or receiving copies of these
modifications. See Brennan Aff. ¶ 14.
II. LEGAL STANDARDS
A. Motion to Dismiss
Dismissal of a complaint for failure to state a claim pursuant to Rule
12(b)(6) is proper only where "`it appears beyond doubt that the
plaintiff can prove no set of facts in support of [her] claim that would
entitle [her] to relief.'" ICOM Holding, Inc. v. MCI Worldcom, Inc., No.
00-7660, 2001 WL 46675, at *1 (2d Cir. Jan. 22, 2001) (quoting Harris v.
City of New York, 186 F.3d 243, 247 (2d Cir. 1999)). To properly rule on
a 12(b)(6) motion, the court must accept as true all material facts
alleged in the complaint and draw all reasonable inferences in the
nonmoving party's favor. See ICOM Holding, 2001 WL 46675, at *1.
B. Jurisdictional Challenge
A plaintiff's initial burden in defeating a jurisdictional challenge
"is dependent upon the procedural posture of the litigation." Orobia
Eng. S.R.L. v. Sorin Nacht, No. 97 Civ. 4912, 1998 WL 730562, at *2
(S.D.N.Y. Oct. 19, 1998). Although "a plaintiff bears the burden of
establishing jurisdiction over the defendant by a preponderance of the
evidence, the plaintiff need make only a prima facie showing that
jurisdiction exists prior to the holding of an evidentiary hearing." Ball
v. Metallurgie Hoboken-Overpelt. S.A., 902 F.2d 194, 196 (2d Cir. 1990).
In determining whether such a showing is satisfied, a district court
may look at materials other than those contained within the complaint.
See LeBlanc v. Cleveland, 198 F.3d 353, 356 (2d Cir. 1999) ("[W]here
jurisdictional facts are placed in dispute, the court has the power and
obligation to decide issues of fact by reference to evidence outside the
pleadings, such as affidavits."). Appropriate circumstances for holding a
hearing exist when the "proffered evidence is so conflicting and the
record is rife with contradictions." Foster-Miller Inc. v. Babcock &
Wilcox Cananda, 46 F.3d 138, 145 (1StCir. 1995); see also Cheyenne
Autumn Inc. v. Mine and Bill's, No. 94 Civ. 4011, 1995 WL 366388, at *2-4
(S.D.N.Y. June 19, 1995) (evidentiary hearing warranted where the
jurisdictional issue turned on which version of the facts the court
should accept). Although a court must dismiss a case if it does not have
jurisdiction, See RuhrgasA.G. v. Marathon Oil Co., 526 U.S. 574, 577
(1999), "a district court deciding [such a motion] `has considerable
procedural leeway.'" Orobia Eng., 1998 WL 730562, at *2 (quoting Marine
Midland Bank, N.A. v. Miller, 664 F.2d 889, 904 (2d Cir. 1981)).
A. Statute of Limitations
Title VII requires a plaintiff to file a charge of discrimination with
the EEOC within 180 days of the alleged unlawful employment action or, if
the plaintiff has already filed the charge with a state or local equal
employment agency, within 300 days of the alleged act of discrimination.
See 42 U.S.C. § 2000e-2(a)(1). Here, plaintiff filed a charge with
the EEOC on August 19, 2000. See Compl. ¶ 33. Bally thus argues that
because plaintiff is limited to acts of discrimination occurring after
October 20, 1999, her Title VII action is untimely and must be
dismissed. See Defendant's Memorandum of Law in Reply to Plaintiff's
Opposition and Cross-Motion to Defendant's Motion to Dismiss Plaintiff's
Complaint and Compel Arbitration ("Reply Mem.") at 8. Plaintiff responds
that she has alleged a hostile work environment that has existed up until
August 2000. See Plaintiff's Sur-Reply Memorandum of Law
in Opposition to
Defendant's Motion to Dismiss on Statute of Limitations. Plaintiff also
states that she has alleged discriminatory acts that occurred within the
300-day period, thus making dismissal improper.*fn11
A claim of hostile work environment does not presuppose a continuing
violation. See Bampoe v. Coach Stores, Inc., 93 F. Supp.2d 360, 364
(S.D.N.Y. 2000) ("[H]ostile work environment claims fare no differently
under `continuing violation' analysis than do other claims grounded in
Title VII."). Accordingly, plaintiff is limited to post-October 20, 1999
acts of discrimination unless she can prove a continuing violation on
The continuing-violation exception "`extends the limitations period for
all claims of discriminatory acts committed under an ongoing policy of
discrimination even if those acts, standing alone, would have been barred
by the statute of limitations.'" Quinn v. Green Tree Credit Corp.,
159 F.3d 759, 765 (2d Cir. 1998) (quoting Annis v. County of
Westchester, 136 F.3d 239, 246 (2d Cir. 1998)). "A continuing violation
may be found where there is proof of specific ongoing discriminatory
polices (sic] or practices, or where specific and related instances of
discrimination are permitted by the employer to continue unremedied for
so long as to amount to a discriminatory policy or practice." Cornwell
v. Robinson, 23 F.3d 694, 704 (2d Cir. 1994). "Where a continuing
violation can be shown, the plaintiff is entitled to bring suit
challenging all conduct that was a part of that violation, even conduct
that occurred outside the limitations period."*fn12 Id.
Plaintiff alleges that several times she complained of harassment to
Bally superiors who took no corrective action. See Compl. ¶¶ 10, 16,
20. Plaintiff also alleges that Bally had actual knowledge of the hostile
work environment in each of its clubs and promoted sexual harassment
through its policies of hiring and training managers. See id. ¶ 28.
At this stage of the litigation, plaintiff's allegations must be presumed
true. Accordingly, plaintiff has alleged sufficient facts to support the
application of the continuing-violation exception.*fn13 Plaintiff's
sexual harassment claims
will therefore not be dismissed as time-barred.
B. Enforcement of the EDRP
The FAA provides that "an agreement in writing to submit to arbitration
an existing controversy arising out of such a contract, transaction, or
refusal, shall be 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. In deciding whether to compel arbitration, a district
court must first determine whether a valid agreement to arbitrate
exists. See Hartford Accident & Indem. Co. v. Swiss Reinsurance Am.
Corp., 246 F.3d 219, 225-26 (2d Cir. 2001). Bally argues that any "claims
[concerning] the formation of the arbitration agreement . . . must be
[decided] by the arbitrator, not this Court." Reply Mem. at 3. In support
of this proposition, Bally relies on the Supreme Court's decision in
Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 402-04
1. Prima Paint
In Prima Paint Corp., the Supreme Court held that a challenge to the
making of a contract generally, as opposed to the making of an
arbitration provision specifically, must be decided by the arbitrator.
The Court held that "arbitration clauses as a matter of federal law are
`separable' from the contracts in which they are embedded, and that where
no claim is made that fraud was directed to the arbitration clause
itself, a broad arbitration clause will be held to encompass arbitration
of the claim that the contract itself was induced by fraud."*fn14 Id. at
402. However, an independent challenge aimed directly at the arbitration
agreement itself and not the contract as a whole does fall within a
district court's jurisdiction. Cf. id. at 404 ("[I]n passing upon a
§ 3 [of the FAA] application for a stay while the parties arbitrate,
a federal court may consider only those issues relating to the making and
performance of the agreement to arbitrate.") (emphasis added); see also
Unionmutual, 774 F.2d at 529 ("The teaching of Prima Paint is that a
federal court must not remove from the arbitrators consideration of a
substantive challenge to a contract unless there has been an independent
challenge to the making of the arbitration clause itself.")
Contrary to Bally's argument, the EDRP is not an arbitration clause
within a contract, but an entire arbitration agreement. Bally argues that
"[t]he contract, although it is styled EDRP, contains terms that are
broader than the arbitration issue.
For example, it sets forth the terms
and conditions of the plaintiff's employment." Transcript of June 26,
2001 Oral Argument at 8. However, as Brennan rightfully notes, Section
24.1 of the EDRP explicitly states: "This EDRP is not, and shall not be
construed to create any contact of employment, express or implied."
Section 24.1 of the EDRP, Ex. 1 of Infante Cert. Therefore, under Prima
Paint, this Court has the authority to determine whether or not the EDRP
is enforceable. See generally Arakawa v. Jaoan Network Group,
56 F. Supp.2d 349, 352 (S.D.N Y 1999) (court has the authority to address
the enforceability of entire arbitration agreement).
2. The Modifications to the EDRP
In moving to dismiss and compel arbitration, Bally relies primarily
upon the second modification of the EDRP ("EDRP II")*fn15 Thus, in order
to determine whether Brennan's claims are subject to arbitration, the
first question is whether EDRP II is a valid and enforceable contract.
See Hartford Accident & Indem. Co. v. Swiss Reinsurance Am. Corp.,
246 F.3d 219, 225-26 (2d Cir. 2001).
Although Brennan signed the original EDRP, she did not approve, sign,
or otherwise consent to any subsequent unilateral modifications. The
validity of EDRP II is thus dependent upon the legitimacy of the
modification provisions set forth in the original EDRP. Section 25.1 of
the original EDRP states:
This agreement can be modified or terminated by the
Employer upon thirty (30) days notice to the
Employee, and the Employee's continued employment
beyond the expiration of the notice is consideration
for the modification. Modification or revocation of
this Agreement will have no application to disputes
already submitted under the EDRP except by mutual
agreement of the Employer and Employee.
Section 25.1 of EDRP, Ex. 1 of Infante Cert. However, Section 24.3 of the
original EDRP, states that the
EDRP can be modified or revoked only by a writing,
signed by both the Employee and the president or a
representative of the Employer specifically set forth
in Article 6.1., that references this EDRP and
specifically states an intent to modify or revoke this
Section 24.3 of EDRP, Ex. 1 of Infante Cert. (emphasis added).*fn16
While a court should reconcile conflicting provisions in a contract
when possible, these two clauses are irreconcilable. See Hauser v.
Western Group Nurseries, Inc., 767 F. Supp. 475, 488 (S.D.N.Y. 1991)
("Where two seemingly conflicting provisions can be reconciled, a court
should do so in order to give both effect."). Accordingly, the original
EDRP must be construed against Bally, the drafter. See Board of Educ. v.
CNA Ins. Co., 839 F.2d 14, 18 (2d Cir. 1988) ("[B]asic principles of
interpretation require that [contracts] be construed against the drafting
party."). In addition, it is a general rule that "in the case of total
repugnancy between two contract clauses, the first of such clauses shall
be received, and the subsequent one rejected." Honigsbaum's, Inc. v.
Stuyvesant Plaza, Inc. 577 N.Y.S.2d 165, 166 (3rdDep't 1991);
Liang v. Huang, 679 N.Y.S.2d 210, 212 (3rdDep't 1998). Here, Section
24.3 precedes Section 25.1. Accordingly, EDRP II, the second modification
of the EDRP, is not a valid contract, as it was not signed by Brennen and
a Bally representative.
2. The Original EDRP
Regardless of the validity of EDRP II, Bally maintains that Brennan is
bound by the agreement which she signed — the original EDRP. See
Reply Mem. at 2 n. 1. However, plaintiff argues that the original EDRP
should not be enforced because it is an unconscionable contract of
adhesion. See Plaintiff's Memorandum of Law in Opposition to Motion to
Dismiss at 13.
Courts find contracts of adhesion when "the party seeking to rescind
the contract establishes that the other party used `high pressure
tactics,' or `deceptive language,' or that the contract is
unconscionable." Wright v. SFX Entm't Inc., No. 00 Civ. 5354, 2001 WL
103433, at *3 (S.D.N.Y. Feb 7, 2001). In New York, unconscionability
generally requires both procedural and substantive elements. See Gillman
v. Chase Manhattan Bank, 73 N.Y.2d 1, 10 (1988). The "substantive
elements of unconscionability appear in the context of the contract per
se [whereas the] procedural elements must be identified by resort to
evidence of the contract formation process." In re Estate of Friedman,
407 N.Y.S.2d 999, 1008 (2ndDep't 1978). Courts should determine
unconscionability in a flexible manner depending upon all the facts and
circumstances of a particular case." Id.
Courts find contracts unconscionable where "an `absence of meaningful
choice on the part of one of the parties [exists] with contract terms
which are unreasonably favorable to the other party.'" Desiderio v.
National Ass'n of Sec. Dealers, 191 F.3d 198, 207 (2d Cir. 1999), cert.
denied, 121 S.Ct. 756 (2001) (quoting 8 Samuel Williston, A Treatise on
the Law of Contracts § 18:9, at 54 (4th ed. 1998)). Although it is
true that "one who signs an agreement without full knowledge of its terms
might be held to assume the risk that [s]he has entered a one-sided
bargain," this rule does not apply if a plaintiff is able to demonstrate
the requisite "absence of meaningful choice." Id. Brennan alleges that
Bally did not allow her enough time to review and understand the EDRP.
She alleges that Bally employees were given -only a few minutes to read
the fourteen-page document while Infante talked on the phone. See Brennan
Aff. at 14. Infante then collected the agreements by asking each employee
aloud whether he or she had signed it. See id. Under these
circumstances, it is unclear whether Brennan had a "meaningful choice"
and voluntarily assented to the arbitration agreement. Desiderio, 191
F.3d at 207.
In order to compel arbitration, this Court must find that the EDRP was
a valid contract. An unconscionable contract of adhesion is not a valid
contract. Limited discovery is required so that the Court can determine
whether the EDRP was an unconscionable contract of adhesion. See
Friedman, 407 N.Y.S.2d at 1008 (Unconscionability must determined in
light of "the facts and circumstances of a particular case."). In
addition, a jurisdictional hearing may be necessary if the "proffered
evidence is so conflicting and the record is rife with contradictions."
Foster-Miller Inc., 46 F.3d at 145.
For the foregoing reasons, Bally's motion to dismiss the Complaint and
arbitration is denied pending further discovery and a possible
jurisdictional hearing. The parties are directed to commence
jurisdictional discovery so that the Court will be able to make a
decision as to the validity of the arbitration agreement.
Defendant is hereby ORDERED to produce:
1) a videotape of the meeting at which the EDRP was distributed
("Meeting"), if one in fact exists;
2) the videotape of what was shown at the Meeting;
3) the identity of each of the presenters at the Meeting;
4) the written notice informing the staff of the Meeting;
5) the names of all individuals in attendance at the Meeting;
6) the identities of the individuals who did not sign at the meeting and
when they signed, if they did, and the employment status of those who
never signed (whether or when they left and whether or when they were
Plaintiff is hereby ORDERED to produce:
1) the names of witnesses corroborating plaintiff's version of what
occurred at the Meeting and any other documents relevant to the
It is further ORDERED that the depositions of Kathryn Brennan and Fred
Infante be taken forthwith; and
that this limited discovery shall end 30 days from the issuance of this
Order, at which time a conference shall be held to determine whether a
hearing is needed in order to resolve the jurisdictional issue.