Forum selection clause in employment agreement sends Title VII case to California

The Court of Appeals has ruled that a Title VII plaintiff who signed a forum selection clause when she commenced employment in New York must litigate his claim in California.

The case is DeBello v. VolumeCocomo Apparel, a summary order issued on December 28. Plaintiff worked for a clothing manufacturer for an annual salary of $360,000. The salary was reduced over time and plaintiff was eventually fired without explanation after he complained about workplace harassment over his perceived sexual orientation. He filed suit in the Southern District of New York, but the trial case granted defendant's motion to transfer the case to state court in California pursuant to a forum selection clause that plaintiff signed, stating that any dispute arising from the employment relationship must be venued in the Superior Court in Los Angeles. 

A forum selection clause is presumptively enforceable if it was ʺreasonably communicated to the party resisting enforcement,ʺ has ʺmandatory force,ʺ and ʺcovers the claims and parties involved in the dispute.ʺ Plaintiffs can overcome that presumption if the clause ʺwould be unreasonable or unjust.ʺ The Second Circuit says:

We decline to enforce a forum selection clause if: ʺʹ(1) its incorporation was the result of fraud or overreaching; (2) the law to be applied in the selected forum is fundamentally unfair; (3) enforcement contravenes a strong public policy of the forumʹ in which suit is brought; ʹor (4) trial in the selected forum will be so difficult and inconvenient that the plaintiff effectively will be deprived of his day in court.ʹʺ

Plaintiff chooses option three, the public policy objection, arguing that "the forum selection clause at issue contravenes a strong public policy, reflected in Title VIIʹs special venue provision, for litigating employment discrimination claims in a local venue affected by the discriminatory acts." As it happens, Title VII provides for venue in judicial districts where the discrimination took place, where the relevant documents are located and where the plaintiff would have worked but for the discrimination. If the employer is not located in any of those districts, then venue is proper in the district where the employer's principal office is located.

The Second Circuit notes that while no circuit court ruling is on point, district court cases have held that forum selection clauses are not enforceable when they conflict with Title VII's special venue provision.

But in this case, "DeBelloʹs public policy argument does not overcome the presumption that 'a valid forum‐selection clause [should be] given controlling weight in all but the most exceptional cases.' . . . We are not persuaded here that the freely‐bargained forum selection clause is unenforceable based solely on its conflict with a policy preference reflected in Title VIIʹs special venue provision. Although DeBello is deprived of his choice of venue, he retains his right to litigate his discrimination claims." And, the Court of Appeals says, "DeBello, an experienced professional who was hired for an executive position at a relatively high salary, willingly entered into his employment agreement knowing it contained a forum selection clause, and he did so after he had the opportunity to consult with an attorney and make changes to the Agreement. VolumeCocomo is headquartered in Los Angeles and DeBello regularly interacted with VolumeCocomoʹs California‐based employees."

A primer on "John Doe" police litigation

A potential client walks into your office because she wants to sue the police, who assaulted her for no reason. The problem is that you don't know who the officers are. Lawsuits have to identify the defendants by name. If you don't know their names, how do you proceed?

The case is Barrett v. City of Newburgh, a summary order decided on December 21. The answer is that you have to name the defendants as John or Jane Doe. Eventually, you have to name them before the statute of limitations runs out, though there are some exceptions. There is relatively little guidance on John Doe litigation. This case provides a primer.

Plaintiff had a confrontation with the police. She sued the City and John Doe defendants. Under Rule 15(c)(1)(c), "lack of knowledge of a John Doe defendant's name does not constitute a mistake of identity," which means you have to name them before the statute of limitations runs out. But under CPLR 1024, a plaintiff who identifies a John Doe defendant by name can do so outside the statute of limitations if he exercises "due diligence, prior to the running of the statute of limitations, to identify the defendant by name" and he describes the John Doe party in such a way that the correct party is fairly apprises that he is the correct defendant.

The Court of Appeals (Raggi, Jacobs and Droney) notes that the due diligence standard "is not forgiving." The plaintiff has to get moving on this as soon as he files the complaint. The Second Circuit cites federal trial-level and state appellate rulings that bear this out. In the end, "A plaintiff exercising due diligence will take concrete and timely steps to ascertain an officer defendants' identity, for example by submitting multiple discovery demands" or FOIL requests.

The Second Circuit says plaintiff did not exercise due diligence. The Monell claim against the City was dismissed in March 2014. In March 2015, plaintiff filed formal discovery demands on the City's lawyer for police reports relating to the incident. The City did not respond to this, so plaintiff asked again in July 2015. Again, nothing, so she served a subpoena duces tecum on the Police Chief for this information, which finally arrived "months later." The Court thinks the City should have provided these names sooner. But the focus here is on plaintiff. While "she pursued at least avenues to identify the officers," "for reasons not clear to the Court, Barrett waited more than two years after the events took place to begin to inquire into the names of the defendant Does." This sequence convinces the Court of Appeals that the district court did not abuse its discretion in denying the motion to file an amended complaint that would have named the John Doe defendants.

The "situation" put defendant on constructive notice of sexual harassment

I don't think the Second Circuit has issued a major sexual harassment ruling this year. This case comes closest, but it's a summary order with limited precedential value. Still, its an interesting ruling that covers employer liability for co-worker sexual harassment.

The case is MacCluskey v. University of Connecticut Health Center, issued on December 19. Plaintiff was a dental assistant. In 2008, she began working with a dentist, Dr. Young, who was disciplined for sexually harassment in 2000 and given a "last chance agreement" that ordered him to see a psychiatrist and said any further unwanted sexual behavior could result in his termination. After Dr. Young made unwanted sexual advances on plaintiff, she told two co-workers who in turn told a supervisor, Gendell, who then asked plaintiff about this "situation." Plaintiff said there was in fact a "situation" but said she had it under control. Gendell did not know about the last-chance agreement. Later on, Dr. Young again sexually harassed plaintiff, this time putting his hand up her shirt. After management investigated, Dr. Young resigned to avoid termination.

The case went to trial and the jury awarded plaintiff $200,000. The judge reduced it to $125,000. The Court of Appeals (Parker, Lynch and Chin) upholds the verdict, reasoning as follows:

While the employer took immediate action once it found out about the second round of sexual harassment against plaintiff, defendant did not exercise reasonable care to prevent the harassment because it had constructive notice of the harassment, "that is, it should have known about the harassment in the exercise of reasonable care." Plaintiff's supervisors should have known about the last-chance agreement. Their lack of knowledge of the agreement was negligent on defendant's part. Management should have been monitoring Dr. Young to ensure he did not violate that agreement, particularly since he was working closely with plaintiff. When plaintiff complained about the "situation," Gendell should have taken that information seriously and asked follow-up questions. His failure to do so supports the liability verdict.

The Court adds, "There was enough notice that Gendell was prompted to inquire, and instead of asking an informal question in a hallway, she should have conducted a deeper inquiry. Moreover, she should have known about Young's earlier conduct and the last chance agreement, and that knowledge surely would have provided reason for a more probing inquiry" when defendant "became aware there was a 'situation.'"

FLSA claims are arbitrable

Arbitration is the name of the game these days. Employers like arbitration clauses because they take the case away from the jury and in theory are less expensive to litigate. The Supreme Court has been upholding arbitration claims left and right, in the context of employment discrimination and consumer protection suits, so much that many critics think that certain now-legal arbitration clauses will dissuade legitimate plaintiffs from proceeding to arbitration because their claims are not valuable enough without the class actions that arbitration clauses sometimes prohibit. The issue in this case is whether wage and hour cases under the Fair Labor Standards Act can be sent into forced arbitration.

The case is Rodriguez-Depena v. Parts Authority, decided on December 12. The Court of Appeals does not get into the facts other than to say plaintiff's employment contract said that any dispute "arising out of the contract" must be arbitrated. Is that legal? Yes, says the Second Circuit (Newman, Calabresi and Pooler).

The Court starts off by noting that "statutory claims are arbitrable unless Congress 'has evinced an intention to preclude a waiver of judicial remedies for the statutory rights at issue." The Supreme Court said that in Gilmer v. Interstate, 500 U.S. 20 (1991), a case brought under the Age Discrimination in Employment Act. Under Gilmer, age discrimination claims are arbitrable. So are FLSA claims, the Court now holds.

We don't have much analysis from the Second Circuit on this issue. Instead, the Court adopts Judge Weinstein's reasoning in Bynum v. Maplebear Inc., 160 F. Supp. 2d 527 (E.D.N.Y. 2016). So if you want to know the rationale for the holding in this case, you have to read Bynum. In that case, Judge Weinstein notes that "According to general principles of contract law, 'a party is bound by the provisions of a contract that he signs, unless he can show special circumstances that would relieve him of such an obligation.'" In addition, "The federal policy favoring arbitration extends to the enforcement of agreements to arbitrate claims founded on statutory rights." With these settled propositions behind us, you know the result:

The decisions of the Supreme Court, as well as of courts both within and outside this circuit, indicate that valid arbitration agreements subjecting individual FLSA claims to arbitration must be enforced in accordance with the FAA. The Supreme Court has declared: "`[b]y agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute; it only submits to their resolution in an arbitral, rather than a judicial, forum.'" Where the arbitration procedure provided would be unfair to the worker, the court may, as in this case, take into account protective equities and law due to the plaintiff under the FLSA.

Court denies public employee speech case

This First Amendment retaliation case holds that a computer specialist at an update NY school district cannot bring a claim because his speech was not protected under the First Amendment.

The case is Holmes v. Schoharie Central School District, a summary order decided on December 13. Plaintiff's job title was computer support technician. A school principal, Gillis had a legal dispute with the district. Plaintiff agreed to speak up on Gillis's behalf and agreed to testify as a character witness on her behalf. When the school district received an e-discovery request from Gillis's attorney, the district did not tell Holmes about this. Holmes then agreed to testify as a character witness for Gillis. He also complied with a subpoena from Gillis's attorney requesting an email archive from the former superintendent. After all this happened, the district retaliated against Holmes.

So what's it all mean? Holmes cannot proceed with a First Amendment lawsuit unless he spoke on a matter of public importance. He must also speak as a citizen and not as an employee. Employee speech is not protected if the plaintiff speaks pursuant to his job duties. So that the comptroller's speech about wasted money is not free speech. The comptroller's speech about corruption in some other part of the district is free speech.

At oral argument in this case, Holmes's lawyer said his speech was protected because he turned over the materials on his own, not pursuant to his job duties. He also argued that his actions were contrary to the district's interests, further taking the speech away from his job duties. The Court of Appeals (Livingston, Cabranes and Goldberg (visiting judge)) disagrees, treating this as a traditional speech case where the plaintiff merely spoke pursuant to his duties. "As the computer support technician, it was well within the scope of Holmes's ordinary duties to respond to a subpoena for electronic documentation." (The Court does not deal with plaintiff's other speech acts). That makes plaintiff's speech work speech, not citizen speech. The case is dismissed.

Good-faith exception makes unlawful search legal under Fourth Amendment

This case reminds us that the Supreme Court tells the lower courts what to do, and that the law changes over time, which means the Court of Appeals must determine whether its precedents remain good law after the Supreme Court issues a ruling. In this search and seizure case, the law did change post-Supreme Court, but the defendant still loses the appeal.

The case is U.S. v. Gomez, decided on December 5. The police stopped Gomez after surveilling him for drug trafficking. for traffic violations. When the police stopped Gomez, he seemed nervous. Shortly after the police told Gomez they were conducting an investigation into heroin and firearms in the City of Hartford, they asked Gomez questions relating to the traffic stop, they asked if they could search the car. Gomez consented to the search, which revealed narcotics.

In 2005, the Supreme Court said that "a seizure that is justified solely by the interest in issuing a warning ticket to the driver can become unlawful if it is prolonged beyond the time reasonably required to complete the mission." That case was Illinois v. Caballes. A few years later, in Arizona v. Johnson, the Supreme Court said "a stop remains lawful so long as such inquiries do not measurably extend the duration of the stop." After the lower federal courts issued conflicting rulings about how long or short the stop must be to trigger Fourth Amendment protections, the Supreme Court in Rodriguez v. United States (2015) said "the critical question is not whether the unrelated investigation occurs before or after the officer issues a ticket, but whether conducting the unrelated investigation prolongs -- i.e. adds time to -- the stop." This means that "an officer does not earn bonus time to pursue an unrelated criminal investigation by completing all traffic-related tasks expeditiously because the reasonableness of a seizure . . . depends on wheat the police in fact do."

This means that, under Rodriquez, prior Second Circuit case law on this issue is abrogated, that is, it no longer remains good law. Any prolonged police stop, no matter how brief, violates the Fourth Amendment. The stop in this case, then, was unconstitutional because "from the moment Campbell first approached the black Honda, his questioning detoured from the mission of the stop (Gomez's traffic violations" to the DEA's heroin-trafficking investigation." Good new for Gomez.

Actually, bad news for Gomez. The Second Circuit (Droney, Parker and Wesley) goes on to hold that the "good faith" exception under the Fourth Amendment makes the search legal. The police can invoke the good faith" rule if they are relying on old case law that was objectively reasonable at the time but no longer remains good law. Since suppressing the evidence in those circumstances would not deter bad police work, the search will stand up in court. That is the case here, and the conviction is affirmed on appeal.

Hearst interns not entitled to salary under the FLSA

The Court of Appeals over the last year or so has clarified the rules governing when interns are entitled to salary under the Fair Labor Standards Act. So far, the Court has been ruling against the interns. It does so in this case as well.

The case is Wang v. Hearst Corporation, decided on December 8. Here are the standards governing when interns are really employees and are entitled to payment for their services:

1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa;

2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands‐on training provided by educational institutions;

3. The extent to which the internship is tied to the internʹs formal education program by integrated coursework or the receipt of academic credit;

4. The extent to which the internship accommodates the internʹs academic commitments by corresponding to the academic calendar;

5. The extent to which the internshipʹs duration is limited to the period in which the internship provides the intern with beneficial learning;

6. The extent to which the internʹs work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern;

7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

This test derives from Glatt v. Fox Searchlight Pictures, 811 F.3d 528 (2d Cir. 2016), which the principle case in the Second Circuit on this case. The multiple plaintiffs in this particular case worked for Hearst publications and were interested in careers in fashion. One interned for Cosmopolitan. They did perform tasks relating to their professional pursuits and gained valuable knowledge and skills. But they also complained many of their duties were menial and repetitive, did not receive close supervision or guidance and there was little formal training. They mastered most of their tasks within a few weeks but did the same work for the rest of their internships.

So are they interns or employees under the FLSA? The Court of Appeals (Jacobs, Cabranes and Wesley) says factors 1 and 7 favor Hearst because plaintiffs did not expect payment or entitlement to a job.

As for factor 2 (training), the Court says plaintiffs "would . . . limit the discussion of beneficial training . . . to education that resembles university pedagogy to the exclusion of tasks that apply specific skills to the professional environment." That Court does not see it that way. "Training" under the Glatt test "clearly contemplates that training opportunities offered to the intern include products of experiences on the job." While plaintiffs tacitly assume that professions, trades and arts are or should be just like school, "many useful internships are designed to correct that impression."

Factors 3 and 4, dealing with academic integration and the academic calendar, favors Hearst for most of the interns because for one, the internship was a graduation requirement, and for another, the internship meshed with her academic major.

Moving to factor 5, this also favors Hearst because "practical skill may entail practice, and an intern gains familiarity with an industry by day to day professional experience."  As for favor 6 -- which considers the extent to which an intern's work complements the work of paid employees or displaces it -- the Court notes that "An intern’s work is complementary if it requires some level of oversight or involvement by an employee, who may still bear primary responsibility." This favor is not dispositive.

All told, the factors favor Hearst. While plaintiffs argue that any mixed inferences require a trial, under the totality of the circumstances, Hearst wins as a matter of law. The mere existence of some factual dispute is not enough for trial under general summary judgment principles, and "Status as an 'employee' for the purposes of the FLSA is a matter of law, and under our summary judgment standard, a district court can strike a balance on the totality of the circumstances to rule for one side
or the other."

Judge can bring discrimination lawsuit under City Human Rights Law

Judges are employees, too, right? At least this judge is. She is an Administrative Law Judge who works for a New York City agency, the Department of Consumer Affairs. She sues the agency for sex and age discrimination, as well as retaliation.

The case is Kassapian v. City of New York, an Appellate Division ruling handed down on November 15. The plaintiff mostly sues under the New York City Human Rights Law, which provides greater protections than the New York State Human Rights Law and Title VII. The appellate court summarizes her claims this way:

The complaint alleged that the plaintiff and other ALJs spoke out internally within the agency and externally to public officials and the press about an alleged [Department of Consumer Affairs] practice of improperly pressuring ALJs to issue recommended decisions in favor of the agency and to impose maximum fines. The plaintiff was allegedly demoted and subjected to other retaliation due to this speech and to her complaints concerning alleged sexual harassment.

It goes without saying that the alleged pressure for ALJs to issue certain rulings would be a major scandal. But the Appellate Division focuses mostly on whether she has an actionable claim.

On the sexual harassment claim, plaintiff may proceed to discovery upon claiming a coworker "repeatedly demonstrated a sex toy to the plaintiff." She submitted an affirmation from a coworker that corroborates this allegation. This may not constitute a hostile work environment under Title VII (as the harassment must be severe or pervasive), but the rules are different under the City law, which says that any contention that "the behavior was a petty slight or trivial inconvenience constitutes an affirmative defense which should be raised in the defendants' answer and does not lend itself to a pre-answer motion to dismiss." The Second Department cites a well-known First Department case for this proposition, Williams v. New York City Hous. Auth., 61 A.D.3d 62 (1st Dept. 2009), so I wonder if this is the first time the Second Department has ruled this way. If it was not the standard in the Second Department in the past, it is now.

Plaintiff also has an age discrimination claim based on a demotion. We don't know much about this claim except that the individual defendants are the same age as plaintiff. That does not mean she does not have a claim under the City law. Another example of how the City law provides greater protections for plaintiffs than federal law.

Finally, we got ourselves a First Amendment retaliation claim arising from the corruption speech. Not only did plaintiff speak on a matter of public concern, but "the allegations that the plaintiff was demoted following the internal complaints, and that she suffered a campaign of harassment following the external complaints, sufficiently pleaded that the subject speech was a substantial or motivating factor for an adverse employment action."

Every lawyer's nightmare

In this case, the plaintiff's lawyer had three court conferences at the same in three different counties. He tried to attend all the conferences but, of course, that plan failed and he did not make it in time for his federal court appearance in Brooklyn. So the judge dismissed the case after waiting 29 minutes for counsel to appear.

The case is Smalls v. County of Suffolk, a summary order decided on December 4. We all remember how judges react to lawyers who show up late, if at all. We had a judge in White Plains (since retired) who would simply have the court conference without the other lawyer present. Another judge in White Plains will have the conference by calling the offending lawyer and having him participate by phone. A judge at Foley Square would sit on the bench and look at the clock every few minutes before announcing how much time had elapsed since counsel was supposed to be in court. Things are different in state court; the judges put the case at the end of the calendar in assuming the late lawyer is somewhere else in the courthouse before a different judge.

In this case, it was the second time counsel failed to appear for a conference. The case was dismissed sua sponte with prejudice. The Court of Appeals (Leval, Hall and McMahon [D.J.]) reinstates the case, holding that dismissal was too harsh a remedy "because the dereliction of Plaintiffs' attorney could be appropriately dealt with by a monetary sanction on the attorney, instead of so harshly sanctioning the Plaintiffs who were innocent of the dereliction."

While it is true the court can dismiss a case for failure to prosecute under Rule 41(b), that dismissal must "be proceeded by particular procedural prerequisites, including notice of the sanctionable conduct, the standard by which it will be assessed, and an opportunity to be heard." That test draws from Baptist v. Sommers, 768 F.3d 212 (2d Cir. 2014). That procedure was not followed here. While "there was no excuse for counsel's failure to notify a busy district court judge that his obligations to appear on the same morning in three separate courtrooms in three counties made it likely that he would be late for the conference, . . . the sanction imposed was needlessly severe and punished the wrong person." The Second Circuit suggests a monetary sanction on remand might work.