Multiband Corp. Through Its Successor in Interest Goodman Networks, Inc. v. J. Basil Mattingly
2019 CA 001753
Ky. Ct. App.Jun 17, 2021Background
- J. Basil Mattingly was trustee/officer of companies with ESOPs that merged into DirecTECH (DT); Multiband acquired DT in 2009 after indemnity agreements were executed in 2008 protecting Mattingly for Plan-related liabilities.
- The U.S. Department of Labor sued Mattingly in Kentucky; Mattingly settled in June 2011 for over $2,000,000 (no admission of wrongdoing). Multiband denied indemnification and advancement demands.
- Mattingly sued in Kentucky circuit court in 2015 to compel arbitration/enforce indemnification; parties agreed to arbitration and appointed a former federal judge as arbitrator.
- During arbitration Multiband produced a June 30, 2011 document purporting to release Mattingly’s indemnity claims for $1,000; Mattingly denied intending to release those rights.
- The arbitrator found the release unenforceable (no mutual intent) and awarded Mattingly $1,104,910.12 plus $604,420.82 in fees, costs, and interest; the circuit court confirmed the award.
- On appeal Multiband argued (1) Mattingly’s claims were time-barred and (2) the arbitrator acted in manifest disregard of law by refusing to enforce the release (and by applying in pari delicto). The Court of Appeals affirmed.
Issues
| Issue | Plaintiff's Argument (Mattingly) | Defendant's Argument (Multiband) | Held |
|---|---|---|---|
| Which law governs substantive vs. procedural issues in the arbitration agreements? | Delaware governs substantive issues per the agreements; Kentucky forum may govern procedure. | Delaware law (per choice clause) and JAMS rules control; Delaware should govern. | Delaware substantive law governs contracts; forum (Kentucky) law governs procedural matters, including statute of limitations. |
| Are Mattingly’s claims time-barred? | Kentucky’s 15-year written-contract statute (KRS 413.090(2)) applies—claims timely. | Delaware’s 3-year statute for promises applies; Mattingly admitted he could have sued in 2011 so suit filed in 2015 is untimely. | Kentucky’s statute of limitations applies (forum law); claims are timely. |
| Was the June 30, 2011 release enforceable under controlling law (Minnesota law in release)? | Mattingly: he did not intend to release indemnity rights; oral assurances and inconsistent document pages show no meeting of the minds. | Multiband: Mattingly signed the release and is presumed to know its terms; Minnesota law enforces signed releases absent fraud/mistake. | Arbitrator reasonably found release unenforceable for lack of mutual intent; no manifest disregard of law. |
| Did arbitrator act in manifest disregard of law (including in pari delicto application)? | Arbitrator applied appropriate standards; evidence supported findings; in pari delicto was an alternative rationale. | Arbitrator ignored clear legal principles by failing to enforce the release and misapplying in pari delicto. | Manifest-disregard standard not met; arbitrator’s conclusions were arguable and supported by evidence; in pari delicto discussion, even if imperfect, was harmless. |
Key Cases Cited
- Hathaway v. Eckerle, 336 S.W.3d 83 (Ky. 2011) (choice-of-law provisions in arbitration agreements generally valid)
- Phelps v. McClellan, 30 F.3d 658 (6th Cir. 1994) (choice-of-law clauses generally do not imply transfer of forum’s procedural rules such as statutes of limitation)
- Combs v. Int’l Ins. Co., 354 F.3d 568 (6th Cir. 2004) (forum ordinarily applies its statute of limitations)
- Abel v. Austin, 411 S.W.3d 728 (Ky. 2013) (place where cause of action arises determined by location of operative facts)
- DMS Props.-First, Inc. v. P.W. Scott Assocs., Inc., 748 A.2d 389 (Del. 2000) (arbitrability review de novo unless parties clearly delegated arbitrability to arbitrator)
- Travelers Ins. Co. v. Nationwide Mut. Ins. Co., 886 A.2d 46 (Del. Ch. 2005) (Delaware courts afford narrow review of arbitration awards)
- SPX Corp. v. Garda USA, Inc., 94 A.3d 745 (Del. 2014) (explaining "manifest disregard" requires arbitrator knew and willfully ignored a controlling legal principle)
- In re Am. Int’l Group, Inc. Consol. Derivative Litig., 976 A.2d 872 (Del. Ch. 2009) (describing in pari delicto doctrine and its policy rationales)