Monday, October 5, 2015

Artists can challenge NYC's switchblade rules

Did you know switchblade knives are illegal in New York? They are. This case alleges that New York City is classifying too many knives as switchblades, even if they are not actually switchblades but instead any folding knife that cannot be opened with a quick flick of the wrist. This case does not decide if New York City is misinterpreting state law. It instead decides whether plaintiffs have standing to challenge New York City's interpretation.

The case is Knife Rights, Inc. v. Vance, decided on September 22. That's right. We have the rights of gun owners and also the rights of knife users. The individual plaintiffs are artists who use non-switchblade knifes for their work. The City has charged them in the past for carrying these knives. A retail store, Native Leather, sells these knives. The City prosecuted Native Leather for selling them. An advocacy organization, Knife Rights, also sues, claiming the City has gone after its members.

Parties have standing to seek an injunction if they risk being subjected to the questionable rule or law without the injunction. This means that Joe Blow cannot sue New York City in a case like this if he does not own any knives that might get him arrested. As Native Leather has sold these knives in the past, wants to sell them again, and has a real fear of prosecution in light of the City's prior prosecution efforts against it, Native Leather has standing to bring this case. The same analysis applies to the individual plaintiffs, who wish to continue using these knives and were charged in the past with carrying a common folding knife. While the City has not threatened to prosecute them again for this, the City has not "disavowed that they would criminally charge Copeland and Perez again the same circumstances." They have standing to sue.

The Knife Rights organization does not have standing to sue. The Second Circuit does not allow organizations to assert the rights of its members in a Section 1983 suit. The organization can only sue by showing it can independently satisfy Article II standing rules, which requires a personal stake in the litigation. It cannot do so. While Knife Rights says it has incurred expenses in opposing the City's interpretation of the switchblade law, that was in the past. This does not mean the organization will incur these expenses in the future. Since the organization has not shown it will be prosecuted under the statute, it has not standing to bring this case.

Friday, October 2, 2015

More guidance from the Second Circuit on how to plead a discrimination case

Over the past few months, the Court of Appeals has issued two important decisions on what it takes to plead a pluasible prima facie case of discrimination under the civil rights laws. Here's another one, though it is an unpublished summary order. Still, worth a read if you do this for a living.

The case is Dawson v. New York City Transit Authority, decided on September 16. The Court reminds us the standard articulated in Littlejohn v. City of New York, decided on August 3:

“what must be plausibly supported by facts alleged in the complaint is that the plaintiff is a member of a protected class, was qualified, suffered an adverse employment action, and has at least minimal support for the proposition that the employer was motivated by discriminatory intent.” The allegations “must give plausible support to the reduced requirements that arise under McDonnell Douglas in the initial phase of a Title VII litigation.” They need not, however, give “plausible support to the ultimate question of whether the adverse employment action was attributable to discrimination.”
This case was dismissed by the district court under Rule 12, but the Second Circuit (Leval, Lohier and Droney) reinstates it. The district court said plaintiff in this disabilities discrimination case did not plead any adverse action because it said plaintiff was really challenging defendant's refusal to reinstate him, which made this case nothing more than a collateral attack on a prior adverse decision, his termination. But that was not plaintiff's case.

He does not contest the validity of his medically indicated reclassification from train operator to station agent in 2005, a reclassification to which he consented. Rather, Plaintiff challenges Defendant NYCTA’s refusal to consider subsequent developments in his medical condition that could make him newly eligible for classification as a train operator. ... Plaintiff is not in fact disputing the unfairness of his original discharge; nor is it the case that 'only if the original discharge was discriminatory is he entitled to be reinstated.' ... Just as Plaintiff was reclassified in 2005 "because he was not medically able to safely perform the functions of a train operator," Plaintiff now seeks a reclassification because he has allegedly become 'medically able to safely perform the functions' of a train operator.
The district court also tossed the case because it said plaintiff blew the statute of limitations in filing his EEOC charge more than 300 days after he sought the position. The Second Circuit says that analysis is wrong because the adverse decision was made within the 300-day period. By the way, it looks like the Transit Authority admits plaintiff was denied the position because of his history of epilepsy, so he may have a case.

The district court also said the complaint did not allege that plaintiff was ill-treated under circumstances creating an inference of discrimination, another element of the prima facie case. But the Court of Appeals says, "At the pleading stage, district courts would do well to remember this exceedingly low burden that discrimination plaintiffs face even after they have survived a motion to dismiss." Since the City admitted that its refusal to grant Plaintiff's request for reclassification is premised on his disability, he satisfies this standard.   

Tuesday, September 29, 2015

Plaintiffs win arbitration choice-of-forum dispute

Many employment disputes are not resolved through arbitration, not lawsuits. This is because employees sometimes have to sign an agreement that says they cannot sue their employers in court and that the disputes instead must go to arbitration. The employer usually wins if the parties fight about the applicability of an arbitration clause. Not this case.

The case is Holick v. Cellular Sales of New York, decided on September 22. When plaintiffs first got involved with Cellular Sales, they were independent contractors and signed a "Compensation Agreement" that they could pursue any legal actions against Cellular in court. But in 2012, plaintiffs became employees, signing a "Compensation Agreement" with management that said all disputes must be resolved at arbitration. Meanwhile, plaintiffs claimed that Cellular had misclassified them as independent contractors and not as employees prior to 2012. (Sometimes people who are designated by management as contractors are actually employees because management has control over their assignments and job duties). Does that dispute get resolved in court or at arbitration? The answer is court, which is the forum designated for resolving disputes during the time period (pre-2012) when the dispute arose.

This case is is tricky. Explaining that the plain language of the 2012 agreement is ambiguous, the Court says that no "provision of the contract states that the employer‐employee relationship commenced with the execution of the Compensation Agreement or otherwise uses language stating that the employment relationship replaced a prior contractual arrangement." So the Court looks to "parol evidence" (or evidence outside the language of the agreement) to decide the parties' intent in signing these agreements. The plaintiffs win, which means they can litigate the case in court. Judge Wesley writes:

Based on the parties’ conduct prior to executing the Compensation Agreements, the presumption of arbitrability is overcome because we find positive assurance that the arbitration clause’s scope—at least insofar as it concerns the promise to arbitrate matters arising out of, or in relation to Employee’s employment—is temporally limited. We reach this conclusion, in large part, based on the fact that when the Compensation Agreements were signed, the parties’ contractual positions changed in a way that impacted arbitrability. In the Sales Agreements, Defendants‐Appellants agreed with the Sales Companies that Pratt and Burrell were not employees of Cellular Sales.

However, about a year and a half later, Defendants‐Appellants agreed to employ Pratt and Burrell. This evolving business relationship is directly relevant to whether the parties intended to have an employment relationship prior to executing the Compensation Agreement. It would be inconsistent with the parties’ conduct to construe the Compensation Agreement, which referenced “employment,” to apply to a period when the parties themselves did not contemplate such a relationship. Defendants‐Appellants’ change in course is just the type of positive assurance required to show that the parties did not intend for the arbitration clause to cover the current dispute.

Monday, September 28, 2015

This is why lawyers drink

Some of the Federal Rules of Civil Procedure are rigid. So rigid that your life will be worth garbage if you violate them. The Notice of Appeal deadline is one of them. This party learns it the hard way.

The case is Weitzner v. Cynosure, Inc., decided on September 16. You have 30 days from entry of judgment to file the Notice of Appeal. Since this rule is jurisdictional, even filing the Notice a day later is too late. There are a few exceptions, though. If you file a timely motion for reconsideration of the district court's ruling, then the Notice of Appeal deadline is extended until the judge resolves the motion for reconsideration. But that motion must be filed within 28 days after the judgment is entered.

Got that? In this case, plaintiffs alleged that defendant violated the Telephone Consumer Protection Act. Ruling for the defendant, the district court entered judgment on March 5, 2013. On March 15, 2013, plaintiffs served on defendant a motion for reconsideration, but they did not file it with the district court. Plaintiffs failed to file it with the court pursuant to the district court's Individual Practice Rule, which says you file the motion papers after the motion is fully briefed and ready for adjudication. Many district judges utilize that rule, which allows the motion to be docketed in the court's computerized system only when the motion is fully briefed, I suspect because the court's internal deadline to decide the motion does not begin to run until the system is aware that the motion was filed. We call this delayed filing system "bundling." Since motions can take weeks or even months to be fully briefed, bundling means that the motion for reconsideration is not filed with the court within 28 days of entry of the original judgment, even if it was served on the other side right away. That is what happened in this case. The motion for reconsideration was "filed" on August 14, 2013. The district court denied that motion on February 6, 2014. Plaintiff filed a Notice of Appeal from the March 5, 2013 judgment on March 6, 2014.

So what we have is a rigid 30-day Notice of Appeal deadline and a 28-day deadline to file the motion for reconsideration, which tolls the deadline for the Notice of Appeal. We also have the practice of many district court judges who do not want you to file the reconsideration motion until it is fully briefed, more than 28 days after judgment is entered. We all have to follow district court rules, right? Is that a good excuse for the "untimely" filing of a motion for reconsideration, which in turn makes the Notice of Appeal an untimely filing as well? It is not.

The district court may extend the 28-day requirement to file the motion for reconsideration. But plaintiffs do not qualify for that extension because they could have asked the district court for permission to file the motion within 28 days. Failure to do so, the Second Circuit (Leval, Chin and Carney) says, was unreasonable. Since the reconsideration motion was not timely filed (even though it was timely drafted and served on the other side), then the Notice of Appeal is untimely as well. The appeal is dismissed.

The Court of Appeals notes that many district courts require the parties to bundle their motions and that this means motions for reconsideration will be filed more than 28 days from entry of judgment, which will make the appeal untimely. The Court suggests the bundling rule violates the Federal Rules of Civil Procedure, which requires that motions be filed shortly after they are served. The Court concludes by stating,

While it is true that in many cases counsel will have the opportunity, as in this case, to ask the judge’s leave to file without delay, a judge is not always available to deal promptly with an emergency application. Nor is there a guarantee that all judges will reasonably grant an exception from compliance with their rules. Litigants should not be put in the position of risking to be held in contempt for violation of the court’s rules – simply for filing with the court a paper whose filing is not only permitted, but also required, by the federal rules.We have no doubt that the purpose of such individual calendar rules is to assist district courts in dealing with significant administrative burdens. Nonetheless, we are confident that the useful objectives of such rules could be achieved in a manner that would avoid these unacceptable pitfalls. We very strongly recommend that district courts promptly review their individual rules and practices so as to eliminate the unacceptable risk that litigants will forfeit rights because of observance of rules promulgated by individual judges, especially with regard to rules that are of questionable consistency with the governing provisions of the federal rules and statutes.

Wednesday, September 23, 2015

Huge fabrication-of-evidence verdict is sustained

State investigators accused a dentist of Medicaid fraud in the amount of $1.1 million. They said the dentist collected government money for services he never provided. A state judge acquitted the dentist of all charges, and the dentist then sued the investigators, claiming they fabricated spreadsheet evidence against him before the grand jury. The civil jury ruled in his favor, awarding him $7.7 million in damages, including over $4 million in lost earnings, $2.5 million in pain and suffering and $1 million in punitives, amounts that the district court reduced to $4.7 million. The Court of Appeals affirms it all.

The case is Morse v. Hasty, decided on September 11. When juries enter a verdict, you cannot really appeal on the basis that you had better evidence than the winning party. The jury decides who had the better evidence. So you appeal on legal issues.

Qualified immunity is a legal issue that defendants love to invoke. It says that defendants cannot be liable for violating the law if the case law at the time of the alleged violation was not clear enough. Defendants said the could not held liable because "they had no constitutional duty to include all material information in the spreadsheet summaries" when they presented the case to the grand jury. They also argued that the omissions in the spreadsheets did not constitute the kind of fabrication of evidence that the law prohibits. The Second Circuit disagrees. While grand jury proceedings are one-sided in favor of the prosecutor, the general rule prohibiting the fabrication of evidence through false statements or omissions covers what happened here, as the spreadsheets were misleading and effectively falsified. "The integrity of the judicial process can be unlawfully compromise by a government official's submission of information to a jury that implicates the accused based in part on material omissions."

While there are no cases precisely on point, the existing case law placed defendants on notice that what they did (or failed to do) violated the law. "Qualified immunity is unavailable on a claim for denial of the right to a fair trial where that claim is premised on proof that a defendant knowingly fabricated evidence and where a reasonable jury could so find."

The verdict is sustained. Plaintiff lost his dental practice when he got arrested, and his name was dragged through the mud, which is why he won a huge damages award. Judge Sack cites in a footnote a famous quote from a Reagan administration official who was acquitted after a highly-publicized arrest. The official asked where he could go to get his reputation back. The law may give you money, but it cannot give you back your reputation.

Tuesday, September 22, 2015

EEOC can sue Sterling Jewelers for nationwide discrimination

In this case, after receiving 19 individual complaints of discrimination against Sterling Jewelers (the largest fine jewelry company in the U.S.), the EEOC conducted an investigation, finding that Sterling had systematically discriminated against women in promotions and salary. The EEOC then sued Sterling in federal court, which dismissed the case on the ground that the EEOC had not proven that it had conducted a pre-suit investigation. The Court of Appeals reverses.

The case is EEOC v. Sterling Jewelers, Inc., decided on September 9. In 2015, the Supreme Court said in the Mach Mining case said that, before the EEOC can bring an enforcement action under Title VII, it must:

(1) receive a formal charge of discrimination against the employer; (2) provide notice of the charge to the employer; (3) investigate the charge; (4) make and give notice of its determination that there was reasonable cause to believe that a violation of Title VII occurred; and (5) make a good faith effort to conciliate the charges.
While courts have authority to review whether the EEOC has fulfilled its pre-suit administrative obligations, the Second Circuit has never determined the proper scope of that review. On authority of Mach Mining, the Court finds that judicial review into this is limited. "[C]ourts maynot review the sufficiency of an investigation -- only whether an investigation occurred." The Court of Appeals (Walker, Lynch and Lohier) says:

In order to prove that it has fulfilled its pre‐suit investigative obligation, the EEOC must show that it took steps to determine whether there was reasonable cause to believe that the allegations in the charge are true. Here, the EEOC’s complaint against Sterling alleged nationwide discrimination; accordingly, the agency must show that it undertook to investigate whether there was a basis for alleging such widespread discrimination. The EEOC need not, however, describe in detail every step it took or the evidence it uncovered. As with the conciliation process, an affidavit from the EEOC, stating that it performed its investigative obligations and outlining the steps taken to investigate the charges, will usually suffice.
That is what we call deferential review. But that's what the Supreme Court authorized in the Mach Mining case. It is not for the federal courts to second-guess EEOC investigations. In this case, the Court of Appeals holds that the district court got it wrong. While purporting to examine the existence of the EEOC's investigation, it actually considered its sufficiency. It could not consider sufficiency. Since the record shows the EEOC did in fact investigate the discrimination complaints, that is enough to allow it to bring this enforcement lawsuit.

Friday, September 18, 2015

Dodd-Frank protects internal whistleblowers

The Court of Appeals holds that the Dodd-Frank whistleblower law protects employees who report securities violations internally. This case exposes an inter-Circuit conflict that will certainly end up in the Supreme Court.

The case is Berman v. Neo@Ogilvy, LLC, decided on September 10. In 2002, Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act. It says that Wall Street whistleblowers cannot suffer retaliation if they report violations to the Securities and Exchange Commission. But the statute also says extends retaliation protections for people who "make[] disclosures that are required or protected under the Sarbanes-Oxley Act of 2002." We'll call that subdivision (iii)). Under that Act, Wall Street honchos cannot retaliate against employees who report securities violations internally, i.e., to their supervisors. Since Berman only reported violations internally and not to the SEC, if Dodd-Frank only protects whistleblowers who report violations to the SEC, then Berman cannot sue his employer for retaliation. The issue is whether Dodd-Frank also protects internal whistleblowers.

Recognizing the statute has an ambiguity that Congress may not have intended, the Court of Appeals (Sack and Calabresi) defers to the regulations created by the SEC, which says Dodd-Frank covers people who only report violations internally. Under Chevron deference principles, which provide that courts must defer to administrative agency interpretations of ambiguous statutes, the Court of Appeals accepts the SEC's regulation as reasonable. It does so for these reasons:

First, there will be very few employees who simultaneously report securities violations both internally and externally, to the SEC, as some will think that reporting them internally will be enough. Second, some whistleblowers must report their concerns internally before going to the SEC, including auditors and attorneys. "Apart from the rare example of simultaneous (or nearly simultaneous) reporting of wrongdoing to an employer and to the Commission, there would be virtually no situation where an SEC reporting requirement would leave subdivision (iii) with any scope."

Judge Jacobs dissents, siding with the courts that have more narrowly interpreted Dodd-Frank. He notes that whistleblowers in certain circumstances are still protected under Sarbanes-Oxley.