State ex rel. Jesse Newberry, Relator v. The Honorable Steve Jackson, consolidated with State ex rel. Becky Lowrance, Relator v. The Honorable Steve Jackson

SUPREME COURT OF MISSOURI
en banc
STATE ex rel. JESSE NEWBERRY, ) Opinion issued May 21, 2019
)
Relator, )
)
v. ) No. SC96985
)
The HONORABLE STEVE JACKSON, )
)
Respondent. )

consolidated with

STATE ex rel. BECKY LOWRANCE, )
)
Relator, )
)
v. ) No. SC96986
)
The HONORABLE STEVE JACKSON, )
)
Respondent. )

ORIGINAL PROCEEDING IN PROHIBITION

Jesse Newberry and Becky Lowrance each seek a permanent writ of prohibition

preventing the circuit court from enforcing its January 2018 orders sustaining motions to

compel arbitration and stay proceedings filed by Dolgencorp, LLC, d/b/a Dollar General.

Mr. Newberry and Ms. Lowrance assert the circuit court improperly sustained Dollar

General’s motions to compel arbitration because Dollar General failed to meet its burden
to show consideration supported either the employee arbitration agreements or the

provisions delegating threshold issues of arbitrability to the arbitrator. This Court issued

a preliminary writ in each case.

This Court holds the arbitration agreement in each case includes a delegation

clause providing that the arbitrator decides issues of formation – namely, whether there

was consideration for the arbitration agreements. Because Mr. Newberry and

Ms. Lowrance do not raise challenges specific to the delegation provisions, the circuit

court properly sustained Dollar General’s motions to compel arbitration, stayed the cases,

and ordered the parties to arbitrate the question of whether consideration existed. The

preliminary writs are quashed.

Factual and Procedural Background

In August 2014, Dollar General began prompting its employees each time they

logged into their computers to electronically sign a document titled “Dollar General

Employee Arbitration Agreement.” The agreement requires Dollar General and its

employees to settle “Covered Claims,” including discrimination and retaliation, in

arbitration. It indicates all arbitrations are to be conducted in accordance with the

American Arbitration Association (“AAA”) Employment Arbitration Rules, “except as

superseded by the terms of this [a]greement.” As incorporated, AAA Employment

Arbitration Rule 6.a provides arbitrators “shall have the power to rule on [their] own

jurisdiction, including any objections with respect to the existence, scope or validity of

the arbitration agreement.” The agreement itself, however, supersedes the AAA rule by

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stating claims regarding the “scope or enforceability” of the agreement are not considered

arbitrable “Covered Claims.”

The agreement further contains language permitting Dollar General employees to

“opt out” of the agreement, provided the employees complete and submit an “Arbitration

Opt Out Form” within 30 days of accessing the agreement. On the other hand, the

agreement advises that if employees take no action within 30 days of the initial notice,

the agreement automatically goes into effect. Ms. Lowrance, an at-will employee of nine

years at the time, and Mr. Newberry, an at-will employee of 15 years at the time, testified

they asked the district manager about the consequences of failing to sign the agreement.

The manager informed them they would likely be discharged if they did not sign. Fearing

loss of employment, Mr. Newberry and Ms. Lowrance electronically signed their

agreements in August 2014. No Dollar General representatives signed the agreements.

Mr. Newberry was discharged in June 2016, and Ms. Lowrance was discharged in

October 2016. Both timely filed charges of discrimination with the Missouri Human

Rights Commission and received notices of right to sue. In July 2017, Mr. Newberry

timely filed a petition against Dollar General asserting sex, age, and disability

discrimination, along with retaliation for voicing his opposition to the discrimination,

against Dolgencorp and the supervisors who oversaw the discrimination and retaliation.

In November 2017, Ms. Lowrance timely filed a separate petition raising the same claims

against the same defendants.

Dollar General filed motions to compel Mr. Newberry and Ms. Lowrance to

submit their claims to arbitration and stay further proceedings. In their suggestions

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opposing Dollar General’s motions to compel, Mr. Newberry and Ms. Lowrance argued

there was no consideration for the arbitration agreements. They further claimed to

“specifically challenge[]” the delegation provisions by asserting they are unconscionable

and there is no “clear and unmistakable evidence” of the parties’ intent to incorporate

them. During the hearing about Dollar General’s motions to compel arbitration,

Mr. Newberry and Ms. Lowrance testified they signed the agreements with knowledge

they would be bound to arbitrate covered claims, read the documents before they signed

them, read the “opt out” provisions, but did not necessarily “understand” the documents.

In January 2018, the circuit court sustained Dollar General’s motions to compel

arbitration and stay proceedings, finding “no reason the principles of [State ex rel.

Pinkerton v. Fahnestock, 531 S.W.3d 36 (Mo. banc 2016),] regarding a ‘delegation

clause’ should not apply to a case with individuals the same as a ‘commercial case.’” The

court alternatively held the arbitration agreements were valid, executed by the parties, not

unconscionable on their face, and supported by consideration in the form of mutuality of

enforcement and continued at-will employment.

Mr. Newberry and Ms. Lowrance filed petitions for a writ of mandamus or

prohibition in the court of appeals, which denied their writ petitions. Mr. Newberry and

Ms. Lowrance subsequently petitioned this Court for a writ of mandamus or prohibition

compelling the circuit court to rescind its orders for arbitration and prohibiting the circuit

court from requiring them to submit their claims to arbitration. This Court issued its

preliminary writ of prohibition in each case in May 2018. Mo. Const. art. V, sec. 4.1.

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 Standard of Review

This Court has authority to “issue and determine original remedial writs.” Id.

Writs of mandamus or prohibition are proper methods to dispute whether a motion to

compel arbitration was improperly sustained. State ex rel. Hewitt v. Kerr, 461 S.W.3d

798, 805 (Mo. banc 2015); see also State ex rel. Union Pac. R.R. Co. v. David, 331 S.W.3d

666, 666 (Mo. banc 2011). The Court reviews de novo the legal issue of whether a valid,

enforceable delegation clause exists within an arbitration agreement. See Union Pac.,

331 S.W.3d at 667.

No Specific Challenge to Delegation Provisions

Mr. Newberry and Ms. Lowrance each seek a permanent writ of prohibition from

this Court requiring the circuit court to rescind its January 2018 orders compelling

arbitration and staying the court proceedings. They assert Dollar General failed to show

consideration supported their agreements to arbitrate, including the severed delegation

clauses. Specifically, they assert consideration is required for a delegation clause to come

into effect as a contract. They claim, when a defense of lack of consideration is raised,

the party seeking to compel arbitration has the burden of proof, which is a higher burden

of proof than for contract defenses such as unconscionability, fraud, and illegality.

Mr. Newberry and Ms. Lowrance contend threshold issues of formation cannot be

delegated to an arbitrator unless there is a contract to arbitrate and a delegation clause that

are both supported by consideration. They argue arbitrators cannot decide threshold

issues of formation simply “when any document purporting to require arbitration declares

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applicability of the AAA Rules,” regardless of whether consideration existed for the

delegation provision.

It is well-established that contract law governs arbitration agreements.

Rent-A-Ctr. W., Inc. v. Jackson, 561 U.S. 63, 68-69 (2010); State ex rel. Pinkerton v.

Fahnestock, 531 S.W.3d 36, 47 (Mo. banc 2016). The instant agreements further state

they are controlled by the Federal Arbitration Act (“FAA”), which provides in relevant

part: “A written provision in . . . a contract evidencing a transaction involving commerce

to settle by arbitration a controversy thereafter arising out of such contract . . . shall be

valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity

for the revocation of any contract.” 9 U.S.C. § 2. In addition to agreeing to arbitrate

certain classes of disputes, parties can contract to arbitrate “gateway” questions of

“arbitrability,” such as whether the parties agreed to arbitrate in the first place or whether

certain controversies are covered under the agreement. Rent-A-Ctr., 561 U.S. at 68-69.

“An agreement to arbitrate a gateway issue is simply an additional, antecedent agreement

[that] the party seeking arbitration asks the . . . court to enforce, and the FAA operates on

this additional arbitration agreement just as it does on any other.” Id. at 70. As such, a

delegation provision’s validity and enforceability are not dependent on those of the larger

arbitration agreement. See id.

“Generally, any silence or ambiguity ‘concerning the scope of arbitrable issues

should be resolved in favor of arbitration.’” Pinkerton, 531 S.W.3d at 43 (quoting

Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985)).

Nevertheless, the presumption of arbitrability “is reversed when considering whether a

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court or an arbitrator should decide threshold questions of arbitrability.” Id. “Courts

should not assume that the parties agreed to arbitrate arbitrability unless there is ‘clea[r]

and unmistakabl[e]’ evidence that they did so.” First Options of Chi., Inc. v. Kaplan, 514

U.S. 938, 944 (1995) (quoting AT&T Techs., Inc. v. Commc’ns Workers of Am., 475 U.S.

643, 649 (1986)) (alterations in original).

This Court in Pinkerton held a delegation provision clearly and unmistakably

indicates the parties’ intent to delegate threshold issues of arbitrability to the arbitrator

when the arbitration agreement specifically references the AAA commercial arbitration

rules. 531 S.W.3d at 48. These rules include the “jurisdiction” rule that the “[a]rbitrator

shall have the power to rule on his or her own jurisdiction, including any objections with

respect to the existence, scope or validity of the arbitration agreement.” Id. (alterations

in original). While the agreements at bar supersede the AAA rules with respect to “claims

concerning the scope or enforceability” of the agreements, they do not supersede the

associated AAA rule that the arbitrator has the power to rule on the validity of the

agreements.

“A dispute ‘relating to the applicability or enforceability’ of the agreement

presupposes the formation of a contract.” Baker v. Bristol Care, Inc., 450 S.W.3d 770,

774 (Mo. banc 2014). On the other hand, the “argument that there was no consideration

to create a valid agreement raises a contract formation issue rather than an applicability

or enforceability issue.” Id. Because Mr. Newberry and Ms. Lowrance contest the

presence of consideration, the threshold issue of validity (or formation) is at issue here.

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 Furthermore, in Rent-A-Center, the United States Supreme Court held a delegation

provision is severable from an arbitration agreement just as that arbitration agreement is

severable from the broader employment contract. See 561 U.S. at 70-72. It determined

the fact “that agreements to arbitrate are severable does not mean that they are

unassailable. If a party challenges the validity under § 2 of the precise agreement to

arbitrate at issue, the federal court must consider the challenge before ordering

compliance with that agreement under § 4.” Id. at 71. In other words, if the employee

specifically challenges the delegation provision, then a court should determine the

validity of the delegation provision. Id. But when the party fails to “challenge[] the

delegation provision specifically,” the reviewing court “must treat it as valid . . . , leaving

any challenge to the validity of the [arbitration agreement] as a whole for the arbitrator.”

Id. at 72. This Court adopted the reasoning of Rent-A-Center in Soars v. Easter Seals

Midwest, 563 S.W.3d 111, 116 (Mo. banc 2018), holding “a party must specifically

challenge a delegation provision to avoid its application.”

Mr. Newberry and Ms. Lowrance have failed to meet this burden. In their

suggestions opposing the motions to compel arbitration, they contended only that the

general arbitration agreements themselves lacked consideration. They did not separately

claim a lack of consideration for the addition of the delegation provisions to the general

arbitration contracts. Instead, they asserted the delegation clauses were invalid due to an

unspecified “unconscionability” rather than a lack of consideration. But, in this Court, as

well as in their writ petitions in the court of appeals, they dropped their claims of

unconscionability and asserted for the first time that there was no consideration for the

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delegation clauses in their contracts because those clauses were part of arbitration

agreements that themselves were made without consideration.

These allegations are inadequate to constitute a specific challenge to the delegation

provision. A party may not simply raise a challenge to the entire contract and then say

the severed delegation clause within that contract is, therefore, also invalid. Rather, Rent-

A-Center teaches that a delegation clause must be treated as a separate contract within the

larger arbitration contract and must be challenged on an additional ground or basis beyond

the fact it is contained in an arbitration contract that the party also contends is invalid.

See Rent-A-Ctr., 561 U.S. at 71; Pinkerton, 531 S.W.3d at 51. Because the lack of

consideration Mr. Newberry and Ms. Lowrance assert with respect to the delegation

clauses is the same lack of consideration they claim should invalidate the overall

arbitration agreements, they do not raise a unique challenge to the delegation clauses.

Accordingly, the delegation provisions are valid, and Dollar General did not have a

burden in the circuit court to show legally sufficient consideration. 1

Conclusion

Mr. Newberry and Ms. Lowrance’s argument asserting lack of consideration was

not specific to the delegation provisions. Because they challenged whether consideration

supported the arbitration agreements, including the delegation clauses, this threshold

1
A federal district court in Missouri has addressed the same Dollar General agreement at
issue here. In Doty v. Dolgencorp, Inc., No. 4:15 CV 1931 RWS, 2016 WL 1732768, at
*4 (E.D. Mo. May 2, 2016), the court held Mr. Doty’s argument that the arbitration
agreement lacked consideration must be decided by the arbitrator because he did not
challenge the delegation provision specifically.

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issue was properly delegated to the arbitrator. Accordingly, the circuit court properly

sustained Dollar General’s motions to compel arbitration and stay the cases. The

preliminary writs are quashed.

___________________________________
PATRICIA BRECKENRIDGE, JUDGE

All concur.

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