United States District Court, D. Arizona
G. CAMPBELL UNITED STATES DISTRICT JUDGE
Humana Insurance Company and Humana Health Plan, Inc.
(“Humana”) have filed a motion to compel
arbitration and stay all further proceedings. Doc. 18. The
motion is fully briefed, and the Court concludes that oral
argument will not aid its decision. Fed.R.Civ.P. 78(b). The
Court will deny the motion.
Sherrin Rose is a licensed insurance broker who specializes
in the sale of insurance products to senior citizens,
including Medicare insurance products. Doc. 19 at 2. In 2004,
Plaintiff signed a “Group Producing Agent/Agency
Contract” with Humana (“2004 Producer
Agreement”), which permitted Plaintiff to market and
sell Humana's Medicare products. Doc 18-2 at 5-9; Doc.
19-1 at 2-5. The 2004 Producer Agreement provides that it
“may be amended at any time and from time to time by
written notice from a duly authorized officer of
[Humana].” Doc. 19-1 at 5 ¶ 5(H).
2015, Humana unilaterally modified the 2004 Producer
Agreement to require arbitration of “[a]ll disputes
arising out of or in any way relating to the Contract or the
business relationship of the Parties.” Doc. 18 at 3;
Doc 18-1 at 15 ¶ 15.23(B); Doc. 18-3 at 3 ¶ 3. On
November 8, 2016, Humana terminated Plaintiff. Doc. 19 at 2.
Plaintiff subsequently filed this case against Humana and
other defendants, alleging breach of contract, breach of the
covenant of good faith and fair dealing, unjust enrichment,
and interference with business expectancies. Doc. 5. Humana
asks the Court to compel arbitration of Plaintiff's
claims. Doc. 18.
Federal Arbitration Act (“FAA”) “provides
that arbitration agreements ‘shall be valid,
irrevocable, and enforceable, save upon such grounds as exist
at law or in equity for the revocation of any
contract.'” Chalk v. T-Mobile USA, Inc.,
560 F.3d 1087, 1092 (9th Cir. 2009) (quoting 9 U.S.C. §
2). Because arbitration is a matter of contract, “a
party cannot be required to submit to arbitration any dispute
which he has not agreed so to submit.” AT&T
Techs., Inc. v. Commc'ns Workers of Am., 475 U.S.
643, 648 (1986). Thus, “[a] party seeking to compel
arbitration has the burden under the FAA to show (1) the
existence of a valid, written agreement to arbitrate; and, if
it exists, (2) that the agreement to arbitrate encompasses
the dispute at issue.” Ashbey v. Archstone Prop.
Mgmt., Inc., 785 F.3d 1320, 1323 (9th Cir. 2015). If a
valid agreement to arbitrate encompasses the dispute, the FAA
requires the court “to enforce the arbitration
agreement in accordance with its terms.” Chiron
Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126,
1130 (9th Cir. 2000).
argues that Humana failed to provide legally adequate notice
of the arbitration amendment to the 2004 Producer Agreement.
Doc. 19 at 5. Without proper notice, Plaintiff contends, she
could not assent to the arbitration agreement. Id.
at 6. Humana responds that Plaintiff received proper notice
in the form of an email notification. Doc. 20 at 2-3.
determining whether parties have agreed to arbitrate, courts
apply ordinary state law contract-formation principles.
Davis v. Nordstrom, Inc., 755 F.3d 1089, 1093 (9th
Cir. 2014). The parties agree that Arizona law applies. Doc.
19 at 4; Doc. 20 at 2-4.
Arizona law, a party cannot unilaterally change the terms of
a contract. Demasse v. ITT Corp., 984 P.2d 1138,
1144 (Ariz. 1999) (noting the “traditional contract
law” rule that, once a contract is formed, “a
party may no longer unilaterally modify the terms”
unless there is assent to and consideration for the offer to
modify); Yeazell v. Copins, 402 P.2d 541, 545 (Ariz.
1965) (“A contract cannot be unilaterally modified nor
can one party to a contract alter its terms without the
assent of the other party.”). Consequently, “to
effectively modify a contract . . . there must be: (1) an
offer to modify the contract, (2) assent to or acceptance of
that offer, and (3) consideration.” Demasse,
984 P.2d at 1144. Humana bears the burden of proving that the
contract was validly modified. Id. at 1146
(“The burden is on the employer to show that the
employee assented with knowledge of the attempted
modification and understanding of its impact on the
underlying contract.”); Yeazell, 402 P.2d at
546 (“He who asserts the modification of a contract has
the burden of proof.”).
establish assent to the modification, Humana must show that
Plaintiff had “legally adequate notice of the
modification.” Demasse, 984 P.2d at 1146.
“Legally adequate notice is more than the
employee's awareness of or receipt of the newest
handbook.” Id. Plaintiff must have been
“informed of any new term” and “aware of
its impact on the pre-existing contract.” Id.
“‘Proof that plaintiff has read the agreement and
continued working, has been sufficient to establish
consent.'” Pinto v. USAA Ins. Agency Inc. of
Tex., --- F.Supp.3d ---, 2017 WL 3172871, at *2 (D.
Ariz. July 26, 2017) (finding sufficient evidence that
plaintiff assented to arbitration agreement where plaintiff
electronically signed a statement acknowledging his
responsibility to read employee handbook, which contained the
arbitration agreement, and plaintiff emailed employer
acknowledging that he received and agreed to the arbitration
agreement); see also Nghiem v. NEC Elec., Inc., 25
F.3d 1437, 1439-40 (9th Cir. 1994) (finding plaintiff
assented to arbitration where plaintiff acknowledged
receiving employee handbook, which contained the arbitration
agreement, and wrote a letter to his employer requesting to
proceed with arbitration).
2004 Producer Agreement provides that Humana “may
choose to communicate with [Plaintiff] through the use of
mail, email, or facsimile.” Doc. 19-1 at 3 ¶ 2(H).
It also states that the agreement “may be amended at
any time and from time to time by written notice from a duly
authorized officer of [Humana].” Id. at 5
¶ 5(H)(1). Humana asserts that on June 16, 2015, it
emailed its contracted insurance agents regarding amendments
to the 2004 Producer Agreement. Doc. 18-3 at 3 ¶ 3.
Humana's compliance manager avows that this notification
was emailed to Plaintiff and that “Humana's records
indicate that this email was not rejected by
[Plaintiff's] email server.” Id. at
disputes that she received the email: “at no time have
I ever received any prior advance written notice, by mail or
email, from Humana with the proposed amendments.” Doc.
19-2 at 3 ¶ 6. Plaintiff attests that she
“searched for and found no email communications from
Humana with the purported . . . amendments to the 
Producer Agreement, including the arbitration
agreement.” Id. at ¶ 7. Plaintiff states
that Humana normally sent proposed amendments by regular mail