RICHARD B. TEITELMAN, Judge.
Bristol Care Inc. and David Furnell (Appellants) appeal an order overruling their motion to compel arbitration. They contend that the circuit court erred by not compelling arbitration because the arbitration agreement between Bristol and its employee, Carla Baker, is valid and enforceable.
This Court affirms the circuit court's order because there was no consideration to create a valid arbitration agreement.
Bristol promoted Baker from her position as an hourly employee to a salaried managerial position at one of Bristol's long-term care facilities. Bristol drafted an employment agreement and arbitration agreement for Baker to sign. The parties signed the agreements contemporaneously at the time of Baker's promotion.
The employment agreement provided that Baker's employment would "continue indefinitely" unless Baker gave 60 days notice or Bristol elected to terminate her employment in one of four ways: (1) with five days' written notice "at [Bristol's] sole option;" (2) without notice if Bristol paid Baker five days' compensation; (3) without notice if, in Bristol's "sole opinion," Baker violates the employment agreement in a way that "jeopardizes the general operation of the facility or the care, comfort or security of its residents;" or (4) without notice for "dishonesty, insubordination, moral turpitude or incompetence." The employment agreement also provided that Baker would receive increased pay and employment benefits, including a license to live in the facility rent-free.
The arbitration agreement provides that all legal claims the parties may have against one another will be resolved by binding arbitration. The arbitration agreement provides that consideration consists of Baker's continued employment and mutual promises to resolve claims through arbitration. Section 3 of the arbitration agreement, titled "Employment-At-Will," provides:
Finally, the arbitration agreement provides that Bristol specifically "reserves the right to amend, modify or revoke this agreement upon thirty (30) days' prior written notice to the Employee."
Bristol terminated Baker from her position as administrator of the long-term care facility. Baker filed a class action lawsuit against Appellants seeking compensation for allegedly unpaid overtime hours. Appellants filed a motion to compel arbitration. The circuit court overruled the motion. This appeal followed.
Section 435.440, RSMo 2000,
I. Validity of the arbitration agreement is determined by the courts
Appellants assert that the arbitrator should decide any questions of enforceability because both Bristol Care and Baker agreed to have the arbitrator do so in the arbitration agreement. The arbitration agreement provides: "The arbitrator has exclusive authority to resolve any dispute
Appellants rely on Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63, 130 S.Ct. 2772, 177 L.Ed.2d 403 (2010). In Rent-A-Center, the arbitration agreement provided that the arbitrator "shall have exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation of this Agreement." Id. at 2775. (Emphasis added). The employee argued that the agreement was not enforceable because it was unconscionable under Nevada law. Id. The United States Supreme Court held that the delegation provision vested the arbitrator, not the courts, with the authority to determine whether the agreement was unconscionable. Id. at 2778-79.
The arbitration agreement in this case provides that the arbitrator will resolve disputes "relating to the applicability or enforceability" of the agreement. Unlike the agreement at issue in Rent-A-Center, the arbitration agreement in this case does not delegate to the arbitrator disputes regarding contract formation. A dispute "relating to the applicability or enforceability" of the agreement presupposes the formation of a contract. Baker's argument that there was no consideration to create a valid agreement raises a contract formation issue rather than an applicability or enforceability issue.
Although federal law preempts state laws that invalidate arbitration agreements on public policy grounds, state courts are permitted to apply state law defenses to the formation of the particular contract at issue. Brewer v. Missouri Title Loans, 364 S.W.3d 486, 492 (Mo. banc 2012); Robinson v. Title Lenders, Inc., 364 S.W.3d 505, 510 (Mo. banc 2012). Baker's claim raises a contract formation issue that is subject to resolution by Missouri state courts.
II. Validity of Arbitration Agreement
The issue of whether arbitration should be compelled is a question of law subject to de novo review. State ex rel. Vincent v. Schneider, 194 S.W.3d 853, 856 (Mo. banc 2006). "Missouri contract law applies to determine whether the parties have entered a valid agreement to arbitrate." Id. "The essential elements of any contract, including one for arbitration, are "`offer, acceptance, and bargained for consideration.'" Johnson v. McDonnell Douglas Corp., 745 S.W.2d 661, 662 (Mo. banc 1988). Consideration "consists either of a promise (to do or refrain from doing something) or the transfer or giving up of something of value to the other party." Morrow v. Hallmark Cards, Inc., 273 S.W.3d 15, 25 (Mo.App.2008).
Appellants argue that there are two sources of consideration for the arbitration agreement: (1) Baker's promotion, continued employment and attendant benefits; and (2) Bristol's promise to arbitrate its claims arising out of the employment relationship between it and Baker and to assume the costs of arbitration. "If two considerations are given for a promise, one of them being legally sufficient to support a promise and the other not sufficient, the promise is enforceable." Earl v. St. Louis Univ., 875 S.W.2d 234, 236-237 (Mo.App. 1994) (citing 1 Corbin on Contracts, § 126 (1963)). The arbitration contract, therefore, is enforceable if either source of consideration is valid.
A. Continued Employment
Bristol argues that Baker's acceptance of continued employment, with the attendant increase in salary and benefits, plus the limits on Bristol's right to terminate her employment, constitute consideration to support the arbitration agreement.
The Missouri Court of Appeals has held that continued at-will employment is not valid consideration to support an agreement requiring the employee to arbitrate his or her claims against the employer. See, e.g., Whitworth v. McBride & Son Homes, Inc., 344 S.W.3d 730, 741 (Mo. App.2011); Frye v. Speedway Chevrolet Cadillac, 321 S.W.3d 429, 438-439 (Mo. App.2010); Morrow, 273 S.W.3d at 26. An offer of continued at-will employment is not valid consideration because the employer makes no legally enforceable promise to do or refrain from doing anything it is not already entitled to do. The employer still can terminate the employee immediately for any reason. Morrow, 273 S.W.3d at 26-27. While the federal courts have reached a different result, this Court rejects that approach and, instead, adopts the analysis employed by Morrow and subsequent court of appeals cases, which hold that continued at-will employment is not valid consideration to create an enforceable contract.
The at-will employment doctrine is well-established in Missouri law. Margiotta v. Christian Hosp. Ne. Nw., 315 S.W.3d 342, 345 (Mo. banc 2010) (citing Johnson v. McDonnell Douglas Corp., 745 S.W.2d at 661). Absent an employment contract with a "definite statement of duration... an employment at will is created." Id. citing Luethans v. Washington Univ., 894 S.W.2d 169 (Mo. banc 1995). An employer may terminate an at-will employee "for any reason or for no reason." Id. (citing Crabtree v. Bugby, 967 S.W.2d 66, 70 (Mo. banc 1998)). Key indicia of at-will employment include indefinite duration or employment and the employer's option to terminate the employment immediately without cause.
The employment agreement provides that Baker's employment will "continue indefinitely" unless Bristol elected to terminate Baker by giving her five days' written notice "at [Bristol's] sole option" or terminating her without notice and paying Baker five days' compensation. The employment agreement permits Bristol to terminate Baker immediately without notice for any reason by paying her what amounts to a severance package worth five days' pay. There is no guaranteed duration of employment. The lack of a defined duration of employment is consistent with at-will employment.
The arbitration agreement drafted by Bristol confirms that the parties understood that Baker was an at-will employee. Section 3 of the arbitration agreement provides that the agreement "does not alter Employee's status as an at-will employee." The agreement then provides that "[n]otwithstanding this Agreement, either Employee or Company can terminate the employment... at any time, for any reason, with or without cause at the option of the Employee or the Company." These provisions amount to an unequivocal, positive
Bristol asserts that the statement in the arbitration agreement providing that Baker is "an at-will employee" does not govern because the arbitration agreement is a dispute resolution document, not an employment agreement. As noted, Bristol drafted an employment agreement and an arbitration agreement for Baker to sign. The parties acknowledge that the agreements were executed contemporaneously. Documents that are executed contemporaneously are considered together as a single agreement. State ex rel. Johnson v. JF Enterprises, LLC, 400 S.W.3d 763, 764 (Mo. banc 2013). If possible, all provisions in the various documents should be harmonized in order to effectuate the parties' intent. Id. at 770 (citing, J.E. Hathman, Inc. v. Sigma Alpha Epsilon Club, 491 S.W.2d 261, 264 (Mo. banc 1973)). When considered together, as one agreement, Bristol's argument amounts to an effort to disclaim its specific statement that Baker's employment was at-will as well as the fact that Bristol retained the right to terminate Baker's employment at any time for any reason. Baker was an at-will employee and remained so after she signed the employment and arbitration agreements.
Bristol also asserts that Baker's entitlement to severance pay following termination without notice constitutes consideration above and beyond continued at-will employment. Even if Baker had legal recourse to recover her severance pay, the fact remains that her term of employment was indefinite, Bristol retained the right to terminate her employment immediately without cause, Baker had no recourse to challenge her termination beyond the legally recognized exceptions to the at-will employment doctrine, and Bristol affirmatively and unequivocally stated that Baker's status is that of "an at-will employee." Under these circumstances, the obligation to pay severance is not sufficient to alter Baker's status as an at-will employee. See Karzin v. Collett, 562 S.W.2d 397, 400 (Mo. App.1978) (indicating that employment was at-will when employee was entitled to severance but could be fired immediately without cause). Baker's severance pay was a term and condition of her at-will employment.
B. Mutual Promises to Arbitrate
Appellants contend that the arbitration agreement also is supported by mutual promises to arbitrate. As the dissent explains at length, bilateral contracts are supported by consideration and enforceable when each party promises to undertake some legal duty or liability. Sumners v. Serv. Vending, Co., Inc., 102 S.W.3d 37, 41 (Mo.App.2003). These promises, however, must be binding, not illusory. Id. A promise is illusory when one party retains the unilateral right to amend the agreement and avoid its obligations. Morrow, 273 S.W.3d at 25.
In this case, Bristol's alleged mutual promise to arbitrate is conditioned on Bristol's unilateral "right to amend, modify or revoke this agreement upon thirty (30) days' prior written notice to the Employee." The quoted language does not limit Bristol's authority to modify the arbitration agreement unilaterally and retroactively. If Bristol retains unilateral authority to amend the agreement retroactively,
Bristol asserts that the requirement of prior written notice means that any modifications must apply prospectively only. The fact that Bristol must give prior written notice of an amendment to the arbitration agreement does not preclude Bristol from giving Baker prior written notice that, effective in thirty days, Bristol retroactively is disclaiming a promise made in the arbitration agreement. For instance, if in the course of an ongoing arbitration process, Bristol concluded that the process was not favorable, Bristol could provide Baker notice that, effective in 30 days, it no longer would consider itself bound by the results of the arbitration. While the dissent concludes summarily that no court would adopt a construction of the agreement allowing Bristol to disclaim or modify its arbitration promises unilaterally at any time for its own benefit, the fact remains that the language of the agreement would permit Bristol to do just that.
Appellants cite Pierce v. Kellogg, Brown & Root, Inc., 245 F.Supp.2d 1212, 1215-16 (E.D.Okla.2003) for the proposition that the notice requirement in the arbitration agreement renders the promise sufficiently binding to provide consideration. Aside from the fact that Pierce is not binding authority on this Court, the case is distinguishable because the agreement at issue not only required 10 days' notice to the employee of any modification, it also expressly provided that any amendment would not be effective "as to disputes... for which a proceeding ha[d] been initiated pursuant to the Rules." (quoting contract language). Unlike this case, the employer in Pierce expressly was limited to prospective amendment of the arbitration agreement. Contracts, like the arbitration agreement in this case, that permit unilateral, retroactive amendment are deemed illusory and do not constitute consideration to create an enforceable contract. See Frye, 321 S.W.3d at 442-445; see also Morrow, 273 S.W.3d at 20 (Ahuja, J., concurring) (quoting Am. Laminates, Inc., v. J.S. Latta, Co., 980 S.W.2d 12, 23 (Mo.App.1998)); Carey v. 24 Hour Fitness, USA, Inc., 669 F.3d 202 (5th Cir. 2012) (provision permitting unilateral amendment to arbitration agreement by employer is an illusory promise; reasonable advance notice and language denoting prospective application of amendments are required). Consequently, Bristol's alleged mutual promise to arbitrate is not valid consideration to support the arbitration agreement.
Baker's continued at-will employment and Bristol's promise to resolve claims through arbitration do not provide consideration to form a valid arbitration agreement. The judgment overruling appellant's motion to compel arbitration is affirmed.
RUSSELL, C.J., STITH and draper, JJ., concur; WILSON, J., dissents in separate opinion filed; BRECKENRIDGE and FISCHER, JJ., concur in opinion of WILSON, J.
PAUL C. WILSON, Judge.
The majority opinion holds there was only one agreement between Ms. Baker and Bristol Care concerning her employment as facility administrator. I agree.
Where I part company with the majority opinion, however, is its conclusion that no contract
I. Arbitration-Neutral Principles of Missouri Law Govern Questions of Contract Formation
A promise to arbitrate can be part of a contract limited to that issue, or it can be contained in a contract that addresses arbitration among many other terms. Here, as Ms. Baker concedes (and the majority opinion holds), the contract between Ms. Baker and Bristol Care — if one was formed — deals with arbitration only as one of the terms of Ms. Baker's promotion to facility administrator. The enforceability of this arbitration promise is controlled by the Federal Arbitration Act, 9 U.S.C. §§ 1-9 (the "FAA"), but the FAA looks to state law to decide the threshold questions of contract formation. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995). Accordingly, Ms. Baker's claim that none of the promises between the parties is enforceable due to a lack of consideration raises a question of contract formation that must be resolved under Missouri law.
The FAA's deference to state law on questions of contract formation is not unlimited, however. Given that one of Congress's purposes in enacting the FAA was to overcome deeply entrenched judicial hostility toward arbitration contracts, see AT & T Mobility LLC v. Concepcion, ___ U.S. ___, 131 S.Ct. 1740, 1745, 179 L.Ed.2d 742 (2011), the FAA defers only to principles of state law that apply generally to all contracts. See 9 U.S.C. § 2 (providing that all arbitration promises "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract"). In other words, state law principles that
Accordingly, Ms. Baker's consideration claim must be analyzed only under principles of Missouri law that are "arbitration neutral," i.e., that treat all contracts the same regardless of whether they contain a promise to arbitrate. Allied-Bruce Terminix Companies, Inc. v. Dobson, 513 U.S. 265, 281, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995) ("What States may not do is decide that a contract is fair enough to enforce all its basic terms (price, service, credit), but not fair enough to enforce its arbitration clause.").
II. Consideration as an Element of Contract Formation
Ms. Baker does not challenge the formation of her contract with Bristol Care on the basis that there was no mutual assent, i.e., offer and acceptance. The two documents plainly reflect the terms on which Bristol Care offered the promotion to facility administrator, and Ms. Baker's signatures evidenced her acceptance of and assent to those terms. Instead, she claims that no contract was formed between herself and Bristol Care as to those terms because there was no exchange of consideration to make their respective promises binding. Consideration, like mutual assent, is one of the basic elements of contract formation. Nat'l Ref. Co. v. McDowell, 201 S.W.2d 342, 347 (Mo.1947) ("One of the essential elements of a contract is the consideration.").
There have been numerous opinions from this Court and others on the subject of consideration, and scholars have filled countless pages in their efforts to explain what those opinions mean. The subtle nuances in the application of this doctrine at the outer edges are as complex as any in the common law. Corbin on Contracts (1995), §§ 5.1 and 5.2, pp. 5-6 and 11-13. But no matter how much these nuances may thrill scholars, haunt courts, and torture first-year law students, they are unnecessary to the decision of this case. This case requires only the straightforward application of three basic principles of consideration that have been stated and applied by Missouri courts without hesitation or qualification for generations.
A. A Bargained-For Exchange
The first relevant principle of consideration is that it is a bargained-for exchange. In other words, when a promise is given in exchange for a benefit to the promisor, or in exchange for a detriment to the promisee, this bargain supplies the consideration needed to form a contract. State ex rel. Kansas City v. State Highway Comm'n, 349 Mo. 865, 163 S.W.2d 948, 953 (1942) ("consideration of a contract can consist either in a benefit conferred upon the promisor or in a legal detriment to the promisee"). In this way, consideration demonstrates the seriousness of the parties' bargain and provides assurance that they intended a promise to be enforceable in a court of law. Corbin on Contracts (1995), § 5.3, pp. 19-20.
Identifying a bargained-for exchange, therefore, is the key to determining whether consideration was given. "[C]onsideration may consist of some right, interest, profit or benefit accruing to [the promisor], or some forbearance, loss or responsibility given, suffered or undertaken by the [promisee]." Perbal v. Dazor Mfg. Corp., 436 S.W.2d 677, 697 (Mo.1968). When the
For example, consider the simple contract in which A promises to pay $100 to B if B mows A's lawn. When B mows the lawn, A's promise to pay is binding (i.e., a contract is formed) because A gave it in exchange for: (1) the benefit to A of having the lawn mowed (which A otherwise would not have received), or (2) the detriment to B of having mowed A's lawn (a chore B otherwise would not have performed).
The foregoing example is a unilateral contract because the offeror requires the offeree to manifest acceptance by tendering performance, not by making a promise to perform. In a bilateral contract, on the other hand, the offeree accepts by making the promise(s) sought by the offeror. Even though the nature of the exchange between the parties is different than in a unilateral contract, the consideration analysis remains the same. In both circumstances, the focus is on identifying a bargained-for exchange consisting of a benefit to the promisor or a detriment to the promisee.
For example, consider the following bilateral contract: A promises to pay $100 to B, and B promises to mow A's lawn. A's promise is supported by consideration because A gave it in exchange for: (1) the
As this second example shows, bilateral contracts-by definition-are supported by consideration. "In any bilateral contract, each promise is the consideration for the other promise. Such is the bargain." Corbin on Contracts (1995), § 5. 20, p. 102. "This has been true for at least four centuries, ever since bilateral contracts [as relative newcomers to the law of contracts] were recognized." Id. § 5.25, p. 126 (citing cases from as early as 1555). This
Ragan v. Schreffler, 306 S.W.2d 494, 499 (Mo.1957). Thus, it is clear that it is not the price that supplies the necessary consideration but the offeree's promise to pay it.
Of course, not every promise will supply consideration. For example, a promise does not constitute consideration if the performance promised would not, itself, constitute consideration. See Restatement (Second) of Contracts, § 75 (a promise is not consideration when the promisor knows at the time the promise is made that the promise can be performed by an act that would not be consideration for a unilateral contract, e.g., payment of a preexisting debt). In the absence of such an exception, however, the general rule remains: a bargained-for exchange of promises supplies the consideration needed to bind both parties to their promises.
B. Courts Do NOT Evaluate Consideration for "Adequacy"
The second relevant principle regarding consideration is that it requires no qualitative analysis. Consideration either is present (and a contract is formed), or it is not. Courts have no authority to attempt to value the bargained-for consideration in an effort to determine whether the promisor is — or is not — receiving "adequate" return for the promise given.
Marks v. Bank of Missouri, 8 Mo. 316, 319 (1843) (emphasis added), overruled on other grounds by Wild v. Howe, 74 Mo. 551, 553 (1881). See also Weinstein v. KLT
Accordingly, any bargained-for exchange will supply the consideration needed to form a contract, regardless of whether a court believes (with the benefit of hindsight) that the promisor gave a promise that was worth more — even far more — than the benefit or detriment received in the exchange.
Ms. Baker argues that grossly inadequate consideration may suggest that a contract is voidable due to fraud, duress, or unconscionability. See Vondera v. Chapman, 352 Mo. 1034, 180 S.W.2d 704, 705 (1944). This may be, but such defenses have nothing to do with contract formation. In fact, these defenses assume a contract was formed, i.e., that consideration was bargained for in exchange for each party's promise(s). See Restatement (Second) of Contract, § 208, comment c ("Inadequacy of consideration does not itself invalidate a bargain, but gross disparity... may be an important factor in a determination that a contract is unconscionable"); Arthur Fels Bond & Mortg. Co. v. Pollock, 347 Mo. 853, 149 S.W.2d 356, 359 (1941) ("inadequacy does not constitute a failure of consideration").
C. Separate Consideration is Not Needed for Each Contemporaneous Promise
The third relevant principle is that all contemporaneous promises by one party are deemed to have been given in exchange for the aggregate benefit to that party or the aggregate detriment to the other party. See Restatement (Second) of Contracts, at § 80(1) ("There is consideration for a set of promises if what is bargained for and given in exchange would have been consideration for each promise in the set if exchanged for that promise
This principle likely is a corollary of the principle stated above, i.e., that courts cannot assess the value of the consideration in determining whether consideration existed.
Drummond Realty & Inv. Co. v. W.H. Thompson Trust Co., 178 S.W. 479, 482 (Mo.1915) (quoting Parsons on Contracts (9th Ed.), Vol. 1, p. 455). See also Fullington v. Ozark Poultry Supply Co., 327 Mo. 1167, 39 S.W.2d 780, 783-84 (1931) ("If, without deciding, the recited purchase of stock is not a consideration supporting respondent's hiring of appellant, the other consideration of mutual promises [to hire and to serve] is sufficient....") (citing Drummond Realty); Y.W. By & Through Smith v. Nat'l Super Markets, Inc., 876 S.W.2d 785, 791 (Mo.App.1994) ("contract which has several items of consideration, one sufficient and one insufficient, may be upheld on the strength of the valid consideration") (citing Calamari & Perillo, Contracts (2d ed.1977), § 4.23, Corbin, Corbin on Contracts (1952), § 126); Empire Gas Corp. v. Small's LP Gas Co., 637 S.W.2d 239, 246 (Mo.App.1982) ("even if there be partial failure of consideration, yet if there is a substantial consideration left it will be sufficient to sustain the contract") (citing 17 C.J.S. Contracts, §§ 129-30, pp. 848-852).
As noted, however, this principle applies only to contemporaneous promises. When a party makes a new promise after a contract is formed, benefits or detriments bargained for as part of the original contract cannot serve as consideration for the subsequent promise. Corbin on Contracts (1995), § 7.1, p. 342. For example, this Court held that there was no consideration to support an employee's promise not to compete with the employer after his employment because the promise was given after-but during the term of — the beginning of the employment contract. Nat'l Motor Club of Mo., Inc. v. Noe, 475 S.W.2d 16, 21 (Mo.1972) (no consideration because employee "did not get a new position when he signed [the covenant not to compete], or anything new").
This distinction between multiple promises that are part of an initial contract and subsequent promises was the focus of Purcell Tire & Rubber Co. v. Executive Beechcraft, Inc., 59 S.W.3d 505 (Mo. banc 2001). There, Purcell Tire hired Beechcraft to inspect a plane Purcell Tire was considering buying. Their contract included a cap on Beechcraft's liability to Purcell Tire in the event Beechcraft either failed to inspect the plane or failed to inspect it competently. In response to Purcell Tire's claim that this liability cap or waiver was invalid for lack of separate consideration, this Court noted the general rule that, when such a promise is made after the parties' initial contract is formed, new consideration is required to make that promise binding. Id. at 509. But Beechcraft's liability cap was part of the parties' original
Accordingly, a promise to arbitrate need not be supported by separate consideration if it is made at the same time as other promises and those promises, viewed collectively, were supported by consideration. When several promises are given as part of a bargained-for exchange that results in any benefit to the promisor or any detriment to the promisee (or both), a contract is formed with respect to all of the promises made.
III. There was Consideration for the Parties' Exchange of Promises
Prior to her promotion as facility administrator, Ms. Baker worked as an hourly (i.e., "non-exempt") employee pursuant to a simple unilateral contract. Bristol Care promised to pay a specified wage if Ms. Baker worked — not promised to work — in Bristol Care's facilities. That contract was terminable at any time by either party. The agreement with respect to Ms. Baker's promotion to facility administrator, however, was quite different. As Ms. Baker concedes, she was "required to sign the employment document and the arbitration document as a condition of her employment" as facility administrator. The following is a list of some, though not all, of the promises each party made to the other at the outset of their new arrangement.
Bristol Care promised:
Ms. Baker promised:
Applying the principles set forth above, the exchange of promises in this bilateral contract supplies consideration to make all of the parties' promises binding. Ms. Baker concedes that she signed the two agreements — and thus made each of the promises memorialized in those agreements — in order to receive the collection of promises Bristol Care was making to her (e.g., the promotion and related benefits). By the same token, Bristol Care made its collection of promises in exchange for the collection of promises Ms. Baker made. The amount of consideration is immaterial because any bargained-for exchange of benefits or detriments, no matter how small, supplies the consideration needed to make these promises binding.
A. No Separate Consideration Needed for Ms. Baker's Arbitration Promise
Ms. Baker contends that her promise to arbitrate specified claims against Bristol is not enforceable because that promise was not supported by separate consideration. As explained in Section B, below, this argument is contrary to this Court's decision in Purcell Tire, 59 S.W.3d at 509, because it ignores the fact that Ms. Baker's arbitration promise was just one of the many promises that Bristol Care bargained for — and she gave — in order to receive the promotion to facility administrator and accompanying benefits. But, even though Ms. Baker's claim is based on a faulty premise, it is worth noting that her claim still cannot succeed.
1. Bristol Care Agreed to Arbitrate Ms. Baker's Claims
Even if the Court were to treat Ms. Baker's promise to arbitrate as though it was made after — and not as part of — the parties' broader exchange of promises regarding her promotion to facility administrator (which she concedes it was), that promise was supported by consideration. In exchange for her promise to arbitrate any specified claims that she may have against Bristol Care, Ms. Baker received Bristol Care's promise to arbitrate her claims as well.
As a result of this bargained-for exchange, therefore: (1) Ms. Baker received the benefit of access to a process that is (or that she reasonably could have expected it could be) quicker and less expensive than resorting to the administrative review and civil litigation procedures to which she otherwise was limited, and (2) Bristol Care incurred the detriment of agreeing prospectively to waive its right to a jury trial on whatever specified claims Ms. Baker may assert against it and, instead, submit to her arbitration process and abide by its results. Even viewed in isolation, therefore, this Court's precedents and the basic principles of consideration require this Court to hold that Ms. Baker's arbitration promise is supported by consideration.
To hold otherwise is to say that mutual promises are not valid consideration, a conclusion that is contrary to every case
2. Bristol Care Also Agreed to Arbitrate Its Specified Claims
Such a narrow focus cannot be justified, however. Even ignoring all of the parties' promises regarding Ms. Baker's promotion, there was a substantial exchange of promises between the parties in the "Mandatory Arbitration Agreement." Bristol Care not only promised to arbitrate any specified claims that Ms. Baker may assert against it, but Bristol Care also promised to arbitrate any specified claims it may wish to assert against her. This Court already has held that arbitration promises need not be mutual in this way to make an exchange of promises to arbitrate only one party's claims enforceable, see Schneider, 194 S.W.3d at 859, but the willingness of Bristol Care and Ms. Baker to exchange mutual arbitration promises surely supplies the consideration needed to make those promises binding.
And those are not the only promises Ms. Baker and Bristol Care exchanged in the "Mandatory Arbitration Agreement." Both agreed to keep the existence, subject matter, and results of any future arbitration between them confidential. Because neither party was required to pledge such confidentiality, the benefit and detriment to each party of the mutual promises to do so supplies the consideration needed to make those promises binding. And, if there is consideration for any one promise, that consideration extends to all of the contemporaneous promises by that party.
Similarly, both parties agreed to abide by the American Arbitration Association's Rules for the Resolution of Employment Disputes (renamed by the AAA as the "Employment Arbitration Rules and Mediation Procedures") in effect at the time a claim is filed. Because neither party was obligated to agree to these rules, the benefit and detriment to each party of their mutual promises to do so supplies the consideration needed to make those promises — and all other contemporaneous promises in the arbitration agreement — binding.
Finally, Bristol Care agreed to pay all of the costs of the arbitration, including the arbitrator's fees and expenses. As a result, Ms. Baker would be obligated to pay only the initial filing fee for any arbitration she may initiate (plus the fees and expenses of any attorneys and/or witnesses she may choose to employ). As noted above, Bristol Care had no preexisting obligation to assume this uneven share of the
3. Bristol Care's Arbitration Promises are Not Illusory
Ms. Baker argues that none of Bristol Care's promises in the "Mandatory Arbitration Agreement," nor the combined effect of all of those promises, supplies consideration for the promises she made in that agreement. Because Ms. Baker agreed to give Bristol Care the right to "amend, modify or revoke this agreement upon thirty (30) days' prior written notice to the Employee," she now insists that right renders all of Bristol Care's promises illusory.
Bristol Care counters that, because it is bound to give written notice 30 days before any change, it agreed to be bound by the "Mandatory Arbitration Agreement" for at least 30 days. In addition, Bristol Care emphasizes that both parties agreed to be bound by the AAA rules in effect at the time a claim was filed and, therefore, Bristol Care had no right to alter the agreement as to any claim pending at the time of — or filed within 30 days after — any notice from Bristol Care that it was intending to change the agreement.
There is no question that the construction of this provision that Bristol Care offers is the one this Court would adopt if Bristol Care were trying to realize a retrospective advantage from some unilateral alteration to the agreement. Nor is there any question that the construction volunteered by Bristol Care now is the one that any court would adopt in the future should Bristol Care try to alter its obligations to Ms. Baker under this agreement with respect to the claims she has already asserted. Accordingly, there is no justification for refusing to adopt this construction here, especially when the consequences of that refusal is that
Even if the Court is unwilling to read the "Mandatory Arbitration Agreement" as both parties plainly intended it to be read from the outset, however, this does not mean that Bristol Care's promises are illusory and Ms. Baker's arbitration promise is not binding. Instead, in section 25 of the parties' arbitration agreement, Ms. Baker and Bristol Care expressly agreed that this Court can — and should — "
B. The Parties' Broad Exchange of Promises Supplies Consideration
Finally, as noted above, Ms. Baker's efforts to focus the Court's consideration analysis solely on her arbitration promise
If Ms. Baker's arbitration promise had been made after — and not as part of — the parties' exchange of promises, it nevertheless would be enforceable because it was given in exchange for one or more of Bristol Care's arbitration and arbitration-related promises under the analysis in the preceding section. Otherwise, her promise would not be enforceable under this Court's decision in Noe, 475 S.W.2d at 21. But, as explained in Purcell Tire, such an analysis is not necessary when the promise is given as part of an original exchange of promises between the parties. Purcell Tire, 59 S.W.3d at 509. The Court is bound by Noe and Purcell Tire and cannot reach a different conclusion merely because the promise at issue involves arbitration rather than a liability cap or a covenant not to compete. Perry, 482 U.S. at 492 n. 9, 107 S.Ct. 2520 (the FAA preempts any "state-law principle that takes its meaning precisely from the fact that a contract to arbitrate is at issue").
Morrow is Irrelevant
In an effort to avoid the obvious and unavoidable conclusions of a consideration analysis focusing on the multifaceted exchange of promises between her and Bristol Care regarding her promotion to facility administrator, Ms. Baker relies heavily on Morrow v. Hallmark Cards, Inc., 273 S.W.3d 15 (Mo.App.2008). But Morrow is the antithesis of this case and provides no authority for her position.
In Morrow, the plaintiff had been working for Hallmark for nearly 20 years when the company unilaterally imposed a dispute resolution program (including arbitration) covering all employees and all claims against the company. Hallmark notified its employees that anyone who continued to work for the company after the effective date of the new program would be deemed to have agreed to be bound by it. Ms. Morrow did so and, when she later filed a lawsuit against Hallmark arising out of her termination, the trial court compelled her to arbitrate that claim. Following arbitration, Ms. Morrow sought to vacate what she claimed was an inadequate award on the ground that there was no consideration for her promise to arbitrate. The court of appeals agreed. Id. at 27. Regardless of whether the analysis in Morrow was proper, it sheds no useful light on the issues in this case.
First, in Morrow, the question was whether plaintiff's continued employment — and nothing more — could supply the both the assent and the consideration needed to make an implied arbitration promise binding. Ms. Morrow's arbitration promise was not given in exchange for a promotion, new duties, or a pay raise as part of the type of bargained-for exchange in which Ms. Baker made her arbitration promise. In fact, Morrow stresses that the only reason a consideration analysis was needed was that there were no contemporaneous promises by the employer in exchange for the employee's arbitration promise. Id. at 24-25 ("When a contract is not bilateral (when promises do not
Second, even in the absence of any bargained-for exchange of employment-related promises from Hallmark, Morrow acknowledges there would have been consideration for the employee's arbitration promise if Hallmark had made an arbitration promise in return. Hallmark did not promise to arbitrate its claims against employees, but Bristol Care
Because Hallmark made no arbitration-related promises to Ms. Morrow that were not illusory, and because it had made no other promises to Ms. Morrow contemporaneous with and in exchange for her arbitration promise, Morrow turned on a single question: whether the mere continuation of employment — with no new benefit to the employee or detriment to the employer — supplied consideration to make the employee's arbitration promise binding. Id. at 27. Not only is that question not dispositive in the present case (as it was in Morrow), it is not even relevant.
Mr. Baker's arbitration promise was one of many express promises she gave in order to receive the promotion Bristol Care offered. It bears no resemblance to Ms. Morrow's arbitration promise, which she never made expressly and which could be implied only because she continued to work the same job for the same pay that she had worked before Hallmark demanded the unilateral arbitration promise from her. Here, Bristol Care made a collection of promises to Ms. Baker (e.g., a promotion, a pay raise, living quarters, and its agreement to arbitrate all specified claims against her or by her) in order to obtain the collection of promises she made to it (e.g., to serve as a facility administrator, not to quit without 60 days' notice, not to compete, and to arbitrate all specified claims against it or by it). In Morrow, Hallmark did not promise anything to the employee except to pay her the same amount for the same work she had done before.
2. Bristol Care's Employment Promises are Not Illusory
Ms. Baker tries to make Morrow relevant by arguing that she, too, was an "at will" employee even after her promotion to facility administrator. In other words, because she contends (now, at least) that Bristol Care could have terminated her employment at any time and for any reason, she maintains that all of Bristol Care's promotion-related promises were illusory and, therefore, cannot supply the consideration needed to make her arbitration promise binding. This is a severe distortion of Morrow and an assertion supported by no other case or principle of contract law. See Corbin on Contracts, § 6.13, pp. 309-10 (when "one party shall have the power to terminate by notice given for some stated period ... the contract should never be held to be rendered invalid thereby for lack of `mutuality' or for lack of consideration"); and § 6.14, pp. 313-14 ("same is true of a promise in which the promisor reserves the power to terminate for good cause").
Morrow does not hold that the arbitration-related promises Hallmark made to the employee in exchange for her arbitration promise were illusory because the
Moreover, Morrow recognizes that, for employment not to be "at will," the employment contract must contain a specific duration for the employment or "the contract must be one that
3. Missouri Law Recognizes Continued Employment as Consideration
Even if Ms. Baker were an "at will" employee under the definition in Morrow despite the limitations on its common law rights to terminate her to which Bristol Care agreed (and plainly she was not), this Court has never held that such an arrangement fails to supply the consideration needed to make an employee's promises given in exchange for such employment binding, at least to the extent of the employment actually provided. Moreover, lower courts have rejected that argument repeatedly. See JumboSack Corp. v. Buyck, 407 S.W.3d 51, 55-56 (Mo. App.2013) ("Missouri courts have recognized that continued at-will employment constitutes consideration for a non-compete agreement where the employer allows the employee `by virtue of the employment[,] to have continued access to [its] protectable assets and relationships.'") (emphasis in original).
In Computer Sales Int'l, Inc. v. Collins, 723 S.W.2d 450 (Mo.App.1986), the court applied this principle, holding:
Id. at 451-52. In Reed, Roberts Associates, Inc. v. Bailenson, 537 S.W.2d 238 (Mo.App.1976), the court explained further:
Id. at 241.
"This view is consistent with Missouri law, and with prevailing authority generally."
Missouri courts cannot apply one rule to an employee's non-compete promises but apply a different rule if the case involves an employee's arbitration promise. "A court may not, then, in assessing the rights of litigants to enforce an arbitration agreement, construe that agreement in a manner different from that in which it otherwise construes nonarbitration agreements under state law." Perry, 482 U.S. at 492 n. 9, 107 S.Ct. 2520.
Doctor's Associates, Inc. v. Casarotto, 517 U.S. 681, 686, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996) (quoting Allied-Bruce, 513 U.S. at 281, 115 S.Ct. 834).
As explained above, the Court need not concern itself with Morrow in this case because it decided different legal issues on highly dissimilar facts. But, to the extent Ms. Baker succeeds in bringing that case into the Court's analysis, the Court cannot adopt its conclusions. It is not that the Court should not do so, though that is true as well. It is that the Court cannot do so. Decades of decisions rejecting Morrow's holding outside the context of arbitration promises show that any effort by this Court to follow Morrow in the present case involving an arbitration promise is, in reality, merely the application of a special rule regarding consideration in employment contracts involving arbitration promises. The FAA, as construed in Casarotto, Perry, and Allied-Bruce, precludes the application of such a rule.
For the reasons set forth above, I would hold that Ms. Baker's arbitration promise was supported by consideration and, therefore, should be enforced pursuant to Bristol Care's motion and the FAA. Because the majority opinion allows Ms. Baker to litigate her claim in state court despite her having promised not to do so, I respectfully dissent.