Gar Disability Advocates, LLC v. Taylor

Citation365 F.Supp.3d 522
Decision Date06 February 2019
Docket NumberNo. 17-cv-3038 (KM)(MAH),17-cv-3038 (KM)(MAH)
Parties GAR DISABILITY ADVOCATES, LLC, Plaintiff, v. Pamela S. TAYLOR, Defendant.
CourtU.S. District Court — District of New Jersey

Eli J. Rogers, Dreifuss Bonacci & Parker, Florham Park, NJ, Tamra Ann Jones, Englewood Cliffs, NJ, for Plaintiff.

Michael A. Orozco, Renee A. Fatovic, Price, Meese, Schulman & D'Arminio, P.C., Woodcliff Lake, NJ, for Defendant.

Kevin McNulty, United States District Judge

Plaintiff GAR Disability Advocates, LLC ("GAR") has brought this action against one of its former employees, defendant Pamela S. Taylor, for breach of contract and for various forms of equitable relief. Taylor has filed a counterclaim for breach of contract, seeking monetary damages.

Now before the court is GAR's motion to dismiss Taylor's counterclaim and to compel arbitration. For the reasons expressed herein, GAR's motion to compel arbitration is granted. (DE 24). However, because the arbitration provision covers all disputes arising from the agreements at issue, I find that both GAR's and Taylor's complaints are arbitrable. GAR's motion to amend to the complaint is denied as moot.

I. Background

GAR is an organization that assists individuals that are either applying for or receiving Social Security Disability Benefits ("SSDI") or Supplemental Security Income ("SSI"). On February 26, 2015, GAR and Taylor entered into Asset Purchase and Sale Agreement (DE 5-1, "APS Agreement", ¶ 9).1 Pursuant to the terms of this agreement, Taylor agreed to sell and assign her current and prospective SSDI and SSI cases to GAR. (APS Agreement ¶ 2). In return, GAR agreed to pay $ 275,000 for those "assets," and it alleges that it paid Taylor that amount on March 3, 2015. (Id. ¶¶ 15-16).

The APS Agreement addressed Taylor's right to seek the advice of an attorney prior to executing the agreement:

Seller hereby acknowledges that she has been advised to retain her own attorney, was given adequate time to seek the advice of such attorney and that she has either done so or has voluntarily chosen not to seek such counsel. The parties acknowledge and agree that this Agreement was entered into an arm's length, without duress or coercion, and is to be interpreted as an agreement between two parties of equal bargaining strength.

(Id. , Representations and Warranties, ¶ 8(f) ).

The APS Agreement contains an arbitration provision:

Any disputes regarding this agreement shall be decided by arbitration before one (1) arbitrator. The parties shall first try to find a mutually agreeable arbitrator. If one cannot be found then they shall choose one arbitrator from a list provided by the American Arbitration Association with the costs to be paid by the losing party to the dispute. This Agreement shall be controlled by and interpreted in accordance with the laws of the State of New Jersey, without regard to any choice of law rules which may direct the application of laws of another jurisdiction.

(Id. 18(d) ).

The APS Agreement referenced and attached as an exhibit an unexecuted copy of an Employment Agreement. (Id. ¶ 5). The APS Agreement provided that the parties would execute the attached Employment Agreement once the "assets" were transferred to GAR. (Id. ).

On March 2, 2015, the parties executed the Employment Agreement. ("Employment Agreement", DE 5-2). Under the Employment Agreement, GAR agreed to employ Taylor as a "Case Manager/Advocate." Like the APS Agreement, the Employment Agreement contains an arbitration clause:

Governing Law; Jurisdiction. Any disputes regarding this agreement shall be decided by arbitration before one (I) arbitrator. The parties shall first try to find a mutually agreeable arbitrator. If one cannot be found then they shall choose one arbitrator from a list provided by the American Arbitration Association with the costs to be paid by the losing party to the dispute. This Agreement shall be controlled by and interpreted in accordance with the laws of the State of New Jersey, without regard to any choice of law rules which may direct the application of laws of another jurisdiction.

(Employment Agreement ¶ 15)

The Employment Agreement also contained non-disclosure, non-compete, and non-disparagement clauses. (Id. ¶¶ 8-10). In the event of a breach of any of those provisions, the contract provided that GAR could seek injunctive and equitable relief:

[T]he Employee acknowledges that, in the event of any breach or threatened breach by the Employee of the provisions of Sections 8, 9 or 10, the Employer and its subsidiaries and affiliates shall be entitled to temporary, preliminary and permanent injunctive or other equitable relief against the Employee ... and to an equitable accounting of all earnings, profits and other benefits arising, directly or indirectly, from such violation, which rights shall be cumulative and in adding to (rather than instead of) any other rights or remedies available at law or in equity.

(Id. ¶ 11). In the agreement, Taylor acknowledged that she "read and understands all of the terms of this Agreement," had "had an opportunity to consult with independent counsel with respect to the terms of this Agreement," and had "made such investigation of the facts pertaining to this Agreement and of all the matters pertaining hereto as she deems necessary." (Id. ¶ 24).

GAR claims that Taylor breached the non-disclosure, non-compete, and non-disparagement clauses of the Employment Agreement when she failed to assign new cases and clients to GAR, and held herself out as the primary representative to clients, instead of GAR. (AC ¶¶ 41-43). On April 7, 2017, GAR terminated Taylor's employment. (AC ¶ 44). The parties dispute whether this termination was with or without cause. Since Taylor's termination, GAR alleges, she has sent various emails to GAR, threatening to take employees and claimants, and to release confidential information. (AC ¶¶ 48, 50-51).

On May 20, 2017, GAR filed its original complaint seeking an injunction and equitable relief related to Taylor's alleged violation of the non-disclosure, non-compete, and non-disparagement clauses. (DE 1).

On May 30, 2017, GAR filed its Amended Complaint (DE 5), asserting four different causes of action: breach of the APS Agreement; breach of the Employment Agreement; temporary restraints/ permanent injunction; and an accounting. (AC ¶¶ 52-76).

On June 16, 2017, Taylor filed an Answer to the Amended Complaint, which included a Counterclaim for breach of contract. (DE 7). Taylor asserts that she was not paid her salary, reasonable expenses, or compensation for unused vacation time, as required by her Employment Agreement. (Id. ).

On July 14, 2017, GAR filed the original version of this motion to compel arbitration of Taylor's counterclaim. (DE 10). That motion was dismissed without prejudice so that the parties discuss whether they wished to proceed with arbitration. (DE 17). The parties failed to reach an agreement, however, and the motion to compel arbitration was renewed on May 16, 2018. (DE 24).

The Employment Agreement contains a choice of law provision, providing that it is governed by New Jersey law. Taylor's opposition to GAR's motion to compel relied almost exclusively upon the New Jersey Supreme Court case of Atalese v. U.S. Legal Servs. Grp., L.P. , 219 N.J. 430, 99 A.3d 306 (2014), cert. denied, ––– U.S. ––––, 135 S.Ct. 2804, 192 L.Ed.2d 847 (2015). (DE 26). Prior to the renewal of the motion to compel, however, the New Jersey Supreme Court granted certification in Kernahan v. Home Warranty Adm'r of Fla., Inc. , a case that had the potential to affect the Atalese holding. See 231 N.J. 334, 175 A.3d 177 (N.J. Nov. 29, 2017) (granting certification).

Resolution of the motion to compel was held over pending a decision in Kernahan. On January 10, 2019, the New Jersey Supreme Court rendered its decision. Kernahan v. Home Warranty Adm'r of Fla., Inc. , 236 N.J. 301, 199 A.3d 766 (2019). I granted leave to submit supplemental briefing to address the effect of Kernahan (DE 31), and on January 25, 2019, both sides submitted supplemental briefs. (DE 32, 33).

II. Standard

The Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq. , creates a strong federal policy in favor of arbitration. See Harris v. Green Tree Fin. Corp. , 183 F.3d 173, 178-79 (3d Cir. 1999) (noting that FAA "creates a body of federal substantive law establishing and governing the duty to honor agreements to arbitrate disputes."). To achieve that aim, the FAA authorizes a party to enforce a valid arbitration agreement by moving to compel arbitration. 9 U.S.C. §§ 2 - 4 ; In re Pharmacy Benefit Managers Antitrust Litig. , 700 F.3d 109, 116 (3d Cir. 2012).

Arbitration is a matter of contract between parties, so a judicial mandate to arbitrate must be predicated on the parties' consent. Guidotti v. Legal Helpers Debt Resolution, L.L.C. , 716 F.3d 764, 771 (3d Cir. 2013) (quoting Par-Knit Mills, Inc. v. Stockbridge Fabrics Co., Ltd. , 636 F.2d 51, 54 (3d Cir. 1980) ). When a district court is presented with a motion to compel arbitration, the Court must first determine whether the agreement to arbitrate is valid, and then decide whether the dispute falls within the agreement's scope. Century Indem. Co. v. Certain Underwriters at Lloyd's, 584 F.3d 513, 523 (3d Cir. 2009).

If the agreement at issue contains both a choice-of-law clause and an arbitration clause, the reviewing court will interpret the arbitration clause under the substantive law chosen by the parties. Mastrobuono v. Shearson Lehman Hutton, Inc. , 514 U.S. 52, 63-64, 115 S.Ct. 1212, 131 L.Ed.2d 76 (1995) (holding that application of state law identified in choice-of-law clause harmonizes choice of law clause and arbitration clause); see also Kirleis v. Dickie, McCamey & Chilcote, 560 F.3d 156, 160 (3d Cir. 2009) (noting that court applies "ordinary state-law principles that govern the formation of contracts.").

III. Discussion

Taylor claims that the arbitration clause is not a valid agreement under New Jersey law...

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