Delegation Clauses in Arbitration Agreements

The Missouri Supreme Court analyzed delegation clauses in  State ex rel. Newberry v. Jackson, 2019 WL 2181859 (May 21, 2019). Employees bringing a workplace discrimination claim challenged the delegation provision in an arbitration agreement contained in an employment contract. The employment contact at issue here incorporated the AAA rules, which delegate decisions about enforceability to the arbitrator. The US Supreme Court's decision in Rent-A-Center held that delegation clauses are severable from arbitration clauses much as Prima Paint long ago held that  an arbitration agreement is a separate component of a contract and, therefore, to avoid a motion to compel a party needs to challenge the arbitration agreement and not just contract as a whole. The Missouri Supreme Court says that a delegation clause in an arbitration agreement is similar and must be specifically challenged to avoid delegation to the arbitrator. The Court also found that no such specific challenge was made in this case. 

Arbitration Nation goes into more depth on the decision and the issue of separability/delegation as a whole.

Missouri Supreme Court Enforces Arbitration Agreement in At-Will Employment

An at-will employee argued that his promise to arbitrate was not supported by consideration. Soars v. Easter Seals Midwest, 563 S.W.3d 111 (Mo. 2018). While both lower courts agreed with the employee and thus refused to compel arbitration, the Missouri Supreme Court reversed because the agreement “includes a delegation clause, identical to the one upheld in Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63 (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.”

“For [employee] to properly contest the validity of [this] delegation provision, he must have challenged the delegation provision specifically,” according to the Missouri Supreme Court. “The delegation provision is supported by adequate consideration because the provision, severed from the rest of the Agreement and considered by itself, is a bilateral contract supported by consideration.” So the court held that it was for the arbitrator to consider the employee’s other arguments.

In contrast, two dissenters “believe the arbitration agreement in this case is not enforceable because it lacked legal consideration due to Soars’ at-will employment status.”

Lisa Larkin of Baker Sterchi Cowden & Rice LLC covers the case with more details.

Missouri Supreme Court Holds Unavailability of National Arbitration Forum Prevents Enforcement of Arbitration Agreement

The Missouri Supreme Court in A-1 Premium Acceptance, Inc. vs. Meeka Hunter affirmed a decision denying arbitration when a chosen arbitration forum was unavailable. The parties’ agreement, contained in a lender’s contract of adhesion, stipulated that the National Arbitration Forum (“NAF”) would resolve any disputes. However, the NAF reached an agreement with the Minnesota Attorney General and agreed not to arbitrate consumer disputes, including the one at issue here. The Missouri Supreme Court held that nothing in the Federal Arbitration Act created an obligation of the court to appoint a substitute arbitration forum or arbitrator.

However, the Missouri Supreme Court recognizes several disparate results in footnote four. In Green v. U.S. Cash Advance Ill., LLC, the 7th Circuit uses § 5 of the FAA to appoint a substitute arbitration forum reasoning that, “[the contract] makes one thing clear: These parties selected private dispute resolution. Courts should not use uncertainty in just how that would be accomplished to defeat the evident choice.” Green v. U.S. Cash Advance Ill., LLC, 724 F.3d 787, 793 (7th Cir. 2013).

Maurice Wutscher LLP provides a more detailed discussion of the procedural history and reasoning.

Workplace Arbitration

Workplace arbitration is the subject of a new website ArbitrationInfo.com by the Center for the Study of Dispute Resolution at the University of Missouri School of Law and the National Academy of Arbitrators