Kinney v. Int'l Bus. Machs. Corp.

557 F.Supp.3d 823

Nancy KINNEY, Charles Townsley, Michael Sauro, Walter Noffsinger, Rosa Davidson, Michael Kelly, Tom Kierl, Constance Lewis, Sheri Parr, Paul Pham, Alvaro Paiz, Titon Hoque, Chris Mancuso, Wilbert Talmadge, Janet Gelphman, Thanh Do

v.INTERNATIONAL BUSINESS MACHINES CORPORATION

CAUSE NO. 1-20-CV-969-LY

United States District Court, W.D. Texas, Austin Division.

Signed August 6, 2021

Austin Harris Kaplan, Kaplan Law Firm, PLLC, Heidi A. Coughlin, Archie Carl Pierce, Blair J. Leake, Wright & Greenhill, P.C., Austin, TX, for Nancy Kinney, Charles Townsley, Michael Sauro, Walter Noffsinger, Rosa Davidson, Michael Kelly, Alvaro Paiz, Titon Hoque, Thanh Do, Janet Gelphman.

Alan Lin, Andrew J. Broadaway, Edward M. Smith, Cornell Smith Mierl Brutocao Burton LLP, Austin, TX, for International Business Machines Corporation.

ORDER

LEE YEAKEL, UNITED STATES DISTRICT JUDGE

Before the court are: Defendant International Business Machines Corporation's Motion to Compel Arbitration of ADEA Claims and Partial Motion to Dismiss (Dkt. No. 10) filed October 23, 2020; Plaintiff's Response (Dkt. No. 16) filed November 20, 2020; IBM's Reply (Dkt. No. 23) filed December 11, 2020; Plaintiff's Sur-Reply (Dkt. No. 52) filed March 1, 2021; Plaintiffs’ Sealed Sur-Sur Reply (Dkt. No. 44) filed May 3, 2021; and IBM's Response (Dkt. No. 49) filed May 10, 2021.

BACKGROUND

This is an age-discrimination case in which 10 remaining named Plaintiffs out of an original 16 collectively sue their former employer International Business Machines Corporation ("IBM") for age discrimination under the Age Discrimination in Employment Act of 1967 ("ADEA") and "applicable state laws protecting citizens from discrimination on the basis of age."

In a prior order, this court transferred the claims of six Plaintiffs—Tom Kierl, Constance Lewis, Sheri Parr, Paul Pham, Chris Mancuso, and Wilbert Talmadge—for lack of personal jurisdiction. IBM now moves the court to compel arbitration and dismiss two additional Plaintiffs, Nancy Kinney¹ ("Kinney") and Alvaro Paiz ("Paiz"), asserting they signed separation agreements with IBM in which they agreed to resolve any ADEA claims exclusively through individual arbitration. Plaintiffs² respond that the agreements were procured by fraud and are not enforceable. Plaintiffs also bring state-law discrimination claims and a claim for fraudulent inducement, which IBM argues they waived, released, or should also be compelled to arbitrate.

STANDARD

The Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 1, et seq. , provides that "[a] written provision in any ... contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. Section 4 of the FAA permits a party to seek an order compelling arbitration if the other party has failed to arbitrate under a written agreement. 9 U.S.C. § 4. "The party resisting arbitration bears the burden of showing that he is entitled to a jury trial under § 4 of the Arbitration Act." Dillard v. Merrill Lynch, Pierce, Fenner & Smith, Inc. , 961 F.2d 1148, 1154 (5th Cir. 1992).

Courts apply a two-step inquiry when ruling on a motion to compel arbitration. Edwards v. Doordash, Inc. , 888 F.3d 738, 743 (5th Cir. 2018). "First, the court asks whether there is a valid agreement to arbitrate and, second, whether the current dispute falls within the scope of a valid agreement." Id.

"Determining whether there is a valid arbitration agreement is a question of state contract law and is for the court." Huckaba v. Ref-Chem, L.P. , 892 F.3d 686, 688 (5th Cir. 2018). "[T]he party moving to compel arbitration must show that the agreement meets all of the requisite contract elements." Id. The movant must only prove the existence of an agreement by a preponderance of the evidence. Grant v. Houser , 469 F. App'x 310, 315 (5th Cir. 2012). The party resisting arbitration "must make at least some showing that under prevailing law, he would be relieved of his contractual obligation to arbitrate if his allegations proved to be true ... [and] he must produce at least some evidence to substantiate his factual allegations." Dillard , 961 F.2d at 1154 ; Chester v. DirecTV, LLC , 607 F. App'x 362, 363–64 (5th Cir. 2015) (per curiam).

"[I]n step two of the analysis, determining the scope of a valid arbitration agreement ... we apply the federal policy and resolve ambiguities in favor of arbitration." Klein v. Nabors Drilling USA L.P. , 710 F.3d 234, 237 (5th Cir. 2013) (internal citations omitted). This second question usually is for the court, unless the arbitration clause contains a valid delegation clause. Kubala v. Supreme Production Services, Inc. , 830 F.3d 199, 202 (5th Cir. 2016). The parties do not dispute the existence of a valid delegation clause³ in the agreements, and thus the court need not address the second issue.

ANALYSIS

The Separation Agreements

Upon their separation from IBM, and in return for a severance package and other additional benefits, Kinney and Paiz signed separation agreements with IBM. Dkt. Nos. 10-1, 10-3, 10-5 and 10-6. The separation agreement signed by Kinney, which is substantively identical to that signed by Paiz, provides as follows in relevant part:

Resource Action Separation Agreement

You are being offered payments and benefits as part of a resource action that you otherwise would not have been entitled to receive. You will receive and be entitled to keep these payments and benefits only if you accept and comply with all terms of this Agreement. This Agreement requires you to release IBM and related parties from claims you may have as described below. This Agreement also requires you to arbitrate certain claims that are not released on an individual basis.

By accepting this Agreement and the benefits and payments it provides, you agree that if you choose to pursue certain claims that are not released under this Agreement, then such claims must be submitted to arbitration on an individual basis as provided below and may not be pursued in court.

You should thoroughly review and understand the effect of this Agreement before you accept it.

...

2. What you release by accepting this agreement

By accepting this Agreement you release IBM from ALL claims that you may have against it at the time of accepting, whether or not related to your employment with IBM or the termination of your employment (EXCEPT FOR THOSE SPECIFICALLY IDENTIFIED IN SECTION 3), and including, without limitation:

...

• all state and local laws prohibiting discrimination on the basis of age

• claims based on contract, tort, or any other legal theory

• all claims whether or not you know about them at the time you accept this Agreement

...

3. What you do not release by accepting this agreement

By accepting this Agreement, you do not release:

...

• any claim under the Federal Age Discrimination in Employment Act of 1967 or the West Virginia Human Rights Act, provided however such claims are subject to arbitration on an individual basis as described below

...

5. Arbitration and waiver or class claims and jury trial

You agree that any and all legal claims or disputes between you and IBM under the federal Age Discrimination in Employment Act or 1967 ("ADEA") or the West Virginia Human Rights Act, as well as any and all claims or disputes between you and IBM that have not or cannot be released by private agreement as a matter of law (such as under the federal Fair Labor Standards Act of 1938 (FLSA)) (collectively "Covered Claims") will be resolved on an individual basis by private, confidential, final and binding arbitration according to the IBM Arbitration Procedures and Collective Action Waiver (which are attached and incorporated as part of this Agreement) and under the auspices of JAMS, or if there is no JAMS office within 100 miles of your most recent assigned IBM office location, then an arbitration forum provider to be mutually agreed to by the parties. Regardless of the designated arbitration administrator, the arbitration shall be held in accordance with the JAMS Employment Arbitration Rules & Procedures. You understand and agree that you are giving up your right to a court action for Covered Claims, including any right to a trial before a judge or jury in federal or state court. This agreement to arbitrate does not apply to government agency proceedings.

To the maximum extent permitted by applicable law, you agree that no Covered Claims may be initiated, maintained, heard or determined on a class action, collective action or multi-party basis either in court or in arbitration, and that you are not entitled to serve or participate as a class action member or representative or collective action member or representative or receive any recovery from a class or collective action involving any Covered Claims either in court or in arbitration.

....

The Parties’ Arguments

IBM argues that Kinney and Paiz are barred by the separation agreements from: (1) bringing their claims in this forum instead of through arbitration; (2) participating in a multi-party action which is waived by the separation agreements; and (3) bringing any age-discrimination claim or other claim under state law. IBM asserts that Kinney and Paiz recognized that their claims in this action are barred by the separation agreements and, therefore, amended their complaint to allege that they were fraudulently induced to sign these agreements. IBM requests that the court: (1) compel Kinney and Paiz's claims to arbitration; and (2) dismiss their state-law age-discrimination and stand-alone fraud claims on various bases.⁴

Kinney and Paiz argue that the separation agreements were procured by fraud and therefore the arbitration provisions should not be enforced, because the agreements to arbitrate do not constitute valid contracts under New York law.⁵ Anticipating...