Arbitration Compelled in Employment Discrimination Case; FAA Held to “Displace” CPLR 7515 Here

In Rollag v. Cowen Inc. et al, 2021 WL 807210 (S.D.N.Y. March 3, 2021) – in which the plaintiff alleges that defendants discriminated and retaliated against him in violation of the Family and Medical Leave Act, 29 U.S.C. §§ 2601 et seq., Section 806 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1514A, and New York State Human Rights Law – granted defendants’ motion to compel arbitration (as to all claims except for plaintiff’s SOX claim).

This decision represents yet another example of courts assessing the apparent conflict between the Federal Arbitration Act (FAA), on the one hand, and New York Civil Practice Law and Rules section 7515 (which, in sum, bans mandatory arbitration in employment discrimination cases).

Here is the court’s discussion of that issue:

Plaintiff opposes the motion to compel arbitration on the grounds that the Agreements’ provisions mandating arbitration are nullified by NY CPLR § 7515, which prohibits the contractual arbitration of discrimination claims. While Plaintiff claims that § 7515 applies to the Agreements by virtue of the choice-of-law provision, Defendants maintain that it is displaced by the FAA in this instance. The Court agrees with Defendants.

The Supreme Court has held that any state law that “prohibits outright the arbitration of a particular type of claim …. is displaced by the FAA.” Concepcion, 563 U.S. at 341. NY CPLR § 7515 is a paradigmatic example of such a law, and Plaintiff does not contend otherwise. Nor could he. The statute prohibits any “written contract, entered into on or after [July 11, 2018]1” from containing “any clause or provision … 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 discrimination,” and renders “null and void” any provisions that contain such a prohibited clause, “[e]xcept where inconsistent with federal law.” NY CPLR § 7515(b). The law’s outright prohibition on the arbitration of discrimination claims is plainly inconsistent with the FAA and the Supreme Court’s interpretation of that federal law. Accordingly, NY CPLR § 7515 is displaced by the FAA in this case.

*6 The Court finds support for this conclusion in two recent opinions from this District. In Latif v. Morgan Stanley & Co. LLC, for example, Judge Cote concluded that § 7515 was displaced by the FAA because it is “not a ground as exists at law or in equity for the revocation of any contract … but rather a state law prohibiting outright the arbitration of a particular type of claim.” No. 18CV11528 (DLC), 2019 WL 2610985, at *3 (S.D.N.Y. June 26, 2019) (internal quotation marks and alterations omitted). Similarly, in Whyte v. WeWork Companies, Inc., Chief Judge McMahon stated that “[t]he Supreme Court has specifically forbidden state legislatures from creating exceptions to the FAA like the one embodied in CPLR § 7515.” No. 20-CV-1800 (CM), 2020 WL 3099969, at *5 (S.D.N.Y. June 11, 2020).

Plaintiff’s attempts to distinguish these cases are entirely without merit. Plaintiff notes that “other cases in which CPLR 7515 was found to be preempted by the FAA involved contracts with arbitration language that specifically invoked the FAA and its application to their terms.” Opp. at 2. Although that fact may be true, it is irrelevant because the FAA applies to “any arbitration agreement within the coverage of the Act.” Moses H. Cone, 460 U.S. at 24. Neither party disputes that the Agreements are covered within the meaning of the FAA. Plaintiff points to no authority for the proposition that the FAA applies only those contracts that expressly reference the statute.

Plaintiff further contends that the Agreements’ carveout for “claims prohibited by law from being arbitrated,” see, e.g., Terms & Conditions ¶ 17, in combination with the choice-of-law provision, demonstrates the parties’ intent to incorporate New York’s statutory prohibition on the arbitration of discrimination claims, thereby requiring the Court to apply § 7515 in spite of the FAA. That argument is similarly misplaced. First, it ignores that the Agreements elsewhere state that the “arbitration provision applies to, but is not limited to, statutory discrimination, harassment, and retaliation claims under federal, state and local law,” id., seemingly contradicting Plaintiff’s interpretation of the provisions. That contradiction prevents the Court from reading into the Agreements any specific intent to incorporate § 7515. Indeed, as Defendants rightly noted at oral argument, if the parties had wished to exempt discrimination claims from arbitration, they could have done so. Second, and more importantly, the Court rejects Plaintiff’s contention that the choice-of-law provision exempts the Agreements from the requirements of the FAA. See Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 62 (1995) (“When a court interprets [choice-of-law] provisions in an agreement covered by the FAA, due regard must be given to the federal policy favoring arbitration, and ambiguities as to the scope of the arbitration clause itself resolved in favor of arbitration.”); see also DIRECTV, Inc. v. Imburgia, 577 U.S. 47, 54-58 (2015) (holding that choice-of-law provision in arbitration agreement incorporated only “valid state law” and not state law preempted by the FAA). Parties cannot contract their way out of the FAA’s displacement of state-law prohibitions on the arbitration of particular types of claims. Simply put, NY CPLR § 7515 is displaced by the FAA in any “arbitration agreement within the coverage of the Act.” Moses H. Cone, 460 U.S. at 24.

Having determined that New York’s prohibition on the arbitration of discrimination claims is displaced by the FAA in this instance, the Court finds that the arbitration provisions in the Agreements cover Plaintiff’s claims in this case.

The court, thus, granted defendants’ motion to compel arbitration.

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