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LAGB, LLC v. Total Merchant Services, Inc.

Supreme Court of Mississippi

September 26, 2019

LAGB, LLC AND MAMA KIO'S GRILL, INC.
v.
TOTAL MERCHANT SERVICES, INC., HSBC BANK USA, GLOBAL PAYMENTS, INC. AND GLOBAL PAYMENTS DIRECT, INC.

          DATE OF JUDGMENT: 04/13/2018

          HINDS COUNTY CIRCUIT COURT HON. WINSTON L. KIDD TRIAL JUDGE

          TRIAL COURT ATTORNEYS: WALTER H. BOONE CHARLES H. RUSSELL, III LAWRENCE M. COCO, III T. STEWART LEE, JR. COLLEEN SUZANNE WELCH JOHN T. ROUSE JAMES E. GRAVES, III H. KEITH KEETON

          ATTORNEYS FOR APPELLANTS: JAMES L. KELLY H. KEITH KEETON.

          ATTORNEYS FOR APPELLEES: CHARLES H. RUSSELL, III JAMES E. GRAVES, III JOHN T. ROUSE WALTER H. BOONE.

          BEFORE RANDOLPH, C.J., ISHEE AND GRIFFIS, JJ.

          RANDOLPH, CHIEF JUSTICE

         ¶1. LAGB, LLC, a commercial landlord, sued its tenant Mama Kio's Grill and numerous companies that provided credit-card processing services to Mama Kio's, alleging that the negligence of the credit-card processing companies caused Mama Kio's to breach its lease with LAGB. Mama Kio's filed a cross-claim against the credit-card processing companies, alleging misrepresentations and tortious interference with its business. The credit-card processing companies filed motions compelling LAGB and Mama Kio's to arbitrate. The trial court granted the motions. While the trial court did not err by compelling Mama Kio's to arbitrate its cross-claims, it did err by compelling LAGB to arbitrate its claims.

         FACTS AND PROCEDURAL HISTORY

         ¶2. In January 2013, LAGB was formed "for the sole purpose of acquiring and owning the 10, 000 square foot building . . . renovating and improving the said building for the purpose of housing a Mexican restaurant, and then leasing the improved building to Mama Kio's Grill, Inc." Once the building was acquired, LAGB and Mama Kio's entered into a commercial lease.

         ¶3. Federico Garcia, president of Mama Kio's, entered into an agreement with Total Merchant Services (TMS) for credit-card financial services for the restaurant. Two months after opening Mama Kio's, Garcia noticed that the bank deposits through TMS were considerably less than expected. TMS later discovered the cause was an improper code in its software that had failed to collect the tips authorized by the customers. The missing tips totaled approximately $14, 000. TMS attempted to remedy the error by running the credit cards again for the uncharged tip amounts. However, the customers were charged not only for the uncollected tips but also for the entire charged amounts. More than three thousand customers' transactions were double and/or triple billed, resulting in more than $400, 000 taken from Mama Kio's customers' accounts. Mama Kio's worked with the credit-card companies for more than a month to repair and mitigate the damages. Mama Kio's was forced to close its restaurant for lack of customers.

         ¶4. LAGB filed suit against Mama Kio's for breach of its lease contract and sought damages for rent, insurance, taxes, and capital improvements. LAGB also filed suit against the credit-card processing companies, pleading in the alternative three theories of wrongdoing: negligence, tortious interference with a contract, and tortious interference with a prospective business advantage. In its answer to the complaint, Mama Kio's filed cross-claims against the credit-card processing companies, alleging causes of action for breach of fiduciary relationship, intentional and/or gross negligent misrepresentation, and tortious interference with a prospective business advantage.

         ¶5. The credit-card processing companies filed motions to compel arbitration of LAGB's claims against them and Mama Kio's cross-claims. The companies also filed motions to stay, alleging that all claims arose from contractual breaches of the agreement between the companies and Mama Kio's and that the agreement contained an arbitration clause. The companies alternatively moved to dismiss the complaint, because LAGB lacked standing to bring an action against the companies and the companies owed no legal duty to LAGB.

         ¶6. LAGB argued that it never contracted with the companies, that it was not a third-party beneficiary of the contract, and that it could not be bound by an arbitration clause in a contract between two other parties. Mama Kio's argued that its claims did not arise out of the Merchant Agreement signed by a representative of Mama Kio's and that Mama Kio's was not aware of and had never signed any other agreement that contained an arbitration clause.

         ¶7. The trial court granted the companies' motions to compel arbitration. LAGB and Mama Kio's separately moved to alter or amend the judgment and filed a motion for the trial court to enter specific findings of fact and conclusions of law. After a hearing was conducted on the motions, the trial court denied their motions. Subsequently, Mama Kio's and LAGB appealed.

         ISSUES

         ¶8. For brevity and clarity, the issues have been reordered and restated as follows:

I. Is there a valid arbitration agreement?
II. Does the dispute fall within the scope of the ...

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