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Mississippi State Port Authority v. Southern Industrial Contractors LLC

Court of Appeals of Mississippi

December 18, 2018

MISSISSIPPI STATE PORT AUTHORITY AT GULFPORT APPELLANT
v.
SOUTHERN INDUSTRIAL CONTRACTORS LLC APPELLEE

          DATE OF JUDGMENT: 09/26/2017

          COURT FROM WHICH APPEALED: HINDS COUNTY CIRCUIT COURT, FIRST JUDICIAL DISTRICT TRIAL JUDGE: HON. WINSTON L. KIDD

          ATTORNEYS FOR APPELLANT: BEN HARRY STONE MICHAEL BRANT PETTIS

          ATTORNEYS FOR APPELLEE: CHRISTOPHER SOLOP BRENDA TANNER REDFERN JOHN T. ANDRISHOK STEVEN B. LOEB

          BEFORE CARLTON, P.J., WILSON AND GREENLEE, JJ.

          CARLTON, P.J.

         ¶1. This case involves a construction dispute between the Mississippi State Port Authority at Gulfport and Southern Industrial Contractors LLC (SIC). After the Port Authority terminated its contract with SIC, SIC filed a motion to compel arbitration, or alternatively, a one-count complaint for breach of contract, in the Circuit Court of the First Judicial District of Hinds County, Mississippi. The Port Authority moved to dismiss SIC's motion to compel arbitration, arguing that (1) the contract between the parties did not contain a binding arbitration agreement; (2) SIC had effectively asserted a tortious wrongful-termination claim and failed to comply with the Mississippi Tort Claims Act (MTCA) prior to filing that claim; and (3) venue is improper because the lawsuit should be heard in the First Judicial District of the Harrison County Circuit Court of Mississippi. The circuit court summarily granted SIC's motion to compel arbitration, and denied the Port Authority's motion to dismiss. The Port Authority appeals both orders.

         ¶2. We find that the contract between the parties does not contain a binding arbitration agreement, and we reverse and render the circuit court's order compelling arbitration for this reason. We further find that the MTCA does not apply to SIC's breach of contract claim, and, thus, we affirm the circuit court's denial of the Port Authority's motion to dismiss as to that issue. Finally, we find that venue is improper in the First Judicial District of Hinds County, Mississippi, and we, therefore, reverse and remand on this issue, with instructions to the circuit court that this lawsuit should be transferred to the First Judicial District of Harrison County, Mississippi, pursuant to Mississippi Code Annotated section 11-11-3 (Rev. 2004), which is Mississippi's general circuit-court venue statute.

         STATEMENT OF FACTS AND PROCEDURAL HISTORY

         ¶3. This dispute arises out of a public-works contract that was awarded by the Port Authority to SIC (the Contract) for a construction project known as West Pier Facilities, Project 305 (the Project). The Project is for the construction of a 1, 300-foot-long by 226- foot-wide transit shed and two smaller buildings.[1] The Port Authority and SIC executed the Contract on July 25, 2014.

         ¶4. During the course of construction, SIC encountered large underground debris fields in the same location where SIC was to drive the foundation pilings for the transit shed. The debris removal resulted in extra work for SIC, construction delays ensued, and disputes arose between the Port Authority and SIC regarding timing and payment for the additional work. Ultimately, the Port Authority terminated the Contract in a letter dated September 14, 2016, entitled "NOTICE OF MATERIAL BREACH OF CONTRACT . . . AND NOTICE OF TERMINATION." In that letter, the Port Authority cited to paragraph 29 of the general conditions of the Contract and stated that in accordance with that provision, it was terminating the Contract for cause. The letter then provided the specific reasons for termination, with citations to specific Contract provisions.

         ¶5. On November 11, 2016, counsel for SIC sent an email to counsel for the Port Authority asking whether the Port Authority would be "willing to resolve all claims and contract disputes by arbitration in the event that the present efforts to negotiate a settlement fail." Counsel for the Port Authority responded that same day, sending an email in which he said that "[the Port Authority], as a state agency, cannot agree to arbitration." By letter dated November 15, 2016, SIC sent the Port Authority a "notice of intention to arbitrate . . . the claims and contract disputes between SIC and the [Port Authority] arising out of the . . . Project." In its notice, SIC specified that "[t]he nature of the dispute involves losses sustained by SIC as a result of the [Port Authority's] breach of its contractual obligations." SIC quantified each of its claims in its notice, including a line-item for "wrongful termination" in the amount of $10, 000, 000.

         ¶6. Two days later, SIC filed its motion to compel arbitration in the Hinds County Circuit Court, alleging that "[t]he [Port Authority] is . . . liable for all losses sustained by SIC as a result of the [Port Authority's] breach of its contractual obligations," and asking the circuit court to enter an order compelling the Port Authority to engage in binding arbitration to resolve the matter. In support of its motion to compel arbitration, SIC relied upon Section 8 of Attachment 5 to the Contract (sometimes referred to as Section 8).[2] Attachment No. 5 is titled "Mississippi Development Authority Special Provisions to be included in all Contracts between the Subrecipient and Contracted Parties and in ALL Contracts between Contracted Parties and their Subcontractors." Section 8 of Attachment 5 provides:

8. The Subrecipient [Port Authority] and the Contracted Party [SIC] agree to resolve all claims and contract disputes by negotiations, arbitration, litigation, or other means as provided in the Contract documents and state law, prior to submission of any related change order or Contract Amendment to MDA for review and approval, in order to obtain a grant eligibility or allowability determination.

         ¶7. Alternatively, SIC included in its motion to compel arbitration its complaint against the Port Authority. SIC asserted a single count, "COUNT I: BREACH OF CONTRACT," alleging that "[t]he [Port Authority's] actions and omissions constitute a breach of the contract between SIC and [the Port Authority] for which the [Port Authority] is liable to SIC." SIC further alleged that it is entitled to liquidated damages for an amount not less than $10, 039, 371.30, and "damages in the amount of $10, 000, 000 for its wrongful termination."

         ¶8. The Port Authority responded by filing a motion to dismiss in which it asserted that (1) there was not an enforceable agreement to arbitrate between the parties and that the Port Authority does not have the authority to agree to arbitrate under Mississippi law; (2) upon dismissal of the motion to compel arbitration, the circuit court should dismiss all alternative claims for relief which fall within the purview of the MTCA because SIC did not provide the required ninety-days' written notice under the MTCA prior to filing its tort claim for wrongful termination;[3] and (3) venue is improper because the lawsuit should be heard in the Circuit Court of the First Judicial District of Harrison County, Mississippi.

         ¶9. After holding a hearing on the parties' motions, the circuit court, in separate, one-page orders, summarily granted SIC's motion to compel arbitration and denied the Port Authority's motion to dismiss.

         ¶10. The Port Authority appeals both orders, asserting three primary issues: (1) whether the parties agreed to binding arbitration; (2) whether the MTCA applies to SIC's wrongful termination-of-contract claim; and (3) whether venue is improper in the First Judicial District of Hinds County, Mississippi, requiring dismissal or transfer to the First Judicial District of Harrison County, Mississippi, pursuant to the applicable venue statute.

         STANDARD OF REVIEW AND OTHER APPLICABLE STANDARDS

         ¶11. "A grant or denial of a motion to compel arbitration is reviewed de novo." Harrison Cty. Commercial Lot LLC v. H. Gordon Myrick Inc., 107 So.3d 943, 949 (¶12) (Miss. 2013); Driver Pipeline Co. Inc. v. Williams Transp. LLC, 104 So.3d 845, 847 (¶5) (Miss. 2012). A de novo standard of review also applies when reviewing a trial court's denial of a motion to dismiss. Booneville Collision Repair Inc. v. City of Booneville, 152 So.3d 265, 269 (¶9) (Miss. 2014). Additionally, "[c]ontract interpretation is a question of law that is reviewed de novo." Driver Pipeline, 104 So.3d at 847 (¶5). Finally, regarding venue, the Mississippi Supreme Court has held that a trial court's ruling regarding venue will not be disturbed "unless it clearly appears that there has been an abuse of discretion or that the discretion has not been justly and properly exercised under the circumstances of the case. But if the interpretation of a venue statute is at issue, this Court will review the trial court's [venue] decision de novo." Holmes v. McMillan, 21 So.3d 614, 617 (¶8) (Miss. 2009) (internal quotation mark omitted).

         ¶12. SIC, as the party seeking to invoke arbitration under Section 8 of Attachment 5 to the Contract, bears the burden of establishing that this provision creates a binding arbitration agreement. Wellness Inc. v. Pearl River Cty. Hosp., 178 So.3d 1287, 1292 (¶14) (Miss. 2015). The courts apply a two-prong test in determining whether a motion to compel arbitration should be granted:

Under the first prong, the court should determine whether the parties have agreed to arbitrate the dispute . . . . In order to determine if the parties have agreed to arbitrate the dispute, two considerations are taken into account: (1) whether there is a valid arbitration agreement; and (2) whether the parties' dispute is within the scope of the arbitration agreement. If the court determines that the parties did in fact agree to arbitrate their dispute, the second prong is applied. The United States Supreme Court has instructed that the second prong is whether legal constraints external to the parties' agreement foreclosed arbitration of those claims.

Driver Pipeline, 104 So.3d at 849 (¶12) (citations and internal quotation marks omitted).

         ¶13. Although the Mississippi courts recognize the "liberal federal policy favoring arbitration," Qualcomm Inc. v. Am. Wireless License Grp. LLC, 980 So.2d 261, 268 (¶15) (Miss. 2007), the courts "will not construe arbitration agreements so broadly 'as to encompass claims and parties that were not intended by the original contract.'" Driver Pipeline, 104 So.3d at 850 (¶13) (quoting Smith ex rel. Smith v. Captain D's LLC, 963 So.2d 1116, 1119 (¶11) (Miss. 2007)). This is so because "arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit." Id.

         DISCUSSION

         I.Whether Section 8 of Attachment 5 to the Contract is a Binding ...


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