Brown v. Dillard's, Inc.

• Decision Date: 06 December 2005
• Docket Number: No. 03-56719.,03-56719.
• Citation: 430 F.3d 1004
• Parties: Stephanie BROWN, Plaintiff-Appellee, v. DILLARD'S, INC., a corporation; Dillard's Store Services, Inc., d/b/a Condev West, Inc., a corporation, Defendants-Appellants, and Dillard's Department Store, a corporation, Defendant.
• Court: U.S. Court of Appeals — Ninth Circuit

430 F.3d 1004

Stephanie BROWN, Plaintiff-Appellee, v. DILLARD'S, INC., a corporation; Dillard's Store Services, Inc., d/b/a Condev West, Inc., a corporation, Defendants-Appellants, and Dillard's Department Store, a corporation, Defendant.

No. 03-56719.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted April 7, 2005.

Filed December 6, 2005.

David Raizman, Bryan Cave LLP, Santa Monica, CA, for the appellant.

Lisa A. Jordan, Van Nuys, CA, for the appellee.

Appeal from the United States District Court for the Central District of California; Nora M. Manella, District Judge, Presiding. D.C. No. CV-03-03903-NM.

Before: NELSON, W. FLETCHER, and BEA, Circuit Judges.

WILLIAM A. FLETCHER, Circuit Judge:

Defendants Dillard's Department Store and Dillard's Store Services (collectively "Dillard's") require employees to agree to arbitrate employment-related claims under what it calls "Dillard's Fairness in Action Program." Plaintiff Stephanie Brown was an employee at one of Dillard's department stores in California until she was fired.

Brown filed a notice of intent to arbitrate a wrongful termination claim under the Fairness in Action Program. Dillard's refused to participate in the arbitration proceedings. Brown then filed suit in Los Angeles County Superior Court. At that point, Dillard's decided that it wanted to arbitrate her claim. Dillard's removed Brown's suit to federal court and moved to compel arbitration. Assuming the truth of Brown's allegations, the district court denied the motion, holding that the arbitration agreement was unconscionable and thus unenforceable under California law.

We conditionally affirm on a different ground, and we remand to the district court. We do not express a view on whether the agreement was unconscionable under California law. Rather, assuming the truth of Brown's allegations, we hold that when an employer enters into an arbitration agreement with its employees, it must itself participate in properly initiated arbitration proceedings or forego its right to compel arbitration. That is, we hold that Dillard's cannot compel Brown to honor an arbitration agreement of which it is itself in material breach.

I

This case comes to us in a somewhat unusual procedural posture. After Dillard's removed Brown's suit to federal district court, it moved to compel arbitration. The district court had before it plaintiff's complaint and defendants' answer. Defendants' answer admitted and denied a few of plaintiff's allegations. For most allegations, it asserted that it lacked sufficient information to admit or deny. The district court also had before it declarations from five individuals — Brown, Brown's attorney, an employee from Dillard's Legal Office, the Dillard's store manager, and an attorney representing Dillard's in this litigation.

For the limited purpose of ruling on Dillard's motion to compel arbitration, the district court assumed the truth of allegations in plaintiff's complaint. For the limited purpose of reviewing the district court's ruling, we, too, assume the truth of those allegations. To the degree that our conclusion that Dillard's breached its arbitration agreement with Brown depends on disputed facts, Dillard's is free on remand to contest those facts.

Stephanie Brown started working for Dillard's Store Services as a sales associate in the Juniors Department at a Dillard's Department Store in Palmdale, California, sometime around April 2001. On July 21, 2001, Brown was summoned to the office of her supervisor, Andrea Howard, along with several coworkers. Howard told the employees that the company was starting the "Dillard's Fairness in Action Program." In effect, the Fairness in Action Program is an arbitration agreement, which employees like Brown were deemed to have accepted simply by continuing their employment. A guide to the program told employees that "[t]he Fairness in Action Program is fast, straightforward, and much less expensive than taking a dispute to a court of law — but most of all, it is fair to both you and Dillard's." (Emphasis in original.) The guide further explained that

[a]cross the country, many companies and their employees are electing to settle disputes using this method, and in doing so are avoiding long, drawn-out court battles where attorney's fees may be overwhelming for both parties. And more than just saving time and money, the Fairness in Action Program assures that each party gets a fair deal — that's what justice is about, after all.

Contrary to the guide's representation, Dillard's did not allow its employees to "elect" — in the sense of "choose voluntarily"— to settle disputes through arbitration. Rather, they were required to arbitrate. Howard told Brown and the other employees that they were required to sign a form titled "Current Associates: Acknowledgment of Receipt of Rules for Arbitration." The form provided,

Effective immediately, all employees (as hereinafter defined) of Dillard's, Inc., its affiliates, subsidiaries and Limited Liability Partnerships (the "Company") shall be subject to the RULES OF ARBITRATION (the "Rules") described below. Employees are deemed to have agreed to the provisions of the Rules by virtue of accepting employment with the Company and/or continuing employment therewith.

One of Brown's coworkers, Monika Gonzales, asked Howard if she could take the agreement home and discuss it with her parents. Howard responded that Gonzalez's job would be in jeopardy if she did not sign the acknowledgment form immediately. Along with her coworkers, Brown signed the form acknowledging receipt of the rules for arbitration and returned it to Howard. Brown says that she was not provided with a copy of the rules. The meeting with Howard lasted less than five minutes.

Dillard's admits that Brown worked for its Palmdale store, that she signed the "Fairness in Action Program" arbitration agreement, and that she gave it to Howard.

At the Palmdale store, Dillard's required employees to "punch" in and out on a computer system at the beginning and end of their shifts. At shift changes, many people needed to use the computer, so employees were given a six-minute grace period during which they could clock in and still be considered on time. The computer system was frequently down, so a stack of paper time sheets next to the computer served as a backup. The paper time sheets allowed Dillard's to manipulate employees' work hours. When working the evening shift, Brown was scheduled to get off work at 9:15 p.m., but she was often not dismissed until as much as forty minutes later when the store was fully cleaned. Brown would fill in a time sheet on some of these occasions, stating that she had stopped working at 9:15 p.m., because Dillard's did not want her to qualify for overtime pay.

On April 29, 2002, Brown informed Howard that she had received a job offer from an employer called Countrywide. Brown told Howard that she intended to work at both Dillard's and Countrywide so that she could save money to attend air traffic control school. Howard told Brown that she would probably not be allowed to work two jobs. The next day, Brown spoke to the store manager, Tricia Alvillar, who told her that she was not willing to help Brown arrange a schedule that would allow her to work both jobs. Brown told the store manager that she would ask Countrywide to accommodate her Dillard's work schedule.

On May 2, 2002, Brown received a phone call from an assistant to Howard. Brown was not scheduled to work that evening, but the assistant told her the store was shorthanded and asked her to work the evening shift. Brown agreed to report to work at 6 p.m. Brown says that she was told not to report before 6 p.m., because, if she did, she would work enough hours to qualify for overtime. Brown says that she arrived at the store at 5:58 p.m. and that upon arriving she spoke to a coworker (described only as "Sue") whose shift ended at 6:00 p.m. Brown clocked in on the computer.

At work the following day, Brown was asked to report to Sue Porter, secretary to the operations manager at the store. Porter asked Brown what time she had arrived at work the day before, and she asked her to fill out a time entry form. Brown told Porter that she had clocked in on the computer and asked why she needed to fill in a paper form. Porter told Brown that the "punch had not taken," and told Brown that it was "no big deal." This was the first time that Brown had been summoned to complete a time entry form.

Dillard's admits that Brown spoke to Alvillar about her new job, and states that Brown told Alvillar that she would discuss scheduling conflicts between the two jobs with her new employer. Dillard's also admits that Porter's shift ended at 6:00 p.m. on May 2, and that Porter saw Brown arrive at work that evening. Dillard's also admits that Brown was asked to report to Porter on May 3, and that she was asked to fill out a time entry form on the ground that the computer "had not recorded each of her arrivals and departures on May 2."

Later that same day, Brown was summoned to the office of Karen Burke, the store's operation manager. Howard and her assistant were present upon Brown's arrival. Burke told Brown that they had reviewed a videotape of the previous day and that she had arrived at 6:10 p.m., not 6:00 p.m. as she had recorded on the time form. Burke told Brown that she was being terminated for falsifying documents to defraud Dillard's out of pay for ten minutes of time. Burke told Brown that "people like you cost the company money." When Brown began to cry, Burke said, "You already got another job, right? Then everything should be okay. This won't be a problem for you will it?"

Dillard's admits that Brown met with Burke on May 3, and that Burke asked Brown what time she had arrived at work on the previous evening. Dillard's admits that when Brown replied that she had arrived at 6:00 p.m., Burke responded that she had reviewed the...