Members of Delta Electric Power Association (“Delta”) filed a lawsuit alleging Delta was retaining excess revenues that it did not need to fund operations. Delta filed a motion to compel arbitration pursuant to an arbitration clause included in its bylaws. The trial court denied Delta’s motion to compel and held the arbitration provision was unenforceable for the following reasons:
• Plaintiffs did not agree to arbitrate the dispute;
• Bylaws contained two separate arbitration provisions: mandatory and nonmandatory;
• Used the word “may” which makes it permissive, not mandatory;
• Mandatory arbitration provision did not apply retroactively;
• Delta had a duty to disclose or explain the arbitration provision;
• Mandatory provision was unconscionable.
The Supreme Court of Mississippi reversed the trial court and remanded the case because the court already decided in Virgil v. Southwest Mississippi Electric Power Association that arbitration agreements contained in a cooperative’s bylaws were valid and enforceable. The Plaintiffs in this case signed a membership agreement that stated “members would be bound by the bylaws and that the bylaws could be amended by the elected board,” and the board adopted an arbitration provision. Since the facts between Virgil and Delta’s case, the court had to arrive at the same decision. The court also noted the issue of whether the inclusion of the arbitration provision without notice was unconscionable may be raised before the arbitrator.
Jeremy Fetty is a partner in the law firm of Parr Richey Frandsen Patterson Kruse with offices in Lebanon and Indianapolis. He often advises businesses and utilities (for profit, non-profit and cooperative) on organizational, human resources, and transactional matters and drafts and reviews commercial contracts.
The statements contained herein are matters of opinion and general information only and are not to be considered legal advice and should not be construed to form an attorney-client relationship. If you have any questions regarding this article, please contact an attorney.