Jung v. Skadden, Arps, Slate Meagher & Flom, LLP et al

Filing 14

Jung v. Skadden, Arps, Slate Meagher & Flom, LLP et al

Doc. 14

Case 2:05-cv-04286-CM

Document 14

Filed 12/27/2005

Page 1 of 23

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK ---------------------------------x - ONATHAN JUNG, J : Plaint iff, : - against : SKADDEN, ARPS, SLATE, MEAGHER & FLOM, LLP, : Defendant. : ---------------------------------x -

05-CV-4286 (MBM) ECF Case

DEFENDANT'S REPLY MEMORANDUM OF LAW IN FURTHER SUPPORT OF ITS MOTION TO COMPEL ARBITRATION AND STAY THIS ACTION

SKADDEN, ARPS, SLATE, MEAGHER & FLO M LLP
ATTORNEYS FOR DEFENDANT SKADDEN, ARPS, SLATE, MEAGHER & FLO M LLP FOUR TIMES SQUAR E BOROUGH OF MANHATTAN CITY OF NEW YORK NEW YORK 10036-6522 [phone]

Dockets.Justia.com

Case 2:05-cv-04286-CM

Document 14

Filed 12/27/2005

Page 2 of 23

TABLE OF CONTENTS TABLE OF AUTHORITIES ........................................................................................... ii INTRODUCTION .......................................................................................................... 1 STATEMENT OF FACTS .............................................................................................. 3 ARGUMENT .................................................................................................................. 5 POINT I UNDER THE APPLICABLE STANDARD, ANY DOUBT CONCERNING A WAIVER OF THE RIGHT TO ARBITRATE MUST BE RESOLVED IN FAVOR OF ARBITRATION .................................. 5 POINT II THE FIRM DID NOT WAIVE ITS RIGHT TO COMPEL ARBITRATION OF MR. JUNG'S CLAIMS ....................................................... 7 A. The Amount Of Time Which Elapsed Fro m The Filing Of The Complaint To The Filing Of The Instant Motion To Compel Arbitration Does Not Support A Finding Of Waiver.......................................................................................... 7 The Parties Have Not Engaged In The Lit igat ion Of Substant ial Issues Going To The Merits Which Could Support A Waiver Of The Firm's Right To Arbitratio n ................. 8 1. 2. C. The Right To Arbitration Is Not Waived By Filing A Rule 12(b)(6) Motion To Dismiss .................................. 8 A Party Ordinarily May Not Waive Its Right To Arbitration Unt il It Files An Answer On the Merits ......... 11

B.

Mr. Jung Has Not Suffered The Prejudice Necessary To Find That The Firm Waived Its Right To Arbitrate ..................... 12

POINT III THE FIRM HAS NOT ENGAGED IN IMPERMISSIBLE FORUM AND LAW SHOPPING ............................................................................................. 18 CONCLUSION ............................................................................................................. 19

i

Case 2:05-cv-04286-CM

Document 14

Filed 12/27/2005

Page 3 of 23

TABLE OF AUTHORITIES CASES PAGE(S)

Becker v. DPC Acquisit io n Corp., No. 00 Civ. 1035, 2002 WL 1144066 (S.D.N.Y. May 30, 2002)............................................................................ passim Brill v. Prudent ial-Bache Securit ies, Inc., No. 84 Civ. 0846, 1986 WL 6787 (S.D.N.Y. June 13, 1986)..................................................................................... 6 Chamo is v. Countrywide Ho me Loans, Nos. 02 Civ. 9550 and 02 Civ. 9553, 2003 WL 23022033 (S.D.N.Y. Dec. 29, 2003)...................................... 1, 6, 11, 12 D.H. Blair & Co., Inc. v. Johnson, No. 95 Civ. 3463, 1995 WL 422162 (S.D.N.Y. July 18, 1995) ................................................................................... 18 Dialog Group, Inc. v. Eaker, No. 04 Civ. 3498, 2004 WL 1660604 (S.D.N.Y. July 23, 2004) .................................................................................................... 14 EEOC v. Waffle House, Inc., 534 U.S. 279 (2002) ........................................................ 13 Genesco, Inc. v. T. Kakiuchi & Co., Ltd., 815 F.2d 840 (2d Cir. 1987) ........................... 1 Hunt v. Mobil Oil Corp., 557 F. Supp. 368 (S.D.N.Y. 1983) ......................................... 14 In re HBLS, L.P., No. 01 CIV. 2025, 2001 WL 1490696 (S.D.N.Y. Nov. 21, 2001)................................................................................................. 7, 8 Interstate Securit ies Corp. v. Siegel, 676 F. Supp. 54 (S.D.N.Y. 1988) .......................... 10 Kramer v. Hammo nd, 943 F.2d 176 (2d Cir. 1991) ....................................................... 15 Leadertex, Inc. v. Morganton Dyeing & Finishing Corp., 67 F.3d 20 (2d Cir. 1995)...................................................................... 5, 6, 12, 16 Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1 (1983) ................................................................................................ 5 Rush v. Oppenheimer & Co., 779 F.2d 885 (2d Cir. 1985) ............................. 7, 10, 12, 14 S & R Co. of Kingston v. Latona Trucking, Inc., 159 F.3d 80 (2d Cir. 1998)............... 6, 7 Scott v. Merrill Lynch, Pierce, Fenner & Smit h, Inc., No. 89 Civ. 3749, 1992 WL 245506 (S.D.N.Y. Sept. 14, 1992) .................................................. 9, 10 Sweater Bee by Banff, Ltd. v. Manhattan Industries, Inc., 754 F.2d 457 (2d Cir. 1985) ................................................................................. 5, 9, 13, 17, 19

ii

Case 2:05-cv-04286-CM

Document 14

Filed 12/27/2005

Page 4 of 23

Teltronics Services, Inc. v. L M Ericsson Teleco mmunicat ions, Inc., 642 F.2d 31 (2d Cir. 1981) ..................................................................................... 8, 9 Thomas v. A.R. Baron & Co., Inc., 967 F. Supp. 785 (S.D.N.Y. 1997)............................ 8 Thyssen, Inc. v. Calypso Shipping Corp., S.A., 310 F.3d 102 (2d Cir. 2002) .................................................................................................... 17 U.S. Offshore, Inc. v. Seabulk Offshore, Ltd., 753 F. Supp. 86 (S.D.N.Y. 1990) ................................................................................................................. 18 STATUTES PAGE(S)

9 U.S.C. §§ 1-16 ............................................................................................................. 1

iii

Case 2:05-cv-04286-CM

Document 14

Filed 12/27/2005

Page 5 of 23

Defendant Skadden, Arps, Slate, Meagher & Flo m LLP respectfully submit s this reply memorandum o f law in further support of its Motion to Compel Arbitration and Stay the Instant Act ion pursuant to the Federal Arbitrat ion Act, 9 U.S.C. §§ 1 et seq.1 INTRODUCTION As fully established in the Moving Brief, and as conceded by Plaint iff in the Opposit ion Brief, the claims brought by Mr. Jung in this act ion are arbitrable because: (1) (2) (3) Mr. Jung signed the Arbitrat ion Agreement as a condit io n of his emplo yment with the Firm; By its terms, the Arbitration Agreement explicit ly covers all o f the claims asserted by Mr. Jung; and Mr. Jung's Tit le VII, NYSHRL and NYCHRL claims are not subject to any congressio nal except ions fro m arbitrabilit y.

See Genesco, Inc. v. T. Kakiuchi & Co., Ltd., 815 F.2d 840, 844 (2d Cir. 1987) (setting forth the factors to be utilized when assessing a motion to compel arbitrat ion and stay proceedings); Chamo is v. Countrywide Home Loans, Nos. 02 Civ. 9550 and 02 Civ.

1

All defined terms in the Moving Brief are incorporated herein. "Moving Brief" and "D. Br." refer to the Memorandum o f Law in Support of Defendant's Motion to Compel Arbitration and Stay this Action dated November 14, 2005; "Schwartz Decl." refers to the Declaration o f David E. Schwartz dated November 14, 2005; "Opposit ion Brief" and "P. Br." refer to the Memorandum of Law in Support of Plaint iff's Opposit ion to Defendant's Motion to Compel Arbitrat ion and Stay this Act ion dated December 5, 2005; "MTD Brief" and "Motion to Dismiss Brief" refer to the Memorandum o f Law in Support of Defendants' Motion to Dismiss the First, Third, Fourth and Sixth Causes o f Act ion in Plaint iff's Co mplaint dated June 10, 2005; "Co mplaint" refers to Plaint iff's Co mplaint dated April 29, 2005; "Amended Complaint" refers to Plaint iff's Amended Co mplaint dated October 28, 2005; "October 20 Decisio n" refers to this Court's decision dated October 20, 2005 on Defendants' motion to dismiss the first, third, fourth and sixth causes o f action in the Complaint. For the Court's convenience, copies o f all unreported decisio ns referred to herein are submitted in an acco mpanying Compendium o f Unreported Cases.

1

Case 2:05-cv-04286-CM

Document 14

Filed 12/27/2005

Page 6 of 23

9553, 2003 WL 23022033, at *2-3 (S.D.N.Y. Dec. 29, 2003) (Mukasey, J.) (compelling arbitration of plaint iffs' Tit le VII and NYSHRL claims). The Opposition Brief fails to make even one argument showing that Mr. Jung's claims are not generally arbitrable. Indeed, Mr. Jung concedes that "[h]ad Defendants filed the instant motion simultaneously with [its] FRCP Rule 12(b)(6) mot ion," this Court "would have stayed the action pending the outcome of the arbitration."2 (P. Br. at 5.) Further emphasizing this concessio n, Plaint iff argues that had the Firm not filed a motion under Rule 12(b)(6) of the Federal Rules of Civil Procedure, this act ion would be "an otherwise arbitrable case." (P. Br. at 11 (emphasis added).) Plaint iff's so le content ion in opposing the instant Motion to Compel Arbitration and Stay this Action is that the Firm supposedly waived its right to arbitrate by filing a Rule 12(b)(6) motion to dismiss. However, Plaint iff builds this argument through a series of quotes ripped out of context from cases and false analogies. Plaint iff has not cited a single case in which the filing of a mot ion to dismiss standing alo ne has effectuated a waiver of the right to arbitrate. In fact, the clear and overwhelming case law in the Second Circuit conclusively establishes that Plaint iff's posit ion that a Rule 12(b)(6) motion to dismiss const itutes a waiver of the right to compel arbitrat ion is completely wrong. See, e.g., Becker v. DPC Acquisit io n Corp., No. 00 Civ. 1035, 2002 WL 1144066, at *13 (S.D.N.Y. May 30, 2002) ("[T]he Second Circuit has held that a party lit igat ing a motion to dismiss 'does not waive the right to arbitrate.'" (quoting Rush v. Oppenheimer & Co., 779 F.2d 885, 888 (2d Cir. 1985) (holding defendants had not
2

Plaint iff incorrectly refers throughout the Opposition Brief to "Defendants" rather than to "Defendant." There is only one defendant in this case, Skadden, Arps. The Firm's Treasurer, Susan Dornfeld, who was named as a defendant in the Complaint, is no longer a defendant in this case.

2

Case 2:05-cv-04286-CM

Document 14

Filed 12/27/2005

Page 7 of 23

waived their right to arbitrate by participating in eight months of lit igat ion, taking extensive discovery and bringing a motion to dismiss before invoking the arbitrat ion clause))). STATEMENT OF FACTS Mr. Jung mischaracterizes the proceedings to create the appearance that the Firm improperly delayed making the instant Motion to Compel Arbitrat ion and Stay this Act ion. In fact, the Firm did not delay in making this motion, as demonstrated by the fo llo wing relevant dates in this act ion: April 29, 2005: Plaint iff filed the Complaint. (P. Br. at 3.) June 10, 2005: The Firm filed a Rule 12(b)(6) motio n to dismiss the Tit le VII and NYCHRL claims in the Co mplaint (P. Br. at 4) and expressly reserved its right to arbitrate. (D. Br. at 6; MTD Brief at 1 n.2.) July 29, 2005: The parties co mpleted briefing the mot ion to dismiss. October 20, 2005: This Court granted the motion to dismiss but also granted Plaint iff leave to file an amended co mplaint. (D. Br. at 7; October 20 Decisio n at 2, 4.) The Firm requested that Mr. Jung vo luntarily submit his claims to arbitration. (P. Br. at 4; Schwartz Decl. Ex. E.) October 28, 2005: Mr. Jung rejected the Firm's request that he comply with the Arbitration Agreement and filed the Amended Co mplaint. (P. Br. at 4; Schwartz Decl. Ex. F.) November 14, 2005: The Firm filed the instant Motion to Compel Arbitration and Stay this Action. In addit ion, the Opposit ion Brief misstates a number of facts which, for clarit y sake, should be corrected: First, Plaint iff repeatedly states in the Opposition Brief that the Firm mo ved to dismiss the Complaint. (See, e.g., P. Br. at 4.) The Firm did not move to

3

Case 2:05-cv-04286-CM

Document 14

Filed 12/27/2005

Page 8 of 23

dismiss the ent ire Co mplaint. Rather, the Firm moved to dismiss four of six causes of action because those four causes of action failed to state claims upon which relief could be granted. (See MTD Brief; D. Br. at 7; October 20 Decisio n at 1.) Accordingly, to the extent that Plaint iff is arguing that the Firm had hoped to have the entire case dismissed without having to arbitrate any claims, his content ion is mistaken. Rather, consistent with the prevailing case law, the Firm sought dismissal o f the claims which could not on their face support any cause of act ion -- even assuming that the erroneous allegat ions were true -- so that it could compel arbitrat ion of the remaining claims. Second, the Opposit ion Brief contains numerous assert ions that "Defendants' FRCP Rule 12(b)(6) motion was unsuccessful" (P. Br. at 5) and refers to "the Court's reading of the decisio n denying Defendants' FRCP Rule 12(b)(6) motion to dismiss." (P. Br. at 2.) To the contrary, this Court granted the Firm's and Ms. Dornfeld's mot ion to dismiss Mr. Jung's Tit le VII and NYCHRL claims. (October 20 Decisio n at 2, 4.) The fact that this Court granted Plaint iff leave to replead does not change that this Court also granted the motion to dismiss. Third, Mr. Jung's content ions in the Opposit ion Brief that the Firm "sprung [the Arbitration Agreement] on Plaint iff's counsel on or about October 20, 2005" (P. Br. at 9) and that "[t]he first time counsel for Plaint iff learned of an arbitration agreement was in Court [that day]" (P. Br. at 2) are both wrong and irrelevant. Mr. Jung's counsel knew (or should have known) of the existence o f the Arbitrat ion Agreement prior to October 20, 2005. The Firm advised Mr. Jung's prior counsel in or about April 2004 that Mr. Jung was required to pursue his claims through arbitration. (Schwartz Decl. Ex. E.) In addit ion, the Firm expressly reserved its right to compel arbitrat ion of Mr. Jung's

4

Case 2:05-cv-04286-CM

Document 14

Filed 12/27/2005

Page 9 of 23

claims on the very first page of its Motion to Dismiss Brief. (See D. Br. at 6; MTD Brief at 1 n.2.) If Plaint iff's counsel had any doubt about the existence of an Arbitration Agreement, he could have inquired. Counsel did not do this. In any event, the relevant inquiry is not whether Mr. Jung's lawyer knew of the Arbitrat ion Agreement, but whether Mr. Jung knew of it. Clearly, Mr. Jung knew of the existence of the Arbitration Agreement prior to October 20, 2005 since he signed it. Even under Plaint iff's erroneous portrayal o f the facts, however, the controlling case law establishes that the Firm did not waive its right to arbitration. ARGUMENT POINT I UNDER THE APPLICABLE STANDARD, ANY DOUBT CONCERNING A WAIVER OF THE RIGHT TO ARBITRATE MUST BE RESOLVED IN FAVOR OF ARBITRATION As "the party seeking . . . a finding -- that his opponent has waived a conceded right to arbitration" Mr. Jung "has a 'heavy burden. '" Sweater Bee by Banff, Ltd. v. Manhattan Indus., Inc., 754 F.2d 457, 466 (2d Cir. 1985) (emphasis added). It is well established that under the Federal Arbitration Act, "any doubts concerning the scope of arbitrable issues should be reso lved in favor of arbitration, whether the problem at hand is the construction of the contract language it self or an allegat ion of waiver, delay, or a like defense to arbitrabilit y. " Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983) (emphasis added). Thus, courts in the Second Circuit examine whether the right to compel arbitration has been waived in light of the strong federal policy favoring arbitrat ion. See, e.g., Becker, 2002 WL 1144066, at *11 ("'Whether or not there has been a waiver is decided in the context of the case, with a healthy regard for the policy o f promoting arbitration. '" (quoting Leadertex, Inc. v. Morganton Dyeing & 5

Case 2:05-cv-04286-CM

Document 14

Filed 12/27/2005

Page 10 of 23

Finishing Corp., 67 F.3d 20, 25 (2d Cir. 1995))). As this Court held in Chamo is, "'[t]here is a strong presumpt ion in favor of arbitration, and waiver of the right to arbitration is not to be light ly inferred.'" 2003 WL 23022033, at *5 (quoting Thyssen, Inc. v. Calypso Shipping Corp., S.A., 310 F.3d 102, 104-05 (2d Cir. 2002)). Alt hough Plaint iff misapplies the standard to be used, the Opposit ion Brief correctly ident ifies the fo llowing three factors as the elements to be considered in determining whether a party has waived its right to arbitration: (1) (2) (3) the time elapsed fro m the commencement of lit igatio n to the request for arbitration; the amount of lit igat ion (including exchanges of pleadings, any substant ive motions, and discovery); and proof of prejudice, including taking advantage of pre-trial discovery not available in arbitrat ion, delay, and expense.

S & R Co. of Kingston v. Latona Trucking, Inc., 159 F.3d 80, 83 (2d Cir. 1998). "The proximit y of a trial date when arbitration is sought is also relevant." Leadertex, 67 F.3d at 25. In applying these factors, "'[a]ny doubts concerning whether there has been a waiver are resolved in favor of arbitrat ion.'" Becker, 2002 WL 1144066, at *12 (quoting Leadertex, 67 F.3d at 25); see also Brill v. Prudential-Bache Sec., Inc., No. 84 Civ. 0846, 1986 WL 6787 (S.D.N.Y. June 13, 1986) (holding any doubts concerning the question of waiver must be resolved in favor of arbitrat ion).

6

Case 2:05-cv-04286-CM

Document 14

Filed 12/27/2005

Page 11 of 23

POINT II THE FIRM DID NOT WAIVE ITS RIGHT TO COMPEL ARBITRATION OF MR. JUNG'S CLAIMS A. The Amount Of Time Which Elapsed From The Filing Of The Complaint To The Filing Of The Instant Motion To Compel Arbitration Does Not Support A Finding Of Waiver The first considerat ion set forth in S. & R. Co. of Kingston is the "time elapsed fro m the commencement of lit igation to the request for arbitration." 159 F.3d at 83. This t ime period did not, as Plaint iff argues, commence wit h the first conversat ion between counsel approximately fourteen months before the Firm stated its intent ion to compel arbitrat ion. (P. Br. at 4.) Under the proper analysis, only six and a half mo nths passed between Mr. Jung's filing of the Complaint on April 29, 2005 and the Firm's filing of the Motion to Compel Arbitrat ion and Stay the Instant Action on November 14, 2005.3 It is beyo nd quest ion that such six and a half mo nth interval is insufficient by itself to constitute a waiver of the right to arbitrate, without a showing of prejudice to Mr. Jung. See Rush v. Oppenheimer & Co., 779 F.2d 885, 887 (2d Cir. 1985) (holding defendant's delay in seeking arbitrat ion during approximately eight months of pretrial proceedings was insufficient by itself to constitute a waiver). "[E]ven a lengthy delay in seeking arbitrat ion will not typically result in waiver unless it prejudices the opposing party." In re HBLS, L.P., No. 01 CIV. 2025,

3

Of this six and a half mo nth period, the Firm's motio n to dismiss was pending for approximately three mo nths. In addition, by letter dated October 20, 2005 -- less than six mo nths fo llowing the date of the Complaint -- the Firm requested that Mr. Jung vo luntarily submit his claims to arbitration pursuant to the Arbitration Agreement. (P. Br. at 4; D. Br. at 7; Schwartz Decl. Ex. E.) Moreover, the Firm expressly reserved its right to compel arbitration when it filed its motion to dismiss on June 10, 2005 -less than two months after Mr. Jung filed the Complaint. (P. Br. at 4; D. Br. at 6; MTD Brief at 1 n.2.)

7

Case 2:05-cv-04286-CM

Document 14

Filed 12/27/2005

Page 12 of 23

2001 WL 1490696, at *7 (S.D.N.Y. Nov. 21, 2001). Accordingly, courts routinely find that delays of the duration which Plaint iff argues occurred here -- and longer -- do not constitute a waiver of the right to compel arbitration. See, e.g., Becker, 2002 WL 1144066, at *12 (finding no waiver where defendants did not assert their right to arbitrate unt il more than fourteen months after plaint iff filed his complaint); In re HBLS, 2001 WL 1490696, at *7-8 (holding there was no waiver where seventeen months had elapsed before defendant moved to compel arbitration); Thomas v. A.R. Baron & Co., Inc., 967 F. Supp. 785, 789 (S.D.N.Y. 1997) (holding defendants did not waive their right to arbitrate by wait ing a year and a half after the complaint was filed before seeking arbitrat ion). B. The Parties Have Not Engaged In The Litigation Of Substantial Issues Going To The Merits Which Could Support A Waiver Of The Firm's Right To Arbitration 1. The Right To Arbitration Is Not Waived By Filing A Rule 12(b)(6) Motion To Dismiss Plaint iff simply cannot demonstrate that the Firm's filing of a motion to dismiss const itutes "'the lit igation of substant ial issues going to the merits [which] may constitute a waiver of arbitration. '" (P. Br. at 5 (quoting Doctor's Assocs., Inc. v. Distajo, 66 F.3d 438, 455 (2d Cir. 1995).) Plaint iff attempts to argue that by filing a motion to dismiss, the Firm has engaged in substant ial lit igatio n on the merits of his claim. In support of his posit ion, Plaint iff quotes Teltronics Services, Inc. v. L M Ericsson Teleco mmunicat ions, Inc., 642 F.2d 31 (2d Cir. 1981), for the proposit ion that "[j]udgments under Rule 12(b)(6) are on the merits, with res judicata effects." (P. Br. at 5.) However, the Teltronics Court applied this rule to find that the plaint iff's ant itrust action was barred by the doctrine of res judicata because a prior suit invo lving the same parties, same cause o f action and same facts had been dismissed, for failure to state a

8

Case 2:05-cv-04286-CM

Document 14

Filed 12/27/2005

Page 13 of 23

claim, pursuant to Rule 12(b)(6). 642 F.2d at 35-37. It did not apply this rule to foreclose a possible arbitration. Indeed, the Teltronics case did not invo lve a motion to compel arbitrat ion at all. Thus, it has no bearing on the instant motion. Put simply, a decisio n on a motion to dismiss may be "on the merits" for purposes of res judicata but the motion does not const itute "substant ial lit igation," let alone "substant ial lit igat ion on the underlying merits of the claims." Moreover, the plaint iff in Sweater Bee, a case actually cited by Plaint iff in the Opposit ion Brief, advanced the exact same argument that Mr. Jung is making here, namely, that filing a motion to dismiss const ituted lit igat ion of substant ial issues going to the merits under Teltronics. The Second Circuit rejected the argument. Sweater Bee, 754 F.2d at 462-63, 466. Plaint iff fails to disclose this key po int in the Opposit ion Brief even though he cites the Sweater Bee case repeatedly. Indeed, as a matter of well-established law, the Firm has not waived its right to arbitration by filing a motion to dismiss Mr. Jung's Tit le VII and NYCHRL claims in this act ion. See Becker, 2002 WL 1144066, at *13 ("[T]he Second Circuit has held that a party lit igating a motion to dismiss 'does not waive the right to arbitrate.'" (quoting Rush, 779 F.2d at 888)). In Sweater Bee, the Second Circuit applied the "substant ial issues go ing to the merits" standard, and held that the defendants did not waive their right to compel arbitration by filing a mot ion under Rule 12(b)(6) to dismiss plaint iff's amended co mplaint. 754 F.2d at 466. The court contrasted a Rule 12(b)(6) mot ion, calling for the dismissal "of a totally needless and unmeritorious claim," wit h a Rule 56 motion on the merits, "at which point the effect would be to preclude any arbitration of the issue by virtue of waiver." Id. at 465. Likewise, in Scott v. Merrill

9

Case 2:05-cv-04286-CM

Document 14

Filed 12/27/2005

Page 14 of 23

Lynch, Pierce, Fenner & Smit h, Inc., No. 89 Civ. 3749, 1992 WL 245506 (S.D.N.Y. Sept. 14, 1992), the court held that "[t]here ha[d] been no such 'merits' lit igat ion'" where Merrill Lynch "fil[ed] a motion to dismiss the co mplaint, respond[ed] to a document demand, produc[ed] documents, respond[ed] to interrogatories, serv[ed] its own document demand and answer[ed] the complaint, all wit hout asserting a right to arbitrate."4 Id. at *3-4. Following the Sweater Bee decisio n, courts in the Second Circuit have consistent ly held that filing a motion to dismiss does not waive a party's right to arbitrate. See, e.g., Rush, 779 F.2d at 887-88 (holding there was no waiver where defendants brought a motion to dismiss, participated in eight months of lit igat ion and took extensive discovery before invoking the arbitration clause); Becker, 2002 WL 1144066, at *13 (holding that the defendants did not waive their right to compel arbitration by lit igat ing their motions to dismiss the action, or by securing extensio ns o f time in which to brief those motions); Interstate Sec. Corp. v. Siegel, 676 F. Supp. 54, 57 (S.D.N.Y. 1988) (holding that "mere expense and delay, participat ion in discovery, service of a Motion to Dismiss, and service of an Answer containing affirmat ive defenses, none of which raise the agreement to arbitrate, are insufficient to compel a waiver of arbitration"). Indeed, not one of the cases cited in the Opposit ion Brief held that a mot ion to dismiss standing alo ne was sufficient to constitute a waiver of the right to compel arbitrat ion. Moreover, the cases cited by Plaint iff in which there were findings o f "lit igat ion of substantial issues go ing to the merits" stand in stark contrast to the facts of
4

The Scott v. Merrill Lynch Court noted that in the cases the plaint iff cited in support of his proposit ion that Merrill Lynch waived its right to compel arbitrat ion, the person assert ing the right to arbitration had either moved for partial summary judgment, summary judgment or had a full trial on the merits. 1992 WL 245506, at *7 n.4.

10

Case 2:05-cv-04286-CM

Document 14

Filed 12/27/2005

Page 15 of 23

the cases finding no waiver and to the facts of this case. (See, e.g., P. Br. at 5 (cit ing Doctor's Assocs., 66 F.3d at 455 (finding potential waiver where subsidiary init iated evict ion proceedings and parent seeking to enforce an arbitration clause may have been subsidiary's "alter ego")); P. Br. at 6 (cit ing Co m-Tech Assocs. v. Computer Assocs. Int'l, Inc., 938 F.2d 1574, 1577-78 (2d Cir. 1991) (finding waiver where defendants had filed mot ion for partial summary judgment, discovery was nearly co mplete and the trial had been scheduled)); P. Br. at 6, 8 (cit ing Kramer v. Hammo nd, 943 F.2d 176, 179 (2d Cir. 1991) (finding waiver where pet it ioner filed summary judgment motion and participated in over four years of lit igat ion of two different parallel cases in two different state courts)); P. Br. at 6-7 (cit ing Cotton v. Slone, 4 F.3d 176, 180 (2d Cir. 1993) (finding waiver where defendant brought motion for summary judgment, engaged in discovery that is often unavailable in arbitral forum, including deposit ions, and sought protective orders)).) 2. A Party Ordinarily May Not Waive Its Right To Arbitration Until It Files An Answer On the Merits The Second Circuit has expressly held that "the earliest point at which a party may ordinarily waive its right to arbitration is when that party files an answer on the merits." Becker, 2002 WL 1144066, at *13 (cit ing Chatham Shipping Co. v. Fertex Steamship Corp., 352 F.2d 291, 293 (2d Cir. 1965)); see also Chamo is, 2003 WL 23022033, at *4 (holding that "'the earliest point at which such preclusio n may be found is when the other party files an answer on the merits'" (citation omitted)). Thus, the Becker Court held that defendants did not waive their right to arbitration by filing mot ions to dismiss, not only because "a motion to dismiss 'does not waive the right to arbitrate,'" but also because defendants filed such mot ions before filing their answer.

11

Case 2:05-cv-04286-CM

Document 14

Filed 12/27/2005

Page 16 of 23

2002 WL 1144066, at *13. Correspondingly, in Chamo is, where defendants moved to dismiss two former emplo yees' discriminat ion claims on the ground that they had waived their right to arbitrate by filing lawsuit s in court, this Court held that the former emplo yees had not waived the right to arbitrate since defendants had not yet filed an answer to plaint iffs' claims on the merits. 2003 WL 23022033, at *5. Here, the Firm has not filed an Answer. Accordingly, the Firm could not have waived its right to compel arbitrat ion. C. Mr. Jung Has Not Suffered The Prejudice Necessary To Find That The Firm Waived Its Right To Arbitrate Even if this Court finds that there was sufficient delay or lit igat ion of substant ial issues going to the merits to support a waiver of the right to arbitrate -- which there is not -- such a waiver "may be found only when prejudice to the other party is demonstrated." Rush, 779 F.2d at 887. Here, as a matter of law, Mr. Jung has not demonstrated -- and cannot demonstrate -- that he has suffered any prejudice. Mr. Jung's attempt to establish prejudice is primarily premised on his assert ion that "Defendant[] ha[s] caused Plaint iff to incur unnecessary delay and expense in forcing Plaint iff to respond to [its] FRCP Rule 12(b)(6) motion and the instant mot ion."5 (P. Br. at 7.) However, it is well establis hed that "pretrial expense and delay -unfortunately inherent in lit igat ion -- without more, do not constitute prejudice sufficient to support a finding of waiver." Leadertex, 67 F.3d at 26 (holding that the expense and
5

The Firm attempted to avoid the delay and expense which both Mr. Jung and the Firm have incurred in briefing the instant Motion to Compel Arbitrat ion and Stay this Act ion. On October 20, 2005, counsel for Defendant sent Mr. Jung a copy of the Arbitration Agreement and asked Mr. Jung to agree to voluntarily submit his claims to arbitration. Mr. Jung refused to do so, thereby providing the Firm wit h no choice but to file the instant motion.

12

Case 2:05-cv-04286-CM

Document 14

Filed 12/27/2005

Page 17 of 23

delay associated with defendant's extensive discovery, including mult iple interrogatories, demands for document production and deposit ions, did not constitute prejudice sufficient to find a waiver of arbitration) (cit ing Rush, 779 F.2d at 887-88 (holding the expense and delay plaint iff incurred as a result of defendant taking extensive discovery and bringing a mot ion to dismiss did not constitute prejudice sufficient to find a waiver)).6 Moreover, as established above, the filing of a Rule 12(b)(6) motion to dismiss does not itself const itute lit igat ion going to the merits. (See Point II.B.1. above.) A fortiori, the filing of such a motion cannot constitute prejudice. Indeed, contrary to the assert ion Plaint iff attempts to make with his out-of-context quotes (P. Br. at 6-7), the case law in the Second Circuit clearly ho lds that filing a Rule 12(b)(6) motion does not give rise to such prejudice necessary to find waiver has occurred. The court in Sweater Bee, for example, explicit ly held that there cannot be prejudice stemming fro m "the time necessary for [a] Rule 12(b)(6) . . . motion to be made, briefed, and decided." 754 F.2d at 463. Similarly, in Becker, the court held that since defendants' lit igat ion of motions to dismiss did not support an inference o f waiver, the legal fees which plaint iff incurred in
6

Plaint iff also asserts that the Firm should have "ma[de] [] reference to an arbitration agreement" before Mr. Jung filed a charge of discriminat ion with the Equal Emplo yment Opportunit y Co mmission ("EEOC") or in the posit ion statement it submitted to the EEOC on December 15, 2004. (P. Br. at 3, 7.) This crit icism makes no sense because: (1) the Firm's posit ion statement was addressed to the EEOC, not to Mr. Jung; (2) the EEOC does not provide a procedural mechanism for compelling arbitration; (3) according to the EEOC's Policy Statement on Mandatory Binding Arbitration of Emplo yment Discriminat ion Disputes as a Condit ion of Emplo yment, dated July 10, 1997, the EEOC will process charges and bring suit notwithstanding an emplo yee's agreement to arbitrate; and (4) the U.S. Supreme Court held in EEOC v. Waffle House, Inc., 534 U.S. 279 (2002), that a private mandatory arbitration agreement between an emplo yee and emplo yer does not prevent the EEOC from seeking vict im-specific relief in a separate civil actio n brought by the agency on the e p ye bhl Thus, there was no need for the Firm to raise the Arbitration m l e' ea . os f Agreement before Mr. Jung filed an EEOC charge or in the Firm's posit ion statement to the EEOC.

13

Case 2:05-cv-04286-CM

Document 14

Filed 12/27/2005

Page 18 of 23

responding to those motions were insufficient evidence of prejudice to just ify a finding o f waiver. 2002 WL 1144066, at *13. Plaint iff also erroneously contends that because the American Arbitration Associat ion ("AAA") rules do not expressly authorize motions to dismiss (i.e., motions directed at the pleadings as opposed to the merits), the Firm has engaged in "machinat ions" to attain a "tactical advantage" not available in arbitrat ion. (P. Br. at 8-9.) This contention is based solely on a few cases in which a party took advantage of discovery not available in arbitrat ion. (Id.) However, Plaint iff's analogy does not hold up. First, Plaint iff cites no cases for the proposit ions that the AAA will not consider a mot ion to dismiss or that a party to an arbitration agreement may not take advantage for Rule 12(b)(6) after it has been sued in federal court by the other party to the arbitration agreement. Second, it is well-known that arbitrators will entertain motions to dismiss. See, e.g., Dialog Group, Inc. v. Eaker, No. 04 Civ. 3498, 2004 WL 1660604, at *1 (S.D.N.Y. July 23, 2004) (noting an AAA arbitrat ion panel's denial o f a motion to dismiss); Hunt v. Mobil Oil Corp., 557 F. Supp. 368, 373-74 (S.D.N.Y. 1983) (noting that an AAA arbitration panel granted a motion to dismiss), aff'd mem., 742 F.2d 1438 (2d Cir. 1983). Third, the argument that prejudice may be shown by a party's Rule 12(b)(6) motion to dismiss -- which by definit ion is directed at facially deficient pleadings -- has been rejected by those decisio ns which have found no waiver after a party brought a Rule 12(b)(6) motion to dismiss. See, e.g., Rush, 779 F.2d at 887-88 (compelling arbitration where defendants brought a motion to dismiss before invoking the arbitration clause); Becker, 2002 WL 1144066, at *1 (holding defendant had not

14

Case 2:05-cv-04286-CM

Document 14

Filed 12/27/2005

Page 19 of 23

waived its right to arbitration before the AAA fo llowing lit igat ion of its motion to dismiss). The handful o f cases cited in the Opposition Brief which actually found a waiver did so where the party opposing arbitration demonstrated a type of prejudice which is clearly lacking here. For example, Plaint iff is relying on cases in which prejudice was found based on substantial discovery prior to the filing o f a motion to compel arbitrat ion. (See, e.g., P. Br. at 6 (cit ing S. & R. Co. of Kingston, 159 F.3d at 83 (ho lding pet it ioners waived right to arbitration because they prejudiced their adversary by engaging in extensive discovery, "thereby obtaining informat ion that would not have been available in arbitration")); P. Br. at 8 (cit ing PPG Indus., Inc. v. Webster Auto Parts Inc., 128 F.3d 103, 110 (2d Cir. 1997) (finding prejudice where PPG sought "to take the informat ion that it received during discovery and to use that informat ion against Webster in the arbitral forum")); P. Br. at 8 (citing Zwitserse Maatschappij Van Levensverzekering En Lijfrente v. ABN Int'l Capital Mkts. Corp., 996 F.2d 1478 (2d Cir. 1993) (finding prejudice where investor obtained deposition-t ype discovery in internat ional proceeding which would not have been available in NASD arbitrat ion)).) By co mparison, there has been no discovery in the instant action.7 Likewise, Plaint iff's reliance on Kramer for the proposit ion that he has experienced prejudice due to "extended lit igation" is who lly misplaced. (P. Br. at 8 (cit ing Kramer, 943 F.2d at 180).) In Kramer, the Second Circuit held that the petitioner waived the right to arbitrate because he filed "numerous appeals in which he had litt le
7

However, Plaint iff has benefited by obtaining a copy of the position statement which the Firm submitted to the EEOC in opposition to Plaint iff's charge of discriminat ion. (P. Br. at 3, Ex. 4.)

15

Case 2:05-cv-04286-CM

Document 14

Filed 12/27/2005

Page 20 of 23

likelihood of success" which unfairly prejudiced his adversary. 943 F.2d at 179. Nothing of this sort has happened in the instant action. In addit ion, Plaint iff relies on several cases in which prejudice was found because a party moved to compel arbitration "on the eve of trial." (See, e.g., P. Br. at 8 (cit ing S. & R. Co. of Kingston, 159 F.3d at 83 (holding petit ioners waived right to arbitration because they prejudiced their adversary by act ively participating in lit igat ion for fifteen mo nths before invoking their right to arbitrate "on the eve of trial")); P. Br. at 6 (cit ing Co m-Tech Assocs., 938 F.2d at 1576-77 (ho lding a party waived its right to arbitration where it did not move to compel arbitration unt il just four months before the scheduled trial date)).) A trial date has not been set -- or even contemplated -- in this case. Leadertex, cited in the Opposit ion Brief, demo nstrates the extent of harm a party opposing a motion to compel arbitration must demonstrate to show a waiver. (P. Br. at 5 (cit ing Leadertex, 67 F.3d at 25).) In that case, the court held that the expense and delay associated with defendant's extensive discovery, including mult iple interrogatories, demands for document production and deposit ions, did not constitute prejudice sufficient to find a waiver of arbitration. Leadertex, 67 F.3d at 26. The court's ult imate holding that defendant had waived the right to arbitration was based so lely on a finding of ongoing harm where the defendant held virtually all o f the plaint iff's inventory during the lit igat ion, and the result ing ongoing econo mic harm incurred by the plaint iff would be exacerbated were the init iat ion of arbitrat ion compelled. Id. at 27. Mr. Jung has not demonstrated similar ongoing interference wit h his current abilit y to earn a livelihood.

16

Case 2:05-cv-04286-CM

Document 14

Filed 12/27/2005

Page 21 of 23

Plaint iff cites Thyssen, Inc. v. Calypso Shipping Corp., S.A., 310 F.3d 102 (2d Cir. 2002), for the general proposition that "[p]rejudice can be substant ive." (P. Br. at 6.) He neglects to disclose, however, that in Thyssen, the Second Circuit affirmed this Court's ho lding that plaint iff did not suffer any "substantive prejudice," and defendants had not waived their right to arbitrate, even though defendant filed an answer which did not raise arbitration as a defense and "allow[ed] lit igation to proceed." 310 F.3d at 104, 105-06. In the instant action, as in Thyssen, there was no evidence o f extensive discovery or substant ive motions by defendant. Id. at 105. Moreover, unlike the situation in Thyssen, the Firm clearly put Plaint iff on notice of the potential for arbitration by expressly reserving its right to compel arbitrat ion in the Firm's first responsive pleading. (D. Br. at 6; MTD Brief at 1 n.2.) Furthermore, Plaint iff's content ion that it has incurred "substantive prejudice" as a result of "Defendant['s] unsuccessful attempt to dismiss the Co mplaint on the merits" and purported "attempt[] to relit igate the issues by invoking arbitrat ion" (P. Br. at 7) is misguided in several respects. First, as set forth in the Statement of Facts above, the Firm was not "unsuccessful" on its motion to dismiss Mr. Jung's Tit le VII and NYCHRL claims. Second, Plaint iff filed an Amended Complaint which the Firm has not mo ved to dismiss. Accordingly, Mr. Jung is no worse off proceeding now to arbitration than had the Firm moved for arbitration immediately after being served wit h the Complaint. See Sweater Bee, 754 F.2d at 463 (holding defendant had not waived right to arbitration where plaint iff would be "no worse off proceeding now to arbitration" fo llo wing defendant's mot ion to dismiss the amended complaint than had defendant mo ved for arbitration immediately after being served with the amended co mplaint).

17

Case 2:05-cv-04286-CM

Document 14

Filed 12/27/2005

Page 22 of 23

POINT III THE FIRM HAS NOT ENGAGED IN IMPERMISSIBLE FORUM AND LAW SHOPPING Contrary to Plaint iff's contention, the Firm has not engaged in impermissible forum and law shopping by filing a Rule 12(b)(6) motion to dismiss with this Court prior to moving to compel arbitrat ion of Mr. Jung's claims. (P. Br. at 9-10.) In making this argument, Plaint iff erroneously co mpares the Firm's conduct to the tactics of the parties in D.H. Blair & Co., Inc. v. Johnson, No. 95 Civ. 3463, 1995 WL 422162 (S.D.N.Y. July 18, 1995), and U.S. Offshore, Inc. v. Seabulk Offshore, Ltd., 753 F. Supp. 86 (S.D.N.Y. 1990). (P. Br. at 9-10.) The D.H. Blair case, however, invo lved a motion to vacate an arbitration award brought in a New York court even though the arbitration occurred in Florida and there was already pending in Florida an act ion to confirm the award brought by the other party. 1995 WL 422162, at *1. Similarly, in U.S. Offshore, the court permitted a party to pursue an action to vacate an arbitration award in a New York court even though the other party had filed an earlier act ion to confirm the award in a Florida court. 753 F. Supp. at 89. Neither of these cases invo lve a cho ice between arbitration and federal court. Accordingly, they have no applicat ion on the instant motion. Finally, Plaint iff's argument that compelling arbitration after the Firm made a Rule 12(b)(6) motion to dismiss would encourage unnecessary Rule 12(b)(6) mot ions to dismiss (P. Br. at 11) has already been rejected by the Second Circuit. As the Sweater Bee Court explained, it is unlikely that defendants will bring unnecessary Rule 12(b)(6) motions in otherwise arbitrable cases because they run the risk that, if matters going outside the pleadings are presented to the court, the motion will be treated as one for summary judgment, at which point the effect would be to preclude any arbitration of

18

Case 2:05-cv-04286-CM

Document 14

Filed 12/27/2005

Page 23 of 23

the issue by virtue of waiver. 754 F.2d at 465. Thus, the most to be gained by allowing a party to bring a motion to dismiss before invoking its right to compel arbitration "is dismissal of a totally needless and unmeritorious claim. " Id. If anyt hing, Mr. Jung, not the Firm, is "forum shopping" in this case. Mr. Jung chose to bring his claims to this Court even though he signed an Arbitration Agreement requiring arbitrat ion of such claims. Now he is attempt ing to dissuade this Court fro m referring Mr. Jung's claims to an arbitral forum, despite the clear precedents demonstrating that the Firm has not waived its right to arbitration. This Court should not reward Plaint iff's hyperbo le and false accusat ions by allo wing him to avoid the enforceable Arbitrat ion Agreement. CONCLUSION For the foregoing reasons, and for the reasons set forth in the Moving Brief, the Firm respectfully requests that this Court compel Plaint iff to arbitrate all o f his claims against the Firm pursuant to the Arbitration Agreement, stay the instant action pending co mpletion o f the arbitration proceeding and grant such other and further relief as this Court deems just and proper. Dated: New York, New York December 19, 2005 Respect fully submitted, /s/ David E. Schwartz Henry P. Baer (HB 1305) David E. Schwartz (DS 4473) SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP Four Times Square New York, New York 10036 [phone] Attorneys for Defendant Skadden, Arps, Slate, Meagher & Flo m LLP 19