Did the banking customer sign away her rights under an arbitration agreement?

This case holds that the trial court did not have enough information to determine whether the plaintiff in this potential class action suit against a credit union signed away her rights in an arbitration agreement that would also waive any class action. The issue is whether the crafty consent document was sufficiently visible to plaintiff when she opened her account with Hudson Valley Credit Union.

The case is Zachman v. Hudson Valley Credit Union, issued on September 14. Plaintiff says the credit union wrongly assessed and collected overdraft fees and insufficient funds fees on checking accounts that were not actually overdrawn. She filed this lawsuit, but HVCU filed a motion to compel arbitration, which would take the case away from the jury and provide the parties limited discovery and other rights. The credit union said that plaintiff was on "inquiry notice" about the arbitration agreement when she opened the account. As the Court of Appeals puts it, HVCU says "she agreed to an Internet Banking Agreement that incorporated by reference the revised Account Agreement containing the arbitration and class action waiver provisions, and that HVCU published the modified Account Agreement on the HVCU website which Zachman used for online banking."

That "inquiry notice" arrangement may seem unfair, as it's not the same as a customer signing an arbitration agreement with a pen and paper. But that's arbitration these days. You can consent by signing onto a banking arrangement online. While the credit union's senior compliance officer said the arbitration agreement can be accessed on the bank's website by either running a search on the webpage or clicking on the Resources tab on the website, plaintiff said she never got any such agreement in the mail and the agreement was obscured on the website and therefore not readily visible such that she was on notice that any disputes with the bank would go to arbitration.

While the district court sided with plaintiff on this issue, the Court of Appeals remands for more factfinding. The trial court has to decide whether an Internet-based contract like this put plaintiff on "inquiry notice" of the arbitration agreement. You can actually "agree" to such a provision by clicking "I agree" or similar language while processing your application for the banking services online. We all do this; we click here and there until we get the services we want, and God knows what we just consented to. But it's legal under the case law. The problem here is that the "agreement" may or may not have been readily visible to plaintiff. The district court will have to look at screenshots of the bank's website to make that determination.

Court requires Yeshiva University to recognize LGBT student group, for now

A new religious freedom case is coming around the bend. This one will ask whether a private university can, on religious grounds, prohibit an LGBT student organization from organizing on campus. The Supreme Court for now has said it's too early for this case to reach the Court, which means the university has to proceed through the state appellate courts in New York. But yesterday's ruling denying the stay is a temporary measure. This case will likely return to the Court someday and provide the Justices with its first opportunity to interpret the New York City Human Rights Law, amended in 2005 to provide greater civil rights protections than federal law.

The case is Yeshiva University v. YU Pride Alliance, issued on September 14. The case was initially resolved in the New York State trial court, which ruled against the university, holding that the New York City Human Rights Law prohibits this kind of sexual orientation discrimination. Yeshiva unsuccessfully sought emergency relief from the New York appellate courts before filing in the Supreme Court. The 5-4 Court majority says Yeshiva has to follow through on its state appeals through an expedited process. Yeshiva will do that, I am sure, and if the New York appellate courts rule in favor of the student group, the case will return to the Supreme Court, which is in the process of revitalizing the Free Exercise Clause to expand the religious rights of institutions and individuals.

State Supreme Court (the trial-level court in New York) ruled against Yeshiva in June 2022, holding that while the university is an educational institution with a rich Jewish heritage and a mission to combine"the spirit of the Torah" with strong secular studies, while Yeshiva believes the LGBT student group's mission conflicts with that of the university, Yeshiva is a place of "public accommodation" and not an exempt religious corporation under the City Human Rights Law, one of the most expansive civil rights laws in the country. 

The Supreme Court's three liberals voted with Chief Justice Roberts and Justice Kavanaugh to deny the stay. Justice Alito writes the dissent from yesterday's ruling, joined by Justices Gorsuch, Barrett and Thomas. Alito opens his dissent as follows:

Does the First Amendment permit a State to force a Jewish school to instruct its students in accordance with an interpretation of Torah that the school, after careful study, has concluded is incorrect? The answer to that question is surely “no.” The First Amendment guarantees the right to the free exercise of religion, and if that provision means anything, it prohibits a State from enforcing its own preferred interpretation of Holy Scripture. Yet that is exactly what New York has done in this case, and it is disappointing that a majority of this Court refuses to provide relief.

Ultimately, Alito writes, "A State’s imposition of its own mandatory interpretation of scripture is a shocking development that calls out for review. The Free Exercise Clause protects the ability of religious schools to educate in accordance with their faith." In forcing Yeshiva to recognize this student group, the university "would force Yeshiva to make a 'statement' in support of an in interpretation with
which the University disagrees."

Covid-19 shutdown lawsuit against every school district in the country is dismissed

Another Covid-19 shutdown case has reached the Second Circuit. This one alleges that the remote-learning thing that kids went through in 2020-2021 violated the students' right to a free and appropriate public education. The case raises a novel theory, but novel theories don't really fly in the Court of Appeals. The case is dismissed.

The case is KM v. Every School District in the United States, a summary order issued on August 31. That caption is no joke. The real defendants are dozens of school districts and state governments around the country. Plaintiffs brought this putative class action on behalf of all students and parents against New York officials "as well as all 13,821 public school districts in the United States and the state departments of education in all fifty States," Washington DC and Puerto Rico. (The real caption is KM v. Adams). 

The putative class would consist of all public school students with a disability. The Court of Appeals (Chin, Sullivan and Menashi) writes, "Alleging principally that the shift from in-person to remote instruction constituted a per se deprivation of the 'free appropriate public education' guaranteed to disabled students under the [Individuals with Disabilities in Education Act], the Students and Parents brought claims – as relevant to this appeal – under the IDEA and RICO." RICO is the federal conspiracy law that the government used to take down the Mafia. The idea is that the Individualized Education Programs (IEP) for disabled students cannot all be complied with through remote learning, as some services can only be provided in-person.

The problem for plaintiffs is procedural: to bring a claim under the IDEA and related laws, you have to exhaust administrative remedies, which means prior to the lawsuit, you have to seek your remedies through state educational agencies. No such exhaustion is needed if such a route is futile or the agency has no authority to grant the relief you are looking for. The courts rarely find futility under the IDEA, and it does not do so here, holding that plaintiffs cannot show the State Education Department would have taken forever to resolve this claim. Nor have plaintiffs preserved the argument that the agency had no power to grant them the relief they want, as plaintiffs did not advance that argument in the district court. What it all means is the district court lacked subject matter jurisdiction to hear the case in the first instance. 

Circuit reverses ALJ on social security benefits

The Court of Appeals has reversed the findings of the Social Security Administration and found that a woman is entitled to Supplemental Security Income because she is in fact disabled and cannot work a full range of jobs.

The case is Rucker v. Kijakazi, issued on September 6. People who apply for SSI benefits have to proceed to a hearing, where an administrative law judge hears medical evidence from both sides before determining whether the applicant can recover these benefits because of their inability to work as a result of their disability. Courts will defer to the ALJ's findings, a process consistent with the general rule that courts give these experts the benefit of their experience; the applicants for these benefits prevail on appeal only when the ALJ blows it.

As the Second Circuit (Leval and Parker) sees it, the ALJ got it wrong in finding that Rucker can perform the full range of work at all exertional levels and has the basic capacity to read spell or perform mathematical functions. The ALJ did say Rucker cannot work with others and should avoid work that involves joint effort. In fact, the Court of Appeals says, the medical evidence shows that plaintiff is moderately limited in her ability to accept instructions, respond appropriately to criticism from supervisors, get along with coworkers and peers, and suffers from borderline personality disorder and schizoaffective disorder. Rucker gets her benefits and the ALJ's findings on this point are overturned.

The Court does uphold the ALJ's findings that Rucker's physical impairments do not render her physically disabled. The test is whether she had a severe impairment that could be expected to result in death or that could last for a continuous period of 12 months. While Rucker is obese, there is no evidence that that condition imposes any limitations on her functional capacity. 

Judge Menashi dissents from the first holding, stating that the "substantial evidence" standard applicable in administrative law cases like this supports the ALJ's findings. He writes that while the ALJ limited the amount of time Rucker should spend with coworkers, the ALJ also said Rucker can work alone and can perform simple tasks and follow simple instructions.

Jury verdict in inmate's favor is reversed on appeal

A federal jury in Albany awarded this inmate-plaintiff $20,000 in damages for pain and suffering resulting from bad jail conditions that included cell overcrowding and threats of violence/lack of safe living conditions. That verdict is now gone, the victim of both the Prison Litigation Reform Act and qualified immunity.

The case is Walker v. Schult, issued on August 16. We have a series of holdings to explain why the jury's findings are not enough to support the verdict. This case is complex, which explains why it took the Second Circuit (Kearse, Lynch and Chin) over a year to resolve the appeal following oral argument.

1. While the Eighth Amendment prohibits cruel and unusual punishment, overcrowded cells by themselves are not enough to violate the Constitution unless the overcrowding is accompanied by some treatment that deprives the inmates of the minimal civilized measure of life's necessities. That rule derives from a Supreme Court case, Rhodes v. Chapman (1981). The idea is that the Constitution does not mandate comfortable prisons. 

2. Further complicating things for plaintiff is the Prison Litigation Reform Act of 1996, when Congress decided to scale back inmate lawsuits by imposing certain procedural and substantive conditions for victory. One such limitation is that inmates cannot recover damages for pain and suffering without some showing of physical injury resulting from those conditions. The jury in this case was not instructed about that legal principle, as the trial court apparently thought the federal defendants had waived that defense; in fact, the Second Circuit says, plaintiff and his lawyers should've seen this defense coming in light of the procedural history of this case, and the "limitation on recovery" defense is not the kind of affirmative defense that a party can waive. This means the jury should have been instructed on the principle that the inmate plaintiff cannot win without a showing of physical injury. And since there was no such showing, the verdict is vacated and the inmate loses.

3. What is more, the federal defendants are entitled to qualified immunity, which preludes any liability when the plaintiff proceeds on a legal claim that is not clearly-established under prior Second Circuit and Supreme Court case law. You may have come across commentary over the last few years on this kind of immunity, which makes it difficult for civil rights plaintiffs to win their cases. There was hope that the Supreme Court or even Congress might do something about qualified immunity, but for now this immunity is here to stay, a mainstay of federal civil rights law since the 1960s. On the factual findings reached by the jury, particularly that all plaintiff was able to prove was overcrowding and threats of violence, the federal defendants are immune from suit. The trial judge should have recognized that once the verdict came in with the jury's factual findings, but it failed to do so. Since there is no case that says the inmate can win an Eighth Amendment case solely on the basis of overcrowding, qualified immunity attaches, and plaintiff loses. 

Circuit affirms large attorneys' fees award in FLSA case

In this ruling, the Court of Appeals says the plaintiffs' attorneys were able to secure a huge attorneys' fees award for their work on a wage-and-hour claim even though some of their claims failed in the district court. The Court of Appeals also finds that the district court was able to reduce their attorneys' fees award by 40 percent, still resulting in a large fee award for the plaintiffs' lawyers. This case provides a good summary of how attorneys' fees work when the plaintiff achieves a partial victory in the district court.

The case is Holick v. Cellular Sales of New York, issued on September 7. Plaintiffs were owners of companies that sold cellular service plans and devices to the general public through contracts with Cellular, an authorized Verizon Wireless dealer. The arrangement provided plaintiffs with a commission for selling cell service plans, but if the customers cancelled their cell service plan within 6 months, Cellular deducted the sale from its checks to plaintiffs, who claim in turn that the defendants misclassified them as independent contractors when they were actually employees who should not have been subjected to those deductions. While the district court denied plaintiffs' motion for class certification, it said plaintiffs were Cellular employees, granting them about $11,000 for unpaid minimum wages and overtime. This is a partial victory for plaintiffs, as the class certification motion was far more lucrative (they sought $4 million in damages and $700,000 in damages for the name plaintiffs) than the claims upon which they prevailed.

The district court held that the successful and unsuccessful claims were intertwined such that their attorneys' could recover fees expended on all claims, even those that failed. We all know that this can happen if the claims bear a close relationship with each other such that discovery on the bad claims would have been intertwined with the good claims. The district court has discretion to make that determination, and the Court of Appeals will not second guess it. The general rule is that it's not an abuse of discretion if the district court had a variety of options to resolve the motion and was not required to issue one ruling in particular. That rule, deriving from Zervos v. Verizon N.Y., Inc., 252 F.3d 163 (2d Cir. 2001), helps plaintiffs, as the district court said, and the Court of Appeals (Pooler, Wesley and Carney) agrees, stating that "Plaintiffs' claims were all based upon the terms of the contracts between Plaintiffs and Defendants, the circumstances under which the commissions were earned, and the formula by which Plaintiffs were paid. These claims would largely require similar discovery and proof and would be difficult to sever in billing records."

What about the 40 percent reduction? Defendants wanted a greater reduction, but the Court of Appeals says that percentage also falls within the range of permissible decisions by the district court. The Second Circuit does not like to second-guess attorneys' fees rulings like this, as the trial court knows the case better than anyone and these are essentially findings of fact, which are better suited for the trial court than the appellate judges on cold, boring paper record. The Court notes that while the fees in this case amounted to $576,000 and the plaintiffs won a fraction of that amount in damages, FLSA cases often do not yield large damages awards and the law wants good lawyers to take on these cases to ensure that "everyday workers" are adequately paid for their work.

Court holds that speech on bus safety issues does not address a matter of public concern

Over a strong dissent, the Court of Appeals holds that a school bus driver who argued with his employer about the frequency with which bus defects should reported did not speak on a matter of public concern. This means the plaintiff did not engage in protected speech under the First Amendment, and he cannot redress what he calls his retaliatory termination.

The case is Shara v. Maine-Endwell Central School District, issued on August 18. Plaintiff told a transportation mechanic for the district that it was not enough that bus defects were being reported on a single occasion. Plaintiff wanted these defects to be reported on a daily basis until the defect is corrected. The district's Director of Auxiliary Services disagreed with plaintiff about the reporting protocol. Plaintiff was terminated shortly thereafter, and this lawsuit claims he was fired because of his speech. (My write-up about a related holding in this case is at this link).

Public employees cannot be fired if they speak on matters of public concern, defined as any matter of interest to the community. This prevents employees from filing retaliation lawsuits because they complained about matters that were strictly personal to them ("I was unfairly denied a promotion") or matters that the public would not care about ("the air conditioning around here is not working"). While plaintiff spoke up about school bus safety issues, that is not a matter of public concern, the Court of Appeals (Sullivan and Park) says, because plaintiff was not really a whistleblower. Rather, "the allegations in his Complaint were more pedestrian and involved little more than an intramural dispute about the best way to report maintenance issues involving the School District's buses. Nowhere in his Complaint did Shara allege that the School District's reporting practice permitted unsafe buses to be out on the road or that [the district was] attempting to sweep needed bus repairs under the rug."

Judge Pooler dissents, stating that the majority's interpretation of the Complaint is far too narrow. Noting that the Court has previously held that "the safety of public employees is, indeed, a matter of public concern," as she sees it, "Shara’s comments were clearly on a matter of public concern. Shara was concerned with the frequency of reporting safety issues regarding the School District’s buses used to transport schoolchildren." Moreover, "Common sense dictates that Shara’s speech concerned the safety of the workplace, the safety of the Maine-Endwell community’s schoolchildren, and the safety of other motorists whose lives might be at risk of colliding with a school bus with faulty brakes or other mechanical issues, such as the two buses that had already failed inspection. Surely speech on such a topic is the paradigmatic example of speech on a matter of public concern."