VERNON S. BRODERICK, District Judge.
Petitioners Crispin Porter & Bogusky LLC ("CP+B"), MDC Partners, Inc. ("MDC"), Mitchell Gendel, and Dusty Nelson (collectively, "Petitioners") initiated this miscellaneous action to compel Respondent Ralph M. Watson ("Respondent") to arbitrate claims alleged in a lawsuit filed in the United States District Court for the District of Colorado ("Colorado Action"). Before me is Petitioners' motion to compel arbitration and to dismiss, or, in the alternative, to stay the Colorado Action. For the reasons discussed below, Petitioners' motion is GRANTED IN PART and DENIED IN PART. Because Respondent's claims fall within the scope of a valid agreement to arbitrate, Petitioners' motion to compel arbitration is GRANTED. Because I do not have the authority to dismiss or stay the Colorado Action, Petitioners' motion to dismiss or stay that action is DENIED without prejudice.
Petitioner CP+B is an advertising agency and a wholly owned subsidiary of Petitioner MDC, (Colo. Compl. ¶¶ 4-5);
Section 18 of the Employment Agreement sets forth the terms of the parties' agreement to arbitrate certain disputes (the "Arbitration Provision"). (Emp't Agr't 15-17.) Specifically, part (a) of the Arbitration Provision provides:
(Id. at 15-16.) Part (b) of the Arbitration Provision, which is entirely in bold text, states:
(Id. at 16-17.)
In addition, Section 6(a) of the Employment Agreement discusses the termination of Respondent's employment, providing:
(Id. at 5.) Finally, Section 7(b) of the Employment Agreement continues the discussion of termination of Respondent's employment, providing:
(Id. at 6.)
In or around February 2018, after receiving anonymous allegations of sexual harassment against Respondent, CP+B terminated Respondent's employment for cause. (Id. ¶¶ 15-26.) On July 19, 2018, Respondent filed the Colorado Action in the United States District Court for the District of Colorado, bringing claims under the Age Discrimination in Employment Act of 1967 (`ADEA"), 29 U.S.C. § 621, et seq., and Title VII of the Civil Rights Act of 1964 ("Title VII"), 42 U.S.C. § 2000e, et seq., as well as various common law claims. (See Colo. Compl. ¶¶ 34-137.) On July 25, 2018, Petitioners filed a motion to compel arbitration in the Colorado Action. (Pet'rs' Mem. 7.)
On August 22, 2018, Petitioners filed a motion to compel arbitration and to dismiss the Colorado Action, or, in the alternative, to stay the Colorado Action, in the Southern District of New York. (See Docs. 1, 6.)
The Federal Arbitration Act ("FAA"), 9 U.S.C. § 1, et seq., provides that an arbitration provision in a "contract evidencing a transaction involving commerce . . . 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. In creating "a body of federal substantive law of arbitrability, applicable to any arbitration agreement within [its] coverage," the FAA was "a congressional declaration of a liberal federal policy favoring arbitration agreements, notwithstanding any state substantive or procedural policies to the contrary." Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983); see also AT & T Mobility LLC v. Concepcion, 563 U.S. 333, 346 (2011) ("[O]ur cases place it beyond dispute that the FAA was designed to promote arbitration. They have repeatedly described the Act as `embod[ying] [a] national policy favoring arbitration,' . . . .") (alteration in original) (quoting Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 443 (2006)). The "principal purpose of the FAA is to ensure that private arbitration agreements are enforced according to their terms." Concepcion, 563 U.S. at 344 (citation omitted). Notwithstanding the strong policy in favor of arbitration agreements, "`a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.'" In re Am. Express Fin. Advisors Sec. Litig., 672 F.3d 113, 127 (2d Cir. 2011) (quoting Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002)); see also Concepcion, 563 U.S. at 339 ("[C]ourts must place arbitration agreements on an equal footing with other contracts, and enforce them according to their terms.") (internal citations omitted).
In determining whether claims are subject to arbitration, courts in this Circuit consider "(1) whether the parties have entered into a valid agreement to arbitrate, and if so, (2) whether the dispute at issue comes within the scope of the arbitration agreement." Am. Express Fin. Advisors, 672 F.3d at 128. If these two conditions are met, the FAA "mandates that district courts shall direct the parties to proceed to arbitration." Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985). When determining whether the parties have entered into a valid agreement to arbitrate, "courts should apply ordinary state-law principles that govern the formation of contracts," and evaluate the allegations "to determine whether they raise a genuine issue of material fact." Sacchi v. Verizon Online LLC, No. 14-CV-423, 2015 WL 765940, at *4 (S.D.N.Y. Feb. 23, 2015) (internal quotation marks and citations omitted).
Respondent does not dispute that he signed the Employment Agreement, which included the Arbitration Provision.
There are two types of validity challenges under § 2 of the FAA: "One type challenges specifically the validity of the agreement to arbitrate," and "[t]he other challenges the contract as a whole, either on a ground that directly affects the entire agreement (e.g., the agreement was fraudulently induced), or on the ground that the illegality of one of the contract's provisions renders the whole contract invalid." Buckeye, 546 U.S. at 444. "[O]nly the first type of challenge is relevant to a court's determination whether the arbitration agreement at issue is enforceable." Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63, 70 (2010). "`[A]n arbitration provision is severable from the remainder of the contract' and so `a party's challenge to another provision of the contract, or to the contract as a whole, does not prevent a court from enforcing a specific agreement to arbitrate.'" Arrigo v. Blue Fish Commodities, Inc., 408 F. App'x 480, 482 (2d Cir. 2011) (alteration in original) (quoting Rent-A-Ctr., 561 U.S. at 70).
Sections 6(a) and 7(b) fall outside the Arbitration Provision, which is unambiguously titled "Arbitration." (See Emp't Agr't 5-6, 15.) Nonetheless, Respondent argues that his challenge based on Sections 6(a) and 7(b) falls into the first category of validity challenges identified in Buckeye—challenges to the validity of the agreement to arbitrate—because Section 6(a) refers to an arbitrator and incorporates Section 7(b) by reference. (See Resp't's Opp. 8-10.) Specifically, Section 6(a) states that, if Respondent is terminated for cause, and "the arbitrator appointed pursuant to [the Arbitration Provision] determines" that Respondent was not terminated for cause, then the termination is determined to have been without cause, and Respondent's "rights and remedies will be governed by Section 7(b), in full satisfaction and in lieu of any and all other or further remedies [Respondent] may have," thereby limiting Petitioners' liability under any other legal claims. (Emp't Agr't 5.) Although Section 6(a) mentions arbitration, it is "found outside of the arbitration provision, and, as such, has no bearing on [CP+B] and [Respondent's] otherwise valid agreement to arbitrate." Paduano v. Express Scripts, Inc., 55 F.Supp.3d 400, 427 (E.D.N.Y. 2014) (citing Rent-A-Ctr., 561 U.S. at 70). Respondent's "argument that the Arbitration Provision is unconscionable because § [6(a)] of the Agreement limits [CP+B's] liability attacks the validity of the contract as a whole[,]" not the validity of the Arbitration Provision itself, and so "this issue must . . . be decided by the arbitrator." Damato v. Time Warner Cable, Inc., No. 13-CV-994 (ARR)(RML), 2013 WL 3968765, at *8 (E.D.N.Y. July 31, 2013).
The fee-shifting clause, on the other hand, does appear in the Arbitration Provision. (See Emp't Agr't 16.) Specifically, the Arbitration Provision includes a clause under which the "prevailing party in any arbitration shall be entitled to receive its reasonable attorneys' fees and costs from the other party(ies) as awarded by the arbitrator." (Id.) Respondent argues that this provision is unconscionable because certain of his claims are brought under Title VII, (Resp't's Opp. 20-21), under which "a plaintiff should not be assessed his opponent's attorney's fees unless a court finds that his claim was frivolous, unreasonable or groundless." Sista v. CDC Ixis N. Am., Inc., 445 F.3d 161, 178 (2d Cir. 2006) (internal quotation marks omitted).
Respondent asserts such an "attorney fee-shifting clause has been found to be unenforceable by New York courts." (Resp't's Opp. 13.) However, the only authority identified by Respondent to support this assertion is Ragone v. Atl. Video at Manhattan Ctr., 595 F.3d 115 (2d Cir. 2010). In Ragone, "the Second Circuit suggested, but did not hold, that provisions of an arbitration agreement, . . . [including] a fee-shifting provision requiring the award of attorney's fees to the prevailing party[,] might be substantially unconscionable as applied to certain discrimination claims." Arshad v. Transportation Sys., Inc., 183 F.Supp.3d 442, 449 (S.D.N.Y. 2016) (emphasis added). Respondent does not identify a single federal or New York court that has invalidated an agreement to arbitrate based on the inclusion of a fee-shifting clause. Moreover, Respondent makes no attempt to explain why the fee-shifting clause invalidates the Arbitration Provision as applied to his other claims (e.g., his state common law claims). Finally, if an arbitrator were to award attorneys' fees to a prevailing employer on a Title VII claim, without first making a finding that the claim was frivolous, unreasonable or groundless, such an award would be subject to attack on the grounds that the arbitrator had "exhibited a `manifest disregard of law.'" Westerbeke Corp. v. Daihatsu Motor Co., 304 F.3d 200, 208 (2d Cir. 2002) (quoting Wilko v. Swan, 346 U.S. 427, 436 (1953), overruled on other grounds, Rodriguez de Quijas v. Shearson/Am. Express, Inc., 490 U.S. 477 (1989)).
Petitioners' motion requests that I "dismiss[] or, in the alternative, stay[] the action brought by [Respondent] against Petitioners in the United States District Court for the District of Colorado." (Pet'rs' Mot. 1.)
Accordingly, Petitioners' motion to dismiss or to stay the Colorado Action is denied without prejudice to refile the motion in the Colorado Action.
For the reasons set forth above, Petitioners' motion to compel arbitration is GRANTED, and Petitioner's motion to dismiss the complaint and stay proceedings is DENIED without prejudice. The Clerk of Court is respectfully directed to terminate the open motion at Document 6 and to close this case.
SO ORDERED.