Crispin Porter & Bogusky LLC et al v. Watson
Filing
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OPINION & ORDER re: 6 MISCELLANEOUS CASE INITIATING DOCUMENT - MOTION to Compel Respondent to Arbitrate. Other Court Name: United States District Court - District of Colorado. Other Court Case Number: 1:18-cv-01658 (STV). filed by Dusty Nelson, MDC Partners Inc., Crispin Porter & Bogusky LLC, Mitchell Gendel. For the reasons set forth above, Petitioners' motion to compel arbitration is GRANTED, and Petitioner's motion to dismiss the complaint and stay proceedi ngs is DENIED without prejudice. The Clerk of Court is respectfully directed to terminate the open motion at Document 6 and to close this case.SO ORDERED. (Signed by Judge Vernon S. Broderick on 10/10/2019) (rro) Transmission to Orders and Judgments Clerk for processing.
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
CRISPIN PORTER & BOGUSKY LLC, a
:
limited liability company; MDC PARTNERS :
INC., a corporation; MITCHELL GENDEL, :
:
as an individual and in his capacity as a
company officer; DUSTY NELSON, as an
:
individual and in her capacity as a company :
officer; and DOES 1 through 10 inclusive,
:
whose true names are unknown,
:
:
Petitioners, :
:
:
-against:
:
RALPH M. WATSON, an individual,
:
Respondent. :
:
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10/10/2019
18-MC-384 (VSB)
OPINION & ORDER
Appearances
Howard Jeffrey Rubin
Davis & Gilbert LLP
New York, New York
Counsel for Petitioners
Michael W. Ayotte
Law Offices of Michael W. Ayotte
Hermosa Beach, California
Counsel for Respondent
VERNON S. BRODERICK, United States District Judge:
Petitioners Crispin Porter & Bogusky LLC (“CP+B”), MDC Partners, Inc. (“MDC”),
Mitchell Gendel, and Dusty Nelson (collectively, “Petitioners”) initiated this miscellaneous
action to compel Respondent Ralph M. Watson (“Respondent”) to arbitrate claims alleged in a
lawsuit filed in the United States District Court for the District of Colorado (“Colorado Action”).
Before me is Petitioners’ motion to compel arbitration and to dismiss, or, in the alternative, to
1
stay the Colorado Action. For the reasons discussed below, Petitioners’ motion is GRANTED
IN PART and DENIED IN PART. Because Respondent’s claims fall within the scope of a valid
agreement to arbitrate, Petitioners’ motion to compel arbitration is GRANTED. Because I do not
have the authority to dismiss or stay the Colorado Action, Petitioners’ motion to dismiss or stay
that action is DENIED without prejudice.
I.
Background
Petitioner CP+B is an advertising agency and a wholly owned subsidiary of Petitioner
MDC, (Colo. Compl. ¶¶ 4–5); 1 Petitioner Gendel is general counsel of MDC, (id. ¶ 6); and
Petitioner Nelson is the global CFO of CP+B, (id. ¶ 7). Respondent was hired by Petitioner
CP+B as its Boulder Chief Creative Officer in approximately April 2014. (Id. ¶ 9.) CP+B
extended an offer of employment to Respondent on March 24, 2014. (Resp’t Decl. ¶ 7; see also
id. Ex. 1.)2 Shortly thereafter, CP+B sent Respondent an employment agreement, setting forth
the terms and conditions of Respondent’s employment (“Employment Agreement” or
“Agreement”). (See generally Emp’t Agr’t.) 3 Respondent signed and returned the Employment
Agreement to CP+B. (Resp’t Decl. ¶¶ 10–11; Emp’t Agr’t 18.) According to Respondent, the
Employment Agreement, dated April 2, 2014, was “fully executed.” (Resp’t Decl. ¶ 10.)
1
“Colo. Compl.” refers to the Amended Complaint for Age Discrimination; Reverse Sex Discrimination; Civil
Conspiracy; Defamation; Intentional Interference with Contract; Intentional Interference with Prospective Economic
Advantage; Intentional Infliction of Emotional Distress; Wrongful Termination in Violation of Public Policy; and
Breach of Contract, filed by Respondent in the United States District Court for the District of Colorado on July 19,
2018, a copy of which is attached as Exhibit B to the Rubin Declaration. (Doc. 7-2.) “Rubin Declaration” or
“Rubin Decl.” refers to the Declaration of Howard J. Rubin, filed August 23, 2018. (Doc. 7.)
2
“Respondent Declaration” or “Resp’t Decl.” refers to the Declaration of Ralph M. Watson in Support of His
Response to Petitioners’ Motion to Compel Arbitration, filed September 28, 2018. (Doc. 20-1.)
3
“Emp’t Agr’t” refers to the Employment Agreement, which is attached as Exhibit 2 to the Respondent Declaration,
filed September 28, 2018. (Doc. 20-3.)
2
Section 18 of the Employment Agreement sets forth the terms of the parties’ agreement
to arbitrate certain disputes (the “Arbitration Provision”). (Emp’t Agr’t 15–17.) Specifically,
part (a) of the Arbitration Provision provides:
If any dispute arises between the parties . . . including, but not limited to, any
dispute, controversy or claim arising out of, relating to, or in connection with this
Agreement (including, without limitation, any claim regarding or related to the
interpretation, scope, effect, enforcement, termination, extension, breach, legality,
remedies and other aspects of this Agreement or the conduct and communications
of the parties regarding this Agreement and the subject matter of this Agreement),
the exclusive remedy for resolving any such dispute . . . shall be arbitration at the
offices of JAMS, the Resolution Experts. . . . The prevailing party in any arbitration
shall be entitled to receive its reasonable attorneys’ fees and costs from the other
party(ies) as awarded by the arbitrator.
(Id. at 15–16.) Part (b) of the Arbitration Provision, which is entirely in bold text, states:
[Respondent] has read and understands this [Arbitration Provision] which discusses
arbitration. [Respondent] understands that by signing this Agreement,
[Respondent] agrees to submit any claims arising out of, relating to, or in
connection with this Agreement, or the interpretation, validity, construction,
performance, breach or termination thereof, or his employment or the termination
thereof, to binding arbitration . . . and relates to the resolution of all disputes relating
to all aspects of the employer/employee relationship, including but not limited to
the following:
(i)
Any and all claims for wrongful discharge of employment, breach of contract,
both express and implied; breach of the covenant of good faith and fair
dealing, both express and implied; negligent or intentional infliction of
emotional distress; negligent or intentional misrepresentation; negligent or
intentional interference with contract or prospective economic advantage; and
defamation;
(ii)
Any and all claims for violation of any federal, state or municipal statute,
including, without limitation, Title VII of the Civil Rights Act of 1964, . . .
the Age Discrimination in Employment Act of 1967, . . . and
(iii) Any and all claims arising out of any other Federal, state or local laws or
regulations relating to employment or employment discrimination.
(Id. at 16–17.)
In addition, Section 6(a) of the Employment Agreement discusses the termination of
Respondent’s employment, providing:
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In the event that [Respondent] is purportedly terminated for Cause and the arbitrator
appointed pursuant to [the Arbitration Provision] determines that Cause as defined
herein was not present, then such purported termination for cause shall be deemed
a termination without Cause pursuant to Section 6(b) and [Respondent’s] rights and
remedies will be governed by Section 7(b), in full satisfaction and in lieu of any
and all other or further remedies [Respondent] may have.”
(Id. at 5.) Finally, Section 7(b) of the Employment Agreement continues the discussion of
termination of Respondent’s employment, providing:
In the event of a termination of [Respondent’s] employment by [CP+B] without
Cause, [Respondent] shall be entitled to the following payments and benefits,
subject to any Offsets:
(i)
as liquidated damages, his applicable Base Salary compensation when
otherwise payable for a period commencing on the Termination Date and
ending six (6) months thereafter (the “Severance Period”), payable on the
regular salary payment dates during such period; and
(ii)
any unpaid reimbursable expenses outstanding as of the Termination Date.
(Id. at 6.)
In or around February 2018, after receiving anonymous allegations of sexual harassment
against Respondent, CP+B terminated Respondent’s employment for cause. (Id. ¶¶ 15–26.) On
July 19, 2018, Respondent filed the Colorado Action in the United States District Court for the
District of Colorado, bringing claims under the Age Discrimination in Employment Act of 1967
(‘ADEA”), 29 U.S.C. § 621, et seq., and Title VII of the Civil Rights Act of 1964 (“Title VII”),
42 U.S.C. § 2000e, et seq., as well as various common law claims. (See Colo. Compl. ¶¶ 34–
137.) On July 25, 2018, Petitioners filed a motion to compel arbitration in the Colorado Action.
(Pet’rs’ Mem. 7.) 4 Because the Arbitration Provision includes a requirement that “[s]uits to
4
“Pet’rs’ Mem.” refers to the Memorandum of Law of Petitioners Crispin Porter & Bogusky LLC, MDC Partners
Inc., Mitchell Gendel and Dusty Nelson in Support of Their Motion to Dismiss Respondent’s Amended Complaint,
or in the Alternative to Stay, and to Compel Arbitration, filed August 23, 2018. (Doc. 8.)
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compel or enjoin arbitration or to determine the applicability or legality of arbitration shall be
brought in the United States District Court, Southern District of New York,” (Emp’t Agr’t 16),
Respondent argued that Petitioners should have filed the motion in this court, (see Pet’rs’
Mem. 7). On February 12, 2019, the Colorado Action was administratively closed pending
resolution of the motion presently before me. See Watson v. Crispin Porter & Bogusky LLC, No.
18-cv-1658, Dkt. Entry 32 (D. Colo. Feb. 12, 2019).
II.
Procedural History
On August 22, 2018, Petitioners filed a motion to compel arbitration and to dismiss the
Colorado Action, or, in the alternative, to stay the Colorado Action, in the Southern District of
New York. (See Docs. 1, 6.) 5 In support of the motion, Petitioners submitted a declaration with
exhibits, (Doc. 7), and a memorandum of law, (Doc. 8). On September 14, 2018, Respondent
submitted a letter requesting that I adjourn consideration of Petitioners’ motion until after a
related motion was resolved in the Colorado Action. (Doc. 12.) Petitioners opposed the request
on September 18, 2018, (Doc. 16), and, later the same day, Respondent submitted an additional
letter in support of the request, (Doc. 17). On September 19, 2018, I entered an order denying
Respondent’s request because the motion in the Colorado Action did not ask the court to finally
decide the same issues in the motion before me. (Doc. 18.) In the same order, I extended
Respondent’s time to respond to Petitioners’ motion. (Id.) On September 28, 2018, Respondent
filed a memorandum in opposition, which attached an affidavit with exhibits. (Doc. 20.)
Petitioners filed a reply memorandum on October 11, 2018. (Doc. 21.) On February 13, 2019,
Petitioners submitted a letter informing me that the Colorado Action had been administratively
closed pending resolution of the motion presently before me. (Doc. 22.)
5
Due to a filing error, Petitioners refiled the initial motion, (Doc. 1), on August 23, 2018, (Doc. 6).
5
III.
Legal Standard
The Federal Arbitration Act (“FAA”), 9 U.S.C. § 1, et seq., provides that an arbitration
provision in a “contract evidencing a transaction involving commerce . . . shall be valid,
irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the
revocation of any contract.” 9 U.S.C. § 2. In creating “a body of federal substantive law of
arbitrability, applicable to any arbitration agreement within [its] coverage,” the FAA was “a
congressional declaration of a liberal federal policy favoring arbitration agreements,
notwithstanding any state substantive or procedural policies to the contrary.” Moses H. Cone
Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983); see also AT & T Mobility LLC v.
Concepcion, 563 U.S. 333, 346 (2011) (“[O]ur cases place it beyond dispute that the FAA was
designed to promote arbitration. They have repeatedly described the Act as ‘embod[ying] [a]
national policy favoring arbitration,’ . . . .”) (alteration in original) (quoting Buckeye Check
Cashing, Inc. v. Cardegna, 546 U.S. 440, 443 (2006)). The “principal purpose of the FAA is to
ensure that private arbitration agreements are enforced according to their terms.” Concepcion,
563 U.S. at 344 (citation omitted). Notwithstanding the strong policy in favor of arbitration
agreements, “‘a party cannot be required to submit to arbitration any dispute which he has not
agreed so to submit.’” In re Am. Express Fin. Advisors Sec. Litig., 672 F.3d 113, 127 (2d Cir.
2011) (quoting Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002)); see also
Concepcion, 563 U.S. at 339 (“[C]ourts must place arbitration agreements on an equal footing
with other contracts, and enforce them according to their terms.”) (internal citations omitted).
In determining whether claims are subject to arbitration, courts in this Circuit consider
“(1) whether the parties have entered into a valid agreement to arbitrate, and if so, (2) whether
the dispute at issue comes within the scope of the arbitration agreement.” Am. Express Fin.
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Advisors, 672 F.3d at 128. If these two conditions are met, the FAA “mandates that district
courts shall direct the parties to proceed to arbitration.” Dean Witter Reynolds, Inc. v. Byrd, 470
U.S. 213, 218 (1985). When determining whether the parties have entered into a valid
agreement to arbitrate, “courts should apply ordinary state-law principles that govern the
formation of contracts,” and evaluate the allegations “to determine whether they raise a genuine
issue of material fact.” Sacchi v. Verizon Online LLC, No. 14-CV-423, 2015 WL 765940, at *4
(S.D.N.Y. Feb. 23, 2015) (internal quotation marks and citations omitted).
IV.
Discussion
Respondent does not dispute that he signed the Employment Agreement, which included
the Arbitration Provision. 6 (See generally Resp’t’s Opp.) 7 He also does not dispute that his
claims against Petitioners fall within the scope of the Arbitration Provision, which covers any
dispute “arising out of, relating to, or in connection with [the Employment Agreement].” (See
Emp’t Agr’t 15; see generally Resp’t’s Opp.) 8 Rather, Respondent argues that the parties did not
6
Respondent asserts that he understood the initial offer letter to be the “actual contract” between CP+B and himself,
(Resp’t Decl. ¶ 9), even though the offer letter advised him that CP+B “will provide an employment agreement that
will spell out the terms of your employment,” (id. Ex. 1). Respondent also asserts that he believed signing the
Employment Agreement, which contained “boilerplate language,” was a “mere formality.” (Id. ¶¶ 10–11.)
According to Respondent, “[n]o one at CP+B discussed the Employment Agreement with [him], or recommended
that [he] consult with an attorney,” and that he “did [not] consult an attorney” or “knowingly agree to any limitation
of liability, or a cap of [his] contractual damages.” (Id. ¶ 11.) Although Respondent makes these factual assertions
in his declaration and memorandum, (id. ¶¶ 9–11; Resp’t’s Opp. 5), he makes no legal argument, including citations
to case law, that the Employment Agreement is not a valid contract based on those facts. To the contrary,
Respondent does not allege that any Petitioner committed a wrongful act so as to call the legality of the Employment
Agreement into question. Under the undisputed facts, Respondent is subject to the “general rule that ‘a party who
signs or accepts a written contract . . . is conclusively presumed to know its contents and to assent to them.’”
Marciano v. DCH Auto Grp., 14 F. Supp. 3d 322, 331 (S.D.N.Y. 2014) (omission in original) (quoting Gold v.
Deutsche Aktiengesellschaft, 365 F.3d 144, 149 (2d Cir. 2004)).
7
“Resp’t’s Opp.” refers to Respondent Watson’s Response to Petitioners’ Motion to Dismiss His Amended
Complaint, or in the Alternative to Stay, and to Compel Arbitration, filed September 28, 2018. (Doc. 20.)
8
Indeed, Respondent’s causes of action for wrongful discharge, (see Colo. Compl. ¶¶ 117–22), breach of contract,
(id. ¶¶ 123–27), intentional infliction of emotional distress, (id. ¶¶ 110–16), intentional interference with
prospective economic relations, (id. ¶¶ 98–109), defamation, (id. ¶¶ 67–87), violation of Title VII, (id. ¶¶ 46–56),
and violation of the ADEA, (id. ¶¶ 34–45), are explicitly enumerated among the types of claims that must be
submitted to arbitration, (see Emp’t Agr’t 16–17.)
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enter into a valid agreement to arbitrate. (See Resp’t’s Opp. 8–13.) Respondent bases his
validity challenge on two parts of the Employment Agreement: (1) the limitation on Petitioners’
liability imposed by Sections 6(a) and 7(b); and (2) the fee-shifting clause of the Arbitration
Provision. I consider each argument in turn.
A.
Liability Limitation
There are two types of validity challenges under § 2 of the FAA: “One type challenges
specifically the validity of the agreement to arbitrate,” and “[t]he other challenges the contract as
a whole, either on a ground that directly affects the entire agreement (e.g., the agreement was
fraudulently induced), or on the ground that the illegality of one of the contract’s provisions
renders the whole contract invalid.” Buckeye, , 546 U.S. at 444. “[O]nly the first type of
challenge is relevant to a court’s determination whether the arbitration agreement at issue is
enforceable.” Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63, 70 (2010). “‘[A]n arbitration
provision is severable from the remainder of the contract’ and so ‘a party’s challenge to another
provision of the contract, or to the contract as a whole, does not prevent a court from enforcing a
specific agreement to arbitrate.’” Arrigo v. Blue Fish Commodities, Inc., 408 F. App’x 480, 482
(2d Cir. 2011) (alteration in original) (quoting Rent-A-Ctr., 561 U.S. at 70).
Sections 6(a) and 7(b) fall outside the Arbitration Provision, which is unambiguously
titled “Arbitration.” (See Emp’t Agr’t 5–6, 15.) Nonetheless, Respondent argues that his
challenge based on Sections 6(a) and 7(b) falls into the first category of validity challenges
identified in Buckeye—challenges to the validity of the agreement to arbitrate—because Section
6(a) refers to an arbitrator and incorporates Section 7(b) by reference. (See Resp’t’s Opp. 8–10.)
Specifically, Section 6(a) states that, if Respondent is terminated for cause, and “the arbitrator
appointed pursuant to [the Arbitration Provision] determines” that Respondent was not
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terminated for cause, then the termination is determined to have been without cause, and
Respondent’s “rights and remedies will be governed by Section 7(b), in full satisfaction and in
lieu of any and all other or further remedies [Respondent] may have,” thereby limiting
Petitioners’ liability under any other legal claims. (Emp’t Agr’t 5.) Although Section 6(a)
mentions arbitration, it is “found outside of the arbitration provision, and, as such, has no bearing
on [CP+B] and [Respondent’s] otherwise valid agreement to arbitrate.” Paduano v. Express
Scripts, Inc., 55 F. Supp. 3d 400, 427 (E.D.N.Y. 2014) (citing Rent–A–Ctr., 561 U.S. at 70).
Respondent’s “argument that the Arbitration Provision is unconscionable because § [6(a)] of the
Agreement limits [CP+B’s] liability attacks the validity of the contract as a whole[,]” not the
validity of the Arbitration Provision itself, and so “this issue must . . . be decided by the
arbitrator.” Damato v. Time Warner Cable, Inc., No. 13–CV–994 (ARR)(RML), 2013 WL
3968765, at *8 (E.D.N.Y. July 31, 2013).
B.
Fee-Shifting
The fee-shifting clause, on the other hand, does appear in the Arbitration Provision. (See
Emp’t Agr’t 16.) Specifically, the Arbitration Provision includes a clause under which the
“prevailing party in any arbitration shall be entitled to receive its reasonable attorneys’ fees and
costs from the other party(ies) as awarded by the arbitrator.” (Id.) Respondent argues that this
provision is unconscionable because certain of his claims are brought under Title VII, (Resp’t’s
Opp. 20–21), under which “a plaintiff should not be assessed his opponent’s attorney’s fees
unless a court finds that his claim was frivolous, unreasonable or groundless.” Sista v. CDC Ixis
N. Am., Inc., 445 F.3d 161, 178 (2d Cir. 2006) (internal quotation marks omitted).
Respondent asserts such an “attorney fee-shifting clause has been found to be
unenforceable by New York courts.” (Resp’t’s Opp. 13.) However, the only authority identified
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by Respondent to support this assertion is Ragone v. Atl. Video at Manhattan Ctr., 595 F.3d 115
(2d Cir. 2010). In Ragone, “the Second Circuit suggested, but did not hold, that provisions of an
arbitration agreement, . . . [including] 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.” Arshad v. Transportation Sys., Inc., 183 F. Supp. 3d 442, 449 (S.D.N.Y.
2016) (emphasis added). Respondent does not identify a single federal or New York court that
has invalidated an agreement to arbitrate based on the inclusion of a fee-shifting clause.
Moreover, Respondent makes no attempt to explain why the fee-shifting clause invalidates the
Arbitration Provision as applied to his other claims (e.g., his state common law claims). Finally,
if an arbitrator were to award attorneys’ fees to a prevailing employer on a Title VII claim,
without first making a finding that the claim was frivolous, unreasonable or groundless, such an
award would be subject to attack on the grounds that the arbitrator had “exhibited a ‘manifest
disregard of law.’” Westerbeke Corp. v. Daihatsu Motor Co., 304 F.3d 200, 208 (2d Cir. 2002)
(quoting Wilko v. Swan, 346 U.S. 427, 436 (1953), overruled on other grounds, Rodriguez de
Quijas v. Shearson/Am. Express, Inc., 490 U.S. 477 (1989)).
C.
Motion to Dismiss or to Stay
Petitioners’ motion requests that I “dismiss[] or, in the alternative, stay[] the action
brought by [Respondent] against Petitioners in the United States District Court for the District of
Colorado.” (Pet’rs’ Mot. 1.) 9 Petitioners provide no authority demonstrating that I have the
jurisdiction to enter an order imposing upon the docket management of another United States
district court. To the contrary, under § 3 of the FAA, when a “suit or proceeding [is] brought in
any of the courts of the United States[,]” if there is a validly arbitrable issue, “the court in which
9
“Pet’rs’ Mot.” refers to Petitioners’ Notice of Motion, filed August 23, 2018. (Doc. 6.)
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such suit is pending . . . shall . . . stay the trial of the action until such arbitration has been had
. . . .” 9 U.S.C. § 3. The Colorado Action is not pending before me, so § 3 of the FAA does not
authorize me to stay it.
Accordingly, Petitioners’ motion to dismiss or to stay the Colorado Action is denied
without prejudice to refile the motion in the Colorado Action.
V.
Conclusion
For the reasons set forth above, Petitioners’ motion to compel arbitration is GRANTED,
and Petitioner’s motion to dismiss the complaint and stay proceedings is DENIED without
prejudice. The Clerk of Court is respectfully directed to terminate the open motion at Document
6 and to close this case.
SO ORDERED.
Dated: October 10, 2019
New York, New York
______________________
Vernon S. Broderick
United States District Judge
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