Independence County v. City of Clarksville
2012 Ark. 17
| Ark. | 2012Background
- Independence County, Arkansas appeals aJohnson County Circuit Court denial of its motion to compel arbitration under a PPA with the City of Clarksville.
- The Amended and Restated White River Hydroelectric Project Power Purchase and Sale Agreement (PPA) governs power supply and includes a mandatory arbitration clause in 4.3.
- Section 4.1 allows termination if the plant fails to begin commercial operation within 22 months, with notice to the other party; operation benchmark defined in Consent Agreement 9(d).
- Appellant began supplying electricity in 2006, but project faced financial/operational troubles; Memorandum of Understanding in 2008–2010 increased rates and expired in 2010.
- Clarksville invoked termination effective November 1, 2010, contending the plant did not achieve commercial operation and thus the PPA was terminated; appellee demanded arbitration, which appellant resisted.
- Circuit Court held arbitration unenforceable: (i) appellee validly terminated the PPA for non-operation, extinguishing the arbitration obligation; (ii) lack of mutuality in the arbitration provisions because the panel could not award monetary damages or other relief against Clarksville. The court denied arbitration; appellate review followed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether termination of the PPA extinguishes the arbitration obligation | Independence County | Clarksville | Not dispositive; the lack of mutuality controls; arbitration unenforceable |
| Whether the arbitration provisions lack mutuality of obligation | Arb clause binds both parties to arbitrate and allows remedies outside arbitration | Arb panel cannot award monetary damages or other relief against Clarksville | Arbitration lacks mutuality; unenforceable |
| Whether the circuit court should have decided contract validity or arbitration scope | Court may determine contract validity; panel not bound to decide | Validity of the entire contract is within arbitration scope | Court correctly concluded mutuality defect renders arbitration unenforceable; need not reach contract validity |
Key Cases Cited
- The Money Place, LLC v. Barnes, 349 Ark. 411 (Ark. 2002) (mutuality required; one side cannot shield itself from litigation)
- Archer v. Tyson Foods, Inc., 356 Ark. 136 (Ark. 2004) (mutuality lacking when one party preserves court remedies while the other is arbitration-bound)
- Brosh v. Asbury Automotive Used Car Ctr., L.L.C., 364 Ark. 386 (Ark. 2005) (absence of mutuality when one party retains legal/equitable relief outside arbitration)
- Cash in a Flash Check Advance of Ark., L.L.C. v. Spencer, 348 Ark. 459 (Ark. 2002) (check-cashing style mutuality principle applying to arbitration)
- E-Z Cash Advance, Inc. v. Harris, 347 Ark. 132 (Ark. 2001) (arbitration contract interpretation; mutuality considerations)
- Foundation Telecomms., Inc. v. Moe Studio, Inc., 341 Ark. 231 (Ark. 2000) (essential elements of a contract; mutual obligations underlying arbitration)
- Hamilton v. Ford Motor Credit Co., 99 Ark.App. 124 (Ark. App. 2007) (courts’ treatment of mutuality; non-binding for controlling authority but cited)
- Nat’l Cash, Inc. v. Loveless, 361 Ark. 112 (Ark. 2005) (arbitration and mutuality considerations in contract disputes)
- BancorpSouth Bank v. Shields, 2011 Ark. 503 (Ark. 2011) (arbitration-related contract interpretation and standards of review)