JAMES C. FRANCIS IV, United States Magistrate Judge.
This is a putative class action in which the plaintiffs allege that their employer, Goldman, Sachs & Co. and The Goldman Sachs Group, Inc. (collectively, "Goldman
Ms. Parisi's individual claims are subject to an arbitration clause signed as part of her employment agreement, and, pursuant to that agreement, Goldman Sachs cannot be required to arbitrate on a class basis. However, because an arbitration clause may not be enforced if it precludes the vindication of substantive rights, and because a pattern or practice claim under Title VII can only be brought in the context of a class action, Ms. Parisi's Title VII claim cannot be committed to arbitration lest she be deprived of her substantive rights. Therefore, as discussed more fully below, the defendants' motion to stay this action and compel arbitration is denied.
The plaintiffs are three women who worked for Goldman Sachs between 1997 and 2008. (Complaint ("Compl."), ¶¶ 13-18). Plaintiff H. Cristina Chen-Oster was hired in March 1997 and promoted to the position of Vice President in June of that year. (Compl., ¶ 70). She remained in that position for the next eight years, until her resignation from the firm. (Compl., ¶¶ 70, 102). Plaintiff Shanna Orlich was hired as a Summer Associate by Goldman Sachs in 2006, and then as a full-time Associate in July 2007. (Compl., ¶ 115). She remained in that position until she was terminated, in November 2008. (Compl., ¶ 134). Plaintiff Lisa Parisi (the "plaintiff") was hired by Goldman Sachs as a Vice President in August 2001. (Compl., ¶ 104). In 2003, Ms. Parisi was promoted to the position of Managing Director at Goldman Sachs. (Compl., ¶ 104). As a condition of her promotion, Ms. Parisi signed an employment contract. (Letter of Henry M. Paulson, Jr., dated Nov. 4, 2003 (the "Employment Agreement"), attached as Exh. 1 to Declaration of Erin E. LaRuffa dated Nov. 22, 2010). The Employment Agreement contains an arbitration clause that provides as follows:
(Employment Agreement, § 4). The Employment Agreement defines "Employment Related Matters" as "matters arising out of or relating to or concerning this Agreement, your hire by or employment with the Firm or the termination thereof, or otherwise concerning any rights, obligations or other aspects of your employment relationship in respect of the Firm." (Employment Agreement, § 3). Ms. Parisi continued as a Managing Director until her employment was terminated by Goldman Sachs in November 2008. (Compl., ¶¶ 104, 113).
Following their separation from Goldman Sachs, each of the plaintiffs filed
At the same time that it answered the complaint, on November 22, 2010, Goldman Sachs filed the instant motion to stay Ms. Parisi's claims and compel individual arbitration. (Notice of Motion dated Nov. 22, 2010). In response, the plaintiff sought limited discovery related to Goldman Sachs' custom and practice with respect to arbitration, ultimately filing a motion to compel disclosure of exemplar credit card and employment agreements. (Memorandum and Order dated March 1, 2011 ("3/1/11 Order") at 1-2, 3, 2011 WL 803101). I denied that motion on March 1, 2011, finding that, because there was no ambiguity in Ms. Parisi's employment contract, New York law prohibited consideration of extrinsic evidence in interpreting its provisions, and the requested discovery was therefore irrelevant. (3/1/11 Order at 5-8). The parties subsequently completed briefing of Goldman Sachs' motion to stay and compel arbitration, including the filing of a sur-reply by the plaintiff addressing the Second Circuit's decision in In re American Express Merchants' Litigation, 634 F.3d 187 (2d Cir.2011) ("American Express II"), issued on March 8, 2011.
As an initial matter, the defendants note that the arbitrability of Ms.
In this case, part of the dispute centers on whether the contract at issue forbids class arbitration — precisely the issue deemed to be one of contract interpretation by the plurality in Bazzle. However, the motion is appropriately resolved by this Court for two reasons. First, as both parties are in agreement that the Court is the appropriate forum for resolution of this dispute, it seems plain that the dispute fits into the
Howsam, 537 U.S. at 83-84, 123 S.Ct. 588; see also Skirchak v. Dynamics Research Corp., 508 F.3d 49, 56 (1st Cir.2007) ("An agreement to arbitrate does not divest a court of its jurisdiction."). Second, the balance of the parties' dispute is over "whether [they] have agreed to submi[t] a particular dispute to arbitration," a question that is generally resolved by the courts. Granite Rock Co. v. International Brotherhood of Teamsters, ___ U.S. ___, ___, 130 S.Ct. 2847, 2855, 177 L.Ed.2d 567 (2010) (second alteration in original) (internal quotation marks omitted). The questions raised by the parties require determination of the scope and enforceability of the arbitration clause, and therefore the issue is appropriately characterized as a dispute over arbitrability. See Rent-A-Center, West, Inc., ___ U.S. at ___, 130 S.Ct. at 2778 ("If a party challenges the validity ... of the precise agreement to
Arbitration clauses in employment contracts are generally subject to the provisions set forth in the Federal Arbitration Act (the "FAA"), 9 U.S.C. §§ 1 et seq. See Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 119, 121 S.Ct. 1302, 149 L.Ed.2d 234 (2001) (finding all employment contracts subject to FAA except those of "transportation workers"). Under the FAA,
9 U.S.C. § 3. In deciding whether to stay an action and compel arbitration, four factors are relevant: (1) whether the parties agreed to arbitrate; (2) the scope of the agreement to arbitrate; (3) whether Congress intended any asserted federal statutory claims to be nonarbitrable; and (4) whether a stay is appropriate. Reynolds v. de Silva, No. 09 Civ. 9218, 2010 WL 743510, at *2 (S.D.N.Y. Feb. 24, 2010) (citing Genesco, Inc. v. T. Kakiuchi & Co., 815 F.2d 840, 844 (2d Cir.1987)).
"[W]hen determining whether a contract to arbitrate has been established for the purposes of the FAA, federal courts should apply `ordinary state-law principles that govern the formation of contracts' to decide `whether the parties agreed to arbitrate a certain matter.'" Sinnett v. Friendly Ice Cream Corp., 319 F.Supp.2d 439, 443 (S.D.N.Y.2004) (quoting First Options, Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995)). Nonetheless, "the FAA imposes certain rules of fundamental importance, including the basic precept that arbitration `is a matter of consent, not coercion.'" Stolt-Nielsen, ___ U.S. at ___, 130 S.Ct. at 1773 (quoting Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior University, 489 U.S. 468, 479, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989)). Given the preference for arbitration embodied in the FAA and Supreme Court case law, federal courts construe arbitration clauses broadly and apply a "presumption of arbitrability." Sinnett, 319 F.Supp.2d at 444; see also 9 U.S.C. § 2 ("An agreement in writing to submit to arbitration ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.").
In opposing the motion to compel arbitration, the plaintiff argues that, although the Employment Agreement contains an arbitration clause, that clause does not apply to her class claims because the Employment Agreement also contains a judicial forum selection clause that "anticipates that some matters will not be subject to arbitration and should be brought in court"; she asserts that these provisions create an ambiguity that "should be read to provide [the plaintiff] with her forum of choice for class claims." (Pl. Memo. at 10-11). This argument depends upon a determination that there is, in fact, ambiguity on the face of the Employment Agreement, which would then require construction of the ambiguity against the defendants, who drafted the Agreement. (Pl. Memo. at 10-11).
However, the existence of a judicial forum selection provision does not render the arbitration clause ambiguous or susceptible to any alternative interpretation.
Even if the co-existence of a forum selection clause and an arbitration clause rendered the intent to arbitrate ambiguous under state contract law, both federal and state case law require resolving any such ambiguity in favor of arbitration.
Thus, in this case there is an operational agreement to arbitrate. Because that agreement applies to all "Employment Related Matters," the plaintiff's claims of gender-based employment discrimination and retaliation are encompassed by the clause.
The plaintiff argues in the alternative that the Employment Agreement allows for the arbitration of her claims on a class basis. However, this interpretation of the Agreement is foreclosed by the Supreme Court's recent holding in Stolt-Nielsen that
___ U.S. at ___, 130 S.Ct. at 1775. In other words, "a party may not be compelled under the FAA to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so." Id.
In this case, the Employment Agreement is undisputedly silent with respect to the availability of class arbitration. (Employment Agreement, § 4; Def. Memo. at 8-9; Pl. Memo. at 13). The plaintiff contends that the agreement may nonetheless
Indeed, the Supreme Court in Stolt-Nielsen had "no occasion to decide what contractual basis may support a finding that the parties agreed to authorize class-action arbitration" because the parties in that case had stipulated that there was "no agreement" to allow arbitration on a class basis. ___ U.S. at ___, 130 S.Ct. at 1776 n. 10. Further, the Court criticized the arbitrator in that case for failing to inquire whether "New York law contains a `default rule'" for the construction of agreements to arbitrate on a class-wide basis. Id. at ___, 130 S.Ct. at 1768-69; (see also 3/1/11 Order at 4-5).
However, there is no clear "default rule" under New York contract law for determining if the parties intended to submit to class arbitration.
Additionally, more general principles of New York contract law do not allow the conclusion that the parties in this case intended to submit to class arbitration. As I already determined in denying the plaintiff's motion to compel, there is no ambiguity on the face of the contract; it is simply silent with respect to class arbitration. (3/1/11 Order at 8); see also Wyly v. CA, Inc., No. 05 CV 4430, 2009 WL 3128034, at *9 (E.D.N.Y. Sept. 29, 2009) ("`[S]ilence alone does not equate to ambiguity.'" (quoting Henrich v. Phazar Antenna Corp., 33 A.D.3d 864, 867, 827 N.Y.S.2d 58, 61 (2d Dep't 2006)). Thus, the plaintiff's arguments that industry custom and the relationship between the parties demonstrate an intent to arbitrate on a class basis impermissibly rely on extrinsic evidence, and they therefore fail. (Pl. Memo. at 13-14, 15-16); Millgard Corp. v. E.E.Cruz/Nab/Fronier-Kemper, No. 99 Civ. 2952, 2003 WL 22741664, at *2
Further, to the extent that New York courts have weighed the right to proceed judicially on a class basis against an agreement to arbitrate, they have upheld the arbitration clauses even when doing so effectively foreclosed the ability to proceed as a class. See, e.g., Hayes v. County Bank, 26 A.D.3d 465, 467, 811 N.Y.S.2d 741, 743 (2d Dep't 2006) ("[T]he fact that the arbitration agreements effectively preclude her from pursuing a class action does not alone render them substantively unconscionable."); Tsadilas v. Providian National Bank, 13 A.D.3d 190, 191, 786 N.Y.S.2d 478, 480 (1st Dep't 2004) ("The arbitration provision is enforceable even though it waives plaintiff's right to bring a class action."). Thus, any argument that class arbitration must be read into a silent contract because the plaintiff did not understand that, by agreeing to arbitrate, she "would be waiving her right to assert substantive class claims in any forum" (Pl. Memo. at 14), must fail, especially in light of the Supreme Court's affirmative statement that "[a]n implicit agreement to authorize class-action arbitration [] is not a term that the arbitrator may infer solely from the fact of the parties' agreement to arbitrate," Stolt-Nielsen, ___ U.S. at ___, 130 S.Ct. at 1775.
Finally, other judges sitting in this district have rejected arguments that rely on the circumstances of the parties' relationship or relevant customs and practices to establish an implied agreement to arbitrate on a class basis. See Jock v. Sterling Jewelers, Inc., 725 F.Supp.2d 444, 450 (S.D.N.Y.2010) ("While contextual factors such as the sophistication of the parties, their relative bargaining position with respect to the arbitration clauses, and any pertinent tradition of dispute resolution might aid in construing ambiguous manifestations of the parties' intentions, they cannot establish assent to class arbitration where, as here, the contract itself provides no reason to believe the parties reached any agreement on that issue."). In this case, as in Jock, there is simply no evidence on the face of the contract that the parties agreed to submit to class-based arbitration. See also Fensterstock v. Education Finance Partners, 611 F.3d 124, 141 (2d Cir.2010) ("[E]xcising the Note's class action and class arbitration waiver clause leaves the Note silent as to the permissibility of class-based arbitration, and under Stolt-Nielsen we have no authority to order class-based arbitration."); Sutherland v. Ernst & Young LLP, 768 F.Supp.2d 547, 554 (S.D.N.Y.2011) ("In accordance with Stolt-Nielsen, class arbitration may not be imposed on parties whose arbitration agreements are silent on the permissibility of class proceedings."). Therefore, under Stolt-Nielsen and New York contract law, the defendant cannot be compelled to submit to class arbitration; the Employment Agreement's arbitrability clause thus operates as an implied waiver of the plaintiff's class claims in this action.
It is well established that Congress intended claims under Title VII to be arbitrable. See Circuit City, 532 U.S. at 123, 121 S.Ct. 1302 ("The Court has been quite specific in holding that arbitration agreements can be enforced under the FAA without contravening the policies of congressional enactments giving employees specific protection against discrimination prohibited by federal law."); Gold v. Deutsche Aktiengesellschaft, 365 F.3d 144, 147 (2d Cir.2004) ("Courts have consistently
However, "`[b]y agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute; it only submits to their resolution in an arbitral, rather than a judicial, forum.'" Circuit City, 532 U.S. at 123, 121 S.Ct. 1302 (alteration in original) (quoting Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991)); Desiderio, 191 F.3d at 205-06 ("Moreover, the substantive rights found in the statute are not in any way diminished by our holding that arbitration may be compelled in this case, since only the forum — an arbitral rather than a judicial one — is affected, and plaintiff's rights may be as fully vindicated in the former as in the latter."); see also Mastrobuono, 514 U.S. at 63-64, 115 S.Ct. 1212 (refusing to enforce choice-of-law clause that would have practical effect of prohibiting arbitrator from awarding punitive damages because "it seems unlikely that petitioners were actually aware ... that by signing a standard-form agreement to arbitrate disputes they might be giving up an important substantive right"); Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 637 n. 19, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985) (noting that if arbitration clause and other contractual provisions "operated in tandem as a prospective waiver of a party's right to pursue statutory remedies," "we would have little hesitation in condemning the agreement as against public policy"). Indeed, "the arbitration of a statutory claim will be compelled only if that claim can be effectively vindicated in the arbitral forum." Sutherland, 768 F.Supp.2d at 549; see also Herrera v. Katz Communications, Inc., 532 F.Supp.2d 644, 646 (S.D.N.Y. 2008) ("[A] statutory cause of action will not be appropriate for arbitration if `the prospective litigant [cannot] effectively ... vindicate [his or her] statutory cause of action in the arbitral forum.'" (alterations in original) (quoting Gilmer, 500 U.S. at 28, 111 S.Ct. 1647)); Pyett, ___ U.S. at ___, 129 S.Ct. at 1474 ("[A] substantive waiver of federally protected civil rights will not be upheld.").
When a plaintiff's statutory rights are not capable of vindication through arbitration, the "federal substantive law of arbitrability," grounded in the FAA, allows federal courts to declare otherwise operative arbitration clauses unenforceable through a "vindication of statutory rights analysis." American Express II, 634 F.3d at 194; see also American Express I, 554 F.3d at 320 ("We do not follow these cases because they all rely on findings of unconscionability under state law, while we have relied here on a vindication of statutory rights analysis, which is part of the federal substantive law of arbitrability."); Sutherland, 768 F.Supp.2d at 554 ("[T]he Court finds that the class waiver provision here at issue is unenforceable because it prevents [the plaintiff] from vindicating her statutory rights."); see also Kristian v. Comcast Corp., 446 F.3d 25, 47-48 (1st Cir.2006) (severing as unenforceable provision of arbitration agreement limiting availability of treble damages under antitrust statute); Hadnot v. Bay, Ltd., 344 F.3d 474, 478 n. 14 (5th Cir.2003) (severing restriction on available remedies from arbitration
In American Express I, the Second Circuit concluded that a class action waiver contained within an arbitration agreement was unenforceable because, given the great expense of pursuing antitrust litigation and the small individual recovery each plaintiff could expect, the waiver would have the practical effect of ensuring no claims would be brought at all, granting the defendant "de facto immunity from ... liability." 554 F.3d at 320. The court found that this was a "valid ground" for the revocation of the class waiver under Section 2 of the FAA, and as such the provision was unenforceable. Id. at 320. Although the Supreme Court vacated this decision and remanded it for reconsideration in light of its decision in Stolt-Nielsen, ___ U.S. ___, 130 S.Ct. 2401, 176 L.Ed.2d 920, on further review the Second Circuit upheld its conclusion that "as the class action waiver in this case precludes plaintiffs from enforcing their statutory rights, we find the arbitration provision unenforceable." 634 F.3d at 199. The court distinguished Stolt-Nielsen, finding that it established "that parties cannot be forced to engage in a class arbitration absent a contractual agreement to do so," but did not render "a contractual clause barring class arbitration [] per se enforceable." Id. at 193-94. The court again cited Supreme Court dicta indicating there might be "instances in which an arbitration agreement contained provisions that would be unenforceable because they would prevent a prospective litigant from vindicating its rights ... in an arbitral forum," id. at 197 (citing Mitsubishi Motors Corp., 473 U.S. at 637, 105 S.Ct. 3346), and reaffirmed that the prohibitive cost of litigating the plaintiff's claims on an individual basis rendered the class action waiver unenforceable, id. at 197-99.
In fact, the Second Circuit has recently evinced a strong commitment to the vindication of statutory rights analysis, indicating in dicta a willingness to declare unenforceable an arbitration agreement containing a shortened statute of limitations and a fee-shifting provision that would "significantly diminish a litigant's rights under Title VII." Ragone v. Atlantic Video at Manhattan Center, 595 F.3d 115, 125-26 (2d Cir.2010). The court in that case reiterated that
Id. at 125 (quoting Mitsubishi Motors Corp., 473 U.S. at 637, 105 S.Ct. 3346).
In this case, the plaintiff has alleged that the defendants violated Title VII by engaging "in an intentional, company-wide, and systematic policy, pattern, and/or practice of discrimination against its female Associates, Vice Presidents, and Managing Directors." (Compl., ¶ 138). "Disparate treatment claims under Title VII generally are of two types: (1) individual disparate treatment claims ... and (2) pattern-or-practice disparate treatment claims that center on group-wide allegations of intentional discrimination." Robinson v. Metro-North Commuter Railroad Co., 267 F.3d 147, 158 n. 3 (2d Cir.2001). "Pattern-or-practice disparate treatment claims focus on allegations of widespread acts of intentional discrimination against individuals. To succeed on a pattern-or-practice claim, plaintiffs must prove more than sporadic acts of discrimination; rather, they must establish that intentional discrimination was the defendant's `standard operating procedure.'" Id. at 158 (quoting International Brotherhood of Teamsters v. United States, 431 U.S. 324, 336, 97 S.Ct. 1843, 52 L.Ed.2d 396 (1977)).
Although Title VII initially envisioned that pattern or practice claims would be made by the government, 42 U.S.C. § 2000e-6; International Brotherhood of Teamsters, 431 U.S. at 328 n. 1, 97 S.Ct. 1843, courts have unequivocally granted private individuals the right to vindicate those claims, Cooper v. Federal Reserve Bank of Richmond, 467 U.S. 867, 876 n. 9, 104 S.Ct. 2794, 81 L.Ed.2d 718 (1984); see also Tucker v. Gonzales, No. 03 Civ. 3106, 2005 WL 2385844, at *3 (S.D.N.Y. Sept. 27, 2005); Melani v. Board of Higher Education, 561 F.Supp. 769, 773 n. 5 (S.D.N.Y.1983). However, there is a consensus among courts in this district that pattern or practice claims may not be brought by a single individual, but rather must be pursued by a class. Houston v. Manheim-New York, No. 09 Civ. 4544, 2010 WL 6121688, at *5-6 (S.D.N.Y. July 7, 2010) ("Pattern or practice discrimination claims ... must be made as a class action."), report and recommendation adopted, 2011 WL 924199 (S.D.N.Y. March 16, 2011); United States v. City of New York, 631 F.Supp.2d 419, 427 (S.D.N.Y. 2009) ("[T]his Court holds that individuals cannot maintain a private, non-class, pattern-or-practice claim."); Marrow v. Potter, No. 06 Civ. 13681, 2010 WL 6334856, at *7 (S.D.N.Y. May 27, 2010) (same); see also Garrett v. Mazza, No. 97 Civ. 9148, 2010 WL 653489, at *11 n. 8 (S.D.N.Y. Feb. 22, 2010) ("While neither the Supreme Court nor the Second Circuit have specifically addressed the question of
Under the Supreme Court's initial formulation of the burden-shifting scheme in pattern or practice claims, plaintiffs need not establish individual instances of discrimination; they need only establish that a pattern or practice of discrimination exists. International Brotherhood of Teamsters, 431 U.S. at 360 & n. 46, 97 S.Ct. 1843. Plaintiffs generally rely on statistical evidence and "testimony from protected class members" to meet this burden; even if an employer then rebuts individual instances of discrimination, it must demonstrate that statistical evidence "`is either inaccurate or insignificant'" in order to escape liability.
Thus, the difference between the showings required for individual and pattern or practice discrimination claims is substantive: first, because in establishing a prima facie pattern or practice case a plaintiff may rely entirely on statistical evidence, and, second, because "[t]he effect of the presumption from the liability stage is to substantially lessen each class member's evidentiary burden relative to that which would be required if the employee were proceeding separately with an individual disparate treatment claim under the McDonnell Douglas framework." Robinson, 267 F.3d at 159; see also Glass v. IDS Financial Services, Inc., 798 F.Supp. 1411, 1416 (D.Minn.1992) (finding that "burdens of proof also vary significantly between" individual and pattern or practice discrimination claims). Although a Rule 23 class action alone "neither change[s] plaintiffs' separate entitlements to relief nor abridge[s] defendants' rights," Shady Grove Orthopedic Associates. P.A. v. Allstate Insurance Co., ___ U.S. ___, ___, 130 S.Ct. 1431, 1443, 176 L.Ed.2d 311 (2010), and is "ancillary to the litigation of substantive claims," Deposit Guaranty National Bank v. Roper, 445 U.S. 326, 332, 100 S.Ct. 1166, 63 L.Ed.2d 427 (1980); (Def. Reply Memo. at 7), Title VII, as construed in the case law, makes substantively distinct claims available to those victims of alleged discrimination proceeding individually and those proceeding as a
In most cases where one portion of an otherwise valid agreement is held to be unenforceable, that portion will be severed from the agreement, leaving the remainder of the agreement's terms in place. Herrera, 532 F.Supp.2d at 647 ("[T]he proper remedy [for unenforceable attorneys' fees clause] would be to sever the invalid provision of the arbitration clause and compel arbitration of the underlying dispute, rather than to invalidate the entire arbitration clause."); Beletsis v. Credit Suisse First Boston, Corp., No. 01 Civ. 6266, 2002 WL 2031610, at *6 (S.D.N.Y. Sept. 4, 2002) ("When a contract contains
For the reasons set forth above, the defendants' motion to stay the case and compel arbitration of Ms. Parisi's claims (Docket no. 23) is denied.
SO ORDERED.