PRICE v. UBS FINANCIAL SERVICES INC.
OPINION. Signed by Judge William J. Martini on 3/8/18. (gh, )
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
CRAIG D. PRICE,
Civ. No. 2:17-01882
UBS FINANCIAL SERVICES, INC.,
WILLIAM J. MARTINI, U.S.D.J.:
Plaintiff Craig D. Price brings this action against UBS Financial Services, Inc.
(“Defendant”), alleging claims of whistleblowing retaliation under the Wall Street Reform
and Consumer Protection Act (“Dodd-Frank”), 15 U.S.C. § 78u–6, and the Florida
Whistleblower Act (the “FWA”), Fla. Stat. § 448.102. This matter comes before the Court
on Defendant’s motion to compel arbitration pursuant to the Federal Arbitration Act
(“FAA”), 9 U.S.C. § 1, et seq. There was no oral argument. Fed. R. Civ. P. 78(b). For the
reasons set forth below, Defendant’s motion is DENIED.
The Court assumes the parties’ familiarity with the facts and procedural history of
the case. The Court’s November 2017 opinion provides a more complete recitation. ECF
No. 19 at 1–2. The following facts are relevant to the instant motion.
On March 22, 2017, Plaintiff filed a complaint (“Complaint”), alleging that
Defendant retaliated against him for making disclosures protected under Dodd-Frank and
the FWA. ECF No. 1. Approximately two and a half months later, Defendant filed a
motion to dismiss both counts of the Complaint. ECF No. 11. In its motion, Defendant
did not alternatively argue for the Court to compel arbitration nor did it state its intent to
do so on a later date.
On July 20, 2017, the parties sought a consent order for an adjournment of
Defendant’s motion until September 5, 2017, which the Court granted. ECF Nos. 15 & 16.
The Court subsequently decided the merits of Defendant’s motion, denying dismissal of
the FWA claim but staying the Dodd-Frank claim pending a decision by the Supreme Court
in Digital Realty Trust, Inc. v. Somers. ECF Nos. 19 & 20.
Approximately two weeks later, Defendant filed the instant motion to compel
arbitration, arguing that Plaintiff’s claims fall squarely within the scope of the arbitration
agreements that he executed in exchange for compensation packages from Defendant. See
Def.’s Mem. of Law in Supp. of Its Mot. to Compel Arbitration (“Def.’s Mem.”) 8–13,
ECF No. 22-3. Defendant preemptively argues that it did not waive its right to compel
arbitration by first filing a motion to dismiss. Id. at 13–14. Specifically, it argues that the
factors enumerated by the Third Circuit in Hoxworth v. Blinder, 980 F.2d 912 (3d Cir.
1992), favor arbitration because it filed its motion to compel in a timely fashion, it provided
notice to Plaintiff of its intent to arbitrate, and neither party has engaged in discovery. Id.
at 14. Defendant states that the Third Circuit has unequivocally held that a single meritsbased motion to dismiss does not waive a party’s right to arbitration. Id. Finally,
Defendant argues that the Court should dismiss the Complaint or, in the alternative, stay
proceedings in this Court pending arbitration. Id. at 15.
Plaintiff opposes, arguing first that Defendant has not shown a valid arbitration
agreement under New Jersey law. See Pl.’s Resp. in Opp’n to Def.’s Mot. (“Pl.’s Opp’n”)
5–8, ECF No. 26. Plaintiff submits that the agreements do not satisfy New Jersey’s
“express waiver rule” because they fail to reference statutory whistleblower rights. Id. at
6–7. Plaintiff further argues that Defendant waived its arbitration right because
Defendant’s motion to dismiss prejudiced Plaintiff through the expenditure of substantial
resources in litigating that motion. See id. at 8–11. Alternatively, Plaintiff argues that the
Court should stay proceedings pending arbitration as opposed to dismissing its Complaint.
Id. at 12–13.
In its reply, Defendant counters that the agreements are valid and enforceable
because they provide for arbitration of “any disputes,” including related to termination of
employment and retaliation whether they arise by statute or otherwise. See Def.’s Reply
in Supp. of Its Mot. (“Def.’s Reply”) 2–7, ECF No. 28. Defendant also reiterates that a
single merits-based motion to dismiss is not sufficient to find that it waived its right to
arbitrate. Id. at 8–11. Finally, Defendant reargues for dismissal over a stay in the interest
of judicial efficiency. Id. at 11–13.
The FAA “creates a body of federal substantive law establishing and governing the
duty to honor agreements to arbitrate disputes” and expresses “a strong federal policy in
favor of resolving disputes through arbitration.” See Century Indem. Co. v. Certain
Underwriters at Lloyd’s, London, 584 F.3d 513, 522 (3d Cir. 2009). “Before compelling
a party to arbitrate pursuant to the FAA, a court must determine that (1) there is an
agreement to arbitrate and (2) the dispute at issue falls within the scope of that agreement.”
Id. at 523. “To determine whether the parties have agreed to arbitrate, [courts] apply
‘ordinary state-law principles that govern the formation of contracts.’” Id. at 524 (quoting
First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944 (1995)). “[O]nce a court has found
that there is a valid agreement to arbitrate, . . . the determination of whether a particular
dispute is within the class of those disputes governed by the arbitration clause . . . is a
matter of federal law.” See id. (quotation omitted). In making such a determination, “‘there
is a presumption of arbitrability[:] an order to arbitrate the particular grievance should not
be denied unless it may be said with positive assurance that the arbitration clause is not
susceptible of an interpretation that covers the asserted dispute.’” Id. (quoting AT&T
Techs., Inc. v. Commc’ns Workers of Am., 475 U.S. 643, 650 (1986)).
Courts in the Third Circuit apply two different standards when considering a motion
to compel arbitration. “[W]hen it is apparent, based on ‘the face of a complaint, and
documents relied upon in the complaint,’ that certain of a party’s claims ‘are subject to an
enforceable arbitration clause, a motion to compel arbitration should be considered under
a Rule 12(b)(6) standard without discovery’s delay.’” Guidotti v. Legal Helpers Debt
Resolution, L.L.C., 716 F.3d 764, 776 (3d Cir. 2013) (quoting Somerset Consulting, LLC
v. United Capital Lenders, LLC, 832 F. Supp. 2d 474, 482 (E.D. Pa. 2011)). “But if the
complaint and its supporting documents are unclear regarding the agreement to arbitrate,
or if the plaintiff has responded to a motion to compel arbitration with additional facts
sufficient to place the agreement to arbitrate in issue, then ‘the parties should be entitled to
discovery on the question of arbitrability before a court entertains further briefing on [the]
question.” Id. (quoting same). Under such circumstances, courts apply a summary
judgment standard. See id.
Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of a complaint,
in whole or in part, if the plaintiff fails to state a claim upon which relief can be granted.
The moving party bears the burden of showing that no claim has been stated. Hedges v.
United States, 404 F.3d 744, 750 (3d Cir. 2005). In deciding a motion to dismiss under
Rule 12(b)(6), a court must take all allegations in the complaint as true and view them in
the light most favorable to the plaintiff. See Warth v. Seldin, 422 U.S. 490, 501 (1975);
Trump Hotels & Casino Resorts, Inc. v. Mirage Resorts Inc., 140 F.3d 478, 483 (3d Cir.
Plaintiff does not dispute that he executed the arbitration agreements nor does he
allege that he was unaware of their presence in the contracts that he made with Defendant.
The Court, therefore, applies the Rule 12(b)(6) standard to the instant motion. The Court
first addresses the agreements’ validity before considering the issue of waiver.
The Arbitration Agreements Are Valid and Enforceable
There is little question that the agreements are enforceable. First, the question of
whether the parties made an agreement to arbitrate falls under state contract law. “Under
New Jersey law, a party must prove the existence of a contract by showing that: (1) there
was a meeting of the minds; (2) there was an offer and acceptance; (3) there was
consideration; and, (4) there was certainty in the terms of the agreement.” Allen v.
Bloomingdale’s, Inc., 225 F. Supp. 3d 254, 258 (D.N.J. 2016) (internal quotation and
citation omitted). As previously mentioned, Plaintiff does not dispute that he executed the
agreements. He also does not contest that he received significant consideration from
Defendant in exchange for his execution. The contracts clearly label the arbitration clauses
and the language plainly states the parameters by which the parties agree to arbitrate their
disputes. See, e.g., Def.’s Mem., Ex. A at 19, Ex. K at 3–4.1 The Court, therefore, finds
that agreements satisfy New Jersey contract law.
The question of the agreements’ scope falls under federal law. Dodd-Frank and
FWA claims are subject to arbitration. See Khazin v. TD Ameritrade Holding Corp., 773
F.3d 488, 492 (3d Cir. 2014) (“The text and structure of Dodd-Frank compel the conclusion
that whistleblower retaliation claims brought pursuant to 15 U.S.C. § 78u–6(h) are not
exempt from predispute arbitration agreements.”); Hospicecare of Se. Fla., Inc. v. Major,
968 So. 2d 117, 118 (Fla. Dist. Ct. App. 2007) (“Several courts in Florida have held that
claims under the [FWA] may be subject to arbitration.”). Furthermore, the agreements
plainly state that arbitration covers retaliation claims. See, e.g., Ex. A at 19 (“. . . any
claims for discrimination, retaliation, or harassment, or any other claims whether they arise
by statute or otherwise . . .”); Ex. K at 4 (listing “retaliation claims” under the “Covered
Claims” section of the arbitration clause). The Court, therefore, finds that Plaintiff’s claims
fall within the scope of the arbitration agreements and that those agreements are valid and
Defendant Waived Its Right to Compel Arbitration
“[P]rejudice is the touchstone for determining whether the right to arbitrate has been
waived by litigation conduct.” See In re Pharmacy Benefit Managers Antitrust Litig., 700
F.3d 109, 117 (3d Cir. 2012) (internal quotation and citation omitted). “[T]he concept of
prejudice includes not only substantive prejudice to the legal position of the party claiming
waiver, but also extends to prejudice resulting from the unnecessary delay and expense
incurred by the plaintiffs as a result of the defendants’ belated invocation of their right to
arbitrate.” Nino v. Jewelry Exchange, Inc., 609 F.3d 191, 209 (3d Cir. 2010) (internal
quotations and citation omitted). The Third Circuit employs six nonexclusive factors to
assist in a prejudice inquiry: “(1) timeliness or lack thereof of the motion to arbitrate; (2)
extent to which a party seeking arbitration has contested the merits of opposing party’s
claims; (3) whether the party seeking arbitration informed its adversary of its intent to
pursue arbitration prior to seeking to enjoin the court proceedings; (4) the extent to which
a party seeking arbitration engaged in non-merits motion practice; (5) the party’s
acquiescence to the court’s pretrial orders; and (6) the extent to which the parties have
engaged in discovery.” See Gray Holdco, Inc. v. Cassady, 654 F.3d 444, 451 (3d Cir.
2011) (citing Hoxworth, 980 F.2d at 926–27). “This recognition that the right to arbitrate
may be waived under such circumstances is consistent with the purpose behind arbitration
itself—arbitration is meant to streamline the proceedings, lower costs, and conserve private
and judicial resources, and it furthers none of those purposes when a party actively litigates
a case for an extended period only to belatedly assert that the dispute should have been
arbitrated, not litigated, in the first place.” Nino, 609 F.3d at 209.
The Court notes that some of the clauses differ in their language but the substance is consistent throughout all of
The Court need not address Plaintiff’s “express waiver” argument because New Jersey law does not apply to the
scope of the arbitration agreements.
1. Timeliness of Defendant’s Motion
Plaintiff filed his Complaint almost one year from the issuance of this opinion.
Defendant took two and a half months to file its motion to dismiss in response to the
Complaint. Plaintiff sought an extension of time to respond pursuant to his right under the
District of New Jersey’s Local Rules. A month later, the parties mutually sought an
adjournment of that motion, which prolonged the return date an additional six weeks. As
a result, the Court did not decide the merits of Defendant’s motion until late November
2017. Two weeks later, Defendant filed the instant motion, over eight months after
Plaintiff initially filed his Complaint.
Defendant offers no explanation for the delay of its filing the instant motion except
for its legal interpretation of Third Circuit and Supreme Court precedent, which it states
unequivocally provides for Defendant to pursue a single merits-based motion without
waiving its right to invoke arbitration. The applicable precedent does not so provide. The
Third Circuit’s six-factor inquiry from Hoxworth makes clear that courts must consider the
totality of the circumstances in determining whether a moving party’s conduct is
inconsistent with its right to arbitrate. See Nino, 609 F.3d at 208–09. The fact that
Defendant has filed only one merits-based motion is merely one factor under
The Third Circuit has previously found against waiver in cases where the moving
party has waited between one and two months to assert its arbitration right; however, it has
found for waiver where a moving party waited ten months or longer to assert its right. See
In re Pharmacy Benefit Managers, 700 F.3d at 118 (summarizing cases). Here, the Court
finds that the elapsed time of more than eight months leans toward waiver, albeit on the
lowest end of that spectrum. Moreover, Defendant’s sole explanation for its delay is its
apparent litigation strategy in pursuing dismissal in this Court before presumably pursuing
a similar tactic in arbitration—i.e., a second bite at the apple. At a minimum, Defendant
should have included its arbitration claim as an alternative form of relief in its motion to
dismiss or otherwise stated its intent to pursue such a course later in the litigation. The fact
that Defendant hid its intent until it received a determination from this Court on its meritsbased motion, one that was partially unfavorable, defies the main purpose underlying
arbitration in the first place: “arbitration is meant to streamline the proceedings, lower
costs, and conserve private and judicial resources[.]” See Nino, 609 F.3d at 209. The
Court, therefore, finds that Defendant’s motion is untimely and this factor weighs in favor
Defendant points to an opinion issued by this Court in James v. Global Tel*Link Corp. as support for its argument
that its filing of a single merits-based motion to dismiss does not waive its right to arbitrate. Defendant overlooks the
fact that the Rule 12 motion in that case concerned “the threshold issue of jurisdiction,” which the Court specifically
found was not a merits-based motion. See No. 13-cv-4989, 2016 WL 589676, at *10 (D.N.J. Feb. 11, 2016).
2. Whether Defendant Contested the Merits of Plaintiff’s Claims
Defendant’s motion sought the dismissal of Plaintiff’s entire Complaint under Rule
12(b)(6), which is a merits-based motion. Accordingly, the Court finds that Defendant
contested the merits of Plaintiff’s claims and this factor weighs heavily in favor of waiver.
3. Whether Defendant Provided Notice
Plaintiff maintains, and Defendant does not dispute, that Defendant called Plaintiff’s
counsel to inform him of its intent to pursue arbitration shortly before filing the instant
motion. See Price Decl. ¶ 3, ECF No. 26-1. In Nino, the Third Circuit analyzed the notice
factor in considering the inclusion of arbitration as an affirmative defense in the
defendant’s answer. It found that asserting arbitration as an affirmative defense
undoubtedly disclosed the possibility that the defendant would seek to compel arbitration
at some point; however, the significance of that disclosure decreased the longer the
defendant pursued litigation. See Nino, 609 F.3d at 211. It reasoned, “[A] party’s capacity
to develop a litigation strategy with regard to the likelihood of arbitration diminishes the
longer the case is litigated with no further indication that a motion to compel is
forthcoming.” Id. Moreover, “[i]n the waiver context, where prejudice to the non-movant
is key, an initial invocation of the defense of arbitration becomes less significant the longer
and more actively a party litigates after having made the initial invocation without making
any further mention of arbitration.” Id. at 211–12.
Here, Defendant made no mention of arbitration at any time to Plaintiff or this Court
until just before filing the instant motion. Defendant’s conduct gave Plaintiff no reason to
expect an invocation of arbitration, particularly after the parties litigated a dispositive
motion. The phone call from Defendant’s counsel just before its filing was purely cosmetic
in nature and provided Plaintiff with no real substantive notice. The Court, therefore, finds
that the notice factor weighs in favor of waiver.
4. Extent of Non-Merits Motion Practice
Upon reviewing the docket, the Court notes that the only non-merits motion practice
undertaken by Defendant relates pro hac vice motions filed by Defendant’s counsel and
the parties’ consent motion to adjourn the motion to dismiss. These motions did not compel
responses from Plaintiff and did not otherwise prejudice him. The Court, therefore, finds
that this factor weighs against a finding of waiver.
5. Acquiescence to Pretrial Orders
The Court has not issued any pretrial orders as of the issuance of this opinion. The
Court did order discovery to commence on Plaintiff’s FWA claim while awaiting the
Supreme Court’s decision in Digital Realty; however, Defendant subsequently filed the
instant motion, which inevitably delayed the issuance of a pretrial order due to the potential
dispositive outcome herein. The Court, therefore, finds that this factor does not tilt the
balance in either direction.
6. Extent to Which the Parties Have Engaged in Discovery
Plaintiff maintains that he has “worked on the case getting discovery ready” during
the intervening period between the completion of briefing and the issuance of the Court’s
decision addressing Defendant’s motion to dismiss. See Price Decl. ¶ 5. Defendant argues
that any such undertaking of discovery by Plaintiff was premature. See Def.’s Reply at
10–11. The Court agrees with Defendant. “[Third Circuit] cases finding waiver have
uniformly featured significant discovery activity in the district court.” In re Pharmacy
Benefit Managers, 700 F.3d at 120. There has been no such discovery activity present
here. The Court, therefore, finds that this factor weighs against a finding of waiver.
In sum, the Court finds that the totality of the circumstances here favors a finding
of waiver. Defendant’s conduct up until its filing of the instant motion was entirely
inconsistent with its right to arbitrate. Defendant chose to litigate the merits of the case,
seeking the dismissal of Plaintiff’s entire Complaint under Rule 12(b)(6). Defendant
further hid its intent to invoke arbitration, purposefully withholding any mention of
arbitration from Plaintiff or this Court until moments before seeking its compulsion.
Defendant’s conduct defied the very purpose behind arbitration: the streamlining of
proceedings and the conservation of private and judicial resources. This Court will not
now sanction such conduct by giving Defendant another chance to seek dismissal in
arbitration, an outcome that would prejudice Plaintiff after it partially defeated Defendant’s
previous motion to dismiss. Accordingly, the Court finds that Defendant waived its right
to invoke arbitration and its motion to compel arbitration is DENIED.
For the reasons stated above, Defendant’s motion to compel arbitration is DENIED.
An appropriate order follows.
/s/ William J. Martini
WILLIAM J. MARTINI, U.S.D.J.
Date: March 8, 2018
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