First Circuit Remands NY Life Racism Case to FINRA Arbitration

March 31, 2021

Fourteen-year veteran New York Life employee Ketler Bosse was the company's first African-American District Agent. Following his January 15, 2016 termination, he filed a Complaint on January 7, 2019, in the United States District Court for the District of New Hampshire ("DNH") against various New York Life entities asserting discrimination and retaliation under 42 U.S.C. § 1981, conspiracy to interfere with civil rights under 42 U.S.C. § 1985, and breach of contract under 42 U.S.C. § 1981 additionally, Bosse asserted state law claims including breach of the covenant of good faith and fair dealing, fraud, wrongful termination, tortious interference with economic advantage, violation of New Hampshire's Consumer Protection Act (RSA 358-A), breach of fiduciary duty, unjust enrichment, quantum meruit, conversion, defamation per quod, and defamation per se. In response to Bosse's federal Complaint, the New York Life entities moved to remand the dispute to arbitration before the Financial Industry Regulatory Authority ("FINRA"), and to dismiss/stay Bosse's Complaint, or, in the alternative, to dismiss Bosse's claim that New York Life conspired to interfere with his civil rights for failure to state a claim. Ketler Bosse, Plaintiff, v. New York Life Insurance Company, New York Life Insurance and Annuity Corp., and New York Life Insurance Company of Arizona, Defendants (Order, DNH, 19-CV-016, Opinion No. 2019) (the "DNH Order").

2001 Agent Contract

In 2001, Bosse began working for NY Life as a commissioned agent pursuant to an Agent's Contract authorizing him to solicit individual policies for life insurance, annuity, and health insurance, and for group insurance and annuity. The Agent's Contract did not contain an arbitration provision. 

2004 Partner's Employment Agreement

In 2004, Bosse entered into a Partner's Employment Agreement, which, in part, provided that:

The Partner and New York Life agree that any dispute, claim or controversy arising between them, including those alleging employment discrimination (including sexual harassment and age and race discrimination) in violation of a statute (hereinafter "the Claim"), as well as any dispute as to whether such Claim is arbitrable, shall be resolved by an arbitration proceeding administered by the NASD in accordance with its arbitration rules.

2005 Return to Agent Role

In 2005, Bosse returned to his former role as a NY Life Agent; and, in 2013, he became a NY Life District Agent. Unclear is whether a District Agent Agreement was executed by either party. 

2016 Termination

As explained in pertinent part in the DNH Order:

Bosse was New York Life's first African-American District Agent. The agents he hired were racially diverse. According to Bosse, that racial diversity provoked a strong reaction of racial animus and discrimination from some New York Life associates. As a result, Bosse alleges that the company: failed to process and underwrite insurance applications submitted by Bosse and his agents; engaged in back billing that undermined Bosse and his agents; and "stole or drove away" agents Bosse hired to work in his office. Compl. ¶ 41. Bosse further alleges that the company treated him differently than similarly situated New York Life District Agents who were white, and failed to investigate the disparate treatment complaints he made. 

On January 15, 2016, New York Life terminated Bosse's District Agent Contract, purportedly based on inaccuracies found in the electronic application process related to a particular client. Bosse contends that the termination was retaliatory, that the reasons given by New York Life for termination were pretextual, and that his contract was actually terminated based on racial discrimination. He further contends that, following termination, New York Life defamed him to his New York Life clients, many of whom then ceased doing business with him.

Pages 4 - 5 of the DNH Order

NY Life Seek FINRA Arbitration

In response to Bosse's federal Complaint, NY Life argues that his claims must be dismissed in favor of FINRA Arbitration, as is purportedly required under the 2004 Partner's Agreement. DNH denied the NY Life Defendants' Motion to Compel Arbitration and to Stay the Proceedings, and further denied their Motion to Dismiss. 

A Matter of Survival: the 2004 Partner's Agreement

Initially, DNH sets the table as to whether the 2004 Partner's Agreement governs the dispute and compels remand to FINRA Arbitration:

The Partner's Agreement upon which defendants rely was terminated in 2005 when Bosse transitioned back to an Agent's position. However, the Partner's Agreement is unambiguous in providing that the arbitration clause survives termination of that agreement. Bosse notes that the facts and circumstances that gave rise to this suit occurred over 12 years after the Partner's Agreement expired, while he was working as an independent contractor under two different agreements with the defendants, neither of which included an arbitration obligation. He argues that, even if the arbitration clause "survived termination" of the Partner's Agreement, it cannot reasonably be applied to these claims because they are completely unrelated and unconnected to the Partner's Agreement, and because they arose so long after termination of that contract.

Page 7 of the DNH Order

As perceived by the Court, the Defendants argued that 2004 Partner's Agreement's :

[A]rbitration clause is so expansive that it literally covers any conceivable dispute that might arise between the contracting parties at any time in the future, and under any set of facts or circumstances. Under that reading, Bosse's current claims would be covered. They are, after all, disputes with New York Life, and they have arisen in time, and both the nature of the disputes and the time of accrual, or assertion, are unimportant given the expansive language used. The language used also excludes any "relatedness" requirement. That is, there are no words used that explicitly limit the clause's application to only those disputes bearing some relationship to or having some connection to the contract in which it is found. The arbitration provision, by its terms, purports to apply to "any dispute, claim or controversy arising between" the parties.

Page 10 of the DNH Order

DNH declined to find the existence of a "valid" agreement to arbitrate because the court viewed the 2004 Partner's Agreement as no longer controlling at the time of Bosse's termination:

Such a broad interpretation, however, is problematic for several reasons. First, as the Supreme Court has noted, "[t]he object of an arbitration clause is to implement a contract, not to transcend it." Litton Fin. Printing Div., a Div. of Litton Bus. Sys., Inc. v. N.L.R.B., 501 U.S. 190, 205 (1991). No reasonable person in either Bosse's position or New York Life's position would have understood the 2004 Partner's Agreement arbitration provision (and survival provision) to require arbitration of any and all future claims of whatever nature or type, no matter how unrelated to the Partner's Agreement, and no matter how distant in the future the claim arose. For example, a reasonable person signing the Partner's Agreement would hardly think that a slip and fall injury suffered by plaintiff on New York Life property 30 years in the future, and 25 years after any work or other relationship terminated, would be subject to arbitration under that particular clause. Defendants' current position - that the Partner's Agreement obligates the parties to arbitrate any and every dispute between them, no matter what it is and no matter when it arises - is unbounded to the point of absurdity. Defendants' proffered construction of the arbitration clause would not only transcend the purpose and terms of the Partner's Agreement, but would operate to deprive employees of all future rights to either a jury trial or court resolution of completely unrelated matters arising generations in the future.

Page 11 - 12 of the DNH Order

The Conspiracy

Among the substantive elements of Bosse's case was his allegation of a conspiracy against him -- as characterized by DNH:

Bosse alleges that James Robbins, New York Life's Director of Operations for the New Hampshire Office, used his position to influence other New York Life employees, including, but not limited to, New York Life Compliance Office and Senior Associate, Nicholas Inglese, past Managing Partner of New York Life's New Hampshire Office, Steven Irish, and others, in a civil conspiracy to intentionally deprive Bosse of his right to equal protection under the law." Compl. ¶ 132. In support of that allegation, Bosse asserts that Robbins, Irish and Inglese: 

(1) delay[ed] processing orders for Mr. Bosse and his new agents who depended on that income; (2) maliciously den[ied] Mr. Bosse advance commissions, thereby taking away his income and livelihood; (3) allow[ed] New York Life agents working out of the New Hampshire office to take clients from Mr. Bosse to give [the white agents] a chance, and/or forcing Mr. Bosse to share his commissions with white agents;" (4) attribute[ed] the credit of hiring new and experienced agents groomed by Mr. Bosse to white agents; (5) causing multiple withdrawals from client accounts without Mr. Bosse's advance knowledge, causing those clients to cut ties with Mr. Bosse; and (6) publicly and privately disparaging or allowing others to publicly and privately disparage Mr. Bosse's diverse ethnic agents, including but not limited to, using racial slurs when referring to them. Compl. p. 3. . . .

Page 18 of the DNH Order

Intracorporate-Conspiracy Doctrine

Defendants assert that Bosse's conspiracy claim must be dismissed for failure to implicate two or more defendants (in contradistinction to his alleged reference to three NY Life employees) -- thus invoking the "intracorporate-conspiracy doctrine," which purportedly establishes that an agreement among agents of a common legal entity when in furtherance of their official capacities, does not rise to the level of an unlawful conspiracy. The gist of that position is that the acts of agents are attributed to a common principal, thus extinguishing the multiplicity of conspirators required to meet that circumstance. 

It is well established that there cannot be a conspiracy of "one," and, as such, the intracorporate-conspiracy doctrine attempts to extend that jurisprudence by invoking the legal fiction that the acts of multiple corporate agents should be attributed to the unity of the corporate entity. Notwithstanding that such a view may, at times, be reasonable, DNH deems the cited doctrine as unsettled on a national level, and declines to apply it. In reaching its decision, DNH notes the recent pronouncement of its parent1st Circuit that:

expressed doubt about applying the doctrine outside the antitrust context. See, Stathos v. Bowden, 728 F.2d 15, 20-21 (1st Cir. 1984) ("We doubt that this 'intracorporate' exception should be read broadly. The cases employing it have rested in large part on precedent drawn from the antitrust field."). On the other hand, however, the court has applied the principle in a case not much different than this one. . .

Defendants Appeal to 1Cir

Following DNH's refusal to enforce the arbitration agreement by referring the dispute to an arbitrator for the determination of whether the disputes were arbitrable, Defendants appealed to the United States Court of Appeals for the First Circuit ("1Cir"). 
Ketler Bosse, Plaintiff/Appellee, v. New York Life Insurance Company, New York Life Insurance and Annuity Corp., and New York Life Insurance Company of Arizona, Defendants/Appellants (Opinion, 1Cir, 19-2240 /  March 30, 2021) (Chief Judge Howard and Judge Lynch for the Majority; Judge Barron Dissenting) ("1Cir Opinion")

In framing the appeal and clearly telegraphing its finding, the Majority stated:

[N]ew York Life said the arbitration clauses survived under an explicit "Survival" clause in the parties' Employment Agreement and asked the court to compel arbitration and stay or dismiss the lawsuit. 

The district court refused to do either. We hold that the district court's reasoning contravened the holdings in Supreme Court decisions. The clause delegating all disputes about arbitrability is clear, unmistakable, and unambiguous. It should have been enforced on those terms. And even if there were any ambiguity, and we see none, the presumption in favor of arbitrability would lead to the same result. Reversal is required under the Federal Arbitration Act ("FAA") and Supreme Court opinions interpreting the FAA, and none of Bossé's other arguments would permit affirmance. 

at Page 4 of the 1Cir Opinion

Unmistakably and Unambiguously

In dismissing the brunt of Bosse's arguments, 1Cir offers this overview [Ed:footnotes omitted]:

Bossé does not argue that the arbitration agreement was invalidly formed. Nor does he challenge the validity or formation of the delegation clause specifically. Rather, he asserts that the arbitration agreement and the delegation clause do not apply to his particular claims. The district court reasoned that the issue was for it, not the arbitrator, to decide and then determined the issue, in agreement with Bossé. See Bossé, 2019 WL 5967204, at *4-5.

We hold that the text of the parties' agreement clearly, unmistakably, and unambiguously delegates the arbitrability dispute at issue here to the arbitrator. The district court erred in not enforcing that agreement according to its own language and in not referring the dispute about whether Bossé's claims are arbitrable to the arbitrator. 

at Pages 15 - 16 of the 1Cir Opinion

Circular Reasoning

Pointedly, 1Cir disagreed with Bosse's framing of the issue of the mechanics by which a threshold determination of arbitrability is handled:

[H]e argues the question of the scope of the delegation clause is distinct from but related to the scope of the arbitration agreement. His attempted atomization of the arbitrability question is prohibited by the Supreme Court's reasoning in Henry Schein. The question of the scope of the delegation clause cannot be separated from the question of the scope of the arbitration agreement as a whole here. His argument has it backwards.  

. . .

[B]ossé's reasoning is thus circular: it requires the court to consider for itself whether a particular claim falls within the scope of the arbitration agreement and delegation clause in order to determine whether the dispute should be submitted to the arbitrator to determine its arbitrability. At that point, the arbitrability question has already been answered by the court, and the delegation clause here is rendered meaningless. This is precisely the type of "short-circuit[ing] [of] the process" which concerned the Supreme Court in Henry Schein. 139 S. Ct. at 527. It is merely an application of the "wholly groundless exception" under a different guise. See id. at 528-31. 

at Pages 20 - 21 of the 1Cir Opinion

Accordingly, 1Cir reversed DNH, stayed the federal court proceeding, and remanded the matter to arbitration.

Judge Barron Dissents

In his Dissent, Judge Barron preliminarily frames his concerns as follows:

Under the terms of the "Employment Agreement," "[t]he Partner and New York Life" plainly agreed that "any dispute, claim or controversy arising between them, including those alleging employment discrimination (including sexual harassment and age and race discrimination) in violation of a statute (hereinafter 'the Claim') . . . shall be resolved by [] arbitration." Thus, they agreed that "the Claim" -- defined as "any dispute, claim or controversy arising between them" -- "shall be resolved by [] arbitration." (emphasis added). But, what does "the Claim" encompass? Does it encompass even a lawsuit that seeks recovery based on alleged actionable misconduct by New York Life that first occurred only after the Partner who signed the Employment Agreement was no longer a Partner at all? 

If the Employment Agreement said nothing more than what I have just quoted from it, then it would be clear that the parties had left the answer to that question about the meaning of "the Claim" -- and, thus, about the scope of the arbitration agreement that they had reached -- to a court to resolve. But, the majority points out, the Employment Agreement also contains what is known as a delegation clause, which operates as an ancillary agreement to arbitrate certain specified matters concerning arbitrability. See Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524, 529 (2019). And, that delegation clause provides that "[t]he - 27 - Partner and New York Life agree that . . . any dispute as to whether such Claim is arbitrable[] shall be resolved by [] arbitration."

at Pages 26 - 27 of the 1Cir Opinion 

In rejecting the Majority's finding that the inclusion of a delegation clause in the Employment Agreement required that the arbitrability of the racial discrimination issues be presented to an arbitrator, Judge Barron explained that the Marjority's conclusion:

derives from a superficially plausible but, in my view, ultimately textually untenable construction of the delegation clause. Nor can I agree with New York Life's contention that, even if the parties to the Employment Agreement did not agree to delegate the question regarding the scope of the arbitration agreement to an arbitrator to resolve, the District Court erred in resolving that question as it did. 

at Page 27 of the 1Cir Opinion 

In a lovely bit of prose, Barron further asserts that:

I quite agree that it is sensible to presume that the parties who draft contracts do so more after the fashion of Bob Ross than M.C. Escher. There is nothing circular, however, about a delegation clause that requires a court to first determine the scope of "the Claim" in the arbitration agreement before enforcing the putative delegation clause. Contrary to the majority's assertion, such a delegation clause simply reflects the fact that the parties who drafted it intended that it would encompass only those disputes that concern the arbitrability of the class of "dispute[s], claim[s] or controvers[ies]" that the arbitration agreement itself encompasses and not disputes over what that class encompasses. 

at Page 33 of the 1Cir Opinion