Are mandatory arbitration provisions recognized in your state? If so, are there any limitations to its enforcement?

1. Contract Based Mandatory Arbitration

Arbitration provisions in New York are governed under both Federal and State Law. At the federal level, arbitration is governed by the Federal Arbitration Act of 1925 (“FAA”).[i] Whereas, New York’s specific arbitration law is codified in Article 75 of New York’s Civil Practice Law & Rules (“CPLR”). Mandatory arbitration provisions are recognized in New York State with few employment related exceptions.

Under CPLR § 7515(a)(2), mandatory arbitration provisions are prohibited where, as a condition to the enforcement of the contract or obtaining remedies under the contract, the parties must submit to mandatory arbitration to resolve any allegation or claim of discrimination in violation of laws prohibiting discrimination.[ii] However, CPLR § 7515 is unenforceable to the extent it is inconsistent with federal law per CPLR § 7515(b)(i) & (iii).[iii]

The FAA reigns supreme over the enforceability of arbitration agreements in contracts “involving commerce.” The Supreme Court declared that state laws prohibiting the arbitration of particular categories of claims are at odds with the scope of the FAA, the conflicting rule is displaced by the FAA.[iv]

Pre 2022, several federal district courts held that CPLR § 7515 was preempted by the FAA in employment contracts involving commerce.[v]

The federal “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act,” which applies to claims or disputes arising on or after March 3, 2022, makes CPLR § 7515 “consistent with federal law” to the extent a discrimination case is based on sexual assault or sexual harassment.[vi] The amendment also grants the option of choosing court over arbitration to the named representative of a class or in a collective action alleging sexual misconduct notwithstanding any predispute joint-action waiver.[vii]

However, the amended FAA does not currently apply to other types of discrimination claims such as those based on race, religion, ethnicity or age. Therefore, it is likely that new case law will continue to enforce mandatory arbitration agreements in those areas through the preemption of CPLR § 7515.

2. Mandatory Arbitration Generally

While there is no definitive statewide mandate for arbitration, there are some State and Federal Courts in New York which have enacted mandatory arbitration programs.

With regard to matters subject to the jurisdiction of State Courts in the State of New York, Part 28 of the Rules of the Chief Judge prescribe “Alternative Methods of Dispute Resolution by Arbitration.”[viii]  Pursuant to Section 28.2, the Chief Administrator may establish in any trial court in any county the arbitration program authorized by this Part.

In each county where such an arbitration program is established, and to the extent directed by the Chief Administrator, civil actions for a sum of money only, except those commenced in small claims parts and not subsequently transferred to a regular part of court, that are noticed for trial or commenced in the Supreme Court, County Court, the Civil Court of the City of New York, a District Court or a City Court, on or after the effective date of the order where recovery sought for each cause of action is $6,000 or less, or $10,000 or less in the Civil Court of the City of New York, or such other sum as may be authorized by law, exclusive of costs and interest, shall be heard and decided by a panel of arbitrators. The Chief Administrator may also, at any time, upon the establishment of the program in any particular court or county or thereafter, provide for the submission to arbitration of actions, seeking recovery of such sums, which are pending for trial in those courts on the effective date of the order.

In addition, upon stipulation filed with the clerk of the court where the action was commenced or, if the case was transferred, the clerk of the court to which it has been transferred, any civil action for a sum of money only, pending or thereafter commenced in such courts, including actions removed to a court of limited jurisdiction from the Supreme Court pursuant to CPLR 325(d), regardless of the amount in controversy, shall be arbitrated, and in any such action the arbitration award shall not be limited to the amounts provided in subdivision (b) of this section, or to the monetary jurisdiction of the court. Any stipulation pursuant to this section may set forth agreed facts, defenses waived or similar terms, and to that extent shall replace the pleadings.

With regard to matters subject to the jurisdiction of Federal Courts in the State of New York, each Federal District Court in the State of New York may set its own rules for mandatory arbitration.

The United States District Court for the Eastern District of New York is the only Federal District Court in New York with a mandatory Arbitration program.[ix] Arbitration is mandatory for where money damages do not exceed $150,000.00. The results are binding unless one of the parties requests a trial de novo.

The United States District Court for the Western District of New York does not have a mandatory Arbitration program, but all new civil cases filed in, or transferred to, the Court are referred automatically to ADR/Mediation, unless expressly exempt by the ADR Plan.[x]

The United States District Court for the Southern District of New York does not have a mandatory Arbitration program, but all civil cases other than social security, habeas corpus, and tax cases are eligible for ADR/Mediation, whether assigned to Manhattan or White Plains.  The Board of Judges may, by Administrative Order, direct that certain specified categories of cases shall automatically be submitted to the mediation program. The assigned District Judge or Magistrate Judge may issue a written order exempting a particular case with or without the request of the parties.  [xi]

The United States District Court for the Northern District of New York does not have a mandatory Arbitration program, but it has adopted a mandatory ADR/Mediation program.  This mandatory ADR/Mediation plan applies to civil actions pending as well as newly filed actions, except as otherwise indicated herein.  The Local Rules for voluntary mediation will apply only to Pro Se Cases that proceed through the Assisted Mediation Program.  The following categories of action are exempt from automatic referral to the Mediation program: (1) Habeas Corpus and extraordinary writs; (2) applications to vacate a sentence; (3) social security appeals; (4)  bankruptcy appeals; (5) cases implicating issues of public policy, exclusively or predominantly; (6) IRS summons enforcement actions; (7) government foreclosure actions; (8) civil asset forfeiture; (9) prisoner civil rights actions; (10) civilian Pro Se actions; and (11) any action to enforce a government summons, subpoena or civil investigative demand. [xii]

What is your state’s law, if any, regarding gift cards, subscription services and loyalty programs?

On December 10, 2021, New York State Governor, Kathy Hochul, signed legislation (S.3467-B/A.4629-C) serving to prohibit gift card fees and limiting the expiration date of gift cards.  This bill protects consumers by prohibiting all fees on gift cards and prohibiting gift cards that decline in value over time.  In addition, to further eliminate loss of value to consumers, this bill prohibits expiration dates on gift cards and gift certificates that occur earlier than nine years from the date of issuance and allows for redemption when the remaining balance is less than five dollars.[xiii]

On February 9, 2021, New York State enacted a strict law regarding the provision of automatic renewal and continuous service clauses in paid subscription or purchasing agreements with consumers.  New York General Business Law §§ 527 and 527-a broadly govern any contract for goods or services with “any individual who seeks or acquires, by purchase or lease, any goods, services, money, or credit for personal, family, or household purposes” in which a “plan or arrangement in which a paid subscription or purchasing agreement is automatically renewed at the end of a definite term for a subsequent term,” or in which a “plan or arrangement in which a subscription or purchasing agreement continues until the consumer cancels the service.” In addition to this new law, New York General Obligations Law § 5-903 is an existing law applicable to service contracts for service, maintenance, or repair to or for any real property with auto-renewal periods greater than one (1) month. [xiv]

On December 10, 2022, New York State Senate Bill No. S133B came into effect.  New York State Senate Bill No. S133B serves to amend New York General Business Law § 520-e to give consumers a set grace period to use their credit card reward points when certain changes (e.g., modification, cancellation, closure, or termination) are made to a “reward, loyalty, or other incentive program.”  Under the new law, credit card companies must “inform credit card holders within 45 days if their account or rewards program is modified, cancelled, closed or terminated. Unless the customer has engaged in fraud or misuse of the account, holders will then have 90 days to redeem or exchange their rewards points.”[xv]

[i] See, 9 U.S.C.A.

[ii] See, CPLR § 7515

[iii] See, CPLR § 7515(b)(i) & (iii)

[iv] See, AT & T Mobility LLC v. Concepcion, 2011, 563 U.S. 333, 341, 131 S.Ct. 1740, 1747, 179 L.Ed.2d 742

[v] See, Rollag v. Cowen Inc., 2021 WL 807210 (S.D.N.Y.2021) (federal discrimination claim based on parental status (FMLA)); Gilbert v. Indeed, Inc., 513 F.Supp.3d 374 (S.D.N.Y.2021) (federal and state sexual harassment claims); Whyte v. WeWork Companies, Inc., 2020 WL 3099969 (S.D.N.Y.2020) (state racial and gender discrimination claims). See also Wyche v. KM Systems, Inc., 2021 WL 1535529 (E.D.N.Y.2021).

[vi] See, 9 U.S.C.A. § 404(1)

[vii] See, 9 U.S.C.A. § 402(a)

[viii] See, http://ww2.nycourts.gov/rules/chiefjudge/28.shtml#02

[ix] See, https://www.nyed.uscourts.gov/arbitration

[x] See, https://www.nywd.uscourts.gov/alternative-dispute-resolution

[xi] See, https://www.nysd.uscourts.gov/programs/mediation-adr

[xii] See, https://www.nynd.uscourts.gov/sites/nynd/files/general-ordes/GO47_3.pdf

[xiii] See, https://www.governor.ny.gov/news/governor-hochul-signs-package-legislation-protect-credit-and-gift-card-holders

[xiv] See, https://www.nysenate.gov/legislation/laws/GBS/527-A

[xv] See, https://www.nysenate.gov/legislation/bills/2021/S133