Lefoldt v. Horne L.L.P., 853 F.3d 804

Background

NRMC (a Mississippi public hospital) paid Horne for audit services under three engagement letters signed by NRMC’s CFO in 2009, 2010, and 2012; each letter contained arbitration provisions.
NRMC board minutes expressly record acceptance of Horne’s 2009 audit bid, but the 2010 and 2012 letters are not mentioned in any board minutes.
NRMC later filed Chapter 9 bankruptcy; the trustee sued Horne for professional malpractice. Horne moved in district court to compel arbitration and stay proceedings.
The district court denied the motion, reasoning that because the later engagement letters were not reflected in the board minutes, no agreement to arbitrate existed; it also rejected Horne’s equitable-estoppel arguments.
On interlocutory appeal, the Fifth Circuit considered whether Mississippi’s “minutes rule” (requiring board actions be recorded in minutes) goes to contract formation (court decides) or to contract validity/enforceability (arbitrator may decide).

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Does Mississippi’s minutes rule pertain to formation of a contract or only to enforceability of contract terms?	Horne: rule does not bar arbitration; arbitration agreements should be placed on equal footing under FAA.	NRMC: minutes rule prevents formation/enforceability of arbitration clauses absent minutes.	The rule can do either depending on facts; where minutes show a contract (2009) the rule concerns enforceability; where minutes say nothing (2010/2012) it concerns formation.
Are the 2010 and 2012 engagement letters binding on NRMC (and thus subject to arbitration)?	Horne: NRMC performed and paid under the letters; arbitration should be compelled.	NRMC: letters not reflected in minutes so no board-approved contracts were formed.	The court held no contract was formed for 2010 and 2012 under Mississippi minutes rule; denial of compel as to those letters was affirmed.
Is the 2009 engagement letter subject to arbitration despite minutes-rule challenges?	Horne: 2009 letter is recorded in minutes; arbitration clause is enforceable and district court should compel arbitration.	NRMC: minutes rule limits enforcement or scope of arbitration provision.	Because the 2009 contract is recorded, the minutes rule presents a validity/enforceability challenge (not formation); arbitration clause severability principles apply — remanded to determine scope and whether the arbitrator or court decides effect of minutes rule on arbitration clause.
Does FAA §2 (equal footing) preclude applying Mississippi’s minutes rule to arbitration clauses?	Horne: FAA requires equal footing and preempts singling out arbitration via the minutes rule.	NRMC: minutes rule is generally applicable to public-entity contracts and not specifically targeted at arbitration.	The Fifth Circuit held the minutes rule is generally applicable and consistent with FAA §2; it does not, by itself, preclude application to arbitration clauses.

Key Cases Cited

Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (Sup. Ct.) (distinguishes challenges to contract validity from challenges to whether a contract was ever formed)
Rent‑A‑Center, West, Inc. v. Jackson, 561 U.S. 63 (Sup. Ct.) (delegation clauses and requirement that challenges to delegation be made specifically)
Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (Sup. Ct.) (arbitration clause severability and arbitrator decides defenses to the contract generally)
AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (Sup. Ct.) (FAA §2 requires courts to place arbitration agreements on equal footing with other contracts)
Wellness, Inc. v. Pearl River Cty. Hosp., 178 So.3d 1287 (Miss. 2015) (modern Mississippi discussion of purposes and scope of the minutes requirement)
Smith Cty. v. Mangum, 89 So. 913 (Miss. 1921) (historic Mississippi precedent enforcing strict minutes requirement for board contracts)
Colle Towing Co. v. Harrison Cty., 57 So.2d 171 (Miss. 1952) (Mississippi refuses equitable estoppel to overcome minutes-rule defects)