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In an apparent ruling of first impression, a federal judge in the Northern District of New York has held that an arbitration agreement is unenforceable where an employee can show a likelihood of incurring significant costs that would not be incurred in a judicial forum. Unlike other jurists, Judge David N. Hurd found that the proper analysis is not whether a particular plaintiff can afford the costs of arbitration, but whether those costs are significantly more than would be faced in court. Hurd’s decision in Ball v. SFX Broadcasting, 00-CV-1090, opens the courthouse doors to a woman who signed an arbitration agreement and now wants her dispute litigated. “This clears the way for a nationwide class action by all women employed or previously employed by SFX Broadcasting who were required to sign one of these agreements,” said the plaintiffs’ attorney, John E. Higgins of Cusick, Hacker & Murphy in Albany County, New York. The case involves two women, Karen Ball and Tracy Christopher, who were employees of an Albany radio station when it was purchased by SFX Broadcasting in 1996. As a condition of continued employment, both women were required to sign an employment agreement containing an arbitration clause. Under that clause, all disputes involving termination, discrimination or retaliation must be submitted to binding arbitration under the rules of the American Arbitration Association, with the cost split between the employer and employee. Ball and Christopher both contend that they were forced from their jobs because they became pregnant. They filed suit alleging violations of Title VII of the Civil Rights Act of 1964, 42 U.S.C. �2000e and state law, claiming discrimination based on sex and pregnancy as well as retaliation. Ball unsuccessfully litigated the validity of the arbitration agreement in state court, and is therefore precluded from re-litigating in federal court, but Christopher is entitled to her day in a federal tribunal, Judge Hurd ruled. Judge Hurd said that while the U.S. Supreme Court’s decision this year in Circuit City Stores Inc. v. Adams, 121 S.Ct. 1302, established that an employee’s Title VII claims are subject to arbitration under the Federal Arbitration Act, it left unsettled the question of “what, if any, minimal fairness requirements must be met in order for a court to conclude that an employee is not being compelled to forfeit [substantive rights] in agreeing to the mandatory arbitration.” CIRCUIT COURT RULINGS At least two circuit courts have confronted the issue. In Cole v. Burns International Security Services, 105 F.3d 1465 (1997), the U.S. Court of Appeals for the D.C. Circuit concluded “it would undermine Congress’ intent to prevent employees who are seeking to vindicate statutory rights from gaining access to a judicial forum and then require them to pay for the services of an arbitrator when they would never be required to pay for a judge in court.” The 10th U.S. Circuit Court of Appeals rendered a similar opinion in Shankle v. B-G Maintenance Management of Colorado Inc., 163 F.3d 1230 (1999). Courts within the 2nd Circuit have not reached a consensus. Other courts addressing the question have generally focused on the individual financial situation of a particular plaintiff. Under that analysis, Christopher has shown that as a person newly employed on a commission basis and supporting herself and four children, she cannot afford to pay for arbitration, Judge Hurd said. But Hurd concluded that that is not the question, and went a step further by adopting a new per se rule. “It is held that it is sufficient for an employee seeking to avoid arbitration to show a likelihood that he or she will be responsible for significant arbitrators’ fees, or other costs which would not be incurred in a judicial forum,” Hurd said. “Such a showing is sufficient to demonstrate that the challenged arbitration agreement does not provide an effective mechanism for the vindication of statutory rights.” Higgins said he will move immediately to certify a class of roughly 500 current and former SFX employees “on the question of whether or not that mandatory arbitration agreement has an adverse impact on women generally and pregnant women in particular.” He also said he would either appeal or seek reargument of that portion of the decision dismissing Ball’s complaint. SFX is represented by Eric M. Robinson and Michael T. Rasnick of Winston & Strawn in Manhattan.

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