JIA DENG v. FREQUENCY ELECTRONICS, INC., and AJILON PROFESSIONAL STAFFING LLC
Case 2:21-cv-06081-BMC
UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK
November 14, 2022
COGAN, District Judge.
COGAN, District Judge.
This case arises under the Fair Labor Standards Act,
The issue before the Court is whether plaintiff must resolve her claims against both the staffing company and its client in arbitration as opposed to in this Court. I conclude that she must. The arbitration agreement is extremely broad, and it protects both the staffing company and its client. Defendants’ motion to compel arbitration is therefore granted, with the exception of her claims for statutory damages under New York law, which are dismissed for lack of standing.
This case is about a six-month employment relationship. The complaint alleges that defendants employed plaintiff from May 2019 to November 2019 as an office worker dealing with a variety of supply chain issues. She was paid about $28 an hour and worked approximately 41-45 or more hours per week, but she was not paid overtime. Plaintiff also alleges that defendants terminated her employment because she complained about defendants’ unlawful practice of reducing plaintiff‘s overtime hours and not paying her for all the time and overtime that she worked. Her complaint contains four claims for relief: (1) failure to pay overtime wages as required by the FLSA,
Defendant ADO Professional Solutions, Inc. f/k/a Accounting Principals, Inc. d/b/a Ajilon, Parker + Lynch (“ADO“), and mistakenly sued here (for reasons explained below) as Ajilon Professional Staffing LLC, is one of the largest staffing service companies in the United States, with operations in 47 states, including New York. “Staffing services” means that it recruits workers for clients who retain it for that purpose. ADO clients will contract with ADO to find individuals with skillsets that the client needs. ADO will recruit candidates and, if ADO hires a candidate, that candidate will be placed with the ADO client that has the need.
ADO uses a web-based application known as “USVerify” when it onboards individuals to whom it has made employment offers. USVerify provides a means by which prospective employees, after they have received an offer of employment with ADO, can complete a package of initial employment forms online. The signature on each form is applied electronically, and the
There is no dispute that plaintiff Jia Deng signed all the required forms online through USVerify, including the arbitration agreement, and that ADO countersigned that agreement. The arbitration agreement provides that it is entered between plaintiff and “Accounting Principals dba Ajilon, Parker + Lynch“, defined as “the Company.” Paragraph 1 of the arbitration agreement provides that
the Company and Employee agree that any and all disputes, claims or controversies arising out of or relating to this Agreement, the employment relationship between the Parties, or the termination of the employment relationship (collectively, “Claims” or individually, “Claim“), shall be resolved by binding arbitration in accordance with the Employment Arbitration Rules of the American Arbitration Association then in effect, except as noted in Paragraph 2.1 These Rules can be obtained from the Company Human Resources Department or online at Employment Arbitration Rules and Mediation Procedures (https://www.adr.org/Rules). The agreement to arbitrate includes any Claims that the Company may have against Employee, and/or that Employee may have against the Company, Company Client(s), and/or Company and/or Company Client(s)’ officers, directors, employees, agents, or parent, subsidiary, or affiliated entities, except as set forth below. The Company and Employee agree that the aggrieved party must give written notice of any Claim to the other party no later than the expiration of the statute of limitations (deadline for filing) that the law sets forth for such Claim. This Agreement shall be enforceable under and subject
Immediately following this provision is a sentence stating:
BY SIGNING THIS AGREEMENT, THE PARTIES HEREBY WAIVE THEIR RIGHT TO HAVE ANY CLAIM COVERED BY THE ARBITRATION OBLIGATIONS IN THIS AGREEMENT DECIDED BY A JUDGE OR JURY IN A COURT.
(Emphasis in original).
Defendant Frequency Electronics, Inc. (“FEI“) supplies “time and frequency products” for ground, seaborne, airborne, and space terminals and platforms used by commercial, governmental and military systems suppliers to synchronize voice, data, and video transmissions in wireless communications systems. It also has a nationwide presence. From time to time, it enters into contracts with ADO under which ADO would provide FEI with short-term employees. Plaintiff was one of those employees.
DISCUSSION
I. Applicable law
When deciding a motion to compel arbitration, courts apply a standard “similar to that applicable for a motion for summary judgment.” Meyer v. Uber Techs., Inc., 868 F.3d 66, 74 (2d Cir. 2017) (citation omitted). A court “consider[s] all relevant, admissible evidence submitted by the parties and contained in ‘pleadings, depositions, answers to interrogatories, and admissions on file, together with . . . affidavits,‘” Chambers v. Time Warner, Inc., 282 F.3d 147, 155 (2d Cir. 2002) (quoting
The party seeking to compel arbitration “must make a prima facie initial showing that an agreement to arbitrate existed before the burden shifts to the party opposing arbitration to put the
Courts consider four factors to determine whether to compel arbitration: “(1) whether the parties agreed to arbitrate; (2) the scope [of] the arbitration agreement; (3) whether, if federal statutory claims are asserted, Congress intended those claims to be nonarbitrable; and (4) whether, if some but not all of the claims in the case are arbitrable, the case should be stayed pending arbitration.” McAllister v. Conn. Renaissance Inc., 496 F. App‘x 104, 106 (2d Cir. 2012) (citing JLM Indus., Inc. v. Stolt-Nielsen SA, 387 F.3d 163, 169 (2d Cir. 2004)).
In many circumstances, the critical factor is “whether the parties have indeed agreed to arbitrate.” Doctor‘s Assocs., Inc. v. Alemayehu, 934 F.3d 245, 250 (2d Cir. 2019) (citation omitted). Courts resolve this issue by looking to state law. See Bell v. Cendant Corp., 293 F.3d 563, 566 (2d Cir. 2002); see also Schnabel v. Trilegiant Corp., 697 F.3d 110, 119 (2d Cir. 2012).3 Like other contracts, arbitration agreements “may be invalidated by ‘generally applicable contract defenses, such as fraud, duress, or unconscionability.‘” Rent-A-Center, W., Inc. v. Jackson, 561 U.S. 63, 68 (2010) (citation omitted).
A. Arbitrability
There is no dispute in this case as to the application of factors 2, 3, and 4 above. The scope of the arbitration agreement plainly includes the claims at issue here, as the agreement covers all claims arising out of or relating to plaintiff‘s employment or her termination. The law is clear that FLSA claims are subject to arbitration, see Rodriguez-Depena v. Parts Auth., Inc., 877 F.3d 122, 123-24 (2d Cir. 2017), as are NYLL claims, see Sutherland v. Ernst & Young LLP, 726 F.3d 290, 292 n.1 (2d Cir. 2013). For the same reasons, this is not a “split claim” case where some but not all of plaintiff‘s claims fall within the arbitration agreement.
The only disputed issue as to arbitrability is whether the parties agreed to arbitrate. That issue also seems straightforward. The arbitration agreement is signed by both plaintiff and ADO (under its prior name). Plaintiff does not claim that she did not know or was unable to appreciate that she was voluntarily agreeing to submit claims arising out of her employment to arbitration.
Instead, plaintiff argues that the arbitration agreement is invalid because plaintiff‘s counterparty was not in existence at the time she signed the arbitration agreement. There is no dispute that the named defendant in this suit – Ajilon Professional Staffing LLC (“APS LLC“) – was inactive before plaintiff‘s employment. But APS LLC was not the party that signed the arbitration agreement and not the entity that hired plaintiff. The arbitration agreement instead states that plaintiff‘s counterparty is “Accounting Principals dba Ajilon, Parker + Lynch.”
However, plaintiff has also submitted documentation purporting to show that Accounting Principals, Inc. has been inactive since 2005. Since Accounting Principals, Inc. was inactive, any contracts it signed, according to plaintiff, are not enforceable. Defendants, in response, have submitted documents filed with the New York Department of State showing that ADO has
These seemingly conflicting corporate records – one showing that Accounting Principals, Inc. became inactive in 2005, and others showing that Accounting Principals, Inc. was active from 2005 to 2021 – can be reconciled by looking at the “Merger History” for these entities reported on the New York Department of State‘s website.4 In fact, there were two companies named Accounting Principals, Inc.
On December 24, 2004, the entity now operating as ADO Professional Solutions, Inc. – then operating as Accounting Principals, Inc. – acquired another entity named Accounting Principals, Inc. The records submitted by plaintiff reflect the termination of the target company “Accounting Principals, Inc.” – but the surviving Accounting Principals, Inc. was active from 2005 to 2021. It thereafter continued to be active under a name change to ADO Professional Solutions, Inc.
The arbitration agreement, signed by Accounting Principals, Inc. and plaintiff in 2019, is consistent with this timeline. True, the “Inc.” designation does not appear after “Accounting Principals” in the agreement. But according to the New York Department of State website, there is no entity other than Accounting Principals, Inc. that used the appellation “Accounting Principals” during that time. And there is no entity involved in the facts giving rise to this case called “Ajilon Professional Staffing LLC,” the defendant that plaintiff has named.
Plaintiff‘s related argument is that she cannot be forced to litigate against ADO or API because they are not parties to this action. Usually, when a plaintiff misnames a defendant, the name is corrected on consent, see e.g. Rozier v. Financial Recovery Systems, Inc., No. 10-cv-3273, 2011 WL 2295116, at *1 n. 1 (E.D.N.Y. June 7, 2011), or the court simply orders it sua sponte, see Hylton v. New York Methodist Hosp., 708 F. Supp. 2d 248, n.1 (E.D.N.Y. 2009). Plaintiff doesn‘t want to consent to that, however, because she needs to maintain the purported separateness of ADO, API, and APS LLC if she is to avoid arbitration. But for the reasons set forth above, she cannot. The documents that ADO has submitted demonstrate, first, that ADO is simply a name change from API, and second, that APS LLC is not the entity that employed plaintiff because, as plaintiff acknowledges, it was defunct more than ten years before plaintiff started working for ADO.6
ADO probably should have moved to substitute in for APS LLC when it became aware that plaintiff was not consenting to the substitution, rather than just assuming that it could appear
Alternatively, plaintiff argues that even if she is obligated to arbitrate employment claims against ADO, she is not obligated to arbitrate her claims against FEI. However, the arbitration agreement says otherwise. It provides that: “The agreement to arbitrate includes any Claims that the Company may have against Employee, and/or that Employee may have against . . . Company Client(s) . . . .” Plaintiff argues that the term “Company Client” is ambiguous, but she offers no interpretation of this language other than that it refers to those companies, like FEI, which hire ADO to help with their staffing needs. No reasonable jury could find that it means anything else. Having determined that ADO was plaintiff‘s employer, and giving “clients” of ADO its ordinary meaning, it follows that FEI is entitled to the benefit of the arbitration agreement.
Finally, plaintiff argues that even if the arbitration agreement covers ADO employees’ claims against FEI, FEI somehow loses that protection pursuant to its separate contract with ADO (the “FEI/ADO agreement“) – that is, the contract by which ADO agreed to hire individuals who could meet FEI‘s needs (including, among other terms, the fee for ADO‘s
Plaintiff‘s reasoning based on that sentence proceeds like this: (1) the arbitration agreement waives both signatories’ right to proceed in court before a jury; (2) the FEI/ADO agreement, in the language quoted above, prevents ADO from acting as FEI‘s agent; and (3) since ADO could not act as FEI‘s agent in waiving FEI‘s right to proceed in court before a jury, FEI cannot rely on the arbitration clause.
Plaintiff‘s axioms are valid, but her conclusion creates a false syllogism. FEI, like ADO, has moved to arbitrate. The disclaimer of a general agency relationship in the FEI/ADO agreement does not prevent FEI from accepting those benefits that ADO obtains in its contract with its employees. Perhaps FEI would have an argument to avoid arbitration if it wanted to proceed in court, but it doesn‘t want to proceed in court. It is happy to avail itself of the arbitration agreement and its inclusion within that agreement. It is not plaintiff‘s place to tell FEI that it might have an “out” when FEI is not interested in one.
Plaintiff‘s arguments are creative but ultimately unpersuasive. This is a straightforward arbitration agreement that plaintiff entered into with ADO under its prior name, and the agreement clearly includes the claims that plaintiff has raised.
III. Waiver by conduct
Plaintiff argues that even if the case is arbitrable, ADO and FEI have waived their respective rights to arbitration by doing nothing from the time they were served in November 2021 until they filed their motions to compel arbitration in August 2022. Plaintiff asserts that
Prior to Morgan, courts within this Circuit considered three factors to determine if a party had waived its right to arbitrate: “(1) the time elapsed from when litigation was commenced until the request for arbitration; (2) the amount of litigation to date, including motion practice and discovery; and (3) proof of prejudice.” La. Stadium & Exposition Dist. v. Merrill Lynch, Pierce, Fenner & Smith Inc., 626 F.3d 156, 159 (2d Cir. 2010) (citations omitted). The most important of these factors was prejudice. Id. However, Morgan eliminated the prejudice requirement. The question is – what‘s left?
The ready answer is that if Morgan strips away one out of three factors, then there are two factors left. (I will refer to this as the “stripped-down arbitration standard.“) But as Judge Woods recently pointed out in an insightful decision, Herrera v. Manna 2nd Avenue LLC, No. 20-cv-11026, 2022 WL 2819072, at *7–8 (S.D.N.Y. July 18, 2022), that may be wrong. The waiver test used in this Circuit pre-Morgan was an arbitration-specific test. And as Morgan makes clear, there can be no special arbitration tests that go beyond the requirements of the
The most basic requirement of the common law doctrine of contractual waiver is that there must be a knowing and voluntary surrender of a contractual right. Herrera concisely stated the law:
Waiver requires a clear manifestation of an intent to relinquish [a] known right. Waiver may be established by affirmative conduct or by a failure to act that evinces the intent to abandon the right. But waiver should not be lightly presumed and must be based on a clear manifestation of intent to relinquish a contractual protection. Mere silence, oversight or thoughtlessness in failing to object is insufficient to support an inference of waiver. While such a waiver may be express or implied, the intent to waive must be clearly established and cannot be inferred from doubtful or equivocal acts or language, and the burden of proof is on the person claiming the waiver of the right.
2022 WL 2819072, at *8 (citations and quotations omitted). Applying this standard, neither ADO nor FEI has taken or failed to take any action that rises to the level of a clear manifestation of intent to forego arbitration.
Plaintiff‘s primary basis for alleging waiver as to ADO is that APC LLC has defaulted. But as explained above, that is simply because plaintiff sued a defunct LLC instead of plaintiff‘s employer. No wonder it took awhile for the summons and complaint to get to ADO when
An affidavit from FEI‘s attorney avers that he did not become aware of the arbitration clause in plaintiff‘s employment contract with ADO until July 18, 2022. I take that as true, but it does not tell the whole story of why FEI didn‘t know about it earlier. I have no affidavit from FEI itself, saying, for example, that FEI did not have the arbitration agreement, or that it is not the practice of FEI to receive or retain a copy of an ADO employee‘s contract with ADO, and thus FEI didn‘t know about it. And by wording his affidavit carefully to say he “became aware” of the arbitration agreement on July 18, 2022, FEI‘s attorney has not excluded the possibility that he had the employment agreement well prior to that date but failed to thoroughly review it.
It therefore is possible that somewhere in FEI‘s files, there was a copy of the employment agreement that FEI had received from ADO that FEI should have turned over to its attorney or, if it did, that its attorney should have found and reviewed. However, that would be ordinary negligence. It does not rise to the level of a voluntary relinquishment of FEI‘s right to arbitrate. See Rsch. Frontiers Inc. v. Prelco Inc., No. 18-cv-2939, 2020 WL 6746730, at *5 (E.D.N.Y. Nov. 17, 2020) (“A [contractual] waiver cannot be created by negligence, oversight, or thoughtlessness; instead, it must be proved that a party intentionally or voluntarily waived a contractual right or advantage.“) (cleaned up)). Moreover, even assuming that FEI led plaintiff down a primrose path towards mediation for a couple of months before pulling out, that does not constitute the level of activity that would amount to a voluntary waiver of a known right. See id. (“[S]ilence and inaction do create an implied waiver, where . . . there is proof that there was a voluntary and intentional relinquishment of a known and otherwise enforceable right.“).8
FEI (but not ADO) contends that plaintiff has no standing to pursue her
Plaintiff, in contrast, points to
In other words, under plaintiff‘s view, no employee who has been duly paid as required under the New York Labor Law can maintain a stand-alone action for failure to provide a time-of-hiring notice or wage statements. It is as if the statutory damages for those violations are similar to liquidated damages for willful failure to pay wages, see
This dependent clause argument has some attraction.
However, a closer reading of the statute requires rejection of plaintiff‘s argument. The subsections of
Note that this affirmative defense of full payment of wages is only available in an action brought by the Commissioner. It is not available in an action brought by the employee. If we are going to apply the canon of statutory interpretation that “[a] statute should be construed so that effect is given to all its provisions, so that no part will be inoperative or superfluous, void or
That may be a laudable means of incentivizing employers to provide the required paperwork. But it is not sufficient for standing under Ramirez because it allows recovery by an employee despite the absence of any actual and concrete injury arising from the lack of paperwork.
Plaintiff‘s alternative argument is that Ramirez itself implies that standing will obtain when a plaintiff seeks recovery for “informational injury.” As the Court stated in Ramirez: “The plaintiffs did not allege that they failed to receive any required information. They argued only that they received it in the wrong format.” 141 S. Ct. at 2214. Deprivation of information, plaintiff correctly points out, is exactly the statutory violations at which
However, Ramirez does not mean that any deprivation of information will automatically create standing. Informational injury cannot be a separate category that stands independent from the bedrock requirement of actual and concrete injury. It is easy enough to see where a failure to provide accurate information would lead to injury. Suppose, for example, that a home purchaser makes a down payment on the assumption that she has a great credit rating. Unbeknownst to her, however, her credit report contains inaccurate information that materially disparages her credit to the point where she cannot get a mortgage and so loses both the home and her down payment. That informational injury is obviously sufficient to create standing. But there is
The lack of standing means that the Court does not have subject matter jurisdiction over plaintiff‘s
CONCLUSION
Defendants’ motions to compel arbitration are granted, except as to plaintiff‘s claims under
The remainder of the action is stayed pending any final determination of an arbitral tribunal. The stay shall be implemented by administrative closure of the case, and the case will
Finally, the Clerk of Court is directed to substitute ADO PROFESSIONAL SOLUTIONS, INC. f/k/a Accounting Principals, Inc. as a defendant in this action in place of AJILON PROFESSIONAL STAFFING LLC in the caption of this case.
SO ORDERED.
Brian M. Cogan
U.S.D.J.
Dated: Brooklyn, New York
November 14, 2022