LITTLE ROCK — Lawyers for the city of Clarksville and Independence County argued Thursday before the state Supreme Court whether the western Arkansas city should be allowed to terminate its contract to buy electricity from the northeastern Arkansas county.
The case revolves around a hydroelectric power plant Independence County built after entering into a contract with Clarksville. The city agreed to buy all electricity generated by the plant.
Clarksville officials contend the city should be allowed to terminate its contract to buy electricity from Independence County, while county officials maintain the dispute should go to arbitration.
The city began buying electricity from the county in 2007. In August 2010, Clarksville sent the county a letter saying it would terminate the agreement effective Nov. 1, 2010, because the plant had never achieved the level of output the county had promised.
Independence County filed a motion to compel arbitration, arguing that the contract requires that disputes go to arbitration. Johnson County Circuit Judge William Pearson denied the motion, saying Clarksville could terminate the contract. Independence County appealed the ruling. David Powell, an attorney for Independence County, argued Thursday before the Supreme Court that the contract clearly states that all disputes arising from or related to the contract must be submitted to an arbitration panel.
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Zachary Wilson, an attorney representing Clarksville, argued that the county effectively terminated the contract by not complying with its terms.
“My primary argument is that the contract was … terminated before arbitration ever began,” Wilson said.
Wilson also argued that for an arbitration clause to be valid, there must be a mutual obligation to arbitrate, but in this case the contract states that the arbitration panel has no authority to require the city to pay monetary damages.
He said a limitation on damages against one party is equivalent to a lack of mutual obligation to arbitrate, because any monetary judgment against the city would be void.
Justice Courtney Goodson quizzed Powell on that point.
“If the arbitration panel can’t (order the city to pay damages), what body could?” she asked.
Powell said he did not know that any body could, but he argued that a limitation on damages against one party is permissible.
“There is a limitation of remedy with respect to one party, but the parties still have a mutual obligation to arbitrate,” Powell said.
The high court did not immediately issue a ruling in the case.