Anne Scheurer v. Fromm Family Foods, LLC
Filed opinion of the court by Judge Hamilton. AFFIRMED. Michael S. Kanne, Circuit Judge; Diane S. Sykes, Circuit Judge and David F. Hamilton, Circuit Judge. [6854632-1]  [16-3327]
United States Court of Appeals
For the Seventh Circuit
ANNE E. SCHEURER,
FROMM FAMILY FOODS LLC,
Appeal from the United States District Court for the
Western District of Wisconsin.
No. 15‐cv‐770‐jdp — James D. Peterson, Chief Judge.
ARGUED MAY 31, 2017 — DECIDED JULY 17, 2017
Before KANNE, SYKES, and HAMILTON, Circuit Judges.
HAMILTON, Circuit Judge. Plaintiff Anne Scheurer filed this
sexual harassment and retaliation suit under Title VII of the
Civil Rights Act of 1964 against defendant Fromm Family
Foods. During discovery, Fromm learned that Scheurer’s con‐
tract with the staffing agency that employed her and directed
her to Fromm included an arbitration clause. Fromm moved
to compel arbitration. The district court denied the motion.
Such a denial is immediately appealable under the Federal
Arbitration Act, 9 U.S.C. § 16(a)(1)(B), and Fromm has ap‐
pealed. We affirm.
The question is whether employer Fromm, which did not
have a written arbitration agreement with Scheurer, can en‐
force against her the arbitration clause in her agreement with
the staffing agency. This question is governed by state law, in
this case, Wisconsin law. See Arthur Andersen LLP v. Carlisle,
556 U.S. 624, 630–31 (2009). We agree with the district court
that Fromm has not shown a legal basis for compelling
Scheurer to arbitrate her Title VII claim against Fromm. We
first review the factual and procedural background leading to
this appeal. We then examine Fromm’s only theory for com‐
pelling arbitration that it has not waived.
I. Factual and Procedural Background
In August 2013, in Beaver Dam, Wisconsin, plaintiff Anne
Scheurer applied to work at Richelieu Foods, which out‐
sourced its staffing needs to Remedy Intelligent Staffing, a
temporary staffing agency. The application form she signed
with Remedy for placement with Richelieu contained an arbi‐
tration agreement.1 She was assigned to work for a time for
Richelieu, but that assignment ended after some months.
1 The key sentence said, with grammar mistake included: “In the event
there is any dispute between Employer and I relating to or arising out of
relating to my employment or the termination of my employment, which
Employer and I are unable to resolve informally through direct discussion,
regardless of the kind or type of dispute, Employer and I agree to submit
all such claims or disputes to be resolved by final and binding arbitration
in accordance with the National Rules for the Resolution of Employment
Disputes of the American Arbitration Association within the state of em‐
ployment.” Supp. App. 35. The arbitration clause identified Title VII
claims in the list of types of claims that would be covered.
About a year after she first applied, Remedy placed
Scheurer with Fromm Family Foods. Scheurer alleges that
while working at Fromm, her supervisor sexually harassed
her. The present appeal does not require us to consider the
merits of her claims; we assume for present purposes that her
allegations are true. Briefly, she alleges that her supervisor
took advantage of his access to her personnel file to obtain her
personal telephone number and repeatedly harassed her in
unwelcome ways, including sexually explicit comments to
her in front of other employees. Scheurer alleges that she com‐
plained to Fromm management and that the supervisor had a
history of sexual harassment and discrimination against
women in the workplace. She also alleges that Fromm took no
serious action to address the sexual harassment and instead
Richard Best, the chief operating officer of Fromm, submit‐
ted an affidavit that actually tends to support Scheurer’s
claim. He testified that Fromm immediately investigated the
harassment complaint and took unspecified action against the
supervisor. So far, so good for Fromm. But Best also said that
Fromm tried to arrange a work situation that would have sep‐
arated Scheurer from the supervisor, but that when that
proved “impossible,” Fromm asked Remedy to assign
Scheurer to another client. That action seems to amount to
Fromm terminating Scheurer’s employment with it, assuming
she can show joint employment. From the sequence of com‐
plaint, unspecified discipline of the supervisor, an unsuccess‐
ful effort to separate the two people, followed by termination
of the complaining subordinate, the inference of retaliatory
intent would not seem unreasonable.
Scheurer filed this lawsuit against Fromm—but not Rem‐
edy—under Title VII for sexual harassment and retaliation. 42
U.S.C. §§ 2000e‐2(a)(1) & 2000e‐3(a). Scheurer’s mandatory
disclosures in the federal discovery process included her ap‐
plication to Remedy, which included the arbitration agree‐
ment. Fromm argued that arbitration should be compelled
under the contract law principle of equitable estoppel and be‐
cause Fromm was a third‐party beneficiary of the agreement.
The district court denied Fromm’s motion. Scheurer v.
Fromm Family Foods, LLC, 202 F. Supp. 3d 1040, 1046 (W.D.
Wis. 2016). The court correctly relied on state law and first de‐
termined that equitable estoppel did not apply because there
was no basis for finding that Fromm relied on Scheurer’s ar‐
bitration agreement since Fromm did not even know about it.
Id. at 1043–44. The court also found that Fromm was not a
third‐party beneficiary of Remedy’s agreement with Scheurer.
Id. at 1045–46.
The question on appeal is whether Fromm can enforce the
arbitration agreement between Remedy and Scheurer to com‐
pel arbitration of her claims against Fromm. That question is
at bottom a question of contract law.
The standard of review for a district court’s ruling on a
motion to compel arbitration turns on the procedural posture
of that ruling. We have said on occasion that we review de novo
a district court’s ruling on a motion to compel arbitration, but
that we review any findings of fact for clear error. E.g., Druco
Restaurants, Inc. v. Steak N Shake Enterprises, Inc., 765 F.3d 776,
779–80 (7th Cir. 2014), citing Lumbermens Mutual Casualty Co.
v. Broadspire Management Services., Inc., 623 F.3d 476, 480 (7th
Cir. 2010); James v. McDonald’s Corp., 417 F.3d 672, 676 (7th Cir.
2005); Zurich American Ins. Co. v. Watts Industries, Inc., 417 F.3d
682, 687 (7th Cir. 2005). Arbitrability of a dispute is often a
question of law that does not depend on undisputed facts, but
in other cases it can present a mixed question of law and fact.
See 21 Williston on Contracts § 57:68 (4th ed. 2017).
The Federal Arbitration Act actually provides for jury tri‐
als on the question of arbitrability if there is a factual dispute
as to whether “an agreement for arbitration was made.” 9
U.S.C. § 4. A court reviewing such a jury finding must uphold
the finding if it is supported by a reasonable basis in the rec‐
ord. See, e.g., Gorlikowski v. Tolbert, 52 F.3d 1439, 1446 (7th Cir.
1995), citing Carmel v. Clapp & Eisenberg, P.C., 960 F.2d 698, 703
(7th Cir. 1992). Similarly, if the judge held an evidentiary hear‐
ing, findings of fact would be reviewed for clear error. See,
e.g., Fyrnetics (Hong Kong) Ltd. v. Quantum Group, Inc., 293 F.3d
1023, 1026, 1028 (7th Cir. 2002). Where there are were no fac‐
tual disputes, however, as is the case here, then review should
be de novo. See, e.g., Lewis v. Epic Systems Corp., 823 F.3d 1147,
1151 (7th Cir. 2016), cert. granted, — U.S. —, 137 S. Ct. 809
(2017), citing Gore v. Alltel Communications, LLC, 666 F.3d 1027,
1033 (7th Cir. 2012). Accordingly, because there are no dis‐
puted factual issues material to the motion to compel arbitra‐
tion, we review de novo the district court’s denial of that mo‐
2 In some situations, arbitrability may depend on equitable doctrines such
as waiver and estoppel, which may require a court to resolve issues such
as prejudice and reliance. See, e.g., Ernst & Young LLP v. Baker O’Neal Hold‐
ings, Inc., 304 F.3d 753, 756–57 (7th Cir. 2002) (affirming finding that party
had waived its contractual right to arbitrate); Cabinetree of Wisconsin, Inc.
v. Kraftmaid Cabinetry, Inc., 50 F.3d 388, 390–91 (7th Cir. 1995) (same); St.
The Federal Arbitration Act requires federal and state
courts to place written arbitration agreements on the same
footing as other contracts. 9 U.S.C. § 2; Kindred Nursing Cen‐
ters, Ltd. v. Clark, 581 U.S. —, —, 137 S. Ct. 1421, 1424 (2017)
(citations omitted); Arthur Andersen, 556 U.S. at 629–30 (cita‐
tions omitted). Under the FAA, arbitration should be com‐
pelled if three elements are present: (1) an enforceable written
agreement to arbitrate, (2) a dispute within the scope of the
arbitration agreement, and (3) a refusal to arbitrate. Zurich,
417 F.3d at 687; 9 U.S.C. § 4. Generally, federal policy favors
arbitration, and once an enforceable arbitration contract is
shown to exist, questions as to the scope of arbitrable issues
should be resolved in favor of arbitration. Moses H. Cone Me‐
morial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24–25
At bottom, however, arbitration is contractual. A party
“cannot be required to submit to arbitration any dispute
which he has not agreed so to submit.” United Steelworkers of
America v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582
(1960); Zurich, 417 F.3d at 687, quoting Thomson‐CSF, S.A. v.
American Arbitration Ass’n, 64 F.3d 773, 776 (2d Cir. 1995); see
also Arthur Andersen, 556 U.S. at 630–31 (state law governs
Mary’s Medical Center of Evansville, Inc. v. Disco Aluminum Products Co., 969
F.2d 585, 591 (7th Cir. 1992) (same). We typically review the application of
such doctrines for abuse of discretion, and nothing about arbitration
would seem to call for a different approach. Plaintiff has not argued for
such deferential review here, however. The role of equitable discretion in
deciding arbitrability and the standard of review may benefit from further
consideration in a case where it makes a difference. Cf. Kawasaki Heavy
Industries, Ltd. v. Bombardier Recreational Products, Inc., 660 F.3d 988, 994
(7th Cir. 2011) (reversing finding of waiver under de novo review).
whether a contract with an arbitration agreement is enforce‐
In Arthur Andersen, the Supreme Court directly addressed
which law governs who may enforce an arbitration agree‐
ment. The Court explained that “traditional principles of state
law” govern whether a contract, including an arbitration
agreement, is enforceable by or against a non‐party. Arthur
Andersen, 556 U.S. at 631 (quotations and citation omitted).
The Court stated its holding in terms directly applicable here:
“a litigant who was not a party to the relevant arbitration
agreement may invoke § 3 if the relevant state contract law
allows him to enforce the agreement.” Id. at 632.3
Arthur Andersen identified assumption, piercing the cor‐
porate veil, alter ego, incorporation by reference, third‐party
beneficiary, waiver, and estoppel among those state law prin‐
ciples that could govern who may enforce the agreement. Id.
at 631. We have also included assumption and agency in the
list of state law doctrines governing when a non‐signatory
may be bound to arbitration. Zurich, 417 F.3d at 687.
3 The district court correctly cited Arthur Andersen and followed its hold‐
ing by applying Wisconsin state contract law to Fromm’s motion to com‐
pel arbitration. Scheurer, 202 F. Supp. 3d at 1043. In its opening appellate
brief, however, Fromm argued that federal law governed the issues, citing
almost exclusively pre‐Arthur Andersen decisions. Brief of Appellant at 8
n.4. (The lone post‐Arthur Andersen opinion, Paragon Micro, Inc. v. Bundy,
22 F.Supp.3d 880 (N.D. Ill 2014), took a more nuanced approach than
Fromm indicates and did not cite Arthur Andersen, in any event.) Fromm
did not bother to cite Arthur Andersen or the district court’s reliance upon
it. Effective appellate advocacy requires an appellant to confront directly,
not to ignore, controlling Supreme Court precedent and the reasoning of
the decision under review.
In the district court, Fromm argued that Scheurer should
be compelled to arbitrate against Fromm based on contract
principles of equitable estoppel and as a third‐party benefi‐
ciary of Scheurer’s contract with Remedy. On appeal, Fromm
continues to argue that equitable estoppel should compel ar‐
bitration. It has dropped its third‐party beneficiary argument.
It has also raised for the first time on appeal a new argument
on an agency theory. We affirm the district court’s denial of
the motion to compel arbitration. Equitable estoppel is not
available because there is no evidence that Fromm relied on
the arbitration agreement between Remedy and Scheurer. The
other two theories have been waived, one in the district court
and the other on appeal.
Pursuant to Arthur Andersen, we first address the doctrine
of equitable estoppel under Wisconsin contract law. Substan‐
tive federal arbitration law does not “alter background prin‐
ciples of state contract law regarding the scope of agreements
(including the question of who is bound by them).” Arthur
Andersen, 556 U.S. at 630.
Under Wisconsin law, equitable estoppel requires: “(1) ac‐
tion or non‐action; (2) on the part of one against whom estop‐
pel is asserted; (3) which induces reasonable reliance thereon
by the other, either in action or non‐action; (4) which is to the
relying party’s detriment.” Pagan v. Integrity Solution Services,
Inc., 42 F. Supp. 3d 932, 934 (E.D. Wis. 2014), citing Affordable
Erecting, Inc. v. Neosho Trompler, Inc., 715 N.W.2d 620, 628 (Wis.
2006). Wisconsin courts and federal district courts applying
Wisconsin law have rejected equitable estoppel claims when
the party seeking to apply estoppel could not show specific
facts supporting reasonable and detrimental reliance. See,
e.g., Parsons v. Associated Banc‐Corp., 893 N.W.2d 212, 224 (Wis.
2017) (no reasonable reliance on defendant’s initial acquies‐
cence to plaintiff’s unfounded jury trial demand); United Cen‐
tral Bank v. Maple Court LLC, No. 10‐CV‐00464, 2014 WL
2441046, at *7–8 (E.D. Wis. Aug. 19, 2014) (slight burdens aris‐
ing from normal contract negotiations do not establish detri‐
mental reliance); Watertown Tire Recyclers, LLC v. Nortman, 795
N.W.2d 493, 2011 WL 166100, at *10 (Wis. App. 2011) (table
decision) (holding party’s claim of equitable estoppel failed
because it was unable to “set forth specific facts” showing det‐
rimental reliance); cf. Affordable Erecting, 715 N.W.2d at 629–
30 (plaintiff was equitably estopped from pursuing claims;
plaintiff induced defendant’s reasonable reliance on apparent
settlement of claims by not objecting to insurer’s issuance of
Fromm cannot establish reliance here. As the district court
found, there is no evidence “that Fromm relied on (or even
knew of) the fact that Scheurer had signed an agreement with
an arbitration provision when it accepted her assignment
from Remedy.” Scheurer, 202 F. Supp. 3d at 1044. Fromm could
not have relied upon an agreement it did not know about. At
bottom, this case is that simple.
To avoid the district court’s reasoning, Fromm relies pri‐
marily on our decision in Hughes Masonry Co. v. Greater Clark
County School Bldg. Corp., 659 F.2d 836 (7th Cir. 1981), and sec‐
ondarily on Ragone v. Atlantic Video at Manhattan Center, 595
F.3d 115 (2d Cir. 2010). These authorities do not establish a
basis for compelling arbitration here.
In Hughes Masonry, decided long before Arthur Andersen,
we found that the plaintiff had signed a construction contract
that required arbitration. Plaintiff sued a defendant who was
not a party to the contract itself but whose obligations were
spelled out in the contract. The claim was a tort claim, but
proof would require the plaintiff to rely on the terms of the
contract. We reasoned that the plaintiff could not assert a
claim that relied upon the contract while avoiding the same
contract’s arbitration clause. The plaintiff seeking to avoid ar‐
bitration “cannot rely on the contract when it works to its ad‐
vantage, and repudiate it when it works to … its … disad‐
vantage.” 659 F.2d at 838–39, quoting Tepper Realty Co. v. Mo‐
saic Tile Co., 259 F.Supp. 688, 692 (S.D.N.Y. 1966). To the extent
the Hughes Masonry reasoning survives Arthur Andersen, it
does not apply here. Scheuer’s claims arise under federal em‐
ployment discrimination statutes and do not depend on her
contract with Remedy.
Fromm finds somewhat stronger support from Ragone but
the facts differ from this case in a critical way. In Ragone, an
employee hired through a separate company sued for sex dis‐
crimination. She sued both the company with which she
signed a contract, AVI, and also ESPN, the company for
whom she worked directly. 595 F.3d at 119, 126. Her contract
with AVI contained an arbitration clause, and ESPN sought to
compel Ragone to arbitrate her claim against them as well,
even though ESPN had not signed her employment contract.
Id. at 119, 128. The Second Circuit affirmed a decision compel‐
ling Ragone to arbitrate her claims against both the staffing
agency and ESPN. The court applied equitable estoppel be‐
cause “a careful review of the relationship among the parties,
the contracts they signed … , and the issues that had arisen
among them discloses that the issues the nonsignatory is seek‐
ing to resolve in arbitration are intertwined with the agree‐
ment that the estopped party has signed.” Id. at 126–27 (quo‐
Fromm urges us to adopt this theory and then to extend it
to cases in which the employee asserts no claim against the
company with which she has an arbitration agreement. We
are not persuaded to adopt this extended version of the
Ragone approach. It was clear in Ragone—it was the major
thrust of the appeal—that Ragone would be required to arbi‐
trate her claim against the staffing agency. Once a court knows
a dispute is going to be arbitrated, the reasons for requiring
claims against affiliated parties to be arbitrated become more
powerful. Cf. Webb v. Frawley, 858 F.3d 459, 462 (7th Cir. 2017)
(affirming order compelling arbitration of one plaintiff’s
claims but reversing order compelling arbitration of second
plaintiff’s claims where second plaintiff had not signed appli‐
cable arbitration agreement and was entitled to litigate claims
In addition, we must remember that Arthur Andersen di‐
rects us to apply the state law of estoppel, and we see no basis
in Wisconsin law for applying estoppel under these circum‐
stances, where Fromm did not even know of the arbitration
agreement and the staffing agency is not a party to the dis‐
pute, which is not a contract dispute at all. See Crawford Prof’l
Drugs, Inc. v. CVS Caremark Corp., 748 F.3d 249, 255, 261–62,
262 n.9 (5th Cir. 2014) (collecting cases; observing that its own
“prior decisions applying federal common law, rather than
state contract law, to decide such questions … have been mod‐
ified to conform with Arthur Andersen.”).
For the first time on appeal, Fromm argues that the doc‐
trine of agency should compel arbitration. “The well‐estab‐
lished rule in this Circuit is that a plaintiff waives the right to
argue an issue on appeal if she fails to raise the issue before a
lower court.” Robyns v. Reliance Standard Life Ins. Co., 130 F.3d
1231, 1238 (7th Cir. 1997), citing Milwaukee Area Joint Appren‐
ticeship Training Comm. v. Howell, 67 F.3d 1333, 1337 (7th Cir.
1995); Economy Folding Box Corp. v. Anchor Frozen Foods Corp.,
515 F.3d 718, 720 (7th Cir. 2008), quoting Christmas v. Sanders,
759 F.2d 1284, 1291 (7th Cir. 1985). At oral argument, Fromm
was unable to direct the court to its agency argument in the
district court, referring only to the district court opinion’s dis‐
cussion of joint employment. See Scheurer, 202 F.Supp.3d at
1045 n.3. (While there is no mention of agency in Fromm’s mo‐
tion to compel arbitration, there is a short discussion arguing
that arbitration should be compelled because Fromm is a joint
employer.) In addition, Fromm made no attempt to show the
basis for an agency theory under Wisconsin law, which would
govern this issue.4 The agency theory has been waived.
The decision of the district court denying Fromm’s motion
to compel arbitration is AFFIRMED.
4 Wisconsin law of agency requires “an agreement of two parties, embod‐
ying three factual elements: (1) the manifestation of the principal that the
agent is to act for him; (2) the agent’s acceptance of the undertaking; and
(3) the understanding of the parties that the principal is to control the un‐
dertaking.” Norton v. American Home Mortgage Servicing, Inc., No. 11‐C‐842,
2011 WL 5828122, at *2 (E.D. Wis. Nov. 18, 2011), citing Wis. JI‐Civil 4000;
Arsand v. City of Franklin, 264 N.W.2d 579, 581 (Wis. 1978).
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