Nadeau v. Equity Residential Properties Management Corporation
OPINION AND ORDER re: #16 MOTION to Compel Arbitration . filed by Equity Residential Properties Management Corporation. Defendant's motion to compel arbitration and to stay this action is DENIED. The Court's Order of November 23, 2016, staying the Mediation Referral Order (Doc. #8) pending a decision on the instant motion (Doc. #23) is VACATED. The parties are directed to contact the assigned mediator and proceed promptly to mediation in accordance with the Mediation Referral Order. The initial conference originally scheduled for February 2, 2017 (Doc. #9), is re-scheduled for July 28, 2017, at 9:30 a.m. The Clerk is instructed to terminate the motion. (Doc. #16). ( Initial Conference set for 7/28/2017 at 09:30 AM before Judge Vincent L. Briccetti.) (Signed by Judge Vincent L. Briccetti on 5/4/2017) (rj)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
JANICE NADEAU, Individually and on behalf of
all others similarly situated,
EQUITY RESIDENTIAL PROPERTIES
OPINION AND ORDER
16 CV 7986 (VB)
Plaintiff Janice Nadeau brings this action, individually and on behalf of all others
similarly situated, against defendant Equity Residential Properties Management Corporation,
claiming violations of the Fair Labor Standards Act, 29 U.S.C. § 201 et seq., New York Labor
Law, Art. 19 § 650 et seq., and the New York Codes, Rules and Regulations § 142-2.
Before the Court is defendant’s motion to compel arbitration and stay this action pending
arbitration, pursuant to the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq. (Doc. #16).
For the following reasons, the motion is DENIED.
The Court has jurisdiction under 28 U.S.C. §§ 1331, 1367.
For the purpose of ruling on this motion, the Court considers only the pleadings and
evidence relevant to defendant’s motion to compel arbitration and stay this action.
Plaintiff worked full-time as a customer support assistant for defendant from February
24, 2015, to June 10, 2016. Defendant required plaintiff sign an arbitration agreement (the
“Agreement” or the “Arbitration Agreement”) prior to her employment, which states in relevant
Any claim, controversy, or dispute you may have with Equity or any of its past,
present or future employees, agents, directors, trustees or shareholders, or which
Equity may have with you, arising from or relating to your application for
employment, employment, the termination of your employment, or any postemployment conduct or events, excluding claims for workers’ compensation
benefits, unemployment compensation benefits, and claims, controversies, or
disputes arising out of job elimination or in which Equity seeks temporary or
permanent injunctive relief relating to theft or misuse of trade secrets, confidential
or proprietary information or violation of a non-compete or non-solicitation
agreement, will be finally settled by binding arbitration. Claims which must be
settled by binding arbitration include, but are not limited to, claims arising
under . . . the Family And Medical Leave Act, . . . any amendments to these acts,
and any state or local employment related statute or ordinance, and any future
federal, state or local employment related statutes or ordinances.
(Pawlisa Decl. Ex. B) (emphasis added). The Agreement further provides: “Filing and
administrative fees of the arbitration will be paid by Equity, as will the fees and other expenses
of the arbitrator.” (Id.).
Plaintiff avers defendant regularly required her “to read and respond to text messages and
phone calls before and after . . . scheduled work hours” (Nadeau Decl. ¶ 6) without properly
recording this time or compensating her for this work.
In May 2016, plaintiff received a text message from her supervisor “instructing [her] to
attend a company event off-the-clock.” (Nadeau Decl. ¶ 11). Plaintiff responded to this text
message using vulgar language to express her displeasure about defendant requiring her to work
off-the-clock without compensation. In response, defendant “issued an Employee Counseling
Summary Report alleging that [plaintiff] had violated company policy by communicating with
her supervisor by text message . . . and using inappropriate language.” (Id. ¶ 12).
Subsequently, plaintiff filed an arbitration demand (the “Demand”) with the American
Arbitration Association (“AAA”), the designated arbitrator under the Agreement. In the
Demand, plaintiff described the nature of her claim, stating: “Received a formal ‘write up;’
(co[u]nseling) because my language used in a text after my manager while I was off texted me
first to explain I had to go to what she said was a mandatory outing.” (Traub Affirm. Ex. A).
Plaintiff requested an arbitrator “sa[v]vy with labor laws, in NYC.” (Id.).
On June 3, 2016, the AAA informed plaintiff it had not yet received defendant’s filing
fees for the arbitration, but that it had requested payment from defendant by June 6, 2016.
(Nadeau Decl. ¶ 16).
On June 10, 2016, defendant terminated plaintiff’s employment. Plaintiff avers she
believes she “was fired in retaliation for complaining about Equity’s unlawful wage policies and
for initiating arbitration before the AAA.” (Nadeau Decl. ¶ 17).
On June 13, 2016, plaintiff and Lisa Leib, a vice president in defendant’s legal
department, spoke via telephone and discussed the Demand. (Nadeau Decl. ¶ 18). On June 22,
2016, Leib emailed plaintiff, offering to settle the case by paying to plaintiff the AAA fees in
exchange for a release of all plaintiff’s claims. (Id. ¶ 20). Plaintiff rejected this offer, insisted on
arbitration, and requested defendant pay the AAA fees. (Id. ¶ 21).
On June 23, 2016, Leib emailed plaintiff, asking “what is your counter offer?” Plaintiff
responded that she “prefer[s] to have everything documented and addressed through AAA.”
Leib then asked, “Are you saying you do not have any number that you would settle this case
before we go forward in the AAA? I just want to make sure I understand your position.”
Plaintiff responded, “I’m saying that under the circumstances, I don’t feel comfortable agreeing
to a number without representation.” Leib replied, “The AAA does not represent you. They are
a neutral third-party that will adjudicate this case. You should talk to them to make sure you
understand their role. If you want representation for this case you will have to find your own
attorney.” Plaintiff insisted on arbitration and responded, “I am very aware what the AAA role
will be and I want to resolve with a mediation and . . . unbiased third party case manager there to
reach a sound agreement.” (Nadeau Decl. Ex. 4).
On July 18, 2016, plaintiff received a letter from the AAA stating that because defendant
had “failed to submit payment as requested in accordance with our Employment Arbitration
Rules . . ., we have administratively closed our file on this matter.” (Nadeau Decl. Ex. 5).
In a complaint filed October 12, 2016, plaintiff claimed multiple violations of the Fair
Labor Standards Act, the New York Labor Law, and the New York Code, Rules and
Regulations, for requiring employees to work off-the-clock without compensation, failing to pay
overtime wages, failing to provide accurate wage statements, and retaliating against plaintiff for
initiating arbitration. In response, defendant moved to compel arbitration and for a stay.
Standard of Review
“In the context of motions to compel arbitration brought under the Federal Arbitration
Act, the court applies a standard similar to that applicable for a motion for summary judgment.”
Bensadoun v. Jobe-Riat, 316 F.3d 171, 175 (2d Cir. 2003) (citation omitted). Accordingly, the
Court must grant a motion to compel arbitration if the pleadings, discovery materials before the
Court, and any affidavits show there is no genuine issue as to any material fact and it is clear the
moving party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(c); Celotex Corp
v. Catrett, 477 U.S. 317, 322 (1986).
“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. Atl. Sounding
Co., 602 F.3d 113, 124 (2d Cir. 2010).
Enforceability of the Arbitration Agreement
“The FAA was enacted in 1925 in response to widespread judicial hostility to arbitration
agreements.” AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011). The FAA
“establishe[d] that, as a matter of federal law, any doubts concerning the scope of arbitrable issues
should be resolved in favor of arbitration.” Moses H. Cone Mem’l Hosp. v. Mercury Constr.
Corp., 460 U.S. 1, 24–25 (1983). Thus, the FAA reflects “both a liberal federal policy favoring
arbitration, and the fundamental principle that arbitration is a matter of contract. In line with these
principles, courts must place arbitration agreements on equal footing with other contracts.” AT&T
Mobility LLC v. Concepcion, 563 U.S. at 339 (internal quotation marks and citations omitted).
The FAA provides that otherwise-valid arbitration agreements can be rendered
unenforceable based “upon such grounds as exist at law or in equity for the revocation of any
contract.” 9 U.S.C. § 2. “Thus, a party seeking to avoid enforcement of an arbitration agreement
can . . . invoke a defense that would be available to a party seeking to avoid the enforcement of
any contract.” Brown v. Dillard’s, Inc., 430 F.3d 1004, 1010 (9th Cir. 2005) (explaining that
state laws related specifically to arbitration agreements are not a valid basis on which to render
an arbitration agreement unenforceable). Under New York law, when a party to a contract
materially breaches that contract, it cannot then enforce that contract against a non-breaching
party. See, e.g., In re Lavigne, 114 F.3d 379, 387 (2d Cir. 1997). A breach is material when it
“substantially defeats the purpose of that contract.” Id.
Plaintiff argues defendant cannot compel arbitration because defendant breached the
Agreement by refusing to arbitrate before the AAA. In the alternative, plaintiff argues defendant
waived its right to compel arbitration by refusing to arbitrate.
The Court agrees defendant materially breached the Arbitration Agreement and therefore
cannot use the Agreement to compel arbitration. 1 To hold otherwise “would set up a perverse
incentive scheme,” contrary to the FAA and common sense:
Employers like [defendant] would have an incentive to refuse to arbitrate claims
brought by employees in the hope that the frustrated employees would simply
abandon them. This tactic would be costless to employers if they were allowed to
compel arbitration whenever a frustrated but persistent employee eventually
initiated litigation. [The Court] decline[s] to adopt a rule that would encourage
companies to refuse to participate in properly initiated arbitration proceedings.
Brown v. Dillard’s, Inc., 430 F.3d at 1012 (citation omitted). Thus, “when an employer enters
into an arbitration agreement with its employees, it must itself participate in properly initiated
arbitration proceedings or forego its right to compel arbitration. [Defendant] cannot compel
[plaintiff] to honor an arbitration agreement of which it is itself in material breach.” Id. at 1006.
Defendant argues it did not breach the Agreement 2 because the Demand (i) was deficient
and failed to properly initiate arbitration, and (ii) addressed a different claim that is not covered
by the Agreement. The Court addresses each argument in turn.
Sufficiency of the Demand
Defendant argues that the Demand was deficient because plaintiff failed to sign and date
the Demand, and because she failed to check a box regarding whether her claims involved
statutorily protected rights. Defendant further argues that because of these deficiencies, plaintiff
did not initiate arbitration, and therefore defendant did not breach the Agreement by refusing to
The Court disagrees.
Because the Court denies defendant’s motion to compel based on defendant’s breach of
the Arbitration Agreement, it need not address plaintiff’s waiver argument.
Defendant does not argue that any breach, if it occurred, was immaterial.
Defendant provides no authority for the proposition that plaintiff was required to satisfy
various technical pleading conditions to initiate arbitration. Further, the Court is not aware of
anything in the Arbitration Agreement, defendant’s employee handbook (“defendant’s
Handbook”), the AAA’s Employment Arbitration Rules and Mediation Procedures (the “AAA
Rules”), the FAA, or any other law imposing such requirements. Indeed, to the extent these
sources address the requirements of pleadings in arbitration demands, these sources suggest the
opposite conclusion; that is, that arbitration demands are not subject to formalistic requirements,
nor are they comparable to pleadings in federal court. The AAA Rules state that such technical
failures are immaterial: “The form of any filing in these rules shall not be subject to technical
pleading requirements.” (Nadeau Decl. Ex. 1 at 8). Perhaps most importantly, the AAA deemed
the Demand adequate to initiate an arbitration, and defendant fails to persuade the Court why it
should hold plaintiff’s Demand to a higher standard than that used by the AAA.
Accordingly, the Demand triggered defendant’s obligation to arbitrate despite any
technical deficiencies contained therein, and therefore defendant breached the Arbitration
Agreement by its refusal to arbitrate.
Claims Asserted in the Demand
Defendant asserts two arguments regarding the claims asserted in the Demand in support
of its position that it did not breach the Arbitration Agreement.
First, defendant argues the Demand’s asserted claims regarding plaintiff’s formal writeup are not arbitrable, since the Agreement applies only to “certain types of employment related
disputes,” (Def.’s Reply at 3 (quoting Pawlisa Decl. Ex. B)). Because, defendant argues, the
Demand did not raise arbitrable issues, its refusal to arbitrate did not breach the Agreement.
Defendant is wrong.
Defendant mistakenly assumes this is the proper forum to challenge the arbitrability of
the Demand’s asserted claims. The appropriate forum for such an argument is before the AAA,
where defendant could have moved to dismiss the arbitration, not federal court. See Brown v.
Dillard’s, Inc., 430 F.3d at 1010. “Instead, [defendant] refused to participate in the arbitration
process at all, [and defendant’s] breach of its obligations under the arbitration agreement
deprives it of the right to enforce that agreement.” Id.
Defendant is also wrong that the claims asserted in the Demand are outside the scope of
the Arbitration Agreement. Arbitration clauses are construed “as broadly as possible.” David L.
Threlkeld & Co. v. Metallgesellschaft Ltd. (London), 923 F.2d 245, 250 (2d Cir. 1991) (quoting
S.A. Mineracao da Trindade–Samitri v. Utah Int’l, Inc., 745 F.2d 190, 194 (2d Cir. 1984).
Moreover, there is a “strong federal policy favoring arbitration as an alternative means of dispute
resolution.” State of N.Y. v. Oneida Indian Nation of N.Y., 90 F.3d 58, 61 (2d Cir. 1996). It
follows that ambiguity regarding the arbitrability of a claim is resolved in favor of arbitrability.
Id. Thus, absent an “express provision excluding a particular grievance from arbitration, . . .
only the most forceful evidence of a purpose to exclude the claim from arbitration can prevail.”
AT&T Techs., Inc. v. Commc’ns Workers of Am., 475 U.S. 643, 654 (1986) (quoting United
Steelworkers of Am. v. Warrior & Gulf Nav. Co., 363 U.S. 574, 584–85 (1960)).
The Agreement provides that the “types of employment-related disputes” subject to
arbitration are, among other things, “[a]ny claim, controversy, or dispute you may have with
Equity . . . arising from or relating to your . . . employment, the termination of your employment,
or any post-employment conduct or events.” 3 (Pawlisa Decl. Ex. B). This expansive definition
The Agreement provides exceptions, but defendant does not argue any are applicable.
of arbitrable disputes unambiguously encompasses plaintiff’s claims regarding discipline for
complaining about the terms and requirements of her employment.
Defendant also argues that pursuant to defendant’s Handbook, “plaintiff acknowledged at
the outset of her employment a less formal and less costly procedure existed for other
indignities—communication first with a supervisor and, if unsuccessful, with higher levels of
management or with Human Resources.” (Def.’s Reply at 3 (citation omitted)). Although such
procedures may exist, their existence does not require their use, and defendant provides no basis
to conclude otherwise.
Second, defendant argues the Demand raised different claims than the claims asserted
The Court disagrees both that the Demand raised claims distinct from those plaintiff
raises here, and that it would change the impact of defendant’s breach of the Arbitration
Agreement, even if the Demand did raise different claims.
Defendant argues that “the Demand is devoid of any allegations, claims or complaints of
the nature alleged in this suit” because plaintiff merely mentions “a single ‘write up’ [p]laintiff
received for ‘language used in a text,’” and that plaintiff failed to check the boxes as to whether
plaintiff’s rights were statutorily protected. (Def.’s Br. at 2 (quoting Traub Affirm. Ex. A)).
Although the Demand does not raise the exact issues articulated in the complaint, such
precision is not required, and the Demand clearly pertained to the same issues and underlying
events. Indeed, the Demand states that plaintiff was in a dispute with her manager about having
to attend a mandatory work function while not being paid. And while the Demand also states
that plaintiff’s claims related to the “formal ‘write up’” she received as a consequence of her
inappropriate language, the Court sees no reason to limit the Demand to that issue. Defendant’s
argument asks this Court to construe narrowly the allegations in the Demand, but provides no
basis to do so.
More importantly, even if plaintiff’s claims here were inconsistent with the Demand,
defendant completely fails to explain how that inconsistency would ameliorate or cure
defendant’s breach of the Arbitration Agreement. As discussed above, plaintiff’s claims
regarding the “write up” were arbitrable under the Agreement, and defendant breached the
Agreement by refusing to arbitrate.
Accordingly, defendant’s refusal to arbitrate constitutes a material breach of the
Arbitration Agreement, and therefore defendant cannot compel arbitration.
Defendant’s motion to compel arbitration and to stay this action is DENIED.
The Court’s Order of November 23, 2016, staying the Mediation Referral Order (Doc.
#8) pending a decision on the instant motion (Doc. #23) is VACATED. The parties are directed
to contact the assigned mediator and proceed promptly to mediation in accordance with the
Mediation Referral Order.
The initial conference originally scheduled for February 2, 2017 (Doc. #9), is rescheduled for July 28, 2017, at 9:30 a.m.
The Clerk is instructed to terminate the motion. (Doc. #16).
Dated: May 4, 2017
White Plains, NY
Vincent L. Briccetti
United States District Judge
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