US ex rel. Mikes v. Straus, 92 Civ. 2754(WCC).

Decision Date22 September 1995
Docket NumberNo. 92 Civ. 2754(WCC).,92 Civ. 2754(WCC).
Citation897 F. Supp. 805
PartiesUNITED STATES ex rel. Patricia S. MIKES and Patricia S. Mikes, Individually, Plaintiffs, v. Marc STRAUS, Jeffrey M. Ambinder and Eliot L. Friedman, Defendants.
CourtU.S. District Court — Southern District of New York

Holland Kaufmann & Bartels, Greenwich, CT (Harold R. Burke, of counsel), for plaintiffs.

Meiselman, Farber, Packman & Eberz, P.C., Mount Kisco, N.Y. (Mary Beth Kilgannon, of counsel), for defendants.

OPINION AND ORDER

WILLIAM C. CONNER, Senior District Judge.

Plaintiff Patricia S. Mikes brings this action on behalf of the United States and herself against her former employers under the qui tam provisions of the False Claims Act (the "FCA"), 31 U.S.C. § 3730, for alleged improper billing of medical procedures to the United States and for retaliatory discharge, and under New York Labor Law § 191 for unpaid wages for a two-week period of employment after her formal termination. In a prior opinion we denied defendants' motion to dismiss, converted by the Court sua sponte into a motion for summary judgment, but granted defendants' motion to compel arbitration of plaintiff's retaliatory discharge and § 191 claims in light of an arbitration clause contained in plaintiff's employment contract with defendants. Plaintiff now moves this Court to reconsider our order compelling arbitration of her retaliatory discharge claim brought under 31 U.S.C. § 3730(h). For the reasons stated below, we deny plaintiff's motion.

DISCUSSION

The facts in this case are fully articulated in our prior opinion and need not be repeated here. See Mikes v. Strauss, 889 F.Supp. 746 (S.D.N.Y.1995). In seeking reconsideration, plaintiff asserts that we erroneously relied on the Federal Arbitration Act (the "FAA"), 9 U.S.C. §§ 1-307, as dictating the arbitrability of her § 3730(h) claim. Instead, plaintiff argues that New York arbitration law controls and that it does not permit submission of the instant federal statutory claim to arbitration. We will address both of these contentions below.

A. The Federal Arbitration Act

In distinguishing the FAA's coverage from the instant dispute, plaintiff relies on two of its provisions. First, plaintiff claims that her prior employment with defendants was not "a transaction involving commerce" within the meaning of § 2 of the FAA. That section provides:

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....

9 U.S.C. § 2. Section 1 of the Act defines commerce as "commerce among the several States or with foreign nations...." 9 U.S.C. § 1.

The Supreme Court has held that the scope of the "involving commerce" requirement, and hence the coverage of the Act, extends to the limits of Congress' Commerce Clause power. Allied-Bruce Terminix Cos. v. Dobson, ___ U.S. ___, ___, 115 S.Ct. 834, 836, 130 L.Ed.2d 753 (1995). However, plaintiff urges that because she was required to maintain admitting privileges only in New York, defendants' offices were located in New York, and a restrictive covenant contained in the employment agreement precluding her from competing with defendants extended only to designated areas within New York, the contract did not involve interstate commerce. Therefore, she asserts, the FAA does not govern the arbitrability of her retaliatory discharge claim.

Second, plaintiff contends that the explicit language in § 1 of the Act excluding "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce" from its coverage exempts the arbitration clause contained in her employment contract from enforcement under the FAA. 9 U.S.C. § 1. Plaintiff points out that in a case that we cited in our prior opinion as supporting arbitration of her retaliatory discharge claim, Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991), the Supreme Court specifically declined to decide whether § 1 excluded employment contracts from its coverage. Id. at 25 n. 2, 111 S.Ct. at 1651 n. 2. On the other hand, in light of the FAA's legislative history and a more recent, arguably expansive reading of the clause by the Supreme Court in United Paperworkers Int'l Union, AFL-CIO v. Misco, 484 U.S. 29, 40 n. 9, 108 S.Ct. 364, 372 n. 9, 98 L.Ed.2d 286 (1987), plaintiff argues that its plain language precludes application of the Act in the instant case.

At the outset, we note that plaintiff did not raise either of these arguments in response to defendants' motion to compel arbitration. While this oversight could be considered fatal to her plea for reconsideration, and indeed defendants so argue, even if we were to agree with plaintiff that the FAA does not control arbitrability on the instant facts and instead state law applies, our result would not change. Therefore, while we consider plaintiff's arguments articulated above, we need not address their merits.

B. New York Arbitration Law

Even assuming arguendo that New York law, rather than the FAA, controls the arbitrability of plaintiff's retaliatory discharge claim, our order compelling arbitration would not change.1 While historically the New York courts have been reluctant to enforce arbitration clauses, see Meacham v. Jamestown, Franklyn & Clearfield R.R. Co., 211 N.Y. 346, 354, 105 N.E. 653, 656 (1914) (Cardozo J., concurring), the modern view recognizes arbitration as an "effective and expeditious means of resolving disputes between willing parties desirous of avoiding expense and delay frequently attendant to the judicial process." Maross Constr., Inc. v. Cent. New York Regional Transp. Auth., 66 N.Y.2d 341, 345, 497 N.Y.S.2d 321, 323, 488 N.E.2d 67, 69 (1985). When no conflict with law or public policy exists, the New York courts will enforce the parties' contractual decision to submit their disputes to arbitration. Id. at 346, 497 N.Y.S.2d at 324, 488 N.E.2d at 70. Moreover, courts will give full effect to broadly worded contractual provisions expressly calling for arbitration of all disputes arising out of the parties' contract. Id. (citing numerous cases).

Plaintiff argues that § 3730(h) evidences a strong public policy against being "discharged, demoted, suspended, threatened, harassed or in any other matter discriminated against ... by his or her employer because of lawful acts done by an employee ... in furtherance of an action under 31 U.S.C. § 3730," which can be vindicated only in a judicial forum. See 31 U.S.C. § 3730(h). In particular, plaintiff analogizes her § 3730(h) claim to Harris v. Iannaccone, 107 A.D.2d 429, 487 N.Y.S.2d 562, aff'd, 66 N.Y.2d 728, 496 N.Y.S.2d 998, 487 N.E.2d 908 (1985), which held that charges of discrimination must be aired in a judicial forum in light of the attendant public policy surrounding such suits. Id., 107 A.D.2d at 431, 487 N.Y.S.2d at 564 (citing Matter of Wertheim & Co. v. Halpert, 48 N.Y.2d 681, 683, 421 N.Y.S.2d 876, 877, 397 N.E.2d 386, 387 (1979)).

Generally, this Court will look first to decisions of the New York Court of Appeals to ascertain and interpret controlling New York law. Gonzalez v. Rutherford Corp., 881 F.Supp. 829, 834 (E.D.N.Y.1995). Absent a plain ruling by the state's highest court, the rulings of the intermediate courts "are entitled to persuasive, if not decisive consideration." Sphere Drake Ins. Co. v. P.B.L. Entertainment, Inc., 30 F.3d 21, 23 (2d Cir.1994), vacated on other grounds, 52 F.3d 22 (2d Cir.1995) (citation omitted). On the other hand, when appellate division decisions do not speak unequivocally to the facts at issue, a federal court must "endeavor to predict how the highest court of the state" would resolve the issue. U.S. East Telecommunications, Inc. v. U.S. West Communications Services, Inc., 38 F.3d 1289, 1296 (2d Cir.1994).

Here, the parties have cited no New York decisional law regarding the arbitrability of retaliatory discharge claims, and we have been unable to find any. We do note, however, that at least until the Court of Appeals' ruling in Fletcher v. Kidder, Peabody & Co., 81 N.Y.2d 623, 601 N.Y.S.2d 686, 619 N.E.2d 998, cert. denied, ___ U.S. ___, 114 S.Ct. 554, 126 L.Ed.2d 455 (1993), New York law prevented arbitration of discrimination claims.2 Therefore, in resolving the instant issue, we must "endeavor to predict" how the Court of Appeals would rule given the instant facts.

While recognizing certain "public policy" exceptions to blind enforcement of arbitration provisions, the Court of Appeals has cautioned against expanding those exceptions to swallow the rule. As the court stated:

The courts ... must exercise due restraint in this regard, for the preservation of the arbitration process and the policy of allowing parties to choose a nonjudicial forum, embedded in freedom to contract principles, must not be disturbed by courts, acting under the guise of public policy, wishing to decide the dispute on its merits, for arguably every controversy has at its core some issue requiring the application, or weighing, of policy considerations. Thus, there are now but a few matters of concern which have been recognized as so intertwined with overriding public policy considerations as to ... place them beyond the bounds of the arbitration process....

Matter of Sprinzen v. Nomberg, 46 N.Y.2d 623, 630, 415 N.Y.S.2d 974, 977, 389 N.E.2d 456, 459 (1979). The court articulated the appropriate test for assessing the arbitrability of a claim as whether public policy considerations, embodied in statute or decisional law, prohibit, in an absolute sense, particular matters from being decided or certain relief from being granted by an arbitrator. Id. at 631, 415 N.Y.S.2d at 978, 389 N.E.2d at 460. In applying this test, courts must be able to examine an arbitration agreement on its face, without engaging in extended factfinding or legal analysis, and conclude that...

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