Sexual Harassment Claims Subject to Arbitration Agreement; EFAA Inapplicable, Court Rules

In O’Sullivan et al v. Jacaranda Club, LLC et al, No. 1779, 2023-04923, 2024 WL 847860 (N.Y.A.D. 1 Dept., Feb. 29, 2024), the court affirmed the lower court’s decision granting defendant’s motion to compel arbitration of their sexual harassment and other claims.

From the decision:

Asserting claims under New York State and City Human Rights Laws, plaintiffs allege that they were subjected to sexual assault, sexual harassment, discrimination, and retaliation while working as dancers and entertainers at two of defendants’ adult clubs in New York City. As a condition of their employment at the clubs, plaintiffs signed Entertainment License Agreements, in which they agreed to arbitrate any and all disputes arising out of their performance of services at the clubs (arbitration agreements).

Plaintiffs contend that the arbitration agreements were invalidated by the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (Pub L 117–90, 136 Stat 26 [codified at 9 USC §§ 401, 402] ) (EFAA), which became effective on March 3, 2022. The EFAA applies to “any dispute or claim that arises or accrues on or after” its enactment. They argue that their “case” includes at least one “claim” covered by the EFAA.

It is undisputed that plaintiffs Krauel’s and O’Sullivan’s claims are not covered by the EFAA because each claim arose or accrued prior to March 3, 2022; the latest Krauel and O’Sullivan worked at the clubs was April 12, 2019 and February 25, 2022, respectively (see Walters v. Starbucks Corp., 623 F Supp 3d 333, 337 [SD N.Y.2022] ). Even assuming plaintiff Ciaramella1– who worked at one of the clubs on and off approximately from March 29, 2013, to September 22, 2022 – had some nonarbitrable claims arising on or after March 3, 2022, the EFAA does not permit Krauel and O’Sullivan to avoid arbitration of their claims simply by adding Ciaramella’s EFAA-protected claims to a single complaint (see KPMG LLP v. Cocchi, 565 U.S. 18, 19 [2011] ). Nor does the court have discretion to retain jurisdiction over plaintiffs’ claims that accrued prior to March 3, 2022.

The court additionally rejected plaintiffs’ invocation of CPLR 7515 – which was amended in 2018 to provide that “[e]xcept where inconsistent with federal law, no written contract, entered into on or after the effective date of this section” shall contain a clause requiring parties to arbitrate any discrimination claim – since CPLR 7515 was preempted by the Federal Arbitration Act until the effective date of the EFAA.

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