Gilbert v. Indeed, Inc.Gilbert v. Indeed, Inc.
Case Information
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
---------------------------------------------------------------------- X 1/19/2021
:
TAYLOR GILBERT, :
:
Plaintiff, :
: 20-cv-3826 (LJL) -v- : : OPINION AND ORDER
INDEED, INC., et al., :
:
Defendants. :
:
---------------------------------------------------------------------- X
LEWIS J. LIMAN, United States District Judge:
Defendants Indeed, Inc. (“Indeed”), Alexa Wachstein (“Wachstein”), Gabrielle Verbaro (“Verbaro”), and Michelle Lam (“Lam,” and collectively, the “Indeed Defendants”) move to compel arbitration and to stay the action or, in the alternative, to dismiss the claims against them. Defendant Aaron Schwartz (“Schwartz”) moves to dismiss for lack of personal jurisdiction or, in the alternative, to compel arbitration.
For the following reasons, the motion to compel arbitration by the Indeed Defendants is granted and the motion to dismiss for lack of personal jurisdiction by Schwartz is granted.
BACKGROUND
I. Plaintiff’s Allegations
Plaintiff Taylor Gilbert (“Plaintiff” or “Gilbert”) is a Senior Account Executive at Indeed where she has been employed since 2015. Dkt. No. 1 (the “Complaint” or “Compl.”) ¶¶ 35, 40. Indeed is a foreign business corporation organized under the laws of the state of Delaware. Id. ¶ 24. Its principal business is to provide a search engine for job listings that connect prospective employees with employers. Id. ¶ 30. Defendant Schwartz, who no longer works at Indeed, was a manager based in Austin, Texas. ¶¶ 3, 27. Defendant Wachstein was Plaintiff’s supervisor. Id. ¶¶ 6, 26. Defendant Verbaro was a human resources manager at Indeed. Id. ¶¶ 12, 28. Defendant Lam was Plaintiff’s manager until her employment at Indeed ended in March 2019. Id. ¶¶ 10, 29. The individual defendants other than Schwartz worked in the New York office of Indeed. Id. ¶¶ 26, 28-29.
The Complaint tells a brutal story in several parts. The first part relates to the sexual assault and rape of Plaintiff. On July 13, 2015, Plaintiff, then 22 years old, began her employment at Indeed as an Account Executive based in New York City. Id. ¶¶ 34-35. In late July 2015, less than two weeks after she started her job with Indeed, Plaintiff attended a multi-day orientation/training event in Stamford, Connecticut. Id. ¶¶ 3, 44. While she was at the event, Schwartz—who was then a senior employee and an Indeed manager based in Austin, Texas—sexually assaulted and raped her. Id. ¶¶ 3-5, 45, 49-54.
The next day, Gilbert suffered through the rest of the day’s training session. She returned to New York City following the orientation trip on July 24, 2015. Id. ¶ 55. On July 25, 2015, she went to Mount Sinai Beth Israel Hospital and completed a rape kit. Id. ¶ 56. She also told her parents and others about the rape but did not immediately tell her supervisors. Id.
Her abuse did not end with the 2015 rape. In the fall of 2015, a new male hire at Indeed sent Gilbert a snapchat of himself in front of a mirror wearing only a towel. Id. ¶ 66. Gilbert reported this incident to her then-supervisor, Wachstein, who disregarded it. Id. In December 2015, another Indeed employee “hit” on Gilbert over Indeed’s intracompany chat system and tried to solicit her to go to a bar with him. Id. ¶ 68. Also in December 2015, following a company holiday party, another Indeed employee repeatedly commented on Gilbert’s breasts and tried to touch her even as she rebuffed his advances. Id. ¶ 67. That same employee, in February 2016, solicited Gilbert for oral sex. ¶ 69.
After suffering in silence for several months, Gilbert reported the rape to her then- supervisor, Wachstein, in March 2016 after seeing a person whom she believed to be Schwartz in the New York office. Id. ¶¶ 6, 59-60. She also told Wachstein how uncomfortable she felt when men at Indeed continuously “hit on” and sexually assaulted her. Id. ¶ 60. Wachstein acknowledged that Schwartz’s conduct was criminal, that there was proof of rape, that Schwartz may have raped others, and that she (Wachstein) had a duty to report it, but stated that she would not do so. Id. ¶¶ 6, 61-62; Dkt. No. 43-1. Plaintiff also reported the rape to a more senior Indeed employee in the spring/summer of 2016, but Indeed took no action. Compl. ¶ 63.
Instead, Plaintiff’s abuse continued. In July 2017, yet another male Indeed employee pressured Gilbert to have sex with him; she rejected his advances. Id. ¶ 70. In the fall of 2017, at an Indeed-sponsored happy hour, a male Indeed senior account executive told Gilbert she was his “type” and he would date her if he did not already have a girlfriend. Id. ¶ 71. In December 2018, the wife of an Indeed employee told Gilbert that a male Indeed employee at a party had groped her breasts. Id. ¶ 72. In October 2019, Schwartz—still an Indeed employee at the time— sent Gilbert a LinkedIn invitation. Id. ¶ 74. Schwartz then was sent to the New York office where Gilbert was working. Id.
The second part of Plaintiff’s allegations relates to the medical conditions that Plaintiff developed in the aftermath of the rape and Indeed’s reaction to those conditions. Plaintiff alleges that she has suffered from depression, post-traumatic stress disorder, and other physical and psychological illnesses as a result of the rape, Indeed’s failure to take action against Schwartz and decision to promote him and allow him to return to work, and the ongoing sexual harassment and hostile work environment she experienced at Indeed. ¶ 75. Those conditions included: (1) pervasive and severe migraines, id. ¶¶ 76, 78; (2) stroke-like symptoms for which she was admitted to the hospital, id. ¶ 77; (3) hospitalization for difficile bacterium, id. ¶ 79; and (4) positive tests for lupus and antiphospholipid syndrome, id. She did not experience any signs of those ailments prior to the rape. Id. ¶ 83. Gilbert alleges that she needed reasonable accommodations to address her medical conditions, that Defendants Lam and Verbaro and others were aware of the medical conditions, and that she was not only denied reasonable accommodations but was unlawfully discriminated against based on her medical conditions. Id. ¶¶ 80-83.
In the third part of her Complaint, Plaintiff alleges a hostile work environment at Indeed through a pattern and practice of favoring through promotions and other beneficial treatment women who engage in sexual and/or romantic relationships with male colleagues. Id. ¶¶ 85-87. Plaintiff alleges Indeed discriminated against her for her failure to engage in such relationships, her objection to them, and her medical conditions. Id. ¶¶ 88-98. She identifies by pseudonym four specific women who were equally or less qualified than Plaintiff and identifies, sometimes by name, the male employees with whom they had sexual relations; she alleges that they were promoted and given favorable treatment because they, and not Plaintiff, were willing to have sex with male employees at Indeed and did not object to the hostile work environment at Indeed and did not have disabilities. Id. ¶¶ 85-87, 91-92.
Finally, Plaintiff alleges that she was retaliated against, given negative reviews, and denied reasonable accommodations because of her complaints, her refusal to acquiesce to the culture at Indeed, and her medical conditions. ¶¶ 93-96; 99-107.
Plaintiff brings a series of claims against various groups of Defendants. These include
federal law claims against Indeed under: Title VII of the Civil Rights Act of 1964,
She brings state law claims against all Defendants under the New York City Human
Rights Law (“NYCHRL”) for gender harassment and disability/perceived disability
discrimination (“Count III”), New York State Human Rights Law (“NYSHRL”) for gender
harassment and disability discrimination (“Count IV”), and the New York State Equal Pay Law,
She also brings state law claims against Indeed, Wachstein, Verbaro and Lam under the NYSHRL and NYCHRL for retaliation (“Count VII”) [2] , and claims against Schwartz, Wachstein, Verbaro, and Lam under the NYSHRL and NYCHRL for aiding and abetting Indeed’s gender harassment discrimination and retaliation (“Count V”).
Finally, Plaintiff brings state law claims against Schwartz pursuant to
II. The Relevant Arbitration Provisions
Upon commencing her employment with Indeed, on July 12, 2015, Plaintiff signed a document entitled Nondisclosure, Inventions Assignment and Arbitration Agreement (the “Nondisclosure Agreement”). The Nondisclosure Agreement recites certain agreements Plaintiff makes in exchange for consideration, including her employment with Indeed. Those agreements include that she is an at-will employee, that she will not compete with Indeed for a period of time after the end of her employment, provisions with respect to the assignment of any inventions she conceives during the course of her employment, and an arbitration agreement. The arbitration clause states:
The parties hereby agree to submit all disputes I might have against the Company, and all disputes the Company might have against me, to final, binding arbitration to the fullest extent permitted by law. This provision shall be referred to herein as the “ADR Agreement.” The Federal Arbitration Act,9 U.S.C. § 1 et seq. , shall govern the interpretation and enforcement of this ADR Agreement. The statutory limitations period shall apply to any such claim asserted in any arbitration proceeding under this ADR Agreement. Arbitration is commenced for limitations purposes by submitting the matter to the arbitral forum.
Dkt. No. 31-1 § 8.
The arbitration provision lists the claims that are to be covered and not covered: (b) Claims Covered. The disputes covered by this ADR Agreement shall include any claims, including but not limited to claims known or accrued as of the date of execution of this Agreement, under applicable local, state or federal law that any current or former employee might have against the Company that arise out of and/or are ancillary to the employment relationship including, but not limited to, all claims related to . . . promotion . . . discipline; job placement . . . claims of unlawful harassment and/or discrimination including, but not limited to, claims based on . . . sex . . . disability . . . or any other protected class (including claims under Title VII of the Civil Rights Act of 1964 . . . the Americans with Disabilities Act . . . and any other local, state or federal law that deals with employment or employment discrimination . . . any other federal, state, or local law that deals with wages or hours . . . retaliation . . . violation of any federal, state, local or other governmental law, statute, regulation or ordinance that arises out of or is ancillary to the employment relationship. The disputes covered by this policy shall also include any claims an employee might have against any officer, director, employee or agent of the Company, or any of the Company’s subsidiaries, divisions and affiliates, if that claim in any way arises out of or is ancillary to the employment relationship. The disputes covered by this policy shall also include any claims under applicable local, state or federal law that the Company might have against the employee that arise out of or are ancillary to the employment relationship. Both the Company and the employee shall be precluded from bringing or raising in court or another forum any dispute that was or could have been submitted to binding arbitration.
(c) Claims Not Covered. Claims not covered by this ADR Agreement include those the employee might have for workers’ compensation benefits, unemployment benefits, and claims arising under any of the Company’s employee welfare benefit and pension plans (i.e., ERISA claims). Also not covered by this ADR Agreement are claims by either party for injunctive or equitable relief to the extent required to prevent irreparable harm, including but not limited to claims under Sections 2, 3, 4 and 7 of this Agreement.
Id. § 8(b)-(c).
The Nondisclosure Agreement requires a party who resists arbitration to pay the other side’s costs, expenses and attorney’s fees in connection with the motion to compel arbitration if the court nonetheless compels arbitration:
(d) Failure to Comply. With respect to any claim required to be submitted to arbitration under this ADR Agreement, should either the Company or the employee institute any legal action or administrative proceeding against the other by any method other than by arbitration and upon notice refuses to proceed in arbitration, then the responding party shall be entitled to recover from the initiating party all costs, expenses, and attorneys’ fees incurred as a result of such action, including all costs, expenses, and attorneys’ fees incurred in connection with a motion or petition to compel arbitration. lf as a result of such a motion or petition, a court compels arbitration pursuant to this ADR Agreement, then the party seeking that order shall be entitled to its attorney’s fees and costs incurred in pursuing that order or petition and it is agreed that the court issuing the order or petition shall have jurisdiction to award such fees and costs immediately following the issuance of that order or petition and before the commencement or completion of the arbitration, and without regard to whether the party that successfully compels arbitration ultimately prevails on the claims to be arbitrated. § 8(d).
Finally, the end of the Nondisclosure Agreement contains the following language in bold and all capitals:
I ACKNOWLEDGE THAT I HAVE CAREFULLY READ THIS AGREEMENT, AND I UNDERSTAND AND AGREE TO ITS TERMS. I HAVE ENTERED INTO THIS AGREEMENT VOLUNTARILY, AND HAVE NOT RELIED UPON ANY PROMISES OR REPRESENTATIONS OTHER THAN THOSE CONTAINED HEREIN. I ALSO ACKNOWLEDGE THAT I HAVE HAD THE OPPORTUNITY TO CONSULT WITH AN ATTORNEY IF I SO CHOOSE REGARDING THIS AGREEMENT.
I UNDERSTAND I AM GIVING UP MY RIGHT TO A JURY TRIAL BY ENTERING INTO THIS AGREEMENT.
I UNDERSTAND I AM GIVING UP MY RIGHT TO COMMENCE OR PARTICIPATE IN A CLASS OR COLLECTIVE ACTION OR OTHER FORM OF REPRESENTATIVE ACTION AND INSTEAD AGREE TO ARBITRATE ANY EMPLOYMENT-RELATED DISPUTE ON AN INDIVIDUAL BASIS ONLY. at 5.
Also on July 12, 2015, Plaintiff signed the “Performance Unit Agreement” under Indeed’s Long Term Incentive Plan Agreement (“2015 Performance Unit Agreement”) that granted Gilbert performance units in the form of long-term cash award opportunities (“LTIP units”). Plaintiff signed a Performance Unit Agreement each year from 2015 to 2019. In exchange for LTIP units, Gilbert agreed to abide by and be bound by the terms of the Nondisclosure Agreement. For example, the 2015 Performance Unit Agreement states in bold:
The grant of the 2015 Performance Units and payment of the 2015 Performance Units (whether vested or unvested) are subject to your execution and delivery to the Company of this Agreement, the execution and delivery to the Company of the NDA if you have not previously signed the NDA, and your continued compliance with the terms and conditions of the NDA. By your signature below, you hereby acknowledge that a copy of the Plan has been made available to you via the company’s internal website and you hereby agree to abide by the terms of and conditions of this Agreement, the Plan and the NDA.
Dkt. No. 31-1.
The Performance Unit Agreement signed by Gilbert in 2019 (the “2019 Performance Unit Agreement”) provides in nearly identical language:
The grant of the 2019 Performance Units and payment of the 2019 Performance Units (whether vested or unvested) are subject to your execution and delivery to the Company of this Agreement, the execution and delivery to the Company of the Confidentiality, Proprietary Rights, Restrictive Covenants, and Arbitration Agreement (“Confidentiality Agreement”) if you have not previously signed the Confidentiality Agreement, and your continued compliance with the terms and conditions of the Confidentiality Agreement. By your signature below, you hereby acknowledge that a copy of the Plan has been made available to you via the company’s internal website and you hereby agree to abide by the terms of and conditions of this Agreement, the Plan and the Confidentiality Agreement.
Dkt. No. 31-5.
On May 3, 2019, Gilbert signed an updated version of the Nondisclosure Agreement entitled the Confidentiality, Proprietary Rights, Restrictive Covenants, and Arbitration Agreement (the “Confidentiality Agreement”). The second paragraph of Section 11 of the Confidentiality Agreement provides:
The parties hereby agree to submit all disputes Employee might have against the Company, and all disputes the Company might have against Employee to final, binding arbitration to the fullest extent permitted by law. This provision shall be referred to herein as the “ADR Agreement.” The Federal Arbitration Act,9 U.S.C. § 1 et seq. , shall govern the interpretation and enforcement of this ADR Agreement. The statutory limitations period applicable to a claim asserted in a civil action shall apply to any such claim asserted in any arbitration proceeding under this ADR Agreement. Arbitration is commenced for limitations purposes by submitting the matter to the arbitral forum (i.e., JAMS or AAA as described in paragraph (e) below).
Id. § 11.
The “Claims Covered” is given the same broad definition and the “Claims Not Covered” the same narrow definition as in the Nondisclosure Agreement. It also contains the same “Failure to Comply” provision, which is almost identical in substance, except for its cross- reference to paragraph 11(c) of the Confidentiality Agreement:
(d) Failure to Comply. With respect to any claim required to be submitted to arbitration under this ADR Agreement, should either the Company or the employee institute any legal action or administrative proceeding (except those excluded under paragraph 11(c)) against the other by any method other than by arbitration, and upon notice refuse to proceed in arbitration, then the responding party shall be entitled to recover from the initiating party all costs, expenses, and attorneys’ fees incurred in connection with a motion or petition to compel arbitration. lf as a result of such a motion or petition, a court compels arbitration pursuant to this ADR Agreement, then the party seeking that order shall be entitled to its attorney’s fees and costs incurred in pursuing that order or petition, and it is agreed that the court issuing the order or petition shall have jurisdiction to award such fees and costs immediately following the issuance of that order or petition and before the commencement or completion of the arbitration, and without regard to whether the party that successfully compels arbitration ultimately prevails on the claims to be arbitrated.
Id. § 11(d).
The Confidentiality Agreement contains a choice of law provision providing for Texas law:
This Agreement and any issues regarding its enforceability or validity shall be governed by and construed in accordance with the laws of the State of Texas, without regard to the conflict of law principles thereof. Employee acknowledges that, because Company’s operations are based in Texas and Employee will have regular interaction with Company representatives based in Texas, it is appropriate and reasonable for a dispute concerning this Agreement to be determined in accordance with the laws of the State of Texas.
Id. § 18.
Finally, the Confidentiality Agreement contains a similar acknowledgement at the end and next to the employee’s signature.
III. EEOC Complaint and Subsequent Indeed Agreements
On January 24, 2020, Plaintiff filed a charge of discrimination with the New York City Commission on Human Rights (“NYCCHR”) and cross-filed the complaint with the Equal Employment Opportunity Commission (“EEOC”). Compl. ¶ 19. The NYCCHR issued a notice of administrative closure on March 6, 2020, and the EEOC issued a Right to Sue Letter on May 5, 2020. ¶ 20.
On March 31, 2020, Indeed sent to Plaintiff the proposed Performance Unit Agreement under Indeed’s Long-Term Incentive Plan Agreement (the “2020 Performance Unit Agreement”), which contained the same language as in the 2019 Performance Unit Agreement and required Plaintiff to reaffirm the Confidentiality Agreement. Dkt. No. 43-2. Indeed requested an execution date of May 31, 2020. Dkt. No. 43-4. On April 22, 2020, Plaintiff sent an email to Verbaro in which she rejected the 2020 Performance Unit Agreement:
I reject the 2020 Performance Unit Agreement because I do not consent to any mandatory arbitration provision in the Confidentiality, Proprietary Rights, Restrictive Covenants, and Arbitration Agreement. As previously indicated by my counsel, I fully intend to pursue my rape/sexual harassment, discrimination, hostile work environment, failure to accommodate, unequal pay, retaliation and other claims and allegations raised in my New York City Commission of Human Rights Complaint in court. I am not willing to sign any new agreements that purport to inhibit this process. Additionally, my understanding is that the arbitration provision violates New York law.
Dkt. No. 43-3.
By letter from Plaintiff’s counsel to Indeed, dated April 22, 2020, Plaintiff refused to sign the agreement because of the mandatory proposed arbitration provision. The letter recites in part:
We are aware that Indeed, Inc. (“Indeed”) has recently offered a 2020 Performance Unit Agreement to Ms. Gilbert as part of Indeed’s Long Term Incentive Plan (“LTIP”), and that the 2020 Performance Unit Agreement purports to require an acknowledgment to the Confidentiality, Proprietary Rights, Restrictive Covenants, and Arbitration Agreement. Ms. Gilbert has rejected the 2020 Performance Unit Agreement because she does not consent to any purported mandatory arbitration provision in the Confidentiality, Proprietary Rights, Restrictive Covenants, and Arbitration Agreement. As noted on many occasions and in previous correspondence with Indeed, Ms. Gilbert fully intends to pursue in court her rape/sexual harassment, discrimination, hostile work environment, failure to accommodate, unequal pay, retaliation and other claims and allegations raised in her New York City Commission on Human Rights Complaint and in prior demand letters. She will reject all new agreements that would purport to inhibit this process.
Dkt. No. 44-2.
After Plaintiff refused to sign the 2020 Performance Unit Agreement, Indeed did not grant her LTIP units but continued to employ her.
PROCEDURAL HISTORY
Plaintiff initiated this action on May 18, 2020. The Indeed Defendants waived service and were given until July 20, 2020 to respond to the Complaint. Plaintiff and Schwartz stipulated that his response would be due by August 31, 2020.
On July 17, 2020, Plaintiff wrote a letter to the Court, stating that Indeed had demanded that Plaintiff dismiss her Complaint in favor of arbitration and that Indeed had threatened, if Plaintiff did not dismiss her Complaint, that it would file a motion to compel arbitration and seek to enforce the provision of the Confidentiality Agreement requiring Plaintiff to pay for costs and attorneys’ fees in connection with that motion. Dkt. No. 25. Plaintiff requested permission for the parties to litigate the enforceability of the cost and fee issue at the outset. On the same date, the Indeed Defendants filed a motion to compel arbitration, or in the alternative, stay the litigation. Dkt. No. 29.
On July 21, 2020, the Indeed Defendants responded to Plaintiff’s July 17 letter to argue that the Court should not make a preliminary ruling on the fees prior to ruling on the enforceability of the arbitration agreement. Dkt. No. 34. On the same date, the Court denied Plaintiff’s letter motion and stated it would address the issue in connection with the motion to compel. Dkt. No. 25. Briefing by the Indeed Defendants concluded on September 18, 2020.
On August 31, 2020, Schwartz filed a motion to dismiss for lack of personal jurisdiction, or in the alternative, join the Indeed Defendants’ motion to compel. Dkt. No. 47. Briefing by Schwartz concluded on October 13, 2020.
The Court held a hearing on the motions on October 19, 2020. See Dkt. No. 65 (“Hr’g Tr.”). After the hearing, the Indeed Defendants filed a letter with the Court in which they withdrew the request in their motion to recover the costs and attorneys’ fees incurred by them in connection with the motion to compel. Dkt. No. 63. On October 21, 2020, Plaintiff responded in a letter to argue that this waiver was a tactical ploy to salvage the arbitration clause because enforcement of the provision would otherwise render the arbitration clause unenforceable.
LEGAL STANDARDS
I. Motion to Compel Arbitration
“The Second Circuit has recognized that, depending on the facts and arguments
presented, a motion to dismiss based on an arbitration clause may be treated as a motion to
compel arbitration[.]”
Begonja v. Vornado Realty Tr.
,
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.
,
II. Motion to Dismiss under
“A court facing challenges as to both its jurisdiction over a party and the sufficiency of
any claims raised must first address the jurisdictional question” and must dismiss the action
against any defendant over whom it lacks personal jurisdiction.
Lugones v. Pete & Gerry’s
Organic, LLC
,
“[T]he plaintiff bears the burden of showing that the court has jurisdiction over the
defendant.”
Metro. Life Ins. Co. v. Robertson-Ceco Corp.
,
This prima facie showing “must include an averment of facts that, if credited by the
ultimate trier of fact, would suffice to establish jurisdiction over the defendant.”
Dorchester Fin.
Sec.
,
DISCUSSION
I. Indeed Defendants’ Motion to Dismiss and/or Compel Arbitration
The Indeed Defendants move to dismiss on the basis that Plaintiff agreed to arbitrate the claims asserted in this action when she entered into the Nondisclosure Agreement, each of the Performance Unit Agreements between 2015 and 2019, and the Confidentiality Agreement. They also initially asserted that, under the same provisions, they are entitled to attorneys’ fees and expenses in connection with their motion to compel arbitration. [3] Plaintiff does not dispute that her claims would fall within the scope of the arbitration agreement if it were enforceable, but she argues that it is not enforceable. She argues: (1) any prior agreements she made to arbitrate are not enforceable against her by virtue of her refusal to sign the 2020 Performance Unit Agreement; (2) New York State law makes it unlawful for an employer to require an employee such as Plaintiff to agree to arbitrate a statutory claim of discrimination; and (3) the arbitration agreement is otherwise unconscionable, including because it contains a provision requiring attorney-fee shifting when a court grants a motion to compel arbitration even when the employee has a meritorious discrimination claim but not when the court denies such a motion. The Court takes these arguments in turn.
A. Agreement to Arbitrate
“This first step of the Court’s inquiry is only a determination of whether there is an
agreement ‘to arbitrate any set of claims.’”
Qazi v. Stage Stores, Inc.
,
There is no real dispute that the parties agreed to arbitration when they signed the
Nondisclosure Agreement, each of the Performance Unit Agreements, and the Confidentiality
Agreement.
See Kalenga v. Irving Holdings, Inc.
,
Plaintiff’s argument rests on the assertion that the obligations of the Confidentiality Agreement do not have continuing effect on their own terms and that those obligations need to be reaffirmed on an annual basis to be binding on her in future periods. She points to Indeed’s the laws of the state of Texas. Plaintiff disputes that this choice of law provision applies, but only because Plaintiff argues that the entire Confidentiality Agreement itself, as opposed to the choice of law provision specifically, has no force or effect. Plaintiff agrees that, otherwise, the analysis is the same under Texas and New York law. See Dkt. No. 32 at 8 nn.5-6. The Indeed Defendants state that Texas law applies, but that the arbitration clause is binding under either Texas or New York law. See Dkt. No. 42 at 12 n.5, 14 n.6. The parties, and the Court, thus agree that as relevant here, Texas and New York law is identical in all material respects. request every year that Plaintiff resign a Performance Unit Agreement to receive LTIP units and continued employment. Id. at 13-14. Plaintiff asserts: “This pattern of practice plainly demonstrates that the parties intended for a new arbitration proposal to be agreed upon each year, and that a rejection of the proposal in any subsequent year would cut off any previously agreed upon arbitration provision and any obligation by Indeed to provide Ms. Gilbert with additional LTIP units.” Id. at 13.
The argument misreads the agreement and Texas law. The Confidentiality Agreement,
signed by Plaintiff, addresses both “claims known or accrued as of the date of execution of th[e]
[Confidentiality] Agreement” as well as those claims that accrue or arise during the term of the
Confidentiality Agreement. Dkt. No. 31-5 ¶ 11(b). The Confidentiality Agreement further
provides: “The parties hereby agree that, this Agreement shall not be modified, amended,
superseded or terminated in whole or in part except in a writing signed by the parties. Any
subsequent change or changes in Employee’s duties, salary, or compensation will not affect the
validity or scope of this Agreement.”
Id.
¶ 13. Plaintiff has not submitted such “a writing signed
by the parties” that “modified, amended, superseded or terminated” the Confidentiality
Agreement and its arbitration provision. To the contrary, the Confidentiality Agreement
continued to be in effect throughout the time the claims asserted in this action accrued and was
reaffirmed by Plaintiff each year. Thus, the terms of that agreement and Plaintiff’s obligation to
arbitrate remain binding on her as to all of the claims asserted in this action.
See Gonzalez v.
Denning
,
Plaintiff could not unilaterally relieve herself of the obligations she has to arbitrate by refusing to sign the Confidentiality Agreement in connection with the 2020 Performance Unit Agreement. In fact, the language of the 2020 Performance Unit Agreement cuts the other way. The 2020 Performance Unit Agreement addressed the grant and payment of the LTIP units. It conditioned the grant and payment of those interests on three requirements: (1) the execution and delivery of the 2020 Performance Unit Agreement, (2) execution and delivery of the Confidentiality Agreement “if [Plaintiff] ha[d] not previously signed the Confidentiality Agreement,” (3) and Plaintiff’s continued compliance with the Confidentiality Agreement. Dkt. No. 43-2. Thus, the 2020 Performance Unit Agreement, like the similar agreements that preceded it, reflects the parties’ understanding that if Plaintiff had previously signed the Confidentiality Agreement, its terms would remain in effect and there would be no need for Plaintiff to resign it. Plaintiff’s refusal to resign the Confidentiality Agreement in connection with the 2020 Performance Agreement thus is of no legal significance. Plaintiff was bound to the terms of the Confidentiality Agreement by her prior signature on that agreement. She was not required to resign the Confidentiality Agreement in 2020 and her refusal to do so thus cannot relieve her of her obligations under that prior agreement.
Plaintiff’s refusal to sign the 2020 Performance Unit Agreement could be considered a
repudiation by Plaintiff of the Confidentiality Agreement, i.e., a statement to Indeed of Plaintiff’s
intent no longer to abide by the terms of the Confidentiality Agreement. But, even then, that
refusal would not relieve Plaintiff of her obligation to arbitrate this dispute. One party to an
agreement cannot unilaterally relieve herself of her contractual obligations. In the event of a
repudiation by Plaintiff, Indeed—as the non-breaching party—would have the option to rescind
the Confidentiality Agreement or enforce it and hold Plaintiff to her obligation to arbitrate. The
contract would not cease to exist.
See Gonzalez
,
Rightnour v. Tiffany & Co.
,
Unlike in Rightnour , Plaintiff here previously signed agreements providing for arbitration, including the Nondisclosure Agreement in 2015 and its updated version, the Confidentiality Agreement, in 2019. The Confidentiality Agreement provided for the continuing effect of the arbitration provision, and the Performance Unit Agreements did not change this effect but rather addressed the grant of LTIP units.
The result is the same under Texas law. Plaintiff points to
Adcock v. Five Star
Rentals/Sales, Inc.
,
There is no similar conduct on the part of Indeed here. Indeed did not waive or forego its rights under the Confidentiality Agreement when Plaintiff rejected the 2020 Performance Unit Agreement, nor has it participated in the litigation without timely raising the issue of arbitration. It has early, repeatedly, and aggressively insisted on its rights to have this dispute resolved in an arbitral forum, making clear its view that Plaintiff was bound by the terms of that agreement and was required to arbitrate. It thus cannot be deemed to have waived or acquiesced to litigation and is not estopped from relying on its contractual rights.
B. Enforceability Under New York Law of an Agreement to Arbitrate Statutory Discrimination Claims
Plaintiff argues that to the extent the arbitration clause is read to cover her statutory discrimination claims, it is null and void and cannot be enforced under Section 7515 of the C.P.L.R. The Indeed Defendants argue that whether Section 7515 applies goes to the question of arbitrability. In their view, the parties agreed to have the arbitrators decide whether the arbitration clause is null and void as applied to Plaintiff’s discrimination claims. If they decide that it is null and void, the case presumably would be returned to this Court. Alternatively, the Indeed Defendants argue that if this Court reaches the issue, Section 7515 does not provide grounds for invalidating the arbitration clause because it is preempted by the Federal Arbitration Act (“FAA”).
The Court rejects Plaintiff’s first argument. The “questions of arbitrability,” which are
reserved for the arbitrators under the provisions to which Plaintiff agreed, concern “certain
gateway matters, such as ‘whether the parties are bound by a given arbitration clause’ or
‘whether an arbitration clause in a concededly binding contract applies to a particular type of
controversy.’”
Wells Fargo Advisors, LLC v. Sappington
,
The Court accepts the Indeed Defendants’ second argument.
Section 7515(b)(i) provides: “Except where inconsistent with federal law, no written
contract, entered into on or after the effective date of this section shall contain a prohibited
clause as defined in paragraph two of subdivision (a) of this section.”
Section 2 of the FAA provides that “[a] written provision in . . . a 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.”
The Supreme Court has held, in a ruling binding on this Court, that the saving clause
“permits agreements to arbitrate to be invalidated by ‘generally applicable contract defenses,
such as fraud, duress, or unconscionability,’ but not by defenses that apply only to arbitration or
that derive their meaning from the fact that an agreement to arbitrate is at issue.”
AT&T Mobility
LLC v. Concepcion
,
The Supreme Court has also held that “Section 2 ‘declare[s] a national policy favoring
arbitration’ of claims that parties contract to settle in that manner” which “foreclose[s] state
legislative attempts to undercut the enforceability of arbitration agreements” so that “[t]he FAA’s
displacement of conflicting state law is ‘now well-established,’ and has been repeatedly
reaffirmed.”
Preston v. Ferrer
,
It follows from these principles that New York State cannot exempt Plaintiffs’ federal
employment discrimination and state law claims from mandatory arbitration under the FAA.
Congress did not intend that discrimination claims be exempted from the FAA or its requirement
that arbitration agreements requiring private dispute resolution be enforced “save upon such
grounds as exist at law or in equity for the revocation of any contract.”
The same conclusion also follows for Plaintiffs’ state and city statutory claims. Claims
under both federal and state and city discrimination laws generally can be the subject of
mandatory arbitration.
See, e.g.
,
Ragone v. Atl. Video at Manhattan Ctr.
,
With respect to the power of the states, the state statutory claims in
Southland
are
materially indistinguishable from the state and city statutory claims here. The Supreme Court
has held that Congress has the power to compel arbitration in the employment context just as it
has in the general commercial context.
See E.E.O.C. v. Waffle House, Inc.
,
The Court does not reach this conclusion lightly. Justice Ginsburg has described
As an original matter, there is little doubt that the 1925 Congress that passed the FAA
could never have imagined it being applied to preclude litigation of state or city statutory claims
that the state or city intended be litigated in a public forum.
Cf. Zarda v. Altitude Express, Inc.
,
At the same time, both today and in 1925, it was generally understood that the Commerce
Clause power did not extend to such items as purely intrastate gender-motivated violence. Such
matters fall within the police powers of the states.
See United States v. Morrison
,
But that all appears to be water under the bridge. Congress has held that arbitration
agreements are enforceable “save upon such grounds as exist at law or in equity for the
revocation of any contract,”
The contrary decision by the state supreme court in
Newton v. LVMH Moët Hennessy
Louis Vuitton Inc.
,
Plaintiff also argues that the FAA does not apply to her claims because they do not arise
out of “a transaction involving commerce” under
Plaintiff’s argument can be quickly addressed; it asks the wrong question. Under the
plain language of Section 2 of the FAA, the relevant question is not whether
the claim
arises
from a transaction involving commerce, but rather whether
the contract
containing the
arbitration clause “evidenc[es] a transaction involving commerce.”
The contract containing the arbitration clause here manifestly evidences a transaction
involving or affecting commerce. In
Allied-Bruce
, the Supreme Court held that a termite
protection contract between plaintiffs located in Alabama and the local Alabama office of a
defendant, a multistate firm, “evidence[d] a transaction in commerce” because, in addition to the
multistate nature of the defendant, the materials used in connection with efforts to carry out the
contract came from outside Alabama.
Allied-Bruce
,
Here too, Plaintiff is located in New York and Indeed is a Delaware corporation with
headquarters in Texas, offices in New York and Texas, and employment training in at least New
York and Connecticut. The employment contract also “relates to a ‘general practice’ involving
or affecting commerce,” i.e., the employment of persons.
Simeon v. Domino’s Pizza LLC
, 2019
WL 7882143, at *3 (E.D.N.Y. Feb. 6, 2019) (employment contract for pizza delivery drivers
affected commerce);
see Waffle House
,
C. Unconscionability
“[Q]uestions of contractual validity relating to the unconscionability of [an] arbitration
agreement must be resolved first, as a matter of state law, before compelling arbitration pursuant
to the FAA.”
Cap Gemini Ernst & Young, U.S., L.L.C. v. Nackel
,
Texas recognizes both substantive and procedural unconscionability.
See In re Olshan
Found. Repair Co., LLC
,
1. Substantive Unconscionability Plaintiff argues that the arbitration clause, read to address the claims she makes in this case, is unconscionable because it violates public policy. Plaintiff also argues that, even if Indeed has now decided not to enforce it, the fee-shifting provision renders the arbitration clause unenforceable.
a. Public Policy Plaintiff argues that the arbitration clause is substantively unconscionable because: (1) there is a New York and national public policy against mandatory arbitration of sexual harassment and discrimination claims and requiring private arbitration of rape and related sexual harassment claims would create a dangerous precedent by preventing other employees from knowing of the perpetrator; and (2) the arbitration clause was one-sided in favor of Indeed.
“Whether a contract is contrary to public policy or unconscionable at the time it is formed
is a question of law.”
In re Poly-Am., L.P.
,
The policy concerns raised by Plaintiff and by those opposing mandatory arbitration of
sexual harassment claims are legitimate and weighty. There is a public cost to forcing those who
have been victimized by sexual assault to raise those claims only in a private arbitral forum and
denying them a public forum in which to air their grievances. That cost can be measured both in
the specific and in the general. As Plaintiff notes, private arbitration might deprive those who
are at risk from a sexual predator of the information necessary or helpful to protect themselves.
It also can have the effect of hiding from public view the extent of a problem of general societal
concern.
See, e.g.
,
Murphy v. Glencore Ltd.
,
The Supreme Court has held that mandatory arbitration of an ADEA discrimination claim
does not prevent a party from vindicating his or her rights, explicitly rejecting the argument that
such arbitration can render an arbitration clause unconscionable.
Gilmer
,
Plaintiff’s arguments as to state law and public policy as a means for invalidating the
arbitration clause as unconscionable also “do not change the fact that [Plaintiff] entered into a
valid arbitration agreement which explicitly covered claims” brought here.
Chatziplis v.
PriceWaterhouseCoopers LLP
,
In
Marmet
, the Supreme Court reversed a decision by the West Virginia court that held
the FAA did not preempt the “state public policy against predispute arbitration agreements that
apply to claims of personal injury or wrongful death against nursing homes.”
Marmet Health
Care Ctr., Inc. v. Brown
,
As to Plaintiff’s second set of arguments under substantive unconscionability, the test is
“whether, given the parties’ general commercial background and the commercial needs of the
particular trade or case, the clause involved is so one-sided that it is unconscionable under the
circumstances existing when the parties made the contract.”
In re FirstMerit Bank
, 52 S.W.3d at
757;
see also In re Poly-Am.
,
Contrary to Plaintiff’s assertion, the arbitration clause is not one-sided as it requires each party to “submit all disputes Employee might have against the Company, and all disputes the Company might have against Employee to final, binding arbitration to the fullest extent permitted by law. Dkt. No. 31-5 § 11. Thus, if Indeed had a claim against Plaintiff, whether for breach of her duties or any other misconduct, it would be required to arbitrate. It would be denied a public forum. The fact that the arbitration clause is invoked because it is Plaintiff who has a claim against Indeed and not Indeed that has a claim against Plaintiff does not make the clause unenforceable. The enforceability of the arbitration clause thus does not turn on whether the employer would ever have a discrimination and sexual harassment claim against the employee. It is mutual and two-sided because Indeed might have other disputes with its employees and would be required to arbitrate those just as Plaintiff is required to arbitrate her disputes with Indeed.
Plaintiff also argues that because she was required to sign the Confidentiality Agreement in 2019, four years after her rape, she was denied the right to proceed in court on her pending (describing Stolt-Nielsen and Concepcion as “reject[ing] the idea that public policy behind state law could be used either to interpret the parties’ intent or to find an arbitration clause unconscionable”).
sexual harassment claim.
Id.
But the case on which Plaintiff relies,
Brennan
, is distinguishable.
The court there held that the arbitration clause was substantively unconscionable because of two
provisions, the combination of which made the arbitration clause unreasonably favorable to the
employer: First, the contract allowed the employer (but not the employee) to modify its terms
unilaterally at any time thus binding the employee to a contract he or she may never have seen;
and second, it denied the plaintiff the right to proceed in court on a pending sexual harassment
claim she had against the company.
See Brennan v. Bally Total Fitness
,
b. “Failure to Comply” Provision Plaintiff argues that the “Failure to Comply” provision in the arbitration agreement is substantively unconscionable because it affects her substantive rights under Title VII to recover attorneys’ fees as the prevailing policy.
The “Failure to Comply” provision provides that should either Indeed or the employee initiate a litigation or administrative proceeding with respect to any claim required to be submitted to arbitration and thereafter refuse to proceed to arbitration, the responding party is entitled to recover from the initiating party all costs, expenses, and attorneys’ fees incurred in connection with a motion or petition to compel arbitration, regardless of the outcome of the motion or petition. Dkt. No. 31-5 § 11(d). It also provides that if the court compels arbitration, the party seeking that order is entitled to its attorney’s fees and costs incurred in pursuing that order or petition. The provision is mutual in the sense that it applies equally to Indeed and to the employee if either is the initiating party. § 11(e)(5). But it is not neutral with respect to arbitration. A party who seeks arbitration is entitled to its costs, fees and expenses if it prevails on the motion to compel (and maybe even if it does not). A party who resists arbitration and desires to litigate is not entitled to its costs, fees or expenses even if that party prevails and the court determines the matter should not be arbitrated.
Plaintiff’s opposition to arbitration can be understood to raise two separate arguments:
(1) under federal law, that the agreement to arbitrate is not enforceable since the terms of the
agreement deprive Plaintiff of statutory remedies to which she would have been entitled if the
case were litigated in federal court; and (2) under state law, the agreement is substantively
unconscionable because it precludes Plaintiff from enforcing her rights in arbitration.
See
Ragone
,
The Supreme Court has held that “statutory claims may be the subject of an arbitration
agreement,” so long as the arbitration agreement preserves the ability of the plaintiff to pursue
the statutory remedies in arbitration that she would be permitted to pursue in court.
Id.
at 125
(quoting
Gilmer
,
Thus, the Second Circuit affirmed the district court’s ruling compelling arbitration of an
employment dispute in
Ragone
only “with something less than robust enthusiasm” and only
because the defendant had waived provisions in the arbitration agreement that awarded attorneys
fees to the prevailing party and that significantly shortened the statute of limitations. The court
noted that a court will compel arbitration “only if it is clear that ‘the prospective litigant
effectively may vindicate its statutory claim in the arbitral forum,’”
id.
at 125 (quoting
Mitsubishi
,
Although the arbitration clause here is not identical to the clause in
Ragone
, the reasoning
of
Ragone
applies by extension here. There is no reason to believe that Congress intended for a
plaintiff who takes an ultimately losing but not unreasonable position with respect to the forum
in which to bring suit to be subject to an attorneys’ fees award, just as Congress does not impose
such fees on a plaintiff who takes any other reasonable but ultimately unsuccessful legal or
factual position.
[13]
Plaintiff brought her claim under Title VII here because the statute gave her a
right to do so. She filed an EEOC complaint and there is no argument that she did not exhaust
her administrative remedies. The attorneys’ fees provisions of Title VII were enacted “broadly,
to encourage individuals injured by . . . discrimination to seek judicial relief.”
Newman v. Piggie
Park Enters., Inc.
,
The effect, under the “Failure to Comply” provision, of an order compelling arbitration of
Plaintiff’s Title VII statutory rights and remedies under Title VII is every bit as great in kind, if
not in magnitude, as under the arbitration agreement in
Ragone
. Under
Christiansburg
, Plaintiff
is entitled to attorneys’ fees if she prevails in this litigation. But, under the provision, if she loses
in this Court on the motion to compel, she will have to pay her adversary’s fees, not because her
claims or her legal positions are “frivolous, unreasonable, or groundless” (on their face, they are
not), but because she has not won. The fees she will have to pay presumably may not be as large
as those in
Ragone
(which involved fees for litigating the claim on the merits), but the insult to
her statutory rights are every bit as great. Congress’s objective “to encourage litigants injured by
. . . discrimination to seek judicial relief,”
Piggie Park
,
Plaintiff’s argument to resist arbitration here on these grounds, however, fails for the
same reason that the claim of the plaintiff in
Ragone
failed. The
Ragone
court declined to find
the arbitration agreement unenforceable because defendant had waived the enforcement of its
problematic portions. Plaintiff “herself ha[d] not been chilled in asserting her Title VII rights.”
Ragone
,
Second, Plaintiff argues that the provision makes the arbitration provision substantively
unconscionable as a matter of Texas state law. “Arbitration provisions relating to federal
statutory claims are not enforceable ‘when a party is forced to forgo the substantive rights
afforded by the statute,’ as opposed to merely ‘submit[ting] to resolution in an arbitral, rather
than a judicial, forum.’”
Coronado v. D.N. W. Hous., Inc.
,
Once again, however, the combination of
Ragone
and the Indeed Defendants’ waiver of
the attorney fee provision are fatal to Plaintiff’s argument. “Because unconscionability is an
equitable defense to the enforcement of harsh or unreasonable contract terms, a party cannot
complain when the defendant through its waivers declines to enforce any potentially
unconscionable term.”
Ragone
,
Moreover, the Confidentiality Agreement contains a severability provision: “If one or more of the provisions in this Agreement are deemed void or voidable under applicable law, then the remaining provisions will continue in full force and effect.” Dkt. No. 31-5 § 14. Although that provision is not unique to the arbitration clause but constitutes a separate section of the Confidentiality Agreement as a whole, there is no doubt that it applies to the arbitration clause and reflects the parties’ intent to preserve any unobjectionable provisions of the arbitration clause even if portions of that clause are objectionable: it refers to “one or more of the provisions” in the Confidentiality Agreement, which would include the arbitration clause.
Under Texas law, “[a]n illegal or unconscionable provision of a contract may generally
be severed so long as it does not constitute the essential purpose of the agreement.”
Venture
Cotton Co-op. v. Freeman
,
The essential purpose of the Confidentiality Agreement is three-fold: it requires
confidentiality, prohibits the use or disclosure of proprietary information, and refers covered
claims to arbitration. All of those interests are satisfied without the “Failure to Comply”
provision. The Confidentiality Agreement still ensures confidentiality as to the subjects covered
by it; Plaintiff is still subject to confidentiality requirements even if she brings litigation or
litigates her right to bring an action in court. She still is prohibited from using or disclosing
proprietary information improperly. Finally, “Covered Claims” will be referred to arbitration if
required by the FAA or state law. It is not necessary also to charge Plaintiff with Indeed’s costs
and expenses in order to satisfy those interests. Because the arbitration provision can stand
without the “Failure to Comply” provision, any defect in the “Failure to Comply” provision does
not require the Court also to strike the arbitration provision.
See Hadnot v. Bay, Ltd.
, 344 F.3d
474, 478 (5th Cir. 2003) (“The purpose of the arbitration provision is to settle any and all
disputes arising out of the employment relationship in an arbitral forum rather than a court of
law. Even with its unlawful limitation on the types or permissible damage awards lifted . . . the
arbitration clause remains capable of achieving this goal.”);
see also Ragone,
2. Procedural Unconscionability
Plaintiff further argues that the Confidentiality Agreement is also procedurally
unconscionable because she had no opportunity to negotiate her employment documents or to
opt-out from the arbitration clause, and she did not have counsel when reviewing the documents
nor did Indeed advise her of
Plaintiff’s argument regarding procedural unconscionability fails as well. To find an
agreement procedurally unconscionable, “the circumstances surrounding the negotiations must
be shocking.”
Delfingen
,
A “take it or leave it” contract does not render an arbitration clause unconscionable. See
In re Halliburton Co.
,
D. Arbitrability
Finally, the Indeed Defendants argue that the dispute falls within the scope of the
arbitration clause because it delegated questions regarding arbitrability to the arbitrator. The
Court therefore must determine whether a court or an arbitrator should decide if the dispute falls
within the scope of the agreement to arbitrate and whether the dispute does fall within the
scope—the question of arbitrability.
See AT & T Techs., Inc. v. Commc’ns Workers of Am.
, 475
U.S. 643, 648-50 (1986). If the parties evidenced a “clear and unmistakable” intent to submit the
dispute to an arbitrator, then the Court shall delegate the third question to the arbitrator.
Henry
Schein, Inc. v. Archer & White Sales, Inc.
,
Under the arbitration clause in the Confidentiality Agreement, the question of whether
the dispute should be arbitrated falls within the power of the arbitrators to decide. “Where the
arbitration clause is broad, ‘there arises a presumption of arbitrability’ and arbitration of even a
collateral matter will be ordered if the claim alleged ‘implicates issues of contract construction or
the parties’ rights and obligations under it.’”
Louis Dreyfus Negoce S.A. v. Blystad Shipping &
Trading Inc.
,
The arbitration clause covers “any claims, including but not limited to claims known or
accrued as of the date of execution of this Agreement, under applicable local, state or federal law
that any current or former employee might have against the Company that arise out of and/or are
ancillary to the employment relationship.” Dkt. No. 31-5 § 11(b). There is “clear and
unmistakable evidence” that the arbitration clause delegates the question of arbitrability to the
arbitrator.
Henry Schein
,
Moreover, the arbitration clause explicitly incorporates the rules under Judicial Arbitration and Mediation Services, Inc. (“JAMS”), or, if no JAMS office serves the venue where the arbitration is to take place, under the American Arbitration Association (“AAA”). Dkt. No. 31-5 § 11(e). JAMS Rule 11(b) provides that “the Arbitrator has the authority to determine . . . arbitrability issues as a preliminary matter.” Dkt. No. 32 at 12. The AAA Rules similarly state: “[If a] party . . . object[s] to the jurisdiction of the arbitrator or to the arbitrability of a claim . . . , [t]he arbitrator may rule on such objections as a preliminary matter or as part of the final award.”
The arbitration clause thus vests in the arbitrator the decision whether this dispute falls
within the scope of the arbitration clause. “[A] signatory to a contract containing an arbitration
clause and incorporating by reference the AAA Rules” may not “disown its agreed-to obligation
to arbitrate all disputes, including the question of arbitrability.”
Contec Corp. v. Remote Sol.,
Co., Ltd.
,
Accordingly, the motion to compel arbitration is granted. Given the Court’s decision to refer the parties to arbitration, the motion to dismiss for failure to state a claim is denied as moot. II. Schwartz’s Motion to Dismiss and/or Compel Arbitration
Schwartz moves to dismiss the complaint against him pursuant to
A. Personal Jurisdiction
New York’s general jurisdiction statute provides for jurisdiction over “persons, property,
or status as might have been exercised heretofore.”
New York’s specific jurisdiction statute states that “a court may exercise personal jurisdiction over any non-domiciliary, or his executor or administrator, who in person or through an agent”:
1. transacts any business within the state or contracts anywhere to supply goods or services in the state; or
2. commits a tortious act within the state, except as to a cause of action for defamation of character arising from the act; or
3. commits a tortious act without the state causing injury to person or property within the state, except as to a cause of action for defamation of character arising from the act, if he (i) regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the state, or (ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce; or owns, uses or possesses any real property situated within the state.
“Unlike CPLR
Plaintiff brings six claims against Schwartz: sexual harassment under the NYCHRL
(Count III) and NYSHRL (Count IV); aiding and abetting Indeed’s gender harassment
discrimination and retaliation under the NYSHRL and NYCHRL (Count V); violation of
1.
Under the first prong, a non-domiciliary defendant need not be physically present in New
York to “transact business,” so long as the defendant has engaged in “purposeful activity,” for
example, “some act by which the defendant purposefully avails itself of the privilege of
conducting activities within the forum State, thus invoking the benefits and protections of its
laws.”
Best Van Lines, Inc. v. Walker
,
Defendant Schwartz has worked in the Austin office of Indeed at all times and has lived in Austin for the past six years. Dkt. No. 49-2 ¶ 1. Plaintiff alleges only three contacts New York: Plaintiff “believ[ed]” she saw Schwartz in the New York office in February 2016, Compl. ¶ 59, Indeed sent Schwartz to the New York office in October 2019, id. ¶ 74, and Schwartz, while in Texas, sent a LinkedIn invitation to Plaintiff, while in New York, on September 24, 2019, id. [18] Schwartz also admits that beginning in the fall of 2016, he was required to report, through bi-weekly phone meetings, to a manager in New York and thereafter, visited Indeed’s New York office two to three times per year over the next four years for team trainings or the occasional in-person meeting. Dkt. No. 62 ¶ 11.
Schwartz did not purposefully avail himself of the privilege of conducting activities in New York when he invited Plaintiff to connect via LinkedIn. A user can request to connect with another user via LinkedIn in different ways. One way is by searching for another user’s profile, which may or may not list where the user is located, and clicking “Connect.” Another method of connection, which Schwartz asserts occurred here, is through LinkedIn’s feature that suggests other LinkedIn users based on commonalities between users. See id. ¶ 13. In that instance, the user does not search for the other user, but rather LinkedIn recommends the connection based on an algorithm. In both methods, LinkedIn, not the requesting user, sends an email to the requested user informing him or her of the invitation request.
The “advent of the internet” has created “a new set of challenges” regarding personal
jurisdiction.
Citigroup Inc. v. City Holding Co.
,
At one end of the spectrum are situations where a defendant clearly does business over the Internet. If the defendant enters into contracts with residents of a foreign jurisdiction that involve the knowing and repeated transmission of computer files over the Internet, personal jurisdiction is proper. At the opposite end are situations where a defendant has simply posted information on an Internet Web site which is accessible to users in foreign jurisdictions. A passive Web site that does little more than make information available to those who are interested in it is not grounds for the exercise [of] personal jurisdiction. The middle ground is occupied by interactive Web sites where a user can exchange information with the host computer. In these cases, the exercise of jurisdiction is determined by examining the level of interactivity and commercial nature of the exchange of information that occurs on the Web site.
Zippo
,
The LinkedIn invitation falls somewhere in the middle of the spectrum. LinkedIn permits
the passive display of the employment history of its users, but it can also be used interactively,
such as by allowing users to seek job opportunities, post news articles, or comment on others’
announcements. Social media sites, such as LinkedIn and Facebook, may offer the opportunity
to “seek[] out and initiate[] contact with New York, solicit[] business in New York, and
establish[] a continuing relationship,” such as, for example, when a user connects to a company
on LinkedIn in order to seek employment.
Paterno v. Laser Spine Inst.
,
Key here, however, is that there is no evidence that Schwartz, by his invitation to
establish a social media relationship over LinkedIn, intended to do anything other than be able to
view Plaintiff’s profile and to display Plaintiff as a listed connection on his webpage. Although
the act of sending a LinkedIn invitation “is not wholly passive because it is not limited to making
information available,” it “is also not conducting traditional business over the internet because it
is not selling goods or services, or charging membership fees to registered users.”
Weiss v. Barc,
Inc.
,
The mere invitation to connect through a social media platform cannot, by itself, confer
personal jurisdiction over a defendant because an invitation alone does not represent “purposeful
availment” of “the privilege of conducting activities within the forum State, thus invoking the
benefits and protections of its laws.”
Hanson
,
A social media user may have hundreds of connections and may thereafter ignore such connections once the request to connect is accepted. Such a user cannot be subject to personal jurisdiction of the residence of each state in which their connections reside. Moreover, the location displayed for each social media user is selected by that user—whether the location of that user is accurate or not. Thus, if a user in Texas requested to connect with a user who represented she lived in New York, but in fact lived in Connecticut, would the Texas user be said to have purposefully availed itself of the privileges of conducting activities in New York or Connecticut? That situation is less clear than the cases where it is undisputed that New York is the forum state at issue, such as when a company ships products to a state in New York or a known New York user accesses a website.
Schwartz’s infrequent trips to New York for Indeed trainings or phone calls with his
manager also cannot serve as a basis for personal jurisdiction. “A defendant may not be subject
to jurisdiction based on ‘random,’ ‘fortuitous,’ or ‘attenuated contacts.’”
Moore v. Publicis
Groupe SA
,
Taken together, Schwartz’s alleged contacts do not establish that he purposefully availed himself of the privileges of conducting activities in New York, and thus the Court need not reach the second element of whether there is “some articulable nexus between the business transacted and the cause of action sued upon or where there is a substantial relationship between the transaction or the claim asserted.” Sole Resort, S.A. de C.V. v. Allure Resorts Mgmt., LLC , 450 F.3d 100, 103 (2d Cir. 2006).
2.
The rape did not occur “within the state” of New York and thus Counts IX and X, as well
as the sexual harassment claims based on the rape, cannot establish personal jurisdiction over
Schwartz pursuant to this section.
See Sunward Elecs., Inc v. McDonald
,
As to Plaintiff’s remaining claims against Schwartz, Plaintiff has not alleged that the
conduct in New York supporting her claims of discrimination and aiding and abetting
discrimination constitutes a tortious act. “There must be some basis for considering the
defendant’s actions to be tortious, either under the law of New York or some other pertinent
jurisdiction.”
Ehrenfeld v. Mahfouz
,
At oral argument, Plaintiff relied on
Holland v. United States
,
The allegations concerning Schwartz’s behavior in New York are far different from those
in
Holland
. Plaintiff does not allege facts establishing that Schwartz’s presence alone, or even
combined with the LinkedIn invitation, amounts to sexual harassment or gender discrimination
or an actionable hostile work environment claim. A hostile work environment claim under
NYCHRL “need not be ‘severe or pervasive’” but it still must “amount to ‘unwanted
gender-based conduct.’”
Erasmus v. Deutsche Bank Ams. Holding Corp.
,
Finally, Plaintiff’s claim under
No employee with status within one or more protected class or classes shall be paid a wage at a rate less than the rate at which an employee without status within the same protected class or classes in the same establishment is paid for: (a) equal work on a job the performance of which requires equal skill, effort and responsibility, and which is performed under similar working conditions, or (b) substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions; except where payment is made pursuant to a differential based on: (i) a seniority system; (ii) a merit system; (iii) a system which measures earnings by quantity or quality of production; or (iv) a bona fide factor other than status within one or more protected class or classes, such as education, training, or experience.
That statute provides a remedy for employees against their employers.
See
3.
Under
The tortious act of rape in Connecticut and the “first effects” of that rape were felt in
Connecticut, not New York.
Bank Brussels
,
Plaintiff’s claims relating to discrimination and aiding and abetting discrimination also do
not establish personal jurisdiction under
Because the Court does not have personal jurisdiction over Schwartz, the claims against him are dismissed.
CONCLUSION
The Indeed Defendants’ motion to compel arbitration is GRANTED. Dkt. No. 29. Schwartz’s motion to dismiss for lack of personal jurisdiction is GRANTED. Dkt. No. 47. Schwartz is dismissed from the action as a defendant.
A stay of proceedings is mandatory after “all claims have been referred to arbitration and
a stay [has been] requested” by a party.
Katz v. Cellco P’ship
,
The Clerk of Court is respectfully directed to close Dkt. Nos. 29, 47.
SO ORDERED. Dated: January 19, 2021 __________________________________
New York, New York LEWIS J. LIMAN United States District Judge
Notes
[1] In the Complaint, Count VI groups together claims based on the failure to provide a reasonable accommodation in violation of the ADA against Indeed only and in violation of the NYSHRL and NYCHRL against Indeed, Verbaro, and Lam.
[2] In the Complaint, Count VII groups together claims based on retaliation in violation of Title VII and the ADA against Indeed only and in violation of the NYSHRL and NYCHRL against Indeed, Wachstein, Verbaro, and Lam.
[3] After oral argument in this case, Indeed agreed to forego its request for fees and expenses. See Dkt. No. 63. Nonetheless the issue is relevant to Plaintiff’s argument that the fee-shifting clause renders the arbitration agreement as a whole unenforceable.
[4] The Confidentiality Agreement states that it is governed by and construed in accordance with
[5]
[6]
Tantaros v. Fox News Network, LLC
also involved claims under
[7] The Court notes that the FAA does not entirely give a private employer the right to opt out of public enforcement of a statute that the states pass in the exercise of their police powers. If the EEOC or its state or city counterparts believe that the conduct in this or any other case transcends the interest of the individual victim, the FAA does not prevent them from investigating and then taking action, including action in a public forum. See Waffle House , 534 U.S. at 286-87.
[8]
Newton
also distinguished the Supreme Court’s decision to compel arbitration in
Waffle House
by stating that the “critical distinction” in
Waffle House
was that the dispute revolved
“exclusively around a quintessential incident of ‘employment,’ i.e., the loss, by an employee, of
his job and the salary and benefits that go with it, resulting in the employee’s attempt, through
EEOC, to pursue a judgment for backpay and reinstatement.”
Newton
,
[9] Although the Confidentiality Agreement warns that “[t]his is not an employment contract,” the next sentence provides that “[e]mployee understands and acknowledges that his/her employment with the Company is for an unspecified duration and constitutes employment “at will” and may be terminated by Employee or the Company, at any time for any reason or for no reason, with or without notice.” Dkt. No. 31-5. It also states that “Employee’s employment/continued employment . . . is dependent upon Employee signing this agreement.”
[10] Although Plaintiff cites New York and Texas cases on unconscionability, she does not dispute that Texas law applies. See Dkt. No. 31-5 (2019 Confidentiality Agreement states that “any issues regarding its enforceability or validity shall be governed by and construed in accordance with the laws of the State of Texas.”).
[11]
Cf. Circuit City
,
[12] See also Andrea Doneff, Is Green Tree v. Randolph Still Good Law? How the Supreme Court’s Emphasis on Contract Language in Arbitration Clauses Will Impact the Use of Public Policy to Allow Parties to Vindicate Their Rights , 39 Ohio N.U. L. Rev. 63, 85 (2012)
[13] A plaintiff unsuccessful on the merits because of a position that is “frivolous, unreasonable, or groundless” may be required to pay attorneys’ fees but Defendants here do not contend that Gilbert’s position is unreasonable.
[14]
See also Nino v. Jewelry Exch., Inc.
,
[15] Given its holding that the provision is unconscionable with respect to at least the Title VII
claims, the Court need not address Plaintiff’s argument that the arbitration clause should be
invalidated “on the ground that arbitration would be prohibitively expensive.”
Green Tree Fin.
Corp.-Ala. v. Randolph
,
[16] Plaintiff cites only one case in which the Eleventh Circuit refused to sever a fee-shifting
provision. Dkt. No. 42 at 32. But the arbitration agreement at issue in that case did not contain a
severability provision, which was critical to the Eleventh Circuit’s decision, because the
Eleventh Circuit had “has previously rejected the contention that the policy favoring arbitration
agreements requires that courts sever unlawful provisions, rather than void the agreement.”
See
Perez v. Globe Airport Sec. Servs., Inc.
,
[17] Plaintiff does not seriously argue for general jurisdiction under
[18] For the first time in her opposition brief, Plaintiff also states that during the October 2019 trip, “as part of his harassment of Ms. Gilbert in New York, Schwartz sent a print job to the printer on Ms. Gilbert’s floor in the New York office closest to her desk.” Dkt. No. 55 at 10; see Dkt. No. 57 ¶ 11. Plaintiff does not state whether she interacted with Schwartz, and Schwartz maintains that he had no contact with her. Dkt. No. 49-2 ¶ 9.
[19]
Cf. Sec. & Exch. Comm’n v. PlexCorps
,
[20] If Plaintiff was the only user with whom Schwartz had engaged on social media, or if
Schwartz connected with Plaintiff in order to engage in some purposeful activity beyond mere
connection, the Court’s analysis might well be different.
See Alcon Labs., Inc. v. Lens.com, Inc.
,
[21] In addition, Plaintiff’s “belief” as to Schwartz’s visit to New York in February 2016 is also
insufficient to meet her burden of establishing jurisdiction.
See Zanotti v. Invention Submission
Corp.
,
[22] Some courts have held that certain discrimination claims under NYSHRL and NYCHRL
cannot establish personal jurisdiction under