Chahla v. Jukko, Inc.

Background

Daniel Chahla was hired by Jukko, Inc. in March 2017 to serve as the company’s Chief Technology Officer. He was terminated in November 2017. Chahla alleged that he was fired for opposing the sexual harassment of Jukko’s CEO, Elizabeth Sarquis, and for questioning Jukko’s business practices.

Chahla brought claims in state court under the Minnesota Human Rights Act and Minnesota’s Whistleblower Act, as well as a claim for unpaid wages under Minnesota law. Jukko removed the case to federal court, asserting diversity jurisdiction. Jukko also moved to compel arbitration based on an arbitration provision in the employment offer it gave Chahla. In the alternative, Jukko sought dismissal under Federal Rule of Civil Procedure 12(b)(6), which concerns whether a complaint states a legally sufficient claim.

Jurisdiction

Chahla argued that Jukko was a Minnesota company and that federal diversity jurisdiction was therefore improper. Jukko stated that it was a Delaware corporation headquartered in New York City, although it had no official office space there. Jukko also stated that it had closed its Minnesota office after Chahla’s termination, deregistered with Minnesota’s Secretary of State in March 2018, and had no official presence or business-related contacts with Minnesota after the termination. Two of Jukko’s three officers lived and worked in New York, while the third, Sarquis, lived in Minnesota and traveled to New York to work.

Chahla requested jurisdictional discovery, meaning discovery aimed at gathering facts about whether the court had jurisdiction, and asked the court to delay ruling on arbitration. The court held that jurisdictional discovery was not warranted because Chahla had not identified specific facts to be obtained, explained how they would create a genuine dispute, or shown why his efforts to obtain them had failed. The court characterized his request as speculative. Based on the facts before it, the court concluded that Jukko was no longer a Minnesota company and that diversity jurisdiction was proper.

Arbitration

The employment offer required arbitration in Manhattan County, New York, of “any and all disputes, claims, or causes of action” arising from or relating to the agreement, Chahla’s employment, or the termination of his employment. Chahla signed the offer on March 30, 2017, and Jukko conditioned the employment offer on his acceptance of the arbitration provision.

Chahla argued that it was procedurally unfair for Jukko to remove the case to federal court and then seek arbitration. The court rejected that argument. He also argued that the arbitration agreement was an adhesion contract under Minnesota law. The court found that the allegations in his complaint showed that the parties negotiated his employment terms for several weeks and concluded that he had not shown the agreement was a take-it-or-leave-it contract resulting from unequal bargaining power.

The court further rejected Chahla’s argument that arbitration in New York was too inconvenient. It found that he was not completely unable to pursue his claims there and that the inconvenience of travel did not provide a sufficient reason to disregard the agreement. The court also rejected his argument that his statutory claims could not be arbitrated, explaining that arbitration changes the forum for resolving those claims but does not eliminate the substantive rights provided by the statutes.

Disposition

The court ordered that:

The opinion did not decide whether Chahla’s underlying employment claims were valid. It required those claims to proceed in arbitration instead of court.