Phillips v. Termnet of New Mexico Inc.

Andrew Phillips and Kathryn Jill Phillips divorced in New Mexico in 1996. Under the terms of the divorce settlement, the company they owned, Integrated Transaction Services, Inc., would be sold upon court approval. The Phillipses entered into a stock purchase agreement to sell all of the shares of their business to TermNet Merchant Services, Inc. Kathryn Phillips was to receive $300,000 cash and a $600,000 note from TermNet. TermNet was to give Andrew Phillips 800,000 shares of TermNet stock, and pay off debts he owed to L. P. Whistle and Sunwest Bank. Andrew Phillips also agreed to work for TermNet under an employment agreement. The deal was approved by the New Mexico court. Later, disputes arose between TermNet and Andrew Phillips relating to both the stock purchase agreement and the employment agreement, and he was fired. TermNet of New Mexico, Inc. and TermNet Merchant Services, Inc. collectively TermNet sued Andrew Phillips in Cobb County Superior Court for, among other things, breach of the employment and stock purchase agreements. TermNet later amended the complaint to include a claim based on Andrew Phillips’ failure to make payments pursuant to a promissory note. Andrew Phillips moved to stay the proceedings, citing provisions in the employment and stock purchase agreements requiring that disputes concerning those agreements go to arbitration. The motion to stay was granted.

TermNet then filed a demand for arbitration, alleging that Kathryn and Andrew Phillips breached the stock purchase agreement, and that Andrew Phillips breached the employment agreement.1 In arbitration, Kathryn Phillips reached a settlement with TermNet and agreed to take about one-half the amount TermNet owed her under the stock purchase agreement. Then Kathryn Phillips filed a cross-claim in arbitration seeking to recover from Andrew Phillips the difference between what she received in the settlement and what TermNet owed her under the stock purchase agreement. Andrew Phillips moved to dismiss her cross-claim based on principles of res judicata and collateral estoppel.