Natalie C. Grimsley v. Patterson Company, LLC ( 2023 )

11/07/2023
IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
March 3, 2023 Session
NATALIE C. GRIMSLEY v. PATTERSON COMPANY, LLC
Appeal from the Chancery Court for Williamson County
No. 22CV-51320 Michael Binkley, Judge
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No. M2022-00987-COA-R3-CV
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The Plaintiff brought suit against her former employer, alleging sexual harassment by her
supervisor and claiming constructive discharge. The Employer moved to compel
arbitration based on a provision in the Plaintiff’s employment agreement. The Plaintiff
responded by invoking the federal Ending Forced Arbitration of Sexual Assault and
Sexual Harassment Act of 2021, which the trial court concluded invalidates the
mandatory arbitration provision. We reverse the trial court’s decision because the
harassment of the Plaintiff and her constructive discharge occurred prior to the effective
date of the Act.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Reversed
JEFFREY USMAN, J., delivered the opinion of the court, in which FRANK G. CLEMENT, JR.,
P.J., M.S., and ANDY D. BENNETT, J., joined.
Charles J. Mataya, Russell B. Morgan, and Tara S. Sarosiek, Nashville, Tennessee, for
the appellant, Patterson Company, LLC.
Jason A. Lee, Nashville, Tennessee, for the appellee, Natalie C. Grimsley.
OPINION
I.
Patterson Company (Patterson), a Tennessee limited liability company, is a
national commercial homebuilder. The company hired Natalie Grimsley as a
1
Neighborhood Sales Manager in 2014. Seven years later, Patterson hired Michael
1
Neighborhood Sales Managers are licensed real estate professionals who oversee the entire sales
Bottoms and placed Ms. Grimsley under his immediate supervision. Shortly thereafter,
according to the complaint, Mr. Bottoms “began to make sexual comments and to
sexually harass” Ms. Grimsley.2 Ms. Grimsley alleges that Patterson did not have any
corporate safeguards, such as a human resources department, employee handbook, or
sexual harassment policy, and that the absence of safeguards empowered Mr. Bottoms to
continue this behavior. She resigned from her role at Patterson in December of 2021.
Ms. Grimsley sued Patterson in Williamson County Chancery Court on March 16,
2022. She claimed inter alia that Mr. Bottoms, while working in his capacity as
Patterson’s agent, created a “sexually hostile work environment” and sexually harassed
her within the meaning of the Tennessee Human Rights Act. Ms. Grimsley sought a total
of $2.5 million in damages.
Shortly thereafter, Patterson moved to compel arbitration. The company pointed
out that Ms. Grimsley signed numerous Neighborhood Sales Manager (NSM)
Agreements, each of which contained an arbitration provision. Patterson attached the
most recent version that Ms. Grimsley signed in January of 2021 as an exhibit. Patterson
directed the trial court to Section 10, entitled “Dispute Resolution,” which reads:
The Parties agree that all disputes, claims, or controversies between NSM
and the Company arising out of NSM’s employment or this Agreement,
whether during NSM[’s] employment or after the termination thereof, shall
be resolved exclusively through confidential, private and binding
arbitration. The arbitration of any such disputes will occur in Franklin,
Tennessee or such other location as the Parties may agree. The costs of
arbitration proceedings hereunder shall be borne equally by both Parties;
each Party shall bear its own attorneys’ fees. The Parties each hereby
expressly waive their right to have disputes between them resolved by a
court or jury. The Parties further expressly waive their right to pursue
claims on behalf of a class or as a representative of others in arbitration
under this Section.
In its original motion, the company argued that the Federal Arbitration Act (FAA)
mandates enforcement of this predispute arbitration agreement.
In response, Ms. Grimsley invoked the federal Ending Forced Arbitration of
Sexual Assault and Sexual Harassment Act of 2021 (the Act). She explained that this Act
amended the FAA to specifically allow victims of sexual harassment to void otherwise
valid predispute arbitration agreements. Ms. Grimsley acknowledged that the Act “does
process in particular areas served by the company.
2
Ms. Grimsley described numerous sexual comments that Mr. Bottoms made about her in 2021.
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not technically apply to this case” because it includes a statutory note providing that it
can only govern “any dispute or claim that arises or accrues on or after the date of
enactment,” March 3, 2022, and all of Mr. Bottom’s harassment occurred prior to that
date. Nevertheless, she argued that it should be given effect here to further Congress’s
stated desire to support victims of sexual harassment.
In its Memorandum and Order, the trial court went beyond the argument advanced
by Ms. Grimsley. The trial court held that the Act actually does apply to her present
lawsuit against the company and denied Patterson’s request to compel arbitration.
Though her complaint only targets harassment and discharge occurring before the Act
took effect, the trial court emphasized that Ms. Grimsley filed her complaint “after the
effective date of the Act.” The trial court found that Ms. Grimsley’s Neighborhood Sales
Manager Agreement qualified as a “predispute arbitration agreement,” that her case
against Patterson involved a “sexual harassment dispute,” and that her choice to file after
the effective date opened the door to apply the Act. The trial court extensively examined
whether applying the Act “would have a ‘genuinely retroactive effect’” and concluded
that it would not since the Act only modifies rules of procedure. Finally, after implicitly
concluding that the FAA preempted Tennessee law on this point, the trial court denied
Patterson’s motion to compel.
Patterson appealed. The company’s primary argument is that the Ending Forced
Arbitration of Sexual Assault and Sexual Harassment Act of 2021 cannot apply in this
suit to void the parties’ otherwise valid predispute arbitration agreement. The company
contends that the Act does not apply to conduct that took place prior to the effective date
of the law. In response, Ms. Grimsley argues that the trial court correctly applied the Act
to her case. We respectfully disagree and reverse the trial court’s ruling that the Act is
applicable to the present case.
II.
The Tennessee Supreme Court has held that a trial court’s decision to grant or
deny a motion to compel arbitration in the face of undisputed facts presents a question of
law, which may be reviewed de novo “without a presumption of correctness afforded to
the trial court’s conclusions.” Owens v. Nat’l Health Corp., 263 S.W.3d 876, 882 (Tenn.
2007), rev’d on other grounds, Welch v. Oaktree Health and Rehabilitation Ctr. LLC,
674 S.W.3d 881, 897 (Tenn. 2023); Wofford v. M.J. Edwards & Sons Funeral Homes
Inc., 490 S.W.3d 800, 807 (Tenn. Ct. App. 2015). This is true because “[a] trial court’s
order on a motion to compel arbitration addresses itself primarily to the application of
contract law.” Rosenberg v. BlueCross BlueShield of Tenn., Inc., 219 S.W.3d 892, 903
(Tenn. Ct. App. 2006). While sometimes the task of deciding “whether the parties have a
valid arbitration agreement at all . . . requires the consideration of matters outside of the
pleadings,” the Tennessee Supreme Court has recognized that other cases “attacking the
agreement” on purely legal grounds “can be resolved solely as a matter of law.” Welch,
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674 S.W.3d at 889 (quoting Elite Emergency Servs., LLC v. Stat Sols., LLC, No. M2008-
02793-COA-R3-CV, 2010 WL 845392, at *8 (Tenn. Ct. App. Mar. 10, 2010)).
III.
Ms. Grimsley contends that the claim or dispute did not arise or accrue until the
civil action was filed or alternatively the later date when the company moved, in
response, to compel arbitration. Both of these dates are after the effective date of the Act.
We do not find either date, however, to be controlling. The Act does not govern her case
because her “claim or dispute” neither arose nor accrued before the effective date of the
Act.3
During the legislative process, Congress approved of a statutory note that provides
an effective date for the Act. PL 117-90, March 3, 2022, 136 Stat 26.4 According to the
statutory note,
This Act, and the amendments made by this Act, shall apply with respect to
any claim or dispute that arises or accrues on or after the date of enactment
of this Act.
PL 117-90, March 3, 2022, 136 Stat 26. The trial court concluded that plaintiffs can
benefit from the Act so long as they filed their lawsuit after March 3, 2022.
In supporting the trial court’s conclusion, Ms. Grimsley argues that the word
“claim” links to the word “arises” and the word “dispute” links to the word “accrues.”
She contends that the “or” included in the phrases “claim or dispute” and “arises or
3
Since we conclude that Ms. Grimsley cannot benefit from the Act, we do not reach the
company’s alternative choice of law argument. After Ms. Grimsley filed her response to Patterson’s
motion to compel arbitration, the company, which initially moved to compel under the FAA, changed
course. Patterson instead began arguing that Section 9 of Ms. Grimsley’s contract, which provides that
Tennessee law should govern the parties’ relationship “without having effect to any conflict of laws
principles,” made any application of the FAA to her case inappropriate—despite having based its motion
to compel on the FAA. Because we conclude that the Act does not apply, it is unnecessary to address the
company’s alternative argument. We do note that the Tennessee Uniform Arbitration Act does not
include a provision analogous to the Act. The question of whether persons asserting claims of sexual
harassment should be forced to arbitrate those claims presents a question of public policy that may
warrant thoughtful attention from the Tennessee General Assembly.
4
Ms. Grimsley implies that the statutory note was not converted into a section of the Act, and as
a result does not carry the weight of law. However, it “is of no moment” that the codifier chose to make
this effective date provision a statutory note rather than a separate section: “The Statutes at Large provide
the evidence of the laws of the United States.” Conyers v. Merit Sys. Protection Bd., 388 F.3d 1380, 1382
n.2 (Fed. Cir. 2004), cert. denied 543 U.S. 1171 (2005) (citing 1 U.S.C. § 112; United States v. Welden,
377 U.S. 95, 98 n.4 (1964)). Patterson correctly points to this principle and, despite Ms. Grimsley’s
arguments to the contrary, we agree that the statutory note carries the effect of law.
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accrues” marks Congress’s clear intention to treat these words differently. Ms. Grimsley
asserts that
these words must have different meanings otherwise the word ‘or’ and the
word ‘accrues’ would be worthless and duplicative. The best plain
language interpretation of these words would be that ‘arises’ would be the
date the Plaintiff knew or should have known of a dispute. The word
‘accrues’ would be the date the lawsuit was filed (or the date the dispute
accrued related to the arbitration provision). This is the best statutory
interpretation for this language in the statute.
We aware of no court that has read the language of the Act in the manner
suggested by Ms. Grimsley, under which a dispute does not accrue until filing of a
motion to compel arbitration. Though the vast majority of the courts that have
considered this issue have rejected arguments akin to those advanced by Ms. Grimsley, at
least two courts have read the statute in a manner broadly in accord with the conclusion
she has advanced, emphasizing the importance of the act of filing. See Famuyide v.
Chipotle Mexican Grill, Inc., No. 23-1127, 2023 WL 5651915, at *3-4 (D. Minn. Aug.
31, 2023), app. filed (8 Cir. Oct. 2, 2023); Hodgin v. Intensive Care Consortium, Inc.,
No. 22-81733-CV, 2023 WL 2751443, at *2 (S.D. Fla. Mar. 31, 2023). In reaching their
conclusions, these two courts noted the adversarial nature of the term dispute. In
Famuyide v. Chipotle Mexican Grill, Inc., the court concluded that the dispute arose
when the plaintiff filed her claim in state court. 2023 WL 5651915, at *4. The Hodgin v.
Intensive Care Consortium, Inc. court concluded that the dispute arose when the
employee filed charges of discrimination against her employer with the United States
Equal Employment Opportunity Commission. 2023 WL 2751443, at *2. In these cases,
the court understood a dispute arising as being linked with the filing of an action.
Most courts that have considered the question presented in this case, however,
have rejected arguments akin to those advanced by Ms. Grimsley. They have done so for
at least ten different reasons. One, courts have observed that a conventional
interpretation of the critical terms governing the effective date leads to an understanding
that the latest potential date that a dispute or claim arises or accrues is the date when a
plaintiff becomes aware of her injuries. See Walters v. Starbucks Corp., 623 F. Supp. 3d
333, 338 (S.D.N.Y. 2022); Newcombe-Dierl v. Amgen, No. CV 22-2155-DMG (MRWx),
2022 WL 3012211, at *5 (C.D. Cal. May 26, 2022). Two, this conventional
understanding is in accordance with how courts have interpreted similar language in the
context of Title VII sexual harassment claims in which the key dates are linked to when
the plaintiff knew or should have known of the discriminatory act or when the adverse
employment action is taken. Marshall v. Hum. Servs. of Se. Texas, Inc., No. 1:21-CV-
529, 2023 WL 1818214, at *3 (E.D. Tex. Feb. 7, 2023); Palmer v. Johns Island Post
Acute, LLC, No. CV 2:22-3432-RMG-KDW, 2023 WL 4409038, at *8 (D.S.C. Mar. 7,
2023), report and recommendation adopted, No. 2:22-CV-3432-RMG, 2023 WL
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4117366 (D.S.C. June 22, 2023). As for why this well-established interpretation of Title
VII language is persuasive when interpreting this Act, a court observed that the Act
“should be interpreted in accordance with these well-settled accrual principles that apply
to harassment claims—the very claims that are the heart of the” Act. Olivieri v. Stifel,
Nicolaus & Co., Inc., No. 21-CV-0046 (JMA) (ARL), 2023 WL 2740846, at *6
(E.D.N.Y. Mar. 31, 2023), perm. app. filed (2d Cir. Apr. 21, 2023). Three, courts have
concluded that arising or accruing for a claim or dispute related to sexual harassment
cannot occur after the employee is no longer employed by the employer who is subject to
suit. See Bopda v. Comcast of the Dist., LLC, No. CV PJM 22-2889, 2023 WL 6292767,
at *3 (D. Md. Sept. 27, 2023); Palmer, 2023 WL 4409038, at *8. Four, Congress
expressly employed the language of case filing in addressing the scope of the Act but did
not do so in setting the effective date of the Act. Under the Act, “no predispute
arbitration agreement or predispute joint-action waiver shall be valid or enforceable with
respect to a case which is filed under Federal, Tribal, or State law and relates to the
sexual assault dispute or the sexual harassment dispute.” 9 U.S.C. § 402(a). Congress
employed different language, however, utilizing “claim or dispute and “arises or accrues”
instead of filing of a case, in setting forth the effective date of the Act. Accordingly, in
rejecting a contention that the filing date is determinative as to the effective date of the
Act, one court noted that “‘when Congress includes particular language in one section of
a statute but omits it in another,’ it is ‘presume[d] Congress intended a difference in
meaning.’” Barnes v. Festival Fun Parks, LLC, No. 3:22-CV-165, 2023 WL 4209745, at
*9 (W.D. Pa. June 27, 2023) (quoting Digital Realty Trust, Inc. v. Somers, 138 S. Ct. 767,
777 (2018)).
Courts have also explored the claim and dispute language in the context of the
Act. As a fifth rationale, courts have looked to the Black’s Law Dictionary definition of
the terms dispute and claim, finding the definitions therein to be unsupportive of the
types of arguments advanced by Ms. Grimsley. Black’s Law Dictionary defines
“dispute” as “[a] conflict or controversy, esp. one that has given rise to a particular
lawsuit,”5 and “claim” as “[a] demand for money, property, or a legal remedy to which
one asserts a right.”6 Reflecting on these definitions, courts have observed that they
“differentiate dispute and claim by the point in time they come into existence, indicating
that a dispute is an underlying conflict which will later give rise to the lawsuit while a
claim refers to an existing right which may be the object of a lawsuit.” Barnes, 2023 WL
4209745 at *10. Endeavoring to apply these Black’s Law Dictionary definitions, one
court concluded that a “‘dispute arises when the conduct which constitutes the alleged
sexual assault or sexual harassment occurs’ whereas ‘a claim accrues when the plaintiff
has a complete and present cause of action.’” Castillo v. Altice USA, Inc., No. 1:23-CV-
05040 (JLR), 2023 WL 6690674, at *4 (S.D.N.Y. Oct. 12, 2023). Six, the plain
5
Dispute, Black's Law Dictionary (11th ed. 2019).
6
Claim, Black's Law Dictionary (11th ed. 2019).
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language of the Act “makes clear the term ‘claim or dispute’ refers to a claim or dispute
of sexual harassment—not a dispute regarding arbitrability.” Steinberg v. Capgemini
Am., Inc., No. CV 22-489, 2022 WL 3371323, at *2 (E.D. Pa. Aug. 16, 2022). Notably,
“Congress never referenced a ‘dispute as to the arbitrability’ in discussing accrual in 9
U.S.C. § 401, although they certainly could have done so. Instead, Congress specifically
defined ‘sexual harassment dispute’ as a dispute “relating to conduct that is alleged to
constitute sexual harassment.” Id. (quoting 9 U.S.C. § 401(3) & (4)). Therefore, “[t]he
dispute in question must pertain to sexual assault or harassment—the statute is not
referencing a dispute regarding arbitrability.” Id. Seven, relatedly, the Act defines a
predispute arbitration agreement as “any agreement to arbitrate a dispute that had not yet
arisen at the time of the making of the agreement.” 9 U.S.C. § 401(1). Reflecting on this
provision, a court observed that “the use of dispute in this context clearly refers to the
discriminatory conduct underlying the Complaint, requiring the arbitration agreement to
be entered into prior to the dispute—the discriminatory conduct.” Barnes, 2023 WL
4209745, at *10.
In reaching their conclusions, courts have also looked at the Act’s prospective
application language, state court interpretation of the same language in different contexts,
and legislative history. As an eighth rationale, courts have observed that Congress by
utilizing the “dispute or claim” and “arises or accrues” “after the date of enactment”
language has plainly provided for prospective rather than retroactive application of the
Act. See Zinsky v. Russin, No. 2:22-CV-547, 2022 WL 2906371, at *4 (W.D. Pa. July
22, 2022); see also Settle v. Securitas Sec. Servs. USA, Inc., No. A-0723-22, 2023 WL
2909118, at *4 (N.J. Super. Ct. App. Div. Apr. 12, 2023) (noting that “[w]e acknowledge
the [Act] represents a significant evolution in the enforcement of arbitration provisions,
however, Congress has specifically elected to apply this change prospectively rather than
retroactively”). As noted by one court, “[w]hile the Act represents a significant sea
change in the enforcement of arbitration provisions, Congress has chosen to temper that
change through prospective rather than retrospective applicability.” Zinsky, 2022 WL
2906371, at *4. Nine, in cases where the underlying actions involved state claims, courts
have looked to state court interpretations of the terms “arise” and “accrue” which have
been linked to injury and discovery. Palmer, 2023 WL 4409038, at *8 (discussing South
Carolina law); Zinsky, 2022 WL, at *3 (addressing Texas and Pennsylvania tort law).
Ten, a court considered the legislative history which it determined indicates that the only
backward-looking impact of the measure is application as to arbitration agreements
signed prior to the effective date of the Act but that the sexual harassment conduct itself
would have to be after the passage of the Act to be within the reach of the statutory
provision. Barnes, 2023 WL 4209745, at *11. In reflecting on the legislative history of
the Act, a court observed that “Congress considered whether public policy required
voiding all existing arbitration agreements with respect to disputes involving sexual
harassment under the FAA and determined that such policy was not required.” Lopez v.
Biotronik, Inc., No. 3:21-CV-1868-JR, 2022 WL 18587756, at *3 (D. Or. Dec. 20, 2022),
report and recommendation adopted, No. 3:21-CV-1868-JR, 2023 WL 1778655 (D. Or.
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Feb. 6, 2023).
Tennessee courts have had frequent occasion to apply the language “arise and
accrue,” for example in considering limitations periods and venue decisions, and have
repeatedly concluded that they reference conduct predating the filing of a lawsuit. See,
e.g., Akers v. Sessions Paving Co., No. M2012-02602-COA-R3-CV, 2013 WL 4107622,
at *3 (Tenn. Ct. App. Aug. 13, 2013), perm. app. denied (Tenn. Jan. 14, 2014) (“A cause
of action . . . arises if the acts and conduct of one party show an intention to no longer be
bound by the contract, even if the contract has not yet been breached.”); Dobson v.
Marion Cnty., No. M2004-02154-COA-R3-CV, 2006 WL 1026422, at *4 (Tenn. Ct.
App. Apr. 18, 2006) (“The test to determine when a cause of action arises or accrues is
when the plaintiff has suffered a legal injury, that is, when he or she has the right to
maintain an action or first may maintain an action to a successful conclusion.” (quoting
51 Am. Jur. 2d Limitation of Actions § 148 (2005))); Parrish v. Marquis, No. W1999-
02629-COA-R3-CV, 2000 WL 1051842, at *4 (Tenn. Ct. App. July 31, 2000)
(explaining that “the time a cause of action arises will determine where the action arises
or accrues”); Pilcher v. Carroll, 15 Tenn. App. 423, 425-26 (Tenn. Ct. App. 1932)
(concluding Texas’ statute of limitations “was intended to cover actions that accrued
against parties while they were residents of another state and not actions that accrued
while the parties were residents of this state”). The meaning that Tennessee state courts
have given these words in other contexts aligns with the majority understanding of the
Act.
Accepting for purposes of argument Ms. Grimsley’s core contention that the terms
“claim” and “dispute” and the terms “arise” and “accrue” should be interpreted as having
different meanings, we would still conclude that this case does not fall within the ambit
of the Act. We agree that the term “dispute” is linked with the underlying conduct giving
rise to the claim, not to a dispute over arbitrability, which eliminates the latest date
suggested by Ms. Grimsley -- the date of the filing of a motion to compel arbitration. We
also agree that Congress simply has not provided for the filing date as controlling the
effective date of the Act. In a case where the employee allegedly has been sexually
harassed and has been terminated or constructively discharged with the continuing
offense ceasing prior to the effective date of the Act, whatever variations may exist
between the terms “claim” and “dispute” and the terms “arises” and “accrues,” we cannot
say that the claim or dispute arose or accrued after the last date of employment.
Therefore, the trial court erred in concluding that the Act is applicable in the present case.
IV.
In considering the arguments advanced on appeal and for the reasons discussed
above, we reverse the judgment of the Chancery Court for Williamson County. Costs of
the appeal are taxed to the appellee, Natalie Grimsley, for which execution may issue if
necessary. The case is remanded for such further proceedings as may be necessary and
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consistent with this opinion.
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JEFFREY USMAN, JUDGE
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