Unconscionability of confidentiality provision delegated to arbitrator; real estate agent must arbitrate sexual harassment claims
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Thursday, February 13, 2020

Unconscionability of confidentiality provision delegated to arbitrator; real estate agent must arbitrate sexual harassment claims

By Kathleen Kapusta, J.D.

The real estate agent did not challenge the delegation clause specifically, said the court, and the enforceability of the confidentiality clause was different from the enforceability of the delegation clause.

Although troubled by an arbitration agreement’s confidentiality provision in the context of a real estate agent’s sexual harassment claims against her employer stemming from the alleged harassment by a colleague, a federal district court in Massachusetts found determination of the unconscionability of the provision had been delegated to the arbitrator and because she did not specifically challenge the delegation provision, it could not reach her unconscionability argument. But, said the court granting Coldwell Banker’s motion to compel arbitration, the agent was "free to argue to the arbitrator that the confidentiality clause is not enforceable because of the serious nature of the allegations." Nor could she avoid arbitration of those claims against her colleague that were based on interdependent and concerted misconduct by all defendants, even though he was a non-signatory to the agreement; her tort claims against him, however, were based on harassment that occurred outside the scope of her employment and thus were not subject to arbitration (Tissera v. NRT New England dba Coldwell Banker Residential Brokerage, February 10, 2020, Saris, P.).

Confidentiality requirement. In 2015, the broker signed an Independent Contractor Agreement with Coldwell that not only contained an arbitration agreement but also delegated threshold questions of arbitrability and enforceability to the arbitrator. In addition, a confidentiality clause provided that the parties would "to the greatest extent permitted by applicable law," keep all proceedings before an arbitrator confidential.

Alleged harassment. About a year later, she retained her colleague, a "star broker" in the office, to sell her house. It was then, she claimed, that he started harassing her by leaving flirtatious gifts at her home and texting her that he was "thinking of her" while sitting on her bed. Although she told him she was not interested in a romantic relationship, the harassment escalated and he started stalking her by showing up unannounced at open houses, driving by her house on numerous occasions, and approaching her children and ex-husband at a grocery store.

When she complained to the managing broker, she was asked if she wanted to transfer to another office. Though she ultimately quit, he continued to harass and follow her, sending her gifts, calling from different phone numbers, trying to find out where she lived, and parking immediately next to her outside of her new part-time job. She subsequently sued Coldwell and the managing broker, as well as her colleague, asserting numerous claims against all three and all moved to compel arbitration.

Unconscionable? As to Coldwell and the managing broker’s motion to compel, the real estate agent argued that the arbitration agreement was unconscionable, and thus unenforceable, because the confidentiality provision impermissibly silences sexual harassment victims. In response, Coldwell, pointing to the delegation clause, asserted that challenges to the agreement’s enforceability were for an arbitrator to decide. In arguing that the arbitration agreement was unconscionable based on the confidentiality provision, the agent did not specifically challenge the delegation clause. "However," the court observed, "the enforceability of the confidentiality clause is different from the enforceability of the delegation clause."

Rent-A-Center. While the agent argued that the Supreme Court’s decision in Rent-A-Center, West, Inc. v Jackson left it up to courts to decide issues of validity specifically related to an arbitration provision, the court here pointed out that the High Court held it could not consider the plaintiff’s substantive unconscionability challenges "because none was specific to the delegation provision." And here, said the court, because the agent did not challenge the delegation provision specifically, it could not reach her unconscionability arguments as "the unconscionability of that provision has been delegated to the arbitrator."

Claims against broker. She next argued that because the broker was not a signatory to her contract with Coldwell, he could not compel arbitration of the claims against him. While non-signatories cannot typically invoke arbitration under a contract to which they have no privity, the broker argued that he could, pursuant to state law, invoke her agreement under an equity estoppel theory. Specifically, he argued that equitable estoppel allows a non-signatory to compel arbitration when a signatory raises allegations of substantially interdependent and concerted misconduct by both the non-signatory and one or more of the signatories to the contract.

Turning to her claims relating to the creation of a hostile work environment by all defendants, in which she alleged the broker’s conduct and Coldwell’s refusal to adequately respond adversely affected her job performance and severed her membership in a real estate brokers’ organization, the court found this to be interdependent and concerted misconduct by all defendants. Thus, she was estopped from avoiding arbitration with the broker regarding these claims.

Tort claims. But her remaining tort claims against the broker for intentional infliction of emotional distress, intentional interference with contractual relations, assault and battery, and invasion of privacy were not based on interdependent and concerted misconduct but rather on his conduct alone. Indeed, said the court, much of the alleged harassment—including stalking the employee and approaching her children—occurred outside the scope of his employment. Thus, those claims were not subject to arbitration under an estoppel theory.

Also rejected was his attempt to invoke arbitration under an agency theory. But an agent can only benefit from his principal’s arbitration clause where the action at dispute was undertaken in the course of the agent’s employment and here, the complaint alleged that much of the tortious conduct occurred while the broker was not performing any real estate related activity, was outside of the normal time and space limitations of the employment agreement, and was not serving a purpose of Coldwell Banker. Although some of the alleged conduct did occur in the office, there was no evidence his conduct fell within the state law definition of agency, said the court, and thus his tort claims did not fall within the agency exception for non-signatories.

Finally, noting the seriousness of her claims against the broker, the court declined to stay proceedings as to the nonarbitrable claims.

The case is No. 19-12118-PBS.

Attorneys: Ana I. Munoz (Zalkind Duncan & Bernstein) for Amy Tissera. Francis J. Bingham (Littler Mendelson) for NRT New England dba Coldwell Banker Residential Brokerage and Anne Webster. Todd J. Bennett (Bennett & Belfort) for John Paul Farrell.

Companies: NRT New England; Coldwell Banker Residential Brokerage

Cases: Arbitration Procedure ContractClaims SexualHarassment CoverageLiability TortClaims MassachusettsNews

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