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II. JUDICIAL UPDATE Brown v. Dillard’s, Inc. (9th Cir. 2005) provides a compelling example of how an employer’s bad faith tactics can come back to haunt it. The employer, Dillard’s, Inc. (“Dillard’s”), required all of its employees to execute an arbitration agreement (which it dubbed “Dillard’s Fairness in Action Program”) in order to continue their employment. Employee Stephanie Brown (“Employee”) was thereafter discharged. She believed that the discharge was inappropriate and filed a “notice of intent to arbitrate” pursuant to Dillard’s Fairness in Action Program. Dillard’s, however, refused to participate in the arbitration process for almost one full year, prompting Employee to file a civil lawsuit in federal court. Dillard’s then moved to compel enforcement of the arbitration agreement. The district court denied the motion because it found that: (1) the arbitration agreement itself was unconscionable and unenforceable; and (2) because Dillard’s coerced existing employees into executing the agreement under threat of discharge, the agreement was “procedurally unconscionable.” The Ninth Circuit of Court of Appeals upheld the decision denying Dillard’s motion to compel arbitration, adding that even if it assumed that the agreement was enforceable, Dillard’s had breached it when it refused to participate in the arbitration proceedings that Employee had initiated. The court confirmed that “a bedrock principle of California contract law is that ‘[h]e who seeks to enforce a contract must show that he has complied with the conditions and agreements of the contract on his part to be performed.’ . . . Dillard’s clearly breached the arbitration agreement.” Thus, by refusing to participate in the arbitration process in good faith, Dillard’s lost its opportunity to enforce its own policy.
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