Hill v. Peoplesoft Usa, Inc.

• Decision Date: 22 June 2005
• Docket Number: No. 04-2187.,04-2187.
• Citation: 412 F.3d 540
• Parties: Karren Y. HILL, Plaintiff-Appellee, v. PEOPLESOFT USA, INCORPORATED, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

412 F.3d 540

Karren Y. HILL, Plaintiff-Appellee, v. PEOPLESOFT USA, INCORPORATED, Defendant-Appellant.

No. 04-2187.

United States Court of Appeals, Fourth Circuit.

Argued May 25, 2005.

Decided June 22, 2005.

ARGUED: Fred Saul Sommer, Shulman, Rogers, Gandal, Pordy & Ecker, P.A., Rockville, Maryland, for Appellant. Patrick Joseph Massari, Washington, D.C., for Appellee. Daniel H. Handman, Shulman, Rogers, Gandal, Pordy & Ecker, P.A., Rockville, Maryland, for Appellant.

Before MOTZ and GREGORY, Circuit Judges, and HAMILTON, Senior Circuit Judge.

Vacated and remanded with instructions by published opinion. Senior Judge HAMILTON wrote the opinion, in which Judge MOTZ and Judge GREGORY joined.

OPINION

HAMILTON, Senior Circuit Judge.

The issue in this case is whether the district court erred when it refused to compel Karren Hill (Hill) to arbitrate the discrimination claims she brought against PeopleSoft USA, Incorporated (PeopleSoft). The district court refused to compel arbitration, holding that the arbitration agreement signed by the parties was not supported by consideration. PeopleSoft appeals, and, for the reasons stated below, we vacate the district court's judgment and remand the case to the district court with instructions to grant the motion to compel arbitration.

I

In August 2001, by way of an offer letter (the Offer Letter), PeopleSoft offered Hill the position of customer product consultant. In the Offer Letter, PeopleSoft indicated that, as a condition of her employment, Hill would have to sign a separate arbitration agreement (the Arbitration Agreement).

The Arbitration Agreement signed by the parties is a comprehensive six-page document which sets forth both Hill and PeopleSoft's obligations concerning arbitration. Specifically, in the Arbitration Agreement, the parties agreed to arbitrate "all" claims arising out of Hill's employment relationship with PeopleSoft, except for those claims involving workers compensation, unemployment insurance, or the administrative jurisdiction of a labor commissioner, the National Labor Relations Board, or the Equal Employment Opportunity Commission. Moreover, in the Arbitration Agreement, PeopleSoft retained the right to enforce, in court, any violation of its intellectual property rights.

The Arbitration Agreement also sets forth the process for requesting arbitration, the parties' rights concerning legal representation in the arbitration proceeding, the rules governing the selection of an arbitrator, the arbitrator's authority, the pleadings and extensive discovery allowed in the arbitration proceeding, the hearing procedure, and information regarding fees and costs. Moreover, in the Arbitration Agreement, neither party reserved the right to modify the agreement's terms.

In the Offer Letter, PeopleSoft also indicated that Hill, by accepting PeopleSoft's offer of employment, was agreeing to be bound by the company's "Internal Dispute Solution" program (the IDS Program). Unlike the Arbitration Agreement, the IDS Program is not a document signed by the parties. Rather, the IDS Program is a company policy generally applicable to all employees. It involves a three-stage process for resolving all "legal employment claim(s) or dispute(s)." Step one, the open-door policy, allows an employee to raise any issue with her manager. Step two, the employee relations step, involves action by the company's human resources department and may involve internal or external mediation of a claim or dispute. If the first two steps are unsuccessful at resolving the claim or dispute, the parties must proceed to the third step — binding arbitration. Unlike the separate Arbitration Agreement, in the IDS Program PeopleSoft reserved the right to "change" the program "without notice."

On January 28, 2004, Hill brought this action against PeopleSoft in the United States District Court for the District of Maryland. According to the complaint, numerous acts of discrimination by Hill's coworkers and superiors in PeopleSoft's Bethesda, Maryland office and elsewhere formed the basis of her claims of sexual harassment, hostile work environment, retaliation, and race discrimination. On February 18, 2004, PeopleSoft filed a motion to compel arbitration. In response, Hill filed an opposition to the motion to compel arbitration and filed her own cross-motion for summary judgment. In her cross-motion for summary judgment, Hill argued that the Arbitration Agreement was both procedurally and substantively unconscionable and that PeopleSoft waived its right to proceed to arbitration. On August 31, 2004, the district court denied PeopleSoft's motion to compel arbitration, and PeopleSoft noted a timely appeal.

II

Under the Federal Arbitration Act (the FAA), a court must stay "any suit or proceeding" pending arbitration of "any issue referable to arbitration under an agreement in writing for such arbitration." 9 U.S.C. § 3. Because ascertaining the scope of an arbitration agreement is a task of contract interpretation, we review de novo a district court's determination of the arbitrability of a dispute. United States v. Bankers Ins. Co., 245 F.3d 315, 319 (4th Cir.2001). At the same time, we give due regard to the federal policy favoring arbitration and resolve "any doubts concerning the scope of arbitrable issues ... in favor of arbitration." Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983).

The Supreme Court has directed that we "apply ordinary state-law principles that govern the formation of contracts," First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995), and the "federal substantive law of arbitrability." Moses H. Cone Mem'l Hosp., 460 U.S. at 24, 103 S.Ct. 927. Thus, state law determines questions "concerning the validity, revocability, or enforceability of contracts generally," Perry v. Thomas, 482 U.S. 483, 493 n. 9, 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987), but the FAA creates "a body of federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the Act." Moses H. Cone Mem'l Hosp., 460 U.S. at 24, 103 S.Ct. 927. The FAA constitutes "a congressional declaration of a liberal federal policy favoring arbitration agreements, notwithstanding any state substantive or procedural policies to the contrary." Id.

Because this case involves the question of whether the Arbitration Agreement was a valid contract, we turn to Maryland law, which the parties agree applies in this case. Under Maryland law, to be binding and enforceable, an arbitration agreement must be a valid contract. Cheek v. United Healthcare of Mid-Atlantic, Inc., 378 Md. 139, 835 A.2d 656, 661 (2003). In examining whether an arbitration agreement is a valid contract, we examine only the language of the arbitration agreement itself. Id. at 664-65. Moreover, to be binding and enforceable, a contract must be supported by consideration. Id. at 661. A "promise becomes consideration for another promise only when it constitutes a binding obligation." Id. Unlike a binding obligation, an "`illusory promise' appears to be a promise, but it does not actually bind or obligate the promisor to anything." Id. at 662....