Third Department Justices Disagree on Whether Student Accused of Sexual Assault Should Have Right to Cross-Examine Accuser

The Appellate Division, Third Department has decided a number of significant issues recently involving the State University of New York’s disciplinary system in sexual assault cases. First, it was Matter of Haug v State Univ. of N.Y. at Potsdam, in which the Court annulled the expulsion of a student accused of sexual assault, finding that the hearsay statement of the accuser wasn’t enough to support the discipline. That case is at the Court of Appeals on an appeal as of right, and has been fully briefed, just waiting for an argument date.

Next, it was Matter of Weber v State Univ. of N.Y., Coll. At Cortland, where the Third Department reached a seemingly contradictory result to Haug. In Weber, the facts were a little more clear, but in neither case did the accused student have the “affirmative consent” to sex that the SUNY Code of Conduct requires. While in Haug, the Third Department vacated the expulsion, in Weber, the Court upheld it.

The Third Department’s latest foray into the SUNY disciplinary process in sexual assault cases came just this week. In Matter of Jacobson v Blaise, the Third Department heard a case arising from an alleged sexual assault on Halloween 2015 at SUNY Plattsburgh. Neither the accused student nor the accuser remembered who initiated the sex, and both were drunk at the time. Five days afterward, the accuser reported it as sexual assault, and the accused was issued a “No Contact” order.

At the eventual disciplinary hearing, the accuser listened to the proceedings via Skype, but did not participate. Instead, the lead investigator that had filed the disciplinary charges against Jacobson read the accuser’s statement into the record at the hearing. Jacobson was allowed to cross-examine the investigator at the hearing, but not the accuser herself. This was a major point of contention between the majority and dissent at the Third Department.

As the majority explained, under the “‘Students’ bill of rights’ section in the Education Law, the reporting person has the right to ‘[m]ake a decision about whether or not to . . . participate in the judical or conduct process . . . free from pressure by the institution’ (Education Law § 6443).” This protection has two components: first, the accuser can decide whether or not to participate in the hearing, and the school can’t tell him or her that failure to participate could hinder the case; second, the accuser has the right to remain anonymous. In light of these protections, the Court held, Jacobson had no due process right to cross-examine his accuser at the hearing, whether in person, electronically through Skype, through the hearing officer, or by written questions. His right to question the investigator about the accuser’s statement was enough in this case, the majority decided.

The majority recognized, however, that there may be a case where a limited right to cross-examination of the accuser should be permitted. In Weber, for example, “the accused student submitted questions through the hearing officer who reworked the question ‘into a more neutral form'” (Weber, 150 AD3d at 1432). Thus, the majority set out a new rule for when the limited right to cross-examine the accuser arises:

where a material factual conflict exists between the statements of a reporting person and an accused student, a mechanism should be made available for the accused student to present questions for the reporting person to address, akin to that utilized in Doe or Weber.

The two Justice dissent, on the other hand, would have held that Jacobson’s due process rights had been violated. The dissent countered:

The dissent recognized that cross-examination is not necessary or warranted in many student disciplinary cases, most of which result in nothing more than a slap on the wrist or a suspension from which the student can return to school. But sexual assault cases are different, the dissent reasoned. They lie at the extreme end of disciplinary consequences and, thus, an accused student should have a full panoply of due process rights to cross-examine the accuser in whatever form the hearing officer finds appropriate.

In this case, the dissent noted, the accuser was already watching the hearing via Skype and could have been questioned that same way, or Jacobson could have been allowed to submit questions for the hearing officer to ask. Either way, the dissent argued, the failure to give Jacobson this right deprived him of due process at the hearing and rendered his expulsion void.

Here’s the thing though. The majority too found a reason to vacate Jacobson’s expulsion. It just wasn’t on due process grounds. Instead, the majority held that the investigator had at the hearing improperly defined what it meant to obtain affirmative consent to sex and suggested that Jacobson had to have been the one to ask for consent because he initiated the sex by penetrating the accuser. That’s not the right definition of either affirmative consent or initiation, the majority held, and it seriously undermined the Board’s decision to sustain the sexual assault charges. So, it sent the case back to the SUNY Disciplinary Board for a new hearing.

The dissent agreed with that flaw too, but because it also found a due process violation, it wouldn’t have sent the case back. Instead, it would have annulled the determination and ended the matter altogether.

Now, Jacobson will have a chance to go back before the Board for a new hearing in the charges, which may be of little comfort to him if he is again denied a chance to have the accuser questioned.

The right of cross examination issue in sexual assault disciplinary hearings is a hard and interesting one. There are certainly important interests on both sides, and I haven’t done enough research to know how those interests should be balanced.

It’s the kind of issue that should be heard by the Court of Appeals so there is a single rule to be applied statewide, but that won’t happen quite yet, unless the Third Department dissenters grant Jacobson leave to appeal. Without an Appellate Division leave grant, the Court of Appeals can’t hear the issue in this case because the remand for a new administrative hearing renders the Appellate Division order nonfinal. It seems to me, though, that this would be a good companion case to Haug, which is now fully submitted before the Court of Appeals. I can’t imagine it will be long before the Court is asked to address the question.

The Appellate Division, Third Department order can be found here.

Expressions Hair Design Update: The Second Circuit Certifies Interpretation Question to the Court of Appeals

You’ve bought things with a credit card before, right? Me too. Have you ever thought that you might be charged a different price for what you’re buying because you’re not paying in cash? Me neither, and that seems to be what New York General Business Law § 518 tries to prevent.  It provides:

No seller in any sales transaction may impose a surcharge on a holder who elects to use a credit card in lieu of payment by cash, check, or similar means.

But what does section 518 actually prohibit a merchant from doing?  How far is its reach?  The Second Circuit previously suggested that section 518 appears to bar a retailer from posting a cash price and noting along side it that those paying with a credit card will be charged a certain amount more, the so-called “single-sticker-price scheme.”  Retailers seem to be able to offer discounts to people paying in cash, however.  No New York courts have addressed the reach of the provision, and so what exactly is prohibited remains an unsettled question.

The Second Circuit has now asked the Court of Appeals to resolve that question.  For those who haven’t been following the case closely, including its quick trip to the Supreme Court, here’s a brief recap.  In Expressions Hair Design v Schneiderman, five New York retailers challenged section 518 as a violation of their First Amendment rights by impermissibly regulating how they communicate their prices to customers.  The District Court found in the retailers’ favor, but the Second Circuit vacated the District Court judgment. The Second Circuit held that section 518 regulated conduct, not commercial speech, and thus did not violate the First Amendment.

The Supreme Court granted certiorari, however, and reversed. The Supreme Court held that section 518 does regulate commercial speech, and clearly bars the single-sticker-price scheme to which the retailers had limited their challenge. The The Court, therefore, remanded the case to the Second Circuit to address the question that it did not previously, whether Section 518’s regulation of commercial speech survived First Amendment scrutiny.  Although the Court’s consideration of the question was limited to the single-sticker pricing scheme set forth by the retailers, the Court noted that the Second Circuit was free to consider the constitutionality of other pricing schemes should it decide to do so.

On remand from the Supreme Court, the Second Circuit asked the parties for further briefing on the First Amendment issues and whether the unsettled statutory interpretation question should be certified to the Court of Appeals for a determination under New York law.  In response, the State argued that the Second Circuit should certify two questions concerning the interpretation of section 518 to the Court of Appeals because the statute’s constitutionality turns on the Court’s answer to those questions.  Particularly, the State asked the Second Circuit to certify these questions:

The retailers, on the other hand, argued that the Supreme Court’s opinion foreclosed the certification route by adopting the Second Circuit’s prior interpretation of section 518.  Regardless, the retailers argued, certification was inappropriate because the Court of Appeals could not construe section 518 as prohibiting any dual pricing scheme because such an interpretation “would directly conflict with a federal statute expressly protecting the right of merchants to provide discounts to cash-paying customers, see 15 U.S.C. § 1666f—and so would likely be preempted under the Constitution’s Supremacy Clause. The constitutional-avoidance doctrine thus has no application in a case like this one, where avoiding one set of constitutional problems necessarily presents the court with an entirely new set of constitutional problems.”  (Plaintiffs’ Brief, at 18).

After evaluating the parties’ arguments, the Second Circuit decided on the certification route, and certified this question:

Does a merchant comply with New York’s General Business Law § 518 so long as the merchant posts the total‐dollars‐and‐cents price charged to credit card users?

Because the Supreme Court remanded on “whether Section 518, as applied to the single‐price scheme, is either a valid regulation of commercial speech under Central Hudson or a permissible disclosure rule under Zauderer,” the Second Circuit decided that the Court of Appeals’ interpretation of the scope of the statute would help the Court choose which test applies.

More fundamentally, because the question whether to apply Central Hudson’s test or Zauderer’s turns in part on a functional analysis of Section 518, the First Amendment inquiry in this case properly begins by accounting for the way the statute operates in practice. Despite the general rationale it offered in Zauderer for the lesser standard of review it articulated in that case, the Supreme Court has never clearly specified a governing framework that determines when Zauderer’s less‐exacting standard should apply instead of Central Hudson’s intermediate scrutiny. However, the Supreme Court has suggested that, at a minimum, Zauderer supplies the governing standard when evaluating the constitutionality of a law (1) designed to address misleading commercial speech (or, presumably, its equivalent, the non‐disclosure of information material to the consumer), (2) which mandates only that the merchant make certain truthful statements, and (3) which does not prevent the merchant from conveying additional truthful information.

We see no obvious way to conduct the functional analysis this view of the Central Hudson/Zauderer distinction requires without first gaining greater clarity about the correct application of Section 518 under New York law. Here, of course, the State argues that Section 518 is designed to address the possibility that consumers will be misled if a merchant does not clearly disclose, at the outset, the price it charges to credit card users. As a result, the scope of Section 518’s prohibition is crucial to our analysis in this case. If Section 518 forces a merchant to disclose an item’s credit‐card price, without otherwise either barring the merchant from (a) implementing (and describing to customers) a pricing scheme that differentiates between payments by credit card and cash or (b) conveying to its customers other information the merchant finds relevant, then Zauderer might apply. However, if the statutory prohibition sweeps much more broadly, then Central Hudson might apply. At the very least, without some clarification of Section 518’s scope from the Court of Appeals, and in the absence of some other way to identify the actual scope of Section 518’s rule, it is not clear that we can even decide the basic question of which standard of review — Central Hudson or Zauderer — properly applies.

Here’s the thing, though. In certifying the interpretation question to the Court of Appeals, the Second Circuit makes a number of statements that seem to suggest, clearly to me at least, where the Court stands on the retailer’s First Amendment challenge.  For instance, when explaining how the Court of Appeals’ interpretation could affect the Zauderer test, the Second Circuit explains how section 518 could survive scrutiny under that test, and then, with a conspicuous caveat that it isn’t deciding the merits, basically rejects the retailers’ arguments on the merits. I wouldn’t be too encouraged if I was one of the retailers.

Another interesting point from the Second Circuit’s certification decision is that it explains that it is choosing between the Central Hudson and Zauderer tests without much, if any, guidance from the Supreme Court on when each applies. It is conceivable that this case could go to the Court of Appeals for resolution of the scope of section 518, come back to the Second Circuit for which test applies and whether section 518 withstands the retailers’ First Amendment challenges, and then head back to the Supreme Court for the second time. An appellate geek like me can only dream!

The Second Circuit’s certification opinion can be found here.

Fourth Department Affirms Class Certification for Buffalo Jills in Case Against NFL, Bills

In Ferrari v The National Football League, four former members of the Buffalo Jills, the Bills’ cheerleading squad, brought a proposed class action against the NFL, the Bills, and their employer alleging that they weren’t paid for hundreds of hours of work because they were “deliberately misclassified as independent contractors rather than employees.” The Jills’ complaint can be found here.  This suit came on the heels of similar cases brought against the Raiders, Bengals, and 49ers by the teams’ cheerleading squads.  While those cases were either settled (Raiders and Bengals) or dismissed (49ers), the Buffalo Jills case has gone forward.

The latest fight in the case was over class certification, basically, whether the four named plaintiffs in the Jills case can represent the interests and press the wage claims on behalf of all of the current and former members of the Jills as a whole.  Class certification is a key point in a case like this.  If a class is certified, the plaintiffs will have a much stronger position to negotiate a settlement of the case and likely for more money.  If the court doesn’t think the interests are sufficiently similar, however, and all of the plaintiffs are made to bring and prove their own harms and damages, the NFL and Bills would be in a much stronger position.  It’s far less likely that individual Jills will hire their own attorneys and pay to litigate a case for what could end up being a small amount of damages. So, without class certification, many proposed class actions end up being dismissed.  The juice just wouldn’t be worth the squeeze at that point.

In the Jills case, Supreme Court, Erie County held that the Jills’ claims had common questions—whether they were improperly classified as independent contractors instead of employees, and thus were denied wages they should have been paid for appearances in the community—and there were enough affected individuals that the case would be better tried as a class action. Recognizing that this was a pivotal issue in the case, the NFL and Bills appealed.

The Appellate Division, Fourth Department, however, affirmed the class certification order, holding that all five requirements for class certification under CPLR 901(a) had been met.  These are the five requirements that the Court looked at:

a. One or more members of a class may sue or be sued as representative parties on behalf of all if:
1. the class is so numerous that joinder of all members, whether otherwise required or permitted, is impracticable;
2. there are questions of law or fact common to the class which predominate over any questions affecting only individual members;
3. the claims or defenses of the representative parties are typical of the claims or defenses of the class;
4. the representative parties will fairly and adequately protect the interests of the class; and
5. a class action is superior to other available methods for the fair and efficient adjudication of the controversy.

Particularly, the Court held that “the common questions include whether the putative class members were employees or independent contractors and whether defendants failed to pay them in accordance with the law, and we conclude that those questions  predominate over individual questions of damages” (Opn, at 3). The Court also noted that the claims of the four named plaintiffs were the same as the potential class members, and that the named plaintiffs can adequately protect the interests of the rest of the class.  Finally, the Court held that the class action was the preferable means of litigating these claims against the NFL and Bills because “this is a case where the cost of prosecuting individual actions would deprive many of the putative class members of their day in court” (Opn, at 4).

This was a big win for the Jills, and the case will now go back to the Erie County trial court, where the parties will go through discovery, depositions, motion practice, and possibly try to reach a settlement.

The Appellate Division, Fourth Department’s order can be found here.


En Banc Second Circuit Hears Arguments Whether Sexual Orientation Discrimination is Discrimination Because of Sex Under Title VII

The full Second Circuit yesterday heard arguments in Zarda v Altitude Express, which involves the hot button legal question whether Title VII offers protection for sexual orientation discrimination under the clause prohibiting discrimination “because . . . of sex.” In a nearly two-hour argument, with three attorneys arguing on each side, the Court was fairly active in questioning the parties, trying to drive each of them to address the weakest parts of their arguments and help the Court draw a line for what Title VII protects and what it doesn’t.

After a lackluster start by counsel for Plaintiffs, where it took him a great while of stumbling to get into the statutory interpretation question, counsel for the EEOC picked up the mantle for why the agency believes that Title VII does protect against sexual orientation discrimination and ran with it.  As the EEOC amicus brief laid out, there are three theories of interpretation to get there: first, that sexual orientation discrimination requires the employer to take the employee’s sex into account in conjunction with the sex of that employee’s actual or desired partner; second, that sexual orientation discrimination is a form of sex stereotyping prohibited under Title VII by the Supreme Court’s decision in Price Waterhouse v Hopkins; and, third, that it is gender-based associational discrimination treating LGBTQ individuals disparately because of with whom they romantically or sexually associate.

The EEOC counsel was by far, I thought, the most polished of the three on Plaintiffs’ side, and adeptly maneuvered the Judges’ hypotheticals like “how can the discrimination be based on sex if a woman could presumably also be fired for her sexual orientation?”  To that the EEOC’s counsel responded, under that scenario, “both a man and a woman would be fired for not comporting with proper gender roles,” which is prohibited under the Price Waterhouse sex stereotyping theory.

What was most interesting to me was the Judges pushed the EEOC to explain its change in position over the years to now argue that Title VII offers protection against sexual orientation discrimination.  The EEOC’s counsel explained that following the Supreme Court’s decisions over the last 15 or so years concerning LGBTQ rights, the agency undertook a “fresh look” and sought input from both employers and employees on what protections they believed Title VII offered.  This “fresh look,” the EEOC counsel advised the Judges, resulted in the new view on the statutory interpretation question, like the en banc Seventh Circuit undertook in Hively and Chief Judge Katzmann did in his concurrence in Christiansen v Omnicom Group.

The strangeness of the USDOJ’s contrary position certainly was not lost on the Judges during the argument either. As Judge Rosemary Pooler put it, “You know we love to hear from the federal government, but it’s a bit awkward to hear from them on both sides.”  To that, the EEOC counsel could only respond, “Indeed, your Honor.”

That was not the end of the issue. As soon as the USDOJ attorney got up to the lectern, the Judges started in on him.  In fact, the first question before the USDOJ even got out his first sentence was: “Can I interrupt and ask a question about why you’re here?  Doesn’t DOJ ordinarily defer to the EEOC on Title VII questions?” Ouch. The best he could come up with is that the USDOJ is the nation’s largest employer and the interpretation of Title VII would have an impact on it.

And the questions about USDOJ’s participation kept coming in rapid succession. Next, “Who is the representative from the Civil Rights Division on this brief?”  Then, “So in Hively, the EEOC filed an amicus brief, but DOJ did not. Is there some reason why a brief wasn’t filed then, but one is filed now?” And, “With respect to the EEOC and Department of Justice, what is the process that is entered into in terms of filing a brief?  Can the EEOC file its own brief without consultation with the Department of Justice?”  The USDOJ lawyer eventually got so uncomfortable with the questions that he repeated, multiple times, that he didn’t believe it was appropriate to disclose the internal processes of the DOJ as to when and how a brief contradicting the EEOC is filed.

The argument went downhill from there.  The USDOJ reiterated its arguments that men and women are treated the same for the context of their sexual relationships and, thus, sexual orientation discrimination is not discrimination because of sex.  The Judges, however, just didn’t seem to be buying it.

This is a fascinating argument to hear, made even more so because of the Court’s interest in issues other than the pure statutory interpretation of Title VII.  If you have a free two hours, I strongly recommend listening.  The audio is available on the Second Circuit’s website here.

New York Judge Denies State’s Motion to Dismiss Suit Challenging Constitutionality of New York’s DFS Law

Last year, a wave of uncertainty surrounded the legality of daily fantasy sports. In New York, Attorney General Eric Schneiderman brought a high profile suit to enjoin the operation of Draft Kings and FanDuel, arguing that their DFS games violated New York’s constitutional ban on gambling. Specifically, Article I, § 9 of the New York Constitution provides, in relevant part: “no lottery or the sale of lottery tickets, pool-selling, book-making, or any other kind of gambling, except [the State lottery, betting on horse races, and casino gambling] shall hereafter be authorized or allowed within this state.”  New York is different.  Gambling isn’t just prohibited by statute that can be easily amended by the Legislature; it is banned by the State Constitution.

In addition to opposing the AG’s lawsuit, Draft Kings, FanDuel, and the entire DFS industry undertook a substantial lobbying effort to legalize DFS in New York.  Instead of pushing for a constitutional amendment to create an exception for DFS from the definition of “gambling” prohibited under the New York Constitution, like the Legislature has done before for the State lottery, horse racing, and most recently to allow casinos, however, the industry decided to try a shorter path.  In New York, a constitutional amendment is, at minimum, a two-plus-year process.  The proposed amendment—here the DFS legalization bill—must be passed in two successive legislatures and then approved at a referendum by the people of the State at a general election.  The DFS industry didn’t want to wait that long.  Instead, they pushed for a one off bill. And that’s just what they got.

In 2016, the New York Legislature passed Chapter 237 of the Laws of 2016, which exempts “interactive fantasy sports” from the New York Constitution’s ban on gambling. Chapter 237, codified in Article 14 of the Racing, Pari-Mutuel Wagering and Breeding Law, provides:

The AG settled the DFS suit against DraftKings and FanDuel, and DFS was up and running in New York for last year’s football season.

Unsurprisingly, a group of plaintiffs challenged the new DFS law, arguing that DFS is gambling prohibited by the New York Constitution, just as the AG had argued in the DraftKings and FanDuel suit.  So, the plaintiffs argued, the Legislature couldn’t just pass a single bill to exempt the games from the constitutional ban.

The State moved to dismiss, arguing that the Legislature has been granted the authority to enforce the constitutional gambling prohibition. which includes the power to define DFS as outside of that prohibition.  The State argues that the Legislature’s enactment was rational, and unless the plaintiffs could establish otherwise beyond a reasonable doubt, the case should be dismissed.

As I had predicted when the motion to dismiss was filed, the Albany County trial judge, Gerald Connolly, denied the State’s motion to dismiss.  The Court essentially held that the State’s arguments are better suited for a post-answer motion for summary judgment, not a pre-answer motion to dismiss on the pleadings.  Accepting each of the allegations of the complaint as true, as the Court must on the pre-answer motion, the Court held that the plaintiffs had sufficiently stated a claim that the DFS law violates New York’s constitutional ban on gambling.

It’s a straightforward and unsurprising decision.  A copy of the Court’s decision denying the motion to dismiss can be found here.

Now, the fireworks really begin.  The parties will fully brief the issues on the merits, and soon enough the Judge will decide whether the legislation authorizing DFS in New York passes constitutional muster.  That decision will not be the end of the case, however.  An appeal to the Appellate Division, Third Department will follow, possibly a stay application depending on how the merits come out below, and then on to the Court of Appeals because a substantial constitutional question is at the heart of the case.  The moral of the story is that this won’t be finally resolved any time soon, and the fate of DFS in New York hangs in the balance.

U.S. Department of Justice Contradicts EEOC, Argues that Title VII Does Not Protect Against Sexual Orientation Discrimination

In Zarda v Altitude Express, Inc., the Second Circuit, sitting en banc, is faced with the question of whether to overrule its prior precedent and hold that Title VII protects against sexual orientation discrimination.  One month ago, the EEOC filed an amicus brief urging the Court to overrule its prior precedent in Simonton v Runyan, and hold that Title VII protects against sexual orientation discrimination by prohibiting discrimination "because of . . . sex."

The U.S. Department of Justice, filing its amicus brief in Zarda, takes the direct opposite position.  The USDOJ argues that the Second Circuit should adhere to Simonton's holding that Title VII does not protect against sexual orientation discrimination.  Title VII does not define the term "sex," the USDOJ notes, but it has generally only been applied to mean gender, that is, being "biologically male or female."  Under the USDOJ's construction then, an employer cannot intentionally treat men and women differently, but can treat gay and straight employees differently as long as the same treatment is accorded between the sexes.

To support this position, the USDOJ argues that when Congress amended the Civil Rights Act in 1991, it declined to add express protection for sexual orientation, notwithstanding that numerous Courts of Appeals had held that it was not included under Title VII's prohibition on discrimination "because of . . . sex." Likening it to Congress' decision to retain the operative text of the Fair Housing Act after multiple Courts of Appeals had held that the FHA authorized disparate impact claims and thereby ratify those decisions, the USDOJ argues that Congress' failure to amend Title VII to include protection for sexual orientation expressly is evidence that it ratified the Courts of Appeals' interpretations restricting protection under the "because of . . . sex" clause to gender.

The USDOJ, however, points to no legislative history underlying the 1991 amendment to the Civil Rights Act, be it a statement from the sponsors of the bill, debate from the floor, or a statement from the President, to suggest that Congress actually intended to ratify the Courts of Appeals' decisions that sexual orientation was not entitled to protection.  With the volumes of legislative history available for each congressional enactment, the USDOJ's failure to come up with any shred of actual evidence to support its ratification theory undercuts its argument.

On the contrary, the USDOJ's ratification argument turns the purpose of the Civil Rights Act of 1991 on its head.  As explained by the EEOC, the 1991 amendments were intended to overrule decisions of the Supreme Court that made it more difficult for employees to prove discrimination claims under Title VII. It was a remedial amendment to provide workers with more protection.  Accepting the USDOJ's argument to deny LGBT employees protection under Title VII seems contrary to its very purpose.

Further, as Sasha Samberg-Champi, a seasoned civil rights lawyer, pointed out on Twitter (@ssamcham), the USDOJ's analogy to Congress' ratification of Courts of Appeals decisions in the Fair Housing Act amendments is inapt.


Although the USDOJ acknowledges that society is changing, it argues that those changes don't grant the courts license to re-write Title VII to include protections against sexual orientation discrimination.  Instead, that role is left to Congress, and Congress has repeatedly declined to change the law.


The Second Circuit is scheduled to hear arguments in Zarda en banc on September 26, 2017 at 2:00 p.m. It will certainly be an interesting argument, and if the Court takes the EEOC's position, it will only further the Circuit split that could lead this case and the issue whether Title VII protects against sexual orientation discrimination to the Supreme Court.

The USDOJ amicus brief can be found here.

Chevron Strikes Again: Second Circuit Holds FMLA Retaliation Plaintiffs Need Only Show Exercise of Rights was Motivating Factor, Not But For Cause

The Family Medical Leave Act provides job protection for workers who need time off for a serious health condition or to care for family members who are suffering from a qualifying condition.  Because of its broad protections, the FMLA has also engendered a substantial amount of litigation.  The claims can take two different shapes: FMLA interference, where a plaintiff alleges that the employer interfered with the exercise of rights under the Act, or FMLA retaliation claims, where the plaintiff claims that the employer took some adverse employment action—that is, termination, suspension, reduction in hours, wages, or benefits, etc.—because of the exercise of FMLA rights.

In Woods v. START Treatment & Recovery Ctrs., it was a FMLA retaliation claim.  The plaintiff, a substance abuse counselor at a non-profit, alleged that START put her on probation and then terminated her because she took FMLA leave while hospitalized with anemia, and actually told her that she couldn’t take FMLA leave to deal with her condition because she was on probation.  START told a different story, of course. It said the plaintiff for years failed to complete the patient notes that were required to qualify for reimbursement from Medicaid.  She was counseled, warned, given extra training, and even put on probation, but she still only finished between 25 to 30% of her patient notes.  All other employees completed 90 to 95%.

After the plaintiff was eventually terminated, she sued claiming that she was retaliated against for exercising her FMLA rights.  At trial, the parties fought about the standard for causation that would be charged to the jury, the plaintiff arguing for a motivating factor analysis and START claiming that but for causation applied.  The District Court adopted START’s formulation and told the jury that in order to succeed on her FMLA retaliation claim, the plaintiff had to show that her exercise of FMLA rights was the but for cause of her termination, that is, that absent her FMLA leave, she would not have been fired.  The jury rendered a verdict for START, and the plaintiff appealed.

The Second Circuit on appeal addressed two unsettled FMLA questions in the Circuit: (1) under what provision of the FMLA do retaliation claims arise, and (2) what kind of causation is required to succeed on a FMLA retaliation claim.  As to the first question, the Court pointed out that although the Circuits are split on the statutory authority for FMLA retaliation claims, two main provisions are generally asserted.

Analyzing the statutory langauge, the Court held that FMLA retaliation claims flow from 29 USC § 2615(a)(1)’s prohibition on interfering with or restraining the exercise of FMLA rights, as the First Circuit has held.

Next, the Court turned to causation, particularly, what causal connection must the plaintiff show between her exercise of FMLA rights and the adverse employment action in order to succeed on her FMLA retaliation claim?  Turning again to the statute, the Court noted that the language of the FMLA’s protections does not provide any standard of causation.  In the absence of any statutory command, the Court analyzed whether Chevron deference was appropriate to a USDOL regulation that provides that employers can’t use the exercise of FMLA rights as a “negative factor” in employment decisions.

Because the FMLA is absolutely silent as to causation, and the USDOL interpretation of the standard for causation was reasonable, the Second Circuit deferred to the USDOL’s interpretation and held that a plaintiff alleging a FMLA retaliation claim need only establish that the exercise of FMLA rights was a motivating factor in the adverse employment action, not the but for cause of it.

This causation decision is a monumental shift in favor of FMLA plaintiffs, and presents an interesting case for Supreme Court review. Indeed, we have a Circuit conflict over which provision of the FMLA gives rise to retaliation claims and a Chevron deferral to an agency gap-filling regulation where the statute is silent on causation, causing a potential conflict with the Supreme Court’s default holding that but for causation applies absent express Congressional intent to negate that standard.  Come on, Justice Gorsuch, this is your chance to make your mark on Chevron deference once and for all.

The Second Circuit’s opinion can be found here.

Expressions Hair Design Update: State Asks Second Circuit to Certify Interpretation of General Business Law § 518 to the Court of Appeals

Seven weeks ago, the Second Circuit asked the parties in Expressions Hair Design v Schneiderman to submit further briefing on whether it should certify to the Court of Appeals the question of how General Business Law § 518, New York’s credit card surcharge law, should be interpreted, whether section 518 is a valid commercial disclosure, and whether the statute validly limits commercial speech as applied to the retailers’ proposed single-sticker pricing scheme.  The parties’ briefs are now in.

Following on the recommendation of Justice Sotomayor in her Supreme Court concurrence, the State argues that the Second Circuit should certify two questions concerning the interpretation of section 518 to the Court of Appeals because the statute’s constitutionality turns on the Court’s answer to those questions.  Particularly, the State asked the Second Circuit to certify these questions:

The Court of Appeals has never addressed the scope of section 518, that is, what exactly the law prohibits.  The State argues that it has consistently interpreted the provision to bar the retailers from showing a single sticker price, but then charging consumers who pay with a credit card more.  “Under this reading, the statute does not apply to a seller that either posts a regular price that is the price that credit-card users pay, or that posts a total dollars-and-cents credit-card price along with a (lower) price for cash users.”  (State’s Brief, at 11).  Although the State claims its interpretation has been consistent, it acknowledges that at least three of the Supreme Court justices expressed doubt about exactly what the law prohibits.  Because of the “lingering interpretive uncertainty over GBL § 518,” the State argues that the Second Circuit should allow the Court of Appeals to resolve any doubt.

The Court of Appeals’ interpretation of section 518 would determine the First Amendment analysis that the Second Circuit must conduct, the State argues, or could show that the statute does not violate the First Amendment “if it were interpreted to prohibit sellers from imposing any price differential on cash and credit-card users—including a cash discount.”  (State’s Brief, at 13-14).  Certification would also allow the Court of Appeals to determine whether the plain text of section 518 may be interpreted in a way to avoid the potential constitutional issue.  Thus, the State argues, “the New York Court of Appeals should be afforded the opportunity to adopt the narrower, less problematic interpretation, using the interpretive tools, presumptions, and standards that it deems proper.” (State’s Brief, at 15 [cleaned up]).

The retailer plaintiffs, on the other hand, argue that certification of the statutory interpretation question to the Court of Appeals is barred by the Supreme Court’s opinion.  The Supreme Court, they argue, “adopted [the Second Circuit’s] interpretation of the law, held that the law proscribes the plaintiffs’ intended speech, and remanded for [the Second Circuit] to analyze § 518 as a speech regulation—an analysis that does not turn on any unsettled question of state law.”  (Plaintiffs’ Brief, at 2 [cleaned up]).  Thus, the Plaintiffs argue, the Supreme Court’s interpretation of the law as a speech regulation forecloses the Second Circuit’s ability to certify “whether the law is a speech regulation (or any other question) to New York state court.”  (Plaintiffs’ Brief, at 17).

Indeed, they point out, although Justice Sotomayor’s opinion is styled as a concurrence, on the point that the case should have been remanded with a direction to certify the interpretation question to the Court of Appeals, she was effectively dissenting from the majority’s refusal to do that.  The Plaintiffs, therefore, argue that the Supreme Court majority’s direction that the Second Circuit decide whether section 518’s ban on credit card surcharges violates the First Amendment allows the Court to do only that, not to certify a question to the Court of Appeals.

Even without their construction of the Supreme Court opinion, the Plaintiffs argue that certification is inappropriate because the Court of Appeals could not construe section 518 as prohibiting any dual pricing scheme because such an interpretation “would directly conflict with a federal statute expressly protecting the right of merchants to provide discounts to cash-paying customers, see 15 U.S.C. § 1666f—and so would likely be preempted under the Constitution’s Supremacy Clause. The constitutional-avoidance doctrine thus has no application in a case like this one, where avoiding one set of constitutional problems necessarily presents the court with an entirely new set of constitutional problems.”  (Plaintiffs’ Brief, at 18).  Finally, the Plaintiffs pointed out that they were not challenging section 518’s application to a two-sticker pricing scheme, so there was no judiciable dispute there to certify to the Court of Appeals.

Given the stark contrast in the parties’ positions, it will be interesting to see which approach the Second Circuit decides to take.  Copies of the State’s brief and the Plaintiffs’ brief are linked here.


Court of Appeals Holds Promissory Estoppel and Unconscionability May Foreclose Reliance on the Statute of Frauds

For years, you work with your grandfather to manage his rental apartments.  When he retires from the business, you take over the rentals and upkeep of the building.  You find tenants.  You pay the mortgage and taxes.  You do everything.  In exchange for your years of work, he orally promises to give you the building free and clear of the mortgage, deeds you the property, and changes his will to ensure that the mortgage is paid out of the proceeds of his estate.  But a few years later, your grandfather revokes the will and signs a new one that no longer provides for the mortgage to be paid off.  Can you still hold him to the deal on which you have relied for all these years?

In Matter of Estate of Hennel (No. 78), previewed here, the Court of Appeals says no.  It feels your pain and admits it’s unfair, but it’s not unconscionable, which is the only way to avoid the statute of frauds bar to oral agreements relating to a will.  Unless enforcement of the statute of frauds’ requirement that testamentary agreements be in writing would be unconscionable, the Court held, a written agreement is necessary.

In Hennel, after the later will was admitted to probate, the grandsons objected arguing that they had a binding deal to have the mortgage for the property paid out of their grandfather’s estate and that they held up their end of the bargain. Surrogate’s Court agreed, and granted the grandsons summary judgment and ordered the grandfather’s estate to pay off the mortgage.

The Appellate Division, Third Department affirmed, but with two Justices dissenting. Although the Court noted that wills are generally revocable at any time, it held that the testimony of family attorney who drafted the first will and the grandsons’ conduct in reliance on their agreement with the grandfather established a binding, irrevocable commitment for the estate to pay off the mortgage.  The Court declined to apply the Statute of Frauds, which would have otherwise barred enforcement of the grandsons’ unwritten agreement with the grandfather because it concerned an testamentory provision, because it would have lead to an unconscionable result in this case.

The dissenting Justices agreed with the majority in large part, including that the Statute of Frauds applied, but departed on unconscionability. The dissenters said, the grandsons sustained a few losses, but they were also well compensated for maintaining and renting out the property.  The few minor losses, the dissent would have held, did not rise to the level of unconscionabilty so as to avoid the Statute of Frauds bar.

The Court of Appeals, for the first time, adopts the rule followed by the Appellate Division departments that “where the elements of promissory estoppel are established, and the injury to the party who acted in reliance on the oral promise is so great that enforcement of the statute of frauds would be unconscionable, the promisor should be estopped from reliance on the statute of frauds” (Opn, at 10).  The Court, therefore, approves the rule in Restatement (Second) of Contracts § 139(1) that an oral testamentary promise may be enforced notwithstanding the statute of frauds if enforcement would be the only way to avoid injustice.  But, the Court is quick to point out that it rejects the Restatement’s suggestion that injustice short of unconscionability will suffice.

The new rule is no comfort to the Hennel grandsons, unfortunately.  The Court held that even if the grandsons had shown that the grandfather’s promise was sufficiently clear and unambiguous, they reasonably relied on it by continuing to manage the rentals, and harm caused by their reliance, they cannot enforce the oral agreement to pay off the mortgage of the estate funds.  As the grandsons admitted, they have been able to pay the mortgage on the property solely out of the funds earned from the rentals, without their own money, and the management of the property has not been so burdensome that they had to neglect other business.  Thus, the Court held, the mere fact that the grandsons did not get the full benefit of their bargain does not make the result unconscionable, that is, so egregious that “no person in his or her senses and not under delusion would make on the one hand, and as no honest and fair person would accept on the other, the inequality being so strong and manifest as to shock the conscience and confound the judgment of any person of common sense” (Christian v Christian, 42 NY2d 63, 71 [1977] [cleaned up]).  In fact, the Court noted, the grandsons could sell the property, pay off the mortgage, and make a $150,000 profit.  So, yes, it’s not fair that the grandfather could later change his mind after the grandsons did everything that they were supposed to, but that is no reason to ignore the law’s requirement that testamentary agreements must be in writing.

The Court of Appeals’ opinion can be found here.

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