Arshad v. Transportation Systems, Inc. et al

Filing 25

MEMORANDUM AND ORDER: denying as moot 14 Motion to Dismiss; granting in part and denying in part 15 Motion to Compel Arbitration; granting 15 Letter Motion to Stay. For the foregoing reasons, defendants' motion to compel arbitration an d stay the action is granted in part in that the Court finds that the question of arbitrability must be decided by arbitration. The remainder of defendants' motion is denied as moot. The Clerk of the Court is directed to terminate the motions pe nding at ECF Nos. 14 and 15 and to mark this case stayed. Defendants are directed to file a brief letter every 60 days informing the Court of the status of the arbitration. The first such report shall be due June 24, 2016. SO ORDERED. (Signed by Judge Naomi Reice Buchwald on 4/25/2016) (ama)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
----------------------------------X
MUHAMMAD ARSHAD,
Plaintiff,
- against MEMORANDUM AND ORDER
TRANSPORTATION SYSTEMS, INC.,
EXECUTIVE TRANSPORTATION GROUP
LTD., LOVE LIMOUSINE NYC, LTD.
d/b/a BLUE LINE, JOHN ACIERNO,
JEFFREY ACIERNO, FRED SOLOMON,
and HAIDER “WALLY” HAIDERE,

15 Civ. 2138 (NRB)

Defendants.
----------------------------------X
NAOMI REICE BUCHWALD
UNITED STATES DISTRICT JUDGE

In this employment discrimination case, plaintiff Muhammad
Arshad alleges that defendants, who own and operate a for-hire
limousine transportation company, discriminated and retaliated
against

him

Presently

in

before

violation
the

of

Court

federal
is

and

New

defendants’

York

motion

City
to

law.

compel

arbitration and stay the case pursuant to Sections 3 and 4 of the
Federal Arbitration Act, or, in the alternative, to dismiss the
case pursuant to Federal Rule of Civil Procedure 12(b)(6).

For

the following reasons, defendants’ motion is granted in part in
that the Court finds that the matter must be sent to arbitration
for

a

determination

on

the

question

of

remainder of the motion is denied as moot.

arbitrability.

The

I. BACKGROUND1
Defendants

Transportation

Systems,

Inc.

and

Executive

Transportation Group Ltd. are in the business of “luxury car and
limousine transportation services,” also known as the “black car”
industry.

Compl. ¶¶ 11–12.

Plaintiff claims these defendants

run their black car business through a number of separately
incorporated companies, including defendant Love Limousine NYC,
Ltd. (“Love Limousine”), which does business under the name Blue
Line Corporate Car (“Blue Line”).

Id. ¶¶ 13, 16.2

The individual

defendants John Acierno, Jeffrey Acierno, and Fred Solomon are
each, according to plaintiff, managers and owners of the corporate
defendants.

Id. ¶¶ 22–23, 30–31, 38.

Blue Line operates by selling “subscriptions” or “franchises”
to individual drivers.

Id. ¶¶ 52, 55–56; Mem. 3.

In exchange for

certain payments to Blue Line, these drivers (“subscribers” or
“franchisees”) obtain the right to accept dispatches from Blue
Line’s

computerized

customers.

dispatch

network

and

drive

Blue

Line

Compl. ¶¶ 55, 62; Mem. 3.

1

Factual background is drawn principally from plaintiff’s amended
complaint, ECF No. 12 (“Compl.”). We also consider defendants’ memorandum of
law in support of their motion, ECF No. 18 (“Mem.”), plaintiff’s memorandum of
law in opposition, ECF No. 20 (“Opp’n”), defendants’ reply memorandum of law,
ECF No. 24 (“Reply”), and the documents submitted in support of the memoranda,
ECF Nos. 16–17, 21.

2

Defendants dispute plaintiff’s “conclusory assertions about the
relationship among these entities.” Mem. 20. This dispute is immaterial for
our present purposes.

2

On September 15, 2009, plaintiff entered into an agreement
with Love Limousine to purchase a Blue Line franchise.

Compl. ¶

62; see Decl. of Bradley J. Nash, Esq. in Supp. of Mot. to Compel
Arbitration (“Nash Decl.”) Ex. 2 (“Subscription Agreement”).

The

agreement provides, inter alia, that plaintiff “will abide by the
rules and regulations set forth in the Company’s manual of rules
and regulations.”

Subscription Agreement § 5.4.

This manual is

the “Blue Line Rulebook,” Compl. ¶ 64, a set of rules, procedures,
and penalties pertaining to Blue Line drivers.

See Nash Decl. Ex.

3 (“Blue Line Rulebook”).
The Blue Line Rulebook provides for the annual election of a
“Security Committee Chairman” by the franchisees.

Id. § 25.

The

Chairman, in turn, selects a “Security Committee” of franchisees,
id. § 25(h), which is responsible for enforcement of the rules.
The Security Committee adjudicates “slips,” or formal disciplinary
complaints.

Id. § 26(i).

A driver who is issued a slip and either

fails to attend an upcoming Security Committee meeting or fails to
pay a fine imposed by the Committee is “made blue”: temporarily
denied access to the Company’s dispatch system.
(h).

Id. §§ 27(f),

Throughout the time period relevant plaintiff’s claims,

defendant

Haider

Chairman.

Compl. ¶ 77.

The
clause.

“Wally”

Subscription

Haidere

Agreement

It states that:

3

was

also

the

Security

contains

an

Committee

arbitration

The sole and exclusive method of resolving any claim or
controversy
whatsoever
between
the
Company,
its
Affiliates, and their respective officers, directors,
other agents, employees and shareholders on the one hand
and the Subscriber . . . on the other hand, unless
otherwise specified in this Subscription Agreement,
shall be binding arbitration according to the procedures
set forth in this section. . . .
Subscription Agreement § 20(a).
are as follows.

The rules for arbitration

First, “[d]isputes which shall be subject to

binding arbitration shall include but shall not be limited
to” three categories of claims3 that must first be submitted
to the “Blue Line Appeals Committee”4 within 60 days of the
date the controversy arose.
must

demand

arbitration

Id.

After that, the subscriber

within

180

days

of

the

Appeals

Committee’s final determination.

Id.

The arbitration shall

be:
conducted by a single arbitrator and administered by the
American Arbitration Association under its Commercial
Arbitration Rules, or by such other independent and
impartial organization as may be designated by the
Company, and the determination rendered by the
arbitrator shall be final and may be entered in any court
having jurisdiction over the parties.
Id.

For claims outside of the three enumerated categories,

initial submission to the Blue Line Appeals Committee is not
3

The three categories are disputes involving: “(i) the amount of payment
for or deduction from Subscriber’s voucher payments; (ii) any monetary fine
assessed against a Subscriber pursuant to Rules and Regulations promulgated
under this Subscription Agreement; and (iii) any claim for discrimination of
work offered to Subscriber or Subscriber’s driver.” Id.

4

The Appeals Committee, composed of the Security Committee Chairman and
two representatives of management, also hears appeals of penalties above $1,000
imposed by the Security Committee. Blue Line Rulebook § 26(j).

4

required.

Id.

Instead, the claim must simply be submitted

to arbitration within 180 days of the date the controversy
arose.

Id.

Failure to abide by the time limitations for

submitting claims “shall be a complete bar to such claims”
“notwithstanding any longer period that may be provided by
statute

or

the

Commercial

Arbitration

Rules.”

Id.

Additionally,
each party shall bear its own expenses, including legal
fees; provided, however, that in the event the
Subscriber recovers more than two-thirds of the amount
in controversy, the Company shall reimburse the
Subscriber’s filing fees but no other expenses or fees.
An arbitrator shall have the authority to award
compensatory damages only.
Id.
The gravamen of the complaint is that Chairman Haidere -- who
is “Middle Eastern,” a “Shia . . . Muslim,” and “originally from
Afghanistan,” Compl. ¶¶ 43–44 -- discriminated against plaintiff
--

who

is

“Asian,”

a

“Sunni

Muslim,”

and

“originally

from

Pakistan,” Id. ¶¶ 5–6 -- on the basis of race, religion, and
national origin. Plaintiff alleges that, throughout 2013 and 2014,
Haidere

harassed

plaintiff

by

verbally

abusing

him,

issuing

baseless slips against him, and issuing a $200 fine against him in
excess of the $50 allowed by the Blue Line Rulebook.
126.

Id.

¶¶ 103–

Plaintiff further claims that when he complained about

Haidere’s harassment, he was underassigned work and ultimately
“made

blue”

on

March

6,

2014,

5

constituting

retaliation

and

constructive termination. Id. ¶¶ 156–176. Plaintiff brings claims
of hostile work environment and retaliation under 42 U.S.C. § 1981,
Title VII of the Civil Rights Act of 1964, and the New York City
Human Rights Law.

Defendants move to compel arbitration and stay

the case on the basis of the Subscription Agreement’s arbitration
provision, or, in the alternative, to dismiss the action pursuant
to Federal Rule of Civil Procedure 12(b)(6).5

ECF No. 15.

II. DISCUSSION
It is undisputed that the Subscription Agreement is valid and
enforceable; that it contains an arbitration clause; and that, in
general, discrimination and retaliation claims may be subject to
compulsory arbitration when an arbitration provision so provides.
Opp’n 9; Reply 1.
applicability
plaintiff’s

of

The only disputed issues relating to the
the

particular

arbitration

clause

are:

claims

within

the

fall

(1)
scope

whether
of

the

arbitration clause; and (2) whether an arbitrator or the Court
should resolve this question of arbitrability.
A. Legal Standards
The parties agree that the Federal Arbitration Act, 9 U.S.C.
§ 1 et seq., (“FAA”) governs our analysis of the Subscription
Agreement’s arbitration clause.

5

Defendant
Haidere,
who
is
codefendants’ motion. ECF No. 14.

Mem. 6; Opp’n 8.

separately

6

The standard

represented,

adopts

his

for review of petitions to compel arbitration pursuant the FAA, 9
U.S.C. § 4, is akin to the standard applied to motions for summary
judgment.
2003).

Bensadoun v. Jobe–Riat, 316 F.3d 171, 175 (2d Cir.

Thus, “where the undisputed facts in the record require

the matter of arbitrability to be decided against one side or the
other as a matter of law,” the court may grant or deny the petition
without a trial.

Wachovia Bank, Nat′1 Ass'n v. VCG Special

Opportunities Master Fund, Ltd., 661 F.3d 164, 172 (2d Cir. 2011).
The disposition of the present motion turns on the meaning of the
arbitration clause: on this issue, there are no material disputed
facts and the decisive question is purely legal.
The FAA “reflects an ‘emphatic federal policy in favor of
arbitral dispute resolution.’”

KPMG LLP v. Cocchi, 132 S. Ct. 23,

25 (2011) (quoting Mitsubishi Motors Corp. v. Soler Chrysler–
Plymouth, Inc., 473 U.S. 614, 631 (1985)). “Courts must rigorously
enforce arbitration agreements according to their terms.”

Am.

Express Co. v. Italian Colors Rest., 133 S. Ct. 2304, 2306 (2013)
(internal quotation marks omitted).

Yet because “the obligation

to arbitrate nevertheless remains a creature of contract,” “a party
cannot be required to submit to arbitration any dispute which he
has not agreed so to submit.” Louis Dreyfus Negoce S.A. v. Blystad
Shipping & Trading Inc., 252 F.3d 218, 224 (2d Cir. 2001) (internal
quotation marks omitted).

7

An initial question is, who decides whether a claim falls
within the scope of the mandatory arbitration clause?

There is a

general presumption that courts, not arbitrators, decide issues of
arbitrability.

Telenor Mobile Commc'ns AS v. Storm LLC, 584 F.3d

396, 406 (2d Cir. 2009).
with

“clear

and

However, this presumption is rebutted

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.”

Contec Corp. v. Remote Solution, Co., 398 F.3d

205, 208 (2d Cir. 2005) (emphasis removed) (internal quotation
marks omitted).6
arbitration

Clear and unmistakable evidence exists when an

clause

explicitly

delegates

arbitrability

determinations to the arbitrator, or when it incorporates by
reference arbitration rules that do so.

See Contec Corp., 398

F.3d at 208 (“[W]hen . . . parties explicitly incorporate rules
that empower an arbitrator to decide issues of arbitrability, the
incorporation serves as clear and unmistakable evidence of the
parties’ intent to delegate such issues to an arbitrator.”); Shaw
Group Inc. v. Triplefine Int'l Corp., 322 F.3d 115, 122 (2d Cir.

6

The Subscription Agreement is governed by New York law.
Subscription
Agreement § 15. “New York law . . . follows the same standard as federal law
with respect to who determines arbitrability: generally, it is a question for
the court unless there is a clear and unmistakable agreement to arbitrate
arbitrability.” Contec Corp., 398 F.3d at 208 n.1 (internal quotation marks
omitted); see Smith Barney Shearson Inc. v. Sacharow, 91 N.Y.2d 39, 45-46, 689
N.E.2d 884 (1997)).

8

2003); PaineWebber Inc. v. Bybyk, 81 F.3d 1193, 1202 (2d Cir.
1996).
If there is no such clear and unmistakable evidence, then the
court must resolve the issue of arbitrability.
“expresses

‘a

liberal

federal

policy

Given that FAA

favoring

arbitration

agreements . . . any doubts concerning the scope of arbitrable
issues should be resolved in favor of arbitration.’”

Louis

Dreyfus, 252 F.3d at 223 (quoting Moses H. Cone Mem'l Hosp. v.
Mercury Constr. Corp., 460 U.S. 1, 24–25 (1983)).
To determine whether a particular dispute falls within the
scope of an agreement’s arbitration clause, the Second Circuit has
prescribed a three-part inquiry.

Id. at 224.

First, a court

should classify the arbitration clause as broad or narrow.

Id.

Second, if the clause is narrow, “the court must determine whether
the dispute is over an issue that is on its face within the purview
of the clause,” or, instead, over a “collateral matter” that “will
generally be ruled beyond its purview.”
arbitration

clause

is

broad,

“there

Id.

arises

a

Third, if the
presumption

of

arbitrability and arbitration of even a collateral matter will be
ordered

if

the

claim

alleged

implicates

issues

of

contract

construction or the parties’ rights and obligations under it.”
Id. (internal quotation marks omitted).

An arbitration clause is

broad if “the language of the clause, taken as a whole, evidences
the parties’ intent to have arbitration serve as the primary

9

recourse for disputes connected to the agreement containing the
clause.”

Id. at 225.

It is narrow if the language suggests

“arbitration was designed to play a more limited role in any future
disputes.”

Id.

B. Analysis
We find clear and unmistakable evidence that the Subscription
Agreement’s

arbitration

provision

delegates

the

question

of

arbitrability to the arbitrator.

Specifically, it requires the

arbitration

by

to

be

“administered

the

American

Arbitration

Association under its Commercial Arbitration Rules.”
the

American

Arbitration

Association

(“AAA”)

Rule 7 of
Commercial

Arbitration Rules, in turn, states with respect to jurisdiction
that “[t]he arbitrator shall have the power to rule on his or her
own jurisdiction, including any objections with respect to the
existence, scope or validity of the arbitration agreement.”
Commercial Arbitration Rules, R-7(a).
repeatedly

held

this

arrangement

to

AAA

The Second Circuit has
clearly

and

unmistakably

indicate the parties’ intent to delegate the issue of arbitrability
to an arbitrator.

See Contec Corp., 398 F.3d at 208; Shaw Group,

322 F.3d at 122; PaineWebber Inc., 81 F.3d at 1202.

The same

result obtains here.
We find additional support in the expansive breadth of the
arbitration provision, which imposes mandatory binding arbitration
as “[t]he sole and exclusive method of resolving any claim or

10

controversy whatsoever” between the parties.
Inc.,

81

F.3d

at

1199–1200

(concluding

See PaineWebber

provision

requiring

arbitration of “any and all controversies” reflects a “broad grant
of power to the arbitrators” and clearly evidences “that the
parties intended to arbitrate issues of arbitrability”); PRL USA
Holdings, Inc. v. United States Polo Ass'n, Inc., No. 14-cv-764
(RJS), 2015 WL 1442487, at *4 (S.D.N.Y. Mar. 27, 2015) (concluding
arbitration clause’s “broad language” and its incorporation by
reference of AAA’s Commercial Arbitration Rules constitutes “clear
and unmistakable evidence of the parties’ intent to have an
arbitrator decide the arbitrability of their disputes”).
For

these

reasons,

we

conclude

that

the

Subscription

Agreement reserves the question of whether Arshad’s employment
discrimination claims are subject to mandatory arbitration for the
arbitrator to decide, not this Court.

Accordingly, defendants’

motion to compel arbitration is granted so that the question of
arbitrability may be presented to the arbitrator.

The Second

Circuit has held that when “all of the claims in an action have
been referred to arbitration and a stay requested,” the district
court must stay an action instead of dismissing it. Katz v. Cellco
P'ship, 794 F.3d 341, 347 (2d Cir. 2015), cert. denied, 136 S. Ct.
596 (2015).

Therefore, the action is stayed.

We additionally note that if this Court reached the merits of
whether Arshad’s claims fall under the Agreement, we would conclude

11

that they do, and we would grant defendants’ motion to compel
arbitration on this additional ground.
The arbitration clause is undoubtedly broad.

It reaches “any

claim or controversy whatsoever” (subject to a list of three
enumerated exceptions), a broad phrase indicating the “parties’
intent to have arbitration serve as the primary recourse for
disputes connected to the agreement.”
225.

Louis Dreyfus, 252 F.3d at

See Collins & Aikman Prods. Co. v. Bldg. Sys., Inc., 58 F.3d

16, 20 (2d Cir. 1995) (an arbitration clause covering “any claim
or controversy arising out of or relating to the agreement” is
“the paradigm of a broad clause” (brackets omitted)); Alghanim v.
Alghanim, 828 F. Supp. 2d 636, 652 (S.D.N.Y. 2011) (same).
therefore triggers a presumption favor of arbitrability.
context,

broad

discrimination

arbitration
claims

arising

provisions
out

of

It

In this

encompass
a

statutory

putative

employment

relationship, even if not explicitly stated in the arbitration
clause.

See Oldroyd v. Elmira Sav. Bank, FSB, 134 F.3d 72, 76–77

(2d Cir. 1998) (holding retaliatory discharge claim within scope
of arbitration clause covering “any, dispute controversy or claim
arising

under

or

in

connection

with

Oldroyd’s

employment

agreement” (brackets omitted)), abrogated on separate grounds by
Katz, 794 F.3d at 347; Rajjak v. McFrank & Williams, No. 01 CIV
0493 LAP, 2001 WL 799766, at *2–3, *5 (S.D.N.Y. July 13, 2001)

12

(collecting cases and granting motion to compel arbitration of
Title VII and New York state discrimination claims).
We reject plaintiff’s claim that the arbitration provision is
narrow because it enumerated three categories of disputes that it
“shall include but shall not be limited to,” none of which refer
to civil rights claims.

Opp’n 10.

First, the phrase “including

but not limited to” is “unambiguously exemplary, rather than
exclusionary.”

World Props., Inc. v. Arlon, Inc., 663 F. Supp. 2d

98, 104 (D. Conn. 2009).

Adopting plaintiff’s interpretation,

which would cast doubt on the arbitrability of any claim not
explicitly named, would not only run headlong into the presumption
in favor of arbitrability, but also render the provision’s broad
first sentence meaningless, an unacceptable result under basic
contract law.

See Manley v. AmBase Corp., 337 F.3d 237, 250 (2d

Cir. 2003) (“New York law . . . disfavors interpretations that
render

contract

provisions

meaningless

or

superfluous.”).

Moreover, the clause appears to enumerate this list not to limit
the scope of arbitration, but to impose the additional procedural
requirement of first submitting these claims, and only these
claims, to the Appeals Committee.
We also reject plaintiff’s claim that the instant dispute is
one of the three types of claims excluded by the arbitration
clause.

Opp’n 12.

discrimination

Plaintiff contends that because defendants’

culminated

in

his

13

being

“made

blue,”

he

was

constructively discharged; therefore, his complaint raises claims
“arising

from

or

in

connection
which

with
are

the

termination

excluded

from

of

the

Subscription

Agreement,”

mandatory

arbitration.

However, even accepting as true the facts alleged in

the complaint, Arshad’s temporary sanction did not terminate the
Subscription Agreement.

See Compl. ¶¶ 168–169, 176, 188 (alleging

Arshad was “made blue”); Blue Line Rulebook at 4 (defining “blue”
as “[t]emporary denial of a unit’s access to the Company’s dispatch
system”).

See also Compl. ¶¶ 87–88 (distinguishing the penalty

of “being made ‘blue’” from “being ‘expelled’ from Blue Line”).
Instead, it appears that had plaintiff paid the $200 fine levied
against him, he could have continued to work and also pursued his
discrimination claims through arbitration.
Plaintiff’s remaining arguments are similarly unavailing.
Plaintiff cites White v. Cantor Fitzgerald, L.P., 393 F. App’x 804
(2d Cir. 2010) (summary order), and the related case Dunloy v. BGC
Fin., L.P., No. 12 Civ. 1253 (NRB), 2012 WL 6700070 (S.D.N.Y. Dec.
19 2012), as examples in which an arbitration clause’s failure to
explicitly discuss employment discrimination claims supported the
conclusion that it did not cover those claims.
however,
Employment

“the

omission

Agreement

of

[was]

discrimination
significant

in

In those cases,
claims

from

comparison

to

the
the

explicit inclusion of such claims” in a prior arbitration provision
that had been superseded. Dunloy, 2012 WL 6700070, at *3 (emphasis

14

added). Moreover, in those cases, the employer conceded it neither
intended nor drafted the arbitration clause to include employment
discrimination claims.

Id.

No such facts are present here.

Finally, we reject the claim that the arbitration provision
is unconscionable under New York law.

Opp’n 17.

Plaintiff relies

on Ragone v. Atl. Video at Manhattan Ctr., 595 F.3d 115, 123–25
(2d Cir. 2010), in which the Second Circuit suggested, but did not
hold, that provisions of an arbitration agreement (specifically
(1) a 90-day limitations period for demanding arbitration and (2)
a fee-shifting provision requiring the award of attorney’s fees to
the prevailing party) might be substantially unconscionable as
applied to certain discrimination claims.

Because the defendants

in Ragone agreed to waive the offending provisions, the Court,
citing New York law, enforced the arbitration agreement excluding
those provisions.

Id. at 124–25.

Ragone therefore offers no help to plaintiff here.
because

different

arbitration

factually inapposite.

terms

are

at

issue,

First,

Ragone

is

The Subscription Agreement here imposes a

180-day limitation period and a rule that each side must generally
bear its own fees and expenses.

Plaintiff, who incorrectly claims

that “[t]he Arbitration Provision at issue here contains the same
unconscionable clauses at issue in Ragone,” Opp’n 20, offers no
analysis as to how these less harsh terms “act ‘as a prospective
waiver of a party’s right to pursue statutory remedies,’” Ragone,

15

595 F.3d at 125 (quoting Mitsubishi Motors Corp., 473 U.S. at 637
n.19).

Second, Ragone is clear that even if an arbitration

agreement contains unconscionable terms, the appropriate remedy is
not to invalidate the agreement to arbitrate but to disregard the
offending terms. Id. at 124; see Schreiber v. K–Sea Transp. Corp.,
9 N.Y.3d 331, 341, 879 N.E.2d 733 (2007).

And, as in Ragone,

defendants here have agreed to waive any arbitration terms to the
extent they are incompatible with Title VII’s statutory regime.
Reply 7.

Thus, even if the arbitration clause at issue contained

substantively

unconscionable

provisions,

invalidation

of

the

entire agreement to arbitrate would be inappropriate.
For these, reasons, were the question of arbitrability before
the Court, we would decide that the instant claims and dispute are
within the scope of the parties’ agreement to arbitrate.7

III. CONCLUSION
For

the

foregoing

reasons,

defendants’

motion

to

compel

arbitration and stay the action is granted in part in that the
Court finds that the question of arbitrability must be decided by
arbitration.
moot.

The remainder of defendants’ motion is denied as

The Clerk of the Court is directed to terminate the motions

pending at ECF Nos. 14 and 15 and to mark this case stayed.

7

We do not reach defendants’ request, in the alternative, that the
complaint be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(6).

16

Defendants

are

directed

to

f1le

a

brief

letter

every

inform1ng the Court of the status of the arbitration.

60

days

The first

such report shall be due June 24, 2016.
SO ORDERED.

Dated:

New York, New York
April 25, 2016

NAOMI REICE BUCHWALD
UNITED STATES DISTRICT JUDGE

17