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Kanoff v. Better Life Renting Corp.

February 14, 2008


The opinion of the court was delivered by: Wolfson, District Judge


Before the Court is a motion to dismiss, or in the alternative, to stay and to compel arbitration filed by defendants Better Life Renting Corp. ("Better Life") and Lefrak Organizations, Inc. ("Lefrak")(collectively, "Defendants"). Defendants seek, in this motion, to dismiss and to compel Plaintiff Barbara Kanoff ("Plaintiff") to arbitrate her employment-related discrimination claims under the New Jersey Law Against Discrimination (the "NJLAD") based upon an Arbitration Agreement (the "Agreement"). The Court held oral argument on December 19, 2007, wherein the Court addressed the majority of Plaintiff's arguments in regard to the enforceability of the Agreement. The Court also requested the parties to further brief the question of whether SPD Services Corp. ("SPD"), a signatory to the Agreement, is an affiliate of Better Life within the meaning of the Agreement. After reviewing correspondence from the parties on this issue, the Court is satisfied that the Arbitration Agreement is enforceable, and for the reasons set forth herein, Defendants' motion is GRANTED and Plaintiff's claims are DISMISSED without prejudice.


As the Court has extensively recounted the facts of this case during oral argument, it will only recount relevant facts here. Plaintiff alleges that she was employed as a rental agent at Harrison Towers, an apartment complex in Somerset, New Jersey, from 1998 to April 2007, by Michael Bass of Better Life. Plaintiff concedes that when she was hired, she knew that the building was owned by defendant Lefrak, a large family-owned entity that erected and rented apartments, primarily in New York and New Jersey, and that Better Life administered Lefrak's apartment rentals in New Jersey. Plaintiff alleges that she dealt solely with Mr. Bass throughout her employment.

In or around May 2004, Plaintiff received a request to sign the subject Arbitration Agreement. The Agreement specifically provides that it covers: all Employment Disputes between you and the Company, whether occurring before, on the date of, or after the execution of this Agreement, and includes, but is not limited to, claims or allegations concerning wages or compensation . . . discrimination, harassment or retaliation (including . . . claims or allegations of discrimination on the basis of race, sex, color, national origin, sexual orientation, age, religion, creed, marital status, veteran status) . . . or any alleged violation of any federal, state, or other governmental law, statute or regulation, including . . . the New Jersey Law Against Discrimination . . . .

See the Agreement at 2. The Agreement provides for arbitration of "Employment Disputes," which is defined to include "any claim, controversy or dispute arising out of, or relating to [Plaintiff's] employment, the terms and condition of employment or the termination of that employment." Id. at 1. The term "Company," which is listed as SPD, is defined as Plaintiff's "employer and any of its affiliates, parents, subsidiaries and owners, together with its or their respective past, present of future officers, directors, employees, shareholders, principals, partners, limited liability company members, trustees, spouses, heirs . . . ." Id. Furthermore, the paragraph immediately above Plaintiff's signature states that by signing the Agreement, Plaintiff would agree that "in consideration for [her] employment and continued employment, [she] agree[s] to all provisions of this Agreement. This includes the requirement that any Employment Dispute should be submitted to final and binding arbitration." See Farrelly Decl., Exhibit C. Plaintiff would also be "waiv[ing] any rights [she] may have to bring a lawsuit against the Company and to a jury trial . . . ." Id. Plaintiff signed the Agreement.

Approximately three years later, Plaintiff was terminated from her job, and she initiated the instant suit alleging that Defendants terminated her employment as a result of age discrimination in contravention of the NJLAD. Pursuant to the Agreement, Defendants move the Court to compel Plaintiff to arbitrate her discrimination claims. In response, Plaintiff offered the Court various contractual arguments why the Agreement should not be enforced. Specifically, Plaintiff argues that the Agreement (1) is not enforceable as a matter of law because there was inadequate consideration in exchange for Plaintiff to sign the Agreement; (2) is not enforceable because it is a contract of adhesion; (3) is not a valid waiver because it does not specifically cover disputes arising out of the NJLAD and does not provide that she waived her right to a jury trial; and (4) is not enforceable because it is not between her and her employer.

On December 19, 2007, the Court held an oral argument with the parties. In that hearing, the Court addressed all of the issues (outlined above) raised by Plaintiff except one, and as to that issue, the Court requested the parties to submit further briefing. Specifically, with regard to Plaintiff's lack of consideration claim, I held that continued employment was sufficient consideration to support an arbitration agreement between Plaintiff and her employer. See Hogan v. Bergen Brunswig Corp., 153 N.J. Super. 37, 43 (App. Div. 1977); Zellner v. Conrad, 183 A.D.2d 250, 256 (N.Y. App. Div. 1992). Next, I found that while the Agreement was arguably a contract of adhesion, pursuant to the holdings set forth in Martindale v. Sandvik, Inc., 173 N.J. 76, 91-92 (2002) and Gilmer v. Interstate/Johnson Land Corp., 500 U.S. 20, 33 (1991), this fact alone does not invalidate the Agreement. I reasoned that "[m]ere inequality in bargaining power . . . is not a sufficient reason to hold that arbitration agreements are never enforceable in the employment context." Gilmer, 500 U.S. at 33. There must be more egregious conduct from the employer than ordinary economic pressure faced by every employee who needs the job. Young v. Prudential Insurance Company of America, 297 N.J. Super. 605, 621 (App. Div. 1997). Moreover, the employment application was not offered on a take-it-or-leave-it basis. Defendants gave Plaintiff an opportunity to consult with an attorney before signing the Agreement. Nothing in the record indicates that the terms of the Agreement were oppressive or unconscionable. Absent a showing of fraud or oppressive conduct, I found the Agreement enforceable. See Martindale, 173 N.J. at 91-92 (New Jersey courts have held on "numerous occasions that agreements to arbitrate are not violative of public policy . . . [r]ather, the affirmative policy of this State, both legislative and judicial, favors arbitration as a mechanism of resolving disputes"). Finally, I found that language of the Agreement clearly encompassed the employment dispute at issue, namely, age discrimination under the NJLAD.

During oral argument, Plaintiff's counsel vehemently argued that because SPD and Better Life are not affiliates, or related, within the definition of "Company," Plaintiff did not sign an arbitration agreement with her employer, Better Life. Plaintiff argued that the Agreement is only enforceable to the extent that employment disputes were with SPD and its affiliates, and because there is no relationship between Better Life and SPD, the Agreement does not control. The Court instructed the parties to further brief this issue, and requested Defendants to submit proof that SPD and Better Life are affiliates.*fn1 Since the hearing, the Court has received correspondence from both parties. The Court will now address whether SPD and Better Life are within the definition of the "Company" under the Agreement.


"[A]rbitartion is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit." AT&T Tech., Inc. v. Communications Workers of Am., 475 U.S. 643, 648 (1986)(citations omitted); see also Laborers' Int'l Union of N. Am. v. Foster Wheeler Corp., 868 F.2d 573, 576 (3d Cir. 1989)(per curiam). "The question whether the parties have submitted a particular dispute to arbitration . . . is an issue for judicial determination [u]nless the parties clearly and unmistakably provide otherwise."Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 183 (2002)(citations omitted); see also Laborers' Int'l Union of N. Am., 868 F.2d at 576. When determining whether the parties entered into a valid arbitration agreement, the court "decides only whether there was an agreement to arbitrate, and if so, whether the agreement is valid." Great W. Mortgage Corp. v. Peacock, 110 F.3d 222, 228 (3d Cir. 1996)(citing 9 U.S.C. § 2). The "court is not to consider the merits of the claims giving rise to the controversy, but is only to determine . . . whether there is a valid agreement to arbitrate." Id. If the court finds there is an agreement to arbitrate, the disposition of the merits is left to the arbitrator. Id.

The Third Circuit has set forth a two-prong inquiry for courts to use when determining whether to compel arbitration. Under this two-prong test, the questions posed are: "(1) Did the parties seeking or resisting arbitration enter into a valid arbitration agreement? (2) Does the dispute between those parties fall within the language of the arbitration agreement?" John Hancock Mut. Life Ins. Co. v. Olick, 151 F.3d 132, 137 (3d Cir. 1998) (citations omitted). Additionally, "when considering a motion to compel arbitration which is opposed on the ground that no agreement to arbitrate had been made between the parties, [the court] should give to the opposing party the benefit of all reasonable doubts and inferences that may arise." Par-Knit Mills v. Stockbridge Fabrics Co., 636 F.2d 51, 54 (3d Cir. 1980). Moreover, the Federal Arbitration Act ("FAA") specifically "permits states to regulate contracts, including contracts containing arbitration agreements under general contract principles; therefore, an arbitration clause may be invalidated 'upon such grounds as exist at law or in equity for the revocation of any contract.'" Leodori v. Cigna Corp., 175 N.J. 293, 301 (2003)(quoting Martindale, 173 N.J. at 85); see Gay v. Creditinform, 511 F.3d 369 (3d. Cir. 2007)(courts are to look to state contract principles when interpreting arbitration agreements).

However, questions of arbitrability "must be addressed with a healthy regard for the federal policy favoring arbitration." Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983). If the scope of an arbitration agreement is ambiguous, the FAA "establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration." Id. at 24-25. As the parties have cited to New Jersey substantive contract law, the Court shall apply applicable New Jersey state law principles to evaluate the Agreement.*fn2

To begin, the Court notes that the Agreement defines the "Company" as Plaintiff's "employer and any of its affiliates, parents, subsidiaries and owners, together with its or their respective past, present of future officers, directors, employees, shareholders, principals, partners, limited liability company members, trustees, spouses, heirs . . . ." See the Agreement at 1. While "a non-signatory cannot be bound to arbitrate unless it is bound 'under traditional principles of contract and agency law' to be akin to a signatory of the underlying agreement," E.I. Dupont de Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates, S.A.S., 269 F.3d 187, 194 (3d Cir. 2001) (citing Bel-Ray Co. v. Chemrite Ltd., 181 F.3d 435, 444 (3d Cir. 1999)), the Third Circuit has recognized that an intended third party beneficiary of an arbitration agreement may be bound by the agreement's terms; "whether seeking to avoid or compel arbitration, a third party beneficiary has been bound by contract terms where its claim arises out of the underlying contract to which it was an intended third party ...

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