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Use it or lose it
December 06, 2005 by Ross Runkel at LawMemo

Here's an interesting legal theory for not enforcing an agreement to arbitrate: material breach of contract.

An ex-employee (who had signed an arbitration agreement) claimed she had been wrongfully terminated, she filed an arbitration demand, but the employer refused to participate in the arbitration proceedings. The employee then sued in state court, and the employer removed the case to federal court and moved to compel arbitration.

I would have thought this was a simple waiver by the employer of the right to arbitrate.

The trial court denied arbitration on the ground that the arbitration agreement was unconscionable.

The 9th Circuit affirmed on a totally different ground. The employer's refusal to participate in the arbitration proceedings was a material breach of contract. Not just the employment contract, but a breach of the arbitration agreement. Therefore, the employee was excused from arbitrating.

I'm not sure why the court relied on breach-of-contract theory, because it went on to say that the employer had waived the right to arbitrate.

Brown v. Dillard's, Inc. (9th Cir 12/06/2005).

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