)25 7+( 6287+(51 ',675,&7 2) 0,66,66,33, 1257+(51 ',9,6,21 ......Apr 30, 2020 · EXHIBIT 1 EXHIBIT...

IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF MISSISSIPPI

NORTHERN DIVISION

ALYSSON MILLS, IN HER CAPACITY AS RECEIVER FOR ARTHUR LAMAR ADAMS AND MADISON TIMBER PROPERTIES, LLC PLAINTIFF

VS. CIVIL ACTION NO. 3:19-cv-941-CWR-FKB

TRUSTMARK NATIONAL BANK; BENNIE BUTTS; JUD WATKINS; SOUTHERN BANCORP BANK; and RIVERHILLS BANK DEFENDANTS

DEFENDANT JUD WATKINS’ MOTION TO COMPEL ARBITRATION

Defendant Jud Watkins (“Watkins”), by and through counsel, hereby moves the Court,

pursuant to the Federal Arbitration Act, 9 U.S.C. § 1, et seq., and the Federal Rules of Civil

Procedure to enter an order compelling the Receiver to submit all of her claims asserted against

him to binding arbitration. Watkins also requests that the Court dismiss, with prejudice, the

Plaintiff’s claims asserted against him.

In addition to the separate memorandum of authorities, Jud Watkins relies upon the

following:

Exhibit Description

1 MTP Money Market Account Agreement

2 MTP Deposit Account Arbitration Agreement

3 Limited Liability Company Authorization Resolution

4 MTP Checking Account Agreement

5 MTP Deposit Account Arbitration Agreement

Case 3:19-cv-00941-CWR-FKB Document 35 Filed 04/30/20 of 2

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6 Limited Liability Company Authorization Resolution

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Arbitration Disclosure MTP Deposit Account Arbitration Agreement

WHEREFORE, Defendant Jud Watkins respectfully requests that the Court enter an order

compelling arbitration of Plaintiff’s claims asserted against him to binding arbitration. Jud

Watkins further requests that the Plaintiff’s claims asserted against him be dismissed with

prejudice.

This, the 30th day of April, 2020.

Respectfully submitted,

JUD WATKINS

By: s/ Kelly D. Simpkins

Walter D. Willson (MSB #7291) Kelly D. Simpkins (MSB #9028) WELLS MARBLE & HURST, PLLC 300 Concourse Boulevard, Suite 200 Ridgeland, Mississippi 39157 Post Office Box 131 Jackson, Mississippi 39205-0131

Telephone: 601-605-6900 Facsimile: 601-605-6901 [email protected] [email protected] Counsel for Jud Watkins and RiverHills Bank

/274493

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IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF MISSISSIPPI

NORTHERN DIVISION

ALYSSON MILLS, IN HER CAPACITY AS RECEIVER FOR ARTHUR LAMAR ADAMS AND MADISON TIMBER PROPERTIES, LLC PLAINTIFF

VS. CIVIL ACTION NO. 3:19-cv-941-CWR-FKB

TRUSTMARK NATIONAL BANK; BENNIE BUTTS; JUD WATKINS; SOUTHERN BANCORP BANK; and RIVERHILLS BANK DEFENDANTS

DEFENDANT JUD WATKINS MEMORANDUM BRIEF IN SUPPORT OF HIS MOTION TO COMPEL ARBITRATION

Defendant Jud Watkins (“Watkins”) hereby submits his Memorandum Brief in Support

of his Motion to Compel Arbitration as follows:

I. Introduction

This action arises out of the Receiver’s effort to recover from third parties for losses

caused by Lamar Adams’ Ponzi scheme through his company Madison Timber Properties, LLC

(“MTP”). The Receiver claims Jud Watkins’ actions and omissions contributed to and furthered

the Ponzi scheme. Adams on behalf of MTP entered into Deposit Account Arbitration

Agreements (“Agreement”) with RiverHills Bank. The agreements required MTP and Adams to

arbitrate any and all claims they may have against RiverHills or any of its employees or officers,

including Watkins. The claims against Watkins must be dismissed or stayed, and the Receiver

compelled to arbitrate her claims against Watkins in accordance with the Arbitration

Agreements.

Case 3:19-cv-00941-CWR-FKB Document 36 Filed 04/30/20 Page 1 of 9

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II. The Complaint

The Court is well acquainted with the general background of Adams’ Ponzi scheme and

therefore it need not be repeated here. The Receiver has filed several civil actions against

various entities and persons arising out of Adams’ Ponzi scheme. Although the Receiver’s

Introduction, Jurisdiction and Venue in the instant action is similar to those sections in the other

complaints, there are distinct differences between the instant action and those cases. For

example, although Butler Snow sought to compel arbitration of the claims against it, the Court

denied Butler Snow’s Motion to Compel Arbitration because conflicting clauses were construed

in favor of the Receiver. Miller v. Butler Snow, et al., 2019 WL 4546587, at *6 (S.D. Miss.).

Such is not the case here.

The claims against RiverHills and Watkins arise out of and relate to Adams’ use of two

accounts he opened with RiverHills. “The RiverHills Madison Timber Account was the primary

account from which Madison Timber’s investors were paid by wire and check. . . . Adams used

his line of credit to move money into the RiverHills Madison Timber Account when he needed to

pay investors. . . . The wires [from MTP’s account] were numerous and required careful

attention. . . . Anyone could see that the money flowed into the RiverHills Madison Timber

Account – primarily from FNBC and Southern Bancorp but also from Adams’s RiverHills line of

credit – then flowed right back out again. . . . From Madison Timber’s FNBC account alone, the

RiverHills Madison Timber Account received wires in the amounts of . . . .” (¶¶ 78, 81, 82,

84). Central to the Receiver’s claims against RiverHills is her allegation that the activity of

money coming in the accounts and going out the accounts was an indicia of fraud that allegedly

should have raised RiverHills and Watkins’ suspicions.


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Watkins was hired by Trustmark in 2001 where he remained employed until he began

working at Riverhills on April 20, 2015. The Receiver claims that typical, innocent, ordinary

business development actions taken by Watkins were nefarious. For example, she alleges that

Watkins stated Adams and Kelly were financially very strong and Watkins would grow

RiverHills’ relationship with them. She alleges that he immediately extended Adams a home

equity line of credit. She quotes a letter written to address an error in a wire transfer. The

gravamen of the Receiver’s claim against him is:

In short, Southern Bancorp, RiverHills, and Watkins had before them the nuts and bolts of the Madison Timber Ponzi scheme: large and highly suspicious transfers of money; routine and large overdrafts; implausibly high and consistent guaranteed returns; no purchases of timber; and no money received from any mills. Southern Bancorp, RiverHills, and Watkins had unique information from which they could have reached only one conclusion: Madison Timber was a fraud.

(¶ 95).

III. The Agreements

On November 1, 2016, MTP opened two accounts at RiverHills. The first account was a

money market business account and the second account was a checking account. Both Account

Agreements were accompanied by a Deposit Account Arbitration Agreement. Both the Account

Agreements and the Arbitration Agreements were signed by Adams and Wayne Kelly. Adams

and Kelly both signed an Arbitration Disclosure acknowledging that they were “waiving our

rights to litigate disputes in court, including the right to a jury trial because we’ve each given the

other party the right to demand arbitration.” The Arbitration Agreements are identical and state,

in pertinent part:


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DEPOSIT ACCOUNT ARBITRATON AGREEMENT

* * * 3. Dispute Resolution. Any claim, counterclaim, third party claim, cross-claim, dispute or controversy between customer and any party to the Deposit Account and/or the bank, as well as between customer and bank’s employees, officers, . . . (whether in contract, tort or otherwise, whether pre-existing, present or future, and including statutory, common law, intentional and equitable claims), arising from or relating in any manner, including, but not limited to, this Agreement, the Deposit Account, any past or future interactions, business or dealings or interactions between the parties or between Customer and the Covered Persons or any application, advertisements, promotions, or oral or written statements related to this Agreement or the Deposit Account, any goods or services furnished in connection with the deposit account or the terms of financing, the relationships with respect to the Deposit Account or your business or interactions with any Covered Person . . . or the validity, enforceability or scope of this Agreement . . . shall be resolved upon the unilateral or joint election of Customer or Bank or any of said Covered Persons, respectively, by binding arbitration as hereinafter provided.

(Exs. 2, 5 & 8) (emphasis added),

IV. The Law Regarding Enforcement of Arbitration Agreements.

The Federal Arbitration Act (“FAA”) establishes that an arbitration agreement “shall be

valid, irrevocable, and enforceable.” See 9 U.S.C. § 2. Congress’ purposes in enacting the FAA

were, first, to reverse years of judicial hostility towards arbitration agreements, see Green Tree

Fin. Corp. Al. v. Randolph, 531 U.S. 79, 86 (2000) and, second, to provide for “the expeditious,

inexpensive resolution of disputes,” see Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp.,

460 U.S. 1, 23 (1983). By enacting the FAA, Congress “placed arbitration agreements upon the

same footing as other contracts” and declared a national policy in favor of arbitration requiring

courts to enforce arbitration agreements. Shearson/Am. Ex., Inc. v. McMahon, 482 U.S. 220, 226

(1987).

Moreover, “all doubts concerning the arbitrability of claims should be resolved in favor

of arbitration.” Primerica Life Ins. Co. v. Brown, 304 F.3d 469, 471 (5th Cir. 2002). This Court

has held that federal policy strongly favors the enforcement of arbitration agreements and that


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the Supreme Court requires “that [courts] ‘rigorously enforce agreements to arbitrate.’” Graham

v. Am. Bankers Ins. Co., 2007 WL 4333833, at *2 (S.D. Miss. Dec. 7, 2007) (quoting Moses H.

Cone Memorial Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24 (1983)). The Mississippi

Supreme Court has, likewise, specifically recognized that the FAA was enacted to establish a

broad “federal policy favoring arbitration” mandating that courts “rigorously enforce agreements

to arbitrate.” East Ford, Inc. v. Taylor, 826 So. 2d 709, 713 (Miss. 2002) (citing Shearson/Am.

Ex., 482 U.S. at 226). Thus, “any doubts concerning the scope of arbitrable issues should be

resolved in favor of arbitration, whether the problem at hand is the construction of the contract

language itself or an allegation of waiver, delay, or a like defense to arbitrability.” Taylor, 826

So. 2d at 713 (citing Moses H. Cone, 460 U.S. 1 (1983) at 24-25)).

Section 2 of the FAA specifically states that it is applicable when there is “a contract

evidencing a transaction involving commerce.” See 9 U.S.C. § 2. The Supreme Court has

stated, however, that “it is perfectly clear that the FAA encompasses a wider range of

transactions than those actually ‘in commerce.’” See Allied-Bruce Terminix Companies, Inc. v.

Dobson, 513 U.S. 265, 273 (1995).

V. The Receiver is Bound by the Arbitration Agreements.

Under the FAA, courts generally conduct a two-pronged inquiry to determine whether

arbitration should be compelled. See Webb v. Investacorp., Inc., 89 F.3d 252, 257-58 (5th Cir.

1996); Kulpa v. OM Fin. Life Ins. Co., 558 F. Supp. 2d 676, 684 (S.D. Miss. 2008). Under the

first prong, the court must determine whether the parties agreed to arbitrate the dispute in

question. Id. This step involves two considerations: (1) whether there is a valid agreement to

arbitrate and (2) whether the dispute in question falls within the scope of the arbitration


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agreement. Id. Under the second prong, the court considers whether there are any legal

constraints preventing arbitration of the claims in dispute. See Webb, 89 F.3d at 258.

A. Both Elements of the First Prong are Met.

1. There is a valid arbitration agreement.

Mississippi contract law applies to determine whether there is a valid agreement to

arbitrate. See Adams Cmty. Car Ctr., LLC v. Reed, 37 So. 3d 1155, 1158 (Miss. 2010) (setting

forth six elements of valid agreement). The Arbitration Agreement contains each of those six

factors.

2. This dispute is within the scope of the arbitration agreement.

The Agreement states that, “the validity, and enforceability or scope of this Agreement

(collectively, ‘Claim’), shall be resolved upon the unilateral or joint election of customer or bank

or any of said Covered Persons, respectively, by BINDING ARBITRATION, as hereinafter

provided.” Thus, according to the Agreement, the arbitrator determines whether the dispute

between the Receiver and Watkins is within the scope of the Agreements. Last year the Supreme

Court rejected the Fifth Circuit’s “wholly groundless” exception as being inconsistent with the

Federal Arbitration Act. Henry Schien, Inc. v. Archer & White Sales, Inc., 139 S.Ct. 524, 527-28

(2019). The Supreme Court first reiterated that, “[u]nder the Act and this Court’s cases, the

question of who decides arbitrability is itself a question of contract. The Act allows parties to

agree by contract that an arbitrator, rather than a court, will resolve threshold arbitrability

questions as well as underlying merits disputes. Id. The Court then rejected the “wholly

groundless” exception recognizing that, “when the parties’ contract delegates the arbitrability

question to an arbitrator, the courts must respect the parties’ decision as embodied in the


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contract.” Id at 531. Here, there is no doubt that MTP agreed to submit the “scope of this

agreement” to binding arbitration.

Even if the parties had not contracted that the arbitrator determines the scope, the claims

are within the scope of the Agreement. Specifically, it contemplates that “Any claim . . . arising

from or relating to any matter, including, but not limited to this Agreement, the Deposit Account,

any past or future interactions, business dealings or interactions between the parties or between

the Customer and the Covered Persons . . . .” (Exs. 2, 5 & 8, ¶ 1) (emphasis added), shall be

determined by arbitration. Both Judge Pepper and Judge Mills have found identical arbitration

agreements to be both broad and enforceable because of the any language contained therein. See

Brain v. Caldwell Banker Real Estate Corp., 2007 WL 778405, at *3 (N.D. Miss.); Smith v.

Caldwell Banker Real Estate Corp., 2007 WL 2725826, at *4 (N.D. Miss.).

Given the Receiver’s joinder of Watkins in this lawsuit and the claims she has asserted

against him, there is clearly a “claim or dispute” against Watkins which is encompassed by the

language of the arbitration agreement.

B. There Are No Legal Constraints Preventing Arbitration.

In analyzing this issue, courts generally consider “defenses available under state contract

law such as fraud, duress, and unconscionability that may invalidate the arbitration agreement.”

See Taylor, 826 So. 2d at 713 (citing Casarotto, 517 U.S. at 868). However, any defenses raised

must be aimed specifically at the arbitration agreement, not the contract or transaction as a

whole. See e.g., Blackmon, 109 So. 3d at 1050 (citing Prima Paint, 388 U.S. at 395). Id. at 1054

(citing Prima Paint, 388 U.S. at 403-403; Cardegna, 546 U.S. at 445-46; Will-Drill Resources,

Inc. v. Samson Res. Co., 352 F.3d 211, 218 (5th Cir. 2003); Rent-A-Center, West, Inc. v. Jackson,

561 U.S. 63, 130 S.Ct. 2772, 2774 (2010)). Thus, if a defense is aimed at the contract as a whole


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(and not the arbitration agreement specifically), then the claims and defenses should be turned

over to the arbitrator to decide. Id.

In this case, there are no external legal constraints to compelling arbitration. The

binding effect on the Receiver arises from the fact that she stands in the shoes of MTP and

Adams. See Janvey v. Democratic Senatorial Campaign Comm., Inc., 712 F.3d 185, 190 (5th

Cir. 2013) (“A federal equity receiver has standing to assert only the claims of the entities in the

receivership, and not the claims of the entities’ investor-creditors.”) Courts have not been

reluctant to compel receivers to arbitrate their claims when there is a binding arbitration

agreement. See, e.g., Javitch v. First Union Securities, Inc., 315 F.3d, 619, 628 (6th Cir. 2003)

(receiver was bound to arbitration agreements entered into by the receivership entities to the

same extent that they would have been absent the appointment of the receiver); Wiand v.

Schneiderman, 778 F.3d 917, 924 (11th Cir. 2015) (affirmed district court’s granting of motion to

compel arbitration of claw-back action by receiver as well as confirmed the award in favor or

investor-estate and against receiver); Moran v. Svete, 366 Fed. Appx. 624, 630 (6th Cir. 2010)

(“It is undisputed that the receiver, asserting the claims of LifeTime, is bound to arbitrate to the

same extent that LifeTime would have been absent the appointment of a receiver.”); see also

KPMG, LLP, v. Cocchi, 132 S.Ct. 23, 26 (2011) (investors in a Ponzi scheme brought action

against KPMG; court vacated denial of motion to compel arbitration because lower court applied

intertwining doctrine and instructed lower court to determine which claims were subject to

arbitration).

VI. The Receiver’s Claims Against Watkins Should Be Dismissed With Prejudice For the reasons above, the Receiver’s claims against Watkins should be compelled to

arbitration, and the claims asserted against him should be dismissed with prejudice. See Alford v.


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Dean Whitter Reynolds, Inc., 975 F.2d 1161, 1164 (5th Cir. 1992) (“The road of authority

supports dismissal of the case when all of the issues raised in the district court must be submitted

to arbitration.”); Bridgestone Firestone N. Am. Tire, LLC v. J & J Tire Co., 602 F. Supp. 2d 770,

774 (S.D. Miss. 2009) (“Given that all claims herein are subject to arbitration, the court finds

there is no practical reason for staying the case, rather than dismissing.”); Masztal v. Meritplan

Insurance Co., 586 F. Supp. 2d 662, 667 (S.D. Miss. 2008) (dismissing claims in underlying

action with prejudice and compelling arbitration).

WHEREFORE, Defendant Jud Watkins respectfully requests that the Court enter an

order compelling arbitration of the Receiver’s claims asserted against him to binding arbitration.

Furthermore, her claims against Watkins should be dismissed with.

This, the 30th day of April, 2020.

Respectfully submitted,

JUD WATKINS

By: s/ Kelly D. Simpkins

Walter D. Willson (MSB #7291) Kelly D. Simpkins (MSB #9028) WELLS MARBLE & HURST, PLLC 300 Concourse Boulevard, Suite 200 Ridgeland, Mississippi 39157 Post Office Box 131 Jackson, Mississippi 39205-0131

Telephone: 601-605-6900 Facsimile: 601-605-6901 [email protected] [email protected] Counsel for Jud Watkins

/274334


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