United States District Court, E.D. New York
January 11, 2005.
RUTH BALDEO, Plaintiff,
DARDEN RESTAURANTS, INC. d/b/a RED LOBSTER, Defendant.
The opinion of the court was delivered by: JOHN GLEESON, District Judge
MEMORANDUM AND ORDER
Plaintiff Ruth Baldeo brought this diversity action against her
former employer, Red Lobster, asserting claims of discrimination
in violation of the New York State Human Rights Law and the New
York City Human Rights Law. In addition, Baldeo asserts claims of
defamation, libel, slander, and tortious interference with
prospective contractual relationships under New York law. Baldeo
seeks both injunctive relief (specifically, to enjoin Red Lobster
employees from making certain allegedly defamatory statements
about her) and money damages. Defendant Darden Restaurants, Inc.
("Red Lobster") moves to dismiss the complaint and to compel arbitration.
For the reasons set forth below, the motion is granted. The
action is stayed while the parties resort to the alternate
dispute resolution procedure to which they agreed.
In June 2000, Red Lobster hired Baldeo as a manager-trainee.
During her tenure at Red Lobster, Baldeo became a general manager
("GM"), and worked at several restaurants in Red Lobster's Long
Island region, including restaurants in Huntington, Carle Place,
Stony Brook, and Brooklyn. Baldeo alleges that beginning in
approximately September 2003, after Gregory Corbly became the
Director of Operations for the Long Island Region of Red Lobster,
Baldeo began to observe and experience gender discrimination
against female managers and supervisors, and was subject to a
hostile work environment. In addition, Baldeo alleges that she
was subject to other harassive behavior, in particular the
circulation of false statements concerning a purported sexual
relationship between Baldeo and a vendor or contractor, a
relationship which would be contrary to Red Lobster policy.
In approximately November 2003, Baldeo spoke to her former
supervisor Timothy Eames about the discrimination she was facing,
and he advised her to speak directly to Gregory Corbly (one of
the people allegedly participating in the discrimination) and
Suzanne Hanna, the Senior Vice President supervising Red
Lobster's Big East division. Baldeo alleges that when she met
with Corbly, he was angry at her for speaking to Eames, and told
her that she should quit. That same evening, Baldeo spoke with
Hanna and William Chillianis, a Director of Operations, about the
alleged discrimination. Baldeo alleges that after these
discussions, she was retaliated against in several ways, including: the undermining of
her authority as the GM of the Brooklyn restaurant; being asked
questions about her sexual activity with contractors; being
suspended on January 6, 2004; and finally, being terminated on
January 11, 2004.
On January 6, 2004, after Baldeo was informed of her
suspension, she contacted Christopher Heinbloch, the Senior Vice
President for Crew Relations. Heinbloch told Baldeo that an
investigation into Baldeo's conduct was being conducted, and that
the results of the investigation would be communicated to her.
Neither Heinbloch nor anyone else at Red Lobster called Baldeo to
discuss the results of this investigation. About a month after
her termination, Baldeo again called Heinbloch to stop Red
Lobster employees from circulating false rumors about Baldeo.
During that conversation, Baldeo informed Heinbloch of the
discrimination, harassment, and retaliatory conduct that she had
faced. In response, Heinbloch told Baldeo in effect that she
could do whatever she wanted but would not get her job back.
Heinbloch never told Baldeo that she "would have to proceed
through arbitration or follow any step of the [Dispute Resolution
Process]." Baldeo Aff. ¶ 25.
On May 25, 2004, Baldeo commenced this action.
B. The Dispute Resolution Procedure at Red Lobster
On the day Baldeo was hired, she was given a packet of
documents, which included a brochure regarding Red Lobster's
dispute resolution procedure ("DRP") entitled "Can we talk?"
Baldeo was told to review the packet and sign various documents,
including the DRP brochure, a process which took between 45 and
75 minutes. Baldeo alleges that the DRP process was not explained
to her on the day she was hired or at any time thereafter, nor
did anyone "carefully explain the DRP brochure's implications as
to the various legal rights [Baldeo] would have to waive in order to be a Red Lobster manager trainee [or
to] remain employed by [Red Lobster.]". (Baldeo Aff. ¶ 12.)
1. The DRP Brochure
The Red Lobster "Can we talk?" brochure "gives [employees] an
overview of the [dispute resolution] procedure." The brochure
explains that Red Lobster has a four-step dispute resolution
process. Step one is the "open door policy," where employees are
encouraged to talk over problems such as discrimination. The
brochure states: "The manager's door is ALWAYS open, and you can
speak up totally without fear . . . they'll listen to you openly
and honestly and you never have to worry about reprisal or
retaliation." (emphasis in original.) The brochure states that an
employee can also call an Operations Director, division Senior
Vice President or Crew Relations representative to discuss her
If resort to the open door policy does not resolve the problem
to the employee's satisfaction, she may proceed to step two of
the DRP, which is "peer review." A request form to commence peer
review is available from a general manager (the position Baldeo
occupied). At the peer review stage, a panel of employees listens
to both sides, ask questions, looks at evidence, and makes a
decision as to how to resolve the dispute.
If either side is unhappy with the decision of the peer review
panel, it can invoke mediation, which is step three. Finally, if
mediation fails, binding arbitration is the fourth and final
step. The DRP brochure states that while it offers an overview,
an employee can "get a complete explanation in the DRP Handbook,
available from your manager."
The brochure sets forth the scope of claims subject to the DRP,
stating that it covers claims for "wages and other compensation;
tort recovery . . .; discrimination; sexual harassment; denial of benefits; and violations of state, federal
or common law. DRP does not cover issues like performance
reviews, benefits programs, pay rates, layoffs, job transfers or
job elimination." (emphasis in original.) As a condition of her
employment, Baldeo was required to sign the DRP agreement upon
being hired by Red Lobster, and she did so. On April 23, 2002,
Baldeo, who was by then a manager, signed a form entitled "Clear
Direction Acknowledgment" (the "Acknowledgment" form). This form
states the following:
I have received information entitled "Can we talk?"
Dispute Resolution at Red Lobster (DRP), which
contains a description of DRP. I have read this
information and understand and agree to the terms and
conditions of DRP and understand that Red Lobster is
equally bound. I agree that, as a condition of my
employment at Red Lobster, to submit any eligible
disputes I may have to the company's DRP and to abide
by the provisions outlined. I understand that this
includes, for example, claims under state and federal
laws relating to harassment or discrimination, as
well as, other employment-related claims as defined
by the DRP.
Corbly Aff. Ex. B.
As part of her duties as a manager, Baldeo explained the DRP
process to new employees, and instructed subordinate managers
regarding how to explain the DRP process to other employees.
Baldeo Aff. at ¶¶ 15-16; Corbly Aff. ¶ 9. At oral argument,
Baldeo stated that at some point in 2003, she received copies of
the DRP handbook in case an employee requested to see one.
Congressional policy, as embodied in the Federal Arbitration
Act ("FAA"), 9 U.S.C. § 1 et seq., favors enforcement of
arbitration clauses in contracts. See Gilmer v.
Interstate/Johnson Lane Corp., 500 U.S. 20, 24-25 (1991); Moses
H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983); Mitsubishi
Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 625
(1985). Section 2 of the FAA expresses this preference, stating
that written agreements to arbitrate "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. A further provision requires courts to stay judicial
proceedings pending arbitration if the court is satisfied that
the issues presented are contemplated by an agreement to
arbitrate. See 9 U.S.C. § 3. These statutory provisions are
mandatory, as the Supreme Court emphasized in Dean Witter
Reynolds, Inc. v. Byrd, 470 U.S. 213 (1985):
[T]he [Arbitration] Act leaves no place for the
exercise of discretion by a district court, but
instead mandates that district courts shall direct
the parties to proceed to arbitration on issues as to
which an arbitration agreement has been signed. Thus,
insofar as the language of the Act guides our
disposition of this case, we would conclude that
agreements to arbitrate must be enforced, absent a
ground for revocation of the contractual agreement.
Id. at 218 (emphasis in original, citations omitted); see also
Genesco, Inc. v. T. Kakiuchi & Co., Ltd., 815 F.2d 840
, 844 (2d
Cir. 1987). This strong presumption in favor of arbitration has
survived the greater scrutiny given to the use of mandatory
pre-dispute arbitration agreements, such as the agreement at
issue here, to resolve claims of employment discrimination. Gold
v. Deutsche Aktiengesellschaft, 365 F.3d 144
, 147 (2d Cir.
The Second Circuit has established a two-part test for
determining the arbitrability of claims which do not involve
federal statutes: "(1) whether the parties agreed to arbitrate
disputes at all; and (2) whether the dispute at issue comes
within the scope of the arbitration agreement." ACE Capital Re
Overseas Ltd. v. Central United Life Ins. Co., 307 F.3d 24, 28
(2d Cir. 2002). The determination as to whether a party is bound
by the arbitration clause is determined by looking at generally accepted principles of
contract law. See Gold, 365 F.3d at 149. "Under such
principles, in the absence of fraud or other wrongful act[s] on
the part of another contracting party, a party who signs or
accepts a written contract is conclusively presumed to know its
contents and to assent to them." Id. (internal quotation and
ellipses omitted). Baldeo has not disputed the fact that her
claims fall within the scope of the arbitration agreement in
question.*fn1 Thus, the sole question here is whether this
arbitration agreement is valid and enforceable.
A. Validity of the Arbitration Agreement
Baldeo asserts two arguments as to why the arbitration
agreement here is unenforceable: (1) that there was no mutual
assent between Baldeo and Red Lobster; and (2) that the
arbitration agreement is unconscionable.
1. Mutual Assent
Under New York law, mutual assent to the essential term of a
contract is required in order for there to be an enforceable contract. See, e.g.,
Opals on Ice Lingerie v. Body Lines Inc., 320 F.3d 362, 372 (2d
Baldeo does not dispute that she agreed to have her employment
discrimination claims subjected to Red Lobster's DRP process.
Baldeo Aff. ¶¶ 14-19. In addition, Baldeo understood the
four-step process of Red Lobster's dispute resolution procedure,
and was responsible for explaining it to other employees. For
example, under a heading in her submission entitled "My
Understanding of Red Lobster's DRP Process," Baldeo states that
it is "absolutely true" that she was aware of Red Lobster's
four-step DRP process. Baldeo Aff. ¶¶ 14-15. "Indeed," states
Baldeo, "as a General Manager . . . for Red Lobster, I also
explained Red Lobster's DRP process to be a step-by-step four (4)
step process with the "Open Door Policy" as being the first (1st)
step and arbitration as being the fourth (4th) and last step."
Baldeo Aff. ¶ 15 (emphasis omitted).
Baldeo argues, however, that though there was mutual assent to
the proposition that employment discrimination claims would be
subject to arbitration, there was no mutual assent for a term in
the agreement that would allow a party to "bypass" steps two and
three (peer review and mediation) of the DRP process and proceed
directly to arbitration. Baldeo Aff. ¶¶ 17, 18, 29, 30. Had she
known about this possibility, Baldeo states, she "would have had
serious reservations about signing the Acknowledgment Form and/or
Brochure." Baldeo Aff. ¶ 30. Baldeo argues that this right to
bypass was not in the brochure, which she acknowledges signing
off on, and instead was included in the more comprehensive DRP
handbook, to which a brief reference is made in the brochure (and
which she did not read). This argument does not provide grounds
for avoiding an otherwise valid arbitration agreement. First, the failure to read a document incorporated by reference
into a valid arbitration agreement does not generally allow an
employee to avoid the terms set forth in the incorporated
document. See generally Gold, 365 F.3d 144. In the absence of
fraud or other wrongful acts, a party who signs or accepts a
written contract is conclusively presumed to know its contents
and to assent to them. Gold, 365 F.3d at 149. Courts must not
inquire "on whether there was subjective agreement as to each
clause in the contract, but on whether there was an objective
agreement with respect to the entire contract." Beletsis v.
Credit Suisse First Boston, Corp., No. 01 CIV. 6266(RCC), 2002
WL 2031610, at *3 (S.D.N.Y. Sept. 4, 2002) (quoting Genesco,
815 F.2d at 846); see also Gold, 365 F.3d at 149-150
(explaining that rules set forth in a document which, while not
provided to the employee, are incorporated by reference into an
arbitration agreement signed by the employee are enforceable).
In Gold, the plaintiff (Gold) argued that he should not be
bound by an arbitration agreement to litigate employment
discrimination claims because the clause stating that the
arbitration agreement covered employment discrimination was in a
document that he had not read, which was incorporated by
reference in the arbitration agreement itself. Id. at 146. The
Second Circuit held that the employee was bound by the agreement.
Id. at 150. The Court reasoned that "even if Gold did not
understand the form or had questions about the arbitration clause
or the rules, as he alleges, the burden was upon him to have his
concerns addressed before signing [the agreement.]" Id. at 149.
"While it would have made sense," the Court stated, "for
[defendant] to have explained the form and to have provided Gold
the [rules] that were incorporated by reference," the failure to
do so does not render the arbitration clause invalid. Id. at
150. "[T]he arbitration clause was broad and plain and put Gold
on notice" that any dispute between him and his firm could be arbitratable. Id.; see also
Tarulli v. Circuit City Stores Inc., 333 F. Supp. 2d 151, 156-58
(S.D.N.Y. 2004) (arbitration agreement not unconscionable where
agreement stated that the applicant must request a copy of the
arbitration rules if she had not received one, and employee did
not do so during her six years of employment).
Here, Baldeo signed the Acknowledgment form stating that she'd
received the "Can we talk?" brochure, had read and understood it,
and had "agree[d] to the terms and conditions of DRP." The
brochure stated that a "complete explanation" of the dispute
resolution procedure was in the DRP handbook, which was available
from a manager. And Baldeo, who was a manager, had received
copies of the handbook during her tenure at Red Lobster, and was
responsible for explaining the DRP to other employees as well as
for providing them with copies of the DRP handbook if they asked
for one. Baldeo's argument that she was unfamiliar with the terms
set forth in the handbook, and that she would have had
reservations about continuing to work at Red Lobster if only she
had known about these terms, rings hollow. In any event, even had
she never received the handbook, her failure to review it would
not allow her to avoid her agreement to abide by Red Lobster's
dispute resolution process, under which employment-related claims
such as hers are subject to arbitration.
Second, Baldeo argues that when she contacted her superiors to
complain about discrimination, engaging in the first step of DRP
(the open door procedure), her superiors retaliated against her
for doing so, and never told her that she had to engage further
in the DRP process. Baldeo states, for example, that Red Lobster
"never gave me the opportunity to use Peer Review, the next step
of the DRP Process." Baldeo Aff. ¶ 28. This in turn leads to
Baldeo's claim that Red Lobster converted the DRP into a two-step
process (open door and then arbitration), a resolution procedure to which she never agreed.
Baldeo concludes this facet of her argument by asserting that
there was no mutual assent to an arbitration procedure in which
Red Lobster could unilaterally bypass step two (peer review) and
step three (mediation), and thus she should not have to abide by
This argument is meritless. The fact that Baldeo's superiors
did not invite or direct her to proceed to peer review after she
engaged in the open door procedure is irrelevant. The DRP
brochure and handbook both empower the dissatisfied employee to
initiate the peer review step of the DRP. The brochure states,
for example, that "[i]f our Open Door Policy doesn't `calm the
waters,' your next step is to take your dispute to a Peer
Review panel." (emphasis added). Likewise, the DRP handbook
states, "[i]f the Open Door Policy has not resolved your concern
under the DRP, you may present your complaint to a Peer
Review panel." DRP Handbook at 5. (emphasis added). Further, the
handbook states that any dispute that is not resolved through the
open door policy "must be submitted in writing on a Darden
Dispute Resolution Procedure Request Form." As general manager,
Baldeo was in charge of these request forms. She admitted at oral
argument that she never submitted such a form or took any other
action to initiate the Peer Review step of the DRP.
I agree that Baldeo's superiors, once having notice of her
claims and of the failure to resolve them at step one, should
have suggested that Baldeo proceed to the next step of the DRP
process by submitting her claim in writing. That would be
consistent with the manner in which DRP is described in Red
Lobster's brochure, as "the way we resolve workplace disputes."
(emphasis in original.) However, the fact that Baldeo's
complaints produced alleged retaliation, rather than a calming of the waters, did not vitiate the terms of
2. Unconscionability and Ambiguity
Baldeo makes several arguments based on the asserted
unconscionability and ambiguity of the arbitration agreement at
issue here, concluding that it is unenforceable. First, Baldeo
appears to argue that the agreement is unconscionable because (1)
there was inequality in bargaining positions such that Baldeo
lacked a meaningful choice in deciding whether to sign the
contract; and (2) the terms of the agreement are unreasonably
favorable to Red Lobster. An employee must hurdle a high bar to
establish the unconscionability of an arbitration agreement, and
Baldeo has not made such a showing here.
An agreement that is unconscionable is unenforceable. Brennan
v. Bally Total Fitness, 198 F. Supp. 2d 377, 381 (S.D.N.Y. 2002)
(citing Gillman v. Chase Manhattan Bank, 73 N.Y.2d 1, 10,
537 N.Y.S.2d 787 (1988). An agreement is unconscionable where there
is an absence of meaningful choice for one party together with
unreasonably favorable contract terms for the other party.
Desiderio v. Nat'l Ass'n of Sec. Dealers, Inc., 191 F.3d 198,
207 (2d Cir. 1999). Under New York law, "[a] determination of
unconscionability generally requires a showing that the contract
was both procedurally and substantively unconscionable when
made." Ciago v. Ameriquest Mortgage Co., 295 F. Supp. 2d 324,
328 (S.D.N.Y. 2003) (quoting Gillman, 73 N.Y.2d at 10).
In determining whether there was procedural unconscionability,
courts look to whether a party lacked meaningful choice.
Brennan, 198 F. Supp. at 382. Courts focus on evidence of high
pressure or deceptive tactics, as well as on disparity in the
bargaining power between the parties. Id. Inequality in
bargaining power alone, however, is not sufficient to render an
arbitration agreement unenforceable. Gold, 365 F.3d at 150.
Baldeo has not established procedural unconscionability here.
She has not pointed to any deceptive or high pressure tactic, or
any other conduct on the part of Red Lobster employees that would
suggest that she was deprived of a meaningful choice when she
signed the DRP brochure upon being hired or later when she signed
the Acknowledgment form. Cf. Brennan, 198 F. Supp. at 383
(finding procedural unconscionability where high pressure tactics
included giving employee only fifteen minutes to review a
sixteen-page, single-spaced document; threatening to deny
promotion if employee did not sign the agreement; and failing to
tell employee that agreement would affect her pending harassment
claim). Baldeo has not suggested that Red Lobster coerced her
into signing the agreement. Instead she states that she would
have had reservations about signing the arbitration agreement had
she known about the contents of the DRP handbook. Such
reservations do not establish procedural unconscionability.
A contract is substantively unconscionable where its terms
unreasonably favor the stronger party. Brennan,
198 F. Supp. at 382 (citing Desiderio, 191 F.3d at 207). Generally, arbitration agreements that are binding on both parties are not
considered to unreasonably favor the stronger party. See
Desiderio, 191 F.3d at 207. Baldeo has not pointed to any
specific provisions of the DPR that would warrant a finding of
substantive unconscionability under the circumstances of this
case, and I see none.*fn3
Finally, Baldeo finds ambiguity in the language describing the
scope of the DRP process. The DRP brochure states that it covers
claims for "wages and other compensation; tort recovery . . .;
discrimination; sexual harassment; denial of benefits; and
violations of state, federal or common law. DRP does not cover
issues like performance reviews, benefits programs, pay rates,
layoffs, job transfers or job elimination." Baldeo suggests some
hypothetical scenarios which could conceivably allow Red Lobster
to manipulate the type of claims that could be covered by the
arbitration agreement. The argument, which is strained to begin
with, fails because no manipulation is at issue here. Baldeo
signed an acknowledgment form in which she agreed to submit eligible disputes to the DRP process, including
"claims under state and federal law relating to harassment or
discrimination, as well as? other employment-related claims."
Accordingly, I find that there is neither procedural nor
substantive unconscionability here, and that the arbitration
agreement is valid and enforceable. Of course, the validity and
meaning of specific provisions in the arbitration agreement can
be decided by the arbitrator. See Ciago, 295 F. Supp. 2d at 330
(citing Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84
(2002) ("Procedural questions which grow out of the dispute and
bear on its final disposition are presumptively not for the
judge, but for an arbitrator to decide") (internal quotation
marks and citation omitted); see also Stewart v. Paul, Hastings,
Janofsky & Walker, LLP, 201 F. Supp. 2d 291, 292 (S.D.N.Y. 2002)
(enforceability of fee-splitting clause in arbitration agreement
was a matter for arbitrator to decide). My review is limited to
the gateway issue of whether there is a valid arbitration
agreement. Ciago, 295 F. Supp. 2d at 330 (citing Green Tree
Fin. Corp. v. Bazzle, 539 U.S. 444, 452 (2003)). If this matter
proceeds to arbitration, Baldeo can argue the unconscionability
or unenforceability of any specific provisions to the arbitrator.
For the reasons stated above, defendant's motion to compel
arbitration is granted. The motion to dismiss is denied. All
motions are hereby stayed pending the outcome of the arbitration.