GREGORY G. NETHERY
CAPITALSOUTH PARTNERS FUND II, L.P., CAPITALSOUTH PARTNERS SBIC FUND III, L.P., CAPITALSOUTH PARTNERS FLORIDA SIDECAR FUND I, LP, CAPITALSOUTH PARTNERS, LLC, HARBERT MEZZANINE PARTNERS III SBIC, LP, HARBERT MEZZANINE PARTNERS III, LP PROPERLY KNOWN AS HARBERT MEZZANINE III, LP f/k/a HARBERT MEZZANINE PARTNERS III SBIC, LP, ON-SITE FUEL SERVICE, INC. AND ON-SITE FUEL HOLDINGS, INC.
OF JUDGMENT: 08/25/2017
FROM WHICH APPEALED HON. WILLIAM E. CHAPMAN, III CECIL MAISON
HEIDELBERG KAYTIE MICHELLE PICKETT EMERSON BARNEY ROBINSON,
III PHILIP W. THOMAS ADAM STONE J. KEVIN WATSON PHIL B.
ABERNETHY JOHN HOUSTON DOLLARHIDE RANKIN COUNTY CIRCUIT COURT
ATTORNEYS FOR APPELLANT: CECIL MAISON HEIDELBERG J. KEVIN
ATTORNEYS FOR APPELLEES: KAYTIE MICHELLE PICKETT ADAM STONE
JACKIE RAY BOST, II EMERSON BARNEY ROBINSON, III PHIL B.
ABERNETHY JOHN HOUSTON DOLLARHIDE PHILIP W. THOMAS.
KITCHENS, P.J., BEAM AND CHAMBERLIN, JJ.
Gregory Nethery appeals from the Rankin County Circuit
Court's decision to grant a motion to compel arbitration
filed by Defendants CapitalSouth Partners,  Harbert Mezzanine
Partners, and On-Site Fuel Services (collectively,
"Defendants"). Finding the circuit court properly
granted Defendants' motion to compel arbitration, we
Nethery founded On-Site Fuel Service, Inc. (OSFS), in 1996.
In 2011, Defendants CapitalSouth and Harbert approached
Nethery about acquiring an ownership interest in OSFS. A deal
was consummated for CaptialSouth and Harbert to invest in
OSFS, and OSFS then used the investment capital to buy out
two other longtime investors. On-Site Fuel Holdings (OSFH)
was then created as a holding company. OSFH is a Delaware
corporation that owns OSFS and does business in interstate
commerce and in Mississippi.
Nethery retained a minority thirty-percent ownership interest
in OSFS through his stock interest in OSFH. CapitalSouth and
Harbert each held the remaining interest. No shareholder owns
more than fifty percent of the holding company.
As part of the deal, Nethery signed a Stockholders Agreement
containing an arbitration clause (denoted as Section 5.03(b)
of the agreement), which provided the following:
Except as provided in Section 6.03(a),  any dispute among
the parties hereto shall, on demand of any party to such
dispute, be submitted to binding arbitration in Charlotte,
North Carolina, conducted in accordance with the Commercial
Arbitration Rules of the American Arbitration Association by
a panel of three impartial arbitrators selected in accordance
with such Commercial Arbitration Rules, and judgment upon the
award may be entered in any court of competent jurisdiction.
In rendering the award, the arbitrators shall enforce this
Agreement in accordance with its terms and in accordance with
applicable law, and shall assess the costs of such
arbitration as they deem just and equitable in light of their
determination of the issues being arbitrated.
In October 2016, Nethery filed suit in circuit court against
CapitalSouth and Harbert, claiming breach of fiduciary duty,
corporate freeze out, unjust enrichment, constructive trust,
civil conspiracy, and negligence and
In the complaint, Nethery claimed that OSFS, under his
continued guidance, transitioned well from CapitalSouth's
and Harbert's entry into the business, growing
"Earnings Before Interest, Taxes, Depreciation and
Amortization" (EBITDA) substantially, which in turn
"grew enterprise value." Due to the growth, OSFS
was contacted by numerous investment groups interested in
acquisition. But CapitalSouth and Harbert refused to engage
seriously in these opportunities that "would have
benefited all stockholders handsomely."
In December 2013, CapitalSouth and Harbert appointed their
own executive to be present at the company offices on a
regular basis. In 2014, Nethery claims he began to be
excluded from company and departmental meetings. Nethery
confronted CapitalSouth and Harbert about his exclusion from
company business to no avail.
In June 2014, Nethery says he was invited to Atlanta to meet
with CapitalSouth principals. CapitalSouth demanded core
changes in the company and told Nethery these demands were
better than asking for Nethery's resignation.
According to Nethery, CapitalSouth Defendants suspended him
later that same month "under the guise of false and
specious allegations." And in July 2014, Nethery was
terminated without cause.
Nethery claims that since his termination, "the
company's trajectory has spiraled in a
180-direction." The company reported approximately $8
million in losses during 2015, and shareholder equity
essentially vanished. But the majority shareholders
"profited in spite of the losses by implementing a loan
arrangement with the company where they collect over $250,
000 per month through interest and accruals." Through
their loans to the company, the majority shareholders
"drain cash flow, handcuffing the company, while they
Nethery claims that at all times, CapitalSouth and Harbert
"conspired together and acted in concert on behalf of
themselves and each other, taking the positions of each
other, and acting in one block to control the voting of the
company." Considering their combined majority interest,
CapitalSouth and Harbert worked together for themselves and
against the interests of Nethery, the minority shareholder.
Defendants answered Nethery's complaint, asserting the
affirmative defense of arbitration, and filed their motion to
compel arbitration that same day. The circuit court granted
the motion and stayed the action ...