CASPER, District Judge.
Plaintiff Arthur J. Discipio ("Discipio"), a former employee of Defendant Anacomp, Inc. ("Anacomp"), has sued Anacomp and several co-defendants, all officers or board members of Anacomp, for damages arising out of the termination of his employment. In his amended complaint, filed on October 22, 2010, Discipio alleges violation of the Massachusetts Wage Act and breach of contract and seeks previously earned and/or accrued base salary, incentive compensation, vacation pay and severance pay and treble damages pursuant to Mass. Gen. L. c. 149, § 150. On December 18, 2010, Anacomp moved to dismiss and/or stay the amended complaint. This motion amounted to a motion to compel arbitration of Discipio's claims given the provision of Anacomp's employment agreement, dated March 6, 2007 ("employment agreement"), with Discipio that included an agreement to arbitrate. The motion to dismiss was fully briefed by the parties and a hearing on the motion was held on February 24, 2011. The magistrate judge (Collings, M.J.) issued his report and recommendation on May 5, 2011 recommending that Discipio's claim for severance pay under the Massachusetts Wage Act ("Wage Act") be dismissed and that the remainder of Plaintiff's claims be referred to arbitration. Discipio has now filed objections to the report and recommendation and Anacomp has responded to Discipio's objections.
The Court, pursuant to 28 U.S.C. § 636(b)(1), has made a de novo determination
First, Discipio's statutory rights under the Wage Act can be vindicated in arbitration. Discipio objects that his Wage Act claim should not be subject to arbitration because the magistrate judge incorrectly found that the applicable rules of arbitration provide "for at least limited discovery and a written decision." (Pl. Objections at 1; Report and Recommendation ["R & R"] at 12). However, even if Discipio were correct that this factual finding was incorrect, his Wage Act may still be subject to arbitration since the absence of such provisions are "insufficient to preclude arbitration of statutory claims." Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 30-31, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991); see Kristian v. Comcast Corp., 446 F.3d 25, 42-43 (1st Cir.2006) (noting that given the Gilmer precedent, "there is no need to decide anew whether limited discovery raises a question of arbitrability"); Dixon v. Perry & Slesnick, P.C., 75 Mass.App.Ct. 271, 273, 914 N.E.2d 97 (2009) ("conclud[ing] that claims under the Wage Act are arbitrable"). Moreover, to the extent that Discipio is arguing that any arbitration of his Wage Act claim must allow for at least limited discovery and result in a written decision, the employment agreement includes a California choice-of-law provision that incorporates the California Arbitration Act ("CAA") that does provide for discovery and a written arbitral award. See Volt Information Sciences, Inc. v. Board of Trustees of the Leland Stanford Junior Univ., 489 U.S. 468, 476, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989) (ruling that a California choice-oflaw provision incorporated the procedural rules of the CAA).
Second, the finding that the parties had agreed that attorney's fees would be awarded to prevailing party "[in] the event of litigation" (Pl. Objection at 1; R & R at 15) was not incorrect. In reaching its finding, the Court relied upon Section 16(m) of the employment agreement: "[i]n the event of litigation between the parties over the terms of this Agreement and the performance of their respective obligations hereunder, the prevailing party shall be entitled to receive its reasonable attorney's fees and expenses from the other party." The core of Discipio's objection is that the parties agreed under this provision to the award of attorney's fees in litigation "on the contract, not in connection with litigation under a statute." (Pl. Objections at 2). Anacomp characterizes this objection as a "red herring" in the context of issue before the Court — i.e., whether Discipio's Wage Act claim is arbitrable (D. Response to Pl. Objections at 4) — and the Court agrees since this objection does not militate against the recommendation that the Wage Act claim be subject to arbitration. The provision under Section 16(m) provides for the award of attorney's fees
Third, severance pay is not covered by the Wage Act according to prevailing state law. As Discipio recognizes and as the magistrate judge discussed in the Report and Recommendation, the Massachusetts Appeals Court, in Prozinski v. Northeast Real Estate Servs., LLC, 59 Mass.App.Ct. 599, 603-604, 797 N.E.2d 415 (2003), ruled that the Wage Act does not include severance pay. Although Discipio does not dispute the holding in Prozinski, he relies upon a more recent Superior Court decision, Juergens v. Microgroup, Inc., 2011 WL 1020856, *1 (Mass.Super. January 28, 2011) in which the court refused to dismiss a claim for severance pay under the Wage Act. He argues that "the Magistrate [Judge] was wrong in ruling that the current state of the law in Massachusetts is that severance pay is not covered by the Wage Act," relying on the fact that the Appeals Court "upheld" the decision in Juergens. (Pl. Objections at 2). Discipio, however, overstates the appellate court's treatment of Juergens. The Appeals Court declined to review Juergens on the defendant's petition to a single justice of that court (and again upon reconsideration); it did not reach the merits of Juergens. (R & R at 20-21).
For the foregoing reasons, Discipio's objections to the report and recommendation of Magistrate Judge Collings are overruled and the report and recommendation is accepted by the Court. Accordingly, Anacomp's motion to dismiss and/or motion to stay the amended complaint (# 21) is ALLOWED to the extent that the plaintiff's severance pay claim under the Massachusetts Wage Act be DISMISSED; and Anacomp's motion to dismiss and/or motion to stay the amended complaint is ALLOWED to the extent a stay is requested as to all other claims in the amended complaint and that these claims be referred to arbitration pursuant to the arbitration clause in the employment agreement.
COLLINGS, United States Magistrate Judge.
On or about September 3, 2010, Arthur J. DiScipio ("DiScipio") filed a single count
On October 22, 2010, the plaintiff filed an amended complaint (# 20) which included an additional count for breach of contract. On November 5, 2010, Anacomp filed a motion to dismiss and/or motion to stay the amended complaint (# 21
A hearing was held on the motion to dismiss or to stay on February 24, 2011, and the matter was then taken under advisement. With the record now complete, the dispositive motion stands ready for decision.
The facts of the case are as follows
The employment agreement contains numerous provisions that are relevant to the discussion, including an arbitration clause which provides, in relevant part, as follows:
Defendant's Memorandum #22, Exh. A, Exh. A ¶ 15.
The scope of the agreement to arbitrate covers "all potential claims between Employer and the Company relating to employment, such as breach of contract, ... compensation or benefits claims, ... and claims for violation of any local, state or federal law or common law to the fullest extent permitted by law." (# 22, Exh. A, Affidavit of Howard Dratler, Exh. A ¶ 15(a)) With regard to the procedure for the arbitration, the employment agreement states:
Defendant's Memorandum # 22, Exh. A, Exh. A ¶ 15(c).
According to the terms of the employment agreement, the company is to pay the costs of the arbitration proceeding while each of the parties is to pay the costs of preparing their own case as well as their own attorneys' fees. (# 22, Exh. A, Exh. A ¶ 15(d)) The employment agreement also provides "that the arbitrator may, in his or her discretion, award reasonable attorneys' fees and costs to the prevailing party." (# 22, Exh. A, Exh. A ¶ 15(d)
Lastly for present purposes, the terms of the employment agreement state that "[t]his Agreement will be governed by and construed in accordance with the laws of the State of California." (# 22, Exh. A, Exh. A ¶ 16(g))
Although the defendant has styled its motion as one to dismiss, in effect what Anacomp seeks is an order to compel arbitration. See, e.g., IOM Corp. v. Brown Forman Corp., 627 F.3d 440, 449 n. 10 (1 Cir., 2010); see also Sourcing Unlimited, Inc. v. Asimco Intern., Inc., 526 F.3d 38, 46 (1 Cir., 2008). The First Circuit has explained that:
Combined Energies v. CCI, Inc., 514 F.3d 168, 171 (1 Cir., 2008); Soto v. State Industrial Products, Inc., 642 F.3d 67, 71-72 (1 Cir.2011); Dialysis Access Center, LLC v. RMS Lifeline, Inc., 638 F.3d 367, 374-75 (1 Cir.2011).
"Whether or not a dispute is arbitrable is typically a question for judicial determination." Dialysis Access, 638 F.3d at 375 (citation omitted); IOM Corp., 627 F.3d at 450.
In the instant case, there is no contest with respect to points one and three of the test: there is a written arbitration provision in the employment agreement and Anacomp has not waived its right to arbitrate. Turning to the second factor, the breach of contract claims set forth in Count II of the amended complaint unquestionably fall within the scope of the arbitration provision and the plaintiff does not argue otherwise. However, DiScipio does challenge the enforceability of the arbitration clause vis-a-vis his Wage Act claims alleged in Count I of the amended complaint. Thus, the primary issue at hand is whether the mandatory arbitration provision in the employment agreement should be enforced with respect to DiScipio's statutory claims under the Massachusetts Wage Act.
The parties agree that the question of whether the mandatory arbitration clause in the employment agreement is enforceable is governed by the Federal Arbitration Act ("FAA"). (# 22 at 4; # 25 at 1) The FAA provides that "[a] written provision in ... a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. Under the FAA:
Title 9 U.S.C. § 3.
The statute also allows for "[a] party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a
There is no doubt "that statutory claims may be the subject of an arbitration agreement, enforceable pursuant to the FAA." Gilmer, 500 U.S. at 26, 111 S.Ct. 1647. Indeed, the Supreme Court requires the enforcement of arbitration agreements that do not undermine the relevant statutory scheme. Gilmer, 500 U.S. at 26, 111 S.Ct. 1647. As has been repeatedly explained, "`[b]y agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute; it only submits their resolution in an arbitral, rather than a judicial, forum.'" Gilmer, 500 U.S. at 26, 111 S.Ct. 1647 (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985)). Moreover, "`so long as the prospective litigant effectively may vindicate [his or her] statutory cause of action in the arbitral forum, the statute will continue to serve both its remedial and deterrent function.'" Gilmer, 500 U.S. at 28, 111 S.Ct. 1647 (quoting Mitsubishi, 473 U.S. at 637, 105 S.Ct. 3346).
In opposing the defendant's motion, DiScipio argues that his statutory rights under the Massachusetts Wage Act will be abridged if the arbitration provision is enforced. The plaintiff's contention
Kristian v. Comcast Corp., 446 F.3d 25, 37 (1 Cir., 2006) (internal citations and quotation marks omitted).
DiScipio asserts that his statutory rights cannot be vindicated because the arbitration clause in the employment contract does not require any discovery; it does not require a written award; and it permits the arbitrator, in his or her discretion, to award attorneys' fees and the costs of the arbitration to the prevailing party.
DiScipio contends that in an arbitration he will not be permitted to conduct the full
These arguments can be dispatched in short order. The First Circuit has written that:
Kristian, 446 F.3d at 42-43.
In this case the applicable rules of arbitration provide for at least limited discovery and a written decision.
As noted earlier, the employment agreement contains a choice-of-law provision mandating that the contract was to "be governed by and construed in accordance with the laws of the State of California." (# 22, Exh. A, Exh. A ¶ 16(g)) The rules of the California Arbitration Act
In short, the arbitration rules make provision for at least limited discovery and require that the award be in writing. Therefore, the plaintiff's initial two grounds for resisting arbitration on Count I of the amended complaint must fail. See Gilmer, 500 U.S. at 31-32, 111 S.Ct. 1647.
DiScipio next argues that the arbitration clause in the employment agreement permits the arbitrator, in his or her discretion,
The First Circuit has held:
Muskat v. U.S., 554 F.3d 183, 190 (1 Cir., 2009).
Relevant here are fundamental principles of contract interpretation "including that contracts are to be `read as wholes,' `given effect as rational business documents,' and `should not be read to render various sections contradictory or mere surplusage.'" Uncle Henry's Inc. v. Plaut Consulting Co., 399 F.3d 33, 47 n. 17 (1 Cir., 2005) (citations omitted).
The arbitration clause clearly and unequivocally states, in a separate sentence, that the costs of the arbitration proceeding, including the costs of the arbitrator, are to be borne by the Company, i.e., the defendant Anacomp. The "costs" which may be awarded to a prevailing party are the "costs incurred in the preparation and presentation of its case" referenced together in the second sentence of the clause. To read the "costs" in the second sentence to be the same as the "costs" in the first sentence makes the paragraph as a whole contradictory and irrational. There is no need for such a tortured reading when a straightforward reading is reasonable and makes sense.
According to DiScipio, the defendant would not be able to collect attorneys' fees in this court under the Wage Act claim, so to allow Anacomp potentially to recover attorneys' fees in an arbitration would violate the plaintiff's substantive rights. Any merit this argument may have is undercut by the fact that the employment agreement "provides that `[i]n the event of litigation between the parties over the terms of this Agreement and the performance of their respective obligations hereunder, the prevailing party shall be entitled to receive its reasonable attorney's fees and expenses from the other party.'" (# 22, Exh. A, Exh. A ¶ 16(m)) In other words, either the Court or the arbitrator is authorized under the terms of the employment agreement to award reasonable attorneys' fees to the prevailing party in any litigation.
The plaintiff agreed to the terms of the employment agreement and has advanced no argument that this separate provision is somehow unenforceable. Having agreed in the employment agreement that a prevailing
In his additional reply brief (# 34), DiScipio makes a new argument that should be addressed.
The employment agreement contains a choice-of-law provision which reads "[t]his Agreement will be governed by and construed in accordance with the laws of the State of California." (# 22, Exh. A, Exh. A ¶ 16(g)) While California law governs the employment agreement, it does not govern the substantive law under which the plaintiff may bring his claims. Discipio is a Massachusetts resident who was employed by Anacomp in Massachusetts. (# 20 ¶¶ 1, 9) Count I of the amended complaint is brought pursuant to a Massachusetts statute; Massachusetts substantive law governs the Wage Act claims. "The rate of interest on an award is commonly treated as a matter of substantive law." Conetta v. National Hair Care Centers, Inc., 236 F.3d 67, 77 (1 Cir., 2001). Thus, the 12% prejudgment interest rate would apply as a matter of substantive Massachusetts law. Consequently, any difference in prejudgment interest rates under California and Massachusetts law is not a reason refuse to require arbitration.
Anacomp has moved to dismiss outright the severance pay claim under the Wage Act, presumably under Fed. R. Civ. C. 12(b)(6) for failure to state a claim. Relying on the case of Prozinski v. Northeast Real Estate Services, LLC, 59 Mass.App.Ct. 599, 797 N.E.2d 415 (2003), the defendant argues that "[i]t is well established under Massachusetts law that the Wage Act does not encompass severance pay." (# 22 at 16) The Massachusetts Appeals Court wrote in Prozinski:
Prozinski, 59 Mass.App.Ct. at 603, 797 N.E.2d at 419; see also Doucot v. IDS Scheer, Inc., 734 F.Supp.2d 172, 192 (D.Mass., 2010) ("The Massachusetts Appeals Court has maintained a narrow scope of the MA Wage Act.").
In Okerman, the Appeals Court was addressing commissions, an item specifically covered in the Wage Act. See Mass. Gen. L. c. 149 § 148 ("This section shall apply, so far as apt, to the payment of commissions when the amount of such commissions, less allowable or authorized deductions, has been definitely determined and has become due and payable to such employee, and commissions so determined and due such employees shall be subject to the provisions of section one hundred and fifty.") While DiScipio interprets Okerman as having expanded the coverage of the Wage Act, what the Appeals Court did was reject "other restrictions ... improperly engrafted onto the statute" by the Superior Court. Okerman, 69 Mass.App. Ct. at 776, 871 N.E.2d at 1122. The Okerman decision does not change the outcome of the Prozinski decision. Indeed, the Okerman court cites Prozinski with approval for the proposition that the "court would not read into wage act protection against retention of severance pay where plain language of wage act did not include it." Okerman, 69 Mass.App.Ct. at 779, 871 N.E.2d at 1124.
That having been said, on January 28, 2011, a Massachusetts Superior Court judge refused to dismiss a claim for severance pay under the Wage Act, writing:
Juergens v. Microgroup, Inc., 2011 WL 1020856, *2 (Mass.Super., Jan. 28, 2011).
On February 23, 2011, Microgroup filed a petition pursuant to Mass. Gen. L. c. 231, § 118 in the Massachusetts Appeals Court. See Juergens v. Microgroup, 2011-J-0077. The petition seeking review of the Superior Court's denial of the motion to dismiss the severance pay claim was denied on April 4, 2011(# 5) and again on reconsideration on April 11, 2011.
For the reasons stated, I RECOMMEND that Defendant Anacomp Inc.'s Motion To Dismiss And/Or Motion To Stay Plaintiff's Amended Complaint (# 21) be ALLOWED to the extent that the severance pay claim under the Massachusetts Wage Act be DISMISSED. I FURTHER RECOMMEND that Defendant Anacomp Inc.'s Motion To Dismiss And/Or Motion To Stay Plaintiff's Amended Complaint (# 21) be ALLOWED to the extent a stay is requested as to all other claims in the amended complaint and that all the other claims in the amended complaint be referred to arbitration pursuant to the arbitration clause in the employment agreement.
The parties are hereby advised that any party who objects to these recommendations must file a specific written objection thereto with the Clerk of this Court within 14 days of the party's receipt of this Report and Recommendation. The written objections must specifically identify the portion of the recommendations, or report to which objection is made and the basis for such objections. The parties are further advised that the United States Court of Appeals for this Circuit has repeatedly indicated that failure to comply with Rule 72(b), Fed.R.Civ.P., shall preclude further appellate review. See Keating v. Secretary of Health and Human Services, 848 F.2d 271 (1 Cir., 1988); United States v. Emiliano Valencia-Copete, 792 F.2d 4 (1 Cir., 1986); Scott v. Schweiker, 702 F.2d 13, 14 (1 Cir., 1983); United States v. Vega, 678 F.2d 376, 378-379 (1 Cir., 1982); Park Motor Mart, Inc. v. Ford Motor Co., 616 F.2d 603 (1 Cir., 1980); see also Thomas v. Arn, 474 U.S. 140, 106 S.Ct. 466, 88 L.Ed.2d 435 (1985).