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H. Cristina Chen-Oster; Lisa Parisi; and v. Goldman

April 28, 2011

H. CRISTINA CHEN-OSTER; LISA PARISI; AND SHANNA ORLICH, PLAINTIFFS,
v.
GOLDMAN, SACHS & CO. AND THE GOLDMAN SACHS GROUP, INC., DEFENDANTS.



The opinion of the court was delivered by: James C. Francis IV United States Magistrate Judge

MEMORANDUM AND ORDER

This is a putative class action in which the plaintiffs allege that their employer, Goldman, Sachs & Co. and The Goldman Sachs Group, Inc. (collectively, "Goldman Sachs"), has engaged in a pattern of gender discrimination against its female professional employees in violation of Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., and New York City Human Rights Law, N.Y.C. Admin. Code § 8-107 et seq. Goldman Sachs has moved to stay the action with respect to one representative plaintiff, Lisa Parisi, and to compel arbitration of her claims.

Ms. Parisi's individual claims are subject to an arbitration clause signed as part of her employment agreement, and, pursuant to that agreement, Goldman Sachs cannot be required to arbitrate on a class basis. However, because an arbitration clause may not be enforced if it precludes the vindication of substantive rights, and because a pattern or practice claim under Title VII can only be brought in the context of a class action, Ms. Parisi's Title VII claim cannot be committed to arbitration lest she be deprived of her substantive rights. Therefore, as discussed more fully below, the defendants' motion to stay this action and compel arbitration is denied.

Background

The plaintiffs are three women who worked for Goldman Sachs between 1997 and 2008. (Complaint ("Compl."), ¶¶ 13-18). Plaintiff H. Cristina Chen-Oster was hired in March 1997 and promoted to the position of Vice President in June of that year. (Compl., ¶ 70). She remained in that position for the next eight years, until her resignation from the firm. (Compl., ¶¶ 70, 102). Plaintiff Shanna Orlich was hired as a Summer Associate by Goldman Sachs in 2006, and then as a full-time Associate in July 2007. (Compl., ¶ 115). She remained in that position until she was terminated, in November 2008. (Compl., ¶ 134). Plaintiff Lisa Parisi (the "plaintiff") was hired by Goldman Sachs as a Vice President in August 2001. (Compl., ¶ 104). In 2003, Ms. Parisi was promoted to the position of Managing Director at Goldman Sachs. (Compl., ¶ 104). As a condition of her promotion, Ms. Parisi signed an employment contract. (Letter of Henry M. Paulson, Jr., dated Nov. 4, 2003 (the "Employment Agreement"), attached as Exh. to Declaration of Erin E. LaRuffa dated Nov. 22, 2010). The Employment Agreement contains an arbitration clause that provides as follows:

[A]ny dispute, controversy or claim arising out of or based upon or relating to Employment Related Matters will be finally settled by arbitration in New York City before, and in accordance with the rules then obtaining of, the New York Stock Exchange, Inc. ("NYSE") or if the matter is not arbitrable before the NYSE, the National Association of Securities Dealers ("NASD"). If both the NYSE and the NASD decline to arbitrate the matter, the matter will be arbitrated before the American Arbitration Association ("AAA") in accordance with the commercial arbitration rules of the AAA. You agree that any arbitration decision and/or award will be final and binding upon the parties and may be entered as a judgment in any appropriate court. (Employment Agreement, § 4). The Employment Agreement defines "Employment Related Matters" as "matters arising out of or relating to or concerning this Agreement, your hire by or employment with the Firm or the termination thereof, or otherwise concerning any rights, obligations or other aspects of your employment relationship in respect of the Firm." (Employment Agreement, § 3). Ms. Parisi continued as a Managing Director until her employment was terminated by Goldman Sachs in November 2008. (Compl., ¶¶ 104, 113).

Following their separation from Goldman Sachs, each of the plaintiffs filed charges with the Equal Employment Opportunity Commission (the "EEOC"), alleging gender discrimination and retaliation. (Compl., ¶¶ 103, 114, 135). The plaintiffs filed this suit on September 16, 2010 "on behalf of themselves individually and all similarly situated female Associates, Vice Presidents, and Managing Directors in the United States." (Compl., ¶ 60). The plaintiffs' complaint asserts eight claims for relief, including two claims that Goldman Sachs intentionally discriminated against the plaintiffs and other members of the purported class by engaging in an "intentional, company-wide, and systematic policy, pattern, and/or practice of discrimination against its female Associates, Vice Presidents, and Managing Directors." (Compl., ¶¶ 138, 154). It also asserts two claims that "company-wide policies, patterns, and/or practices of determining compensation and eligibility for promotion based on subjective criteria applied by predominantly male reviewers" and of delegating "unchecked and standardless discretion to its overwhelmingly male managers to distribute business opportunities, determine levels of professional support, evaluate employee performance, set compensation, and select individuals for promotion, and determine other terms and conditions of employment" had a disparate impact on putative class members and on the plaintiffs themselves. (Compl., ¶¶ 147, 163).

At the same time that it answered the complaint, on November 22, 2010, Goldman Sachs filed the instant motion to stay Ms. Parisi's claims and compel individual arbitration. (Notice of Motion dated Nov. 22, 2010). In response, the plaintiff sought limited discovery related to Goldman Sachs' custom and practice with respect to arbitration, ultimately filing a motion to compel disclosure of exemplar credit card and employment agreements. (Memorandum and Order dated March 1, 2011 ("3/1/11 Order") at 1-2, 3). I denied that motion on March 1, 2011, finding that, because there was no ambiguity in Ms. Parisi's employment contract, New York law prohibited consideration of extrinsic evidence in interpreting its provisions, and the requested discovery was therefore irrelevant. (3/1/11 Order at 5-8). The parties subsequently completed briefing of Goldman Sachs' motion to stay and compel arbitration, including the filing of a sur-reply by the plaintiff addressing the Second Circuit's decision in In re American Express Merchants' Litigation, 634 F.3d 187 (2d Cir. 2011) ("American Express II"), issued on March 8, 2011.

Discussion*fn1

A. Proper Decisionmaker

As an initial matter, the defendants note that the arbitrability of Ms. Parisi's claims is for this Court, rather than an arbitrator, to determine. (Memorandum of Law in Support of Defendants' Motion to Stay Plaintiff Parisi's Claims and Compel Individual Arbitration ("Def. Memo.") at 9-10). Indeed, both parties agree that, pursuant to the Supreme Court's holding in Rent-A-Center, West, Inc. v. Jackson, __ U.S. __, 130 S. Ct. 2772 (2010), "the Court decides the question of arbitrability because the arbitration agreement does not clearly and unmistakably delegate that question to the arbitrator." (Plaintiffs' Memorandum of Law in Support of Opposition to Defendants' Motion to Compel Arbitration ("Pl. Memo.") at 12 n.6); see Rent-A-Center, West, Inc., __ U.S. at __, 130 S. Ct. at 2777 n.1. However, while "any potentially dispositive gateway question" might be termed a "question of arbitrability," "[t]he Court's case law [] makes clear that, for purposes of applying the interpretive rule, the phrase 'question of arbitrability' has a far more limited scope." Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002). Furthermore, a plurality of the Supreme Court has specifically held that the question of whether a contract "forbid[s] class arbitration [] does not fall into this narrow exception," but rather is an issue of contract interpretation properly left to the arbitrator. Green Tree Financial Corp. v. Bazzle, 539 U.S. 444, 452-53 (2003).

In this case, part of the dispute centers on whether the contract at issue forbids class arbitration -- precisely the issue deemed to be one of contract interpretation by the plurality in Bazzle. However, the motion is appropriately resolved by this Court for two reasons. First, as both parties are in agreement that the Court is the appropriate forum for resolution of this dispute, it seems plain that the dispute fits into the narrow circumstance where contracting parties would likely have expected a court to have decided the gateway matter, where they are not likely to have thought that they had agreed that an arbitrator would do so, and, consequently, where reference of the gateway dispute to the court avoids the risk of forcing parties to arbitrate a matter that they may well not have agreed to arbitrate.

Howsam, 537 U.S. at 83-84; see also Skirchak v. Dynamics Research Corp., 508 F.3d 49, 56 (1st Cir. 2007) ("An agreement to arbitrate does not divest a court of its jurisdiction."). Second, the balance of the parties' dispute is over "whether [they] have agreed to submi[t] a particular dispute to arbitration," a question that is generally resolved by the courts. Granite Rock Co. v. International Brotherhood of Teamsters, __ U.S. __, __, 130 S. Ct. 2847, 2855 (2010) (second alteration in original) (internal quotation marks omitted). The questions raised by the parties require determination of the scope and enforceability of the arbitration clause, and therefore the issue is appropriately characterized as a dispute over arbitrability. See Rent-A-Center, West, Inc., __ U.S. at __, 130 S. Ct. at 2778 ("If a party challenges the validity . . . of the precise agreement to arbitrate at issue, the federal court must consider the challenge before ordering compliance with that agreement."); In re American Express Merchants' Litigation, 554 F.3d 300, 311 (2d Cir. 2009) ("American Express I") ("[I]f there is a challenge to the arbitration clause itself -- an issue which goes to the making of the agreement to arbitrate -- the federal court may proceed to adjudicate it." (internal quotation marks omitted)), vacated sub nom. American Express Co. v. Italian Colors ...


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