Ragone v. Atlantic Video, ESPN et. al.
(United States Court of Appeal, Second Circuit, February 17, 2010)
Plaintiff-appellant appealed from an order of the district court which granted the motions of Atlantic Video and ESPN dismissing the complaint and compelling arbitration in a Title VII employment discrimination and sexual harassment action. In affirming the trial court decision, the court of appeals upheld the enforceability of the arbitration agreement against claims that it is was both procedurally and substantively unconscionable. The court also properly compelled plaintiff to arbitrate with ESPN in spite of the fact that ESPN was not a party to the employment contract or arbitration agreement.
Specifically, plaintiff initiated the Title VII action that while employed as a make-up artist for Atlantic Video (AVI) (a service supplier to ESPN), she was terminated as a result of her numerous complaints of sexual harassment. The subject appeal considered whether the district court correctly held that plaintiff’s claims should be arbitrated pursuant to the agreement signed at the time of plaintiff’s hiring. Plaintiff asserted that several of the provisions were unconscionable and therefore unenforceable.
As to the status of ESPN, the court of appeals held that while it is undisputed that ESPN was not a signatory to the arbitration agreement, plaintiff’s complaint contains numerous allegations which supported the trial court’s conclusion that plaintiff’s “claims of unlawful harassment and retaliation … relied on the concerted action of both defendants and are therefore substantially interdependent.” As such, the court held that ESPN likewise was subject to the agreement, citing case law precedent allowing non-signatories to enforce arbitration agreements where the issues are sufficiently intertwined
Upon its de novo review of the detailed arbitration provisions and the underlying facts, the circuit court concluded that the arbitration agreement was not procedurally unconscionable merely because it was a condition of her employment, nor because she failed to read and understand the document. The court further explained that New York law does not absolve one of its obligation to read the document simply because one does not have a college degree and has no experience or background in business or human resources.
Likewise, the court of appeals also held that the arbitration agreement was not substantively unconscionable as the defendants had agreed to waive certain burdensome provisions including the statute of limitations and fee shifting provisions. The court further rejected plaintiff’s argument that the district court ruled in an improper “piecemeal” approach in considering the waiver issue and allowing the severability clause to save the agreement that is “permeated by unconscionability.” Specifically, the court held that severability clause was not relevant because the district court never found any provision contrary to the law. Rather, it resolved all questions of potentially unenforceable terms by holding that these terms were either moot, or would be interpreted in a manner consistent with the Federal Arbitration Act (“FAA”) or had been waived. Thus, it held that the district court did not trigger any application of the severability clause. The court of appeals further held that New York law would allow for the enforcement of the arbitration agreement as modified by the defendants’ waivers. Thus, as the defendants’ waiver allowed the plaintiff to “vindicate her statutory causes of action in the arbitral forum,” the court of appeals affirmed the lower court decision upholding the enforceability of the agreement.
A copy of the decision is attached here
Paul Steck and Jeffrey Kingsley