William L. Painter v. Regions Insurance, Inc.

181 So. 3d 970, 2015 Miss. LEXIS 500, 40 I.E.R. Cas. (BNA) 1293, 2015 WL 5854494
CourtMississippi Supreme Court
DecidedOctober 8, 2015
Docket2014-CA-00883-SCT
StatusPublished

This text of 181 So. 3d 970 (William L. Painter v. Regions Insurance, 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
William L. Painter v. Regions Insurance, Inc., 181 So. 3d 970, 2015 Miss. LEXIS 500, 40 I.E.R. Cas. (BNA) 1293, 2015 WL 5854494 (Mich. 2015).

Opinion

LAMAR, Justice,

for The Court:

¶ 1. Regions Insurance sued two former employees for violating their employment agreements. Most of the claims were arbitrated and the arbitrator found in favor of Regions. ' The employees moved the circuit court to vacate the award, claiming the arbitrator exceeded his authority and engaged in “undue means,” “misconduct,” or “misbehavior” that prejudiced their rights. The circuit court denied'’the motion and confirmed the award.’ The employees appeal. Finding no merit to their claims, we affirm.

FACTS AND PROCEDURAL HISTORY

¶2. William Painter and John Chalk both began working for Regions Insurance in 2007. In' their employment contracts with Regions, Painter and' Chalk agreed that they would not compete with or solicit customers or employees from Regions for two years following the end of their employment. They also agreed not to share any of Regions’ confidential information with anyone. In Paragraph 6 of their contracts, they agreed that if they breached the restrictive covenants, they would be liable to Regions for, among other things, liquidated damages equal to twice any commissions they earned servicing former Regions customers for the two-year period following the end of their employment with Regions.

¶ 3. On July 15, 2013, Painter and Chalk both resigned from Regions and immedi *972 ately began working at Alliant Insurance Service. Regions sued Painter and Chalk three days later in Madison County Circuit Court, claiming that the two had breached their employment agreements and seeking to enjoin them from further breaching those agreements. 1 In the complaint, Regions claimed, among other things, that “Painter and Chalk agreed to a liquidated damages provision” in their respective employment agreements, under which they agreed to pay double the amount of any compensation for which they were “a procuring cause.”

¶ 4. After a hearing, the trial court partially granted Regions’ request for .injunc-tive relief by prohibiting Painter and Chalk from soliciting, accepting, or servicing customers they had- serviced in the prior two years while working for Regions. After a later modification, the injunction did not apply to customers who already had switched from Regions to Alliant. The trial court did not enforce a clause in the agreement which would have prevented Painter and Chalk from selling insurance anywhere' in Mississippi or in several other cities where Regions operates.

15. The parties agreed to submit , the remaining claims to binding arbitration, pursuant to a clause in the employment agreement that provided that “[a]ll disputes .arising upder this. Agreement (other than claims in equity) shall be resolved by arbitration in accordance with the. Commercial Arbitration Rules of the American Arbitration Association.” Painter and Chalk selected William Larry Latham as the arbitrator. The arbitration took place from February 11 to February 14, 2014.

¶ 6. At arbitration, there was no dispute about the underlying facts, that Painter and Chalk had resigned from Regions and had begun working at Alliant. The arbitrator rejected a duress defense mounted by Painter and found that the employment agreements were enforceable and that Painter and Chalk had breached them. Specifically, the arbitrator found that “Painter and Chalk accepted and serviced Regions customers, competed with Regions and, improperly used Regions’ proprietary and confidential information, all in violation of their Agreement. It is this breach for which they must answer.”

¶7. During the arbitration, Regions’ counsel asked Painter if he had sought legal advice before signing the employment agreement:

(⅞. It is true, is it not, that prior to signing your agreements you shared those agreements with your personal lawyer, Mark Herbert?
A. Yes, sir.
Q. And .you sought his advice about those agreements. Correct?
A.- Yes, sir. I sought everybody’s advise [sic] I could find about the agreement.

¶ 8. After the arbitration closed, but before the arbitration award issued, Latham telephoned Mark Herbert. According to Herbert’s affidavit, Latham asked how long Herbert had been practicing and whether that practice had involved employment matters, specifically noncompete clauses. Latham next asked about taking judicial notice, as an arbitrator, of Herbert’s expertise. Herbert asked Latham if his questions were related to the Regions arbitration and Latham said they were. Then Herbert explained that he had told Painter he could not advise on the employment agreement because he had a conflict with Regions. Herbert told Painter about *973 Latham’s phone call. Painter then told his arbitration counsel, who emailed Latham, requesting that he immediately resign as arbitrator without issuing the award. La-tham declined and later filed an affidavit explaining the phone call.

¶ 9. The arbitrator issued the award on March 24, 2014. He awarded punitive damages because he found that “Painter and Chalk weighed their options and willfully, with calculated intent, violated their Agreement.” He also ordered Painter and Chalk to pay Regions’ attorney’s fees and arbitration costs.

f 10. In addition, the arbitrator awarded damages based on the formula the parties had agreed to in Paragraph 6 of their employment contracts, and he put- in place a method whereby Regions could collect from Painter and Chalk. Tracking the language of the contract, the arbitrator ordered that any time Painter or Chalk was “a procuring cause, directly or indirectly, for any commission or other compensation,” either .to them or a company they work for, they would have to pay Regions “an amount equal to two (2) times such commission- or compensation,5’ if the compensation, came from any customer Painter or Chalk had serviced during-the two-year period before their resignation from" Regions.

¶11. - After Regions moved the trial court to confirm the arbitration award, Painter and Chalk moved to vacate the award based on two arguments. The first was that the Paragraph 6 damages award and the method by which it was to be enforced amounted to specific performance, and such an equitable remedy, was outside the scope of arbitration. The second -was that Latham’s ex parte phone call to Herbert was “undue means” or “misbehavior” within the meaning- of Mississippi’s arbitration statute. Painter and Chalk also moved the trial court to strike La-tham’s affidavit, claiming that the arbitration rules disallowed such evidence and that it was incompetent evidence that the trial court could not consider when deciding whether the ex parte phone call warranted vacating -the award.

¶12. -The trial court confirmed the award, denying the motion to vacate and the motion to strike Latham’s affidavit. Painter and Chalk appeal, raising' two issues:

1. Whether the arbitrator exceeded his powers, within the meaning of Mississippi Code Section ll-15-23(d) (Rev.2004), when he ordered specific performance of a paragraph of an employment agreement even though the arbitration clause of that agreement reserved “claims in equity” for decision by the Court.

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Bluebook (online)
181 So. 3d 970, 2015 Miss. LEXIS 500, 40 I.E.R. Cas. (BNA) 1293, 2015 WL 5854494, Counsel Stack Legal Research, https://law.counselstack.com/opinion/william-l-painter-v-regions-insurance-inc-miss-2015.