Brady v. Williams Capital Group, L.P., No. 36 (N.Y. Ct. App., March 25, 2010) – In a case of first impression in New York, the Court of Appeals established the standard for determining whether an arbitration agreement’s provision for the equal sharing of fees and costs precludes an employee from pursuing his or her statutory rights in an arbitral forum. The petitioner, a securities broker who was terminated after earning commissions in the low to mid six-figures for six years in a row, filed a demand for arbitration pursuant to the parties’ contract, seeking damages for race and sex discrimination. The arbitration clause in the parties’ contract provided for arbitration fees to be evenly split; however, the employee claimed it was prohibitively expensive and prevented her from vindicating her statutory rights in an arbitration forum.

The Court of Appeals held that a hearing is required to determine the petitioner’s financial ability to pay one-half of the arbitration costs. In doing so, the court announced the following minimum questions to be employed on a case-by-case basis to determine a litigant’s financial ability to share costs: (1) whether the litigant can pay the arbitration fees and costs; (2) the expected cost differential between arbitration and litigation in court; and (3) whether the cost differential is so substantial that it would deter the bringing of a claim in the arbitral forum. Although a full hearing is not required in all situations, the court said, there should at a minimum be a written record of the findings regarding the litigant’s financial ability.

The Court of Appeals remanded the case for a determination of whether the equal pay provision was unenforceable and if so, the appropriate remedy, which could include severing the provision and enforcing the remainder of the agreement, or giving the petitioner a choice between accepting the equal pay provision and bringing a lawsuit in court.