Gruma Corp. v. Morrison

• Decision Date: 01 April 2010
• Docket Number: No. 09–618.,09–618.
• Citation: 362 S.W.3d 898,2010 Ark. 151
• Court: Arkansas Supreme Court
• Parties: GRUMA CORPORATION, Appellant, v. Norman Kenneth MORRISON, Appellee.

2010 Ark. 151

362 S.W.3d 898

GRUMA CORPORATION, Appellant,

v.Norman Kenneth MORRISON, Appellee.

No. 09–618.

Supreme Court of Arkansas.

April 1, 2010.

Newell & Hargraves, by: C. Burt Newell, Hot Springs, and Thompson & Knight LLP, by: Nicole L. Williams and Timothy L. Evans, Dallas, for appellant.

Andi Davis Law Firm, by: Andi Davis, for appellee.

ELANA CUNNINGHAM WILLS, Justice.

This appeal arises out of a food product distribution contract containing an arbitration clause entered into by appellant Gruma Corporation (Gruma) and appellee Morrison. We accepted certification of this case from the court of appeals because it involves an issue of first impression, substantial public interest, and a substantial question of law concerning the interpretation of the Arkansas Franchise Practices Act (AFPA), codified at Ark.Code Ann. §§ 4–72–201 to –210 (Repl.2001). See Ark. Sup.Ct. R. 1–2(b)(1), (4), and (6). Gruma asserts that the circuit court erred in denying its motion to dismiss based on that court's determination that the arbitration agreement did not apply to Morrison's claims under the AFPA. We agree and reverse the circuit court.

Gruma—a Nevada corporation with a principal place of business in Dallas, Texas—and Morrison entered into a contract entitled the “Store Door Distribution Agreement” (SDDA) on November 16, 2006. Under the terms of the SDDA, Morrison became Gruma's “exclusive store door sales distributor for certain of its food products,” such as tortillas and tortilla chips. The SDDA contained an arbitration provision pertaining to claims “arising out of or relating to this Agreement,” including all matters “regarding arbitration, matters relating to performance, breach, interpretation, meaning, construction, or enforceability of all or any part of this Agreement, and all claims for rescission or fraud in the inducement of this Agreement.” The SDDA specified that such claims and causes of action “shall be resolved by arbitration through J–A–M–S/Endispute.” Additionally, the SDDA contained a provision entitled “Governing Law” stating, “This Agreement shall be governed and controlled in accordance with the law of the State of Texas,” and the “Federal Arbitration Act, 9 U.S.C. § 1 et seq. shall also apply as needed to uphold the validity or enforceability of the arbitration provisions of this Agreement.”

On August 27, 2008, Morrison filed a complaint against Gruma in the Garland County Circuit Court alleging violations of the AFPA, breach of contract, and unjust enrichment after Gruma unilaterally terminated the distribution agreement. Asserting the jurisdiction of the circuit court and his status as franchisee, Morrison averred that the AFPA “is applicable to a franchise if the franchisee is required to do business in Arkansas.” Gruma filed a motion to dismiss Morrison's complaint on the basis that the circuit court lacked “subject-matter jurisdiction to resolve the suit at bar because [the parties] agreed to arbitration as an exclusive remedy for any disputes arising under the Store Door Distributor Agreement.” Morrison filed an amended complaint on September 26, 2008, adding allegations of fraud, tortious interference, and breach of covenant of good faith and fair dealing. On October 16, 2008, Gruma filed a motion to dismiss the amended complaint, asserting that the circuit court lacked jurisdiction because the Federal Arbitration Act “governs the SDDA and requires that all matters arising out of the SDDA be arbitrated.”

In Morrison's response to Gruma's motion to dismiss, he stated that “arbitration cannot be compelled” under the Arkansas Uniform Arbitration Act, Ark.Code Ann. § 16–108–201(b)(2), because “torts are involved in the action.” Morrison also contended that parties cannot “contract around” the AFPA. In his brief in support of the response, Morrison argued that, “It would simply disregard all legislative intent behind the drafting of the Arkansas Franchise Act to force Arbitration when the Arkansas Franchise Act has been breached.” Elaborating further, Morrison cited four reasons in his brief why “arbitration should not be compelled”: (1) the arbitration clause was invalid because Morrison “did not understand that he was waiving his right to having a trial”; the “arbitration clause at issue is overly broad”; and “the arbitration agreement is a contract of adhesion”; (2) “a complaint that states a cause of action in tort cannot be arbitrated”; (3) the Federal Arbitration Act does not compel arbitration of the claims pled in the amended complaint; and (4) a “contract cannot bypass” the AFPA.

Gruma filed a reply and incorporated brief reasserting the bases for its motion to dismiss Morrison's amended complaint and stated that the Federal Arbitration Act governs the SDDA and preempts the Arkansas Uniform Arbitration Act, and the Federal Arbitration Act permits the arbitration of torts; the Arkansas Uniform Arbitration Act does not apply under the SDDA's choice-of-law provision; the AFPA was inapplicable because the SDDA did not require Morrison to establish or maintain a place of business in Arkansas; and Morrison's contention that the SDDA was an adhesion contract “is a question for the arbitrator.”

On March 4, 2009, the circuit court filed a letter mailed to the parties' counsel denying Gruma's motion to dismiss because “the contract relied upon conflicts with the Arkansas Franchise Practices Act and the Act controls.” The circuit court repeated this determination that the AFPA controlled in its March 30, 2009 order denying Gruma's motion to dismiss. This appeal followed.

An order denying a motion to compel arbitration is immediately appealable under Ark. R.App. P.-Civ. 2(a)(12). This court reviews an order denying a motion to compel de novo on the record, determining the issue as a matter of law. Nat'l Cash, Inc. v. Loveless, 361 Ark. 112, 205 S.W.3d 127 (2005).

Although Gruma presents several points on appeal to argue that the circuit court erred in denying its motion to dismiss, the central questions on appeal are whether the Federal Arbitration Act or the Arkansas Uniform Arbitration Act governs the SDDA, and whether Morrison's cause of action under the AFPA is subject to arbitration.

Section 15(i)(i) of the SDDA, entitled “Arbitration,” states that claims or causes of action “solely for injunctive relief ... may be brought in a court of law or by arbitration.” But, under section 15(i)(ii), claims or causes of action for damages or monetary relief “shall be resolved by arbitration.” Relevant here to Morrison's nonclass claim, section 15(i)(ii) of the SDDA provides as follows:

Subject to the disclaimer and waiver in Subsection 15(g),¹ the bar of claims older than two years in Subsection 15(h) ², and the conditional limitation in Subsection 15(h)(iii) ³, any and all other claims and causes of action arising out of or relating to this Agreement (including, without limitation, matters relating to this Subsection 15(i) regarding arbitration, matters relating to performance, breach, interpretation, meaning, construction, or enforceability of all or any part of this Agreement, and all claims for rescission or fraud in the inducement of this Agreement) shall be resolved by arbitration

through J–A–M–S/Endispute (“JAMS”) as provided in Subsection 15(i)(iii) below.

Section 15(i)(iv) of the SDDA outlines arbitration procedures and includes a clause stating that arbitration shall be conducted and subject to the provisions of applicable law, and the arbitrator(s) shall be entitled to grant any remedy or relief, subject to the limitations in Subsection 15(g), which a party would be entitled to receive under applicable law in a judicial proceeding.” Section 15(i)(v) allows for judicial review of an arbitration award under the following conditions:

In the event that the amount in controversy in arbitration exceeds $100,000, the parties shall have the right to have any arbitration award judicially reviewed by the courts of law as fully as would be allowed in the review of a decision of a master under Federal Rule of Civil Procedure 53, with findings of fact to be reviewed for clear error and issues of law to be decided de novo by the courts. In the event that the amount in controversy in arbitration is less than $100,000, the arbitration award shall be judicially reviewable by the courts of law under the law generally applicable to an arbitration award.

This court noted in Pest Management, Inc. v. Langer, 369 Ark. 52, 59, 250 S.W.3d 550, 556 (2007), that “[a]rbitration is strongly favored in Arkansas as a matter of public policy and is looked upon with approval by courts as a less expensive and more expeditious means of settling litigation and relieving docket congestion.” Further, in determining whether the parties intended to arbitrate claims arising from a contractual relationship, “any doubts and ambiguities must be resolved in favor of arbitration.” Id.

The threshold issue is whether there is a valid arbitration provision. See, e.g., Showmethemoney Check Cashers, Inc. v. Williams, 342 Ark. 112, 27 S.W.3d 361 (2000). This is a question of state law. Tyson Foods, Inc. v. Archer, 356 Ark. 136, 147 S.W.3d 681 (2004); see also Perry v. Thomas, 482 U.S. 483, 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987). Here, the SDDA's arbitration provision is broad and requires that “claims and causes of action arising out of or relating to this Agreement ... shall be resolved by arbitration,” to include

without limitation, matters relating to this Subsection 15(i) regarding arbitration, matters relating to performance, breach, interpretation, meaning, construction, or enforceability of all or any part of this Agreement, and all claims for rescission or fraud in the inducement of this Agreement.

The parties' intent to arbitrate any claims arising from the SDDA and the relationship of the parties created by the SDDA is clear. The controversy here involves whether the agreement covers the tort claims...