Jacqueline Morgan v. James Ferrell ( 2021 )


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  •                  United States Court of Appeals
    For the Eighth Circuit
    ___________________________
    No. 20-1171
    ___________________________
    Jacqueline Morgan
    lllllllllllllllllllllPlaintiff - Appellee
    v.
    Ferrellgas, Inc.
    lllllllllllllllllllllDefendant
    James Ferrell; Pamela Brueckmann
    lllllllllllllllllllllDefendants - Appellants
    ____________
    Appeal from United States District Court
    for the Western District of Missouri - Kansas City
    ____________
    Submitted: January 13, 2021
    Filed: August 11, 2021
    ____________
    Before LOKEN, GRASZ, and KOBES, Circuit Judges.
    ____________
    LOKEN, Circuit Judge.
    Jacqueline Morgan, a Missouri resident, brought this action in state court
    against her former employer, Ferrellgas, Inc., a propane supplier, and James Ferrell
    and Pamela Brueckmann, Kansas residents and employees and officers of Ferrellgas.
    Morgan asserts gender discrimination claims under the Missouri Human Rights Act
    against Ferrellgas (Counts I and II), and tort claims against all defendants (Counts III-
    VI). Defendants removed the diversity action to the Western District of Missouri and
    moved to compel arbitration of all claims under the arbitration clause in Morgan’s
    employment agreement with Ferrellgas.
    The district court granted defendants’ motion to compel in part, ruling that
    “Morgan’s claims against Ferrellgas, Inc. were subject to the arbitration provision.”
    Order granting stay pending appeal dated Feb. 6, 2020, at p.2. However, the court
    denied the individual defendants’ motion to compel arbitration of Morgan’s tort
    claims against them because they were not parties to the agreement to arbitrate and
    Morgan did not consent to arbitrate “individual tort claims arising from actions which
    predate her employment.” Ferrell and Brueckmann appeal that ruling. The district
    court over Morgan’s objection stayed the entire action pending appeal.
    The Federal Arbitration Act, 9 U.S.C. § 1 et seq. (FAA), “governs the
    applicability and enforceability of arbitration agreements in all contracts involving
    interstate commerce.” State ex rel. Hewitt v. Kerr, 
    461 S.W.3d 798
    , 805 (Mo. banc
    2015). As a matter of federal law, “a litigant who was not a party to the relevant
    arbitration agreement may invoke § 3 [of the FAA] if the relevant state contract law
    allows him to enforce the agreement.” Arthur Anderson LLP v. Carlisle, 
    556 U.S. 624
    , 632 (2009). Ferrell and Brueckmann argue that, under governing Missouri law,
    this is one of the circumstances in which “[a] nonsignatory can enforce an arbitration
    clause against a signatory to the agreement.” CD Partners, LLC v. Grizzle, 
    424 F.3d 795
    , 798 (8th Cir. 2005). Under Missouri law, when there is no fact dispute about the
    existence of an arbitration agreement, as in this case, “[w]hether a dispute is covered
    by an arbitration provision is relegated to the courts as a question of law.” Dunn
    Indus. Group, Inc. v. City of Sugar Creek, 
    112 S.W.3d 421
    , 428 (Mo. banc 2003); see
    Theroff v. Dollar Tree Stores, Inc., 
    591 S.W.3d 432
    , 436 (Mo. banc 2020); accord
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    Torres v. Simpatico, Inc., 
    781 F.3d 963
    , 968 (8th Cir. 2015). Applying these
    principles, we reverse.
    I.
    Morgan’s First Amended Petition alleges that in August and early September,
    2018, she attended a series of meetings with Ferrellgas officers and employees to
    discuss employment as a “C-Level” Ferrellgas executive, beginning with an August
    14 meeting with Brueckmann, acting as “agent and representative” of Ferrellgas, and
    an August 16 meeting with Ferrell, acting as “officer, agent, and representative” of
    Ferrellgas. Ferrell offered Morgan a position on the C-Level executive team on
    September 7. She accepted, signed an “Employee Agreement”on September 27, and
    began her employment as Chief Sales and Administrative Officer on October 4 at a
    salary of $350,000 per year. The First Amended Petition alleges that Ferrell and
    Brueckmann knew Morgan would have to sell her own company if she accepted a
    position with Ferrellgas, which she did after accepting the Ferrellgas offer.
    Morgan was terminated on January 11, 2019 after a period of dissension and
    disruption among members of the C-Level executive team, including an attempted
    “hostile takeover” by three executives who were then “separated from the company.”
    After exhausting administrative remedies under the Missouri Human Rights Act,
    Morgan filed this action in state court in November 2019. Counts I and II alleged
    MHRA gender discrimination claims against Ferrellgas. The district court compelled
    arbitration and stayed those claims; they are not at issue on this appeal. Relevant to
    this appeal are Counts III-VI, tort claims against defendants Ferrellgas, Ferrell, and
    Brueckmann for fraudulent and negligent misrepresentations and omissions. In each
    of these claims, Morgan alleges that “Defendants, including its agents and officers,
    failed to disclose to Plaintiff the existing and ongoing power struggle with the C-
    Level executive team and that members of the C-Level executive team were planning
    a hostile takeover of Defendant Ferrellgas,” and that these were material
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    misrepresentations and omissions that caused Morgan to accept employment with
    unstable Ferrellgas, sell her business, and relocate. The district court concluded the
    arbitration agreement is valid and is enforceable by Ferrellgas but not by the
    individual defendants.
    II.
    The issue is whether Ferrell and Brueckmann may enforce the arbitration
    clause in the Employee Agreement between Morgan and Ferrellgas. Paragraph 20 of
    that Agreement provides as relevant here:
    Any dispute (whether the dispute sounds in contract, tort, or otherwise)
    arising out of or relating to this Agreement or its breach, or the
    employment relationship of the parties . . . shall be fully and finally
    settled by binding arbitration conducted expeditiously in accordance
    with this agreement . . . by three independent and impartial arbitrators.
    Under Missouri law, “[a] broad arbitration provision covers all disputes arising out
    of a contract to arbitrate; a narrow provision limits arbitration to specific types of
    disputes.” Dunn, 
    112 S.W.3d at 428
    . In Dunn, the Court held that a clause covering
    any controversy or claim “arising out of or relating to this contract” was a broad
    arbitration clause. 
    Id.
     “Where an arbitration clause is broad . . . only the most
    forceful evidence of a purpose to exclude the claim from arbitration can prevail.” 
    Id. at 429
    ; accord Unison Co., Ltd. v. Juhl Energy Dev., Inc., 
    789 F.3d 816
    , 818 (8th Cir.
    2015). In CD Partners, the arbitration clause also covered “any claim, controversy
    or dispute arising out of or relating to” the agreement. “Broadly worded arbitration
    clauses such as the ones at issue here,” we observed, “are generally construed to
    cover tort suits arising from the same set of operative facts covered by a contract
    between the parties to the agreement.” 
    424 F.3d at 800
    .
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    A. In this case, the arbitration clause broadly covers disputes sounding in
    contract or tort “arising out of or relating to” the Employee Agreement, its breach,
    or the Ferrellgas-Morgan employment relationship. Morgan’s tort claims against all
    defendants allege that she was damaged by material misrepresentations and omissions
    that caused her to sell her business and enter into the Employee Agreement and an
    employment relationship with Ferrellgas. Similarly, in Bull v. Torbett, the Missouri
    Court of Appeals held that tort claims alleging that a non-signatory’s
    misrepresentations caused the signatory to enter into a real estate purchase contract
    containing a broad arbitration clause were subject to arbitration because the claims
    “result[ed] from the Bulls purchasing the properties.” 
    529 S.W.3d 832
    , 840 (Mo.
    App. 2017); see Madden v. Ellspermann, 
    813 S.W.2d 51
    , 54 (Mo. App. 1991).
    Based on these precedents and the broad language of the arbitration clause at
    issue, we conclude the district court erred in concluding that “no language in the
    Employment Agreement suggests that Morgan consented to arbitrate . . . tort claims
    arising from actions which predate her employment.” Though her claims are based
    on alleged misrepresentations and omissions made before and at the time she
    accepted employment, they are subject to arbitration because they “arise out of and
    relate to” the resulting Employee Agreement and employment relationship, as the
    court implicitly held when it stayed arbitration of the tort claims against Ferrellgas.
    B. The more difficult issue, and the only one the parties vigorously debate on
    appeal, is whether Ferrell and Brueckmann, officers and agents of Ferrellgas who
    were not parties to the Employee Agreement, may enforce the arbitration clause. In
    Missouri, “a non-signatory may, in some instances, compel a signatory to arbitrate
    under the theory that the plaintiff/signatory is estopped from refusing to arbitrate.”
    Hewitt, 461 S.W.3d at 814. Two of those instances were recognized in CD Partners:
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    when the relationship between the signatory and nonsignatory
    defendants is sufficiently close that only by permitting the nonsignatory
    to invoke arbitration may evisceration of the underlying arbitration
    agreement between the signatories be avoided, [and] when the signatory
    to a written agreement containing an arbitration clause must rely on the
    terms of the written agreement in asserting its claims against the
    non-signatory.
    
    424 F.3d at 798
     (quotations omitted). We concluded those circumstances were
    present in CD Partners and therefore the signatory’s tort claims against three
    nonsignatories were subject to arbitration because the allegations all arose “out of
    their conduct while acting as officers of [the principal].” 
    Id. at 799
    . We observed
    that “[t]he test for determining whether a nonsignatory can force a signatory into
    arbitration is different from the test for determining whether a signatory can force a
    nonsignatory into arbitration” he or she never agreed to. 
    Id.
    In Tucker v. Vincent, the Missouri Court of Appeals correctly noted there are
    “limited circumstances under which some courts have allowed a nonsignatory to an
    arbitration agreement to enforce the arbitration agreement against a signatory.” 
    471 S.W.3d 787
    , 796 (Mo. App. 2015). But it erred when it cited the two above-quoted
    circumstances discussed in CD Partners as the only qualifying circumstances,
    ignoring the fact that Hewitt, a controlling Supreme Court of Missouri decision filed
    six months earlier, had defined and applied an additional, significantly broader range
    of circumstances. This error in Tucker was followed by the Court of Appeals in Bull
    v. Torbett, 529 S.W.3d at 838, which did not even cite Hewitt. Unfortunately, the
    parties in their briefs have wrongly treated this error in Tucker as established
    Missouri law. But we must apply Hewitt, the controlling Missouri precedent.
    In Hewitt, the Supreme Court of Missouri noted that, in rejecting enforcement
    of an arbitration agreement against a signatory by a nonsignatory in Netco, Inc. v.
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    Dunn, 
    194 S.W.3d 353
    , 361 (Mo. banc 2006), it had “observed, as have the federal
    courts, that ‘a non-signatory may, in some instances, compel a signatory to arbitrate
    under the theory that the plaintiff/signatory is estopped from refusing to arbitrate.’”
    461 S.W.3d at 814. The Court then cited our decision in Dominium Austin Partners,
    L.L.C. v. Emerson, 
    248 F.3d 720
     (8th Cir. 2001), as “an example of a situation like
    the present one in which all parties are properly referred to arbitration” because the
    signatory plaintiffs “made allegations which treat all these parties [signatories and
    non-signatories] as though they were signatories to the agreements.” 
    Id.
     (cleaned up).
    The Court held that the signatory’s tort claim “should be referred in its entirety to
    arbitration” because his “petition makes no differentiation between the signatory and
    non-signatory defendants, referring to them collectively as ‘the Rams’ or
    ‘Defendants’ . . . . Mr. Hewitt cannot treat these defendants severally for arbitration
    purposes but jointly for all other purposes.” 
    Id. at 815
    .
    We conclude this case is nearly on all fours with Hewitt. Like the petition in
    Hewitt, Morgan’s First Amended Petition alleges that Ferrell and Brueckmann acted
    on behalf of Ferrellgas when making the allegedly tortious misrepresentations and
    omissions. In the fact section she alleges:
    18. Defendant Brueckmann, as an agent and representative of
    Defendant Ferrellgas, did not disclose to Plaintiff that there was an
    existing and ongoing power struggle within the C-Level executive team.
    20. Defendant Brueckmann, as an agent and representative of
    Defendant Ferrellgas, did not disclose to Plaintiff that members of the
    C-level executive team were planning a hostile takeover of Defendant
    Ferrellgas Inc.
    28. Defendant Ferrell, as an officer, agent, and representative of
    Defendant Ferrellgas, did not disclose to Plaintiff that there was an
    existing and ongoing power struggle within the C-Level executive team.
    30. Defendant Ferrell, as an officer, agent and representative of
    Defendant Ferrellgas, did not disclose to Plaintiff that members of the
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    C-level executive team were planning a hostile takeover of Defendant
    Ferrellgas Inc.
    In Counts III-VI, after incorporating by reference these fact allegations, she asserts
    tort claims against “Defendants, including its officers and agents.” A signatory
    plaintiff cannot avoid arbitration when she “treated signatory and non-signatory
    defendants as a ‘single unit.’” Hewitt, 461 S.W.3d at 814, quoting Smith/Enron
    Cogeneration Ltd. P’ship, Inc. v. Smith Cogeneration Int’l, Inc., 
    198 F.3d 88
    , 98 (2d
    Cir. 1999). As in Hewitt, each of Morgan’s tort claims against the defendants “is a
    single one that should be referred in its entirety to arbitration.” 
    Id. at 815
    .
    For these reasons, we conclude the district court erred in denying the motion
    of Ferrell and Brueckmann to compel arbitration. The Order of the district court
    dated January 13, 2020 is affirmed in part and reversed in part and the case is
    remanded for further proceedings not inconsistent with this opinion.
    ______________________________
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