incorporates the "procedures and limitations" that are applicable to
arbitration, as provided in the Akal Arbitration Procedure.
2. Scope of the Agreement
As for the scope of the agreement, the Arbitration Provision is broad,
covering "all legal and or equitable claims arising out of [Mildworm's]
employment or termination of employment." Such a "broad arbitration
clause . . . justifies a presumption of arbitrability." Oldroyd v. Elmira
Savings Bank, 134 F.3d 72, 76 (2d Cir. 1998). Indeed, courts repeatedly
have construed similar arbitration agreements broadly to encompass any
dispute arising out of the employment relationship, including employment
discrimination claims. See Rajjak v. McFrank & Williams, 2001 WL
799766, at *2733 (S.D.N.Y. July 13, 2001); Arakawa, 56 F. Supp.2d at
352-53; Ahing v. Lehman Brothers Inc., 1997 WL 634290, at *2 (S.D.N.Y.
Oct.15, 1997); Gateson v. ASLK-Bank, N.V., 1995 WL 387720, at *45
(S.D.N.Y. June 29, 1995). In this case, the Arbitration Provision
encompasses Mildworm's asserted federal and state employment
discrimination claims, as Mildworm fails to assert circumstances
sufficient to rebut this presumption of arbitrability. Accordingly, the
scope of the arbitration agreement is broad enough to cover Mildworm's
federal and state employment discrimination claims.
Thus, this Court concludes that the Arbitration Provision is not
unenforceable as vague, and that Mildworm's claims against moving
defendants are subject to arbitration.
B. Sharing of Arbitration Costs
As noted above, Mildworm argues that the Arbitration Provision is
unenforceable because it requires a sharing of arbitration costs. Under
the Arbitration Provision, Mildworm must share equally with Akal the
"[c]osts for arbitration," although Mildworm's share of the "cost of the
arbitrator" is capped at $2,500. Mildworm argues that "[a] clause
requiring the employee to bear significant arbitration costs can render
an otherwise valid arbitration agreement unenforceable." Pl. Mem. at 9.
Thus, Mildworm apparently argues that the "cost-sharing" provision taints
the entire Arbitration Provision and cannot be severed. As noted,
Mildworm asserts that he cannot afford to pay the expected arbitration
costs and fees. Mildworm Aff. ¶ 43; Mildworm Supplemental Aff. ¶
12; Yaffee Supplemental Aff. ¶¶ 3-9 & Ex. A.
Moving defendants, on the other hand, argue that the cost-sharing
provision is valid and enforceable. Alternatively, moving defendants argue
that if the cost-sharing provision is found to be invalid, then that
provision can be "modified" — although they neither suggest the
modification nor cite any authority their position.
The Second Circuit has not addressed this issue. While some circuits
have held that an arbitration agreement requiring cost-sharing or
fee-splitting is unenforceable because the potential of such costs deter
or prevent an employee from vindicating his/her statutory rights in the
arbitral forum, see, e.g., Shankle v. B-G Maint. Mgmt. of Cob., Inc.,
163 F.3d 1230, 1235 (10th Cir. 1999); Paladino v. Avnet Computer
Technologies, Inc., 134 F.3d 1054, 1062 (11th Cir. 1998); Cole v. Burns
Int'l Sec. Servs., 105 F.3d 1465, 1485 (D.C.Cir. 1997), other circuits
have held that a cost-sharing or fee-splitting provision does not
necessarily make the arbitration agreement unenforceable, but requires a
case-by-case inquiry to determine whether such costs prevent a party from
effectively vindicating his/her statutory
rights in the arbitral forum, see, e.g., Williams v. Cigna Fin. Advisors
Inc., 197 F.3d 752, 763-64 (5th Cir. 1999); Rosenberg v. Merrill Lynch,
Pierce, Fenner & Smith, Inc., 170 F.3d 1, 15-16 (1st Cir. 1999);
Koveleskie v. SBC Capital Mkts., Inc., 167 F.3d 361, 366 (7th Cir.
However, the Supreme Court in Green Tree Financial Corp.-Alabama v.
Randolph, 531 U.S. 79, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000), addressed
the question of whether an agreement to arbitrate is unenforceable
"because it says nothing about the costs of arbitration, and thus fails
to provide [the party] protection from potentially substantial costs of
pursuing [that party's] federal statutory claims in the arbitral forum."
Id. at 89, 121 S.Ct. 513. Although Green Tree did not involve an
employment dispute, but rather, a plaintiff who asserted claims against
financial institutions that financed her purchase of a mobile home for
violations of the Truth in Lending Act and the Equal Credit Opportunity
Act, the Supreme Court's discussion is particularly instructive. The
district court compelled arbitration, and the Eleventh Circuit reversed,
holding that "the agreement to arbitrate posed a risk that [plaintiffs]
ability to vindicate her statutory rights would be undone by `steep'
arbitration costs, and therefore was unenforceable." Id. at 84, 121
S.Ct. 513. The Supreme Court disagreed and reversed that aspect of the
Eleventh Circuit's judgment. See id. Nevertheless, the Supreme Court
acknowledged that "the existence of large arbitration costs could
preclude a litigant . . . from effectively vindicating her federal
statutory rights in the arbitral forum," id. at 90, 121 S.Ct. 513, and
held that where "a party seeks to invalidate an arbitration agreement on
the ground that arbitration would be prohibitively expensive, that party
bears the burden of showing the likelihood of incurring such costs." Id.
at 92, 121 S.Ct. 513. The Supreme Court did not specify the showing
required to establish that the imposition of arbitration costs prevents a
party from effectively vindicating his/her federal statutory rights, but
it did invite a case-by-case inquiry. See id. ("How detailed the showing
of prohibitive expense must be before the party seeking arbitration must
come forward with contrary evidence is a matter we need not discuss; for
in this case neither during discovery nor when the case was presented on
the merits was there any timely showing at all on the point."). Because
the plaintiff did not make the required showing as to the costs she would
bear if she proceeded to arbitration, the Supreme Court refused to
invalidate the arbitration agreement at issue based merely on plaintiffs
articulated "risk" of prohibitive costs — a ground it found "too
speculative to justify the invalidation of an arbitration agreement." Id.
at 91, 121 S.Ct. 513.
This Court concludes that, based on Green Tree, the appropriate inquiry
requires a case-by-case determination of whether the imposition of
arbitration costs prevents a party from effectively vindicating his/her
federal statutory rights. Indeed, based on Green Tree, the Third and
Fourth Circuits hold that this is the appropriate inquiry. See Bradford
v. Rockwell Semiconductor or Sys., Inc., 238 F.3d 549, 556 (4th Cir.
2001) ("[T]he appropriate inquiry is one that evaluates whether the
arbitral forum in a particular case is an adequate and accessible
substitute to litigation. i.e., a case-by-case analysis that focuses,
among other things, upon the claimant's ability to pay the arbitration
fees and costs, the expected cost differential between arbitration and
litigation in court, and whether that cost differential is so substantial
as to deter the bringing of claims."); Blair v. Scott Specialty Gases,
283 F.3d 595, 606-08 (3d Cir. 2002); but see Ball v. SFX Broad., Inc.,
165 F. Supp.2d 230, 239-40 (S.D.N.Y. 2001).
Nevertheless, the record is not adequate for this Court to determine
how large the costs of arbitration will be, how much of the costs
Mildworm will be required to pay, and whether he can effectively
vindicate his statutory rights, particularly since Mildworm largely
attempts to make this factual showing in his supplemental papers —
as to which moving defendants have not responded. Therefore, this Court
cannot conclude on the present record that the cost-sharing provision
constitutes a barrier to the vindication of Mildworm's statutory rights.
Accordingly, this Court will maintain jurisdiction over any subsequent
petition with respect to the award. See Rosenberg, 170 F.3d at 16;
Koveleskie, 167 F.3d at 366; Rajjak, 2001 WL 799766, at *4; Arakawa, 56
F. Supp.2d at 355.
For the above reasons, defendants Akal and Wimberly's motion to compel
is granted and the action is dismissed as against these defendants; and
this Court retains jurisdiction over any subsequent petition regarding
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