Nina Theroff v. Dollar Tree Stores, Inc. and Janie Harper

Citation: Not availableDocket: SC97235

Court: Supreme Court of Missouri; January 13, 2020; Missouri; State Supreme Court

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Dollar Tree Stores, Inc. and Janie Harper appeal the Circuit Court of Cole County's order denying their motion to compel arbitration in a disability discrimination claim brought by former employee Nina Theroff. The core issue was whether there was assent to the arbitration agreement. The circuit court conducted an evidentiary hearing where both Theroff and Dollar Tree representatives testified. The court ultimately ruled against Dollar Tree, affirming that its decision was supported by substantial evidence and not against the weight of the evidence or misapplied law.

Theroff claimed she was constructively discharged after Dollar Tree denied her request for her service dog to accompany her at work. Following her filing of a discrimination complaint with the Missouri Commission on Human Rights, she received a right to sue letter and subsequently submitted her petition in circuit court. Dollar Tree's motion to compel arbitration was based on a mutual agreement to arbitrate claims that Theroff signed electronically during her hiring process.

Conflicting evidence emerged regarding Theroff's awareness of the arbitration agreement and her digital signature. Theroff asserted that she was unaware the hiring process would involve a computer and required assistance from the assistant manager, Kayla Swift, due to her legal blindness. Swift, however, contended that she did not assist Theroff with the electronic documents and disputed Theroff's claims of having vision issues. The circuit court's order denying the motion to compel arbitration was ultimately affirmed, highlighting the importance of witness credibility in its determination.

Swift did not electronically sign the mutual agreement for Theroff and had no interactions with Theroff regarding it. During the evidentiary hearing, inconsistencies in Swift's understanding of Theroff's hiring emerged. The circuit court overruled a motion to compel arbitration without findings, leading Dollar Tree to appeal. Under Missouri law, when factual disputes arise about an arbitration agreement's existence, the circuit court must hold an evidentiary hearing per section 435.355.1. The appellate court reviews the circuit court's determination for substantial evidence, weight of the evidence, or legal errors. If no factual disputes exist, the review is de novo. Dollar Tree argues that the circuit court should find Theroff signed the mutual agreement and thus delegate challenges to the arbitrator. In contrast, Theroff claims she neither authorized Swift to electronically sign nor was informed about the agreement's existence, which she could not access. Dollar Tree asserts that Theroff had knowledge of and signed the agreement.

The case hinges on the circuit court's role in factfinding and witness assessment, with the appellate court deferring to the circuit court's evaluations when facts are contested. Without written findings, the appellate court assumes facts align with the circuit court's ruling. The standard for affirming the circuit court's judgment is that substantial evidence must support it. The central issue concerns whether an agreement to arbitrate existed, specifically whether Theroff assented to it, despite acknowledging the presence of an electronic signature. Established contract law requires mutual assent for an agreement to be valid. This case introduces the question of assent regarding an arbitration agreement, differing from typical cases where signing is not disputed. Previous cases referenced involved parties who did not contest their signatures but rather the validity of the agreements. Theroff's situation, where she challenges the existence of any agreement, is distinct and necessitates the court's determination of whether a valid arbitration agreement was concluded. The excerpt also touches upon the need for the court to confirm that both parties have indeed formed an arbitration agreement before enforcing arbitration rights.

The excerpt analyzes the distinction between the concepts of contract formation and the existence of an agreement to arbitrate, referencing case law such as Pinkerton and Buckeye Check Cashing. It asserts that issues regarding whether a contract was concluded are generally not suitable for arbitration, and emphasizes that the existence of a contract implies mutual assent between parties. In this context, Theroff's claims of not seeing, reading, knowing, or assenting to the arbitration agreement challenge its existence, which the circuit court addressed and found did not exist. The excerpt further discusses the implications of assent and the 'meeting of the minds' necessary for a contract, citing Arrowhead Contracting. It contrasts the situation with the Soars case, which dealt with consideration rather than assent. The dissenting opinions presented, particularly by Judges Fischer and Powell, are critiqued for misapplying the concepts of existence and formation within the context of section 435.355.1. Ultimately, the circuit court's ruling in favor of Theroff concluded that there was no valid agreement to arbitrate based on the evidence presented, affirming the importance of a substantive determination of the agreement's existence rather than a superficial acknowledgment of a signature.

The circuit court denied Dollar Tree's motion to compel arbitration, with no specific findings regarding Theroff's signature on the mutual agreement. The court accepted Theroff's claims about her inability to view or comprehend the arbitration agreement due to a lack of assistive devices and insufficient guidance during onboarding. This decision was supported by substantial evidence and credibility assessments, as the appellate court found no error in the lower court's ruling. Judge Powell's dissent argued that the electronic signature constituted prima facie evidence of a contract, while Theroff presented evidence contesting the agreement's existence under section 435.355.1. The court reiterated that if an agreement does not exist, any delegation provision within it is ineffective. It emphasized that parties can only delegate arbitrability questions if there is clear evidence of such intent. The court referenced previous cases indicating that a court must first establish the validity of a contract under the Arbitration Act before compelling arbitration. Ultimately, the circuit court concluded that there was no mutual agreement between the parties to arbitrate, as Theroff sufficiently challenged its existence.

Therooff disputed the existence of an arbitration agreement under section 435.355.1, persuading the circuit court that no such agreement existed. Consequently, there was insufficient evidence to support a delegation provision. The circuit court could not refer the matter to an arbitrator since the arbitrator's authority hinged on the existence of an agreement. Judge Powell's dissent contends that Theroff's lack of assent is irrelevant to the existence of the agreement, citing precedents which state that a failure to read or understand a contract does not invalidate it. However, these cases differ from Theroff's situation, where she was completely unaware of any arbitration agreement due to her visual impairment. The circuit court’s order indicates that Theroff neither signed the agreement nor authorized anyone to do so on her behalf. The ruling to deny Dollar Tree’s motion to compel arbitration was upheld. 

A concurring opinion noted that contrary to arguments from Dollar Tree and dissenters, the court's prior decisions did not address the challenge of an arbitration agreement's existence. It emphasized that findings of the U.S. Supreme Court imply that failure to separately contest a delegation clause typically necessitates upholding a motion to compel arbitration, allowing arbitrators to resolve disputes about the delegation clause.

A party's challenge to a contract or its provisions does not prevent a court from enforcing an arbitration agreement. The Supreme Court clarified this in New Prime Inc. v. Oliveira, which stated that a court must first determine the existence of a contract governed by sections 1 and 2 of the Federal Arbitration Act (FAA) before compelling arbitration. This case involved an employment contract that included an arbitration clause, which had to be scrutinized due to the FAA's exceptions for certain transportation employment contracts. The court emphasized that the validity of an arbitration agreement is assessed using state contract law principles. 

In New Prime, the employer's argument that a delegation clause allowed an arbitrator to decide the arbitrability of the dispute was rejected. The Court ruled that enforcement of a delegation clause under the FAA requires the clause to exist in a written contract evidencing a transaction involving commerce. The Court stressed that a determination of the contract's applicability under the FAA is essential before enforcing arbitration provisions. The dissent argued for the opposite approach, suggesting the court could assess the arbitration provision's validity without first confirming the existence of a contract. The majority opinion reinforced that courts must first establish the existence of a qualifying contract before ordering arbitration, affirming the lower court’s decision in this case.

Therooff does not dispute the validity of the delegation provision in the arbitration agreement but contests the formation of the overall arbitration agreement. Disputes regarding the formation of arbitration agreements are threshold issues of arbitrability, which the circuit court lacks the authority to decide. Thus, the circuit court's order denying Dollar Tree's motion to compel arbitration should be reversed. A signed arbitration agreement with an unchallenged delegation provision allows an arbitrator to resolve issues related to the formation and enforceability of the agreement. A party must specifically challenge the delegation provision to prevent the arbitrator from addressing these threshold issues. The concurring opinion argues that the circuit court should determine whether a contract exists before enforcing the delegation provision, but the court's role is limited to assessing whether the contract falls under the Federal Arbitration Act (FAA). The arbitration agreement presented by Dollar Tree, which includes Theroff's electronic signature and a delegation provision, qualifies under the FAA since it involves commerce. The FAA does allow certain transportation workers to be exempt, but this does not apply to Theroff's employment contract.

Theroff is not exempt from coverage under the FAA, thus the contract is governed by the Arbitration Act. Theroff did not contest that the mutual agreement fell outside the FAA's provisions. A party's appeal is limited to the arguments presented in the trial court, and failure to raise issues at that level results in waiver. The Mutual Agreement specifies that arbitration will follow current JAMS Employment Arbitration Rules, which dictate that disputes regarding the agreement's validity and interpretation are to be resolved by the Arbitrator. Theroff's challenge to the entire mutual agreement raises issues about the delegation provision, which contradicts established court precedent. The court has previously ruled that a general challenge to a contract does not invalidate a specific delegation clause unless that clause is specifically contested. In prior cases, courts enforced delegation provisions when no distinct challenges were made against them. The principal opinion's view creates conflict with established arbitration jurisprudence, as it mirrors arguments previously rejected by the court. The law maintains that delegation provisions are distinct and severable, thus requiring enforcement even when the agreement as a whole is challenged.

Theroff did not challenge the existence of the mutual arbitration agreement, nor did she establish that such an agreement did not exist. The principal opinion posits that the circuit court's findings were justified based on Theroff's claims of not seeing or assenting to the arbitration agreement. However, precedent from the court of appeals in Soars indicates that a party can only avoid delegation to an arbitrator by specifically challenging the validity of the delegation provision itself, not merely the arbitration agreement's validity. Theroff acknowledged an arbitration agreement with her electronic signature exists but contended that Dollar Tree failed to prove she signed it or that her blindness prevented her from being aware of it. These points focus on the agreement's enforceability rather than its existence. The circuit court lacked authority to determine the issue raised under section 435.355(1) due to the absence of a challenge to the agreement's existence. Furthermore, Dollar Tree presented the arbitration agreement with Theroff’s electronic signature, which serves as prima facie evidence of a contractual relationship. Thus, the issues raised by Theroff pertain to the contract's formation and enforceability, not its existence, as her signature indicates agreement to arbitrate relevant disputes.

The principal opinion asserts that the circuit court could find that Theroff did not read the mutual agreement, which could serve as a defense to contract formation. However, established legal principles dictate that a contract remains valid even if a party did not see or read it before signing, as seen in Sanger v. Yellow Cab Co. Inc. and Robinson v. Title Lenders, Inc. This principle applies to arbitration agreements as well. The opinion incorrectly merges the concepts of "existence" and contract formation, suggesting that issues regarding the arbitration agreement's formation should be addressed by the arbitrator rather than the court. Theroff only contested the formation and enforceability of the mutual agreement but did not challenge the existence of the arbitration agreement or the delegation provision, which were supported by her electronic signature. The record indicates the presence of a signed mutual agreement, fulfilling the requirement of proving its existence under section 435.355(1). Therefore, any disputes regarding the formation of the arbitration agreement must be resolved through arbitration.

The circuit court made an error by deciding on the formation and enforceability of the mutual agreement and by overruling Dollar Tree's motion to compel arbitration. The appropriate action for this Court is to reverse the circuit court's order, remand the case, and instruct the parties to present the arbitrability issues to an arbitrator. A dissenting opinion highlights concerns regarding the principal opinion's distinction between a contract's "existence" and its "formation," arguing that this distinction is flawed and rooted in misleading precedent. The dissent cites the court's prior rulings that reaffirm the necessity for a specific challenge to a delegation provision to avoid arbitration, indicating that the principal opinion inaccurately frames the issue as one of first impression. It argues that the case fundamentally concerns contract formation, emphasizing that if there is no consideration, the arbitration agreement cannot be concluded, thus necessitating the court's examination of formation before compelling arbitration. The dissent critiques the principal opinion for misapplying established legal principles from previous cases.

A party challenging the existence of an arbitration agreement must establish the essential contract elements: offer, acceptance, and consideration. If any element is missing, it indicates that the parties did not agree to delegate arbitrability questions to an arbitrator. The court's previous memorandum, which holds no precedential value, was rejected by the current ruling, yet this opinion has incorporated its reasoning. The key issue is whether there was mutual agreement to arbitrate, as asserted by Theroff, who claims she did not consent. Mutual assent is fundamental to contract formation. The delegation clause, which Theroff did not specifically contest, states that jurisdictional and arbitrability disputes shall be decided by the arbitrator. Theroff's claim pertains to contract formation, categorized as a "gateway question of arbitrability," which is properly delegated to the arbitrator according to case law. The concurring opinion suggests that the Supreme Court clarified in New Prime Inc. v. Oliveira that a delegation clause does not need to be specifically challenged to prevent enforcement when the arbitration agreement is excluded from the Federal Arbitration Act (FAA). However, it argues that the court should first determine if the contract falls under the FAA's coverage, a point that does not relate to challenges of contract formation but rather to contracts exempt from the FAA.