Dowe v. Leeds Brown Law, P.C.

• Decision Date: 22 November 2019
• Docket Number: 18cv11633 (DLC)
• Citation: 419 F.Supp.3d 748
• Parties: Maureen DOWE; Elvie Moore; and Esther Buckram, individually and on behalf of those Class Members similarly situated, Plaintiffs, v. LEEDS BROWN LAW, P.C.; Leeds Morelli & Brown, P.C. ; Leeds Morelli & Brown, LLP; Leeds & Morelli, P.C. ; Lenard Leeds; Steven a Morelli; Jeffrey K. Brown ; Prudential Financial Inc., parent and successor in interest to Prudential Securities, Inc.; Eric Schwimmer; and John Does 1-25, fictitious persons and entities, Defendants.
• Court: U.S. District Court — Southern District of New York

419 F.Supp.3d 748

Maureen DOWE; Elvie Moore; and Esther Buckram, individually and on behalf of those Class Members similarly situated, Plaintiffs,

v.LEEDS BROWN LAW, P.C.; Leeds Morelli & Brown, P.C. ; Leeds Morelli & Brown, LLP; Leeds & Morelli, P.C. ; Lenard Leeds; Steven a Morelli; Jeffrey K. Brown ; Prudential Financial Inc., parent and successor in interest to Prudential Securities, Inc.; Eric Schwimmer; and John Does 1-25, fictitious persons and entities, Defendants.

18cv11633 (DLC)

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

Signed November 22, 2019

For the plaintiffs: Andrew Lavoott Bluestone, 233 Broadway, Suite 2702, New York, NY 10279, John W. Moscow, Lewis Baach Kaufman Middlemiss PLLC, 405 Lexington Avenue, 62nd Floor, New York, NY 10174

For defendants Prudential Financial Inc. and Eric Schwimmer: Vincent A. Sama, Catherine B. Schumacher, Arnold & Porter Kaye Scholer LLP, 250 West 55th Street, New York, NY 10019, Liza M. Velazquez, Paul, Weiss, Rifkind, Wharton & Garrison LLP, 1285 Avenue of the Americas, New York, NY 10019-6064

For defendants Leeds Brown Law, P.C.; Leeds, Morelli & Brown, P.C.; Leeds, Morelli & Brown, LLP; Leeds & Morelli, P.C.; Lenard, Leeds; Steven A. Morelli ; and Jeffrey K. Brown : Janice J. DiGennaro, Shari C. Lewis, Carol A. Lastorino, Rivkin Radler, 929 RXR Plaza, Uniondale, New York 11556

OPINION AND ORDER

DENISE COTE, District Judge:

Plaintiffs Maureen Dowe, Elvie Moore, and Esther Buckram are former employees of Prudential Securities, Inc. ("Prudential") and former clients of the law firm Leeds & Morelli, P.C. or its successors ("LMB"). In this putative class action, plaintiffs allege that LMB conspired with Prudential to settle discrimination claims against Prudential for less than their true value, in exchange for side payments from Prudential to LMB.

The plaintiffs' settlement agreements with Prudential included an arbitration clause; LMB's retainer agreements with the plaintiffs did not. Prudential and LMB have separately moved to compel arbitration or in the alternative to dismiss the complaint as barred by the statute of limitations. For the reasons that follow, Prudential's motion to compel arbitration is granted, and LMB's motion to compel arbitration is denied. LMB's motion to dismiss is granted.

Background

Unless otherwise noted, the following facts are taken from the second amended complaint ("SAC") and assumed to be true for the purpose of addressing this motion.

I. The Alleged Conspiracy

Beginning in 1997, LMB solicited Prudential employees to become clients of the firm and bring employment-discrimination claims against Prudential. Dowe was one such client, and in January 1998 she signed a retainer agreement providing that LMB would represent her in "negotiating a settlement against" Prudential and that LMB would receive one third of the settlement as attorneys' fees.

On February 13, 1998, LMB entered into a five-page Dispute Resolution Agreement ("DRA") with Prudential. The DRA provided that Prudential and the employees represented by LMB had "agreed to utilize confidential and informal dispute resolution procedures for the resolution of" the employment-discrimination claims. According to the DRA, the employees "irrevocably agree[d] to forgo a jury trial and submit to the dispute resolution procedure described below." That procedure required the parties to first engage in negotiations and, if unable to reach agreement, to submit the dispute to "binding mediation." The DRA also provided that Prudential would pay the employees' "reasonable attorneys' fees in connection with this process" and that LMB would advise its clients concerning this fee arrangement. The DRA contained a confidentiality agreement, requiring the employees and LMB not to disclose any information regarding the employees' claims or the DRA. In the DRA, LMB represented that each of the employees had reviewed the agreement and authorized LMB to execute the agreement on its behalf. The fifth page contained signature lines for LMB and Prudential.

Despite these representations, plaintiffs allege that LMB had not shown the DRA to its clients and never did so. Instead, LMB later presented its clients with a signature page for the DRA and instructed them to sign. Defendants have submitted a signature page executed by Dowe on March 8, 1998. It is entitled Execution and Acknowledgement and contains a declaration under penalty of perjury. Dowe indicates that she had "read the foregoing Agreement" and "agree[d] to the provisions it contains ... voluntarily with full understanding of its consequences." The signature page bears the page number "6" and does not describe the substantive terms of the agreement.

Unbeknownst to Dowe or the other employees, LMB and Prudential had also executed a side agreement on February 13, 1998 -- the same day they entered into the DRA. In a letter to LMB, Prudential agreed that it would pay LMB $1,500,000 within one week of LMB's execution of the DRA. The letter further stated that "[f]ollowing completion of the Dispute Resolution Procedure ... [Prudential] agrees to entertain, in good faith, a request for reasonable additional attorneys' fees." Between 1998 and 2000, Prudential paid LMB an additional $6,000,000 in fees.

II. Plaintiffs' Settlement Agreements

In February 1999, LMB informed Dowe that Prudential had offered $150,000 to settle her claim. LMB recommended that Dowe accept the settlement, and she did so. Dowe signed a settlement agreement on February 6, 1999. That agreement, which defendants have submitted in support of their motions, was made between Dowe and Prudential. Prudential therein agreed to pay Dowe $150,000 in exchange for release of her claims. Dowe agreed not to disclose "any information regarding the amount of, terms of, or facts or circumstances underlying" the settlement. The settlement agreement also included the following arbitration clause:

Any claim or controversy arising out of or related to this Agreement or the interpretation thereof will be settled by arbitration under the then prevailing constitution and rules of the New York Stock Exchange, Inc., or the National Association of Securities Dealers, Inc. Judgment based upon the decision of the arbitrators may be entered in any court having jurisdiction thereof. The governing law of this Agreement shall be the substantive and procedural law of the State of New York.

In the agreement, Dowe also acknowledged that she had carefully read and understood its terms, had not relied on any extrinsic representations or statements, and had been encouraged to have the document reviewed by her attorney. The document was executed by Prudential and Dowe. It was not signed by LMB, nor was LMB mentioned anywhere in the settlement agreement.¹

III. Procedural History

Dowe filed this suit on December 12, 2018. On April 5, 2019, Dowe filed an amended complaint. On May 20, LMB and Prudential filed separate motions to compel arbitration, or in the alternative to dismiss pursuant to Fed. R. Civ. P. 12(b)(6). On June 10, Dowe filed the SAC, which added Moore and Buckram as named plaintiffs and added four new claims.² Defendants' motions became fully submitted on August 9, 2019.

Discussion

I. Motions to Compel Arbitration

Both LMB and Prudential have moved to compel arbitration of the claims brought against them. Plaintiffs first argue that they are not bound by the arbitration clauses in their settlement agreements because the settlement agreements were fraudulently induced and are unenforceable. Plaintiffs further argue that they cannot be compelled to arbitrate against LMB because the firm was not a signatory to the settlement agreements containing the arbitration clauses. Prudential's motion to compel arbitration is granted,³ and LMB's motion to compel arbitration is denied.

A. Legal Standards

When deciding motions to compel arbitration, courts apply a standard "similar to that applicable for a motion for summary judgment." Meyer v. Uber Techs., Inc., 868 F.3d 66, 74 (2d Cir. 2017) (citation omitted). That is, courts consider "all relevant, admissible evidence submitted by the parties and contained in pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits," and draw all reasonable inferences in favor of the non-moving party. Id. (citation omitted). "Where the undisputed facts in the record require the matter of arbitrability to be decided against one side or the other as a matter of law, [courts] may rule on the basis of that legal issue and avoid the need for further court proceedings." Id. (citation omitted). Courts, rather than arbitrators, must decide whether parties have agreed to arbitrate "unless the parties clearly and unmistakably provide otherwise." Nicosia v. Amazon.com, Inc., 834 F.3d 220, 229 (2d Cir. 2016).

The Federal Arbitration Act ("FAA") was enacted to counteract "widespread judicial hostility to arbitration agreements." AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011). Under § 2 of the FAA,

A written provision in ... a 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 Supreme Court has repeatedly instructed that the FAA reflects "both a liberal federal policy favoring arbitration and the fundamental principle that arbitration is a matter of contract." Concepcion, 563 U.S. at 339, 131 S.Ct. 1740 (citation omitted); see also Epic Sys. Corp. v. Lewis, ––– U.S. ––––, 138 S. Ct. 1612, 1621, 200 L.Ed.2d 889 (2018) ; Nitro–Lift Techs., L.L.C. v. Howard, 568 U.S. 17, 20, 133 S.Ct. 500, 184 L.Ed.2d 328 (2012) ; Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63, 67, 130 S.Ct. 2772, 177 L.Ed.2d 403 (2010). "This policy is founded on a desire to preserve the parties' ability to...