Robinson v. Henne

• Citation: 115 So.3d 797
• Decision Date: 20 June 2013
• Docket Number: No. 2012–CA–00301–SCT.,2012–CA–00301–SCT.
• Parties: Jerry ROBINSON, Estate of Robert D. Robinson, Jerry G. Robinson Marital Trust, and Tri–State Brick & Tile Company, Inc. v. Robert HENNE, Hilda Henne Abbott, Linda Henne and Jodie Henne.
• Court: Mississippi Supreme Court

115 So.3d 797

Jerry ROBINSON, Estate of Robert D. Robinson, Jerry G. Robinson Marital Trust, and Tri–State Brick & Tile Company, Inc.

v.Robert HENNE, Hilda Henne Abbott, Linda Henne and Jodie Henne.

No. 2012–CA–00301–SCT.

Supreme Court of Mississippi.

June 20, 2013.

Fred L. Banks, Jr., Jackson, Robert Gregg Mayer, attorneys for appellants.

John Breckenridge Hunt, IV, Shane F. Langston, Jackson, attorneys for appellees.

Before DICKINSON, P.J., PIERCE and COLEMAN, JJ.

COLEMAN, Justice, for the Court:

¶ 1. As a result of ongoing negotiations during trial regarding the ownership of a company, the two parties agreed to a compromise and apprised the circuit court of their agreement. The general terms of the agreement were contained on pieces of legal-pad paper and submitted to the court with the understanding that a subsequent formal agreement would be forthcoming. When a dispute arose as to a provision in the subsequent proposed formal agreement regarding the applicability of a condition precedent requiring the consent of a third-party creditor, the issue was submitted to an arbitrator. The arbitrator found the initial, handwritten agreement, which did not contain the third-party consent clause, to be binding and enforceable. The issue before the Court is whether the arbitrator's decision should be vacated due to his refusal to consider parol evidence of the condition precedent. Finding no statutory grounds to disturb the arbitrator's decision, we affirm the trial court and the arbitrator.

FACTS AND PROCEDURAL HISTORY

¶ 2. Tri–State Brick & Tile Company was formed by R.H. Robinson. Upon his death, all issued common stock was bequeathed to his son, Robert; all preferred shares, representing forty-eight percent ownership of the company, went to his daughter, Martha. The appellees, Robert Henne, Hilda Henne Abbott, Linda Henne, and Jodi Henne, are Martha's heirs. Upon Robert's death, the common shares, as well as operational control of the company, passed to the appellants, Jerry Robinson,the Jerry G. Robinson Marital Trust, and Robert's estate.

¶ 3. After the Hennes discovered what they thought to be improper distribution of constructive dividends to the majority shareholders, they brought suit in Hinds County Circuit Court against Robinson on April 22, 2008. The trial began on July 11, 2011. On the fourth day of the trial, the parties reached a settlement. Counsel for the parties wrote the terms of the agreement on a legal pad, which was deemed the “term sheet,” and the parties asked that it be sealed by the court. Counsel for the Hennes also stated that the term sheet contained “general terms” and that the term sheet would be “subject to a more specific agreement to be executed by all parties.” The parties agreed that any dispute in the agreement would be submitted to an arbitrator mutually agreed upon, or if not, one selected by the court.

¶ 4. On July 22, 2011, counsel for the Hennes circulated a draft of the final formal agreement to counsel for Robinson. Counsel for Robinson agreed that the draft formal agreement was accurate except for some issues regarding carried-forward losses. Included in the draft was a provision stating that effectiveness of the agreement was conditioned on the approval of Trustmark—the third party creditor. On July 29, 2011, Trustmark informed all parties that it would not consent to the agreement. Following Trustmark's decision, the Hennes suggested that all parties move forward based upon what was in the term sheet, which did not include the Trustmark consent clause. Counsel for Robinson responded that Trustmark's consent had been considered an essential element of any settlement and refused to sign the formal agreement without the consent provision. In support of his reasoning, Robinson cited the fact that the term sheet required Trustmark's release of Robinson from certain obligations, which could not be implemented without Trustmark's consent. In response, the Hennes moved to appoint an arbitrator.

¶ 5. The arbitrator found that the term sheet constituted an enforceable agreement because there was a meeting of the minds as to the terms contained therein, the terms were unambiguous, and the agreement did not include a consent provision. Robinson, alleging that parol evidence should have been considered regarding the consent clause, moved for reconsideration. Upon reconsideration, the arbitrator found Robinson to be correct in his assertion that parol evidence should be considered in determination of whether there was a meeting of the minds. However, he maintained that the term sheet constituted an enforceable agreement and failed to address the consent clause issue. On December 21, 2011, the trial court affirmed the arbitrator's finding and entered final judgment on behalf of the Hennes. Robinson timely appealed.

STANDARD OF REVIEW

¶ 6. The level of review afforded to the decision of an arbitrator is quite narrow and provided by statute. Craig v. Barber, 524 So.2d 974, 977 (1988); Miss.Code Ann. § 11–15–23 (Rev.2004). An arbitration award may be overturned only if the elements of the applicable statute are present. Wilson v. Greyhound Bus Lines, Inc., 830 So.2d 1151, 1157 (¶ 16) (Miss.2002).

DISCUSSION

¶ 7. Robinson does not dispute the arbitrator's conclusion that there was a meeting of the minds regarding the general agreement contained within the term sheet; rather, he argues that the arbitrator was plainly wrong in failing to consider the condition precedent—the approval of Trustmark. Even if the arbitrator reached the wrong conclusion of law in his failure to consider the condition precedent, the Court has held that a mistake of law or of fact is not sufficient reason to overturn an arbitrator's decision. “[T]he general rule is that [arbitrators] are the final judges of both law and fact, and an award will not be reviewed or set aside for mistake in either.” Hutto v. Jordan, 204 Miss. 30, 36 So.2d 809 (1948). The only basis recognized for reversal of an arbitrator's decision is a violation of the appropriate statute. See Wilson, 830 So.2d at 1157 (¶ 16).

¶ 8. Robinson alleges that the arbitrator violated subsections (a) and (d) of Section 11–15–23 of the Mississippi Arbitration Act and asserts the Doctrine of Manifest Disregard in support of his argument. Though the Court has never directly addressed the applicability of the doctrine, our previous rulings direct us to conclude that it does not apply under Mississippi law.

¶ 9. Mississippi Code Section 11–15–23 provides the four grounds upon which an arbitrator's decision may be vacated:

(a) That such award was procured by corruption, fraud, or undue means;

(b) That there was evident partiality or corruption on the part of the arbitrators, or any one of them;

(c) That the arbitrators were guilty of misconduct in refusing to postpone the hearing upon sufficient cause shown, or in refusing to hear evidence pertinent or material to the controversy, or other misbehavior by which the rights of the party shall have been prejudiced;

(d) That the arbitrators exceeded their powers, or that they so imperfectly executed them that a mutual, final, and definite award on the subject matter was not made.

Miss.Code Ann. § 11–15–23 (Rev.2004).

¶ 10. The statute is identical to the corresponding provision in the Federal Arbitration Act (“FAA”). 9 U.S.C. § 10. The statutory language was developed in part by the American Arbitrators Association and was adopted verbatim by both Congress and the majority of jurisdictions. The standard requires substantial deference to the arbitrator.

¶ 11. Realizing that the standard allowed for a highly limited review of an arbitrator's decision on appeal, the majority of jurisdictions and federal courts that considered the doctrine's viability adopted the Doctrine of Manifest Disregard throughout the latter half of the Twentieth Century as a judicial remedy for the restrictive statutory language. Essentially, the doctrine provides an avenue for courts to overturn an arbitrator's findings if there was a deliberate or unquestionable misapplication of law. By 2008, nineteen jurisdictions ¹ and every federal circuit court had adopted some version of Manifest Disregard.²

¶ 12. In 2008 the United States Supreme Court made an ambiguous statement regarding Manifest Disregard. See Hall Street Assocs. v. Mattel, Inc., 552 U.S. 576, 128 S.Ct. 1396, 170 L.Ed.2d 254 (2008). Although the doctrine was not the basis for the parties' dispute, the Court cogitated upon the essence of the doctrine and from where it emanated. “Maybe the term ‘manifest disregard’ was meant to name a new ground for review, but maybe it merely referred to the § 10 grounds collectively, rather than adding to them.... Or ... ‘manifest disregard’ may have been shorthand for § 10(a)(3) or § 10(a)(4)....” Id. at 585, 128 S.Ct. 1396 (internal citations omitted). What the United States Supreme Court made clear, however, is that the doctrine could not be used as grounds for vacating an arbitrator's award separate and apart from Sections 10 or 11 of the FAA. Hall Street, 552 U.S. at 584, 128 S.Ct. 1396 (“We now hold that §§ 10 and 11 respectively provide the FAA's exclusive grounds for expedited vacatur and modification.”). In other words, if the doctrine is to be employed, it must be found to exist within the words of the statute.

¶ 13. As would be expected, the Hall Street opinion left federal courts with the task of answering the “maybe” questions regarding the doctrine that the Supreme Court had asked but not answered. Not surprisingly, courts have come up with many different explanations. In the federal circuit courts, the Fifth, Eleventh, and First Circuits have decided that Hall Street completely abrogated the doctrine. See Citigroup Global Markets, Inc. v. Bacon, 562 F.3d 349, 355 (5th Cir.2009); Frazier v. CitiFinancial Corp., 604 F.3d 1313, 1324 (11th Cir.2010); Ramos–Santiago v. United Parcel Service, 524 F.3d 120 (1st Cir.2008)....