Court Opinion

ID: 9939884
Source: CourtListenerOpinion
Date Created: 2024-02-12 22:17:22.573881+00
Date Added: 2024-06-11T13:42:05.765612
License: Public Domain

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
                           DIVISION ONE

 BAIONNE COLEMAN,                                  No. 84421-1-I

                           Respondent,

                 v.
                                                   UNPUBLISHED OPINION
 IMPACT PUBLIC SCHOOLS, a State
 or municipal government agency,

                           Appellant.

       BOWMAN, J. — Baionne Coleman sued her former employer, Impact Public

Schools (Impact), alleging employment discrimination under the Washington Law

Against Discrimination (WLAD), chapter 49.60 RCW. Impact appeals the trial

court’s denial of its motion to dismiss the complaint under CR 12(b)(1) and

compel arbitration. Because the arbitration clause in Coleman’s employment

contract is valid and enforceable, we reverse and remand for further

proceedings.

                                        FACTS

       Impact operates Impact Puget Sound Elementary School in Tukwila. On

June 28, 2017, Impact Chief Executive Officer Jen Wickens offered Coleman a

job at the elementary school as “School Leader Resident” via a two-page offer

letter attached to an e-mail. Two provisions of the letter included:

       At-Will Employment: Your employment with the organization
       will be on an “at will” basis, meaning that either you or [Impact] may
       terminate your employment at any time for any reason or no
No. 84421-1-I/2

       reason, with or without advance notice, without further obligation or
       liability. The terms of your employment also may be altered at any
       time, at the discretion of [Impact].

       Waiver: You agree that any dispute or claim arising out of or
       related to your employment shall be settled by binding arbitration
       conducted in King County and administered by the American
       Arbitration Association [(AAA)] under its National Rules for the
       Resolution of Employment Disputes. This shall include, without
       limitation, disputes relating to employment with [Impact] or
       termination thereof, and any claims of discrimination or any other
       claims under federal, state, or local law or regulation.

Wickens concluded her e-mail by telling Coleman, “Please let me know if you

have any questions/thoughts.”

       Coleman read the offer letter, including the arbitration provision, the same

day Wickens e-mailed it to her. She then initialed the line labeled “I accept” the

“offer of employment” and signed her full name at the bottom of the letter.

       In July 2019, Coleman resigned from Impact. On May 25, 2022, she sued

Impact, asserting a single claim of employment discrimination under the WLAD.

Impact moved under CR 12(b)(1) to dismiss Coleman’s complaint for lack of

subject matter jurisdiction and compel arbitration according to the arbitration

provision in her offer letter. In response, Coleman argued that the arbitration

provision is ambiguous, illusory, and procedurally and substantively

unconscionable. The trial court denied Impact’s motion.

       Impact appeals.

                                    ANALYSIS

       Impact argues that the trial court erred by denying its motion to dismiss

Coleman’s claim and compel arbitration. We review the denial of a motion to

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No. 84421-1-I/3

compel arbitration de novo. Verbeek Props., LLC v. GreenCo Env’t, Inc., 159

Wn. App. 82, 86, 246 P.3d 205 (2010).

       The federal arbitration act (FAA), 9 U.S.C. sections 1 to 16, “applies to all

employment contracts except for employment contracts of certain transportation

workers.” Zuver v. Airtouch Commc’ns, Inc., 153 Wn.2d 293, 301, 103 P.3d 753

(2004) (citing Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 119, 121 S. Ct.

1302, 149 L. Ed. 2d 234 (2001)). Under the FAA, written arbitration agreements

“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. The effect of

section 2 of the FAA is to create a body of substantive federal law on arbitration

that state and federal courts must apply to arbitration agreements that fall under

the act’s coverage. Romney v. Franciscan Med. Grp., 186 Wn. App. 728, 734,

349 P.3d 32 (2015); Perry v. Thomas, 482 U.S. 483, 489, 107 S. Ct. 2520, 96 L.

Ed. 2d 426 (1987).

       Washington has a strong public policy favoring arbitration. Heights at

Issaquah Ridge, Owners Ass’n v. Burton Landscape Grp., Inc., 148 Wn. App.

400, 405, 200 P.3d 254 (2009).1 The party opposing arbitration bears the burden

of showing the arbitration clause is inapplicable or unenforceable. Verbeek, 159

       1
          Citing Zuver, 153 Wn.2d at 301, Impact argues we must indulge every
presumption in favor of arbitration. Amicus Curiae Washington Employment Lawyers
Association point out that under federal law, there is no longer a presumption in favor of
arbitration. See Armstrong v. Michaels Stores, Inc., 59 F.4th 1011, 1014 (9th Cir. 2023)
(“courts ‘must hold a party to its arbitration contract just as the court would to any other
kind’ [and] ‘may not devise novel rules to favor arbitration over litigation’ ”) (quoting
Morgan v. Sundance, Inc., 596 U.S. 411, 418, 142 S. Ct. 1708, 212 L. Ed. 2d 753
(2022)). Because we determine that the contract here is unambiguous, we need not
resolve the issue.

                                             3
No. 84421-1-I/4

Wn. App. at 86-87. When the validity of an agreement to arbitrate is challenged,

we apply ordinary state contract law. McKee v. AT & T Corp., 164 Wn.2d 372,

383, 191 P.3d 845 (2008). “Arbitration agreements stand on equal footing with

other contracts and may be invalidated by ‘[g]eneral contract defenses such as

unconscionability.’ ” Burnett v. Pagliacci Pizza, Inc., 196 Wn.2d 38, 47, 470 P.3d

486 (2020)2 (quoting McKee, 164 Wn.2d at 383).

      Coleman argues that the arbitration provision in her offer letter—or

employment contract—is unenforceable because it lacks mutual assent and

consideration. She also contends the provision is procedurally and substantively

unconscionable. We address each argument in turn.

A. Mutual Assent

      Coleman argues that the arbitration provision is unenforceable because it

is “ambiguous and incapable of acquiring mutual assent.” We disagree.

      To form a contract, the parties must manifest “ ‘their mutual assent to the

same bargain at the same time.’ ” Burnett, 196 Wn.2d at 483 (quoting Yakima

County (W. Valley) Fire Prot. Dist. No. 12 v. City of Yakima, 122 Wn.2d 371, 388,

858 P.2d 245 (1993)). Contract law rests on the principle that “ ‘one is bound by

the contract which [s]he voluntarily and knowingly signs.’ ” H. D. Fowler Co. v.

Warren, 17 Wn. App. 178, 180, 562 P.2d 646 (1977) (quoting Nat’l Bank of

Wash. v. Equity Invs., 81 Wn.2d 886, 912-13, 506 P.2d 20 (1973)). So, when a

party signs a contract, we presume they objectively manifested their assent to its

      2
          Alteration in original.
      3
          Internal quotation marks omitted.

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No. 84421-1-I/5

contents absent some misrepresentation or wrongful act—“ignorance of the

contents of a contract expressed in a written instrument does not ordinarily affect

the liability of one who signs it.” Tjart v. Smith Barney, Inc., 107 Wn. App. 885,

897, 28 P.3d 823 (2001).

       Coleman argues she did not know she assented to arbitrate her claims in

lieu of a trial when she executed the employment contract. She likens her case

to the circumstances in Burnett. In that case, Pagliacci Pizza and Burnett

executed an employment contract. Burnett, 196 Wn.2d at 42-43. The contract

required Burnett to “comply with the rules and policies outlined in [the employee

handbook],” which Pagliacci did not provide to Burnett until after he signed the

contract. Id. at 43, 56-57. Buried in the handbook was a mandatory arbitration

clause. Id. at 43. After Pagliacci terminated Burnett, he sued, alleging various

wage related claims. Id. at 45. Pagliacci moved to enforce the mandatory

arbitration provision. Id.

       Our Supreme Court concluded the arbitration clause was not valid

because Burnett did not assent to arbitration when he executed the contract.

Burnett, 196 Wn.2d at 56-57. It reasoned that “incorporation by reference does

not, in itself, establish mutual assent to the terms being incorporated.” Id. at 49.

Instead, it “ ‘ “must be clear that the parties to the agreement had knowledge of

and assented to the incorporated terms.” ’ ” Id. (quoting Burnett v. Pagliacci

Pizza, Inc., 9 Wn. App. 2d 192, 200, 442 P.3d 1267 (2019) (quoting W. Wash.

Corp. of Seventh-Day Adventists v. Ferrellgas, Inc., 102 Wn. App. 488, 494-95, 7

P.3d 861 (2000))). Because Burnett did not have the employee handbook at the

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No. 84421-1-I/6

time he signed the contact, he did not know of the incorporated terms, and he

could not have assented to the mandatory arbitration provision. Burnett, 196

Wn.2d at 49-50.

       Coleman’s case is different than Burnett. The plain language of

Coleman’s contract states, “You agree that any dispute or claim arising out of or

related to your employment shall be settled by binding arbitration.” It clarifies that

this “shall include, without limitation, disputes relating to employment with

[Impact] or termination thereof, and any claims of discrimination.” And it explains

that the claims not subject to arbitration are only “wage claims, claims for benefits

under workers’ compensation laws or claims for unemployment insurance

benefits.” Unlike the contract in Burnett, Coleman’s contract contains clear

language assenting to arbitration. And that language is on the face of a 2-page

offer letter rather than buried in an employee handbook incorporated by

reference. See Burnett, 196 Wn.2d at 43 (arbitration provision on page 18 of 23-

page handbook).

       Still, Coleman argues the contract lacks mutual assent because the clause

“settled by binding arbitration” is ambiguous. According to Coleman, the term

“settled” is “a modifier defined by alternative and vastly divergent concepts,”

leaving it unclear how disputes would be resolved.

       Washington courts follow the objective manifestation theory of contracts.

Hearst Commc’ns, Inc. v. Seattle Times Co., 154 Wn.2d 493, 503, 115 P.3d 262

(2005). “Under this approach, we attempt to determine the parties’ intent by

focusing on the objective manifestations of the agreement, rather than on the

                                          6
No. 84421-1-I/7

unexpressed subjective intent of the parties.” Id. We “impute an intention

corresponding to the reasonable meaning of the words used” and “generally give

words in a contract their ordinary, usual, and popular meaning unless the entirety

of the agreement clearly demonstrates a contrary intent.” Id. at 503-04. To

determine the ordinary meaning of an undefined term, we look to the dictionary.

Boeing Co. v. Aetna Cas. & Sur. Co., 113 Wn.2d 869, 877, 784 P.2d 507 (1990).

“A contract provision is not ambiguous merely because the parties to the contract

suggest opposing meanings.” GMAC v. Everett Chevrolet, Inc., 179 Wn. App.

126, 135, 317 P.3d 1074 (2014). And we “will not read ambiguity into a contract

‘where it can reasonably be avoided.’ ” Id.4 (quoting Mayer v. Pierce County

Med. Bureau, Inc., 80 Wn. App. 416, 421, 909 P.2d 1323 (1995)).

       Here, the parties agreed that “any dispute or claim arising out of or related

to . . . employment shall be settled by binding arbitration conducted in King

County and administered by the [AAA].” Coleman’s employment contract does

not define the word “settle,” so we look to the dictionary for its plain meaning.

The dictionary defines “settle” as “to conclude (a lawsuit) by agreement between

the parties [usually] out of court.” W EBSTER’S THIRD NEW INTERNATIONAL

DICTIONARY 2079 (2002). Viewed in context of the entire sentence, “settled by

binding arbitration” means resolving any qualifying dispute or claim out of court

through binding arbitration administered by the AAA.

       4
           Internal quotation marks omitted.

                                               7
No. 84421-1-I/8

       Coleman fails to show that the language in the arbitration clause is

ambiguous. And the language shows the parties’ mutual assent to arbitrate any

dispute or claim arising out of or related to Coleman’s employment.

B. Consideration

       Coleman and amicus curiae argue that the arbitration provision in her

contract is not binding because the agreement lacks consideration. They

contend that Impact’s promise to arbitrate is illusory because the “At-Will

Employment” section of the contract states that the terms of Coleman’s

employment, such as the agreement to arbitrate,5 “may be altered at any time, at

the discretion of [Impact].” We disagree.

       Every contract must be supported by consideration to be enforceable.

King v. Riveland, 125 Wn.2d 500, 505, 886 P.2d 160 (1994). “Consideration is a

bargained-for exchange of promises,” or “ ‘any act, forbearance, creation,

modification or destruction of a legal relationship, or return promise given in

exchange.’ ” Labriola v. Pollard Grp., Inc., 152 Wn.2d 828, 833, 100 P.3d 791

(2004) (quoting King, 125 Wn.2d at 505).

       An obligation based on an illusory promise is unenforceable:

       “If the provisions of an agreement leave the promisor’s
       performance entirely within [their] discretion and control, the
       ‘promise’ is illusory. Where there is an absolute right not to perform
       at all, there is an absence of consideration.” Thus, if a promise is
       illusory, there is no consideration and no enforceable obligation.

SAK & Assocs., Inc. v. Ferguson Constr., Inc., 189 Wn. App. 405, 411-12, 357

P.3d 671 (2015) (quoting Felice v. Clausen, 22 Wn. App. 608, 611, 590 P.2d

       5
       Impact does not dispute on appeal that the agreement to arbitrate is a term of
Coleman’s employment. So, we do not address that issue.

                                           8
No. 84421-1-I/9

1283 (1979)). We give preference to reasonable interpretations of contracts

rather than to those that would make the contract unreasonable or its obligations

illusory. Id. at 412 n.18 (quoting Shakey’s Inc. v. Covalt, 704 F.2d 426, 434 (9th

Cir. 1983)).

       Washington is a terminable-at-will employment state. Ford v. Trendwest

Resorts, Inc., 146 Wn.2d 146, 152, 43 P.3d 1223 (2002). Terminable-at-will

employment may be terminated by either the employer or the employee at any

time, with or without cause. Id.; Roe v. TeleTech Customer Care Mgmt. (Colo.),

LLC, 152 Wn. App. 388, 399, 216 P.3d 1055 (2009). Implicit in the right to

terminate at will is the right to unilaterally modify the terms of the employment.

Duncan v. Alaska USA Fed. Credit Union, Inc., 148 Wn. App. 52, 73, 199 P.3d

991 (2008). So, an employer may unilaterally change terms of at-will

employment so long as the employee receives reasonable notice of the change.

Id. at 70 (quoting Cole v. Red Lion, 92 Wn. App. 743, 751, 969 P.2d 481 (1998)).

If the employee accepts the new terms by continuing to work after receiving

notice of the change, a new contract is formed. Cascade Auto Glass, Inc. v.

Progressive Cas. Ins. Co., 135 Wn. App. 760, 769, 145 P.3d 1253 (2006). At-will

agreements are not illusory because a party changing terms must provide the

other party notice—a legal detriment sufficient to satisfy the requirement of

consideration. SAK, 189 Wn. App. at 413.

       Here, Coleman’s offer letter says that employment with Impact “will be on

an ‘at will’ basis.” As such, it advises Coleman that the terms of her employment

“may be altered at any time, at the discretion of [Impact].” This accurately

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No. 84421-1-I/10

describes terminable-at-will-employment and does not render Impact’s promise

to arbitrate illusory. Should Impact propose to modify the arbitration provision,

Coleman can either accept or reject the modification. If she accepts, a new at-

will employment agreement is formed. If not, the parties may choose to continue

under the contract, reach an alternative agreement, or terminate employment.

As a result, Impact has no absolute right to refuse arbitration, and its promise to

arbitrate is not illusory.

C. Procedural Unconscionability

       Coleman argues that the arbitration provision is procedurally

unconscionable. We disagree.

       “Procedural unconscionability is ‘the lack of meaningful choice,

considering all the circumstances surrounding the transaction.’ ” Zuver, 153

Wn.2d at 303 (quoting Nelson v. McGoldrick, 127 Wn.2d 124, 131, 896 P.2d

1258 (1995)). To determine whether an agreement is procedurally

unconscionable, we look at “(1) the manner in which the contract was entered,

(2) whether [the signatory] had a reasonable opportunity to understand the terms

of the contract, and (3) whether the important terms were hidden in a maze of

fine print.” Burnett, 196 Wn.2d at 54. “ ‘[T]hese three factors [should] not be

applied mechanically without regard to whether in truth a meaningful choice

existed.’ ” Zuver, 153 Wn.2d at 3036 (quoting Nelson, 127 Wn.2d at 131). The

“key inquiry” is whether the party “lacked meaningful choice.” Id. at 305.

       6
           Second alteration in original.

                                            10
No. 84421-1-I/11

       Citing Mattingly v. Palmer Ridge Homes LLC, 157 Wn. App. 376, 238 P.3d

505 (2010), Coleman argues that “Impact cannot fairly burden [her] to observe

AAA Rules mentioned in her offer letter” that were not shown or made available

to her. In Mattingly, the plaintiffs entered an agreement with Palmer Ridge

Homes, obligating it to construct a custom home for them. Id. at 382. Six

months later, the Mattinglys signed an application to enroll in Palmer Ridge’s

“New Home Warranty program” (Home Buyers Warranty). Id. at 383. They

acknowledged that they read a sample copy of the warranty booklet but did not in

fact see a copy of the warranty before they signed the enrollment application. Id.

After discovering problems with the construction of their home, the Mattinglys

sued Palmer Ridge. Id. at 386. Palmer Ridge moved for summary judgment,

arguing that the plaintiffs’ claims were barred by the Home Buyers Warranty’s

limitations provisions. Id.

       Division Two of this court concluded that the Home Buyers Warranty’s

limitations were procedurally unconscionable and unenforceable. Mattingly, 157

Wn. App. at 392. It held that the circumstances surrounding the warranty were

“suspect, as there [was] no evidence in the record that the Mattinglys had a

reasonable opportunity to understand the terms contained within the booklet, and

the terms remain buried in the booklet.” Id. Specifically, the court observed that

the plaintiffs did not receive a sample copy of the booklet before signing the

warranty enrollment, and that even if they had received the booklet, the

limitations provisions—though in bold and larger typeface than surrounding

text—were on page 7 of a 32-page booklet. Id. at 391-92.

                                        11
No. 84421-1-I/12

       Unlike in Mattingly, Impact does not seek to hold a consumer to hidden

terms of a warranty. Instead, it seeks to enforce an arbitration provision in an

employment contract. Coleman’s contract specifically identifies AAA as the

agreed body to administer arbitration. And incorporation of the AAA rules by

reference amounts to “clear and unmistakable evidence” that contracting parties

agree to be bound by those rules. Brennan v. Opus Bank, 796 F.3d 1125, 1130

(9th Cir. 2015) (incorporation of AAA rules showed that parties agreed to

delegate arbitrability to the arbitrator under those rules); see also Raven Offshore

Yacht Shipping, LLP v. F.T. Holdings, LLC, 199 Wn. App. 534, 541, 400 P.3d

347 (2017) (by incorporating Maritime Arbitration Association rules into a

contract, “the parties clearly and unmistakably manifested their agreement to be

bound by those rules”).

       Still, citing Ingalls v. Spotify USA, Inc., C16-03533 WHA, 2016 WL

6679561 (N.D. Cal. Nov. 14, 2016) (court order), Coleman argues that

“[i]ncorporation of the AAA rules by reference is insufficient to impose those rules

upon unsophisticated parties.” In Ingalls, the Northern District of California

District Court considered whether incorporation of the AAA rules can be “clear

and unmistakable evidence” that contracting parties agreed to be bound by those

rules “where one party is an unsophisticated consumer.” Id. at *3. The court

determined the plaintiffs, a music teacher and an architect seeking to stream

music on Spotify, did not have the “business or legal acumen” to appreciate the

significance of incorporating the AAA rules in a long contract, which Spotify

                                         12
No. 84421-1-I/13

presented online with a maze of terms and a check box to show consent. Id. at

*4, *1-*2.

       Unlike the plaintiffs in Ingalls, Coleman is not an unsophisticated

consumer seeking to purchase a product online, and the circumstances

surrounding her acceptance of the terms of her contract are different. The record

shows that when Coleman signed her employment contract, she had worked as

a public school administrator and teacher for nearly 15 years. And the

employment contract is a short, two-page document in which the arbitration

clause and reference to the AAA rules are easily identifiable. Finally, Coleman

had time to consider the contract and investigate its terms when Wickens invited

her to “[p]lease let me know if you have any questions/thoughts” about the offer

of employment.

       The arbitration provision in Coleman’s contract is not procedurally

unconscionable.

D. Substantive Unconscionability

       Finally, Coleman argues that the arbitration provision is substantively

unconscionable. Again, we disagree.

       Substantive unconscionability exists when a provision in the contract is

one-sided. Adler v. Fred Lind Manor, 153 Wn.2d 331, 344, 103 P.3d 773, 780

(2004). In determining whether a contractual provision is one-sided or overly

harsh, courts look at whether the provision is “ ‘[s]hocking to the conscience,

                                        13
No. 84421-1-I/14

monstrously harsh, and exceedingly calloused.’ ” Id. at 344-457 (quoting Nelson,

127 Wn.2d at 131).

       Coleman argues that the arbitration provision is substantively

unconscionable as applied to her WLAD case because the AAA rules “frustrate[ ]

the [act’s] mandate to eradicate [discrimination].”8 Our Supreme Court rejected

this same argument in Adler. There, the plaintiff challenged the enforceability of

a mandatory arbitration provision, arguing that the WLAD “requires a judicial

forum for discrimination claims of employees.” Adler, 153 Wn.2d at 342-43. The

court disagreed, holding that when “a valid individual employee-employer

arbitration agreement exists, the FAA requires that employees arbitrate federal

and state law discrimination claims.” Id. 343-44 (citing Gilmer v.

Interstate/Johnson Lane Corp., 500 U.S. 20, 27-28, 111 S. Ct. 1647, 114 L. Ed.

2d 26 (1991)). Coleman provides no authority distinguishing Adler.

       Coleman fails to show that the arbitration provision in her employment

contract lacks mutual consent or consideration. And the provision is not

       7
           Internal quotation marks omitted
       8
          Coleman points to AAA employment rule 9, which states, “The arbitrator shall
have the authority to order such discovery, by way of deposition, interrogatory,
document production, or otherwise, as the arbitrator considers necessary to a full and
fair exploration of the issues in dispute, consistent with the expedited nature of
arbitration.” Am. Arbitration Ass’n, Employment Arbitration Rules and Mediation
Procedures R. 9 (Nov. 1, 2009, rev. Oct. 1, 2017), https://www.adr.org/sites/default/files/
EmploymentRules_Web_0.pdf [https://perma.cc/5BUU-JSKP]. She also cites rule 23,
providing that the “arbitrator shall maintain the confidentiality of the arbitration and shall
have the authority to make appropriate rulings to safeguard that confidentiality, unless
the parties agree otherwise or the law provides to the contrary.” Am. Arbitration Ass’n,
Employment Arbitration Rules and Mediation Procedures R. 23.

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No. 84421-1-I/15

procedurally or substantively unconscionable. We reverse and remand for

further proceedings.9

WE CONCUR:

       9
          Because we reverse, we need not address Impact’s argument that it was
entitled to an evidentiary hearing to resolve disputed facts.

                                         15