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Johnston v. Electrum Partners LLC

United States District Court, S.D. New York

June 21, 2018

PAMELA JOHNSTON, Plaintiff,
v.
ELECTRUM PARTNERS LLC and LESLIE BOCSKOR, Defendants.

          OPINION AND ORDER

          KATHERINE POLK FAILLA UNITED STATES DISTRICT JUDGE. [1]

         In January 2016, Plaintiff Pamela Johnston (“Plaintiff” or “Johnston”) entered into a working relationship with Defendant Electrum Partners LLC (“Electrum”). The nature and terms of that relationship may be open to dispute, but the parties agree that the relationship ended by August 2017. Two months later, in October 2017, Plaintiff brought the instant action claiming wrongful termination and retaliation under the New York City Human Rights Law (“NYCHRL”), N.Y. City Admin. Code §§ 8-101 to 8-131. Specifically, Plaintiff alleges that she was fired after reporting workplace misconduct to Electrum's management, including its founder, president, and managing member, Defendant Leslie Bocskor (“Bocskor, ” and together with Electrum, “Defendants”). In addition, Plaintiff claims that she was terminated after, and as a result of, advising Electrum that she had been diagnosed with an advanced form of cancer.

         Defendants have moved to dismiss the complaint or to stay the case pending arbitration pursuant to the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1-16. For the reasons set forth in the remainder of this Opinion, the Court will stay this litigation pending the results of an existing arbitration proceeding in Nevada.

         BACKGROUND[2]

         A. Factual Background

         1. The Parties

         Plaintiff is a public relations specialist who resides at and works from a Manhattan address. (Compl. ¶¶ 2, 5). In furtherance of this business, Johnston served as President and sole owner of Cloud 12 Group, Inc. (“Cloud 12”), a corporation of which she is also the sole shareholder and principal. (See Bocskor Decl. ¶ 10; Pl. Opp. 8 (describing Cloud 12 as an “entity that [Plaintiff] controlled”); ICA 7 (indicating Johnston signed as President of Cloud 12)).[3]

         Electrum began operations on or about January 6, 2014; Bocskor founded the company, and he continues to act as its president and managing member. (Bocskor Decl. ¶ 4). The company is incorporated in Nevada, and operates out of Las Vegas. (See Id. at ¶¶ 3, 5). Electrum “provides advisory services and guidance to individuals and businesses engaged in the medical and recreational cannabis industries.” (Id. at ¶ 6).

         2. The Independent Contractor Agreement

         On January 4, 2016, Cloud 12 and Electrum entered into an Independent Contractor Agreement (the “ICA” or “Agreement”). (ICA; see also Pl. Opp. 8). Johnston signed the ICA on behalf of Cloud 12 in her capacity as President, while Bocskor signed the ICA on behalf of Electrum in his capacity as Managing Member. (Id. at 7). Per the terms of the ICA, Cloud 12 was to serve as Electrum's Director of Marketing until December 31, 2018, at which point the ICA would terminate. (Id. at 2, 8). Either party could also terminate the Agreement before that time “for any or no reason” upon 60 days' notice. (Id. at 2). Although the ICA allowed the parties to “mutually agree to amend, append or replace [the Agreement] with one another at any time, ” the Agreement could “not be modified, terminated, waived[, ] altered or amended except in writing, signed by [Cloud 12] and a duly authorized officer of” Electrum. (Id. at 2, 7).

         The ICA specified the duties and responsibilities that Cloud 12 was to provide Electrum, including tasks involving “Communication Strategies, ” “Competitive Positioning, ” and “Executive Reputation.” (ICA 8). Cloud 12 would also provide these services to entities beyond Electrum, including its subsidiaries, clients, and partners. (Id.) In exchange, Electrum would pay Cloud 12 “a fee of $8, 500 per month, ” along with stock options. (Id. at 1). Bocskor contends, and nothing in the record contradicts, that (i) Johnston performed all of the work for Cloud 12 that was requested by Electrum, but (ii) all payments for Johnston's work under the ICA were made by Electrum to Cloud 12. (Bocskor Decl. ¶¶ 16-17).

         Bocskor further contends that Johnston negotiated the terms of the ICA with the express purpose of remaining an employee of only Cloud 12 and not Electrum, so that she could continue to “perform work for other clients through … Cloud 12, set her own schedule, and control the amount of personal income she received so as not to adversely affect the financial aid her daughter was receiving at college.” (Bocskor Decl. ¶ 12). Johnston also understood that becoming an Electrum employee would require her to relocate to Nevada, a move that she did not wish to make. (Id. at ¶ 13). Johnston's bid for Cloud 12 to remain an independent contractor to Electrum is borne out by the terms of the ICA, which terms provide that Cloud 12 would perform services for Electrum “as an independent contractor, ” and that Cloud 12 was “not a partner, employee or agent of” Electrum. (ICA 2; see also, e.g., Id. at 1-2 (providing that Cloud 12 would be reimbursed for certain “pre-approved” expenses, but not any “equipment, tools, materials, and/or supplies to accomplish” the services it would provide to Electrum); Id. at 2 (providing that Electrum would not withhold any taxes from its payments to Cloud 12, which was “solely responsible” for making tax payments)).

         Crucial to the instant motion, the ICA included an arbitration provision, which stated, in relevant part:

Except as otherwise provided in this Agreement, any and all controversies or claims arising out of or related to this Agreement or the breach thereof shall be settled by binding arbitration in Las Vegas, Nevada in accordance with the rules of the Judicial Arbitration and Mediation Service (JAMS), and judgment upon the award rendered may be entered in any court having jurisdiction. … Nothing in this Paragraph shall prevent [Electrum] from seeking injunctive relief from the courts pending arbitration.

(ICA 7). Also relevant to the analysis below, the ICA contained a choice-of-law clause, providing that the “Agreement shall be construed in accordance with and governed by the substantive and procedural laws of the State of Nevada, regardless of its conflict of laws provision.” (Id.).

         3. The Alleged Oral Agreement

         Not until August 2017 did any party to the ICA seek in writing to modify or terminate the Agreement. Plaintiff alleges, nonetheless, that in June 2016, she entered into an oral agreement with Electrum and Bocskor in her individual capacity to become Senior Vice President of Strategy and Special Projects for Electrum. (Compl. ¶¶ 20-21, 50). This, Plaintiff argues, made her an Electrum employee, rather than an independent contractor, and thus no longer subject to the ICA. (See Id. at ¶ 22; Pl. Opp. 2). According to Plaintiff, she then “became more involved in the day-to-day operations of Electrum” and was given increased access to Electrum's financial and management information. (Pl. Opp. 2-3).

         During a conference before the Court in anticipation of the instant motion, Plaintiff's counsel stated that when Plaintiff took on the new role at Electrum in June 2016, “she started getting an additional $3, 000 a month.” (IPTC Tr. 5:9-10). Plaintiff, however, has provided no documentary evidence of this pay increase, and Plaintiff's counsel admitted that no written documentation memorialized Plaintiff's new responsibilities or increase in pay. (Id. at 6:24-7:11). Plaintiff's counsel also admitted that as “a matter of convenience, ” Electrum continued to pay Cloud 12 for Johnston's services, rather than Johnston directly. (Id. at 7:18-8:12).

         4. The Termination of the Relationship

         The parties do not dispute that Plaintiff's working relationship with Electrum ended by August 2017. (Compl. ¶¶ 36-37; Bocskor Decl. ¶ 18). According to Johnston, this occurred after she reported several instances of inappropriate sexual behavior by Electrum employees to Bocskor and advised him that she had been diagnosed with stage four breast cancer. (Compl. ¶¶ 26-29). Plaintiff claims that by July 2017, Defendants simply stopped paying her, and that she was fired when she “expressed alarm” at this development. (Id. at ¶¶ 36-37).

         In contrast, Defendants contend that “[o]n August 5, 2017, following numerous incidents involving Ms. Johnston and Cloud 12, Electrum provided written notice to Cloud 12, via Ms. Johnston, that the ICA would terminate” in 60 days. (Bocskor Decl. ¶ 18). According to a Demand for Arbitration that Electrum filed in Nevada, the “incidents” alleged against Johnston include engaging in unprofessional conduct that cost Electrum money and clients; subcontracting work to third parties and surreptitiously billing Electrum for those subcontracts in violation of the ICA; and disclosing confidential information to third parties in violation of the ICA. (See generally Arb. Demand ¶¶ 23-43).[4] By Defendants' account, 20 days after notifying Cloud 12 that Electrum would terminate the ICA, Cloud 12 ceased performing under the Agreement. (Bocskor Decl. ¶ 19).

         B. Procedural Background

         Plaintiff filed the Complaint in this action on October 11, 2017, bringing claims for wrongful termination, aiding and abetting wrongful termination, unlawful retaliation, and aiding and abetting unlawful retaliation under NYCHRL. (Dkt. #1; Compl. ¶¶ 45-64).[5] On November 6, 2017, Defendants filed a letter with this Court requesting a pre-motion conference to address their anticipated motion to dismiss the action, or in the alternative, to stay it pending arbitration. (Dkt. #5). Plaintiff filed a responsive letter on November 9, 2017 (Dkt. #6), and the Court held the conference on December 13, 2017 (Dkt. #12). In response to an inquiry from the Court during the conference, Plaintiff later wrote to the Court to indicate that she did not intend to amend her complaint (Dkt. #10), and the Court therefore set a briefing schedule for the instant motion (Dkt. #11). On February 16, 2018, Defendants filed their motion to dismiss, or alternatively, to stay the action pending arbitration. (Dkt. #14-15). Plaintiff opposed the motion on March 20, 2018 (Dkt. #16), and Defendants replied to Plaintiff's opposition on April 3, 2018 (Dkt. #19).[6]

         DISCUSSION

         A. Applicable Law

         1. Motions to Stay Litigation Under § 3 of the FAA

         The FAA represents a “liberal federal policy favoring arbitration agreements[.]” Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 625 (1985) (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)). Accordingly, “where the contract contains an arbitration clause, ” the obligation to arbitrate a dispute “should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. Doubts should be resolved in favor of coverage.” AT&T Techs., ...


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