Source: https://fhnylaw.com/partys-pursuit-remedies-court-not-evidence-intent-abandon-right-arbitrate-claims/
Timestamp: 2019-04-18 15:32:25+00:00

Document:
Questions of arbitrability and waiver are often litigated by parties to a contract containing an agreement to arbitrate disputes arising thereunder. In the Matter of New Roots Charter School v. Ferreira, 2019 N.Y. Slip Op. 30137(U) (Sup. Ct. Tompkins Cnty. Jan. 16, 2019) (here), the Court was faced with these questions, having to decide whether the parties had agreed to arbitrate their disputes and if so whether the respondent had abandoned his right to litigate certain claims in court.
Arbitration is a favored means of resolving disputes. It is encouraged and recognized by the courts as the public policy of the State. Matter of Smith Barney Shearson v. Sacharow, 91 N.Y.2d 39, 49 (1997) (citations and quotation marks omitted). Id. This is especially so in the labor context. E.g., New York City Transit Auth. v. Transport Workers Union of Am., 99 N.Y.2d 1, 6-7 (2002). Consequently, courts will interfere as little as possible with the agreement of consenting parties to submit their disputes to arbitration. Id. at 49-50. (citations omitted).
Nonetheless, “[l]ike contract rights generally, a right to arbitration may be modified, waived or abandoned.” Sherrill v. Grayco Bldrs., 64 N.Y.2d 261, 272 (1985). Accordingly, a litigant may not compel arbitration when his/her use of the courts is “clearly inconsistent with [his/her] later claim that the parties were obligated to settle their differences by arbitration.” Flores v. Lower E. Side Serv. Ctr., Inc., 4 N.Y.3d 363, 372 (2005) (citations and internal quotation marks omitted). Similarly, where “the grounds urged for relief and remedies sought in each forum are separate and distinct, a party may vigorously pursue both avenues concurrently.” Matter of City School Dist. v. Poughkeepsie Pub. School Teachers Assn., 35 N.Y.2d 599, 606 (1974).
“Generally, when addressing waiver, courts … consider the amount of litigation that has occurred, the length of time between the start of the litigation and the arbitration request, and whether prejudice has been established.” Cusimano v. Schnurr, 26 N.Y.3d 391, 400-01 (2015). There is no bright-line rule or rigid formula “for identifying when a party has waived its right to arbitration;” rather, the courts apply the foregoing factors to the facts of the case before it. Louisiana Stadium & Exposition Dist. v Merrill Lynch, Pierce, Fenner & Smith Inc., 626 F3d 156, 159 (2d Cir 2010). “That said,” however, “‘[t]he key to a waiver analysis is prejudice.’” Id. And, when examining whether there is prejudice, the courts look to see if the opposing party is procedurally and substantively harmed by arbitration and whether the opposing party will incur excessive costs and delay by going to arbitration. Id. See also Cusimano, 26 N.Y.3d at 401.
New Roots Charter School involved the termination of employment of the respondent, David Ferreira (“Ferreira”), a music teacher with the School and a member of the respondent New Roots Charter School Instructional Staff Association (“NRCSISA”), the bargaining representative for the School’s employees, by the petitioner, New Roots Charter School (“NRCS” or the “School”).
On March 30, 2018, Ferreira was placed on paid administrative leave while NRCS investigated allegations of misconduct. Following the investigation, on April 30, 2018, school superintendent, Tina Nilsen-Hodges (“Nilsen-Hodges”), sent Ferreira a letter terminating his employment. The superintendent found that, among other things, Ferreira sent inappropriate messages to a former student, offered alcohol to an underage former student, engaged in non-consensual physical contact with a former student, and made false representations on his resume and to school administrators.
Ferreira commenced the grievance process by meeting with Nilsen-Hodges on May 7, 2018. Approximately two weeks later, Ferreira filed a grievance pursuant to the collective bargaining agreement between the School and NRCSISA. Ferreira alleged that the School violated the collective bargaining agreement by terminating him “without just cause”.
On April 30, 2018, Ferreira commenced an Article 78 proceeding in Madison County Supreme Court seeking, among other things, reinstatement to his position as a music teacher. Respondent filed a verified answer and certified record on May 14, 2018. On June 22, 2018, Nilsen-Hodges issued a supplemental letter of termination to Ferreira adding, among other things, smoking marijuana with students and soliciting students to live with him upon graduation to the bases for termination. On June 22, 2018, Ferreira commenced a grievance regarding the supplemental letter of termination.
On September 6, 2018, Ferreira submitted a notice of intent to arbitrate. Following argument and additional submissions, the court issued a judgment, which found, among other things, and as relevant to the action, that the School had a rational basis for terminating Ferreira.
The School filed a verified petition seeking to permanently stay arbitration on September 24, 2018, arguing that Ferreira had waived his right to pursue arbitration by the commencement and amendment of an Article 78 proceeding which, at least in part, raised the same issues regarding his termination. NRCSISA asserted that the Article 78 claim of bad faith termination was separate and distinct from Ferreira’s grievance under the collective bargaining agreement and, therefore, cross-moved to compel arbitration.
As an initial matter, the Court found that the issues surrounding Ferreira’s termination were governed by the arbitration provision of the collective bargaining agreement. Slip op. at *4 (“The broad arbitration clause certainly encompasses the termination of employees.”) In fact, the Court observed that “there [was] no dispute as to the arbitrability of the issue of Ferreira’s termination.” Id. “Thus, the dispute center[ed] upon whether the Article 78 proceeding commenced and amended in Madison County preclude[ed] arbitration of Ferreira’s termination” – that is, whether Ferreira waived the arbitration of his claims concerning his termination of employment. Id.
In addressing the foregoing question, the Court held that Ferreira did not waive his right to arbitrate his termination of employment. Slip op. at *5 (“There is no indication that his right to arbitration was abandoned in favor of a Court proceeding”). The Court reasoned that the relief sought in the Article 78 proceeding differed from that sought in the arbitration. As such, despite there being “some risk of different outcomes,” Ferreira did not seek “judicial review of a potential contract violation.” Id.
Further, although there is some risk of different outcomes, this can largely [be] attributed to the different standards by which the claims are assessed. In the Article 78 proceeding, the issue was whether the Petitioner’s determination was arbitrary and capricious or an abuse of discretion. In such matters, the Court need only determine whether there was a rational basis for the determination and not whether it would have reached a different conclusion. In contrast, in an arbitration under the collective bargaining agreement, the arbitrator is empowered to evaluate all evidence and make credibility determinations to reach a determination whether the contract provision was violated.
As a result, the Court denied the School’s motion to permanently stay the arbitration and granted Respondents’ cross-motion to compel arbitration.
New Roots Charter School illustrates the fact intensive analysis required to determine whether a party’s actions are “clearly inconsistent with [his/her] later claim that the parties were obligated to settle their differences by arbitration.” Flores, 4 N.Y.3d at 372. As noted by the Court in New Roots Charter School, Ferreira did not take any action in the Article 78 proceeding that was “clearly inconsistent” with his intent to challenge his termination for lack of “just cause” in arbitration. The relief requested in the litigation challenged his termination as being in “bad faith,” a separate and distinct form of relief than requested in the arbitration, where Ferreira claimed that his termination lacked “just cause” as required under the collective bargaining agreement. The separate grounds for relief that Ferreira pursued, therefore, were sufficient for the Court to determine that he had not abandoned his right to arbitration.

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