18-1960 American Family Life Assurance Comp any of New York v. Baker et al. 

### UNITED STATES COURT OF APPEALS FOR THE SECO ND CIRCUIT SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROC EDURE 32.1 AND THIS COURT = S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMEN T FILED WITH THIS CO URT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATA BASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING TO A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPR ESENTED BY COUNSEL. At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Fole y Square, in the City of New York, on the 16 th day of July, two thousand nineteen.
Present: D EBRA A NN L IVINGSTON , S USAN L. C ARNEY , Circuit Judges , E DGARDO R AMOS , District Judge .*

_____________________________________ A MERICAN F AMILY L IFE A SSURANCE C OMPANY OF N EW Y ORK , Plaintiff-Appellee , v. 18-1960
F REDERICK L. B AKER , L OUIS V ARELA , Defendants-Appellants

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_____________________________________ For Defendants-Appellants: D MITRY J OFFE , Joffe Law P.C., New York, NY. For Plaintiff-Appellee: L ISA H. C ASSILLY (David Wohlstadter, on the brief ), Alston & Bird LLP, New York, NY.

* Judge Edgardo Ramos, of the United States District Court for the Southern District of New York, sitting by designation.2 Appeal from a judgment of the United States Di strict Court for the Eastern District of New York (DeArcy Hall, J .). UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that the judgment of the district court is VACATED

. Defendants-Appellants Frederick Baker and Lo uis Varela (together, “Appellants”) appeal from the June 4, 2018 decision and order of the Unite d States District Court for the Eastern District of New York (DeArcy Hall, J .) granting Petitioner-Appellee Am erican Family Life Assurance Company of New York’s (“Aflac NY”) petition to compel arbitration. We review a decision to compel arbitration de novo

. Specht v. Netscape Comm. Corp. , 306 F.3d 17, 26 (2d Cir. 2002). In conducting this review, we employ a “standard simila r to that applicable for a motion for summary judgment,” drawing “all reasonable infere nces in favor of the non-moving party.” Nicosia v. Amazon.com, Inc. , 834 F.3d 220, 229 (2d Cir. 2016). We assume the parties’ familiarity with the underlying facts, the procedur al history of the case, and the issues on appeal.
* * * Appellants, insurance sa les associates in a contractual re lationship with Aflac NY, argue that the district court erred in holding that the parties entered into an enforceable arbitration agreement (the “Agreement”). The validity of the Agreement is governed by the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1, et seq. The FAA provides that “[a] written provision in

. . . a contract . . . to se ttle by arbitration a cont roversy 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. The FAA is an expression of “a strong federal policy favoring arbitration as an alternative means of dispute resolution.” Hartford Accident & Indem. Co. v. Swiss Reinsurance Am. Corp. , 246 F.3d 219, 226 (2d Cir. 2001). At the3 same time, “generally applicable contract defenses, such as fr aud, duress, or unconscionability, may be applied to invalidate arbitration agreements.” Ragone v. Atl. Video at Manhattan Ctr. , 595 F.3d 115, 121 (2d Cir. 2010) (quoting Doctor’s Assocs., Inc. v. Casarotto , 517 U.S. 681, 687 (1996)). Appellants argue that the Agreement is unenforceable because it is procedurally and substantively unconscionable under New York law (the relevant ju risdiction here). A. Procedural Unconscionability First, Appellants argue that the Agreement is procedurally unconscionable because they allegedly lacked a meaningful choice as to the terms of the agreement and a meaningful opportunity to review that agreement before sign ing it. The New York Court of Appeals has held that: The procedural element of unconscionabi lity requires an examination of the contract formation process and the alleged lack of meaningful choice. The focus is on such matters as the size and commerc ial setting of the transaction, whether deceptive or high-pressured tactics were employed, the use of fine print in the contract, the experience a nd education of the party cl aiming unconscionability, and whether there was disparity in bargaining power. Gillman v. Chase Manhattan Bank, N.A. , 534 N.E.2d 824, 828 (N.Y. 1988) (internal citations omitted). Applying the above standard, we agree with the district court’ s conclusion that Appellants have failed to supply sufficient evidence of pro cedural unconscionability . Appellants argue that they were not given adequate time to review the arbitration agreement and that they were offered the agreement in a “take-or-leave-it ” fashion. But Appellants have fa iled to offer ac tual evidence of “high-pressure[] tactics” in the execution of the Agreement. Id. Additionally, as this Court has explained, neither the FAA nor New York law precl udes the enforcement of employment contracts “which make employment conditional upon an empl oyee’s acceptance of mandatory arbitration.”4 Ragone , 595 F.3d at 121, 122. In other words, even if this Agreement had been offered on a “take it or leave it” basis, such negotiation wo uld not render the Agreement procedurally unconscionable. Id . Moreover, the arbitration-related provi sions at issue here are not “deceptive” or located “in fine print.” Gillman , 534 N.E.2d at 828. For example, on the signature page underlined in all-capital type the Agreem ent states: “THIS C ONTRACT CONTAINS AN
ARBITRATION AGREEMENT WHICH MAY BE ENFORCED BY THE PARTIES.” Appendix (“A”) 63. Considering the many factors highlighted above, we reject Appellants’ procedural unconscionability argument. B. Substantive Unconscionability Courts assessing the substantive unconscionabili ty of an agreement consider “whether one or more key terms are unreasonably favorable to one party.” Sablosky v. Edward S. Gordon Co. , 535 N.E.2d 643, 647 (N.Y. 1989). “[A]n unconscionable contract is one which is so grossly unreasonable or unconscionable in the light of th e mores and business practices of the time and place as to be unenforceable acco rding to its literal terms.” Id. (internal quotation marks and alterations omitted). Appellants make three principal unconscionability arguments on appeal; (1) that the Agreement’s cost-sharing provision imposes a cost-prohibitive barrier to adjudicating Appellants’ claims; (2) that the Agreement is severely one-sided in Aflac NY’s favor; and (3) that the Agreement’s confidentiality provision renders it substantively unconscionable. First, New York courts have rejected th e proposition that cost-splitting provisions are per

se unconscionable, instead holding that “the issue of a litigant’s financial ability is to be resolved on a case-by-case basis.” Brady v. Williams Capital Grp., L.P. , 928 N.E.2d 383, 387–88 (N.Y. 2010). Because Appellants have not put forth any ev idence of their financial inability to pursue arbitration under the terms of this Agreement, th eir unconscionability clai m predicated on the cost-5 splitting provision must accordingly fail. Second, the Agreement’s confidentiality pr ovision does not render the entire Agreement substantively unconscionable. See, e.g. , Kopple v. Stonebrook Fund Mgmt. , LLC , 21 Misc. 3d 1144(A) (N.Y. Sup. Ct. 2004), aff’d , 18 A.D.3d 329 (1st Dep’t 2005) (“While the clause requires that arbitrations ‘be conducted on a strictly confid ential basis[,]’ it in no way inhibits a party from preparing his case.”) (internal citations omitted); see also Guyden v. Aetna, Inc. , 544 F.3d 376, 385 (2d Cir. 2008) (“[C]onfidentiality clauses are so common in the arbitr ation context that [an] attack on the confidentiality provision is, in part, an attack on the character of arbitration itself.”) (internal quotation marks omitted). If arbitration proceedings ultimately unfold, the parties are free to contest the enforceability of the confidentiality provision as applied to them, but that matter is distinct from the enforceability of the Agreement. See A. 59 (delegating “any dispute arising under or related in any way to this Agreement” to arbitration). Finally, we are unable to determine on the reco rd presently before us whether Appellants’ argument regarding the “one-sidedness” of the Agreement has merit. See Dallas Aerospace, Inc. v. CIS Air Corp. , 352 F.3d 775, 787 (2d Cir. 2003) (noting that in “the truly exceptional case . . . substantive unconscionability alone can vitiate a contractual duty” under New York law) (quoting Gillman , 534 N.E.2d at 829). Specifically, Appellants ar gue that the Agreemen t is substantively unconscionable because Paragraph 10.7 of the Agr eement bars sales associates from pursuing certain state and federal statutory claims against Aflac NY. We have indicated in dicta that “if certain terms of an agreement served to act ‘as a prospective waiver of a party’s right to pursue statutory remedies, we would have little hesitati on in condemning the agr eement as against public policy.’” Ragone , 595 F.3d at 125 (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth,
Inc. , 473 U.S. 614, 637 n. 19 (1985)). Appellants did not raise this argument in the court below,6 however, and the district court never analyzed th e provision at issue. Appellants claim that they were unable to fully develop this aspect of th eir unconscionability argumen t because the district court severely limited the length of their submissi ons regarding the unconsci onability issue. While we respect the able judgment of the district cour t as to the requisite length of submissions on these issues, we believe in this instance that a more sufficient development of the record here would be appropriate, and that this argument would be bette r addressed by the district court in the first instance.
* * * We have considered Appellants’ remaining argu ments and find them to be without merit. Accordingly, we VACATE the judgment of the district court and remand for further proceedings consistent with this order.
FOR THE COURT: Catherine O’Hagan Wolfe, Clerk