Holloman v. Circuit City Stores, Inc.

DAVIS, J. Appellant, La’tia Holloman, quit her retail sales job with appellee, Circuit City Stores, Inc. and sued appellee in the Circuit Court for Prince George’s County, claiming she had been discriminated against and constructively discharged. 1 Appellee filed a motion to stay the judicial proceedings and to compel arbitration, which the court granted. Thereafter, believing it was necessary “to preserve all her rights,” appellant filed an arbitration complaint against appel-lee. She also filed, in the circuit court, a notice of appeal from the circuit court’s order compelling arbitration and a motion to stay the arbitration proceedings during the pendency of this appeal. The circuit court granted appellant’s motion to stay the arbitration proceedings, and appellant presents two questions for our review, which we have rephrased: 1.

Did the circuit court err when it found that the parties’ arbitration agreement is enforceable, despite appellee’s power to unilaterally modify the agreement? 2. Did the circuit court err when it found that appellant had knowingly and voluntarily waived her constitutional and substantive rights, despite a factual dispute over whether appellant ever received a copy of the arbitration rules? Appellee noted a cross-appeal, presenting a single question: 3. Did the circuit court err in staying the arbitration, as it had already determined that the parties had entered into a valid and enforceable arbitration agreement?

Finding no error, we shall affirm the judgment. FACTUAL BACKGROUND In September 2001, appellant applied for a job at appellee’s store in Marlow Heights, Maryland, in Prince George’s Coun ³³⁴ ty. The first page of her employment application lists several “selection tools” that appellee uses to select its employees. One of those tools was appellee’s “Dispute Resolution Agreement” (DRA), which is described on the employment application: “This agreement requires you and Circuit City to arbitrate certain legal disputes related to your application for employment or employment with Circuit City.” The application then adds, “Circuit City will consider your application only if this agreement is signed.” At the top of the DRA it is stated: If you wish to be considered for employment you must read and sign the following agreement.

You will be considered as an applicant when you have signed the Agreement. Included with this application is the Circuit City Dispute Resolution Rules and Procedures. You should familiarize yourself with these rules and procedures prior to siyniny the Ayreement. If the Rules and Procedures are not included in this booklet you must request a copy from a Circuit City representative prior to siyniny the Ayreement.

You will note that if you sign at this time you do have three (3) days to withdraw your consent. You may, of course, take the package with you and return with it signed, if you wish to continue your application process. (Emphasis added.) The DRA then explains: [B]oth Circuit City and I agree to settle any and all previously unasserted claims, disputes or controversies arising out of or relating to my application or candidacy for employment, employment and/or cessation of employment with Circuit City, exclusively by final and binding arbitration before a neutral Arbitrator.... I understand that if I do file a lawsuit regarding a dispute arising out of or relating to my application or candidacy for employment, employment or cessation of employment, Circuit City may use this Agreement in support of its request to the court to dismiss the lawsuit and require me instead to use arbitration. ³³⁵ ...

I further agree that if I commence an arbitration, it will be conducted in accordance with the “Circuit City Dispute Resolution Rules and Procedures.” I understand that neither this Agreement nor the Dispute Resolution Rules and Procedures form a contract of employment between Circuit City and me. I further understand that my signature to this Agreement in no way guarantees that Circuit City will offer me employment. If Circuit City does offer me employment and I become employed at Circuit City, this Agreement in no way alters the “at-will” status of my employment. I understand that my employment, compensation and terms and conditions of employment can be altered or terminated, with or without cause, and with or without notice, at any time, at the option of either Circuit City or myself.

Appellant signed her initials on the page on which those provisions appear. At the top of the next page, which appellant signed with her full name, it is stated in bold typeface: The Dispute Resolution Agreement and the Dispute Resolution Rules and Procedures affect your legal rights. By signing this Agreement, you acknowledge receipt of the Dispute Resolution Rules and Procedures. You may wish to seek legal advice before signing this Dispute Resolution Agreement.

Finally, the last paragraph of the agreement states: This Agreement will be enforceable through the application process, my employment, and thereafter with respect to any such claims arising from or relating to my application or candidacy for employment, employment or cessation of employment with Circuit City. We then must arbitrate all such employment-related claims, and we may not file a lawsuit in court. A Circuit City representative signed the DRA on the Company’s behalf. The Dispute Resolution Rules appear in a separate twelve-page document, and comprise just nineteen rules.

The bulk of ³³⁶ appellant’s argument on appeal devolves upon our analysis of Rule 19, which states: Rule 19. TERMINATION OR MODIFICATION OF DISPUTE RESOLUTION AGREEMENT OR DISPUTE RESOLUTION RULES AND PROCEDURES. Circuit City may alter or terminate the Agreement and these Dispute Resolution Rules and Procedures on March 1st of any year upon giving 30 calendar days written notice to Associates, provided that all claims arising before alteration or termination shall be subject to the Agreement and corresponding Dispute Resolution Rules and Procedures in effect at the time the Arbitration Request Form and accompanying filing fee, or Request for Waiver of Filing Fee is received by the Company. Notice may be given by posting a written notice by February 1st of each year at all Circuit City locations (including locations of affiliated companies).

A copy of the text of any modification to the Agreement or Rules and Procedures will be published in the Applicant Packet, which will be available at such locations after March 1st of each year. Appellee did modify the rules during appellant’s term of employment, but the changes were minor and assume no relevance here. Appellant alleges that, after she began working for appellee, she was assigned to a “mentor,” co-defendant Curtis Brown, who sexually harassed her and assaulted her. Brown was fired, and appellant subsequently quit, claiming that her departure was a constructive discharge “due to fear for her physical safety and because she had lost all confidence in the ability of the managers at Circuit City to provide a safe work environment for its female employees.” Appellant filed charges of sexual harassment with the EEOC and received a “right to sue” letter.

She then filed a six-count complaint in the circuit court, to which appellee responded by moving the court to compel appellant to arbitrate her claims. The circuit court granted appellee’s motion, ordering arbitration and staying the judicial proceedings. ³³⁷ Appellant subsequently filed an Arbitration Request Form against appellee, after which she filed, in the circuit court, both a notice of appeal and a motion styled “Petition to Stay Arbitration Proceedings Pending Appeal,” which appellee opposed. After a hearing, the circuit court granted appellant’s petition for a stay pending appeal. LEGAL ANALYSIS I Appellant first argues that the circuit court erred in finding that the putative arbitration agreement was supported by consideration.

She contends that appellee’s “ability to unilaterally terminate and modify the Agreement makes its promise to arbitrate illusory.” In Cheek v. United Healthcare of the Mid-Atlantic, Inc., 378 Md. 139 , 835 A.2d 656 (2003), Cheek argued that his arbitration agreement with his employer, United Healthcare, was unenforceable because it was unsupported by consideration. Cheek argued that the following language in the agreement rendered United HealthCare’s promise to arbitrate illusory: United Healthcare reserves the right to alter, amend, modify, or revoke the Policy at its sole and absolute discretion at any time with or without notice. The Court of Appeals agreed with Cheek. Judge Battaglia, wilting for the Court, explained why: The determination of whether there is an agreement to arbitrate, of course, depends on contract principles since arbitration is a matter of contract.

As such, a party cannot be required to submit any dispute to arbitration that it has not agreed to submit. To be binding and enforceable, contracts ordinarily require consideration. In Maryland, consideration may be established by showing a benefit to the promisor or a detriment to the promisee. In particular, we have recognized that the [fjorbearance to exercise a right or pursue a ³³⁸ claim can constitute [ ] sufficient consideration to support [an] ... agreement.

A promise becomes consideration for another promise only when it constitutes a binding obligation. Without a binding obligation, sufficient consideration does not exist to support a legally enforceable agreement. An “illusory promise” appears to be a promise, but it does not actually bind or obligate the promisor to anything. An illusory promise is composed of words in a promissory form that promise nothing.

United initiated the arbitration with Cheek; it has not revoked nor in any way altered the Arbitration Policy with Cheek at any time. Nonetheless, the fact that “United Healthcare reserves the right to alter, amend, modify, or revoke the [Arbitration] Policy at its sole and absolute discretion at any time with or without notice” creates no real promise, and therefore, insufficient consideration to support an enforceable agreement to arbitrate. Indeed, the plain and unambiguous language of the clause appears to allow United to revoke the Employment Arbitration Policy even after arbitration is invoked, and even after a decision is rendered, because United can “revoke” the Policy “at any time.” Thus, we conclude that United’s “promise” to arbitrate employment disputes is entirely illusory, and