Missouri Appellate Court Enforces Delegation Clause, Holds Arbitrator Has Authority to Decide Whether Claims Are Arbitrable

This year, Missouri courts have issued several decisions interpreting arbitration agreements between employers and employees. While some of these agreements have been enforced, others have been struck down. The Missouri Court of Appeals invalidated two employment arbitration agreements in January and July, allowing both employees to pursue their discrimination claims in court. But, in the interim, the Missouri Supreme Court upheld an arbitration agreement, compelling an employee to arbitrate his age discrimination lawsuit.

Most recently, on August 4, 2015, the Missouri Court of Appeals compelled arbitration of an employee’s discrimination claim in Dotson v. Dillard’s, Inc., WD78229 (Mo. App. W.D. August 4, 2015). The court held that, based on the language of the agreement, the arbitrator had the exclusive authority to decide whether the issues raised in the petition were subject to arbitration.

Background

After he was discharged, Laris Dotson filed a lawsuit in Missouri state court alleging discrimination, harassment, and retaliation under the Missouri Human Rights Act. The employer moved to compel arbitration, citing an agreement that had been signed by both the employer and employee. The arbitration agreement included a delegation clause, which stated: “Any dispute over a Legal Claim concerning this Agreement—the way it was formed, its applicability, meaning, enforcement, or any claim that all or part of this Agreement is void or voidable—is subject to arbitration under this Agreement.”

Dotson opposed arbitration, raising seven different arguments why the agreement was invalid and unenforceable. Importantly, Dotson failed to specifically challenge the enforceability of the delegation clause. Notwithstanding the delegation clause, the trial court concluded that it had the authority to decide whether the arbitration agreement was valid. Ultimately, the trial court agreed with Dotson that the agreement was invalid for lack of consideration, and denied the employer’s motion to compel arbitration. The employer appealed. 

The Court’s Analysis

The Missouri Court of Appeals reversed the trial court’s decision. Relying on the delegation clause, the appellate court concluded that the arbitrator—not the court—had the exclusive authority to determine whether the claims raised were subject to arbitration and whether the arbitration agreement was valid. Because Dotson did not challenge the enforceability of the delegation clause itself, there was only one issue for the appellate court to decide: whether the clause “clearly and unmistakably” delegated authority to the arbitrator to determine issues of arbitrability.

Dotson argued that the language of the delegation clause did not expressly divest the court of its authority to decide whether the agreement was enforceable. He contended that the clause allowed either the court or the arbitrator to consider the issue.

The appellate court rejected this argument. The language of the delegation clause “clearly and unmistakably” gave the arbitrator the authority to decide issues of arbitrability. Dotson’s position, if accepted, would add an “unnecessary requirement” to the clear and unmistakable test. “[T]o meet the test,” the court wrote, “a provision need only provide authority to the arbitrator; nothing requires that the provision, to be effective, also expressly exclude courts as an available forum.”

The court also distinguished the Missouri Supreme Court’s recent decision in Baker v. Bristol Care, Inc., where a court properly reached the question of whether an arbitration agreement was enforceable. Unlike the agreement in Dotson, the agreement in Baker did not expressly provide authority for the arbitrator to determine “disputes regarding contract formation.”

Practical Impact

Missouri courts have closely scrutinized the enforceability of arbitration agreements. This case demonstrates that a well-crafted delegation clause can ensure that the arbitrator—not the courts—will have the authority to determine whether the agreement is enforceable and whether the claims are subject to arbitration. In light of these decisions, employers should revisit their arbitration agreements to determine whether their delegation causes are appropriate and enforceable.