In a recent decision by the Ninth Circuit, Defendants Dillard's Department Store and Dillard's Store Services (collectively "Dillard's") require employees to agree to arbitrate employment-related claims under what it calls "Dillard's Fairness in Action Program." Plaintiff Stephanie Brown was an employee at one of Dillard's department stores in California until she was fired.

Brown filed a notice of intent to arbitrate a wrongful termination claim under the Fairness in Action Program. Dillard's refused to participate in the arbitration proceedings. Brown then filed suit in Los Angeles County Superior Court. At that point, Dillard's decided that it wanted to arbitrate her claim. Dillard's removed Brown's suit to federal court and moved to compel arbitration. Assuming the truth of Brown's allegations, the district court denied the motion, holding that the arbitration agreement was unconscionable and thus unenforceable under California law.

The Ninth Circuit remanded to the district court. The Court did not express a view on whether the agreement was unconscionable under California law. Rather, assuming the truth of Brown's allegations, the Ninth Circuit held that when an employer enters into an arbitration agreement with its employees, it must itself participate in properly initiated arbitration proceedings or forego its right to compel arbitration. The Court held that Dillard's cannot compel Brown to honor an arbitration agreement of which it is itself in material breach.

Brown v. Dillard's, decided December 6, 2005