Stone v. Exos Human Capital, LLC
- John Cronan
- 1:24-cv-03548
- U.S. District Court · Southern District of New York
- 35
In Stone v. Exos, Judge Cronan compelled arbitration of Stone’s wage claim, denied Exos’s dismissal request without prejudice, and stayed the case.
Phillip Stone, Exos Human Capital, LLC, MediFit Community Services LLC, and the proposed class of similarly situated New York employees are affected. Stone’s wage claim will proceed first in arbitration, while the federal case is stayed; the arbitrator, not the court, will initially decide whether the claim is covered by the agreement.
What happened
Stone v. Exos Human Capital, LLC concerns Phillip Stone’s claim that Exos and MediFit paid his wages late, violating New York wage law. Stone sought damages for himself and other similarly situated employees.
The companies asked the court to enforce an arbitration clause in Stone’s employment agreement. Stone argued that New Jersey law made the clause invalid because it did not explain that arbitration gives up the right to sue in court, and that requiring arbitration in Phoenix would be unfairly expensive.
Judge John P. Cronan ruled that federal arbitration law overrides the New Jersey explanation requirement, and that Stone had not shown the Phoenix provision was unfairly expensive. The judge ordered arbitration, left the question of whether Stone’s wage claim falls within the clause to the arbitrator, denied Exos’s request to dismiss the claim without prejudice, and stayed the case.
The detailed version
- Stone v. Exos Human Capital, LLC · No. 1:24-cv-03548
- John Cronan
- July 9, 2025
Background
Phillip Stone sued Exos Human Capital, LLC and MediFit Community Services LLC under Section 191(1)(a) of the New York Labor Law. He alleged that, despite performing more than 25 percent physical duties, he was paid every two weeks and therefore received untimely wage payments. He sought monetary damages for himself and a proposed class of New York employees.
Stone signed a March 2017 employment agreement with MediFit. The agreement included a broad arbitration clause covering “[a]ny controversy, dispute or claim arising out of or relating to” the agreement or its breach. It required binding arbitration under the American Arbitration Association’s rules in the Phoenix, Arizona area. The agreement also selected New Jersey law. Stone and MediFit signed the agreement; Exos did not, but Stone did not challenge Exos’s ability to invoke the arbitration clause in this dispute.
The Parties’ Arguments
Exos and MediFit moved to compel arbitration and asked that an arbitrator decide whether Stone’s wage claim falls within the arbitration clause. In the alternative, Exos asked the court to dismiss the claim against it for failure to adequately allege that Exos was Stone’s employer.
Stone argued that the arbitration clause was invalid under the New Jersey Supreme Court’s decision in Atalese v. U.S. Legal Services Group, L.P. That decision requires an arbitration agreement in the relevant context to explain that choosing arbitration means giving up the right to resolve the dispute in court. Stone also argued that requiring arbitration in Phoenix was substantively unconscionable—meaning unfairly one-sided—because it would make pursuing his claim more expensive. He separately argued that his statutory wage claim did not fall within the clause.
Court’s Analysis
The Federal Arbitration Act generally requires courts to enforce written arbitration agreements on the same terms as other contracts, while allowing generally applicable defenses such as fraud, duress, or unconscionability. The Court held that Atalese’s explanation requirement was preempted by the Federal Arbitration Act as applied to this agreement. In the Court’s view, the requirement singled out arbitration agreements for special treatment and imposed a heightened clarity requirement because arbitration involves giving up litigation in court or before a jury. The Court therefore rejected Stone’s argument that the clause was invalid for failing to include the required explanation.
The Court also rejected Stone’s unconscionability challenge to the Phoenix venue. Under the applicable New Jersey standard, significant inconvenience or expense is not enough; the expense must be prohibitively costly or the exchange of obligations so one-sided that it shocks the court’s conscience. The Court found Stone had provided too little information about the likely travel costs, possible virtual proceedings, his current income and assets, or why any cost advantage for MediFit would be excessive.
The Court further held that the agreement clearly and unmistakably delegated gateway questions of arbitrability to the arbitrator. The agreement incorporated American Arbitration Association rules that authorize an arbitrator to decide questions about the agreement’s existence, validity, and scope, and its language was broad. Because the parties had delegated that issue, the Court did not decide whether Stone’s New York wage claim actually falls within the arbitration clause. The Court also stated that Stone had not substantively responded to the companies’ delegation argument.
Rulings and Disposition
Judge John P. Cronan granted Exos and MediFit’s motion to compel arbitration. The arbitrator must decide whether Stone’s New York Labor Law claim falls within the agreement’s scope. The Court denied without prejudice Exos’s request to dismiss the claim against it under Federal Rule of Civil Procedure 12(b)(6), which concerns failure to state a legally sufficient claim.
The Court stayed the case pending arbitration. It ordered the parties to begin arbitration within 60 days after the opinion was filed and to submit a joint status letter within two weeks after the arbitration ends. The Clerk was directed to terminate the motion and maintain the stay.
Read the full 35-page opinion on CourtListener, the free public archive maintained by the Free Law Project.