Opinion ID: 2998170
Heading Depth: 3
Heading Rank: 1

Heading: Agreement to Arbitrate

Text: The FAA provides that a “written provision in any . . . contract . . . to settle by arbitration” any future controversy arising out of such contract “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in No. 04-2383 7 1 equity for the revocation of any contract.” 9 U.S.C. § 2. The FAA was designed “to reverse the longstanding judicial hostility to arbitration agreements . . . and to place [them] on the same footing as other contracts.” Gilmer v. Interstate/ Johnson Lane Corp., 500 U.S. 20, 24 (2000). The FAA embodies a “liberal federal policy favoring arbitration agreements.” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983). Any doubts with respect to arbitrability therefore should be resolved in favor of arbitration. Id. However, a party can be compelled to arbitrate only those matters that she has agreed to submit to arbitration. First Options of Chicago Inc. v. Kaplan, 514 U.S. 938, 945 (1995); Gibson v. Neighborhood Health Clinics, Inc., 121 F.3d 1126, 1130 (7th Cir. 1997) (“An agreement to arbitrate is treated like any other contract. . . . If there is no contract there is to be no forced arbitration.” (internal quotation and citation omitted)). In deciding whether the parties agreed to arbitrate a certain matter, federal courts generally should rely on state contract law governing the formation of contracts. 1 Section 2 of the FAA provides in full: A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract. 9 U.S.C. § 2. 8 No. 04-2383 2 First Options of Chicago Inc., 514 U.S. at 944. Ms. James contends that she should not be forced to arbitrate her claims because she never entered into an agreement to arbitrate her dispute. She submits that she was not aware of the Official Rules, much less that the rules deprived her of a jury trial. For the same reasons, Ms. James contends that, if there was an agreement to arbitrate, it is unconscionable and should not be enforced. To support her position, Ms. James submits that one cannot assume that she knew of, and accepted, the arbitration clause in the Official Rules simply because she ate at a McDonald’s restaurant. She maintains that customers cannot be expected to read every container of food they purchase in order to know that they are entering a contract. Rather, she submits that it was McDonald’s burden to assure her understanding of, and willingness to be bound by, the arbitration provision. Certainly, as Ms. James urges, a contract includes only terms on which the parties have agreed. See ProCD, Inc. v. Zeidenberg, 86 F.3d 1447, 1450 (7th Cir. 1996). However, one of the things that Ms. James agreed to by participating in the “Who Wants to be a Millionaire” game was to follow the game’s rules in order to win the promised prize. As a general rule, a participant in a prize-winning contest must comply with the terms of the contest’s rules in order to form a valid and binding contract with the contest promoter. The promoter’s obligation is limited by the terms of the offer, 2 The parties dispute whether Kentucky or Illinois law applies in this case. See Appellant’s Br. at 9-10; Appellee’s Br. at 13-14. However, neither party argues, nor do we conclude, that the outcome of this case would be different depending on which law we apply. The principles of contract construction in this case are “matters of hornbook law.” Paladino v. Avnet Computer Techs., Inc., 134 F.3d 1054, 1061 n.1 (11th Cir. 1998). No. 04-2383 9 including the conditions and rules of the contest that are 3 made public. Ms. James challenges the district court’s reliance on Kentucky case law that provides that a party who had the opportunity to read a contract, but did not, is bound by the contract terms. Merten v. Vogt, 208 S.W.2d 739, 740 (Ky. 1948); Conseco Fin. Serv. Corp. v. Wilder, 47 S.W.3d 335, 341 (Ky. Ct. App. 2001). Ms. James insists that these cases are inapposite because they involve contracts that were negotiated and signed by the parties. Instead, she relies on Oakwood Mobile Homes, Inc. v. Sprowls, 82 S.W.3d 193, 199 (Ky. 2002), which held that an employee could not validly agree to arbitrate without “actual notice” of the employer’s arbitration policy. The district court’s ruling is not inconsistent with Oakwood, however, because the court found that the Official Rules were “clearly and undisputably identified to [Ms. James] as being part of the contest.” R.32 at 4. It is axiomatic that a contest normally has rules regarding eligibility to win the promised prize. Moreover, Ms. James cannot claim, on the one hand, that a valid contract obligates McDonald’s to redeem her prize and, on the other hand, argue that no contract binds her to the contest rules. A con- 3 See, e.g., Workmon v. Publishers Clearing House, 118 F.3d 457, 459 (6th Cir. 1997); Barnes v. McDonald’s Corp., 72 F. Supp. 2d 1038, 1042-43 (E.D. Ark. 1999), aff ’d, 230 F.3d 1362 (8th Cir. 2000) (unpublished); Nat’l Amateur Bowlers, Inc. v. Tassos, 715 F. Supp. 323, 325 (D. Kan. 1989); Johnson v. BP Oil Co., 602 So. 2d 885, 888 (Ala. 1992); Harlem-Irving Realty Inc. v. Alesi, 425 N.E.2d 1354, 1357 (Ill. App. Ct. 1981); 1 E. Allan Farnsworth, Farnsworth on Contracts § 3.10, at 260-62 & n.34 (3d ed. 2004); 1 Richard A. Lord, Williston on Contracts § 4.3, at 360 (1990); Michael P. Sullivan, Annotation, Private Contests and Lotteries: Entrants’ Rights and Remedies, 64 A.L.R. 4th 1021 (1988). 10 No. 04-2383 test participant cannot pick and choose among the terms and conditions of the contest; the rules stand or fall in their entirety. Outside the promotional-contest context, this court has held that parties are bound to an arbitration provision even if they did not read the provision. For instance, in Hill v. Gateway 2000, Inc., 105 F.3d 1147 (7th Cir.), cert. denied, 522 U.S. 808 (1997), the purchasers of a computer conceded that they had noticed the terms printed inside the box in which their computer was shipped. However, they maintained that they had not read it closely enough to see the arbitration clause. See id. at 1148. We held that the arbitration clause was enforceable because the purchasers had the opportunity to return the computer after reading the terms. We stated that “[a] contract need not be read to be effective; people who accept take the risk that the unread terms may in retrospect prove unwelcome.” Id.; see also ProCD, 86 F.3d at 1452 (binding consumer to arbitration clause printed inside box of software because consumer had the opportunity to return the software after reading the terms). In Hill, we explained that [p]ractical considerations support allowing vendors to enclose the full legal terms with their products. Cashiers cannot be expected to read legal documents to cus- tomers before ringing up sales. If the staff at that the other end of the phone for direct-sales operations such as Gateway’s had to read the four-page statement of terms before taking the buyer’s credit card number, the droning voice would anesthetize rather than enlighten many potential buyers. Others would hang up in a rage over the waste of their time. And oral recitation would not avoid customers’ assertions (whether true or feigned) that the clerk did not read term X to them, or that they did not remember or understand it. No. 04-2383 11 Hill, 105 F.3d at 1149; see also ProCD, 86 F.3d at 1451. The situation faced by McDonald’s presents an apt comparison. To require McDonald’s cashiers to recite to each and every customer the fourteen pages of the Official Rules, and then have each customer sign an agreement to be bound by the rules, would be unreasonable and unworkable. The Official Rules were identified to Ms. James as part of the contest, and that identification is sufficient in this case to apprise her of the contents of the rules.