It’s a Waiver and a Breach

Over on the always-interesting LawMemo Blog, Russ Runkel notes yesterday’s Ninth Circuit decision in Brown v. Dillard’s, Inc., No. 03-56719 (9th Cir. Dec. 6, 2005).  In the case, the Dillard’s department store had a mandatory arbitration agreement in its contract with its employee.  When the employee was fired, she initiated an arbitration proceeding, demanding $710 in lost pay and that certain representations made about her be found to be false.  Dillard’s refused to participate.  Instead of moving to compel arbitration, the employee simply sued Dillard’s in state court.  Dillard’s thereupon decided that arbitration was a good idea, so it removed the case to federal court and moved to compel arbitration.

The court had no trouble finding that Dillard’s had waived its right to arbitrate, but it went a good deal further by holding in the alternative that Dillard’s actions breached the contract, and that Dillard’s breach meant that it could not rely on the arbitration agreement.  Distinguishing some cases to the contrary, the court held that where the breach goes to the arbitration agreement itself, the arbitration agreement does not survive the breach.

[Frank Snyder]