A New York federal district court applied the doctrine of equitable estoppel ordered arbitration of a make-up artist’s sexual harassment and retaliation claims against her employer and its client, ESPN.

In Ragone v. Atlantic Video at Manhattan Center, No. 07 Civ. 6084(JGK), 2008 WL 4058480 (S.D.N.Y. Aug. 29, 2008), Ragone was hired by Atlantic Video (AV) to provide make-up artist services to air talents employed by ESPN on the morning sports show "Cold Pizza." After repeated complaints to AV and ESPN management, Ragone was singled out for termination by ESPN and AV and was later fired. Ragone brought claims of sexual harassment and retaliation against AV and ESPN.

AV and ESPN moved to compel arbitration of Ragone’s claims in accordance with an arbitration agreement contained in employment documents signed when Ragone was hired. Ragone argued that the agreement was unconscionable and ESPN could not enforce the agreement as a non-signatory.

In its substantive unconscionability analysis, the Court noted the presence of a "saving clause" allowing for the severance of any unconscionable provisions, and accepted AV’s agreement to waive and sever any potentially unconscionable statutes of limitations and fee-shifting provisions within the agreement. Ragone also argued that the arbitration agreement was unconscionable because it limited appellate review of arbitral decisions, but the Court interpreted those provisions as valid, still allowing vacatur of awards based on the standard statutory grounds.

As to procedural unconscionability, the Court refused to find the agreement invalid merely because it was presented to Ragone on a "take it or leave it basis." Furthermore, the Court found no evidence that Ragone was pressured, deprived of an opportunity to review, or lacked the capacity to understand the agreement.

Finally, the Court also ordered arbitration of Ragone’s claims against ESPN, despite the fact that ESPN was not a signatory to the arbitration agreement. The Court found the claims asserted against ESPN were "intertwined with the underlying contractual obligations" in the signatories’ contract.

According to the Court, Ragone’s claims against ESPN clearly arose from the same subject matter as those against AV – namely, the alleged harassment by both companies’ employees and refusal by management of both companies to address her complaints. Also, the Court found the requisite "close relationship" existed between ESPN and AV that warranted applying the doctrine of equitable estoppel. Ragone essentially treated the entities as interchangeable in all other parts of her complaint, and the Court found it inequitable to allow Ragone to argue their distinctiveness only to avoid arbitration.

Accordingly, the Court ordered arbitration of all of Ragone’s claims against AV and ESPN, severing only the statute of limitations and fee-splitting provisions in the arbitration agreement.