Soars v. Easter Seals Midwest, SC 97018

• Decision Date: 18 December 2018
• Docket Number: No. SC 97018,SC 97018
• Citation: 563 S.W.3d 111
• Parties: Lewis SOARS, Respondent, v. EASTER SEALS MIDWEST and Charity Twine, Appellants.
• Court: Missouri Supreme Court

563 S.W.3d 111

Lewis SOARS, Respondent,

v.EASTER SEALS MIDWEST and Charity Twine, Appellants.

No. SC 97018

Supreme Court of Missouri, en banc.

Opinion issued December 18, 2018

Easter Seals and Twine were represented by Charles E. Reis IV and Nicole Rivers of Little Mendelson PC in St. Louis, (314) 659-2000.

Soars was represented by Bret Kleefuss of the Law Offices of Derald L. Gab PC in St. Louis, (314) 367-4878.

Zel M. Fischer, Chief Justice

Easter Seals Midwest and Charity Twine appeal the circuit court's denial of a motion to compel arbitration pursuant to § 435.440.1.¹ They argue the circuit court erred in refusing to compel arbitration because the arbitration agreement – signed by both Easter Seals and Lewis Soars – contains valid delegation clauses mandating that the arbitrator has exclusive authority to decide threshold issues of interpretation, applicability, enforceability, or formation. The circuit court's order is reversed.

Factual and Procedural History

Easter Seals Midwest (ESM), a charitable organization, presents each new, at-will employee with a standalone arbitration agreement ("Agreement") to be signed as a necessary condition of initial employment with the organization. The Agreement provides in relevant part:

As consideration for employment with Easter Seals-Midwest, I hereby knowingly agree and consent to submit any disputes, claims, or controversies that may arise out of my application for employment, employment, and/or termination of employment with Easter Seals-Midwest to binding arbitration in any such claims against Easter Seals-Midwest and/or its current or former employees.

In return for the signee's acceptance, ESM "agrees to submit any disputes, claims, or controversies that may arise out of my application for employment, hiring, employment, and/or termination of employment with Easter Seals-Midwest to binding arbitration."

Additionally, the Agreement includes a delegation clause, identical to the one upheld in Rent-A-Center, West, Inc. v. Jackson , 561 U.S. 63, 130 S.Ct. 2772, 177 L.Ed.2d 403 (2010), providing:

The Arbitrator, and not any federal, state, or local court or agency, shall have exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation of this Agreement including, but not limited to any claim that all or any part of this Agreement is void or voidable.

The Agreement also prescribes the selection of a neutral arbitrator and the arbitration itself is to be in accordance with the American Arbitration Association's National Rules for the Resolution of Employment Disputes.

Lewis Soars signed the Agreement as a condition of his employment in October 2015, during his pre-employment orientation. Soars was made aware his employment with ESM was conditioned upon him signing the Agreement.

In January 2016, Soars was terminated from ESM after he refused to participate in an internal investigation involving accusations against him of abuse or neglect of ESM's clients. In response, he filed suit against ESM in circuit court for wrongful discharge, and against ESM and ESM employee Charity Twine for race discrimination. ESM and Twine jointly filed a motion to compel arbitration.² Soars argued the Agreement and delegation clause lack consideration and mutuality, and are unconscionable. In March 2017, the circuit court overruled ESM and Twine's joint motion. ESM and Twine appeal pursuant to § 435.440.1, the court of appeals affirmed the circuit court's order with a written order pursuant to Rule 84.16(b), and this Court granted transfer. Mo. Const. art. V, sec. 10.

Analysis

The denial of a motion to compel arbitration is reviewed de novo.

Ruhl v. Lee's Summit Honda , 322 S.W.3d 136, 138 (Mo. banc 2010). Arbitration is a matter of contract under the Federal Arbitration Act (FAA). AT&T Mobility, LLC v. Concepcion , 563 U.S. 333, 339, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011) ; State ex rel. Pinkerton v. Fahnestock , 531 S.W.3d 36, 43 (Mo. banc 2017). An arbitrator's authority over a particular dispute exists only "because the parties have agreed in advance to submit such grievances to arbitration." AT&T Techs., Inc. v. Commc'ns Workers of Am. , 475 U.S. 643, 648-49, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986). "The delegation provision is an agreement to arbitrate threshold issues concerning the arbitration agreement." Rent-A-Ctr. , 561 U.S. at 68, 130 S.Ct. 2772. Accordingly, it "is simply an additional, antecedent agreement the party seeking arbitration asks the ... court to enforce, and the FAA operates on this additional arbitration agreement just as it does on any other." Id. at 70, 130 S.Ct. 2772. A delegation provision giving an arbitrator the power to decide threshold issues of arbitrability "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2.

"Generally any silence or ambiguity concerning the scope of arbitrable issues should be resolved in favor of arbitration." Pinkerton , 531 S.W.3d at 43 (internal quotations omitted). However, when considering whether a court or an arbitrator should decide threshold questions of arbitrability, there is generally a presumption against arbitrability. First Options of Chi., Inc. v. Kaplan , 514 U.S. 938, 944-45, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995). "[C]lear and unmistakable evidence" the parties manifestly intended to arbitrate questions of arbitrability is required to overcome this presumption. Rent-A-Ctr. , 561 U.S. at 69 n.1, 130 S.Ct. 2772 ; see also Howsam v. Dean Witter Reynolds, Inc. , 537 U.S. 79, 83, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002) (referring to this evidentiary standard as an "interpretive rule").

Here, the Agreement's delegation clause was clear in evincing a manifest intention to delegate threshold questions of arbitrability to a neutral arbitrator, and is identical to the provision at issue in Rent-A-Center . The parties expressly agreed to give an arbitrator "exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation," and the question now is whether the Agreement was validly reached.

Invalidation of an arbitration agreement requires a specific challenge to the arbitration agreement, not to the contract as a whole. Ellis v. JF Enters., LLC , 482 S.W.3d 417, 423-24 (Mo. banc 2016). Arbitration agreements are severable and "are to be considered separate and apart from any underlying or contemporaneously related agreement." Id. at 419. Because a delegation provision is an additional arbitration agreement, it should be treated as an additional "written provision ... to settle by arbitration a controversy." Rent-A-Ctr. , 561 U.S. at 71, 130 S.Ct. 2772 (quoting 9 U.S.C. § 2 ). Therefore, the delegation provision itself is severable and should be considered separately from the underlying arbitration agreement. See id. at 72, 130 S.Ct. 2772 ("In this case, the underlying contract is itself an arbitration agreement. But that makes no difference. Application of the severability rule does not depend on the substance of the remainder of the contract."). For Soars to properly contest the validity of the delegation provision, he must have challenged the delegation provision specifically. Otherwise it is treated as valid and enforced – "leaving any challenge to the validity of the Agreement as a whole for the arbitrator." Id. ; see 9 U.S.C. §§ 2 - 4 ; Pinkerton , 531 S.W.3d at 50-51.³

Soars' arguments against the delegation provision in circuit court were expressly identical to his arguments against the Agreement as a whole.⁴ Throughout his initial filing with the circuit court detailing his opposition to ESM and Twine's motion to compel arbitration, Soars failed to direct any specific arguments to the delegation provision apart from merely tacking on the phrase "disputed delegation clause" to each argument made against the Agreement itself.

In Pinkerton , this Court dealt with similar arguments leveled against a facially valid delegation provision. Pinkerton had raised one specific claim against the delegation provision – that it was unconscionable to delegate threshold determinations to an arbitrator. The Court found that argument to be without merit. Though Pinkerton claimed he had raised other challenges specific to the delegation provision, the Court found his arguments, in effect, were challenges to the Agreement as a whole, regardless of how he had worded them.

Just as the relator did in Pinkerton , Soars has attempted to circumvent this Court's and the United State Supreme Court's holding that a party must specifically challenge a delegation provision to avoid its application.⁵ Soars asserted in the circuit court that both the delegation provision and the Agreement lack mutual obligations due to their questionable application to claims by other employees against him. This was not a specific challenge to the delegation provision, nor does the argument have any merit. The Agreement as a whole prescribes arbitration for "any such claims against Easter-Seals Midwest and/or its current or former employees." ESM notes in its brief that all ESM employees are required to sign arbitration agreements before working – meaning every employee is required to bring its claims against the company and/or current or former employees in arbitration. Therefore, both the delegation provision and the Agreement would apply to any claims brought by other employees or the company itself against Soars regarding employment disputes.

He also contended in the circuit court that both the delegation provision and the Agreement lack mutual obligations because ESM reserves for itself the right to bring its most likely claims in Court against Soars. Not only was this challenge not specific to the delegation provision, it also does not apply to it. The delegation clause is clear it applies to "any dispute" regarding "the interpretation, applicability, enforceability[,] or...