Fox News sexual harassment case must be resolved in federal court despite arbitration clause

If you're a fan of federal jurisdiction, this case is for you. The plaintiff is a former Fox News commentator who sued the network and Roger Ailes for sexual harassment and retaliation. But there was an arbitration clause in her contract. She sued in federal court anyway, triggering a round of motion practice that wound up in the Court of Appeals. 

The case is Tantaros v. Fox News Channel, issued on August 27. Arbitration clauses take the case out of the courts and into a private justice system. In response to the Me-Too movement, New York tried to deal with this a few years ago in enacting CPLR 7515, which prohibited mandatory arbitration clauses in sexual harassment cases except where inconsistent with federal law. Under the Federal Arbitration Act, arbitration clauses are enforceable. This means that Section 7515 has a trap door for plaintiffs.

Plaintiff filed her case in state court but defendant tried to remove it to federal court on the basis that the case raises a federal claim. State court cases that raise a federal claim can be removed to federal court. Plaintiff opposed that motion, arguing this is not really a federal case. The district court disagreed, and the Court of Appeals (Walker, Cabranes, and Wesley in dissent) disagrees, and the case returns to state court, where I presume Fox News will then try to enforce the arbitration clause and take the case out of the courts completely.

Judge Walker says this case raises a federal claim because it turns on a substantial question of federal law, as per the Supreme Court's analysis in the Gunn/Grable line of cases. Many state law claims cannot be removed to federal court even if they will raise a federal defense, i.e., state law defamation cases that will be met with a First Amendment response. But if the state court case implicates a substantial federal issue, it can be removed to federal court. That's this case, Judge Walker writes, because plaintiffs right to relief necessarily turns on a resolution of a question of federal law. That is, the court must apply federal law to the plaintiff's claim. Since Section 7515 contains a federal exception within that very statute, this case requires the court to consider federal law in determining whether Section 7515's prohibition against mandatory arbitration applies.