Sanderson Farms, Inc. v. Gatlin


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Docket Number: 2000-IA-00790-SCT

Supreme Court: Opinion Link
Opinion Date: 06-26-2003
Opinion Author: McRae, P.J.
Holding: AFFIRMED AND REMANDED

Additional Case Information: Topic: Breach of contract - Arbitration - Costs/expenses - Waiver - Severance
Judge(s) Concurring: Diaz, Easley and Graves, JJ.
Dissenting Author : Cobb, J.
Dissent Joined By : Smith, P.J., and Carlson, J.
Concurs in Result Only: Pittman, C.J., and Waller, J.
Procedural History: Interlocutory Appeal
Nature of the Case: CIVIL - CONTRACT

Trial Court: Date of Trial Judgment: 09-26-2000
Appealed from: Jones County Circuit Court
Judge: Billy Joe Landrum
Disposition: Circuit Court denied Sanderson Farm's motion to dismiss and motion to reconsider.
Case Number: 99-150-CV9

Note: Notice of Attorney's Lien for Fee filed by Michael T. Rushing is dismissed without prejudice.

  Party Name: Attorney Name:  
Appellant: Sanderson Farms, Inc.




RICHARD O. BURSON BROOKE FERRIS RICHARD A. FOLLIS



 

Appellee: Roy R. Gatlin and Nelda T. Gatlin LAWRENCE E. ABERNATHY, III JOHN DUDLEY BUTLER MICHAEL J. QUIRK  

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Topic: Breach of contract - Arbitration - Costs/expenses - Waiver - Severance

Summary of the Facts: Roy Gatlin signed a Broiler Production Agreement with Sanderson Farms which contained a mandatory arbitration clause. When Sanderson Farms terminated its contract with Roy, Roy filed a demand for arbitration and paid the initial administrative fee of $2,000. Roy and Sanderson Farms then participated in mediation which led to no resolution of the matter but cost Roy an additional $750. Pursuant to the arbitration provision in the contract, Roy called upon Sanderson Farms to split the expenses of the arbitration. Sanderson Farms claimed that Roy must bear the costs of the initial filing fees. Prior to any hearing, Roy was informed that he owed an additional $8,250 in arbitrator's compensation. Roy and his wife filed suit against Sanderson Farms alleging intentional infliction of emotional distress and willful and intentional breach of contract in arbitrarily terminating the broiler contract and in refusing to pay arbitration fees in accordance with the broiler contract. The complaint sought compensatory damages, attorneys fees, simple tort damages, and punitive damages. Sanderson Farms filed a motion to dismiss. The court found that Sanderson Farms was indeed by contract obligated to pay one-half of the filing and initial fees for arbitration and that its refusal to do so was a breach of the agreement which constituted a waiver of any right to arbitration. Sanderson Farms filed a petition for interlocutory appeal which was granted.

Summary of Opinion Analysis: Issue 1: Breach Sanderson Farms argues that it did not breach the arbitration provision and that its interpretation of the cost splitting portion of the provision is correct. The arbitration provision provided that “[t]he cost of such arbitration will be divided among the parties to the arbitration [and e]ach party will bear the cost of their own expenses and attorney's fees.” The contract does not define "cost" or "expenses." Webster's New Collegiate Dictionary defines cost as "among or equivalent paid or charged for something; the outlay or expenditure (as of effort or sacrifice) made to achieve an object; loss or penalty incurred in gaining something; and expenses incurred in litigation” and expense as “"the act or practice of expending money; the act or process of using up; something expended to secure a benefit or bring about a result." Under these definitions, the filing and administrative fees charged by the American Arbitration Association are "costs" which by contract Sanderson Farms agreed to divide equally with Roy. Applying the legal definitions to these terms leads to the same result. If Sanderson Farms meant "cost" to include filing fees and administrative fees, then it could have specifically stated that in its contract. By refusing to pay one-half of the $2,750 cost which amounted to filing and administrative fees and/or the $8,250 cost of arbitration fees and compensation, Sanderson Farms breached the arbitration provision. Issue 2: Waiver Sanderson Farms argues that it at no time waived its right to arbitrate. A party to a contract may by words or conduct waive a right to which he would otherwise have been entitled. Waiver may be express or implied when the party actively participates in litigation or acts inconsistently with its rights to proceed with arbitration. Here, Sanderson Farms waived its right to arbitration by refusing to pay its one-half of the costs. This refusal amounts to an act inconsistent with the right to arbitrate. Issue 3: Severance Sanderson Farms argues that if portions of the arbitration provision are found to be unenforceable due to unconscionability or waiver, then those portions should be severed from the provision and the rest of the arbitration provision or the broiler contract should be allowed to stand. Since Sanderson Farms breached the arbitration agreement and thereby waived its protections, the only just outcome is to strike the entire arbitration agreement from the contract.


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