Opinion ID: 2639591
Heading Depth: 3
Heading Rank: 2

Heading: Unambiguous Intent to Submit to Arbitration

Text: We stated in Earl M. Jorgensen Co. v. Mark Construction, Inc., 56 Haw. 466, 540 P.2d 978 (1975), that [t]here must be a mutual assent or a meeting of the minds on all essential elements or terms to create a binding contract. . . . The existence of mutual assent or intent to accept is determined by an objective standard. . . . Unexpressed intentions are nugatory when the problem is to ascertain the legal relations, if any, between two parties. Id. at 470-71, 540 P.2d at 982 (citations omitted). Douglass argues that, although he signed the acknowledgment form verifying his receipt of the Handbook, he did not assent to the arbitration provision contained therein. Pflueger, however, maintains that, since Douglass signed the acknowledgment stating that he had received and understood the foregoing document, he must therefore have agreed to the terms in the Handbook, including the arbitration process for any disputes or controversies arising out of his employment and/or termination. In support of its contention, Pflueger relies solely upon this court's decision in Brown. In Brown, a terminated employee of African American descent (the plaintiff) brought suit against his former employer, KFC National Management Company (KFC), alleging, inter alia, race discrimination and harassment. 82 Hawai`i at 230, 921 P.2d at 150. KFC sought to enforce the arbitration clause contained in the employment application. Id. at 231, 921 P.2d at 151. The clause provided: Because of the delay and expense which results from the use of the federal and state court systems, KFC and I agree to submit to binding arbitration any controversies concerning my compensation, employment[,] or termination of employment, rather than to use such court systems. In any such arbitration, the American Arbitration Association rules shall govern the procedure[,] and the Federal Arbitration Act shall govern the substance of such controversies. Id. at 230, 921 P.2d at 150 (some brackets in original) (emphasis added). We noted in Brown that the arbitration clause was manifestly unambiguous in its expressed intent that KFC and [the plaintiff] agree to submit to binding arbitration[.] Id. at 239, 921 P.2d at 159. We held that, on its face, the `written agreement for arbitration[ ]' reflects . . . mutual assent to the arbitration of employment-related disputes[.] Id. at 240, 921 P.2d at 160 (citation omitted). Similarly, here, by its plain language, the arbitration provision is manifestly unambiguous in its expressed intent that: Any and all claims arising out of the employee's employment with the Company and his/her termination shall be settled by final and binding arbitration . . . . The results of any arbitration shall be final and binding upon the parties. The parties agree not to institute any action in any court located in the State of Hawai`i or elsewhere against the other arising out of the claims covered by this paragraph. (Emphases added.) Indeed, the provision uses contractual terms such as shall be settled, final and binding upon the parties, and [t]he parties agree. We believe that the language used in the above arbitration provision  on its face . . . reflects . . . mutual assent to the arbitration of employment-related disputes[.] Id. at 240, 921 P.2d at 160 (emphasis added) (citation omitted). Nonetheless, we cannot conclude that, in combination with the surrounding circumstances presented in this case, there is mutual assent between Pflueger and Douglass to arbitrate their disputes. Douglass argues that he could not have known about the purported arbitration agreement to consent to it when: (1) the provision consist[s] of two paragraphs of text buried, and hidden from sight, on page 20 of the 60 page `[E]mployee [H]andbook', and was not signed or initialed by him; (2) the signed acknowledgment form, which does not mention the purported arbitration agreement, is located forty pages away; and (3) immediately preceding the acknowledgment form is a section, entitled DISCLAIMER, that provides in capitalized letters: THE POLICIES DESCRIBED IN THIS HANDBOOK ARE INTENDED AS GUIDELINES REFLECTING CURRENT POLICIES AND ARE NOT INTENDED TO AND DO NOT CREATE A CONTRACT BETWEEN YOU AND THE COMPANY[;] and (4) the acknowledgment section itself states in bold lettering that: The provisions contained in this handbook are presented as a matter of information only and do not constitute an employment contract. In Kummetz v. Tech Mold, Inc., 152 F.3d 1153 (9th Cir.1998), the facts of which are nearly identical to the case at bar, the United States Court of Appeals for the Ninth Circuit held that, because the acknowledgment form did not contain the arbitration provision or notify the employee of the arbitration clause in the employer's information booklet, the employee did not knowingly agree to arbitrate his claims. In Kummetz, the plaintiff sued his former employer for employment discrimination in violation of the Americans with Disabilities Act (ADA) and the Arizona Civil Rights Act. Id. at 1154. About a week after he began work, the employer issued to the plaintiff an Employment Information Booklet (Booklet) and an acknowledgment form. Id. The acknowledgment, which the plaintiff signed, declared that: I understand and agree that I am covered by and must abide by the contents of this Booklet. I also understand and agree that this Booklet in no way constitutes an employment contract and that I remain an at-will employee. . . . . I understand that the policies, practices and benefits set forth in this Booklet are subject to change at any time and without prior notice at the sole and unlimited discretion of the Company. The Company also reserves the right to interpret any ambiguity or any confusion about the meaning of any term in this Booklet, and that interpretation shall be final and binding. Id. (emphasis added) (ellipsis in original). The acknowledgment did not refer to or imply that the Booklet contained an arbitration provision. Consequently, the Ninth Circuit court concluded that the employee had not knowingly agreed to the arbitration clause because `[n]othing in that acknowledgement [sic] notified [the employee] either that the [Booklet] contained an arbitration clause or that his acceptance of the [Booklet] constituted a waiver of his right to a judicial forum in which to resolve claims covered by the ADA.' Id. at 1155 (some brackets in original and some added) (quoting Nelson v. Cyprus Bagdad Copper Corp., 119 F.3d 756, 758-61 (9th Cir.1997) (similarly holding that there was no meeting of the minds where the employee signed an acknowledgment, which declared that he had received the handbook and agreed to read it and understand its contents, but made no mention of the arbitration agreement contained in the handbook)). Here, Douglass merely acknowledged his receipt and understanding of the items presented to him. He never expressed assent to the terms contained in those items, except for those terms expressly stating that the policies in the Handbook did not create a contract, were to be treated as guidelines, and were presented for information only. The acknowledgment which Douglass signed makes no mention of the arbitration provision contained in the Handbook, nor sufficiently informs him that the Handbook contains terms to which he is contractually obligating himself. Nothing in the acknowledgment form that Douglass signed suggests to us that he was entering into an arbitration agreement. Cf. Patterson v. Tenet Healthcare, Inc., 113 F.3d 832, 834-35 (8th Cir.1997) (holding that the arbitration clause in an employee handbook was enforceable because the acknowledgment form explicitly referenced an arbitration agreement); Towles v. United HealthCare Corp., 338 S.C. 29, 524 S.E.2d 839, 842 (App.1999) (employee signed a handbook which read that the provisions in this Handbook are guidelines and, except for the provisions of the Employment Arbitration Policy, do not establish a contract (emphasis added)); MicroStrategy, Inc. v. Lauricia, 268 F.3d 244, 248 (4th Cir.2001) (employee signed an Employee Acknowledgment Form and Agreement to Arbitrate  (emphases added)). Similarly, in holding that the arbitration agreement in Brown was valid and enforceable inasmuch as it was severable and distinct from the remainder of the employment application, 82 Hawai`i at 246, 921 P.2d at 166, and despite the existence of a contract disclaimer, we emphasized that the arbitration agreement is contained in a discrete section of the [employment] application, denominated Agreement. The Agreement is boxed off from the other sections of the application. Moreover, the Employee Rights subsection, in which the arbitration agreement is located, is set off from the preceding paragraphs of the Agreement by its own subheading, labeled Arbitration of Employee Rights. The signature line prepared for the applicant appears just below the arbitration agreement. Id. at 245, 921 P.2d at 165. In addition, the plaintiff signed on the above-described signature line below the arbitration agreement. Id. at 229, 921 P.2d at 149. In contrast, the arbitration provision at issue here is not boxed off or otherwise set apart from the other provisions in the Handbook or on the acknowledgment form. In fact, the arbitration provision, like all the other provisions in the Employee Handbook, is (1) introduced by its own bold faced heading and (2) in the same font size as the rest of the Handbook. Moreover, the agreement, unlike the agreement in Brown that was set off and on the same page as the signature line, is located on page 20 of the sixty-page Handbook, and Douglass' signature is not found until forty pages later on the acknowledgment page, which, as previously pointed out, makes no mention of the arbitration provision. Only if [Pflueger] had specifically called [Douglass'] attention to the arbitration clause in the [Handbook] would the clause suffice in the face of the uninformative Acknowledgement [sic]. Kummetz, 152 F.3d at 1156. The record before us, however, does not indicate that Douglass was informed of the existence of the arbitration provision, let alone that he would be bound by it. The record shows that Arlene Cheung, the Human Resources Administrator for Pfleuger, conducted [Douglass'] orientation and reviewed the provisions of Pflueger's Employee Handbook with him[;] however, her declaration does not reveal whether she specifically mentioned the arbitration provision to Douglass. (Cheung Decl.) The declaration made by Douglass states in relevant part that: 10. During the September 13, 2001 meeting, [Cheung] showed me some parts of the handbook after I signed the Acknowledgement [sic]. 11. I do not remember exactly what parts of the employee handbook were reviewed and what was not reviewed. 12. I do not remember discussing anything about arbitration, or giving up the right to file a lawsuit in court, or anything else like that. 13. It is[,] therefore, not likely that [Cheung] and I discussed anything about arbitration or giving up the right to file a lawsuit in court, or anything else like that. 14. I do not remember reading any part of the employee handbook entitled Arbitration Agreement. (Emphasis added.) Further, during his deposition, Douglass testified regarding the orientation conducted by Cheung as follows: Q. [By defense counsel] Mr. Douglass, is this the handbook that was given to you on September 13th ÔÇö A. [Douglass] Yes. Q. ÔÇöthe orientation? Is that correct? A. Yes. . . . . Q. What other policies in the handbook were reviewed with you by [Cheung] at your orientation? A. I can't remember. Q. You can't remember? A. I think she showed me the whole handbook, though. . . . . Q. Once she reviewed with you the handbook and had you sign the acknowledgment.. . . [Cheung] then gave you the handbook to take with you, is that correct? A. Yes. His testimony that Cheung showed [him] the whole handbook does not indicate to us that he was put on notice regarding the existence of the arbitration provision and the binding effect thereof. [12] We, therefore, conclude that the second Brown requirement, i.e., unambiguous intent to submit to arbitration, has not been satisfied. See Malani v. Clapp, 56 Haw. 507, 510, 542 P.2d 1265, 1267 (1975) (It is an elementary rule of contract law that there must be . . . a meeting of the minds on all essential elements or terms in order to create a binding contract. (Citations omitted.)). Accordingly, we hold that, under the circumstances of this case, Douglass cannot be compelled to arbitrate his claims against Pflueger.