226 F. Supp. 3d 937
D.S.D.2016Background
- Schwalm applied for a TCF position via an online job site in November 2013 and began employment with TCF on February 3, 2014. TCF’s online application included a Dispute Resolution Policy (DRP) statement binding applicants by eSignature.
- TCF produced an application record showing an electronic signature attributed to Schwalm (signed Nov. 26, 2013) from an IP address in Brookings, SD, and answered prescreening questions. TCF also produced a February 6, 2014 Employee Acknowledgement Receipt initialed by Schwalm acknowledging receipt of the DRP.
- During employment Schwalm made multiple discrimination/harassment complaints, later took medical leave, and was terminated on June 1, 2015. She sued for age discrimination and retaliation.
- TCF moved to compel arbitration under its DRP; Schwalm argued she never agreed to arbitrate (Indeed/agent submission, no notice or understanding, no opt-out), and that the DRP is unconscionable and lacks mutuality.
- The court evaluated whether a valid arbitration agreement existed under South Dakota contract law and FAA standards, and whether Schwalm’s claims fell within the DRP’s scope.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a valid arbitration agreement was formed (electronic application) | Schwalm: Indeed (or CareerBuilder) submitted the application on her behalf without her signing; she never submitted it. | TCF: Schwalm reviewed/approved Indeed-populated applications and her eSignature on Nov. 26 binds her. TCF presented IP, answered prescreen questions, and application language binding applicants. | Court: eSignature attributable to Schwalm based on context, IP, her own description of Indeed workflow; valid formation. |
| Whether Schwalm had notice/consented and knew of 60-day opt-out | Schwalm: She never received or understood the DRP; did not knowingly consent and thus didn’t opt out. | TCF: Schwalm initialed the Employee Acknowledgement Receipt acknowledging receipt of Policy Highlights and the DRP; presumption she read/understood. | Court: Acknowledgement form and handbook locate DRP; Schwalm had notice and voluntarily consented. |
| Whether the DRP is unconscionable or lacks mutuality | Schwalm: DRP is an adhesion contract, substantively one-sided and lacks mutuality. | TCF: Employees could opt out within 60 days; DRP requires both parties to arbitrate covered claims; no limits on remedies. | Court: Not procedurally unconscionable (opt-out available), not substantively unconscionable, and DRP contains mutual-arbitration language. |
| Whether Schwalm’s age discrimination and retaliation claims are covered by the DRP | Schwalm: TCF applied DRP arbitrarily and failed to follow its own protocols, so claims should not be arbitrable. | TCF: DRP explicitly covers employment discrimination and retaliation; claims fall squarely within covered claims. | Court: Scope construed liberally in favor of arbitration; claims fall within DRP. |
Key Cases Cited
- Neb. Mach. Co. v. Cargotec Solutions, LLC, 762 F.3d 737 (8th Cir. 2014) (standard for determining whether parties entered arbitration agreement)
- Shearson/Am. Exp., Inc. v. McMahon, 482 U.S. 220 (U.S. 1987) (FAA policy favoring arbitration)
- Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213 (U.S. 1985) (courts must enforce written arbitration agreements)
- Pro Tech Indus., Inc. v. URS Corp., 377 F.3d 868 (8th Cir. 2004) (two-step inquiry: existence and scope of arbitration agreement)
- Lyster v. Ryan’s Family Steak Houses, Inc., 239 F.3d 943 (8th Cir. 2001) (party who has not agreed to arbitrate cannot be forced)
- AT&T Tech., Inc. v. Communications Workers of America, 475 U.S. 643 (U.S. 1986) (limits on compelling arbitration when no agreement exists)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (U.S. 1995) (state contract principles govern formation of arbitration agreement)
- Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (U.S. 1991) (inequality of bargaining power alone does not make arbitration unenforceable)
- Rozeboom v. Northwestern Bell Tel. Co., 358 N.W.2d 241 (S.D. 1984) (definition and analysis of unconscionability under South Dakota law)