Avraham Gold, et al., Respondents,v.New York Life Insurance Co., et al., Appellants.BriefN.Y.October 10, 2018Morgan Lewis Sean P. Lynch Of Counsel +1.609.919.6611 sean.lynch@morganlewis.com July 11,2018 VIA FEDERAL EXPRESS John P. Asiello Chief Clerk and Legal Counsel to the Court Court of Appeals of the State of New York 20 Eagle Street Albany, New York 12207-1095 Re: Gold et al. v. New York Life Insurance Co., et al., APL-2017-00172 Dear Mr. Asiello: This firm represents the Defendants-Appellants New York Life Insurance Company, New York Life Insurance and Annuity Corporation and NYLIFE Securities (collectively “New York Life”) in the above-captioned appeal. Pursuant to 22 NYCRR §500.11(b)(2) and the Court’s June 20, 2018 letter, we submit this letter brief in support of New York Life’s application for reversal of the Appellate Division, First Department’s order denying New York Life’s motion to compel arbitration of Plaintiff-Respondent Melek Kartal’s claims. With the Court’s permission, the parties have invoked this informal briefing process in lieu of more formal submissions because the recent, controlling precedent from the United States Supreme Court in Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018), compels reversal of the First Department’s order denying New York Life’s motion to compel individual arbitration of Kartal’s claims. The sole issue raised on this appeal is whether the First Department erred in finding that Section 7 of the National Labor Relations Act (“NLRA”) precluded enforcement of Kartal’s arbitration agreement because that agreement contains a class action waiver. In a 3-2 split, the First Department held that the NLRA precludes enforcement of class action waivers of employment-related claims. It Morgan, Lewis & Bockius LLP 502 Carnegie Center Princeton, NJ 08540-6241 United States 0 +1.609.919.6600 © +1.609.919.6701 A Pennsylvania Limited Liability Partnership | Steven M. Cohen, Partner-In-Charge John P. Asiello July 11,2018 Page 2 did so while acknowledging that there was an existing circuit split on the issue, which was likely to soon be resolved. Gold v. New York Life Ins. Co., 153 A.D.3d 216, 225, 59 N.Y.S. 316, 322 (2017) (“In all likelihood, the United States Supreme Court will resolve this circuit split in due course.”). On December 6, 2017, this Court stayed the briefing in this case while Epic Systems remained pending. On May 21, 2018, the Supreme Court held in Epic Systems that class action waivers of employment-related claims do not violate the NLRA. Epic Systems compels reversal of the First Department’s order denying Defendants’ motion to compel arbitration. Relevant Factual Background and Procedural History Kartal Agreed to Arbitrate Her Claims Against New York Life. Plaintiffs-Respondents are former New York Life insurance agents. They have asserted a variety of claims under the New York Labor law - including claims based upon the allegation that they were improperly denied overtime and that New York Life imposed unlawful wage deductions. Plaintiffs-Respondents each joined New York Life at different times. The first to join was Avraham Gold, who contracted with the company in 2001. The last to join was Melek Kartal, who contracted with the Company in 2012. When new agents join New York Life, they sign an Agent’s Contract and, if applicable, a Training Allowance Subsidy (“TAS”) Agreement. New York Life periodically updates the contracts it enters into with agents. In November 2011, New York Life updated its Agent’s Contracts and TAS Agreements to include an arbitration provision with class action and jury trial waivers. Since November 2011, every version of the Agent’s Contract and TAS Agreement issued to agents who are beginning their affiliation with New York Life in New York has included an arbitration provision with a class action waiver. When Plaintiff Melek Kartal joined New York Life in 2012, she signed an Agent’s contract that provided, in pertinent part: Arbitration, a. You and New York Life (which includes New York Life, NYLIFE Securities LLC and their affiliates, successors, employees and agents) agree that any dispute, claim, request for equitable relief or I. A. John P. Asiello July 11,2018 Page 3 controversy arising between them, including but not limited to those alleging employment discrimination or harassment based on sex, race, age, disability or status in any other group or class, or retaliation, in violation of any federal, state or local statute, regulation or rule (hereinafter “ the Claim”), as well as any dispute as to whether such Claim is arbitrable, shall be resolved by a final and binding arbitration proceeding administered by the Financial Industry Regulatory Authority (“FINRA”) in accordance with its applicable arbitration rules (“FINRA’s arbitration rules”) then in effect. These rules may be found at www.fmra.ors. c. In the event that a claim is not arbitrable under FINRA’s arbitration rules, or FINRA refuses to arbitrate the Claim, You and New York Life agree that the Claim, as well as any dispute as to whether such Claim is arbitrable, shall be resolved by a sole arbitrator in a final and binding arbitration proceeding administered by the American Arbitration Association (“hereinafter “AAA”) in accordance with its rules for the resolution of employment disputes then in effect. These rules may be found at www.adr.ors. d. You and New York Life both agree to waive any right to a jury trial with respect to any Claim covered by this agreement. e. You and New York Life agree that no claim may be initiated or maintained on a class action, collective action or representative action basis either in court or arbitration. All Claims must be brought in a party’s individual capacity, and not as a plaintiff or class representative or member or otherwise on behalf of others in any purported class, collective, or representative proceeding. The Agent and New York Life further agree that if, for any reason, the waiver of any ability to initiate or maintain a claim as a class, collective or representative action is found to be unenforceable or invalid, then any such class, collective or representative claim shall be litigated and decided in a court of competent jurisdiction, and not in arbitration. Any issue concerning the enforceability or validity of the waiver must be decided by a court, as provided under Section 37 of this Agreement and not by an arbitrator. f. Claims may not be joined or consolidated in arbitration with claims brought by other individuals, and no damages or penalties may be sought or John P. Asiello July 11,2018 Page 4 recovered on behalf of other individuals, unless agreed to in writing by all parties. R.282-83 fl[ 24). Pursuant to these terms, Kartal agreed to arbitrate any and all claims that she has against New York Life on an individual basis and she waived any right that she had to participate in a class, collective, or representative action. Nonetheless, in September 2014, Kartal became a named plaintiff in this purported class action lawsuit when Plaintiffs filed their Consolidated and Amended Class Action Complaint, asserting claims against New York Life on behalf of herself and other New York Life insurance agents arising from her affiliation with New York Life-claims that fall squarely within her arbitration agreement. R.133-177. B. Relevant Procedural History On March 16, 2015, Justice O. Peter Sherwood granted New York Life’s motion to compel arbitration of Kartal’s claims pursuant to the arbitration agreement that she signed. Sherwood’s decision granting summary judgment to New York Life on three of four of Plaintiffs’ claims), to the Appellate Division, First Department. R.5. As part of that appeal, Kartal for the first time contended - based upon the Seventh Circuit’s decision in Lewis v. Epic Systems Corp., 823 F.3d 1147 (7th Cir. 2016)- that the arbitration agreement she signed was unenforceable because it violated Section 7 of the NLRA. Appellants’ Br. p. 56-60. On July 18, 2017, the First Department decided Plaintiffs’ appeal. The court unanimously affirmed the grant of summary judgment to New York Life and split 3-2 on the arbitration issue. The majority, relying on the Seventh Circuit’s decision in Lewis v. Epic Systems, held that “that waiver of collective claims violates the NLRA, and is void and invalid under the FAA’s saving clause.” See Gold v. New York Life Ins. Co., 153 A.D.3d 216, 225 (2017). Two judges dissented, disagreeing with the reasoning of Lewis v. Epic Systems. Id. at 228-233. Both the majority opinion and the two-judge dissent noted that there was an existing split in the federal circuits on the issue of whether employment arbitration Plaintiffs appealed that decision (as well as JusticeR.116-119. John P. Asiello July 11,2018 Page 5 agreements containing class action waivers were enforceable that the U.S. Supreme Court would likely soon resolve. Gold, 153 A.D.3d at 225, 231 (fn. 2) (“Further, there is a recent split among the Federal Circuit Courts regarding these types of clauses...In all likelihood, the United States Supreme Court will resolve this circuit split in due course. . . . Lewis and Morris have been consolidated for oral argument for the Supreme Court’s October 2017 Term. The question presented is whether the collective-bargaining provisions of the NLRA prohibit the enforcement under the FAA of an agreement requiring an employee to arbitrate claims against an employer on an individual, rather than a collective, basis.”). In May 2018, the U.S. Supreme Court held that class action waivers of employment-related claims do not violate the NLRA. Epic Systems, 138 S. Ct. 1612. On June 7, 2018, the parties in this matter jointly requested that this appeal proceed under the alternate procedure set forth in 22 NYCRR §500.11(b)(2) based upon the “recent, controlling precedent” from the Supreme Court, which request this Court granted on June 20, 2018. II. Legal Argument A. The FAA Requires Enforcement of Arbitration Agreements According To Their Terms. The Federal Arbitration Act (“FAA”), 9 U.S.C. § 2, sets forth a national and “liberal policy favoring arbitration” and reinforces “the fundamental principle that arbitration is a matter of contract.” AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339; see also Flanagan v. Prudential-Bache Securities, Inc., 67 N.Y.2d 500; 495 N.E.2d 345; 504 N.Y.S.2d 82 (N.Y. 1986) (applying FAA to employment- based arbitration agreement where plaintiff worked in the financial services industry while noting that New York also has a strong public policy in favor of arbitration and that New York Courts follow the federal interpretation of the FAA); Stark v. Molod Spitz DeSantis & Stark, P C., 9 N.Y.3d 59, 876 N.E.2d 903, 845 N.Y.S.2d 217 (N.Y. 2007) (reiterating that New York has a “long and strong public policy favoring arbitration”).1 It requires courts to “rigorously enforce Consistent with the FAA, CPLR § 7503 provides that, “[w]here there is no substantial question whether a valid agreement was made or complied with, and the claim sought to be arbitrated is not barred by limitation under subdivision (b) of section 7502, the court shall direct the parties to arbitrate.” John P. Asiello July 11,2018 Page 6 agreements to arbitrate” according to their terms “unless the FAA’s mandate has been overridden by a contrary congressional command.” CompuCredit Corp. v. Greenwood, 565 U.S. 95, 98 (2012); American Express Co. v. Italian Colors Rest., 133 S.Ct. 2304, 2308 (2013) (FAA prohibits courts from “invalidating] arbitration agreements on the ground that they do not permit class arbitration” or class proceedings in court); DIRECTV ] Inc. v. Imburgia, 136 S.Ct. 463 at 471 (reiterating that state courts must enforce arbitration agreements containing class waivers). A valid and enforceable agreement requiring resolution of employment-related disputes through arbitration precludes an employee’s right to pursue such claims in a judicial context. Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 123 (2001) (rejecting “the supposition that the advantages of the arbitration process somehow disappear when transferred to the employment context”); Gilmer v. Interstate/ Johnson Lane Corp., 500 U.S. 20, 26 (1991) (as a general rule, “having made the bargain to arbitrate, the parties should be held to it unless Congress itself has evinced an intention to preclude a waiver of judicial remedies for the statutory rights at issue.”). Against that legal backdrop, when considering a motion to compel arbitration, the Court must answer two questions: (1) does a valid agreement to arbitrate exist; and, if it does, (2) does the arbitration agreement encompass the dispute or claims at issue? In answering these questions, the Court must apply a presumption of arbitrability such that “any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983) (an arbitration agreement is presumed enforceable unless it may be said with “positive assurance” that the arbitration clause is “not susceptible of an interpretation” that covers the asserted dispute). Where there is a valid arbitration agreement that covers the claims pled in the complaint then the Court must compel arbitration. That is precisely the case here. B. Kartal’s Arbitration Agreement With New York Life Is Valid And Enforceable It is undisputed that Kartal and New York Life entered into the written arbitration agreement- the Agent’s Contract. R.282-83 (1j 24). Likewise, it is undisputed that Kartal’s claims in this lawsuit fall within the scope of that agreement insofar as John P. Asiello July 11,2018 Page 7 they arise out of or relate to her affiliation with New York Life. R.133-177 (f 24). Her arbitration agreement broadly covers “any dispute, claim, request for equitable relief, or controversy” arising between her and New York Life and her claims in this action are just that - claims arising between her and New York Life stemming from her employment with the Company. R.282-83 (| 24). Because Kartal’s claims were covered by the explicit and unambiguous language of the arbitration provision in the Agent’s Contract, both prerequisites for New York Life’s motion to compel arbitration are met. Indeed, Kartal did not challenge these conclusions on appeal. Rather, the only potential hurdle to enforcement of her arbitration agreement that Kartal raised before the First Department was the argument that Section 7 of the NLRA constitutes a “contrary constitutional command” that overrides the FAA and precludes enforcement of enforcement of class action waivers of employment- related claims. The Supreme Court removed that hurdle when it decided Epic Systems, reversing the Seventh Circuit’s opinion upon which the First Department’s 3-2 majority relied. C. Epic Systems Confirms the Enforceability of Kartal’s Arbitration Agreement and Compels Reversal. Epic Systems was actually three consolidated cases. The common thread of the cases is that the employee-plaintiffs signed arbitration agreements with their employers that expressly barred them from bringing claims on a class or collective basis. The plaintiffs argued that Section 7 of the NLRA, which provides employees with “the right to self-organization, to form, join or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purposes of collective bargaining or other mutual aid or protection,” precludes enforcement of any agreement by employees that waives their right to bring claims against their employer on a class or collective basis. 29 U.S.C. § 157. In advancing that argument, the plaintiffs contended that the statutory protection from interference with “concerted activity” under the NLRA amounted to a “contrary congressional command” that precluded enforcement of class action waivers in the employment context. John P. Asiello July 11,2018 Page 8 In rejecting that argument, the U.S. Supreme Court held that the inclusion of a class action waiver in an employment arbitration agreement does not render the agreement enforceable under the NLRA, noting: But as a matter of law the answer is clear. In the Federal Arbitration Act, Congress has instructed federal courts to enforce arbitration agreements according to their terms— including terms providing for individualized proceedings. Nor can we agree with the employees’ suggestion that the National Labor Relations Act (NLRA) offers a conflicting command. It is this Court’s duty to interpret Congress’s statutes as a harmonious whole rather than at war with one another. And abiding that duty here leads to an unmistakable conclusion. The NLRA secures to employees rights to organize unions and bargain collectively, but it says nothing about how judges and arbitrators must try legal disputes that leave the workplace and enter the courtroom or arbitral forum. This Court has never read a right to class actions into the NLRA— and for three quarters of a century neither did the National Labor Relations Board. Far from conflicting, the Arbitration Act and the NLRA have long enjoyed separate spheres of influence and neither permits this Court to declare the parties’ agreements unlawful. Epic Systems, 138 S. Ct. at 1619. On the specific issue of whether an arbitration agreement with a class action waiver is invalid under the NLRA’s Saving Clause, the Supreme Court noted: The law of precedent teaches that like cases should generally be treated alike, and appropriate respect for that principle means the Arbitration Act’s saving clause can no more save the defense at issue in these cases than it did the defense at issue in Concepcion. At the end of our encounter with the Arbitration Act, then, it appears just as it did at the beginning: a congressional command requiring us to enforce, not override, the terms of the arbitration agreements before us. Id. at 1623. Insofar as the employees and employers in Epic Systems “contracted for arbitration” and specified that arbitration would use “individualized rather than John P. Asiello July 11,2018 Page 9 class or collective action procedures,” the Court held that the FAA protected that agreement “pretty absolutely.” Id. at 1621. From a policy perspective, Epic Systems reemphasized the “liberal federal policy” favoring arbitration, including Congress’s directive to courts “to respect and enforce the parties’ chosen arbitration procedures” and “the rules under which that arbitration will be conducted.’” Epic Sys., 2018 WL 2292444, at *5-6 (citation omitted). That decision comports with Second Circuit authority in this area. See e.g. Sutherland v. Ernst & Young LLP, 726 F.3d 290, 292 (2d Cir. 2013) (class action waivers are enforceable even in the context of employment agreements); Patterson v. Raymours Furniture Co., Inc., 659 Fed.Appx. 40 (2d Cir. 2016) (same). It also is consistent with the primary purposes of the FAA, which were to “enforce private agreements into which parties [have] entered,” to “reverse the longstanding judicial hostility to arbitration agreements,” and to substitute “an emphatic federal policy in favor of arbitral dispute resolution” Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 625-26 (1985); EEOC v. Waffle House, Inc., 534 U.S. 279, 289 (2002); KPMG LLP v. Cocchi, 132 S. Ct. 23,25 (2011) (per curiam). Epic Systems unequivocally confirms that the First Department majority incorrectly decided the arbitration piece of Plaintiffs’ appeal and improperly denied New York Life’s motion to compel arbitration of Kartal’s claims. The lynchpin of the First Department’s decision was the Seventh Circuit’s decision in Epic Systems -which held that the NLRA precluded enforcement of class waivers in the employment context. The Supreme Court expressly reversed the Seventh Circuit’s ruling and rejected the underlying reasoning. The Supreme Court’s holding in Epic Systems is dispositive of this appeal, insofar as the issue of whether Kartal must arbitrate her claims against New York Life hinges upon precisely the same FAA interpretation issue that was presented in that case. See Epic Sys., 2018 WL 2292444, at *5 (recognizing that the FAA applies to employment-related arbitration agreements where the employer is engaged in interstate commerce); Singer v. Jefferies & Co., Inc., 78 N.Y.2d 76, 81, 575 N.E.2d 98, 100, 571 N.Y.S.2d 680, 682 (N.Y. 1991) (recognizing that the FAA applies to written agreements to arbitrate arising out of employment in the financial services industry). John P. Asiello July 11,2018 Page 10 Where, as here, the U.S. Supreme Court has provided specific interpretive guidance on an issue governed by the FAA, this Court is bound to follow that guidance. As this Court observed in Flanagan, 67 N.Y.2d 500, 505-506; 495 N.E.2d 345, 347-348; 504 N.Y.S.2d 82, 84-85: Although enforcement of the Federal Arbitration Act “is left in large part to the state courts,” it “creates a body of federal substantive law establishing and regulating the duty to honor an agreement to arbitrate” (Cone Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 25, n. 32, 103 S.Ct. 927, 942, n. 32, 74 L.Ed.2d 765; Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, 473 U.S.-,-, 105 S.Ct. 3346, 3353, 87 L.Ed.2d 444) which is not dependent upon the forum in which the right to arbitration is asserted (Southland Corp. v. Keating, 465 U.S. 1, 12, 13, 104 S.Ct. 852, 859, 79 L.Ed.2d 1; GAF Corp. v. Werner, 66 N.Y.2d 97, 102, 495 N.Y.S.2d 312, 485 N.E.2d 977). In such a case we are bound to apply the statute as interpreted by Supreme Court decision or, absent such, in accordance with the rule established by lower Federal courts if they are in agreement (Alvez v. American Export Lines, 46 N.Y.2d 634, 639, 415 N.Y.S.2d 979, 389 N.E.2d 461, affd. 446 U.S. 274, 100 S.Ct. 1673, 64 L.Ed.2d 284). Accordingly, this Court is compelled to follow Epic Systems and to reverse the First Department’s ruling denying Defendants’ motion to compel arbitration of Kartal’s claims. Under the express terms of her contract, which is valid under Epic Systems, Kartal waived her right to litigate her claims against New York Life in court as well as her right to bring a class or collective proceeding against New York Life. She must, therefore, arbitrate her claims on an individual basis in accordance with her contract. Defendants respectfully request that this Court enter an Order reversing the First Department’s ruling insofar as it denied New York Life’s motion to compel arbitration of Kartal’s claims. John P. Asiello July 11,2018 Page 11 submitted, •SearriA Ly: cc: Richard G. Rosenblatt, Esq. John Halebian, Esq. Sanford F. Young, Esq. Word Count Certification I certify pursuant to § 500.13 of the Rules and Practice of this Court that the total word count for all printed text in the body of Appellant’s letter brief is 3,438 words. Dated: July 11,2018 i Sean P. DISCLOSURE STATEMENT PURSUANT TO RULE 500.1(f) Pursuant to Section 500.1(f) of the Rules of the Court of Appeals of New York, Appellants New York Life Insurance Company, New York Life Insurance and Annuity Corp., NYLIFE Insurance Co. of Arizona and NYLIFE Securities LLC state as follows: New York Life Insurance Company (“NYLIC”) is a mutual insurance1. company which is owned by its policy holders. Therefore, any policy holder has a share in the Company. NYLIC has no parents, subsidiaries or affiliates that are publicly owned. New York Life Insurance and Annuity Corporation (‘NYLIAC”) is a2. wholly owned subsidiary of NYLIC. NYLIAC has no subsidiaries. NYLIAC has no affiliates that are publicly owned. NYLIFE Insurance Company of Arizona (“NYLAZ”) is a wholly owned3. subsidiary of NYLIC. NYLAZ has no subsidiaries. NYLAZ has no affiliates that are publicly owned. NYLIFE Securities LLC (“NYLSEC”) is a wholly owned subsidiary of4. NYLIFE LLC, which is a wholly owned subsidiary of NYLIC. NYLSEC has no subsidiaries. NYLSEC has no affiliates that are publicly owned. NYLSEC’s parent - NYLIFE LLC-has no subsidiaries or affiliates that are publicly owned. Dated: July 11,2018 Bjt ISean