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Scheurer v. Fromm Family Foods LLC

United States Court of Appeals, Seventh Circuit

July 17, 2017

Anne E. Scheurer, Plaintiff-Appellee,
Fromm Family Foods LLC, Defendant-Appellant.

          Argued May 31, 2017

         Appeal from the United States District Court for the Western District of Wisconsin. No. 15-cv-770-jdp - James D. Peterson, Chief Judge.

          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 contract 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 appealed. We affirm.

         The question is whether employer Fromm, which did not have a written arbitration agreement with Scheurer, can enforce 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 compelling 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 outsourced its staffing needs to Remedy Intelligent Staffing, a temporary staffing agency. The application form she signed with Remedy for placement with Richelieu contained an arbitration agreement.[1] She was assigned to work for a time for Richelieu, but that assignment ended after some months.

          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 complained 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 fired her.

         Richard Best, the chief operating officer of Fromm, submitted 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 separated 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 complaint, unspecified discipline of the supervisor, an unsuccessful 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 Remedy-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 application to Remedy, which included the arbitration agreement. Fromm argued that arbitration should be compelled under the contract law principle of equitable estoppel and because 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 determined that equitable estoppel did not apply because there was no basis for finding that Fromm relied on Scheurer's arbitration 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.

         II. Analysis

         The question on appeal is whether Fromm can enforce the arbitration agreement between Remedy and Scheurer to compel arbitration of her claims against Fromm. That ...

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