Henry County and the City of Martinsville are awaiting a decision following a Monday hearing with a special court tasked with deciding whether a Memorandum of Understanding (MOU) or Voluntary Settlement Agreement (VSA) between the two localities meets the benchmark for arbitration.
Presiding Chief Judge W. Reilly Marchant, of Richmond, and Frederick A. Rowlett, of Smyth and Washington counties and the City of Bristol, determined to issue a written opinion in the case following the more than an hour hearing.
Attorneys representing each locality made arguments in the case, including Stephen C. Piepgrass, attorney for the City of Martinsville, and Jeremy Carroll, attorney for Henry County. County Attorney George Lyle and City Attorney Eric Monday also attended the hearing that was held via Zoom.
While a procedurally complex case, Piepgrass said “the issue before the court is simple.”
He asked the court to determine whether an arbitration clause in the city’s MOU or VSA with the county, “or both of those clauses, binding, effective or enforceable? If that question is answered in the affirmative by the court, then the court does not need to go into” other issues of merit.
“We believe the law is very clear that the arbitration agreements are enforceable and should be enforced in this case,” Piepgrass said.
Martinsville has been looking at reversion since the 1950s, Piepgrass said, adding that declining population translated into a decline in revenues, while services to city residents remain “pretty much the same.” Given the loss of population and revenue, “reversion is really inevitable, especially because of cities being barred from expanding their borders for the last several decades.”
The city initially pursued a contested reversion, he said. Following mediation, an MOU was approved and signed by both city and county officials on May 26, 2021, Piepgrass said, and noted that while the MOU stated that each locality should do its best to reduce the MOU to an agreement, or VSA, if that did not occur, terms of the MOU stated that it would remain a binding agreement.
The next paragraph in the MOU includes the arbitration clause, Piepgrass said, adding that the MOU created “a framework or a skeleton for reversion.”
After the MOU was signed, Piepgrass said he, along with legal counsel for both localities “went to work putting the meat on that skeleton and coming up with the more substantial” provisions of the Voluntary Settlement Agreement, which was approved by resolution on Aug. 24, 2021.
The VSA included a number of provisions and effective dates, some immediately upon signing while others were later in the process, Piepgrass said. Among the key provisions that went into effect upon signing were related to the parties agreeing to take steps to effectuate reversion, and another in which the parties agreed that neither of them would take steps to undermine the agreement.
Another section noted by Piepgrass contains the arbitration clause, he said. The Commission on Local Government then approved the agreement, and “then, the election … and the apparent transfer of power,” the county rejected the agreement in December 2021.
“The last part you just said about the county not agreeing to it … That was a necessary step was it not,” Rowlett asked. “And there’s no dispute that the board of supervisors did not approve it?”
Piepgrass responded affirmatively to both questions.
Marchant said the problem is the VSA was to have then received an affirmative majority vote by both legislative bodies, but “you didn’t get” that. “You got the board of supervisors of Henry County rejected it. So, what would there be to arbitrate?”
An arbitrator would not have the authority to tell the Henry County Board of Supervisors “which way they’ve got to vote,” Marchant said. “If they voted not to approve the Voluntary Settlement Agreement, they’re independent individuals that vote as they see fit.
“They’re a political branch, not a judiciary branch, not an executive branch … I don’t know what there would be to arbitrate,” Marchant said. “It seems to me like you got to the end of the line of voluntary settlement after the county voted against it because I don’t know what’s left” in terms of the voluntary settlement statute.
Piepgrass fielded most of the questions and spent much of the allotted 30 minutes detailing the city’s position on the case.
Carroll, of Guynn Waddell Carroll & Lockaby, spoke briefly and outlined the county’s position.
The agreement shall not become binding on the localities until affirmed by the court, he said, adding that applies to both the MOU and the VSA.
He argued that to have a binding arbitration, “you have to have a binding contract. We know the parties do not have a binding contract. There has been some contention about enforcing piecemeal parts of the Voluntary Settlement Agreement.
“Respectfully, there is no severability clause in either agreement so there is no basis for concluding that certain provisions of either” agreement are enforceable, Carroll said. “We respectfully request that the courts overrule the motion to compel arbitration.”
In rebuttal, Piepgrass, of the Troutman Pepper firm, maintained that the MOU, which remains in effect, includes the arbitration clause. He added it “is binding and effective on the parties.”
