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Tuesday, December 17, 2013

Broad Arbitration Clause in Employment Agreement Also Captures Dispute over Asset Purchase Agreement

  EDNYIn 2010, plaintiff James Palese (Palese) sold two companies to defendant Tanner Bolt & Nut, Inc. (Tanner), and Tanner hired Palese as the General Manager of its new Herman's Hardware Division, which included Palese's companies.  Palese entered into a five-year Employment Agreement with a broad  arbitration clause calling for arbitration of "all claims . . .in any way relating" to the Employment Agreement.   At the same time, he entered into two Asset Purchase Agreements, which provided that disputes should be settled in "any court of competent jurisdiction" in Kings County, New York.  The Employment Agreement and the Asset Purchase Agreement made refernence to one another and were part of what the court deemd "an integrated deal."  

In March, 2012, Tanner terminated Palese and then stopped payment on promissory notes relating to the Asset Purchase Agreement.  Palese filed charges of discrimination and retaliation with the EEOC and then brought suit in the Eastern District of New York.  Tanner moved to compel arbitration and dismiss the suit.  On December 5, 2013, the District Court granted Tanner's motion in Palese v. Tanner Bolt & Nut, Inc.

 There is no question that if Palese's only claim were breach of his employment agreement, the claim would be subject to the arbitration clause.  But what of his claim that Tanner also breached the Purchase Agreements.  As the District Court noted

[T]he essence of Palese's allegation is that Tanner retaliated against him in two ways—first by firing him, and second, in "further retaliation," by stopping payment on the promissory notes—in response to a single cause: Palese's objections to his employer's "constant racist, illegal and discriminatory" workplace conduct. 

So put, it seems clear that his claims relating to the Purchase Agreement relate to the Employment Agreement.  

The District Court also rejected Palese's further contention that the forum selection clause in the Asset Purchase Agreements vitiates the arbitration clause.  That argument was foreclosed by the Second Court's decision in Bank Julius Baer & Co., Ltd. v. Waxfield, Ltd., 424 F.3d 278, (2d Cir. 2005).  As in that case, the forum selection clause in the Asset Purchase Agreements could be read as complementary rather than contraditory to the arbitration clause in Palese's Employment Agreement.

The court thus granted Tanner's motion to compel arbitration of all of plaintiff's claims.

[JT]

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