Carson v. Higbee Co ( 2005 )

  •                                                        United States Court of Appeals
                                                                    Fifth Circuit
                                                                 F I L E D
                            FOR THE FIFTH CIRCUIT              September 30, 2005
                          ))))))))))))))))))))))))))         Charles R. Fulbruge III
                                No. 04-60572
                              VERA P. CARSON,
                       HIGBEE COMPANY; WILLIAM CARR,
               Appeal from the United States District Court
                 for the Southern District of Mississippi
    Before SMITH, DENNIS, and PRADO, Circuit Judges.
         Higbee Company d/b/a Dillard’s (“the Company” or
    “Dillard’s”) and William Carr (collectively, “Defendants”) appeal
    the district court’s denial of their motion to compel
    arbitration.   We reverse and remand.
         Vera Carson began working at Dillard’s as a sales associate
    in 1993 and was eventually promoted to the position of assistant
           Pursuant to 5TH CIRCUIT RULE 47.5, the court has determined
    that this opinion should not be published and is not precedent
    except under the limited circumstances set forth in 5TH CIRCUIT
    RULE 47.5.4.
    sales manager.   She was still working in that position when in
    2001, the Company adopted an arbitration policy for employment-
    related disputes.   That year, the Company held a management
    meeting to discuss the policy.    Carson attended.
         During the 2001 meeting, the store manager, William Carr,
    showed the attendees two documents related to the Company’s new
    arbitration policy: the Rules of Arbitration and an
    acknowledgment form.    The acknowledgment form was labeled
    “Acknowledgment of Receipt of Rules of Arbitration.”    It
    described the purposes of the arbitration policy and contained
    the following notice provision:
         Effective immediately, all employees (as hereinafter
         defined) of Dillard’s, Inc., its affiliates, subsidiaries
         and Limited Liability Partnerships (the “Company”) shall
         be subject to the RULES OF ARBITRATION (the “Rules”)
         described below. Employees are deemed to have agreed to
         the provisions of the Rules by virtue of accepting
         employment with the company and/or continuing employment
    (Emphasis added).   Below the notice provision was a space for
    both the Company employee’s signature as well as that of a
    Company representative.    The notice provision was printed in the
    same font size, but different font style, as the rest of the
    acknowledgment form.1
         Carson continued her employment with Dillard’s after the
    Rules of Arbitration were implemented.    During this time, she
          The notice provision was in roman type; the rest of the
    acknowledgment form was italicized.
    dealt with the acknowledgment form on a daily basis.   A copy of
    the form was on display in the Company’s personnel office.     In
    addition, Carson assisted Dillard’s in obtaining signatures on
    the acknowledgment form from other employees and signed several
    forms herself as a witness to other signatures.
         Nevertheless, Carson testified that she could not remember
    whether she signed the acknowledgment form.   However, she did not
    refuse to sign the form either verbally or in writing.2    Carson
    also claims she was told that the arbitration policy would be
    optional for employees in management positions.
         In March 2002, Carson applied for and was denied the
    position of assistant store manager.   The following month, she
    brought suit against the Company and Carr, alleging claims of sex
    and race discrimination.
         The Defendants filed a motion to compel arbitration, which
    the district court denied.   The Defendants timely appealed.
         We review the denial of a motion to compel arbitration de
    novo.    Freudensprung v. Offshore Technical Servs., Inc., 
    379 F.3d 327
    , 337 (5th Cir. 2004).    Where, as here, the issue is whether
    the parties have a valid and enforceable agreement to arbitrate,
    courts apply the contract law of the state governing the
          Some employees did refuse to sign the acknowledgment form.
    Those employees were not terminated, nor is there any evidence
    that they suffered adverse employment-related consequences for
    their failure to sign.
    agreement.     Wash. Mut. Fin. Group, LLC v. Bailey, 
    364 F.3d 260
    264 (5th Cir. 2004).3    Mississippi contract law applies here.4
         Carson raises three issues on appeal: First, she claims that
    she did not assent to arbitration.     Second, she claims that if an
    agreement to arbitrate does exist, that agreement is
    unconscionable.    Finally, Carson claims that any agreement to
    arbitrate was procured by fraudulent inducement.    We will address
    each argument in turn.
         Arbitration must proceed by agreement: “[A]rbitration is a
    matter of contract and a party cannot be required to submit to
    arbitration any dispute which he has not agreed so to submit.”
    May v. Higbee Co., 
    372 F.3d 757
    , 763 (5th Cir. 2004) (quoting
    AT&T Techs., Inc. v. Communications Workers of Am., 
    475 U.S. 643
    648 (1986)).    Carson’s first argument is that no agreement to
    arbitrate exists in this case.    Specifically, she makes two
    claims: First, Carson argues that “there are no actions which
          See also 9 U.S.C. § 2 (stating that arbitration agreements
    are enforceable “save upon such grounds as exist at law or in
    equity for the revocation of any contract”); Doctor’s Assocs.,
    Inc. v. Casarotto, 
    517 U.S. 681
    , 687 (1996) (“[G]enerally
    applicable [state-law] contract defenses, such as fraud, duress,
    or unconscionability, may be applied to invalidate arbitration
    agreements without contravening § 2.”).
          Both Carson and Carr are citizens of Mississippi, and
    Mississippi is the site of the controversy. See Boardman v.
    United Servs. Auto. Ass’n, 
    470 So. 2d 1024
    , 1031 (Miss. 1985)
    (explaining that Mississippi follows the “center of gravity”
    approach to choice-of-law issues).
    indicate that [she] intended to be bound by the arbitration
    agreement”; that is, there was no written acceptance of the
    arbitration policy, nor was her continued employment with
    Dillard’s enough to manifest assent.   Second, Carson argues that
    even if she had signed the acknowledgment form, it is an
    ambiguous document, and thus parol evidence may be introduced to
    clarify its meaning.   According to Carson, she was told that the
    arbitration policy would be optional for management employees.
    Thus, she argues, her continued employment did not constitute
    acceptance of the contract.
         We must reject both of these claims in light of May v.
    Higbee Company, 
    372 F.3d 757
     (5th Cir. 2004), issued shortly
    before the district court ruled in this case.5    That case is
    indistinguishable: it involved the same defendants, the same
    arbitration policy and acknowledgment form, and a plaintiff
    similarly situated to Carson.
         In May, a panel of this court rejected the same argument
    that Carson makes here.   May, 372 F.3d at 764.   First, the court
    held that the acknowledgment form was not ambiguous, explaining,
         Properly construed, . . . the Acknowledgment Form and
         May’s signature thereon did not by themselves constitute
         May’s   assent  to   arbitration.      By  signing   the
         Acknowledgment Form, May indicated that she had received
          See also Marino v. Dillard’s, Inc., 
    413 F.3d 530
    , 533 (5th
    Cir. 2005) (“As in May, the Acknowledgment Form here is clear in
    advising Marino . . . of the means of consent, i.e., Marino’s
    continued employment with Dillard’s.”).
           the Rules, but the signature did not all by itself bind
           May to the arbitration program. Rather, May became bound
           through her subsequent conduct, for the Acknowledgment
           Form unambiguously notified May that “[e]mployees are
           deemed to have agreed to the provisions of the Rules by
           virtue of . . . continuing employment [with Dillard’s].”
    Id. (second ellipsis in original).        Thus, the court explained,
    the acknowledgment form “notified May of how she would manifest
    her assent to be bound”——by her continued employment.        Id.
    Furthermore, May undisputedly continued her employment with
    Dillard’s, manifesting her assent to be bound by the Rules of
    Arbitration.       Id.   Therefore, the court held, the district court
    had erred in looking to parol evidence “to vary the terms of the
    unambiguous writings that were before it.”        Id.
           The May court also noted that “Mississippi courts have long
    held that a party’s conduct may manifest assent to an agreement.”6
    And even though there was no Mississippi case specifically
    addressing continued employment in the context of arbitration
    agreements,7 the May court “[saw] no reason to think that the
    Mississippi courts would reject the general rule when it comes to
    this particular species of assent-manifesting conduct.”        Id. at
    765.       To buttress that conclusion, the May court pointed out that
          May, 372 F.3d at 764 (citing Edwards v. Wurster Oil Co.,
    688 So. 2d 772
    , 775 (Miss. 1997); Misso v. Nat’l Bank of
    95 So. 2d 124
     (Miss. 1957)).
          Our more recent research continues to reveal no
    Mississippi case addressing continued employment in the context
    of arbitration agreements.
    many other courts had “held under the law of various states that
    a party may manifest assent through continued employment.”8
    Because the acknowledgment form was not ambiguous and May
    assented to the Rules of Arbitration through her continued
    employment, this court reversed the district court’s denial of
    the Company’s motion to compel arbitration.         Id. at 765.
         Carson attempts to distinguish May by pointing out that the
    plaintiff in that case admitted to having signed the
    acknowledgment form.   That fact, however was irrelevant to the
    court’s decision in May: it was May’s continued employment——not
    her signature——that manifested her assent to be bound by the
    arbitration policy.    Id. at 764.       Thus, the factual difference
    between this case and May changes nothing.        Carson, like May,
    manifested her assent to arbitration by continuing her employment
    with Dillard’s.   Her first argument is rejected.
         Carson next argues that the arbitration agreement is
    unconscionable and therefore invalid.        Mississippi courts
    recognize two types of unconscionability: procedural and
    substantive.   East Ford, Inc. v. Taylor, 
    826 So. 2d 709
    , 714
          May, 372 F.3d at 765 (citing Gutman v. Baldwin Corp., No.
    Civ. A 02-CV-7971, 
    2002 WL 32107938
    , at *4 (E.D. Pa. Nov. 22,
    2002); Lang v. Burlington N. R.R. Co., 
    835 F. Supp. 1104
    , 1105–06
    (D. Minn. 1993); Baptist Health Sys., Inc. v. Mack, 
    860 So. 2d 1265
    , 1273–74 (Ala. 2003); In re Haliburton Co., 
    80 S.W.3d 566
    568–69 (Tex. 2002); Asmus v. Pac. Bell, 
    999 P.2d 71
    , 79 (Cal.
    (Miss. 2002).   Carson argues both types of unconscionability
         Carson may prove that the agreement to arbitrate is
    procedurally unconscionable by showing “a lack of knowledge, lack
    of voluntariness, inconspicuous print, the use of complex
    legalistic language, disparity in sophistication or bargaining
    power of the parties and/or a lack of opportunity to study the
    contract and inquire about the contract terms.”     East Ford, 
    826 So. 2d
     at 714 (internal quotation marks omitted).    She has not
    done so.
         Carson’s procedural unconscionability arguments can be
    summarized as follows: Carson did not voluntarily enter into the
    arbitration agreement because it was a contract of adhesion,
    unilaterally imposed on her by the Company; the provision of the
    acknowledgment form notifying the employee that continued
    employment would constitute acceptance of the arbitration
    contract was “an inconspicuous statement within the document[] in
    legalistic language”; there was a “lack of knowledge” by Carson
    of the contract terms because she did not have “the least
    opportunity to discuss or negotiate the . . . policy’s
    provisions”; and there was a disparity in bargaining power
    between Carson and the Company.
         Carson principally relies on East Ford, Inc. v. Taylor, 826
    8 So. 2d 709
     (Miss. 2002), to support these arguments.     In that
    case, Taylor filed suit against East Ford, alleging that East
    Ford had sold him a used truck that was represented to him as
    new.    Id. at 711.   When he bought the vehicle, Taylor signed a
    purchase agreement that contained an arbitration clause.      Id.
    After Taylor filed suit, East Ford moved to compel arbitration
    based on the contract clause.     Id.   The trial court found the
    arbitration agreement to be unconscionable, and the Mississippi
    Supreme Court affirmed.     Id.
           The East Ford court held that the arbitration clause at
    issue in that case was procedurally unconscionable because Taylor
    was not told of the arbitration provision before signing the
    contract; the font size of the provision was one-third the size
    of other terms of the contract; and the arbitration provision was
    not underlined or emphasized and did not otherwise alert the
    reader to its importance.     Id. at 714–17.   The facts of this case
    are not comparable.
           Here, Carson undoubtedly knew of the arbitration policy: she
    attended the 2001 meeting where Carr introduced the policy to
    Company employees; a copy of the acknowledgment form was on
    display in the Company personnel office; and Carson assisted
    Dillard’s in obtaining signed acknowledgment forms from other
    employees, even signing several forms herself as a witness.
    Moreover, the arbitration agreement in the acknowledgment form is
    the entire contract.   In East Ford, by contrast, the arbitration
    agreement was just one provision of a contract for the sale of an
    automobile.    Here, the notice provision was in the same font size
    as the rest of the acknowledgment form and in a different font
    type; there, the arbitration provision was obscured.       Finally, as
    the East Ford court recognized, this court has previously held
    that contracts of adhesion are not automatically void.        Id. at
    716 (citing Hughes Training, Inc. v. Cook, 
    254 F.3d 588
    , 593 (5th
    Cir. 2001)).    East Ford is distinguishable.    The arbitration
    agreement is not procedurally unconscionable.
         Carson also argues that the arbitration agreement is
    substantively unconscionable.   Substantive unconscionability may
    be proven by showing that the terms of the arbitration agreement
    are oppressive.    East Ford, 
    826 So. 2d
     at 714.      “Substantively
    unconscionable clauses have been held to include waiver of choice
    of forum and waiver of certain remedies.”       Id.
         Carson again relies on East Ford to make her substantive
    unconscionability argument.   The court did not reach the issue of
    substantive unconscionability in that case, id. at 717, but
    suggested in a later case that the terms of the East Ford
    provision might have indeed been substantively unconscionable,
    see Russell v. Performance Toyota, Inc., 
    826 So. 2d 719
    , 726 n.1
    (Miss. 2002) (distinguishing East Ford from the case before the
         The contract provision at issue in East Ford allowed East
    Ford to unilaterally rescind the arbitration agreement, while
    Taylor could only rescind the agreement if his Lemon Law rights
    were implicated.    East Ford, 
    826 So. 2d
     at 715; Russell, 
    826 So. 2d
     at 726 n.1.    Carson argues that the Company’s arbitration
    agreement is substantively unconscionable because it suffers from
    the same defect as the provision in East Ford.    Specifically, she
    claims that under the Rules of Arbitration, “nearly all
    conceivable employee rights to a judicial forum are waived,”
    while the Company is permitted to seek judicial relief in cases
    involving unfair competition, the use or disclosure of trade
    secrets or confidential information, and potential criminal
         This argument ignores the record evidence showing that many
    employee claims are, in fact, not covered by the agreement.      For
    example, claims under ERISA, wage claims not brought under a
    statute or ordinance, and claims precluded from arbitration under
    the National Labor Relations Act may be brought in a judicial
    forum.    Under the agreement at issue here, both the Company and
    the employee retain the right to a judicial forum in certain
    instances; thus, this agreement is wholly unlike that in East
    Ford, where East Ford could unilaterally rescind the agreement in
    any circumstance.    The agreement here is not substantively
         Finally, Carson argues that she was fraudulently induced to
    enter into the arbitration agreement.   Carson failed to raise
    this argument before the district court; therefore, we will not
    consider it here.   See, e.g., Alford v. Dean Witter Reynolds,
    975 F.2d 1161
    , 1163 (5th Cir. 1992) (refusing the consider
    a fraudulent inducement claim raised for the first time on
         For the foregoing reasons, the district court erred in
    denying the Company’s motion to compel arbitration.   The judgment
    is reversed.