2008 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

8-28-2008

Morales v. Sun Constructors Inc

Precedential or Non-Precedential: Precedential

Docket No. 07-3806

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 PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

____________

No. 07-3806

____________

JUAN MORALES

 v.

SUN CONSTRUCTORS, INC.,

Appellant.

____________

Appeal from the District Court

of the Virgin Islands

(No. 07-cv-00005)

District Judge: Honorable Raymond L. Finch

Argued May 6, 2008

Before: RENDELL, FUENTES, and CHAGARES, Circuit

Judges.

____________

(Filed: August 28, 2008)

Charles E. Engeman (Argued)

Fermín E. Fontanés Gómez

Ogletree, Deakins, Nash, Smoak & Stewart, LLC

The Tunick Building, Suite 201

1336 Beltjen Road

St. Thomas, Virgin Islands 00802
2

Counsel for Appellant

Emile A. Henderson III (Argued)

Law Offices of Yvette D. Ross-Edwards

115 Queen Street

Frederiksted, St. Croix

U.S. Virgin Islands 00840

Counsel for Appellee

OPINION OF THE COURT

CHAGARES, Circuit Judge.

This case requires us to determine whether an arbitration

clause in an employment agreement is enforceable where one party

is ignorant of the language in which the agreement is written. 

Juan Morales (Morales) was employed by Sun Constructors,

Inc. (Sun). The employment relationship between Morales and Sun

was governed by a signed employment agreement (the Agreement)

that contained an arbitration clause. Morales was terminated by

Sun, and he filed a wrongful termination suit against his former

employer in the District Court of the Virgin Islands. Sun moved to

stay the proceedings pending arbitration, but the District Court

denied the motion, finding that Morales signed the Agreement

without realizing it contained an arbitration clause. The Agreement

was written in English, a language Morales cannot understand, and

the District Court concluded that the arbitration clause was

unenforceable because Morales did not assent to the clause. On

appeal, Sun argues that Morales is bound by the entire Agreement,

even if he is ignorant of its terms. We agree and will reverse the

decision of the District Court and remand the case with instructions

to enter a stay pending arbitration.

I.

Appellee Morales is a Spanish-speaking welder who resides

in St. Croix, United States Virgin Islands. Welders like Morales
3

were in high demand by appellant Sun, and Morales acknowledged:

“[Sun] needed me. It was an emergency . . . .They needed to start

work, so they were under pressure.” Appendix (App.) 114, 121.

On April 15, 2004, after Morales had passed a written exam, in

English, Sun hired him and required him to attend a 2 1/2-hour

orientation conducted entirely in English and to sign an hourly

employment agreement. Five paragraphs of the Agreement

(paragraphs 12 through 16) pertained to arbitration and covered

nearly 8 of the 13 pages of the Agreement. App. 126-38. The Sun

employee who conducted the orientation, Mr. Langner, asked Jose

Hodge (Hodge), a bilingual applicant who was also present at the

orientation, and whom Morales knew, to explain to Morales what

Langner was saying and help him fill out the documents. App 83,

69. Hodge testified that he generally understands about eighty-five

percent of what is said and written in English. App. 94. He also

stated that Morales did not ask him what he was signing and that

he did not specifically explain the arbitration clause to Morales.

App. 69, 94. Mr. Langner stated that he did explain the arbitration

provisions in English and that, during the orientation, Hodge was

speaking to Morales in a foreign language. App. 82-83. The

Agreement governed the employment relationship between

Morales and Sun for the entirety of the relationship. 

On April 6, 2005, Sun fired Morales for allegedly dumping

a bottle of urine from a great height on another contractor’s

employees in violation of safety standards. Morales filed a

wrongful termination suit against Sun in the District Court on

December 20, 2006, seeking relief under eight causes of action all

covered by the Agreement’s arbitration clause. The District Court

determined that mutual assent to the arbitration clause did not exist

and denied Sun’s motion to stay the proceedings pending

arbitration. This appeal followed.

II.

We have jurisdiction over this appeal pursuant to 28 U.S.C.

§ 1291 and 9 U.S.C. § 16 and exercise plenary review over the

District Court’s denial of Sun’s motion to stay proceedings pending

arbitration. To the extent that the District Court based its decision

on findings of fact, however, we review for clear error. See
4

Medtronic AVE, Inc. v. Advanced Cardiovascular Sys., Inc., 247

F.3d 44, 53-54 (3d Cir. 2001). 

III.

The Federal Arbitration Act (FAA), 9 U.S.C. §§ 1-16,

provides that arbitration agreements are “enforceable to the same

extent as other contracts,” and “establishes a strong federal policy

in favor of the resolution of disputes through arbitration.”

Alexander v. Anthony Int’l, L.P., 341 F.3d 256, 263 (3d Cir. 2003)

(quotation marks and citation omitted). However, “arbitration

provisions may be attacked under ‘such grounds as exist at law or

in equity for the revocation of a contract.’” Plaskett v. Bechtel

Int’l, Inc., 243 F. Supp. 2d 334, 339 (D.V.I. 2003) (quoting 9

U.S.C. § 2).

When determining “whether the parties agreed to arbitrate

a certain matter . . . courts generally . . . should apply ordinary

state-law principles that govern the formation of contracts.” First

Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995). In

the absence of contrary Virgin Islands law, this case is governed by

the rules of the common law, as expressed in the restatements of

law approved by the American Law Institute. See 1 V.I. Code

Ann. § 4 (2007); Barclays Invs., Inc. v. St. Croix Estates, 399 F.3d

570, 577 (3d Cir. 2005). 

A.

It is well-settled under the Restatement (Second) of

Contracts (the Restatement) that mutual assent between parties is

necessary for the formation of a contract. See Restatement § 17;

see also Univ. of V.I. v. Petersen-Springer, 232 F. Supp. 2d 462,

469 (D.V.I. 2002) (“[T]he formation of a contract requires ‘a

bargain in which there is a manifestation of mutual assent to the

exchange and a consideration.’”) (quoting Restatement § 17).

While mutual assent “is sometimes referred to as a ‘meeting of the

minds,’” Restatement § 17 cmt. c, this phrase must not be

construed too literally. Acceptance is measured not by the parties’

subjective intent, but rather by their outward expressions of assent.

As the Restatement explains:
5

The parties to most contracts give actual as well as apparent

assent, but it is clear that a mental reservation of a party to

a bargain does not impair the obligation he purports to

undertake. The phrase used here, therefore, is

“manifestation of mutual assent.”

Id.

The Supreme Court has observed: “It will not do for a man

to enter into a contract, and, when called upon to respond to its

obligations, to say that he did not read it when he signed it, or did

not know what it contained.” Upton v. Tribilcock, 91 U.S. 45, 50

(1875). The “integrity of contracts demands” that this principle “be

rigidly enforced by the courts.” 1 Richard A. Lord, Williston on

Contracts § 4:19 (4th ed. 2008). As one noted treatise explains:

According to the objective theory of contract formation,

what is essential is not assent, but rather what the person to

whom a manifestation is made is justified as regarding as

assent. Thus, if an offeree, in ignorance of the terms of an

offer, so acts or expresses itself as to justify the other party

in inferring assent, and this action or expression was of such

a character that a reasonable person in the position of the

offeree should have known it was calculated to lead the

offeror to believe that the offer had been accepted, a

contract will be formed in spite of the offeree’s ignorance

of the terms of the offer. The most common illustration of

this principle is the situation when one who is ignorant of

the language in which a document is written, or who is

illiterate, executes a writing proposed as a contract under a

mistake as to its contents. Such a person is bound, in the

absence of fraud, if the person does not require the

document to be read to him . . . . 

Id. See New York Life Ins. Co. v. Kwetkauskas, 63 F.2d 890, 891

(3d Cir. 1933) (recognizing that “[i]t is true that an illiterate man

may bind himself by contract by negligently failing to learn the

contents of an instrument which he has executed”); Hoshaw v.
6

Cosgriff, 247 F. 22, 26 (8th Cir. 1917) (holding that every

contracting party has the duty “to learn and know the contents of

a contract before he signs and delivers it”). Arbitration agreements

in the employment context are not exempt from this principle. See,

e.g., Booker v. Robert Half Int’l, Inc., 315 F. Supp. 2d 94, 101

(D.D.C. 2004) (stating that “[f]ailure to read or understand an

arbitration agreement, or an employer’s failure to explain it, simply

will not constitute ‘special circumstances’ warranting relieving an

employee from compliance with the terms of an arbitration

agreement that she signed”). 

Morales, in essence, requests that this Court create an

exception to the objective theory of contract formation where a

party is ignorant of the language in which a contract is written. We

decline to do so. In the absence of fraud, the fact that an offeree

cannot read, write, speak, or understand the English language is

immaterial to whether an English-language agreement the offeree

executes is enforceable. See Paper Express, Ltd. v. Pfankuch

Maschinen, 972 F.2d 753, 757 (7th Cir. 1992) (addressing a

contract dispute between an Illinois corporation and a German

corporation and holding that parties should be held to contracts,

even if the contracts are in foreign languages or the parties cannot

read or understand the contracts due to blindness or illiteracy);

Shirazi v. Greyhound Corp., 401 P. 559, 562 (Mont. 1965) (holding

Iranian student subject to limitation contained in baggage receipt

and stating that “[i]t was incumbent upon [the plaintiff], who knew

of his own inability to read the English language, to acquaint

himself with the contents of the ticket”); Paulink v. Am. Express

Co., 163 N.E. 740, 741 (Mass. 1928) (stating that “plaintiff was

bound by the[] terms [of foreign bills of exchange], in the absence

of deceit on the part of the defendant, even though not

understanding their purport and ignorant of the English language”);

Wilkisius v. Sheehan, 156 N.E. 5, 6 (Mass. 1927) (holding that

Lithuanian husband and wife, who did not speak or understand

English and used an interpreter to contract for an exchange of real

estate, were bound by the terms of the agreement because “their

failure to understand these details was not due to fraudulent acts on

the part of the defendant but to their own inability to read, write,
The dissent analogizes this case to American Heritage Life 1

Insurance Company v. Lang. Unlike Morales, however, the

illiterate plaintiff in Lang asked the defendant’s agent to explain

each of the documents Lang signed, and he submitted evidence that

the agent deliberately mislead him as to what he was signing by

claiming that the papers were loan or insurance documents rather

than an arbitration agreement.

7

speak or understand the English language, and to the incapacity of

the interpreter”).

Morales is not claiming fraud, see App. 78, 95, and he is not

alleging that Sun misrepresented the contents of the Agreement to

him. Cf. Am. Heritage Life Ins. Co. v. Lang, 321 F.3d 533, 538

(5th Cir. 2003) (recognizing that “[i]t is a widely accepted principle

of contracts that one who signs or accepts a written instrument will

normally be bound in accordance with its written terms,” and that

a defendant, “illiterate or not, would be bound by the terms of the

arbitration agreements,” but remanding for adjudication of a claim

of fraud in the inducement); Pimpinello v. Swift & Co., 253 N.Y.

159, 163 (1930) (stating that “[i]f the signer is illiterate, or blind,

or ignorant of the alien language of the writing, and the contents

thereof are misread or misrepresented to him by the other party .

. . unless the signer be negligent, the writing is void”) (emphasis

added). Further, there is no evidence that Sun tried to hide the 1

arbitration clause; indeed, it comprised about one-half of the

Agreement. 

It was Morales’ obligation to ensure he understood the

Agreement before signing. Morales did not ask Hodge to translate

the document word-for-word or ask to take the Agreement home

and have it translated, notwithstanding the fact that he testified that,

in the past, he had paid someone to translate documents for him.

App. 32-33. Morales did not even request a copy of the

employment contract, a demand Sun has indicated it would have

granted without dispute. App. 84. Moreover, in the almost one

year that Morales worked for Sun, he never questioned the terms

of the Agreement. Morales’ signature manifested his assent to the 
We disagree with the dissent’s characterization of the 2

circumstances in this case. The dissent suggests that “Sun assigned

Hodge . . . to translate the [Agreement] for Morales; [ ] Hodge . .

. neglected to translate the arbitration clauses; and [ ] as a result of

Hodge’s incomplete translation, Morales was not aware that the

Agreement contained an arbitration clause.” Dissent at 3. Sun

requested that Hodge assist Morales in completing the pre-hire

documents. Morales did not ask Hodge for an explanation of the

Agreement, and Hodge testified that if Morales had asked

questions, he “would have translated to him what [a specific] page

[was] for.” App. 90. Indeed, Morales initialed each page of the

Agreement, including those containing the arbitration provisions,

without requesting any specific translations. See App. 126-38. 

While we are sympathetic to Morales’ situation, Hodge did

not misread or misrepresent the Agreement to Morales, and the

“incomplete translation” was due to Morales’ failure to request any

explanation or translation. Furthermore, we reiterate that Morales

worked under this Agreement for almost a year without question or

complaint.

8

entire Agreement, and he is bound by the arbitration clause

therein. 

2

B.

Sun also asserts that the District Court improperly applied

a heightened standard of “knowing consent” to the Agreement’s

arbitration clause because of the valuable rights relinquished under

the provision. Sun contends that, contrary to ordinary contract law

principles, the District Court required that Morales have knowledge

and understanding of the arbitration clause’s terms in order for the

provision to be enforceable. While it is unclear whether the

District Court indeed took such action, we reiterate our holding in

Seus v. John Nuveen & Co., Inc., 146 F.3d 175 (3d Cir. 1998),

overruled on other grounds by Green Tree Financial Corp.-

Alabama v. Randolph, 531 U.S. 79 (2000), that applying a

heightened “knowing and voluntary” standard to arbitration

agreements would be inconsistent with the FAA. See Seus, 146

F.3d at 183-84 (explaining that a “knowing and voluntary”
9

standard meaning “more than with an understanding that a binding

agreement is being entered and without fraud or duress” should not

be applied to arbitration agreements). Morales entered into the

Agreement with Sun without fraud or duress, and he is bound by its

arbitration clause.

IV.

For the foregoing reasons, the judgment of the District Court

will be reversed and the case remanded for the District Court to

enter a stay pending arbitration.
I join the majority in its affirmance of our ruling in Seus v. 3

John Nuveen & Co., Inc., 146 F.3d 175 (3d Cir. 1998), that it

would be inconsistent with the Federal Arbitration Act to apply a

heightened “knowing and voluntary” standard to arbitration

agreements.

12

FUENTES, Circuit Judge, dissenting.

No one disputes that Sun asked Hodge to translate

the Employment Agreement for Morales, who did not read English.

And no one disputes that Hodge failed to translate the arbitration

clause in the Agreement. On this basis, I disagree with my

colleagues’ conclusion that the parties here manifested mutual

assent to the arbitration clause of the Agreement, and I would

therefore affirm the District Court’s decision.3

The majority opens its opinion by asserting that this

case “requires us to determine whether an arbitration clause is

enforceable where one party is ignorant of the language in which

the agreement is written.” Maj. Op. at 2. The problem, however,

is not simply Morales’ ignorance of the language. The gravamen

of this case is that Sun – the other party to the Agreement – took

upon itself the task of translating the Agreement for Morales and,

in doing so, failed to convey the entire contents of the Agreement.

What we must determine is whether this failure resulted in a lack

of mutual assent; I believe that it did.

The law is clear that a party may not be relieved of

his or her obligations pursuant to a contract solely because he or

she cannot understand the language in which that contract is

written. However, the law is also clear that there are certain

circumstances where a person’s inability to comprehend the

language in which a contract is written may result in a lack of

mutual assent. In fact, the very cases upon which the majority

relies acknowledge that such circumstances exist. For example, in

New York Life Insurance Co. v. Kwetkauskas, we noted that “an

illiterate man may bind himself by contract by negligently failing

to learn the contents of an instrument which he has executed,”
11

suggesting that a person who had not acted negligently may not be

so bound. 63 F.2d 890, 891 (3d Cir. 1933) (emphasis added).

Similarly, in Booker v. Robert Half International, Inc., the court

stated that failure “to read or understand an arbitration agreement,

or an employer’s failure to explain it, simply will not constitute

‘special circumstances’ [that] warrant[] relieving an employee from

compliance with the terms of an arbitration agreement that she

signed,” suggesting that “special circumstances” do exist. 315 F.

Supp. 2d 94, 101 (D.D.C. 2004) (emphasis added).

The majority appears to agree that there can be such

“special circumstances,” but suggests that these circumstances exist

only in a case where a fraud has been perpetuated. Maj. Op. at 7.

I do not think that this is correct. In New York Life, the court

noted that an illiterate signer will be held to a contract if he or she

negligently failed to learn its contents; it does not automatically

follow that an illiterate signer who is unaware of the contents of a

contract but did not act in a negligent fashion will similarly be held

to that contract unless he or she was a victim of fraud. 63 F.2d at

891. In Pimpinello v. Swift & Co., another case cited by the

majority, the court found that if a signer is “illiterate, or blind, or

ignorant of the alien language of the writing” and the contents of

a contract “are misread or misinterpreted to him” or her, the writing

would be considered void unless the signer had acted negligently.

253 N.Y. 159, 163 (1930) (emphasis added). The court did not

suggest that the contents would need to be intentionally “misread

or misinterpreted” in order to void the writing.

More recently, in American Heritage Life Insurance

Co. v. Lang, the Fifth Circuit considered similar facts as those here.

321 F.3d 533 (5th Cir. 1993). In Lang, also cited by the majority,

an illiterate man executed a series of loans with a representative of

an insurance company. Id. at 535. The representative was aware

that the man was unable to read, and took on the task of explaining

each document to him. Id. at 536. The man later testified that the

representative never explained that some of the documents were

arbitration agreements, and brought suit charging both that the

arbitration clause was invalid and that the representative had
12

defrauded him. Id. The Lang court addressed the questions of

mutual assent and fraud separately. It noted that while illiteracy

alone is not a sufficient basis for the invalidation of an arbitration

agreement, the man’s “alleged ignorance of the fact that he was

signing arbitration agreements signifies that he may not have

consented to them and a meeting of the minds may not have

existed.” Id. at 538; see also id. at 539 (concluding that “there

[was] sufficient evidence to indicate that the arbitration agreements

may not have been valid under ordinary contract principles,”

including the principle that both parties must manifest mutual

assent). While the case was ultimately remanded so that the district

court could reconsider the claim of fraud, the remand did not affect

the court’s separate observation that a “meeting of the minds” may

not have not occurred. Id. at 539.

Here, although Morales does not allege that Sun

acted fraudulently, he does allege that Hodge, who was translating

the document at Sun’s direction, failed to inform Morales that the

Agreement contained an arbitration clause. Importantly, Sun does

not dispute the following factual findings made by the District

Court: (1) Morales was unable to read the contract; (2) Sun

assigned Hodge, a coworker who himself was not fluent in English,

to translate the document for Morales; (3) Hodge, in translating the

document, neglected to translate the arbitration clauses; and (4) as

a result of Hodge’s incomplete translation, Morales was not aware

that the Agreement contained an arbitration clause. (App. 3-5.) I

also note, as does the majority, that the record demonstrates that

Sun was under pressure to hire Morales in an expedient manner,

and urged him to accept Hodge’s translation and to sign the

Agreement immediately. Maj. Op. at 3.

As in Lang, Morales did not read English and Sun

was aware of his inability to understand the contents of the

Agreement. As in Lang, Sun also represented that it (via Hodge)

would explain what was contained in the Agreement. And as in

Lang, Morales’ failure to realize that an arbitration provision was

contained within the Agreement was the direct result of Hodge’s

failure to properly translate the document, just as the failure of the
 The majority notes that Morales “worked under the 4

Agreement for almost a year without complaint.” Maj. Op. at 8

n.2. This fact is irrelevant to the analysis. Until there was an

employment dispute between Morales and Sun, Morales had no

reason to review the Agreement to determine whether it contained

clauses that had not originally been translated for him. 

The majority opinion regrettably provides no incentive for 5

employers such as Sun to implement procedures that might avoid

such a situation.

11

plaintiff in Lang to realize he had signed an arbitration provision

was because the representative didn’t inform him of that fact.

Neither Morales nor the plaintiff in Lang was aware of what they

did not know about the contract, and not because they could not

read English and acted negligently by not bothering to learn the

terms of the contract; but because the translation they were

presented with by the other party to the contract, which they had no

reason to suspect and no immediate way to verify, was incorrect or

incomplete.4

If the facts of this case were different, I might adopt

the majority’s position. For example, if Sun had simply handed the

Agreement to Morales and indicated that it was Morales’

responsibility to find a translator, and Morales had employed a

incompetent translator who failed to translate the arbitration clause,

I would agree that Morales was bound by the Agreement.

However, when Sun made the decision to insert itself between

Morales and the contract, it created a situation where lack of

mutual assent could, and did, occur. Because I do not believe it 5

was negligent or otherwise improper for Morales to rely upon the

translation provided by Sun, and because Morales was not

informed in the course of that translation that the Agreement

contained an arbitration clause, I agree with the District Court that

Morales did not “manifest an intention” to be bound by the

arbitration clause.
12

For the foregoing reasons, I respectfully dissent.