In Circuit City Stores, Inc., v. Ahmed, 2002 WL 441528, on remand from the United States Supreme Court, the U.S. Court of Appeals for the Ninth Circuit held that a contractual binding arbitration provision was enforceable against an employee who was given a chance to “opt out” of his employer’s dispute resolution program but failed to do so. The Court affirmed a federal district court’s order staying the employee’s state court action and compelling him to arbitrate his dispute.
The employee, Mohammad Sharfuddin Ahmed, began work for Circuit City Stores, Inc., as a salesperson in March 1995. In April 1995, the company instituted an “Issue Resolution Program” that included a provision subjecting employees to “binding arbitration of legal disputes.” Ahmed received a handbook explaining the program, a list of rules and procedures, and an “opt-out” form. The materials clearly indicated that, if Ahmed did not return the opt-out form within 30 days, he would automatically become a program participant and required arbitrating employment-related legal disputes. Ahmed did not return the opt-out form.
In December 1997, Ahmed sued Circuit City in California State court under the state’s anti-discrimination law. Circuit City requested an order from the federal district court staying Ahmed’s state court action and compelling arbitration. The district court granted Circuit City’s request, and Ahmed appealed.
The Court of Appeals affirmed the district court’s decision, holding Ahmed was required to arbitrate his complaint. The Court first noted the case presented legal issues identical to those involved in its recent decision in Circuit City Stores, Inc. v. Adams, 279 F.3d 889 (9th Cir. 2002). [See KMTG Legal Alert, U.S. Supreme Court Disagrees with Ninth Circuit’s Interpretation of Exclusion Provision of Federal Arbitration Act, March 21, 2001.] In Adams, however, the Court refused to compel arbitration of an employee’s discrimination claim because it found the agreement to which Circuit City had subjected its employee legally “unconscionable,” i.e., so inequitable and one-sided that it was deemed unenforceable as a matter of law.
Ahmed’s situation differed significantly, the Court said, because Ahmed was given a chance not to participate in the program, whereas the Adamsemployee had been required to participate as a condition of employment. In addition, the Court found the arbitration provisions applicable to Ahmed were more equitable than those involved in
Adams. Thus, although the cases involved identical legal issues, the factual differences involved in Ahmed’s situation rendered his participation in the company’s program, including its binding arbitration language, enforceable.
The Court rejected Ahmed’s argument that he did not have a “meaningful” chance to opt out of the program because he was not sophisticated enough to understand the opt-out provision, and because 30 days was too short a period in which to make such a decision. These arguments ran counter to the general rule that “one who signs a contract is bound by its provisions and cannot complain of unfamiliarity” with the contract’s language, the Court said, and Ahmed cited no legal authority to support the arguments. The Court therefore applied the general rule, and affirmed the order compelling arbitration.