ERA Franchise Sys.s, Inc. v. Mathis
| Docket Number: | 2005-IA-00350-SCT | |
| Supreme Court: | Opinion Link Opinion Date: 06-22-2006 Opinion Author: Waller, P.J. Holding: REVERSED AND REMANDED |
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| Additional Case Information: |
Topic: Contract - Jurisdiction - Stockholder derivative action Judge(s) Concurring: Smith, C.J., Carlson and Dickinson, JJ. Non Participating Judge(s): Cobb, P.J., and Randolph, J. Dissenting Author : Easley, J. Dissenting Author : Graves, J. Dissent Joined By : Diaz, J. Procedural History: Bench Trial Nature of the Case: CIVIL - OTHER |
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| Trial Court: |
Date of Trial Judgment: 02-03-2005 Appealed from: Covington County Chancery Court Judge: J. Larry Buffington Disposition: The chancellor held a hearing and, ruling that he would bifurcate the trial between equitable and legal claims, denied the ERA is the only defendant who has appealed t 1 he chancellor’s decision. 2 motion to transfer. Case Number: 03-117 |
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| Party Name: | Attorney Name: | |||
| Appellant: | ERA FRANCHISE SYSTEMS, INC. |
CHRISTOPHER A. SHAPLEY,
ROBERT L. GIBBS, JOSEPH ANTHONY SCLAFANI, STEVE J. ALLEN |
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| Appellee: | VENNIT B. MATHIS, II | EDDIE J. ABDEEN, SAM S. THOMAS |
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Synopsis provided by:  If you are interested in subscribing to the weekly synopses of all Mississippi Supreme Court and Court of Appeals hand downs please contact Tammy Upton in the MLI Press office. |
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| Topic: | Contract - Jurisdiction - Stockholder derivative action |
| Summary of the Facts: | Vennit Mathis, II, filed suit against ERA Franchise Systems, Inc., Jackie “Chip” Hill, Pamela Hill, H. Stuart Irby, Mark Warren, Real Estate Professionals of Central Mississippi, LLC (REP-Central), and Real Estate Professionals of the Pine Belt, LLC (REPPine Belt) in the Chancery Court of Covington County. Mathis’s complaint contained fourteen causes of action - first seeking the right to bring derivative claims on behalf of REP and including numerous breach of contract allegations, breach of fiduciary duties, violations of various duties of loyalty and care, tortious interference with contracts and business advantages, conspiracy, and other causes of action. Mathis requested relief in the form of a constructive trust, estoppel, specific performance, and actual and punitive damages. ERA filed a motion to have the action transferred to circuit court. The chancellor ruled that he would bifurcate the trial between equitable and legal claims and denied the motion to transfer. ERA filed a petition for interlocutory appeal which the Supreme Court granted. |
| Summary of Opinion Analysis: | Mathis argues that because he is asserting REP’s claims derivatively and seeks to have a court of equity fashion a remedy that prevents the other equity member of REP (Irby) from profiting from his wrongful conduct, jurisdiction is proper in chancery court. ERA challenges Mathis’s assertion that this is a derivative action. ERA argues that because Mathis is seeking only an individual recovery in this action, he is clearly not asserting these claims for the benefit of REP, the business entity. A true stockholder derivative action is a suit in equity which confers jurisdiction on the chancery court. However, Mathis is asserting his own personal claims, in addition to the derivative claims of REP, in a direct action that may benefit him alone, to the exclusion of the other equity owner in REP. Based on these facts, as to the derivative claims through which Mathis seeks compensatory and punitive damages, he is pursuing a direct legal action rather than a true shareholder’s derivative action. While a chancery court has, in the past, been allowed to retain jurisdiction over cases involving questions of both law and equity, more recent cases have held that equitable claims are more appropriately brought before a circuit court when they are connected to a contractual relationship or other claims tied to questions of law. In addition, ERA would also be denied the opportunity for a jury trial if Mathis’s claims are adjudicated by a chancery court, and plaintiffs should not be allowed to deprive defendants of their constitutional right to a jury trial simply by a choice of forum. Under the circumstances, the chancellor erred by denying the defendants’ motion to transfer the case. |
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