Magdalasov v. ByteDance Inc.

Background

Yakov Magdalasov, proceeding without a lawyer, filed two suits based on the same events involving his former employer, ByteDance Inc. The first suit began in state court and was removed to federal court. The court previously denied Magdalasov’s motion to remand that case and denied his request for preliminary injunctive relief. Magdalasov later filed a second state-court suit, which ByteDance also removed. He again moved to remand.

In both cases, ByteDance moved to dismiss claims that could not be arbitrated and to compel arbitration of the remaining claims. Magdalasov also sought discovery concerning whether his claims had to be arbitrated. The opinion notes that much of his briefing cited nonexistent or inaccurately described cases and misrepresented docket facts. The court stated that the likely use of artificial intelligence did not excuse the obligation to act honestly and in good faith.

Remand and federal jurisdiction

The court denied Magdalasov’s motions to remand. It relied on diversity jurisdiction and did not decide whether federal-question jurisdiction also existed. The court stated that Magdalasov claimed Russian citizenship, ByteDance was a citizen of Delaware and California, and TikTok was organized under California law with its principal place of business in California. The opinion states that complete diversity remained intact.

Magdalasov argued that Maria Malvar’s New York citizenship triggered the forum-defendant rule, which generally can prevent removal when a properly joined and served defendant is a citizen of the forum state. The court rejected that argument because ByteDance removed the action before Malvar was served. Applying Second Circuit precedent, the court held that the forum-defendant rule did not apply before service and therefore allowed the removal.

The court also rejected Magdalasov’s arguments based on the federal procedural rules governing signatures and attorney appearances. It found that the notice of removal was properly signed and that the cited local rule did not prevent ByteDance from filing it. Finally, the court held that the amount-in-controversy requirement was met. Although Magdalasov identified $67,000 as the amount he had been paid before termination, he also sought reinstatement and additional damages. The court considered his stated annual pay, bonus, and stock options and concluded that the amount in controversy exceeded $75,000.

ERISA claims

The court dismissed Magdalasov’s claims arising under the Employee Retirement Income Security Act, a federal law concerning employee benefit plans. Magdalasov had initially sought relief under that law but later amended one complaint to remove those claims and stated that he was pursuing benefits claims separately in another lawsuit. He also stated that the present suits asserted only employment claims under the New York State Human Rights Law. Because he disavowed ERISA benefits claims, the court dismissed any such claims in these cases.

Arbitration agreement

The court granted defendants’ motions to compel arbitration of Magdalasov’s remaining claims. The employment contract contained an agreement providing that disputes arising from or related to his application, employment, or termination would be decided by a single arbitrator rather than by a court or jury. Magdalasov did not dispute that he signed the contract, but argued that the various onboarding documents were inconsistent and did not create an enforceable agreement.

The court rejected those arguments. It found no conflict among the offer letter, employee handbook, and Confidentiality, Investment Assignment, and Arbitration Agreement. The court also rejected arguments based on the handbook’s language, allegedly missing attachments, the lack of contract negotiation, and Magdalasov’s assertion that he had not been trained or advised about arbitration. The court noted that he had a three-day period to review the agreements but signed them the same night they were sent.

The court further held that the arbitration clause covered the disputes and permitted the listed entities and individuals to enforce the agreement. It rejected Magdalasov’s argument that TikTok and Malvar could not compel arbitration because they were not signatories. The agreement expressly stated that the entities and individuals listed in it could enforce the agreement, making TikTok and Malvar third-party beneficiaries of the arbitration agreement for this purpose.

Waiver and delegation of enforceability questions

The court held that ByteDance had not waived its right to arbitrate. ByteDance moved to compel arbitration in both cases within one month after removal, before discovery and as its first substantive motions. The court rejected Magdalasov’s contention that ByteDance had first pursued a motion to dismiss and waited months to seek arbitration, finding that the docket did not support that description.

The agreement also contained a delegation clause assigning the arbitrator, rather than a court, exclusive authority to decide disputes concerning the agreement’s validity, applicability, enforceability, or waiver. The court held that this delegation was clear and unmistakable. It rejected Magdalasov’s arguments that the clause was unclear, unconscionable, contrary to public policy, or limited to only some challenges. The court stated that challenges directed only at the contract as a whole were insufficient to challenge the delegation clause specifically. It also noted that Magdalasov had disclaimed statutory causes of action that could not legally be arbitrated.

Discovery and disposition

The court denied Magdalasov’s request for discovery. It found that the complaint and incorporated documents showed that the claims were subject to arbitration and that the issues concerning contract formation, waiver, and unconscionability were not ambiguous. The court concluded that additional discovery would not change its analysis.

The court denied Magdalasov’s motions to remand. Defendants’ motions to dismiss the ERISA claims and to compel arbitration on the remaining claims were granted. The court denied the discovery motion and directed that both cases be stayed while arbitration proceeded. The opinion does not state the result of any arbitration.