United States District Court, W.D. Kentucky, Paducah Division
THOMAS B. RUSSELL, Senior District Judge.
This matter is before the Court upon Defendant O'Charley's Restaurant Properties, LLC's "Motion to Dismiss and Petition to Compel Arbitration and Stay Proceedings." (Docket No. 4.) Plaintiffs Malisa Braxton, Darla Bailey, and Lisa Colburn have responded, (Docket No. 8), Defendant has replied, (Docket No. 9), and Plaintiffs have filed their Surreply,  (Docket No. 10). This matter now is ripe for adjudication. For the reasons that follow, Defendant's Motion to Dismiss will be GRANTED.
Plaintiffs are all former employees of Defendant, O'Charley's Restaurant Properties, LLC (O'Charley's), who worked at the O'Charley's restaurant on Fort Campbell Boulevard in Hopkinsville, Kentucky. Plaintiffs allege they each were wrongfully terminated by O'Charley's for asserting their rights to worker's compensation benefits. Plaintiffs originally filed suit in Christian Circuit Court on July 9, 2013, (Docket No. 1-1), and O'Charley's timely removed Plaintiffs' lawsuit to this Court on August 9, 2013, (Docket No. 1).
At the time each of the Plaintiffs was hired, O'Charley's had in place an arbitration agreement. That agreement provides that claims arising out of an employee's employment with O'Charley's or the termination of employment must be submitted to a neutral arbitrator for a final and binding determination. (Docket No. 4-1, at 3-4.) O'Charley's has submitted sworn declarations by Alan Parrino, O'Charley's regional human resources manager, (Docket No. 4-1), and by Doris Meador, a human resources information systems analyst for O'Charley's, (Docket No. 4-2). Parrino states that all O'Charley's employees are required to execute the arbitration agreement as a condition of their employment and are not permitted to continue with O'Charley's newhire orientation program until they express their consent to the terms of that agreement. (Docket No. 4-1, at 1-2.) Parrino further states that all hourly employees are provided a copy of O'Charley's "Hourly Policy and Procedures Handbook" (Handbook), which reflects that employees are required to execute an arbitration agreement as a condition of employment. (Docket No. 9-1, at 1.) Under the heading "Mediation & Arbitration, " that Handbook specifically states: "As a condition of employment, all team members must sign an Arbitration Agreement." (Docket No. 9-1, at 6.) Meador similarly avers that all new hires are required to review various employment-related documents, including the arbitration agreement, and are not permitted to continue with orientation until they consent to the terms of the arbitration agreement. (Docket No. 4-2, at 2.) Upon hire, each new employee is set up in O'Charley's "human resources information system" with a unique employee identification number and a unique password consisting of a combination of parts of the employee's social security number and last name. (Docket No. 4-2, at 2.) The new hire's review of these employment-related documents is done electronically through O'Charley's human resources information system, and the new hire electronically expresses his or her consent to the arbitration agreement by clicking a button stating "I Agree" to the terms of that agreement. (Docket No. 4-1, at 2.) According to Meador, the employee's only choice is to click "I Agree" or exit the program. (Docket No. 4-2, at 2.) Once an employee clicks "I Agree, " an electronic signature is captured as a record of the employee's consent to the agreement. (Docket No. 4-2, at 2.) In conjunction with Meador's declaration, O'Charley's has submitted computer printouts indicating that each Plaintiff electronically signed the arbitration agreement along with various other employment documents, such as direct-deposit forms and W-4 tax forms. ( See Docket Nos. 4-2, at 7-13.) These printouts also reflect that each Plaintiff received and consented to the terms of the Handbook. ( See Docket No. 4-2, at 9, 11, 13.)
Plaintiffs each have submitted sworn affidavits denying that they signed any arbitration agreement with O'Charley's, electronically or otherwise. (Docket Nos. 8-2, at 1; 8-3, at 1; 8-4, at 1). By way of argument, Plaintiffs further insist that they were unaware of the arbitration agreement and, at least implicitly, seem to maintain that they were never informed that their continued employment bound them to arbitration. (Docket No. 10, at 3.)
O'Charley's moves the Court to dismiss this action under Fed.R.Civ.P. 12 or, in the alternative, to compel arbitration and stay these proceedings pending the outcome of such arbitration pursuant to 9 U.S.C. §§ 3-4. Thus, the principal issue that must be resolved is whether the arbitration agreement at issue is enforceable against the Plaintiffs.
Congress enacted the United States Arbitration Act of 1925, more commonly referred to as the Federal Arbitration Act (FAA), 9 U.S.C. §§ 1-16, in response to the common law hostility toward arbitration and the refusal of many courts to enforce arbitration agreements. The United States Supreme Court has since interpreted the FAA as codifying "a national policy favoring arbitration when the parties contract for that mode of dispute resolution." Preston v. Ferrer, 552 U.S. 346, 349 (2008). The Supreme Court has further stated that the FAA's underlying purpose is to put arbitration agreements "upon the same footing as other contracts." EEOC v. Waffle House, Inc., 534 U.S. 279, 289 (2002) (quoting Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24 (1991)). The FAA establishes a procedural framework applicable in both federal and state courts, and also mandates that substantive federal arbitration law be applied in both. See Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265 (1995); Southland Corp. v. Keating, 465 U.S. 1, 16 (1984).
Whereas § 2 of the FAA mandates enforcement, § 3 permits a party seeking to enforce an arbitration agreement to request that litigation be stayed until the terms of the arbitration agreement have been fulfilled. 9 U.S.C. §§ 2-3. Section 4 goes on to provide the mechanism by which a party may petition a court to compel arbitration:
A party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court... for an order directing that such arbitration proceed in the manner provided for in such agreement.... The court shall hear the parties, and upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement.... If the making of the arbitration agreement or the failure, neglect, or refusal to perform the same be in issue, the court shall proceed summarily to the trial thereof.
Id. § 4. Thus, before compelling arbitration, the Court "must engage in a limited review to determine whether the dispute is arbitrable." Masco Corp. v. Zurich Am. Ins. Co., 382 F.3d 624, 627 (6th Cir. 2004) (quoting Javitch v. First Union Sec., Inc., 315 F.3d 619, 624 (6th Cir. 2003)). Such review, the Sixth Circuit advises, requires the Court to determine first whether "a valid agreement to arbitrate exists between the parties, " and second whether "the specific dispute falls within the substantive scope of the agreement." Id. (quoting Javitch, 315 F.3d at 624). Plaintiffs do not appear to argue that their claims fall outside the scope of the arbitration agreement; rather, at issue here is whether a valid and enforceable arbitration agreement exists between Plaintiffs and O'Charley's.
Plaintiffs unequivocally deny entering into any arbitration agreement with O'Charley's and insist that no such agreement ever was made. Because the formation of the arbitration agreement is at issue, Plaintiffs urge that the issue of arbitration must be determined by a jury. ( See Docket No. 8-1, at 4-5.) Accordingly, the Court must determine whether Plaintiffs and O'Charley's actually agreed to arbitrate their disputes via the arbitration agreement. "Because arbitration agreements are fundamentally contracts, " the Court must "review the enforceability of an arbitration agreement according to the applicable state law of contract formation." Seawright v. Am. Gen. Fin. Servs., Inc., 507 F.3d 967, 972 (6th Cir. 2007) (citing First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 943-44 (1995)). In Kentucky, as in all jurisdictions, a contract is only enforceable if both parties agree to be bound by it. See, e.g., David Roth's Sons, Inc. v. Wright & Taylor, Inc., 343 S.W.2d 389, 391 (Ky. 1976). Contracting parties typically manifest their agreement by signing the contract; however, "Kentucky courts will also enforce unsigned arbitration agreements where the parties have indicated acceptance of the contract through their actions." Polly v. Affiliated Computer Servs., Inc., 2011 WL 93715, at *2 (E.D. Ky. Jan. 11, 2011) (citing Sweeney v. Theobald, 128 S.W.3d 498, 501 (Ky. Ct. App. 2004)); see also Parts Depot, Inc. v. Beiswenger, 170 S.W.3d 354, 362-63 (Ky. 2005) (discussing how an employer's offer for a unilateral contract, which was embodied in a written personnel policy, can become binding "once it is accepted by the employee through his continuing to work." (citations omitted)). This is consistent both with the text of § 2 of the FAA, which requires only that arbitration agreements be in writing, and with the approach taken by the Sixth Circuit and other circuit courts. See Seawright, 507 F.3d at 978 ("[A]rbitration agreements under the FAA need to be written, but not necessarily signed. "); accord Caley v. Gulfstream Aero. Corp., 428 F.3d 1359, 1369 (11th Cir. 2005) ("We readily conclude that no signature is needed to satisfy the FAA's written agreement requirement."); Tinder v. Pinkerton Sec., 305 F.3d 728, 736 (7th Cir. 2002) ("Although § 3 of the FAA requires arbitration agreements to be written, it does not require them to be signed."); Genesco, Inc. v. T. Kakiuchi & Co., 815 F.2d 840, 846 (2nd Cir. 1987) ("[W]hile the [FAA] requires a writing, it does not require that the writing be signed by the parties.")
Here, O'Charley's has come forward with some evidence showing that Plaintiffs each agreed to the arbitration agreement: Parrino's and Meador's affidavits, which state that new employees are required to electronically sign the arbitration agreement in order to continue with the orientation program; Meador's affidavit, which explains how new employees are assigned unique employee identification numbers and passwords, and the process by which new employees electronically review and sign the arbitration agreement; computer printouts reflecting that each of the Plaintiffs signed the arbitration agreement with her unique password; and computer printouts indicating that each Plaintiff received the Handbook, which also advised employees about the arbitration agreement. Nonetheless, each Plaintiff firmly maintains that she never signed any arbitration agreement relating to her employment at O'Charley's. ...