Parent company is responsible for racial harassment in million dollar verdict case

This racial harassment case against a steel plant near Buffalo provides insight into how the Court of Appeals views damages awards in these cases. The jury awarded the black plaintiff $1.32 million in compensatory damages and $24 million in punitives. That's right, $24 million in punitives. The Court sustains the compensatories but finds the punitives excessive.

The case is Turley v. ISG Lackawanna, Inc., decided on December 17. This is the second racial discrimination case in a year that the Second Circuit has to use the N word and other vulgarities in summarizing the case. The first case was Matusick v. Erie County Water Authority. Both cases are written by Judge Sack, who once again apologizes to the reader about having to use this language in the decision. In this case, plaintiff worked in a "living hell" characterized by every sort of racial harassment you can imagine. Just use your imagination on this one. Management did not properly investigate his complaints about the harassment, and some supervisors had even engaged in the abuse. The question on appeal is not whether the jury properly found liability under the civil rights laws, but whether (1) the judge properly charged the jury; (2) the parent company was properly held responsible and (3) the damages were too high. I'll write up four blog posts on this case, starting with parent-subsidiary liability.

The jury said that Lackawanna and its corporate parent, ArcelorMittal USA, were both liable for the harassment. The Court of Appeals says the record supports that finding. While the law allows a corporation to organize in a way that isolates liabilities among separate entities, they can still be a "single employer" under the employment laws. The Court of Appeals has tread this ground before. Here is the legal standard:

ʺUnder this test, ʹa parent and subsidiary cannot be found to represent a single, integrated enterprise in the absence of evidence of (1) interrelation of operations, (2) centralized control of labor relations, (3) common management, and (4) common ownership or financial control.ʹʺ Although no one factor controls the analysis, the second, ʺcentralized control of labor relations,ʺ is the most significant.

The trial record contains "some evidence" that the parent company was involved in decisions relating to plaintiff's employment "and to the course of harassment." In our world, "some evidence" can be enough to sustain a jury verdict. The parent company negotiated the union contract, which governed the resolution of harassment complaints. The parent company did in fact handle harassment complaints. Summing up, the Circuit says:

A 2007 harassment training seminar explained that all complaints must be reported to the corporate human resources department, and that any settlement that changes anyoneʹs terms of employment must be approved by the corporate office. Employees were directed to report harassment to the ʺAlertline,ʺ a nationwide ʺhotline.ʺ Plant managers repeatedly stated that they were required to check with the corporate legal department in Chicago before providing information to assist police investigations concerning threats against Turley. And Turleyʹs employment ended when the parent company shut down the Lackawanna plant and sold its assets.

I don't see significant overlap among corporate entities over plaintiff's case, but it is enough to sustain the jury's finding that the parent company is partly liable for the harassment as part of a "single employer."

Circuit takes a look at anti-unionization effort at New York hotel

A few months after the housekeeping employees at the Hyatt Hotel considered whether to unionize, the hotel launched a disinformation campaign against the union and subcontracted out its housekeeping work. The subcontractor hired most of the former hotel employees, but the hotel then cancelled the subcontract, fired its old employees and replaced them with new people. The U.S. government filed an unfair labor charge against the hotel, and an administrative law judge ruled against the hotel. When the case reached federal court, the judge refused to dismiss the unfair labor practice petition but also declined to enter an injunction against the hotel.

The case is Paulson v. Remington Lodging & Hospitality, LLC, decided on December 12. This case highlights the usual tactics of an anti-union campaign. Since the ALJ ruled in favor of the union on the merits, we deem the above sequence of events as true for purposes of deciding whether the hotel went too far in opposing the union campaign. The issue for the Court of Appeals (Winter, Parker and Hall) is what to do about this violation. The district court declined to reinstate the employees who were fired; it said that the NLRB had waited too long to seek that relief, and rehiring the employees would displace the replacement employees. The Court of Appeals disagrees.

The Second Circuit writes that "the district court's analysis ... focused heavily on the harm to individual employees (both those discharged and their replacements) caused by the discharges and delayed reinstatements. That analysis, however, failed adequately to account for harm to unionization efforts." First, the Court of Appeals says, "the rights of improperly discharged employees take priority over the rights of those hired to replace them." Second, time was of the essence in replacing the fired employees, as their absence from the workplace "can quickly extinguish organizational efforts and reinforce fears within the workforce concerning the consequences of supporting a unionization campaign." The Court of Appeals relies on extra-Circuit authority for these propositions, so this ruling covers new ground in the Second Circuit.

Without citation to any authority, though, the Court rejects the district court's belief that the fired workers knew they were being offered reinstatement and also knew this case was pending in court, which should have reassured them that they had a right to organize. But the countervailing concern, says Judge Parker, is that litigation is always uncertain and the hotel was challenging the ALJ's findings.

In the end, however, reinstatement is not appropriate because circumstances have changed in the case over time. All the housekeeping employees have been offered reinstatement. Some came back, and some did not, but the ones who did not would probably not return at this point. And a cease and desist order against unfair labor practices remains in place.  

Another look at the independent contractor/employer distinction

The nurses at Harry's Nurses Registry were denied overtime, so they brought a lawsuit. The district court granted them summary judgment, and the nurses won. The Court of Appeals affirms the ruling.

The case is Gayle v. Harry's Nurses Registry, Inc., a summary order issued on December 10. The employer argues that the nurses cannot win because they are not employees. This prompts the Court of Appeals to review once again the rules governing when people are employees or independent contractors. Under the "economic reality test," we consider "(1) the degree of control exercised by the employer over the workers, (2) the workers’ opportunity for profit or loss and their investment in the business, (3) the degree of skill
and independent initiative required to perform the work, (4) the permanence or duration of the working relationship, and (5) the extent to which the work is an integral part of the employer’s business."

These factors favor the nurses. Harry's -- which places nurses with outside entities -- has economic control over them because nurses are not allowed to contract independently with placements, they cannot subcontract a shift to another nurse, they cannot take partial shift and Harry's fixes their hourly rate. Harry's also has professional control over the nurses because the nursing supervisors monitor the nurses' daily phone calls reporting to shifts, and nursing supervisors can require nurses to attend continuing education to maintain their licenses. The nurses have no opportunity to share in profit and loss of the company. They are simply paid an hourly wage and are paid even if the insurance carrier pays Harry's promptly.

Harry's goes so far as to say that nurses are not integral to the business. The Court of Appeals (Katzmann, Winter and Marrero [D.J.]) will have none of this. "Notwithstanding that 'Nurses' is—literally—Harry’s middle name," the Court notes that placing nurses accounts constitutes Harry’s only income, "The nurses are not just an integral part but the sine qua non of Harry’s business. Considering all these circumstances, we agree with the district court that these nurses are, as a matter of economic reality, employees and not independent contractors of Harry’s."

Nor does the Court like another argument made by the employer, that the nurses were not nurses but home health aides who are not entitled to overtime under the exemption for domestic companionship workers. The employer also says "they do not meet the threshold requirement of having performed overtime 'work.'" The Court says, "This argument does violence to the dictionary definition of work as well as to the dignity of nurses, and we reject it emphatically." 

Second Circuit decides tricky labor law issue (with help from State Court of Appeals)

This is the kind of complex labor law question that prompts the Second Circuit to refer the issues to the State Court of Appeals for a definitive ruling interpreting state law. The issue is whether employee contracts committing parties to pay prevailing waves under a provision of the State Labor Law must specify what particular work the prevailing wages will be paid for.

The case is Ramos v. SimplexGrinnell LP, decided on December 4. The case was argued in September 2013, but this trick question needed clarification from the New York Court of Appeals, which issued a ruling in October 2014.

Plaintiffs did testing and inspection work. They sued because they did not receive prevailing wages for that work, despite the contract to do so. Again, what was the scope of that contract? With guidance from the State Court of Appeals, the Second Circuit (Calabresi, Livingston and Chin) says that, since plaintiffs were "laborers, workmen or mechanics" under state Labor Law, and since the State Department of Labor interprets the statute to mean that testing and inspection falls within that statutory language, plaintiffs may recover the prevailing wages that were denied to them.

The case is remanded to the district court to calculate damages. Plaintiffs argue that they are entitled to damages right now and that remand is not necessary. Not so fast, the Second Circuit says, because the employer challenges the conclusions reached by plaintiff's expert report on how many hours they spent on testing and inspection work as compared with other work.

Here is how IDEA exhaustion works

The federal courts will defer to the expertise of state officials in certain areas, like education, which means plaintiffs must exhaust state remedies before seeking federal relief. This is particularly true when plaintiffs sue over the rights of disabled schoolchildren. This case summarizes the lay of the land.

The case is Stropkay v. Garden City Union Free School District, a summary order issued on December 3. Under the Individuals with Disabilities in Education Act (IDEA), disabled students get an IEP, or an Individualized Educational Plan that the school and the parents create to accommodate the student's learning and other disabilities. Normally, a dissatisfied family challenges the bad IEP at an administrative hearing and, if they lose at the hearing, appeal to the State Educational Department. If that fails, the parents can then sue in federal court. Courts will allow families to proceed straight to federal court without exhausting state administrative procedures in rare circumstances, like when they are challenging systemic problems with the process that the administrative process cannot remedy, or when exhausting state remedies would be futile.

Some of the claims in this case are not appropriate for federal court. The parents raise "grievances related to the education of disabled children," so they must exhaust state remedies, even if they are suing under other civil rights statutes, and not the IDEA. Since plaintiffs did not do that, the question is whether their claims are suitable for federal court. One is, the others are not.

One claim alleges that the school retaliated against plaintiffs for invoking their rights under the disability laws. Since that claim raises a matter "related to the education of disabled children," the parents had to go through the state system first. Another claim also fails because, while plaintiffs said there were systemic violations relating to the need for specific student services, "alleging some students were denied services is not sufficient to allege systemic violations and thus does not exempt plaintiffs from the need to exhaust administrative remedies."

But another claim survives the exhaustion requirement.  Plaintiffs say the district did not comply with the student's IEP requirements. Normally, if the parents don't like the IEP created by the district, they have to exhaust all state remedies. Not when the IEP is in place and the school fails to honor its terms. Under Second Circuit authority, plaintiffs can proceed straight to federal court. A fine line, to be sure.

En banc review in Occupy Wall Street protest case

In August 2014, the Court of Appeals ruled 2-1 in favor of the Occupy Wall Street protesters who got arrested after crossing the Brooklyn Bridge. The Second Circuit rejected the City's Rule 12 motion and allowed the case to proceed to discovery. The full Court of Appeals has now voted to hear the case en banc, and the 2-1 decision is withdrawn. A new decision will issue when the full 13-judge Court hears the case on reargument.

The case is Garcia v. John Doe Officers. The en banc order was issued on December 18. Here is how I covered the case in August:

This case arises from the Occupy Wall Street movement, which sprouted in 2011 in New York City. On October 1, 2011, the protesters marched across the Brooklyn Bridge. They allege that the police allowed them to do this and even led them onto the bridge. The police initially did not prevent the protesters from walking along the roadway. While some officers eventually told the protesters to get on the sidewalk, few protesters heard this command. They were then arrested for disorderly conduct. The plaintiffs sue for false arrest.

The case is Garcia v. Doe, decided on August 21. The crux of the complaint is that "'[p]rior to terminating the march when it was mid‐way across the bridge, the police did not convey that they were going to revoke the actual and apparent permission of the march to proceed,' and that the officers therefore did not have probable cause to arrest them for disorderly conduct." The officers seek qualified immunity, arguing that "an objectively reasonable police officer would not have understood that the presence of police officers on the Bridge constituted implicit permission to the demonstrators to be on the Bridge roadway in contravention of the law." The Court of Appeals (Calabresi, Lynch and Livingston [dissenting]) disagrees, and the lawsuit can proceed.

The Supreme Court held in 1965 that "when officials grant permission to demonstrate in a certain way, then seek to revoke that permission and arrest demonstrators, they must first give 'fair warning.'” The officers try to get around this by arguing that they sanctioned the bridge march so long as the protesters remained on the sidewalk, and that once the protesters spilled into the roadway, they were fair game for arrest; without an implicit invitation to walk along the road, the protesters got what they deserved when the officers arrested them.

The two-judge majority in Garcia said the Complaint stated a cause of action and that the officers were not entitled to qualified immunity at this early stage of the case. Judge Livingston issued a thorough dissent in the case. That dissent, I am sure, will drive the City's arguments this time around. En banc review is quite rare in the Second Circuit. This case must have hit a raw nerve with someone on the Court. And, I must say, I predicted this turn of events, writing in August:

Qualified immunity continues to be a subject of great debate among judges, with many emphasizing that this immunity allows the police and other public officials to do their jobs without the fear of crippling lawsuits. This debate exposes the liberal-conservative judicial divide. I would guess this case is a good candidate for full court, or en banc, review.

Suicide note was in "plain view"

The Court of Appeals grants summary judgment to police officers who seized a suicide note that was in plain view after the entered the house following a 911 call. Even if the police could have handled things better, they are entitled to qualified immunity because they did not violate clearly established law.

The case is Veeder v Nutting, a summary order decided on December 15. Under the "plian view" rule, the police can take things without a warrant if the police ha a right to be there and the items are literally in plain view, i.e., laying on the kitchen table or on the dashboard. the polkice had the right to be in the Veeder home after someone called 911 because of a self-inflicted hanging. A women inside the house told the police that the manila folder she was holding contained the suicide note and that she was going to read it in front of them. "Under the circumstances, defendants had probable cause to believe that the manila folder contained suicide notes," the Court of Appeals (Cabranes, Wesley and Hall) says.

Plaintiffs brought this action because the law generally confers upon you a privacy interest in letters and other sealed packages delivered through the mail. But the Second Circuit cannot identify any clearly established case law that says "the police may not subsequently read a person's private papers, the text of which is not in plain view, that have lawfully been seized under the plain view doctrine." Since the state of the law was not clear at the time, the police get qualified immunity and plaintiffs cannot sue them for damages.

The police could have gotten a warrant, the Court of Appeals says, but that does not affect their entitlement to qualified immunity. Left unsaid in this decision is why the police wanted the note. The district court ruling suggests the police treated the home as a potential crime scene. A quick Google Scholar search turns up a worker's compensation decision relating to this case, suggesting that the suicide grew out of a work-related problem (the decedent worked for the state police). That decision reads:

Decedent had been employed as a forensic scientist for approximately 31 years by the employer. In April 2008, the forensic lab where decedent worked underwent a reaccreditation process, during the course of which an audit uncovered an inconsistency in the fiber proficiency tests that were regularly performed by decedent. An investigation into the issue was commenced by the employer and, over the course of three days, several meetings were held between decedent and his supervisors to discuss the inconsistencies in the test results. After decedent advised his supervisors that he had skipped a step in the fiber test analysis procedure and, therefore, was noncompliant in performing the test, a "nonconforming work inquiry" was initiated by the employer. Decedent subsequently stopped going to work and weeks later, on May 23, 2008, committed suicide.

A few words on qualified immunity, which bear repeating. The Constitution protects certain rights which may be enforced in court, but if the case law interpreting those provisions is not clear at the time of the violation, then the defendants cannot be sued for damages. This means that only the truly incompetent may be sued in Section 1983 cases. Public officials are presumed to know about binding case law (whether they actually do or not). When the state of the law is fuzzy, then these abstract rights get you nowhere in court.