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State ex rel. Hewitt v. Kerr

Supreme Court of Missouri, En Banc

April 28, 2015

STATE ex rel. TODD HEWITT, Relator,

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Hewitt was represented by John D. Lynn of Sedey Harper PC in St. Louis.

The Rams were represented by Bradley A. Winters of Sher Corwin Winters LLC in St. Louis.

Russell, C.J., Breckenridge and Draper, JJ., concur; Stith, J., concurs in part and dissents in part in separate opinion filed; Teitelman, J., concurs in part and dissents in part in separate opinion filed; Fischer, J., dissents in separate opinion filed; Wilson, J., concurs in opinion of Fischer, J.; Wilson, J., dissents in separate opinion filed.

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A former employee of the St. Louis Rams Partnership, Todd Hewitt, seeks a writ of mandamus requiring the circuit court to vacate its order compelling arbitration of his claim of age discrimination against the St. Louis Rams Partnership and three of its affiliates. Five judges find that a writ of mandamus is the appropriate mechanism to review whether the trial court erred in sustaining a motion to compel arbitration. Four judges find that Mr. Hewitt's employment contract contained a valid and enforceable arbitration clause that required him to arbitrate disputes, including his statutory claims, against the Rams. Four judges also find that the National Football League's dispute resolution procedural guidelines setting out the essential terms of arbitration were not referenced in Mr. Hewitt's employment contract and, therefore, were not incorporated into his contract. Four judges further find that the terms of the contract designating the NFL commissioner, an employee of the team owners, as the sole arbitrator with unfettered discretion to establish the rules for arbitration are unconscionable and, therefore, unenforceable. Four judges find that Missouri's uniform arbitration act provides a mechanism to imply the terms missing from the arbitration agreement and provides the rules for appointing an arbitrator to replace the NFL commissioner. Accordingly, four judges issue a permanent writ of mandamus directing the trial court to vacate its order granting the motion to compel arbitration and, instead, issue an order compelling arbitration wherein the trial court appoints a neutral arbitrator, implies the specific terms of arbitration from applicable statues in Missouri's uniform arbitration act, and directs the parties to proceed with arbitration.

I. Factual and Procedural Background

The Rams are a professional football team affiliated with the NFL. Starting as a summer equipment department employee for the Rams during college, Mr. Hewitt joined the organization full time in 1978 and was promoted to equipment manager in 1985. He held that position until early 2011.

Mr. Hewitt entered into a number of employment contracts with the Rams during the more than 40 years he was employed by the team. In November 2008, he signed his most recent contract with the Rams. It covered the 2009-2010 and 2010-2011 NFL seasons. Like many of his prior employment contracts, this contract contained an arbitration clause that stated:

Hewitt agrees to abide by and to be legally bound by the Constitution and By-Laws and Rules and Regulations of the National Football League and by the decisions of the Commissioner of the

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National Football League, which shall be final, binding, conclusive and unappealable. The Rams and Hewitt also severally and mutually promise and agree that in any dispute which may arise between them, the matter in dispute shall be referred to the Commissioner of the National Football League for decision and after due notice and hearing, at which both parties may appear, the decision of said Commissioner shall be final, binding, conclusive and unappealable, and the Rams and Hewitt severally and jointly hereby release the Commissioner and waive every claim each or both have or may have against the Commissioner and/or the National Football League, and against every director, partner, officer, and stockholder of every Club in the National Football League, for all claims and demands whatsoever arising out of or in connection with any decision of the Commissioner of the National Football League.

The constitution and bylaws of the NFL further provided that " [t]he Commissioner shall have full, complete, and final jurisdiction and authority to arbitrate."

In January 2011, then head coach Steve Spagnuolo notified Mr. Hewitt that his employment contract would not be renewed. At that time, Mr. Hewitt was 54 years old. In May 2012, Mr. Hewitt filed suit in the St. Louis County circuit court against the St. Louis Rams Partnership and three affiliated companies ? The Rams Football Company, Inc., ITB Football Company, L.L.C., and The St. Louis Rams, L.L.C. ? (collectively " the Rams" ) alleging age discrimination in violation of the Missouri Human Rights Act (MHRA), section 213.010 et seq. [1]

The Rams moved to compel arbitration and to dismiss or stay the court proceedings, citing the arbitration provision of Mr. Hewitt's employment contract. Mr. Hewitt opposed arbitration, arguing that the arbitration provision was invalid and unenforceable against him because: (1) three of the four defendants did not sign the agreement; (2) there was no meeting of the minds as to the essential terms of the arbitration agreement; (3) there was no consideration for the arbitration agreement; (4) the agreement does not contain a clear and unmistakable waiver of Mr. Hewitt's right to bring a statutory violation claim in court and several provisions of the arbitration agreement interfere with Mr. Hewitt's rights under the MHRA, barring arbitration under the " denial of statutory rights" doctrine; and (5) several provisions of the arbitration agreement are unconscionable, including the provision naming the NFL commissioner as the arbitrator.

The trial court granted the Rams' motion to compel arbitration and ordered that the court action be stayed pending the arbitration. After an unsuccessful attempt at an appeal,[2] Mr. Hewitt petitioned the court of appeals for a writ of mandamus or prohibition. The court of appeals issued a

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preliminary order in mandamus. After opinion, both parties sought, and were granted, transfer to this Court pursuant to article V, section 10 of the Missouri Constitution. On transfer, Mr. Hewitt asks this Court to issue a writ of mandamus preventing the trial court from compelling arbitration of this dispute.[3]

II. Standard of Review and Issuance of Writ of Mandamus

This Court has the authority to " issue and determine original remedial writs," including the extraordinary writ of mandamus. See Mo. Const. art. V, sec. 4.1. This Court recognized, in State ex rel. Vincent v. Schneider that a writ of mandamus is an appropriate mechanism to review whether a motion to compel arbitration was improperly sustained. 194 S.W.3d 853, 855 (Mo. banc 2006). A litigant seeking " relief by mandamus must allege and prove that he has a clear, unequivocal, specific right to a thing claimed." Furlong Cos., Inc. v. City of Kansas City, 189 S.W.3d 157, 166 (Mo. banc 2006). This right may arise from a statute that creates a right but does not explicitly provide mandamus as a remedy to enforce the right. See State ex rel. JCA Architects, Inc. v. Schmidt, 751 S.W.2d 756, 757 (Mo. banc 1988). Additionally, this Court will not issue a remedial writ " in any case wherein adequate relief can be afforded by an appeal." Rule 84.22(a).

The Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq. (2006), governs the applicability and enforceability of arbitration agreements in all contracts involving interstate commerce. Section 2 extends the scope of the FAA to any " contract evidencing a transaction involving commerce." 9 U.S.C. § 2. Section 1 defines " commerce" as " commerce among the several States." Id. § 1. The United States Supreme Court has construed this language broadly, stating:

We have interpreted the term " involving commerce" in the FAA as the functional equivalent of the more familiar term " affecting commerce" words of art that ordinarily signal the broadest permissible exercise of Congress' Commerce Clause power. Because the statute provides for " the enforcement of arbitration agreements within the full reach of the Commerce Clause," it is perfectly clear that the FAA encompasses a wider range of transactions than those actually " in commerce" that is, " within the flow of interstate commerce."

Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 56, 123 S.Ct. 2037, 156 L.Ed.2d 46 (2003) (internal citations omitted).

The Supreme Court further has held that the FAA applies even when, for example, an arbitration agreement is executed in a single state by residents of that state if one of the parties to the agreement engages in business in multiple states. Id. at 57. It is undisputed that the Rams operate in interstate commerce; the team, its players and employees, participate in away games and take in revenue in other states, and several of the defendant corporations named in this suit are incorporated in Delaware. Mr. Hewitt's employment contract to provide equipment managerial services to the team as it was engaged in interstate commerce brings the contract within the purview of the FAA.[4]

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Under the FAA, a party must submit to arbitration " save upon such grounds as exist at law or in equity for the revocation of any contract." [5] 9 U.S.C. § 2.[6] This Court and the Supreme Court have found the contract defenses Mr. Hewitt raises fall under the FAA's aforementioned savings clause. AT& T Mobility LLC v. Concepcion, 563 U.S. 333, 131 S.Ct. 1740, 1745, 179 L.Ed.2d 742 (2011); Robinson v. Title Lenders, Inc., 364 S.W.3d 505, 515 (Mo. banc 2012). Mr. Hewitt has a clearly established right to arbitrate his claims using only those terms that are not unconscionable as determined using the general principles governing contract law in Missouri. See Robinson, 364 S.W.3d at 515.

Further, mandamus is an appropriate remedy when alternative remedies waste judicial resources or result in a burdensome delay, creating irreparable harm to the parties. State ex rel. Sasnett v. Moorhouse, 267 S.W.3d 717, 725 (Mo. App. 2008). If Mr. Hewitt is not bound to arbitrate under the terms of his contract, this Court can readily avoid this duplicative and unnecessary additional litigation through a writ of mandamus. To do otherwise would be result in a failure of judicial efficiency. Accordingly, there is no adequate remedy on appeal for the present claims. See Vincent, 194 S.W.3d 853. Here, as in Vincent, a writ of mandamus is the proper mechanism to review the grant of a motion to compel arbitration.

While this Court has held that inconvenient delay to the complaining party is not, in itself, a basis for the issuance of a writ of mandamus, the ruling was based on very different circumstances. State ex rel. Kelley v. Mitchell, 595 S.W.2d 261, 268 (Mo. banc 1980). In Kelley , the relators first sought declaratory judgment regarding the construction of a contested statute and, one day later, filed a writ of mandamus. Id. at 262-63. The Court found the writ of mandamus was an inappropriate attempted " short-cut" because there was " no reason to doubt that the relators would be able to receive full, prompt and adequate relief in the declaratory judgment action." Id. at 267. Mr. Hewitt has no immediate alternative remedy to his claim that the arbitration agreement is invalid. Additionally, the delay results in harm not only to the relator but also to both parties, who must needlessly protract litigation and dispute resolution, and to the courts, which have already devoted considerable resources to litigate this issue.

Additionally, to the extent that it could be argued that prohibition rather than mandamus is the more appropriate writ, this Court has noted, " [T]he distinction between prohibition and mandamus is often elusive and sometimes only serves to

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create confusion for parties." State ex rel. Unnerstall v. Berkemeyer, 298 S.W.3d 513, 515-16 (Mo. banc 2009). Unnerstall notes that this confusion has led the court of appeals to hold that distinctions between the two types of writs are anachronistic and that, in modern practice, " [t]he distinction between mandamus and prohibition is at best blurred, at worst nonexistent, and the subject matter to which the two writs apply overlap to a great extent." Id. at 516 (internal citations omitted). For example, prohibition has also been used to prevent a waste of judicial resources through unnecessary, inconvenient and expensive litigation. State ex rel. Springfield Underground, Inc. v. Sweeney, 102 S.W.3d 7, 8-9 (Mo. banc 2003); See also State ex rel. Police Ret. Sys. of St. Louis v. Mummert, 875 S.W.2d 553 (Mo banc. 1994).

III. Arbitration Clause is Valid and Enforceable

Mr. Hewitt asserts the arbitration provision is invalid and unenforceable on numerous grounds, including that it provides for a decision by an allegedly biased arbitrator, a lack of mutual agreement to the arbitration's essential terms, lack of consideration, lack of waiver of and a denial of his statutory rights, and allegations of procedural unconscionability. He also contends that the three named defendants that did not sign the employment contract cannot enforce the arbitration provision against him. Mr. Hewitt's claims of lack of consideration and procedural unconscionability relate to the validity of the agreement to arbitrate, whereas his claims regarding the arbitrator and terms of arbitration relate to only specific terms of arbitration. Accordingly, the Court will address these claims separately. The Court will also address separately Mr. Hewitt's arguments that he did not waive his right to bring his statutory claim in a judicial forum and that the defendants who did not sign the contract cannot enforce it because those arguments involve whether the arbitration agreement encompasses his underlying claims.

A. The Court May Determine Whether the Arbitration Agreement is Valid

As previously discussed, Mr. Hewitt's employment contract is governed by the FAA. The Supreme Court stated in Concepcion that the FAA reflects a " liberal policy favoring arbitration and the fundamental principle that arbitration is a matter of contract. . . . [C]ourts must place arbitration agreements on an equal footing with other contracts and enforce them according to their terms." 131 S.Ct. at 1745 (internal citations and quotation marks omitted).

If there is no valid arbitration clause, however, then there is no agreement to arbitrate, and the case may proceed in civil court. See 9 U.S.C. § 2. A court determines the validity of an arbitration agreement by applying state contract law principles. Vincent, 194 S.W.3d at 856. In Brewer v. Missouri Title Loans, this Court reaffirmed that Concepcion did not diminish a trial court's broad authority to evaluate the validity and enforceability of arbitration agreements prior to granting or denying a motion to compel arbitration and, so, " permit[s] state courts to apply state law defenses to the formation of the particular contract at issue." 364 S.W.3d 486, 492 (Mo. banc 2012). This provision means that, prior to referral to arbitration, a Missouri court can declare an arbitration agreement " unenforceable if a generally applicable contract defense, such as fraud, duress, or unconscionability, applie[s] to concerns raised about the agreement.[7]

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Robinson, 364 S.W.3d at 515 (Mo. banc 2012); see also Brewer, 364 S.W.3d at 492 n.3.

Mr. Hewitt concedes that his employment contract included an arbitration provision, and the trial court found that a similar arbitration provision had been included in many of the previous employment contracts he signed with the Rams over the prior 40 years. This provision is treated like any other contract and is enforced according to its terms. See Concepcion, 131 S.Ct. at 1745. The terms of a contract are to be read " as a whole to determine the intention of the parties," giving the terms " their plain, ordinary, and usual meaning." Dunn Indus. Grp., Inc. v. City of Sugar Creek, 112 S.W.3d 421, 428 (Mo. banc 2003). According to the plain language in his contract with the Rams, Mr. Hewitt intended to be legally bound by the constitution and bylaws of the NFL, which provided that his disputes would be arbitrated.

B. Arbitration Clause is Supported by Valid Consideration

Despite executing an agreement to arbitrate, Mr. Hewitt asserts the agreement is not valid for lack of consideration. Specifically, he claims a lack of consideration on the basis that both contracting parties were not bound by the arbitration agreement. As Mr. Hewitt notes, the first sentence of the provision states only that " Hewitt agrees to abide by and to be legally bound by the Constitution and By-Laws and Rules and Regulations of the National Football League and by the decisions of the Commissioner of the National Football League, which shall be final, binding, conclusive and unappealable."

But the arbitration provision does not end there. The following sentence states, " The Rams and Hewitt also severally and mutually promise and agree that in any dispute which may arise between them, the matter in dispute shall be referred to the Commissioner of the National Football League for decision . . .." In this second sentence, the Rams expressly promise to arbitrate any and all disputes before the commissioner. Both the Rams and Mr. Hewitt signed and are bound by this agreement. The trial court found that the Rams' agreement with the NFL stated that they, as members of the league, would be bound by the constitution and bylaws, which expressly refer to the commissioner's authority to arbitrate. While, as Mr. Hewitt notes, legal questions could arise as to the meaning of some of these constitutional provisions or bylaws, he has not demonstrated that a fact question exists as to the content of these provisions or as to the fact that those provisions say that NFL teams must comply with their terms.

The record supports the trial court's explicit finding that the constitution and bylaws " already bind the St. Louis Rams Partnership, [but] Mr. Hewitt must separately agree to be bound." Mr. Hewitt cites no cases that would have required the Rams to expressly reaffirm their NFL membership agreement obligations in each individual employment contract they sign when, as here, the individual employment

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contract requires that arbitration be determined by the commissioner and governed by the NFL constitution and bylaws.

Indeed, the language of the arbitration agreement signed by Mr. Hewitt and the Rams distinguishes this case from the two cases cited by Mr. Hewitt in which arbitration agreements in NFL employment contracts were found to lack consideration. Sniezek v. Kansas City Chiefs Football Club, 402 S.W.3d 580 (Mo. App. 2013), and Clemmons v. Kansas City Chiefs Football Club, Inc., 397 S.W.3d 503 (Mo. App. 2013). In those agreements, the employees alone promised to be bound by the constitution and bylaws of the NFL and to refer disputes to the commissioner for arbitration. The Chiefs did not, as the Rams do here, promise to arbitrate disputes before the commissioner, nor did they sign the agreements at issue in Sniezek and Clemmons. By contrast, Mr. Hewitt's employment contract was signed by and is binding on both Mr. Hewitt and then Rams' president and general manager, Jay Zygmunt. Therefore, Mr. Hewitt's argument that the agreement lacked consideration fails.

C. No Procedural Unconscionability

Mr. Hewitt contends the agreement should not be enforced because the conditions under which he renewed his employment contract were unconscionable. Specifically, he asserts the contract was presented " in a hurried way without any discussion of [the contract's] terms." This argument is undermined by Mr. Hewitt's own long, more than 40 year tenure as a Rams employee, during which time the trial court found he had signed many employment contracts containing arbitration provisions substantially similar to this one.[8] As the trial court stated, " If Mr. Hewitt did not read his contract, inquire about its terms or ask for supporting documents during those decades, the [c]ourt is not able to turn back the hands of time and shield him from his own contractual promises."

Mr. Hewitt also argues that the take-it-or-leave-it basis of the agreement makes it an adhesion contract. He concedes, however, that he did not attempt to negotiate the terms of his contract, except on one occasion as to an earlier contract for which he provides no further information as to his success or failure. Mr. Hewitt's conclusory allegations that he was unable to alter the terms of his contract and that there was disparity in the parties' bargaining power do not prove themselves, nor would they make the agreement unconscionable. See Vincent, 194 S.W.3d at 857 (failure to negotiate does not " prove the negative" that one could not have done so).

Rather, as this Court made clear in Robinson, lack of negotiation and the adhesive nature of a contractual agreement are factors to consider in determining unconscionability, but " post- Concepcion, a court should not invalidate an arbitration agreement in a consumer contract simply because it is contained in a contract of adhesion or because the parties had unequal bargaining power, as these are hallmarks of modern consumer contracts generally." 364 S.W.3d at 515. " Mere inequality in bargaining power . . . is not a sufficient reason to hold that arbitration agreements are never enforceable

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in the employment context." Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 33, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991); see also Brewer, 364 S.W.3d at 495; Smith v. Kriska, 113 S.W.3d 293, 298 (Mo. App. 2003). Mr. Hewitt does not allege that he " was coerced or defrauded into agreeing to the arbitration clause," Gilmer, 500 U.S. at 33, particularly after decades of signing such agreements. He further offers no other explanation of why the disparity in bargaining power should invalidate the contract in the absence of evidence that the Rams abused their power.

Under the plain language of the employment contract between Mr. Hewitt and the Rams, Mr. Hewitt agreed to arbitrate his disputes against the Rams. The agreement is supported by consideration and obligates both parties to arbitrate. Further, Mr. Hewitt does not show that the circumstances under which the contract was entered into were so unconscionable as to render the agreement invalid. Therefore, there is a valid and enforceable agreement to arbitrate.

IV. Terms of Arbitration

Next, Mr. Hewitt asserts that the arbitration agreement is invalid and unenforceable because there was no mutual agreement to the essential terms of arbitration. The arbitration provision in Mr. Hewitt's employment contract states:

Hewitt agrees to abide by and to be legally bound by the Constitution and By-Laws and Rules and Regulations of the National Football League and by the decisions of the Commissioner of the National Football League, which shall be final, binding, conclusive and unappealable . . ..

The constitution and bylaws of the NFL further provide:

The Commissioner shall have full, complete, and final jurisdiction and authority to arbitrate[.] . . . The Commissioner shall interpret and from time to time establish policy and procedure in respect to the provisions of the Constitution and Bylaws and any enforcement thereof.

In its order compelling arbitration, the trial court found that the NFL dispute resolution procedural guidelines governed the arbitration procedure and that both parties were bound by the guidelines. Mr. Hewitt acknowledges that the arbitration provision clearly states he will be bound by " the Constitution and By-Laws and Rules and Regulations" of the NFL but contends he did not have sufficient information to make him aware of the full provisions of his employment contract because it does not directly mention the guidelines or attach them. Similarly, Mr. Hewitt asserts that the reference to the commissioner's authority to interpret and establish policy does not reference the terms found in the guidelines with any amount of specificity that would enable him to assent to these terms. Mr. Hewitt stated in his affidavit that he did not know of the existence of the guidelines until the Rams sought to compel him to arbitrate his age discrimination claim.

A valid arbitration clause in an employment contract requires mutuality of agreement, which " implies a mutuality of assent by the parties to the terms of the contract." Abrams v. Four Seasons Lakesites/Chase Resorts, Inc., 925 S.W.2d 932, 938 (Mo. App. 1996). Terms not explicit in a contract may be incorporated into the contract by reference. Dunn Indus. Grp., 112 S.W.3d at 435 n.5. The intent to incorporate must be clear. See St. Louis Union Trust Co. v. Blue, 353 S.W.2d 770, 777 (Mo. ...

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