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holding that veil-piercing could bind a non-signatory to arbitration, even though the arbitration clause was "specifically" limited to controversies between the parties
Summary of this case from Petersen v. EMC Telecom Corp.Opinion
No. 02-CV-1094 (FB) (RML)
December 13, 2002
HARRY WEINBERG, ESQ., Law Offices of Harry Weinberg, New York, NY., for plaintiff.
RICKI E. ROER, ESQ., Wilson, Elser, Moskowitz, Edelman Dicker LLP, New York, NY., for defendants.
MEMORANDUM AND ORDER
Plaintiff John Calamia ("Calamia") brings this action against defendants Riversoft, Inc. ("Riversoft, Inc.") and Riversoft Limited ("Riversoft Ltd.") (collectively, "defendants"), for violation of the Age Discrimination in Employment Act ("ADEA"), and pendant state claims for violation of the New York Human Rights Law and common law breach of contract. Defendants move for summary judgment to compel arbitration. For the following reasons, the Court, inter alia, compels arbitration of Calamia's claims against Riversoft, Inc.
BACKGROUND
The following facts, which none of the parties dispute, are taken from Calamia's complaint and affidavit in opposition to defendants' motion, and from the employment agreement between Calamia and Riversoft, Inc. attached to defendants' motion papers.
Calamia is a resident of New York. Riversoft, Inc., a foreign corporation doing business in New York, is a wholly-owned subsidiary of Riversoft Ltd., a British corporation, which shares employees and management with Riversoft, Inc. In November 1999, Calamia, then age 51, signed a written employment agreement ("agreement") with Riversoft, Inc. to become the company's vice president of sales. The agreement was printed on Riversoft Ltd. letterhead.
The agreement contained the following arbitration clause:
The Company [Riversoft, Inc.] and you [Calamia] agree that any controversy or dispute arising out of your employment relationship with the Company shall be resolved by arbitration in New York, N.Y. in accordance with the prevailing rules of the American Arbitration Association [("AAA")]. Both you and the Company will select an arbitrator and each respective arbitrator will select a third arbitrator. The arbitration panel will be empowered to reach a decision and a judgment on the panel's decision shall be final and any be entered in any court having jurisdiction. The arbitration procedure shall be in lieu of any and all actions in law or equity except as otherwise allowed under the Company's Proprietary Information and Inventions Agreement referred to below. Any dispute or controversy shall be governed by and construed in accordance with the substantive law of the State of New York.
Notice of Mot., Ex. B, at 3 (agreement).
Under the agreement, Calamia was compensated with an annual salary and Riversoft Ltd. stock options. The agreement contained a severance clause that stated that the employment relationship was terminable at will, but that Riversoft, Inc. would compensate Calamia if he were terminated without cause by paying him 50% of his then-annual base salary, and allowing him to immediately exercise "all [stock options] granted with respect to shares which were due to vest on or before the next annual anniversary date of [his] employment following the effective date of termination."
On May 8, 2001, Calamia was laid off and replaced by a younger worker. Riversoft, Inc. paid Calamia his salary as specified by the severance clause and vested the stock options, but only allowed him to exercise his stock options if he agreed to limiting conditions not set forth in the severance clause of the agreement.
After pursuing administrative remedies before the proper agencies, Calamia brought this action on February 14, 2002, alleging that defendants violated the ADEA and the New York State Human Rights Law by discriminating against him because of his age. Calamia also alleges that defendants breached that part of the severance clause relating to his right to exercise stock options upon termination.
In opposition to defendants' motion to compel arbitration, Calamia raises several arguments: (1) none of his claims are arbitrable because the arbitration clause does not extend to any dispute arising upon termination of the employment relationship; (2) alternatively, his ADEA claim is not arbitrable because the arbitration clause is restricted to claims arising only under New York law; and (3) his claims against Riversoft Ltd. should remain in federal court because Riversoft Ltd. is not bound by the arbitration clause, since it is not a party to the employment agreement.
DISCUSSION
The Court will grant a motion for summary judgment if there is no genuine issue of material fact to be tried, and the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex, 477 U.S. at 322. The Court's role in reviewing a motion for summary judgment is not "to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). All ambiguities must be resolved, and all inferences drawn, in favor of the non-moving party. See D'Amico v. City of New York, 132 F.3d 145, 149 (2d Cir. 1998). Nonetheless, "[u]nsupported allegations do not create a material issue of fact," Weinstock v. Columbia Univ., 224 F.3d 33, 41 (2d Cir. 2000); the non-movant must offer some "hard evidence" to show that "its version of the events is not wholly fanciful." D'Amico, 132 F.3d at 149.
The Federal Arbitration Act ("FAA"), the federal statute governing all arbitration disputes affecting commerce, establishes that written arbitration agreements "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." FAA, 9 U.S.C. § 2; see also Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 121 (2001) (employment contracts containing arbitration clauses are covered by the FAA). Section 4 of the FAA allows the Court to compel arbitration if the parties have entered into an enforceable, written arbitration agreement. FAA, 9 U.S.C. § 4. To determine whether an arbitration agreement is enforceable, the Court must resolve four issues: (1) "it must determine whether the parties agreed to arbitrate;" (2) "it must determine the scope of that agreement;" (3) "if federal statutory claims are asserted, it must consider whether Congress intended those claims to be nonarbitratable;" (4) "if the court concludes that some, but not all, of the claims in the case are arbitratable, it must then decide whether to stay the balance of the proceedings pending arbitration." Oldroyd v. Elmira Savings Bank, 134 F.3d 72, 75-76 (2d Cir. 1998) (citing Genesco, Inc. v. T. Kakiuchi Co., 815 F.2d 840, 844 (2d Cir. 1987)).
FAA, section 3 provides:
If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration. FAA, 9 U.S.C. § 3.
It is unquestioned that Calamia and Riversoft, Inc. entered into a signed agreement that contained an arbitration clause, in satisfaction of the first element. With respect to the third element, case law holds that federal discrimination claims, including ADEA claims, may be. arbitrated. See Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 23 (1991) (ADEA); see also Desiderio v. NASD, 191 F.3d 198, 204 (2d Cir. 1998) (Title VII); see also Fletcher v. Kidder, Peabody Co., 81 N.Y.2d 623, 629, cert. denied, 510 U.S. 993 (1993) (N.Y. Human Rights Law claims are arbitrable). The Court must determine whether the scope of the arbitration clause encompasses Calamia's claims, and the applicability of the fourth element, i.e. whether any stays are indicated.
A. Claims against Riversoft, Inc.
1. Statutory Discrimination Claims
When interpreting arbitration clauses under the FAA, courts apply "ordinary statelaw principles that govern the formation of contracts" to decide "whether the parties agreed to arbitrate a certain matter." First Options, Inc. v. Kaplan, 514 U.S. 938, 944 (1995). Under state contract law, "[i]t is axiomatic that where the language of a contract is unambiguous, the parties' intent is determined within the four corners of the contract, without reference to external evidence." Feifer v. Prudential Ins. Co. of Am., 306 F.3d 1202, 1210 (2d Cir. 2002). Also bearing on the Court's interpretation of arbitration clauses is a strong federal policy that "favor[s] arbitration as an alternative means of dispute resolution," and requires courts to construe the causes as broadly as possible. Oldroyd, 134 F.3d at 76. "[A]ny doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay or a like defense to arbitrability." Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 360 U.S. 1, 24-25 (1983). The FAA excuses parties from arbitrating claims only when they have "specifically excepted a certain type of claim from mandatory arbitration." Oldroyd, 134 F.3d at 76.
Arbitration clauses fall into two groups: "narrow" clauses, which limit arbitration to specific types of disputes, and "broad" clauses that cover any and all dispute, controversy or claim under an agreement. Oldroyd, 134 F.3d at 76. Parties using broad, expansive language in their arbitration clauses "presumably . . . intend all issues that `touch matters' within the main agreement to be arbitrated, while the intended scope of a narrow arbitration clause is obviously more limited." Ace Capital RE Overseas Ltd. v. Central United Life Ins. Co., 307 F.3d 24, 34 (2d Cir. 2002) (internal quotation omitted). The paradigm broad clause, which allows arbitration for "any claim or controversy arising out of or relating to an agreement," is normally entitled to a "presumption of arbitrability which is only overcome if it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that [it] covers the asserted dispute." WorldCrisa Corp. v. Armstrong, 129 F.3d 71, 74 (2d Cir. 1997); see Oldroyd, 134 F.3d at 76.
Calamia contends that the arbitration clause is limited to disputes arising while he was employed, not claims arising upon his termination. The Court determines that the unambiguous language of the agreement does not support his interpretation.
The arbitration clause applies to "any controversy or dispute arising from [the] employment relationship." Notice of Mot., Ex. B, at 3. Employment termination is a component of an "employment relationship." See Baron v. Port Authority of N.Y. N.J., 271 F.3d 81, 85 (2d Cir. 2001) (employment relationship includes procedures and grounds for termination). In fact, one section of the agreement governing Calamia and Riversoft, Inc.'s employment relationship addresses its termination and the consequent award of severance pay. See Notice of Mot., Ex. B, at 2.
Moreover, the language of the arbitration clause is similar to other broad arbitration clauses that apply to statutory claims arising upon termination of employment. See, e.g., Oldroyd, 134 F.3d at 74, 79 (holding claim for retaliatory discharge to be within the scope of broad arbitration clause requiring arbitration of "any dispute, controversy or claim arising under or in connection with this Agreement"); Cap Gemini Ernst Young U.S. LLC v. Nackel, No. 02-CV-6872, 2000 WL 31626703, at *1, *3 (S.D.N.Y. Nov. 21, 2002) (compelling arbitration of termination of employment claim pursuant to clause requiring arbitration of "any dispute, controversy or claim . . . arising out of or relating to or concerning the provisions of this Agreement . . . or arising out of your employment with us or otherwise concerning any rights, obligations, or other aspects of your employment relationship, including, without limitation, discrimination claims") (emphasis added); Rajjak v. McFrank Williams, No. 01-CV-0493 2001, 2001 WL 799766, at *1, *5 (S.D.N.Y. July 13, 2001) (determining that statutory discrimination and retaliatory discharge claims were subject to arbitration where arbitration clause required arbitration of "any dispute of any kind between [parties], whether or not arising out of this Agreement"); Gold v. Deutsche Aktiengesellschaft, No. 97-CV-1304, 1998 WL 126058, at *1, *3 (S.D.N.Y. Mar. 19, 1998) (granting motion to compel arbitration of claim for termination of employment where broad arbitration clause required arbitration of "any dispute, claim or controversy that may arise between me and my firm, or a customer, or any other person"); cf. Coffey v. Cushman Wakefield, Inc., No. 01-CV-9447, 2002 WL 1610913, *7, *8 (S.D.N.Y. July 22, 2002) (denying motion to compel arbitration of statutory discrimination and retaliatory discharge claims that did not fit within scope of narrow arbitration clause that required arbitration only when "a broker has a dispute with one or more other brokers"). The arbitration clause between Calamia and Riversoft, Inc. is unambiguous, uses broad language, and does not specifically exclude claims arising upon termination; hence, the Court concludes that the arbitration clause is not limited to pre-termination employment disputes.
In his second argument Calamia contends that his ADEA claim is not arbitrable because the language at the end of the arbitration clause, requiring "any dispute or controversy [to] be governed by and construed in accordance with the substantive law of New York," limits the scope of arbitrable claims to state common law claims. Notice of Mot., Ex. B, at 3. The Court does not agree.
The "New York law" reference in the arbitration clause is a choice-of-law provision. See, e.g., Mastobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 59 (1995); Paine Webber Inc. v. Bybyk, 81 F.3d 1193, 1196 (2d Cir. 1996). A choice-of-law provision does not "signify the parties' intent to be bound by the substantive limitations" of New York law. Paine Webber, 81 F.3d at 1200. Rather, it "may reasonably be read as merely a substitute for the conflict-of-laws analysis that otherwise would determine what law to apply to disputes arising out of the contractual relationship." Mastobuono, 514 U.S. at 59. When accompanied by an arbitration provision requiring the parties to follow the rules of the AAA, "the choice-of-law provision covers the rights and duties of the parties, while the arbitration clause covers arbitration; neither sentence intrudes upon the other." Id. at 64. The choice-of-law provision does not limit the scope of the claims that are arbitrable under the arbitration clause in the agreement between Calamia and Riversoft, Inc., and has no impact on the Court's determination that the parties' agreement allows arbitration of statutory claims predicated on the termination of the employment relationship.
Because the Court concludes that the statutory claims fall within the scope of the arbitration clause, the Court directs Calamia to arbitrate these claims. See Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 218 (1985) ("[D]istrict courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed.")
2. State Breach-of-Contract Claim
Calamia argues that his state breach-of contract claim is not arbitrable because, like the statutory claims, it arose upon his termination. Calamia's right to exercise stock options is unambiguously part of his "employment relationship" with Riversoft, Inc., as it was a component of both his compensation and severance packages described in the agreement; consequently, his breach of contract claim falls within the scope of the arbitration agreement. Accordingly, the Court orders Calamia to proceed to arbitration on this issue.
B. Claims Against Riversoft Ltd.
Calamia argues that the arbitration clause does not pertain to his claims against Riversoft Ltd., because the clause specifically refers to controversies between Calamia and Riversoft, Inc. Calamia is correct that the Court cannot compel arbitration unless the entity was a party to the contract. See Worldcrisa Corp. v. Armstrong, 129 F.3d 71, 75 (2d Cir. 1997). However, "principles of agency and contract law may . . . provide grounds for holding a non-signatory to an arbitration agreement." Id. at 76; see Tompson-CSF, S.A. v. American Arbitration Assoc., 64 F.3d 773, 776 (2d Cir. 1995) (traditional bases for binding a non-signatory include information by reference, assumption, agency, veil-piercing/alter ego, and estoppel). Whether Riversoft Ltd., as a non-signatory, should be deemed a party to the agreement, and hence a party to the arbitration clause, under any of the traditional principles of agency or contract law is an issue for the Court to decide. See, e.g., Worldcrisa Corp., 129 F.3d at 75-76.
On the present record, the Court cannot make that determination as a matter of law, especially in regard to veil piercing. To determine whether a corporate veil should be pierced, the Court examines four factors: "(1) interrelation of operations, (2) centralized control of labor relations, (3) common management, and (4) common ownership or financial control." Cook v. Arrowsmith Shelburne, Inc., 69 F.3d 1235, 1240 (2d Cir. 1995). Calamia's allegations suggest a significant overlap between Riversoft, Inc. and Riversoft Ltd. that might justify piercing the corporate veil: the companies share management and employees, Calamia's employment agreement was printed on Riversoft Ltd. letterhead, and he was compensated in part with Riversoft Ltd. stock options. The facts, however, are not conclusive and do not provide sufficient grounds for the Court to now conclusively rule whether Riversoft Ltd. should be deemed a party to the agreement.
If Calamia is successful in his arbitration, he will be permitted, if he chooses, to return to Court to seek enforcement of his award against both defendants, at which time the issue of Riversoft Ltd.'s liability will be adjudicated. See Oldroyd, 134 F.3d at 75-76.
CONCLUSION
Defendants' motion for summary judgment is granted compelling arbitration of all claims against Riversoft, Inc. The Court will administratively close the case with leave to Calamia to return to Court upon due notice of a successful arbitration award and his desire to enforce the award against both defendants.