In May, the House passed the venue and joinder bill (Senate Bill 7) by a 100-46 vote. The bill primarily aims to restrict non-Missouri plaintiffs from joining their claims, in the same lawsuit, with those of a Missouri resident, where the non-residents’ claims have no legal nexus to Missouri. Read more here and here. Senate Bill 7, however, was still waiting for the Governor’s signature to become law in May.
In case you missed the news (again), look no further…..
Governor Mike Parson has officially signed Senate Bill 7 (along with three other tort reform bills) into law on July 10, 2019. This move was anticipated based on prior, favorable statements he made about the bill.
Opponents of the bill continue to believe that the passage of this bill “will harm state citizens by favoring corporations over individuals.” Proponents of the bill, now law, believe that this move will make Missouri “a pro-business state.”
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Attorneys: Megan Sterchi Lammert
From the East to the West, Does Arbitration in Missouri Reign Best? Missouri Courts Uphold and Invalidate Arbitration AgreementsJune 25, 2019 | Robert Chandler
This past May, the Missouri Supreme Court, Missouri Court of Appeals, and both United States District Courts in Missouri analyzed the validity and enforceability of arbitration provisions. Three key concepts have emerged from these recent decisions:
(1) A challenge to the delegation clause in an arbitration agreement (one that says the arbitrator gets to decide who decides whether the dispute is fit for arbitration) must be pleaded separately from a challenge to the contract
(2) Incorporation of the AAA rules in an arbitration agreement generally constitutes clear and unmistakable evidence of the parties’ intention to arbitrate.
(3) Under long-standing Missouri law, an employee’s continued employment, without more, does not in and of itself constitute adequate consideration for an agreement to arbitrate.
Consideration for the Entire Contract is Separate from Consideration for the Delegation Provision
Newberry v. Jackson, 2019 WL 2181859 (Mo. banc. 2019)
The Missouri Supreme Court affirmed, en banc, the circuit court’s motion to compel arbitration and stay court proceedings. Employees brought discrimination and retaliation claims against their former employer, Dollar General. The employer responded with Motions to Compel Arbitration and Stay Further Proceedings, to which the employees responded that there was no consideration for the arbitration agreements. More specifically, the employees claimed that the delegation provisions were unconscionable and there was no clear and unmistakable evidence of the parties’ intent to incorporate them. Although the employees admitted to signing the documents and knew they would be bound to arbitration, they did not necessarily understand the documents. Nevertheless, the circuit court sustained the motions to compel arbitration and stay the proceedings under the Missouri Supreme Court’s Pinkerton decision (which upheld a delegation clause in an arbitration agreement), and alternatively held the arbitration agreements valid because they were not unconscionable on their face and supported by consideration by mutuality of enforcement and continued at-will employment.
The Missouri Supreme Court accepted the case for review, and affirmed its earlier Pinkerton decision, which it found to be consistent with the U.S. Supreme Court decision in Rent-A-Ctr v. Jackson. The court found the employee’s allegations of unconscionability to be inadequate because they challenged the entire contract—not the delegation provision, specifically. Under Rent-A-Center, the “delegation clause must be treated as a separate contract within the larger arbitration contract and must be challenged on an additional ground or basis beyond the fact it is contained in an arbitration contract that the party also contends is invalid.” The court found that because the lack of consideration that the employees assert is the same lack of consideration they claim should invalidate the overall arbitration agreements, “they do not raise a unique challenge to the delegation clauses. Accordingly, the delegation provisions are valid,” and the employer “did not have a burden in the circuit court to show legally sufficient consideration.”
Incorporation of AAA Rules Is Clear and Unmistakable Evidence of Intent to Arbitrate
Hughes v. Ancestry.com, 2019 WL 2260666 (Mo. App. Ct. W.D. May 28, 2019) (not officially published)
Although Missouri state courts have consistently held that continued at-will employment alone does not constitute consideration for an arbitration agreement, they continue to hold that the incorporation of the AAA rules in an arbitration agreement shows clear and unmistakable evidence of intent to arbitrate. In this consumer action, the Missouri Court of Appeals for the Western District reversed the trial court’s denial of a motion to compel arbitration. Consumers brought an action against Ancestry.com for allegedly releasing their private health information to third parties without their expressed permission. The company responded with a Motion to Compel Arbitration and Stay Litigation which was subsequently denied by the circuit court. The Court of Appeals reversed and remanded because the consumers failed to separately contest the validity of the delegation provision.
The court reviewed the case de novo because arbitrability is a matter of contractual interpretation, which is a question of law. The court had to first determine whether the parties’ agreement contained a provision that clearly and unmistakably delegated threshold issues of arbitrability to the arbitrator. The provision in the agreement incorporated the AAA rules, which has been held to constitute clear and unmistakable evidence of the parties’ intent to arbitrate. The court then had to determine the validity of the provision. The Missouri Court of Appeals also reasoned that under Rent-A-Center, the validity of the delegation provision must be challenged separately from a challenge against the agreement, as a whole.
Hobby Lobby Stores, Inc. v. Bachman, 2019 WL 2331006 (E.D. Mo. May 23, 2019)
In this employment discrimination case, the United States District Court of Missouri for the Eastern District had to determine if the Mutual Arbitration Agreement was valid and enforceable in order to grant the employer’s Petition to Compel Arbitration. For the reasons discussed above, the court held that because the Mutual Arbitration Agreement incorporated the AAA rules and the employees had not challenged the delegation provision specifically, the agreement was, indeed, enforceable.
Continued At-Will Employment and Presentation of Agreement Does Not Manifest Mutual Assent
Wilbur v. Securitas Security Services USA, Inc. 2019 WL 1980703 (W.D. Mo. May 3, 2019)
In this employment discrimination case, the United States District Court for the Western District of Missouri had to determine if there was a valid arbitration agreement and if the dispute fell within the terms of the agreement. As the party seeking to compel arbitration, the employer bore the burden of proving the existence of the valid and enforceable arbitration agreement. The “Dispute Resolution Agreement Acknowledgment” stated, inter alia, that all claims against the parties must be solved by Arbitration instead of in a court of law. The employee signed and printed his name; however, the lines for the employer representative signature and printed name were left blank. The employer argued that even though the agreement lacked their signature, the presentation of the agreement, the employee’s acceptance of the agreement, and their continued employment provided adequate consideration and gave rise to mutual assent. The court cited Missouri state court precedent, in Baier v. Darden Restaurants, in holding that an “acknowledgment” of this type was not adequate evidence of mutual assent to arbitrate, and that continued employment, without more, did not constitute adequate legal consideration for an agreement to arbitrate.
Missouri has continued to hold that incorporation of the AAA Rules is clear and unmistakable evidence of the parties’ intent to engage in arbitration. When challenging arbitration, the delegation provision must be challenged separately from a challenge to the whole contract. Presentation of an arbitration agreement to an employee, the employee’s acknowledgement of receipt, and the employee’s continued at-will employment are not enough to form an enforceable arbitration agreement. An employer should always obtain the employee’s expressed assent - i.e., a signature agreeing to the terms of the arbitration provision, and not merely acknowledging its receipt. Additionally, an employer should always specifically express its agreement in order to avoid a mutual assent challenge.
* Kelly M. “Koki” Sabatés, Summer Law Clerk, assisted in the research and drafting of this post. Sabatés is a rising 3L student at the University of Missouri-Columbia.
Negligent References- Is there a duty in Missouri to refrain from making a negligent recommendation to a prospective employer?June 12, 2019 | Joshua Davis and Andreea Sharkey
In recent years, the plaintiffs’ employment bar has continued to explore new and more creative avenues to state claims in Missouri. In Doe v. Ozark Christian College, Plaintiff filed a negligence action against Ozark Christian College, claiming the college negligently recommended a prospective employee to the employer church, which directly resulted in the employee then injuring Plaintiff after two years. The employee in question had been a student at Ozark Christian College from 1982 to 1989. The employer, a church, contacted Defendant for recommendations on filling an open position. Plaintiff alleged that based upon Defendant’s positive recommendation, the church hired the employee in 2004. Plaintiff further alleged that as a result of that employment, employee then sexually abused Plaintiff from 2006 through 2010.
The Southern District of the Missouri Court of Appeals, however, affirmed the trial court’s ruling that Missouri has not defined or recognized a duty to make recommendations to a prospective employer, whether such a recommendation is done appropriately, or as alleged here, negligently. The Court of Appeals found that while some other states like California, New Mexico and Texas have permitted a “negligent job reference” cause of action, Missouri had not yet done so. The Court of Appeals reasoned that a whether a duty exists is purely a question of law, either imposed by a controlling statute, ordinance, contract, or by common law. While Plaintiff conceded there was no established case law or statutory authority for such a duty in Missouri, he argued that Missouri should recognize this duty because: Defendant assumed the duty under Section 324A of the Restatement Second of Torts; Section 311 of the Restatement Second of Torts imposes a duty and liability for negligent misrepresentation involving risk of physical harm; other states have recognized this as a duty of common law; and public policy facts support an imposition of this duty upon the Defendant. In a case of first impression, the arguments were ultimately struck down.
The Court of Appeals found that Plaintiff’s arguments contemplated the declaration of a new common-law duty rather than supporting the existence of a current duty. The threshold application of Section 324A is whether a defendant assumed an obligation or intended to render services for the benefit of an employer. Because Plaintiff lacked proper pleadings to support this legal conclusion, there could be no finding regarding Defendant’s undertaking to render services to the employer and therefore application of Section 324A was not appropriate.
The Court also held that there is no precedent in Missouri jurisprudence to allow the application of Section 311, where Plaintiff had failed to identify any controlling duty that exists under Missouri common law. While Plaintiff provided case law from New Mexico, Texas, and California in support of his arguments, the Court found numerous contrary cases in Indiana, Kentucky, Washington, Illinois, and New York. The Court of Appeals further stated that it is an error-correcting court, whereas the Supreme Court of Missouri is a law-declaring court and therefore declaration of a new duty is not properly within the Court of Appeals’ purview.
While numerous jurisdictions, like Missouri, that have declined to recognize a duty related to employment recommendations and prospective employers, the rise of these new theories of liability have caused great concern among employers who face a variety of challenges for giving a good reference, a bad reference or an incomplete reference. For this reason, many employers uniformly follow a policy that if asked for a reference for a former employee, they will provide only the person’s dates of employment and positions held. Because the law in this area varies from state to state, employers with blanket policies of referrals need to reconsider and make sure that each such request is reviewed using common criteria and guidelines. Questions regarding hiring and employment procedures and policies can always be directed to counsel.
John Doe v. Ozark Christian College, SD35573.
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