Mercedes v. Manhattan Food & Bev LTD

Background

Defendants initially moved to dismiss the case and require arbitration. They later amended the motion to seek an order compelling arbitration and staying, or pausing, the case while arbitration proceeds.

At a hearing, all five plaintiffs testified under oath that they had signed the arbitration agreement. The court said the motion therefore did not involve the possibility that employee signatures had been forged. The court also found that consideration—a legal exchange supporting a contract—was provided in the form of employment.

Court’s Analysis

The court explained that, at this stage, it was deciding whether the parties had agreed to arbitrate, including whether they had the capacity to enter into a contract. Because the arbitration agreement was broad and incorporated American Arbitration Association rules assigning questions about jurisdiction and enforceability to the arbitrator, the court said the arbitrator would address enforceability issues after the agreement’s formation was established.

The court found that Mercedes, Dubouzet, Tran, and Coyle had the capacity to agree to the contracts. The court noted that these plaintiffs were educated, that all but one of the five plaintiffs spoke fluent English, and that two were college graduates. Although the plaintiffs said they had only a brief period to sign the documents, the court found no evidence that defendants prevented them from reading the documents, refused a request for more time, or fraudulently induced them to sign. Under New York law, the court said, a person who signs a document without a valid excuse for not reading it is bound by its terms.

The court acknowledged that the plaintiffs were told the documents were necessary to be paid and that this placed pressure on them. It nevertheless concluded that the pressure did not excuse failing to read the documents or ask questions before signing. The court also noted that the plaintiffs alleged that defendants were an unscrupulous employer, but said the record did not establish fraudulent inducement.

Disposition

The court granted defendants’ motion to compel arbitration in part. It concluded that Mercedes, Dubouzet, Tran, and Coyle must arbitrate their claims and stayed the action as to them pending arbitration. The court retained the ability to enforce an arbitration award or settlement.

The court treated Teran Iniguez separately. Her ability to understand English when she signed the documents was, in the court’s view, an open question. She had been in the United States for only a few days, communicated with her employer in English through Google Translate, and testified about an explanation allegedly given by a manager who did not testify. The court credited Teran Iniguez’s testimony in full and ordered the parties to brief by March 31 whether her language difficulties and the circumstances of signing affected her ability to enter into a contract. The opinion does not state the later outcome of that issue.