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CAP GEMINI ERNST & YOUNG U.S. LLC v. NACKEL

March 23, 2004.

CAP GEMINI ERNST & YOUNG U.S. LLC, Plaintiff
v.
JOHN NACKEL, Defendant



The opinion of the court was delivered by: DENISE COTE, District Judge

OPINION AND ORDER

Cap Gemini Ernst & Young U.S. LLC ("Cap Gemini") filed this diversity action on August 28, 2002, to enforce an arbitration clause in an employment agreement with former employee John Nackel ("Nackel"). Nackel originally brought suit against Cap Gemini in California state court, alleging violations of that state's statutory prohibitions against employment discrimination and retaliation for complaints of such discrimination. Cap Gemini commenced an arbitration proceeding before the American Arbitration Association ("AAA") in New York and sought to compel Nackel to submit any claims of employment discrimination or retaliation to the New York arbitration.

  On November 21, 2002, this Court issued an Opinion and Order ("Opinion"), No. 02 Civ. 8672 (DLC), 2002 WL 31626703 (Nov. 21, Page 2 2002), compelling arbitration of Nackel's claims and staying the pursuit of those claims through judicial proceedings in California. The Opinion concluded that the written employment agreement between Cap Gemini and Nackel ("Employment Agreement") was governed by New York law and that the Agreement's provision requiring arbitration of Nackel's claims of employment discrimination and retaliation was enforceable. Id. at *2. The Employment Agreement contains a New York choice-of-law provision. Nackel appealed the decision.

  The Court of Appeals issued an Opinion on October 14, 2003 ("Appellate Opinion"), 346 F.3d 360 (2d Cir. 2003), vacating the Opinion and remanding this action. The Appellate Opinion holds that it is necessary to conduct a choice-of-law analysis to determine whether New York or California law governs the threshold issue of whether the parties entered into a contractually valid arbitration agreement. The Appellate Opinion states

 
. . . While it is undisputed that Nackel's employment agreement contains a choice-of-law clause providing that the agreement shall be construed in accordance with New York law, the parties' contract does not automatically settle the choice-of-law question. For although, "New York courts generally defer to the choice of law made by the parties to a contract . . . New York law allows a court to disregard the parties' choice when `the most significant contacts' with the matter in dispute are in another state." Cargill, Inc. v. Charles Kowsky Res., Inc., 949 F.2d 51, 55 (2d Cir. 1991); see also Hartford Fire Ins. Co. v. Orient Overseas Containers Lines, 230 F.3d 549, 556 (2d Cir. 2000) ("New York law is clear [that] in cases involving a contract with an express choice-of-law provision . . . a court is to apply the law selected in the contract as long as the state selected has sufficient contacts with the transaction.") (emphasis added).
  While the choice of New York law would be reasonable, and hence enforceable, if Cap Gemini's principal place of business were in New York, creating Page 3 significant contacts to the state, see, e.g., Woodlinq v. Garrett Corp., 813 F.2d 543, 552 (2d Cir. 1987); Finucane v. Interior Constr. Corp., 695 N.Y.S.2d 322, 325 (1st Dep't 1999) (mem.), the record merely reveals that Cap Gemini's "headquarters" are in New York . . . .[W]e must vacate the District Court's order and remand for further findings on the choice-of-law question.

 Id. at 365-66. Following remand, the parties briefed the remanded legal issues and submitted additional evidence concerning New York's contacts with this matter.

  Background

  The following facts are undisputed unless otherwise noted. Cap Gemini is incorporated in Delaware but maintains its headquarters and a separate location housing the Office of General Counsel in New York, New York. Cap Gemini's essential records are principally maintained in its headquarters, which also houses Board Resolutions enacted by its Board of Directors Cap Gemini conducts official correspondence from New York and lists New York as its principle place of business on its income tax returns and on annual statements filed with the states in which it does business.

  In April 2000, Nackel accepted the position of Vice-President at Cap Gemini and voluntarily executed an Employment Agreement providing in relevant part:

  [A]ny dispute, controversy or claim . . . arising out of or relating to or concerning the provisions of this Agreement, any agreement between you and the Firm relating to or arising out of your employment with us or otherwise concerning any rights, obligations or other aspects of your employment relationship, including, without limitation, discrimination claims, or your relationship in respect of the firm . . . shall be finally settled by arbitration in the City of New York . . . in accordance with the arbitration procedures set forth in the attached Annex 4, and the Page 4 commercial arbitration rules then obtaining of the American Arbitration Association (the "AAA").

  * * *

 
This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to its conflict of laws provisions.
(Emphasis supplied.) Annex 4 to the Employment Agreement states that discovery will be permitted "if authorized by the arbitration panel" and that the arbitrators have no power to award punitive damages "except such damages as may be provided for by statute and which may not be waived by agreement."

  Nackel's employment with Cap Gemini became effective May 23, 2000. Throughout his employment, he maintained his office in Los Angeles, California. He acted as Managing Director for the New Ventures division until February 1, 2001, when he was named to serve as the CEO of the Extended Workforces Businesses Division. In June, he became CEO of the North American Operations of the Local Professional Services Division and began reporting to a superior in the Netherlands. Nackel supervised California employees and spent the majority of his time in California, but spent approximately 15 to 18 days in New York on business during the course of his employment with Cap Gemini, which was terminated on November 4, 2001. *fn1 Nackel alleges that he was dismissed in retaliation for comments he made concerning the discriminatory behavior of a ...


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