En Banc Second Circuit Agrees to Decide Whether Title VII Protects Against Sexual Orientation Discrimination

Following the Second Circuit’s opinion in Christiansen v Omnicom Group, where the Court held it was constrained to dismiss a sexual orientation discrimination claim under Title VII because a three-Judge panel of the Court could not overrule the binding precedent in Simonton v Runyon, which held that sexual orientation discrimination claims are not cognizable under Title VII, a different panel of the Second Circuit dismissed the plaintiff’s Title VII sexual orientation discrimination claim in Zarda v Altitude Express.  In Zarda, the plaintiff claimed that he was fired from his job as a sky diving instructor because of his sexual orientation. The District Court dismissed his Title VII claims because it was constrained by Simonton, but found a question of fact on Zarda’s discrimination claims under the New York Human Rights Law. The case proceeded to trial, where the jury found that Altitude Express did not discriminate in violation of the state anti-discrimination statute. 

Zarda appealed and specifically argued that Simonton should be overruled.  Like in Christiansen, the Second Circuit panel again held that it was constrained to dismiss the claim.  Only the full en banc Court can overrule prior precedent, it held.

Zarda thus petitioned for en banc review, and the full Second Circuit has agreed to hear the case.  The en banc Court will now take up whether Title VII protects against sexual orientation discrimination under the clause prohibiting discrimination “because of . . . sex.”

In light of Chief Judge Katzmann’s stirring concurrence in Christiansen, urging the Court to reconsider the Simonton decision en banc, the Court’s decision to take up the issue is unsurprising.  After the Seventh Circuit held in Hively v Ivy Tech Community College of Indiana that sexual orientation discrimination is barred by Title VII, Chief Judge Katzmann reached the same conclusion in his concurrence in Christiansen, and a Judge of the Southern District of New York held the same (unwilling to wait for the Second Circuit to take the issue en banc), the trend in the law in the Circuit seems to favor the Second Circuit joining the Seventh to further a Circuit split on the issue.  That split, if reinforced by the Second Circuit’s holding in Zarda,  would likely convince the Supreme Court to hear the cases and settle the issue nationwide.

According to the Second Circuit’s order, which can be found here, Zarda and the amici supporting him have until June 26th to file their briefs. Altitude Express and the amici supporting it have until July 26th to file theirs, and Zarda’s reply is due on August 9th. The Court sitting en banc with all 13 Judges will then hear arguments on September 26th at 2 p.m. 

Although the Court has not livestreamed arguments before, after the successful livestreams in the Fourth and Ninth Circuit travel ban arguments, I expect there will be much clamoring to have the Court make the Zarda en banc argument its first foray into live audio. Given the stakes of the issue the Court is considering, and the inevitably significant public interest, I think it would be a good place to start.

Expressions Hair Design Update: Second Circuit Calls For Further Briefing, Asks Parties to Address Whether Part of Case Should Be Certified to Court of Appeals

After the Supreme Court unanimously held in March that New York’s credit card surcharge law regulates speech, the Second Circuit has taken up the case again. As a refresher, New York General Business Law § 518 provides that that “[n]o 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.” That prohibits retailers from charging a surcharge to consumers who pay for things with credit cards, but allows the retailers to offer a discount to those who pay in cash.  Five New York businesses challenged the statute as a violation of their First Amendment rights by impermissibly regulating how they communicate their prices to customers.

The Second Circuit issued an order on Monday restoring the case to its active docket and asking the parties to provide further briefing on three issues:

(1) Whether as applied to the retailers’ proposed single-sticker pricing scheme, where the retailers would advertise one price, but charged a slightly higher price to customers who pay with credit cards, General Business Law § 518 is “a valid commercial speech regulation under the four-part analysis laid out in Central Hudson Gas & Electric Corp. v. Public Service Commission of New York, 447 U.S. 557 (1980)?”  In Central Hudson, the Supreme Court held that courts considering a restriction on commercial speech must evaluate: (1) whether the commercial speech concerns lawful activity and is not misleading, (2) whether the asserted governmental interest is substantial, (3) whether the regulation directly advances the governmental interest asserted, and (4) whether it is not more extensive than is necessary to serve that interest (id. at 566). The first criteria seems to me the most relevant here, whether the retailers’ proposed single-sticker price is misleading to the customers when that is not the price that will be charged when the customers use credit cards.

(2) Whether as applied to the retailers’ proposed single-sticker pricing scheme, General Business Law § 518 is “a valid disclosure requirement under Zauderer v. Office of Disciplinary Counsel of Supreme Court of Ohio, 471 U.S. 626 (1985)?” In Zauderer, the Supreme Court upheld an Ohio attorney advertising regulation requiring attorney advertisements for contingency cases to disclose when the potential client will have to pay for the expenses of the litigation if the claims did not succeed.  The Court reasoned, because the potential client didn’t understand the difference between legal “fees,” which would not be due for a losing case, and “expenses,” which could be, the disclosure requirement compelling attorneys to say more than they wanted to about the potential costs of the case was a valid regulation of the commercial speech.  Is the same true of section 518, the Second Circuit asks?  Can the New York credit card surcharge ban be viewed as a valid disclosure requirement so that customers aren’t confused when they see one advertised price, but are charged another when they use a credit card to pay?

(3) Whether the Court should certify the unsettled interpretation of General Business Law § 518 to the Court of Appeals, as Justice Sonia Sotomayor in her concurrence in the judgment at the Supreme Court would have required? Specifically, Justice Sotomayor pointed out that the Supreme Court’s limited holding that section 518 regulates speech was only a “quarter-loaf” of the issues in the case.  The Supreme Court was constrained without an interpretation of the scope of New York’s credit card surcharge ban, she noted.  Thus, the Second Circuit, she said, erred by failing to ask the Court of Appeals to provide a definitive interpretation of what pricing schemes section 518 prohibits.  As Justice Sotomayor put it:

The parties now have until June 13th to provide the Second Circuit with answers to these questions, after which the Court will decide whether to certify the interpretation question to the Court of Appeals, whether to hold oral argument, or whether to just decide the case on its own.

I think Justice Sotomayor’s points are well taken. If the Court of Appeals is asked to interpret General Business Law § 518, the Court’s guidance would go a long way to deciding or at least limiting the retailers’ challenges to section 518. From the way the questions are structured, I wouldn’t be surprised if that is the route the Second Circuit decides to take.

The Second Circuit’s order can be found here.

Second Circuit Certifies Question to Court of Appeals Whether Untreated Alcoholics are Disabled Under NYCHRL

In Makinen v City of New York, two New York City police officers sued the City and the Police Commissioner alleging that they were discriminated against because they were perceived to be untreated alcoholics, a form of disability discrimination.  The problem is, they weren’t alcoholics at all, and the express terms of the New York City Human Rights Law only considers recovered or recovering alcoholics to be disabled.  This is significantly different than the protections of the New York State Human Rights Law and the Americans with Disabilities Act, which do not require an alcoholic to be recovered or recovering to be protected.

That’s the tension that the Second Circuit saw.  When the NYCHRL was adopted, it was intended to be a civil rights floor higher than the protections offered by state or federal law. But in this case, the NYCHRL contains an express limitation on disability for alcoholics not found in state or federal law. If the Second Circuit followed the express language of the NYCHRL, and held that the plaintiffs were not considered disabled because they were perceived as untreated alcoholics, even though they weren’t, it would offer less protection than the purpose of the statute intended.  Following the purpose of the NYCHRL to find the plaintiffs protected, on the other hand, would ignore the statute’s express limitation that only recovered or recovering alcoholics, or those perceived to be so, are protected.

Because no New York Court has addressed this question, the Second Circuit decided not to decide. Instead, it certified the following question to the Court of Appeals: “Do sections 8‐102(16)(c) and 8-107(1)(a) of the New York City Administrative Code preclude a  plaintiff from bringing a disability discrimination claim based solely on a perception of untreated alcoholism?”

The Court of Appeals will now take up the question.  Can the remedial purpose of a discrimination statute trump its express language where the purpose offers more protection than does the text? I think the Court would be hard pressed to overlook the express limitation that was chosen, offering protection only to recovered or recovering alcoholics. If that limitation is out of line with the protections intended, that is a question for the Legislature to resolve, not the courts.

The Second Circuit’s opinion can be found here.

Second Circuit Holds that in Recission Action, Entire Value of Contract is Amount in Controversy for Jurisdictional Purposes

In Pyskaty v. Wide World of Cars, LLC, the Second Circuit joins the Third and Sixth Circuits in holding that when a plaintiff sues for rescission of a contract, the total value of the contract, without any offsets, is the amount in controversy for jurisdictional purposes.  In Psykaty, the plaintiff bought a certified pre-owned BMW from a dealer who told her that the car had never been in an accident.  After the car had numerous irreparable problems that began only a few weeks after she bought it, the plaintiff sued the dealer under the federal Lemon Law and New York State law, seeking actual damages and rescission of the contract of sale, among other things.  The plaintiff alleged that when she bought the car for approximately $52,000, it was actually only worth $20,000.

The District Court dismissed the case, holding that the plaintiff’s federal Lemon Law claims did not meet the $50,000 amount in controversy jurisdictional threshold.  The District Court held that the plaintiff alleged actual damages of $30,000, that the plaintiff’s state law claims could not be aggregated to meet the amount in controversy threshold under the federal Lemon Law, and that the rescission claim did not add enough value because the car was only worth $20,000 when the plaintiff bought it.

The Second Circuit reversed the dismissal, holding that the value of the plaintiff’s claim for rescission of the contract must be measured by the full purchase price of the defective car, not by its value at the time of the sale.  The Court therefore rejected the District Court’s approach to determining the amount in controversy by looking to the value of the good.

Because the full purchase price of the contract was in excess of $50,000, the Court held that the plaintiff’s rescission claim satisfied the jurisdictional amount in controversy.  The Court also rejected the defendants’ arguments that the rescission claim could not be considered because the contract itself had waived any other than the specified remedies.  The New York UCC, the Court held, however, does not appear to countenance such a result.

In light of the Court’s holding, it declined to reach, and therefore left for another day, the question whether a plaintiff’s state law claims can be considered and aggregated with federal Lemon Law claims to meet the $50,000 federal jurisdictional amount in controversy threshold.

The Second Circuit’s opinion can be found here

SDNY Judge Holds Sexual Orientation Discrimination is Cognizable Under Title VII

In Philpott v State of New York (SDNY Case No. 16 CIV 6778), U.S. District Court Judge Alvin K. Hellerstein decided he wouldn’t wait to see if the Second Circuit would grant en banc review in Christiansen v Omnicom Group to hold that Title VII prohibits discrimination on the basis of sexual orientation.  Relying on Chief Judge Katzmann’s persuasive concurrence in Christiansen discussed here, and the Seventh Circuit’s en banc ruling in Hively v Ivy Tech Community College of Indiana, Judge Hellerstein held that he would not embrace what he called an “‘illogical’ and artificial distinction between gender stereotyping discrimination and sexual orientation discrimination.”


Judge Hellerstein’s decision, although surprising that he declined to follow the Second Circuit’s controlling precedent in Simonton v Runyon, is just the latest step in what will in all likelihood culminate in an en banc ruling of the Second Circuit joining the Seventh Circuit to hold that Title VII protects against sexual orientation discrimination.

Second Circuit Holds Lehman Bros. Restricted Stock Units Must Be Subordinated in Bankruptcy 

When Lehman Brothers went under, many of its employees were left holding restricted stock units that could have been converted to common stock 5 years after they were issued.  Lehman’s bankruptcy before the 5 years expired, however, rendered the restricted stock units worthless. So, the employees filed claims against Lehman’s bankruptcy estate to recover the face value of the stock had it been converted to common stock.  Lehman objected, and the bankruptcy court held that the claims were subordinate to Lehman’s general creditors because they arose from the purchase or sale of securities.

The Second Circuit agreed, holding that the employees’ claims had to be subordinated under 11 U.S.C. § 510(b) “because, for purpose of th[e] statute, (1) RSUs are securities, (2)
the claimants acquired them in a purchase, and (3) the claims for damages arise from those purchases or the asserted rescissions thereof.”  In light of its holding, the Second Circuit declined to reach the alternative holding of the bankruptcy court that the RSUs were “equity securities” under 11 U.S.C. § 101(16), leaving that question for another day.

The Second Circuit’s opinion can be found here.

Second Circuit Holds Employee’s Offensive Facebook Post Still Protected Under NLRA

The Second Circuit, deferring to the NLRB’s factual findings, holds that an employee’s offensive and derogatory Facebook post about his boss and his boss’s mother were still protected under the NLRA because it contained union advocacy.  This is the post.

The Court, therefore, held that the employer violated the NLRA by terminating his employment for the post.  It all goes to show how protective the NLRA is of union advocacy, even when it’s laced with vulgarities.

The Second Circuit’s opinion can be found here.

Second Circuit Again Constrained to Dismiss Title VII Sexual Orientation  Discrimination Claim 

A panel of the Second Circuit again holds that it is constrained to dismiss Title VII sexual orientation discrimination claim by court’s prior Simonton holding. The Court’s recent Christiansen and Zarda holdings set the stage for en banc reconsideration of seemingly outdated Circuit precedent that Title VII does not protect against sexual orientation discrimination.

The Second Circuit’s opinion can be found here.

Second Circuit Clarifies Fair Debt Collection Practices Act Issues

In Carlin v Davidson Fink LLP, the Second Circuit clarifies a number of issues concerning initial communications under the Fair Debt Collection Practices Act, including the required statement of the total amount due. First, a foreclosure complaint is not an “initial communication” under FDCPA, nor is a communication started by the debtor. Second, the inclusion of estimated expenses not yet incurred in the statement of the total amount due violates the FDCPA. 

The Second Circuit’s opinion can be found here.

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