Sablosky v. Edward S. Gordon Co., Inc., 73 N.Y.2d 133 (1989)

An arbitration agreement supported by consideration is valid even if it lacks mutuality of remedy, meaning one party has the option to litigate while the other is bound to arbitrate.

Summary

Thomas Sablosky, a former commission salesman, sued Edward S. Gordon Company, Inc., for commissions he claimed were owed from a real estate sale. The company moved to compel arbitration based on an arbitration clause in Sablosky’s employment agreement, which allowed the company to elect arbitration while Sablosky was bound to it. The New York Court of Appeals held that the arbitration clause was enforceable, even though it lacked mutuality of remedy, as the overall employment contract was supported by consideration. The court also found no basis for deeming the agreement unconscionable.

Facts

Thomas Sablosky was employed by Edward S. Gordon Company, Inc., as a commission salesman. He claimed he was owed a $3.6 million commission for his role in the sale of the Exxon Building. Sablosky’s employment contract contained an arbitration clause that gave the company the option to demand arbitration for any disputes, while Sablosky did not have the same option. The company moved to stay the lawsuit and compel arbitration.

Procedural History

The Supreme Court granted the company’s motion to compel arbitration. The Appellate Division reversed, holding that the arbitration agreement was unenforceable due to a lack of mutuality of obligation. The Court of Appeals granted the company leave to appeal.

Issue(s)

Whether an employment contract containing an arbitration clause that compels one party to arbitrate but allows the other party the choice of arbitration or litigation is invalid for lack of mutuality of remedy or obligation.

Holding

No, because mutuality of remedy is not required in arbitration contracts as long as the entire agreement is supported by consideration. The court also found the agreement was not unconscionable.

Court’s Reasoning

The Court of Appeals reasoned that the validity of an arbitration agreement should be determined by the laws applicable to contracts generally, and contract law does not require mutuality of remedy. “If there is consideration for the entire agreement that is sufficient; the consideration supports the arbitration option, as it does every other obligation in the agreement.” The court noted that an increasing number of jurisdictions enforce commercial arbitration clauses despite the lack of mutuality of remedies. It distinguished its prior holdings in Hull Dye & Print Works v Riegel Textile Corp. and Matter of Kaye Knitting Mills [Prime Yarn Co.]. The court also addressed the plaintiff’s arguments regarding unconscionability, stating that the arbitration clause was not unreasonable, and the contract was not one of adhesion. The court explained that the real estate brokerage business is bound to generate disputes, and an employer with many employees should be able to protect itself from costly litigation by including an arbitration clause. Concerning unconscionability, the court held: “[a]n unconscionable contract [is] one which ‘is so grossly unreasonable or unconscionable in the light of the mores and business practices of the time and place as to be unenforcible according to its literal terms.’ ” Furthermore, the Court found that the contract was not procedurally unconscionable simply because it was drafted by the employer, as this is common practice. The court concluded that the plaintiff’s claim of potential bias in the arbitration panel was premature.