Opinion
Civil Action 23 Civ. 7809 (AT) (SLC)
04-25-2024
BILLBOARD MEDIA, LLC, Petitioner, v. LAUREN WRAY, Respondent.
REPORT AND RECOMMENDATION
SARAH L. CAVE, United States Magistrate Judge.
TO THE HONORABLE ANALISA TORRES, United States District Judge:
I. INTRODUCTION
Petitioner Billboard Media, LLC (“Billboard”) brings this action against Respondent Lauren Wray (“Ms. Wray”), a former Billboard employee, seeking an order under the Federal Arbitration Act (“FAA”), 9 U.S.C. § 4, compelling Ms. Wray to arbitrate any employment-related claims she has against Billboard pursuant to an arbitration agreement (ECF No. 5-2 (the “Second Arbitration Agreement”)). (ECF Nos. 1 (the “Petition”); 3). Ms. Wray opposes the Petition on the grounds that, inter alia, the Second Arbitration Agreement's clause delegating certain issues to an arbitrator (the “Delegation Clause”) is procedurally and substantively unconscionable. (ECF No. 17 at 16-36 (the “Opposition”)).
For the reasons set forth below, the Court respectfully recommends that the Petition be GRANTED, and Ms. Wray be COMPELLED to arbitrate any claims covered by the Second Arbitration Agreement.
II. BACKGROUND
“‘Courts deciding motions to compel [arbitration] apply a standard similar to the one applicable to a motion for summary judgment,' meaning that they can consider relevant evidence outside the complaint.” Gordon v. Wilson Elser Moskowitz Edelman & Dicker LLP, No. 22 Civ. 5212 (JPC) (JEW), 2023 WL 2138693, at *1 n.1 (S.D.N.Y. Feb. 21, 2023) (quoting Starke v. SquareTrade, Inc., 913 F.3d 279, 281 n.1 (2d Cir. 2019)). “On a motion for summary judgment, the court considers all relevant, admissible evidence submitted by the parties and contained in the pleadings, depositions, answers to interrogatories, admissions and affidavits, and draws all reasonable inferences in favor of the non-moving party.” Id. Thus, here, the Court considers the allegations in the Petition, the documents it incorporates by reference, and the declarations and exhibits submitted by the parties, and the following factual background is derived therefrom. See id. at *1 & n.1 (considering same with respect to a motion to compel arbitration under the FAA); Citigroup Inc. v. Sayeg, No. 21 Civ. 10413 (JPC), 2022 WL 179203, at *1 & n.1 (S.D.N.Y. Jan. 20, 2022) (same with respect to a petition to compel arbitration under the FAA).
Billboard is a limited liability company organized under Delaware law with offices in California and New York. (ECF No. 1 ¶ 3). Penske Media Corporation (“PMC”), Billboard's “ultimate, majority parent” corporation, is organized in Delaware and headquartered in California and New York. (Id.) In the summer of 2020, Ms. Wray interviewed with PMC in connection with her application for the position of “Executive Director of Partnerships for the West Coast.” (ECF No. 16-1 ¶¶ 5-6). On September 18, 2020, PMC offered Ms. Wray the position by sending her an offer letter. (Id. ¶ 7; id. at 9-11 (the “2020 Offer Letter”)). The 2020 Offer Letter stated that:
[t]his offer of employment is conditioned upon . . . your signed agreement to, and ongoing compliance with, the terms of the [PMC's] Mutual Agreement to Arbitrate Employment Claims [(the “First Arbitration Agreement”)] . . . which will be provided to you on or prior to your first day of employment. You will be required to sign this documentation within three (3) days of the commencement of your employment ....(Id. at 10). Ms. Wray claims that she was not “allowed to negotiate or modify the terms” of the 2020 Offer Letter, but “immediately” signed it. (Id. ¶ 7). Ms. Wray began her employment on October 1, 2020 (ECF No. 5 ¶ 4), and was provided with the First Arbitration Agreement “after [she] began employment[.]” (ECF No. 16-1 ¶ 7; see ECF No. 19-4 at 6). Ms. Wray signed the First Arbitration Agreement on June 30, 2021, approximately nine months after she started working for PMC. (ECF No. 19-4 at 6).
On November 10, 2021, Billboard, then and now a subsidiary of PMC, offered Ms. Wray the position of “Executive Director, Brand Partnerships” by emailing her an offer letter. (ECF Nos. 5 ¶ 5; 5-1 at 2-5 (the “2021 Offer Letter”); see ECF No. 16-1 ¶ 10 & at 45-48). The 2021 Offer Letter stated that:
[a]ll terms and conditions of your employment with PMC, including, without limitation, your base salary and commission opportunities, if any, benefits, paid time off, title and reporting structure shall remain the same, unaffected by this formal change in employment relationship. All of your agreements and acknowledgements regarding your employment, including, without limitation, this Offer Letter and your confidentiality and inventions assignment agreement, mutual arbitration agreement, and policy acknowledgements shall remain in full force and effect; provided that, for the avoidance of doubt, such documents (and/or PMC's rights and obligations thereunder) will be assigned to Billboard effective as of [January 1, 2021].(ECF No. 5-1 at 2). Similar to the 2020 Offer Letter, the 2021 Offer Letter also stated that:
[t]his offer of employment is conditioned upon . . . your participation in the Company's alternative dispute resolution program pursuant to the terms of the Mutual Arbitration Agreement . . . which will be provided to you prior to the Start Date [of November 15, 2021].(Id. at 4). Ms. Wray signed the 2021 Offer Letter on November 12, 2021 (ECF Nos. 5 ¶ 5; 5-1 at 5), began her employment with Billboard on November 15, 2021 (ECF No. 5 ¶ 5; see ECF No. 5-1 at 2), and signed the Second Arbitration Agreement on November 15, 2021 (ECF Nos. 1 ¶ 13; 5 ¶ 6). The Second Arbitration Agreement provided that:
[i]n return for [Ms. Wray's] initial or continued employment with [Billboard], receipt of compensation and benefits now and hereafter paid to [Ms. Wray] by
[Billboard], and other consideration which [Ms. Wray] hereby acknowledges, [Ms. Wray] and [Billboard] agree to participate in this alternative dispute resolution program on the terms and conditions set forth in this Mutual Arbitration Agreement.(ECF No. 5-2 at 2). Under the Second Arbitration Agreement, Billboard and Ms. Wray agreed that all “Covered Claims” “are subject to binding arbitration pursuant to the terms of this [Second Arbitration] Agreement and will be resolved by arbitration and NOT by a court or jury.” (Id.) “Covered Claims” subject to mandatory arbitration are defined as follows:
any claim, dispute, complaint or controversy that [Ms. Wray] now has or in the future may have against [Billboard] or any of its parents, subsidiaries, affiliates, current or former officers, directors, employees, attorneys or agents (collectively, the “Company Group”), or that any member of the Company Group now has or in the future may have against [Ms. Wray], arising from, relating to, or having any relationship or connection whatsoever with [Ms. Wray's] employment with or termination of employment from [Billboard], [Ms. Wray's] seeking employment with [Billboard], or the terms and conditions of [Ms. Wray's] employment with Billboard, whether based in tort, contract, or statute including claims for compensation, benefits, damages, penalties, fees or otherwise[.](Id.) Covered Claims include, but are not limited to:
claims for discrimination, harassment, or retaliation, claims under the New York State or City Human Rights Law, Title VII of the Civil Rights Act of 1964, as amended, the Americans with Disabilities Act of 1990, the Fair Labor Standards Act, the Age Discrimination in Employment Act of 1967, the Equal Pay Act, the Family and Medical Leave Act, and claims under any other local, state or federal statute, regulation, ordinance or common law.(Id.) The Second Arbitration Agreement provides that any such claims “will be heard by a single arbitrator in New York, New York, unless both parties agree otherwise[,]” and “[t]he arbitrator shall apply the substantive law of the state of New York except if preempted by federal law, as applicable, to the claims and defenses asserted.” (Id. at 3). Any such arbitration will be administered by JAMS (a national provider of alternative dispute resolution services), “subject to [JAMS'] then-current employment arbitration rules & procedures[.]” (Id.) The Second Arbitration Agreement states that:
the arbitrator shall have the sole and exclusive authority to resolve any dispute relating to the scope, interpretation, applicability, enforceability or formation of this [Second Arbitration] Agreement, including but not limited to any assertion that all or any part of this [Second Arbitration] Agreement is void or voidable or is unconscionable ....(Id.) The Second Arbitration Agreement provides that it “shall be governed by and interpreted in accordance with the [FAA] and, to the extent not inconsistent with or preempted by the [FAA], by the laws of the state of New York, without regard to principles of conflicts of law.” (Id.) The First and Second Arbitration Agreements (together, the “Agreements”) are substantially identical, containing the same definition of Covered Claims, New York choice-of-law provision, and choice-of-venue provision designating the venue for arbitration in New York. (Compare ECF No. 5-2 at 2-6 with ECF No. 19-4 at 2-6).
Ms. Wray remained employed by Billboard until her resignation on or about January 9, 2023. (ECF No. 1 ¶¶ 5, 12; see ECF No. 16-1 ¶ 17).
B. Procedural History
1. The California Action
On March 6, 2023, Ms. Wray, via her counsel, sent a letter (the “Demand Letter”) to Billboard containing allegations of discrimination and a demand for compensation. (See ECF Nos. 1 ¶¶ 20-21; 6 ¶ 3). On March 26, 2023, counsel for Billboard sent an email informing Ms. Wray's counsel that Ms. Wray had signed the Second Arbitration Agreement and stating Billboard's position that the claims asserted in the Demand Letter were subject to mandatory arbitration in New York under New York law. (ECF No. 6 ¶ 3; see ECF No. 1 ¶ 21). On April 21, 2023, counsel for Billboard sent a letter to Ms. Wray's counsel responding to the allegations in the Demand Letter and reiterating that “Ms. Wray . . . signed the [Second Arbitration] Agreement with Billboard, which provides that New York substantive law applies to the arbitration of covered claims, and therefore Ms. Wray must resolve her alleged claims in arbitration in New York . . . .” (ECF No. 6 ¶ 3; see ECF No. 1 ¶ 21).
On July 31, 2023, Ms. Wray filed a lawsuit in California Superior Court (the “California Action”) alleging, inter alia, sex and pregnancy discrimination and retaliation claims under California state law against Billboard, PMC, Andrei Radaza, and Mike Van.(ECF Nos. 1 ¶ 22; 6-1; see ECF Nos. 1 ¶ 10; 16-1 ¶ 28). On November 3, 2023, the California Superior Court (Broadbelt, J.) stayed the California Action pending the outcome of the Petition. (ECF No. 19-2 at 7; see ECF No. 19-1 ¶ 2).
Mr. Radaza and Mr. Van are Billboard employees who supervised Ms. Wray in her position with Billboard. (ECF Nos. 5 ¶ 3; 11 ¶¶ 11-17).
2. This Proceeding
On September 1, 2023, Billboard filed the Petition. (ECF No. 1). Billboard seeks an order under the FAA compelling Ms. Wray to arbitrate in New York any Covered Claims she may have against Billboard and/or its related entities including those asserted in the California Action. (Id. ¶ 1 & at 6-7).Together with the Petition, Billboard submitted declarations of Anne Doyle, the Vice President of Human Resources for PMC (ECF No. 5), and Andrea Fellion, counsel for Billboard in the California Action and this proceeding (ECF No. 6), and a memorandum of law in support (ECF No. 4).
Billboard initially moved for an injunction enjoining Ms. Wray from pursuing any Covered Claims outside of arbitration (ECF Nos. 1 at 6-7; 3 at 13-17), but subsequently withdrew that request as moot. (ECF No. 19 at 18).
On October 27, 2023, Ms. Wray filed a memorandum of law in opposition to the Petition (ECF No. 15; see ECF No. 17), together with declarations of Hugh Baran, counsel for Ms. Wray in this proceeding (ECF No. 16); Corey Bennett, counsel for Ms. Wray in the California Action and this proceeding (ECF No. 16-2 at 2-3); and Ms. Wray herself (ECF No. 16-1 at 2-7 (the “Wray Declaration”)). Ms. Wray also submitted the declaration of Mark Gough, a “tenured Associate Professor and Director of Undergraduate Studies in the School of Labor Studies and Employment Relations at The Pennsylvania State University[,]” in order to “provide the Court with certain information related to JAMS fees[.]” (ECF No. 16-3 ¶¶ 1-2 & at 2-6 (the “Gough Declaration”)).
Ms. Wray's memorandum of law in opposition to the Petition was later amended at ECF No. 17.
On November 16, 2023, Billboard filed a memorandum of law in reply (ECF No. 19), together with the declaration of Brendan Killeen, counsel for Billboard (ECF No. 19-1), and the supplemental declaration of Ms. Doyle. (ECF No. 19-3).
On January 22, 2024, the Honorable Analisa Torres referred the Petition for a report and recommendation. (ECF No. 20).
III. STANDARD OF REVIEW
Under the FAA, a written agreement to arbitrate is “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract[.]” 9 U.S.C. § 2. “The FAA embodies a national policy favoring arbitration founded upon a desire to preserve the parties' ability to agree to arbitrate, rather than litigate, their disputes.” Gordon, 2023 WL 2138693, at *2 (quoting Doctor's Assocs. v. Alemayehu, 934 F.3d 245, 250 (2d Cir. 2019)).Because the FAA “intended to place arbitration agreements upon the same footing as other contracts,” arbitration remains “a creature of contract.” Id. (quoting Alemayehu, 934 F.3d at 250).
Internal citations and quotation marks are omitted from case citations unless otherwise indicated.
To determine whether to compel arbitration, the court performs a two-step inquiry that looks at contract principles “governed by state rather than federal law.” Cap Gemini Ernst & Young, U.S., L.L.C. v. Nackel, 346 F.3d 360, 365 (2d Cir. 2003) (per curiam). At step one, the court considers whether “the parties enter[ed] into a contractually valid arbitration agreement[.]” Id. At step two, the court considers “whether a court or an arbitrator should decide if the dispute falls within the scope of the agreement to arbitrate.” Sayeg, 2022 WL 179203, at *5.
“[I]f the agreement delegates the arbitrability issue to an arbitrator, a court may not decide the arbitrability issue.” Henry Schein, Inc. v. Archer & White Sales, Inc., 586 U.S. 63, 69 (2019). The agreement to delegate threshold arbitrability questions to an arbitrator must be supported by “clear and unmistakable evidence.” Flores v. NFL, 658 F.Supp.3d 198, 206 (S.D.N.Y. 2023) (quoting Contec Corp. v. Remote Sol. Co., 398 F.3d 205, 208 (2d Cir. 2005)). Powers that may be delegated to an arbitrator include “whether the arbitration agreement as a whole is unenforceable for unconscionability or any other applicable contract defense.” Id. (quoting Rent-A-Center, W., Inc. v. Jackson, 561 U.S. 63, 73-75 (2010)); see Cohen v. Westlake Flooring Servs. Inc., No. 22 Civ. 7182 (VB), 2023 WL 2971772, at *2 (S.D.N.Y. Apr. 17, 2023) (holding that “the delegation of the questions of unconscionability and enforceability of an arbitration agreement to an arbitrator must be upheld”). If the arbitration agreement contains a delegation clause, “the Court should only intervene if the basis of the non-movant's challenge is directed specifically to enforceability of the delegation clause” itself. Paguay v. ESH Rest. Grp. LLC, No. 23 Civ. 8434 (JPO) (KHP), 2024 WL 1376163, at *2 (S.D.N.Y. Apr. 1, 2024) (quoting Rent-A-Center, 561 U.S. at 71). “Thus, a party's challenge to another provision of the contract, or to the contract as a whole, does not prevent a court from enforcing a specific agreement to arbitrate.” Marino v. CVS Health, No. 23 Civ. 764 (VB), 2023 WL 6813098, at *5 (S.D.N.Y. Oct. 16, 2023) (quoting Rent-A-Center, 561 U.S. at 71).
After conducting the two-step inquiry, the court then considers “whether one party to the agreement has failed, neglected or refused to arbitrate.” Beijing Shougang Mining Inv. Co. v. Mongolia, 11 F.4th 144, 162 (2d Cir. 2021), cert. denied, 142 S.Ct. 2889 (2022). “A party has refused to arbitrate if it commences litigation or is ordered to arbitrate the dispute by the relevant arbitral authority and fails to do so.” Id.
IV. DISCUSSION
A. Ms. Wray Should be Compelled to Arbitrate.
1. The parties entered into a valid arbitration agreement.
While Ms. Wray argues that California law, not New York law, governs her challenge to the Second Arbitration Agreement's Delegation Clause (see ECF No. 17 at 19 and passim), neither party argues that California law should apply to the Court's analysis of contract formation. Accordingly, the Court applies New York law. See Badinelli v. The Tuxedo Club, 183 F.Supp.3d 450, 454 (S.D.N.Y. 2016) (applying New York law to motion to compel arbitration because “the [e]mployment [a]greement provides that New York law governs, and neither party disputes the application of New York law to the question of whether there a valid agreement to arbitrate”) (emphasis added). Even assuming the Court were to apply California law to this issue, it would reach the same result because “New York and California apply substantially similar rules for determining whether the parties have mutually assented to a contract term.” Curtis v. JPMorgan Chase Bank, N.A., No. 22 Civ. 10286 (LGS), 2024 WL 283474, at *3 (S.D.N.Y. Jan. 25, 2024) (holding that “a choice-of-law analysis [to determine whether to apply New York or California law is] unnecessary” to determine whether the parties entered into a valid agreement to arbitrate) (citing Meyer v. Uber Techs., Inc., 868 F.3d 66, 74 (2d Cir. 2017) and Schnabel v. Trilegiant Corp., 697 F.3d 110, 119 (2d Cir. 2012)).
The party moving to compel arbitration has the initial burden of showing that the parties agreed to arbitrate. Gordon, 2023 WL 2138693, at *3 (citing Hines v. Overstock.com, Inc., 380 Fed.Appx. 22, 24 (2d Cir. 2010) (summary order)). While parties may “agree to arbitrate threshold questions such as whether the arbitration clause applies to a particular dispute, or whether it is enforceable, parties may not delegate to the arbitrator the fundamental question of whether they formed the agreement to arbitrate in the first place.” Alemayehu, 934 F.3d at 251 (citing Granite Rock Co. v. Int'l Brotherhood of Teamsters, 561 U.S. 287, 299-301 (2010)). “Or said a bit differently, parties can agree to arbitrate questions about a contract's enforceability and scope but cannot agree to arbitrate ‘questions concerning contract formation.'” Sayeg, 2022 WL 179203, at *5 (quoting Granite Rock Co., 561 U.S. at 299). Thus, “to satisfy itself that such agreement exists, the court must resolve any issue that calls into question the formation or applicability of the specific arbitration clause that a party seeks to have the court enforce.” Gordon, 2023 WL 2138693, at *3 (quoting Granite Rock Co., 561 U.S. at 297).
Here, Ms. Wray does not directly dispute that the parties validly entered into the Agreements; rather, she argues that certain of the Agreements' terms, including the Delegation Clause that delegates enforceability and unconscionability issues to the arbitrator (ECF No. 5-2 at 3), are unconscionable. (ECF No. 17 at 17-36). Even construing Ms. Wray to be challenging whether a valid agreement to arbitrate was formed, the Court would find that Ms. Wray entered into an unambiguous agreement to arbitrate any employment-related claims it may have against Billboard, PMC, or employees of either entity. When Ms. Wray signed the 2020 Offer Letter on September 18, 2020 in connection with her acceptance of employment with PMC, she agreed to comply with “the terms of the Company's Mutual Agreement to Arbitrate Employment Claims[.]” (ECF No. 16-1 at 10). Ms. Wray then signed the First Arbitration Agreement on June 30, 2021, nine months after agreeing to be bound by it. (ECF No. 19-4 at 6). On November 12, 2021, Ms. Wray signed the 2021 Offer Letter in connection with her acceptance of a role with Billboard, which (i) assigned her prior agreements with PMC to Billboard (ECF No. 5-1 at 2), and (ii) again conditioned her employment on “participation in the Company's alternative dispute resolution program pursuant to the terms of the Mutual Arbitration Agreement . . . which will be provided to you prior to the Start Date [of November 15, 2021]” (id. at 3). On November 15, 2021, her first day of employment, Ms. Wray signed the Second Arbitration Agreement, which is substantively identical to the First Arbitration Agreement. (ECF No. 1 ¶ 13; 5 ¶ 5). Having agreed in writing to be bound by unambiguous arbitration provisions multiple times throughout her employment with PMC and Billboard, Ms. Wray cannot dispute that she entered into a valid agreement to arbitrate. See, e.g., Sayeg, 2022 WL 179203, at *6 (finding a valid arbitration agreement whether the parties “entered into unambiguous agreements to arbitrate any disputes”).
To the extent that Ms. Wray is attacking the formation of the Agreements-as opposed to procedural or substantive unconscionability of individual terms-those arguments would fail. Ms. Wray claims that (i) she was deprived of the opportunity to “meaningfully negotiate” the terms of the 2020 Offer Letter, First Arbitration Agreement, 2021 Offer Letter, and Second Arbitration Agreement (see ECF Nos. 16-1 ¶¶ 7, 10; 17 at 9, 20-21, 25), and (ii) she received and signed the Agreements only after having received and signed the 2020 and 2021 Offer Letters and, in the case of the First Arbitration Agreement, months after she started working for PMC. (See ECF Nos. 16-1 ¶¶ 7, 10; 17 at 8, 21). Neither argument casts doubt on the formation of an agreement to arbitrate.
“Whether one can be bound by an arbitration clause is usually determined by looking at generally accepted principles of contract law.” Gold v. Deutsche Aktiengesellschaft, 365 F.3d 144, 149 (2d Cir. 2004). Under generally accepted principles of contract law, “in the absence of fraud or other wrongful act on the part of another contracting party, a party who signs or accepts a written contract is conclusively presumed to know its contents and to assent to them[.]” Oganesyan v. Tiffany & Co., No. 23 Civ. 4287 (JGLC), 2023 WL 7928098, at *5 (S.D.N.Y. Nov. 16, 2023) (quoting Gold, 365 F.3d at 149). Further, “a party is bound by the provisions of a contract that [s]he signs, unless [s]he can show special circumstances that would relieve [her] of such an obligation.” Genesco, Inc. v. T. Kakiuchi & Co., 815 F.2d 840, 845 (2d Cir. 1987). Applying these principles, courts in this District enforce arbitration agreements even where individuals claim to have not read or received them as attachments at the time they signed underlying agreements. See, e.g., Oganesyan, 2023 WL 7928098, at *4-5 (upholding arbitration agreement and rejecting plaintiff's claim that she was not provided with the entirety of the agreement at the time she signed it, because “[e]ven if Plaintiff ‘did not understand the form or had questions about the arbitration clause or the rules . . . the burden was upon her to have her concerns addressed before signing.' Although it may be troubling that Plaintiff did not know the entirety of the [a]greement at the time she signed it, it was her responsibility to ensure she understood the document she signed”) (quoting Gold, 365 F.3d at 149); DeBono v. Wash. Mut. Bank, No. 05 Civ. 10333 (DC), 2006 WL 3538938, at *2-3 (S.D.N.Y. Dec. 8, 2006) (upholding agreement to arbitrate where plaintiff was only provided with the signature page of the document, because “[i]f he had questions concerning the document, it was his responsibility to raise them prior to placing his signature on that document[,]” and because “[w]hen plaintiff was made an offer, he received an offer letter . . . which [] stated that he was required to sign a binding arbitration agreement as a condition of employment”); see also Schwartz v. Sterling Ent. Enters., LLC, No. 21 Civ. 1084 (PAC), 2021 WL 4321106, at *4-5 (S.D.N.Y. Sept. 23, 2021) (upholding arbitration agreement and rejecting argument that arbitration program rules and procedures were mentioned in but not provided with the agreement employee signed because “[t]he [c]ompany need not have actually attached [the rules] to incorporate [the rules] by reference[,]” and “it is undisputed that [the employee] had a copy of [the rules] as long ago as 2013, and was able to access that copy in December 2020, after a dispute arose . . .”). Further, courts in this District routinely reject conclusory assertions that an employee lacked sufficient time to review an arbitration agreement or was unable to negotiate its terms. See King v. AptDeco, Inc., No. 20 Civ. 9865 (JGK), 2022 WL 4448679, at *4 (S.D.N.Y. Sept. 22, 2022) (upholding arbitration agreement and rejecting argument that plaintiff “was not given enough time to review the [a]greement before he signed it[,]” finding that “[t]he record does not support this contention”); Cantey v. Mount Vernon City Sch. Dist., No. 16 Civ. 2669 (NSR), 2018 WL 3315574, at *6 (S.D.N.Y. July 5, 2018) (rejecting claims that plaintiff was “not given sufficient time with the [a]greement,” and rejecting as “conclusory and devoid of fact” the claim that plaintiff “did not have an opportunity to negotiate the terms of the contract”).
This precedent compels the conclusion that Ms. Wray's arguments to avoid the Agreements similarly fail here. Her claim not to have reviewed or received the Agreements at the time she signed the Offer Letters does not preclude enforcement of the Agreements. In addition, Ms. Wray has not substantiated her assertion that she was rushed into signing either of the Agreements or that she signed either under duress. Indeed, after signing the Second Arbitration Agreement she continued to work for over one year before resigning, during which time she did not attempt to repudiate the Second Arbitration Agreement. See Oganesyan, 2023 WL 7928098, at *5 (“Plaintiff signed the agreement in February 2017, but continued working for [the company] until October 2022. Plaintiff does not claim that she repudiated the [a]greement at any point during this period and so has waived her right to do so.”). Accordingly, the Court finds that the parties entered into a valid agreement to arbitrate, and proceeds to the second step of the analysis.
2. The parties delegated to the arbitrator questions of enforceability, unconscionability, and arbitrability.
a. The Delegation Clause is clear and unmistakable.
Ms. Wray argues that: (1) certain of the terms of the Second Arbitration Agreement terms are “extreme” and “unconscionable,” (2) it is in conflict with JAMS' rules and procedures, and (3) the Delegation Clause is unconscionable. (ECF No. 17 at 16-36). Billboard responds that the Delegation Clause delegates issues of enforceability and unconscionability to the arbitrator, and that, therefore, Ms. Wray's challenges are not for this Court to decide. (ECF No. 19 at 5-13).
Here, the Delegation Clause in the Second Arbitration Agreement clearly and unmistakably delegates to the arbitrator issues of arbitrability, including gateway questions of the enforceability and unconscionability of all or part of the Second Arbitration Agreement: “the arbitrator shall have the sole and exclusive authority to resolve any dispute relating to the scope, interpretation, applicability, enforceability or formation of this [Second Arbitration] Agreement, including but not limited to any assertion that all or any part of this [Second Arbitration] Agreement is void or voidable or is unconscionable ....” (ECF No. 5-2 at 3). Courts have consistently found that similar delegation clauses provide clear and unmistakable evidence of the parties' intent to delegate. See, e.g., Rent-A-Center, 561 U.S. at 65 (finding that clause providing that “[t]he Arbitrator . . . shall have exclusive authority to resolve any dispute relating to the . . . enforceability . . . of this [a]greement including, but not limited to any claim that all or any part of this [a]greement is void or voidable,” delegated to the arbitrator the question of whether the arbitration agreement was unconscionable); Spates v. Uber Techs., Inc., No. 21 Civ. 10155 (ALC), 2023 WL 3506138, at *3 (S.D.N.Y. Mar. 31, 2023) (upholding as clear and unmistakable evidence of delegation to the arbitrator clause providing that “the arbitrator . . . shall have exclusive authority to resolve any disputes relating to the interpretation, applicability, enforceability or formation of this [a]rbitration [a]greement, including any claim that all or any part of this [a]rbitration [a]greement is void or voidable[,]” and “shall also be responsible for determining all threshold arbitrability issues, including issues relating to whether the [t]erms are unconscionable . . .”).
Accordingly, given the Delegation Clause, this Court may only entertain a direct challenge to whether the Delegation Clause itself is valid and enforceable. See, e.g., Paguay, 2024 WL 1376163, at *2 (holding that, “[i]f the arbitration agreement includes a clause that delegates decisions of arbitrability to the arbitrator, the Court should only intervene if the basis of the non-movant's challenge is directed specifically to enforceability of the delegation clause”) (citing Rent-A-Center, 561 U.S. at 71); Morehouse v. PayPal Inc., No. 21 Civ. 4012 (RA), 2022 WL 912966, at *7 (S.D.N.Y. Mar. 28, 2022) (holding that, because the underlying agreement “clearly delegates questions of arbitrability to the arbitrator . . . the Court may only consider Plaintiff's unconscionability arguments to the extent the delegation provision itself”).
b. Many of Ms. Wray's arguments do not directly challenge the Delegation Clause.
Where, as here, the non-movant purports to challenge the Delegation Clause itself (ECF No. 17 at 18-28), the Court must determine whether the challenges are “directed to the delegation clause specifically,” or whether they are “attacks on the [agreement] as a whole,” the latter of which are reserved for the arbitrator. Greene v. Kabbalah Ctr. Int'l, Inc., 625 F.Supp.3d 3, 17 (E.D.N.Y. 2022) (citing Rent-A-Center, 561 U.S. at 72). Ms. Wray argues that the Delegation Clause is unconscionable because: (1) her acceptance of the 2021 Offer Letter was conditioned on her signing the Second Arbitration Agreement (ECF No. 17 at 20, 25); (2) she was not provided with and had not reviewed the Second Arbitration Agreement when she was presented with the 2021 Offer Letter and did not have an opportunity to negotiate its terms at that time (id.); (3) she only received and signed the Second Arbitration Agreement on the day she began working (id.); (4) she was pregnant and “particularly vulnerable” when she signed the Second Arbitration Agreement because “she had already left her prior position with PMC to start the new position will Billboard” and needed to maintain her health insurance (id. at 25); and (5) the cost-splitting provision requiring each side to pay its own costs and split the cost of arbitration favors Billboard (id. at 22, 26). Although Ms. Wray couches these arguments as supporting her assertion that the Delegation Clause itself is unconscionable, none is directed at the Delegation Clause specifically and instead concern other terms of the Second Arbitration Agreement. These arguments must therefore be presented to the arbitrator. See Greene, 625 F.Supp.3d at 17 (holding that plaintiffs “only make a series of general attacks on the [agreements] as a whole. Though they purport to challenge the delegation provision, they do not do so in fact.... [T]heir argument challenges the [agreements] as a whole on the basis of conscionability[, and] the assertion of undue influence is lodged against the [agreements] as a whole-not the delegation provision specifically”); Faith v. Khosrowshahi, No. 21 Civ. 6913 (JMA) (JMW), 2023 WL 5278126, at *7 (E.D.N.Y. Aug. 16, 2023) (rejecting delegation clause challenge where “Plaintiff challenges the [agreement] as a whole, and not the delegation clause of the arbitration provision alone”).
Ms. Wray claims unconscionability under both California and New York law, and argues that the Court should apply California law. (ECF No. 17 at 18-29). The Second Arbitration Agreement provides, however, that it “shall be governed by and interpreted in accordance with the [FAA] and, to the extent not inconsistent with or preempted by the [FAA], by the laws of the state of New York, without regard to principles of conflicts of law.” (ECF No. 5-2 at 5). Thus, having found that the Second Arbitration Agreement was validly formed (see § IV.A.1, supra), the Court follows its terms and applies the FAA and New York law. See, e.g., Ragone v. Atl. Video, 595 F.3d 115, 121 (2d Cir. 2010) (applying New York law in assessing whether arbitration agreement was unconscionable because “the arbitration agreement at issue contains a choice of law clause which provides that New York law will govern the agreement's construction and enforcement”); De Jesus v. Gregorys Coffee Mgmt., LLC, No. 20 Civ. 6305 (MKB), 2021 WL 5591026, at *4 (E.D.N.Y. Nov. 29, 2021) (same).
c. The Delegation Clause is not unconscionable.
Under New York law, “a delegation clause is unconscionable only if it is ‘both procedurally and substantively unconscionable.'” Oganesyan, 2023 WL 7928098, at *4 (citing Ragone, 595 F.3d at 121). “The procedural element of unconscionability concerns the contract formation process and the alleged lack of meaningful choice; the substantive element looks to the content of the contract[, per se].” Washington v. William Morris Endeavor Ent., LLC, No. 10 Civ. 9647 (PKC) (JCF), 2011 WL 3251504, at *7 (S.D.N.Y. July 20, 2011) (quoting Ragone, 595 F.3d at 121-22).
The only arguments by which Ms. Wray attacks the Delegation Clause specifically are: (1) that the Delegation Clause is procedurally unconscionable “because it is buried at the bottom of the second page of a five-page single-spaced agreement with no highlighting or space for acknowledgement” (ECF No. 17 at 21), and (2) that the Delegation Clause is substantively unconscionable “because its terms require Ms. Wray to pay thousands of dollars in arbitration costs . . . solely to arbitrate threshold issues of enforceability” (id. at 22-23; see id. at 7, 18). Neither argument demonstrates that the Delegation Clause is unconscionable.
First, Ms. Wray's contention that the Delegation Clause is “buried” in the Second Arbitration Agreement is unfounded. The Delegation Clause appears on the second page of the five-page document, in typeface of the same size as the other provisions, under a heading clearly marked as “Rules Governing the Arbitration.” (ECF No. 5-2 at 3). Courts in this Circuit have rejected challenges to arbitration clauses formatted like the one here. See Mumin v. Uber Techs., Inc., 239 F.Supp.3d 507, 524 n.6 (E.D.N.Y. 2017) (rejecting argument that “the language regarding delegation of arbitrability was ‘buried within [] dense language' and that it was not ‘bolded [or] underlined, [and did not] contain capitalized words[,]'” stating that “[t]he court [] sees no issue with the location of the contested delegation clause. It is located in the third paragraph of a section entitled ‘How This Arbitration Provision Applies' . . .”); Peng v. Uber Techs., Inc., 237 F.Supp.3d 36, 57 (E.D.N.Y. 2017) (holding that “the delegation clause is neither buried nor ‘hidden in Uber's “prolix form,”' as Plaintiffs allege. Rather, it appears on the third page of the [a]rbitration [p]rovision, under the section titled “How This Arbitration Provision Applies”).
Ms. Wray also implies that the Delegation Clause is procedurally unconscionable because she was not required to sign it separately (ECF No. 17 at 21), but she does not cite any case law binding on this Court holding that a delegation clause must be signed separately from the agreement in which it appears. The Court does not agree that Ms. Wray signing the Second Arbitration Agreement at the bottom of the fifth page-just three pages after where the Delegation Clause appears-renders the Delegation Clause unconscionable. See Oganesyan, 2023 WL 7928098, at *5 (holding that “a party who signs or accepts a written contract is conclusively presumed to know its contents and to assent to them”) (quoting Gold, 365 F.3d at 149).
In addition, Ms. Wray's argument that the Delegation Clause is substantively unconscionable because it may require her to pay her share of arbitration costs to “arbitrate threshold issues of enforceability” (ECF No. 17 at 23; see id. at 7, 18) fails for three reasons. First, as Billboard correctly notes (see ECF No. 19 at 16-17), the cost-splitting provision applies equally to both parties, providing that (i) each party will bear their own attorneys' fees (as would be the case in court), (ii) the parties will share equally in arbitration costs, and (iii) the arbitrator may award any party costs or attorneys' fees under applicable law just as a court could. (ECF No. 5-2 at 4). To the extent Ms. Wray challenges these provisions as conflicting with JAMS rules (ECF No. 17 at 17-18 and passim), this does not suggest unconscionability because the Second Arbitration Agreement states that, in the event of a conflict, the Second Arbitration Agreement will govern. (ECF No. 5-2 at 3 (“the parties agree to use JAMS, subject to its then-current employment arbitration rules & procedures . . . unless those rules and/or procedures conflict with any express term of this [Second Arbitration] Agreement, in which case this [Second Arbitration] Agreement is controlling”)).
Second, Ms. Wray has not demonstrated that she would be financially unable to litigate her enforceability challenges before an arbitrator. “Courts applying New York law have refused to find that fee-splitting provisions in arbitration agreements are unenforceable where plaintiffs have not affirmatively demonstrated that the fee-splitting provisions would preclude them from pursuing their rights in the arbitral forum.” Peng, 237 F.Supp.3d at 57 (citing Brady v. Williams Cap. Grp., L.P., 14 N.Y.3d 459 (2010)). In determining whether Ms. Wray is unable to afford to litigate her enforceability challenges before an arbitrator, the Court considers, inter alia, the “expected cost differential between arbitration and litigation in court” and “whether the cost differential is so substantial as to deter the brining of claims in the arbitral forum.” Yost v. Everyrealm, Inc., No. 22 Civ. 6549 (PAE), 2023 WL 2859160, at *9 (S.D.N.Y. Apr. 10, 2023) (quoting Brady, 14 N.Y.3d at 467). While the Gough Declaration discusses the average hourly cost for JAMS arbitrators and the average total arbitrator fees for employment cases that proceed to a hearing (ECF No. 16-3 ¶¶ 8-15), Mr. Gough does not address the expected cost to Ms. Wray for litigating enforceability challenges before an arbitrator. The Supreme Court has made clear that the Court must view this type of challenge as one directed toward the “fee-splitting arrangement . . . for the arbitration of enforceability” rather than “for arbitration of more complex and fact-related aspects of the [claim.]” Peng, 237 F.Supp.3d at 36 (citing Rent-A-Center, 561 U.S. at 74) (emphasis added). Without estimates for the amount of arbitrator time required and associated expense to Ms. Wray narrowed specifically to preliminary enforceability challenges to the arbitrator, the Court cannot conclude that Ms. Wray would be unable to afford these costs. Furthermore, although the Court is sensitive to the facts that Ms. Wray is the sole working parent in a family with three young children and her occupational income only permits her to “save a small amount each month” (ECF No. 16-1 ¶¶ 3, 26), Ms. Wray acknowledges that she earns a salary of $220,000 per year and, importantly, omits how much money her family has in savings after withdrawing $117,000 in 2023 (id. ¶¶ 19, 27). For these reasons, Ms. Wray fails to establish substantive unconscionability based on her alleged inability to finance enforceability challenges before an arbitrator. See Yost, 2023 WL 2859160, at *10 (collecting cases); Reyes v. Gracefully, Inc., No. 17 Civ. 9328 (VEC), 2018 WL 2209486, at *8 (S.D.N.Y. May 11, 2018) (holding that, "[i]n light of the ambiguity in this record, Plaintiff has not carried his burden of proving that arbitration would be prohibitively expensive or impair the vindication of his statutory rights”) (citing Green Tree Fin. Corp. v. Randolph, 531 U.S. 79, 91-92 (2000)) (collecting cases).
Third, the Second Arbitration Agreement provides that “[t]he arbitrator shall have the authority to make an award of attorneys' fees and costs to the extent permitted by applicable law and to the same extent such an award could have been made if the Covered Claim had been filed in court.” (ECF No. 5-2 at 4). Thus, as another court in this District has held, “the assertion regarding plaintiff's possible liability for costs . . . is vastly overstated because the enforceability of the cost sharing provision as well as the amount of any award in that respect are for the arbitrator, thus demonstrating that it by no means is inevitable that plaintiff would be forced to pay any costs at all, much less costs in excess of her means.” Stewart v. Paul, Hastings, Janofsky & Walker, LLP, 201 F.Supp.2d 291, 292-93 (S.D.N.Y. 2002).
Accordingly, Ms. Wray has failed to establish that the Delegation Clause is unconscionable, and, therefore, the Delegation Clause requires that her enforceability disputes be presented to an arbitrator.
3. Ms. Wray has refused to arbitrate.
Having determined that the parties are bound by the Second Arbitration Agreement and that any issues of enforceability, unconscionability, or arbitrability are to be decided by the arbitrator per the Second Arbitration Agreement (see §§ IV.A.1-2, supra), the Court considers whether Ms. Wray has “refused to arbitrate.” Mongolia, 11 F.4th at 162. “A party has refused to arbitrate if it commences litigation or is ordered to arbitrate the dispute by the relevant arbitral authority and fails to do so.” Gordon, 2023 WL 2138693, at *9 (quoting Mongolia, 11 F.4th at 162). Ms. Wray does not dispute that she commenced the California Action-which remains ongoing (see § II.B.1, supra)-nor does she dispute that the claims asserted in the California Action are covered by the Second Arbitration Agreement. (See ECF Nos. 16-1; 17). Ms. Wray has therefore refused to arbitrate. See, e.g., Gordon, 2023 WL 2138693, at *9; Severstal U.S. Holdings, LLC v. RG Steel, LLC, 865 F.Supp.2d 430, 437 (S.D.N.Y. 2012) (finding that plaintiff refused to arbitrate by commencing an action in court).
V. CONCLUSION
For the reasons set forth above, the Court respectfully recommends that the Petition be GRANTED, and Ms. Wray be COMPELLED to arbitrate any claims covered by the Second Arbitration Agreement, including those asserted in the California Action.
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NOTICE OF PROCEDURE FOR FILING OBJECTIONS TO THIS REPORT AND RECOMMENDATION
The parties shall have fourteen (14) days (including weekends and holidays) from service of this Report and Recommendation to file written objections pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure. See also Fed.R.Civ.P. 6(a), (d) (adding three additional days when service is made under Fed.R.Civ.P. 5(b)(2)(C), (D) or (F)). A party may respond to another party's objections within fourteen (14) days after being served with a copy. Fed.R.Civ.P. 72(b)(2). Such objections, and any response to objections, shall be filed with the Clerk of the Court. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), (d), 72(b). Any request for an extension of time for filing objections must be addressed to Judge Torres.
FAILURE TO OBJECT WITHIN FOURTEEN (14) DAYS WILL RESULT IN A WAIVER OF OBJECTIONS AND WILL PRECLUDE APPELLATE REVIEW. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), (d), 72(b); Thomas v. Arn, 474 U.S. 140 (1985).