Ciago v. Ameriquest Mortgage Co.

• Decision Date: 15 December 2003
• Docket Number: No. 03 Civ. 1742(WCC).,03 Civ. 1742(WCC).
• Citation: 295 F.Supp.2d 324
• Parties: Angela CIAGO, individually and on behalf of others similarly situated, Plaintiff, v. AMERIQUEST MORTGAGE COMPANY, Defendant.
• Court: U.S. District Court — Southern District of New York

295 F.Supp.2d 324

Angela CIAGO, individually and on behalf of others similarly situated, Plaintiff, v. AMERIQUEST MORTGAGE COMPANY, Defendant.

No. 03 Civ. 1742(WCC).

United States District Court, S.D. New York.

December 15, 2003.

COPYRIGHT MATERIAL OMITTED

Law Office of Dan Getman, New Paltz, NY, Dan Getman, Of Counsel, Attorneys for Plaintiff.

Dorsey & Whitney LLP, New York City, Richard F. Albert, Laura M. Lestrade, Of Counsel.Buchalter Nemer Fields & Younger, Los Angeles, CA, Arthur Chinski, Ruth L. Seroussi, Of Counsel, for Defendant.

OPINION AND ORDER

WILLIAM C. CONNER, Senior District Judge.

Plaintiff Angela Ciago brought this action naming as defendant Ameriquest Mortgage Company ("Ameriquest"), alleging violations of the Fair Labor Standards Act ("FLSA"), 29 U.S.C. §§ 203, 207 et seq., and state law for failure to pay overtime wages. Plaintiff also alleges a claim under New York law for retaliation that allegedly occurred after she complained of age discrimination by defendant.¹ Defendant has moved for an order dismissing the action and compelling arbitration pursuant to sections three and four of the Federal Arbitration Act ("FAA"). 9 U.S.C. §§ 3, 4. For the reasons stated hereinafter, the motion is granted.

BACKGROUND

Ameriquest is a residential mortgage lender that has its principal place of business in Orange County, California, and employees located throughout the United States. (Am. Complt. ¶ 14; Wright Aff. ¶ 2.) Plaintiff completed an application for employment with Ameriquest dated December 22, 1998. (Wright Aff., Ex. 1.) On this application, plaintiff signed a statement indicating that she understood future employment would be conditioned upon, inter alia, her assent to an arbitration agreement. (Id.) Ameriquest later tendered a job offer to plaintiff memorialized in a letter dated January 29, 1999. In the text of this letter, Ameriquest explained once again that plaintiff would be required to sign an arbitration agreement as a condition of employment. (Id., Ex. 2.) When plaintiff started work for Ameriquest in Poughkeepsie, New York on February 1, 1999, she was given the Arbitration Agreement ("Arbitration Agreement" or "Agreement") and other employment-related documents to sign. (Ciago Decl. ¶ 6.) While plaintiff does not deny that she signed the Agreement, she claims that she has no recollection of signing it or of its contents. (Id. ¶ 7.) Defendant has provided a copy of the Arbitration Agreement signed by plaintiff. (Wright Aff., Ex. 3.)

The Arbitration Agreement provided for arbitration of "all claims" between the parties except workers' compensation and unemployment claims or claims that Ameriquest might have against plaintiff for unfair competition or theft of trade secrets. (Id.) It contained the following provisions regarding notice of claims, forum selection and cost sharing:

The Company and I agree that the aggrieved party must give written notice of any claim to the other party within one (1) year of the date the aggrieved party first has knowledge of the event giving rise to the claim; otherwise the claim shall be void and deemed waived even if there is a federal or state statute of limitations which would have given more time to pursue the claim....

If I am or was employed outside the State of California, [the arbitration shall take place] ... at the Company's headquarters in Orange, California....

The Company and I shall equally share the fees and costs of the Arbitrator. Each party will deposit funds or other appropriate security for its share of the Arbitrator's fee, in an amount and manner determined by the Arbitrator, 10 days before the first day of hearing. ...

(Id.) The Agreement also contained provisions relating to discovery, the substantive law and procedural rules to govern arbitration and the severability of clauses in the Arbitration Agreement adjudged to be invalid. (Id.) Finally, the Arbitration Agreement provided that "[t]he Arbitrator... shall have exclusive authority to resolve any dispute relating to interpretation, applicability, enforceability or formation of this Agreement...." (Id.) Defendant claims that pursuant to the Arbitration Agreement, the Court must dismiss this action in favor of arbitration. Plaintiff contends that the Arbitration Agreement should not be given effect because it is invalid.

DISCUSSION

The FAA provides, in relevant part: "A written provision in any ... contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction ... 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. The FAA manifests "a `liberal federal policy favoring arbitration agreements.'" Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 25, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991) (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)). Therefore, even where an arbitration agreement requires the arbitration of disputes involving a federal statute, the parties to a valid arbitration agreement are compelled to arbitrate "`so long as the prospective litigant effectively may vindicate [his or her] statutory cause of action in the arbitral forum....'" Gilmer, 500 U.S. at 28, 111 S.Ct. 1647 (quoting Mitsubishi Motors Corp. v. Soler Chrysler Plymouth, Inc., 473 U.S. 614, 637, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985)). The Second Circuit has enumerated the following factors to be considered when deciding whether to compel arbitration: (1) whether the parties agreed to arbitrate; (2) the scope of that agreement; (3) whether Congress intended the plaintiff's statutory claims to be nonarbitrable; and (4) if not all claims are arbitrable, the court must determine whether to stay the balance of the proceedings pending arbitration. See Oldroyd v. Elmira Sav. Bank, FSB, 134 F.3d 72, 75-76 (2d Cir.1998) (citing Genesco, Inc. v. T. Kakiuchi & Co., Ltd., 815 F.2d 840, 844 (2d Cir.1987)); Bird v. Shearson Lehman/American Express, Inc., 926 F.2d 116, 118 (2d Cir.1991). Because the Court concludes that the fourth consideration outlined by the Second Circuit is inapplicable here, we will consider only the first three.

I. Whether the Parties Agreed to Arbitrate

Whether the parties agreed to arbitrate is determined by state contract law. See First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995) (noting that state law governs determination of whether parties agreed to arbitrate). See also 9 U.S.C. § 2 (an agreement 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."). Accordingly, an agreement to arbitrate may be set aside if it is unconscionable. Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 687, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996) ("[A]pplicable contract defenses, such as ... unconscionability, may be applied to invalidate arbitration agreements."). "A contract or clause is unconscionable when there is `an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.'" Desiderio v. Nat'l Assoc. of Sec. Dealers, 191 F.3d 198, 207 (2d Cir. 1999) (quoting 8 SAMUEL WILLISTON, A TREATISE ON THE LAW OF CONTRACTS, § 18:9). Under New York law, "[a] determination of unconscionability generally requires a showing that the contract was both procedurally and substantively unconscionable when made ...." Gillman v. Chase Manhattan Bank, N.A., 73 N.Y.2d 1, 10, 534 N.E.2d 824, 828, 537 N.Y.S.2d 787, 791 (1988). Normally "procedural and substantive unconscionability operate on a `sliding scale'; the more questionable the meaningfulness of choice, the less imbalance in a contract's terms should be tolerated and vice versa." New York v. Wolowitz, 96 A.D.2d 47, 68, 468 N.Y.S.2d 131 (2d Dep't 1983). However, "there have been exceptional cases where a provision of the contract is so outrageous as to warrant holding it unenforceable on the ground of substantive unconscionability alone ...." Gillman, 73 N.Y.2d at 12, 534 N.E.2d at 829, 537 N.Y.S.2d at 792; Beletsis v. Credit Suisse First Boston, Corp., No. 01 Civ. 6266, 2002 WL 2031610, at *6 (S.D.N.Y. Sept.4, 2002) ("It is true that an overabundance of invalid provisions can void an entire agreement.").

Standing alone, unequal bargaining power will not render an agreement to arbitrate within an employment contract invalid. Gilmer, 500 U.S. at 33, 111 S.Ct. 1647 ("Mere inequality in bargaining power ... is not a sufficient reason to hold that arbitration agreements are never enforceable in the employment context ...."); Hart v. Canadian Imperial Bank of Commerce, 43 F.Supp.2d 395, 400 (S.D.N.Y. 1999) (Conner, J.). The mere fact that an agreement to arbitrate was required as a condition of employment, or continued employment, also is insufficient to invalidate the provision. Bailey v. Ameriquest Mortgage Co., 346 F.3d 821, 823 (8th Cir.2003) (holding that arbitration agreement identical to the one used here was not unconscionable merely because it was offered on a "take-it-or-leave-it" basis); Arakawa v. Japan Network Group, 56 F.Supp.2d 349, 352 (S.D.N.Y.1999).

Plaintiff argues that, despite the provisions in the application and letter alerting her that she would eventually have to sign an Arbitration Agreement, there was procedural unconscionability in this case because a copy of the Agreement was not provided until she had accepted employment with Ameriquest, quit her previous job and reported for her first day of work. (Pl. Mem. Opp. Mot. Dismiss at 10.) According to plaintiff, she lacked a "meaningful choice" because she was in no position at that late date to object to the specific terms of the Arbitration Agreement. (Id.) We conclude that plaintiff was not deprived of a ...