KEVIN McNULTY, District Judge.
Pending before the Court is a motion (DE 5) to dismiss the complaint and enforce the parties' agreement to arbitrate, filed by defendants ESquared Hospitality, LLC ("ESquared"), BC Commissary NJ, LLC ("BC"), and Debra Mulholland. Defendants also move for an award of attorney's fees. (Id.). For the reasons explained herein, the defendants' motion to dismiss is granted and the matter is referred to arbitration. Defendants' motion for fees is denied.
Defendants make and distribute vegan products. Mr. Neith was employed by defendants for several years, eventually holding the title of production manager at defendants' New Jersey facility. (Compl. ¶ 5).
On October 11, 2018, Mr. Neith was operating a "Formatic cookie molding machine" when he seriously injured his hand. (Id. ¶ 1). As a result of his injury, Mr. Neith requested and received leave under the Family Medical Leave Act ("FMLA") (id. ¶ 23) and went on temporary disability. (Id. ¶ 6). During this time Mr. Neith also collected workers' compensation benefits. (Id.).
However, on October 22, 2018, 11 days after his injury, Mr. Neith's employment was terminated. (Id.). Mr. Neith asserts that he was fired in retaliation for his having applied for workers' compensation, filed suit in "the workers' compensation courts" against defendants (id. ¶ 10-11), and made a request for FMLA leave (id. ¶ 23).
On December 14, 2018, Mr. Neith filed a complaint in the Superior Court of New Jersey, Law Division, Essex County. The complaint essentially asserts four claims:
Counts V and VI assert similar claims against fictitious defendants, which have not been identified, so I do not discuss them.
On May 8, 2019, defendant BC was served with a copy of the summons and complaint. (DE 1 at 5). On June 7, 2019, counsel for ESquared Hospitality and Debra Mulholland accepted service. (Id.). The same day, they filed a timely notice of removal to federal court. (Id.).
On June 26, 2019, defendants moved to dismiss the complaint in favor of arbitration. (DE 5) Mr. Neith filed papers in opposition to that motion. (DE 6). Defendants filed a reply. (DE 9)
Defendants assert that Mr. Neith signed an enforceable arbitration agreement. Attached to their papers is a copy of the 2017 arbitration agreement that they say Mr. Neith electronically signed. (DE 5-2 at 4-7; DE 9-2 at 4-7). Ms. Mulholland submits a certification as a former "Talent Strategy Manager" for ESquared. In it, she states that in January 2017 defendants began using an online platform called "Harri" that allows employees to review and electronically sign employment documents. (DE 9-2 (Declaration of Debra Mulholland) at 1).
Electronic records, she says, demonstrate that on May 1, 2017 at 5:26 pm GMT, Mr. Neith, through Harri, electronically signed an "Agreement to Resolve Disputes by Arbitration." (Id. at 2-3). She attached to her certification an additional document that provides the "IP address"
The other party to the arbitration agreement is "The Restaurant," defined to "include[] any affiliates and their current and former employees and agents." (DE 5-2 at 4). The Restaurant is not otherwise defined in the agreement. At the top of page 1 of the agreement, however, appears a logo showing a large "E
The relevant portions of the arbitration agreement read as follows:
This Circuit's case law has meandered somewhat in defining the proper standard of review of a motion to compel arbitration. The upshot, however, is fairly clear. Where the issue can be decided without evidence, it will be, based on an application of the familiar Rule 12(b)(6) standard to the face of the pleadings. Failing that, however, the Court will permit discovery and decide the issue on a summary judgment standard, pursuant to Rule 56. If there is a genuine issue of fact, summary judgment will be denied and the issues will be tried.
Because arbitration is a "matter of contract" between two parties, "a judicial mandate to arbitrate must be predicated upon the parties' consent." Guidotti v. Legal Helpers Debt Resolution, L.L.C., 716 F.3d 764, 771 (3d Cir. 2013) (quoting Par-Knit Mills, Inc. v. Stockbridge Fabrics Co., Ltd., 636 F.2d 51, 54 (3d Cir. 1980)). Pursuant to the Federal Arbitration Act ("FAA"), a court may enforce a contract to arbitrate, but only if the court is satisfied that the "making of the agreement" to arbitrate is not "in issue." Id.
In Guidotti v. Legal Helpers Debt Resolution, the Third Circuit stated the approach a court must take on a motion to compel arbitration. The judiciary must balance the competing goals of the FAA: the speedy and efficient resolution of disputes, and the enforcement of private agreements. Id. at 773. Reconciling sometimes murky precedent in light of those competing interests, the Guidotti court reasoned that where "the affirmative defense of arbitrability of claims is apparent on the face of a complaint (or ... documents relied upon in the complaint), ... the FAA would favor resolving a motion to compel arbitration under a motion to dismiss standard without the inherent delay of discovery." Id. at 773-74. Such an approach "appropriately fosters the FAA's interest in speedy dispute resolution. In those circumstances, `[t]he question to be answered ... becomes whether the assertions of the complaint, given the required broad sweep, would permit adduction of proofs that would provide a recognized legal basis' for rejecting the affirmative defense." Id. at 774 (quoting Leone v. Aetna Cas. & Sur. Co., 599 F.2d 566, 567 (3d Cir. 1979).
"In many cases, however, a more deliberate pace is required, in light of both the FAA's insistence that private agreements be honored and the judicial responsibility to interpret the parties' agreement, if any, to arbitrate." Id.
Id. (internal citations and quotations and external citation omitted).
Thus, where the complaint and supporting documents are unclear as to an agreement to arbitrate or where a plaintiff responds to a motion to compel with additional facts sufficient to place the issue of arbitrability "in issue," then the parties should be entitled to discovery. After limited discovery, a court may then "entertain a renewed motion to compel arbitration" and should review such a motion under the summary judgment standard.
If summary judgment is unwarranted in light of material factual disputes regarding an agreement's enforceability, a court should then proceed to trial "regarding `the making of the arbitration agreement or the failure, neglect, or refusal to perform the same,' as Section 4 of the FAA envisions." Id. (quoting Somerset Consulting, LLC v. United Capital Lenders, LLC, 832 F.Supp.2d 474, 482 (E.D. Pa. 2011)). In every instance, "[b]efore a party to a lawsuit can be ordered to arbitrate and thus be deprived of a day in court, there should be an express, unequivocal agreement to that effect." Id. (quoting Par-Knit Mills, 636 F.2d at 54).
Federal law is decidedly pro-arbitration. The FAA's purpose is "to reverse the longstanding judicial hostility to arbitration agreements that had existed at English common law and had been adopted by American courts, and to place arbitration agreements upon the same footing as other contracts." Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24 (1991). Thus, the statute makes agreements to arbitrate "valid, irrevocable, and enforceable," 9 U.S.C. § 2, subject only to traditional principles of contract formation and interpretation. The FAA provides that contract provisions manifesting the intent of the parties to settle disputes in arbitration shall be binding, allows for the stay of federal court proceedings in any matter that is referable to arbitration, and permits both federal and state courts to compel arbitration if one party has failed to comply with an agreement to arbitrate. 9 U.S.C. §§ 2-4.
Cumulatively, those provisions "manifest a liberal federal policy favoring arbitration agreements." Gilmer, 500 U.S. at 24 (quotations omitted). Thus, "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).
The Supreme Court has recently given new content to that strong federal pro-arbitration policy. In fact, the Court seems to have implied, with disapproval, that the states were promulgating facially neutral rules that were in fact intended to discriminate against agreements to arbitrate vis-a-vis other contracts:
Kindred Nursing Centers Ltd. P'ship v. Clark, ___ U.S. ___, 137 S.Ct. 1421, 1426, 197 L.Ed.2d 806 (2017) (quoting AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 341, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011)). Any consideration of State law, then, must bear in mind the Kindred preemption principle.
New Jersey courts, too, have held that arbitration "is a favored means of dispute resolution." Hojnowski v. Vans Skate Park, 187 N.J. 323, 342, 901 A.2d 381 (2006). The state courts have "long noted our public policy that encourages the `use of arbitration proceedings as an alternative forum." Wein v. Morris, 194 N.J. 364, 375-76, 944 A.2d 642 (2008) (citing Perini Corp. v. Greate Bay Hotel & Casino. Inc., 129 N.J. 479, 489, 610 A.2d 364 (1992)); see also Delta Funding Corp. v. Harris, 189 N.J. 28, 39, 912 A.2d 104 (2006). Accordingly, arbitration clauses are afforded a "presumption of arbitrability," which can only be overcome if the Court can determine with "positive assurances" that the clause does not cover the dispute at issue. AT&T Techs. v. Commc'ns. Workers of Am., 475 U.S. 643, 650, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986); see also Moses H. Cone Mem'l Hosp., 460 U.S. at 4, 103 S.Ct. 927 ("Any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration"). Ultimately, arbitration agreements should be read liberally to find arbitrability whenever possible. Jansen v. Solomon Smith Barney, Inc., 776 A.2d 816 (N.J. Super. App. Div. 2001).
Arbitration is a creature of contract. Before referring any controversy to arbitration, the Court must determine whether the parties have indeed agreed to arbitrate it. Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444, 452 (2003). That determination has three subparts:
Sarbak v. Citigroup Global Markets, Inc., 354 F.Supp.2d 531, 536-37 (D.N.J. 2004).
I dispose of elements
As for element
A declarant with knowledge, she establishes that the arbitration agreement was electronically signed by Mr. Neith while he was employed by defendants. She attaches the relevant electronic business records to establish this. (See DE 9-2 at 1-2). In the Facts section of Mr. Neith's opposing brief, his attorney seemingly expresses skepticism, but does not forthrightly deny that Mr. Neith signed the agreement with ESquared. Counsel briefly complains that there is no affidavit sponsoring the electronic signature (but immediately transitions to the assumption arguendo that it was signed). Ms. Mulholland's certification, submitted in reply, remedies that deficiency.
Ms. Mulholland's declaration also states credibly that the "Restaurant" in the agreement refers to ESquared. The agreement, she demonstrates, is printed on that entity's letterhead. (See 9-2 at 1-2; DE 5-2). Again, plaintiff's counsel, in the Facts section of the brief, argues that the "Restaurant" is not adequately defined. Mr. Neith, however, offers no evidence or sworn statement in opposition to Mulholland's declaration. Nor does he explain who, if not ESquared, he was contracting with.
Attorney statements in a brief, particularly equivocal nondenial-denials like these, carry no evidentiary weight. Tellingly, the operative Argument section of Mr. Neith's brief does not assert an argument that these parties did not enter into this agreement. It assumes that existence of the agreement and is devoted exclusively to the argument that this dispute falls outside the legitimate scope of the arbitration provision.
As for element
I turn to the main argument, concerning element
In support, he points to Moon v. Breathless Inc, 868 F.3d 209, 214 (3d Cir. 2017). In Moon, the question was whether an employment agreement that contained an arbitration provision was enforceable with respect to that plaintiff's claims under FLSA, the New Jersey Wage Payment Law ("NJWPL"), N.J. Stat. Ann. § 34:11-4.1, et seq., and the New Jersey Wage and Hour Law ("NJWHL"), N.J. Stat. Ann. § 34:11-56a, et seq. Moon, 868 F.3d at 212.
In Moon, the Third Circuit surveyed the case law and outlined a three-part test to determine whether statutory claims were covered by an arbitration provision:
Moon, 868 F.3d at 214 (emphasis added).
Two of the cited state cases, Garfinkel and Atalese, held that the arbitration clause did not cover plaintiff's statutory claims:
In Garfinkel, language in the arbitration provision confined its scope to disputes concerning interpretation of the contract terms. Arbitration was limited to "any controversy or claim arising out of, or relating to, this Agreement or the breach thereof." Garfinkel, 773 A.2d at 672. That plaintiff's statutory claims therefore fell outside the scope of the arbitration provision.
In Atalese, the New Jersey Supreme Court interpreted the arbitration provision of a debt-adjustment service contract. The arbitration clause, it found, did not sufficiently notify the plaintiff that she was surrendering her right to pursue her statutory claims in court. The Atalese provision read as follows:
Atalese, 99 A.3d at 310.
In a third case discussed by the Third Circuit, Martindale, the New Jersey Supreme Court came to the opposite conclusion. That employment agreement contained the following broad arbitration provision:
Martindale, 800 A.2d at 875. That language, the New Jersey Supreme Court held, contained no limit as to the kind of employment-related disputes that were covered. Moreover, it was appropriately clear regarding the waiver of the right to litigate in court. Id. at 884. Therefore, the Martindale court determined that plaintiff's statutory claims were covered by the arbitration agreement.
In Moon, which applied this case law, the arbitration provision read as follows:
Moon ultimately held that this arbitration provision fell on the Garfinkel/Atalese, not the Martindale, side of the line, and therefore did not cover plaintiff's statutory claims. The "dispute between Dancer and Club under this Agreement," Moon held, referred only to contract disputes, not statutory claims. 868 F.3d at 216.
I find that this case is most analogous to Martindale and therefore hold that Mr. Neith's claims fall within the scope of the arbitration agreement.
The first prong of the Moon test—that the agreement must identify the general substantive area that the arbitration provision covers—is satisfied. The arbitration agreement covers "employment related disputes" and includes very broad language requiring arbitration of "all disputes that could be brought in a court." Indeed, the clause explicitly states that it applies to "all federal, state and local laws" claims:
(DE 5-2 at 4). This provision does not contain any limiting language that would exclude statutory claims.
It is true that the agreement does outline a subset of "Excluded Claims." (See id.) For example, claims for unpaid workers' or unemployment compensation benefits are excluded. That only tends to confirm that, where the drafters of the agreement intended to exclude a particular kind of claim, they knew how to do so. Mr. Neith's claims here do not fall within the exclusion of claims for unpaid workers' compensation.
The second prong of the Moon test—that the arbitration provision must reference the types of claims waived—has also been met. Mr. Neith points out that the NJLAD, FMLA, and NJWCA statutes are not specifically mentioned in the agreement. (DE 6 at 13). But, as Garfinkel noted, "we do not suggest that a party need refer specifically to the LAD or list every imaginable statute by name to effectuate a knowing and voluntary waiver of rights. To pass muster, however, a waiver-of-rights provision should at least provide that the employee agrees to arbitrate all statutory claims arising out of the employment relationship or its termination." 773 A.2d at 672. Defendants' arbitration agreement passes this test. It provided Mr. Neith with notice that "all federal, state and local laws, regulations, common law claims" arising from his employment are covered. This is perfectly clear; no more is required.
The third prong of the Moon test—that the agreement sufficiently explain the difference between arbitration and litigation—is likewise satisfied. The agreement is substantially dedicated to discussing the terms under which Mr. Neith agreed to arbitrate disputes. (See agreement, quoted at pp. 3-6, supra.) The agreement starts in its first paragraph by indicating that should an employee be unable to resolve a dispute informally, then the employee agrees to the "arbitration process described below." (DE 5-2 at 4). That arbitration process, as outlined in the agreement, tells each employee that an arbitration must be brought by an employee on an individual basis rather than as a class action. (Id.). The employee is then told that an arbitrator, rather than a judge, will have exclusive authority to resolve all disputes. (Id. § 2). However, the agreement states that should it be determined that the bar on class actions is unlawful, "then that action may proceed in a court." (Id.). The Agreement then highlights the rules governing the arbitration: how many arbitrators will hear the case, how an arbitrator is to render decisions, what should happen if summary judgment motions are submitted, where the arbitration will take place, and who will pay for the arbitration. (Id. § 4). Finally, the agreement concludes by stating that "I KNOWINGLY AND FREELY AGREE TO THIS MUTUAL AGREEMENT TO ARBITRATE CLIAMS WHICH OTHERWISE COULD HAVE BEEN BROUGHT IN COURT." (Id. at 6). The agreement thus spells out how the arbitration proceeding is to take place and explains that this process is different from a court proceeding. Again, this could hardly be clearer. It cannot be said that Mr. Neith was not informed that an arbitration proceeding would be different from, and would take place in lieu of, a court proceeding.
Accordingly, I find that Mr. Neith's claims are covered by the parties' arbitration agreement. That agreement will be enforced, and all of the claims in the complaint will be referred to arbitration.
A procedural question remains. The Arbitration Act, 9 U.S.C. § 3, provides that the court "shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration." The Court of Appeals has held that a stay, rather than dismissal, is mandatory when one of the parties has made application for it. See Lloyd v. HOVENSA, LLC., 369 F.3d 263, 269 (3d Cir. 2004).
No such application has been made here, however. The plaintiff has moved for dismissal. The defendant has not moved for a stay, but has argued in the alternative that, if only some claims are arbitrable, then only they should be dismissed. (See Def. Brf. 13, DE 6 at 17.) By negative implication, defendant is endorsing the notion that dismissal is the remedy in connection with referral of claims to arbitration. At least where all claims have been found arbitrable and no party has moved for a stay, it would appear that the court retains the discretion to dismiss rather than stay the case. Cf. LaFurno v. Virbac Corp., No. CIV.A. 11-4774 SRC, 2012 WL 646029, at *2 (D.N.J. Feb. 24, 2012).
I will exercise my discretion to grant Defendants' motion to dismiss the complaint in connection with referring the claims to arbitration.
Defendants assert, without citation to legal authority, that they should be awarded their attorney's fees in connection with this motion. I disagree.
When Mr. Neith signed the arbitration agreement, he was guaranteed the right to challenge the enforceability of the arbitration provision: "Nothing precludes you from challenging the enforceability of this Agreement; however, the Restaurant will assert that you have agreed to pursue all claims individually in arbitration." (DE 5-2 at 5). That is precisely what has taken place; I cannot find that any wrongful litigation conduct has occurred.
In any event, "[o]ur basic point of reference when considering the award of attorney's fees is the bedrock principle known as the American Rule: Each litigant pays his own attorney's fees, win or lose, unless a statute or contract provides otherwise." Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242, 252-253 (2010); see also In re Niles, 176 N.J. 282, 293-94 (N.J. 2003) ("New Jersey has a strong public policy against the shifting of costs" and that "[t]his Court has embraced that policy by adopting the `American Rule,' which prohibits recovery of counsel fees by the prevailing party against the losing party.").
Accordingly, defendants' motion for attorney's fees is
For the reasons set forth above, the arbitration agreement is enforced, the matter is referred to arbitration. The motion to dismiss (DE 5) is
An appropriate order follows.