By Nicole D. Prysby, J.D.
An executive must arbitrate her disability discrimination claims against individual executives of the partnership she worked for, even though they were not signatories to her arbitration agreement, held a federal district court in New York. She alleged that the conduct of the individual defendants was part of a strategy developed by the employer to hide discriminatory acts and therefore her dispute against the individual defendants was factually intertwined with her dispute against the employer. The court rejected the executive’s argument that the agreement was unconscionable because it would result in her not being able to sue the individual defendants in state court for state-law violations. Because her claims against the individual defendants were brought under state law, not federal law, the effective-vindication rule did not come into play (Keyes v. The Ayco Co., L.P., December 19, 2018, Sannes, B.).
Discrimination claims. The plaintiff was an executive officer, partner, and general counsel for a limited partnership. The partnership was acquired by Goldman Sachs in 2003 and prior to the acquisition, she entered into an arbitration agreement with the partnership and Goldman Sachs. Following the acquisition, she became the COO and a senior vice president at the partnership. In 2016, she was terminated and she claimed it was due to disability discrimination.
She brought claims under federal and state law against the partnership, Goldman Sachs, and individual defendants, and asserted that she was not required to arbitrate the claims because the individual defendants were not parties to the arbitration agreement. She also asserted that the arbitration agreement was unconscionable, and that it should be considered a collective bargaining agreement (CBA) rather than a negotiated employment agreement.
Nonsignatories, but protected. The plaintiff argued that the individual defendants could not enforce the arbitration agreement because they could not establish that they were third-party beneficiaries of the agreement. The court disagreed, finding that because the individual defendants were employees of a party to the agreement, they were protected by it even though they were not signatories. Because she alleged that their conduct was part of a strategy developed by the partnership and Goldman Sachs to hide discriminatory acts, her dispute against the individual defendants was factually intertwined with the dispute against the partnership and Goldman Sachs. It would be inefficient and unfair for the same witnesses to appear both in an arbitration proceeding and then again in a separate litigation relating to the same matters in dispute, the court reasoned.
Substantive unconscionability. The plaintiff asserted that the arbitration agreement was substantively unconscionable because it would result in her not being able to sue the individual defendants in state court for state-law violations. But because her claims against the individual defendants were brought under state law, not federal law, the effective-vindication rule did not come into play.
She provided no other basis for asserting substantive unconscionability and, since the arbitration clause applied equally to both parties, and did not forbid appeal of the arbitrator’s decision or limit the time in which she could bring her claims, it was not unconscionable.
Procedural unconscionability. The court also rejected her argument that the arbitration agreement was procedurally unconscionable. She argued it was unconscionable because she had no leverage to negotiate the terms, but arbitration agreements are enforceable despite inequality in bargaining power. Moreover, she did not allege that she even attempted to negotiate, or that high-pressure tactics were used against her. She was not precluded from reading the agreement and she is a sophisticated party who could have conferred with an attorney or questioned provisions before signing the agreement. Also, the fact that the employer drafted the agreement did not render it procedurally unconscionable.
Dispute was within the scope. Having found that an enforceable arbitration agreement existed, the court turned to the question whether her claims were within the scope of the agreement. Noting that the agreement was very broad and required arbitration of all disputes arising out of her employment, the court found the discrimination claims at hand were within the scope of the agreement. It rejected her assertion that the agreement should be treated as a CBA, not an arbitration agreement.
Disability claims not precluded. Finally, because she offered no support for the notion that Congress intended to limit arbitration for disability discrimination claims, the court rejected this argument as well, and found her claims were arbitrable.
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