Howard v. Oakwood Homes Corp.

Decision Date06 July 1999
Docket NumberNo. COA98-1101.,COA98-1101.
Citation516 S.E.2d 879,134 NC App. 116
PartiesCathy HOWARD, Plaintiff-Appellee, v. OAKWOOD HOMES CORP., Defendant-Appellant.
CourtNorth Carolina Court of Appeals

Gray, Newell & Johnson, LLP, by Angela Newell Gray, Greensboro, for plaintiff-appellee.

Constangy, Brooks & Smith, LLC, by W.R. Loftis, Jr., and Virginia A. Piekarski, Winston-Salem, for defendant-appellant.

MARTIN, Judge.

Defendant Oakwood Homes Corp. appeals the denial of its motion to compel arbitration and stay judicial proceedings in the underlying civil action. Briefly summarized, the record discloses that defendant manufactures and sells homes throughout the United States and employs approximately 9,600 employees to that end. Plaintiff Cathy Howard began employment with defendant on a temporary basis in 1991, and accepted a full time position as an at-will employee in defendant's Title Department in September 1992.

On 1 May 1997, defendant implemented a Dispute Resolution Program ("DRP") requiring defendant and its employees to submit to dispute resolution as the exclusive means of resolving a variety of employment disputes, including those arising out of an employee's termination. The program provides that an employee with a claim may submit a written complaint to defendant's Director of Human Resources. The complaint is then investigated, and an answer is provided to the employee. If the employee is not satisfied, the employee may request non-binding mediation conducted by a mediator provided by the American Arbitration Association. If the defendant and the employee are unable to resolve the dispute through mediation, the employee may elect to submit the dispute to binding arbitration in which the arbitrator may grant any remedy or relief that would have been available through the courts. Under the DRP, all arbitrations are conducted in accordance with the Federal Arbitration Act ("FAA").

Prior to the 1 May 1997 effective date of the DRP, on 1 April 1997, defendant's Vice-President of Human Resources mailed to covered employees a copy of the DRP with a memorandum informing employees that both defendant and the employee would be bound by the program, and that an employee's decision to continue employment with defendant would constitute an agreement to be bound by the terms of the DRP. Additionally, on 7 April 1997, Paul Macksood, defendant's Director of Human Resources, distributed an office memorandum to employees informing them of scheduled meetings at which employees were to be instructed on the terms of the DRP and permitted to ask questions about it.

On 3 June 1997, following implementation of the DRP, plaintiff's employment with defendant was terminated for poor performance. Plaintiff complained that she was not issued a final warning prior to her termination. In response to her complaint, Mr. Macksood informed plaintiff that her claim was treated as though it had been brought under the DRP, that it had been investigated accordingly, and although defendant was not required to issue plaintiff a final warning, defendant would provide plaintiff another opportunity to improve her level of performance. Plaintiff's termination was rescinded. Mr. Macksood reminded plaintiff by letter that she was bound by the DRP and attached a copy of the program thereto.

On 18 July 1997 plaintiff was again terminated for poor performance, and on 23 April 1998 she commenced the underlying civil action against defendant, alleging wrongful termination, negligent infliction of emotional distress, negligent supervision, negligent retention, and intentional infliction of emotional distress. On 12 June 1998 defendant moved for an order to stay judicial proceedings and compel plaintiff to submit her claim to dispute resolution pursuant to the DRP. The trial court denied defendant's motion, concluding that no agreement to arbitrate existed due to lack of consideration.

Where a trial court's order, such as the order sub judice, fails to resolve all issues between all parties in an action, the order is not a final judgment, but rather is interlocutory. First Atlantic Management Corp. v. Dunlea Realty Co., 131 N.C.App. 242, 507 S.E.2d 56 (1998). While an interlocutory order is generally not directly appealable, such an order will be considered "`if the trial court's decision deprives the appellant of a substantial right which would be lost absent immediate review.'" N.C. Ins. Guar. Ass'n v. Burnette, 131 N.C.App. 840, 843, 508 S.E.2d 837, 839 (1998) (citation omitted); see also N.C. Gen.Stat. § 1-277, 7A-27. The right to arbitrate a claim is a substantial right which may be lost if review is delayed, and an order denying arbitration is therefore immediately appealable. Burke v. Wilkins, 131 N.C.App. 687, 507 S.E.2d 913 (1998).

In its sole assignment of error, defendant argues that its motion to compel arbitration should have been granted, and that the trial court erred in concluding that the DRP was not an enforceable agreement due to lack of consideration. We agree.

We note at the outset that North Carolina "`has a strong public policy favoring the settlement of disputes by arbitration'", and that "[o]ur Supreme Court has held that where there is any doubt concerning the existence of an arbitration agreement, it should be resolved in favor of arbitration." Martin v. Vance, ___ N.C.App. ___, ___, 514 S.E.2d 306, 309 (1999) (citing Johnston County v. R.N. Rouse & Co., 331 N.C. 88, 91-92, 414 S.E.2d 30, 32 (1992)). Although arbitration is favored in the law, in order to be enforced, the underlying agreement must first be shown to be valid as determined by a common law contract analysis. Routh v. Snap-On Tools Corp., 108 N.C.App. 268, 423 S.E.2d 791 (1992). It is a basic principle of contract law that in order to be valid, an agreement must be supported by adequate consideration. Deans v. Layton, 89 N.C.App. 358, 368, 366 S.E.2d 560, 567, disc. review denied, 322 N.C. 834, 371 S.E.2d 276 (1988) (citation omitted). "Mutual promises may constitute reciprocal consideration to support a contract." Id.

In Vance, supra, this Court recently ruled on the validity of an agreement to arbitrate in the employment context. The plaintiff in Vance had been employed with the defendant since 1990, and in 1994 the defendant implemented an alternative dispute resolution grievance procedure which was set forth in the personnel policy manual. In holding that the agreement was supported by adequate consideration, this Court stated,

... the agreement to arbitrate does not fail for lack of consideration. Mutual binding promises provide adequate consideration to support a contract. Where each party agrees to be bound by an arbitration agreement, there is sufficient consideration to uphold the agreement.

Vance at ___, 514 S.E.2d at 310 (citations omitted). The Vance court noted that other jurisdictions have held that mutual promises to arbitrate constitute sufficient consideration, specifically citing the Fourth Circuit opinions in O'Neil v. Hilton Head Hospital, 115 F.3d 272 (4th Cir.1997), and Johnson v. Circuit City Stores, 148 F.3d 373 (4th Cir. 1998). We too find such cases instructive.

In O'Neil, the plaintiff had been employed with defendant hospital since 1991. In 1994, the plaintiff signed an agreement that she would arbitrate all claims as a condition of her continued employment. O'Neil at 273. The plaintiff was subsequently terminated, and she filed suit, arguing that the agreement was invalid for lack of consideration where it was not binding on the hospital. Id. at 274-75. The Fourth Circuit, in holding that the agreement was mutually binding, stated that the employer's proffer of the agreement implied that both employer and employee would be bound by the agreement, and that the employer had consistently argued that it was bound by the agreement. Id. at 275. The court held that a mutual agreement existed, and that "a mutual promise to arbitrate constitutes sufficient consideration for this arbitration agreement." Id. (citation omitted).

In Johnson, the Fourth Circuit reversed the district court's conclusion that an arbitration agreement was void for lack of consideration, and held that an agreement between the parties to be bound by the same rules was sufficient consideration to support the arbitration agreement. Johnson at 378. The court stated,

As in O'Neil, both parties in this case agreed to be bound by the arbitration process for the resolution of any claim required to be submitted to arbitration under the Dispute Resolution Agreement. Therefore, we hold that the Dispute Resolution Agreement was supported by adequate consideration .... no consideration above and beyond the agreement to be bound by the arbitration process was required.

Id. Following this Court's holding in Vance, and applying the reasoning of O'Neil and Johnson, we hold that the mutual promise to abide by the provisions of the DRP and to relinquish the right to pursue certain disputes in court is sufficient consideration to support the DRP agreement.

Moreover, we are unpersuaded by plaintiff's argument that there was no mutual agreement to be bound by the terms of the DRP. As in O'Neil, supra, by proffering the DRP, defendant has at least implicitly agreed to be mutually bound by the DRP, and, as in O'Neil, defendant has consistently argued that it is bound by the DRP and has shown a commitment to arbitration by virtue of this action. Moreover, the DRP provides that all...

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