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United States District Court, Southern District of New York

May 22, 2003


The opinion of the court was delivered by: Sidney Stein, District Judge.


Plaintiff Jenny Gruber brings this employment discrimination action against her employers (collectively "Louis Hornick"), alleging that she was subjected to sexual harassment and retaliation in violation of Title VII of the Civil Rights Act of 1964 and the New York City Human Rights Law. Defendants have moved to compel arbitration and stay further judicial proceedings pending arbitration. For the following reasons, that motion is granted.


Plaintiff was employed by Louis Hornick, a curtain and draperies manufacturer, for 10 months — from April 2001 to January 2002 — as an Assistant Designer in its New York City office. As a condition of employment, Louis Hornick requires its employees to sign an "Undertaking and Inducement to Louis Hornick & Co., Inc.," ("Agreement") that contains the following agreement to arbitrate:

Any dispute or controversy between the Company and Applicant relating to or arising out of the employment of Applicant or the termination of such employment for any reason and under any circumstance . . . shall be determined in arbitration in the City of New York pursuant to the Commercial Rules then in effect of the American Arbitration Association . . . The arbitration award shall be final and binding upon the parties and judgment may be entered thereon in the Supreme Court of the State of New York or in any other court of competent jurisdiction.
(Anatole Aff. Ex. A ¶ 3). On April 4, 2001, plaintiff signed the Agreement, acknowledging that she had read and understood it.*fn1

On January 18, 2002, for reasons that are in dispute, Gruber was terminated by Louis Hornick. She claims that she was sexually harassed and terminated in retaliation for raising complaints. Defendants argue that Gruber was terminated for proper business reasons. Six months after being terminated, Gruber filed this action, asserting claims pursuant to Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000a, et seq., and the New York City Civil Rights Law, N.Y. City Admin. Code §§ 8-107 et. seq. Defendants have now moved to compel Gruber to arbitrate their disputes.


The Federal Arbitration Act ("FAA") provides that "an agreement in writing to submit to arbitration an existing controversy . . . 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. There is a strong federal policy favoring alternative means of dispute resolution, and in light of that policy, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration. Arakawa v. Japan Network Group, 56 F. Supp. 349, 352 (S.D.N.Y. 1999) (citing Oldroyd v. Elmira Savings Bank, FSB, 134 F.3d 72, 76 (2d Cir. 1998) and Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 941, 74 L.Ed.2d 765 (1983)). In determining whether to compel arbitration pursuant to the FAA, a court considers: 1) whether the parties agreed to arbitrate; 2) what the scope of the arbitration agreement is; and 3) whether Congress intended the federal statutory claims asserted by the plaintiff to be nonarbitrable. See Genesco, Inc. v. T. Kaiuchi & Co., 815 F.2d 840, 844 (2d Cir. 1987).

In response to defendants' motion to compel arbitration, Gruber contends her claims are nonarbitrable because first, she did not knowingly and willfully enter into the agreement to arbitrate, and second, the arbitration provisions with respect to costs and attorney's fees render the agreement unenforceable in the context of a Title VII suit. The litigants do not dispute the scope of the arbitration agreement.

A. Gruber Agreed to Arbitrate

In determining whether panics have agreed to arbitrate, courts apply generally accepted principles of contract law. See id. at 845. A person who signs a contract is presumed to know its contents and assent to them. See Arakawa, 56 F. Supp.2d at 352; Berger v. Cantor Fitzgerald Securities, 967 F. Supp. 91, 93 (S.D.N.Y. 1997). Plaintiff is bound by the agreement to arbitrate unless she can show special circumstances, such as duress or coercion, which would justify non-enforcement of the contract. Arakawa, 56 F. Supp.2d at 352 (citing Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 33, 111 S.Ct. 1647, 1655, L.Ed.2d 26 (1991)).

Gather contends that she signed the Agreement under duress. She asserts that she was hired on Friday, March 30, 2001, and left her prior employment to begin work for Louis Hornick the following Monday. (Gruber Aff.). In support of her contention of duress, she states merely that the Agreement "was not discussed with me. I was told I had to sign it and return it." (Gruber Aff. ¶ 3) and that, when she was given the Agreement two days after starting work, "I was told that if I did not sign the Agreement, I would not be able to work for [Louis Hornick]" (Gruber Aff. ¶ 5).

In order for a party to show that a contract was signed under duress, she must show "(1) a threat, (2) which was unlawfully made, and (3) caused involuntary acceptance of contract terms, (4) because the circumstances permitted no other alternative." DeGaetano v. Smith Barney, Inc., No. 95 Civ. 1613 (DLC), 1996 WL 44226 at *5 (S.D.N.Y. Feb. 5, 1996) ("DeGaetano I"). Despite the inequality in bargaining power between employers and employees, conditioning employment upon an agreement to arbitrate does not by itself constitute duress. See Gilmer, 500 U.S. at 33, 11 S.Ct. 1647. Nor does conditioning further employment to a current employee's agreement to arbitrate by itself constitute duress. See Brennan v. Bally Total Fitness, 198 F. Supp.2d 377, 383 (S.D.N.Y. 2002) (holding arbitration agreement invalid because of coercive circumstances of employer's presentation of agreement to employees); see also Arawaka, F. Supp.2d at 352 (holding arbitration agreement was not invalid because employee signed it in order to keep her job, absent other allegations of unfairness, oppression or unconscionability.

Here, Gruber has failed to establish or even allege the additional circumstances required to establish that she lacked a meaningful choice in deciding whether or not to sign the Agreement. Her sole allegation is that she was told that if she did not sign, she would not be able to work for defendants. (Gruber Aff. ¶ 5). In contrast to cases where duress has been found in the signing of agreements to arbitrate employment disputes, there are no allegations that plaintiff was not given sufficient time to read the agreement or that defendants misled her about its contents. See Brennan, 198 F. Supp.2d at 383 (holding arbitration agreement invalid due to duress where plaintiff given insufficient time to review agreement and defendant used additional pressure tactics); Berger v. Cantor Fitzgerald Securities, 942 F. Supp. 963, 966 (S.D.N.Y. 1996) (ordering discovery on issue of whether plaintiff agreed to arbitrate where plaintiff alleged that he was misled about the arbitration agreement's contents and given insufficient time to review the agreement). Accordingly, the Court holds that Gruber has not shown that the Agreement was signed under duress, and therefore agreed to arbitrate.

B. The Title VII Claims are Arbitrable Pursuant to the Agreement

Title VII claims are not subject to a general legislative exception to arbitrability, and are therefore generally arbitrable. See Desiderio v. National Ass'n of Secs. Dealers, Inc., 191 F.3d 198, 204-05 (2d Cir. 1999). Such claims, however, cannot be subject to arbitration where the forum requires a party to forgo a substantive right afforded by the statute. See Gilmer, 500 U.S. at 28 (finding ADEA claims arbitrable because substantive rights of the statute could be vindicated in arbitral forum); Martens v. Smith Barney, Inc., 181 F.R.D. 243, 255-56 (S.D.N.Y. 1998) (setting forth requirements to ensure arbitration will not subvert statutory scheme).

The Agreement provides that arbitration is to be held pursuant to the rules of the American Arbitration Association ("AAA"). Gruber contends that two provisions of these rules render the Agreement invalid. First, she contends that the AAA's administrative fee schedule makes the costs to her to arbitrate prohibitive. Second, she contends that the AAA's attorney's fees provisions, which award attorney's fees to employers who prevail against non-frivolous complaints, unduly "chills" plaintiffs from vindicating their substantive rights afforded by the statute.

1. Arbitration Fees

The existence of significant arbitration costs may preclude a litigant from effectively vindicating her federal statutory rights in the arbitral forum. Green Tree Financial v. Randolph, 531 U.S. 79, 90, 121 S.Ct. 513, 522, 148 L.Ed.2d 373 (2000). The party seeking to invalidate an arbitration agreement on the ground that arbitration would be prohibitively expensive "bears the burden of showing the likelihood of incurring such costs." Id. at 92, 121 S.Ct. at 522.

Plaintiff submits that in an employment dispute such as hers, she would be assessed an initial filing fee of $1250, a case service fee of $750, and an administrative fee of $150 per day of the hearing. In addition, there are daily fees for the rental of hearing rooms and compensation for the arbitrator which can exceed $1,000 per day. (Plt. Exh. 1, pp.3-4. Louis Hornick responds that Gruber's information is out of date, and that effective November 1, 2002, the AAA adopted a new, lower, administrative fee schedule for employment disputes. (Rudderman Aff. II, Ex.A). Under the new fee schedule, plaintiff's filing fee is capped at $125, and all other expenses, including hearing fees, administrative fees, rental fees, and the arbitrator's compensation are paid by the employer. Id.

It is unclear from the competing submissions of the parties what the AAA fee schedule is this case. Plaintiff's submission provides the AAA administrative fee schedule for disputes arising out of "individually-negotiated employment agreements" as of January 1, 2001. (Gruber Aff. Exh. 1). Defendant's submission, on the other hand, is the AAA administrative fee schedule for disputes arising out of "employer-promulgated plans" as of November 1, 2002. Neither side has provided any information as to whether according to the AAA's rules this employment agreement is "individually-negotiated" or "employer-promulgated."

It is clear that under the fee schedule for "employer-promulgated" agreements, plaintiff is not effectively precluded from vindicating her rights due to the fees of arbitrating. The higher, "individually-negotiated" schedule, presents a more difficult question. However, plaintiff has not submitted any information that demonstrates what the higher schedule would amount to in this case, or that she would be unable to pay any fees incurred. The record, therefore, is inadequate for the Court to conclude that even the higher fee schedule would constitute a barrier to the vindication of plaintiff's rights. See Mildworm v. Ashcroft, 200 F. Supp.2d 171, 180 (declining to invalidate similar arbitration agreement in advance of the arbitration when it was unclear what fees would in fact be assessed). Accordingly, this Court will maintain jurisdiction over any subsequent petition to confirm or vacate the award. Id.; Arakawa, 56 F. Supp.2d at 355.

2. Attorney's Fees

Title VII provides for the discretionary award of attorney's fees to the prevailing party. 42 U.S.C. § 2000e-5 (k). A prevailing plaintiff ordinarily is to be awarded attorney's fees in all but special circumstances. Chrisitansburg Garment Co. v. EEOC, 434 U.S. 412, 417, 98 S.Ct. 694, 698 (1978). When an action is brought in good faith, a prevailing defendant is only entitled to an award of attorney's fees upon a finding that the plaintiff's action was frivolous, unreasonable, or without foundation. Id. at 421, 87 S.Ct. at 700. To the extent an arbitration agreement waives a plaintiff's right to obtain attorney's fees, the agreement is invalid. DeGaetano v. Smith Barney, Inc., 983 F. Supp. 459, 468-69 (S.D.N.Y. 1997) ("DeGaetano II").

Unlike the agreement in DeGaetano II, the AAA's attorney's fees provision does not limit Gruber's right to obtain attorney's fees should she prevail. It is therefore analogous to any other potentially burdensome arbitration cost addressed by the Supreme Court in Green Tree. As it is quite unclear at this point in the litigation whether plaintiff will be assessed defendant's attorney's fees at all and if so, how large those fees will be, plaintiff has not shown the arbitration will be prohibitively expensive because of this provision. See Arawaka, 56 F. Supp.2d 349, 355 (holding that plaintiff had not shown a fee splitting arrangement to be a barrier to her statutory rights when it was not yet determined what, if any, amount would be assessed against the plaintiff). The validity of any attorney's fees awarded can be addressed within the context of a petition to confirm or vacate the arbitration award at the conclusion of the arbitration. See DeGaetano II, 983 F. Supp. at 470 (granting motion to vacate or modify portion of arbitration award relating to attorney's fees). As noted above, this Court will maintain jurisdiction over any subsequent petition to confirm or vacate the award. Arakawa, 56 F. Supp.2d at 355.


Accordingly, defendants' motion to compel arbitration is granted, the complaint is dismissed, and the parties are directed to proceed to arbitration forthwith. This Court will maintain jurisdiction over any subsequent petition to vacate or confirm the award.


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