657 F.Supp.3d 535
S.D.N.Y.2023Background:
- Johnson, hired as Everyrealm director, signed broad mandatory arbitration agreements dated Feb 24 and Mar 2, 2022.
- He alleges repeated sexualized conduct by CEO Janine Yorio (e.g., urging a workplace "KYP/KYC" sex game, hotel and office sexual propositions, intrusive questions about his sex life) and other sexually derogatory remarks by executives, occurring in part in New York City after March 3, 2022.
- Johnson also alleges race- and pay-discrimination and whistleblowing/retaliation tied to his employment and termination.
- The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (EFAA) took effect March 3, 2022 and provides that, at the election of the person alleging a sexual harassment dispute, predispute arbitration agreements are unenforceable with respect to a "case" filed under federal, state, or tribal law that "relates to" the sexual harassment dispute.
- Everyrealm moved to compel arbitration; Johnson argued the EFAA precludes enforcement because his FAC plausibly pleads a sexual harassment claim under the NYCHRL.
- The court held Johnson plausibly pleaded a NYCHRL sexual-harassment claim, found the EFAA applicable, and ruled the EFAA renders the arbitration clause unenforceable as to the entire case; the motion to compel arbitration was denied.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the FAC plausibly pleads conduct constituting a sexual harassment dispute under the NYCHRL | Johnson: factual allegations (KYP propositions, repeated sexual advances/questions, sexualized comments by supervisors) suffice under NYCHRL's liberal standard | Everyrealm: allegations are petty slights, implausible, or fabricated; should be dismissed under Rule 12(b)(6) | Court: FAC plausibly pleads an NYCHRL sexual-harassment claim; allegations exceed petty slights and survive 12(b)(6) |
| Whether the EFAA applies to this case | Johnson: because FAC pleads a sexual harassment dispute after Mar 3, 2022, the EFAA applies to block arbitration | Everyrealm: EFAA should not apply; or if it does, it should be limited | Court: EFAA applies because FAC alleges sexual harassment occurring after March 3, 2022 |
| If EFAA applies, does it invalidate arbitration only as to harassment claims or the entire case? | Johnson: EFAA invalidates pre-dispute arbitration for the entire case once a sexual harassment dispute is properly alleged | Everyrealm: EFAA should render only the harassment claims non-arbitrable; other claims remain arbitrable | Court: Interpreting "case" in 9 U.S.C. § 402(a) broadly, the EFAA makes predispute arbitration agreements unenforceable with respect to the entire case relating to the sexual harassment dispute |
| Pleading threshold to invoke EFAA | Johnson/amici: EFAA should reach any non-frivolous sexual-harassment allegation; lower threshold argued by amici | Everyrealm: plaintiff must plausibly plead a sexual-harassment claim (survive 12(b)(6)) before EFAA blocks arbitration | Court: applied the Rule 12(b)(6) plausibility standard, found FAC meets it; did not decide whether a lesser showing might suffice in other cases |
Key Cases Cited
- Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985) (FAA establishes federal policy favoring enforcement of arbitration agreements)
- Scherk v. Alberto-Culver Co., 417 U.S. 506 (1974) (arbitration agreements placed on same footing as other contracts)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading must be plausible to survive Rule 12(b)(6))
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (legal conclusions are not entitled to an assumption of truth in pleading analysis)
- KPMG LLP v. Cocchi, 565 U.S. 18 (2011) (where multiple claims exist, arbitrable claims generally must be sent to arbitration absent contrary congressional command)
- CompuCredit Corp. v. Greenwood, 565 U.S. 95 (2012) (Congress can override FAA's policy favoring arbitration)
- Mihalik v. Credit Agricole Cheuvreux N. Am., Inc., 715 F.3d 102 (2d Cir. 2013) (NYCHRL standard: show unwanted gender-based conduct and treated less well because of sex)
- Ragone v. Atl. Video at Manhattan Ctr., 595 F.3d 115 (2d Cir. 2010) (standards for unconscionability under New York law)
- Albunio v. City of New York, 16 N.Y.3d 472 (N.Y. 2011) (NYCHRL must be construed broadly in favor of discrimination plaintiffs)