RANDOLPH, Justice, for the Court:
¶ 1. In December 2006, Derek A. Wyatt entered into an unwritten employment agreement with Nutt & McAlister, PLLC. Nutt & McAlister was a member of the Katrina Joint Venture (which also included
¶ 2. In April 2008, all Katrina Joint Venture attorneys and associates were disqualified from Mississippi federal court cases against State Farm Insurance Company in which they were involved, based upon payments to material witnesses in hurricane-damage claims which were likely to become the subject of litigation. Following that disqualification, Nutt & McAlister, despite Wyatt's protest, withdrew from the Katrina Joint Venture and relinquished its interest in all cases related thereto. Concurrently, Wyatt was engaged in a fee dispute with Nutt & McAlister regarding his claim to a ten-percent interest in Nutt & McAlister's share of Katrina Joint Venture fees.
¶ 3. Wyatt's First Amended Complaint ("Complaint") was filed in the Circuit Court of Lafayette County, Mississippi, in June 2009, against Scruggs and SLF, Inc. ("Scruggs Defendants"), et al.
¶ 4. In response, the Scruggs Defendants filed a "Motion to Compel Arbitration and To Stay Pending Completion of Arbitration," asserting that all of Wyatt's claims against them related to "his alleged entitlement to fees collected in the course of the [Katrina Joint] [V]enture." As such, the Scruggs Defendants maintained that such claims were within the "broad" scope of the Katrina JVA's "mandatory binding arbitration" provision. Following hearing, the circuit court found the arbitration provision "broad enough in scope to cover the instant controversy," yet overruled the Scruggs Defendants' "Motion to Compel Arbitration and To Stay Pending Completion of Arbitration." The circuit court reasoned that "there is no agreement between [Wyatt] and the [Scruggs Defendants] to arbitrate since [Wyatt] did not sign the [Katrina JVA] nor was his particular involvement foreseeable as a [third-]party beneficiary." From that ruling, the Scruggs Defendants timely filed their "Notice of Appeal."
¶ 5. On November 8, 2005, the Scruggs Law Firm; Barrett Law Office, PA; Nutt & McAlister; John G. Jones of Jones, Funderburg, Sessums & Peterson, PLLC ("Jones Firm"); and Dewitt "Sparky" Lovelace of the Lovelace Law Firm, PA, entered into the Katrina JVA. The Katrina JVA provided that "[t]his agreement constitutes the sole and only agreement of the members hereto and supersedes any prior understandings, written or oral agreements between the members of this venture." (Emphasis added.) The Katrina JVA stated that the role of the Scruggs Law Firm was as "[l]ead counsel," while the role of Nutt & McAlister was "[f]unding;[
¶ 6. According to Wyatt's Complaint, when the Katrina JVA was signed, he was "employed as a salaried associate at the Barrett Law Office. . . ." Wyatt claimed that "[b]y mid-2006," he was advised by "Barrett's senior partner . . . to . . . devote the majority if not all of his time to the Katrina [Joint] Venture," and that in the fall of 2006, Nutt & McAlister requested that he come to work for their firm. Before beginning that employment on December 15, 2006, Wyatt allegedly entered into an unwritten employment agreement with Nutt & McAlister. According to the Complaint, Wyatt was hired for a "nominal salary of $100,000,"
¶ 7. On January 23, 2007, the Katrina Joint Venture publicly announced a $106.8 million settlement with State Farm, although Wyatt had been instructed to "stand down" from taking depositions in that litigation as early as January 5, 2007, three weeks after his employment began. Wyatt's Complaint provided that the Katrina Joint Venture's attorneys fees from that settlement "were $26.7 million." According to Wyatt, he was entitled to an estimated $823,770.12 share of that settlement, which was not paid by Nutt & McAlister. Instead, he was given only a $100,000 bonus for his three weeks of service. By contrast, Nutt & McAlister maintained that Wyatt "was clearly and unequivocally informed . . . that he would not receive a bonus in connection with the State Farm . . . settlement[,]" but nonetheless Wyatt was "gratuitously paid" the $100,000 bonus. Wyatt further averred that "additional settlements were [subsequently] made, distributing $75.4 million in policy benefits to homeowners who had retained the [Katrina Joint] Venture[,]" of
¶ 8. In March 2007, the Jones Firm filed an amended complaint "assert[ing] claims against the co-venturers, and [Scruggs] and Don Barrett individually. . . ." Barrett v. Jones, Funderburg, Sessums, Peterson & Lee, LLC, 27 So.3d 363, 365-66 (Miss. 2009). The defendants in that action filed a motion to stay the proceedings and compel arbitration pursuant to the Katrina JVA. See id. at 366. Thereafter, Scruggs was federally indicted for his involvement in "a conspiracy to attempt to influence [Circuit Court Judge Henry L. Lackey] to grant the motion to compel arbitration by offering to pay Judge Lackey $40,000 in exchange for a favorable order."
¶ 9. Subsequently, all Katrina Joint Venture attorneys and associates who had worked on any of the Katrina Joint Venture's Mississippi federal court cases against State Farm were disqualified therefrom.
¶ 10. On June 18, 2009, Wyatt filed the Complaint at issue, naming the Scruggs Defendants; David H. Nutt, Mary Krichbaum McAlister, Nutt & McAlister, David Nutt, P.A., David Nutt & Associates, PC (collectively, "Nutt Defendants"); and John/Jane Does 1-25 as defendants. The "Introduction" to the Complaint began by stating that "[f]rom 2006-2008, [Wyatt] was employed as an attorney in a litigation joint venture[
(Emphasis added.)
¶ 11. On August 28, 2009, the Scruggs Defendants filed a "Motion to Compel Arbitration and To Stay Pending Completion of Arbitration." While the Scruggs Defendants denied that they owed any duty to Wyatt or were liable to Wyatt "under any of his theories of recovery[,]" they maintained that all of Wyatt's claims against them "relate to his alleged entitlement to fees collected in the course of the [Katrina Joint] [V]enture. His claims necessarily fall within the scope of the [Katrina JVA's] `broad' arbitration provision."
¶ 12. On September 15, 2009, in response to the Nutt Defendants' "Motion to Transfer Venue or To Stay and For Other Relief," Wyatt maintained that:
As such, Wyatt argued his employment with Nutt & McAlister was within the scope of the Katrina Joint Venture's business, and that Nutt & McAlister's:
(Emphasis added.) In sum, Wyatt contended that "Scruggs is jointly and severally liable with Nutt & McAlister for its breaches of fiduciary duties owed to Wyatt."
¶ 13. Following hearing, the circuit court overruled the Scruggs Defendants' "Motion to Compel Arbitration and To Stay Pending Completion of Arbitration." First, the circuit court noted that Wyatt was "not a signatory party under the Katrina JVA. . . ." The circuit court further determined that Wyatt was not a third-party beneficiary to the Katrina JVA. The circuit court then found that "[t]he dispute sought to be arbitrated is not within the scope of the arbitration clause." According
¶ 14. Thereafter, the Scruggs Defendants filed a "Motion for Stay Pending Appeal," which was granted upon agreement of the parties, and then a timely "Notice of Appeal" from the denial of their "Motion to Compel Arbitration and To Stay Pending Completion of Arbitration." See Sawyers v. Herrin-Gear Chevrolet Co., Inc., 26 So.3d 1026, 1034 (Miss.2010) (citing Miss. R.App. P. 3, 4) ("any final decision with respect to arbitration is appealable to this Court pursuant to Mississippi Rules of Appellate Procedure 3 and 4.").
¶ 15. This Court will consider:
¶ 16. "This Court reviews the grant or denial of a motion to compel arbitration de novo." Sawyers, 26 So.3d at 1034 (citing East Ford, Inc. v. Taylor, 826 So.2d 709, 713 (Miss.2002)). In that analysis, this Court's:
Terminix Int'l, Inc. v. Rice, 904 So.2d 1051, 1054-55 (Miss.2004) (quoting Russell v. Performance Toyota, Inc., 826 So.2d 719, 722 (Miss.2002)). In:
Waste Mgmt., Inc. v. Residuos Industriales Multiquim, S.A., 372 F.3d 339, 344 (5th Cir.2004) (quoting Smith/Enron Cogeneration Ltd. P'ship v. Smith Cogeneration Int'l, 198 F.3d 88, 99 (2nd Cir.1999)).
¶ 17. Under the Federal Arbitration Act, this Court conducts a two-prong arbitration inquiry, "first, whether the parties intended to arbitrate the dispute, and second, if they did intend to arbitrate, `whether legal constraints external to the parties' agreement foreclosed the arbitration of those claims.'" Qualcomm Inc. v. Am. Wireless License Group, 980 So.2d 261, 268 (Miss.2007) (quoting East Ford, 826 So.2d at 713). "The first prong is two-fold in that the court considers whether there is a valid arbitration agreement and then whether the parties' dispute is within the scope of the arbitration agreement." Greater Canton Ford Mercury, Inc. v. Ables, 948 So.2d 417, 421 (Miss.2007) (citing East Ford, 826 So.2d at 713). Under the second prong, "[t]he
¶ 18. Wyatt does not challenge the validity of the arbitration provision itself, but instead contends that there was no agreement to arbitrate between himself and the Scruggs Defendants. Furthermore, in Jones, Funderburg, this Court determined that, apart from sanctions, this exact arbitration provision was valid and enforceable. See Jones, Funderburg, 27 So.3d at 376-77. Accordingly, this Court concludes that this subprong is satisfied.
¶ 19. Under this subprong, "two questions must be answered: (1) whether the proper forum for determining the scope of the arbitration agreement is in court or in arbitration,[
¶ 20. Wyatt was not a signatory party to the Katrina JVA, although he claims that he was a "fee sharing participant" thereto. Since arbitration provisions are "contractual in nature, the general rule is that `a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.'" Qualcomm, 980 So.2d at 269 (quoting Adams v. Greenpoint Credit, LLC, 943 So.2d 703, 708 (Miss.2006)). See also Bridas S.A.P.I.C. v. Gov't of Turkmenistan, 345 F.3d 347, 354 n. 3 (5th Cir.2003) (quoting Westmoreland v. Sadoux, 299 F.3d 462, 465 (5th Cir.2002)) (arbitration agreements apply to nonsignatories only "in rare circumstances."). However, "a non-signatory party may be bound to an arbitration agreement if so dictated by the ordinary principles of contract and agency." Miss. Care Ctr. of Greenville, LLC v. Hinyub, 975 So.2d 211, 216 (Miss.2008) (quoting Washington Mut. Fin. Group, LLC v. Bailey, 364 F.3d 260, 266 (5th Cir.2004)). For example, "a signatory may enforce an arbitration agreement against a non-signatory if the non-signatory is a third-party beneficiary or if the doctrine of . . . estoppel applies." Qualcomm, 980 So.2d at 269 (citing Adams, 943 So.2d at 708). See also Bridas, 345 F.3d at 356 ("[s]ix theories for binding a non-signatory to an arbitration agreement have been recognized: (a) incorporation by reference; (b) assumption; (c) agency; (d) veil-piercing/alter ego; (e) estoppel; and (f) third-party beneficiary."). This Court will address only estoppel, as we find it applicable to Wyatt.
¶ 21. "Direct-benefit estoppel involve[s] non-signatories who, during the life of the contract, have embraced the contract despite their non-signatory status, but then, during litigation, attempt to repudiate the arbitration clause in the contract." Noble Drilling Servs., Inc. v. Certex USA, Inc., 620 F.3d 469, 473 (5th Cir. 2010) (quoting Hellenic Inv. Fund, Inc. v. Det Norske Veritas, 464 F.3d 514, 517-18 (5th Cir.2006)) (emphasis added). See also Simmons Hous., Inc. v. Shelton, 36 So.3d 1283, 1287-88 (Miss.2010) ("estoppel prevents a party from embracing the benefits of a contract while simultaneously trying
¶ 22. The Scruggs Defendants contend that the circuit court failed to address the issue of direct-benefit estoppel and assert that "[e]stoppel principles . . . prohibit Wyatt from avoiding arbitration while seeking benefits under the [Katrina JVA]." According to the Scruggs Defendants, "virtually every claim stated by Wyatt references and relies upon the existence of the [Katrina JVA] and rights and duties allegedly arising from that agreement." For example, the Scruggs Defendants maintain that "[t]he [Katrina JVA] . . . is the sole basis for the existence of th[e] purported fiduciary duties and contractual obligations" alleged in Wyatt's Complaint, such that "Wyatt's claims are impossible to resolve or determine without reference to the legal relationships and obligations created by the" Katrina JVA.
¶ 23. By brief, Wyatt responded that his claims against the Scruggs Defendants "are not dependent on the Katrina JVA. He is not alleging that the Scruggs Defendants breached the [Katrina] JVA, and he is not seeking to enforce the terms of the [Katrina JVA]." Instead, Wyatt contended that only his unwritten fee-sharing agreement with Nutt & McAlister, which was not made "subject to the arbitration clause in the [Katrina JVA,]" is at issue. According to Wyatt, his claims against the Scruggs Defendants "arise under the Mississippi Uniform Partnership Act ("MUPA") . . . and tort law[,]" in that:
¶ 24. Wyatt adds that "[t]o the extent [his] . . . Complaint is read or interpreted as asserting a breach of contract claim against Scruggs, the claim is withdrawn. Wyatt intends to amend his Complaint once the trial court stay is lifted." The Scruggs Defendants respond that "[t]his Court should give no weight to this . . . promise, particularly in light of the fact that Wyatt provides no details about how
In light of the "fee-sharing participant" — type language throughout the Complaint, see supra ¶¶ 3, 10, the factual allegations in Wyatt's Complaint clearly "`touch matters' covered by" the Katrina JVA. Waste Mgmt., 372 F.3d at 344 (quoting Smith/Enron, 198 F.3d at 99).
¶ 25. This Court has stated that:
Jones, Funderburg, 27 So.3d at 372-73 (emphasis added). See also Miss.Code Ann. § 79-13-302(1) (Rev.2009) ("[a]n act of a partner . . . for apparently carrying on in the ordinary course the partnership business or business of the kind carried on by the partnership binds the partnership, unless the partner had no authority to act for the partnership in the particular matter and the person with whom the partner was dealing knew or had received a notification that the partner lacked authority."); Miss.Code Ann. § 79-13-305 (Rev.2009) (a partnership is liable for "loss or injury caused to a person, or for a penalty incurred, as a result of a wrongful act or omission, or other actionable conduct, of a partner acting in the ordinary course of business of the partnership or with authority of the partnership."); Idom v. Weeks & Russell, 135 Miss. 65, 76-77, 99 So. 761, 763 (1924) (citations omitted) ("[i]f a tort be committed by one partner while engaged in a transaction within the scope of the partnership business, and such tort be committed in furtherance of the interests of the partnership, it will be liable.").
¶ 26. The only reference by the circuit court to estoppel was that "Scruggs should be estopped to enforce the arbitration clause because of his criminal conduct" in the Jones, Funderburg case. The circuit
¶ 27. This Court first addresses the "knowingly exploited" theory of direct-benefit estoppel. Wyatt argues that "he is not seeking to enforce the terms of" the Katrina JVA, but only his unwritten fee-sharing agreement with Nutt & McAlister. If one assumes the validity of this position, the benefit sought by Wyatt from the Katrina JVA seems more collateral than "direct," insofar as the Scruggs Defendants' duties as joint venturers with Nutt & McAlister are implicated. Noble Drilling, 620 F.3d at 473. However, Wyatt's Complaint also asserted that he is a "fee sharing participant in the Katrina Joint Venture"; a "fee sharing attorney" under the Katrina Joint Venture; that he has a "fee-sharing interest in the Katrina Joint Venture"; and that the defendants have a "fee sharing relationship" with him. If one assumes the validity of Wyatt's assertions, these claims allege "direct benefits" are due to Wyatt by virtue of the Katrina JVA. But even if one accepts the argument that the "knowingly exploited" theory of direct-benefit estoppel does not apply to Wyatt, the direct-benefit estoppel inquiry is not complete.
¶ 28. The foundation of Wyatt's lawsuit is premised upon a dispute with Nutt & McAlister over his compensation (fee share) directly tied to successful recovery by the Katrina Joint Venture against its client's insurers. As such, Wyatt's claims against the Scruggs Defendants are directly dependent on the Katrina JVA, and require reference thereto. See id. Counsel for Wyatt acknowledged as much during the following exchange at oral argument:
In short, even if Wyatt claims that the Scruggs Defendants are jointly and severally liable with Nutt & McAlister as joint venturers, the fount of such alleged joint and several liability flows from the Katrina JVA, which was "the sole and only agreement of the members" of the Katrina Joint Venture. See Bailey, 364 F.3d at 267 (a nonsignatory was bound by an arbitration provision because "the factual basis of each of her claims" arose from "her husband's loan and credit insurance transactions[,]" to which the arbitration provision applied). As Wyatt's claims against the Scruggs Defendants are "determined by reference to" the Katrina JVA, this Court concludes that direct-benefit estoppel theory requires the nonsignatory claimant, Wyatt, to arbitrate his claims against the Scruggs Defendants. Noble Drilling, 620 F.3d at 473.
¶ 30. Alternatively, Wyatt contends that "Scruggs, individually, has no standing to compel arbitration" because he was not individually identified as a party to the Katrina JVA and "did not even sign the Katrina JVA on behalf of The Scruggs Law Firm."
¶ 31. In both Bailey and Blinco v. Green Tree Servicing, LLC, 400 F.3d 1308 (11th Cir.2005), nonsignatories permitted to compel arbitration against other nonsignatories were "operating under a broad arbitration clause." Amstar Mortgage Corp. v. Indian Gold, LLC, 517 F.Supp.2d 889, 899-900 (S.D.Miss.2007) (citing Blinco, 400 F.3d at 1311-12; Bailey, 364 F.3d at 267-68) (emphasis added). In the present case, the arbitration provision in the
¶ 32. As discussed previously, the arbitration provision at issue plainly uses broad language (i.e., "[a]ny dispute arising under or relating to the terms of this agreement shall be resolved by mandatory binding arbitration"). See Horton, 926 So.2d at 176. The circuit court acknowledged that "the clause is broad enough to cover the instant controversy. . . ." Finally, the factual allegations in Wyatt's Complaint clearly "`touch matters' covered by" the Katrina JVA. Waste Mgmt., 372 F.3d at 344 (quoting Smith/Enron, 198 F.3d at 99). Therefore, this Court concludes that Wyatt's claims against the Scruggs Defendants are within the scope of the Katrina JVA's arbitration provision.
¶ 33. Wyatt argues that because the Scruggs Defendants "are seeking to enforce an arbitration clause that Scruggs previously entered into a criminal conspiracy to enforce in the [Jones, Funderburg] lawsuit[,]" then they "should be estopped from invoking" that same arbitration provision in this case. The Scruggs Defendants respond that Wyatt did not present an "unclean hands" argument in the circuit court and, furthermore, that "for the unclean hands doctrine to bar recovery, the party seeking relief must be `guilty of willful misconduct in the transaction at issue.'" See Bailey v. Bailey, 724 So.2d 335, 337 (Miss.1998). According to the Scruggs Defendants, Wyatt essentially is arguing "that this Court should further sanction [the Scruggs Defendants] due to misconduct for which they have already been sanctioned." As Wyatt presented an argument akin to "unclean hands" in the circuit court, we will address this issue.
¶ 34. This Court has stated that "[t]he clean hands doctrine prevents a complaining party from obtaining equitable relief in court when he is guilty of willful misconduct in the transaction at issue." Id. (citing Calcote v. Calcote, 583 So.2d 197, 199-200 (Miss.1991)) (emphasis added). In Community Bank of Mississippi v. Stuckey, 52 So.3d 1179 (Miss.2010), this Court applied that doctrine against Community Bank in concluding that "we will not compel arbitration based on third-party-beneficiary status or equitable estoppel where the movant has encouraged or engaged in forging the non-movant's signature." Id. at 1183.
¶ 35. This Court reiterates that Wyatt's lawsuit is premised upon his dispute with Nutt & McAlister over his fee share under an unwritten employment agreement. There is no allegation that the Scruggs Defendants have engaged in criminal conduct like that for which they were sanctioned in Jones, Funderburg. Therefore, the question becomes whether the Scruggs Defendants are now categorically prohibited from enforcing the subject
¶ 36. Accordingly, this Court reverses the Circuit Court of Lafayette County's denial of the Scruggs Defendants' "Motion to Compel Arbitration and To Stay Pending Completion of Arbitration," and remands with directions to the circuit court to stay the proceedings as against the Scruggs Defendants and refer this matter to arbitration.
¶ 37.
WALLER, C.J., DICKINSON, P.J., LAMAR, CHANDLER AND PIERCE, JJ., CONCUR. CARLSON, P.J., KITCHENS AND KING, JJ., NOT PARTICIPATING.