because preventing fraud and mismanagement -- the goals of FIRREA -- are more easily obtained in federal court where the proceedings are public, judges are experienced in applying federal law, discovery is expansive, a jury is available, and judicial review exists.
The differences cited by Oldroyd, however, do not distinguish FIRREA from any other federal statute establishing a private right of action. For instance, federal statutes prohibiting race, gender and age discrimination also contain language describing how individuals may assert discrimination claims in federal court. However, statutory discrimination claims generally are considered arbitrable. See Gilmer, 500 U.S. at 35 (holding ADEA claims arbitrable); Alford v. Dean Witter Reynolds Inc., 939 F.2d at 230 (5th Cir. 1991) (holding Title VII claims arbitrable); Maye, 897 F. Supp. at 109 (same); Townsend, 906 F. Supp. at 157, n. 4 (same).
Nor can one say that the goals of FIRREA are uniquely deserving of federal court resolution more than the goals of any other federal statute, like Title VII or the ADEA.
Finally, while FIRREA provides a private right of action for retaliatory discharge, Oldroyd cites no language in the statute or its legislative history that addresses the arbitrability, vel non, of such claims.
In short, Oldroyd has not met his burden of proving that "Congress itself has evinced an intention to preclude a waiver of judicial remedies for the statutory rights at issue." Gilmer, 500 U.S. at 26. I find that his retaliatory discharge claim is arbitrable.
4) Oldroyd's Retaliatory Discharge Claim is Not Within the Scope of the Arbitration Clause
While Oldroyd's FIRREA claim is arbitrable, I find that it falls outside the scope of the arbitration provision found in the ESB/Oldroyd Agreement. Unlike the breach of contract claim which is directly rooted in Oldroyd's employment agreement, the retaliatory discharge claim is different. In my view, it does not "arise under or in connection with" the ESB/Oldroyd Agreement. Therefore, I believe that it is not subject to arbitration.
The language in the arbitration clause is crucial. The ESB/Oldroyd Agreement refers to "any dispute, controversy or claim arising under or in connection with this Agreement". This clause relates directly to resolving disputes concerning the written agreement. For that reason, as stated above, I believe that the breach of contract claim is covered by the arbitration agreement.
However, it would be improper to force a party to arbitrate a retaliatory discharge claim unless there was a clear agreement by the parties to submit such a dispute to arbitration. A victim of retaliation should not lose his right to rectify that conduct in federal court absent a clear agreement to do so. In my view, there is no clear agreement by the parties in this case to submit such a dispute to arbitration.
The Ninth Circuit case of Prudential Ins. Co. of America v. Lai, 42 F.3d 1299 (9th Cir. 1994), cert. denied, 133 L. Ed. 2d 24, 116 S. Ct. 61 (1995) is instructive. The Ninth Circuit vacated an order compelling arbitration because it found that the employees in question had not agreed to submit discrimination claims to arbitration. The Court emphasized the importance of compelling arbitration only relating to those claims that were clearly contemplated by the parties. Plaintiffs "could not have understood that in signing it [U-4 Form, used in securities industry], they were agreeing to arbitrate sexual discrimination suits." Lai, 42 F.3d at 1305. "They did not knowingly contract to forego their statutory remedies in favor of arbitration." Id.
To be sure, the result here might be different if the language of the arbitration clause were different. In my view, the arbitration clause is not especially broad. In several other cases where courts ordered arbitration of statutory claims the arbitration clauses were much broader than the clause at issue here.
For example, if the parties had agreed to arbitrate "all disputes" or "all controversies" arising between the parties, then the result here might be different. See, e.g., Rojas v. TK Communications, Inc., 87 F.3d 745 (5th Cir. 1996) (Title VII claim was within scope of agreement to arbitrate "any action contesting the validity of this Agreement ... or any other disputes"); McWilliams v. Logicon, Inc., 1996 U.S. Dist. LEXIS 11113, 1996 WL 439291 (D.Kan., July 9, 1996) (ADA claim was within scope of agreement to arbitrate "disputes arising out of the termination of [plaintiff's] employment..."); Pitter v. Prudential Life Ins. Co., 906 F. Supp. 130 (E.D.N.Y. 1995) (Title VII claim was within scope of agreement to arbitrate "any dispute, claim or controversy arising out of or in connection with the business of any member of the [NASD]...."); DiCrisci, 807 F. Supp. at 950 (Title VII claim was within the scope of agreement to arbitrate "any dispute between [plaintiff and her employer] or claim by either of them against the other ....").
The parties here, however, did not agree to arbitrate "all disputes" or "all controversies." Rather, they agreed to arbitrate only those disputes arising under or in connection with the ESB/Oldroyd Agreement. See Hoffman v. Aaron Kamhi, Inc., 927 F. Supp. 640 (S.D.N.Y. 1996) (ADA and FMLA claims were not within the scope of agreement to arbitrate disputes "pertaining to the [employer company]" and "arising out of or respecting any matter contained in [the] Agreement or any differences as to the interpretation of any of the provisions of [the] Agreement").
The existence of the ESB/Oldroyd Agreement and the contents of that Agreement have no bearing on Oldroyd's retaliation claim. Even if Oldroyd had no written employment agreement, he would still be able to prosecute a retaliatory discharge claim since such a cause of action is authorized by statute and arises independent of any contract right.
This cannot be said of Oldroyd's breach of contract claim.
I recognize that there are some district court cases that have interpreted arbitration clauses similar to Oldroyd's and have compelled arbitration of discrimination or retaliatory discharge claims. E.g., Gateson v. ASLK-Bank, N.V./CGER-Banque, 1995 U.S. Dist. LEXIS 9004, 1995 WL 387720 (S.D.N.Y. 1995); Powers, 923 F. Supp. at 24; Mikes v. Strauss, 889 F. Supp. at 755 (S.D.N.Y. 1995). I am not persuaded by these cases. In Mikes there is virtually no analysis of the issue, and, in Gateson and Powers, where there is analysis, I disagree with it. See also Arthur v. Jones, No. 94-CV-6200L (W.D.N.Y. 1995). Especially in the employment context, where the employee has little bargaining power, such expansive interpretation of these arbitration clauses violates standard contract interpretation rules.
In sum, while Oldroyd's retaliatory discharge claim is arbitrable, I find that it does not fall within the scope of the arbitration provision at issue. Accordingly, this claim is not referred to arbitration and may remain in federal court.
B) Motion For Partial Summary Judgment
As noted, ESB also moves to dismiss those parts of Oldroyd's claims seeking punitive damages, on the grounds that such damages are unavailable under both 12 U.S.C. § 1831j and New York contract law.
With respect to Oldroyd's breach of contract claim, I decline to resolve this issue and refer it to the arbitrator. As for punitive damages on Oldroyd's retaliatory discharge claim, I deny ESB's motion.
1) Availability of Punitive Damages on Oldroyd's Breach of Contract Claim
ESB asserts that under New York law, punitive damages are never available as a remedy for breach of contract, unless the conduct at issue is so egregious as to constitute an independent tort. See New York University v. Continental Insurance Co., 87 N.Y.2d 308, 639 N.Y.S.2d 283, 662 N.E.2d 763 (1995). ESB further asserts that its conduct in the present matter could never meet the high standards required for such finding. Id. Accordingly, ESB asserts that I should find as a matter of law that punitive damages are not recoverable on this claim.
Historically under New York law, arbitrators have not had the power to award punitive damages. See Garrity v. Lyle Stuart Inc., 40 N.Y.2d 354, 386 N.Y.S.2d 831, 353 N.E.2d 793 (1976). This policy, however, recently was rejected by the New York Supreme Court, Appellate Division, First Department in Mulder v. Donaldson, Lufkin & Jenrette, 224 A.D.2d 125, 648 N.Y.S.2d 535, 1996 WL 578275 (1st Dep't, Oct. 8, 1996). There, relying upon Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 131 L. Ed. 2d 76, 115 S. Ct. 1212 (1995), the Appellate Division found that the FAA preempts the so-called Garrity rule and that, where the parties have agreed to arbitrate their disputes, and punitive damages are impliedly a potential remedy for those disputes, unless the parties have expressly agreed otherwise the arbitrator must be allowed to make a punitive damages determination. Mulder, at *4 ("Since the parties did not explicitly agree to exclude the award of punitive damages from arbitration, and it is implicit in the agreement that punitive damages are subject to arbitration, we find that the issue of punitive damages should be heard by the arbitrators.").
In this case, the ESB/Oldroyd Agreement is silent as to punitive damages. It simply contemplates that disputes arising out of the Agreement be arbitrated. Because the parties did not expressly determine that punitive damages should not be decided by the arbitrator, I find that the arbitrator should determine all aspects of the breach of contract claim -- including, if necessary, whether the conduct of defendants merits the award of punitive damages. See Mulder at *4 ("With respect to arbitration proceedings governed by the FAA which preempts the Garrity rule, the arbitration of punitive damage claims is required except where the parties have unequivocally agreed otherwise."); see also Mastrobuono, 115 S. Ct. at 1219.
Accordingly, ESB's motion for partial summary judgment as to punitive damages on Oldroyd's breach of contract claim is denied without prejudice. This issue must be decided, in the first instance, together with the merits of the breach of contract claim by the arbitrator.
2) Availability of Punitive Damages on Oldroyd's Retaliatory Discharge Claim
I deny on the merits ESB's motion for partial summary judgment striking the claim for punitive damages in connection with Oldroyd's retaliatory discharge claim. I find as a matter of law that punitive damages may be awarded, if the facts warrant such an award, under the terms of 12 U.S.C. § 1831j.
Where a bank is found to have wrongfully discharged an employee in retaliation for "whistle blowing," subsection (c) of 12 U.S.C. § 1831j states that a district court may order the bank
(1) to reinstate the employee to his former position;
(2) to pay compensatory damages; or