Shelle HARDIN, Plaintiff-Appellee/Cross-Appellant, v. FIRST CASH FINANCIAL SERVICES, INC., d/b/a First Cash Auto Pawn, Defendant-Appellant/Cross-Appellee.
Nos. 05-6090, 05-6107.
United States Court of Appeals, Tenth Circuit.
Oct. 6, 2006.
Mark E. Hammons, Sr. (Tamara L. Gowens with him on the briefs), Hammons, Gowens & Associates, Oklahoma City, Oklahoma, for Plaintiff-Appellee/Cross-Appellant.
Before HARTZ, MCKAY, and TYMKOVICH, Circuit Judges.
TYMKOVICH, Circuit Judge.
Shelle Hardin brought suit in federal district court alleging sex discrimination by her former employer, First Cash Financial Services. First Cash moved to compel arbitration pursuant to its newly adopted arbitration agreement. The court dismissed this motion, finding that Hardin had not agreed to be bound by the arbitration agreement. First Cash appealed pursuant to
This appeal requires us to resolve three issues: (1) the scope of both the district court‘s and this court‘s jurisdiction during the appeal; (2) whether an employee‘s continued employment acts to accept an employer‘s unilateral changes to an at-will employment contract under Oklahoma law; and (3) whether First Cash‘s arbitration agreement is unenforceable under Oklahoma law.
For the reasons discussed below, we affirm in part and reverse and remand in part with instructions to compel arbitration.
I. Background
A. Facts
First Cash operates over 200 pawnshops and check cashing stores throughout the United States. In 1997, First Cash hired Shelle Hardin as a manager for one of its Oklahoma stores. At that time, First Cash did not require its employees to settle disputes through arbitration.
Beginning in December 2002, however, First Cash created a Dispute Resolution Program (DRP), which requires its employees to submit all employment-related legal disputes to arbitration. First Cash distributed copies of the DRP, along with a Dispute Resolution Agreement (Agreement) to every employee. In the letter accompanying this package, First Cash told the employees they would not immediately be bound by the DRP but could voluntarily opt into it any time before March 1, 2003. After that time, participation became mandatory, and an employee‘s continued employment constituted acceptance of the terms of the DRP. The Agreement, although allowing for the employee‘s signature, reiterated that an employee‘s continued employment with the company after March 1 would act to accept its terms regardless of whether the employee actually signed the Agreement.
Shortly after receiving these materials, Hardin discussed the DRP with her supervisor and unequivocally refused to consent to the DRP. Hardin stated that, although she would not quit, her continued employment was not intended to serve as her assent. Her supervisor responded that despite her statements to the contrary her continued employment with First Cash would manifest her acceptance. There was no further communication between Hardin and First Cash, and Hardin never signed the Agreement.
In December 2003, First Cash fired Hardin, and Hardin subsequently filed suit in federal district court alleging sex discrimination. First Cash moved to compel arbitration, claiming that Hardin was bound by the DRP.
B. District Court Proceedings
The district court found that Hardin was not bound by the DRP and denied First Cash‘s motion to compel arbitration. Citing Oklahoma law, the court noted that while an employee‘s continued employment could act to accept changes to an at-will employment contract, acceptance must be absolute and unqualified. The court concluded Hardin‘s conduct did not meet this standard as evidenced by (1) her failure to sign the Agreement,1 and (2) her unequivocal statements to her supervisor. The court construed Hardin‘s conduct as a counteroffer, which First Cash accepted by failing to terminate her employment.
II. Analysis
We face three issues on appeal. First, we address two preliminary matters: (1) whether the district court erred in granting First Cash‘s motion to stay, and (2) whether this court has subject matter jurisdiction to hear the appeal. If we have jurisdiction, we consider whether the district court correctly concluded that Hardin was not bound by the DRP. Finally, if we find the district court in error, we determine whether the court‘s decision should nevertheless be affirmed on the alternate ground that the DRP is illusory and therefore unenforceable.
A. Jurisdictional Concerns
Hardin raises two separate jurisdictional concerns: (1) whether First Cash‘s appeal automatically divested the district court of jurisdiction; and (2) whether this court has jurisdiction over the instant appeal.
1. District Court Jurisdiction
Hardin asserts that the district court erred by issuing a stay pending the resolution of First Cash‘s appeal to this court. She argues that First Cash‘s appeal did not automatically divest the district court of jurisdiction. Instead, she argues, a stay should have been granted only if First Cash initially demonstrated to the court its entitlement to a stay and the court then balanced the respective harms to the parties to conclude a stay was appropriate. After reviewing the district court‘s decision for abuse of discretion, we disagree.
A party aggrieved by a district court‘s denial of a motion to compel arbitration has the right under the FAA to file an interlocutory appeal. McCauley v. Halliburton Energy Servs., 413 F.3d 1158, 1160 (10th Cir.2005); see
Because First Cash appealed the district court‘s denial of its motion to compel arbitration under § 16(a), and First Cash‘s appeal is not frivolous, we find that the appeal divested the district court of jurisdiction. Therefore, the district court properly issued a stay.2
2. Appellate Jurisdiction
We have jurisdiction over final orders “denying a petition under section 4 of this title to order arbitration to proceed.”
Under
A party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court which, save for such agreement, would have jurisdiction under Title 28, in a civil action ... for an order directing that such arbitration proceed in the manner provided for in such agreement.
In the event that the making of the arbitration agreement is in dispute,
the court shall proceed summarily to the trial thereof [but if] no jury trial be demanded by the party alleged to be in default ... the court shall hear and determine such issue.
Under our cases,
Based on the statutory text and our precedent, we find Hardin‘s arguments unpersuasive. First, although the parties disputed the application of the DRP, the court was able to resolve that question on the pleadings and other materials before it. See id. Accordingly, no jury or bench trial was necessary, and the district court properly issued an order denying First Cash‘s motion to compel arbitration. Even if a trial were warranted, the plain language of § 4 permits only the “party alleged to be in default” to request a jury trial. Hardin, the party refusing arbitration, is that party, not First Cash.
Second, Hardin‘s contention that the district court order cannot be properly construed as one for summary judgment also fails. As a preliminary matter, we reject Hardin‘s assertion that the court must either proceed to trial or issue a summary judgment order. Section 4 merely states that if a jury trial is not warranted, “the court shall hear and determine such issue.”
In short, the district court properly heard and determined First Cash‘s motion under § 4, issuing a final order refusing to compel arbitration. We therefore have jurisdiction to hear this appeal.
*
Accordingly, because First Cash‘s appeal automatically and immediately divested the district court of jurisdiction, we affirm the district court‘s order granting First Cash‘s motion to stay. We find that the district court issued a final order under § 4 of the FAA, and we therefore exercise our jurisdiction to hear this appeal.
B. Acceptance of Arbitration Agreement
First Cash‘s primary argument on appeal is that the district court improperly denied its motion to compel arbitration because Hardin‘s conduct evidenced an intention to be bound by the DRP. In deciding the merits of this contention, we, like the district court, must answer an unresolved question of Oklahoma law.
Generally, courts “should apply ordinary state-law principles that govern the formation of contracts” to determine whether a party has agreed to arbitrate a dispute. First Options, 514 U.S. 938, at 944. Here, be-
First Cash argues that Oklahoma law permits an employee‘s continued employment to manifest her assent to an employer‘s proposed modification of an at-will employment relationship even where she expressly rejects the modification. Although we find Oklahoma law unclear on this point, we ultimately find that Hardin‘s conduct did act to accept the DRP—because First Cash rejected Hardin‘s counteroffer (to continue employment on the old terms), her decision to remain on the job after March 1 manifested her assent to First Cash‘s outstanding offer to modify the terms of her at-will employment.
In general, Oklahoma follows traditional contract principles in permitting acceptance of an offer by performance: “Performance of the conditions of a proposal, or the acceptance of the consideration offered with a proposal, is an acceptance of the proposal.”
To be sure, the instant case involves an offer, the DRP, which contemplates acceptance by performance. At the same time, however, this case is distinguishable from Langdon. First, the DRP is arguably not an employee benefit, but instead acts to restrict the employee‘s legal options to sue the company. More fundamentally, Hardin expressly rejected the DRP. The question, therefore, is whether these two factors alter the Langdon calculus.
Oklahoma law does not definitively answer this question. On one hand, Oklahoma law provides that “[a]n acceptance must be absolute and unqualified.... A qualified acceptance is a new proposal.”
In Robinson, an employer reduced the plaintiff employee‘s commission rate. The plaintiff protested the change, but continued his employment. Id. The court held that the employee‘s continued performance manifested assent to the altered employment contract. The court stated,
An employment terminable at any time is ... subject to modification at any time by either party as a condition of its continuance. In our opinion, the contract involved in this action is such a contract, and when plaintiff was notified by defendant that [his commission rate was being reduced], he was at liberty to treat the contract as totally rescinded and quit the employment of the defendant, but he could not remain in such employment and simply by protest against change in the rate of commission continue the original contract in force.
Id. at 322-23 (quotation omitted); see also Willock v. Downtown Airpark, Inc., 130 F.Supp. 704, 706 n. 5 (D.Okla.1955) (citing Robinson for the proposition that “the acceptance by plaintiff of new terms of employment by continuing to work for defendant ... amount to a valid modification of the original agreement“).
Were we to consider either
Here, First Cash, in the explicit language of the Agreement, made an offer to Hardin, which stated that her continued employment after March 1 would manifest her assent to the DRP. Hardin, in equally explicit language, made a counteroffer and informed her supervisor that she refused to abide by those terms. First Cash immediately rejected this counteroffer when Hardin‘s supervisor reiterated that her continued employment would serve as her acceptance.
Typically, “[a]n offeree‘s power of acceptance is terminated by [her] making of a counter-offer.” Restatement (Second) of Contracts § 39(2) (1981). This is not the case, though, where the “offeror has manifested a contrary intention.” Id.; see id. § 38(1) (“An offeree‘s power of acceptance is terminated by his rejection of the offer, unless the offeror has manifested a contrary intention.“). For example, “a statement in the offer that it will continue in effect despite a rejection is effective, and a similar statement after a rejection makes a new offer [that is effective].” Id. § 38 cmt. b; see id. § 39 cmt. a (“A counter-offer must be capable of being accepted; it carries negotiations on rather than breaking them off.“).
In its offer, First Cash manifested a “contrary intention” not to end negotiations. First Cash specifically informed the employees that the offer continued in effect until March 1, but that they did not have to accept the terms of the DRP until that time. Additionally, First Cash repeated its offer in early 2003 when it posted a reminder notice that continued employment after March 1 would constitute acceptance of the DRP. In other words, the Agreement as well as the posting manifested First Cash‘s contrary intention not
Indeed, March 1 came and went and Hardin never renewed her objection. In the face of these facts, Hardin came to work. We, therefore, construe Hardin‘s continued employment after March 1 as acceptance of the terms of the DRP.3 See Berkley v. Dillard‘s Inc., 450 F.3d 775, 777 (8th Cir.2006) (finding an employee, who refused to sign an arbitration agreement, but continued employment assented to the terms of the program where the agreement explicitly stated that an employee‘s continued employment constituted acceptance and the company personally informed the employee that failure to sign would not alter the effect of the agreement).
Accordingly, we find that under Oklahoma law Hardin‘s conduct in continuing employment after March 1 manifested her assent to be bound by the terms of the arbitration agreement.
C. Illusory Contract
Because we find that Hardin‘s conduct served to accept the arbitration agreement, we must determine whether the contract nonetheless is enforceable. Hardin suggests that since the contract reserves to First Cash a unilateral right to terminate or amend the DRP, the contract is illusory and, consequently, unenforceable. We are not persuaded.
The Agreement states that First Cash “retains the right to terminate the [Agreement], and/or to modify or discontinue the [DRP].” Cross-Aplt. App. at 49; accord id. at 61. However, this right is limited: “[N]o amendment shall apply to any claims, disputes, or controversies of which the Company had actual notice on the date of the amendment, and termination of the [Agreement and/or DRP] shall not be effective until 10 days after reasonable notice of termination is given to Employee or as to claims, disputes, or controversies which arose prior to the date of termination.” Id. at 49, 61.
We have held that “an arbitration agreement allowing one party the unfettered right to alter the arbitration agreement‘s existence or its scope is illusory.” Dumais v. Am. Golf Corp., 299 F.3d 1216, 1219 (10th Cir.2002). Here, though, First Cash‘s right to modify the Agreement was not unrestricted. For example, before amending or terminating the Agreement, First Cash must provide 10-days notice to its current employees. Additionally, it cannot amend the Agreement if it has actual notice of a potential dispute or claim, nor may it terminate the Agreement as to any claims which arose prior to the date of termination.
These limitations are sufficient to avoid rendering the parties’ Agreement to arbitrate illusory. While “the reservation of a unilateral right to cancel [an] entire agreement is so broad as to negate the existence of any consideration in that the promise is essentially empty or illusory,” if “notice of cancellation is required the promisor is bound sufficiently so that his promise to buy or give notice of cancellation meets the requirement of consideration.” Wilson v. Gifford-Hill & Co., Inc., 570 P.2d 624, 626 (1977); see Pierce v. Kellogg, Brown & Root, Inc., 245 F.Supp.2d 1212, 1215 (D.Okla.2003) (applying Oklahoma law and finding an arbitration agreement enforceable that permitted the company to amend or terminate on 10-days notice); see also In re Halliburton Co., 80 S.W.3d 566, 570 (Tex.2002) (finding an arbitration agreement not illusory where the employer‘s right to modify was restricted in cases where it had actual notice of the dispute and required 10-days notice to employees before termination).
Hardin relies on the Ninth Circuit‘s opinion in Ingle v. Circuit City Stores, Inc., 328 F.3d 1165 (9th Cir.2003), to argue that the restrictions are insufficient to save the Agreement. In Ingle, the defendant company‘s unilateral right to modify an arbitration agreement was restricted in only one respect: modifications required 30 days notice to employees. The court concluded that a 30-day “notice is trivial when there is no meaningful opportunity to negotiate the terms of the agreement.” Id. at 1179. Finding a lack of mutuality in the right to modify, the court held that the modification provision was “substantively unconscionable.” Id.
Hardin‘s reliance on Ingle is misplaced. First, Oklahoma law suggests that reasonable modification provisions are permissible, unlike in Ingle where the court was applying California law. More critically, however, the Ingle court explicitly stated that it drew “no conclusion as to whether [the modification clause], by itself, renders the [entire arbitration] contract unenforceable,” begging the question of whether the agreement was still effective. Id. at n. 23.
We conclude under Oklahoma law that an arbitration agreement allowing a defendant company the unilateral right to modify or terminate the agreement is not illusory so long as reasonable restrictions are placed on this right. See Wilson, 570 P.2d at 626; Pierce, 245 F.Supp.2d at 1215; see also Am. Gen. Life & Accident Ins. Co. v. Wood, 429 F.3d 83, 91 n. 5 (4th Cir.2005) (rejecting a similar claim); Iberia Credit Bureau, Inc. v. Cingular Wireless LLC, 379 F.3d 159, 173-74 (5th Cir.2004) (same); Morrison v. Circuit City Stores, Inc., 317 F.3d 646, 667-68 (6th Cir.2003) (same); Caley v. Gulfstream Aerospace Corp., 428 F.3d 1359, 1376-77 (11th Cir.2005) (same). The Agreement here satisfies Oklahoma law and is therefore enforceable.
III. Conclusion
Accordingly, because we hold that under Oklahoma law Hardin‘s conduct constituted acceptance of the terms of the arbitration agreement and because such Agreement was not illusory, we REVERSE the district court‘s order denying First Cash‘s motion to compel arbitration and REMAND for proceedings consistent with this opinion. We AFFIRM the district court‘s order granting a stay pending this appeal.