Diaz-Roa v. Hermes Law, P.C.

Background

Hermes Law, P.C. and Syzygy Legal Tech, Inc. d/b/a ClaimDeck initiated arbitration against Silvia Diaz-Roa in Dallas, Texas. Diaz-Roa separately sued Hermes Law, ClaimDeck, Dwayne Hermes, and Andrea Hermes in the Southern District of New York, asserting claims including sexual harassment, breach of contract, violation of the New York Labor Law, tortious interference with contract, and conversion.

The defendants moved to compel arbitration, dismiss the amended complaint, or transfer the case to the Northern District of Texas. Diaz-Roa moved to stay the arbitration. On November 1, 2024, the Court orally stayed the arbitration pending further order. On November 21, 2024, the Court held that the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (EFAA), at Diaz-Roa’s election, made the arbitration agreement invalid and unenforceable with respect to the case. The Court denied the defendants’ motion to compel arbitration as to all of Diaz-Roa’s claims, denied the motion to transfer, and granted in part and denied in part the motion to dismiss. The Court dismissed the breach-of-contract and tortious-interference claims without prejudice and dismissed the New York Labor Law wage-deprivation claim with prejudice.

The defendants filed an interlocutory appeal from that ruling. The arbitration tribunal later stayed its own proceedings because it found the status of the judicial stay unclear. The parties then asked the Court to clarify whether the arbitration could continue during the appeal.

Parties’ Positions

The defendants argued that the arbitration involved their separate claim for declaratory relief concerning the parties’ contract, rather than only Diaz-Roa’s claims in the federal case. They also argued that the Court’s November 21 order ended the earlier stay and that the interlocutory appeal automatically stayed the effect of the Court’s orders.

Diaz-Roa responded that, because the Court denied the motion to compel arbitration, she could not be compelled to arbitrate any of her claims.

Court’s Ruling

The Court held that it retained authority to clarify its earlier stay while the interlocutory appeal was pending. An appeal from an order denying a motion to compel arbitration automatically stays district-court proceedings related to the appealed matter, but the appeal did not automatically lift the arbitration stay or otherwise suspend the effect of the Court’s orders.

The Court explained that its oral ruling staying arbitration pending further order was intended to keep the arbitration paused until an order specifically allowed it to proceed. The Court’s later denial of the motion to compel arbitration did not lift the stay. Because the arbitration sought declaratory relief concerning Diaz-Roa’s termination and equity stake in Hermes Law and ClaimDeck, it overlapped with at least her surviving conversion claim. Allowing the arbitration to proceed could produce findings that would interfere with the Court’s ability to decide the federal case.

The Court therefore clarified that the arbitration remains stayed until either the Court or the Second Circuit issues an order stating that it is no longer stayed. The Court did not state that the Second Circuit had decided the appeal.

Disposition

The Memorandum and Order clarified that the arbitration remains stayed. It did not lift the stay or otherwise authorize the arbitration to proceed.