Opinion
00 Civ. 5730 (RLC).
December 28, 2000.
Michael C. Silberberg, Morvillo, Abramowitz, Grand, Iason Silberberg, P.C., New York, NY, Barry E. Ungar, Larry H. Spector, Mann, Ungar, Spector Labovitz, P.C., Philadelphia, Pa, Attorneys for Plaintiff.
Jay S. Berke, David E. Schwartz, Skadden, Arps, Slate, Meagher Flom LLP, New York, NY, Attorneys for Defendant.
OPINION
Defendant BlackRock, Inc., ("BlackRock") moves for an order pursuant to the Federal Arbitration Act, 9 U.S.C. § 1 et seq., compelling arbitration of Plaintiff Daniel Eagan's ("Eagan's") entire cause of action and staying Eagan's present action before the court. Plaintiff opposes this motion.
BACKGROUND
BlackRock provides investment management and advisory services and sells shares of various BlackRock mutual funds. (Pl.'s Mem. at 4.) Eagan was employed under an employment agreement as the lead manager for two of these funds. Id. When his employment was terminated, he owned 99,637.67 shares of restricted BlackRock Class B common stock. Id. at 5, n. 8. Pursuant to a stockholders agreement executed by Eagan, the restrictions on the stock would lapse in one third increments beginning in 2000 and continuing each year thereafter through 2002. (Berke Aff. Ex. A.) In the event that Eagan was terminated for good reason or cause (as defined in the employment contract) then Eagan would be required to immediately sell back the stock at the lower of the market value or the price he originally paid for it. Id. If he was terminated without good reason or cause, then Eagan would retain the stock and the restrictions would lapse. Id.
BlackRock became displeased with Eagan's performance and apparently made its displeasure known on several occasions. On July 19, 2000, BlackRock terminated Eagan's employment, effective August 18, 2000, allegedly for good reason as defined by § 1(m) of the employment contract ("Good Reason"). Eagan filed a complaint with the court on August 2, 2000, protesting his termination. He also filed a Demand for Arbitration with the American Arbitration Association on August 11, 2000, but both parties have stipulated to a stay of that proceeding pending the outcome of the litigation before the court.
BlackRock issued a performance review in December, 1999, of Eagan's work which noted a need for improvement. (Berke Aff. Ex. F.) Additionally, an e-mail message from Eagan on June 28, 2000, acknowledged a prior conversation in which he apparently was told that the "current performance is unsatisfactory." (Berke Aff. Ex. G.)
While he remained on the payroll until August 18, 2000, Eagan's employment was effectively terminated on July 19, 2000, as he was forbidden from entering BlackRocks offices after that date. (Berke Aff. Ex. D.)
DISCUSSION
Neither party disputes the well settled policy favoring a broad reading of agreements to arbitrate disputes. See Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983) (holding that "any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration"); Thomas James Assocs., Inc. v. Jameson, 102 F.3d 60, 65 (2d Cir. 1996) (holding that "arbitration must be preferred `unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute'") (citation omitted). This policy dictates that when a disagreement is arguably arbitrable or is necessarily connected to a question which is clearly arbitrable, the dispute should be the exclusive province of an arbitration proceeding. See Genesco, Inc. v. T. Kakiuchi Co., 815 F.2d 840, 846 (2d Cir. 1987).
The employment contract at issue here provides for arbitration in limited circumstances. As such, it is essential to determine whether Eagan's grievance is of the type which is appropriate for arbitration. The crux of Eagan's argument is that he was terminated without Good Reason. Section 10(b) of the employment agreement provides that the determination of Good Reason is an arbitrable question. (Berke Aff. Ex. A.)
Section 12 of the employment agreement states that all disputes arising out of the agreement — with the exception of two specific provisions — shall be resolved by the courts. (Berke Aff. Ex. A.)
Neither party contests the validity of the employment contract or the arbitration provision. Rather, they disagree on whether the arbitration provision applies to the instant dispute.
The court does not reach the issue of whether Eagan was fired for Good Reason or whether BlackRock followed all of the proper procedures in terminating him. The analysis is limited to whether the arbitration clause controls this dispute.
Eagan argues, however, that certain conditions precedent to the arbitration clause were never met in this case. In particular, while he was given thirty days notice of his termination, Eagan notes that he was not given the formal thirty day period referenced in § 10(b) of the employment agreement to improve his alleged poor performance (the "cure period"). (Berke Aff. Ex. D.) The essential question for the court to resolve is whether that cure period is a condition precedent to the arbitration provision. If it is, then the arbitration clause was arguably never triggered and is therefore irrelevant to this litigation. If it is not, then the arbitration clause is applicable and a proper reading of that provision would encompass this dispute.
If BlackRock failed to follow the proper procedures in terminating Eagan, such failure may invalidate a Good Reason determination. Under § 10(b), disputes regarding the determination of Good Reason are to be resolved through arbitration. Interpreting the arbitration clause broadly, as the court must, the issue of whether BlackRock complied with the necessary procedures in reaching its Good Reason determination is appropriate for arbitration. The only way in which resolving these procedural issues would not be arbitrable is if those procedures are conditions precedent to arbitration itself.
It is well settled that where the language is unclear, a court should not presume a condition precedent. See Kidder Peabody Co. v. Unigestion Intl. Ltd., 903 F. Supp. 479, 501 (S.D.N Y 1995) (Sweet, J.) (holding that "a contractual duty is not to be construed as a condition precedent unless the language of the contract clearly imposes such a condition"); Unigard Sec. Ins. Co. v. N. River Ins. Co., 79 N.Y.2d 576, 581, 594 N.E.2d 571, 573, 584 N.Y.S.2d 290, 292 (1992). In this case, the relevant language may be found at § 10(b) of Eagan's employment agreement:
If BlackRock or an affiliate thereof proposes to terminate [Eagan's] employment for Cause or Good Reason BlackRock's CEO shall immediately notify [Eagan] of such fact in writing, specifying the action or conduct which resulted in such determination. Within 30 days, [Eagan] shall have the right to cure such . . . conduct or to submit the determination of Cause or Good Reason to binding arbitration.
(Berke Aff. Ex. A.) Based on this language, BlackRock was not even required to provide a cure period. Eagan's rights here are framed in the disjunctive. He has a right to cure or to submit the determination to arbitration. For the right to cure to be a condition precedent, Eagan would need to be entitled to both the right to cure and the right to submit the decision to arbitration. The contract could have easily been written to allow Eagan both rights, but it was not.
Furthermore, Eagan cannot argue that even though he may not be guaranteed both a cure period and the chance to submit the decision to arbitration, having a choice between the two is a condition precedent to arbitration. There is nothing in the language of § 10(b) which provides Eagan with a choice. Furthermore, even assuming, arguendo, that a choice was implied, the court cannot view such a choice as constituting a condition precedent because of the policy, discussed earlier, against construing unclear provisions in such a manner.
To put it another way, BlackRock did not violate § 10(b) by failing to provide Eagan a right to cure so long as Eagan still enjoyed the alternate right of submitting the decision to arbitration within thirty days. In its letter terminating Eagan's employment, BlackRock explicitly acknowledges that Eagan may still submit the determination to arbitration. Since a cure period is not a condition precedent, the arbitration clause is effective and covers this dispute.
BlackRock states in its letter terminating Eagan's employment: "Kindly notify us, prior to August 18, 2000, if you wish to exercise your right to submit our determination of Good Reason to arbitration." (Berke Aff. at Ex. D.)
Eagan's contention that a letter proposing termination (rather than simply terminating him) was required under § 10(b) as a condition precedent to arbitration is also incorrect. (Pl.'s Mem. at 6, 11.) Section 10(b) states that BlackRock must notify Eagan in writing if it "proposes to terminate [Eagan's] employment for Cause or Good Reason" (emphasis added). Here, BlackRock has proposed that Eagan's termination be for Good Reason, and under §§ 10(b)(i)-(iii). That proposal will not be a final determination of Good Reason until the conclusion of the arbitration proceeding.
CONCLUSION
For the foregoing reasons, BlackRock's motion to compel arbitration and stay this action is granted.IT IS SO ORDERED.