Sullivan v. Protex Weatherproofing, Inc.

913 So. 2d 256, 2005 WL 729536
CourtMississippi Supreme Court
DecidedMarch 31, 2005
Docket2003-CA-02274-SCT
StatusPublished
Cited by14 cases

This text of 913 So. 2d 256 (Sullivan v. Protex Weatherproofing, Inc.) is published on Counsel Stack Legal Research, covering Mississippi Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Sullivan v. Protex Weatherproofing, Inc., 913 So. 2d 256, 2005 WL 729536 (Mich. 2005).

Opinion

913 So.2d 256 (2005)

Rudolph D. SULLIVAN, Jr.
v.
PROTEX WEATHERPROOFING, INC. and ATX Telecom, Inc.

No. 2003-CA-02274-SCT.

Supreme Court of Mississippi.

March 31, 2005.

Gregory Moreau Johnston, Madison, attorney for appellant.

Patrick Ryan Beckett, Paula Graves Ardelean, Emerson Barney Robinson, Jackson, attorneys for appellees.

EN BANC.

DICKINSON, Justice, for the Court.

¶ 1. This is a dispute over an arbitration clause in an employment agreement which was part of a global transaction to sell the assets of a business. The question presented is whether that arbitration clause may be used to force arbitration of a dispute over a different agreement which had no arbitration clause.

FACTUAL BACKGROUND

¶ 2. Rudolph D. Sullivan, Jr., and Mike Scrimpshire invented, developed, and eventually patented a device to weatherproof joints in coaxial cable. They manufactured and sold the device through their company, Protex, Inc., which they eventually decided to sell. After negotiations with ATX, a Canadian telecommunications company, they reached an agreement *257 which culminated in a July, 2001 closing of the sale.

¶ 3. On July 1, 2001, the various parties signed the documents necessary to close the transaction, including an Asset Purchase Agreement and employment contracts for both Sullivan and Scrimpshire. The parties to the Asset Purchase Agreement were:

Purchaser: PROTEX WEATHERPROOFING, INC., a wholly owned subsidiary of ATX which was formed for the purpose of taking ownership of the assets being purchased and continuing the business of Protex;
ATX: ATX TELECOM, INC., a Canadian corporation which provided the funds to purchase the assets;
Vendor: PROTEX, INC., a Mississippi corporation which owned most of the assets being sold;
Principals: JAMES MICHAEL SCRIMPSHIRE and RUDOLPH D. SULLIVAN, JR., owners of Protex, Inc., and some of the intellectual property being sold.

¶ 4. The parties to Sullivan's employment contract (the "Employment Contract") were Sullivan and Protex Weatherproofing. The Employment Contract provided that he would work four and a half years for Protex Weatherproofing for a minimum salary of $70,000 for the year 2001, with salary increases each year based on the financial performance of Protex Weatherproofing. Section 4.03 of the Employment Contract provided:

Notwithstanding anything contained in this Agreement, in the event that the employment relationship is terminated without Cause, the Employee shall be entitled to receive a continuation of his remuneration for the unexpired term of this Agreement or to receive a lump sum payment in lieu thereof

¶ 5. After the closing, Sullivan became vice president and a director of Protex Weatherproofing and worked for approximately one year until September 30, 2002, when he was terminated. Claiming his termination was without cause, Sullivan demanded the lump sum payment provided in section 4.03 of the Employment Contract. When Protex Weatherproofing refused to pay, he filed suit against Protex Weatherproofing and ATX.

¶ 6. On January 22, 2003, ATX and Protex Weatherproofing filed answers. Both affirmatively alleged that Sullivan's claims were "subject to mandatory and binding arbitration." Additionally, the defendants filed a joint motion to compel arbitration.

¶ 7. The parties extensively briefed and argued their respective positions to the learned trial judge who, on October 14, 2003, entered an order compelling arbitration and dismissing the complaint without prejudice. Aggrieved, Sullivan appeals.

ANALYSIS

¶ 8. Sullivan raises the following issues on appeal:

I. Arbitration should not be compelled in this matter as plaintiff has made claims against ATX that are independent of the "Employment Contract."
II. Arbitration should not be compelled in this matter, as ATX is a nonsignatory to the "Employment Contract."
III. ATX should not be allowed to enjoy the protection of the arbitration provision of the "Employment Contract" while claiming no liability to plaintiff under the Employment Contract.

¶ 9. We review de novo the grant or denial of a petition to compel arbitration. East Ford, Inc. v. Taylor, 826 So.2d 709, 713 (Miss.2002).

*258 ¶ 10. First, we find no challenge in this appeal to the dismissal of Protex Weatherproofing. Sullivan's assignments of error relate only to the application of the Arbitration Provision to ATX, who was not a signatory to the Employment Contract. Thus, we do not address the dismissal of Protex Weatherproofing and turn to Sullivan's claims concerning ATX.

¶ 11. Sullivan says arbitration of his claims against ATX should not be compelled because he made claims against ATX under the Asset Purchase Agreement, which had no arbitration provision. He argues that these claims are "independent" of the Employment Contract. Stated differently, Sullivan claims ATX should not be allowed to use the arbitration provision in the Employment Contract to compel arbitration of disputes involving the Asset Purchase Agreement.

¶ 12. The Employment Contract, to which Sullivan is a party, contains an arbitration provision which includes the following language: "[Sullivan] agrees that any dispute or controversy arising out of, relating to, or in connection with this Agreement, or the interpretation, validity, construction, performance, breach, or termination thereof, shall be settled by binding arbitration." (emphasis added). Sullivan does not dispute that he is bound by this language. He claims that the language has nothing to do with his claim under the Asset Purchase Agreement.

Claims under the Asset Purchase Agreement

¶ 13. Sullivan's complaint alleges that, "From the inception ... the defendants did not provide adequate funding, marketing support, or other resources" necessary for Protex Weatherproofing to succeed. Sullivan further claims the formation of Protex Weatherproofing was a sham, that ATX entered the Asset Purchase Agreement solely for the purpose of obtaining the patents, and that ATX never had any intention of making Protex Weatherproofing a viable company.

¶ 14. Sullivan's complaint alleges four causes of action against Protex Weatherproofing and ATX: fraud, breach of contract, gross breach of duty of good faith and fair dealing and misrepresentation. Sullivan bases each of these causes of action on his claim that he was not paid what he was due under the Employment Contract.

¶ 15. COUNT I. — FRAUD, alleges he was fraudulently induced into signing the Asset Purchase Agreement and selling his patents "in return for false promises of consideration, including the [Employment] Contract."

¶ 16. COUNT II. — BREACH OF CONTRACT, alleges that defendants[1] "are liable to [Sullivan] for wrongfully and tortiously breaching their [Employment] Contract with Plaintiff in failing to continue the compensation or providing a lump sum payment as required under the Contract." The claim for breach of contract does not allege any breach of the Asset Purchase Agreement.

¶ 17. COUNT III. — GROSS BREACH OF DUTY OF GOOD FAITH AND FAIR DEALING, alleges the defendants breached their duty by failure to provide "the consideration promised to [Sullivan] under the Asset Purchase Agreement and [Employment] Contract."

¶ 18. COUNT V.(sic) — MISREPRESENTATION, alleges the defendants misrepresented "the consideration and support it would provide to [Sullivan]."

*259

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Cite This Page — Counsel Stack

Bluebook (online)
913 So. 2d 256, 2005 WL 729536, Counsel Stack Legal Research, https://law.counselstack.com/opinion/sullivan-v-protex-weatherproofing-inc-miss-2005.