LAGB, LLC AND MAMA KIO'S GRILL, INC.
TOTAL MERCHANT SERVICES, INC., HSBC BANK USA, GLOBAL PAYMENTS, INC. AND GLOBAL PAYMENTS DIRECT, INC.
OF JUDGMENT: 04/13/2018
COUNTY CIRCUIT COURT HON. WINSTON L. KIDD TRIAL JUDGE
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.
RANDOLPH, C.J., ISHEE AND GRIFFIS, JJ.
RANDOLPH, CHIEF JUSTICE
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.
AND PROCEDURAL HISTORY
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.
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.
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.
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 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.
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
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 ...