A rare victory in challenging an arbitration provision

Watch what you sign when you enter into a customer agreement. You may unwittingly sign an arbitration provision that says any lawsuit you may have against the company will be arbitrated and not litigated in court. You may not care at the moment because most people don't wish to initiate any proceedings against the company, but if you do, and even if you want a class action, you are stuck in arbitration. Most plaintiffs would rather be in court.

The case is Lipsett v. Popular Bank, a summary order issued on January 10. Courts are inclined to uphold most arbitration agreements. One way to challenge them is to argue that the box you checked online was not conspicuous enough for you to know it was even there. In this case, plaintiff and the potential class want to sue the bank in federal court. The court ruling does not tell us what the dispute was about. But when plaintiffs filed this lawsuit, the bank moved to compel arbitration. 

Plaintiff argued that he never consented to the arbitration provision. The general rule is this:"where an offeree lacks actual notice of certain contract terms, he is nevertheless bound by such terms if he is on inquiry notice of them and assents to them through conduct that a reasonable person would understand to constitute assent. Whether an individual is on inquiry notice turns on whether the contract terms were presented to the offeree in a clear and conspicuous way, taking into account the totality of the circumstances.” This legal standard requires judges to determine what a reasonable person would know and what they would not know.

Plaintiff wins the appeal and the case remains in federal court. The arbitration provision that plaintiff supposedly agreed to was too confusing. The Court of Appeals (Sack, Lohier, Kahn) says:

While the 2014 Notice draws attention to the arbitration provision, it misleadingly states that there “continues to be a Mandatory Arbitration Provision.” This statement signals to a reasonable customer like Lipsett, who was not previously informed of the arbitration provision or consented to arbitration and therefore not bound by any previous iteration of the arbitration provision, that it does not apply to him and that his agreement with the Bank remained effectively unchanged.

In other words, the provision mistakenly presumes that plaintiff already knew about an arbitration provision that he was not previously informed about. In signing the agreement, plaintiff was not consenting to continue the terms of the prior arbitration agreement because such an agreement did not apply to him. In addition, the agreement that plaintiff signed did not expressly tell plaintiff about the terms upon which he could accept or deny the arbitration provision. 

This is all very complex, and the courts, as I said, have to put themselves in the shoes of the average consumer in determining whether the consumer knowingly agreed to a legitimate arbitration provision.

Court of Appeals reinstates False Claims Act case

This is a case brought under the False Claims Act in which the plaintiffs allege that a home health and hospice care company in Louisiana with facilities around the country falsely certified unqualified patients for home health care, provided unnecessary and improper treatment, falsified time records, and manipulated patient records. These schemes resulted in fraudulent bills to the government for reimbursement under Medicare, Medicaid, and other government-funded healthcare programs. Following plaintiffs' whistleblowing, they suffered retaliation. The district court rejected the case, but the Court of Appeals brings it back.

The case is Pilat v. Amedisys, Inc., a summary order issued on January 17. The district court said that plaintiffs did not engage in protected activity, a necessary prerequisite to any retaliation claim. Under the statute, you engage in protected activity by engaging "in efforts to stop one or more violations of' the FCA. Such efforts can include both complaining internally to supervisors about suspected fraudulent practices and refusing to engage in such practices."

Both plaintiffs engaged in protected activity. "After Maniscalco’s supervisors had already overruled his recommendations for a specific Medicare patient twice and recertified the patient after two six-week programs, Maniscalco 'refused instructions by his supervisors to recertify a third time, insisting that she was completely independent and it would be unethical to do so.'” That qualifies as protected activity under the statute. While Maniscalco objected to "unethical" behavior as opposed to "illegal" behavior, "his comments support the inference that he was attempting to prevent Amedisys from providing, and overbilling for, unneeded treatment."

Pilat also engaged in protected activity, as he "repeatedly expressed his concerns to his supervisor over email 'about the inability of the nurses and therapists to keep up with Amedisys’s extensive volume of patients.'”

The trial court said these objections concerned the quality of patient care and not fraud. The Court of Appeals (Lohier, Robinson and Nathan) does not see it that way. The Court of Appeals writes:

Overscheduling clinicians and cramming in patient visits results in poor quality care, but the TAC also explains how those acts are fraudulent: “Amedisys still billed for the services . . . as if the clinician had actually fully performed them,” even though many patients were seen only “for a few minutes rather than an amount of time commensurate with the Government billing,” That is fraud, and the TAC adequately alleged that Pilat engaged in protected activity by voicing concerns about this fraud to his supervisors.

Plaintiffs also have to plead with particularity that defendant engaged in fraud. They "have identified multiple specific instances in which a clinician was instructed either to document patient information falsely to allow for treatments for which the patient did not qualify, or to recommend an unnecessary course of treatment." The decision provides specific examples that will be useful for attorneys writing up these lawsuits. "For example, Maniscalco’s supervisors instructed him in early 2017 to fraudulently write that a 50-year-old man he was treating was not independent and needed assistance to use stairs, even though that wasn’t true." Plaintiffs also identified multiple specific instances when defendant falsified time sheets.



 

Barstool Sports wins defamation claim despite inflammatory allegations against plaintiff

This case tells us how difficult it is to win a defamation case in New York. Plaintiffs can win when someone conveys a disparaging falsehood about them, but there are numerous defenses that can force the trial court to dismiss the case prior to trial.

The case is Rapaport v. Barstool Sports, Inc., a summary order issued on January 9. Barstool is a media enterprise with a presence on the Internet and satellite radio, among other places, where the hosts talk about sports, politics, pop culture, etc., in an unfiltered and controversial manner. Rapaport is an actor, performer and comedian who signed a contract with Barstool as one of its commentators. But the parties then had a falling out, and other Barstool personalities publicly called Rapaport a racist and a fraud, said he had stalked and physically attacked his ex-girlfriend, and that Rapaport has herpes. If the allegations were false, you would think this would be actionable defamation case, but the case was dismissed in the district court and the Court of Appeals that plaintiff has no case.

You can only win a defamation case when the defendant asserts untrue facts against you. Opinions are not fact and cannot predicate a defamation case. We also consider the context of the allegedly defamatory statements, in that hyperbole and non-literal language is not actionable, and if the reader or listener would understand that the forum is not the place for serious discussion, then the disparaging comments are not actionable. Here is why the district court dismissed the case:

[T]he statements were largely laden with epithets, vulgarities, hyperbole, and non- literal language and imagery; delivered in the midst of a public and very acrimonious dispute between the Barstool Defendants and Rapaport that would have been obvious to even the most casual observer; and published on social media, blogs, and sports talk radio, which are all platforms where audiences reasonably anticipate hearing opinionated statements.

In other words, the fact that these statements were made on the Barstool platform, and not the New York Times podcast, doom this case. The New York Court of Appeals has said that "the forum in which a statement has been made, as well as the other surrounding circumstances comprising the ‘broader social setting,’ are only useful gauges for determining whether a reasonable reader or listener would understand the complained-of assertions as opinion or statements of fact.”  The Second Circuit also says that the context of this case "was one within which even certain ostensibly factual statements could be reasonably understood as part of a 'tasteless effort to lampoon' because they were made '[i]n the emotional aftermath of a [situation] when animosity would be expected to persist' and in circumstances where 'an audience may anticipate the use of epithets, fiery rhetoric or hyperbole.'”

Retaliation plaintiff gets much less money in damages at second trial

Let us all say a prayer for all the plaintiffs who had to proceed to a second trial after winning the first one because the trial court said the plaintiff was awarded too much money. These prayers are limited to those plaintiffs who got less money the second time around. In this case, the plaintiff got a lot less money at the second trial.

The case is Cole v. Foxmar, Inc., a summary order issued on January 8. This is a retaliation claim brought under Vermont law. Plaintiff said he was fired in retaliation to complaining that employees were unable to take sick leave. The case went to trial and the jury ruled for plaintiff, awarding him $75,000 for emotional distress and $3 million in punitive damages. Great win for plaintiff. Except that the trial court said the damages were too high and were unsupported by the evidence. Without offering plaintiff a chance to avoid a second trial if he accepted a lesser amount (which is what most trial judges do in federal court), the trial court ordered a new trial, solely on damages,

Let's step back a bit and think about this. Jurors are told at trial that they are the final judges of the case. No one tells the jury that, post-trial, the attorneys and the judge pick through the verdict to make sure the jury did not exceed its authority in ruling for one party or another, and in issuing a damages award. But that's our system. If the jurors in the first trial in this case decide to Google this case, they will be surprised to know the case continued for several years after they rendered their verdict.

At the second trial, the jury awarded plaintiff only $35,000 in back pay and $20,000 for emotional distress. So, while the first jury gave plaintiff $3,075,000 in damages, the second trial only yielded $55,000 in damages Plaintiff's appeal argues that the trial court abused its discretion in ordering the second trial in the first place and that the original damages awards should stand.

The problem for plaintiff is that trial judges have discretion to order a second trial on damages if they think the first damages award was tainted in some way. What happened here is the first jury gave plaintiff more money in lost wages than he had asked for, and the jury assumed in awarding all that money in back pay that he would have continued working for defendant for more than 15 years, an assessment that was not supported by the trial record. The trial court also believed the jury exceeded its authority in awarding $3 million in punitive damages since plaintiff did not suffer any physical injuries from the retaliation, the employer only suppressed plaintiff's complaints about sick leave in isolated incidents, and the punitive damages exceeded the lost wages award by a large ratio (14:1) that offends the Due Process Clause under Supreme Court precedent.  

What about the trial judge's failure to offer plaintiff a remittitur? The Court of Appeals (Cabranes, Sullivan and Perez) says that while plaintiff argued in his reply brief that Vermont law requires that plaintiff be given that choice, he did not preserve that argument in his opening brief. This allows the Court of Appeals to apply federal law on this issue, and federal law says the trial court has the option of simply ordering a second trial on damages without a remittitur option.

NYC fast-food wrongful discharge law is upheld

In 2017, the New York City Council enacted a law that protects employees at large fast-food chains in New York City from arbitrary terminations and reductions in hours. This law was significant because, generally speaking, most employees who are not unionized have no protections against arbitrary terminations or wage reductions because they are at-will employees and courts usually defer to managerial prerogatives. A significant law like this will always undergo a court challenge, however. The Restaurant Law Center and New York State Restaurant Association brought this case, alleging that the NYC law violates the Constitution and federal wage and hour laws. The Court of Appeals (Nathan and Parker) rejects these arguments and the law stands.

The case is Restaurant Law Center v. City of New York, issued on January 5. Under the law, fast food chains cannot fire hourly wage employees without notice or reason in the absence of egregious misconduct. These employees also have the option whether to arbitrate their claims or bring their cases to court. That distinction can make all the difference in whether you won or lose the case, as juries will be more sympathetic to wrongful discharge cases than arbitrators who are paid by the companies to resolve the case. 

The lawsuit does not allege that the City law is a good idea or a bad idea. The focus is more legalistic, involving areas of the law that would bore non-lawyers to death. These areas of the law might even bore lawyers to death. But the case is important because lots of people work for these fast food chains and, prior to this law's enactment, they had minimal protections against arbitrary personnel decisions. 

We have two challenges here: first, the industry argues that the City law is preempted by federal law. If that is the case, then the City law fails. But the National Labor Relations Act does not take precedence here because the NLRA only regulates the process of labor negotiations, not the substance of labor negotiations. The Second Circuit says that regulating the substance of labor negotiations, by prohibiting arbitrary terminations and salary reductions, does not fall within the NLRA. In fact, all employees in NYC who work for large fast food places are covered under the City law, not just unionized employees. 

The second challenge to the City law falls under the Dormant Commerce Clause. The Constitution says that Congress shall regulate interstate commerce. Over the years, the Supreme Court has also determined that the Commerce Clause also makes it illegal for states to practice protectionism by favoring in-state commerce over out-of-state commerce. That's the Dormant Commerce Clause. The industry argues that the City law violates the Dormant Commerce Clause because, in practice, the City law favors New York City franchises over out-of-state franchises. The Court of Appeals disagrees, finding as follows:

Any burdens imposed by the Law are highly localized. The Law does not impose direct costs on out-of-state franchisors or any other out-of-state entity—only individual restaurants operating in New York City.  Put otherwise, at the restaurant level, every restaurant to which the Law applies is an in-state business; and at the chain level, the Law applies equally regardless of where a franchise is headquartered. So, for example, the Law imposes the same burdens on a local franchisee of a New York-based interstate chain like Shake Shack or Nathan’s Famous as it does on a local franchisee of an interstate chain headquartered outside New York.

 

Police misconduct case will proceed to trial

The plaintiff alleges the City of Long Beach police officers subjected him to excessive force. The district court denied summary judgment on this claim, so the officers appeal to the Second Circuit on qualified immunity grounds, claiming their actions did not violate clearly-established law. The Court of Appeals is not buying this argument and the case will proceed to trial.

The case is Benny v. City of Long Beach, a summary order issued on December 14. If you want to appeal right away from the denial of qualified immunity (the federal rules normally disallow early appeals prior to entry of judgment) you have to argue that even if the plaintiff's facts are true, the officer is still entitled to immunity from suit. 

It is clearly established law in the Second Circuit that the police cannot assault people who did not resist arrest. Those cases are Rogoz v. City of Hartford, 796 F.3d 236 (2d Cir. 2015), and O'Hara v. City of New York, 570 Fed. Appx. 21 (2d Cir. 2014). Here, the summary judgment record (and the video) shows that the officers subjected plaintiff to physical force without warning or the opportunity for plaintiff to comply with their orders. Instead, he was thrown to the ground. If the jury credits plaintiff's version of events, it can find the officers knowingly violated clearly-established law in throwing him to the ground. That means plaintiff can win the case, and the appeal is denied.

Plaintiff also pursues a failure to intervene claim. These cases are difficult in the excessive force context because normally the use of force happens so fast that the other officers cannot take action to prevent the constitutional violation. But this claim survives summary judgment also. The Court of Appeals (Lynch, Park and Williams [D.J.]) reminds us that "whether the officer had a realistic opportunity to intervene is normally a question for the jury" unless the evidence shows otherwise. The Court of Appeals holds that this is one of those close cases alleging failure to intervene that will go to the jury.

Michael Cohen loses Bivens claim against Trump and other constitutional retaliators

In 1971, the Supreme Court held that civil rights violations against federal officials may be remedied through a Bivens action. Bivens was the name of the case that said this. It implies a constitutional remedy similar to cases under Section 1983, which are brought against state defendants. But ever since that time, we have had a Bivens problem. This case highlights that.

The case is Cohen v. Trump, a summary order issued on January 2. Michael Cohen used to to be Donald Trump's attorney and fixer. As you probably know, they had a falling out after Cohen used his money to pay off a porn star who claimed she and Trump had an affair. Trump reimbursed Cohen, but only Cohen went to jail over this campaign finance violation. While in jail, Cohen worked on a memoir that painted Trump in a negative light. Cohen claims that, after he was given early release from federal prison in the wake of the COVID pandemic, he was remanded back to federal prison where he spent 16 days in solitary confinement with bad ventilation and no air conditioning. A federal judge eventually granted Cohen's writ of habeas corpus, ruling that Cohen was remanded back to prison in retaliation for writing a book that criticized Trump. Had a governor done this, Cohen would have a good Section 1983 claim. But Trump and the other defendants are federal officials, so Cohen has to invoke Bivens.

Cohen's constitutional lawsuit against Trump and the other federal officials who caused his remand to prison fails because the Supreme Court has, over the years, narrowed Bivens to the point that nearly all Bivens claims fail. Here is the unforgiving, two-part legal standard:

The first step requires a court to determine “whether the request involves a claim that arises in a ‘new context’ or involves a ‘new category of defendants.’” We interpret “new context” broadly, and a context is “‘new’ if it is ‘different in a meaningful way from previous Bivens cases decided by’” the Supreme Court. If a claim arises in a new context, the second step requires a court to determine whether “there are ‘special factors’ indicating that the Judiciary is at least arguably less equipped than Congress to ‘weigh the costs and benefits of allowing a damages action to proceed.’”

My guess is the Supreme Court will someday dispense with Bivens claim altogether. For now, Bivens is still on the books, but it is barely breathing. Cohen loses "because there is reason to hesitate before extending Bivens to this new context. Cohen sues a former President, a former Attorney General of the United States, FCI Otisville’s warden, and officers and agents of the BOP and the PTS. Cohen’s Fourth Amendment claim involves 'new categor[ies] of defendants' that were not contemplated in Bivens." Cohen also loses because he did get some relief from this governmental misconduct in the form of a favorable habeas ruling from Judge Hellerstein that sprung Cohen out of prison on First Amendment grounds. That ruling did not award Cohen any damages (habeas rulings do not provide for damages) but it did get Cohen some relief. Under Bivens, that's enough.