Oce Business Services, Inc. (" Oce ") commenced this proceeding on November 24, 2004, by Notice of Petition and Verified Petition against Douglas Christensen ("Christensen"), pursuant to Civil Practice Law and Rules ("CPLR") Article 75, to compel Christensen to arbitrate a dispute alleged to have arisen out of his employment relationship with Oce . On January 5, 2005, Christensen answered Oce 's Verified Petition and cross-moved for an order pursuant to CPLR §3211 to dismiss the Verified Petition for lack of personal jurisdiction over Christensen.

Christensen, a California resident, was employed by Oce ^[FN1] from December 4, 2000 through May 2004. Prior to his commencement of employment, Oce sent him an offer letter, dated November 28, 2000 (the "Agreement") setting forth certain terms of his employment, including his compensation. Christensen faxed a countersigned copy to Oce on November 29, 2000. The Agreement included an arbitration clause (the "Clause") which provided, inter alia;

Any controversy, claim or dispute arising out of this letter agreement shall be determined and settled by arbitration in New York City, New York, by the American Arbitration Association in accordance with the then current Labor Arbitration rules of the American Arbitration Association.

After Christensen left the employ of Oce , a dispute arose regarding his commission. Responding to such claims and the apparent inability of the parties to resolve them, Oce filed a Demand of Arbitration on Christensen on May 18, 2004, seeking to arbitrate the dispute pursuant to the Clause. On May 26, 2004, Christensen e-mailed house counsel for Oce , declining to arbitrate, stating "I have moved past the issue."

Subsequently, Christensen attempted to bring his commission dispute before the California State courts, which suit was brought to Oce 's attention when, on November 23, 2004, Christensen sought a restraining order from the California State court to restrain Oce from seeking arbitration [*2]of such dispute. The next day, November 24, 2004, immediately following the denial of Christensen's application for the restraining order, Oce served the Notice of Motion and Verified Petition herein to demand arbitration of the commission dispute before the American Arbitration Association ("AAA") in New York pursuant to the Clause.

On January 3, 2005, Christensen answered and Cross Moved to dismiss Oce 's petition for lack of personal jurisdiction over him.

This Court will first address the Cross Motion to Dismiss. In support of his motion, Christensen argues that he has not transacted enough business in New York for New York to invoke jurisdiction on such grounds. Oce claims that the basis of jurisdiction is the Clause itself, which specifies arbitration in New York. As an initial matter, such agreement is sufficient consent to the jurisdiction of this Court, at least to consider the substantive and procedural issues raised by the parties.

Particularly persuasive here on this issue is Archer Management Services v. Klostermann, NYLJ, vol. 25, p. 18, col. 1 (Aug. 5, 2004) where Judge Acosta of this Court considered the same Clause in a dispute between Oce (under its prior name of Archer Management Services, Inc.) and Klosterman, the former Oce district Sales Representative for Los Angeles. In that case, Klostermann raised the same jurisdictional issue. Judge Acosta stated:

An agreement to participate in arbitration in New York should be deemed an implied consent to the jurisdiction of the New York Court to enforce and regulate arbitration. Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Lecopulos, 553 F.2d 842 (C.A. NY 1997). By signing the Offer Letter, respondent Klostermann agreed to its terms, including resolving compensation disputes before the American Arbitration Association of New York City. As noted, Klostermann was an experienced businessman familiar with complex contract negotiations and had sufficient time to review the terms of the Offer Letter and raise any objections he may have had. See Arakawa v. Japan Network Group, 56 F. Supp.2d 349, 352 (S.D.NY 1999) [the mere inequality of bargaining power that exists between an employee and employer is insufficient to find an arbitration agreement unenforceable.]

Respondent has provided this Court with no valid reason why the agreement he voluntarily entered into should not be enforced. Rather, both Archer and Klostermann were free to bargain in advance to select the forum in which their disputes would be resolved. AGR Financial v. Ready Holding Corp., 99 F.Supp2d (S.D.NY 1998). Here, "jurisdiction springs from the voluntary act of the nonresident himself who by written contract has obligated himself to arbitrate the controversy in this State." Matter of Liberty Country Wear, 197 Misc. 581, 585 (1950).

Because Christensen is not a party to such case, the decision is not res judicata here, nor is it collateral estoppel, in that although Oce prevailed in such case, Christensen has not had his opportunity to litigate the issues against Oce . The facts in this case, however, are virtually identical to those in Archer Management. The education level of Christensen, the sequence of the execution of the Agreement and the arbitration clause itself in the two cases are indistinguishable. As Archer Management is the decision of another Judge of this Court, it is not binding here. However, this Court finds it persuasive as precedent on the jurisdiction issue, and this Court will follow such case and dismiss Christensen's Cross Motion to Dismiss on Lack of Personal Jurisdiction, and proceed to the next series of issues and defenses raised by Christensen in his Answer. After reviewing such [*3]issues and defenses, the Court finds no basis not to compel arbitration in this case.

Christensen challenges the validity of the Clause, arguing that it was "forced upon him" and, in any event, was later repudiated and/or superceded by Oce 's dispute resolving policy which required arbitration in California. He charges that the Clause is invalid or unenforceable under California Law which he asserts applies to determine the issue. As Christensen seeks to enforce other rights under the Agreement, he avoids claiming that the Agreement itself did not exist or was not signed, but argues that the Clause may be avoided so that the remainder of the Agreement might be enforced in a California court. If the Clause is indeed unenforceable, this Court cannot require arbitration here. In such event, any issue of whether the remainder of the Agreement would be separable or would, as inseparable from the Clause be also unenforceable, would be left for another court in another proceeding.

Christensen also contends that his California lawsuit, commenced by him as a quasi-private attorney-general, prevents this Court from mandating arbitration, and that alleged improper or incomplete details of the Clause render it unenforceable. Finally, Christensen requests that this Court abstain from imposing arbitration under various theories of judicial abstention.

Arbitration clauses are, as a general matter, binding and enforceable in New York; a choice of arbitration forum is a provision commonly included in such clauses. Agreements evidencing a transaction involving commerce which provide for arbitration agreements are also "valid, irrevocable and enforceable, save upon such grounds as may exist at law or in equity for the revocation of any contract" under the Federal Arbitration Act ("FAA") 9 USCA §2. The FAA coverage includes (with exceptions not relevant here) contracts of employment. Circuit City Stores, Inc., v. Adams, 532 US 105 (2001).

As Christensen asserts, the FAA makes it clear that it any ground "as may exists at law or in equity for revocation of any contract" may be invoked as a bar to the enforcement of an arbitration clause. The Court must therefore address Christensen's initial assertion that applying appropriate law a court should decline to enforce the contract.

Such inquiry is a contractual analysis, i.e., did the parties have a valid contract to arbitrate. If they do, they must arbitrate and if they do not, arbitration cannot be compelled. It is for the Court, rather than the arbitrator, to decide these initial questions of whether Oce 's agreement with Christensen to arbitrate is voidable by Christensen.

In determining whether the contract was voidable, the Court must initially determine under which law such decision is to be made - that of New York or California. The FAA subsumes the necessity for such an analysis where a claim that an agreement to arbitrate is not enforceable by reason of its unconsionability under State law. Cap Gemini Ernst & Young, U.S., L.L.C. v. Nackel, 346 F3d 360 (2nd Cir. 2003).^[FN2] In making this choice, as a New York Court, this Court must first look to the New York rules relating to choice law and conflicts of laws.^[FN3] [*4]

Unlike the arbitration agreement in Cap Gemini, supra, the Clause does not specify a choice of law. Accordingly, this Court is left to general New York principles of choice and conflicts of law.

Christensen asserts that New York would, under the situation in this case, apply California law to determine whether the contract to arbitrate, i.e., the Clause, was avoidable. Oce does not seriously challenge this assertion, but argues instead that

the Clause is indeed enforceable both under New York and California laws.^[FN4]

Because the entry into the Agreement was accomplished in California between Oce , an employer with a California office, and Christensen, a California resident, as part of an employment agreement relating to Christensen's duties as a sale manager for the territory of Los Angeles County in California, to be based in such county, the New York doctrine of a "center of gravity" or "grouping of contracts" would apply to this case making California law govern as to whether a contract was formed. In Re Allstate Ins. and Stolary, 81 NY2d 219 (1993). Thus, the claim made by Christensen, that the Clause is unenforceable, must be determined under California law, subject to two exceptions. First is that the Court must apply Federal law instead of California law to the extent Federal law preempts or supercedes California law, and second, in applying California law, this Court may not violate a public policy of New York. Here, there is no controlling New York public policy issue.

Both parties assert that the controlling California precedents are Armendariz v. Foundation Health Psychecare Services, Inc., 24 Cal. 4th 83, 6 P.3d 669, 99 Cal. Rptr.2d 745 (2000) and O'Hare v. Municipal Resources Consultants, 107 Cal. App. 4th 267, 132 Cal. Rptr.2 116 (Cal App. 2d Dist, Div. 4, 2003). Christensen claims these cases support his position that the Clause should be voided, and Oce claims that such cases do not.

In Armendariz his employer attempted to compel him to arbitrate under a pre-employment agreement to arbitrate claims of wrongful termination. The Court found the agreement to arbitrate unconscionable and therefore unenforceable. While in the opinion in Armendariz Court considered the impact of the FAA, it noted that it then was unclear whether the FAA applied to employment contracts,^[FN5] and decided the case on whether the agreement to arbitrate was unconscionable under California law noting that the FAA itself expressly contemplated non-enforcement of an agreement [*5]to arbitrate "upon such grounds as exist at law or in equity for the revocation of any contract."

Among the issues considered in the opinion were Armendariz' claim that violations under the California Fair Employment and Housing Act ("FEHA") were not arbitratable. The Court found that the existence of FEHA claims were irrelevant to the analysis and that if the contract to arbitrate was enforceable, claims under FEHA were also for the arbitrator to determine. Accordingly, under California law Christensen's assertion that he could avoid arbitration because he asserted FEHA claims and was therefore a "private attorney general," is unsustainable in this case.

In finding that the agreement was in fact "unconscionable" and was therefore voidable, the Court set forth a road map under California law for determining when an agreement to arbitrate might be unconscionable. This road map required a two-tier analysis which the Court termed procedural and substantive unconsionability. In applying this analysis, the Court held that both procedural and substantive unconscionablity "must be present in order for a court to refuse to enforce a contract or clause under the doctrine of unconscionability." Id at 114.

Procedural unconscionability focuses on "'oppression' or 'surprise' due to unequal bargaining power." Armendariz at 114. The Court looked at whether the contract was adhesive and found it to be so on the grounds that "[i]t was imposed on employees as a condition or employment and there was no opportunity to negotiate." The Court did not address surprise in this context, but such surprise could arise where the arbitration clause was hidden in small type or in an obscure cross-reference or in a long contract for a simple job. In Armendariz, the Court found procedural unconscionability in that the contract was one of adhesion.

Substantive unconscionability focuses on "overly harsh" or "one-sided results." Id at 114. In Armendariz, the Court found a series of one-sided provisions. They included granting a right to arbitrate to the employer only, and limiting the remedies for the employer's breach. The Court also discussed other supposed failings of the arbitration agreement but addressed them by finding that where a contract to arbitrate contained FEHA claims, an implied obligation was to be read into the agreement to resolve these issues so as to exclude what might otherwise be additional indicia of substantive unconscionability. Under Armendariz this would include an implied employer obligation to pay expenses of the arbitration, to require a written decision adequate to permit judicial review and to provide adequate discovery.

Because this case is proceeding to arbitration, this Court need not address these issues. As the arbitrator may rule on both law and facts, the arbitrator may consider whether the FAA overrules the special California gloss on the obligations of parties who have merely agreed to arbitrate, as set forth in Armendariz.

Christensen also cites O'Hare to show that California would not enforce the Clause because it was unconscionable. The Court in O'Hare refused to enforce the arbitration clause in such case as both substantively and procedurally unconscionable. Armendariz was cited to show that the agreement was procedural unconscionable because there was undue bargaining power on one side, and substantively unconscionable as there was no "mutuality," (i.e., O'Hare had to arbitrate while his employer retained the right to sue), and because the "the costs provision applicable to the arbitration is inconsistent" with the Armendariz requirements. The Court considered, but did not rule, on whether the limited discovery rights under the O'Hare agreement also made the agreement [*6]unconscionable.^[FN6]

Here the Clause is clearly a mutual obligation of Christensen and Oce . Accordingly, the sole basis on which O'Hare could apply to render the Clause unenforceable is that the contract here was negotiated between unequal parties, and therefore as effectively one of the adhesion, would be unconscionable. Such at most would, under California law, constitute "procedural unconscionability." As there would be no basis for a finding of "substantive unconscionability" as also required under California law in order to render an agreement unenforceable, the Clause would stand as enforceable.

O'Hare expressly reviewed the same AAA rule at issue here and expressly considered the proffer of O'Hare's employer at the time to bear all arbitration expenses, as Oce has for this dispute, but found, nonetheless, both that the AAA rules contravened Armendariz and that the agreement of O'Hare's employer to bear all fees, after the agreement to arbitrate was made, could not resurrect an already unconscionable agreement. Although such conclusion in O'Hare was not necessary for its result, as the agreement on its face, and as construed in O'Hare was clearly not mutual, and thus unconscionable for that reason alone, the language relating to costs would seem to apply to this case also had not this case involved a FEHA claim. As it does, the objection to fee issues must vanish. Under Armendariz, California law construes a contract to arbitrate in such circumstances to have implicitly included provisions for conscionable discovery and costs in an arbitration proceeding. ("An arbitration agreement that contains within its scope the arbitration of FEHA claims impliedly obliges the employer to pay all types of costs that are unique to arbitration" Armendariz at 84).

Because this Court has found that the Clause was not unconscionable under the two California cases which the parties have agreed constitute the relevant recent California law on the subject, it is not necessary for this Court to decide whether and, if so, the extent to which the FAA supercedes California rules of unconscionability as a bar to the enforcement of an agreement to arbitrate. The Armendariz court noted only that it was then not clear whether the FAA applied to employment agreements ^[FN7] and that in any event, the provisions fo the FAA relating to excluding from its ambit enforceability on "any ground as may exist at law or equity for the revocation of any contract," allowed California law relating to unconscionability apply. Clearly, this exception was not intended to allow a state to find garden variety arbitration, agreements or even pre-dispute garden variety arbitration agreements per se unconscionable, and thus unenforceable. As the Clause passes muster here, this Court does not have to determine. How far a state may bootstrap its opposition to arbitration by finding common or inherent aspects of arbitration so objectionable so as to circumvent the FAA either by avoiding arbitration agreements generally used elsewhere, or by restrictions by construing arbitration, clauses to add procedural requirements in arbitration significantly more onerous than was meant by Congress in adopting the FAA.

Christensen also argues that his agreement to arbitrate was later repudiated and/or superceded [*7]by Oce 's dispute resolving policy which required arbitration in California. This claim is meritless. Even to the extent such policies would bind Oce , they specifically exclude disputes arising under offer letters as Christensen had signed, which here, included the obligation to arbitrate in New York.

Finally, Christensen's argument that the arbitration clause is somehow too vague to enforce also has no merit. The Clause is about as garden variety an arbitration clause as is possible and is consistent with clauses in many form books. To find such an agreement too vague to enforce would fly in the face of the FAA by voiding what contracting parties across the country have commonly adopted as the usual formulation of an agreement to arbitrate. Further, as the parties have indeed agreed to arbitrate any dispute under the Agreement, any argument as to the meaning of the Clause is a dispute under the Agreement which is in any event left to the arbitrator. The objection is no more than a makeweight.

Christensen also asserts that the rules Oce seeks to apply to the arbitration are not the rules he has agreed to. Here, the Clause specified that the arbitration would be conducted under "the then Current Labor Arbitration Rules of the American Arbitration Association." The AAA has advised that its present rules for this dispute, based on the nature of the dispute, are its National Rules for the Resolution of Employment Disputes, amended July 1, 2004 (the "Current Rules"). Thus, although the Current Rules changes the name of the rules applicable, the Current Rules are the "then Current" Labor Arbitration Rules to which Christensen had agree would apply.

Finally, Christensen urges that this Court "exercise judicial abstention" and allow the California Court to exercise jurisdiction. While couched in the language of abstention, this request is no more than one more attempt to avoid the arbitration in New York to which Christensen had agreed to. Abstention, in any event, is a rarely applied doctrine, invoked only where the forum state has minimal interests in entertaining the proceeding. Here such grounds are not present. Oce is a national company with thousands of employees and many offices, having its headquarters in New York. Accordingly, there is no "minimal contact" analysis which can be made. Further, the FAA mandates that this Court enforce the agreement to arbitrate. This Court has found no authority under such statute to imply or permit abstention from its enforcement.

Further, arbitration in New York is a popular choice in many international and national contacts. New York profits from and promotes such activity as part of its policy to be and remain the world's principle commercial center. This strong New York public policy would be undercut by any decision to abstain from enforcing an arbitration provision or choice of New York forum in an arbitration contract. This Court will therefore not abstain in this case.

Accordingly, this Court finds that there was a binding agreement to arbitrate, and the parties must do so.

Oce 's Petition is granted and Christensen's cross-Motion is denied. Settle Order.

DATED:JUNE 2, 2005

NEW YORK, NEW YORK

Hon. Lewis Bart Stone [*8]

Justice of the Supreme Court