Yost v. Everyrealm Inc.

Background

Katherine Yost brought claims against Everyrealm, Inc., certain officers, and affiliated entities. The claims alleged discrimination and retaliation under federal, state, and local law based on gender, sexual orientation, disability, and marital status. The court had previously dismissed Yost’s sexual-harassment claims as implausibly pleaded and held that the federal law allowing some sexual-assault and sexual-harassment claims to avoid arbitration did not apply.

Yost entered three work-related agreements. The first two contained broad arbitration clauses and required the parties to share certain arbitration costs. The third, a January 24, 2022 Worksite Employment Agreement, required binding arbitration of disputes and stated that it replaced earlier agreements concerning arbitration. That agreement did not contain a cost-sharing provision. Yost signed it, but the opinion states that there was no evidence that Republic Realm, Inc., or Justworks signed it on the other side.

Which agreement controlled

Applying New York law, the court held that the Worksite Employment Agreement controlled. Although the earlier agreements required written amendments signed by both parties, the court ruled that the later agreement was effective because it was written, Yost signed it, and her conduct showed that she knowingly accepted and ratified it. The court noted that Yost had substantial human-resources experience and continued working for Everyrealm for about six months after signing the later agreement.

Unconscionability challenge

The court rejected Yost’s argument that the Worksite Employment Agreement was unconscionable, meaning unfairly one-sided or formed without a meaningful choice. The agreement’s cost provisions largely tracked the costs that could arise in court, and the court found that Yost had not shown that the arbitration costs would be materially different or unaffordable. The court also found that her concerns about being charged under commercial arbitration rules were speculative and noted the Everyrealm defendants’ position that her fees under the employment rules would be capped at $300.

The court separately addressed the cost-sharing provisions in the first two agreements. It held that those agreements delegated questions about arbitrability, including unconscionability, to the arbitrator through their broad arbitration clauses and incorporation of American Arbitration Association rules. In any event, the court concluded that Yost had not shown that the provisions were unconscionable. It also stated that, even if a cost-sharing provision were unenforceable, New York law would permit the court to remove that provision while enforcing the rest of the arbitration agreement.

Ruling and effect

The court granted the Everyrealm defendants’ motion to compel arbitration as to Yost’s claims against them. It denied their request to dismiss those claims and instead stayed them while arbitration proceeded.

The affiliate defendants did not move to compel arbitration, so the court did not compel arbitration of Yost’s claims against them. The court nevertheless exercised its discretion to stay those claims because the arbitration could affect, narrow, resolve, or encourage settlement of the related claims, and because proceeding with the affiliate litigation could involve issues overlapping with the arbitration.

The court stayed the entire action pending completion of the arbitration between Yost and the Everyrealm defendants. It denied all pending motions to dismiss, including the affiliate defendants’ motions, without prejudice to renewal after the arbitration and the stay’s conclusion.