Opinion
CAUSE NO. 1-20-CV-969-LY
2021-08-06
Nancy KINNEY, Charles Townsley, Michael Sauro, Walter Noffsinger, Rosa Davidson, Michael Kelly, Tom Kierl, Constance Lewis, Sheri Parr, Paul Pham, Alvaro Paiz, Titon Hoque, Chris Mancuso, Wilbert Talmadge, Janet Gelphman, Thanh Do v. INTERNATIONAL BUSINESS MACHINES CORPORATION
Austin Harris Kaplan, Kaplan Law Firm, PLLC, Heidi A. Coughlin, Archie Carl Pierce, Blair J. Leake, Wright & Greenhill, P.C., Austin, TX, for Nancy Kinney, Charles Townsley, Michael Sauro, Walter Noffsinger, Rosa Davidson, Michael Kelly, Alvaro Paiz, Titon Hoque, Thanh Do, Janet Gelphman. Alan Lin, Andrew J. Broadaway, Edward M. Smith, Cornell Smith Mierl Brutocao Burton LLP, Austin, TX, for International Business Machines Corporation.
Austin Harris Kaplan, Kaplan Law Firm, PLLC, Heidi A. Coughlin, Archie Carl Pierce, Blair J. Leake, Wright & Greenhill, P.C., Austin, TX, for Nancy Kinney, Charles Townsley, Michael Sauro, Walter Noffsinger, Rosa Davidson, Michael Kelly, Alvaro Paiz, Titon Hoque, Thanh Do, Janet Gelphman.
Alan Lin, Andrew J. Broadaway, Edward M. Smith, Cornell Smith Mierl Brutocao Burton LLP, Austin, TX, for International Business Machines Corporation.
ORDER
LEE YEAKEL, UNITED STATES DISTRICT JUDGE
Before the court are: Defendant International Business Machines Corporation's Motion to Compel Arbitration of ADEA Claims and Partial Motion to Dismiss (Dkt. No. 10) filed October 23, 2020; Plaintiff's Response (Dkt. No. 16) filed November 20, 2020; IBM's Reply (Dkt. No. 23) filed December 11, 2020; Plaintiff's Sur-Reply (Dkt. No. 52) filed March 1, 2021; Plaintiffs’ Sealed Sur-Sur Reply (Dkt. No. 44) filed May 3, 2021; and IBM's Response (Dkt. No. 49) filed May 10, 2021.
BACKGROUND
This is an age-discrimination case in which 10 remaining named Plaintiffs out of an original 16 collectively sue their former employer International Business Machines Corporation ("IBM") for age discrimination under the Age Discrimination in Employment Act of 1967 ("ADEA") and "applicable state laws protecting citizens from discrimination on the basis of age."
In a prior order, this court transferred the claims of six Plaintiffs—Tom Kierl, Constance Lewis, Sheri Parr, Paul Pham, Chris Mancuso, and Wilbert Talmadge—for lack of personal jurisdiction. IBM now moves the court to compel arbitration and dismiss two additional Plaintiffs, Nancy Kinney ("Kinney") and Alvaro Paiz ("Paiz"), asserting they signed separation agreements with IBM in which they agreed to resolve any ADEA claims exclusively through individual arbitration. Plaintiffs respond that the agreements were procured by fraud and are not enforceable. Plaintiffs also bring state-law discrimination claims and a claim for fraudulent inducement, which IBM argues they waived, released, or should also be compelled to arbitrate.
IBM also moves to compel Tom Kierl, Constance Lewis, and Sherri Parr to arbitrate, but the court dismissed them.
For the purposes of this order, the court collectively refers to Kinney and Paiz as "Plaintiffs."
STANDARD
The Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 1, et seq. , provides that "[a] written provision in any ... contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. Section 4 of the FAA permits a party to seek an order compelling arbitration if the other party has failed to arbitrate under a written agreement. 9 U.S.C. § 4. "The party resisting arbitration bears the burden of showing that he is entitled to a jury trial under § 4 of the Arbitration Act." Dillard v. Merrill Lynch, Pierce, Fenner & Smith, Inc. , 961 F.2d 1148, 1154 (5th Cir. 1992).
Courts apply a two-step inquiry when ruling on a motion to compel arbitration. Edwards v. Doordash, Inc. , 888 F.3d 738, 743 (5th Cir. 2018). "First, the court asks whether there is a valid agreement to arbitrate and, second, whether the current dispute falls within the scope of a valid agreement." Id.
"Determining whether there is a valid arbitration agreement is a question of state contract law and is for the court." Huckaba v. Ref-Chem, L.P. , 892 F.3d 686, 688 (5th Cir. 2018). "[T]he party moving to compel arbitration must show that the agreement meets all of the requisite contract elements." Id. The movant must only prove the existence of an agreement by a preponderance of the evidence. Grant v. Houser , 469 F. App'x 310, 315 (5th Cir. 2012). The party resisting arbitration "must make at least some showing that under prevailing law, he would be relieved of his contractual obligation to arbitrate if his allegations proved to be true ... [and] he must produce at least some evidence to substantiate his factual allegations." Dillard , 961 F.2d at 1154 ; Chester v. DirecTV, LLC , 607 F. App'x 362, 363–64 (5th Cir. 2015) (per curiam).
"[I]n step two of the analysis, determining the scope of a valid arbitration agreement ... we apply the federal policy and resolve ambiguities in favor of arbitration." Klein v. Nabors Drilling USA L.P. , 710 F.3d 234, 237 (5th Cir. 2013) (internal citations omitted). This second question usually is for the court, unless the arbitration clause contains a valid delegation clause. Kubala v. Supreme Production Services, Inc. , 830 F.3d 199, 202 (5th Cir. 2016). The parties do not dispute the existence of a valid delegation clause in the agreements, and thus the court need not address the second issue.
A "delegation clause," or agreement to arbitrate issues of arbitrability, such as is contained in the separation agreements at issue here is "enforceable and transfers the court's power to decide arbitrability questions to the arbitrator." Kubala , 830 F.3d at 202.
ANALYSIS
The Separation Agreements
Upon their separation from IBM, and in return for a severance package and other additional benefits, Kinney and Paiz signed separation agreements with IBM. Dkt. Nos. 10-1, 10-3, 10-5 and 10-6. The separation agreement signed by Kinney, which is substantively identical to that signed by Paiz, provides as follows in relevant part:
Resource Action Separation Agreement
You are being offered payments and benefits as part of a resource action that you otherwise would not have been entitled to receive. You will receive and be entitled to keep these payments and benefits only if you accept and comply with all terms of this Agreement. This Agreement requires you to release IBM and related parties from claims you may have as described below. This Agreement also requires you to arbitrate certain claims that are not released on an individual basis.
By accepting this Agreement and the benefits and payments it provides, you agree that if you choose to pursue certain claims that are not released under this Agreement, then such claims must be submitted to arbitration on an individual basis as provided below and may not be pursued in court.
You should thoroughly review and understand the effect of this Agreement before you accept it.
...
2. What you release by accepting this agreement
By accepting this Agreement you release IBM from ALL claims that you may have against it at the time of accepting, whether or not related to your employment with IBM or the termination of your employment (EXCEPT FOR THOSE SPECIFICALLY IDENTIFIED IN SECTION 3), and including, without limitation:
...
• all state and local laws prohibiting discrimination on the basis of age
• claims based on contract, tort, or any other legal theory
• all claims whether or not you know about them at the time you accept this Agreement
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3. What you do not release by accepting this agreement
By accepting this Agreement, you do not release:
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• any claim under the Federal Age Discrimination in Employment Act of 1967 or the West Virginia Human Rights Act, provided however such claims are subject to arbitration on an individual basis as described below
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5. Arbitration and waiver or class claims and jury trial
You agree that any and all legal claims or disputes between you and IBM under the federal Age Discrimination in Employment Act or 1967 ("ADEA") or the West Virginia Human Rights Act, as well as any and all claims or disputes between you and IBM that have not or cannot be released by private agreement as a matter of law (such as under the federal Fair Labor Standards Act of 1938 (FLSA)) (collectively "Covered Claims") will be resolved on an individual basis by private, confidential, final and binding arbitration according to the IBM Arbitration Procedures and Collective Action Waiver (which are attached and incorporated as part of this Agreement) and under the auspices of JAMS, or if there is no JAMS office within 100 miles of your most recent assigned IBM office location, then an arbitration forum provider to be mutually agreed to by the parties. Regardless of the designated arbitration administrator, the arbitration shall be held in accordance with the JAMS Employment Arbitration Rules &
Procedures. You understand and agree that you are giving up your right to a court action for Covered Claims, including any right to a trial before a judge or jury in federal or state court. This agreement to arbitrate does not apply to government agency proceedings.
To the maximum extent permitted by applicable law, you agree that no Covered Claims may be initiated, maintained, heard or determined on a class action, collective action or multi-party basis either in court or in arbitration, and that you are not entitled to serve or participate as a class action member or representative or collective action member or representative or receive any recovery from a class or collective action involving any Covered Claims either in court or in arbitration.
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The Parties’ Arguments
IBM argues that Kinney and Paiz are barred by the separation agreements from: (1) bringing their claims in this forum instead of through arbitration; (2) participating in a multi-party action which is waived by the separation agreements; and (3) bringing any age-discrimination claim or other claim under state law. IBM asserts that Kinney and Paiz recognized that their claims in this action are barred by the separation agreements and, therefore, amended their complaint to allege that they were fraudulently induced to sign these agreements. IBM requests that the court: (1) compel Kinney and Paiz's claims to arbitration; and (2) dismiss their state-law age-discrimination and stand-alone fraud claims on various bases.
In its reply, IBM requests that the court with prejudice alternatively compel these claims to arbitration. In the Fifth Circuit, arguments cannot be raised for the first time in a reply brief. Benefit Recovery, Inc. v. Donelon , 521 F.3d 326 (5th Cir. 2008).
Kinney and Paiz argue that the separation agreements were procured by fraud and therefore the arbitration provisions should not be enforced, because the agreements to arbitrate do not constitute valid contracts under New York law. Anticipating their arguments in its motion, IBM asserts that Kinney and Paiz's fraudulent inducement claim: (1) does not affect the arbitration provision because it challenges the validity of the separation agreement as a whole, and not the arbitration clause specifically, so must be decided by the arbitrator; (2) fails because it is based on the contention that IBM failed to disclose discrimination, which courts have held is not an adequate basis to invalidate the release of a discrimination claim if the release was otherwise knowing and voluntary; and (3) is not supported by adequately pleaded specific facts.
The parties agree that New York contract law controls here. See Overstreet v. Contigroup Cos., Inc. , 462 F.3d 409, 411 (5th Cir. 2006) ("[A]t least for the purposes of our analysis, the validity of the Georgia choice of law provision applicable to the parties’ contract has not been called into question. Therefore, we see no reason to disregard the parties’ agreement to apply Georgia law to their contract.").
Kinney and Paiz assert that: (1) this court can decide their challenge to the validity of the arbitration clause, which they assert they specifically challenge, and not the entire contract; (2) they adequately pleaded fraudulent inducement; and (3) the New York court in McCormack v. IBM , 145 F.Supp. 3d 258 (S.D.N.Y. 2015), addressed IBM's argument regarding the adequacy of IBM's disclosure of potential discrimination claims before obtaining releases from individuals like them.
Validity of the Arbitration Agreement
It is well settled that "before referring a dispute to an arbitrator, the court determines whether a valid arbitration agreement exists." Henry Schein, Inc. v. Archer & White Sales, Inc. , ––– U.S. ––––, 139 S. Ct. 524, 530, 202 L.Ed.2d 480 (2019). Under New York law, a party may invalidate a contract by satisfying the elements of a fraudulent-inducement claim. See Maxam v. Kucharczyk , 138 A.D.3d 1268, 29 N.Y.S.3d 683, 685 (2016) (holding that plaintiff failed to establish contract was invalid because she failed to state cause of action for fraudulent inducement); see also Shapiro v. NFGTV, Inc. , No. 16-CV-9152, 2018 WL 2127806, at *6 (S.D.N.Y. Feb. 9, 2018) (Where "a plaintiff seeks to invalidate a release due to fraudulent inducement, plaintiff must establish the basic elements of fraud."); Citigroup Global Markets, Inc. v. KLCC Investments, LLC , No. 06-CV-5466, 2015 WL 5853916, at *9 (S.D.N.Y. Sept. 28, 2015) (stating that, under New York law, party may void contract by stating fraudulent-inducement claim (citing Dalessio v. Kressler , 6 A.D.3d 57, 773 N.Y.S.2d 434, 437 (2004) ).
The Court Decides the Fraudulent-Inducement Claim Because Plaintiffs Specifically Challenge the Arbitration Clause
The parties dispute whether Kinney and Paiz challenge the validity of the arbitration clause or of the entire separation agreement. IBM argues that Plaintiffs challenge the entirety of the separation agreement, but Plaintiffs argue that they challenge only the arbitration clause. A court may adjudicate the issue where a plaintiff alleges fraudulent inducement in obtaining the arbitration provision specifically, but the principle does not extend to more general claims of fraud. Prima Paint Corp. v. Flood & Conklin Manufacturing Co. , 388 U.S. 395, 403–04, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967) ("[I]f the claim is fraud in the inducement of the arbitration clause itself ... the federal court may proceed to adjudicate it. But the statutory language [of the FAA] does not permit the federal court to consider claims of fraud in the inducement of the contract generally."); accord Buckeye Check Cashing, Inc. v. Cardegna , 546 U.S. 440, 449, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006) ; Rent-A-Center, West, Inc. v. Jackson , 561 U.S. 63, 70, 130 S.Ct. 2772, 177 L.Ed.2d 403 (2010).
Kinney and Paiz address IBM's contention that they are attacking the validity of the entire separation agreement rather than the arbitration clause, by asserting that in an effort to establish that they seek to invalidate the entire contract, IBM acted duplicitously in attaching only three pages of the separation agreement to its motion. Plaintiffs maintain that IBM should have attached the entire 28-page contract. Aside from the fact that Plaintiffs can and did put into evidence the entire separation agreement, the court finds whether IBM attached the entire separation agreement is irrelevant. In their response Plaintiffs also make arguments that the paginations and fonts in the separation agreements are inconsistent, asserting that these inconsistencies "call into question the authenticity of the documents themselves." However, Kinney and Paiz offer no evidence that the agreements are inauthentic, do not move to strike them from evidence, and do not dispute that they signed them, or what they signed. What is relevant is Plaintiffs’ pleadings, in that they illuminate whether their claims are about the validity of the arbitration clause or the entire separation agreement. Plaintiffs state in their First Amended Complaint:
127. Plaintiffs expect IBM will claim some of the Plaintiffs named herein are contractually bound to bring their federal age discrimination claims in secret, individualized arbitrations. Plaintiffs are well aware the law favors arbitration but asserts the arbitration provision contained in the Resource Action Separation
Agreement ("RA Agreement") is legally unenforceable because it was obtained through fraud.
128. IBM provided fraudulent justifications for layoffs and simultaneously withheld federally mandated age information—that would have revealed the number of older workers being impacted—to fraudulently induce employees into signing an arbitration provision. Absent IBM's fraudulent conduct, these cunningly crafted agreements, which ushered laid off employees into secret arbitration, would have effectively skirted the law.
129. The rationales provided by IBM to justify the layoffs have no basis in truth. The proffered "legitimate business need" justifications—insufficient skills, need to offshore, changing direction, job elimination, business needs, reduction of resources, reorganization, failure to meet business targets, etc.—were fabricated as part of IBM's larger scheme to quietly lay off thousands while simultaneously hiring their younger replacements.
130. IBM realized that providing employees accurate data would reveal its scheme. In order to prevent enforcement of age discrimination claims in open court, IBM offered healthcare benefits and paltry severance pay as an inducement to employees who signed the RA Agreement—non-signers received nothing. This agreement required employees to release virtually all causes of actions against IBM. Cleverly, it did not require employees to give up their age discrimination claims under the ADEA. To do so would have triggered the disclosure requirements of the Older Workers Benefit Protection Act ("OWBPA"). Under the OWBPA, employers who ask laid-off employees to sign away their rights must disclose the ages of persons in their unit who are being laid off—as well as the ages of persons retained. The purpose of this requirement is to provide employees with the factual circumstances of their layoff so that they can determine whether they were discriminated against before giving up their rights. The ADEA carve out contained in the RA Agreement is evidence of IBM willful intent to avoid OWBPA. IBM knew if it disclosed the age information, no person in their right mind would sign the waiver.
...
148. IBM knowingly engaged in fraud, including fraudulent inducement, by making misrepresentations of material facts in relation to Plaintiffs’ terminations, that Plaintiffs relied upon to their detriment, in violation of applicable federal and state statutory and common law.
150. As a result of IBM's fraudulent acts or omissions, Plaintiffs’ agreements to arbitrate ADEA claims and waive certain state law claims are rendered void and unenforceable as a matter of law.
Reading the amended complaint, the court finds Kinney and Paiz separately plead that the arbitration clause was fraudulently induced. Plaintiffs claim that IBM withheld and provided false information related to its ongoing practice of age discrimination in order to induce them to "sign[ ] an arbitration provision." Therefore, the court may address the issue of whether the Plaintiffs’ entry into the arbitration clause was fraudulently induced by IBM. See Rent-A-Center. , 561 U.S. at 70, 130 S.Ct. 2772 (holding that "only" a "challenge[ ] [to] specifically the validity of the agreement to arbitrate" and not the "challenge[ ] [to] the contract as a whole ... is relevant to a court's determination whether the arbitration agreement at issue is enforceable").
The arbitration clause of the separation agreement also specifically states, "Any issue concerning the validity or enforceability of this Agreement ... shall be decided only by a court of competent jurisdiction." The language further directs that, in contrast, issues of arbitrability are to be resolved by the arbitrator and not a court. Neither party directed the court to this provision of the separation agreement.
IBM asserts that Plaintiffs’ fraudulent-inducement theory fails to distinguish the arbitration clause from the entire separation agreement and therefore Plaintiffs’ fraud claims apply to the separation agreement as a whole. IBM points out that Plaintiffs did not separately sign the arbitration clause; instead, they signed a separation agreement that contained an arbitration clause. Therefore, IBM argues, any fraudulent inducement alleged in connection with the arbitration clause applies to and would invalidate the entire separation agreement. In support of this IBM points out that Plaintiffs have failed to plead the heightened specifics of a fraud claim with regard to the arbitration clause and also have pleaded that the agreements’ waiver was similarly induced through fraud.
While IBM's argument is appealing, the cases it cites do not support its argument. Those cases all involve situations where the gist of the parties’ claim was the invalidation of entire contracts that happened to contain arbitration clauses. See Prima Paint , 388 U.S. at 398, 87 S.Ct. 1801 (seeking rescission of consulting agreement on basis of fraudulent inducement); Buckeye Check Cashing , 546 U.S. 440, 126 S.Ct. 1204 (attacking check-cashing agreements as usurious contracts void for illegality); Primerica Life Insurance Co. v. Brown , 304 F.3d 469, 471 (5th Cir. 2002) (attacking Plaintiff's entire contract with CitiFinancial as void due to lack of mental capacity); Snap-on Tools Corp. v. Mason , 18 F.3d 1261, 1263 (5th Cir. 1994) (asserting claim for fraudulent inducement into dealership contract); Will-Drill Resources, Inc. v. Samson Resources Co. , 352 F.3d 211, 212 (5th Cir. 2003) (challenging validity of a sales agreement).
This case is not a contract case where the main claim is breach of contract, but an age-discrimination case. Plaintiffs argue that their agreement to the arbitration clause and the waiver of their state claims were both fraudulently induced. Neither party directs the court to case law involving a situation where a party disputing the enforcement of an arbitration provision asserts that both provisions of the contract in general and the arbitration provision in particular were fraudulently induced. In Rubin v. Sona International Corp. , 457 F.Supp. 2d 191, 196-97 (S.D.N.Y. 2006), the district court determined that when both were challenged, the issue of whether the entire contract was void was to be addressed by the arbitrator, and the issue of whether the arbitration clause was induced by fraud was to be determined by the court as a matter of law. Thus, in cases such as this, where the plaintiffs specifically plead that fraudulent inducement of the arbitration provision in conjunction with broader fraud claims, the court decides whether the arbitration clause stands.
Fraudulent Inducement of Arbitration Claim
Kinney and Paiz argue they were induced by fraud to enter into the arbitration clause in the separation agreement. The court concludes that, as a matter of law, they were not. IBM asserts that the separation agreement in general and the arbitration clause in particular are valid and binding under New York contract law, asserting they meet the requirements of offer, acceptance, consideration, mutual assent, and intent to be bound. Benicorp Insurance Co. v. National Medical Health Card Systems, Inc. , 447 F.Supp. 2d 329, 337 (S.D.N.Y. 2006). Rather than attacking the validity of the elements of the contract, Plaintiffs assert that since the arbitration clause was fraudulently induced, it is void, and they should not be compelled to arbitrate their ADEA claims.
Under New York law, to state a claim for fraudulent inducement "a plaintiff must show: (1) a representation of material fact, (2) which was untrue, (3) which was known to be untrue or made with reckless disregard for the truth, (4) which was offered to deceive another or induce him to act, and (5) which that other party relied on to its injury." Aetna Casualty & Surety Co. , 404 F.3d 566, 580 (2d Cir. 2005) ; see also Global Energy & Management, LLC v. Xethanol Corp. , No. 07-CV-11049, 2009 WL 464449, at *2 (S.D.N.Y. Feb. 24, 2009). Fraudulent inducement is an affirmative defense to contract formation. Manufacturers Hanover Trust Co. v. Yanakas , 7 F.3d 310, 316-18 (2d Cir. 1993).
Plaintiffs’ fraudulent-inducement claim asserts that IBM "provided fraudulent justifications for layoffs and simultaneously withheld federally mandated age information—that would have revealed the number of older workers being impacted—to fraudulently induce employees into signing an arbitration provision." Plaintiffs also assert that IBM's "legitimate business need" rationale for the layoffs was untruthful.
With regard to Plaintiffs’ assertion that IBM withheld "federally mandated age information," that argument is not true as recognized by Plaintiffs in their own briefing. The Older Worker Benefits Protection Act ("OWBPA"), 29 U.S.C. § 626, requires that an employer provide employees with certain data regarding the ages of laid-off employees before requiring them to sign a release, only where a release purports to waive claims under the ADEA. In this case, Kinney and Paiz did not waive their ADEA claims, but merely agreed to arbitrate them. There was no federal mandate to IBM to reveal age information to Plaintiffs in this situation. Plaintiffs’ assertion that IBM withheld "federally mandated age information" is incorrect, and therefore does not qualify as a misrepresentation. Because as a matter of law, there was no knowing misrepresentation of material fact, Plaintiffs have failed to carry their burden to establish fraudulent inducement to an agreement to arbitrate on this basis.
Thus Plaintiffs’ only remaining basis for fraudulent inducement to arbitrate their claims would be the alleged "fraudulent justifications" for their layoffs. However, this claim also fails as a matter of law. Courts have consistently rejected the notion that a complaint of unlawful discrimination may be recast as a claim for fraudulent inducement. See Sheridan v. McGraw-Hill Cos. , 129 F. Supp. 2d 633, 638 (S.D.N.Y.) (the assertion that plaintiff's "termination was the product of unlawful discrimination is insufficient to support an allegation of fraudulent inducement"), aff'd , 24 F. App'x 64 (2d Cir. 2001) ; Yassan v. J.P. Morgan Chase & Co. , 708 F.3d 963, 974 (7th Cir. 2013) (rejecting plaintiff's claim he was fraudulently induced to release his ADEA claims, despite acknowledging that employer "may have misrepresented its reasons for terminating" plaintiff); Pampillonia v. RJR Nabisco, Inc. , 138 F.3d 459, 462–63 (2d Cir. 1998) (upholding release, despite alleged misrepresentations on part of employer); Frumkin v. IBM , 801 F. Supp. 1029, 1041 (S.D.N.Y. 1992) (rejecting Plaintiff's claim "that his signature on the release was fraudulently induced insofar as he had no idea he was being discriminated against the day he signed the Release and had been fraudulently told that the department for which he worked was being abolished.") (citation omitted). Plaintiffs rely on McCormack v. IBM , 145 F. Supp. 3d 258, 275 (S.D.N.Y. 2015), in support of their position. However, McCormack involved the legal sufficiency of the release of ADEA claims requiring the higher level of disclosure under the OWBPA, and not the entry into an agreement to arbitrate which is now before the court, and is therefore not on point. Additionally, in McCormack the plaintiffs identified specific alleged fraudulent statements by IBM inducing the waiver of their ADEA claims that were allegedly relied upon by those plaintiffs in waiving those claims, while similar statement are not evident in the pleadings in this case. In fact, Plaintiffs here have not identified any statements upon which they specifically relied in signing the arbitration clauses.
Plaintiffs have presented inadequate pleadings, and no evidence, such as an affidavit or declaration, describing the circumstances surrounding their entry into any agreement, and supporting their fraudulent-inducement claims. They have entirely failed to plead any qualifying misrepresentation regarding the arbitration clause upon which to base a fraudulent inducement claim. Plaintiffs have failed to carry their burden.
Thus, addressing whether the arbitration clause alone was fraudulently induced, the court concludes as a matter of law it was not. The arbitration clause is valid and enforceable and Kinney and Paiz's ADEA claims will be dismissed and they will be compelled to arbitration.
Multi-Party Waiver Waives Separation Agreement Plaintiffs’ Ability to Bring Collective Claims
IBM argues that Kinney and Paiz's state-law claims should be dismissed because, pursuant to the multi-party waiver, they waived the right to assert these claims or seek any relief in a multi-party action. The relevant language states, "you agree that no Covered Claims may be initiated, maintained, heard or determined on a class action, collective action or multi-party basis" and that "you are not entitled to serve or participate as a class action member or representative or collective action member or representative or receive any recovery from a class or collective action involving any Covered Claims either in court or in arbitration." IBM directs the court to case law supporting its position. See Gilmer v. Interstate/Johnson Lane Corp. , 500 U.S. 20, 32, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991) (holding that class and collective action waivers in the ADEA context specifically are enforceable); American Express Co. v. Italian Colors Restaurant , 570 U.S. 228, 237, 133 S.Ct. 2304, 186 L.Ed.2d 417 (2013) (rejecting challenge to enforceability of class and collective action waiver); AT&T Mobility LLC v. Concepcion , 563 U.S. 333, 343, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011) (same).
Plaintiffs also bring a stand-alone fraud claim, which IBM moves to dismiss for failure to plead with particularity pursuant to Federal Rules of Civil Procedure 9(b) and 12(b)(6). See Shushany v. Allwaste, Inc. , 992 F.2d 517, 520 (5th Cir. 1993) ("A dismissal for failure to state fraud with particularity as required by Rule 9(b) is a dismissal on the pleadings for failure to state a claim."). In their amended complaint, Plaintiffs plead that: "IBM knowingly engaged in fraud, including fraudulent inducement, by making misrepresentations of material facts in relation to Plaintiffs’ terminations, that Plaintiffs relied upon to their detriment, in violation of applicable federal and state statutory and common law." Plaintiffs further plead that, "as a result of IBM's fraudulent acts or omissions, Plaintiffs’ agreements to arbitrate ADEA claims and waive certain state law claims are rendered void and unenforceable as a matter of law." As relief, Plaintiffs request that "IBM be enjoined from enforcing any agreements found void, invalid, or unenforceable." "Generally applicable contract defenses, such as fraud, duress, or unconscionability, may be applied to invalidate arbitration agreements." Doctor's Associates, Inc. v. Casarotto , 517 U.S. 681, 686–87, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996). The court does not address the motion with regard to this claim as it is in reality a defense, as evident from their requested relief, and not a claim at all. Moreover, to the extent the fraud claim applies to the issue of the waiver of any state-law claims, those claims are dismissed as described herein.
IBM also relies largely on Estle v. IBM , No. 19-CV-2729, 2020 WL 5633154 (S.D.N.Y. Sept. 21, 2020), in which the Southern District of New York recently held that the same multi-party waiver at issue here is fully enforceable and, on that basis, dismissed those plaintiffs who had signed the waiver. The Estle court rejected the plaintiffs’ attempt to have it declare the class and collective-action waiver unenforceable, holding that "the right to bring a collective action is not a substantive right." See id. at *3–7 ; see also Rusis v. IBM , 529 F.Supp.3d 178, 195 (S.D.N.Y. 2021) (finding Estle to be well-reasoned and thorough, and agreeing that class and collective-action waiver in IBM's separation agreements is fully enforceable).
Plaintiffs’ response to IBM's argument is that the term "multi-party basis" is not defined in the contract, is ambiguous, and should be resolved against IBM as the drafter. Plaintiffs amended complaint states, "Plaintiffs file this action against Defendant International Business Machines Corporation [ ] collectively complaining of violations of the ADEA." Having explicitly stated they are bringing an action "collectively" any argument about a failure to define "multi-party basis" is a red herring. Additionally, "multi-party" is not ambiguous—it means more than one plaintiff, because the phrase refers to who is "initiating" the claim. "Contract language is not ambiguous if it has ‘a definite and precise meaning, unattended by danger of misconception in the purport of the [contract] itself, and concerning which there is no reasonable basis for a difference of opinion.’ " JA Apparel Corp. v. Abboud , 568 F.3d 390, 396 (2d Cir. 2009). Plaintiffs acknowledge in their own pleadings that they filed this action "collectively," and under the clear terms of the separation agreement, their state-law claims against IBM are foreclosed from being brought in this action. Kinney and Paiz's state-law claims are waived and are properly dismissed.
IT IS THEREFORE ORDERED that Defendant International Business Machines Corporation's Motion to Compel Arbitration of ADEA Claims and Partial Motion to Dismiss (Dkt. No. 10) filed October 23, 2020 IS GRANTED IN PART to the extent that Plaintiffs Nancy Kinney and Alvaro Paiz's ADEA claims ARE DISMISSED WITH PREJUDICE and Plaintiffs are COMPELLED to ARBITRATION on those claims, while Plaintiffs’ state-law claims are DISMISSED WITHOUT PREJUDICE. In all other respects the motion is DENIED.