United States District Court, D. Massachusetts
MEMORANDUM OF DECISION AND ORDER ON DEFENDANT'S
MOTION TO DISMISS AND COMPEL ARBITRATION
Gail Dein United States Magistrate Judge.
plaintiff, Dana Tannatt, brought this action against his
former employer Varonis Systems, Inc. (“Varonis”)
over the validity of his employment agreement. The
plaintiff's suit was originally filed in state court, but
Varonis removed the action to this court on the basis of
diversity jurisdiction. (See Docket No. 1). As
alleged in the Complaint, Tannatt seeks a declaratory
judgment, pursuant to Mass. Gen. Laws ch. 231A, that his
employment agreemen is no longer in effect, is void, and/or
is unenforceable, or, in the alternative, that Varonis is
barred from enforcing any restrictive covenants contained
within the employment agreemen The Complaint also seeks an
order to enjoin arbitration proceedings that Varonis has
initiated New York.
matter is before the court on “Defendant Varonis
Systems, Inc.'s Motion to Dismiss and Compel
Arbitration.” (See Docket No. 6). As discussed
herein, the defendant has established that a valid
arbitration provision exists which delegates the threshold
issue of arbitrability to an arbitrator. Therefore, the
defendant's motion to dismiss and compel arbitration is
ALLOWED IN PART and DENIED IN PART. Specifically, the motion
is ALLOWED as to a determination on the threshold issue of
arbitrability and the case is stayed pending the
arbitrator's decision on arbitrability. The motion is
STATEMENT OF FACTS
court summarizes the facts as alleged in the plaintiff's
complaint. Varonis is a Delaware corporation with its
principal place of business in New York. (Docket No. 1-1
(“Complaint”) ¶ 2). The company does
business in Massachusetts but does not maintain any offices
in the state. (See id. ¶ 5). Varonis hired
Tannatt in 2011 as a sales engineer. (Id. ¶ 4).
Tannatt worked out of his home in North Andover.
(Id. ¶ 5). As a condition of his employment,
Tannatt signed a document called “Varonis Systems, Inc.
At-Will Employment, Confidential Information, Invention
Assignment and Arbitration Agreement”
(“Agreement”) on or about December 13, 2011.
(Id. ¶ 6; Docket No. 1-1, Ex. A). The Agreement
includes restrictive covenants not to compete with Varonis or
solicit any of its customers for a period of 12 months
following the termination of Tannatt's employment with
Varonis. (See Complaint ¶ 7). The Agreement
also states that the plaintiff agrees to arbitrate “any
and all controversies, claims, or disputes . . . arising out
of, relating to, or resulting from [Tannatt's] employment
with [Varonis] . . . .” (Agreement at 9). Under the
Agreement, any such arbitration is to be administered by
Judicial Arbitration & Mediation Services, Inc.
(“JAMS”) in New York, pursuant to New York
lawand JAMS's “Employment
Arbitration Rules & Procedures” (“JAMS
Rules”). (Id.). Further, the Agreement
provides that “arbitration shall be the sole,
exclusive, and final remedy for any dispute between [Tannatt]
and [Varonis].” (Id. at 10). The Agreement
does provide, however, that “any party may also
petition the court for injunctive relief where either party
alleges or claims a violation of the at-will employment,
confidential information, invention assignment, and
arbitration agreement between [Tannatt] and [Varonis] or any
other agreement regarding trade secrets, confidential
information, noncompetition or nonsolicitation.”
2015, Tannatt was promoted to the position of manager of
sales engineering. (Complaint ¶ 11). As part of his
promotion, he took on additional responsibilities, received a
salary increase, and performed far less sales engineering
work himself. (Id.). Approximately one year later,
Tannatt was told to choose between working exclusively as a
manager or focusing entirely on sales engineering work.
(Id. ¶ 12). He chose the latter option and
resigned his management position. (Id.). As a
result, his duties reverted to those he had prior to his
promotion, but his salary remained the same. (Id.).
In January 2018, Tannatt was reassigned to a new sales
representative, which caused his sales production numbers to
drop. (Id. ¶¶ 13, 14). At no point did
Tannatt sign a new employment agreement or restrictive
covenant in connection with these changes to his job
responsibilities. (See id. ¶¶ 11-13).
However, the Agreement does state that “[a]ny
subsequent change or changes in [Tannatt's] duties,
salary, or compensation will not affect the validity or scope
of this Agreement.” (Agreement at 11).
2018, Tannatt resigned from Varonis and began a new job with
SailPoint Technologies, Inc. (“Sailpoint”).
(Complaint ¶ 15). Varonis sent a letter to the plaintiff
which asserted that SailPoint was a competitor and sought to
enforce the non-competition provision of the Agreement.
(Id. ¶ 17). Tannatt refused to resign from
SailPoint. (Id. ¶ 18). Pursuant to the
Agreement's arbitration provision, Varonis submitted a
demand for arbitration to JAMS in New York, alleging two
counts of breach of contract. (Id. ¶ 18;
see Docket No. 1-2 at 15-16).
response, Tannatt filed this declaratory judgment action. He
contends not only that the Agreement is entirely
unenforceable due to substantial changes in his employment
since he signed the contract, but also that arbitration in
New York would preclude him from effectively defending
against claims by Varonis.
facts will be provided below where appropriate.
Federal Arbitration Act (FAA) applies to any “written
provision in . . . a contract evidencing a transaction
involving commerce to settle by arbitration a controversy
thereafter arising out of such contract . . . .” 9
U.S.C. § 2. See Circuit City Stores, Inc. v.
Adams, 532 U.S. 105, 113, 121 S.Ct. 1302, 1308, 149
L.Ed.2d 234 (2001) (holding that employment contracts are
within the scope of § 2 of the FAA). Under the FAA, a
court must determine whether a valid arbitration agreement
exists before referring the dispute to an arbitrator.
Henry Schein, Inc. v. Archer & White Sales,
Inc., 139 S.Ct. 524, 530 (2019). This inquiry is
separate and severable from the issue of whether the contract
as a whole - or other provisions contained therein - is
valid. See Buckeye Check Cashing, Inc. v. Cardegna,
546 U.S. 440, 444-46, 126 S.Ct. 1204, 1208-09, 163 L.Ed.2d
to Pursue a Declaratory Judgment Action
initial matter, the plaintiff contends that the FAA does not
eclipse his right to bring, and pursue to conclusion, a
declaratory judgment action separate and apart from the
arbitration proceedings. The plaintiff is mistaken. Section 2
of the FAA embodies “a national policy favoring
arbitration, ” and with its passage, Congress
“withdrew the power of the states to require a judicial
forum for the resolution of claims which the contracting
parties agreed to resolve by arbitration.”
Southland Corp. v. Keating, 465 U.S. 1, 10, 104
S.Ct. 852, 858, 79 L.Ed.2d 1 (1984). In other words, bringing
a claim via a declaratory judgment action does not allow a
litigant to evade the FAA if the underlying dispute falls
within the reach of the arbitration provision. See
Aeronaves de Mexico, S. A. v. Triangle Aviation Servs.,
Inc., 389 F.Supp. 1388, 1391 (S.D.N.Y. 1974),
aff'd,515 F.2d 504 (2d Cir. 1975) (“Where