This 'n That in FLSA appeal

This appeal challenges various rulings from the district court on overtime claims brought under the Fair Labor Standards Act and the New York Labor Law. The jury ruled for the plaintiffs, and the district court took some of thee successful claims away. Everyone appeals. The case was argued n January, and the Court of Appeals issued this summary order on April 26, a long time for a summary order, which usually comes down a few weeks after argument.

The case is Leevson v. Aqualife USA, issued on April 26. This case has been kicking around since 2014. At trial, the jury awarded around $300,000 in damages for overtime and other damages. The parties raise a cornucopia of issues.

While the trial court threw out the jury verdict in plaintiffs' favor on their individual commissions and granted Aqualife judgment as a matter of law on that claim, the Court of Appeals (Sullivan, Carney and Hall) brings that claim back. Why? Because Aqualife did not seek judgment as a matter of law on this claim during trial, and they did not seek that relief following trial. These Rule 50 motions have to be asserted during and after trial if you want to preserve these claims on appeal. Having waived those issues at trial, the Court of Appeals reinstates that portion of the verdict. I can't say I've seen that happen too often, where the Second Circuit reinstates a favorable verdict on waiver grounds even though the trial court set aside that verdict post-trial. But it happened here. The lesson here is that you have to move for judgment as a matter of law during and after trial if you want to challenge any adverse verdict on appeal. The only way around this is by proving on appeal that the verdict is a manifest injustice, which means the jury totally blew it and there was no evidence whatsoever to support the verdict in any way.

Defendants also challenge the trial court's order awarding plaintiffs double damages for their overtime claims. The Court of Appeals notes that double damages are the natural order of things in FLSA claims. This is sort of a punishment for employers who don't pay their people the first time around. The employer can get around double damages if they acted in good faith. But, the Court of Appeals says, the employer "has not come close to demonstrating good faith," and its evidence intended to prove good faith was actually a "concoction" to avoid the labor laws in the first place.

Another issue raised on appeal was management's claim that plaintiffs were estopped from claiming they were employees (and therefore entitled to overtime pay) and not independent contractors (who have few rights) because made contrary statements to the IRS. Normally, if you say one thing in a judicial or administrative proceeding but the opposite in a different proceeding, you are estopped from that switch-a-roo. But statements to the IRS are not part of any "proceeding," so that argument fails. Sounds more like a credibility argument for trial, which the jury must have ignored, as they ruled for the plaintiffs anyway.

Another broad pro-arbitration ruling from the Supreme Court

The employees at Lamps Plus signed an agreement when they commenced employment. The agreement said employer/employees will arbitrate their disputes "in lieu of any and all lawsuits or other civil legal proceedings.” In other words, no lawsuits, just arbitration, without a jury or the procedures normally available in lawsuits. The agreement also said the parties would arbitrate any claims that, "in the absence of this Agreement, would have been available to the parties by law.” The arbitration agreement does not expressly address class actions. So what happens if the employees want to band together for a class action against Lamps Plus?

The case is Lamps Plus v. Varela, issued by the Supreme Court on April 24. The short answer is the employees cannot bring a class action under this agreement, only individual arbitration claims. So the employees cannot even bring a class arbitration. The Court's 5-4 ruling divides along the usual partisan lines, with the conservative justices siding with management and the liberal justices siding with the employees.

It all started when a hacker accessed the employer's computer and disclosed the tax information of 1,300 employees. Then a fake income tax return was filed in Frank Varela's name. Varela was a Lamps Plus employee. He filed suit in federal court, seeking a class action. Management moved to compel arbitration on an individual and not classwide basis and to dismiss the lawsuit. The Supreme Court finds that, although the arbitration agreement says nothing about agreeing to forego class actions or even class arbitrations, that ambiguity is held against the employee. The Court reaches this conclusion for the following reasons:

First, the Federal Arbitration Act requires the courts to enforce arbitration agreements. Employment lawyers and class action attorneys already know this. Over the last decade or so, the Supreme Court has upheld a multitude of arbitration agreements in cases involving employment discrimination and consumer protection. Corporate America will have employees and customers agree to arbitrate their disputes even when the latter do not read the fine print or even realize (or fully comprehend) the consequences of that agreement. If they do know the consequences, the employees and customers may not care, as they are not contemplating bringing a lawsuit anyway. And, I doubt employees and consumers will refuse to sign or "consent" to any arbitration agreement, as that means they cannot work there or avail themselves of some consumer product they need. So we sign away our rights. If you sign the agreement, you consented to it.

Second, the Court has already held that arbitration is a favored method of resolving disputes, since they proceed faster and are supposed to be less expensive than full-blown litigation. You may not get to fully litigate the dispute under arbitration, but that downside is outweighed by the "speed and simplicity and inexpensiveness" of arbitration. Under Supreme Court precedent (and most of these cases are decided by the 5-4 conservative majority), almost anything can be arbitrated and taken away from the courts. Plaintiffs' lawyers will tell anyone who will listen that court is better than arbitration, in part because there are no juries in arbitration.

Third, the Court has held there is "reason to doubt the parties' mutual consent to resolve disputes through classwide arbitration" and that "courts may not infer consent to participate in class arbitration absent an affirmative 'contractual basis for concluding that the parties agreed to do so.'" So even an ambiguous arbitration agreement on the subject of classwide arbitrations does not mean the employer must submit to a classwide arbitration. While the employee in this case came up with a great argument, that ambiguous contracts are usually interpreted against the party drafting it, that does not apply in federal arbitration cases. At least not anymore, it doesn't, the Court says in this case, even if that principle typically applies in most contract cases.

We don't quite know the downside of not allowing the employee in this case to bring a class arbitration. My best guess is the damages in this case are not high enough to justify individual arbitrations, and the best way to seek justice is through a class proceeding, particularly if more than 1,000 employees have the same grievance. The Court majority does not address any such downside, even if this ruling puts the kabosh on a single-employee arbitration.

As always, the dissenting justices attack the majority ruling as unrealistic. Justice Ginsburg write to "emphasize once again how treacherous the Court has strayed from the principle that 'arbitration is a matter of consent, not coercion." And Justice Kagan wonders why the normal rules governing the interpretation of ambiguous contracts do not apply here.

Plaintiff cannot make out disability discrimination claim, 2d Circuit says

As I wrote in this blog post, the Second Circuit has held that cases alleging disability discrimination require the plaintiff to prove "but-for" causation, a more defendant-friendly burden of proof than race/gender/religious discrimination cases under Title VII of the Civil Rights Act of 1964. The Court in this case goes on to hold that the plaintiff cannot meet that burden, and the case is dismissed for good.

The case is Natofsky v. City of New York, issued on April 18. Plaintiff has a hearing disability.  He worked for the Department of Investigation as Director of Human Resources and Budget. While plaintiff receiving praise for his performance in 2013, there were managerial changes this time, but plaintiff's supervisor, Ulon, remained in place. Ulon in 2013 asked plaintiff to follow up on emails more quickly, but plaintiff said he was unable to multitask during meetings because he had to put "extraordinary effort into listening" during meetings. Also that year, Ulon wanted plaintiff to come into work later in the morning and made other demands that she later withdrew after plaintiff raised concerns with other supervisors. Ulon then issued plaintiff a performance memo that criticized his performance, and she issued a negative performance appraisal.

After Ulon left the agency, two other supervisors treated plaintiff poorly: one, Pogoda, kept staring at plaintiff's ears as he spoke and rolled her eyes at plaintiff when he mentioned his hearing disability. Pogoda was also impatient with plaintiff and told him to speak more clearly and quickly. On another occasion, Pogoda said plaintiff was "clueless," and he eventually demoted plaintiff, which lowered his salary. After plaintiff protested his demotion, Pogota and another supervisor, Peters, moved plaintiff from his private office to a cubicle in a high-traffic, high-volume area. After complaining about the salary reduction to a Deputy Commissioner, plaintiff's salary was readjusted. Plaintiff eventually resigned from the agency and got a better job with the City's Department of Transportation.

Relying on the Cat's Paw theory of discrimination, Plaintiff's lawsuit claims that Pogoda influenced Peters to demote him because of Pogota's hostility toward plaintiff's disability. Rather than determine whether Cat's Paw applies to "but-for" discrimination cases (it applies in mixed-motive cases under Title VII), the Court of Appeals (Keenan [D.J.] and Walker, with Chin dissenting) says plaintiff cannot prove that, but for his hearing disability, he would not have been demoted. The Court of Appeals cites evidence that management was unhappy with plaintiff's job performance, which explains the demotion. The Court reasons:

There was ample evidence that Pogoda and Peters had reason to (and did) think that Natofsky’s performance was deficient and demoted him on that basis. First, Pogoda noted in March 2014 her view that Natofsky was ʺclueless.ʺ Second, that same month, Natofsky failed to provide Peters with information regarding staffing and budgeting at the DOI, two areas under Natofskyʹs purview. Third, there was a new administration in office that was restructuring the department in which Natofsky worked. Defendants presented evidence that other employees had been asked to leave or were transferred from their positions, including Natofskyʹs immediate supervisor, Ulon. We conclude that ʺconstruing the evidence in the light most favorableʺ to Natofsky and ʺdrawing all reasonable inferences in his favor,ʺ no reasonable juror could conclude that Natofsky would have retained his position but for his disability.

The other claims are also dismissed. Plaintiff cannot show that Ulon denied his preferred work hours and vacation time and criticized his performance out of discriminatory animus. "Natofsky, however, points to no evidence that Ulonʹs critique of his email responsiveness was based specifically on Natofsky’s failure to respond to emails during meetings, as opposed to a more general critique of his timeliness in responding to emails." And, any workplace changes put in place by Ulon were reversed after plaintiff objected to other managers, so these are not adverse employment actions. The retaliation claim against UIon for the negative performance review also fails because the review was drafted almost a year after plaintiff complained about Ulon's maltreatment to another supervisor; that is too much time to draw a retaliatory inference. As for the retaliation claim against Pogoda and Peters, the Court says appealing a negative performance review is not protected activity under the civil rights laws, and plaintiff was not protesting discrimination "but offering a defense of why he may have been slow in responding to emails."

Judge Chin dissents, viewing the evidence differently than the majority, raising the question: if appellate judges view the evidence differently and one of them thinks the plaintiff can win at trial, is there not a factual dispute for the jury after all? Here is how Judge Chin sees it:

Natofsky has put forth evidence that Pogoda and Ulon were at least motivated in part by Natofskyʹs disability. First, Natofsky presented evidence that Pogoda ‐‐ whose discriminatory intent can be imputed to Peters -- fixated on the physical markers of his hearing disability, shook her head in disgust and rolled her eyes after Natofsky told her about his hearing disability, demanded he speak faster, and otherwise ridiculed him for his speech. Second, as evidence of Ulonʹs discriminatory animus, Natofsky presented evidence of two conversations during which his disability was discussed: his exchange with Ulon about email responsiveness and Hearnʹs conversation with Ulon regarding Natofskyʹs hours and vacation request. There was other evidence as well, including inexplicably harsh treatment: when new management came in, Natofsky quickly fell from a highly compensated, highly evaluated supervisor to a poorly‐evaluated generalist making just over half his prior salary and confined to what had been his former assistantʹs cubicle. 

Supreme Court to hear LGBT discrimination cases, including Zarda

The Supreme Court has agreed to determine whether sexual orientation discrimination is a form of sex discrimination under Title VII of the Civil Rights Act of 1964, the primary federal employment discrimination statute. One of those cases is Zarda v. Altitude Express, which the Second Circuit resolved in February 2018, ruling that Title VII prohibits sexual orientation discrimination. The other case, Bostock v. Clayton County, arises from the Eleventh Circuit. The Court granted certiorari on April 22.

I wrote about Zarda at this link. I assisted in writing the brief in Zarda in the Second Circuit. The issue is this: in 1964, when Congress enacted the Civil Rights Act, it prohibited employment discrimination on the basis of race, gender, national origin, color and religion. In all likelihood, gay rights were not on the radar when the law was enacted, at least not for any congress-member. Over the years, plaintiffs' lawyers tried to convince the federal courts that sexual orientation discrimination was a form of gender discrimination, but the federal courts rejected those efforts. A few years ago, however, the EEOC took a fresh look at this issue and, in the Baldwin case, ruled that sexual orientation discrimination is in fact a form of gender discrimination. The EEOC reasoned that (1) this form of discrimination constitutes sex stereotyping, which violates Title VII; (2) discrimination on the basis of sexual orientation necessarily takes into account the employee's gender, as men who are attracted to women are not punished like men who are attracted to other men; and (3) this form of discrimination is a form of associational discrimination, which violates Title VII, in that you cannot be fired for associating with African-Americans and, presumably, other men or women.

After the EEOC issued Baldwin, the Seventh Circuit in 2017 ruled en banc that its prior rulings on this issue are now bad law. In the Hively case, the Seventh Circuit adopted the EEOC's reasoning, becoming the first federal appeals court to interpret Title VII this way. In 2018, the Second Circuit also took up this issue en banc, ruling in favor of the plaintiff and jettisoning prior precedent that held to the contrary. But the Eleventh Circuit in Bostock sided with management on this issue, narrowly interpreting Title VII and holding to pre-Baldwin standards. This Circuit split prompted the Supreme Court to take the case.  

The Supreme Court on April 22 also granted certiorari in a related case, R.G. & G.R. Harris Funeral Homes v. EEOC, which held that Title VII also prohibits discrimination against transgender employees. In that case, the Court will decide whether this form of discrimination constitutes unlawful sex-stereotyping, prohibited under Title VII thanks to Price Waterhouse v. Hopkins, decided by the Supreme Court in 1989.

These cases will in all likelihood be the blockbuster civil rights cases for the Supreme Court's 2019-2020 term. There is no way to predict what the Court will do in these cases. Most of the gay rights cases decided by the Supreme Court since 1996 have ruled in favor of expanded rights, most famously in the same-sex marriage case. But the principle author in these cases, Justice Kennedy, has since retired. On the other hand, more and more Americans favor gay rights and would probably be surprised that gay employees in many jurisdictions can be fired because of their sexual orientation, so public opinion is probably in the plaintiffs' favor. There was also a slight bi-partisan divide in the Second Circuit when it issued Zarda: one conservative judge, Dennis Jacobs, sided with the plaintiffs in that case. A liberal judge, Gerard Lynch, dissented and ruled that Title VII (as presently drafted) cannot prohibit sexual orientation discrimination because that is not what Congress had in mind in 1964, when it enacted the Civil Rights Act.

"But-for" causation test governs disability discrimination cases

The Second Circuit holds for the first time that plaintiffs who bring disability discrimination cases under the Americans with Disabilities Act and the Rehabilitation Act must show the discrimination was the "but-for" cause of the adverse action. The Court of Appeals therefore rejects the more plaintiff-friendly "motivating factor" calculus that governs cases brought under Title VII.

The case is Natofsky v. City of New York, issued on April 18. Plaintiff brought this case under the Rehabilitation Act and not the ADA. But in order to determine the burden of proof under the Rehabilitation Act, the Court must determine the scope of the ADA, since Congress said in 1992 that employment discrimination cases brought under the Rehabilitation Act apply the ADA causation standard. Since the Second Circuit has not yet determined the causation test under the ADA, it has to make that determination in the course of interpreting the Rehabilitation Act.

The ADA says you cannot discriminate against someone "on the basis of disability." What does that mean? Does the "but-for" test apply, or does Title VII's "motivating factor" test apply? In 1991, when Congress amended Title VII, it explicitly adopted the motivating factor test for cases involving race, gender, religion and national origin discrimination. It did not use that language for age discrimination cases brought under the ADEA, which is why the Supreme Court in the Gross case in 2009 said the "because of" language in the ADEA requires proof of "but-for" discrimination and not the motivating factor test. (Whether or not Congress actually intended for the ADEA to have a heightened causation test than Title VII is another question; my best guess is that Congress probably thought "motivating factor" and "because of" meant the same thing, but that is water under the bridge, as the Supreme Court's statutory analysis said these phrases have different meaning, and Congress has not corrected the inconsistency). The Supreme Court a few years later in the Nasser case said that "the text of an anti-discrimination statute must expressly provide for a 'motivating factor' test before that test can be applied." This means that even retaliation cases under Title VII require "but-for" proof, since the retaliation provision of Title VII does not use "motivating factor" but "because of."

The Second Circuit (Keenan [D.J.] and Walker, with Chin dissenting) says the "because of language" in the ADEA means the analysis in Gross applies, so that disability discrimination plaintiffs have to prove the discrimination was the "but-for" cause of the adverse action. This makes it a little harder to win disability discrimination cases in the Second Circuit, as everyone agrees that "motivating factor" is a lower burden of proof. The real-world consequences of this holding are hard to predict. I am not sure the "motivating factor" and "but-for" distinction will make a difference on a summary judgment motion, as parsing that out is like dancing on the head of a pin, but it could factor into the jury instructions and push the deliberations toward the employer, as the "but-for" test is more defendant-friendly than "motivating factor," which is not a 50% causation test like the "but-for" test. Since we interpret the ADA this way, the Rehabilitation Act is also interpreted this way.

Judge Chin dissents. He notes in part that when Congress enacted the ADA in 1990, it expressly wanted that statute to be interpreted consistently with Title VII. When Congress amended the ADA in 2008 to deal with some misguided Supreme Court rulings that narrowly interpreted the statute, it again said it wanted "a broad scope of protection to be available under the ADA." What we got here is a battle of statutory analysis involving the most commonly-used anti-discrimination statutes on the books.

These different interpretations affect how the Court of Appeals views Natofsky's case. Remember him? It was Natofstky who brought this case that led to the extended discussions about what the Rehabilitation Act and the ADA really mean. In the next blog post, I will talk about his case in particular, though here's a hint: he loses the appeal, though he would have won had Judge Chin had another like-minded judge on the panel.

Inmate lawsuit is dismissed under PLRA three-strikes rule

Under the Prison Litigation Reform Act, inmates who file three frivolous lawsuits cannot file another case "in forma pauperis," which would waive the filing fees for inmate-litigants who cannot afford them. This is the "three-strikes-you're-out" rule. This case involves an exception to the three strikes rule.

The case is Shepard v. Annucci, issued on April 15. Shepard's prior lawsuits were deemed frivolous, but he sued again, claiming that prison staff did not accommodate his back injury by refusing to house him near the clinic, the package room and the visiting area. While Shepard had exhausted his allotment of frivolous cases, he invoked the exception, which allows you in forma pauperis if you are in "imminent danger of serious physical injury." The idea is that being in imminent danger and the need to file a new lawsuit over that outweighs the three-strikes penalty. So if you are in imminent danger, the filing fees are waived just this once.

The government opposed Sherpard's request for waive the filing fees, claiming (1) Shepard had not come clean about all of his prior frivolous lawsuits and (2) he was in imminent physical danger. Of course, the work the government expended in fighting off Shepard's claimed exception to the three-strikes rule far exceeded the amount of the filing fees that Shepard was trying to avoid paying, but my guess is the government thought this effort was worth it to avoid another lawsuit by Shepard. In any event, the district court dismissed the case after agreeing with the government's position.

The Court of Appeals (Cabranes, Droney and Sullivan) affirms, taking up a new issue under the PLRA. The Circuit says the district court can go beyond the complaint to determine if the inmate-plaintiff really is facing imminent danger. This is consistent with the rule that "courts have long permitted evidentiary submissions at the pleading stage in a variety of different circumstances," including inquiries into whether the court has jurisdiction to hear the case. It is not enough for the inmate to assert in his complaint that he is facing imminent danger. Holding otherwise would only encourage inmates to assert the physical injury exception to avoid paying filing fees. We don't want that, do we?

What is means for Shepard is the district court got it right in finding Shepard was not really facing imminent danger when he filed the lawsuit. Prison doctors said that while Shepard does have chronic back pain, he has access to a wheelchair and other ambulatory aids and the doctors did in fact provide him with pain medication. The Court also finds that plaintiff's claim that his muscles atrophied because of his 24-hour confinement "was shown to be 'ridiculous.'" This all means that Shepard cannot proceed with his case without paying the filing fee. No fee, no case.

"Stupid Egyptian" comment gives discrimination plaintiff a jury trial

The Court of Appeals has reinstated an employment discrimination case, concluding the jury may find the plaintiff was terminated from his position because of his national origin, Egyptian. The key evidence in the case is that plaintiff claimed to overhear the decisionmaker tell someone that she "kn[e]w how to terminate this stupid Egyptian guy." Plaintiff was the only Egyptian in the department.

The case is Moza v. Health and Hospitals Corp., a summary order issued on April 15. I represented plaintiff on appeal. Plaintiff was a doctor who worked in the Risk Management Department for a City hospital. The summary order does not set this out, but he mostly received positive performance reviews for quite some time until a new supervisor, Woll, came aboard. It was Woll who uttered the "stupid Egyptian" comment in April 2013. In September, Woll recommended plaintiff's termination. While the Second Circuit (Pooler, Chin and Vitaliano [D.J.]) emphasizes the "stupid Egyptian"comment, it notes in passing that plaintiff claims that Woll said other discriminatory comments to him, including a statement to a coworker that plaintiff has a "different culture from us." Also, while discussing plaintiff's religious practices (plaintiff is a Coptic Christian), Woll said, "This is stupid" and walked away.

What we have in this case, then is a swearing match, where plaintiff testifies that Woll made these discriminatory comments, and Woll denies it. As the Second Circuit notes, "It is for the jury to determine whether to credit Moza's account." The Court cites Owen v. New York City Housing Authority, 934 F.2d 405, 410 (2d Cir. 1991). If Woll said these things, then it taints the negative performance evaluations that she prepared against plaintiff, and the jury can rule in plaintiff's favor. While many discrimination cases involve circumstantial evidence, requiring the plaintiff to argue that the employer's lies about job performance and discipline are false, direct evidence cases like this are quite different. You don't see racial comments like this every day, which is why the courts have devised a formula for sorting through circumstantial evidence. It is much easier for the plaintiff to win through direct evidence.

A side note to this appeal deals with summary judgment in employment cases. The Second Circuit's pro bono panel assigned me this case. While the plaintiff alleged in his summary judgment opposition brief that Woll made the "stupid Egyptian"comment, his attorney did not cite to plaintiff's sworn statement to that effect. The district court noted that omission and said plaintiff did not testify to this at deposition and the allegation was therefore meritless. But while the statement is not in plaintiff's deposition, contrary to the district court's analysis, that was not the end of the story. True, the first place we look for "smoking gun" evidence is the plaintiff's deposition, where it is sure to come out in response to questions by the defendant's lawyer. But for some reason, this issue did not come up at deposition. But the sworn statement was in the record through plaintiff's verified complaint filed with the State Division of Human Rights. As a sworn statement, the SDHR charge has the same effect as an affidavit. You can use it in opposing a summary judgment motion. Since the SDHR charge was in the summary judgment record, the Court of Appeals was able to reverse the grant of summary judgment and remand this case for trial. If you are a plaintiff's lawyer trying to fend off a summary judgment motion, look for these sworn statements filed with the administrative agencies to press those factual disputes.