Mary Triplet v. Menard, Inc. ( 2022 )

United States Court of Appeals
For the Eighth Circuit
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No. 21-3157
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Mary Triplet, as Guardian and Conservator of Margaret Triplet; Margaret Triplet
Plaintiffs - Appellees
v.
Menard, Inc.; Barb Myers
Defendants - Appellants
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Appeal from United States District Court
for the District of South Dakota - Northern
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Submitted: May 12, 2022
Filed: July 29, 2022
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Before ERICKSON, STRAS, and KOBES, Circuit Judges.
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KOBES, Circuit Judge.
Maggie Triplet sued Menard, Inc. and Barb Myers for employment
discrimination and several state-law torts. Menard filed a motion to compel
arbitration under a clause in Maggie’s employment agreement. The district court
denied the motion, and Menard appealed. We vacate the district court’s order and
remand for further proceedings consistent with this opinion.
I.
Maggie Triplet has severe autism, which makes 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, Mary Triplet, as her guardian
and conservator.
Because Maggie’s condition makes holding a job difficult, Mary arranged for
a state-sponsored job coach to help Maggie. The coach took Maggie to a job fair at
a Menards1 store in Watertown. The coach explained her role and asked Menards
employees to let her help Maggie with her application and interview. They refused,
so Maggie filled out the application and did the interview by herself, and Menard
hired Maggie as a cashier. During the store’s job orientation, Maggie’s coach again
asked to help Maggie. But Menard refused, and Maggie went alone. At the
orientation, Maggie signed an employment agreement that included an arbitration
clause. She had no opportunity to show the agreement to her coach or Mary for
review.
Menard did not allow Maggie’s coach to assist her when working. Maggie
struggled to meet expectations as a cashier, so the store transferred her to the garden
department. But she had trouble acclimating to that position as well. Maggie’s
workplace problems came to a head one day when she became overstimulated, “shut
down,” and huddled in the corner of the garden center. Her manager, Barb Myers,
responded by yelling, pinning Maggie’s arms behind her back, and “dragging” her
to the Menards supervisor. The supervisor told Maggie to either sign resignation
papers or be fired, and that it was in her best interest to resign. Maggie signed the
resignation papers without the opportunity to talk to her coach or Mary.
Maggie and Mary, as her guardian and conservator, sued Menard and Myers
for employment discrimination under the Americans with Disabilities Act, and for
1
Menard, Inc. owns the Menards chain of home improvement retail stores.
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state-law assault, battery, and intentional infliction of emotional distress. Because
Maggie’s employment agreement contained an arbitration clause, Menard and
Myers filed a motion to compel arbitration and stay proceedings. The district court
denied the motion, holding that: (1) the arbitration agreement was unenforceable as
a matter of equity; (2) Myers couldn’t enforce the agreement as a non-signatory; and
(3) the state-law tort claims were outside the scope of arbitration. Menard and Myers
appealed.
II.
We review the denial of a motion to compel arbitration de novo. 3M Co. v.
Amtex Sec., Inc., 542 F.3d 1193, 1198 (8th Cir. 2008). We also review the district
court’s interpretation of a contract de novo and its factual findings for clear error.
Keymer v. Mgmt. Recruiters Int’l, Inc., 169 F.3d 501, 504 (8th Cir. 1999).
The Federal Arbitration Act allows parties to use arbitration, instead of
lawsuits, to resolve their disputes. 9 U.S.C. § 2. “A court must grant a motion to
compel arbitration if a valid arbitration clause exists which encompasses the dispute
between the parties.” 3M, 542 F.3d at 1198 (citing 9 U.S.C. § 4). The FAA
promotes a “liberal federal policy favoring arbitration agreements,” and “questions
of arbitrability must be addressed with a healthy regard for the federal policy
favoring arbitration.” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460
U.S. 1, 24 (1983). Because of this, the FAA “leaves no place for the exercise of
discretion by a district court” and obligates the court to refer arbitrable matters to
binding arbitration. Pro Tech Indus., Inc. v. URS Corp., 377 F.3d 868, 871 (8th Cir.
2004) (citation omitted).
Written arbitration agreements “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. “A court’s role under the FAA is therefore limited to
determining (1) whether a valid agreement to arbitrate exists and, if it does, (2)
whether the agreement encompasses the dispute.” Pro Tech Indus., 377 F.3d at 871.
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The FAA “establishes that, as a matter of federal law, any doubts concerning the
scope of arbitrable issues should be resolved in favor of arbitration.” Moses H. Cone,
460 U.S. at 24–25. The party resisting arbitration bears the burden of showing either
that the arbitration provision is invalid or that it does not encompass the claims at
issue. See E.E.O.C. v. Woodmen of World Life Ins. Soc’y, 479 F.3d 561, 565 (8th
Cir. 2007). State contract law governs whether a valid agreement to arbitrate exists.
Id. The parties agree that South Dakota law applies here.
The district court concluded that “grounds as exist at law or in equity”
rendered the arbitration agreement unenforceable. See 9 U.S.C. § 2. Specifically,
the court reasoned that Maggie’s status as the ward of a guardianship and
conservatorship, as well as Menard’s refusal to let Maggie’s job coach assist her in
reviewing the employment agreement, made it inequitable to enforce the arbitration
clause. But the court did not decide whether Maggie was incapable, as a matter of
law, of entering a contract.
While the district court focused on fairness, written arbitration agreements are
unenforceable under the FAA only if state-law grounds exist to revoke the contract.
See AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011) (“This saving
clause permits agreements to arbitrate to be invalidated by ‘generally applicable
contract defenses, such as fraud, duress, or unconscionability.’” (citation omitted));
Plummer v. McSweeney, 941 F.3d 341, 345 (8th Cir. 2019) (“Under the FAA,
agreements to arbitrate ‘shall be valid, irrevocable, and enforceable, save upon such
grounds as exist at law or in equity for the revocation of any contract.’ One of these
grounds is unconscionability.” (citation omitted)). In other words, there must be an
applicable state-law contract defense. The district court, however, did not identify
such a defense. Nor did it analyze the validity of the agreement under South Dakota
contract law.
In South Dakota, the “[e]lements essential to existence of a contract are: (1)
[p]arties capable of contracting; (2) [t]heir consent; (3) [a] lawful object; and (4)
[s]ufficient cause or consideration.” SDCL § 53-1-2. By statute, “[a]ll persons are
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capable of contracting except minors, persons of unsound mind, and persons
deprived of civil rights.” SDCL § 53-2-1. “Minors and persons of unsound mind
have only such capacity as is specified in the statutes relating to such persons.”
SDCL § 53-2-2.
Maggie argues that, because of her diminished capacities which required her
to be placed under conservatorship, she was incapable of contracting under South
Dakota law. But the guardianship and conservatorship statute explains that “[t]he
appointment of a guardian or conservator of a protected person does not constitute a
general finding of legal incompetence unless the court so orders, and the protected
person shall otherwise retain all rights which have not been granted to the guardian
or conservator.” SDCL § 29A-5-118. And the court that ordered Maggie’s
guardianship and conservatorship did not grant her contract rights to Mary or find
that Maggie was legally incompetent to contract. Because the state court did not
disturb her contractual rights, Maggie is still subject to the general presumption of
capacity in SDCL § 53-2-1.
Although the arbitration agreement is facially valid under South Dakota
positive law, it may be revocable under the void contract defense. “Historically, the
void contract concept has been applied to nullify agreements made by mental
incompetents who have contracted either entirely without understanding or after a
judicial determination of incapacity had been entered.” First State Bank of Sinai v.
Hyland, 399 N.W.2d 894, 896 (S.D. 1987). “A party attempting to avoid his contract
must carry the burden of proving that he was entirely without understanding when
he contracted.” Id. at 897. “Lapse of memory, carelessness of person and property,
and unreasonableness are not determinative of one’s ability to presently enter into
an agreement.” Id. “Neither should a contract be found void because of previous or
subsequent incompetence.” Id. Instead, the “inquiry must always focus on the
person’s mental acuity and understanding of the transaction at the time contracting
occurred.” Id.-5-
The district court did not decide whether Maggie was “entirely without
understanding” at the time she signed the arbitration agreement. Nor is the record
developed enough for us to make that finding.2 We remand the case for a summary
trial to determine whether the arbitration agreement is enforceable under South
Dakota law.3 See Neb. Mach. Co. v. Cargotec Sols., LLC, 762 F.3d 737, 744 (8th
Cir. 2014) (remanding a motion to compel arbitration “for the district court to hold
a non jury trial, make findings of fact, and apply the appropriate [law] in light of
those facts”).
III.
For the foregoing reasons, we vacate and remand for the district court to make
the appropriate findings consistent with this opinion.
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2
Maggie underwent a psychiatric evaluation as part of the proceedings that led
to her placement under a guardianship and conservatorship. That evaluation,
however, does not reveal whether Maggie was “entirely without understanding” at
the time she signed the arbitration agreement because it was conducted two years
earlier and focused on her language and social skills—not her ability to understand
legal agreements.
3
Because we cannot determine whether there is an enforceable arbitration
agreement, we decline to consider whether Myers may enforce the agreement as a
non-signatory.
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