Mississippi Supreme Court Rules That Major Poultry Producer Cannot Force Family Farmers into Arbitration

TLPJ Successfully Urged Court to Rule That Sanderson Farms Violated Its Agreement to Pay Half of Arbitration Costs

Chicks eating from a metal feeder in broiler house in Mississippi. USDA photo by Joe Valbuena

The Supreme Court of Mississippi ruled on June 26, 2003 that Sanderson Farms, Inc. (Sanderson) - one of the top seven poultry producers in the United States - wrongfully denied family farmers Roy and Nelda Gatlin of Jones County, Mississippi, the right to have their day in court, when the company terminated the couple’s production contract prematurely, then breached its promise to pay half the $11,000 estimated costs for an arbitration hearing.

The Court affirmed by a 6-3 vote the ruling of the Circuit Court of Jones County, which found that Sanderson had violated its own arbitration clause and, in so doing, waived its ability to force the farmers into arbitration. Trial Lawyers for Public Justice (TLPJ), a nationwide public interest law firm, wrote the Gatlins’ brief on appeal, which was filed on July 3, 2001. TLPJ’s brief argued that the trial court was correct and, alternatively, that the arbitration clause was unconscionable for imposing significant costs and depriving the farmers of their right to recover punitive damages or participate in class actions.

“Arbitration costs exceeding $10,000 are shocking to the conscience,” said TLPJ Staff Attorney Michael J. Quirk, who authored the Gatlins’ appellate brief. “The Court’s decision tells companies that they cannot spring unexpected and excessive arbitration costs on family farmers to prevent them from getting access to justice.”

“The Court’s decision, in both the majority and dissenting opinions, shows that arbitration should be used as an alternative method for resolving disputes, not as a weapon for depriving people of a forum for resolving disputes,” said J. Dudley Butler of Jackson, Mississippi, co-lead counsel for the Gatlins. “Arbitration is a valuable tool when properly used, but is all too often abused by corporations seeking to insulate themselves from defenses such as fraud, duress, and unconscionability. Arbitration should be permitted only when the parties knowingly and voluntarily agree to it; it should not be imposed through power and chicanery.”

Farmers Roy and Nelda Gatlin first contracted with Sanderson to raise broiler chickens in 1980, when the couple bought their farm in Jones County, Mississippi. Later, Sanderson authorized them to build two additional broiler houses on their farm, based on their ranking in the top 50% of the company’s growers. The Gatlins pledged their farm, which included their home and four broiler houses, as security on a mortgage of over $250,000 so they could perform their contract with the company. In January 1997, Sanderson presented a new 15-year contract to Roy Gatlin, which for the first time contained a mandatory arbitration clause. The arbitration clause provided that “the cost of such arbitration will be divided equally among the parties to the arbitration.”

Some time after Gatlin and Sanderson signed the 15-year contract, Gatlin was told that Sanderson would find a way to terminate the contract because of Gatlin’s earlier questioning of the company’s management procedures. On Christmas Day, 1997, Sanderson called Gatlin and told him to come to its office the next day. Sanderson informed the Gatlins on December 26, 1997 that it was going to terminate their contract effective January 1, 1998, with 14 years remaining on the contract. Sanderson Farms then took its most recent shipment of chickens from the Gatlins and delivered them to another grower. The Gatlins immediately contacted every poultry processing company in their area, but all of them refused to deliver chickens to the Gatlins.

In February 1998, Roy Gatlin filed a demand for arbitration against Sanderson Farms based on the company’s unilateral termination of the Broiler Production Agreement. Gatlin paid half the $2,750 arbitration filing fee to the American Arbitration Association (AAA), the private legal system chosen by Sanderson Farms. But Sanderson refused to pay any of the filing fee when AAA requested payment of the balance, claiming that its arbitration clause’s reference to the “cost of arbitration” did not include the filing fee. Gatlin paid the full $2,750 filing fee to AAA. In July 1999, less than two weeks before the arbitration hearing was to be held, Gatlin received a billing statement from AAArequiring him to pay an additional $8,250 in arbitration costs, including $6,900 in arbitrators’ compensation and $1,000 in arbitrators’ expenses. Adding this to his prior payments, Roy Gatlin would have been required to pay at least $11,000 even before getting his arbitration hearing. Unable to afford these costs, he was forced to abandon the arbitration.

“The Mississippi Supreme Court’s ruling is truly a thrilling victory for the public interest,” said Lawrence E. Abernathy III of Laurel, Mississippi, co-lead counsel for the Gatlins. “Companies cannot force family farmers out of court and into private arbitration, then break their promise to share in the arbitration costs.”

TLPJ’s key legal brief in Sanderson Farms, Inc. v. Gatlin is posted on its website, www.tlpj.org.

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Trial Lawyers for Public Justice is the only national public interest law firm dedicated to using trial lawyers’ skills and resources to advance the public good. Founded in 1982, TLPJ utilizes a nationwide network of more than 3,000 trial lawyers to pursue precedent-setting and socially significant litigation. It has a wide-ranging litigation docket in the areas of fighting mandatory arbitration abuse, civil rights and liberties, consumer rights, worker safety, toxic torts, environmental protection, and access to the courts. TLPJ is the principal project of The TLPJ Foundation, a not-for-profit membership organization. It has offices in Washington, DC, and Oakland, CA. The TLPJ web site address is www.tlpj.org. TLPJ’s State Coordinator in Mississippi is Brian Herrington, 662-834-2376.