?Takeaway: Courts can reject arbitration agreements based on equitable principles. Nonetheless, they must carefully consider state contract law to determine how and if such principles apply. An arbitration agreement is not automatically invalid because the employee is subject to a conservatorship.
?A former employee who had severe autism and was denied the opportunity to have her job coach review an agreement that included an arbitration clause challenged the validity of the clause in a case before the 8th U.S. Circuit Court of Appeals.
The plaintiff’s autism made it difficult for her to recognize social cues, resist influence from others, keep a job and manage her personal affairs. In 2016, a South Dakota court appointed her mother as her guardian and conservator.
The plaintiff attended a job fair with a state-sponsored job coach and applied for a job at a Menards home improvement store, owned by Menard Inc., in Watertown, S.D. The coach explained her role and asked Menard employees to let her help the plaintiff with her application and interview. They refused, so the plaintiff filled out the application and did the interview by herself, and the company hired her as a cashier. The plaintiff’s coach asked to help during the store’s job orientation. The store refused, and the plaintiff went alone.
At the orientation, she signed an employment agreement that included an arbitration clause. She had no opportunity to have her job coach or her mother review the agreement. Menard did not allow the plaintiff’s coach to assist her when working, either.
The plaintiff struggled to meet expectations as a cashier, so the store transferred her to the garden department. She had trouble adapting to that position, as well. One day she became overstimulated, shut down and huddled in the corner of the garden center. Her manager allegedly responded by yelling, pinning the plaintiff’s arms behind her back and bringing her to the Menard supervisor.
The Menard supervisor told the plaintiff to either sign resignation papers or be fired and said that it was in her best interest to resign. The plaintiff signed the resignation papers without the opportunity to talk to her coach or her mother.
The job coach and the plaintiff’s mother sued Menard and its manager under the Americans with Disabilities Act and also filed a lawsuit alleging assault, battery and intentional infliction of emotional distress. Because the employment agreement contained an arbitration clause, Menard and its manager filed a motion to stay proceedings and compel arbitration.
The district court denied the motion, holding that the arbitration agreement was unenforceable as a matter of equity. It reasoned that the plaintiff’s status as the ward of a guardianship and conservatorship and Menard’s refusal to let her job coach assist her in reviewing the employment agreement made it inequitable to enforce the arbitration clause. It also found that the manager could not enforce the agreement as a nonsignatory and that the tort claims were outside the scope of arbitration.
Menard and its manager appealed to the 8th Circuit. The appeals court noted that the Federal Arbitration Act strongly favors arbitration and leaves no place for a district court to exercise discretion. It obligates the court to refer arbitrable matters to arbitration.
Under South Dakota law, the appointment of a guardian or conservator does not alone render an individual legally incompetent unless a court so orders, and an individual retains all rights not granted to the guardian or conservator. Because the state court did not specifically remove the plaintiff’s contract rights, she was presumed to have the capacity to contract.
While the arbitration agreement was valid on its face, it might be subject to revocation under the void contract defense. To prove this defense, a party must show that she was entirely without understanding when she contracted. Therefore, the district court had to determine whether the plaintiff was entirely without understanding at the time she signed the arbitration agreement.
The 8th Circuit found that the record was not sufficient to make such a finding and sent the case back to the district court. It ordered the district court to conduct a summary trial to determine the plaintiff’s ability to understand legal agreements at the time of signing.
Triplet v. Menard Inc., 8th Cir., No. 21-3157 (July 29, 2022), petition for rehearing en banc and petition for panel rehearing denied (Sept. 1, 2022).
Jeffrey Rhodes is an attorney with McInroy, Rigby & Rhodes LLP in Arlington, Va.