Larry CRAIN, Sr., and Crain Automotive Holdings, LLC, Appellants
Christopher S. BYRD, Appellee
FROM THE PULASKI COUNTY CIRCUIT COURT, FIFTH Division [NO.
60CV-18-754], HONORABLE WENDELL GRIFFEN, JUDGE
Law Firm, Little Rock, by: Stephen L. Gershner, for
R. Crabtree, Little Rock, for appellee.
Appellants Larry Crain, Sr., and Crain Automotive Holdings,
LLC, appeal from an order of the Pulaski
County Circuit Court denying their motion to compel
arbitration. On appeal, appellants argue that the circuit
court erred by denying their motion to compel arbitration
because certain operating agreements of the involved
dealerships provide for arbitration. They also assert that
they did not waive arbitration. We affirm.
Appellee Christopher Byrd had been employed as chief
financial officer of Crain Automotive Holdings for many years
until his employment ceased on October 26, 2017. On November
13, appellee and appellants entered into an
"Employer/Employee Mutual Release Agreement"
(Mutual Release Agreement). By the terms of the agreement,
appellants agreed to purchase appellees membership interest
in the dealerships Crain Imports of Fayetteville, Crain K of
Conway, and Crain Buick GMC of Springdale. Per the Mutual
Release Agreement, the purchase price of appellees interest
is the value of his capital accounts in the dealerships
determined as of December 31, 2017. "Capital
accounts" are also addressed in the individual operating
agreements of the above-named dealerships.
February 7, 2018, appellee filed suit for fraud and breach of
contract based on the Mutual Release Agreement. The complaint
was sparse with details because the terms of the Mutual
Release Agreement were confidential, but at the motion
hearing, testimony revealed that appellee claimed that
appellants fraudulently caused inventory of the dealerships
to be liquidated and that they handled and accounted for a
Volkswagen settlement incorrectly,
adversely affecting the value of appellees capital accounts.
Appellants answered and denied the claims, filed a motion to
dismiss, and counterclaimed for attorney fees and costs in
defending the claims.
June 8, appellants filed a motion to compel arbitration and
for a stay of the case pending arbitration. The motion
asserted that appellees claims arise from, and are related
to, the operating agreements of the above-named dealerships
and that the claims are subject to the arbitration provision
in the operating agreements. Appellee objected, asserting
that his claims are based on the Mutual Release Agreement,
which does not contain an arbitration provision.
October 5, the circuit court conducted a motion hearing.
After hearing arguments from both sides, it found that there
was no valid agreement to arbitrate between the parties, and
it denied the motion to compel arbitration. In reaching its
decision, the court noted,
The Release Agreement does not reference or incorporate the
operating agreement by way of an integration clause; the
Release Agreement does not itself contain an arbitration
clause; and the Agreement expressly contemplates litigation
("legal proceeding") whereby there is a designation
of forum, waiver of jury trial, enforceable by ...