Martin Badinelli v. The Tuxedo Club
Filing
20
OPINION AND ORDER re: 8 MOTION to Compel Arbitration, MOTION to Dismiss filed by The Tuxedo Club. Defendant's motion to compel arbitration and to stay the action pending arbitration is GRANTED, and the parties are ordered to arbitrate the case pursuant to the terms of the Employment Agreement. An arbitrator shall be appointed in accordance with the following procedure: By May 9, 2016, the parties shall meet and confer to appoint a single arbitrator to arbitrate plaintiff 's claims. If the parties are unable to agree on an arbitrator, by May 16, 2016, each party shall submit ex parte to this Court the names of 5 individuals to arbitrate plaintiff's claims. The list should include each individuals qualificati ons and should be in order of the party's preferences. The Court will then select an arbitrator taking account of the foregoing, and so advise the parties. The parties shall inform the Court of the status of the arbitration by July 25, 2016, a nd every 90 days thereafter. Additionally, within 10 days of completion of the arbitration, the parties shall provide a joint status report to the Court. The Clerk is instructed to terminate the motion (Doc. #8) and stay this case. SO ORDERED. (Signed by Judge Vincent L. Briccetti on 4/25/2016) (mml)
UNITED STATES DISTRICT COURT
SQL FHF R\ D1SFR1CI OF \F \\ YORK
MARTIN BADINELLI.
P1 a i ni i fT.
OPINION AND ORDER
15CV6273(V13)
FHIF TUXEDO CLUB,
Defendant.
Briccetti, J.:
Plaintiff Martin Badinelli brings this diversity action against defendant The Tuxedo Club,
for breach of an employment contract between the parties. retaliation in violation of New York
Labor Law
§
740, and discriminatory discharge based on age in violation of the New York State
Human Rights Law.
Defendant moves to compel arbitration of plaintiff’s claims pursuant to New York Civil
Practice Law and Rules (CPLR”) Article 75, and the Federal Arbitration Act C’FAA”), 9 U.S.C.
§ss I et seq.. and to dismiss or stay the action pending arbitration. (Doe. #8).
For the following reasons, defendant’s motion to compel arbitration and stay the action is
GRANTED.
The Court has jurisdiction under 28 U.S.C.
§
1332.
BACKGROUND
In 2009, plaintiff was hired as General Manager for defendant, a private member-owned
countr club located in Tuxedo Park. Ne York. Plaintiff originallx signed a one-sear
employment agreement, hich ‘aas later orally extended far two additional years. On May I.
2013, the parties entered into a new written contract. the Employment and Confidentiality
Agreement (“Employment Agreement”). which is the subject of this lawsuit.
The Employment Agreement was to have governed plaintiff’s employment for two years
at a base salary of $195,000 for the first year, and $207,500 for the second year. (Doe. #9-1,
Employment Agreement, at Schedule A). The Employment Agreement provides that it would
“be automatically extended for successive additional two (2) year periods,” unless the Tuxedo
Club informed Mr. Badinelli otherwise at least six months in advance ofthe original contract
termination date,
a by October 30,2014. (Compl. ¶ 19; Employment Agreement ¶ 3). Plaintiff
alleges such notice was to have been provided in writing and sent “by postage prepaid, registered
or certified mail” to his home address. (Compl. ¶ 20; Employment Agreement ¶15).
In late 2014, plaintiff raised concerns about defendant’s “wine purchasing practices...
that he believed constituted a violation of the [Mcoholic Beverage Control] laws.” (Compl. ¶
Ill).
Plaintiffalleges on October 23,2014, he was orally told his employment “was a topic of
conversation” at defendant’s board meeting. (Compi. ¶ 23). On January 15,2015, plaintiff was
orally informed defendant’s board “approved an offer of employment for a new General
Manager [and] the offer was accepted.’
(id. ¶ 40).
Plaintiff claims he was terminated and replaced by a new general manager in retaliation
for complaining about defendant’s alleged violations of the Alcoholic Beverage Control laws. In
addition, plaintiff alleges the new general manager is 15 years younger than plaintiff, which is
part of a “pattern and practice” of age-based discrimination by defendant. (Compl. fi 117, 119).
Finally, plaintiff alleges defendant breached the Employment Agreement because it did not give
plaintiff written confirmation of his termination until January 22,2015, several months after the
contract automatically renewed for another two year period.
2
After plaintiff commenced this action. defendant moved to compel arbitration pursuant to
an arbitration provision in the Employment Agreement, which provides:
Arbitration of Disputes. The Company and Employee agree that if
any disputes arise between them. except for the exceptions stated
below, the disputes will be submitted exclusively to mandatory and
binding arbitration. This means that disputes will be decided by an
arbitrator, rather than a court and jury, and that Employer and
Employee hereby waive their rights to a court or jury trial. The
Dispute resolution provision of the Agreement shall govern any
arbitration under this Agreement, and such provisions are
incorporated herein by the reference.
All disputes between the Company and Employee are covered by
this paragraph 10, including claims of wrongful termination,
discrimination. harassment. and any injury to Employee’s physical,
mental or economic interests. All disputes are covered by this
paragraph 10. whether based on claim violations or statutory,
contractual, common law rights or otherwise.
The only disputes between the Company and Employee not covered
by this paragraph 10 are claims for unemployment insurance on
workers’ compensation claims under the National Labor Relations
Act, and disputes giving rise to the Company’s rights and remedies
pursuant to paragraph 9 above.
(Employment Agreement
¶
10) (emphasis added).
DISCUSSION
I.
Legal Standards
The FAA declares arbitration agreements to be “valid, irrevocable, and enforceabJe, save
upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C.
§
2.
Although defendant brought this motion under both the FAA and Article 75 of the CPLR
(Def. Br. at 1), elsewhere in its briefing, defendant suggests the FAA may not be applicable
because it “only applies to a contract evidencing a transaction involving commerce.” (Def.
Reply Br. at 4. n.1). 1-lowever. the phrase “involving commerce” has been interpreted to the
broadest extent possible. Allied-Bruce Terminix Cos.. Inc. v. Dobson, 513 U.S. 265, 277 (1995)
(holding the “involving commerce” language of the FAA evidenced an “an intent to exercise
Congress’ commerce power to the full.”). Local employment contracts can clearly be covered.
See çg ç
jtstoiesjncvAdanis 532 U S 105 (2001) In any eent, the Court igrees
“The FAA leaves no place for the exercise of discretion by a district court, but instead
mandates that district courts il direct the parties to proceed to arbitration on issues as to which
an arbitration agreement has been signed.” Jung v. Skadden, Arps. Slate. Meagher & Flom,
434 F. Supp. 2d 211,21415 (D.N.Y. 2006) (internal quotation marks omitted)
(emphasis in the original).
However, “the FAA does not require parties to arbitrate when they have not agreed to do
so.” Volt Info. Scis., Inc. v, Bd. of Trustees of the Leland Stanford Junior Univ., 489 U.S. 468,
478 (1989). The “principal purpose” of the FAA is “to ensur[e} that private arbitration
agreements are enforced according to their terms,” AT&T Mobility LLC v. Concepcion, 563
U.S. 333, 344 (2011) (internal quotation marks omitted), and an arbitration agreement is
interpreted as any other contract would be. See Rent—A—Ctr., W., Inc. v. Jackson. 561 U.S. 63,
6T-68 (2010). Thus, the FAA reflects “both a liberal federal policy favoring arbitration, and the
fundamental principle that arbitration is a matter of contract.” AT&T Mobility LLC v.
Concepcion, 563 U.S. at 339 (internal quotation marks and citations omitted).
“A party to an arbitration agreement seeking to avoid arbitration generally bears the
burden of showing the agreement to be inapplicable or invalid.” Harrington v. At!. Sounding
Co., Inc., 602 F.3d 113, 124 (2d Cir. 2010) (citing Green Tree Fin. Corp.-Ala. v. Randolph, 531
U.S. 79, 91—92 (2000)); see also Application of Whitehaven S.F., LLC v. Spangler, 4SF. Supp.
3d 333 (S.D,N,Y. 2014) (“consistent with the FAA, the party challenging the agreement.
.
bears the burden of proving its invalidity”).
with defendant that the result would be the same under both the CPLR and the FAA, as both
strongly favor en forcing arbitration agreements.
4
When determining whether an agreement to arbitrate is valid, “the general rule is that
courts should apply ordinary state-law principles that govern the formation of contracts.”
L
Metals. LLC v. Dempsey Pipe & Supply, Inc., 592 F.3d 329, 344 (2d Cir. 2010) (internal
quotation marks and citation omitted).
Schnabel v. Trilegiant Corp., 697 F.3d 110, 119
(2d Cir. 2012) (‘Whether or not the parties have agreed to arbitrate is a question of state contract
law.”). Here, the Employment Agreement provides that New York law governs, and neither
party disputes the application of New York law to the question of whether there is a valid
agreement to arbitrate.
II.
The Agreement to Arbitrate
Plaintiff argues there was no agreement to arbitrate because the arbitration clause referred
to a “Dispute resolution” provision that did not exist elsewhere in the Employment Agreement
and, as a result, he did not understand the arbitration provision when he signed the Agreement.
A.
Missing “Dispute resolution” Provision
Plaintiff first argues there was no enforceable agreement to arbitrate here because “the
arbitration provision referred to a ‘Dispute resolution’ provision, which was not included or set
forth in the agreement.” (Opp. at I). He writes:
The arbitration provision itself does not otherwise set forth a specific
procedure as to how the arbitration will be conducted (e.g., the
selection of the arbitrator, procedures for conducting the arbitration,
and payment of the costs involved), nor does it refer to the rules of
any provider of arbitration services such as the American
Arbitration Association (“AAA”) and Judicial Arbitration and
Mediation Services (“JAMS”).
(ia.).
As a result, plaintiff contends, “[sjince there was no meeting of the minds, the arbitration
provision is unenforceable as a matter of law.” (Opp. at 2).
Plaintiff relies on Dreyfuss v. Etelecare Glob. Sols.—U.S. Inc., 349 F. App’x 551 (2d Cir.
2009) (summary order). to support his argument. There. an employer seeking to compel
arbitration submitted the first and last pages oCan arbitration agreement, but it was clear at least
one and possibly more pages were missing: The last page is signed by [plaintiff], but the text
on the preceding page stops in the middle of a sentence which is not completed on the last page.”
Id. at 552. The incomplete sentence on the first page began “[e]xcept as otherwise provided in
this Agreement
...“
Id. As a result, neither party knew what may have been otherwise
provided” in the agreement. Id. Therefore, the Second Circuit determined, the employer could
not “meet its burden of showing that the meeting of the minds necessary for the existence of an
enforceable contract took place.”
.
at 554.
Although there may be some similarities between this action and Dreyfuss. ultimately the
differences are determinative.
First, there is no dispute that the entire agreement was produced here. The pages are
numbered one through fourteen, and the sentences carry over from one page to the next in a
logical fashion, See Hojnowski v. Buffalo Bills, Inc.. 995 F. Supp. 2d 232. 237 (W.D.N.Y.
201 4) (distinguishing Dreyfuss because “there is no dispute that the complete agreement has
been produced and provided to this Court”); hudson Specialty Ins. Co. v. N.J. Transit Corp.,
2015 WL 3542548, *7 (S.D.N.Y. June 5. 2015) (noting the court in Dreyfuss was “unable to
determine what in fact the parties have agreed to”) (internal quotations omitted).
Second, here, plaintiff merely contends procedural rules governing the arbitration were
lacking. But when procedural rules are not provided to the signatory of an arbitration agreement,
the arbitration clause is nevertheless upheld. Gold v. Deutsche Aktiengesellschaft. 365 F.3d 144,
150 (2d Cir. 2004) (“[W]hile it would have made sense for Deutsche Bank to have explained the
6
form and to have provided Gold the NASD rules that were incorporated by reference. we do not
find on this record that the failure to do so renders the arbitration clause invalid.”): Hudson
Specialty Ins. Co. v. N.J. Transit Corn.. 2015 WL 3542548 at *7 (“Courts within this circuit have
routinely rejected the argument that the procedural rules governing arbitration constitute
essential terms.”); WeWork Companies. Inc. v. Zourner. 2016 WL 1337280. *5 (S.D.N.Y. April
5, 2016) (“The lack of specific terms governing the arbitration’s procedure does not invalidate
the agreement.”): see also Nardi v. Povich. 84 N.Y.S.2d 764 (N.Y. Cty. 2006) (“[E]ven if
Plaintiff did not receive Exhibit A [containing the arbitration provisionj. it was her responsibility
to ensure that she understood the document that she signed.”). As a result, “[tjhe failure to
include specific details on the procedure of the arbitration is not fatal to the clause’s validity.”
We Work Companies, Inc. v. Zourner, 2016 WL 1337280 at 5
That is because the procedural aspects of the arbitration can be decided by the arbitrator.
2
“Once an arbitrator is selected
...
other aspects of the arbitration’s procedure, such as discovery
and costs, can be decided by the arbitrator.” WeWork Companies. Inc. v. Zoumer, 2015 WL
1337280 at *5
gjq Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84 (2002)
(“[Pjrocedural questions which grow out of the dispute and bear on its final disposition are
presumptively
for the judge. but for an arbitrator, to decide.”) (internal quotations omitted);
Ciago v. Ameriguest Mortg. Co., 295 F. Supp. 2d 324, 330 (S.D.N.Y. 2003) (“Once this Court
The Employment Agreement does not specify who shall be the arbitrator of disputes.
Under such circumstances. if the parties cannot agree on an arbitrator, they may make an
application to the Court to have the Court appoint an arbitrator. 9 U.S.C. §5 (“[U]pon the
application of either party to the controversy the court shall designate and appoint an
arbitrator.”): ge also Odyssey Reinsurance Co. v. Certain Underwriters at Lloyds London
Syndicate 53, 615 F. App’x. 22 (2d Cir. 2015) (summary order).
2
7
determines that the parties have agreed to arbitrate, the validity and meaning of specific
provisions within the Agreement to arbitrate is a matter for the arbitrator to decide.”).
For these reasons, the reference to a “Dispute resolution” provision in the arbitration
clause that does not exist else\\ here in the contract does not render the arbitration clause
unenforceable.
B.
Lack of Understanding
Plaintiff also argues there was no agreement to arbitrate because he did not understand
the arbitration provision. Plaintiff claims the arbitration clause “was not discussed with [him]”
and his “knowledge and understanding of how a dispute would be arbitrated was not clear to
[him]” because the “Dispute Resolution provision was not explained to [him].” (Martin A.
Badinelli Decl at ¶1 2, 3). He writes, “[h]aving been satisfied with the monetary terms [of the
Employment Agreement], I executed the Agreement regardless of my lack of understanding
about how arbitration would work if a dispute arose that warranted resolution.” (Id.
¶ 3).
Under generally accepted principles of contract law in New York, ‘in the absence of
fraud or other wrongful act on the part of another contracting party, a party who signs or accepts
a written contract.
.
.
is conclusively presumed to know its contents and to assent to them.”
Gold v. Deutsche Aktiengesellschaft. 365 F.3d 144, 149 (2d Cir. 2004) (quoting Metzger v.
Aetna Ins. Co.. 227 N.Y. 411,416(1920)).
Here. the arbitration clause in question is “broad and plain” and put Badinelli “on notice
that any dispute. claim or controversy thai may arise between him and his firm could be
arbitrable.” regardless of whetherthe rules governing the arbitration were included. Gold v.
Deutsche Aktiengesellschaft. 365 F.3d at 150 (internal quotation marks omitted).
Moreover. plaintiff does not contend the Employment Contract itself is invalid or should
be nullited because ofanv fraud or other rongful act by Tuxedo Club. To the contrary, the
8
facts as presented by plaintiff suggest he read the agreement and, although he may have had a
“lack of understanding” as to some of its terms, he entered into it willingly, knowingly, and
without coercion, fraud, duress, or misrepresentation by Tuxedo Club. Even if plaintiff “did not
understand the form or had questions about the arbitration clause or the rules
.
.
.
the burden was
on him to have his concerns addressed before signing.” Gold v. Deutsche AktiengeseHschaft,
365 F.3d at 149.
For these reasons, the Court finds plaintiff is presumed to have known and assented to the
contents of the Employment Agreement, including the arbitration clause. Accordingly, his “lack
of understanding” argument fails.
III.
Vindication of Statutory Rights
Plaintiff argues in the alternative that “the arbitration provision is unenforceable because
the cost[-]prohibitive nature of arbitration hinders Plaintiff from vindicating his statutory
rights.” (Opp. at 2). He states, “if the parties proceeded with arbitration through the American
Arbitration Association
.
.
.
the filing fee under the Standard Fee Schedule would be at least
$5,000.00.. [in addition to] a final fee of $6,200.00.” (Id. at 11). Adding in estimated hourly
or daily rates for arbitrators, he concludes “the lowest possible arbitration fees
.
.
.
would be
$14,640 and the highest would be $89,900.” (Id. at 12). He compares this to the $400.00 filing
fee for bringing his case in court. He argues “[t]his cost differential is so large,” that if he has to
pay “even half’ of the supposed arbitration fees, “he will not be able to effectively vindicate his
rights by being compelled to arbitrate his c1aims”
(i).
The Supreme Court has recognized the “effective vindication exception” to the FAA
would “perhaps cover filing and administrative fees attached to arbitration that are so high as to
make access to the forum impracticable.” Am. Exp. Co. v. Italian Colors Rest., 133 S.Ct. 2304,
2310-11 (2013). Rut the Court nevertheless cast doubt on this judge-made” exception and held,
“the fact that it is not
‘.
orth the expense involved in provine a statutory remedy does not
constitute the elimination of the right to pursue that remedy.” Id. at 2311 (emphasis in the
original). It therefore held class action waiver provisions that “limit[j arbitration to the two
contracting parties” are not in alid even though they may mean that plaintiffs “have no economic
incentive to pursue their
.
.
.
claims individually in arbitration.” j. at 2310-11.
Here, plaintiff is a well-paid private club manager suing for breach of an employment
contract under which he was paid at least $402,500 for two years of work (excluding any bonus
3
he may have received). Plaintiff contends he is owed “in excess of $750,000” pursuant to the
contract. (Compi.
¶ 2). Under these circumstances, plaintiff’s contention that the arbitration fees
would prevent him from pursuing his claims falls flat. Indeed, applying Italian Colors, the
Second Circuit rejected a “vindication of statutory rights” argument even where the plaintiff
contended the recovery she sought would be “dwarfed by the costs of individual arbitration.”
Sutherland v. Ernst & Young LLP, 726 F.3d 290, 298 (2d Cir. 2013). The arbitration costs cited
by’ plaintiff here. even if accurate, would not come close to dwarfing plaintiffs potential
recovery.
The Court therefore rejects plaintiff’s argument that the cost of arbitration would hinder
plaintiff from vindicating his rights.
Plaintiffs contention that he “was unemployed for seven months, during which time he
received no income” (Opp. at 12) is unavailing, as on its face, it suggests he is employed now.
In fact. a L inkedln profile for a Martin A. Badinelli shows he is now the General Manager of The
ldmnn
c.fli
1 had
mon League Club in \hnhattan (j
:E’HI. presumahl another well-paid position.
10
IV,
Staying the Case
It is now settled law in this Circuit that “the text, structure, and underlying policy of the
FAA mandate a stay of proceedings when all of the claims in an action have been referred to
arbitration and a stay requested.” Katz v. CelIco P’ship. 794 F.3d 341, 347 (2d Cir. 2015). As a
result, it is proper to stay, not dismiss, this action pending arbitration.
CONCLUSION
Defendant’s motion to compel arbitration and to stay the action pending arbitration is
GRANTED, and the parties are ordered to arbitrate the case pursuant to the terms of the
Employment Agreement.
An arbitrator shall be appointed in accordance with the follo\\ ing procedure: 13v rvla\ 9.
201 6. the parties shall meet and confer to appoint a single arbitrator to arbitrate plaintiff’s claims.
lithe parties are unable to agree on an arbitrator, by May 16, 2016. each party shall submit g
pi’te to this Court the names of 5 indi\ iduals to arbitrate plaintiff’s claims. The list should
include each indi iduals qualitcations and should be in order of the party’s preferences. The
Court will then select an arbitrator takinu account of the foregoing. and so advise the parties.
The parties shall inform the Court of the status of the arbitration by July 25, 2016, and
every 90 days thereafter. Additionally, within 10 days of completion of the arbitration, the
parties shall provide a joint status report to the Court.
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The Clerk is instructed to terminate the motion (Doc. #8) and stay this case.
Dated: April 25, 2016
White Plains, NY
SO ORDERED:
Vincent L, Briccetti
United States District Judge
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