Arbitration Compelled in Sexual Harassment Case, Notwithstanding New State Law

In Latif v. Morgan Stanley & Co. LLC, 2019 WL 2610985 (SDNY June 26, 2019), the court held that plaintiff’s claims of employment discrimination were subject to mandatory arbitration.

In this case, plaintiff “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” and that “around February 2018, a female supervisor sexually assaulted him.” He sued, alleging discrimination, a hostile work environment, and retaliation in violation of Title VII of the Civil Rights Act of 1964, the New York State Human Rights Law, and the New York City Human Rights Law.

Defendants moved to compel arbitration pursuant to an Arbitration Agreement which provides that any “covered claim” arising between plaintiff and defendant “will be resolved by final and binding arbitration as set forth in this Arbitration Agreement and in the arbitration provisions of the CARE Guidebook” (attached to the Arbitration Agreement). The Arbitration Agreement defines “covered claims” to include, inter alia, common law claims and “statutory discrimination, harassment and retaliation claims.” It also provides that it “shall be governed by and interpreted in accordance with the Federal Arbitration Act (“FAA”).”

The only disputed issue addressed by the court was whether plaintiff’s sexual harassment claims are subject to the Arbitration Agreement in light of New York’s recently-enacted CPLR § 7515, which limits the extent to which sexual harassment claims are subject to arbitration.

The court concluded that plaintiff’s claims were subject to the Arbitration Agreement, notwithstanding this state law, in light of the Federal Arbitration Act (FAA).

Judge Cote wrote:

Under the terms of the Arbitration Agreement, Latif’s sexual harassment claims are subject to mandatory arbitration. Section 7515 renders agreements to arbitrate sexual harassment claims null and void “[e]xcept where inconsistent with federal law.” N.Y. C.P.L.R. 7515(b)(iii). Here, application of Section 7515 to invalidate the parties’ agreement to arbitrate Latif’s 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 FAA’s saving clause does not render the parties’ Arbitration Agreement unenforceable here. Section 7515(b) applies only to contract provisions that require “mandatory arbitration to resolve any allegation or claim of an unlawful discriminatory practice of sexual harassment.” N.Y. C.P.L.R. § 7515(a)(2). This provision is not a “ground[ ] as exist[s] at law or in equity for the revocation of any contract,” 9 U.S.C. § 2, but rather a “state law prohibit[ing] outright the arbitration of a particular type of claim,” which, as described by the Supreme Court, is “displaced by the FAA.”

The court rejected plaintiff’s argument that, inter alia, “that because clauses mandating arbitration of sexual harassment claims interfere with New York’s substantial state interest in transparently addressing workplace sexual harassment, § 7515 is a ground ‘in equity for the revocation of any contract’ and thus not displaced by the FAA”, reasoning that “[t]his argument … ignores the plain language of the FAA’s saving clause and the Supreme Court’s many decisions construing it, which require any ground providing an exception to arbitration, whether in law or equity, to be generally applicable.”