TEYO JOHNSON, Plаintiff, -v- EVERYREALM, INC., JULIA SCHWARTZ, JANINE YORIO, AND WILLIAM KERR, Defendants.
22 Civ. 6669 (PAE)
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
February 24, 2023
PAUL A. ENGELMAYER, District Judge:
PAUL A. ENGELMAYER, District Judge:
This case calls upon the Court to apply the recently enacted Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (the “EFAA“), Pub. L. No. 117-90, 135 Stat. 26, codified at
Plaintiff Teyo Johnson is a former employee of digital real estate company Everyrealm, Inc. (“Everyrealm“). As a condition of employment, Johnson entered into an agreement with Everyrealm containing a broad mandatory arbitration provision. Johnson now sues Everyrealm and several officers: Janine Yorio, Julia Schwartz, and William Kerr (collectively, “Everyrealm” or “defendants“).The claims in Johnson‘s First Amended Complaint (“FAC“), Dkt. 29, include, against all defendants but Kerr: (1) race discrimination, in violation of
Everyrealm has moved, under the parties’ arbitration agreement, to compel arbitration of Johnson‘s claims. Johnson counters that, because the FAC includes sexual harassment claims, the arbitration agreement is unenforceable under the EFAA. Everyrealm counters that Johnson‘s sexual harassment claims are fabricated and implausibly pled; that these should be dismissed under
For the following reasons, the Court finds that Johnson‘s FAC has pled a plausible claim of sexual harassment in violation of the NYCHRL. And the Court construes the EFAA to render an arbitration clause unenforceable as to the entire case involving a viably pled sexual harassment dispute, as opposed to merely the claims in the case that pertain to the alleged sexual harassment. The Court accordingly denies, in its entirety, Everyrealm‘s motion to enforce the arbitration clause. Johnson‘s claims will now proceed in this Court.
I. Background1
A. Factual Background
The FAC makes many factual allegations in support of its claims. In light
Court recounts other allegations as context and to illuminate the FAC‘s other claims. The Court rejects defendants’ argument that, because the factual allegations on which the FAC‘s sexual harassment claims rest were generally not included in Johnson‘s initial Complaint, the Court must disregard these allegations.2
Everyrealm is a digital real estate company with a principal place of business in New York. Id. ¶¶ 3, 15. Yorio is Everyrealm‘s CEO and a member of its board of directors. Id. ¶ 25. Schwartz is a member of Everyrealm‘s board and an employee. Id. ¶ 26. Kerr is Everyrealm‘s general counsel. Id. ¶ 24.
Everyrealm has attracted celebrity and influencer investors. Id. ¶ 7. Johnson was hired to manage celebrity relationships and cultivate new celebrity, sports, and brand partnerships for Everyrealm. Id. ¶ 9. Before working at Everyrealm, Johnson had played football in the National Football League, and worked in private equity and commercial real estate. Id. ¶¶ 35-36.
Johnson, a Nevada resident, was assigned to Everyrealm‘s New York City office for at least two weeks per month. Id. ¶ 14.
2. Everyrealm Hires Johnson
Johnson was invited to apply for a position at Everyrealm after he helped introduce a professional contact to Yorio, which led to a $500,000 investment in Everyrealm‘s Series A funding round. Id. ¶ 40. Everyrealm interviewed Johnson and hired him as director of strategic partnerships. Id.
During her interview of Johnson, CEO Yorio told him, in response to an answer of his, “you‘re not just a pretty face,” embarrassing Johnson. Id. ¶ 47. During the interview andJohnson‘s ensuing employment, Yorio made strange and unprompted statements to Johnson, including that she, Yorio, was “part Black.” Id. ¶ 49. In July 2022, Johnson learned that Yorio had told other employees after Johnson‘s interview that he “is the whitest Black guy I‘ve ever met.” Id. ¶ 42.
On February 24, 2022, Johnson signed an employment agreement with Everyrealm in which he agreed, inter alia, to arbitrate “any dispute or controversy arising out of or relating to any interpretation, construction, performance, or breach of this Agreement.” Johnson Empl. Agt. at 6.3 “[E]xcited by the opportunity to join a fast-growing startup and to become the first ex-NFL player to enter the Metaverse,” Johnson decided to join Everyrealm. FAC ¶ 50.
Defendants offered Johnson a non-negotiable pay package entailing a $125,000 base salary and a discretionary $40,000 bonus. Id. ¶ 118. Johnson later learned that he was the lowest paid director in Everyrealm‘s history, id. ¶ 119, and that white directors in roles similar to his were paid hundreds of thousands of dollars more while also being given millions of
Everyrealm‘s employee handbook prohibits sexual harassment. Id. ¶ 52.
3. “Know Your Personnel” and “Know Your Client”
The FAC alleges that Johnson experienced “unrelenting harassment that was unsolicited, unwanted, and sexual in nature throughout his Everyrealm tenure.” Id. ¶ 51. Between March 11 and 20, 2022, Johnson attended a South by Southwest (“SXSW“) conference in Austin, Texas, on a work trip also attended by CEO Yorio and other Everyrealm executives. Id. ¶ 53.
While at SXSW, Yorio told Johnson about a “sex-related game that she encouraged employees to play” that she alternatively called “KYP,” for “Know Your Personnel,” or “KYC,” for “Know Your Client.” Id. ¶¶ 54-55. Yorio told Johnson that both “game names were euphemisms for ‘having sex’ or ‘hooking up’ with coworkers and business partners“; she instructed Johnson that “the way to play the game was to ‘get laid’ by a coworker while on a business trip.” Id. ¶¶ 56-57. Yorio asked Johnson if he would be “doing any KYP,” id. ¶ 58, and “insinuat[ed] that doing so was strongly encouraged,” id. ¶ 59. Johnson, “taken aback,” responded that he was “[a]lready really close with someone.” Id. ¶ 60.
Yorio persisted. Later that evening, she confronted Johnson at the hotel and told him that she “‘know[s]’ that he is in a relationship ‘right now’ but that she thought he ‘would cheat on [his girlfriend] if the opportunity arises.‘” Id. ¶ 61 (alterations in original). Johnson was “mortified and dismayed,” id. ¶ 62, and declined to participate in KYP, id. ¶ 64.
After they had returned from SXSW to the New York City office, Yorio continued to ask Johnson repeatedly if he had “done” or “would do ‘any KYP.‘” Id. ¶ 65. Johnson repeatedly told Yorio he did not want to participate. Id. ¶ 66.
Also in the New York City office, Yorio and Everyrealm‘s head of gaming, Zachary Huntgate, in Johnson‘s presence, loudly speculated as to other employees’ “KYP game[s]” and about which employees at the company “were allowed to date each other and which were alreadyin relationships.” Id. ¶¶ 67-70. Yorio asked Huntgate who at Everyrealm was going to date an employee named Rachel. Id. ¶ 69. Huntgate responded that Rachel was “for Tyler.” Id. Yorio responded, “[o]h, ok.” Id. ¶ 70. Johnson, the FAC alleges, felt he “could not escape the sexual harassment-filled toxic work environment” that existed “in the conversations that occurred around his desk.” Id. ¶ 71.
4. The Everyrealm Company Party
Sometime after March 21, 2022, Everyrealm hosted a company-wide party in its New York City office. Id. ¶ 72. Johnson attended with his then-girlfriend, whom he brought at the encouragement of Yorio, Schwartz, and an Everyrealm cofounder. Id. ¶¶ 73-74. Johnson‘s girlfriend suffered from severe anxiety and brought her service dog with her. Id. ¶ 74.
When Johnson and his girlfriend arrived at the party, Yorio and Schwartz ignored him and gave his girlfriend “dirty looks.” Id. ¶ 75. Johnson‘s girlfriend “picked up on the negative tension and dirty looks,” was uncomfortable, and told him Johnson she wanted to leave minutes after arriving. Id. ¶ 76.
The next day, at Everyrealm‘s New York City office, Yorio and Schwartz repeatedly mocked Johnson‘s girlfriend to him and other employees. Id. ¶ 78. They
That same day, also in the New York City office, Yorio told Everyrealm employees “everyone was dragging ass” from the party. Id. ¶ 81. Yorio approached Johnson‘s desk and asked if he had arrived late to work because he “hooked up with Dog in a Bag?” Id. ¶ 82. Johnson responded that he had not been late. Id. Yorio asked Johnson if he “got laid” the nightbefore. Id. ¶ 83. Johnson “again told her ‘No.‘” Id. Johnson “made it abundantly clear that he was uncomfortable and did not want to continue discussing whether he and his guest had had sex the night before.” Id. ¶ 84. Yorio persisted, repeatedly asking Johnson why he and “Dog in a Bag” did not “hook up.” Id. ¶ 85. Johnson, who at this point was “deeply uncomfortable with [Yorio‘s] questions about his sex life but was concerned about not being viewed as a team player in his new job,” told Yorio that his girlfriend was menstruating “so that [Yorio] would stop bothering him about his sex life and let him return to work.” Id. ¶ 86. After this exchange, Yorio told multiple people in the New York City office that Johnson was “walking around telling people that ‘Dog in a Bag is on the rag.‘” Id. ¶ 87. Johnson “felt humiliated and angry.” Id. ¶ 88.
5. Yorio and Kerr Make Inappropriate Comments in Johnson‘s Presence
The FAC alleges that a variety of other sex-related comments were made in Johnson‘s presence. Yorio habitually “referred to external partners’ genitals in her interactions with [Johnson].” Id. ¶ 107. On or after March 7, 2022, Yorio and Johnson had a meeting in the New York City office to discuss potential business partners. Id. ¶ 109. There, Yorio repeatedly referred to a potential partner as “Big Swinging Dick” or as having a “big swinging dick.” Id.
Kerr also made inappropriate comments of a sexual nature about an Everyrealm investor. On or after March 7, 2022, at the New York City office, Kerr and Johnson had a meeting to discuss Johnson‘s responsibilities in his new role. Id. ¶ 97. Kerr told Johnson that he was transitioning resрonsibility for managing celebrity investor relationships to Johnson and referred to an Everyrealm investor as “A Night in Paris.” Id. ¶¶ 98-99. Johnson, confused, asked Kerr to explain the reference. Id. ¶ 100. Kerr stated that “A Night in Paris” is how he and others at Everyrealm referred to celebrity investor Paris Hilton-in reference to a revenge pornographyfilm by the same name involving her. Id. ¶¶ 101-04. Johnson was “horrified that in order to carry out his job duties he was made [to] listen to the derogatory commentary and sexually harassing nickname that defendants had assigned an investor whom [he] was tasked with managing.” Id. ¶ 105.
On March 13 or 14, 2022, at SXSW, Yorio stated in front of group of employees including Johnson that she believed one of her cofounders was an “incel“-that is, an involuntary celibate-and that this cofounder was “‘in love with’ a ‘Japanese guy’ who was also attending SXSW.” Id. ¶ 90 & n.18. The same evening, Yorio told Johnson and other employees that “she hoped her cofounder and this person would ‘have gay sex.‘” Id. ¶ 93. Johnson feared that if he told Yorio to stop making such comments, he would be punished or terminated, particularly because he was a recent employee and, as to his knowledge, the only Black man working at Everyrealm. Id. ¶ 95.
During Johnson‘s first 10 days on the job, including after March 3, 2022 (the effective date of the EFAA), he had negotiated a favorable deal between Everyrealm and Cookies, “the world‘s leading marijuana, cannabidiol, and marijuana apparel company.” Id. ¶ 111. Before a meeting with Cookies‘s president Parker Berling-whom Johnson had introduced to Everyrealm-Yorio agreed in principle to the deal Johnson had negotiated. Id. Yorio stated: “Ok, I am fine to sign this [term sheet]. [Johnson], tell your boy Parker to be nice to me and then we will make magic for him.” Id.
During the meeting with Berling, Yorio, in Johnson‘s presence, Yorio repeatedly called Berling a “dick,” a “fucking dick,” and used the word “dick” at least nine times, including in response to Berling‘s questions about Everyrealm‘s perceptions of their competition. Id. ¶ 112.
At one point, Berling responded, “I‘ve never seen someone react so hostilely to a basic question like this. Are you okay?” Id. ¶ 114. The parties did not sign the deal that Johnson had negotiated. Johnson estimates that, as a result, Everyrealm lost more than $20 million in partnership revenue. Id. The next day, Yorio told Johnson to “[f]ix it“-that is, the deal between Everyrealm and Cookies. Id. ¶ 115. Johnson apologized on Yorio‘s behalf, but Berling and Cookies “put the partnership with Everyrealm on hold where it remains.” Id. ¶ 117.
7. Yorio‘s Racist Comments
Johnson was also “regularly demeaned, tokenized, and humiliated at work on account of his race.” Id. ¶ 145. Yorio repeatedly referred to Johnson as “expensive,” id. ¶ 159, implying that she owned him, and, after Johnson had completed a successful partnership meeting with LeBron James‘s entertainment production company, joked about “trad[ing] [Johnson].” Id. ¶ 145. Yorio also said that Johnson “needs to go” because “[h]e isn‘t smart, he doesn‘t know asset management and he absolutely does not know our industry” and “dоes not put our best foot forward.” Id. ¶ 149. Yorio attempted to justify his termination, in the presence of Schwartz and other Everyrealm employees, saying: “[I]t‘s worse to have a stupid Black person on the team because then you‘re really just exploiting them and making it look like you‘re trying to be diverse.” Id. ¶ 155.
8. The Crypto-Gambling Scheme and Johnson‘s Termination
On an unspecified date during his employment, Johnson learned of a “proposed new business vertical” at Everyrealm-a “crypto gambling scheme“-that struck him as likely illegal. Id. ¶¶ 124-25. The scheme involved a cryptocurrency version of fantasy sports where users would buy packs of non-fungible tokens (“NFTs“) representing professional soccer players’ cards, enter cryptocurrency into a pool, and win prize money if their NFT cards performed betterthan other players’ NFTs. Id. ¶ 126. When he learned that Schwartz and others wanted the packs of NFTs to be “disperse[d] randomly to users playing in each pool,” Johnson believed the project would qualify as a game of chance and be illegal, absent a commercial New York gaming license. Id. ¶ 127. Johnson reported his belief to Schwartz and others. Id. ¶ 125. Eventually, the project was scrapped. Schwartz and Yorio “soured on [him]” after he raised his concerns, and other employees told him he was “in [Yorio‘s] doghouse.” Id. ¶ 128. In retaliation, Yorio and Schwartz began to “stymie[] the deals” that Johnson generated for Everyrealm. Id. ¶¶ 129-33. For example, Johnson had made “[s]ignificant progress” on a partnership deal with NFL.com. Id. ¶ 130.
The Monday after this meeting, while working from Everyrealm‘s New York City office, Johnson created a project plan for the NFL.com proposal and submitted internal requests for 3D graphics designs. Id. ¶ 132. Schwartz asked that Johnson be “kept in the loop” and stated that she wanted to write the proposal herself. Id. Schwartz did not write the proposal, but instead “secretly prevent[ed] anyone in her department from providing [] Johnson with the 3D graphics he had requested.” Id. NFL.com contacted Johnson asking for the proposal. Id. ¶ 133. After learning of NFL.com‘s email, Schwartz asked: “What is the hurry?” Id. ¶ 134. Johnson told the NFL.com representative he would provide a proposal by the end of the week and began to write a proposal using ideas he had discussed with Yorio. Id. ¶ 135. After finishing a draft, Johnsonsent it to Kerr. Id. ¶ 136. Kerr gave positive feedback and told Johnson, “[t]his is the first proposal the company has ever written,” and “all [Yorio] does is send term sheets.” Id. ¶ 137. Johnson brought his proposal-still missing the requested graphics-to Yorio. Id. ¶ 138. He asked that Yorio change the proposal as she saw fit, sign it, and email it to the NFL.com representative. Id. Yorio agreed to do so. Id. But after a separate meeting with Schwartz, at which Johnson was not present, Yorio refused to send the proposal, stating, “[w]e don‘t need to be detailed in what we can build out, we need to be vague.” Id. ¶ 139. Yorio never sent the proposal. Id. ¶ 141. Instead, she re-sent Everyrealm‘s company deck, which NFL.com‘s representative had already received weeks earlier. Id.
After not hearing back from the NFL.com representative, Yorio asked about the deal‘s status, but had not heard a response as of two weeks later. Id. ¶ 142. Yorio removed Johnson from the deal and replaced him with a 23-year-old new hire. Id. The NFL.com deal never materialized. Id. ¶ 143.
At some point thereafter, defendants transferred Johnson from strategic partnerships into a less desirable asset management role. Id. ¶ 116. As part of his transfer, Johnson was made to give his personal rolodex to Schwartz and his replacement. Id. Defendants also placed Johnson on an allegedly retaliatory 30-day performance improvement plan. Id. Defendants ultimately terminated Johnson without severance pay or a separation agreement. Id. ¶ 117.
B. Procedural Background
On August 5, 2022, Johnson filed the initial Complaint, which brought claims against the present defendants and nine other entities.4 See Dkt. 1. It brought, against all defendants, (1) race discrimination claims under
On August 19, 2022, defendants moved to compel arbitration on the basis of the mandatory arbitration provision in Johnson‘s employment agreement. Dkt. 8. In support, they filed a memorandum of law, Dkt. 9 (“MTC Mem.“), and declarations, Dkts. 10-11. On August 22, 2022, the Court set a briefing schedule. Dkt. 12. On September 9, 2022, Johnson responded, MTC Opp., and filed declarations in support, Dkts. 14-15. On September 23, 2022, defendants replied, Dkt. 16 (“MTC Reply“), and filed a declaration in support, Dkt. 17.
On September 26, 2022, Johnson requested leave to file a surreply, Dkt. 18, and, the following day, moved for emergency relief to enjoin an arbitration against him that, Johnson stated, Everyrealm had-without notice to the Court-initiated on September 12, 2022, Dkt. 19. In support, Johnson filed a memorandum of law and a declaration. Dkts. 20-21. Johnson argued
that his lawsuit was subject to the EFAA, precluding enforcement of the arbitration agreement. On September 28, 2022, the Court granted Johnson‘s request to file a surreply. Dkt. 22. Also on September 28, 2022, defendants filed a letter objecting to Johnson‘s failure to confer with them before seeking emergency relief. Dkt. 23. Defendants represented that Johnson had been on notice of the arbitration brought by Everyrealm since September 1, 2022-11 days earlier than the date Johnson had represented to the Court, Dkt. 19. See Dkt. 23.
On September 28, 2022, the Court directed defendants to file a response to Johnson‘s motion for emergency relief and scheduled a hearing to address the motion and parallel developments in Yost v. Everyrealm, No. 22 Civ. 6549 (PAE) (S.D.N.Y. Feb. 24, 2023) (citation forthcoming), a lawsuit brought by another Everyrealm employee represented by the same counsel as Johnson as to which Everyrealm also sought to compel arbitration.6 Dkt. 24. On October 3, 2022, defendants responded. Dkt. 25. On October 4, 2022, Johnson replied, Dkt. 26, and filed a declaration in support, Dkt. 27.
On October 6, 2022, the Court held the hearing. The Court determined that, under a provision of the EFAA,
that would fully set out the factual basis for his allegations of sexual harassment. Id.7 The Court also directed defense counsel to notify the
On October 14, 2022, Johnson filed the FAC. It adds claims under the NYSHRL and the NYCHRL of sexual harassment and gender discrimination. On November 2, 2022, defendants moved to dismiss the sexual harassment claims, Dkt. 33, and filed a supporting memorandum, see MTD Mem., and declarations, Dkts. 35-38. On November 16, 2022, Johnson filed a memorandum in opposition, see MTD Opp., and a supporting declaration, Dkt. 40.
On November 17, 2022, defendants moved to join Kerr to the pending motion to compel arbitration. Dkt. 43. On November 18, 2022, the Court granted that request, and ordered Johnson to make any arguments specific to Kerr in a short letter response. Dkt. 44.8
On November 22, 2022, nonparty Public Justice requested leave to file an amicus brief addressing issues relating to the EFAA on behalf of itself, the American Association for Justice, the National Women‘s Law Center, the National Employment Lawyers Association, Rape, Abuse & Incest National Network (“RAINN“), Rise, and Lift Our Voices (collectively, “amici“).
Dkt. 46. The same day, the Court granted that motion. Dkt. 47. On November 23, 2022, Johnson responded by letter to defendants’ argument that Kerr is covered by his arbitration provision. Dkt. 49. On November 29, 2022, in a letter, defendants requested leave to file a reply to Johnson‘s letter. Dkt. 51. On November 30, 2022, the Court ordered that it would treat defendants’ letter as their reply. Dkt. 52.
On December 7, 2022, amici filed their brief. Dkt. 54 (“Amici Br.“). On December 16, 2022, defendants replied. Dkt. 58 (“MTD Reply“).
On January 18, 2023, Johnson moved to amend his complaint to add federal claims pursuant to Title VII,
On February 14, 2023, Everyrealm moved for sanctions, Dkts. 66-67, which the Court denied the next day as premature, Dkt. 69. On February 15, 2023, Johnson filed the Second Amended Complaint (“SAC“). Dkt. 68.
II. Arbitrability of Johnson‘s Claims
A. The Impact of the EFAA on the Arbitration Agreement
The FAA,
The FAA was enacted to reverse “centuries of judicial hostility to arbitration agreements” and “to place arbitration agreements upon the same footing as other contracts.” Scherk v. Alberto-Culver Co., 417 U.S. 506, 510-11 (1974) (internal quotation marks omitted).
Were it not for the EFAA, all claims pursued by Johnson here would be required to be resolved in arbitration. In his employment agreement, Johnson “agree[d] that any dispute or controversy arising out of or relating to any interpretation, construction, performance, or breach of this Agreement, shall be settled by arbitration to be held in the State of New York, in accordance with the rules then in effect of the American Arbitration Association.” Johnson Empl. Agt. at 5 (§ 13(e)(i)).9 The claims that the FAC brings here-whether under Title VII, the NYSHRL, the NYCHRL, the NYLL, or common law; whether against Everyrealm or its officers Schwartz, Yorio and Kerr; and whether alleging pay disparities, discrimination or harassment based on gender, race, or other protected classifications, retaliation, or intentional infliction of emotional distress-all arise out of, at a minimum, “performance” by Johnson and Everyrealm under the employment agreement. Although Johnson makes passing attempts to avoid the arbitration agreement-claiming that it does not textually apply to his claims and terming it “unconscionable,” see MTC Opp. at 10-19-these do not gain any traction. Johnson‘s claims here, which challenge his employer‘s treatment of him during and in connection with his employment, all come within the broad wording of the arbitration provision. And Johnson does not articulate any facts that would come close to making his employment agreement or its arbitration provision procedurally and substantively unconscionable. See Ragone v. Atl. Video at
Manhattan Ctr., 595 F.3d 115, 121 (2d Cir. 2010) (New York law requires procedural and substantive unconscionability); see, e.g., Kai Peng v. Uber Techs., Inc., 237 F. Supp. 3d 36, 58 (E.D.N.Y. 2017) (fee-splitting provision not unconscionable where plaintiff did not make particularized showing of inability to pay for arbitration or showing of cost differential so substantial so as to deter claims); see also Valle v. ATM Nat., LLC, No. 14 Civ. 7993 (KBF), 2015 WL 413449, at *6 (S.D.N.Y. Jan. 30, 2015) (holding fee-shifting provision within agreement substantively unconscionable as applied, because enforcement would bankrupt plaintiff; court severed this provision, and compelled arbitration).10
The EFAA, however, amends the FAA. It provides:
Notwithstanding any other provision оf this title, at the election of the person alleging conduct constituting a sexual harassment dispute or sexual assault dispute, or the named representative of a class or in a collective action alleging such conduct, no predispute arbitration agreement or predispute joint-action waiver shall be valid or enforceable with respect to a case which is filed under Federal, Tribal, or State law and relates to the sexual assault dispute or the sexual harassment dispute.
arbitration challenges the arbitration agreement specifically or in conjunction with other terms of the contract containing the agreement,” or “whether the agreement purports to delegate such determinations to an arbitrator.”11
The EFAA applies only to claims that accrued on or after March 3, 2022, the day President Biden signed the EFAA into law; it does not have retroactive effect. See Pub. L. No. 117-90, § 3, 136 Stat. 26, 28 (2022); see, e.g., Walters, 2022 WL 3684901, at *3; Zinsky v. Russin, No. 22 Civ. 0547 (MJH), 2022 WL 2906371, at *3-4 (W.D. Pa. July 22, 2022); Newcombe-Dierl v. Amgen, No. 22 Civ. 2155 (DMG), 2022 WL 3012211, at *5 (C.D. Cal. May 26, 2022). The limited case authority to date under the EFAA, all from district courts, has solely concerned whether it applies retroactively and whether the claims at issue in those cases accrued after March 3, 2022. See, e.g., Marshall v. Hum. Servs. of Se. Texas, Inc., No. 21 Civ. 529 (MAC), 2023 WL 1818214, at *3 (E.D. Tex. Feb. 7, 2023) (EFAA not retroactive; affirming arbitration award related to claims that accrued before March 3, 2022; Zuluaga v. Altice USA, No. A-2265-21, 2022 WL 17256726, at *5 (N.J. Super. Ct. App. Div. Nov. 29, 2022) (per curiam) (compelling arbitration of claims that accrued before March 3, 2022); Woodruff v. Dollar Gen. Corp., No. 21 Civ. 1705 (GBW), 2022 WL 17752359, at *3-4 (D. Del. Dec. 19, 2022) (same); Steinberg v. Capgemini Am., Inc., No. 22 Civ. 489 (JRS), 2022 WL 3371323, at *2 (E.D. Pa. Aug. 16, 2022) (same); Walters, 2022 WL 3684901, at *3 (same); Newcombe-Dierl, 2022 WL 3012211, at *5; see also Zinsky, 2022 WL 2906371, at *3-4 (compelling arbitration as to parties to arbitration agreement, but not as to nonparties); Bushey v.
Home Direct Logistics, LLC, No. UWY-CV-21-6061586 S, 2022 WL 2298419, at *4 n.4 (Conn. Super. Ct. June 24, 2022) (citing
In light of the above, defendants’ motion to compel arbitration presents, in sequence, two issues. The first is whether the FAC “alleges conduct constituting a sexual harassment dispute,” so as to come
B. Whether the FAC Plausibly Pleads a Sexual Harassment Claim Under the NYCHRL—and Thereby Contains a Claim Within the EFAA‘s Scope
The parties and amici dispute the showing that must be made for a complaint to implicate the EFAA. Defendants argue that, for the EFAA to apply, a complaint must plausibly allege a claim of sexual harassment—that is, the claim must be pled sufficient to sustain a motion to dismiss under
For the reasons that follow, the Court finds that the claim in Johnson‘s FAC of sexual harassment in violation of the NYCHRL has been plausibly pled. As a result, measured against the most demanding showing that could be—or that has been—advocated, the FAC implicates the EFAA. Accordingly, the Court does not have occasion in this case to resolve whether the EFAA can be implicated by a lesser pleading—that is, a complaint that attempts, but fails, to plausibly plead a claim of sexual harassment. That issue, however, is raised by, and resolved in the decision today in, the companion case of Yost v. Everyrealm, Inc., et al., No. 22 Civ. 6549 (PAE) (S.D.N.Y. Feb. 24, 2023) (citation forthcoming).13
In evaluating the plausibility of the FAC‘s sexual harassment claims, the Court applies familiar standards. To survive a motion to dismiss under
1. Standards for Pleading Sexual Harassment Under the NYCHRL
Although the FAC brings sexual harassment claims under the NYSHRL and the NYCHRL, the Court‘s focus here is on the NYCHRL claim. That is because the NYCHRL‘s standards of liability are lower than, or equal to, those of the NYSHRL.
Historically, the NYCHRL was more lenient than the NYSHRL, whose standards until recently had been keyed to the more demanding standards of Title VII, which, as pertinent here, requires to establish a hostile work environment, “severe and pervasive” conduct. See Williams v. N.Y.C. Hous. Auth., et al., No. 21-1527, slip op. at 24-25 (2d Cir. Feb. 23, 2023); McHenry v. Fox News Network, LLC, 510 F. Supp. 3d 51, 65-66 (S.D.N.Y. 2020). An amendment to the NYSHRL, effective October 11, 2019, has put in place a more lenient standard of liability that has been likened to that of the NYCHRL. See Mondelo v. Quinn, Emanuel, Urquhart & Sullivan, LLP, No. 21 Civ. 02512 (CM), 2022 WL 524551, at *9 (S.D.N.Y. Feb. 22, 2022) (amendment removed “severe and pervasive” requirement). The amended NYSHRL applies to the claims in this case, which postdate the effective date of the amendment. See id.; cf. Wellner v. Montefiore Med. Ctr., No. 17 Civ. 3479 (KPF), 2019 WL 4081898, at *5 n.4 (S.D.N.Y. Aug. 29, 2019) (amendments do not apply to conduct predating effective date). The amended NYSHRL, like thе NYCHRL, is to be construed “liberally for the accomplishment of the remedial purposes thereof, regardless of whether federal civil rights laws including those laws with provisions worded comparably to the provisions of [the NYSHRL] have been so construed.” McHenry, 510 F. Supp. 3d at 68 (alteration in original) (citing
This Court has recently reviewed the NYCHRL‘s standards for sexual harassment, contrasting them to those
At the sаme time, “district courts must be mindful that the NYCHRL is not a general civility code,” McHenry, 510 F. Supp. 3d at 66 (quoting Williams v. N.Y.C. Hous. Auth., 61 A.D.3d 62, 79 (1st Dep‘t 2009)), and does not apply to conduct that “a reasonable victim of discrimination would consider petty slights and trivial inconveniences,” Williams, slip op. at 26 (citation omitted).
2. Does the FAC Plead Conduct Constituting Sexual Harassment Under the NYCHRL?
Defendants first argue that the FAC does not plausibly allege conduct exceeding
Those arguments are unpersuasive. The pertinent standard is whether the plaintiff was subject to “unwanted gender-based conduct.” The FAC so pleads. As reviewed above, the FAC alleges that Yorio repeatedly pressured Johnson to participate in “KYP” or “KYC“—that is, to have sex with colleagues, including herself, or with clients—despite Johnson‘s having repeatedly asked her to stop. See FAC ¶¶ 54-71. Yorio‘s conduct as alleged is easily construed “to reflect sexual advances and propositions, albeit... crude and clumsy ones, towards [Johnson].” McHenry, 510 F. Supp. 3d at 70-71 (sustaining NYCHRL claim where defendant sent plaintiff sexually explicit text messages and doctored photos making it appear that she had sent him a suggestive photo); see, e.g., Mihalik, 715 F.3d at 114-15 (reinstating NYCHRL claim where supervisor‘s “sexually-charged conduct,” including two sexual propositions, “subjected [plaintiff] to a different set of employment conditions than her male colleagues); Kassapian v. City of New York, 155 A.D.3d 851, 853 (2017) (sustaining NYCHRL claim where defendant repeatedly demonstrated sex toy to plaintiff); Kaplan v. N.Y.C. Dep‘t of Health & Mental Hygiene, 142 A.D.3d 1050, 1051 (2016) (sustaining NYCHRL claim based on a single instance of supervisor rubbing his hand over his groin and inner thigh while making “grunting noises of a sexual nature” at a training session with plaintiff and another female employee); Nunez v. N.Y. State Dep‘t of Corr. & Cmty. Supervision, No. 14 Civ. 6647 (JMF), 2015 WL 4605684, at *11 (S.D.N.Y. July 31, 2015) (sustaining NYCHRL claim where supervisor repeatedly invited plaintiff to go to movies or plays with him, said he was “infatuated” with plaintiff, and said that if she did not go on dates with him he would make her “perform the unnecessary and time-consuming task” of transferring her contacts to a new, state-issued Blackberry mobile-phone), aff‘d sub nom. Nunez v. Lima, 762 F. App‘x 65 (2d Cir. 2019); cf. Bray v. N.Y.C. Dep‘t of Educ., 59 Misc. 3d 1222(A), at *6 (N.Y. Sup. Ct. 2018) (unreported) (sustaining, at summary judgment, NYCHRL claim where plaintiff raised triable issue whether alleged workplace conduct included “some form of sexual solicitation“).
Yorio‘s conduct, as alleged, is all the more clearly actionable under the NYCHRL because, as alleged, she propositioned or goaded Johnson towards engaging in workplace sexual conduct multiple times within a short period, soon after his hire, in her capacities as CEO and Johnson‘s immediate supervisor, and while making other sexualized comments. See, e.g., FAC ¶¶ 62-68, 109; see Hernandez v. Kaisman, 957 N.Y.S.2d 53, 59 (2012) (“Viewed independently, defendant‘s dissemination of emails containing mildly offensive sexual media content may not have been enough to rise to the level of hostile work environment under the City HRL,” but they were when viewed in “the overall context” of other demeaning or embarrassing comments.); cf. Williams, slip op. at 23 (considering totality of circumstances in assessing hostile work environment claim); Mihalik, 715 F.3d at 111 (same). Important, too, as pled, Yorio‘s conduct of this nature also extended past the EFAA‘s effective date of March 3, 2022. See, e.g., FAC ¶¶ 53-88.
Defendants attempt to minimize these allegations by labeling the conduct alleged in the FAC mere “petty slights or minor annoyances.” MTD Mem. at 5. For multiple reasons, that argument fails. Most important, as measured by the case law
The FAC also adequately alleges that Yorio‘s sexualized conduct coaxing Johnson to engage in sexual activity with colleagues including her was “because of” his gender. At the pleading stage, a complaint‘s allegations “need only allege facts that give plausible support to the notion that [the plaintiff] has been treated less well because of his gender.” See Garcia v. N.Y.C. Health & Hosps. Corp., No. 15 Civ. 2119 (DAB), 2016 WL 4097850, at *7 (S.D.N.Y. July 26, 2016) (denying motion to dismiss sexual harassment claim under NYCHRL) (internal quotation marks and citations omitted). And in cases such as this alleging “explicit or implicit sexual proposals” by a woman to a man or vice-versa, “there is a presumption that the conduct occurred because of gender differences.” Nachmany v. FXCM, Inc., No. 16 Civ. 225 (DAB), 2020 WL 178413, at *5 (S.D.N.Y. Jan. 9, 2020).16
Here, as alleged, Yorio nоt only repeatedly encouraged Johnson to engage in sexual conduct with work colleagues, but also seemingly propositioned him herself.
3. Does the FAC Allege a Sufficient Nexus to New York City?
Defendants separately argue that if the FAC alleges sexual harassment in violation of the NYCHRL, it does not allege a sufficient nexus to New York City. See MTD Mem. at 13-17; MTD Opp. at 4-13 (arguing the contrary). That argument is easily put aside.
The NYCHRL‘s protections extend “to non-residents who work in [New York] city.” Pedroza v. Ralph Lauren Corp., No. 19 Civ. 8639 (ER), 2020 WL 4273988, at *2 (S.D.N.Y. July 24, 2020). To state a claim under the NYCHRL, a “non-resident plaintiff must allege that the discriminatory conduct had an impact in New York City.” Id.; accord Hoffman v. Parade Publ‘ns, 15 N.Y.3d 285, 291 (2010) (plaintiff must “plead and prove that the alleged discriminatory conduct had an impact in New York“). This “impact” requirement serves to make the NYCHRL “simple for courts to apply and litigants to follow.” Pedroza, 2020 WL 4273988, at *2 (citation omitted).
To determine the location of the discriminatory acts, a court is to look at the location(s) where the conduct had an impact, which may not necessarily be the place in which it occurred; the impact must have been felt by the plaintiff in New York City. See Vangas v. Montefiore Med. Ctr., 823 F.3d 174, 183 (2d Cir. 2016); Pedroza, 2020 WL 4273988, at *2. In other words, “it is the site of impact, not the place of origination, that determines where discriminatory acts occur.” Amaya v. Ballyshear LLC, 340 F. Supp. 3d 215, 221 (E.D.N.Y. 2018) (citation omitted).
Here, as alleged, the bulk of Yorio‘s sexual harassment of Johnson occurred in New York City, where Johnson was assigned to work two weeks a month. FAC ¶ 14. Although Yorio first pressed Johnson to engage in KYP while at the SXSW conference in Texas, id. ¶¶ 53-61, her importuning of Johnson to engage in sex with
This case, involving face-to-face harassment in New York City between the alleged harasser and a plaintiff who had ongoing part-time work responsibilities in the City, is thus a very far cry from those dismissing NYCHRL claims where out-of-state plaintiffs remotely interacted with third parties or defendants based in New York City. See, e.g., Vangas, 823 F.3d at 182-83 (no impact in New York City where out-of-state plaintiff‘s connection to City was “tangential” and consisted of speaking telephonically with New York City-based patients, who were impacted by her termination only after she ceased to work with them); Meilus v. Rest. Opportunities Ctr. United, Inc., No. 21 Civ. 02554 (CM), 2022 WL 4868557, at *10-11 (S.D.N.Y. Oct. 15, 2021) (“frequent communication” with New York City-based colleagues insufficient; although plaintiff traveled to New York for work, she did not allege that any incident occurred in New York City); Lambui v. Collins, No. 14 Civ. 6457 (JS) (AYS), 2015 WL 5821589, at *5 (E.D.N.Y. Sept. 30, 2015) (no impact in New York City where “mоst” alleged conduct occurred elsewhere); Amaya, 340 F. Supp. 3d at 221-23 (insufficient impact in New York City where plaintiff never worked in New York City but attended isolated meetings in City office and communicated with supervisors located in City).
To the extent defendants contend that it is categorically “clear” that a plaintiff may not bring a claim under the NYCHRL “when the plaintiff did not work in New York,” MTD Mem. 15-16, that statement is wrong as a matter of law and irrelevant as a matter of fact. The law is more nuanced. As the Second Circuit recently summarized, “the impact requirement... turn[s] primarily on the plaintiff‘s physical location at the time of the alleged discriminatory acts.” Syeed v. Bloomberg L.P., 58 F.4th 64, 69 (2d Cir. Jan. 23, 2023) (internal quotation marks and alterations omitted). But, the Circuit noted, various state and federal district courts have posited that a plaintiff can also allege impact “if he or she can show that the discriminatory acts affected the terms, conditions, or extent of his or her employment within the boundaries of New York.” Id. (cleaned up). Recognizing the uncertain law in the area, the Circuit in Syeed certified to the New York Court of Appeals whether a nonresident plaintiff could satisfy the impact requirement when her only asserted geographical connection to New York was that she had been denied a New York City-based position. This debate, however, is beside the point here, given the FAC‘s repeated factual allegations of harassing conduct by Yorio towards Johnson in New York City, where he was assigned to work two weeks a month. See, e.g., Kraiem v. JonesTrading Institutional Servs. LLC., 492 F. Supp. 3d 184, 199-200 (S.D.N.Y. 2020) (sustaining NYCHRL claims by a non-New York resident who lived in London based on conduct during business trip to New York City). The FAC thus clearly pleads the requisite nexus to New York City.18
C. Whether the Arbitration Clause Is Unenforceable as to the FAC‘s Sexual Harassment Claims Only—Or as to the Entire Case
The parties dispute whether, after a court, as here, has determined that the EFAA applies to a sexual harassment claim, the arbitration agreement is enforceable as to the other claims in the case. Defendants argue that the EFAA blocks arbitration of only the sexual harassment claim. MTC Mem. at 12-15. Johnson and his amici argue that EFAA blocks arbitration as to the entire case. See MTC Opp. at 6-10; MTD Reply at 18-20; Amici Br. at 13-18. On this question, which is one of statutory construction, Johnson is correct.
Under the FAA, “if a dispute presents multiple claims, some arbitrable and some not, the former must be sent to arbitration even if this will lead to piecemeal litigation.” KPMG LLP v. Cocchi, 565 U.S. 18, 19 (2011). But the FAA‘s mandates in support of its “liberal federal policy favoring arbitration agreements” may be “overridden by a contrary congressional command.” CompuCredit Corp. v. Greenwood, 565 U.S. 95, 98 (2012) (citation omitted). In CompuCredit, the Supreme Court held that the Credit Repair Organizations Act does not contain a contrary such command. The question here is whether the EFAA, which applies “[n]otwithstanding any other provision of [the FAA‘s] title,”
When resolving a dispute over a statute‘s meaning, the Court “begin[s] with the statutory text, exhausting all the textual and structural clues bearing on its meaning and construing each word in its context and in light of the terms surrounding it.” United States v. Bedi, 15 F.4th 222, 226 (2d Cir. 2021) (internal quotation marks and citations omitted). Where the text is plain and unambiguous, the Court‘s inquiry ends there. See BedRoc Ltd., LLC v. United States, 541 U.S. 176, 183 (2004); United States v. Gayle, 342 F.3d 89, 92 (2d Cir. 2003). “Plain meaning draws on ‘the specific context in which that language is used.‘” Williams v. MTA Bus Co., 44 F.4th 115, 127 (2d Cir. 2022) (citation omitted). However, “[i]f upon examination [the Court] find[s] the text to be ambiguous, [it] look[s] to traditional canons of statutory construction for guidance in resolving the ambiguity.” Id.
In its operative language, the EFAA makes a pre-dispute arbitration agreement invalid and unenforceable “with respect to a case which is filed under Federal, Tribal, or State law and relates to the... sexual harassment dispute.”
The term “case” is familiar in the law. Dictionaries define a “case” as “a suit or action in law or equity,” Case, Merriam Webster, https://www.merriam-webster.com/dictionary/case (last visited Feb. 20,
With the ordinary meaning of “case” in mind, the text of
section of a statute but omits it in another, th[e] Court presumes that Congress intended a difference in meaning.” Digital Realty Tr., Inc. v. Somers, 138 S. Ct. 767, 777 (2018) (internal alterations omitted). Courts presume “that Congress intended the words in a statute to carry weight.” Williams, 44 F.4th at 128; see Homaidan v. Sallie Mae, Inc., 3 F.4th 595, 602 (2d Cir. 2021) (“[T]he canon against surplusage... advises courts to interpret a statute to effectuate all its provisions, so that no art will be inoperative or superfluous.” (internal quotation marks omitted)); see also King v. Burwell, 576 U.S. 473, 504 (2015) (Scalia, J., dissenting) (Congress “knew how to equate two different types of Exchanges when it wanted to do so” and it is “telling[]” that it had not.). The reading of the EFAA that lends coherence to the use of these separate terms assigns distinct meanings to “case” and “claim,” with the former referring to the entirety of the lawsuit in which claim(s) implicating a sexual harassment dispute are brought.
In construing
In this respect, the EFAA, which applies to all arbitration agreements covered
The statutory text of the EFAA makes the corollary true here. Congress‘s choice to amend the FAA directly with text broadly blocking enforcement of an arbitration clause with respect to an entire “case” “relating to” a sexual harassment dispute reflects its rejection—in this context—of the FAA norm of allowing individual claims in a lawsuit to be parceled out to arbitrators or courts depending on each claim‘s arbitrability.21
Accordingly, the Court holds that, where a claim in a case alleges “conduct constituting a sexual harassment dispute” as defined, the EFAA, at the election of the party making such an allegation, makes pre-dispute arbitration agreements unenforceable with respect to the entire case relating to that dispute.22
The Court has found the FAC to state a clаim for sexual harassment in violation of the NYCHRL and therefore to entail a “sexual harassment dispute.” And the Court has construed the EFAA to block the enforcement of an arbitration provision with respect to the entirety of a “case filed under Federal, Tribal, or State law that relates to... the sexual harassment dispute.”
Litigation will now proceed in this Court, as follows. The operative Complaint in this case is Johnson‘s SAC, which he sought leave to file on January 18, 2023, see Dkts. 60-62, as to which the Court granted such leave on January 23, 2023, see Dkt. 63, and which Johnson filed on February 15, 2023, see Dkt. 68. The SAC solely adds claims under Title VII, as to which Johnson‘s right to sue, pursuant to a notice from the EEOC, would, according to Johnson, have expired on January 19, 2023. See Dkt. 63. The Court understands defendants to intend to move to dismiss the SAC. Any such motion to dismiss is due on Friday, March 10, 2023. Johnson‘s opposition is due Friday, March 24, 2023. Defendants’ reply is due Friday, March 31, 2023. In the event that defendants elect not to move to dismiss the SAC, defendants’ answer is due Friday, March 10, 2023.24 Also by March 10, 2023, counsel jointly are to file a proposed case management plan, consistent with the Court‘s Individual Rules, which provides for the prompt commencement of discovery.
CONCLUSION
For the foregoing reasons, the Court denies defendants’ motions to compel arbitration.
The Clerk of Court is respectfully directed to terminate the motions at docket numbers 8 and 33.
The schedule for next steps in this case, including defendants’ answer or motion to dismiss, is as set forth herein.
SO ORDERED.
Dated: February 24, 2023
New York, New York
PAUL A. ENGELMAYER
United States District Judge
Notes
Cameron v. McDonough, 1 F.4th 992, 995 (Fed. Cir. 2021) (quoting U.S. Nat‘l Bank of Or. v. Indep. Ins. Agents of Am., Inc., 507 U.S. 439, 448 (1993)); see Nat‘l Veterans Legal Servs. Program v. United States, 968 F.3d 1340, 1343 n.1 (Fed. Cir. 2020) (that text appears as a statutory note, rather than as section text, is “of no moment“). “Indeed, even if a provision is omitted entirely from the Code, it ‘remains on the books if the Statutes at Large so dictates.‘” Cameron, 1 F.4th at 995 (quoting U.S. Nat‘l Bank of Or., 507 U.S. at 448).[I]t is well-established that the placement of a provision in the United States Code as a note is not dispositive. “Though the appearance of a provision in the current edition of the United States Code is ‘prima facie’ evidence that the provision has the force of law,... it is the Statutes at Large that provides the ‘legal evidence of laws‘....”