Opinion
600825/04.
Decided July 12, 2004.
Plaintiff was represented by Harrington, Okco Monk, LP, 81 Main Street, White Plains, NY 10601, (914) 686-4800, Kevin J. Harrington, Esq.
Defendant was represented by Akin Gump Strauss Hauer Feld LLP, 590 Madison Avenue, New York, NY 10022, (212) 872-1000, Gregory W. Knopp, Esq.
Plaintiff Peter S. Kopple, formerly with defendant Stonebrook Fund Management, LLC (Stonebrook), moves for a preliminary injunction enjoining Stonebrook from attempting to enforce any terms contained in its Compliance and Employment Manual, and the annexed Agreement to Arbitrate All Claims Confidentiality and Non-Solicitation Agreement (collectively, the Agreement), which was executed by plaintiff as a condition of his ongoing employment. Whether plaintiff was an employee or a partner is an issue raised by plaintiff.
Defendant cross-moves for an order: (1) staying this action pending arbitration of plaintiff's underlying claims, on the ground that the Agreement requires plaintiff to arbitrate employment-related dispute; and (2) awarding Stonebrook costs.
FACTS
Plaintiff has been a securities trader for three decades. Defendant asserts that he is a former employee of Stonebrook, a fund management company. Stonebrook retained plaintiff as its head trader in 2001, when it was formed. Clearly, there was no written partnership agreement between the parties. Defendant denies that it ever agreed or promised to make plaintiff a partner. In any event, plaintiff worked for defendant. He had no written employment agreement, and no fixed duration of employment.
In November 2003, Stonebrook asked plaintiff and its (other) employees to agree to certain terms and policies as a condition of their ongoing employment. Many of those terms and conditions are contained in the Agreement. Plaintiff was given an opportunity to review the Agreement, and consult an advisor before signing it. Without raising any objections, he chose to execute the Agreement.
The Agreement requires that the parties resolve employment-related disputes through confidential arbitration:
The parties agree to submit all Disputes (as hereafter defined) for resolution pursuant to this Agreement, and agree that arbitration will be the exclusive means for resolving such Disputes.
Agreement at A-4 (Kopple Aff., Exh E). The Agreement defines "disputes" to include "all legal claims, disputes, or issues that relate to or arise out of the employment of Employee against the Company, with the sole exception of those claims listed in Section 2(c) below" ( id.). It further requires that arbitrations "be conducted on a strictly confidential basis," and restricts both parties from divulging the existence or nature of their claims ( id. at A-6). The Agreement does, however, recognize that the parties may engage in discovery during arbitration ( id.).
These exceptions, none of which apply here, include (1) worker's compensation claims; (2) disability benefits claims; (3) unemployment insurance claims; (4) claims that must be resolved pursuant to the terms of an employee benefit plan; (5) claims excluded from arbitration by statute; and (6) claims that are not legal in nature ( see Agreement, at A-4-5).
On January 2, 2004, Stonebrook discharged plaintiff for performance-related reasons.
On March 24, 2004, plaintiff commenced this action. He claims that Stonebrook failed to pay him compensation due, and discharged him on account of his age. In addition, in an apparent effort to avoid arbitration, he seeks a declaratory judgment that the Agreement is void and unenforceable. He offers several reasons for the alleged unenforceability including that he was fraudulently induced and coerced into signing it, that he received no consideration for signing it, and that its terms are unconscionable.
Contending that the Agreement prevented him from finding a new job, plaintiff initially sought a temporary restraining order precluding Stonebrook from enforcing the Agreement. On March 29, 2004, the Court considered plaintiff's request, but denied the temporary restraining order, on the ground that the Agreement does not restrict plaintiff from finding employment. The court has been advised by counsel that plaintiff has found employment in the securities field. Plaintiff now moves for a preliminary injunction precluding Stonebrook from enforcing the Agreement.
DISCUSSION
I. Plaintiff's Motion for Preliminary Injunction
Entitlement to a preliminary injunction requires a showing of (1) the likelihood of success on the merits, (2) irreparable injury absent the granting of preliminary injunctive relief, and (3) a balancing of the equities ( Aetna Ins. Co. v Capasso, 75 NY2d 860; W.T. Grant Co. v Srogi, 52 NY2d 496). If any one of these three requirements is not satisfied, the application must be denied ( see Faberge Intl., Inc. v De Pino, 109 AD2d 235 [1st Dept 1985]). Plaintiff's request for injunctive relief is denied, as he has failed to demonstrate that he will suffer irreparable harm, or that he is likely to succeed on the merits.
First, plaintiff alleges no facts that suggest he might incur irreparable harm. Although plaintiff contends that he will be irreparably harmed if a preliminary injunction is not granted because the terms of the Agreement prevent him from seeking new employment, this contention is without merit. In fact, he has found new employment. The Agreement specifically provides that "the provisions of this Agreement will not preclude Employee from other gainful employment following his/her termination of employment with the Company" ( id.).
Moreover, Stonebrook has never contended that the Agreement precludes plaintiff from working elsewhere, has never sought to enforce the Agreement in that way, and alleges that it has no intention of doing so ( see Lignelli Aff., ¶ 9). Thus, the harm plaintiff seeks to avoid lost employment opportunities is non-existent.
Plaintiff's alternative theory of harm that he cannot prepare his case because the Agreement requires confidentiality with respect to such matters is equally unavailing. Plaintiff contends that the Agreement's arbitration provision precludes him "from assembling any proof to support his claims," in that it prohibits parties from discussing their claims with non-parties. However, that certainly will not bar plaintiff from consulting an attorney or other professional to assist him in the preparation of his case or in defense of defendant's counterclaims, if there are any.
The court notes that it is already six months since plaintiff was discharged. Although the confidentiality agreement precludes plaintiff from soliciting Stonebrook employees fro twelve months, that time period might be found to be unreasonably long. The issue has not been raised directly here, and so it is not ripe for ruling.
Furthermore, even if an arbitration is commenced, the confidentiality clause will not cause him irreparable harm. While the clause requires that arbitrations "be conducted on a strictly confidential basis" (Agreement, at A-4), it in no way inhibits a party from preparing his case. To the contrary, the clause expressly acknowledges that the parties may engage in discovery ( id. at A-6). Plaintiff is thus free to conduct any investigation that he deems appropriate.
Injunctive relief is also improper as plaintiff cannot prove a likelihood of success on his underlying claims. He offers several reasons why the Agreement cannot be enforced, including that he was fraudulently induced and coerced into signing it, that he received no consideration, and that its terms are unconscionable, none of which have any merit.
In order to prove fraudulent inducement, he must demonstrate that Stonebrook knowingly made a false representation on which he relied ( see Lama Holding Co. v Smith Barney Inc., 88 NY2d 413; Channel Master Corp. v Aluminum Ltd. Sales, Inc., 4 NY2d 403). Plaintiff asserts that Stonebrook misled him regarding the contents of the Agreement, by stating that the Agreement did not include the "onerous" non-compete clause, and was simply "cookie cutter." However, such statements are true, as the Agreement does not preclude plaintiff from working for other companies, and it does include numerous commonplace terms. Absent any evidence of knowingly false statements, plaintiff cannot prove fraudulent inducement.
Moreover, given plaintiff's sophistication he attended business school and has more than 30 years of industry experience and the fact that he was given an opportunity to review the Agreement and consult an advisor before signing it ( see Lignelli Aff., ¶ 9), his claim that he was duped is a difficult one ( see Arakawa v Japan Network Group, 56 F Supp 2d 349, 352 [SD NY 1999] ["a person who signs a contract is presumed to know its contents and to assent to them"]).
Plaintiff's claim that Stonebrook concealed the fact that it had already decided to discharge him when it asked him to sign the Agreement is strongly controverted. Defendant's managing director Lignelli attests that Stonebrook did not decided to discharge plaintiff until well after he executed the Agreement ( see Lignelli Aff., ¶ 8). Plaintiff's assertion to the contrary is mere speculation devoid of factual support.
Plaintiff cannot prove that the Agreement is unenforceable for lack of consideration. Plaintiff argues that there can be no consideration because his employment did not continue for a substantial period of time. This argument misses the mark. Under New York law, continued employment of an at-will employee suffices as consideration for a restrictive covenant: (1) "where the employee remained with the employer for a substantial time;" or (2) "where discharge was the alternative" ( Zellner v Stephen D. Conrad, M.D., P.C., 183 AD2d 250, 256 [2d Dept 1992]; accord International Paper Co. v Suwyn, 951 F Supp 445 [SD NY 1997]). While plaintiff argues that the first circumstance does not apply, he completely ignores the second. Yet, as plaintiff himself alleges (Pl Mem, at 14), and as the Agreement explicitly states (Stonebrook "would not have . . . continued to employ [plaintiff] unless [he] agreed to be bound by the terms hereof" [Agreement, at A-4]), discharge was the alternative to signing the Agreement. Thus, plaintiff received valid consideration for executing the Agreement ( see Zellner v Stephen D. Conrad, M.D., P.C., 183 AD2d 250, supra).
Plaintiff also argues that the Agreement is unenforceable because it is a contract of adhesion. In order to establish adhesion, a plaintiff must show fundamental unfairness in the process by which the contract was formed, as well as in the substantive terms of the contract ( see Matter of Ball (SFX Broadcasting, Inc.), 236 AD2d 158 [3d Dept 1997], appeal dismissed 91 NY2d 921, lv denied 92 NY2d 803). Specifically, adhesion exists "where the party seeking to enforce the contract use[s] high pressure tactics or deceptive language in the contract and where there is inequality of bargaining power between the parties" ( Precision Mech., Inc. v Dormitory Auth. , 5 AD3d 653 [2d Dept 2004] [citations omitted]). In evaluating the fairness of the formation process, the relative sophistication of the parties is a primary concern ( see Morris v Snappy Car Rental, Inc., 84 NY2d 21, 30 [rejecting adhesion claim where "[n]othing in the record indicates that plaintiff, a high school graduate who attended college, was prevented from reading the agreement or asking that its contents be explained"]; see also Klos v Lotnicze, 133 F3d 164, 168 [2d Cir 1997] [contracts of adhesion typically involve "unrepresented, uneducated and needy individuals"]).
Plaintiff's sophistication — he attended business school and has more than three decades of business experience forecloses an adhesion claim ( see id.).
Plaintiff also contends that the Agreement itself is so unfair as to be unconscionable. However, where, as here, a party was presented with a meaningful choice, courts will not void contracts simply because they may seem unfair ( see State v Wolowitz, 96 AD2d 47, 68 [2d Dept 1983] ["[a]bsent some violation of law or transgression of a strong public policy, the parties to a contract are basically free to make whatever agreement they wish, no matter how unwise it might appear to a third party"]). Indeed for a contract to be void due to substantive unfairness, it must be "so grossly unreasonable or unconscionable in light of the mores and business practices of the time and place" ( Gillman v Chase Manhattan Bank, N.A., 73 NY2d 1, 10 [citations omitted]).
In addition, plaintiff claims that, because the Agreement requires him to submit to arbitration, he is unfairly "precluded from choosing a forum to litigate any disagreements with Stonebrook" (Pl Mem, at 13). This argument is without merit, as the parties have chosen a forum for the dissolution of any disputes — arbitration. Plaintiff has the opportunity to present and prove his claim in the arbitration. The Agreement's arbitration clause is not unconscionable ( see Curtis, Mallet-Prevost, Colt Mosle, LLP v Garza-Morales, 308 AD2d 261 [1st Dept 2003]; Ranieri v Bell Atlantic Mobile, 304 AD2d 353, supra [same]). Moreover, the fact that Stonebrook may pursue judicial remedies in order to enforce the Agreement is irrelevant ( see Sablosky v Edward S. Gordon Co., Inc., 73 NY2d 133).
II. Stonebrook's Cross Motion to Compel Arbitration
Arbitration is a favored method of dispute resolution in New York ( see De Shazo v Hirschler, 282 AD2d 257 [1st Dept 2001]). Accordingly, "[w]here there is no substantial question whether a valid agreement was made or complied with, and the claim sought to be arbitrated is not barred by limitation . . . the court shall direct the parties to arbitrate" (CPLR 7503; Glickenhaus Co. v Taylor, 163 AD2d 59 [1st Dept 1990]). Furthermore, "[o]nce it is determined that the parties have agreed to arbitrate the subject matter in dispute, the court's role has ended and it may not address the merits of the particular claims" ( Dazco Heating Air Conditioning Corp. v C.B.C. Indus., Inc., 225 AD2d 578, 578 [2d Dept 1996]). Here, the Agreement clearly requires arbitration of plaintiff's underlying claims, and no "substantial question" exists regarding the Agreement's validity. Accordingly, arbitration must be compelled, and this action stayed, pending resolution of the arbitration ( see CPLR 7503 [a]; Weinstein-Korn-Miller, NY Civ Prac ¶ 7503.18). The issues plaintiff raises may be raised before the arbitrator.
Defendant's cross motion for costs is denied, as it provides absolutely no evidence in support of such motion.
The Court has considered the remaining claims, and finds them to be without merit.
Accordingly, it is
ORDERED that plaintiff's motion for a preliminary injunction is denied; and it is further
ORDERED that defendant's cross motion for costs is denied; and it is further
ORDERED that defendant's cross motion to compel arbitration and stay this action, pending arbitration of plaintiff's underlying claims, is granted, to the extent of staying further prosecution of any proceedings in this action; and it is further
ORDERED that the parties are directed to proceed to arbitration forthwith; and it is further
ORDERED that either party may make an application by order to show cause to vacate or modify this stay if there are changes in the facts which warrant such relief.