FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

FAINE DAVIS, individually and on

behalf of all others similarly

situated,

Plaintiff-Appellee,

v.

NORDSTROM, INC.,

Defendant-Appellant.

No. 12-17403

D.C. No.

4:11-cv-03956-

CW

OPINION

Appeal from the United States District Court

for the Northern District of California

Claudia Wilken, Chief District Judge, Presiding

Argued and Submitted

December 6, 2013—Pasadena, California

Filed June 23, 2014

Before: John T. Noonan and Paul J. Watford, Circuit

Judges, and William E. Smith, Chief District Judge.*

Opinion by Judge Smith

* The Honorable William E. Smith, Chief District Judge for the U.S.

District Court the District of Rhode Island, sitting by designation.
2 DAVIS V. NORDSTROM, INC.

SUMMARY**

Arbitration / California Law

The panel reversed the district court’s order denying

Nordstrom, Inc.’s motion to compel arbitration of an

employee’s claims that were brought as a putative class

action alleging violations of state and federal employment

laws, and remanded for further proceedings.

Following the United States Supreme Court’s decision in 

AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011),

Nordstrom made revisions to the employee arbitration policy,

contained in its employee handbook, which precluded

employees from bringing most class action lawsuits.

The panel held that Nordstrom and the employee entered

into a valid agreement to arbitrate disputes on an individual

basis. The panel found that Nordstrom satisfied the minimal

requirements under California law for providing employees

with reasonable notice of a change to its employee handbook

by sending a letter to the employees informing them of the

modification, and not seeking to enforce the arbitration

provision during the 30 day notice period. The panel also

held that Nordstrom was not bound to inform the employee

that her continued employment after receiving the letter

constituted acceptance on new terms of employment. Finally,

the panel declined to address in the first instance the issue

whether the arbitration agreement was unconscionable under

California law.

** This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.
DAVIS V. NORDSTROM, INC. 3

COUNSEL

George S. Howard, Jr. (argued), Jones Day, San Diego,

California; Julie A. Dunne and Dominic J. Messiha, Littler

Mendelson, P.C., Los Angeles, California; Michael G.

Leggieri, Littler Mendelson, P.C., Sacramento, California,for

Defendant-Appellant.

Courtland W. Creekmore (argued), Matthew R. Bainer, and

Hannah R. Salassi, Scott Cole & Associates, APC, Oakland,

California, for Plaintiff-Appellee.

OPINION

SMITH, Chief District Judge:

Following the United States Supreme Court’s decision in

AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011),1

Appellant Nordstrom, Inc. (“Nordstrom”) made revisions to

the employee arbitration policy2contained in its employee

handbook. These changes precluded employees from

bringing most class action lawsuits. Despite these changes,

weeks later, Nordstrom employee Faine Davis filed a class

1

 The United States Supreme Court decision in AT&T Mobility LLC v.

Concepcion, 131 S.Ct. 1740 (2011), overruled the California Supreme

Court finding in Discover Bank v. Superior Court, 36 Cal. 4th 148 (Cal.

2005). In Concepcion, the Supreme Court rejected Discover Bank’s

holding that a class waiver is unconscionable in a contract of adhesion,

reasoning that the California rule to the contrary ran afoul of the Federal

Arbitration Act (“FAA”). Concepcion, 131 S.Ct. at 1746–48, 1753.

2 This policy was referred to internally at Nordstrom as the “Nordstrom

Dispute Resolution Program.”
4 DAVIS V. NORDSTROM, INC.

action lawsuit on behalf of herself and other similarly situated

employees, alleging that Nordstrom violated various state and

federal employment laws.

In time, Nordstrom, relying on the revised arbitration

policy in its employee handbook sought to compel Davis to

submit to individual arbitration of her claims. The district

court held that Davis and Nordstrom did not enter into a valid

arbitration agreement with respect to the revision, and

therefore denied Nordstrom’s motion to compel arbitration. 

Nordstrom appeals the district court’s decision. Because we

find that Nordstrom and Davis did indeed enter into a valid

agreement to arbitrate disputes on an individual basis, we

REVERSE the district court and REMAND for further

proceedings consistent with this order.

I. Standard of Review

We review the district court’s decision to deny the motion

to compel arbitration de novo. Kilgore v. KeyBank Nat’l

Ass’n, 718 F.3d 1052, 1057 (9th Cir. 2013). Factual findings

are reviewed for clear error, Ticknor v. Choice Hotels Int’l,

Inc., 265 F.3d 931, 936 (9th Cir. 2001), but where no facts are

in dispute our entire review is de novo. Pac. Reinsurance

Mgmt. Corp. v. Ohio Reinsurance Corp., 814 F.2d 1324,

1327 (9th Cir. 1987).

II. Background

The basic facts are straightforward and not in dispute. On

August 11, 2011, Davis filed a purported class action lawsuit

against Nordstrom seeking redress for nonpayment of wages,

failure to provide meal periods and rest breaks, and unfair

competition. Relying on the company’s employee handbook,
DAVIS V. NORDSTROM, INC. 5

Nordstrom moved to compel Davis to submit to individual

arbitration of her claims. Davis acknowledges that she

received a copy of the handbook when she first took her

position at Nordstrom, and during her employment the

company revised the handbook several times, always

notifying Davis of the changes.

Two provisions of this handbook matter for this appeal. 

The first explained the circumstances under which Nordstrom

employees were required to arbitrate their disputes with the

company (the “arbitration provision”); the second required

Nordstrom to provide employees with 30 days written notice

of any substantive changes to the arbitration provision (the

“notice provision”). The handbook provided that the notice

provision was included to “allow employees time to consider

the changes and decide whether or not to continue

employment subject to the changes.”

Prior to July 2011, the arbitration provision required

employees to arbitrate individual disputes, but permitted

employees to bring class action lawsuits against the company. 

In July 2011 and again in August 2011, Nordstrom revised

the arbitration provision; both revisions required employees

to arbitrate nearly all claims individually, and precluded

employees from filing most class action lawsuits. To comply

with the notice provision, Nordstrom sent letters to

employees, including Davis, in June 2011 informing them of

the change in the arbitration policy.

3

In this June letter,

Nordstrom informed employees that “the Nordstrom Dispute

Resolution Program has been in place for several years.

We’ve recently made updates to the program and want to

 

3

In the July 2011 revision to the arbitration provision, Nordstrom also

completely removed the notice provision.
6 DAVIS V. NORDSTROM, INC.

ensure you have the current version.” Along with this letter,

Nordstrom included a copy of the entire Dispute Resolution

Program, including the arbitration provision.

III. Discussion

The Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1, et

seq., reflects a “liberal federal policy” in favor of arbitration. 

Concepcion, 131 S. Ct. at 1745. Under the FAA, the role of

the district court is to determine if a valid arbitration

agreement exists, and if so, whether the agreement

encompasses the dispute at issue. Kilgore, 718 F.3d at

1057–58.

A. Contract Formation

The district court determined that no revised agreement

was ever reached – holding that Nordstrom had failed to

provide employees with the required 30 days notice of the

change in the arbitration provision, and to inform employees

that their continued employment constituted acceptance of the

new arbitration provision. Because we hold that Nordstrom

complied with the notice requirement, and that California law

imposes no duty upon Nordstrom specifically to inform

employees that their continued employment constituted

acceptance of new terms of employment, we reverse.

Arbitration is a product of contract. Parties are not

required to arbitrate their disagreements unless they have

agreed to do so. Pinnacle Museum Tower Ass’n v. Pinnacle

Mktg. Dev. (U.S.), LLC, 55 Cal. 4th 223, 236 (Cal. 2012). A

contract to arbitrate will not be inferred absent a “clear

agreement.” Avery v. Integrated Heathcare Holdings, Inc.,

218 Cal. App. 4th 50, 59 (Cal. Ct. App. 2013). When
DAVIS V. NORDSTROM, INC. 7

determining whether a valid contract to arbitrate exists, we

apply ordinary state law principles that govern contract

formation. Ferguson v. Countrywide Credit Indus., Inc.,

298 F.3d 778, 782 (9th Cir. 2002). In California, a “clear

agreement” to arbitrate may be either express or implied in

fact. Pinnacle Mktg. Dev., 55 Cal. 4th at 236.

The handbook Davis received when she began work

established the ground rules of her employment, including

that Davis and Nordstrom would arbitrate certain disputes. 

She accepted employment on this basis, so there was a

binding agreement to arbitrate. Under California law,

Nordstrom was permitted to unilaterally change the terms of

Davis’s employment, including those terms included in its

employee handbook. Craig v. Brown & Root, Inc., 84 Cal.

App. 4th 416, 422 (Cal. Ct. App. 2000). Nordstrom was also

entitled to enforce the terms of employment identified in this

handbook, and any modifications made to it, as it could any

other contract. See id. Indeed, “[i]t is settled that an

employer may unilaterally alter the terms of an employment

agreement,4provided such alteration does not run afoul of the

[California] Labor Code.” Schachter v. Citigroup, Inc.,

47 Cal. 4th 610, 619 (Cal. 2009). Where an employee

continues in his or her employment after being given notice

of the changed terms or conditions, he or she has accepted

those new terms or conditions. Id. at 620.

The parties have not provided, and we have not found, a

case dictating that under California law Nordstrom was

required to provide notice of the change in any particular

way. Instead, “an employer may terminate or modify a

4 The terms of employment need not be memorialized in a formal

“employment agreement.”
8 DAVIS V. NORDSTROM, INC.

contract with no fixed duration period after a reasonable time

period, if it provides employees with reasonable notice, and

the modification does not interfere with vested employee

benefits.” Asmus v. Pac. Bell, 23 Cal. 4th 1, 11 (Cal. 2000). 

Of course, if an employer has prescribed methods of policy

modification and employee notice, it is incumbent upon the

employer to abide by those methods. Ferguson, 298 F.3d at

786. Here, the terms of the arbitration provision in Davis’s

initial handbook stated that Davis would be provided “30

days written notice of substantive changes . . . to allow [her]

time to consider the changes and decide whether or not to

continue employment subject to the changes.”

The first question is whether Nordstrom complied with

the notice requirement. The district court determined that

Nordstrom made the revised arbitration provisions

immediatelyapplicable to its employees without providing 30

days written notice as required by the employee handbook. 

In reaching this conclusion the district court found three

factors determinative: first, Nordstrom failed to submit

evidence that the company told employees the policy change

only went into effect after 30 days; second, the cover letter

Nordstrom sent to employees accompanying the revised

arbitration provision informed employees that the “current

version” of the arbitration provision was enclosed implying

it was immediately effective and; third, a Nordstrom human

resources document set forth internal measures for

implementing the changed policy. Davis relies on the same

factors in this appeal.

Nordstrom argues that it sent the revised arbitration

provision to all employees, including Davis, and that it did

not enforce the provision against Davis, or anyone else,

within 30 days of her receiving it. Additionally, Nordstrom
DAVIS V. NORDSTROM, INC. 9

asserts that during this 30 day time period, Davis never

objected to the revised provision and she did not quit her job.

While the communications with its employees were not

the model of clarity, we find that Nordstrom satisfied the

minimal requirements under California law for providing

employees with reasonable notice of a change to its employee

handbook by sending a letter to Davis and other employees

informing them of the modification, and not seeking to

enforce the arbitration provision during the 30 day notice

period.

The next question is whether Nordstrom was bound to

inform Davis that her continued employment after receiving

the letter constituted acceptance of new terms of employment. 

The district court found it was, but we disagree. The district

court chiefly relied upon Morvant v. P.F. Chang’s China

Bistro, Inc., 870 F. Supp. 2d 831 (N.D. Cal. 2012) for this

finding. The district court read Morvant as holding that an

employer who unilaterally changes terms of employment

must inform his employees that continued employment will

constitute acceptance of new terms of employment. If

Morvant were read in that manner, however, it would be

inconsistent with the holding of the California Supreme Court

in Asmus. In Asmus, the court held that an employer seeking

to terminate a unilateral contract must provide reasonable

notice of the termination and refrain from interfering with

vested rights. Asmus, 23 Cal. 4th at 18. This requirement also

applies to unilateral contract modifications. Id. at 16, 18. 

Nowhere in Asmus did the California Supreme Court require

that employees must be expressly told that continued

employment constitutes acceptance, nor have any California

state appellate court decisions imposed such a requirement.

See Serpa v. California Surety Investigations, Inc., 215 Cal.
10 DAVIS V. NORDSTROM, INC.

App. 4th 695, 516 (Cal. Ct. App. 2013) (holding that an

employer is required to give “reasonable and fair notice”

when modifying terms of employment).

B. Unconscionability

Davis also argues that the arbitration agreement was

unconscionable under Gentry v. Superior Court, 42 Cal. 4th

443 (Cal. 2007). In Gentry, the California Supreme Court

concluded that employees had certain unwaiveable rights to

overtime, and that under certain circumstances a waiver that

precluded an employee from seeking to vindicate those rights

as part of a class action could lead to a de facto waiver of

those rights. Id. at 456–57. The California Supreme Court

relied primarily on its earlier decision in Discover Bank in

this holding. The United States Supreme Court subsequently

overruled Discover Bank holding that the decision ran afoul

of the FAA. Concepcion, 131 S.Ct. at 1746–48, 1753.

Nordstrom argues we should find that Gentry similarly

infringes upon the FAA.

The district court never reached the unconscionability

issue. Typically, “a federal appellate court does not consider

an issue not passed upon below.” Quinn v. Robinson,

783 F.2d 776, 814 (9th Cir. 1986) (quoting Singleton v. Wulff,

428 U.S. 106, 120 (1976)). This court has discretion to

decide whether to reach such an issue, however, where the

issue presented is a purely legal one and the record below has

been fully developed. Quinn, 783 F.2d at 814. In

considering whether to exercise this discretion, “we should

consider whether the resolution of the issue is clear and

whether injustice might otherwise result.” Id.
DAVIS V. NORDSTROM, INC. 11

While the record in this case is fully developed, and Davis

pressed her unconscionability argument before the district

court and did so again here, the resolution of the issue is not

clear, and for that reason we decline to exercise our discretion

to address the unconscionabilty question in the first instance.5

Compare Truly Nolan of Am. v. Superior Court, 208 Cal.

App. 4th 487, 507 (Cal. Ct. App. 2012) (holding Gentry

remains binding law after Concepcion), with Velazquez v.

Sears, Roebuck & Co., 13-cv-680-WQH-DHB, 2013 WL

4525581, at *8 (S.D. Cal. Aug. 26, 2013) (holding Gentry

was overruled by Concepcion). Indeed, the California

Supreme Court currently has pending before it a case that will

decide whether Gentry remains valid under California law. 

See Iskanian v. CLS Transp. of Los Angeles, LLC, No.

S204032 (Cal. petition granted Sept. 19, 2012).6

IV. Conclusion

For the foregoing reasons, we reverse the district court’s

order and remand for further proceedings consistent with this

opinion.

REVERSED AND REMANDED.

5 We also do not take up Davis’s argument that the arbitration policy is

prohibited by the National Labor Relations Act (“NLRA”). The facts of

this case are slightly different than those of Johnmohammadi v.

Bloomgindale’s, Inc., No. 12-55578, also released today. Unlike the

plaintiffin Johnmohammadi, Davis did not have the opportunity to opt out

of the arbitration provision. In Johnmohammadi, we held that a voluntary

arbitration program does not violate the NLRA. We state no opinion, in

the first instance, whether a mandatory arbitration program would.

6 The California Supreme Court heard argument in Iskanian v. CLS

Transp. of Los Angeles, LLC on April 3, 2014.