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Lovelace Farms, Inc. v. Marshall

Court of Appeals of Missouri, Eastern District, Third Division

September 16, 2014

LOVELACE FARMS, INC., et al, Respondents,
v.
MARVIN MARSHALL, et al., Appellants

Page 203

Appeal from the Circuit Court of St. Louis County. Honorable Barbara W. Wallace.

FOR APPELLANTS: Michael A. Clithero, Lathrop & Gage LLP, St. Louis, Missouri; Michael D. Pinnisi, Pinnisi & Anderson, Ithaca, NY.

FOR RESPONDENTS: Thomas B. Weaver, Daniel C. Nelson, Armstrong Teasdale LLP, St. Louis, Missouri.

Kurt S. Odenwald, Presiding Judge. Robert G. Dowd, Jr., J., Concurs, Gary M. Gaertner, Jr., J., Concurs.

OPINION

Kurt S. Odenwald, Presiding Judge

Page 204

Introduction

Appellants Marvin Marshall and P.J. Marshall (" the Marshalls" ) appeal from the judgment of the Circuit Court of St. Louis County granting Respondents Lovelace Farms, Inc., Wayne Lovelace, and Judy Lovelace's motion to stay arbitration. The Marshalls assert that the circuit court erred in staying arbitration because the Federal Arbitration Act (" FAA" ) compelled arbitration. Specifically, the Marshalls contend that the parties' disputes come within the broad scope of a valid arbitration agreement, and any questions as to arbitrability, including the issue of waiver, should be decided by the arbitrator, not the court. Because the issue of waiver based on litigation conduct is a matter for the court and not the arbitrator to decide, and because the Marshalls by their conduct waived their right to arbitration, we affirm the judgment of the circuit court.

Factual and Procedural Background

Wayne and Judy Lovelace (" the Lovelaces" ) operate Lovelace Farms, a tree farm near Elsberry, Missouri. The Lovelaces invented a method for accelerating tree growth called the Root Production Method (" RPM" ). In 2006, the Lovelaces entered into a relationship with the Marshalls to create business entities in the hope of profiting from the RPM technology. To that end, three limited liability corporations were formed: RPM Holdings, LLC, (" Holdings" ), RPM Ecosystems, LLC (" Ecosystems" ), and RPM Technologies, LLC (" Technologies" ). Equity in Holdings was split equally between the Marshalls and Lovelaces.[1] Ecosystems was wholly owned by Holdings, and thus was owned equally by the Marshalls and Lovelaces through their equal ownership of Holdings. Technologies was owned by the Lovelaces only. Each LLC was governed by its own operating agreement, and all three operating agreements contained the following mediation and arbitration clause:

11.1 All disputes, claims, or controversies between Members, or between the Company and any Member(s) arising under or in any way relating to this Agreement . . . shall be [] first submitted to and settled, if possible pursuant to mediation in accordance with the procedures set forth [below] and, if necessary, binding arbitration pursuant to Section 11.[2] of the Agreement.
11.2 Any Management Dispute not resolved pursuant to section 11.1 shall be resolved by arbitration pursuant to the procedures set forth below, before Neutral Arbitrators appointed in accordance with the Commercial Arbitration Rules of the American Arbitration Association . . . ...

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