Title: THOMPSON v. BAR-S FOODS COMPANY
Citation: 175 P.3d 567, 2007 OK 75
Docket Number: 
State: Oklahoma
Issuer: Oklahoma Supreme Court
Date: October 2, 2007

THOMPSON v. BAR-S FOODS COMPANY Annotate this Case THOMPSON v. BAR-S FOODS COMPANY 2007 OK 75 175 P.3d 567 Case Number: 101973 Decided: 10/02/2007 THE SUPREME COURT OF THE STATE OF OKLAHOMA IRENE STEPHANIE THOMPSON, Plaintiff/Appellee, v. BAR-S FOODS COMPANY, a Delaware corporation, Defendant/Appellant. ON WRIT OF CERTIORARI TO THE COURT OF CIVIL APPEALS, DIVISION II ¶0 Plaintiff/Appellee's employment with Defendant/Appellant was terminated after she filed a claim under the Workers' Compensation Act for work-related injuries. She filed an action in the state district court for retaliatory discharge pursuant to 85 O.S. 2001 §§5-7. Appellant filed a motion to compel arbitration which the trial court denied. Defendant filed an appeal and the Court of Civil Appeals reversed the case and remanded it for further proceedings. This Court granted Appellee's petition for writ of certiorari. OPINION OF THE COURT OF CIVIL APPEALS IS VACATED; ORDER OF THE TRIAL COURT IS AFFIRMED AND REMANDED FOR FURTHER PROCEEDINGS. Taylor K. Hammett, Midwest City, Oklahoma, for Plaintiff/Appellee, Gayle Barrett, Adam W. Childers, Oklahoma City, Oklahoma, for Defendant/Appellant. OPINION WATT, J.: ¶1 In this case we decide whether Plaintiff/Appellee Irene Stephanie Thompson is required to submit her state law retaliatory discharge claim to arbitration pursuant to the Federal Arbitration Act (FAA), 9 U.S.C. §§1-16. Her claim originated in state district court pursuant to the Oklahoma Workers' Compensation Act (WCA), specifically the provisions at FACTS AND PROCEDURAL HISTORY ¶2 When Thompson applied for employment with Defendant/Appellant Bar-S Foods Company, she signed an application which she dated on March 14, 2000. The application requested general information such as previous experience, education, special skills and qualifications, possible criminal background and references. Below the space provided for the name of her emergency contact, which was contained within a box, was the following: APPLICANTS ARE REQUIRED TO READ THE FOLLOWING STATEMENTS. Below that heading, in type which is noticeably smaller than the rest of the application, are eight paragraphs followed by spaces for her signature and the date. The material contained within that portion of the application includes a broad range of subjects, including a certification the information is true and correct, the understanding that an investigative report may be made based on interviews with third parties, the release of records, and the agreement to provide acceptable proof of her birth within thirty days of the initial date of employment. ¶3 In addition to the subjects covered above, the application I understand that no offer of employment by any agent of Bar-S Foods Co. shall be considered valid until after completion of the entire application process including, but not limited to, an interview, and testing for alcohol, controlled substances, illegal drugs, and background checks. I have read, understand, and by my signature consent to these statements. ¶4 When hired on April 19, 2000, Thompson signed a document which acknowledges that a copy of the Problem Resolution Process (PRP) is available on the bulletin board and in the personnel office. The signed document provides: On this date I have received a copy of the Bar-S Foods Co. hourly employee handbook. I will read it carefully and if I have any questions, I will discuss them with my supervisor or or (sic) the Personnel department. Management has prepared the hourly employee handbook in order that I will be aware of Bar-S Foods Co. policies and procedures. Any further clarification and/or interpretation of the handbook is at the discretion of the management of Bar-S Foods Co. I understand a copy of the Problem Resolution Process, the Attendance policy and the Disciplinary guidlines (sic) are posted on the plant bulletin board for my review, or I may request a copy from the Personnel office. I understand that all of the afore mentioned documents are subject to change by Bar-S from time to time without notice. Employee signature: s/ Stephanie Thompson Date: 4-19-00 ¶5 Approximately two years after she was hired, Thompson filed a workers' compensation claim for injuries she received which arose out of her employment with Bar-S. While receiving benefits for temporary total disability, she was advised she was being placed on a 90-day layoff. At the end of that period, she was advised her employment was terminated. Thompson sued Bar-S pursuant to ¶6 Bar-S moved to dismiss, or in the alternative, to compel arbitration and to stay the proceedings. Bar-S claimed the parties had agreed to resolve all claims through arbitration. Thompson's affidavit in support of her response to Bar-S's motion to dismiss contains the statement that neither at the time she signed her application nor at the time she was hired did she see a copy of the PRP, nor did she sign it. The trial court overruled Bar-S's motion. It held Thompson's agreement to "mediate" any claims regarding her employment did not excuse Bar-S's compliance with the WCA, 85 O.S. 2001 §§1-211, or constitute a waiver of the protection provided Thompson under the Act. ¶7 The Court of Civil Appeals (COCA) reversed and remanded, stating: The Trial Court refused to compel arbitration because it determined that, despite her agreement to arbitrate, Thompson's right to litigate her retaliatory discharge claim in district court could not be waived. In her employment agreement with Bar-S, Thompson did not waive the right to pursue her statutory claim, she merely agreed to have that claim resolved by an arbitrator rather than the court. For the reasons previously discussed, the determinations that Thompson agreed to arbitrate and that the arbitration agreement assigned the issue of arbitrability to the arbitrator required the Trial Court to Grant Bar-S's motion. This Court previously granted Thompson's petition for writ of certiorari. BURDEN OF PROOF AND STANDARD OF REVIEW ¶8 ¶9 We review an order granting or denying a motion to compel arbitration de novo, the same standard of review employed by the trial court. See Fleming Companies, Inc. v. TRU Discount Foods, COCA'S DECISION ¶10 COCA found Thompson did not argue the FAA was not applicable to this case, only that the arbitration agreement should not be enforced. She raised the issues that the agreement was unfair, contrary to Oklahoma law and the invalidity of the contract based in part on the manner in which the agreements were drafted and presented. In analyzing the application and the arbitration agreement, COCA held the trial court erred when it determined there was an agreement to arbitrate, but denied the motion to compel. COCA ruled the trial court should have granted the motion to compel and that an arbitrator should then have been allowed to determine the arbitrability issue, i.e., whether a valid agreement to arbitrate the retaliatory discharge claim exists, because the parties agreed the FAA would apply to issues of arbitrability. COCA found Thompson agreed to arbitrate and agreed to be governed by the FAA. It failed, however, to consider the issue raised by Thompson that no valid contract existed because of the "manner in which the agreements were drafted and presented." See COCA opinion, ¶5. CONTENTIONS ¶11 Citing Except as otherwise provided for by law, the district courts of the state shall have jurisdiction, for cause shown, to restrain violations of this act. ¶12 Bar-S contends §7 does not show legislative intent to create exclusive jurisdiction in the district courts of Oklahoma and that even if it had so intended, the Federal Arbitration Act (FAA), 9 U.S.C. §§1-16, ¶13 In the trial court and on appeal, Thompson did not dispute that the FAA applies to this case. She argued the arbitration agreement is fundamentally unfair and should not be enforced because it would prevent the pursuit of her claim under The Appellee did state several times in the briefs filed in the District Court of Beckham County and the Court of Civil Appeals that the Federal Arbitration Act would apply to wrongful discharge claims under ¶14 While ordinarily a plaintiff would not be allowed to raise new issues at this stage of the proceedings, see ¶15 Bar-S argues Thompson is bound by her signed agreement to arbitrate claims, and also contends if an applicant later accepts an offer of employment based on an application, it is disingenuous to suggest the content of the offer is not defined by the terms and conditions of the application. Bar-S argues that where a definite condition of continued employment is communicated to an at-will employee, her continued employment manifests assent to the condition and constitutes consideration. It also argues Thompson's acknowledgment of access to the PRP strengthens her obligation to arbitrate. It contends the trial court clearly erred in finding her retaliatory discharge claim was excluded under the PRP ¶16 Bar-S contends the arbitration procedures reflect mutual obligation of employer and employee. It claims that Thompson's argument that she is barred from the right to arbitrate her claim because she failed to follow the preliminary steps is disingenuous. It contends it waived the preliminary requirements and assured the trial court that Thompson could arbitrate her claim if she paid the fee within the appropriate statute of limitation period. It contends she was clearly within time. See FEDERAL ARBITRATION ACT ¶17 The PRP provides that the "Arbitration Procedures" for settling disputes are based on the FAA. In determining whether the FAA mandates submission of a claim to arbitration, a two step inquiry is necessary. See Mitsubishi Motors Corporation v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 , 105 S. Ct. 3346, 87 L. Ed. 2d 444 (1985). First, courts determine whether the arbitration agreement covers the dispute at issue. Mitsubishi, 473 U.S. at 626, 105 S. Ct. at 3353. The PRP provides that it includes claims relating to "employment or termination of . . . employment." Thus, it clearly purports to include it. Next, courts must consider whether legal constraints external to the parties' agreement foreclosed the arbitration of those claims. It must be determined whether the statutory right at issue is one for which Congress intended to preclude a waiver of judicial remedies. Mitsubishi, 473 U.S. at 628, 105 S. Ct. At 3354-55.12 ¶18 We look to Section 2 of the FAA.13 While it requires arbitration of contracts involving commerce, it also provides a qualification which we find applicable to the present case: "save upon such grounds as exist at law or in equity for the revocation of any contract." [emphasis added]. The interpretation of an arbitration agreement is "governed by 'general state-law principles of contract interpretation.'" See Wilkinson v. Dean Witter Reynolds, Inc., 1997 OK 20, ¶9, 933 P.2d 878 , 880 (citation omitted). "When deciding whether the parties agreed to arbitrate a certain matter . . . courts generally . . . should apply ordinary state-law principles that govern the formation of contracts." First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 , 944, 115 S. Ct. 1920, 1924, 131 L. Ed. 2d 985 (1995) (citations omitted). ¶19 An essential element of a contract is sufficient consideration. 15 O.S. 2001§2.14 As a general rule, consideration exists as long as there is a benefit to the promisor or a detriment to the promisee. See Powers Restaurants, Inc. v. Garrison, 1970 OK 30, ¶7, 465 P.2d 761 , 763. In the present case, Thompson as the promisor received no benefit; under the terms of the arbitration agreement, she was required to arbitrate her claim and to waive her right to a trial, in exchange for a promise from Bar-S which it could withdraw without notice. Bar-S stood to suffer no inconvenience or detriment with the ability to amend at any time. ¶20 Oklahoma law has generally recognized the rule of contract law that the reservation of a unilateral right to cancel the entire agreement is so broad that it negates the existence of consideration; the promise is essentially empty or illusory. See Wilson v. Gifford-Hill & Company, Inc., 1977 OK CIV APP 18, 570 P.2d 624 (cert. denied),15 citing 1 A Corbin on Contracts §163 and Calamari and Perillo, Contracts (1970) p. 135. This principle was applied by federal courts in arbitration cases under the FAA, construing Oklahoma law in which the employers have reserved the right to amend the arbitration agreements imposed on their employees to resolve claims and disputes. See Hardin v. First Cash Financial Services, Inc., 465 F.3d 470 (10th Cir. 2006); Pierce v. Kellogg, Brown & Root, Inc., 245 F. Supp. 2d 1212 (E.D.OK 2003). In both cases, the courts held the arbitration agreements were not illusory because they required prior notice to the employees before amendment of terms. We cite the above cases approvingly and apply the rule of law to this case. DISCUSSION ¶21 The existence of an arbitration agreement is governed by principles of state law. Rogers v. Dell Computer Corporation, 2005 OK 51, ¶14, 138 P.3d 826 , 830, citing Wilkinson v. Dean Witter Reynolds, Inc., 1997 OK 20, 933 P.2d 878 . "Under the FAA, issues relating only to the validity of the arbitration provision are generally subject to a judicial determination." Rogers v. Dell Computer Corporation, 2005 OK 51, ¶13, 138 P.3d 826 , 830 [emphasis added], citing Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 , 403-404, 87 S. Ct. 1801, 18 L. Ed. 2d 1270 (1967). It is the court's role to determine whether a valid, enforceable agreement to arbitrate the dispute exists. Rogers v. Dell Computer Corporation, 2005 OK 51, ¶14, 138 P.3d 826 , 830 [citations omitted]. ¶22 In attempting to refute Thompson's argument of lack of mutuality, Bar-S refers to provisions of the PRP itself which require both Bar-S and its employees to submit employment-related claims to arbitration. However, it is undisputed that Bar-S at no time gave Thompson a copy of the PRP. We acknowledge she signed the application which provides she knew the PRP was available upon request. The application also provides, however, that no offer is valid before the drug and alcohol testing and the background checks were complete. The application is thus not an offer of employment, and Thompson's signature is not an acceptance of an offer. The language in the application attempts to bind Thompson without requiring Bar-S to hire her. She was required at the time of signing the application to agree to abide by Bar-S's "rules, guidelines, policies, procedures, and Employee Handbook provisions" without knowing what those rules and policies were. Moreover, in order to apply for a job she was required to agree to resolve future disputes through arbitration and to waive a jury trial without knowing what the arbitration procedures required. ¶23 We acknowledge Bar-S's citations of authority in which arbitration agreements in employment applications have been upheld as valid agreements to arbitrate, see e.g., Circuit City Stores, Inc. v. Adams, 532 U.S. 105 , 121 S. Ct. 1302, 149 L. Ed. 2d 234 (2001) and Adkins v. Labor Ready, Inc., 303 F.3d 496 (4th Cir. 2002). The present case is distinguishable, however, because of the subsequent document Thompson signed. ¶24 As noted above, when Thompson was hired on April 19, 2000, she signed a document acknowledging receipt of the employee handbook.16 This document referred to the PRP as being available on the bulletin board and at the personnel office upon request. The provision referring to availability of the PRP persuades us it was not contained in the handbook she received, nor was a separate copy of it given to her at that time. Therefore, despite Bar-S's contention that Thompson is bound by the PRP's terms, she was never given a copy of it. ¶25 The document signed on April 19, 2000,17 contains the statement, "I understand that all of the afore mentioned documents are subject to change by Bar-S from time to time without notice." [emphasis added]. The PRP is clearly one of the "afore mentioned documents." Thus, Bar-S gave itself the unilateral right to modify the PRP, which contains the arbitration provisions, at any time. ¶26 Thompson has repeatedly raised the issue of the unfairness of the PRP and the circumstances under which she signed the pre-employment application and the post-employment acknowledgment. She swore she did not read the PRP, and as we have noted, Bar-S never gave her a copy of it. The courts of other states have considered similar issues relating to arbitration agreements in employment-related cases which we find instructive. ¶27 In Ex Parte Beasley, 712 So. 2d 338 (Ala. 1998), Beasley's employer instituted a new employment policy requiring arbitration of employment-related disputes. Notice of the policy was provided by issuing an employee handbook which contained the arbitration agreement. Beasley was an employee when this new policy began, and her continued employment was conditioned on acknowledging receipt of the new handbook, in writing. After signing the acknowledgment, she was terminated. The trial court granted the employer's motion to compel arbitration. ¶28 The acknowledgment Beasley signed provides in part that "no written statement or agreement in this handbook concerning employment is binding, since provisions are subject to change, and as all . . . employees are employed on an 'at will' basis." [emphasis added]. Beasley, 712 So. 2d at 340. Beasley argued that provision precluded the existence of a contract because her employer would be allowed to choose which provisions it wished to enforce. The Supreme Court of Alabama agreed and granted Beasley's petition for writ of mandamus directing the trial court to vacate its order compelling arbitration. The Court held that the disclaimer in the acknowledgment form that no written statement in the handbook is binding "vitiates the operative effect of the arbitration provision contained in the standard employee handbook. The plain meaning of the phrase 'no written statement' would include the statement in the standard employee handbook that the employee 'will use binding, independent arbitration as the final step in [his] complaint process.'" [citations omitted] Id., at 340. Beasley left unsigned an acknowledgment form which contained only the arbitration clause. "Absent Beasley's signature on a document that contains a valid arbitration clause, we cannot hold that she agreed to arbitrate her employment claims against Brookwood." Beasley, 712 So. 2d at 341, citing First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 , 944, 115 S. Ct. 1920, 131 L. Ed. 2d 985 (1995) (arbitration is required only for those claims the parties expressly agreed to arbitrate). ¶29 In a later case, the Supreme Court of Alabama distinguished Beasley. See Baptist Health System, Inc. v. Mack, 860 So. 2d 1265 (Ala. 2003). The court held the employee, Mack, was bound by an acknowledgment she signed in which she agreed to arbitrate employment-related disputes. Mack argued she was not required to arbitrate because she signed an acknowledgment form that did not contain an arbitration provision, citing Beasley, supra. The Court disagreed, noting it had held in Beasley that if Beasley had signed the acknowledgment form which set apart and included the arbitration agreement, she would have been obligated to arbitrate her dispute. The Court found the language in the Program document in Mack introducing its new arbitration policy was comparable to the language in the acknowledgment form, containing the arbitration agreement, which Beasley did not sign. The new policy in Mack, entitled "Dispute Resolution Program," was not included in an employee handbook, but it was set out in a separate document, similar to the PRP in the present case. It provided that by continuing her employment after receipt of the document, she agreed to be bound by the terms of the Program which constituted a binding contract between her and Employer BHS. Mack signed a document entitled "Acknowledgment of Receipt of BHS Dispute Resolution Program," acknowledging receipt of the Program document and providing that she understood she was obligated to read the document and that it governed her continued employment and all future legal disputes between her and BHS as defined in the document. Also, meetings were held with employees to explain the terms of the Program before it became effective to ensure employees were aware of the arbitration provision contained within the document. Thus, the Supreme Court of Alabama did not disavow Beasley. By way of comparison, the Court reaffirmed its holding in Beasley by showing how distinguishing facts cause a different outcome. ¶30 In J. M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (Tex. 2003), the Texas Supreme Court ordered a case on appeal remanded for an evidentiary hearing to determine the parties' intentions on an ambiguous statement in the employer's personnel policies. The provision at issue provided that the employer retained a unilateral right to modify "personnel policies" at any time. The court found the term ambiguous because it could not determine whether the term included the arbitration agreement or other certain specified policies. If it included the arbitration agreement, it was illusory because the express terms of the agreement provided the employer was not bound by its terms. "Although we have repeatedly expressed a strong presumption favoring arbitration, the presumption arises only after the party seeking to compel arbitration proves that a valid arbitration agreement exists." Id., at 227. ¶31 The Davidson v. Webster Court compared it to another Texas case, In re Halliburton Co., 80 S.W.3d 566 (Tex.2002), in which the employer's right to modify an arbitration agreement was also considered. The Texas court held the Halliburton arbitration agreement was not illusory because it required ten days' notice of any modification, with only prospective application of any resulting amendments. See also In re Tenet Healthcare, Ltd., 84 S.W.3d 760 (Tex.App. 2002), in which the Court of Appeals of Texas, Houston, held an arbitration agreement was supported by mutual promises, finding the employer could not rescind or change employment-related benefits or the arbitration agreement without written agreement from both parties. ¶32 The Texas Supreme Court in Davidson v. Webster, supra, cited numerous cases which had considered whether arbitration agreements were illusory. One of the citations is to Dumais v. American Golf Corporation, 299 F.3d 1216 (10th Cir. 2002), in which the Tenth Circuit held an ambiguity in an employee handbook relating to arbitration would be construed against the drafter under New Mexico law. It ultimately held the provision was illusory because it allowed the employer to change the arbitration provision at will. "We join other circuits in holding that an arbitration agreement allowing one party the unfettered right to alter the arbitration agreement's existence or its scope is illusory." Dumais v. American Golf Corporation, 299 F.3d 1216, 1219. CONCLUSION ¶33 COCA erred in failing to consider whether the agreement signed by Thompson was invalid under basic state law contract principles, as provided by 9 U.S.C. §2 and the cases cited. The acknowledgment signed by Thompson did not include a copy of the PRP, and the handbook she was given did not contain a copy of it. Moreover, the acknowledgment she signed allowed Bar-S the right to modify the terms of the PRP, as an "afore mentioned document" at any time without notice. Although this Court recognizes the FAA is a valid means of resolving disputes in the workplace, the agreement to arbitrate must be based on a valid contract, supported by consideration. Therefore, under the facts of this case, we hold Thompson is not required to pursue her claim through arbitration. ¶34 Although we agree Thompson should be allowed to pursue her claim in district court, the trial court made an erroneous finding that the PRP did not cover the retaliatory discharge claim. However, we hold the trial court correctly denied the motion to compel arbitration. An order of the trial court which reaches the correct result for the wrong reason or on an incorrect theory will not be reversed. See Jacobs Ranch, L.L.C. v. Smith, 2006 OK 34, 148 P.3d 842 ; Estate of Bartlett, 1984 OK 9, 680 P.2d 369 . The order is thus affirmed, and this case is remanded for a trial on the merits. OPINION OF THE COURT OF CIVIL APPEALS IS VACATED; ORDER OF THE TRIAL COURT IS AFFIRMED AND REMANDED FOR FURTHER PROCEEDINGS. WINCHESTER, C.J., EDMONDSON, V.C.J., HARGRAVE, OPALA, KAUGER, WATT, TAYLOR, COLBERT, JJ. - concur FOOT