A federal district court in Kansas has denied a department store's motion to compel arbitration, finding a former employee's assertion that a company secretary compromised her work account and affixed an electronic signature to the agreement was sufficient to raise an issue of material fact, thus requiring a trial on the existence of the agreement.

In Kerr v. Dillard Store Services, Inc., No. Civ. A. 07-2604-KHV, 2008 WL 2152046 (D. Kan. May 21, 2008), Kerr was employed by Dillard. During the course of her employment, Dillard asked Kerr to execute an arbitration agreement through the use of an electronic signature on a password-protected computer system. According to Kerr, she was repeatedly asked by a company secretary to execute the agreement, but she refused. As part of additional training with the computer system, the secretary accessed Kerr's account in Kerr's presence and accessed several screens that Kerr claimed she had not seen before.

Later, Kerr was terminated by Dillard for allegedly using profane language on the job. Kerr filed a complaint with the Equal Employment Opportunity Commission, alleging discrimination and retaliatory termination. Kerr then filed a notice of intent to arbitrate. After the matter was accepted for arbitration, Kerr also filed a complaint with the Court mirroring the allegations in her request for arbitration. Dillard moved to dismiss or stay litigation pending arbitration.

The Court initially determined that Dillard had presented evidence sufficient to demonstrate an agreement to arbitrate. Dillard noted that the agreement bore Kerr's electronic signature, which, with a showing of effective security measures, satisfied Dillard's obligation to show a presumptively valid agreement.

However, by alleging that she had not executed the agreement and that the secretary accessed unfamiliar screens in her presence, Kerr implied that the secretary had signed the agreement. The Court held that, if this allegation was taken as true, it raised an issue of material fact as to whether the agreement was validly executed. Since these allegations put the "the making of the arbitration agreement" at issue, the Court found a trial on the issue of the electronic signature was required.

In the alternative, Dillard maintained that Kerr's continued employment constituted consent to the arbitration agreement after Dillard notified Kerr of its mandatory nature. However, the Court rejected this argument because the arbitration agreement did not expressly indicate that it was part of the employment relationship and because the record did not show that anyone in management notified Kerr that the agreement was a condition of employment.