Andria Sawyers v. Herrin-Gear Chevrolet Company, Inc. ( 2008 )

IN THE SUPREME COURT OF MISSISSIPPI
NO. 2008-IA-01370-SCT
ANDRIA SAWYERS
v.
HERRIN-GEAR CHEVROLET COMPANY, INC.
A N D A M E R IC A N B AN K E R S IN S U R A N C E
COMPANY OF FLORIDA
DATE OF JUDGMENT: 07/30/2008
TRIAL JUDGE: HON. ROBERT WALTER BAILEY
COURT FROM WHICH APPEALED: WAYNE COUNTY CIRCUIT COURT
ATTORNEY FOR APPELLANT: TIMOTHY J. MATUSHESKI
ATTORNEYS FOR APPELLEES: BRENDA B. BETHANY
C. MICHAEL ELLINGBURG
ROSEMARY GWIN DURFEY
WALTER D. WILLSON
KEVIN ALAN ROGERS
NATURE OF THE CASE: CIVIL - CONTRACT
DISPOSITION: AFFIRMED - 01/07/2010
MOTION FOR REHEARING FILED:
MANDATE ISSUED:
EN BANC.
CARLSON, PRESIDING JUSTICE, FOR THE COURT:
¶1. Andria Sawyers filed suit against Herrin-Gear Chevrolet Company, Inc. (Herrin-Gear)
and American Bankers Insurance Company of Florida (American) in the Circuit Court of
Wayne County, alleging fraud, breach of contract, and bad faith. Herrin-Gear filed its
Motion to Compel Arbitration, joined by American, which the trial court granted. Sawyers
thereafter filed with us a petition for interlocutory appeal, which we granted. See M.R.A.P.
5. Although Herrin-Gear and American assert no error in the trial court’s grant of arbitration,
they do argue that, pursuant to the Federal Arbitration Act (FAA), this Court lacks
jurisdiction to consider the merits of this appeal, because the trial court’s order granting
arbitration is interlocutory in nature and not a final, appealable order. Finding today that this
Court has jurisdiction to consider the merits of this appeal, we find no error in the circuit
court’s order granting defendants’ motion to compel arbitration, and we thus affirm.
FACTS AND PROCEEDINGS IN THE TRIAL COURT
¶2. On August 18, 2003, Andria Sawyers purchased a 2002 Ford Explorer from Herrin-
Gear, along with a “GAP Asset Protection Deficiency Waiver Addendum” (GAP waiver)
administered by American at an additional cost of $495. Sawyers financed the Explorer
through Nuvell Credit Corporation (Nuvell). Sawyers alleges that Herrin-Gear’s sales agent
represented that “American’s GAP covers Plaintiff for the difference between the amount her
primary insurer pays Nuvell for a total loss and the total amount Plaintiff owes Nuvell for the
vehicle, with no exceptions.” During the transaction, Sawyers also signed an arbitration
agreement.
¶3. In her complaint, filed April 24, 2008, in the Circuit Court of Wayne County, Sawyers
alleged that, after she was involved in an automobile accident on December 14, 2007, her
primary automobile insurer determined that the Explorer was a total loss, and agreed to pay
her $10,168.75 on her claim. Sawyers claimed that on February 28, 2008, American’s
adjuster, Assurant Solutions, sent Sawyers a check and a letter indicating that at the time of
the accident, she owed Nuvell $14,234.55. Thus, the difference between the amount paid by
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Sawyers’s primary automobile insurer and the remaining amount that Sawyers owed Nuvell
was $4,065.80.1 According to Sawyers, American did not pay the entire difference owed
under the GAP waiver, but instead made deductions for interest as a result of missed
principal payments, and late fees and other charges because of missed principal payments
and extensions, resulting in a final payment by American of only $686.43. Sawyers alleged
that American, having paid $686.43 to Nuvell, owed an additional $3,455.12 under the GAP
waiver.2
¶4. Sawyers further alleged that she had purchased the GAP waiver in reasonable reliance
on the sales agent’s misrepresentation that the GAP waiver would pay the entire amount she
owed to Nuvell. She asserted claims for fraud, breach of contract, and bad-faith refusal to
pay an insurance claim. Sawyers demanded $3,455.12 in contractual damages, additional
damages for emotional distress, punitive damages, prejudgment interest, and attorney’s fees
and costs. Sawyers demanded a judgment in the amount of $74,999 and waived any damages
recovered in excess of this demand.
¶5. On June 9, 2008, Herrin-Gear filed a motion to compel arbitration, a motion to dismiss
for insufficiency of service of process, and an answer and defenses. Herrin-Gear invoked its
1
In the complaint, Sawyers erroneously stated that the difference between the
$10,168.75 that her primary automobile insurer paid and the $14,234.55 that she owed
Nuvell was $4,141.55. The calculation actually yields a difference of $4,065.80.
2
Subtracting the $686.43 which American paid from the $4,065.80 difference yields
$3,379.37.
3
contractual right to arbitration under the arbitration agreement signed by Sawyers and an
agent of Herrin-Gear, which contained the following language:
Except for an action by Dealer to obtain possession and/or replevin of
the Vehicle, any controversy or claim between Buyer(s)/Lessee(s) and Dealer
arising out of or relating to: (1) the Offer to Purchase or Lease Vehicle
executed by Buyer(s)/Lessee(s) in connection with the purchase or lease of the
Vehicle, (2) the related contract for the purchase or lease of the Vehicle and/or
(3) any and all related finance, insurance, extended warranty and/or service
agreements (hereinafter collectively referred to as the “Agreements”), or any
breach thereof, and/or the Vehicle, shall be resolved by binding arbitration
administered by the Better Business Bureau (“BBB”), in accordance with (1)
BBB’s Commercial Arbitration Rules; (2) the Federal Arbitration Act, 9
U.S.C. § 1 et. seq. (1947, as amended); and (3) the terms and conditions set
forth in this agreement, and, judgment on any award rendered by the
Arbitrator(s) may be entered in any court having jurisdiction thereof.
¶6. In Sawyers’s response, she argued that the arbitration agreement was one-sided and
thus substantively unconscionable.3 American filed an answer asserting all rights concerning
the arbitrability of Sawyers’s claims; later, it filed a joinder in Herrin-Gear’s motion to
compel arbitration. American argued that, although it was a nonsignatory to the arbitration
agreement, Sawyers’s claims against American were so intimately intertwined with her
transaction with Herrin-Gear that Sawyers was equitably estopped from refusing to arbitrate
her claims against American, or, alternatively, that American was in a position to compel
arbitration as Herrin-Gear’s agent for administering the GAP waiver.
¶7. In a supplemental response, Sawyers argued that the GAP waiver was an insurance
policy subject to regulation by the Mississippi Department of Insurance. Sawyers argued that
3
As the trial court duly noted and as revealed by the record, “Plaintiff does not allege
that the Arbitration Agreement was procedurally unconscionable.”
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the arbitration agreement was unenforceable because it did not comply with the requirements
of the Mississippi Department of Insurance for arbitration agreements in insurance policies.
At a hearing on the motion to compel arbitration on July 22, 2008, American maintained that
the GAP waiver was not insurance, and proffered an April 17, 2000, bulletin from the
Mississippi Department of Insurance stating that the department had not determined that a
GAP waiver product is insurance.
¶8. On July 30, 2008, the Wayne County Circuit Court entered its Memorandum Opinion
and Order Granting Defendant’s Motion to Compel Arbitration. The trial court determined
that, since interstate wires were used in completing the transaction at issue, Sawyer’s claims
involved interstate commerce within the meaning of the FAA. The trial court also rejected
Sawyers’s argument that the arbitration agreement was substantively unconscionable, and
it opined that the GAP waiver was not an insurance policy. The trial court further determined
that American, although a nonsignatory, could compel arbitration because American was
acting as Herrin-Gear’s agent for administering GAP claims, and because each of Sawyers’s
claims against American presumed the existence of her contracts with Herrin-Gear. The trial
court did not dismiss the complaint, nor did it grant a stay pending arbitration.
¶9. Aggrieved by the trial court’s ruling, Sawyers filed a petition for interlocutory appeal,
which this Court granted.
DISCUSSION
¶10. Sawyers presents five issues for this Court’s consideration: (1) whether the arbitration
agreement between Sawyers and Herrin-Gear is unenforceable because it is substantively
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unconscionable; (2) whether the arbitration agreement between Sawyers and Herrin-Gear
cannot be enforced because its general purpose is to aid and protect Herrin-Gear and
American’s illegal enterprise of selling and administering unregistered insurance products;
(3) whether the arbitration agreement between Sawyers and Herrin-Gear does not apply to
Sawyers’s claims against American because the arbitration agreement clearly limits the
parties who can enforce the arbitration agreement to Sawyers and Herrin-Gear; (4) whether
Sawyers is equitably estopped from pursuing her claims against American, notwithstanding
the arbitration agreement Sawyers entered with Herrin-Gear; and (5) whether Sawyers is
precluded from pursuing her claims against American based on American’s allegation that
it is Herrin-Gear’s agent. Also, Herrin-Gear and American contend that this Court lacks
jurisdiction over this appeal pursuant to Section 16(b) of the Federal Arbitration Act (FAA).
See 9 U.S.C. § 16 (2006). We also find it necessary to discuss this Court’s appellate
jurisdiction over orders granting motions to compel arbitration and to resolve any ambiguity
that may appear in prior decisions of this Court on this issue. We combine and restate the
issues before us for the sake of today’s discussion.
I. WHETHER THIS COURT HAS JURISDICTION TO CONSIDER
THE MERITS OF THE TRIAL COURT’S ENTRY OF AN
ORDER COMPELLING ARBITRATION.
¶11. Section 16 of the FAA states:
(a) An appeal may be taken from–
(1) an order–
(A) refusing a stay of any action under section 3 of this title,
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(B) denying a petition under section 4 of this title to order
arbitration to proceed,
(C) denying an application under section 206 of this title to
compel arbitration,
(D) confirming or denying confirmation of an award or partial
award, or
(E) modifying, correcting, or vacating an award;
(2) an interlocutory order granting, continuing, or modifying an
injunction against an arbitration that is subject to this title; or
(3) a final decision with respect to an arbitration that is subject to this
title.
(b) Except as otherwise provided in section 1292(b) of title 28, an appeal may
not be taken from an interlocutory order–
(1) granting a stay of any action under section 3 of this title;
(2) directing arbitration to proceed under section 4 of this title;
(3) compelling arbitration under section 206 of this title; or
(4) refusing to enjoin an arbitration that is subject to this title.
9 U.S.C. § 16 (2006). Herrin-Gear and American argue that the trial court’s order was not
final, and that this Court, in Banks v. City Finance Co., 825 So. 2d 642 (Miss. 2002), found
the appellate courts do not have jurisdiction to entertain appeals of interlocutory orders
granting motions to compel arbitration. On the other hand, when a trial court order disposes
of an entire case on the merits, that order is final, and thus appealable.
¶12. Over the past few years, the procedural vehicles used by aggrieved parties to travel
to this Court for review of a trial court’s order granting or denying arbitration have varied.
7
Notwithstanding our decision in Banks, in subsequent cases, we have reviewed and
considered the issue of arbitration from parties who were aggrieved by the trial court’s entry
of an order granting a motion to compel arbitration. See Smith v. Captain D’s, LLC, 963 So.
2d 1116, 1118-19 (Miss. 2007) (interlocutory appeal from trial court’s entry of order granting
motion to compel arbitration and entry of final judgment of dismissal pursuant to Mississippi
Rule of Civil Procedure Rule 54(b), which this Court found should be treated as timely-filed
notice of appeal from final judgment; jurisdiction not raised); In Re Tyco Int’l (US), Inc.,
917 So. 2d 773, 776 (Miss. 2005) (direct appeal from trial-court order granting motion to
compel arbitration and denying Mississippi Rule of Civil Procedure 54(b) certification;
jurisdiction not raised); Sullivan v. Protex Weatherproofing, Inc., 913 So. 2d 256, 257
(Miss. 2005) (direct appeal from trial-court order granting motion to compel arbitration;
jurisdiction not raised); Sullivan v. Mounger, 882 So. 2d 129, 131 (Miss. 2004) (grant of
interlocutory appeal from trial-court order granting motion to compel arbitration); Russell
v. Performance Toyota, Inc., 826 So. 2d 719, 721 (Miss. 2002) (direct appeal from trial-
court order granting motion to compel arbitration; jurisdiction not raised).
¶13. On the other hand, we eventually simplified the process for parties aggrieved by a trial
court’s denial of a motion to compel arbitration. In a case which was not before the Court by
way of an interlocutory appeal or a judgment certified pursuant to Mississippi Rule of Civil
Procedure 54(b), we held that a direct appeal may be taken from a trial-court order denying
a motion to compel arbitration. Tupelo Auto Sales v. Scott, 844 So. 2d 1167, 1169-70 (Miss.
2003).
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¶14. A review of these cases causes us to conclude that this Court has an inconsistent
procedural history in reviewing our trial courts’ actions in granting or denying motions to
compel arbitration. We thus wish to establish via today’s case but one procedure for this
Court’s review of a trial court’s grant or denial of a motion to compel arbitration, and that
one procedure shall be via a direct appeal pursuant to the provisions of Mississippi Rules of
Appellate Procedure 3 & 4.
¶15. Although Section 16(b) of the FAA states that “an appeal may not be taken from an
interlocutory order directing arbitration to proceed under section 4 of this title” or
“compelling arbitration under section 206 of this title,” Section 16(a)(3) states that “[a]n
appeal may be taken from a final decision with respect to an arbitration that is subject to this
title.” 9 U.S.C. 16(a)(3) (2006). More than fifty years ago, this Court held that a decree
forcing arbitration “partook of the nature of a final decree, since once arbitration was
accomplished, all of the relief prayed for by appellees would have been granted.” Mach.
Prods. Co. v. Prairie Local Lodge No. 1538 of Int’l Ass'n, 230 Miss. 809, 94 So. 2d 344,
346 (1957) (overruled on other grounds). Although this Court went on to hold that
arbitration could not be binding, we nonetheless voiced a vital sentiment. When binding
arbitration is compelled, there is nothing left for the court to do but enforce the award. It is
inconsequential whether an appeal is titled as interlocutory when the court only has to
supervise compliance with an arbitration order or enforce an arbitration award. It is on this
issue that this Court now overrules Banks and any other prior decisions of this Court to the
extent they hold otherwise.
9
¶16. In Green Tree Financial Corp.-Alabama v. Randolph, 531 U.S. 79, 121 S. Ct. 513,
517, 148 L. Ed. 2d 373 (2000), the United States Supreme Court addressed “whether an order
compelling arbitration and dismissing a party’s underlying claims is a ‘final decision with
respect to an arbitration’ within the meaning of § 16(a)(3).” The Court stated:
Section 16(a)(3), however, preserves immediate appeal of any “final decision
with respect to an arbitration,” regardless of whether the decision is favorable
or hostile to arbitration. And as petitioners and respondent agree, the term
“final decision” has a well-developed and longstanding meaning. It is a
decision that “‘ends the litigation on the merits and leaves nothing more for the
court to do but execute the judgment.’” Digital Equipment Corp. v. Desktop
Direct, Inc., 511 U.S. 863, 867, 114 S. Ct. 1992, 128 L. Ed. 2d 842 (1994),
and Coopers & Lybrand v. Livesay, 437 U.S. 463, 467, 98 S. Ct. 2454, 57 L.
Ed. 2d 351 (1978) (both quoting Catlin v. United States, 324 U.S. 229, 233,
65 S. Ct. 631, 89 L. Ed. 911 (1945)). See also St. Louis, I.M. & S.R. Co. v.
Southern Express Co., 108 U.S. 24, 28-29, 2 S. Ct. 6, 27 L. Ed. 638 (1883).
Because the FAA does not define “a final decision with respect to an
arbitration” or otherwise suggest that the ordinary meaning of “final decision”
should not apply, we accord the term its well-established meaning. See Evans
v. United States, 504 U.S. 255, 259-260, 112 S. Ct. 1881, 119 L. Ed. 2d 57(1992).
Id. at 519. The Court concluded “that where, as here, the District Court has ordered the
parties to proceed to arbitration, and dismissed all the claims before it, that decision is ‘final’
within the meaning of § 16(a)(3), and therefore appealable.” Id. at 521. Further, “[t]he FAA
does permit parties to arbitration agreements to bring a separate proceeding in a district court
to enter judgment on an arbitration award once it is made (or to vacate or modify it), but the
existence of that remedy does not vitiate the finality of the District Court’s resolution of the
claims in the instant proceeding.” Id. at 520 (citing 9 U.S.C. §§ 9, 10, 11).
10
¶17. In Banks, we held that Green Tree was distinguishable from the case then before us.
Looking now at Banks in the rear-view mirror with more than seven years of experience by
this Court in addressing numerous arbitration issues, we today conclude that we were simply
wrong in Banks and that Green Tree is not distinguishable from Banks, nor is Green Tree
distinguishable from today’s case. In Banks, this Court attempted to distinguish Green Tree
based on the fact that “in Green Tree, the Plaintiffs’ claims were dismissed with prejudice,
thus ending the suit in the district court,” whereas in Banks, “the order which compelled
arbitration did not dismiss the claims nor end the lawsuit.” Banks, 825 So. 2d at 646. Quite
frankly, this conclusion in Banks failed to recognize the crux of the Green Tree decision:
“Because the FAA does not define “a final decision with respect to an arbitration” or
otherwise suggest that the ordinary meaning of “final decision” should not apply, we accord
the term its well-established meaning.” Green Tree, 121 S. Ct. at 519 (citation omitted).
¶18. The Fifth Circuit Court of Appeals has reiterated the well-established meaning of
“final decision,” stating that it is “one that ‘ends the litigation on the merits and leaves
nothing more for the court to do but execute the judgment.’” Am. Heritage Life Ins. Co. v.
Orr, 294 F.3d 702, 707 (5th Cir. 2002) (quoting Green Tree, 121 S. Ct at 519) (citations
omitted). The Fifth Circuit was faced with an argument similar to the one before us today;
the appellees in Orr argued “that because the district court’s order compelled arbitration and
‘closed’ the case instead of compelling arbitration and ‘dismissing’ the case, this court lacks
jurisdiction to hear the appeal of the ruling of the district court.” Id. The Court determined
that “[b]y distinguishing the terms ‘dismiss’ and ‘close’ as they apply to disposition of a case,
11
Appellees attempt to thwart the Court’s instruction in Green Tree to apply the well-
established meaning of ‘final decision,’” and “[t]here is no practical distinction . . . . [t]he
application of each word results in a termination on the merits, leaving the judgment-
rendering court with nothing more to do but execute the judgment.” Id. at 707-08. In
today’s case, regardless of the fact that we are neither faced with a stay nor a dismissal, the
trial court has nothing left to do but supervise compliance with an order for arbitration or
enforce an arbitration award. Orr, 294 F.3d at 715. See also Banks, 825 So. 2d at 650 (Diaz,
J., dissenting). Thus, “[t]here is nothing interlocutory about an order compelling arbitration
that does all the court has to do.” Id. at 714 (citations omitted).
¶19. In an effort to provide uniformity and judicial economy, this Court holds today that
an order compelling arbitration which disposes of all the issues before the trial court or orders
the entire controversy to be arbitrated is a final decision, and therefore, immediately
appealable. Further, any final decision with respect to arbitration is appealable to this Court
pursuant to Mississippi Rules of Appellate Procedure 3 and 4. See M.R.A.P. 3, 4. As stated
by our learned colleagues from the Supreme Court of New Jersey,
When the parties are ordered to arbitration, the right to appeal should not turn
on whether a trial court decides to stay the action or decides to dismiss the
action. Rather, the same result should apply in either case. In that way the
parties will know with relative certainty that the order is appealable as of right.
Wein v. Morris, 194 N.J. 364, 379, 944 A. 2d 642, 650 (2008). The trial court order in
today’s case compelled arbitration of the entire controversy as to all parties. As such, we
find that this Court has appellate jurisdiction over the present matter pursuant to Section
12
16(a)(3) of the FAA. See 9 U.S.C. § 16(a)(3) (2006). To the extent that Banks and its
progeny are in conflict with today’s decision, those cases are overruled.
II. WHETHER THE ARBITRATION AGREEM ENT IS
SUBSTANTIVELY UNCONSCIONABLE.
¶20. This Court reviews the grant or denial of a motion to compel arbitration de novo. East
Ford, Inc. v. Taylor, 826 So. 2d 709, 713 (Miss. 2002). “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). Consistent with the position taken by the United States Supreme
Court’s interpretation of the FAA, this Court has followed the federal policy favoring
arbitration. See East Ford, 826 So. 2d at 713; IP Timberlands Operating Co. v. Denmiss
Corp., 726 So. 2d 96, 103-04 (Miss. 1998).
¶21. Sawyers argues that the trial court erred in enforcing the arbitration agreement
because it is substantively unconscionable. In Covenant Health & Rehabilitation of
Picayune, LP v. Estate of Moulds ex rel. Braddock, this Court stated:
Under “substantive unconscionability, we look within the four corners of an
agreement in order to discover any abuses relating to the specific terms which
violate the expectations of, or cause gross disparity between, the contracting
parties.” Stephens, 911 So. 2d at 521. Substantive unconscionability is proven
by oppressive contract terms such that ‘there is a one-sided agreement whereby
one party is deprived of all the benefits of the agreement or left without a
remedy for another party's nonperformance or breach . . . .’ Holyfield, 476 F.
Supp. at 110.
13
...
Our courts may remedy unconscionable agreements as follows:
“The law of Mississippi imposes an obligation of good faith and fundamental
fairness in the performance of every contract . . . this requirement is so
pronounced that courts have the power to refuse to enforce any contract . . . in
order to avoid an unconscionable result.” Section 75-2-302 of the Mississippi
Code provides: “If the court as a matter of law finds the contract to have been
unconscionable . . . [it] may refuse to enforce the contract, or it may enforce
the remainder of the contract without the unconscionable clause, or it may so
limit the application of any unconscionable clause as to avoid any
unconscionable result.”
Covenant, 14 So. 3d 695, 699-700. Unconscionability has been defined also as “‘an absence
of meaningful choice on the part of one of the parties, together with contract terms which are
unreasonably favorable to the other party.’” Entergy Miss., Inc. v. Burdette Gin Co., 726
So. 2d 1202, 1207 (Miss. 1998). More specifically, Sawyers contends that the arbitration
agreement provides an avenue for Herrin-Gear to pursue its claims in a court of law, while
requiring Sawyers to arbitrate all claims; the arbitration agreement requires the arbitration
be held in the city where Herrin-Gear is located; the arbitrator cannot award Sawyers
damages for attorney’s fees, lost wages, mental anguish, costs, interest, or punitive damages;
and Sawyers is required to give up her right to a judge and jury, while Herrin-Gear is not.
¶22. The arbitration agreement does permit Herrin-Gear to bring an action for possession
and/or replevin of the vehicle purchased by Sawyers in a court of law rather than resolving
the matter by binding arbitration. However, mutuality of obligation is not required for a
contract to be enforceable. Murphy v. AmSouth Bank, 269 F. Supp. 2d 749, 752 (S.D. Miss.
2003). See also McKenzie Check Advance of Miss., LLC v. Hardy, 866 So. 2d 446, 453
14
(Miss. 2004) (“[p]ursuant to Mississippi law, mutuality of obligation is not required for an
arbitration agreement to be enforceable. . .”). Also, as discussed by the trial court, “[i]t is
common for such provisions to be contained in an arbitration agreement where there is
collateral or a security interest at stake, because an arbitrator would not have authority to
grant certain relief that only courts could give.” As such, the provision whereby a limited
exception to arbitration is given only to Herrin-Gear to obtain possession of the subject
vehicle by replevin in the event of Sawyer’s default under the terms of the sales contract
does not render the arbitration agreement substantively unconscionable.
¶23. Further, Sawyers’s contention that the arbitration agreement requires her to give up
the right to a judge and jury while Herrin-Gear is not subject to the same requirement is
without merit. The arbitration agreement states that “any controversy or claim between
Buyer(s)/Lessee(s) and Dealer . . . shall be resolved by binding arbitration.” The only very
limited exception is the one discussed supra, concerning the right of replevin on the part of
Herrin-Gear. The fact that there is also a clause stating, “Buyer(s)/Lessee(s) acknowledge
and agree that by agreeing to arbitrate as set forth herein, Buyer(s)/Lessee(s) give up the right
to go to court and the right to a jury trial,” does not make the agreement one-sided. The
clause merely reinforces the previous notion of binding arbitration and thus emphasizes the
point that the buyer(s)/lessee(s) understand the rights that they are relinquishing. A party
such as Herrin-Gear already would be aware of the relinquishment of these rights, since it
obviously was responsible for drafting the document containing the arbitration agreement.
Sawyers also asserts that the arbitration agreement is substantively unconscionable in that
15
it requires that “[a]ny Arbitration proceeding shall be conducted in the city where Dealer’s
dealership is located.” This Court agrees with the trial court’s analysis here:
Since Plaintiff purchased the automobile in Jackson, it is not unreasonable that
she would expect to have to bring a lawsuit regarding that automobile in
Jackson. Moreover, the Plaintiff has not provided any evidence of any kind
of hardship that would be caused if she were required to arbitrate in Jackson.
The Court finds that Plaintiff has not established that this provision is unfair.
Certainly, if Sawyers was able to make the journey to Jackson to purchase her vehicle, the
arbitration agreement is not one-sided as to deprive Sawyers of all its benefits simply because
she has to drive approximately 150 miles from Waynesboro to Jackson.
¶24. Lastly, Sawyers argues that the arbitration agreement maintains that the arbitrator
cannot award Sawyers damages for attorney’s fees, lost wages, mental anguish, costs, interest
or punitive damages. The trial court determined that “the parties have not agreed to limit any
remedies that could be awarded in arbitration,” and “there is no limitation on remedies that
can be awarded by the arbitrator under the applicable [Better Business Bureau] Rules.” The
Arbitration Agreement does state that “[t]o the extent permitted by law, the Arbitrator(s)
shall have no authority to award punitive damages or other damages not measured by the
prevailing party’s actual damages . . . .” Like the trial court, we do not interpret this clause
as an agreement by the parties to limit any of the remedies which might be awarded in
arbitration. Even so, the parties may be limited as to the amount of punitive damages which
might be awarded, since such an award would have to be “measured by the prevailing party’s
actual damages,” but such limitation is by no means unreasonable. Additionally, this clause
certainly does not dispose of Sawyers’s right to any compensatory or actual damages.
16
¶25. Our analysis is supported by the Supreme Court of the United States, which has held
that on the issue of punitive damages, “[t]he precise [punitive damages] award in any case,
of course, must be based upon the facts and circumstances of the defendant’s conduct and
the harm to the plaintiff,” and there must be efforts to “ensure that the measure of punishment
is both reasonable and proportionate to the amount of harm to the plaintiff and to the general
damages recovered.” State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 425-26,
123 S. Ct. 1513, 1524, 155 L. Ed. 2d 585 (2003). The Campbell Court likewise stated that
“each [punitive damages] award must comport with the principles set forth in Gore.”
Campbell, 538 U.S. at 427, 123 S. Ct. at 1525 (citing BMW of N. Am., Inc. v. Gore, 517
U.S. 559, 116 S. Ct. 1589, 134 L. Ed. 2d 809 (1996)). We thus find our analysis on this issue
is not inconsistent with the United States Supreme Court’s analysis in Campbell.
¶26. Sawyers cites Pitts v. Watkins, 905 So. 2d 553, 557 (Miss. 2005) (home purchasers
sued home inspector alleging breach of duty, misrepresentation, breach of contract, gross
negligence, and negligence) for the proposition that a limitation-of-liability clause which
leaves a party with no adequate remedy is substantively unconscionable. While this
proposition undoubtedly is true, today’s case is easily distinguishable from Pitts, inasmuch
as Sawyers is left with the ability to seek any “damages measured by the prevailing party’s
actual damages.” In Pitts, liability was limited to $265, the amount paid for the home
inspection at issue, and no recovery was available for consequential damages. Id. at 556.
This is certainly not the situation before the Court today, and in this respect, Pitts is
inapplicable.
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¶27. The arbitration agreement at issue is not so one-sided that Sawyers is deprived of all
the benefits of the agreement or left without a remedy for Herrin-Gear’s nonperformance or
breach. Thus, for the reasons stated, the trial court did not commit error in finding that the
arbitration agreement was not substantially unconscionable. Accordingly, this issue has no
merit.
III. WHETHER HERRIN-GEAR AND AMERICAN ARE
INVOLVED IN THE ILLEGAL ENTERPRISE OF SELLING
AND ADMINISTERING UNREGISTERED INSURANCE.
¶28. Sawyers asserts that the arbitration agreement is “unenforceable because the principal
purpose of the arbitration agreement is to directly furnish aid and protection to an illegal
enterprise, namely, . . . American and Herrin’s agreement to sell and administrate
unregistered insurance,” the GAP waiver. For this argument, Sawyers cites Mississippi Code
Section 83-5-5, which defines “insurance company” and “contract of insurance.” See Miss.
Code Ann. § 83-5-5 (Rev. 1999). As stated by the trial court, based on those definitions,
“one could certainly argue that the Agreement is in fact an insurance policy.” However, the
Mississippi Insurance Department stated in its April 17, 2000, Bulletin No. 2000-2:
At this time, the Mississippi Insurance Department has not determined whether
a gap waiver product that is sold to the consumer is insurance. We are taking
this issue under advisement and may propose legislation requiring certain
disclosures to protect the consumer in the next legislative session. Since the
Mississippi Insurance Department is not currently taking the position that the
gap waiver product sold by the lender, car dealership, third party administrator
etc., to the consumer is insurance, the Mississippi Department of Banking and
Consumer Finance will not regulate the amount that is charged to the
borrower/consumer for the product under Miss. Code Ann. § 63-19-33 (Supp.
1999).
18
Nothing in the record indicates that since this Bulletin, the Mississippi Department of
Insurance or the Legislature has made any ruling that GAP waiver products are insurance.
¶29. Furthermore, this Court is of the firm opinion that this determination is best left to the
Mississippi Insurance Department and the Mississippi Legislature. Thus, we find guidance
in the language set forth in the Bulletin, dated April 17, 2000, that a GAP waiver product
sold by the car dealership to the consumer is not insurance. See Miss. Power & Light Co.
v. Cook, 832 So. 2d 474, 480 (Miss. 2002) (“the doctrine of primary jurisdiction ‘determines
whether the court or the agency should make the initial decision’”) (quoting Campbell Sixty-
Six Express, Inc. v. J. & G. Express, Inc., 244 Miss. 427, 141 So. 2d 720, 725 (1962)).
Therefore, Sawyers’s claims that Herrin-Gear and American are engaged in an illegal
enterprise are without merit, and the other allegations asserted by Sawyers regarding these
companies’ potential insurance violations should be directed to the Commissioner of
Insurance.4 See Miss. Code Ann. §§ 83-5-1 to 83-6-35 (Rev. 1999).
IV. WHETHER THE ARBITRATION AGREEMENT APPLIES TO
SAWYERS’S CLAIMS AGAINST AMERICAN.
¶30. Sawyers submits that the arbitration agreement applies only to claims between
Sawyers and Herrin-Gear; that the trial court erred in finding that Sawyers is equitably
estopped from pursuing her claims against American in court; and that the trial court erred
in enforcing the arbitration agreement as to American based on its finding that American is
4
Sawyers also argues that Herrin-Gear and American formed an insurance company
holding system.
19
Herrin-Gear’s agent. Sawyers and Herrin-Gear are the only parties who signed both the
arbitration agreement and the GAP waiver; however, all of Sawyers’s claims against
American presume the existence of a contractual relationship between Sawyers and
American. American asserts that it may compel arbitration as a nonsignatory to the
arbitration agreement based on the doctrines of equitable estoppel and agency, and further,
that nothing in the arbitration agreement specifically prevents a third party from participating
in arbitration or enforcing the terms of the arbitration agreement.
¶31. Sawyers cites Qualcomm, Inc. v. American Wireless License Group, LLC, 980 So.
2d 261, 269 (Miss. 2007), in support of her contention that only the parties listed in the
arbitration agreement have the ability to compel arbitration. However, Sawyers fails to
consider that, in Qualcomm, the Court was “faced with the unique situation of non-
signatories attempting to enforce an arbitration provision against other non-signatories.” Id.The Court went on to state that “[t]here are exceptions to the general rule that non-signatories
may not be bound, which our Court has repeatedly recognized. For instance, a non-signatory
may be able to enforce an arbitration agreement against a signatory where the non-signatory
has a close legal relationship with a signatory of the agreement.” Id. (citing B.C. Rogers
Poultry, Inc. v. Wedgeworth, 911 So. 2d 483, 491-92 (Miss. 2005)). In today’s case,
American was acting on Herrin-Gear’s behalf in administering the GAP waiver. Sawyers
entered into the GAP waiver with Herrin-Gear and had no agreement with American;
however, it is apparent from the parties’ actions that an agreement existed between Herrin
Gear and American to the extent that American supervised payment to Sawyers under the
20
GAP waiver. Also, American was listed on the GAP waiver as the administrator. Herrin-
Gear and American unquestionably maintained a close legal relationship.
¶32. In Wedgeworth, this Court stated:
[S]tate 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.
....
Wedgeworth, 911 So. 2d at 491-92.
¶33. As we have already discussed supra, Sawyers’s allegations against Herrin-Gear and
American involved “substantially interdependent and concerted misconduct” between
Herrin-Gear (a signatory) and American (a nonsignatory), which maintained “a close legal
relationship, such as, . . . [an] agency relationship.” Wedgeworth, 911 So. 2d at 492.
¶34. Also, in Fradella v. Seaberry, 952 So. 2d 165, 175 (Miss. 2007), this Court held:
But for the real estate contract containing the arbitration clause at issue, the
Seaberrys could not bring a claim of breach of contract. Because the Seaberrys
rely on the document for their breach of contract claim, they cannot deny
Fradella the benefit of the arbitration clause within the real estate contract that
21
she relied upon to delineate her duties and responsibilities with regard to the
transaction.
Id. at 175. In today’s case, Sawyers relied on her agreements with Herrin-Gear and the
alleged representations of Herrin-Gear in filing suit against American. Because Sawyers
relies on these agreements and alleged representations, she cannot deny American the benefit
of the arbitration agreement which was an integral part of the transaction at issue. As such,
arbitration of Sawyers’s claims against American is appropriate.
¶35. We do not come to this conclusion flippantly, acknowledging that the doctrine of
equitable estoppel is indeed an extraordinary remedy which courts should invoke cautiously,
only when necessary “‘to prevent unconscionable results.’” Wedgeworth, 911 So. 2d at 491
(citing Harrison Enters., Inc. v. Trilogy Commc’ns, Inc., 818 So. 2d 1088, 1095 (Miss.
2002)). With this premise in mind, we are constrained to find that this issue is without merit.
CONCLUSION
¶36. For the reasons stated, the Wayne County Circuit Court’s Order Granting Defendant’s
Motion to Compel Arbitration is affirmed.
¶37. AFFIRMED.
WALLER, C.J., RANDOLPH, LAMAR AND PIERCE, JJ., CONCUR.
KITCHENS, J., DISSENTS WITH SEPARATE WRITTEN OPINION JOINED BY
GRAVES, P.J. CHANDLER, J., DISSENTS WITH SEPARATE WRITTEN
OPINION. DICKINSON, J., NOT PARTICIPATING.
KITCHENS, JUSTICE, DISSENTING:
¶38. Although I agree that this Court has jurisdiction to review the trial court’s order
compelling arbitration, I disagree with the majority’s conclusion that the arbitration
22
agreement is not unconscionable. Despite the majority’s attempt to distinguish Pitts v.
Watkins, 905 So. 2d 553 (Miss. 2005), from the instant case, I find no significant difference
in the two agreements. In Pitts, this Court held that an arbitration agreement was
unconscionable because it allowed one party to seek redress in a court of law but bound the
other party to arbitration, limited the amount of damages that could be awarded, and
prohibited punitive damages. Id. Because the arbitration agreement in this case contains the
same terms, our precedent requires reversal.
¶39. First, the majority finds that the agreement is not one-sided because Herrin-Gear’s
ability to pursue an action in a court of law is limited to the right of replevin.5 However, in
Pitts, the defendant’s right to pursue an action against the plaintiff in a court of law was
likewise limited. The underlying dispute in Pitts involved a home inspection, and the
contract between the home owners, the Pittses, and the inspector, Watkins, provided that
“[a]ny dispute concerning the interpretation of this Agreement or arising from the Inspection
and Report (unless based on payment of fee) shall be resolved by . . . arbitration.” Id. at 556(emphasis in original). According to this Court, such language “maintain[ed] Watkins’s
ability to pursue a breach by Pitts in a court of law, while Pitts [wa]s required to arbitrate any
5
The majority also states that “mutuality of obligation is not required for a contract
to be enforceable.” Maj. Op. at ¶ 22 (citing Murphy v. AmSouth Bank, 269 F. Supp. 2d 749,
752 (S.D. Miss. 2003). Yet, the opinion omits a vital portion of this rule. Our law holds that
“mutuality of obligation is not required for an arbitration agreement to be enforceable as long
as there is consideration.” McKenzie Check Advance of Miss., LLC v. Hardy, 866 So. 2d
446, 453 (Miss. 2004) (emphasis added).
23
alleged breached by Watkins.” Therefore, this Court held the arbitration clause to be “clearly
one-sided, oppressive, and therefore, substantively unconscionable.” Id.
¶40. The language allowing Herrin-Gear to seek redress in a court of law for replevin is
indistinguishable in principle from the language allowing Watkins to pursue a collection
action in a court of law. As in the Pitts case, Herrin-Gear is the only party entitled to utilize
a court of law to seek a remedy for a wrong that it might suffer.
¶41. Second, like the agreement in Pitts, the arbitration agreement between Sawyers and
Herrin-Gear clearly limits liability to actual damages: “the Arbitrator(s) shall have no
authority to award punitive damages or other damages not measured by the prevailing party’s
actual damages.” Curiously, and despite this clear language, the trial court found, and the
majority agrees, that “the parties have not agreed to limit any remedies.” Maj. Op. at ¶ 24.
Moreover, although the agreement specifically prohibits punitive damages, the majority
reasons that the parties are simply “limited as to the amount of punitive damages since such
an award would have to be ‘measured by the prevailing party’s actual damages.’” Maj. Op.
¶ 24. With utmost respect, this analysis is not workable. Punitive damages are “damages
awarded in addition to actual damages.” Black’s Law Dictionary 418 (8th ed. 1999)
(emphasis added). If it is true, as the majority finds, that the agreement would allow Sawyers
to recover anything beyond her actual damages, then it provides no method for calculating
the amount of her recovery. If the amount is to be “measured by the prevailing party’s actual
damages,” how is such a measurement to be accomplished? The agreement provides no
24
answer, so Sawyers is limited to recovering, at most, the $3,355.12 she claims that she is
owed under the GAP waiver.6
¶42. Thus, the majority’s effort to distinguish Pitts on this issue fails. In Pitts the plaintiffs
were limited to recovering the cost of inspection and explicitly were barred from recovering
consequential or punitive damages. Id. at 556. Although Sawyers can recover more than the
$265 inspection fee in Pitts, she still is limited to a few thousand dollars and is precluded
from obtaining any amount of consequential or punitive damages. Without the ability to
recover even the costs of proving her case (i.e., attorney fees, costs, expert fees, interest,
etc.), the agreement is wholly inequitable. As this Court has recognized, “[c]lauses that limit
liability are given strict scrutiny by this Court and are not to be enforced unless the limitation
is fairly and honestly negotiated and understood by both parties.” Id. (quoting Royer Homes
of Miss., Inc. v. Chandeleur Homes, Inc., 857 So. 2d 748, 754 (Miss. 2003)).7
6
Although the majority cites State Farm Mutual Automobile Insurance Co. v.
Campbell, 538 U.S. 408, 123 S. Ct. 1513, 155 L. Ed. 2d 585 (2003), that opinion provides
no assistance. Indeed, in Campbell, the United States Supreme Court refused to recognize
any methodology for determining punitive damages. Id. at 424-25 (“We have consistently
rejected the notion that the constitutional line is marked by a simple mathematical formula,
even one that compares actual and potential damages to the punitive award.”) (quoting BMW
of N. Am., Inc. v. Gore, 517 U.S. 599, 116 S. Ct. 1589, 134 L. Ed. 2d 809 (1996)). Thus,
Campbell offers no formula by which punitive damages could be calculated, if they were not
prohibited.
7
The Pitts opinion also pointed out that the arbitration agreement attempted to reduce
the statutory three-year statute of limitations to one year, but this clause was simply “further
evidence” of the contract’s unconscionability. Pitts, 905 So. 2d at 558.
25
¶43. The same terms that rendered the Pitts arbitration agreement unconscionable are
before us in the instant case. Because there is no legally significant distinction between the
two contracts, the terms of Herrin-Gear’s arbitration agreement are unconscionable and
unenforceable. For these reasons, I respectfully dissent.
GRAVES, P.J., JOINS THIS OPINION.
CHANDLER, JUSTICE, DISSENTING:
¶44. Today Mississippi departs from the rule embraced by the majority of states, which
holds that an order that merely compels a dispute to arbitration is not a final, appealable
judgment. Chem-Ash, Inc. v. Ark. Power & Light Co., 751 S.W. 2d 353, 354-55 (Ark.
1988); Ruesga v. Kindred Nursing Ctrs., LLC, 161 P. 3d 1253, 1257 (Ariz. Ct. App. 2007);
Parada v. Superior Court, 98 Cal. Rptr. 3d 743, 753 (Cal. App. 4th Dist. 2009); Ferla v.
Infinity Dev. Assocs., Inc., 107 P. 3d 1006, 1008 (Colo. Ct. App. 2004); Evans v. Dreyfuss
Bros., Inc., 971 A. 2d 179, 186 (D.C. 2009); Goshayeshi v. Mehrabian, 501 S.E. 2d 265,
266 (Ga. Ct. App. 1998); Dan Wiebold Ford, Inc. v. Universal Computer Consulting
Holding, Inc., 127 P. 3d 138, 141 (Idaho 2005); National Educ. Assoc.-Topeka v. Unified
Sch. Dist. No. 501, 925 P.2d 835, 844 (Kan. 1996); Fayette County Farm Bureau Fed’n v.
Martin, 758 S.W. 2d 713, 714 (Ky. Ct. App. 1988); Collins v. Prudential Ins. Co. of
America, 752 So. 2d 825, 829 (La. 2000); Creamer v. Bishop, 902 A. 2d 838, 839 (Me.
2006); Commonwealth v. Phillip Morris Inc., 864 N.E. 2d 505, 511 n.9 (Mass. 2007); Miyoi
v. Gold Bond Stamp Co. Employees Ret. Trust,196 N.W. 2d 309, 310 (Minn. 1972); State
26
ex rel. Bruning v. R.J. Reynolds Tobacco Co., 746 N.W. 2d 672, 678 (Neb. 2008); State ex
rel. Masto v. Second Judicial Dist. Court ex rel. County of Washoe, 199 P.3d 828, 832
(Nev. 2009); N.C. Elec. Membership Corp. v. Duke Power Co., 381 S.E. 2d 896, 899 (N.C.
Ct. App. 1989); Superpumper, Inc. v. Nerland Oil, Inc., 582 N.W. 2d 647, 652 (N.D. 1998);
Ass’n of Unit Owners of Bridgeview Condos v. Dunning, 69 P.3d 788, 801 (Or. 2003);
Schantz v. Dodgeland, 830 A.2d 1265, 1266 (Pa. Super. 2003); Widener v. Fort Mill Ford,
674 S.E. 2d 172, 173-74 (S.C. Ct. App. 2009); Dakota Wesleyan Univ. v. HPG Int’l, Inc.,
560 N.W. 2d 921, 923-24 (S.D. 1997); T.R. Mills Contractors, Inc. v. WRH Enters., LLC,
93 S.W. 3d 861, 865 (Tenn. Ct. App. 2002); In re Gulf Exploration, LLC, 289 S.W. 3d 836,
839 (Tex. 2009); Powell v. Cannon, 179 P.3d 799, 805 (Utah 2008); Seguin v. Northrop
Grumman Sys. Corp., 672 S.E. 2d 877, 879 (Va. 2009); Herzog v. Foster & Marshall, Inc.,
783 P.2d 1124, 1129 (Wash. Ct. App. 1989); McGraw v. American Tobacco Co., 681 S.E.
2d 96, 106 (W. Va. 2009).
¶45. The Federal Arbitration Act (FAA) permits appeals from final orders that compel
arbitration, but it does not permit appeals from interlocutory orders that compel arbitration.
9 U.S.C. § 16(a)(3), (b) (2006). In Banks v. City Finance Co., 825 So. 2d 642, 647-48
(Miss. 2002), this Court held that, in accordance with federal precedent, an order that
compels arbitration is not a final, appealable judgment unless the trial court also dismisses
the claims before the court. In Banks, the trial court had entered an order compelling all of
the plaintiffs’ claims to arbitration. Id. at 644. The plaintiffs filed a timely notice of appeal
27
pursuant to Mississippi Rule of Appellate Procedure 4(a). Id. After examining the United
States Supreme Court case of Green Tree Financial Corp.-Ala. v. Randolph, 531 U.S. 79,
121 S. Ct. 513, 148 L. Ed. 2d 373 (2000), this Court determined that the order at issue was
interlocutory. Id. at 648.
¶46. In Green Tree, the district court had granted the motion to compel arbitration, denied
all other motions, and dismissed the plaintiffs’ claims with prejudice. Id. at 83. On
certiorari, the petitioners argued that Section 16(b) prohibited an appeal of the order because
the order compelled arbitration. Id. at 86. The Supreme Court observed that an order
compelling arbitration may be appealed under Section 16(a)(3) if the order is “a final
decision with respect to an arbitration.” Id. The Supreme Court determined that, because the
FAA does not define “a final decision with respect to an arbitration,” the term “final
decision” would be given its well-established meaning of “a decision that ends the litigation
on the merits and leaves nothing more for the court to do but execute the judgment.” Id.
¶47. Applying this standard, the Supreme Court held that the order compelling arbitration
was a final, appealable order because it directed that all claims be resolved by arbitration, and
it dismissed all claims with prejudice, leaving the court with nothing to do but execute the
judgment. Id. The Supreme Court concluded that, when a district court compels arbitration
and dismisses the claims before it, the decision is final and, therefore, appealable under
Section 16(a)(3). Id. at 89. Conversely, an order that compels arbitration and stays the
28
litigation “would not be appealable” under Section 16 because such an order is not “a final
decision with respect to an arbitration.” 8 Id. at 87 n.2 (citing 9 U.S.C. § 16(b)(1)).
¶48. After reviewing Green Tree, this Court in Banks held that the order before the Court
was not final because the order did not dismiss the action on the merits nor end the lawsuit.
Banks, 825 So. 2d at 646. Rather, the order “simply compelled arbitration.” Id. at 647.
Therefore, the Court held that the order was interlocutory. Id. at 648. This holding
comported with Green Tree’s statement that, for the purposes of appealablity under Section
16(a)(3), a final decision is one that “ends the litigation on the merits and leaves nothing
more for the court to do but execute the judgment.” Green Tree, 531 U.S. at 86. Unlike a
“final decision,” an order that merely compels arbitration and does not dismiss the underlying
lawsuit contemplates further action by the trial court, which retains jurisdiction to supervise
compliance with the arbitration order and to enter an order confirming the arbitration award.
Therefore, the order that compelled arbitration in this case, like the order that compelled
arbitration in Banks, was interlocutory and clearly distinguishable from the final order that
compelled arbitration and dismissed the action in Green Tree.
¶49. The Fifth Circuit adheres to the same view this Court espoused in Banks, which is that
an order that compels arbitration, but does not dismiss the underlying proceedings, is not an
appealable order. CitiFinancial Corp. v. Harrison, 453 F.3d 245, 250 (5th Cir. 2006). In
8
For the purposes of this analysis, I draw no distinction between an order that merely
compels arbitration, and an order that compels arbitration and also stays the litigation; both
of these orders have the practical effect of delaying the litigation while the case proceeds to
arbitration. See McCowan v. Dean Witter Reynolds, 889 F.2d 451, 453 (2d Cir. 1989).
29
Harrison, the district court compelled arbitration, stayed the litigation, and administratively
dismissed the case, with the provision that any remaining party could move to reopen the
case if further judicial intervention was necessary. Id. The Fifth Circuit’s analysis of
whether the order constituted a “final decision” under Section 16(a)(3) of the FAA focused
upon whether the order was the functional equivalent of a dismissal under Green Tree. Id.
at 250-51. The court stated that, when a case is “dismissed,” it is “removed from the docket,
terminated indefinitely, and restarted only upon the filing of a new complaint.” Id at 251.
In contrast to a “dismissed” case, an “administratively dismissed” or “administratively
closed” case may be reopened; thus, it remains on the “inactive docket” of the district court
and equates to a stay, prohibiting appellate review. Id. The court distinguished American
Heritage Life Insurance Co. v. Orr, 294 F.3d 702 (5th Cir. 2002). Id. at 251 n.11. In Orr,
the court had held that a district court order stating that a case was “closed,” as opposed to
“administratively closed,” was the functional equivalent of a dismissal, and thus was a “final
decision” under Section 16(a)(3) of the FAA. Orr, 294 F.3d at 707-08. Thus, in Harrison
and Orr, the Fifth Circuit determined the question of finality by considering whether the
district court’s disposition was the functional equivalent of a dismissal under Green Tree.
This is the same analysis this Court employed in Banks and rejects today.
¶50. This Court now deems an order that merely compels a dispute to arbitration to be a
“final decision” that ends the litigation on the merits and leaves the trial court with nothing
to do but execute the judgment. The Court so holds despite the fact that, under such an order,
the trial court retains jurisdiction to supervise compliance with the order and to enforce an
30
arbitration award. I disagree with the Court’s holding because it seems clear that, when the
trial court has entered an order compelling arbitration, “the litigation has not ended. Rather,
it has moved to another forum with the expectation that it will return to the [district court]
for entry of a final judgment.” Corion v. Chen, 964 F.2d 55 (1st Cir. 1992) (quoting De
Fuertes v. Drexel, Burnham, Lambert, Inc., 855 F.2d 10, 11 (1st Cir. 1988)). Viewed in
this manner, an order compelling arbitration is analogous to other interlocutory orders which
contemplate further proceedings, such as an order for a new trial, an order denying summary
judgment, or an order remanding a case to an administrative agency for development of the
record. See Nat’l Educ. Assoc.-Topeka, 925 P.2d at 838-39.
¶51. This Court has stated that “Congress' clear intent, in the Arbitration Act, [was] to
move the parties to an arbitrable dispute out of court and into arbitration as quickly and easily
as possible.” In re Tyco Int’l (U.S.), Inc., 917 So. 2d 773, 782 (Miss. 2005) (quoting Moses
H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S. Ct. 927, 941, 74 L.
Ed. 2d 765 (1983)). The Congressional policy underlying the FAA’s rule against appeals
from interlocutory orders compelling arbitration is that “appeal rules should reflect a strong
policy favoring arbitration.” Stedor Enter., Ltd. v. Armtex, Inc., 947 F.2d 727, 730 (4th Cir.
1991) (quoting 15 C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure §
3914.34 (Supp. 1990)). Consequently, “Congress sought to prevent parties from frustrating
arbitration through lengthy preliminary appeals.” Id. “[A] rule regarding every order
compelling arbitration as ‘final’ and appealable would completely undermine Congress's
31
effort to thwart appeals of such orders.” Turboff v. Merrill Lynch, Pierce, Fenner & Smith,
Inc., 867 F.2d 1518, 1520 (5th Cir. 1989).
¶52. In addition to the strong Congressional policy underlying the FAA’s prohibition of
appeals from interlocutory orders compelling arbitration, several other considerations
mitigate against the Court’s decision to treat orders compelling arbitration as final judgments.
The treatment of these orders as final encourages undesirable piecemeal appeals by allowing
an appeal from an order compelling arbitration, followed by a second appeal from any
subsequent arbitration award. See Colom Law Firm, LLC v. Board of Trustees, 16 So. 3d
692, 695 n.4 (Miss. 2009) (“We take this opportunity to point out that fractured, bifurcated,
or piecemeal appeals are not preferred by this Court.”). Moreover, permitting an appeal from
an order that compels arbitration will tax the resources of the litigants and the judiciary,
while the arbitration might have determined all issues to the parties’ satisfaction and obviated
an appeal. Fundamentally, a rule that delays court-ordered arbitration with a lengthy
appellate process frustrates the purpose of arbitration, which is to provide a forum for speedy
and efficient dispute resolution.
¶53. This Court has determined that, when applicable, the FAA governs appellate review
of arbitration orders. Tupelo Auto Sales v. Scott, 844 So. 2d 1167, 1170 (Miss. 2003).
Under Section 16(b) of the FAA, an interlocutory appeal may not be had from an order
compelling arbitration. 9 U.S.C. § 16(b) (2006). I would reaffirm the rule this Court adopted
in Banks, which holds that an order that compels arbitration and neither dismisses the claims
nor ends the litigation is interlocutory. Banks, 825 So. 2d at 647-48. I would find the instant
32
appeal to be interlocutory, dismiss it, and await any appeal from a final judgment entered
after the arbitration has concluded.
33