compelling arbitration of discrimination claims where arbitration agreement required arbitration of "any dispute . . . concerning any . . . aspects of your employment relationship, including, without limitation, discrimination claims"Summary of this case from Cronas v. Willis Group Holdings LTD
No. 04 Civ. 0299 (DAB).
June 22, 2004
Before the Court is Defendant Charles Arentowicz's ("Arentowicz") Motion to Dismiss or Stay the above-captioned action pursuant to Rule 12(b) of the Federal Rules of Civil Procedure. Plaintiff Cap Gemini Ernst Young U.S. LLC ("Cap Gemini") has cross-moved to compel arbitration in this district.
For the reasons that follow, Defendant's Motion to Dismiss or Stay is DENIED and Plaintiff's Motion to Compel is GRANTED.
Plaintiff Cap Gemini is a large multi-national corporation which provides consulting, technology and outsourcing services here in the United States and abroad. (Compl. ¶ 4.) In April 2000, Cap Gemini hired Defendant Arentowicz to serve as Vice President and the two entered into an employment Agreement (the "Agreement"). (Compl. ¶ 13; Notice of Cross-Motion, Exh. 1.) In the case of employment disputes, the Agreement required that the parties arbitrate the disagreement. Specifically,
any dispute, controversy or claim between us arising out of or relating to or concerning the provisions of this Agreement, any agreement between you and the Firm relating to or arising out of your employment with us or otherwise concerning any rights, obligations or other aspects of your employment relationship, including, without limitation, discrimination claims, or your relationship in respect of the Firm ( "employment related matters"), shall be finally settled by arbitration in the City of New York before, and in accordance with the arbitration procedures set forth in the attached Annex 4. . . .
(Agreement ¶ 5.)
Annex 4, in turn, established the procedures that the Plaintiff and Defendant would follow in arbitration. It states in pertinent part:
nothing contained herein shall prevent a party from seeking temporary relief with respect to a dispute. A party may apply to a court . . . for a temporary restraining order, preliminary injunction, or such other temporary emergency relief. Neither an application for temporary emergency relief, nor a court's consideration or granting of such relief shall (A) constitute a waiver of the right to pursue arbitration . . . or (B) delay the appointment of an arbitration panel or the progress of arbitration proceedings.
(Id., Annex 4, ¶ iv.)
The Agreement also contained a choice-of-law provision that "[t]his Agreement shall be governed by and construed in accordance with the laws of the State of New York." (Id. ¶ 6.) Additionally, Annex 4 states that "[t]he employee and the Employer acknowledge that the forum designated above [any federal or state court in New York City] has a reasonable relation to the employment Agreement, and to the employee's relationship to the Employer." (Id., Annex 4.)
Finally, the Agreement requires that the employee acknowledge that:
I HAVE READ THIS AGREEMENT AND FULLY UNDERSTAND AND ACCEPT ITS TERMS. I ACKNOWLEDGE THAT I HAVE AGREED TO WAIVE ANY RIGHT I MAY HAVE TO HAVE ANY DISPUTE, CONTROVERSY OR CLAIM ARISING OUT OF OR RELATING TO OR CONCERNING THE PROVISIONS OF THIS AGREEMENT DETERMINED BY A COURT OF LAW AND THAT ALL SUCH DISPUTES SHALL BE RESOLVED THROUGH ARBITRATION. I SPECIFICALLY ACKNOWLEDGE THAT THE REMEDIES AVAILABLE UNDER THE ARBITRATION PROVISION OF THIS AGREEMENT ARE MORE LIMITED THAN THOSE WHICH WOULD BE AVAILABLE IN A COURT OF LAW.
This lengthy acknowledgment appears directly above Defendant's signature, dated April 22, 2000. (Id.)
Arentowicz worked at Cap Gemini from April 2000 until December 2002; he was based in the Clark, New Jersey offices. (Compl. ¶ 6.) His supervisor was Kenneth Nowack, who worked out of Cap Gemini's corporate headquarters at 5 Times Square, New York, New York. (Nowack Aff. ¶¶ 1-4.) In the performance of his duties, Arentowicz made periodic trips into New York to attend meetings. (Id. ¶¶ 5-7.)
In October 2003, Arentowicz filed a lawsuit in New Jersey state court, seeking damages for unlawful termination in violation of New Jersey anti-discrimination laws. (Arentowicz Compl. ¶¶ 49-51; Compl. ¶ 1.) Arentowicz additionally sought to have the state court declare the arbitration provisions unconscionable. (Arentowicz Compl. ¶¶ 46-48.) Cap Gemini timely removed the action to the United States District Court in New Jersey. (Notice of Cross-Motion, Exh. 3; Compl. ¶ 1.) Cap Gemini moved to dismiss the New Jersey action or alternatively to transfer it to the Southern District of New York. (Notice of Cross-Motion, Exh. 10.) To date, the motion is still pending.
Plaintiff Cap Gemini then filed an action here seeking both a declaratory judgment that Arentowicz must pursue his claims before the American Arbitration Association (the "AAA") in New York City and a stay in the New Jersey proceedings. (Compl. ¶¶ 15-17.) The Court denied Cap Gemini's Order to Show Cause to compel arbitration and to stay the New Jersey proceedings. (Ct. Order, Jan. 15, 2004; Notice of Cross-Motion, Exh. 6.) At the same time, Cap Gemini commenced an arbitration before the AAA in New York City, which notified the parties that the arbitration would proceed. (Notice of Cross-Motion, Exh. 9.)
Defendant has refused to arbitrate and subsequently moved to stay or dismiss because of a "first filed" action in federal court in New Jersey. (Id., Exh. 8.) Plaintiff cross-moved to compel arbitration.
I. First Filed Action
It is well-established that the "first filed" rule mandates that "where an action is brought in one federal district court and a later action embracing the same issue is brought in another federal court, the first court has jurisdiction to enjoin the prosecution of the second action," City of New York v. Exxon Corp., 932 F.2d 1020, 1025 (2d Cir. 1991) (quoting Meeropol v. Nizer, 505 F.2d 232, 235 (2d Cir. 1974)), unless special circumstances exist that would "justify giving priority to the second" action. Id. (quoting William Gluckin Co. v. International Playtex Corp., 407 F.2d 177, 178 (2d Cir. 1969)).
Arentowicz argues that this case is a second filed action which encompasses the same issue as the first filed one in New Jersey. Specifically, Defendant argues that both cases involve "claims for a declaratory judgment relative to the employment agreement." (Def. Memo. of Law at 6.) As such, the case should be dismissed or stayed in favor of the New Jersey action.
Cap Gemini contends that the "first filed" rule does not apply to this case because the two actions do not encompass the same issue. The New Jersey action involves issues of unconscionability and anti-discrimination laws while this action deals with arbitration.
The Court finds that the issues in the two cases are clearly not the same. The New Jersey action seeks relief under the anti-discrimination laws of New Jersey; the instant case involves compelling arbitration. Although both do seek declaratory judgments, the declaration sought in the New Jersey case concerns whether the Agreement is unconscionable under New Jersey law while the declaration sought in this Court is one that arbitration should proceed in New York City. (Compare Def. Compl. ¶¶ 46-48 with Compl. ¶¶ 15-18.)
A stay or dismissal in this action would not lead to a resolution of all claims as Defendant argues in his papers. It is well-settled, after all, that an order to compel arbitration can only be moved for and filed in the district in which the arbitration is to take place. In the Matter of the Petition of the Home Ins. Co., 908 F. Supp. 180, 182 (S.D.N.Y. 1995) ("[O]nly the district court where the arbitration will proceed may order arbitration.") (collecting cases). As the Agreement unambiguously requires arbitration in New York, this Court is the only forum which can properly adjudicate the claim. Finally, there is no need to stay this case as the Agreement clearly states an application to a court shall not "delay the appointment of an arbitration panel or the progress of arbitration proceedings." (Agreement, Annex 4, ¶ iv.)
Defendant's reliance on National Equipment Rental, Ltd. v. A.L. Fowler, 287 F.2d 43 (2d Cir. 1961) and Adam v. Jacobs, 950 F.2d 89 (2d Cir. 1991) is erroneous. In National Equipment, the Second Circuit affirmed a New York district court's enjoinment of a subsequently filed suit in Alabama because the causes of action in the latter case were merely counterclaims to the New York proceeding. National Equipment, 287 F.2d at 46. InAdam, the Second Circuit found that a district court in New York should have stayed a case which was filed subsequent to an action in Michigan and whose claim was already a compulsory counterclaim in the previously filed Michigan suit. Adam, 950 F.2d at 93-94. Here, as already noted, the only court that can compel arbitration is this Court, and Cap Gemini's Motion to Compel could then not be brought in New Jersey as a counterclaim.National Equipment and Adam are therefore inapposite.
Since the cases lack a common issue, the "first filed" rule is not applicable here. See Home, 908 F. Supp. at 182 (finding that "the first-filed rule is inapplicable here because it only applies where the second-filed action embraces the same issues as the first"). Accordingly, Defendant's Motion to Stay or Dismiss is DENIED.
Defendant's papers also seem to raise a venue issue, devoting several pages to the subject. No motion to transfer venue has been filed; however, the Court notes that the reference to 1391(b) as requiring that Defendant's claims can only be in federal court in New Jersey is erroneous. Indeed, the text of 1391(b) applies only to cases not arising solely from diversity jurisdiction. 28 U.S.C. § 1391(b)(2). This case is solely a diversity action (see Compl. ¶ 7-9), and as such, it is governed by 1391(a). Since, as already noted, the Motion to Compel may only be brought in this Court, venue would appear proper here as this Court seems to have jurisdiction over Defendant and "there is no district in which the action may otherwise be brought." 28 U.S.C. § 1391(a).
II. Motion to Compel Arbitration
Congress' enactment of the Federal Arbitration Act ("FAA") evinces a strong federal policy favoring arbitration agreements.Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24-25, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991) (recounting the history of the FAA and finding that there is a "liberal federal policy favoring arbitration agreements") (quoting Moses H. Cohen Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 941, 74 L.Ed.2d 765 (1983)); Williston on Contracts, § 57:3 ("The Federal Arbitration Act was adopted in part to express the strong national policy in favor of arbitration, and to make arbitration agreements specifically enforceable."). This presumption, the Second Circuit has recently noted,
has survived even "greater scrutiny," . . . given to the use of mandatory pre-dispute arbitration agreements, like the one [Plaintiff] signed, to resolve statutory claims of employment discrimination. Courts have consistently found that such claims can be subject to mandatory arbitration.
Gold v. Deutsche Aktiengesellschaft, 365 F.3d 144, 147-148 (2d Cir. 2004) (citations omitted).
The FAA specifically declares that arbitration agreements are "valid, irrevocable, and enforceable," 9 U.S.C. § 2, and also enables a party to compel arbitration in federal court, which as previously discussed, must proceed in the district court where the arbitration is to transpire. 9 U.S.C. § 4; Home, 908 F. Supp. at 182.
The Second Circuit recently held that "prior to compelling arbitration, the district court must first determine two threshold issues that are governed by state rather than federal law: (1) Did the parties enter into a contractually valid arbitration agreement? and (2) If so, does the parties' dispute fall within the scope of the arbitration agreement?" Cap Gemini Ernst Young, U.S., LLC v. Nackel, 346 F.3d 360, 365 (2d Cir. 2003) (citation omitted) ("Nackel I").
This first question requires the Court to undertake a thorough choice-of-law analysis. Indeed, "New York law is clear [that] in cases involving a contract with an express choice-of-law provision . . . a court is to apply the law selected in the contract as long as the state selected has sufficient contacts with the transaction." Id. (quoting Hartford Fire Ins. Co. v. Orient Overseas Containers Lines, 230 F.3d 549, 556 (2d Cir. 2000)). This inquiry also permits the Court to deal with "questions of contractual validity relating to the unconscionability of the underlying arbitration agreement [which] must be resolved first, as a matter of state law, before compelling arbitration pursuant to the FAA." Id. (citation omitted).
In determining the second question, courts should, given the federal policy favoring arbitration agreements, broadly interpret the clauses that authorize arbitration. Hartford Acc. and Indemn. Co. v. Swiss Reins. America Corp., 246 F.3d 219, 226 (2d Cir. 2001) (noting that where "the existence of an arbitration clause is undisputed, doubts as to whether a claim falls within the scope of that agreement should be resolved in favor of arbitrability.") (citing Moses S. Cohen, 460 U.S. at 24-25, 103 S.Ct. 927). The presumption in favor of arbitration is even "stronger where the arbitration clause itself is a broad clause that refers to arbitration of `all disputes arising out of an agreement.'" Clarendon Nat. Ins. v. Lan, 152 F. Supp.2d at 514 (citations omitted).
Arentowicz does not specifically address the Motion to Compel in his papers, instead relying solely on his arguments in support of a stay or dismissal. However, by arguing that New York has no ties to the lawsuit, Defendant strongly hints that this case is governed by New Jersey rather than New York law. He also states several times that the Agreement is a contract of adhesion and unconscionable. These arguments, if accepted by this Court, would dictate that the arbitration clause is not enforceable and that the Motion to Compel should fail.
Cap Gemini argues that its Motion to Compel should be granted because the parties entered a valid arbitration agreement that encompasses Defendant's discrimination claims. Plaintiff further notes that New York is the proper forum as expressly noted in the Agreement and that the Agreement is not unconscionable in any way. Since the clause is broad, the Agreement's arbitration requirement encompasses Defendant's claims.
A. Valid Arbitration Agreement
It is patently clear that the Agreement contained an express choice-of-law provision. (Agreement ¶ 6.) The record demonstrates that Cap Gemini has its headquarters and principal place of business in New York. (Nowack Aff. ¶ 3.) This alone legally suffices to demonstrate a reasonable relationship between the particular state whose law is sought to be applied and the Agreement. Nackel I, 346 F.3d at 366 (citing Woolding v. Garret Corp., 813 F.2d 543, 552 (2d Cir. 1987); Finucane v. Interior Constr. Corp., 264 A.D.2d 618, 695 N.Y.S.2d 322, 325 (1st Dep't 1999)). The record further indicates that part of Arentowicz's job entailed attendance at meetings at Cap Gemini's headquarters; Defendant's supervisor, who worked out of Manhattan, would observe attendees' participation at these meetings to help evaluate job performance. (Nowack Aff ¶ 1-5; 5-7.) A reasonable relationship between New York and the Agreement has therefore been established.
Under New York law, courts apply generally accepted principles of contract law to determine whether parties have agreed to arbitrate. Arakawa v. Japan Network Group, 56 F. Supp.2d 349, 352 (S.D.N.Y. 1999) (citing Genesco, Inc. v. T, Kakiuchi Co., 815 F.2d 840, 845 (2d Cir. 1987). An individual "who signs a contract is presumed to know its contents and assent to them," unless he can "show special circumstances, such as duress or coercion, which would justify non-enforcement of the contract." Gruber v. Louis Hornick Co., Inc., 02 Civ. 5092 (SHS), 2003 WL 21222541 at *2 (S.D.N.Y., May 23, 2003) (citations omitted).
It is clear that Defendant signed the Agreement and is bound by the provisions in the contract. While he has suggested that the Agreement was both a contract of adhesion and unconscionable, Arentowicz has not demonstrated the existence of any facts that would support such a conclusion. Indeed, courts in this district have rejected such claims in similar circumstances, id. (Allegation that employee was told she would not be hired if she did not sign an agreement was insufficient to prove that the contract's arbitration clause was unenforceable); Arakawa, 56 F. Supp.2d at 352 (finding no contract of adhesion where an employee alleged that she only signed the contract to keep her job when neither the complaint nor her affidavit suggested she had actually been threatened with termination), and the Supreme Court itself has held that the "[m]ere inequality in bargaining power" that exists between an employer and employee does not itself constitute a reason to render an arbitration clause unenforceable. Id. (citing Gilmer, 500 U.S. at 33, 111 S.Ct. 1655).
Finally, the arbitration provision does not appear unconscionable under New York law. Indeed, New York courts have held contracts to be unenforceable only when the agreement at issue "is so grossly unreasonable or unconscionable in light of the mores and business practices of the time and place to be unenforceable according to its literal terms." Gillman v. Chase Manhattan Bank, N.A., 73 N.Y.2d 1, 10 (1988) (citations omitted). Generally, "a determination of unconscionability . . . requires a showing that the contract was both procedurally and substantively unconscionable — i.e., some showing of an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party." Id. at 10 (citations omitted) (internal quotations omitted). Defendant makes no real argument here and has not shown any facts that would allow this Court to conclude that the arbitration clause is unreasonably favorable to Cap Gemini.
B. Scope of the Agreement
The arbitration clause requires that the parties arbitrate "any dispute, controversy or claim between us arising out of or relating to or concerning the provisions of this Agreement . . . including . . . discrimination claims." (Agreement ¶ 5.) This is "the paradigm of a broad clause," which creates the legal presumption that the claims relating to Defendant's termination, which he alleges was due to age discrimination, are arbitrable. Collins Aikman Prod. Co. v. Building Systems Inc., 58 F.3d 16, 20 (2d Cir. 1995) (finding that contractual language which mandated arbitration for "[a]ny claim or controversy arising out of or relating to th[e] agreement" made the claims presumptively arbitrable) (citation omitted). Given this expansive language and the Supreme Court's admonition that "any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration," Id. at 19 (citing Moses H. Cone, 460 U.S. at 24-25, 103 S.Ct. 941-42.), the Court finds that the Agreement's arbitration provisions easily encompass Arentowicz's termination and the alleged discriminatory motives surrounding it. See also Oldroyd v. Elmira Savings Bank, FSB, 134 F.3d 72, 76-77 (2d Cir. 1998) (finding that an arbitration clause requiring "[a]ny dispute, controversy or claim arising under or in connection with" is to be interpreted broadly to include plaintiff's retaliatory discharge claim).
Moreover, the Court notes that a court in this district has compelled arbitration under the very same arbitration clause at issue in this case. See Cap Gemini Ernst Yong U.S. LLC, v. Nackel, 02 Civ. 6872 (DLC), 2002 WL 31626703 at *1, *3 (S.D.N.Y., Nov. 21, 2002). Like Arentowicz, Nackel argued that as non-New York resident who worked in Cap Gemini's Los Angeles office, he should not be forced to participate in arbitration here. Additionally like Arentowicz, Nackel implied that California case law would not have enforced the arbitration clause. Judge Cote found, as this Court did above, that the employee's arguments were unavailing.Id. at *2.
The Court notes that the Nackel case has a complicated procedural history. After Judge Cote entered her order to compel arbitration, the Second Circuit vacated the decision on the grounds that the order should first have addressed the validity of the agreement itself under state law. Nackel I, 346 F.3d at 366. On remand, the district court found that New York law applied and that the arbitration agreement was valid, making the order to arbitrate valid. Nackel II, 2004 WL 569554 at *4-5. The Second Circuit affirmed in an unpublished decision. Cap Gemini Ernst Young U.S. LLC v. Nackel, 2004 WL 1179252 (2d Cir., May 27, 2004) (unpublished).
Because the parties entered into a validly enforceable contract and because the discrimination claims of Defendant clearly fall within the scope of the arbitration clause, the Court hereby GRANTS Plaintiff's Motion to Compel arbitration.
The Clerk of Court is DIRECTED to close the docket in this case. The Complaint is dismissed without prejudice to reinstatement by letter by either party following the conclusion of arbitration proceedings.