforceable, it must be “a written provision in ... a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction.” These are clear words of limitation. Put in the context of this case, at issue are the torts of outrage and defamation. In M.B.M. Co. v. Counce, 268 Ark. 269, 596 S.W.2d 681 (1980), the supreme court first recognized the tort of outrage or intentional infliction of emotional distress and defined it as extreme and outrageous conduct, meaning conduct that is “so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized society.” I simply cannot accept that such conduct can properly be considered to have arisen from an employment contract. Moreover, the FAA also requires that the contract be one “involving commerce.” Amazingly, Terminix asserts that the “transaction involving commerce” was the interstate communication of the alleged defamatory statements. I cannot accept the notion that defamation is commerce. Hitherto, I thought it was axiomatic that appellants are bound by the scope and substance of their arguments. I lament that the majority now has either overruled this practice sub silentio or held that defamation can be interstate commerce. I would hold that while the parties have ostensibly made a choice of law, the law (FAA) has not chosen them. Even assuming that the AUAA did not bar arbitration, I would likewise hold that the parties’ ostensible agreement to arbitrate “torts” is of no effect. By compelling arbitration, Ter-minix was in effect limiting its financial exposure in a tort case. While an award of punitive damages is not precluded by the FAA, see Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52 (1995), such an award would be left to the discretion of the arbitrator to consider. Conversely, if any evidence supporting an award of punitive damages was presented in a jury trial, the jury must be instructed to consider an award of punitive damages. Stein v. Lukas, 308 Ark. 74, 823 S.W.2d 832 (1992). As a general rule, exculpatory clauses in contracts are disfavored. Plant v. Wilbur, 345 Ark. 487, 47 S.W.3d 889 (2001). Setting aside the fact that exculpatory clauses have only been approved in this state to limit a party’s exposure to liability for ordinary negligence and not intentional torts, these clauses will only be enforced (1) when the party is knowledgeable of the potential liability that is released; (2) when the party is benefitting from the activity which may lead to the potential liability that is released; and (3) when the contract that contains the clause was fairly entered into. Finagin v. Arkansas Development Fin. Auth., 355 Ark. 440, 139 S.W.3d 797 (2003). The so-called agreement to arbitrate torts in this case clearly fails to satisfy the knowledge factor because it does not explicitly state the type of torts that would be subject to arbitration. “Torts” could involve any conduct from spilling water on the floor to shooting one’s co-workers. The “fairly entered into” factor also fails to pass muster because the agreement in question was strictly a contract of adhesion. I also find no merit in Terminix’s other arguments. I would reject its contention that public policy favors arbitration, that non-signatories to the arbitration agreement — in this case Josh — are likewise bound to arbitrate, and that the FAA preempts state law. I am mindful that our supreme court has stated that, as a matter of public policy, arbitration is strongly favored in Arkansas. See, e.g., Ruth R. Remmel Revocable Trust, Inc. v. Regions Fin. Corp., 369 Ark. 392, 255 S.W.3d 453 (2007); Pest Mgmt. v. Langer, 369 Ark. 52, 250 S.W.3d 550 (2007). Further, it has also been said that ambiguities must be resolved in favor of arbitration. Tyson Foods, Inc. v. Archer, 356 Ark. 136, 147 S.W.3d 681 (2004). However, upon analyzing these pronouncements, I am unconvinced that they reach as far as Terminix would like us to believe. Significantly, the supreme court stated that it favored arbitration because arbitration is considered a “less expensive and more expeditious means of settling litigation and relieving docket congestion.” Cash In A Flash Check Advance v. Spencer, 348 Ark. 459, 74 S.W.3d 600 (2002). Here, there is no indication that either goal is likely to be achieved in this case. Both parties are represented by counsel and have engaged in discovery, as due diligence would require. Although less formal than a judicial setting, both sides would be required to present there case to an arbitrator, so there is apparently no significant savings to be had here in terms of the expense of putting on the case. Likewise there is nothing in the record to suggest that relieving “docket congestion” is a pressing need. Perhaps more significantly, while the supreme court has expressed its approval of arbitration, it has also repeatedly held that the determination of public policy lies almost exclusively with the legislature, and the courts will not interfere with that determination in the absence of palpable errors. See, e.g., Jordan v. Atlantic Cas. Ins. Co., 344 Ark. 81, 40 S.W.3d 254 (2001); Norton v. Hinson, 337 Ark. 487, 989 S.W.2d 535 (1999); McDonald v. Pettus, 337 Ark. 265, 988 S.W.2d 9 (1999). I cannot ignore that the legislature has clearly declared in the AUAA that tort cases shall not be submitted to arbitration. While I can at least appreciate the validity of both sides of many of the issues that I have discussed, I find it simply untenable to hold that non-signatories to the arbitration agreement — in this case Josh — must likewise be bound to arbitrate. The majority dodges this point, asserting that it need not open this can of worms because the trial court did not rule on it. This procedural bar is disingenuous in the extreme. The trial court ruled that neither Mandy nor Josh was bound to arbitrate. Our review in this case is de novo on the record. Sterne, Agee & Leach, Inc. v. Way, 101 Ark. App. 23, 270 S.W.3d 369 (2007). We owe it to the litigants to decide the issues that are already before us and not create piecemeal appeals. Finally, I cannot agree with Terminix’s blanket contention that the FAA preempts state law. I submit that the majority has ignored our supreme court’s decision in Arkansas Diagnostic Center, P.A. v. Tahiri, 370 Ark. 157, 257 S.W.3d 884 (2007), where it seems to have squarely rejected this contention. I respectfully dissent. Baker, J., joins.