Davis v. Nordstrom, Inc.

• Decision Date: 23 June 2014
• Docket Number: No. 12–17403.,12–17403.
• Citation: 755 F.3d 1089
• Parties: Faine DAVIS, individually and on behalf of all others similarly situated, Plaintiff–Appellee, v. NORDSTROM, INC., Defendant–Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

755 F.3d 1089

Faine DAVIS, individually and on behalf of all others similarly situated, Plaintiff–Appellee,

v.NORDSTROM, INC., Defendant–Appellant.

No. 12–17403.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Dec. 6, 2013.

Filed June 23, 2014.

George S. Howard, Jr. (argued), Jones Day, San Diego, CA; Julie A. Dunne and Dominic J. Messiha, Littler Mendelson, P.C., Los Angeles, CA; Michael G. Leggieri, Littler Mendelson, P.C., Sacramento, CA, for Defendant–Appellant.

Courtland W. Creekmore (argued), Matthew R. Bainer, and Hannah R. Salassi, Scott Cole & Associates, APC, Oakland, CA, for Plaintiff–Appellee.

Appeal from the United States District Court for the Northern District of California, Claudia Wilken, Chief District Judge, Presiding. D.C. No. 4:11–cv–03956–CW.

Before: JOHN T. NOONAN and PAUL J. WATFORD, Circuit Judges, and WILLIAM E. SMITH, Chief District Judge.^*

OPINION

SMITH, Chief District Judge:

Following the United States Supreme Court's decision in AT&T Mobility LLC v. Concepcion, ––– U.S. ––––, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011), ¹ Appellant Nordstrom, Inc. (“Nordstrom”) made revisions to the employee arbitration policy ² contained in its employee handbook. These changes precluded employees from bringing most class action lawsuits. Despite these changes, weeks later, Nordstrom employee Faine Davis filed a class action lawsuit on behalf of herself and other similarly situated employees, alleging that Nordstrom violated various state and federal employment laws.

In time, Nordstrom, relying on the revised arbitration policy in its employee handbook sought to compel Davis to submit to individual arbitration of her claims. The district court held that Davis and Nordstrom did not enter into a valid arbitration agreement with respect to the revision, and therefore denied Nordstrom's motion to compel arbitration. Nordstrom appeals the district court's decision. Because we find that Nordstrom and Davis did indeed enter into a valid agreement to arbitrate disputes on an individual basis, we REVERSE the district court and REMAND for further proceedings consistent with this order.

I. Standard of Review

We review the district court's decision to deny the motion to compel arbitration de novo. Kilgore v. KeyBank Nat'l Ass'n, 718 F.3d 1052, 1057 (9th Cir.2013). Factual findings are reviewed for clear error, Ticknor v. Choice Hotels Int'l, Inc., 265 F.3d 931, 936 (9th Cir.2001), but where no facts are in dispute our entire review is de novo. Pac. Reinsurance Mgmt. Corp. v. Ohio Reinsurance Corp., 814 F.2d 1324, 1327 (9th Cir.1987).

II. Background

The basic facts are straightforward and not in dispute. On August 11, 2011, Davis filed a purported class action lawsuit against Nordstrom seeking redress for nonpayment of wages, failure to provide meal periods and rest breaks, and unfair competition. Relying on the company's employee handbook, Nordstrom moved to compel Davis to submit to individual arbitration of her claims. Davis acknowledges that she received a copy of the handbook when she first took her position at Nordstrom, and during her employment the company revised the handbook several times, always notifying Davis of the changes.

Two provisions of this handbook matter for this appeal. The first explained the circumstances under which Nordstrom employees were required to arbitrate their disputes with the company (the “arbitration provision”); the second required Nordstrom to provide employees with 30 days written notice of any substantive changes to the arbitration provision (the “notice provision”). The handbook provided that the notice provision was included to “allow employees time to consider the changes and decide whether or not to continue employment subject to the changes.”

Prior to July 2011, the arbitration provision required employees to arbitrate individual disputes, but permitted employees to bring class action lawsuits against the company. In July 2011 and again in August 2011, Nordstrom revised the arbitration provision; both revisions required employees to arbitrate nearly all claims individually, and precluded employees from filing most class action lawsuits. To comply with the notice provision, Nordstrom sent letters to employees, including Davis, in June 2011 informing them of the change in the arbitration policy.³ In this June letter, Nordstrom informed employees that “the Nordstrom Dispute Resolution Program has been in place for several years. We've recently made updates to the program and want to ensure you have the current version.” Along with this letter, Nordstrom included a copy of the entire Dispute Resolution Program, including the arbitration provision.

III. Discussion

The Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1, et seq., reflects a “liberal federal policy” in favor of arbitration. Concepcion, 131 S.Ct. at 1745. Under the FAA, the role of the district court is to determine if a valid arbitration agreement exists, and if so, whether the agreement encompasses the dispute at issue. Kilgore, 718 F.3d at 1057–58.

A. Contract Formation

The district court determined that no revised agreement was ever reached—holding that Nordstrom had failed to provide employees with the required 30 days notice of the change in the arbitration provision, and to inform employees that their continued employment constituted acceptance of the new arbitration provision. Because we hold that Nordstrom complied with the notice requirement, and that California law imposes no duty upon Nordstrom specifically to inform employees that their continued employment constituted acceptance of new terms of employment, we reverse.

Arbitration is a product of contract. Parties are not required to arbitrate their disagreements unless they have agreed to do so. Pinnacle Museum Tower Ass'n v. Pinnacle Mkt. Dev. (U.S.), LLC, 55 Cal.4th 223, 236, 145 Cal.Rptr.3d 514, 282 P.3d 1217 (Cal.2012). A contract to arbitrate will not be inferred absent a “clear agreement.” Avery v. Integrated Healthcare Holdings, Inc., 218 Cal.App.4th 50, 59, 159 Cal.Rptr.3d 444 (2013). When determining whether a valid contract to arbitrate exists, we apply ordinary state law principles that govern contract formation. Ferguson v. Countrywide Credit Indus., Inc., 298 F.3d 778, 782 (9th Cir.2002). In California, a “clear agreement” to arbitrate may be either express or implied in fact. Pinnacle Mkt. Dev., 55 Cal.4th at 236, 145 Cal.Rptr.3d 514, 282 P.3d 1217.

The handbook Davis received when she began work established the ground rules of her employment, including that Davis and Nordstrom would arbitrate certain disputes. She accepted employment on this basis, so there was a binding agreement to arbitrate. Under California law, Nordstrom was permitted to unilaterally change the terms of Davis's employment, including those terms included in its employee handbook. Craig v. Brown & Root, Inc., 84 Cal.App.4th 416, 422, 100 Cal.Rptr.2d 818 (Cal.Ct.App.2000). Nordstrom was also entitled to enforce the terms of employment identified in this handbook, and any modifications made to it, as it could any other contract. See id. Indeed, “[i]t is settled that an employer may unilaterally alter the terms of an employment agreement,⁴ provided such alteration does not run afoul of the [California] Labor Code.” Schachter v. Citigroup, Inc., 47 Cal.4th 610, 619, 101 Cal.Rptr.3d 2, 218 P.3d 262 (Cal.2009). Where an employee continues in his or her employment after being given notice of the changed terms or conditions, he or she has accepted those new terms or conditions. Id. at 620, 101 Cal.Rptr.3d 2, 218 P.3d 262.

The parties have not provided, and we have not found, a case dictating that under California law Nordstrom was required to provide notice of the change in any particular way. Instead, “an employer may terminate or modify a contract with no fixed duration period after a reasonable time period, if it provides employees with reasonable notice, and the modification does not interfere with vested employee benefits.” Asmus v. Pac. Bell, 23 Cal.4th 1, 11, 96 Cal.Rptr.2d 179, 999 P.2d 71 (Cal.2000). Of course, if an employer has prescribed methods of policy modification and employee notice, it is incumbent upon the employer to abide by those methods. Ferguson, 298 F.3d at 786. Here, the terms of the arbitration provision in Davis's initial handbook stated that Davis would be provided “30 days written notice of substantive changes ... to allow [her] time to consider the changes and decide whether or not to continue employment subject to the changes.”

The first question is whether Nordstrom complied with the notice requirement. The district court determined that Nordstrom made the revised arbitration provisions immediately applicable to its employees without providing 30 days written notice as required by the employee handbook. In reaching this conclusion the district court found three factors determinative: first, Nordstrom failed to submit evidence that the company told employees the policy change only went into effect after 30 days; second, the cover letter Nordstrom sent to employees accompanying the revised arbitration provision informed employees that the “current version” of the arbitration provision was enclosed implying it was immediately effective and; third, a Nordstrom human resources document set forth internal measures for implementing the changed policy. Davis relies on the same factors in this appeal.

Nordstrom argues that it sent the revised arbitration provision to all employees, including Davis, and that it did not enforce the provision against Davis, or anyone else, within 30 days of her receiving it. Additionally, Nordstrom asserts that during this 30 day time period, Davis never objected to the revised provision and she did not quit her job.

While the communications with its employees were not the model of clarity, we find that Nordstrom satisfied the minimal requirements under California law for providing...