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Full Opinion
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
MAHMOUD LATIF, :
:
Plaintiff, : 18cv11528 (DLC)
:
-v- : OPINION AND ORDER
:
MORGAN STANLEY & CO. LLC, MORGAN :
STANLEY SERVICES GROUP, INC., CARMEN :
GOMEZ, individually, LILY CHAN, :
individually, JACQUELINE LUCAS, :
individually, BRIAN DERBY, :
individually, LISA SWEBERG, :
individually, LAUREN KEIGLER, :
individually, and MICHAEL GREY, :
individually, :
:
Defendants. :
:
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APPEARANCES:
For the plaintiff:
Abraham Zev Wolf Melamed
Derek Smith Law Group, PLLC
1 Penn Plaza, Suite 49th Floor
New York, NY 10011
For the defendants:
Sam Scott Shaulson
Morgan, Lewis & Bockius LLP (New York)
101 Park Avenue
New York, NY 10178
Thomas Anton Linthorst
Kimberley E. Lunetta
Morgan, Lewis & Bockius LLP(NJ)
502 Carnegie Center
Princeton, NJ 08540
DENISE COTE, District Judge:
Mahmoud Latif (âLatifâ) has filed employment discrimination
claims against his former employers Morgan Stanley & Co. LLC and
Morgan Stanley Services Group, Inc. (collectively âMorgan
Stanleyâ) and seven individual employees of Morgan Stanley
(collectively, with Morgan Stanley, âDefendantsâ). Defendants
have moved to compel arbitration of Latifâs claims. For the
following reasons, that motion is granted.
Background
The following facts are taken from the complaint, documents
that were submitted in connection with Defendantsâ motion to
compel arbitration, and a stipulation entered into by the
parties in the course of this litigation. On June 5, 2017,
Latif signed a written offer of employment with Morgan Stanley
(the âOffer Letterâ). The Offer Letter incorporated by
reference Morgan Stanleyâs CARE Arbitration Program Arbitration
Agreement (the âArbitration Agreementâ), which was also attached
to the Offer Letter. The parties agree that Latif accepted the
terms and conditions set forth in the Arbitration Agreement when
he signed the Offer Letter.
The Arbitration Agreement provides that any âcovered claimâ
that arises between Latif and Morgan Stanley âwill be resolved
by final and binding arbitration as set forth in this
Arbitration Agreement and in the arbitration provisions of the
CARE Guidebook,â a copy of which was attached to the Arbitration
Agreement. âCovered claimsâ are defined in the Arbitration
Agreement to include, inter alia, common law claims and
âstatutory discrimination, harassment and retaliation claims.â
The Arbitration Agreement further provides that it âshall be
governed by and interpreted in accordance with the Federal
Arbitration Act (âFAAâ).â
Latif alleges that, beginning in the fall of 2017, he
became the target of, inter alia, inappropriate comments
regarding his sexual orientation, inappropriate touching, sexual
advances, and offensive comments about his religion. He also
alleges that around February 2018, a female supervisor sexually
assaulted him. Beginning in February 2018, Latif reported these
incidents to Morgan Stanleyâs human resources department.
Following months of email exchanges and meetings between Latif
and the human resources department, Latifâs employment was
terminated around August 1, 2018, which is just over a year
after Latif executed the Offer Letter.
Latif filed this lawsuit on December 10, 2018, alleging
discrimination, a hostile work environment, and retaliation in
violation of Title VII of the Civil Rights Act of 1964, 42
U.S.C. § 2000a et seq., the New York State Human Rights Law,
N.Y. Executive Law § 290 et seq., the New York City Human Rights
Law, N.Y.C. Admin. Code § 8-101 et seq., and 42 U.S.C. § 1981;
as well as assault and battery, aggravated sexual abuse,
violation of the Gender Motivated Violence Protection Act,
N.Y.C. Admin. Code § 8-902, and intentional and negligent
infliction of emotional distress. The parties do not dispute
the enforceability of the Arbitration Agreement generally nor
its application to all but one category of Latifâs claims.
Accordingly, on March 21, the Honorable Robert W. Sweet, who
then presided over this case, endorsed a stipulation between the
parties in which they agreed that the Arbitration Agreement was
enforceable as to all of Latifâs claims except for his claims of
sexual harassment.
Latif filed an amended complaint on May 3, 2019.1
Defendants filed the instant motion to compel arbitration and
stay the proceedings on May 7. The only dispute between the
parties is whether Latifâs sexual harassment claims are subject
to the Arbitration Agreement in light of a recently enacted New
York Law, N.Y. C.P.L.R. § 7515 (⧠7515â). The parties do not
dispute that this issue is to be resolved by this Court. The
motion to compel was fully submitted on May 31.
1 The amended complaint was filed following this Courtâs denial
of Latifâs motion to proceed anonymously.
Discussion
When deciding motions to compel arbitration, courts apply a
standard âsimilar to that applicable for a motion for summary
judgment.â Meyer v. Uber Techs., Inc., 868 F.3d 66, 74 (2d Cir.
2017) (citation omitted). On a motion for summary judgment,
courts consider âall relevant, admissible evidence submitted by
the parties and contained in pleadings, depositions, answers to
interrogatories, and admissions on file, together with
affidavits,â and draw all reasonable inferences in favor of the
non-moving party. Id. (citation omitted). âWhere 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.â Id.
(citation omitted). Courts must decide whether parties have
agreed to arbitrate âunless the parties clearly and unmistakably
provide otherwise.â Nicosia v. Amazon.com, Inc., 834 F.3d 220,
229 (2d Cir. 2016).
âThe Federal Arbitration Act requires courts to enforce
covered arbitration agreements according to their terms.â Lamps
Plus, Inc. v. Varela, 139 S. Ct. 1407, 1412 (2019). The Supreme
Court has repeatedly instructed that the FAA reflects âboth a
liberal federal policy favoring arbitration and the fundamental
principle that arbitration is a matter of contract.â AT&T
Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011) (citation
omitted). Consistent with this policy, â[a] party to an
arbitration agreement seeking to avoid arbitration generally
bears the burden of showing the agreement to be inapplicable or
invalid.â Harrington v. Atl. Sounding Co., 602 F.3d 113, 124
(2d Cir. 2010).
Under Section 2 of the Federal Arbitration Act (âFAAâ),
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 (emphasis supplied). This âsaving clause
recognizes only defenses that apply to âanyâ contract . . .
establish[ing] a sort of âequal-treatmentâ rule for arbitration
contracts.â Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612, 1622
(2018). Thus, while arbitration agreements may be âinvalidated
by generally applicable contract defenses, such as fraud,
duress, or unconscionability, . . . defenses that apply only to
arbitration or that derive their meaning from the fact that an
agreement to arbitrate is at issueâ will not invalidate such an
agreement. Concepcion, 563 U.S. at 339 (citation omitted).
â[T]he saving clause does not save defenses that target
arbitration either by name or by more subtle methods.â Epic
Sys., 138 S. Ct. at 1622.
The FAAâs policy favoring the enforcement of arbitration
agreements is not easily displaced by state law. â[S]tate law
is preempted to the extent it stands as an obstacle to the
accomplishment and execution of the full purposes and objectives
of the FAA.â Lamps Plus, 139 S. Ct. at 1415 (citation omitted).
âWhen state law prohibits outright the arbitration of a
particular type of claim, the analysis is straightforward: The
conflicting rule is displaced by the FAA.â Concepcion, 563 U.S.
at 341.
Section 7515 is titled âMandatory arbitration clauses;
prohibited.â It was signed into law in April 2018 and became
effective on July 11, 2018. The law was enacted as Part KK,
Subpart B of the 2018-2019 New York budget bill. Part KK of
this bill contains six subparts all addressing sexual
harassment. These subparts address, among other things,
certifications concerning sexual harassment in bids submitted to
the state, âreimbursement of funds paid by state agencies, state
entities and public entities for the payment of awards
adjudicated in sexual harassment claims,â and a model policy and
training program for the prevention of sexual harassment. 2018
N.Y. Sess. L., ch. 57, at 4-5. The bill was described in Senate
Floor debate as âsweeping legislation that deals with the
scourge of sexual harassmentâ and that âhandles all different
kinds of sexual harassment situations.â N.Y. State Senate,
Stenographic Rec., 241st Leg., Reg. Sess., at 1855 (Mar. 30,
2018).
Section 7515(b) contains three subparts:
(i) Prohibition. Except where inconsistent with
federal law, no written contract, entered into on or
after the effective date of this section shall contain
a prohibited clause as defined in paragraph two of
subdivision (a) of this section.
(ii) Exceptions. Nothing contained in this section
shall be construed to impair or prohibit an employer
from incorporating a non-prohibited clause or other
mandatory arbitration provision within such contract,
that the parties agree upon.
(iii) Mandatory arbitration clause null and void.
Except where inconsistent with federal law, the
provisions of such prohibited clause as defined in
paragraph two of subdivision (a) of this section shall
be null and void. The inclusion of such clause in a
written contract shall not serve to impair the
enforceability of any other provision of such
contract.
N.Y. C.P.L.R. § 7515(b) (emphasis supplied). Section 7515
defines âprohibited clauseâ as âany clause or provision in any
contract which requires as a condition of the enforcement of the
contract or obtaining remedies under the contract that the
parties submit to mandatory arbitration to resolve any
allegation or claim of an unlawful discriminatory practice of
sexual harassment.â N.Y. C.P.L.R. § 7515(a)(2).
Section 7515 was recently cited in Justice Ruth Bader
Ginsburgâs dissenting opinion in Lamps Plus as an example of
state action that âendeavor[s] to safeguard employees'
opportunities to bring sexual harassment suits in courtâ and
âameliorate[s] some of the harm . . . occasionedâ by recent
Supreme Court employment arbitration decisions. Lamps Plus, 139
S. Ct. at 1422 (Ginsburg, J., dissenting). The parties have not
cited and this Court has not found any reported decision
applying § 7515.
Under the terms of the Arbitration Agreement, Latifâs
sexual harassment claims are subject to mandatory arbitration.
Section 7515 renders agreements to arbitrate sexual harassment
claims null and void â[e]xcept where inconsistent with federal
law.â N.Y. C.P.L.R. 7515(b)(iii). Here, application of Section
7515 to invalidate the partiesâ agreement to arbitrate Latifâs
claims would be inconsistent with the FAA. The FAA sets forth a
strong presumption that arbitration agreements are enforceable
and this presumption is not displaced by § 7515.
Moreover, the FAAâs saving clause does not render the
partiesâ Arbitration Agreement unenforceable here. Section
7515(b) applies only to contract provisions that require
âmandatory arbitration to resolve any allegation or claim of an
unlawful discriminatory practice of sexual harassment.â N.Y.
C.P.L.R. § 7515(a)(2). This provision is not a âground[] as
exist[s] at law or in equity for the revocation of any
contract,â 9 U.S.C. § 2, but rather a âstate law prohibit[ing]
outright the arbitration of a particular type of claim,â which,
as described by the Supreme Court, is âdisplaced by the FAA.â
Concepcion, 563 U.S. at 341.2
Latif argues that, when read in conjunction with the bundle
of sexual harassment provisions passed in the same bill, § 7515
reflects a general intent to protect victims of sexual
harassment and not a specific intent to single out arbitration
clauses for singular treatment. He points out that the statute
affects a number of different types of contracts and contract
provisions, and, as such, does not run afoul of the FAAâs
prohibition on arbitration-specific defenses. Latif similarly
argues that because § 7515 does not disfavor all arbitration,
but only arbitration of sexual harassment claims, it is not
inconsistent with the FAA. These arguments are unavailing. The
fact that § 7515 was enacted concurrently with other laws that
address sexual harassment does not alter the plain language of
the law. The bundle of laws that make up Part KK of the 2018-19
2 On June 19, 2019, the New York legislature passed bill
S6577/A8421, which would, inter alia, amend § 7515 to change the
definition of âprohibited clauseâ and âmandatory arbitration
clauseâ to encompass mandatory arbitration of claims of
discrimination generally, rather than specifically of sexual
harassment. For the same reasons described above, § 7515 as so
amended would not provide a defense to the enforcement of the
Arbitration Agreement.
budget bill were clearly intended to address sexual harassment;
nothing in the bill suggests that the New York legislature
intended to create a generally applicable contract defense.
Latif also suggests that because clauses mandating
arbitration of sexual harassment claims interfere with New
Yorkâs substantial state interest in transparently addressing
workplace sexual harassment, § 7515 is a ground âin equity for
the revocation of any contractâ and thus not displaced by the
FAA. 9 U.S.C. § 2. This argument again ignores the plain
language of the FAAâs saving clause and the Supreme Courtâs many
decisions construing it, which require any ground providing an
exception to arbitration, whether in law or equity, to be
generally applicable. Section 7515 presents no generally
applicable contract defense, whether grounded in equity or
otherwise, and as such cannot overcome the FAAâs command that
the partiesâ Arbitration Agreement be enforced.3
3 The Defendants also argue that § 7515(b)(iii) does not nullify
the partiesâ agreement to arbitrate all of Latifâs claims
because the Arbitration Agreement was entered into prior to the
enactment of § 7515 and the law does not apply retroactively.
Because the partiesâ dispute is resolved on other grounds, this
argument need not be addressed.
Conclusion
The Defendantsâ May 7, 2019 motion to compel arbitration is
granted. The action is stayed pending the outcome of
arbitration proceedings.
Dated: New York, New York
June 26, 2019
DENISE COTE
United Btates District Judge
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