Disputing Blog by Karl Bayer, Victoria VanBuren, and Holly Hayes
The Supreme Court of Missouri has issued two significant arbitration decisions in recent weeks, showing its willingness to sever any aspects of an arbitration agreement that it finds unconscionable (while enforcing the overall obligation to arbitrate).
First, in a contentious decision, the Supreme Court of Missouri found that a former employee of the St. Louis Rams football team does have to arbitrate his age discrimination claims, but he does not have to do so using the NFL Commissioner as the arbitrator. State ex rel. Hewitt v. Hon. Kristine Kerr, __ S.W.3d __, 2015 WL 2061986 (Mo. Apr. 29, 2015). The employment agreement incorporated rules stating the “Commissioner shall have full, complete and final jurisdiction and authority to arbitrate… any dispute between any player, coach, and/or other employee of any [team].” The court found that term unconscionable, because “[i]n effect,  the commissioner is required to arbitrate claims against his employers.” (The team owners select the commissioner and determine his salary.) The decision has two full dissents and two partial dissents, but a majority of the court hung together for that gutsy decision. (Reading between the lines, the federal judge in the Adrian Peterson labor dispute appeared to agree that the Commissioner should not be arbitrating NFL employment disputes.) Instead of invalidating the entire agreement to arbitrate, the Supreme Court of Missouri found that the state’s uniform arbitration act would provide the mechanism for appointing an arbitrator to decide the dispute.
More recently, in an uncontentious opinion, the Supreme Court of Missouri also refused to enforce an aspect of an arbitration agreement that it found unconscionable. Eaton v. CMH Homes, Inc., __ S.W.3d __, 2015 WL 3387910 (Mo. May 26, 2015). In Eaton, a purchaser sued a seller for fraud and negligent misrepresentation. The seller sought to compel arbitration. The purchaser responded that the arbitration agreement was unenforceable, largely because it lacked mutuality. Both the trial court and the intermediate appellate court refused to compel arbitration. The Supreme Court of Missouri reversed.
Missouri’s highest court clarified that lack of mutuality in an arbitration agreement is not sufficient by itself to make the arbitration agreement unconscionable, but is a factor that courts should consider. In doing so, the court confirmed that its recent Bristol Care decision (which refused to enforce an arbitration agreement in an employment agreement, finding it illusory and without consideration) is not as sweepingly anti-arbitration as some had feared. The court limited the Bristol Care decision to its unique facts: an arbitration agreement that was added by amendment to an existing contract without sufficient consideration and with an illusory promise in return. Even so, the court found that the lack of mutuality in the Eaton arbitration agreement, in combination with an “anti-waiver” provision (requiring the purchaser to arbitrate claims, even if those claims arose as counterclaims to a court action by the buyer), was unconscionable. Instead of refusing to enforce the entire arbitration agreement, the court found those terms were not essential to the agreement to arbitrate and severed them.
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