Robinson v. Entertainment One US LP et al
Filing
44
MEMORANDUM AND ORDER. The Defendants' motion to compel arbitration under § 4 of the FAA is DENIED. However, their motion under § 3 to stay or dismiss the case in favor of arbitration is GRANTED. For the reasons discussed above, this ca se is DISMISSED without prejudice. This resolves Dkt. No. 36. The Clerk of Court is directed to close the case. Denying 36 Motion to Dismiss for Lack of Jurisdiction; Granting 36 Motion to Dismiss; Granting 36 Motion to Stay. (Signed by Judge Alison J. Nathan on 6/2/2015) (rjm)
USDC
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
DCJ(~
DA
James Robinson,
Plaintiff,
14-cv-1203 (AJN)
-vEntertainment One US LP, et al.
MEMORANDUM &
ORDER
Defendants.
ALISON J. NATHAN, District Judge:
Plaintiff James Robinson brings this case against Entertainment One US LP
("Entertainment One") and Michael Olsen for employment discrimination, intentional infliction
of emotional distress, negligent infliction of emotional distress, breach of contract, unjust
enrichment, and quantum meruit. See Dkt. No. 35. The case primarily concerns Robinson's
time as Senior Vice President and General Manager at an Entertainment One-owned record label
between November 2011 and May 2013. Defendants now move the Court to compel Robinson
to arbitrate his claims in light of an arbitration clause in his employment contract and to then
either stay or dismiss this case. See Dkt. No. 36. Defendants further move for dismissal of the
claims against Defendant Olsen both because the Court lacks personal jurisdiction over Olsen
and because Plaintiff has failed to state a claim against Olsen under Rule 12(b)(6). For the
reasons below, Defendants' motion to compel arbitration is DENIED. Nonetheless, their motion
to stay or dismiss the case in favor of arbitration is GRANTED. Accordingly, the case is
DISMISSED without prejudice.
I.
BACKGROUND 1
Defendant Entertainment One is a record company headquartered in Port Washington,
New York. See Am. Compl.
~
4. One of the company's record labels is Light Records, which
specializes in producing gospel music. Id.
~
8. Plaintiff Robinson was hired by Entertainment
One in 2005 and worked primarily in "A&R" (which the Court understands to mean Artists and
Repertoire) at Light Records. Id.
~
14. In 2010, he was promoted to a managerial role at the
label. Id. According to the amended complaint, Robinson received praise for his work in this
role and was responsible for significant growth at Light Records. Id.
~
8.
In October 2011, Robinson emailed his superior, Defendant Olsen, regarding his level of
compensation. See Olsen Deel, Ex. 1. The email indicated that Robinson had spoken with other
producers working in A&R at competing labels and learned that his income was not
commensurate. Id. Robinson noted in his email that he was in effect working at two jobs for the
label, responsible for both A&R and also for general management of the label. Id. He requested
that Olsen and Entertainment One sign him to a three year contract with an annual salary of
$160,000. Id.
On November 1, 2011, Robinson and Entertainment One entered into an "Executive
Employment Agreement." See Olsen Deel., Ex. 2 (the "Employment Agreement"); Am. Compl.
~
6. The Employment Agreement was to run from November 1, 2011 through December 31,
2014 and guaranteed Robinson an income of $150,000 each year. See Employment Agreement
~~
3, 4. The contract described Robinson's duties in broad terms, requiring him to "faithfully
devote his entire effort, time, attention, and energies to the operation of Light Records" and to
1
The following facts are drawn from Plaintiffs Amended Complaint, see Dkt. No. 35, and, for the purpose of
addressing this motion, are assumed to be true. See Kassner v. 2nd Ave. Delicatessen, Inc., 496 F.3d 229, 237 (2d
Cir. 2007).
2
"discharge all duties which are reasonably required of [him] from time to time by Entertainment
One." Id.
~
2. It also provided specific terms governing termination of his employment. For
instance, Robinson was entitled to a thirty day notice period in which to cure any deficiency in
his performance that might otherwise constitute cause for his termination. Id.
~
7.2(b).
Similarly, if Entertainment One sought to terminate Robinson's employment without cause, he
was entitled to 135 days' notice. Id.
~
7.3. The primary issue in the present motion concerns the
Employment Agreement's arbitration clause, which required the signatories to arbitrate "all
claims, disputes and other matters in question between the parties to this Agreement arising out
of or in any way relating to this Agreement or the breach thereof." Id.
~
11. Finally, the contract
stipulated that the Employment Agreement constituted "the entire agreement of Entertainment
One and the Executive. Oral changes will have no effect." Id.
~
20.
The parties proceeded amicably under the Employment Agreement for some time.
However, in 2013, the relationship between Robinson and Olsen began to deteriorate. Around
March or April 2013, Olsen demoted Robinson from Senior Vice President and General Manager
of Light Records to manager of A&R at the label. See Am.
Comp!.~
15. Robinson was
informed of his demotion in an email that was sent to a number of his colleagues. Id. Around
the time of his demotion, Robinson filed a complaint about Olsen with the company's human
resources department. Id.
~
16. The department's internal investigation and report on the
complaint were finalized on May 28, 2013. Id. On May 31, 2013, Robinson's employment was
terminated by Entertainment One. Id. Robinson alleges that his termination occurred in
violation of the termination clauses of the Employment Agreement. Id.
~
17.
On December 10, 2013, Robinson commenced arbitration against Entertainment One and
Olsen before the New York office of the American Arbitration Association ("AAA"). See Aaron
3
Deel, Ex. 3. The arbitral complaint specified four causes of action: (1) breach of contract against
Entertainment One; (2) breach of the covenant of good faith and fair dealing against
Entertainment One; (3) intentional infliction of emotional distress against both Defendants; and
(4) negligent infliction of emotional distress against both Defendants. Id.
~~
25-45. Robinson
failed to serve notice on Entertainment One and Olsen regarding the arbitration, although they
were later made aware of the proceedings by the AAA. See Aaron Deel., Ex. 4. Entertainment
One filed an answer and counterclaim in those proceedings, alleging that Robinson was in fact
terminated for cause on a number of grounds, including sexual harassment of a client and
attempting to take Entertainment One clients to a rival studio. Id.
On February 24, 2014, shortly after commencing arbitration, Robinson filed the instant
action. See Dkt. No. 2. His complaint again brought four causes of action: (1) a violation of
Title VII of the Civil Rights Act; (2) a violation of the New York State Human Rights Law
("NYSHRL"); (3) a claim for intentional infliction of emotional distress; (4) and a claim for
negligent infliction of emotional distress. Id.
~~
30-50. The substance of the complaint is
virtually identical to the arbitral complaint, save that Plaintiff grafted on several paragraphs
asserting a racial animus in Olsen's conduct. Id.
~~
20-21. In fact, Plaintiffs complaint even
mistakenly requests "[a]ny other relief the Arbitrator deems just and equitable." Id. at 7
(emphasis added).
For some period of time, the parallel actions proceeded in tandem. In the arbitration, the
parties selected an arbitrator. The arbitrator denied Plaintiffs request to move for summary
judgment, dismissed Olsen from the arbitration because he was not a signatory to the Agreement,
and, in June 2014, stayed the arbitration pending this Court's adjudication of the instant motion.
See Aaron
Deel.,~~
6, 7. Subsequently, in this action, the Plaintiff amended his complaint on
4
September 9, 2014. See Dkt. No. 35. The amended complaint added three causes of action
against Entertainment One, including breach of contract, unjust enrichment, and quantum meruit.
Id. , 51-68. Although not described in the original complaint or the arbitral complaint, the
amended complaint alleges that in October 2011 Olsen agreed that Robinson would be paid a
three percent producer's fee on any albums he produced. Id. ,, 52-56. Beyond the addition of
these three counts, the correction of a prior reference to the arbitrator, and the allegation
concerning the October 2011 agreement, the amended complaint is identical to the original.
Shmily after Plaintiffs filing of the amended complaint, Defendants filed the instant motion
seeking compulsion of arbitration and a stay or dismissal of this case. See Dkt. No. 36.
II.
LEGAL STANDARD
Defendants move under the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1, et seq., to
either compel Plaintiff to arbitrate certain claims in this action, or, alternatively, for the Court to
stay or dismiss the action pending arbitration. The FAA "creates a body of federal substantive
law of arbitrability applicable to arbitration agreements ... affecting interstate commerce."
Alliance Bernstein Inv. Research & Mgmt., Inc. v. Schaffran, 445 F.3d 121, 125 (2d Cir. 2006)
(internal quotation marks omitted). The parties do not dispute that the agreement at issue here
affects interstate commerce and, accordingly, there is no question that the FAA applies. See
Ragone v. At!. Video at Manhattan Ctr., 595 F.3d 115, 121 (2d Cir. 2010).
The FAA reflects a "strong and 'liberal federal policy favoring arbitration agreements."'
Thomson-CSF, SA. v. Am. ArbitrationAss'n, 64 F.3d 773, 776 (2d Cir. 1995) (quoting
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 625 (1985)).
Nonetheless, because "[a]rbitration is a matter of contract ... a party cannot be required to
submit to arbitration any dispute which it has not agreed so to submit." Ragone, 595 F.3d at 126
5
(quoting JLM Indus., Inc. v. Stolt-Nielsen SA, 387 F.3d 163, 171 (2d Cir. 2004)) (alterations
omitted). A court "should order arbitration of a dispute only where the court is satisfied that
neither the formation of the parties' arbitration agreement nor (absent a valid provision
specifically committing such disputes to an arbitrator) its enforceability or applicability to the
dispute is in issue." Granite Rock Co. v. Int'! Bhd. of Teamsters, 561 U.S. 287, 299-300 (2010)
(emphasis in original). "In this endeavor, as with any other contract, the parties' intentions
control." UBS Fin. Servs., Inc. v. W Va. Univ., 660 F.3d 643, 661 (2d Cir. 2011) (quoting Stolt-
Nielsen S.A. v. AnimalFeeds Int'! Corp., 559 U.S. 662, 682 (2010)).
Defendants first move under § 4 of the FAA, which allows pmiies to enforce arbitration
agreements by requesting that the district court issue an "order directing that such arbitration
proceed in the manner provided for in such agreement." 9 U.S.C. § 4. Alternatively, if the Court
will not compel arbitration, the Defendants seek a stay pursuant to § 3 of the FAA, which allows
the Court, "upon being satisfied that the issue involved in such suit or proceeding is referable to
arbitration," to "stay the trial of the action until such arbitration has been had in accordance with
the terms of the agreement." 9 U.S.C. § 3.
The Court's inquiry is essentially the same under both provisions. "The Second Circuit
has made clear that in determining both whether a stay under § 3 is appropriate and whether an
order compelling arbitration is appropriate under§ 4, the court must resolve four issues: (1)
whether the parties agreed to arbitrate; (2) the scope of that agreement; (3) if federal statutory
claims are asserted, whether Congress intended those claims to be nonarbitrable; and (4) if some
but not all claims are arbitrable, whether the remaining claims should be stayed pending
arbitration." SDD99, Inc. v. ASA Int'!, Ltd., 06-cv-6089 (CJS), 2007 WL 952046, at *5
6
(W.D.N.Y. Mar. 29, 2007) (citing JLM Indus., 387 F.3d at 169 (interpreting§ 4); Oldroyd v.
Elmira Sav. Bank, 134 F.3d 72, 75-76 (2d Cir. 1998) (interpreting § 3)).
III.
DISCUSSION
Of the Plaintiffs seven claims in this case, only two are presently being disputed in the
arbitration - the intentional and negligent infliction of emotional distress claims. Plaintiffs two
employment discrimination claims have not been raised in the arbitration and his three newest
contract claims concern an allegedly distinct October 2011 agreement which, Plaintiff alleges, is
unrelated to the Employment Agreement containing the arbitration clause. Defendants move to
compel Robinson to arbitrate these five claims as part of the arbitration he elected to commence
in December 2013.
A.
Defendants' Requested Relief Is Unavailable Under § 4 of the FAA
As a preliminary matter, the Court is unable to grant the Defendants their requested relief
under 9 U.S.C. § 4. As many courts have observed, that section paradoxically empowers district
courts to "direct[] that such arbitration proceed in the manner provided" in an agreement, but
with the caveat that the "hearing and proceedings, under such agreement, shall be within the
district in which the petition for an order directing such arbitration is filed." 9 U.S.C. § 4. This
proves problematic where the situs for arbitration specified in the contract falls outside the
judicial district in which the motion to compel is filed. Such is the case here. The Employment
Agreement specifies that "all claims, disputes and other matters in question between the parties
to this Agreement arising out of or in any way relating to this Agreement or the breach thereof,
shall be decided by an arbitration to be conducted in Nassau County, State of New York." See
Employment Agreement~ 11. Nassau County, New York is located within the jurisdiction of
our sister district, the Eastern District of New York.
7
Despite the geographic proximity between this Court and the specified location for
arbitration in this case, "courts within this Circuit consistently have construed the venue
limitation imposed by section 4 as a statutory restriction on the court's power, notwithstanding
the provisions of the arbitration agreement." Couleur Int'! Ltd. v. Saint-Tropez W, a Div. of
Cal(fornia Fashion Indus., Inc., 547 F. Supp. 176, 177-78 (S.D.N.Y. 1982). See also Nat'! City
Golf Fin. v. Higher Ground Country Club Mgmt. Co., 641 F. Supp. 2d 196, 202 (S.D.N.Y. 2009)
(finding the court "lack[ed] authority pursuant to 9 U.S.C. § 4 to compel arbitration outside its
district" where movant sought to compel arbitration in Arizona). Accordingly, the "Court will
consider Defendants' motion under Section 3 of the FAA where it more properly belongs."
Duran v. J Hass Grp. L.L.C., 10-cv-4538 (RRM) (SMG), 2012 WL 3233818, at *2-3 (E.D.N.Y.
June 8, 2012) affd, 531 F. App'x 146 (2d Cir. 2013). See also Symphony Fabrics Corp. v.
Knape!, 07-cv-6606 (GEL), 2008 WL 2332333, at *3 n.2 (S.D.N.Y. Jun. 2, 2008) (treating a
motion to compel arbitration under a contract contemplating arbitration in New Jersey as seeking
the only "available" remedies-dismissal or stay under§ 3). Moreover, "[a]lthough Section 3
contemplates only a stay of an action in favor of arbitration, district courts also have the
'discretion to dismiss-rather than stay-an action when all of the issues in it must be
arbitrated."' Duran, 2012 WL 3233818, at *3 (quoting Mi/grim v. Backroads, Inc., 142 F. Supp.
2d 471, 476 (S.D.N.Y. 2001), aff'd 91 Fed. App'x 702 (2d Cir. 2002)). See also Johnson v.
Tishman Speyer Props., L.P., 09-cv-1959 (WHP), 2009 WL 3364038, at *4 (S.D.N.Y. Oct. 16,
2009). Accordingly, the Court now resolves the four issues identified by the Second Circuit as
controlling whether this case is referable to arbitration, thus meriting a stay or dismissal under §
3.
B.
Plaintifrs Claims Are Referable to Arbitration Under the
Employment Agreement
8
To ascertain whether Plaintiffs claims are referable to arbitration under§ 3, the Court
must first "determine whether the parties agreed to arbitrate; second, it must determine the scope
of that agreement; third, if federal statutory claims are asserted, it must consider whether
Congress intended those claims to be nonarbitrable; and fourth, if the court concludes that some,
but not all, of the claims in the case are arbitrable, it must then decide whether to stay the balance
of the proceedings pending arbitration." Oldroyd, 134 F.3d at 75-76 (citing Genesco, Inc. v. T
Kakiuchi & Co., 815 F.2d 840, 844 (2d Cir. 1987)).
As to the first factor, the parties do not dispute the existence of their agreement to
arbitrate. The core dispute between the parties relates to the second issue - the scope of the
arbitral agreement. Defendants contend that the parties signed an intentionally broad arbitration
agreement, inclusive of "all claims, disputes and other matters in question between the parties to
th[ e] Agreement arising out of or in any way relating to this Agreement or the breach thereof."
See Employment Agreement i! 11. As Defendants correctly note, courts within this Circuit have
deemed similarly worded clauses to represent the "paradigm of a broad clause." Bulkenstein v.
Taptu, Inc., 14-cv-1812 (RWS), 2014 WL 5089385, at *3 (S.D.N.Y. Oct. 9, 2014) (quoting
Collins & Aikman Products Co. v. Building Systems, Inc., 58 F.3d 16, 20 (2d Cir. 1995)). If an
arbitration clause is deemed broad, it "creates a presumption of arbitrability which is only
overcome if it may be said with positive assurance that the arbitration clause is not susceptible of
an interpretation that [it] covers the asserted dispute." WorldCrisa Corp. v. Armstrong, 129 F.3d
71, 74 (2d Cir. 1997).
Plaintiff provides no such positive assurance. Robinson insists that his employment
discrimination claims "arise[] out of E-One [sic] violations of federal discrimination laws" and is
"actually about discriminatory treatment inflicted on Robinson by E-One during his
9
employment." Opp. 12. This argument is completely belied by the plain text of Plaintiff's
amended complaint, which states that Robinson's termination was
in complete violation of Robinson's Employment Contract. There
is no doubt that retaliation was the reason for the termination. Olsen
refused to keep Robinson in his contractual position at all costs. Fair
dealings and contract relations was [sic] not as important as firing
an African-American that complained about Olsen to the Human
Resources Department. Olsen made sure Robinson was gone within
72 hours of the completed discrimination investigation relating to
Olsen.
Am. Com pl.
~
17.
The Court adheres to the reasoning in Oldroyd, where the Second Circuit considered a
nearly identical issue to the one presented here. That case concerned an arbitral clause
making "[a]ny dispute, controversy or claim arising under or in connection with [Oldroyd's
employment agreement]" reforable to arbitration. Oldroyd, 134 F.3d at 76. The Second Circuit
similarly concluded that this broad language created a presumption of arbitrability. Id. The
plaintiff in Oldroyd, as here, "provide[d] only a conclusory allegation that he did not intend for
the arbitration clause in his employment agreement to encompass a claim for retaliatory
discharge." Id at 77. The panel concluded not only that this failed to overcome the presumption
of arbitrability, but also that "even without such a presumption, the contractual language is
sufficiently broad to encompass a claim of retaliatory discharge.'' Id. The appeals court found
''untenable Oldroyd's contention that a claim for retaliatory discharge does not constitute 'a
claim relating to' the agreement governing the terms and conditions of his employment." Id
Applying Oldroyd, this Court concludes, first, that Plaintiff has failed to present any reason to
disregard the presumption of arbitrability attaching to clauses such as the one here and, second,
that the plain text of the agreement is sufficiently broad to encompass possible claims of
retaliatory discharge.
10
Plaintiffs three new contract claims similarly fall within the scope of the arbitration
clause. Plaintiff contends that these new claims relate to a distinct, oral contract made between
Entertainment One and Robinson in October 2011 concerning his role as a music producer for
Light Records and therefore fall outside the scope of the Employment Agreement. See Opp. 19;
Robinson
Deel.~
7. But these claims also 'arise out of or relate to' the Employment Agreement
because they plainly implicate numerous provisions within that agreement. For instance, the
Employment Agreement, several times, disclaims the existence of any separate contract or
employment position for Robinson beyond the one contemplated in that agreement. The
Employment Agreement states that "[u]nless [Robinson] receives the prior ·written consent of
Entertainment One, Robinson shall not, during the term of this Agreement, engage in any other
business activities or enterprise whatsoever." See Employment Agreement~ 2 (emphasis added).
Further, the agreement states that it constitutes "the entire agreement of Entertainment One and
[Robinson]. Oral changes will have no effect. It may be altered only by a written agreement
signed by the party against whom enforcement of any waiver, change, modification, extension,
or discharge is sought." Id.
~
20.
Second, the Employment Agreement explicitly anticipated the sort of intellectual
property issues implicated by Robinson's new claim that he was entitled to an additional
producer's fee. The agreement explains that such intellectual property "shall be deemed Worksfor-Hirc" and "shall be owned exclusively throughout the world by Entertainment One in
perpetuity." Id.
i! 9.4.
Indeed, although Robinson claims the October 2011 oral agreement
entitled to him to executive producer royalties on top of his normal salary, the Employment
Agreement states that any intellectual property developed by Robinson "will be promptly
11
assigned by [Robinson] to the Entertainment One, all without any additional compensation
therefor." Id.
Courts have routinely concluded that arbitral agreements may cover separate agreements
or contracts that relate to the substance of the agreement containing the arbitral clause.
For
instance, in Doctor's Associates, Inc. v. Quinn the parties signed a written Franchise Agreement
containing an arbitration clause. 42 F. Supp. 2d 184, 187 (D. Conn.) ajj'd, 205 F.3d 1322 (2d
Cir. 1999). The plaintiff in that case sued on the basis of an alleged separate oral contract
governing loss sharing between the paiiies. Id. The Court concluded it was "hard to see how a
court could then forego [consideration of the written contract] in resolving the dispute over the
oral agreement." Id. Such is the case here. Because of the overlapping issues between
Plaintiff's new allegations and construction of the employment contract, adjudication of the
Plaintiff's rights under the alleged oral contract would plainly be impossible without reference to
the Employment Agreement. See also Int 'l Talent Grp., Inc. v. Copyright Mgmt., Inc., 629 F.
Supp. 587 (S.D.N.Y. 1986) (concluding that alleged agreement was subject to arbitration clause
in a separate agreement long as "it relates to the subject matter" of the agreement containing the
clause). Indeed, this is best evinced by Plaintiff's own email to Defendant Olsen, which insisted
on negotiation of the Employment Agreement for the very reason that Robinson was working
both in a managerial and production capacity at Light Records. See Olsen Deel., Ex. 1. Because
the issues raised by this alleged separate oral contract '"touch matters' covered by the parties'
[employment agreement] ... those claims must be arbitrated, whatever the legal labels attached
to them." Genesco, 815 F.2d at 846 (quoting Mitsubishi, 473 U.S. at 624 n.13).
Accordingly, the Court concludes that each of the claims raised by Plaintiff's amended
complaint fall within the scope of the arbitral clause contained in the Employment Agreement.
12
Indeed, concluding otherwise would require the Court to ignore the fact that Plaintiffs original
complaint, amended complaint, and arbitral complaint are virtually identical and concern the
same core factual narrative. See Olsen Deel., Exs. 1-3. Because Robinson has presented
essentially identical factual issues to both this Court and the arbitrator, the Court concludes that
the arbitral agreement encompasses all of the claims raised by Plaintiff in this case. See
Genesco, 815 F.2d at 846 ("In determining whether a particular claim falls within the scope of
the parties' arbitration agreement, we focus on the factual allegations in the complaint rather than
the legal causes of action asserted."); Better Benefits, Inc. v. Protective Life Ins. Co., 03-cv-2820
(LAP), 2004 WL 633730, at *4 (S.D.N.Y. Mar. 30, 2004) (party failed to overcome presumption
of arbitrability where "the claims and factual allegations asserted in the Complaint are identical .
. . to those pending in the arbitration").
The final two issues are quickly dispatched and similarly mandate arbitration of
Plaintiffs claims. As to the third issue, there is no real dispute that claims under Title VII and
the NYSHRL are arbitrable. See, e.g., Desiderio v. Nat'! Ass'n of Sec. Dealers, Inc., 191 F.3d
198, 206 (2d Cir. 1999) (discussing purpose and history of Title VII and concluding Congress
did not intend to preclude arbitrability); Johnson, 2009 WL 3364038, at *3 (citing Fletcher v.
Kidder, Peabody & Co., 81N.Y.2d623 (1993)) (race discrimination claims under the NYSHRL
are arbitrable). Finally, the Court need not consider the fourth issue because all of Robinson's
claims in this case are arbitrable under the Employment Agreement.
C.
Waiver and Unconscionability
Robinson argues that, even if the claims in his amended complaint are encompassed by
the arbitral clause in the Employment Agreement, the clause is unenforceable in this case
because he did not waive his right to pursue his Title VII claims in court and because
13
enforcement of the clause would be unconscionable. Neither of these arguments is availing to
Plaintiff.
Plaintiffs waiver argument rests entirely upon non-binding precedent that has been
repeatedly rejected by courts within this Circuit. Namely, Robinson cites Prudential Insurance
Co. ofAmerica v. Lai, 42 F.3d 1299, 1305 (9th Cir. 1994) for the proposition that an explicit
waiver of the right to a judicial forum or actual knowledge of such a waiver is required to
arbitrate a discrimination claim. As an initial matter, this rule has long been rejected in this
Circuit. See, e.g., Desiderio, 191 F.3d at 203 (agreeing with the view of the "majority of
circuits" and rejecting Lai); DeGaetano v. Smith Barney, Inc., 95-cv-1613 (DLC), 1996 WL
44226, at *7 (S.D.N. Y. Feb. 5, 1996) (noting that many courts within this district have expressed
disagreement with Lai); Maye v. Smith Barney Inc., 897 F. Supp. 100, 107 (S.D.N.Y. 1995)
("The reasoning of Lai has been criticized by courts in this and other Circuits as contrary to
Supreme Court precedent"); Rice v. Brown Bros. Harriman & Co., 96-cv-6326 (MBM), 1997
WL 129396, at *4 (S.D.N.Y. Mar. 21, 1997) (collecting cases rejecting Lai).
Moreover, this case is distinguishable from Lai. In that case the Ninth Circuit found that
the employees "were unaware that they signed any document that contained an arbitration clause
[and] were not otherwise on notice that they might be agreeing to arbitrate employment
disputes." Lai, 42 F.3d at 1303. Unlike in Lai, Robinson was not signing a form contract, but
rather negotiated the particular terms himself. See Olsen Deel., i! 6; Ex. 1. Moreover, whereas
the Lai plaintiffs were unaware that the clause required them to arbitrate employment disputes,
the arbitration clause at issue here was contained within an employment agreement and thus
obviously pertained to employment-related disputes, such as retaliatory or discriminatory
discharge. Finally, Robinson himself has already initiated arbitration on the very issues that he
14
now claims are non-arbitrable. His negligent and intentional infliction of emotional distress
claims presently in arbitration are premised on the same factual allegations that form the basis of
his Title VII and NYSHRL claims. In sum, "plaintiff's claim of ignorance as to the requirement
to arbitrate employment disputes is unpersuasive and does not vitiate h[is] agreement" with
Entertainment One. Schuetz v. CS First Boston Corp., 96-cv-5557 (DC), 1997 WL 452392, at *3
(S.D.N.Y. Aug. 8, 1997). See also Raiola v. Union Bank o.f Switzerland, LLC, 47 F. Supp. 2d
499, 506 (S.D.N. Y. 1999) (rejecting waiver argument where plaintiff "provide[ d] little basis to
counter the weight of authority that a pre-dispute agreement to arbitrate ... voluntarily entered
into by the Plaintiff, compels arbitration of Title VII and other employment claims.")
Plaintiffs unconscionability argument is premised on non-relevant, out of Circuit
precedent. As an initial matter, however, the Comi rejects the Defendants' argument that the
issue of unconscionability should be referred to the arbitrator. "It is clear that questions of
contractual validity relating to the unconscionability of the underlying arbitration agreement
must be resolved first, as a matter of state law, before compelling arbitration pursuant to the
FAA." Cap Gemini Ernst & Young, US., L.L.C. v. Nacke!, 346 F.3d 360, 365 (2d Cir. 2003).
See also Rent-A-Ctr., W, Inc. v. Jackson, 561 U.S. 63, 71 (2010) (holding that where a party
challenges the validity of the agreement to arbitrate, rather than the contract as a whole, the
federal court "must consider the challenge before ordering compliance with that agreement").
Accordingly, when an arbitration agreement does not contain "an antecedent agreement
delegating the question of the agreement's enforceability to an arbitrator," the question of
unconscionability is a question for the Court. Kuehn v. Citibank, NA., 12-cv-3287 (DLC), 2012
WL 6057941, at *3 (S.D.N.Y. Dec. 6, 2012) (noting that the Supreme Court, in Rent-a-Ctr.,
recognized the ability of parties to delegate "gateway" issues to the arbitrator). Cf Contee Corp.
15
v. Remote Solution, Co., Ltd., 398 F.3d 205, 209 (2d Cir. 2005) ("[W]e have held that 'the issue
of arbitrability may only be referred to the arbitrator if there is clear and unmistakable evidence
from the arbitration agreement, as construed by the relevant state law, that the parties intended
that the question of arbitrability shall be decided by the arbitrator.')
The question of unconscionability is governed by state law. See Washington v. William
Morris Endeavor Entm't, LLC, 10-cv-9647 (PKC) (JCF), 2011 WL 3251504, at *6 (S.D.N.Y.
July 20, 2011). The parties do not dispute that New York law governs the contract. See
Employment Agreement~ 11. Under New York law, "[a] determination of unconscionability
generally requires a showing that the contract was both procedurally and substantively
unconscionable when made ... " Washington, 2011WL3251504 at *6 (quoting Gillman v.
Chase Manhattan Bank. NA., 73 N.Y.2d 1, 10 (1988)). "The procedural element of
unconscionability concerns the contract formation process and the alleged lack of meaningful
choice; the substantive element looks to the content of the contract[, per se]." Ragone, 595 F.3d
at 121-22 (quoting State v. Wolowitz, 96 A.D.2d 47, 66 (N.Y. App. Div. 1983)). Furthermore,
the Supreme Court has emphasized that "a court may not rely on the uniqueness of an agreement
to arbitrate as a basis for a state-law holding that enforcement would be unconscionable." AT&T
Mobility LLC v. Concepcion, 131 S. Ct. 17 40, 174 7 (2011) (internal quotations removed). In
other words, the Court must apply New York's unconscionability standard to the arbitration
clause as it would any other contract clause.
Despite invoking the doctrine of unconscionability, Plaintiff does not attempt to fashion
an argument under New York law, instead relying on a melange of cases from outside this
Circuit and this state. The one relevant case cited to by Plaintiff concluded that an arbitration
clause was not unconscionable. See Desiderio, 191 F .3d at 207. Plaintiff has not alleged any
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procedural unconscionability such that "he lacked meaningful choice" in entering into the
contract and indeed it is hard to imagine how he could construct such an argument in light of the
fact he was already employed by Entertainment One for nearly six years before requesting that
they supply him with the very contract at issue. See Olsen Deel., Ex. 1; Am. Compl. iii! 6, 14.
Moreover, despite now claiming that the clause is unconscionable, Plaintiff himself invoked the
clause for his own benefit by commencing arbitration in December 2013. See Aaron Deel., Ex.
3. Accordingly, the Court finds no procedural defect in the negotiation of the arbitration clause.
See McNally Wellman Co., a Div. of Boliden Allis v. New York State Elec. & Gas Corp., 63 F.3d
1188, 1198 (2d Cir. 1995) (party possessed "meaningful choice" when it participated in the
drafting and negotiation of clause at issue).
Although Plaintiff's opposition does not phrase it in such language, the complaint that
Robinson is obligated to pay half the costs of the arbitration can be interpreted as alleging a form
of substantive unconscionability. See Opp. 16. However, this is again a puzzling argument due
to the fact that Plaintiff was the party who actually invoked the arbitration clause. "Mandatory
arbitration clauses that bind both parties are generally not substantively unconscionable."
Nichols v. Washington Mut. Bank, 07-cv-3216 (JG) (VVP), 2007 WL 4198252, at *8 (E.D.N.Y.
Nov. 21, 2007) (citing Desiderio, 191 F.3d at 207). Moreover, where "a party seeks to invalidate
an arbitration agreement on the ground that arbitration would be prohibitively expensive, that
party bears the burden of showing the likelihood of incurring such costs." Schatz v. Cellco
P'ship, 842 F. Supp. 2d 594, 598 (S.D.N.Y. 2012) (quoting Green Tree Financial Corp.Alabama v. Randolph, 531 U.S. 79, 92 (2000)). Although he claims it poses a financial hardship,
Plaintiff has not provided any relevant information regarding the expected cost of arbitration,
including its cost relative to the cost of litigation in this Court, and has therefore failed to meet
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this burden. See Hamerslough v. Hippie, 10-cv-3056 (NRB), 2010 WL 4537020, at *3-4
(S.D.N.Y. Nov. 4, 2010) ("The mere 'risk' of prohibitive costs is too speculative to justify the
invalidation of an arbitration agreement ... Here, plaintiff makes no showing whatsoever
regarding his ability to pay the fees and costs, the cost differential between arbitration and
litigation in court, or whether the cost differential is so substantial as to deter the bringing of the
claims.") (internal quotations removed). Indeed, Plaintiffs argument on this point is particularly
weak in light of the fact that it entirely neglects his own decision to commence both the arbitral
and court proceedings in New York, diminishing any differential in cost or logistical burden.
See Chestnut v. Whitehaven Income Fund I, LLC, 12-cv-8854 (PAC), 2014 WL 5388562, at *2-3
(S.D.N.Y. Oct. 23, 2014) ("Plaintiff focuses on the costs involved in filing for arbitration and
traveling to New York to arbitrate. The argument has no substance; after all, it was Plaintiff who
chose a New York court to initiate [his action.]") Accordingly, Plaintiff has demonstrated
neither procedural nor substantive unconscionability.
D.
Dismissal of the Case is Appropriate
Having concluded that the arbitral agreement is enforceable and that all of Plaintiffs
claims are encompassed within that agreement, "[t]here remains only to decide whether to stay
or dismiss the action." Duran, 2012 WL 3233818, at *5. In analogous cases, where arbitration
is set to take place in another judicial district and all claims between the parties are subject to that
arbitration, courts generally find "no useful purpose [that] will be served by granting a stay" and
therefore usually find that "dismissal is the appropriate remedy" under § 3 of the FAA. Id.
(citing Johnson, 2009 WL 3364038, at *4 (quotation marks omitted)). See also Mi/grim, 142 F.
Supp. 2d at 476 (concluding "dismissal of the complaint is appropriate" under§ 3 of the FAA
where "the parties' agreement to arbitrate encompasses all of the issues raised in [the]
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complaint"); Nulife Entm't, Inc. v. Torres, 698 F. Supp. 2d 409, 414 (S.D.N.Y. 2010) ("Because
all of the disputes raised in the plaintiffs complaint in this case are subject to arbitration and no
purpose will be served by a stay, the plaintiffs complaint is dismissed without prejudice.")
The Court agrees with the reasoning of these cases. Indeed, their reasoning applies with
particular force here because arbitration has already commenced and reached a relatively
advanced stage. See Aaron
Deel.~
7. Because all of Plaintiffs claims in the amended complaint
are encompassed within the enforceable arbitral agreement he negotiated with Entertainment
One, there is no purpose in staying this case. It is therefore dismissed without prejudice.
IV.
CONCLUSION
In sum, the Defendants' motion to compel arbitration under§ 4 of the FAA is DENIED.
However, their motion under§ 3 to stay or dismiss the case in favor of arbitration is GRANTED.
For the reasons discussed above, this case is DISMISSED without prejudice. This resolves Dkt.
No. 36. The Clerk of Court is directed to close the case.
SO ORDERED.
Dated:
, 2015
New York, New York
United States District Judge
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