Scheurer v. Fromm Family Foods LLC
2017 U.S. App. LEXIS 12743
| 7th Cir. | 2017Background
- Scheurer was hired through Remedy (a staffing agency) and signed an application with an arbitration clause before being assigned to work at Fromm Family Foods.
- While working at Fromm Scheurer alleges sexual harassment by her supervisor and that she was later fired in retaliation; she sued Fromm (not Remedy) under Title VII.
- During discovery Fromm discovered the Remedy arbitration agreement and moved to compel Scheurer’s Title VII claims to arbitration.
- The district court denied Fromm’s motion, finding no basis under Wisconsin law to bind Fromm (no evidence Fromm knew of or relied on the arbitration agreement) and that Fromm was not a third-party beneficiary.
- On appeal Fromm pressed equitable estoppel as its remaining, non-waived theory; it abandoned the third‑party‑beneficiary theory and raised an agency theory for the first time on appeal.
- The Seventh Circuit affirmed: equitable estoppel fails for lack of knowledge/reliance; the other theories were waived.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a non‑signatory employer (Fromm) can enforce an arbitration clause in an employee’s contract with a staffing agency | Scheurer: non‑signatory cannot be forced to arbitrate her Title VII claims absent state‑law basis; Fromm had no knowledge/reliance | Fromm: may compel arbitration via equitable estoppel, (also argued third‑party beneficiary and agency) | Denied: No state‑law basis shown; equitable estoppel fails for lack of knowledge/reliance; other theories waived |
| Whether equitable estoppel under Wisconsin law binds a non‑signatory to arbitration | Scheurer: estoppel inapplicable because Fromm neither knew of nor relied on the arbitration agreement | Fromm: estoppel applies (invoking precedents where claims are intertwined with contract) | Denied: Wisconsin estoppel requires reasonable detrimental reliance; no evidence Fromm relied on the agreement |
| Whether agency/joint‑employer theories may be used to compel arbitration (raised on appeal) | Scheurer: waived and unsupported (no district court development) | Fromm: agency could make remedy agreement enforceable by Fromm | Not considered on merits: agency theory waived for failure to raise in district court and lack of evidence under Wisconsin law |
Key Cases Cited
- Arthur Andersen LLP v. Carlisle, 556 U.S. 624 (2009) (state contract law governs who may enforce arbitration agreements against non‑parties)
- Hughes Masonry Co. v. Greater Clark County School Bldg. Corp., 659 F.2d 836 (7th Cir. 1981) (party cannot rely on contract benefits while avoiding its arbitration clause)
- Ragone v. Atlantic Video at Manhattan Ctr., 595 F.3d 115 (2d Cir. 2010) (equitable estoppel compelled arbitration where claims were intertwined and employee would be required to arbitrate against staffing agency)
- Zurich Am. Ins. Co. v. Watts Indus., 417 F.3d 682 (7th Cir. 2005) (standards for compelling arbitration and review)
- Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983) (federal policy favors arbitration once a valid agreement is shown)