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COURT OF APPEALS
DATED AND FILED
December 11, 2012
Diane M. Fremgen
Clerk of Court of Appeals
This opinion is subject to further editing. If
published, the official version will appear in
the bound volume of the Official Reports.
A party may file with the Supreme Court a
petition to review an adverse decision by the
Court of Appeals. See WIS. STAT. § 808.10
and RULE 809.62.
Cir. Ct. No. 2011CV22
STATE OF WISCONSIN
IN COURT OF APPEALS
JEFFREY L. ENGEDAL,
APPEAL from an order of the circuit court for Eau Claire County:
PAUL J. LENZ, Judge. Reversed.
Before Hoover, P.J., Mangerson, J., and Thomas Cane, Reserve
PER CURIAM. Menard, Inc. (Menards) appeals an order denying
its motion to compel arbitration of Jeffrey Engedal’s wrongful discharge and
breach of contract claims. The circuit court concluded the arbitration provision in
We conclude the arbitration provision is not procedurally
unconscionable. We therefore reverse.
Menards hired Engedal as a part-time sales associate in 1985, when
he was eighteen years old. In 1991, Engedal was promoted to store manager. In
2006, he became Menards’ hardware merchandise manager, a position that gave
him managerial authority over the hardware departments in all of Menards’ 250
stores. Menards terminated Engedal’s employment on August 19, 2010.
From 1991 until his termination, Engedal’s employment at Menards
was governed by a series of employment agreements, which Engedal signed on a
yearly basis. The 2010 agreement contained two provisions that are relevant to
this case: a noncompete clause and an arbitration provision. The noncompete
clause provided that, for twenty-four months after termination of his employment
with Menards, Engedal would not: (1) accept employment with any of Menards’
direct competitors “in the same or similar capacity for which [he was] employed
by Menards[;]” or (2) accept employment in any capacity with any of Menards’
direct or indirect competitors within a 100 mile radius of the Menards location
where he was last employed.
The arbitration provision stated, in relevant part:
[Y]ou agree that all problems, claims, and disputes
experienced within your work area and/or related to your
employment with Menards, if you are currently employed
by Menards, shall first be resolved as outlined in the Team
Member Relations section of the Grow With Menards Team
Member Information Booklet, which you have received. If
you are unable to resolve the dispute by these means,
choose not to utilize such means, or you are no longer
employed by Menards you agree to submit your dispute(s)
to final and binding arbitration. … Menards agrees that it
shall submit any and all claims it may have, if any, in
compliance with this section, except as provided in
paragraph 8 of this Agreement.
Paragraph 8 provided that, if Engedal breached the noncompete clause or a
separate nondisclosure clause, Menards could go to court to “obtain temporary and
permanent injunctive relief[.]”
On January 7, 2011, Engedal filed the instant lawsuit against
Menards, asserting a claim for wrongful discharge. He also alleged Menards
breached the employment agreement by refusing to pay him a bonus he would
have been eligible to receive had he remained employed through the end of 2010.
In addition, he sought a declaratory judgment that the noncompete clause and
arbitration provision were unenforceable.
Menards moved to stay the proceedings and compel arbitration.
Following an evidentiary hearing, the circuit court denied Menards’ motion,
concluding the arbitration provision was both procedurally and substantively
Addressing procedural unconscionability, the court noted that when
Engedal signed the 2010 employment agreement, he was subject to a noncompete
clause that would have prevented him from working for Menards’ competitors for
two years.1 Thus, the court concluded Menards had greater bargaining power than
Engedal signed the 2010 employment agreement on December 16, 2009. At that time,
he was subject to the 2009 employment agreement. The 2009 agreement is not part of the record
on appeal. The parties and the circuit court proceeded under the assumption that the 2009
agreement contained the same noncompete clause as the 2010 agreement. We accept that
assumption as true for purposes of this appeal.
Engedal because, had Engedal declined to sign the agreement, he would have been
unable to find employment elsewhere in his field for two years. Additionally, the
court noted that, although many of the agreement’s terms were negotiable,
Menards drafted the agreement and was not amenable to changing certain
provisions. The court also concluded the arbitration provision had “a high level of
substantive unconscionability” because it permitted Menards to seek injunctive
relief in the circuit court, but it did not grant Engedal a comparable right of access.
Menards petitioned this court for leave to appeal the order denying its motion to
compel arbitration, and we granted the petition.
Determining whether a contractual provision is unconscionable
involves questions of fact and law. Wisconsin Auto Title Loans, Inc. v. Jones,
2006 WI 53, ¶25, 290 Wis. 2d 514, 714 N.W.2d 155. We will not set aside the
circuit court’s findings of fact unless they are clearly erroneous. Id. However,
whether the facts found by the circuit court render a contractual provision
unconscionable is a question of law that we review independently. Id.
“Unconscionability is an amorphous concept that evades precise
definition.” Id., ¶31. It has often been described as the absence of meaningful
choice on the part of one of the parties, together with contract terms that are
unreasonably favorable to the other party. Id., ¶32. For a contract to be found
unconscionable, it must exhibit both procedural and substantive unconscionability.
Aul v. Golden Rule Ins. Co., 2007 WI App 165, ¶26, 304 Wis. 2d 227, 737
Thus, if we determine the contract was not procedurally
unconscionable, we may uphold the contract without addressing substantive
unconscionability. See Cottonwood Fin., Ltd. v. Estes, 2012 WI App 12, ¶7, 339
Wis. 2d 472, 810 N.W.2d 852.
Determining whether procedural unconscionability exists requires us
to examine factors that bear upon the formation of the contract to see whether the
contracting parties had a real and voluntary meeting of the minds. Wisconsin
Auto Title, 290 Wis. 2d 514, ¶34. The relevant factors include the parties’ age,
education, intelligence, business acumen and experience, their relative bargaining
power, who drafted the contract, whether the terms were explained to the weaker
party, whether alterations in the printed terms would have been permitted by the
drafting party, and whether there were alternative providers of the subject matter
of the contract. Id.
Here, the circuit court determined that the parties’ age, education,
intelligence, and business experience weighed against a finding of procedural
unconscionability. We agree. The circuit court found that Menards is “a large
corporation with annual sales of approximately $9 billion.” However, it also
found that Engedal was forty-three years old when he signed the 2010
employment agreement, he had completed high school and two years of college,
and he had “above average intelligence.” He was employed as a store manager for
fifteen years, during which time he was responsible for all the operations of his
store and supervised approximately 125 employees. He then attained a high-level
management position at Menards’ corporate headquarters, which required him to
directly supervise at least 60 employees and exercise authority over the hardware
departments in 250 stores.
He was also responsible for developing and
maintaining business relationships with 600 to 700 hardware vendors. These facts
establish that, when Engedal signed the 2010 employment agreement, he was an
intelligent adult with some college education and significant business experience.
The circuit court also considered whether the contract’s terms were
explained to Engedal. Although there was no evidence that Menards actually
explained the terms, the court noted that Engedal “had the opportunity to ask
questions about the contract and had the time to review it.” The court also found
that, as both store manager and hardware merchandise manager, Engedal was “the
primary contact to explain the terms and conditions of any Employment
Agreement” to his staff. Additionally, Engedal signed each page of the 2010
agreement, indicating that he read and understood its contents. We agree with the
circuit court that these facts weigh against a finding of procedural
However, the circuit court nevertheless found the arbitration
provision procedurally unconscionable, based on the remaining factors. The court
first concluded Menards had greater bargaining power than Engedal because
Engedal was subject to a noncompete clause that would have “put [him] out of a
job” for two years had he refused to sign the 2010 employment agreement. For
the same reason, the court determined Engedal could not find any alternative
providers for the subject matter of the contract—that is, employment.
The court’s reasoning conflicts with its own factual finding that, had
Engedal refused to sign the 2010 employment agreement, Menards would have
offered him a different position within the corporation. On appeal, Engedal argues
the notion that he would have been offered a different position is “highly
He points out that John Bogumill, Menards’ wall coverings
merchandise manager, testified he was unaware of any employee remaining at
Menards after refusing to sign an employment agreement. However, the court’s
finding that Engedal would have been offered another position was based on the
testimony of Russ Radtke, Menards’ chief merchant.
The circuit court was
entitled to accept Radtke’s testimony. See State v. Peppertree Resort Villas, Inc.,
2002 WI App 207, ¶19, 257 Wis. 2d 421, 651 N.W.2d 345 (“When the circuit
court acts as the finder of fact, it is the ultimate arbiter of the credibility of the
witnesses and the weight to be given to each witness’s testimony.”). The court’s
finding that Engedal would have been offered a different position at Menards is
not clearly erroneous.
Furthermore, the facts do not support the court’s conclusion that
Engedal would have been unable to find other employment for two years had he
refused to sign the 2010 employment agreement.
The court noted that the
noncompete clause barred Engedal from working for Menards’ competitors, and
the court assumed Engedal was unqualified for any other employment. However,
there is no support in the record for the court’s conclusion that Engedal’s
managerial, supervisory, and organizational skills were not transferable outside the
“home improvement mega store” industry. The court’s reasoning also ignores the
fact that, after Engedal lost his job at Menards, he was hired as a general manager
at Hubbard Scientific in Chippewa Falls. Although his employment there was
ultimately terminated, it was because of a reduction in force, not because Engedal
was unqualified or unable to perform his duties.
Moreover, Wisconsin law would prohibit an arbitrator or a court
from applying the noncompete clause in a way that would render Engedal
completely unemployable. Wisconsin law disfavors noncompete agreements. See
WIS. STAT. § 103.465;2 H & R Block E. Enters., Inc. v. Swenson, 2008 WI App
All references to the Wisconsin Statutes are to the 2009-10 version unless otherwise
3, ¶13, 307 Wis. 2d 390, 745 N.W.2d 421. They are regarded with suspicion,
Farm Credit Servs. of N. Cent. Wis., ACA v. Wysocki, 2001 WI 51, ¶9, 243
Wis. 2d 305, 627 N.W.2d 444, and may not be harsh or oppressive to the
employee, H & R Block, 307 Wis. 2d 390, ¶13.
A noncompete clause that
rendered the employee completely unemployable for two years would certainly be
harsh and oppressive.
Finally, Menards argues that, if the noncompete clause in this case
were sufficient to create an imbalance of bargaining power great enough to
establish procedural unconscionability, then nearly every employment agreement
entered into while the employee was subject to noncompete restrictions would be
Menards argues this result would be a “broad
expansion of procedural unconscionability” unsupported by Wisconsin or federal
law. Engedal does not respond to Menards’ argument, and we therefore deem it
conceded. See Charolais Breeding Ranches, Ltd. v. FPC Secs. Corp., 90 Wis. 2d
97, 109, 279 N.W.2d 493 (Ct. App. 1979).
unconscionability on the fact that Menards drafted the employment agreement and
did not allow Engedal to negotiate certain terms. We do not agree that these facts
render the agreement procedurally unconscionable. Although Menards was not
amenable to changing certain contract provisions, including the noncompete
clause and the arbitration provision, the court found that Engedal was able to
negotiate terms relating to his compensation, his management bonus, and his
performance goals. Furthermore, even if the agreement had been a pure adhesion
contract, that fact alone would not be sufficient to establish procedural
unconscionability. See Wisconsin Auto Title, 290 Wis. 2d 514, ¶53 (“Ordinarily,
however, adhesion contracts are valid.”); see also Aul, 304 Wis. 2d 227, ¶27.
The facts of this case do not support a finding that the arbitration
provision in Engedal’s employment agreement was procedurally unconscionable.
Accordingly, the arbitration provision was not unconscionable. See Aul, 304
Wis. 2d 227, ¶26 (unconscionable contract must be both procedurally and
The circuit court therefore erred by denying
Menards’ motion to stay the proceedings and compel arbitration.
By the Court.—Order reversed.
This opinion will not be published.
See WIS. STAT. RULE