Zarda is Out: En Banc Second Circuit Holds Sexual Orientation Discrimination is Protected by Title VII

This is the decision that so many have been waiting for. In a historic ruling in Zarda v Altitude Express, the Second Circuit today overruled its’ prior precedent in Simonton v. Runyon, and held that sexual orientation discrimination is discrimination because of sex that finds protection under Title VII.

The comprehensive opinion the majority of the Second Circuit held that “sexual orientation discrimination is motivated, at least in part, by sex and is thus a subset of sex discrimination” (Opn, at 20-21). Looking to the text of Title VII, the majority concluded that Title VII’s protection against discrimination “because of . . . sex” extends to sexual orientation because “sex is necessarily a factor in sexual orientation” (Opn, at 21). Leading with the Black’s Law Dictionary definition of sexual orientation—”[a] person’s predisposition or inclination toward sexual activity or behavior with other males or females”—the Court noted that a person’s sexual orientation can’t be identified unless that person’s sex is known as well as the sex of those to whom the person is attracted. As the majority put it,

Because one cannot fully define a person’s sexual orientation without identifying his or her sex, sexual orientation is a function of sex. Indeed sexual orientation is doubly delineated by sex because it is a function of both a person’s sex and the sex of those to whom he or she is attracted. Logically, because sexual orientation is a function of sex and sex is a protected characteristic under Title VII, it follows that sexual orientation is also protected.

Taking apart the argument that firing an employee for his or her sexual orientation is not firing them because of their gender, the majority held that “this semantic sleight of hand is not a defense; it is a distraction” (Opn, at 23-24). The failure to reference the employee’s gender doesn’t change the fact that “firing a man because he is attracted to men is a decision motivated, at least in part, by sex” (Opn, at 24). Merely using different terminology to achieve the same discriminatory result, the majority held, doesn’t fly under Title VII.

The Court also held that Congress’ failure to protect expressly sexual orientation under Title VII doesn’t undermine the conclusion that the broad language that Congress did use was intended to protect not only the “principal evil,” but also “comparable evils” (Opn, at 27).  Thus, the majority reasoned, the protections afforded to employees against discrimination because of their “sex” was not meant to be exclusive, and necessarily includes protection for sexual orientation too.

This conclusion, the Court held, is also supported by the Supreme Court’s “comparative test” for when an employment practice constitutes sex discrimination. Using the en banc Seventh Circuit’s decision in Hively v Ivy Tech Community College as a salient example, the majority explained if a female employee who is attracted to females is denied a promotion when a male employee also attracted to females is given the promotion, the denial of the promotion (all other things being equal, of course) is because of the female employee’s sex. Thus, it is clear, the majority held, that sexual orientation discrimination is just a subset of sex discrimination and is protected under Title VII.

Having addressed the proper application of the comparative test, we conclude that the law is clear: To determine whether a trait operates as a proxy for sex, we ask whether the employee would have been treated differently “but for” his or her sex. In the context of sexual orientation, a woman who is subject to an adverse employment action because she is attracted to women would have been treated differently if she had been a man who was attracted to women. We can therefore conclude that sexual orientation is a function of sex and, by extension, sexual orientation discrimination is a subset of sex discrimination.

The gender stereotyping theory provided yet another basis to conclude that sexual orientation discrimination is discrimination because of sex, the majority held. When an employer discriminates because it believes that a man cannot, or should not, be attracted to men, but doesn’t discriminate when women are similarly attracted to men, the employer acts on the basis of the employee’s gender. That is clearly protected by Title VII. Thus, the Court explained, the prior framework under Simonton trying to distinguish when a discrimination claim is impermissibly based on sex stereotyping or when it is (formerly) permissible sexual orientation discrimination no longer worked.  The lower courts struggled with the distinction, the majority held, and no basis remained to keep it.

It is also unlawful associational discrimination for an employer to discriminate based on an employee’s romantic association with a partner of the same sex, the majority held.  Harkening back to the Supreme Court’s decision in Loving v Virginia, the majority explained that “policies that distinguish according to protected characteristics cannot be saved by equal application” (Opn, at 54) and so whether an employer adversely treats both men and women for same sex association is no defense to a claim of discrimination under Title VII. Indeed, discrimination based on sexual orientation, the majority held, “is no less repugnant to Title VII than anti-miscegenation policies” (Opn, at 59).

The Second Circuit has now joined the Seventh Circuit in Hively, holding that sexual orientation discrimination is protected under Title VII. This is a huge decision, and one that has been long awaited by LGBT rights advocates. But, it is certainly not the end.  The Eleventh Circuit has declined to agree. And Zarda may well be poised to head up to the Supreme Court, where it faces an uncertain reception. This decision of the en banc Second Circuit, though, to overrule its prior precedent and recognize that no one should be discriminated against on the basis of their sexual orientation or any other protected characteristic is a monumental one.

The Second Circuit’s en banc opinion 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.

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.

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.


EEOC Argues Sexual Orientation Discrimination is Protected by Title VII, Second Circuit Should Overrule Simonton En Banc

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.  In Simonton v Runyan, the Court previously held that sexual orientation discrimination is not protected under Title VII’s protection against discrimination “because . . . of sex.”  The Court has since recognized, however, gender stereotyping claims and the rule in Simonton has been roundly criticized, including by Chief Judge Katzmann in Christiansen v Omnicom Group.

Appearing as amicus curiae in the en banc hearing of Zarda, the EEOC has now weighed in.  In a brief filed Friday, the EEOC argues that Title VII’s protection against sex discrimination includes sexual orientation discrimination.  Particularly, the EEOC notes, there are three arguments in favor of finding that sexual orientation discrimination is sex discrimination prohibited by Title VII that were not addressed by the Second Circuit’s opinion in Simonton.

Examining these arguments, the EEOC argues 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)” (Brf, at 7).  That is precisely what Title VII forbids, the EEOC argues. The EEOC also argues that sexual orientation discrimination involves prohibited associational discrimination:

 Lastly, the EEOC contends that “[s]exual orientation discrimination necessarily involves sex stereotyping, as it results in the adverse treatment of individuals because they do not conform to the norm that men should be attracted only to women, and women only to men” (Brf, at 13).  Thus, the EEOC argues that sexual orientation discrimination is protected by Title VII, and Simonton should be overruled.

The EEOC also points out that the precedent on which Simonton was decided—DeSantis v Pacific Tel. & Tel. Co., 608 F2d 327, 329-32 (9th Cir 1979); Williamson v A.G. Edwards & Sons, Inc., 876 F2d 69, 70 (8th Cir 1989); Wrightson v Pizza Hut of Am., Inc., 99 F3d 138, 143 (4th Cir 1996)—is no longer good law.  Two of the cases (Williamson and DeSantis) are no longer followed, and Wrightson was based exclusively on those two decisions. 

Finally, the EEOC argues that the Second Circuit’s current distinction between impermissible gender stereotyping and lawful sexual orientation discrimination is unworkable and leads to absurd results.  Numerous courts have found that the fine line drawn by the Court in Simonton just simply doesn’t exist.  For example, the EEOC points out, the Second Circuit’s precedent “leads to the absurd result that only those gay men who act ‘stereotypically feminine’ and those lesbians who act stereotypically masculine are entitled to protection from discrimination” (Brf, at 21).  This can’t be.  Indeed, the Second Circuit’s ruling in Simonton would allow a gay employee to be fired for exercising rights the Supreme Court found protected in Obergefell v Hodges (135 S Ct 2584 [2015]) by marrying his spouse.  Simonton, therefore, should be overruled, the EEOC argues. 

The EEOC’s amicus brief in Zarda can be found here.

Second Circuit Certifies Questions to Court of Appeals Concerning Damages, Interest in Misappropriation of Trade Secrets Cases

Manufacturing plastic security seals is apparently big business.  You know, those seals that are nearly impossible to get off a bottle without a knife but give you a measure of comfort that nobody tampered with your goods before you opened them.  Well, when your company makes those plastic security seals, and three employees steal your trade secrets to take to a competitor, you sue them for misappropriating your hard work and ingenuity.  

That is exactly what happened in E.J. Brooks Co. v Cambridge Sec. Seals, and the plaintiff won at trial.  So, the federal district court ordered the defendants to pay back in damages the costs that they avoided by stealing the trade secrets instead of developing the plastic security seals on their own.  The Court, however, denied the plaintiff’s request for prejudgment interest under CPLR 5001, holding in essence that inclusion of prejudgment interest would be duplicative here because the jury awarded damages from the date of the misappropriation to the date of the verdict.

On appeal, the Second Circuit held that finding liability was easy, but the question of the proper amount of damages for the misappropriation was less so.  The Court explained that New York decisions appear to have authorized a number of different measures of damages in misappropriation of trade secrets cases, but never explicitly the costs avoided measure used by the disctrict court below. So, the Second Circuit decided to certify the question to the Court of Appeals to decide.

The Second Circuit also certified whether the typically mandatory award of prejudgment interest under CPLR 5001 still applies where the plaintiff has already been awarded damages for the entire prejudgment period and an additional award of prejudgment interest would be a windfall.

So, the Second Circuit has asked the Court of Appeals to decide these two certified questions: 

The Second Circuit’s opinion can be found here.

Second Circuit Liberalizes Article III Standing for Class Action Against Whole Foods

You walk into Whole Foods and see organic this, grass fed that, and cage free, free range the other.  What don’t you see? A large sign that says: “Buy some prepackaged tabouli. We have overweighted it and will charge you more than you’re actually going to get.  You’re welcome.”  That’s what the plaintiff in John v. Whole Foods Mkt. Grp., Inc., a proposed class action, alleges that Whole Foods has actually done.  

The problem: the plaintiff doesn’t know if he was actually overcharged.  Instead, he alleges that he shopped at Whole Foods, that he bought prepackaged goods, and that he believes he was charged more than he should have paid because Whole Foods systematically overweighted the food.  His allegations are based, however, almost exclusively on a New York City Department of Consumer Affairs investigation that preliminarily found that Whole Foods’ New York City stores “routinely overstated the weights of its pre‐packaged products–including meats, dairy and baked goods.”  The complaint quotes extensively from a 2015 DCA press release about the investigation and the preliminary findings, including that 

The plaintiff alleged that he shopped at Whole Foods during the time period of the DCA investigation, but could not identify one particular time that he was overcharged.  Instead, he alleged that Whole Foods overpriced the prepackaged goods systematically and he must have fallen victim to the scheme.   

The Southern District of New York dismissed the complaint for lack of Article III standing  because the plaintiff failed to plausibly allege that he was personally
overcharged by Whole Foods for a specific purchase.

The Second Circuit, however, vacated the dismissal and remanded for further proceedings.  Noting that the injury-in-fact requirement is a low bar, the Court held that the plaintiff’s complaint, drawing all reasonable inferences in the plaintiff’s favor, plausibly alleged that he was overcharged while shopping at Whole Foods.  The Court held that the DCA’s press release when combined with the plaintiff’s monthly purchases at Whole Foods were enough because the complaint alleged that the DCA investigation found that the Whole Foods practice was systematic.  It was, therefore, likely that the plaintiff had been overcharged, at least for Article III standing purposes.  Although it held that the plaintiff had standing, the Court cautioned that it remained the plaintiff’s burden to establish that he was actually overcharged in order to succeed in his claims.  

The Second Circuit’s decision liberalizing Article III standing in consumer class actions could have significant implications.  To be sure, in every case where a governmental agency or consumer watchdog conducts an investigation into an allegedly deceptive consumer practice, there will be a plaintiff who will sue based upon the findings of the investigation.  If the plaintiff alleges that the deceptive practice was systematic, and the agency investigation at least in some ways supports that allegation, the plaintiffs will have Article III standing under John.  With more plaintiffs making it past a a motion to dismiss, more cases are likely to settle in order to avoid not only the enormous costs of litigating a class action, but also to avoid paying damage claims to a potentially huge class of plaintiffs.  That’s great for plaintiffs and the plaintiffs’ bar but not so great for Whole Foods and other retailers.

The Second Circuit’s opinion can be found here.

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