On July 13, 2020, the supreme court of New York on Andowah Newton v. LVMH Moet Hennessy Louis Vuitton Inc., Sup. Ct., N.Y. County, July 13, 2020, J. Nock, Index No. 154178/2019, slip op at p. 16, allowed the plaintiff employee or the “Plaintiff” to continue litigating her claims of sexual harassment in court, instead of compelling arbitration under the terms of an arbitration agreement that has been signed by her.
The court held that New York’s prohibition on mandatory arbitration mentioned in Section 7515 of the Civil Practice Law and Rules was not preempted by the Federal Arbitration Act (FAA). The decision in this matter creates a split of authority.
The Court also found that the CPLR 7515 applies to retroactively to make any offending arbitration clause that is already in existence null and void.
In the alternative, the Court held that the defendant employer’s or the “Defendant or Company” own update policies, which, in compliance with the law requirements of New York, informed employees that they could bring claims in court, superseded the earlier agreement of the plaintiff to arbitrate her claims.
There remains an open question whether the decision will withstand the scrutiny of the appellate, and if upheld, whether the Court’s holding will extend more broadly to the other types of employment discrimination claims, such as quid pro quo harassment claims.
On July 13, 2020, the New York Supreme Court denied a motion to compel arbitration and enforced Civil Practice Law and Rules CPLR 7515, which prohibits agreements that require arbitration for certain employment discrimination claims in Andowah Newton v. LVMH Moet Hennessy Louis Vuitton Inc., Sup. Ct., N.Y. County, July 13, 2020, J. Nock, Index No. 154178/2019, slip op at p. 16.
It seemed clear, before Newton that CPLR 7515 would be preempted by the FAA, as federal courts indeed have found. However, under Newton, at least some employment claims brought in the state of New York court may remain in court even though the employee decided to enter into an arbitration agreement.
After the Plaintiff filed a claim of sexual harassment in the New York Supreme Court, the company had moved to compel arbitration, relying on an arbitration agreement that was signed by the Plaintiff in the year 2014. The argument made by the Plaintiff was accepted by the Court that, CPLR 7515, which was enacted on July 11, 2018, and prohibits clauses that mandate arbitration for employment discrimination claims, made the arbitration agreement of the Plaintiff null and void.
The Court rejected the Company’s argument, in finding for the Plaintiff that the FAA, which generally requires enforcement of arbitration clauses, should preempt the law of the state. The Court noted that according to the terms of the FAA, it only applies to a transaction involving commerce and reasoned that claims for sexual harassment cannot reasonably be characterized as claims concerning a transaction involving commerce. The Court also acknowledged that acts of sexual harassment and related retaliation alleged in the complaint of the Plaintiff occurred intrastate in the Company’s New York offices.
In addition to rejecting the federal preemption argument of the Company, the Court also applied the law of New York retroactively to make any contract existing at the time the law was enacted null and void. This made the Plaintiff’s argument of Arbitration 2014, null and void even though the Plaintiff entered into it years prior to the enactment of CPLR 7515.