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Baria v. Singing River Electric Cooperative

United States District Court, S.D. Mississippi, Southern Division

June 3, 2019

SINGING RIVER ELECTRIC COOPERATIVE also known as Singing River Electric Power Association DEFENDANT



         BEFORE THE COURT are the [3] Motion to Compel Arbitration filed by Defendant Singing River Electric Cooperative and the [9] Motion for Limited Lifting of the Stay on Discovery filed by Plaintiffs Barrett Baria, Edward Zielinski, and Lorraine Zielinski. The Motion to Compel Arbitration contends that Plaintiffs have agreed, through their contracts with Singing River, to arbitrate the claims alleged in this lawsuit. Singing River thus asks for the Court to order Plaintiffs to individually arbitrate their claims and to stay this case pending arbitration. The Motion for Limited Lifting of the Stay of Discovery seeks discovery into asserted issues of fact surrounding whether there is a valid agreement to arbitrate claims between Plaintiffs and Singing River. Both motions are fully briefed. Having considered the submissions of the parties, the record, and relevant law, the Court finds that Singing River's Motion to Compel arbitration should be granted and Plaintiffs' Motion to lift the stay of discovery should be denied.

         I. BACKGROUND

         The Singing River Electric Cooperative (“Singing River” or “the Cooperative”) is a rural electric cooperative providing electricity to tens of thousands of Mississippi residents and businesses. It exists as a non-profit corporation organized and created pursuant to section 77-5-205 of the Mississippi Code. Such “corporation(s) not organized for pecuniary profit” can only be formed “for the purpose of promoting and encouraging the fullest possible use of electric energy by making electric energy available at the lowest cost consistent with sound economy and prudent management of the business of such corporations.” Miss. Code. Ann. § 77-5-205.

         In this putative class-action lawsuit, Plaintiffs - who are ratepaying members of Singing River - allege that Singing River has wrongfully withheld and continues to wrongfully withhold patronage capital from current and former members that, under Mississippi law, should have been disbursed to the Cooperative's members. Despite Mississippi law's requirement that electric cooperatives refund excess revenue to its members, Plaintiffs claim that Singing River held $149, 643, 679 of its members' money and had invested another $60, 663, 747 in associated organizations at the end of the 2016 calendar year. Plaintiffs say these sums of money were roughly equal to 41% of Singing River's assets and were, therefore, excessive.

         Plaintiffs filed their Complaint in the Circuit Court of Jackson County, Mississippi on March 22, 2019. Singing River then removed the case to federal district court and filed the instant Motion to Compel Arbitration, invoking Section 4 of the Federal Arbitration Act (“FAA”), 9 U.S.C. § 4. Thereafter, Plaintiffs responded to this Motion and filed their Motion for Limited Lifting of the Stay of Discovery.


         a. Motion to Compel Arbitration Standard of Review

         Section 2 of the FAA provides,

A written provision in any . . . contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

9 U.S.C. § 2. “Under the Act, arbitration is a matter of contract, and courts must enforce arbitration contracts according to their terms.” Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S.Ct. 524, 529 (2019). Accordingly, the Supreme Court “ha[s] held that parties may agree to have an arbitrator decide not only the merits of a particular dispute but also gateway questions of arbitrability, such as whether the parties have agreed to arbitrate or whether their agreement covers a particular controversy.” Id. (citations and internal quotation marks omitted). “An agreement to arbitrate a gateway issue is simply an additional, antecedent agreement the party seeking arbitration asks the federal court to enforce, and the FAA operates on this additional arbitration agreement just as it does on any other.” Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63, 70 (2010).

         When a party seeks to compel arbitration based on a contract's arbitration clause, the Court engages in a two-step analysis. Kubala v. Supreme Prod. Servs., Inc., 830 F.3d 199, 201 (5th Cir. 2016). At step one, “the court must determine ‘whether the parties entered into any arbitration agreement at all.'” IQ Prod. Co. v. WD-40 Co., 871 F.3d 344, 348 (5th Cir. 2017) (quoting Kubala, 830 F.3d at 201).

“This first step is a question of contract formation only - did the parties form a valid agreement to arbitrate some set of claims.” This inquiry is for the court: “Where the very existence of any [arbitration] agreement is disputed, it is for the courts to decide at the outset whether an agreement was reached[.]”

Lloyd's Syndicate 457 v. FloaTEC, L.L.C., 921 F.3d 508, 514 (5th Cir. 2019) (alterations in original) (citations omitted). Only if the Court answers “yes” to the first inquiry does the Court proceed to the second step. “At step two, we engage in a ‘limited' inquiry: ‘[W]hether the [parties'] agreement contains a valid delegation clause.'” Id. (quoting IQ Prod., 871 F.3d at 348). To do so, the Court asks only whether there is “clear and unmistakable” evidence that the parties' agreement delegates threshold issues. Henry Schein, 139 S.Ct. at 530. “[I]f a valid ...

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