Rahm v. TCF National Bank

Filing 28

Memorandum Opinion and ORDER granting 11 Motion to Compel Arbitration; granting 19 Motion to Take Judicial Notice. Signed by U.S. District Judge Lawrence L. Piersol on 8/21/17. (SLW)

UNITED STATES DISTRICT COURT

filed
2J
2017

DISTRICT OF SOUTH DAKOTA
clerk

SOUTHERN DIVISION

DOUGLAS RAHM,

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CIV 17-4018

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Plaintiff,

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vs.

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TCP NATIONAL BANK,

MEMORANDUM OPINION AND
ORDER GRANTING MOTION TO

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COMPEL ARBITRATION

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Defendant.

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Plaintiff, Douglas Rahm ("Rahm"), claims he suffered retaliation by his former employer,

TCP National Bank("TCP"), when he was fired for reporting sexual harassment allegations made

by a female coworker at TCP,and for supporting her in the investigation ofthose claims. Rahm also
alleges that TCP fired him because he was approaching retirement age. He seeks relief under Title
VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, and the South

Dakota Human Rights Act. He also asserts claim for wrongful termination and intentional infliction
ofemotional distress. TCP moves to compel arbitration ofRahm's claims. (Doe. 11.) Rahm resists

the motion. For the following reasons,the motion to compel arbitration will be granted, and the case
will he stayed pending arbitration.

BACKGROUND

The parties generally agree to the core facts in this ease which, taken in the light most
favorable to Rahm, are as follows:

TCP is a national banking association wholly-owned by TCP Financial Corporation. On

October 30, 2011, Rahm applied online for an Operations Manager position that was posted on a
website called Careerbuilder.com. Rahm did not know he was applying to TCP because TCP did not

disclose its identity when it advertised for the Operations Manager position on Careerbuilder.com.

Rahm submitted a cover letter and resume through Careerbuilder.com. He did not agree to
arbitration of any disputes at that time.

Later in the day on October 30, 2011, Rahm applied directly to TCP for an Investigator

Position through Careerbuilder.eom by filling out an online employment application. TCP has
submitted a document showing that Rahm electronically signed the job application at 7:16 PM on

October 30,2011.(Doc. 13-2.)TCP also has submitted a copy ofthe relevant language from the eSignature Statementin TCP's emplojmientapplication,showing the terms to which applicants agree

by electronically signing the application.' TCP does not require employees to have completed an
'The description ofTCP's Dispute Resolution Policy in the e-Signature Statement provides:
By applying for employment or accepting employment, you agree with TCP, and
TCP agrees with you, to resolve all Covered Claims pursuant to TCP's Dispute
Resolution Policy("DRP"). This means that you and TCP will not have a right to
bring a lawsuit against one another or have a jury trial regarding Covered Claims.
The term "TCP" includes TCP National Bank and certain of its subsidiaries and

affiliates. Except as otherwise specified in the DRP, the term "covered Claim"
includes any legal disputes and controversies between you and TCP that related to
or arise from the employment relationship, a request for employment, or the DRP.
Under this DRP,you and TCP will not have the right to consolidate covered claims
or to participate as a representative or member ofany class ofpersons or as a private
attorney general, in any lawsuit or arbitration concerning any Covered Claim. You
have the right to reject arbitration by giving a written rejection notice within the
following time frames. If you apply for a job with TCP and are not hired, you must
give notice no later than 60 days after the date you submitted your application to TCP

(whether or not TCP has made a decision on your application within this time frame.)
If you are hired, you must give notice no later than 60 calendar days after your start
date. If you reject arbitration within these time frames, neither you nor TCP are
required to submit a Covered Claim to final and binding arbitration. To reject
arbitration, you must give a written rejection notice to: TCP Pinancial Corporation,
Attn Director ofCorporate Human Resources, 150 Lake Street West,Suite 102,Mail
Code LSW-Ol-H, Wayzata, MN 55391. Notice must be sent by regular U.S. Mail,
certified U.S. mail - return receipt requested, or overnight delivery service, or you

may hand deliver the notice. You must sign the notice, and the notice must include
your name,home address and a clear statement that you reject arbitration.
The Dispute Resolution Policy Disclosure ahove is just a short description of the
DRP. You acknowledge receiving a complete copy ofthe entire DRP. You may also
obtain a copy ofthe DRP by clicking here or hy requesting a copy in writing from the
Director or Corporate Hiunan Resources at the mailing address above.

By electronically signing below, you agree to the foregoing and that you will be

employment application for the specific TCF position they were offered or hold; it simply requires
that employees have completed at least one TCF application.(Doc.21,^4.)The application is used
by TCF "to consider candidates for whatever open position TCF thinks may be the best match with
the candidate, consistent with the candidate's qualifications and interest. {Id. at H 5.) TCF's online

employment application states, in part,"You acknowledge that you understand TCF may consider
you for a position other than the position you directly applied for, and that your electronic consent
below will also he binding to that position." {Id. at ^ 2 and Exhibit A.)

On November 14,2011,a recruiting manager for TCF contacted Rahm regarding the resume

that he submitted for the Operations Manager position. This was the first time he became aware that

the Operations Manager job was with TCF. Later in November of 2011, Rahm was offered and
accepted the Operations Manager position. The Dispute Resolution Policy ("DRP") was not
mentioned to him in the oral or written communications regarding that particular position. Rahm

says that he informally began working for TCF on December 13,2011,and that his formal start date
was January 2, 2012.

In addition to electronically signing the e-Signature Statement which states, in part, "By

applying for employment or accepting employment,you agree with TCF,and TCF agrees with you,
to resolve all Covered Claims pursuant to TCF's Dispute Resolution Policy," on approximately
December 24, 2011, TCF provided Rahm a copy of its Employee Policy Highlights ("Policy

Highlights "). The thirty-nine page Policy Highlights provides a three-page summary of the DRP.
(Doc.21,Ex.B.) The second-to-last page ofthe Policy Highlights is an Acknowledgment ofReceipt
in which the recipient confirms that he will read TCF's policies. The Acknowledgment states, "I

acknowledge receipt ofcopies ofthe TCF National Bank Employee Policy Highlights. I understand
that it is my responsibility to read the material and become familiar with the policies explained since

bound by the rules, policies and regulation ofTCF,which can be changed from time
to time with or without notice to you.

In addition, you agree that disclosures relating to your Application with TCF may be
provided in electronic form.
(Doc. 21-1, Ex. A.)

I will be expected to comply with them."Id. The three page DRP section ofthe Policy Highlights
explains the process for handling ofdisputes,describes an employee's"Rightto Reject Arbitration,"
and states that"the entire TCP Dispute Resolution Policy is available for viewing on the company's
intranet" Id. On December 26, 2011, Rahm acknowledged receipt of the Policy Highlights.(See

Doc. 13-3.) The DRP allows employees to opt out ofbinding arbitration during their first sixty days
ofemployment.(Doc. 13,f 5.) Rahm had sixty days from his start date on January 2,2012,to reject
the arbitration agreement, but he did not.

Rahm alleges that, on June 22, 2015, a TCP employee reported to him that she was being
stalked and harassed by other TCP employees. {See Complaint, Doc. 1 at ^ 14.) The Complaint
describes the actions Rahm took to address these allegations starting in June 2015 and continuing

through September 2015. On September 16,2015,Rahm's employment with TCP was terminated.
On Pebruary 13, 2017, Rahm filed a six-count Complaint against TCP for retaliation, age
discrimination, wrongful termination and intentional infliction of emotional distress. On May 5,
2017,TCP filed the current motion requesting the Court to compel arbitration ofall counts pursuant
to the Pederal Arbitration Act,9 U.S.C. § 1 et seq. Rahm's main argument opposing arbitration is
that TCP hired him for the Operations Manager position and not the Investigator position. Because

he agreed to arbitration only when he applied for the Investigator position, Rahm asserts that he is
not contractually bound to arbitrate the claims arising from termination of his employment as the
Operations Manager.

STANDARD OF REVIEW

The Pederal Arbitration Act does not identify what evidentiary standard a party seeking to

avoid arbitration must meet. Neb. Mach. Co. v. Cargotec Solutions,LLC,762P.3d 737,741-42(8th

Cir. 2014);see also Henry Techs. Holdings,LLC v. Giordano,2014 WL 3845870,at *3(W.D.Wis.
Aug.5,2014)("The PAA does not define a standard for a district court's determination ofa motion
to compel arbitration[.]"). Courts that have addressed the issue have used a summary judgment
standard. Id.', see also Schwalm v. TCP Nat'l Bank, 226 P.Supp.3d 937, 940 (D.S.D. 2016),
Technetronics,Inc. v. Leybold-Graeus GmbH,1993 WL 197028,at *2(E.D.Pa. June 9,1993) [I]n
(

a motion to stay proceedings and/or compel arbitration, the appropriate standard ofreview for the

district court is the same standard used in resolving summaryjudgment motions pursuant to[Federal

Rule of Civil Procedure] 56(c)."). Therefore, the eourt may consider all evidenee in the reeord,

viewing that evidence in the light mostfavorable to the non-moving party. Id.;see also Lee v. Credit
Acceptance Corp., 2015 WL 7176374, at *1 (W.D. Wis. Nov. 12, 2015).
DISCUSSION

As an initial matter, the Court will grant Rahm's motion to take judicial notice offilings in
thecaseof5c/iwa/mv. TCFNat'lBank,CIV\6-4QlA. SeeKernv. Tri-Statelns. Co.,386F.2d754,

755-56(8th Cir. 1967)(district court may take judicial notice ofother proceedings in same court).
Both state and federal governments have strong policies favoring arbitration.See Green Tree
Fin. Corp.-Alabama v. Randolph, 531 U.S. 79, 89-90 (2000); Rossi Fine Jewelers, Inc. v.
Gunderson, 648 N.W.2d 812, 814 (S.D. 2002)("We have eonsistently favored the resolution of

disputes by arbitration."). Questions of arbitration are governed by the Federal Arbitration Act(or
"FAA"),9 U.S.C. § 1 et seq. The FAA was enacted to "reverse the longstanding judieial hostility
to arbitration agreements" and treat arbitration agreements like any other contraet. Green Tree,531
U.S. at 89. South Dakota has adopted the Uniform Arbitration Aet. See SDCL 21-25A-1, whieh
provides:

A written agreement to submit any existing eontroversy to arbitration or a provision
in a written contraet to submit to arbitration any controversy thereafter arising

between the parties is valid, enforceable and irrevocable,save upon such grounds as
exist at law or in equity for the revocation ofany contract. This chapter also applies
to arbitration agreements between employers and employees or between their
respeetive representatives.
SDCL §21-25A-1.

The FAA "provides that written agreements to arbitrate controversies arising out of an
existing contraet'shall be valid,irrevoeable,and enforceable,save upon such grounds as exist atlaw
or in equity for the revoeation ofany contraet'"Dean Witter Reynolds, Inc. v.
470U.S. 213,

218(1985)(quoting 9 U.S.C. § 2). The FAA "mandates that district courts shall direct the parties
to proceed to arbitration on issues as to which an arbitration agreement has been signed."Id.(citing
9 U.S.C. §§ 3, 4). The "eourt's role under the FAA is therefore limited to determining(1) whether

a valid agreement to arbitrate exists and, if it does,(2) whether the agreement encompasses the
dispute." Pro Tech Indus., Inc. v. URS Corp., Ill F.3d 868, 871 (8th Cir. 2004).
The DRP contains a broad arbitration clause that applies to all claims between an employee

and TCF "that relate to or arise from the employment relationship."(Doe. 14-1 at p. 2.) Rahm does

not contest that his claims fall within the scope ofthe arbitration agreement.^ Rather, Rahm argues
that the agreement to arbitrate is not valid. Thus,the only issue before the Court concerns the validity
of the arbitration agreement. Whether there is a binding arbitration agreement is "an issue for
judicial determination unless the parties clearly and unmistakably provide otherwise." Howsam v.
Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002)(quoting AT & T Tech., Inc. v. Commc'ns
Workers,475 U.S. 643, 649(1986)). In examining whether the parties agreed to arbitrate, courts

must ordinarily apply"state-law principles that govern the formation ofcontracts."First Options of
Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995). In applying state law, however,"due regard
must be given to the federal policy favoring arbitration, and ambiguities as to the scope of the
arbitration clause itself must be resolved in favor of arbitration." Volt Info. Sciences, Inc. v. Board
of Trustees ofLeland Stanford Jr. Univ., 489 U.S. 468, 475-76(1989).

In the present ease, the question whether the parties formed a valid agreement to arbitrate is

governed by the contract law of South Dakota. South Dakota courts apply ordinary contract
principles to arbitration agreements. Masteller v. Champion Home Builders, Co.,723 N.W.2d 561,
564 (S.D. 2006). The required elements to form a valid contract in South Dakota are (1) parties

^ The DRP explicitly states that it covers claims including, but not limited to:

1. Claims relating to involuntary termination, such as layoffs and discharges
(including constructive discharges);

2. Employment discrimination and harassment claims, based on age ... (including,
but not limited to, claims pursuant to the Civil Rights Acts of 1866,1964,and 1991,

the Age Discrimination in Employment Act and the Americans with Disabilities
Act);

3. Retaliation claims for legally protected activity and/or whistleblowing ...;
***

8. Tort claims, including but not limited to ... infliction of emotional distress.
(Doc. 14-1 at p. 2-3.)

capable of contracting; (2) their consent;(3) a lawful purpose; and (4) sufficient consideration.
Setliffv. Akins,616 N.W.2d 878(S.D. 2000)(citing SDCL § 53-1-2). Rahm does not contest that
all ofthe elements to form a valid contract were present when he electronically signed the agreement

to arbitrate at the time he applied online for the Investigator position, and the Court finds that the
parties entered into a valid contract.

Rahm presents three basic arguments that target whether he is required to arbitrate the claims
in this case. Rahm argues that the only time he agreed to the DRP was when he applied for the

Investigator position for which he was not hired and, therefore, the agreement to arbitrate does not
apply to the Operations Manager position. Rahm also argues that the DRP is ambiguous and should
be construed against TCP. Finally, Rahm asserts that the employee Policy Highlights Manual and
the Acknowledgment of Receipt are not contracts binding Rahm to the DRP.

1. Emplovment as Operations Manager

In support of his first argument, Rahm contends that he had a "meeting ofthe minds" with
TCP regarding the Operations Manager position which did not include arbitration, and TCP cannot
modify that agreement with the arbitration clause he signed while applying for the Investigator
position. In support of this argument, Rahm relies on Dakota Foundry, Inc. v. Tromley Indus.
Holdings,Inc.,891 P.Supp.2d 1088(D.S.D.2012),andMa^te/Zerv. Champion Home Builders, Co.,

supra. The parties in Tromley and Masteller originally agreed to a contract without an arbitration
clause. Subsequently,one ofthe parties to the contract attempted to revise the contract to include an
arbitration agreement. The courts in Tromley and Masteller held that the post-contractual attempts
to add an arbitration agreement to the initial contract did not provide reasonable notice that an
arbitration agreement was to be made part of the contract. Thus the parties were not bound by the
arbitration agreement.

Tromley and Masteller are inapposite because,first,TCP did not attempt to add an arbitration

agreement to an existing contract with Rahm. Rather, prior to going to work at TCP,Rahm agreed
that if hired by TCP they would arbitrate certain issues if a dispute arose. Rahm signed the
arbitration agreement in October of2011, before he accepted employment with TCP in November
of 2011. Purthermore, unlike in Tromley and Masteller, TCP provided reasonable notice that an

arbitration agreement was to be part ofRahm's employment with the eompany unless he opted out
of arbitration during the sixty day time period. On October 30, 2011, when Rahm filled out and

electronically signed his online employment application with TCP,an application that he knew was
for a job with TCP,Rahm was provided with an explanation of the DRP. The first sentence states

that "[b]y applying for employment or accepting employment, you agree with TCP and TCP agrees
with you to resolve all Covered Claims pursuant to TCP's Dispute Resolution Policy(DRP)." The
online application further explains that an e-Signature on the application binds a person to this
agreement. Accordingly, Rahm agreed to and is bound to arbitrate disputes arising out of his

employment with TCP.See Schwalm,226 P.Supp.Bd at 940(holding that "if a person applies to a

position at TCP, they are consenting to be bound by the DRP in consideration for TCP accepting
their application").

Rahm cites no authority indicating that consent to arbitrate is not binding if an employee is

hired for a different position than they applied for. The Schwalm court considered and rejected such
an argument:

Schwalm's argument that thejob described in the November 26 application is not the
samejob she eventually received is irrelevant to the question ofwhether she is bound
by the DRP. The language in the DRP on the November 26 application states "by
applying for employment or accepting employment, you agree with TCP, and TCP
agrees with you,to resolve all Covered Claims pursuant to TCP's Dispute Resolution
Policy." Docket 8-1 at 12. Thus, Schwalm's agreement to be bound by the DRP
occurred once she applied for thejob regardless ofwhether she actually received that
job. Purther, the application also clearly states that "TCP may consider you for a
position other than the position you directly applied for, and ... your electronic
consent below will also be binding to that position." Docket 8-1 at 12.
Schwalm, 226 P.Supp.3d at 941-42. In fact, courts have enforced arbitration agreements included
in employment applications even ifthe applicant was never hired for any position. See,e.g.,Johnson
V. Circuit City Stores, 148P.3d373(4th Cir. 1998)(unsuccessfuljob applicant bound by arbitration
agreement in employment application).

Por all of these reasons, the Court rejects Rahm's first argument that the agreement to

arbitrate would apply only if TCP had hired Rahm for the Investigator position.

2. Ambiguity

Rahm's next argument is that the description ofthe arbitration agreement in the employment
application that he electronically signed is ambiguous because the E-Statement provides both that
it is not a contract for employment or any other benefit, and that "[b]y applying for employment or
accepting employment,you agree with TCP,and TCP agrees with you,to resolve all Covered Claims
pursuant to TCP's Dispute Resolution Policy." (Doc. 19-1 at p. 12.)
The Court adheres to the following principles of South Dakota law when construing a
contract:

When construing a contract, the court must ascertain and give effect to the intention
ofthe parties. Malcolm v. Malcolm, 365 N.W.2d 863(S.D. 1985). That intention is
found in the contract language. Id. Unless the language is ambiguous or a different
intention is manifested,the language in a contract is to be given its plain and ordinary
meaning. See Restatement(Second)ofContracts § 202(3)(1981). Whether contract
language is ambiguous is a question of law. Enchanted World Doll Museum v.
Buskohl, 398 N.W.2d 149 (S.D. 1986). Language is ambiguous when a genuine
uncertainty exists as to which of two or more meanings is correct. North River Ins.
Co. V. Golden Rule Constr., Inc., 296 N.W.2d 910(S.D. 1980).
American State Bank v. Adkins,458 N.W.2d 807, 809(S.D. 1990).

This Court does not find the arbitration agreement in TCP's employment application to be

ambiguous. Stating that the employment application is not an employment contract or any other
benefit does not contradict or negate the agreementto arbitrate disputes arising out ofan employment

relationship. The language is clear and unambiguous. The arbitration agreement obviously relates
to the future possibility of employment and, in the event of employment, to employment-related

disputes. The fact that the employment application did not constitute an employment contract does
not undermine the express agreement to resolve claims pursuant to the DRP. Rahm's argument that
the DRP is ambiguous because the e-Signature Statement does not define"benefit," yetthe DRP uses
the term "for the benefit of is equally unavailing.

3. Emplovee Policv Highlights Manual and Emnlovee Acknowledgment of Receipt
Rahm's final argument that the Employee Policy Highlights Manual and Employee
Acknowledgment of Receipt are not contracts binding Rahm to submit his claims to arbitration is

easily resolved because TCP agrees with Rahm on this issue. (Reply Brief, doc. 20 at 7.),TCP
9

admits that the Policy Highlights booklet acts as a reminder to employees that they agreed to the
terms ofthe DRP,and that they have the right to opt out ofthe DRP's arbitration provision during

their first 60 days ofemployment.{Id.) The Court agrees with the parties that the Policy Highlights
and the Acknowledgment ofReceipt are not contracts creating an agreement to arbitrate. This does
not change the fact that Rahm is bound by the arbitration agreement as explained above.

CONCLUSION

For the foregoing reasons, the Court finds Rahm has agreed to arbitrate his claims, and he
must be compelled to do so.

The Court has discretion to stay or dismiss the instant case. See 9 U.S.C. § 3(mandating
courts to stay proceedings pending completion of arbitration); Green v. SuperShuttle Intern., Inc.,

653 F.3d 766(8th Cir. 2011)(noting that the district court in dismissing the underlying action had
relied upon a "judicially-created exception to the general rule which indicates district courts may,
in their discretion, dismiss an action rather than stay it where it is clear the entire controversy

between the parties will be resolved by arbitration"). TCF requests dismissal because all ofRahm's
claims are covered by the DRP.(Doc. 12 at 6.) Rahm lists a number ofreasons that the case should

be stayed rather than dismissed if the motion to compel is granted.(Doc. 17 at 21-22). The Court
finds that staying rather than dismissing this case will promote judicial economy. Accordingly,
IT IS ORDERED:

1. That Plaintiffs Motion to Take Judicial Notice, Doc. 19, is granted; and

2. That Defendant's Motion to Compel Arbitration, Doc. 11, is granted, and this
action is STAYED pending arbitration.

Dated this ^Vfiay of August,2017.
BY THE COUR

,01jUDUPjL

iJuUb

Lawrence L. Piersol

ATTEST:

United States District Judge

JOSEPH HAAS,CLERK

BY: SurvifYlGK
(SEAL)

DEPUTY

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