News & Developments

May 16, 2012

The Beginning of the End for McDonnell Douglas?

In January 2012, the Seventh Circuit handed down its opinion in Coleman v. Donahoe, 2012 WL 32062 (7th Cir. 2012), an employment-discrimination case with several ramifications related to the holy grail of employment cases: McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973). Under McDonnell Douglas, a plaintiff must establish that another “similarly situated” individual, who was not in his or her protected class, was treated more favorably. In response, the employer then must articulate a “legitimate, nondiscriminatory reason” for its action, and if it does so, the burden shifts back to the plaintiff to present evidence that the employer’s stated reason was a pretext. This nearly 40-year-old burden-shifting analysis has been a staple of every employment practitioner’s understanding of pretrial employment-discrimination litigation and, at least in employment-law circles, has the same name recognition as International Shoe v. Washington, 326 U.S. 310 (1945), has throughout the rest of the legal community.

In Donahoe, the Seventh Circuit continued to loosen the standard regarding employees considered “similarly situated” under McDonnell Douglas. The court called for a “flexible, common-sense examination of all the relevant factors” when determining whether a similarly situated individual was treated better. In that case, involving workplace-violence situations, the plaintiff met its burden by showing a common, upper-level supervisor approved the discipline in both situations (even though the direct supervisors were different) and that both situations involved violations of the same workplace-conduct rule (even though the conduct engaged in was not identical). In finding that the plaintiff had met her burden, the court admonished the tendency of district-court judges to require “closer and closer comparability” with the comparison group because doing so would transform the McDonnell Douglas “evidentiary ‘boost’ into an insurmountable hurdle.”

Second, and perhaps more significantly, the concurring opinion—which all three panel members joined—may have forecasted the beginning of the end of the McDonnell Douglas burden-shifting analysis. Judge Wood wrote separately “to call attention to the snarls and knots that the current methodologies used in discrimination cases . . . have inflicted on courts and litigants alike.” She observed that while “McDonnell Douglas was necessary nearly forty years ago, when Title VII litigation was still relatively new in federal courts,” by now the various tests “have lost their utility.” She also pointed out that evidence commonly used in the “similarly situated employee” analysis is the same evidence used in the pretext analysis, thus essentially jumbling the steps of the scheme. Judge Wood suggested scrapping the McDonnell Douglas analysis altogether, and instead, requiring a plaintiff facing summary judgment to “present evidence showing that she is in a class protected by the statute, that she suffered the requisite adverse action (depending on her theory), and that a rational jury could conclude that the employer took that adverse action on account of her protected class, not for any non-invidious reason.”

Judge Wood’s musings on changing the landscape of summary judgment for employment practitioners are interesting and provocative, and there are certainly pros and cons for practitioners on both sides in changing this long-established system. Only time will tell whether other courts will follow the Seventh Circuit’s lead.

— David N. Michael and Jordan M. Hanson, Gould & Ratner LLP, Chicago, IL

May 2, 2012

EEOC Recognizes Gender Identity as a Theory of Proving

On April 20, 2012, the EEOC issued a decision in which it determined that a complaint based on the theory of gender identity or transgender discrimination is cognizable as sex discrimination prohibited by Title VII of the Civil Rights Act of 1964. This decision is important because, in addition to elaborating on the protection provided to transgender individuals under the theory of “sex stereotyping,” the commission further determined that a complainant who can prove that an employer was willing to offer him or her the job when presenting as one gender, but not as the other, proves sex discrimination without presenting any evidence of gender stereotyping.

This decision stems from a failure-to-hire complaint filed by Mia Macy against the Department of Justice related to a position with the Walnut Creek, California, forensics laboratory of the Alcohol, Tobacco, Firearms and Explosives Agency. According to the complaint, in December 2010, Macy initially discussed a position in the forensics lab with the director of the Walnut Creek office. At the time, Macy presented as a man. The director informed Macy in January 2011 that the job was hers pending the completion of a background check. On March 29, 2011, Macy requested that the hiring agency (through whom her recruitment proceeded) inform the director that she was in the process of transitioning from male to female. Several days later, on April 8, 2011, the hiring agency informed Macy that the position with the Walnut Creek forensics lab was no longer available due to budget constraints. Macy later found out, however, that the forensics lab indeed filled the position with another applicant.

Macy filed a formal equal-employment-opportunity complaint on June 13, 2011, indicating that “sex,” “gender identity,” and “sex stereotyping” were the bases for her complaint. Ultimately, the commission issued letters to Macy indicating that it classified her claim as a complaint of discrimination based on “gender identity (female) stereotyping.” The commission further noted that it would process her claim only “based on sex (female) under Title VII[.]” Macy filed a notice of appeal, arguing that the Equal Employment Opportunity Commission (EEOC) has jurisdiction over her entire claim, including claims of discrimination based on “gender identity” or “transgender status.”

On appeal, the commission focused on the issue of whether a complaint of discrimination based on gender identity alone—not relying on the theory of sex stereotyping first recognized in Price Waterhouse v. Hopkins, 490 U.S. 228, 239 (1989)—could proceed under Title VII. Addressing this issue, the commission noted that Title VII’s protections sweep broadly “in part because the term ‘gender’ encompasses not only a person’s biological sex but also the cultural and social aspects associated with masculinity and femininity.” Noting that most courts have found protection for transgender individuals under the “sex stereotyping” theory, the commission further determined that the “sex stereotyping” theory was not the only means of proving cognizable gender discrimination under Title VII. Alternatively, if Macy could prove that the director at the Walnut Creek forensics lab was willing to offer her the position as a man, but not as a woman, she will have proven that the director discriminated against her on the basis of her sex. In other words, “intentional discrimination against a transgender individual because that person is transgender is, by definition, discrimination ‘based on . . . sex,’ and such discrimination therefore violates Title VII.”

While it remains to be seen whether courts will follow the EEOC’s interpretation, this decision nonetheless marks a significant transformation in the law as it relates to gender-identity discrimination. Pursuant to the EEOC’s guidance in this decision, one can expect that additional litigation will arise under not only the traditional “sex stereotyping” theory, but also under the theory that claims of gender identity or transgender discrimination can survive alone under Title VII’s prohibition of discrimination based on sex.

— Daniel E. Harrell, Balch & Bingham LLP, Birmingham, AL

March 14, 2012

Social Media and Employer Documentation: Risk Containment

The law often falls far behind technology and takes years to catch up. The tension between the sheer popularity and proliferation of social-media technologies and their use in the workplace, on one hand, and the proper documentation of ownership of such technologies, on the other, is both palpable and stark. Employers should stand up, take notice, and properly document these ownership issues to avoid lawsuits.

The common dispute that is surfacing these days centers around ownership of LinkedIn and Twitter accounts. When an employee departs—and the employee and the employer have a different view of who owns the social media accounts (as is often the case)—litigation ensues.

A recent case in the Eastern District of Pennsylvania, Eagle v. Morgan, 2011 WL 6739448 (E.D. Pa. Dec. 22, 2011), provides a glimpse of the types of claims that can surface when there is a dispute over ownership of such accounts. Linda Eagle and several colleagues formed Edcomm, Inc., a financial-services and training company. In 2008, she established a LinkedIn account that she used for both business and personal use. In 2010, Edcomm was sold with Eagle retaining an employment position with Edcomm. In 2011, she was terminated. While employed by Edcomm, Eagle had given her password to Edcomm employees for purposes of maintaining her LinkedIn account and updating it. When Eagle was terminated, the company took her laptop and cell phone, and thereafter locked her out of her LinkedIn account.

When Eagle accessed her account shortly after her termination, she discovered that her LinkedIn profile had been co-opted to basically display the name and photograph of the new CEO of Edcomm, with that new CEO bearing all of her background info, and enjoying her extensive “contacts” that she had built in LinkedIn over the years. Eagle filed suit in the EDPA alleging 11 separate causes of action, including a claim for damages under the Computer Fraud and Abuse Act, Lanham Act, conversion, and numerous other state-law theories. Edcomm filed and served counterclaims, making many of the same claims against Eagle. Among other things, the employer claimed it had the right to the Linkedin account and claimed that Eagle had violated the law by accessing the account.

Although the district court dismissed most of the employer’s counterclaims on a motion, it did leave intact a common-law misappropriation claim against Eagle for her alleged misappropriation of the LinkedIn account and the connections she had gathered over the years, all of which, Edcomm claimed, had been assembled solely at its expense and exclusively for its own benefit.

The Eagle case is one of the first cases involving a claim of misappropriation of a social-media account, and points out the specific need for employers and employees to document exactly who owns that social-media account, and what will happen if employment is terminated. It is not uncommon to now see employers secure an agreement from the employee agreeing to “turn over” to the employer the “contacts” that are built up in a LinkedIn account prior to the employee’s departure, and to forego use of those contacts after employment ends. That begs the question of whether such an agreement is enforceable to the extent the employer then seeks to restrict the employee’s post-employment activities, such as solicitation of those contacts. For that, the law will resort to traditional tests of whether an employer has stated a protectable interest over the underlying contact lists and data.

Another unpublished decision that was released in 2010 came close to ruling on this latter issue, but stopped short. In Sasqua Group, Inc. v. Courtney, 2010 WL 3613855 (E.D.N.Y. 2010), a recruiting firm in the financial-services sector made a claim for injunctive relief stemming from a former recruiter’s use of certain industry contact information in the recruiting industry. Magistrate Judge Kathleen Tomlinson undertook a rather exhaustive analysis of the proliferation of data in the recruiter industry, and also provided a good explanation for the unique role of LinkedIn in such business transactions. In the end, the court in Sasqua recognized the limited circumstances in which an employer can claim a protectable interest over industry data that is available in the public domain, and refused to give the employer an injunction.

Twitter and LinkedIn accounts are each different, and the degree to which an employer can claim “ownership” will change depending upon the context in which the technologies are used and developed. Employers would be well advised to take immediate action to incorporate clauses in their employee handbook and employment agreements to deal with these ownership issues, and minimize the risk of litigation later.

Keywords: litigation, employment and labor relations, Eagle v Morgan, Sasqua Group v Courtney

— Kevin O'Connor, Peckar & Abramson, River Edge, NJ

March 14, 2012

Gender-Identity-Discrimination Prosecution Comes to Massachusetts

On November 23, 2011, Massachusetts became the 16th state to treat transgender citizens as a protected class. Governor Deval Patrick signed into law the Transgender Equal Rights Bill designed to protect transgender individuals from discrimination in employment, housing, education, and credit. The new law also increases protections for transgender individuals against hate-crime violence.

The amendment to the Massachusetts Fair Employment Practices Act (Mass. G.L. c. 151B) subjects employers to liability for discrimination in hiring, firing, compensation, or in any terms, conditions, or privileges of employment against an individual based on his or her “gender identity.” The new law will take effect on July 1, 2012.

“Gender identity” is defined as “a person’s gender-related identity, appearance or behavior, whether or not that gender-related identity, appearance or behavior is different from that traditionally associated with the person’s physiology or assigned sex at birth. . . .” To be protected under the law, a persons’ gender identity must be “sincerely held, as part of [the] person’s core identity. . . .”

Currently Massachusetts residents are protected under state and federal law against discrimination in employment based on race, color, religious creed, national origin, sex, pregnancy, sexual orientation, genetic information, ancestry, age, disability, veteran status, military service, and gender identity.

Efforts to gain federal protection against discrimination on the basis of both sexual orientation and gender identity have been stalled for many years. The Employment Non-Discrimination Act (ENDA) has been introduced in some form in almost every Congress since 1994. Given the lack of action on the federal front, the individual states have been left to address the issue as they see fit.

Keywords: litigation, employment and labor relations, Transgender Equal Rights Bill, Massachusetts Transgender law

— Charla Bizios Stevens, McLane, Graf, Raulerson & Middleton, NH and MA

February 21, 2012

Eleventh Circuit Deems Transgender Discrimination Sex-Based

Through its recent decision in Glenn v. Brumby, the Eleventh Circuit has recognized that discrimination against transgender individuals constitutes sex-based discrimination under the Equal Protection Clause.

Vandiver Elizabeth Glenn was born a biological male. Since puberty, she had felt that she was a woman, and in 2005, was diagnosed with Gender Identity Disorder (GID). That same year, Glenn began the process of transitioning from male to female. In October 2005, Glenn was hired by the Georgia General Assembly’s Office of Legislative Counsel, headed by Sewell Brumby.

In 2006, Glenn advised her direct supervisor, Beth Yinger, that she was a transsexual, and was engaged in the process of becoming a woman. On Halloween 2006, Glenn, like her fellow coworkers, came to work wearing a costume; she came to work dressed as a woman. Brumby, after seeing her, told Glenn to leave the office, as her appearance was not appropriate. Brumby stated, “it’s unsettling to think of someone dressed in women’s clothing with male sex organs inside that clothing,” and remarked that a male in women’s clothing is “unnatural.” Shortly thereafter, Brumby spoke with Yinger, who informed Brumby that Glenn intended to transition to female.

In the fall of 2007, Glenn advised Yinger that she was ready to proceed with gender transition and would start coming to work as a woman with a new (female) name. Upon hearing this news from Yinger, Brumby terminated Glenn because her “intended gender transition was inappropriate, that it would be disruptive, that some people would view it as a moral issue, and that it would make Glenn’s coworkers uncomfortable.” Glenn sued, alleging two discrimination claims under the Equal Protection Clause.

In particular, Glenn alleged that Brumby discriminated against her based on sex, “including her female gender identity and her failure to conform to the sex stereotypes associated with the sex [Brumby] perceived her to be.” Additionally, Glenn alleged that Brumby discriminated against her based on her medical condition, GID. The district court granted summary judgment to Glenn on her sex-discrimination claim, and granted summary judgment to Brumby on Glenn’s medical-discrimination claim. Both parties appealed.

In assessing Glenn’s sex-discrimination claim, the Eleventh Circuit started by recognizing that the Equal Protection Clause requires the state to treat all similarly situated persons alike or to avoid classifications that are “arbitrary or irrational,” and those that reflect “a bare . . . desire to harm a politically unpopular group.” City of Cleburne v. Cleburne Living Ctr., Inc., 473 U.S. 432, 446-47 (1985) (internal quotations omitted)). “States are presumed to act lawfully, and therefore state action is generally upheld if it is rationally related to a legitimate governmental purpose.” Id. at 440.

However, citing United States v. Virginia, 518 U.S. 515, 555 (1997), the court found that sex-based discrimination is subject to intermediate rather than rational-basis scrutiny under the Equal Protection Clause. Hence, if the state’s discriminatory act against an individual based on gender nonconformity constituted sex discrimination, the state would have to withstand intermediate scrutiny and show that its “gender classification . . . is substantially related to a sufficiently important government interest.” Cleburne, 473 U.S. at 441.

Reasoning that “[t]he very acts that define transgender people as transgender are those that contradict stereotypes of gender-appropriate appearance and behavior,” the Court found that there is a “congruence between discriminating against transgender and transsexual individuals and discrimination on the basis of gender-based behavioral norms.” Hence, discrimination against a transgender individual based on gender-nonconformity is sex discrimination.

The court cited numerous instances where non-transgender individuals had been deemed protected from gender stereotyping: “[C]ourts have held that plaintiffs cannot be discriminated against for wearing jewelry that was considered too effeminate, carrying a serving tray too gracefully, or taking too active a role in child-rearing. An individual cannot be punished because of his or her perceived gender non-conformity.” Accordingly, a transgender individual likewise cannot be “punished” for not conforming to his or her gender role.

The court went on to apply the heightened scrutiny test under the Equal Protection Clause and held that Brumby had failed to provide an “exceedingly persuasive justification” for terminating Glenn. Virginia, 518 U.S. at 546. Brumby’s speculative concern regarding other employees’ discomfort with Glenn’s use of the women’s restroom was “wholly irrelevant to the heightened scrutiny analysis that is required here.” The Eleventh Circuit then affirmed the district court’s judgment granting Glenn summary judgment on her sex-discrimination claim.

— Bona M. Kim, Allen, Norton & Blue, P.A., Winter Park, FL

December 7, 2011

Courts Increasingly Rejecting or Limiting Fee Awards in FLSA Cases

All attorneys who litigate wage and hour claims should be aware that federal courts across the country are increasing the scrutiny of attorney-fees awards in Fair Labor Standards Act (FLSA) cases. As many labor and employment attorneys can attest, private litigation over minimum wage and overtime claims under the FLSA has increased significantly over the last few years. Whether it is a result of individuals having access to information on the Internet or more attorneys advertising for unpaid wage claims, employees are choosing to litigate their claims instead of seeking assistance from the U.S. Department of Labor. To this end, despite the boom in FLSA lawsuits being filed, according to the U.S. Department of Labor the amount of complaints registered for minimum wage and overtime claims decreased by about 25 percent from Fiscal Year 2004 to Fiscal Year 2008.

Meanwhile, the incentive for private attorneys to take these claims lies largely in the fact that successful FLSA litigants are entitled to their reasonable attorney fees, almost without exception. Prevailing plaintiffs often receive attorney-fee awards substantially greater than the actual recovery of the plaintiffs, and courts have traditionally been hesitant to reduce the requested fee amounts. That is, until recently.

While federal judges plainly recognize and enforce the FLSA’s fee-award provision, courts are increasingly employing proactive methods to encourage early resolution of these cases, often by tempering fee awards. Recent examples of justifications and considerations for reducing or even eliminating attorney-fee awards include:

• Determining that the plaintiffs were not “prevailing parties” under the statute because the case had been dismissed with prejudice as moot after the defendant voluntarily paid the overtime compensation and liquidated damages allegedly due (although not the fees incurred), and the court had not issued a judgment or an approval of settlement. Dionne v. Floormasters Enterprises, Inc., 647 F.3d 1109 (11th Cir. 2011); see also Craig v. Digital Intelligence Systems Corp., Case No. 8:10-cv-2549 (M.D. Fla. Nov. 1, 2011).

• Reducing attorney fees to only those hours that could be accounted for in the court’s records because the plaintiff’s attorney had failed to contemporaneously document his time. Scott v. City of New York, 643 F.3d 56 (2d Cir. 2011).

• Regarding “stalling tactics” by the plaintiff’s counsel as a valid factor in support of reducing an award of attorney fees. Lemus v. Burnham Painting & Drywall, Corp., 426 Fed. App’x 543 (9th Cir. 2011).

While these cases are largely bad news for plaintiff’s counsel, the actions of defense counsel have also adversely factored into fee decisions. For example, in affirming a large attorney-fee award, one court noted that defense counsel had not made an attempt to settle the case. Roussell v. Brinker International, Inc., 2011 WL 4067171 (5th Cir. 2011). On the opposite end, courts look favorably upon defense counsel who promptly tender full settlement of the asserted damages. See Dionne, 647 F.3d at 1110–11.

What do these holdings mean for practitioners? Plaintiff’s counsel should employ extra care to strictly adhere to all court rules and orders, including local rules and those rules regarding timely, detailed documentation and submission of billing records. Settlement discussions should take place early and, where possible, court approval of settlement should be secured prior to dismissal of the action. Defense counsel will need to quickly assess the damages plaintiffs are seeking and the case’s settlement posture, and should be prepared to discuss the advantages and disadvantages of settlement versus litigation with their clients.

Whether representing employees or employers in FLSA claims, it is important to remember that courts are taking notice of the increase in litigation over these claims and scrutinizing the attorney-fees awards they carry. This scrutiny can cut both ways—penalizing plaintiff’s counsel for stalling tactics while approving large fee awards where defense counsel refuse to take advantage of reasonable settlement opportunities. Thus, all employment-law attorneys should be aware that, regardless of which party you represent, your actions through the course of litigation will likely contribute to the attorney-fees analysis.

Keywords: litigation, employment and labor relations, FLSA attorney fees

— Shaina Thorpe, Allen, Norton & Blue, P.A., Tampa, FL

June 20, 2011

Wal-Mart Prevails Before U.S. Supreme Court in Discrimination Case

The wait is over. In a much anticipated decision, the U.S. Supreme Court in Wal-Mart Stores, Inc. v. Dukes et al., issued a ruling on June 20, 2011, in favor of Wal-Mart in what it called “one of the most expansive class actions ever.” The U.S. Supreme Court reversed the Ninth Circuit Court of Appeals and ruled that the certification of the plaintiff class was not consistent with Federal Rule of Civil Procedure 23(a), and the backpay claims were improperly certified under Rule 23(b)(2). The district court and the Ninth Circuit previously approved the certification of a class comprising about one and a half million plaintiffs, current and former female employees of Wal-Mart who allege that the discretion exercised by their local supervisors over pay and promotion matters violates Title VII of the Civil Rights Act of 1964 by discriminating against women. In addition to injunctive relief and declaratory relief, the plaintiffs sought an award of backpay.

The Supreme Court’s Decision
The Supreme Court reversed the Ninth Circuit’s decision. In doing so, the Court found that the class was not consistent with Rule 23(a). Rule 23(a)(2) requires a party seeking class certification to prove that the class has common “questions of law or fact.” The Court found that proof of commonality necessarily overlapped with the plaintiffs’ merits contention that Wal-Mart engages in a pattern or practice of discrimination. However, the crux of a Title VII inquiry revolves around “the reasons for a particular employment decision,” Cooper v. Federal Reserve Bank of Richmond, 467 U.S. 867, 876 (1984), and the class sued for millions of employment decisions at once. The Court found this problematic. According to the Court, “[w]ithout some glue holding together the alleged reasons for those decisions, it will be impossible to say that examination of all the class members’ claims will produce a common answer to the crucial discrimination question.”

In support of its reasoning, the Court cited to General Telephone Co. of Southwest v. Falcon, 457 U.S. 147 (1982), as the proper approach to commonality. According to the Court, on the facts of the Dukes case, the conceptual gap between an individual’s discrimination claim and “the existence of a class of persons who have suffered the same injury,” id. at 157–158, must be bridged by “[s]ignificant proof that an employer operated under a general policy of discrimination.” Id. at 159. The Court found that such proof was absent in this case. In coming to this conclusion, the Court looked at the evidence of both parties. Wal-Mart provided, inter alia, its policy against sex discrimination and its penalties for denials of equal opportunity. The class member’s only evidence of a general discrimination policy was a sociologist’s analysis asserting that Wal-Mart’s corporate culture made it vulnerable to gender bias. Because the sociologist could not estimate what percent of Wal-Mart’s employment decisions might be determined by stereotypical thinking, his testimony was, according to the Court, “worlds away” from “significant proof” that Wal-Mart “operated under a general policy of discrimination.”

The Court did note that Wal-Mart’s corporate “policy” giving local supervisors broad discretion over employment matters, in a largely subjective manner, could create issues. However, according to the Court, although such a policy could be the basis of a Title VII disparate-impact claim, recognizing that a claim “can” exist does not mean that every employee in a company with that policy has a common claim. The Court stated that in a company of Wal-Mart’s size and geographical scope, it is unlikely that all managers would exercise their discretion in a common way without some common direction (i.e., the “glue” holding it together). Likewise, the Court found the class members’ statistical and anecdotal evidence “too weak to raise any inference that all the individual, discretionary personnel decisions are discriminatory.”

The Court also held that the class member’s backpay claims were improperly certified under Rule 23(b)(2) because the claim for monetary relief was not incidental to the requested injunctive or declaratory relief.

Justice Scalia delivered the opinion of the Court, in which Justices Roberts, Kennedy, and Alito joined, and in which Justices Ginsburg, Sotomayor, and Kagan, joined in part. Justice Ginsburg filed an opinion concurring in part and dissenting in part, in which Justices Breyer, Sotomayor, and Kagan joined.

— John A. Ybarra and Michael A. Wilder, Littler Mendelson, P.C., Chicago, Illinois.

Keywords: Wal-Mart v. Dukes, class certification, class action

June 20, 2011

Supreme Court Establishes New Obstacle for Defense Attorney Fees

On June 6, 2011, the U.S. Supreme Court added a new hurdle for prevailing defendants seeking to recover attorney fees under 28 U.S.C. § 1988 in multiple-claim suits. In Fox v. Vice, No. 10-114, 563 U.S. __ (June 6, 2011), a unanimous decision authored by Justice Kagan, the Court confirmed that a defendant in a civil-rights fee-shifting case can recover attorney fees only if the plaintiff’s claim was frivolous, while also setting forth an additional requirement—a defendant must now prove that he or she would not have incurred certain fees but for the frivolous claim. Accordingly, if the litigation involves multiple claims, some of which are frivolous and some of which are not, a defendant can recover attorney fees, but only fees related to the frivolous claims and only if he or she can prove that certain fees are attributable exclusively to the defense of that frivolous claim and not the litigation generally.

Justice Kagan’s opinion addresses and analyzes the theoretical basis for an award of attorney fees to a defendant under section 1988. Specifically, the Court noted that “[Section 1988] serves to relieve a defendant of expenses attributable to frivolous charges . . . and a court may reimburse a defendant for costs under § 1988 even if a plaintiff’s suit is not wholly frivolous.” (Slip Op., p. 7). In other words, the Court recognized that fee-shifting for defendants is not an all-or-nothing concept. Nevertheless, the Court further held that “Section 1988 allows a defendant to recover reasonable attorney’s fees incurred because of, but only because of, a frivolous claim . . . [and] if the defendant would have incurred those fees anyway, to defend against non-frivolous claims, then a court has no basis for transferring the expense to the plaintiff.” (Slip Op., pp. 8–9).

Practically, this new rule minimizes the likelihood that a defendant can obtain reasonable attorney fees in a case involving both frivolous and non-frivolous claims. Consider the following hypothetical: A plaintiff asserts race and gender claims under Title VII, as well as a claim under the Americans with Disabilities Act (ADA). The plaintiff relies on a timely filed Equal Employment Opportunity Commission (EEOC) charge to satisfy his or her jurisdictional prerequisites. However, neither the underlying EEOC charge nor any other documentation submitted to the EEOC makes any mention of a claim of disability discrimination. In fact, there is simply no basis for an argument that an ADA claim grows out of the EEOC charge. Based on these facts, the plaintiff’s ADA claim could be frivolous.

Prior to the Fox decision, the defendant in the above hypothetical could argue that he or she is entitled to a reasonable percentage of the total fees related to the defense of the litigation. The Fox rule, however, now requires that the defendant not only establish that the plaintiff’s ADA claim was frivolous, but also prove that certain work related only to that claim and would not have been undertaken but for that claim. As a result, the defendant cannot recover fees for generally taking the plaintiff’s deposition, but instead must prove that a certain subset of the deposition involved questions related only to the ADA claim. The defendant can recover fees for only that portion of the deposition. Likewise, the defendant must prove that a certain amount of the fees attributable to a summary-judgment motion were specifically undertaken only to draft the section of the motion related to the ADA claim. Case law on the issue of attorney fees in fee-shifting scenarios has long recognized the difficulty with attempting to accurately record the apportionment an attorney’s time and effort in this manner. Nonetheless, such a record of apportionment is now required for defendants in fee-shifting cases.

Ultimately, while theoretically sound, the Fox decision makes it nearly impossible for a defendant to recover reasonable attorney fees. Absent the establishment of billing practices that break down tasks by each individual claim—a practice that courts addressing attorney fees often have held is impracticable—defense counsel should not expect to be successful in pursuing a claim for attorney fees under section 1988. Subsequent to this decision, counsel for defendants should consider a potentially frivolous claim at the outset of the litigation and record all time and costs attributable specifically to that particular claim, if possible. Otherwise, attorney fees likely will be difficult to recover, if not unavailable altogether.

— Daniel E. Harrell is an associate in the Birmingham, Alabama, office of Balch & Bingham LLP.

Keywords: Fox v. Vice, section 1988, attorney fees

October 5, 2010

Supreme Court Expands Role of Arbitrators

In Rent-A-Center, West, Inc. v. Jackson the U.S. Supreme Court continued its trend of favoring arbitration by holding that arbitrators have the power to decide whether an arbitration agreement is unconscionable where the agreement explicitly delegates that decision to the arbitrator.

Under the Federal Arbitration Act, delegation is presumptively enforceable unless the arbitration agreement’s other terms pose an impediment to the enforcement of the delegation clause. If there are other factors that prevent the arbitrator from reasonably ruling on the unconscionability of the arbitration agreement, then a court may decide not to enforce the delegation clause.

The Court majority held that “arbitration is a matter of contract,” and concluded that arbitration agreements should be placed on “an equal footing with other contracts” and should be similarly enforced.

Writing for the majority, Justice Scalia wrote that the Court had recognized that parties can agree to “gateway” questions of arbitrability, including whether the parties have agreed to arbitrate or whether their agreement covers a particular controversy. Again, the Court noted this ruling is merely a further extension of arbitration as a matter of contract.

The Court declared that:

An agreement to arbitrate a gateway issue is simply an additional, antecedent agreement the party seeing arbitration asks the federal court to enforce, and the FAA operates on this additional arbitration agreement just as it does on any other.

This decision is another in a long chain of cases from the Supreme Court favoring arbitration and freedom-of-contract regarding arbitration agreements. The breadth of this decision is yet to be determined. Whether corporations (the usual drafter of most arbitration agreements) prefer arbitrators or courts to be the gateway remains to be seen. There could be a shift toward corporations including an unconscionability delegation as a part of their arbitration agreements. Several other cases are going to be heard that may impact arbitration.

In addition, mandatory arbitration agreements and their scope—after Pyett v. 14 Penn Plaza—continue to receive attention as they should. Recent opinions from the National Labor Relations Board (NLRB) demonstrate that the breadth of the arbitration clause continues to grow even in the labor law context. The NLRB’s general counsel recently :

If mandatory arbitration agreements are drafted to make clear that the employees’ Section 7 [NLRA] rights to challenge those agreements through concerted activity are preserved and that only individuals rights are waived, no issue cognizable under the NLRA is presented by an employer’s making and enforcing an individual employee’s agreement that his or her non-NLRA employment claims will be resolved through the employer’s mandatory arbitration system. In such cases, an employer is acting in accord with its rights under Gilmer and its progeny.

However, a mandatory arbitration agreement that could reasonably be read by an employee as prohibiting him or her from joining with other employees to file an NLRA class action lawsuit is unlawful.

In June 2010, NLRB General Counsel Ronald Meisburg stated:

Employers, nonetheless, may require individual employees to sign a Gilmer waiver of their right to file a class or collective claim without per se violating the Act. So long as the wording of these agreements makes clear to employees that their right to act concertedly to challenge these agreements by pursuing class and collective claims will not be subject to discipline or retaliation by the employer, and that those rights—consistent with Section 7—are preserved, no violation of the Act will be found.

Even if an employee is covered by an arrangement lawful under Gilmer, the employee is still protected by Section 7 of the Act if he or she concertedly files an employment-related class action lawsuit in the face of that agreement and may not be threatened or disciplined by doing so. The employer, however, may lawfully seek to have a class action complaint dismissed by the court on the ground that each purported class member is bound by his or her signing of a lawful Gilmer agreement/waiver.

My prediction is greater focus on arbitration of disputes and enhanced favorability by the Supreme Court. If there is, then the decision in Rent-A-Center, West, Inc. v. Jackson could prove to have a large impact.

— Roger B. Jacobs, Jacobs Rosenberg LLC, Newark, NJ

Sovereign Immunity Trumps FMLA Self-Care Provision

On July 2, 2010, the Supreme Court of Texas rejected a former University of Texas at El Paso (UTEP) employee’s Family Medical Leave Act (FMLA) claim, holding that state agencies enjoy sovereign immunity against claims under the FMLA’s self-care provision.

Alfredo Herrera served as a heating, ventilation, and air-conditioning technician for UTEP. After sustaining an on-the-job injury to his left elbow in March 2005, Herrera took nine months and returned to work in January 2006. Less than one month later, UTEP terminated Herrera. Herrera filed suit, alleging UTEP unlawfully terminated him for having taken personal medical leave under the FMLA’s “self-care” provision, 29 U.S.C. §2612(a)(1)(D), which establishes an eligible employee’s ability to take leave for his or her own serious health condition.

UTEP, a state institution, filed a motion to dismiss, attempting to use state sovereignty as a shield against Herrera’s FMLA claim. Congress cannot undermine a state’s sovereign immunity unless it: (1) unequivocally expresses its intent to do so; and (2) acts under a constitutional provision that gives Congress the power to do so.

The trial court denied UTEP’s motion and the Texas Court of Appeals affirmed, leading to UTEP’s appeal to the Supreme Court of Texas. On appeal, the Supreme Court of Texas acknowledged that the text of the FMLA expressly subjects the states to FMLA claims in 29 U.S.C. § 2617(a)(2), thus satisfying the first step in abrogating sovereign immunity. However, the court found that the second prong could not be satisfied, as Congress did not have authority under the constitution to abrogate Texas agencies’ sovereign immunity under the FMLA’s self-care provision.

In reaching its decision, the Supreme Court of Texas distinguished Herrera’s case from the U.S. Supreme Court case of Nevada Dep’t of Human Resources v. Hibbs, 538 U.S. 721 (2003). In Hibbs, the U.S. Supreme Court held that Congress lawfully abrogated the states’ sovereign immunity by subjecting states to liability for violation of the FMLA’s “family-care provision,” 29 U.S.C. § 2612(a)(1)(C), which provides an eligible employee may take leave to care for a family member with a serious health condition. The Supreme Court of Texas reasoned that while the family-care provision’s application to states was justified by section 5 of the Fourteenth Amendment as a means to enforce guarantees of equal protection, the self-care provision in 29 U.S.C. §2612(a)(1)(D) is not. While the family-care provision is intended to combat gender discrimination, the court found that the self-care provision is not. Accordingly, the Supreme Court of Texas held that UTEP enjoyed protection under the doctrine of sovereign immunity. After further rejecting the plaintiff’s claim that UTEP waived sovereign immunity by acknowledging the FMLA in its Handbook of Operating Procedures, the court dismissed Herrera’s FMLA claim.

According to the Texas Supreme Court, its decision is but a part of an overwhelming trend, as two state high courts and nine federal circuit courts have similarly found Congress lacked authority to abrogate sovereign immunity under the self-care provision, despite Hibbs.

Side Effects of Medication May Constitute Disability under ADA

On April 12, 2010, the Third Circuit Court of Appeals ruled in Sulima v. Tobyhanna Army Depot that the side effects of medication taken to treat a condition could by themselves constitute a disability under the Americans with Disabilities Act (ADA), even when the underlying condition is not itself disabling. This case marks the first time that the Third Circuit has addressed the issue of whether an employee is entitled to protection under the ADA for an impairment that he or she suffers as a result of taking prescription medication. The Third Circuit’s recent decision is consistent with decisions from the Seventh, Eighth, and Eleventh Circuits. Although the Third Circuit concluded in Sulima that the employee in this case failed to demonstrate the necessary “disabling impairment” to qualify for ADA protection, the court set a standard for other employees experiencing side effects from prescription medication.

Sulima, who had been diagnosed as morbidly obese and suffered from sleep apnea, was taking a prescription weight-loss medication. As a result of side effects related to the medication, Sulima took numerous and extended bathroom breaks during the workday. When his supervisors inquired about the breaks, Sulima explained the side effects of his medication advised that he would consult with his doctors as to whether a different prescription was available with fewer side effects. However, Sulima continued to take long bathroom breaks and was transferred out of his work group. No other similar jobs were available. Sulima accepted a “voluntary” layoff and found alternate employment elsewhere. He then sued the defendants, under the ADA and the Rehabilitation Act, arguing that he had been laid off due to a disability or perceived disability. Sulima claimed that the side effects of his prescription medication constituted a disability because they required him to use the restroom frequently.

On appeal, the Third Circuit noted that “the factual situation presented here is somewhat different than a typical ADA claim,” because Sulima claimed “that his impairment under the ADA is based solely on a disorder or condition resulting from the medication, not from the underlying health problem that the medication is meant to treat.” The Third Circuit adopted the factors set forth in the Seventh Circuit’s decision in Christian v. St. Anthony Medical Center that a plaintiff must show to establish a disability due to “the effects of a treatment for a condition that is not itself disabling”: (1) whether the treatment is medically necessary in the prudent judgment of the medical profession; (2) whether the treatment is not just an “attractive option” and there is no available, equally effective alternative that lacks the side effects in question; and (3) whether the treatment is required solely in anticipation of an impairment resulting from the plaintiff’s voluntary choices.

Applying this analysis, the Third Circuit held that Sulima was not disabled under the ADA. According to the court, because Sulima’s doctor discontinued his use of the medication after being informed of the adverse side effects, Sulima could not demonstrate that the medication was “medically necessary” or “required ‘in the prudent judgment of the medical profession.’” In addition, Sulima did not present evidence that the medication being prescribed was the only effective treatment for his conditions or that any other treatments would have caused the same side effects. Finally, the court did not find that the two-month period during which Sulima suffered the side effects was “a long enough duration to qualify for ‘disability’ under the ADA.”

Although in this case, the Third Circuit rejected the employee’s claims, employers and employees should be mindful of the court’s holding that the side effects of medication taken to treat a condition could by themselves constitute a disability under the ADA, even when the underlying condition is not itself disabling.

— Robyn H. Lauber, Esq.