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United States District Court, E.D. New York

January 11, 2005.

RUTH BALDEO, Plaintiff,

The opinion of the court was delivered by: JOHN GLEESON, District Judge


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.


  A. Background

  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 problem.

  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. 2004).

  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 Cir. 2003).

  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 the agreement.

  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 the DRP.*fn2

  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. Id. CONCLUSION

  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.

  So Ordered.

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