Fenlon v. Burch

Filing 33

MEMORANDUM AND ORDER IT IS HEREBY ORDERED that Defendant Paula Burchs Motion to Compel Arbitration or, in the Alternative, to Dismiss, (ECF No. 6), is DENIED to the extent it seeks to compel arbitration. IT IS FURTHER ORDERED that Burchs Motion is GR ANTED to the extent it seeks dismissal pursuant to Fed. R. Civ. P. 12(b)(6), and Fenlons Complaint, (ECF No. 4), is DISMISSED WITHOUT PREJUDICE. IT IS FURTHER ORDERED that Fenlon will have 10 days from the date of this Memorandum and Order to file an amended complaint. 6 ( Response to Court due by 5/28/2015.) Signed by District Judge Jean C. Hamilton on 5/18/15. (CLA)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
MARY FENLON,
Plaintiff,
v.
PAULA BURCH,
Defendant.

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Case No. 4:15-CV-00185(JCH)

MEMORANDUM AND ORDER
This matter is before the Court on Defendant Paula Burch’s Motion to Compel
Arbitration or, in the Alternative, to Dismiss. (ECF No. 6). The Motion has been fully briefed
and is ready for disposition.
Plaintiff Mary Fenlon initiated this action on December 26, 2014 by filing a petition in
the Circuit Court of St. Louis County, Missouri (the “Complaint”). (Removal Notice, ECF No. 1,
¶ 1). According to the Complaint, Fenlon was employed by Clearent, LLC (“Clearent”) at all
times relevant to this case. (Complaint, ECF No. 4, ¶ 1). Burch was employed by Clearent in a
supervisory capacity during the same time. Id. ¶¶ 2, 3. Sometime in 2014, Fenlon noticed that
Burch and several of the employees she supervised were “being paid full time but only working
part-time.” Id. ¶¶ 5, 12, 13. After discovering this information, Fenlon “reported the situation to
upper management.” Id. ¶ 11. “Upon learning of plaintiff’s disclosure, defendant Burch
developed a scheme, plan and design to interfere with plaintiff’s employment with Clearent by
attempting to get her fired.” Id. ¶ 15. Fenlon claims that Burch’s actions amounted to intentional
interference with the employment contract between Fenlon and Clearent. Id. ¶ 19. Fenlon seeks
damages, including lost wages, based on that claim. Id. ¶ 21.

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Fenlon and Burch were each party to separate arbitration agreements with Clearent.
(Fenlon Agreement, ECF No. 6-1, Exh. A; Burch Agreement, ECF No. 6-1, Exh. B). In their
arbitration agreements, the parties and Clearent agreed “to arbitrate before a neutral arbitrator
any and all disputes or claims arising from or relating to Employee’s recruitment to or
employment with Clearent, or the termination of that employment, including claims against any
current or former agent or employee of Clearent . . . .” (Fenlon Agreement at 1; Burch
Agreement at 1). The agreements made arbitration “the sole and exclusive method of resolving
any and all existing and future disputes” within that scope. Id.
In her Motion, Burch seeks either to compel arbitration of Fenlon’s claim against her or
to have the Complaint dismissed for failure to state a claim upon which relief can be granted.
DISCUSSION
I.

Motion to Compel Arbitration
Burch contends that Fenlon’s claim against her must be resolved in arbitration because

both parties “executed mutual arbitration agreements as a condition of their employment with
Clearent . . . .” (Support Memo, ECF No. 7, at 2). These arbitration agreements were valid, and
Fenlon’s claim falls within the scope of covered disputes. Id. at 3-6. Fenlon does not dispute that
her arbitration agreement with Clearent is valid and enforceable. She contends instead that Burch
cannot enforce the arbitration agreement against her because Burch “is not a party to the
agreement between [Fenlon] and Clearent. There is no agreement to arbitrate between” Fenlon
and Burch. (Fenlon Response, ECF No. 18, at 1). Moreover, Burch “does not stand in the shoes
of Clearent and has no rights under an agreement between [Fenlon] and Clearent.” Id. at 3.

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Fenlon is correct that no arbitration agreement exists between her and Burch. Each party
signed an arbitration agreement with Clearent, and neither signed one with the other. The issue
here therefore is whether Burch has some basis for enforcing Fenlon’s agreement with Clearent.
“The Supreme Court has ruled that state contract law governs the ability of nonsignatories to
enforce arbitration provisions.” Donaldson Co. v. Burroughs Diesel, Inc., 581 F.3d 726, 732 (8th
Cir. 2009) (citing Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 630-31 (2009)). The Arthur
Andersen court noted that general contract law normally allows non-parties to enforce contracts
under concepts such as “assumption, piercing the corporate veil, alter ego, incorporation by
reference, third-party beneficiary theories, waiver and estoppel.” Arthur Andersen, 556 U.S. at
631 (quoting 21 R. Lord, Williston on Contracts § 57:19, p. 183 (4th ed. 2001)). It is “these state
law principles [that] control whether a nonparty to an arbitration agreement can enforce the
agreement under sections 3 and 4” of the Federal Arbitration Act. Donaldson, 581 F.3d at 732.
Burch nowhere contends that the Missouri version of one of the theories listed in Arthur
Andersen provides a reason to allow her to enforce Fenlon’s arbitration agreement with Clearent.
Again, her only argument is that both signed independent agreements and that arbitration is
therefore appropriate. The fatal flaw in Burch’s argument is that no agreement between the
parties exists. Burch is therefore a nonsignatory of Fenlon’s arbitration agreement, and there
must be some reason why she, although a nonsignatory, can enforce the contract. Since the Court
is presented with none, there is no basis on which to compel arbitration. That portion of Burch’s
Motion therefore must be denied.1

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Burch suggests in her Reply that federal law, not state law, governs a nonsignatory’s ability to enforce
an arbitration provision. (Burch Reply, ECF No. 19, at 3). She relies on Finnie v. H&R Block Fin.
Advisors, Inc., 307 Fed. App’x 19 (8th Cir. 2009) (per curiam), an unpublished per curiam opinion, for
the proposition that a nonsignatory may enforce an arbitration provision under federal law where the
relationship between a nonsignatory and signatory is “sufficiently close.” Id. at 21 (quoting CD Partners,
LLC v. Grizzle, 424 F.3d 795, 798-800 (8th Cir. 2005)). Finnie conflicts with the Supreme Court’s

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II.

Motion to Dismiss Under Fed. R. Civ. P. 12(b)(6)
Burch also contends in her Motion that Fenlon’s Complaint should be dismissed for

failure to state a claim in accordance with the requirements of Fed. R. Civ. P. 8(a)(2). (Support
Memo at 6-10). Specifically, she contends that Fenlon has failed to state a claim under Missouri
law “for tortious interference with a contract or business expectancy . . . .” Id. at 9 (internal
quotation marks omitted). Instead, according to Burch, Fenlon “has done nothing more than
recite the elements of a tortious interference with a contract claim.” Id. at 10. Fenlon responds
that her Complaint not only satisfied Rule 8(a)(2) but is “more than sufficient under federal rules
[sic].” (Fenlon Response at 8).2
When ruling on a motion to dismiss under Rule 12(b)(6) for failure to state a claim,
courts must view the allegations in the complaint in the light most favorable to the plaintiff.
Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). Courts must also “accept the allegations contained
in the complaint as true and draw all reasonable inferences in favor of the nonmoving party.”
Coons v. Mineta, 410 F.3d 1036, 1039 (8th Cir. 2005) (citation omitted). A Rule 12(b)(6) motion
to dismiss must be granted if the complaint does not contain “enough facts to state a claim to
relief that is plausible on its face.” Twombly, 550 U.S. at 570 (2007). Stated differently, to
survive a Rule 12(b)(6) motion, a complaint’s factual allegations “must be enough to raise a right
to relief above the speculative level.” Id. at 555 (citations omitted).
Under Missouri law, a claim of tortious interference with a contract or business
relationship requires proof of the following elements: “(1) a contract or valid business
holding in Arthur Andersen and the Eighth Circuit’s holding in Donaldson, both of which were decided
after Finnie. Finnie therefore has no precedential value.
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Burch also contends that Fenlon has failed to make out a sufficient claim of “wrongful discharge in
violation of public policy . . . .” (Support Memo at 7). Fenlon’s Complaint does not make explicit her
theory of relief, (see generally Complaint), and she has made no attempt in her Response to show that her
Complaint makes out a sufficient claim of wrongful discharge. The Court therefore treats the Complaint
as containing only a claim for tortious interference.

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expectancy; (2) defendant’s knowledge of the contract or relationship; (3) a breach induced or
caused by defendant’s intentional interference; (4) absence of justification; and (5) damages.”
Rice v. Hodapp, 919. S.W.2d 240, 245 (Mo. 1996) (en banc). To survive dismissal, Fenlon must
have pled sufficient facts to make out a plausible claim in light of those elements.
Fenlon contends her Complaint makes out a sufficient claim because it contains the
following allegations:
17. Plaintiff Mary Fenlon had a written employment contract with
Clearent.
18. Defendant Burch knew of plaintiff’s employment contract.
19. Defendant Burch intentionally interfered with and caused a
severance and termination of plaintiff’s employment relationship with
Clearent.
20. The actions of defendant Burch were without justification.
21. That as a direct and proximate result of the actions of defendant
Burch, plaintiff has been damaged.
(Fenlon Response at 8 (quoting Complaint ¶¶ 17-21)). Plaintiff also notes that the Complaint
“sets forth the factual motive for the tortious interference[,]” i.e. the allegations discussed above
regarding Fenlon alerting Clearent about pay irregularities among the employees Burch
supervised. Id.
These allegations are insufficient to state a claim under Rule 8(a)(2). The allegations in
¶¶ 17-21 are nothing more than a bare recitation of the elements of a tortious interference claim,
which on their own are insufficient to support a plausible claim for relief. Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009) (“Threadbare recitals of the elements of a cause of action, support by mere
conclusory statements, do not suffice.”). While Fenlon is correct that she has also pled facts that
may have given Burch a motive to interfere with Fenlon’s employment contract, there is not a

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single factual allegation that gives some indication of what Burch did to interfere with Fenlon’s
contract. Nor, as Burch notes, does the Complaint provide any information about the terms of the
contract. (Support Memo at 10). It is therefore impossible to discern which contract terms were
the subject of Burch’s interference. Without some factual allegations regarding the nature of
Burch’s actions, even with allegations that suggest a potential motive, Fenlon’s claim of tortious
interference is too speculative to survive dismissal. It is appropriate, however, to allow Fenlon an
opportunity to amend her Complaint and correct these deficiencies.

Accordingly,
IT IS HEREBY ORDERED that Defendant Paula Burch’s Motion to Compel
Arbitration or, in the Alternative, to Dismiss, (ECF No. 6), is DENIED to the extent it seeks to
compel arbitration.
IT IS FURTHER ORDERED that Burch’s Motion is GRANTED to the extent it seeks
dismissal pursuant to Fed. R. Civ. P. 12(b)(6), and Fenlon’s Complaint, (ECF No. 4), is
DISMISSED WITHOUT PREJUDICE.
IT IS FURTHER ORDERED that Fenlon will have 10 days from the date of this
Memorandum and Order to file an amended complaint.

Dated this 18th day of May, 2015.

/s/ Jean C. Hamilton
UNITED STATES DISTRICT JUDGE

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