Hubner v. Cutthroat Communications, Inc.

• Decision Date: 04 December 2003
• Docket Number: No. 03-060.,03-060.
• Citation: 80 P.3d 1256,2003 MT 333
• Court: Montana Supreme Court
• Parties: Elizabeth HUBNER, Plaintiff and Respondent, v. CUTTHROAT COMMUNICATIONS, INC., Defendant and Appellant.

80 P.3d 1256

2003 MT 333

Elizabeth HUBNER, Plaintiff and Respondent, v. CUTTHROAT COMMUNICATIONS, INC., Defendant and Appellant.

No. 03-060.

Supreme Court of Montana.

Submitted on Briefs July 30, 2003.

Decided December 4, 2003.

For Appellant Robert L. Sterup, Holland & Hart, LLP, Billings, Montana.

For Respondent Daniel P. Buckley, Berg, Lilly & Tollefsen, P.C., Bozeman, Montana.

Justice JOHN WARNER delivered the Opinion of the Court.

¶ 1 Cutthroat Communications (Cutthroat) appeals an order of the Eighteenth Judicial District Court, Gallatin County, denying its motion to compel arbitration of Elizabeth Hubner's (Hubner) wrongful discharge from employment claim. We affirm.

¶ 2 We address the following issue on appeal: Did the District Court err in concluding Hubner did not agree to binding arbitration by signing the acknowledgment in her employee handbook?

FACTUAL AND PROCEDURAL BACKGROUND

¶ 3 In late 2000, Hubner was hired to work for Cutthroat as the controller in charge of accounting. She started working on January 2, 2001. On January 19, 2001, she signed an acknowledgment in Cutthroat's employee handbook. This handbook included the arbitration provision at issue here. About one year later, Hubner's employment was terminated. Soon after, Hubner brought a claim for wrongful discharge from employment. Pursuant to § 27-5-115, MCA, Cutthroat moved for a summary disposition compelling Hubner to arbitrate. In response, Hubner asserted that there was no agreement to arbitrate. After conducting a hearing and considering the evidence in accordance with the procedure outlined in § 27-5-115, MCA, the District Court agreed with Hubner and denied Cutthroat's motion. Cutthroat now appeals. Further factual details are discussed below.

STANDARD OF REVIEW

¶ 4 We review a district court's conclusions of law regarding arbitrability like any other issue of contract interpretation; we determine whether the court is correct. Ratchye v. Lucas, 1998 MT 87, ¶ 14, 288 Mont. 345, ¶ 14, 957 P.2d 1128, ¶ 14.

DISCUSSION

¶ 5 Did the District Court err in concluding Hubner did not agree to binding arbitration by signing the acknowledgment in her employee handbook?

¶ 6 In order to address the issue presented, we first set out Cutthroat's employee handbook provisions that give rise to this appeal. First, along the top on the cover page, the employee handbook reads:

NOTICE: THIS EMPLOYEE HANDBOOK CONTAINS A REQUIREMENT THAT ANY CONTROVERSIES ARISING OUT OF OR IN ANY WAY RELATING TO YOUR EMPLOYMENT WITH CUTTHROAT COMMUNICATIONS [sic], INC. ARE SUBJECT TO BINDING ARBITRATION

On page one of the twelve page handbook, there is an introduction which reads:

INTRODUCTION

Employees will be given an Employee Handbook at the time of employment. The Handbook is not intended to address every conceivable policy or situation. It is not a contract of employment. The Handbook includes summaries of key policies, procedures, and standards governing employment at Cutthroat Communications, Inc. ("Employer"). Employees are asked to read it carefully and acknowledge in writing that it has been received and is understood.

On the last page of the handbook, the policies from the previous page regarding Job Restoration continue. Then there is a statement that reads:

NOTICE: THIS CONTRACT AND ANY CONTROVERSIES ARISING OUT OF OR IN ANY WAY RELATING TO YOUR EMPLOYMENT WITH EMPLOYER ARE SUBJECT TO BINDING ARBITRATION.

This statement is immediately followed by four paragraphs which read:

ARBITRATION

Any controversy between the Employee and the Employer, its employees or agents arising out of or in any way relating to Employee's employment or the termination of that employment with Employer for any reason whatsoever shall be determined by arbitration in accordance with the Rules of Procedures [sic] of the American Arbitration Association. The enforceability of the Arbitration Provision in this Agreement shall be determined by Federal, not state, law in accordance which [sic] the Federal Arbitration Act, 9 U.S.C. § 1 et seq.

CHANGES IN POLICY

This Manual has been prepared to provide you with a better understanding of your job with Employer. It contains information about things you can expect from the company, and in turn, what the company expects of you. However, the procedures and plans contained in the booklet and in other statements that may be issued from time to time, are not a contract of any kind. Although Employer expects to continue these procedures and plans, the right is necessarily reserved to make changes, additions or terminations at its sole discretion.

ACKNOWLEDGMENT FOR RECEIPT OF EMPLOYEE HANDBOOK

I, [Elizabeth Hubner is hand printed on the blank line] hereby acknowledge that on this date I have received and read the Employee Handbook provided by Employer.

I understand that I am required to abide by all the conditions and requirements of the Employee Handbook, and further acknowledge that the Employee Handbook shall not constitute a contract of employment between the Employer and myself. The Employee Handbook shall not be construed as creating any relationship other than employment-at-will relationship.

Below this statement is a signature line for the "Employee Signature" which Hubner signed and dated January 19, 2001.

¶ 7 Before turning to the District Court's holding, we note that Hubner and Stanley McHann, Jr., Vice President of Cutthroat, also signed a letter on December 22, 2000, setting out the future terms of Hubner's employment. The letter stated that Hubner would be "asked to sign an employee acknowledgment form." However, we need not address this letter because Cutthroat does not assert Hubner is bound to arbitration by virtue of the letter. Rather, Cutthroat relies on Hubner's signature in the handbook. Further, we also need not address the letter because it states it "is not an employment contract." In addition, the parties dispute Hubner's relative expertise regarding employee handbooks and the extent of her participation and opportunity to comment during the preparation and presentation of the handbook to the employees. However, none of these disputed issues of fact are relevant to our inquiry. Our decision is based on the plain language of the handbook itself, as was the District Court's decision.

¶ 8 Based on the above handbook provisions, the District Court first determined that the handbook contained an ambiguity because it both disclaimed itself as a contract in a number of places including the acknowledgment and referred to itself as "this contract" just before the arbitration provision. The court then followed the rule that ambiguities are to be construed against the drafter and concluded that no contract to arbitrate existed between Hubner and Cutthroat by virtue of the handbook arbitration provision and Hubner's signed acknowledgment of the handbook. The court held that the arbitration provision merely informed Hubner that Cutthroat had a policy of binding arbitration.

¶ 9 Finally, the District Court concluded that the arbitration section of the handbook could not serve as a separate independent contract. In making this conclusion, the court distinguished the terms at issue here from those at issue in Patterson v. Tenet Healthcare (8th Cir.1997), 113 F.3d 832. The District Court stated:

First, the acknowledgment form [in Patterson] was set forth on a separate page of the handbook and introduced by the heading, "IMPORTANT! Acknowledgment Form." Id. Second, the page was removed from the handbook after the employee signed it and was stored in a file. Third, there was a marked transition in language and tone from the paragraph preceding the arbitration clause to the arbitration clause itself. The court found that although the preceding paragraph discussed the company's reservation of its "right to amend, supplement, or rescind" any handbook provisions, the arbitration clause used contractual terms such as "I understand," "I agree," I "agree to abide by and accept," "condition of employment," "final decision," and "ultimate resolution." Id.

In this case Cutthroat's arbitration agreement is not severable from the employee handbook. The clause was not written in a different voice. The clause was not on a page separate from the rest of the employment handbook. The clause was not torn out of the handbook and placed in a file. In fact, there is nothing to indicate that Cutthroat's arbitration clause was meant to be separate from the handbook. Since the arbitration clause was part of Cutthroat's employee handbook, it is not a binding written agreement.

Given the conclusion that the arbitration provision did not constitute a separate contract, the District Court denied Cutthroat's motion.

¶ 10 Cutthroat asserts the District Court erred because Hubner agreed to abide by the handbook and therefore, she agreed to the arbitration provision. In addition, Cutthroat asserts that under Prima Paint Corp. v. Flood & Conklin Mfg. Co. (1967), 388 U.S. 395, 87 S.Ct. 1801, 18 L.Ed.2d 1270, the arbitration clause is separable from the handbook. Cutthroat further argues that the plain language of the clause before the arbitration provision gave notice of the contractual nature of the arbitration provision by using the language "this contract." Finally, Cutthroat argues that because the arbitration clause was separable, it was independently enforceable. Throughout its entire argument, Cutthroat calls this Court's attention to the federal and state policies favoring arbitration by requiring doubts to be resolved in favor of arbitration. Cutthroat further asserts federal law is binding on our decision. ¶ 11 In contrast, Hubner argues, inter alia, that the District Court was correct in concluding she did not consent to binding arbitration by virtue of the handbook provisions. Hubner also argues state law applies to the question of whether she agreed to arbitrate disputes with Cutthroat.

¶ 12 We agree with the District Court that no...