Chen-Oster v. Goldman, Sachs & Co.

DECISION AND ORDER MOTION TO COMPEL ARBITRATION AND CROSS-MOTION TO VOID ARBITRATION AGREEMENTS   In this class action, Plaintiffs allege that Defendants Goldman Sachs & Co. and The Goldman Sachs Group, Inc. (collectively, “Goldman” or “Defendants”) engaged in disparate impact and disparate treatment discrimination against female employees in violation of Title VII of the Civil Rights Act of 1964 (“Title VII”), 42 U.S.C. §§2000e et seq., and the New York City Human Rights Law (“NYCHRL”), Administrative Code §8-107 et seq. On March 30, 2018, the Honorable Analisa Torres, U.S.D.J., granted Plaintiffs’ motion for class certification, certifying a class of female employees in particular positions across three Goldman divisions. Chen-Oster v. Goldman, Sachs & Co., 325 F.R.D. 55 (S.D.N.Y. 2018) (the “Certification Order”). The parties have since been actively engaged in merits discovery, which currently is set to conclude on June 2, 2020. (Dkt. 943.) Goldman now moves the Court for an order staying the claims of approximately fifty-six percent of the more than 3,000 class members, excluding them from the class, and compelling them to individually arbitrate their discrimination claims. (Dkt. 715.) Goldman argues that the majority of class members previously agreed to arbitrate, rather than litigate, their claims when they signed various severance, promotion, and equity compensation agreements. Plaintiffs contend that Goldman has waived its right to compel arbitration, and additionally that arbitration clauses in one category of agreements — equity compensation agreements — are unconscionable and therefore unenforceable. Plaintiffs simultaneously cross-move, pursuant to Federal Rule of Civil Procedure 23(d) governing class actions (“Rule 23(d)”), seeking a judicial order voiding the arbitration clauses (and releases in severance agreements) contained in agreements executed after the filing of this case on September 15, 2010. (Dkt. 717.) Plaintiffs argue that Goldman has improperly attempted to narrow the scope of the class by having putative class members execute agreements to arbitrate and release their claims without notifying them of the existence of this action. In opposition, Goldman contends that it has not coerced or misled class members with its agreements and that relief pursuant to Rule 23(d) is neither authorized nor warranted. (Dkt. 758.) This Decision and Order resolves both motions concurrently. As set forth below, the Court finds that the four categories of arbitration agreements at issue are enforceable as a matter of contract law. The arbitration clauses in one category of agreements — equity award agreements — nevertheless warrant remedial action under Rule 23(d). Accordingly, for the reasons that follow, Defendants’ Motion to Compel and Stay Pending Arbitration is GRANTED IN PART and CONDITIONALLY GRANTED IN PART, and Plaintiffs’ Cross-Motion is GRANTED IN PART and DENIED IN PART.¹ The Parties’ Submissions A. Goldman’s Motion to Compel Arbitration Goldman filed its Motion to Compel Arbitration on April 12, 2019 (“Motion to Compel” or “Motion”). (Dkt. 715.) The Notice of Motion’s “Appendix A” lists 1,852 class members whose claims Goldman seeks to stay and compel into arbitration.² (Id.) The motion includes the Declaration of Robert J. Giuffra, Jr. (Dkt. 716, “Giuffra Decl.”) with Appendices A-F and Exhibits 1-1475 (which collectively include the agreements Goldman seeks to enforce). The Motion also is supported by the declarations of five Goldman employees describing various aspects of Goldman’s employment procedures.³ (Dkt. 721-725.) Defendants submit a Memorandum of Law in Support (Dkt. 726, “Def. Mem.”) and a Reply Memorandum of Law (Dkt. 779, “Def. Reply”). In opposition, Plaintiffs submit the Declaration of Michelle A. Lamy (Dkt. 757, “Lamy Decl.”) with Appendix A and Exhibits 1-2. They also submit a Memorandum of Law in Opposition (Dkt. 756, “Pl. Mem.”) and a Sur-Reply Memorandum of Law (Dkt. 806, “Pl. Sur-Reply”). B. Plaintiffs’ Cross-Motion to Void Arbitration Clauses and Releases Concurrently with Goldman’s Motion to Compel, Plaintiffs filed their Cross-Motion for Relief under Rule 23(d) (Dkt. 717, the “Cross-Motion”). The Cross-Motion seeks an order: (1) voiding the arbitration clauses contained in agreements between Goldman and the class members “to arbitrate employment claims and/or waive participation in a class action that were purportedly executed after the filing of this lawsuit on September 15, 2010″; and (2) voiding releases of claims contained in Separation Agreements between Goldman and class members executed after the filing of this lawsuit on September 15, 2010 “to the extent the releases purport to cover claims that are the subject of this lawsuit.” (Cross Motion at 1.) In support of their Cross-Motion, Plaintiffs include the Declaration of Michael Levin-Gesundheit (Dkt. 719, “Levin-Gesundheit Decl.”) attaching Exhibits A-C, as well as a Memorandum of Law in Support (Dkt. 718, “Cross-Motion Mem.”). On July 11, 2019, Plaintiffs filed a Reply Memorandum of Law in Support. (Dkt. 778, “Cross Motion Reply”.) In opposition, Goldman filed the Declaration of Robert J. Giuffra, Jr. (Dkt. 759, “Giuffra Cross-Motion Decl.”) with Appendices A-B and Exhibits 1-140. Goldman includes declarations by the same five Goldman employees who submitted declarations in connection with its Motion to Compel. (Dkt. 760-764.) Goldman also submits a Memorandum of Law in Opposition (Dkt. 758, “Cross-Motion Opp.”). On August 9, 2019, Defendants filed a Sur-Reply Memorandum of Law (Dkt. 807, “Def. Sur-Reply”). The Court held oral argument on both motions on January 16, 2020. (See Transcript, Dkt. 940, hereinafter “T. at __”.) Factual Background The Court presumes the parties’ familiarity with the factual and procedural history of this case, which has been recounted in prior decisions and orders.⁴ This section focuses only on the background most relevant to the instant motions. A. The Class The Certification Order certified a damages class pursuant to Fed. R. Civ. P. 23(a) and 23(b)(3).⁵ The class consists of current and former female Associates and Vice Presidents employed by Defendants in certain revenue-generating divisions from July 7, 2002 (for employees in New York City) and from September 10, 2004 (for employees in the United States outside of New York City), through the resolution of this lawsuit (collectively, the “Class Members”). There are 3,322 known members of the class (the “Class Members”). (See Pl. Mem. at 1.) The Certification Order and subsequent case management orders provide that the trial will be conducted in two stages. “Phase I” of the trial will determine whether Goldman discriminated against Class Members in implementing three specific evaluation processes known as 360 Reviews, Quartiling and Cross-Ruffing.⁶ (Certification Order at 28, 44, 46; see also Dkt. 630.) Plaintiffs allege that these practices are instruments of discrimination that favor men over women with respect to evaluation, compensation and promotion. (Certification Order at 32.) To determine whether discrimination resulted from these processes, the Phase I trial will include statistical evidence of a generalized nature. Phase II will focus on individualized Class Member issues and damages. (Certification Order at 41-47.) B. The Arbitration Agreements Goldman alleges that it entered into severance, promotion, compensation, and equity agreements, which included broad arbitration clauses, with over 1,800 Class Members. These types of agreements “appl[ied] to all divisions, all jobs, all titles, [and] all genders” and were not solely offered to, or accepted by, Class Members. (T. at 4.) The agreements can be divided into four discreet categories: (1) Separation Agreements, (2) Managing Director (“MD”) Promotion Agreements, (3) Private Wealth Advisor (“PWA”) Agreements, and (4) Equity Award Agreements.⁷ 1. Separation Agreements: In 769 agreements, Class Members agreed to arbitrate employment-related disputes and release claims in exchange for lump-sum severance payments as well as other valuable benefits, such as continuation of base salary payments for months after the employee’s departure, the payment of year-end bonuses after the employee’s departure, access to job placement services, and/or continuation of health and other benefits. (See Giuffra Decl., App. A, Columns G-J.) Taken together, these payments and benefits ranged in value from thousands to hundreds of thousands to millions of dollars. (Id.) Goldman has used the same form Separation Agreements since approximately 2002, all of which include a general release of claims and an agreement to arbitrate disputes. (See Def. Mem. at 7.) Those same terms are also included in the company’s Employee Handbook. (Id.; see also Giuffra Decl., Ex. 1301-1303.) Pursuant to the release provision, each employee who entered into a Separation Agreement agreed to “voluntarily waive and release forever whatever claims, whether known or unknown, [she] ever had or now ha[s] against Goldman Sachs…based upon any matter, cause or thing occurring through the date of [her] signature on this agreement.” (See, e.g., Giuffra Decl., Ex. 362 at §5.1.) The releases extend to “claims based upon or relating to your hire by Goldman Sachs, any aspect of the work you performed, your employment relationship with the firm, or the termination of your employment” and include claims “for discrimination based upon…sex.” (Id.) As for dispute resolution, the Separation Agreements require arbitration of “[a]ny dispute or claim arising out of or based upon or relating in any way to th[e] [Separation] [A]greement, or to your employment or other association with the firm, or the termination of your employment.” (Id. at §9.1.) Of the 769 Separation Agreements, 491 were executed before the lawsuit.⁸ (Dkt. 959 at 3.) 2. MD Promotion Agreements: In 200 agreements, Class Members agreed to arbitrate in exchange for increased compensation and promotion to Extended Managing Director or Participating Managing Director (“Partner”) (collectively, “MD”). (Dkt. 959 at 3.) Since 2002, Goldman has required all employees promoted to Extended Managing Director or Partner to execute MD Promotion Agreements that require arbitration of disputes. (See, e.g., Giuffra Decl., Ex. 883, 989.) All of the 200 MD Promotion Agreements at issue here include a provision virtually identical to that in the Separation Agreements requiring arbitration of “any dispute, controversy or claim arising out of or based upon or relating to Employment Related Matters.”⁹ (Giuffra Decl., App. B, Column I, Ex. 883 at 5.) The MD Promotion Agreements were supported by substantial consideration in the form of sought-after titles along with an increase in base salary to at least $400,000 per year as well as other financial benefits including discretionary annual bonuses.¹⁰ (Landman Decl., 7.) Of the 200 MD Promotion Agreements, 60 were executed before filing of the Complaint. (Dkt. 959 at 3.) 3. PWA Agreements: In 187 agreements, Class Members who served as Private Wealth Advisors agreed to arbitration in exchange for their placement “in a role with significant career and compensation benefit — which includes access to the Firm’s high-net-worth clients, extensive training and placement in an existing PWA team.” (Def. Mem. at 6; see also Dkt. 959; Cupertino Decl.,

9-13.) Of the 187 PWA Agreements, 95 were executed before the Complaint was filed. (Dkt. 959.) All Goldman PWAs are required to register with the Financial Industry Regulatory Authority (“FINRA”) (or, prior to 2007, its predecessor entities the National Association of Securities Dealers and New York Stock Exchange Member Regulation). (Cupertino Decl. 4.) Registered representatives must agree “to arbitrate any dispute, claim or controversy that may arise between me and my firm” in the Form U4 required for FINRA registration. (Uniform Application for Securities Industry Registration or Transfer §15A, 5 (2009).) Since 1998, Goldman Sachs has required all PWAs to enter into a standard PWA Agreement specifying certain conditions of their employment, including that “[a]ny dispute or claim arising out of, based upon or relating in any way to…your employment at Goldman Sachs or the termination of your employment, will be settled and finally determined by arbitration.” (Giuffra Decl., Ex. 1156 at §9; Cupertino Decl. 7.) Like MDs, PWAs are well-educated and experienced professionals; PWAs also have passed FINRA’s registration examinations for investment advisors. (Cupertino Decl.,