S. Cent. Heating Inc. v. Clark Constr. Inc. of Miss.

Citation342 So.3d 160
Decision Date28 June 2022
Docket Number2021-CA-00285-COA
Parties SOUTH CENTRAL HEATING INC. and Jack A. Holsomback, Appellants v. CLARK CONSTRUCTION INC. OF MISSISSIPPI, Michael Spellmeyer, and EBM Group LLC, Appellees
CourtCourt of Appeals of Mississippi

ATTORNEY FOR APPELLANTS: JOLLY W. MATTHEWS III, Hattiesburg

ATTORNEYS FOR APPELLEES: CHRISTOPHER SOLOP, CHARLES STEPHEN STACK JR., Jackson, CLYDE X. COPELAND III, Ridgeland, FRANK RUSSELL BRABEC

BEFORE CARLTON, P.J., McDONALD AND EMFINGER, JJ.

CARLTON, P.J., FOR THE COURT:

¶1. South Central Heating Inc. (South Central) and its president and owner, Jack A. Holsomback, appeal the Forrest County Circuit Court's orders compelling arbitration and staying the circuit court proceedings pending arbitration (orders compelling arbitration). The underlying claims relate to construction contract disputes between Clark Construction Inc. of Mississippi (Clark), its joint venturer EBM Group LLC (EBM), and Michael Spellmeyer, individually, on the one hand, and South Central and Holsomback, on the other. Because various pleadings were filed prior to the circuit court's entry of its orders compelling arbitration, South Central and Holsomback assert that Clark and EBM/Spellmeyer waived their rights to compel arbitration and therefore the circuit court erred in entering its orders compelling arbitration. After a thorough review of the record and the applicable law, we find no waiver on the part of Clark or EBM/Spellmeyer. Accordingly, we affirm the circuit court's orders compelling arbitration and staying the circuit court proceedings pending arbitration.1

STATEMENT OF FACTS AND PROCEDURAL HISTORY

¶2. Clark is a general contractor licensed to conduct business in various states throughout the United States. In March 2017, Clark and EBM, also a general contractor licensed to conduct business in various states, entered into a joint venture agreement for the purpose of "bidding, obtaining, performing, and completing construction contracts." South Central is a contractor that builds and installs duct work in commercial buildings. Holsomback is South Central's president and owner.

¶3. In March 2018, December 2017, and May 2017, Clark entered into contracts with South Central to install the heating and air conditioning (HVAC) systems in three nursing homes located in Virginia, Tennessee, and Florida (the Projects), respectively.2 South Central was unable to provide a payment and performance bond for each of the Projects, so Clark required Holsomback to personally guarantee South Central's payment of its laborers, subcontractors, and equipment and material suppliers.

¶4. Each contract contained an identical arbitration section providing that "[a]ll claims, disputes, and other matters in controversy between the Contractor, Subcontractor, and all individual signatories hereto, arising out of or relating to this Subcontract shall be decided by mandatory and binding arbitration in accordance with the current and applicable Construction Industry rules and procedures of the American Arbitration Association ...."3

¶5. Disputes subsequently arose between Clark and South Central about payments to South Central's subcontractors, resulting in Clark's refusal to pay South Central additional funds, and South Central then leaving the jobs. In January 2019, Clark filed a "Complaint for Damages/Motion to Compel Arbitration and Motion to Stay" against South Central and Holsomback in the Forrest County Circuit Court with respect to all three contracts.

¶6. The first page of Clark's complaint/motion to compel arbitration clearly sets forth Clark's motion to compel arbitration and request for a stay pending arbitration, as follows:

MOTION TO COMPEL ARBITRATION AND STAY LITIGATION
Plaintiff respectfully submits that all of the Subcontract Agreements referenced herein required binding arbitration. Therefore, pursuant to the Mississippi Construction Arbitration Act ( Miss. Code Ann. § 11-15-103 et seq. ) and § 3 of the Federal Arbitration Act ( 9 U.S.C. §§ 1, et seq. ), Plaintiff files this motion seeking an order of the Court that (1) the parties submit to binding and mandatory arbitration of all disputes in the instant cause and (2) that all future proceedings in this Court be stayed, until such arbitration is concluded.

Copies of all three contracts containing the arbitration clause were attached to Clark's complaint/motion to compel arbitration.

¶7. South Central and Holsomback filed a motion seeking additional time to respond to Clark's complaint/motion to compel arbitration, and their motion was granted by the circuit court's order entered on June 4, 2019. South Central and Holsomback were allowed thirty days from entry of the order to file their responses.

When neither South Central nor Holsomback responded to Clark's complaint/motion to compel arbitration in a timely manner, Clark filed an "Application to Clerk for Entry of Default and Supporting Affidavit" on August 27, 2019, and the clerk filed a "Docket Entry of Default" against South Central and Holsomback on the same day.

¶8. South Central and Holsomback filed their "Answer to Complaint and Motion to Compel Arbitration and Stay Litigation and Cross-Complaint" the same day, and also filed a two-page motion to set aside the clerk's entry of default. Clark agreed to do so.

¶9. In responding to Clark's motion to compel arbitration and request for a stay, South Central simply "den[ied] the allegations of the motion to compel arbitration and stay litigation between the parties," asserting that the contracts between Clark and South Central were "null and void and ... not binding on this court or these defendants." South Central's "cross-claim" was actually a counter-claim against Clark,4 seeking monies from Clark that South Central claimed were owed for work on the Projects. Clark answered South Central's counter-claim against it and, in doing so, Clark specifically noted that it was not waiving its right to compel arbitration.5

¶10. In May 2020, South Central filed a motion for partial summary judgment as to Clark's demand for arbitration only. Clark responded to the motion, again noting it was doing so without waiving its right to compel arbitration. Clark also noticed for hearing its motion to compel arbitration and to stay proceedings pending arbitration.

¶11. In August 2020, South Central filed a motion for leave to file a third-party complaint against Spellmeyer, EBM, and John Doe third-party defendants, asserting that they also agreed to pay South Central for the work done on the Projects. Clark responded, clearly stating in its response that it was doing so without waiving its right to compel arbitration, and simply noting in that response that it had no objection to these additional parties being brought into the litigation as long as all parties were compelled to arbitrate all claims.

¶12. The trial court granted South Central's motion for leave to file its third-party complaint and also ordered that Clark's motion to compel arbitration and South Central's motion for partial summary judgment as to Clark's right to compel arbitration would be held in abeyance until the third-party defendants were properly joined in the lawsuit.

¶13. In October 2020, South Central filed its third-party complaint against Spellmeyer, "individually and as agent, servant, and employee of [EBM]," and EBM, among other John Doe third-party defendants. South Central alleged that the third-party defendants were "jointly and sever[ally] liable with Clark" for monies owed to it. Spellmeyer and EBM (collectively, EBM)6 filed an entry of appearance and a general denial, and in December 2020, EBM filed a motion to dismiss and compel arbitration combined with an answer and defenses and counter-claim, expressly brought without waiver of EBM's right to arbitration. EBM also separately filed a "Motion to Dismiss and Compel Arbitration" the same day. EBM filed a notice of hearing for its motion to dismiss and to compel arbitration shortly thereafter. Clark joined in EBM's motion to dismiss and compel arbitration and renewed its own motion to compel arbitration.

¶14. South Central responded to EBM's motion to compel arbitration and its counter-claim against it, and also served Clark and EBM with requests for production of documents. Neither Clark nor EBM responded to the document requests. EBM filed a reply brief in support of its motion to dismiss and compel arbitration in February 2021, attaching as exhibits to its reply copies of the joint venture agreements between Clark and EBM for the three Projects at issue. Clark joined in EBM's reply brief, "without waiving its right to arbitration."

¶15. In February 2021, the circuit court conducted a hearing on South Central's motion for partial summary judgment on the arbitration issue and EBM's and Clark's motions to compel arbitration and stay the proceedings pending arbitration. After hearing the parties’ arguments, the circuit court found that "[neither] Clark [nor] EBM have waived their right to arbitration," and then granted Clark's and EBM's motions to compel arbitration and stay the proceedings pending arbitration. EBM's motion to dismiss was denied. Separate orders granting EBM's and Clark's motions to compel arbitration and stay the circuit court proceedings pending arbitration were entered by the circuit court on February 26, 2021, and March 5, 2021, respectively. South Central and Holsomback appealed.

STANDARD OF REVIEW

¶16. We review de novo the granting of a motion to compel arbitration. B&S MS Holdings LLC v. Landrum , 302 So. 3d 605, 609 (¶11) (Miss. 2020). "Mississippi law, like federal law, favors the enforcement of valid arbitration agreements." Harrison Cnty. Com. Lot LLC v. H. Gordon Myrick Inc ., 107 So. 3d 943, 949 (¶12) (Miss. 2013). Under the Federal Arbitration Act and established Mississippi law, "the Court employs a two-part test: (1) ‘whether the parties intended to arbitrate the dispute,’ and (2) ‘whether legal constraints external to the...

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    ...Harrison County Commercial Lot, LLC v. H. Gordon Myrick Inc. , 107 So.3d 943, 949 (Miss. 2013) ; South Central Heating Inc. v. Clark Construction Inc. of Mississippi , 342 So.3d 160, 165 (2022). Because there is no claim or showing that Mississippi and Pennsylvania law differ in any way tha......

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