Friday, November 13, 2015

The Cat's Paw Takes A Swipe at But-For Causation

After the Supreme Court’s decision in University of Tex. Southwestern Med. Ctr. v. Nassar, 133 S. Ct. 2517 (2013), holding that but-for causation is the standard for proving retaliation in a Title VII case, many thought that there was an open question as to whether the holding in Staub v. Proctor Hosp., 562 U.S. 411 (2011), the so-called “Cat’s Paw” case, would apply in a but-for causation context.  In Staub the Court held that, if the discriminating employee proximately caused the ultimate decisionmaker’s adverse action, then the “Cat’s” discriminatory intent would be imputed to the ultimate decisionmaker even though the decisionmaker was not consciously discriminating.  
So far, four circuits have weighed in on this question, unanimously concluding that even after Nassar, plaintiffs may use a “Cat’s Paw” theory even in Title VII retaliation cases.  See Zamora v. City of Houston, 798 F.3d 326 (5th Cir. 2015); EEOC v. New Breed Logistics, 783 F.3d 1057, 1070 (6th Cir. 2015); Ward v. Jewell, 772 F.3d 1199, 1203, 1205 (10th Cir. 2014); Bennett v. Riceland Foods, Inc., 721 F.3d 546, 551 (8th Cir. 2013); see also Godwin v. WellStar Health Sys., Inc., 615 Fed. Appx. 518 (11th Cir. 2015) (using Cat’s Paw analysis in an ADEA case that required but-for causation).  

Judge Clement, writing for the Fifth Circuit panel in Zamora, stated the holding as follows: “…the applicable standard of causation is relevant only to the latter portion of this Staub test – instead of being a proximate cause, the supervisor’s act must be a ‘[but-for] cause of the ultimate employment action.’” (citation omitted) Zamora v. City of Houston, at 332.  In doing so, Judge Clemente references Seoane-Vazquez v. Ohio State Univ., 577 F.App’x 418, 427-29 (6th Cir. 2014), where the Sixth Circuit substituted but-for causation for motivating factor causation in applying "Cat’s Paw" analysis in a post-Nassar case.  With decisions like Zamora and the Fourth Circuit’s blockbuster holding in Foster v. Univ. of Md. – E. Shore, 787 F.3d 243 (4th Cir. 2015), which held that Nassar’s but-for analysis only applies to direct-evidence cases, and not to McDonald-Douglas cases, the bar and the courts are confronted with the herculean task of drafting jury instructions that the jury can comprehend and that will pass muster in the appellate courts.  Undoubtedly, some of these issues regarding causation will filter back up to the Supreme Court, and, hopefully, we will get more clarity on what causation scheme applies to the alphabet soup of statutory employment claims.  

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Friday, October 16, 2015

Non-Competition "In Any Capacity": Broad Scope Can Sink Your Non-Compete

A recent opinion from the Calvert County Circuit Court in Maryland highlights a common drafting error which can undermine the enforceability of non-compete agreements. In Electronic Security Servs., Inc. v. Higgs, Judge Chandlee ruled that a non-compete which precluded the former employee from working for a competitor “in any capacity” was overly broad and thus unenforceable. See Case No. 04-C-15-304 (Calvert Cnty. Cir. Ct. Md. Sept. 2, 2015) (hereafter “Higgs”). 

In Higgs, a company sued a former employee and the former employee’s new employer, alleging that the employee breached a non-compete agreement and the employee’s employment with the new employer was prohibited by a confidentiality agreement.  The non-compete agreement forbade Mr. Higgs from “compet[ing] directly or indirectly with the company by serving as an officer, partner, director, agent, employee, or consultant with any firm or entities substantially engaged in a business similar to or competitive to the business of the company or an active client of the company in the last 2 years with the company.” It “extend[ed] to the geographic area for the entire states of Maryland and Virginia, The District of Columbia, and any other area that falls within a 150 mile radius of Upper Marlboro.”  Notwithstanding these restrictions, the employee went to work for a competitor in a neighboring county.

The court found the agreement overbroad and unenforceable as a matter of law, noting that it “effectively restricts [the former employee] from obtaining employment from a competitor . . . in any role conceivable.”  The court further held that, even if such a broad restriction were somehow necessary to protect the company’s legitimate business interests, the “need [was] not remotely demonstrated in the complaint.” As a result, the court severed the clause from the non-compete agreement, which “render[ed] the entirety of the agreement void.”

The decision in Higgs reflects a trend in non-compete litigation in favor of scrutinizing the scope of the restrictions to which employees are subject. Several other states have held that language similar to that present in Higgs is overly broad and therefore unenforceable – though some courts have applied blue-penciling rules to save the agreement in a less restrictive form.

In CopyPro, Inc. v. Musgrove, the North Carolina Court of Appeals held that a non-compete agreement that prohibited a former sales representative from working at a competitor in any capacity, “even as a custodian,” was overly broad and unenforceable. 754 S.E.2d 188 (N.C. App. 2014).  In CopyPro the defendant, former employee, Mr. Musgrove, had signed a non-compete agreement that precluded affiliation with a competitor of CopyPro, a purveyor of office equipment systems, for three years following the termination of his employment.  The substantive scope of the agreement was limited to “any business of the type and character of the business engaged in by the Employer at the time of such termination.”  Id. at 192.

During his employment with CopyPro, Mr. Musgrove primarily worked in Pender and Onslow County.  After he resigned, Mr. Musgrove joined a competitor to work in a different county, and he refrained from contacting CopyPro’s customers in the two counties he had covered for CopyPro.  Further, his new employer forbade him from contacting CopyPro’s customers in said counties.

CopyPro nevertheless brought suit against Mr. Musgrove seeking, among other things, a permanent injunction to enforce the terms of the non-compete agreement that he had signed.  CopyPro prevailed in the Superior Court and obtained an injunction preventing Mr. Musgrove, in pertinent part, from working for the allegedly competitive entity.  The Court of Appeals reversed, explaining that “[a]s our decisions reflect, we have held on numerous occasions that covenants restricting an employee from working in a capacity unrelated to that in which he or she worked for the employer are generally overbroad and unenforceable.” CopyPro, 754 S.E.2d at 192 (citing VisionAIR, Inc. v. James, 167 N.C. App. 504, 508-09, 606 S.E.2d 359, 362-63 (2004) (holding that a covenant that prohibited an employee from “own[ing], manag[ing], be[ing] employed by or otherwise participat[ing] in, directly or indirectly, any business similar to” the employer’s business was overly broad and unenforceable)).  The Court went on to hold that “such overly broad restrictions are generally not enforceable in the employer-employee context on the grounds that the scope of the restrictions contained in such agreements far exceeds those necessary to protect an employer’s legitimate business interests.” CopyPro, 754 S.E.2d at 193.

The Court noted that its decision here was distinguishable from prior holdings:

Aside from the fact that the restriction at issue in Precision Walls was to remain in effect for only one year while the noncompetition agreement at issue here will remain in effect for three years, the present record contains no indication that Defendant ever had either the same level of responsibility or the same level of access to competitively sensitive information as the defendant whose conduct was at issue in Precision Walls. Simply put, the record developed in this case, unlike the record developed in Precision Walls, contains no evidence that Defendant had the responsibility for developing client-specific pricing proposals or adjusting prices for competitive reasons or that Defendant was involved in the development and operation of his employer’s bidding or pricing strategies. Although Plaintiff contended in the court below that Defendant might share vital information even if he were hired by a competing business as a custodian, nothing in the present record indicates that Defendant actually possessed sufficiently important information to render him a competitive threat regardless of the position he held with a subsequent employer.”   

See Precision Walls, Inc. v. Servie, 568 S.E.2d 267 (N.C. App. 2002).

Of course, it is well established that non-competes such as those described above are unenforceable in Virginia under the so-called “Janitor Rule.”  In Home Paramount Pest Control Cos., Inc. v. Shaffer, the Supreme Court of Virginia found a non-compete provision in an employment agreement overbroad on its face and therefore unenforceable. 718 S.E.2d 762 (Va. 2011).  Mr. Shaffer, the Plaintiff, was an employee of Home Paramount Pest Control Companies, Inc. In January 2009, he signed an employment agreement containing the following provision:
The Employee will not engage directly or indirectly or concern himself/herself in any manner whatsoever in the carrying on or conducting the business of exterminating, pest control, termite control and/or fumigation services as an owner, agent, servant, representative, or employee, and/or as a member of a partnership and/or as an officer, director or stockholder of any corporation, or in any manner whatsoever, in any city, cities, county or counties in the state(s) in which the Employee works and/or in which the Employee was assigned during the two (2) years next preceding the termination of the Employment Agreement and for a period of two (2) years from and after the date upon which he/she shall cease for any reason whatsoever to be an employee of [Home Paramount].
Id. at 414-415.
The Court explained that, in Virginia, a provision that restricts competition “is enforceable if it is narrowly drawn to protect the employer’s legitimate business interest, is not unduly burdensome on the employee’s ability to earn a living, and is not against public policy.” Id. at 415. The burden of proving each factor rests with the employer seeking court enforcement of the restriction. Id. “When evaluating whether the employer has met that burden, we consider the function, geographic scope, and duration elements of the restriction.  These elements are considered together rather than as three separate and distinct issues.” Id.  In Home Paramount,  the Court held that the provision was unenforceable, noting that “[o]n its face, it prohibits Shaffer from working for Connor's or any other business in the pest control industry in any capacity. It bars him from engaging even indirectly, or concerning himself in any manner whatsoever, in the pest control business, even as a passive stockholder of a publicly traded international conglomerate with a pest control subsidiary. The circuit court therefore did not err in requiring Home Paramount to prove it had a legitimate business interest in such a sweeping prohibition.” Id. at 418.

In NanoMech, Inc. v. Suresh, U.S. Court of Appeals for the Eighth Circuit, applying Arkansas law, affirmed the district court’s decision that a non-compete agreement which prevented the employee from performing any work for any competitor anywhere in the world was overbroad and unenforceable under Arkansas law.  777 F.3d 1020 (8th Cir. 2015) (Colloton, J.).  In NanoMech, defendant, former employee Ms. Suresh, had signed a non-compete agreement before being hired at NanoMech, a company involved in the research and development of nanotechnology.  The non-compete agreement prohibited her from “directly or indirectly” entering into, being employed by or consulting “in any business which competes with the Company” for two years after her departure.  The covenant contained no geographic limitation and did not define “any business which competes with” NanoMech.  Ms. Suresh eventually left NanoMech and joined a competitor as a chemist within the two-year departure term.  NanoMech sued to enjoin her from working there for the remainder of the term of the non-compete and to prevent her from disclosing any of NanoMech’s confidential information.

Generally, a non-compete agreement is enforceable under Arkansas law if the employer has a valid interest to protect, the geographical restriction is not overly broad and a reasonable time limit is imposed. The covenant’s plain language prohibited the employee from working for any competitor of NanoMech, in any capacity, worldwide. The Court rejected NanoMech’s argument that the covenant was reasonable due to the global nature of the business and the employee’s broad access to trade secrets, and refused to enforce the covenant, finding it was overbroad.  The Court held that global non-compete agreements may be permissible if the prohibitions on employee activities are narrowly drawn.

Finally, in Clark’s Sales and Service, Inc. v. Smith and Ferguson Enterprises, Mr. Smith, Defendant, was required to sign a non-compete agreement by employer Clark's Sales & Service, Inc. after several years of employment as a salesman.  4 N.E.3d 772  (Ind. Ct. App. 2014)
The key provisions of the agreement stated that for two years after the employee’s termination from employment, he was prohibited from, in any capacity:
[S]oliciting or providing services competitive to those offered by his employer to any business account or customer who was a business account or customer at any point in time during his employment;” and “working in a competitive capacity with a named competitor of the employer in the state of Indiana, in any city or state in which the competitor conducts business, or to work for any business that provides services similar or competitive to those offered by the employer during the term of his employment, including but not limited to within the state of Indiana, Marion County, the counties surrounding Marion County, or within a 50 mile radius of his principal office with the employer.
Id. at 780.  After the employee resigned and went to go work for one a competitor, the employer filed suit to enforce the non-compete and sought injunctive relief. The Court noted that its Supreme Court has “long held that noncompetition covenants in employment contracts are disfavored in the law, and we will construe these covenants strictly against the employer and will not enforce an unreasonable restriction.” Id.

The Court of Appeals took issue with several parts of the agreement. First, the Court found that the restriction on contacting or serving customers was overbroad and unreasonable because it prohibited the employee from servicing anyone who had been a customer at any point in time during his employment. Id. at 782.  Second, the Court viewed the scope of prohibited activities as too broad because it went beyond the sales job he had with his prior employer and prohibited him from engaging in any service that offered but which he personally never performed during his employment-- i.e., drafted so as to prohibit “seemingly harmless conduct.” Id.   Third, the Court viewed the geographic restriction as “unquestionabl[ly] unreasonable as written”, and stated that the 50-mile restriction alone might have been acceptable, as “it is reasonable for individuals in the community to travel up to 50 miles to visit Clark's.” Id.
If you’re considering having your employees sign a non-compete, you should ensure that the restrictions are narrowly drawn to address legitimate business needs.  In other words, the primary inquiry should be what relationships and knowledge the employee gained while employed by your organization and what legitimate business concerns about the use of the knowledge and relationships you hope to address.  The more you can tailor your non-compete so that it addresses your concerns but isn’t overly broad, the greater the chances that it will be enforceable in most jurisdictions.

While much could be said about the appropriate duration and scope of a restrictive covenant, those are subjects for another day.  What the decisions above make clear is that, in drafting the substantive restrictions in a non-compete agreement – or any other restrictive covenant – you should focus on areas of actual concern.  These might include preventing an employee from working for a specific list of competitors, preventing an employee from performing a specific job or function for entities in similar line(s) of business, and soliciting current customers, vendors, or employees.  As demonstrated above, courts are skeptical of sweeping language which prevents an individual from working for a competitor “in any capacity.”  Including such language, especially in states which do not blue-pencil agreements, raises the very real possibility that the entire clause or agreement will be stricken.  Regardless of a state’s blue-penciling rules, it is never advisable to gamble on how a court might re-write your agreement. Instead, you should use language such as “in any position or performing any function substantially similar to any position held or function performed by the employee during the twelve-month period prior to the termination of her employment.”

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Friday, September 11, 2015

Appealing Appellate Advocacy: Twenty-Five Rules

I will be speaking next week on appellate advocacy in employment cases to the Metropolitan Washington Employment Lawyers Association.  In preparation for this speech, I have spent some time speaking confidentially with federal appellate court judges about their views on what makes an effective appellate advocate.  This blog reflects their thoughts, as well as my own experiences.

1.       Know When to Shut Up
Do not try to speak over the judges.  Do not interrupt the judges.  Never start talking until you are sure that the judge has finished.  This is the first rule for two very good reasons, one obvious, and one less obvious.  The obvious reason is that, while simple decorum will not win you your case, rudeness is the surest way to turn an otherwise sympathetic judge against your case.  The less obvious reason for this rule is that you want to be sure that you answer the judge’s question (Rule 4) and that the judge may be trying to help you (Rule 6 “Know Your Friends”).  If you don’t follow this rule, then you cannot follow those.

2.       Moot Your Briefs And Argument
Many attorneys moot their arguments, but relatively few seek input on their briefs from colleagues with no dog in the fight to moot the draft brief.  One judge with whom I spoke was firm in his conviction that best practices demand that you allow briefs to be reviewed by other experienced colleagues.

3.       Moot Your Briefs and Argument AGAIN
Having participated in scores of moots of colleagues preparing to argue their cases, there invariably is more than one moot.  The first moot is usually an intense affair and often identifies substantial additional issues and approaches.  The second (and sometimes third) moot is useful to further refine those points.  In most cases, I am later told that the moots were substantially more difficult than the oral argument itself – which is the goal.

4.       Standard of Review
The proper standard of review is outcome determinative in many cases.  The judges know this, and you can expect the standard of review to play a significant role in many oral arguments, even if it is only “behind the scenes”.  

5.       Civility
Like Rule 1 “Know When to Shut Up”, above, this one emphasizes the need to maintain a proper level of decorum in the courtroom.  More specifically, you should show respect not just for the Court, but also for your opponent.  Do not engage in name calling, sniping, cheap shots, or other personal attacks.  You are here to argue the merits of your case, and you should not allow anything to distract the Judges from those arguments.  If you begin to fling mud, most of it will land on your own arguments.

6.       Answer the Questions
This means that, first, you should listen carefully to the questions (see Rule 1 “Know When to Shut Up”).  If the question is susceptible to a “yes” or “no” response then, in most situations, the first word out of your mouth should be either “yes” or “no”, followed immediately by an explanation.  While you should make sure to return, at the end of your answer, to your planned “talking points”, NEVER do so until you have fully answered the Judge’s question.  When answering, answer directly – do not try to prevaricate or, like a politician, change the subject.  The questions are a window into the judge’s thinking, and if you do not answer them, you can be sure that your opponent will.  If you do not know the answer, do not “wing it.”  Simply state that you don’t know and that you will address the matter in rebuttal.

7.       Know the Record
The record is the beginning and – often – end of every case on appeal.  Live it, learn it, love it – do not play games with it.  While you should, of course, present the record in the light most favorable to your position (see Rule 4 “Standard of Review”), you should not distort or exaggerate it.  Your credibility as an advocate is far more powerful than any temporary advantage you might gain through even well-meaning shading of the facts.  You can be sure that your opponent will seize on any errors or untenable positions as a means of undermining your stronger points, which might otherwise be unassailable.

8.       Know Your Audience
Prior to oral argument, you should observe each judge in action.  In some courts, you will know your assigned panel far enough in advance to view each of the assigned judges in action.  In other courts, you will not receive such advance notice and will have to be content observing a representative sample.  Knowing how each judge thinks will help you tailor your arguments to your audience.  You should research the judges before whom you might appear thoroughly.  This involves reviewing their decisions on the subject (of course) but also reviewing transcripts of prior oral arguments in which they participated.  

9.       Know Your Friends
Successful appellate advocates often spend a great deal of time anticipating hard questions (see Rules 2 and 3), sometimes so much so that they fail to recognize a “softball” when they see one.  Oftentimes oral argument is used by the judges not as a means of questioning you, but as a means of previewing their own arguments to their colleagues.  When a friendly judge hands you an easy question, be prepared to knock it out of the park.  

10.   You Are Not Funny
Yes, I mean you.  Unless you are a successful stand-up comedian (in which case, why are you still practicing law?), do not attempt to have a sense of humor in oral argument.  Even if a judge makes a humorous comment or joke, do not be tempted to join in.  Most likely any attempt at humor will fall flat and, even if it does not, it inevitably cheapens the points you are trying to make.  You want the judges to view your performance as one of studious logic, not rhetoric (see Rule 19).

11.   Review of Jury Verdicts
Increasingly, the appellate courts are called on to review jury verdicts.  In such a case, you should learn your jurisdiction’s law on the scope of review in such cases (see Rule 4).

12.   Review of Jury Instructions
Jury instructions can sink your boat.  To reverse the lower court, you will need to create a clear record in the jury charge session.  That session can often be intense and fast paced.  Thorough preparation is necessary if you are to have any hope of creating a clear record for appeal.  To the extent possible, you should try to anticipate the language which your opponent will request, and your objections thereto.

13.   The First Sixty Seconds
First impressions matter.  We often form snap judgments about the effectiveness of professionals in an astoundingly short period of time (perhaps even as little as sixty seconds).  You should make sure that your first impression is a good one.  The first sixty seconds of you argument should be carefully rehearsed to provide the judges with a good impression, as well as a clear, concise, and persuasive statement of your case, as well as a roadmap to the key points you will address.  This will help the judges understand the points you make later in the argument, and will also allow them to ask more effective questions, which will, in turn, allow you to use your time more effectively (see Rule 6 “Answer the Questions”).  A final reason to carefully plan the first sixty seconds of your argument is that it is the one portion of the argument over which you have the most control.  Once the questions start coming, it can be difficult for even a seasoned advocate to control the direction of the dialogue.

14.   Win the Battle – But Don’t Lose the War
While we, as advocates, are bound to zealously seek the best interests of our clients, you will nevertheless need to keep at least half an eye on the implications of your position for future cases.  There are two principal reasons for this.  First, especially if your client is a “repeat player” in litigation, how they win can sometimes be just as – if not more – important than whether they win.  A victory which results in a precedent that might haunt your client for decades to come is not a victory.  Second, the judges will certainly be interested in implications of your position for future cases – and so you must be prepared to explain what those implications are. 

There are several common issues which arise when discussing the future implications of a ruling, some of which are addressed below.

a.       The “Sluice Gate” Argument
The ruling will open the “sluice gates” of litigation, bogging the courts down in an endless quagmire of meaningless, and purportedly unresolveable, legal issues. 
As the plaintiff-appellant, or as plaintiff-appellee, you will need to be prepared to respond to this argument thoroughly with relevant facts.  Particularly useful in this regard can be examples of similar changes made by past precedent, or rules similar to the one which you are propose, which did not lead to a flood of litigation.

b.      Burden on Taxpayers
The ruling will so increase the costs of administering some governmental function that it would noticeably burden the taxpayers.  

Again, you should be prepared with law and facts to respond to this argument.  In this area, particularly, it may be that journals and other relevant literature might be used in your brief and argument to bolster your position.  As always, when using such sources (and especially statistics), you should be thoroughly familiar with the opinions of your court regarding the relevance and usage of such evidence in an appellate context.

c.       The “Anti-Business Climate” Argument
The ruling will so offend the business community that they will pack up shop and move somewhere else.  

One retort to this argument can be the simple fact that the District of Columbia is a vibrant business community.

15.   Do Not Exaggerate (It Would Be The End of the World)
The most persuasive aspect of your presentation is not your arguments – it is your credibility.  The moment that you are caught exaggerating the record (which you should know cold – see Rule 7) or the law, you will lose that credibility with the panel.  

16.   Counsel’s Table
This is one rule where there was some disagreement.  My own experience, and those of some individuals with whom I have spoken, is that having anyone sit with you at the counsel’s table is, at best, a distraction.  Others, however, have indicated that an assistant who can pass brief notes is not a meaningful distraction, and that judges understand that few advocates possess the level of recall needed to effectively “go it alone”.  

That said, there was one point of agreement – leave your client at home.  Lawyers whose clients are in attendance may feel the need to grandstand to impress their clients – which can only detract from the quality of their arguments.  Your client is free to review the transcript later or even listen to the argument contemporaneously in jurisdictions where that option is available.

17.   Framing the Appeal
Returning to the suggestion that you moot your briefs (Rules 2 and 3), you should also moot the nature of your appeal.  What are the issues in the lower court which you can win on, what if done wrong, can be a basis for reversal?

18.   Follow the Rules
Details matter.  You should know the rules of the Court and follow them scrupulously.  This applies not only to crucial procedural issues, but also to the minutiae of font size, pagination, and required disclosures.  Disregard the rules at your peril.

It is worth emphasizing that your briefs should be letter-perfect – no typos.  Not only will typos distract the judges from your argument, but they also demonstrate a lack of care that may make the judge question the amount of attention paid to the substance of your argument.

19.   No Rhetoric
You should rely on facts and law in your argument.  Leave the bloviating at home.  The judges are neither your client nor a jury, and they are unlikely to be swayed by rhetoric. As with other rules here, the simple fact is that rhetoric is a distraction from, and cheapens, your argument.  

20.   Have a Conversation
Look the judges in the eye when you are speaking.  Do not be captive to your notes, and instead focus on paying attention to the judges, identifying their concerns, and addressing them.  If you must take notes to the podium, keep them brief, and general – a reminder of your roadmap, not a straightjacket.

21.   Dress to Blend In
Sometimes the squeaky wheel gets the grease – but in Court, the nail that sticks up gets pounded down.  You should dress professionally and in a manner that does not draw attention to yourself.  Anything that draws attention to you distracts from your argument.

22.   Listen to What is Troubling the Judges
This is part and parcel with knowing when to shut up (Rule 1) and having a conversation (Rule 20).  The most important information you get during oral argument comes from the judges themselves.  The questions will tell you what they view as important – or irrelevant – to your matter.  They may also provide clues into internal disagreements on the panel.  A wise advocate listens carefully and is familiar enough with her arguments to tailor them on the fly to address what is on the judges’ minds.

23.   Tell a Compelling Story
Those first moments are your chance to encapsulate what this case is all about.  Tell that story in just a few sentences – and make it compelling!

24.   Think Like a Defense Lawyer
As an employee-side lawyer, you can become a victim of the syndrome of talking to yourself.  Instead, you must think like the other side – management.  You actually can be a better advocate for management because you are intimately familiar with all of your weaknesses – especially after mooting your briefs and arguments twice (see rules 2 and 3).  Ask yourself the hard questions, and prepare the answers.

25.   Know the Defense Cases Better than They Do
Read their cases and be prepared to address them.  If possible, explain how they support your own position.

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Friday, July 10, 2015

A Sham or Just Self-Serving? Either Way, Affidavits Are Admissible

Defense counsel, during the course of taking plaintiff’s deposition in an employment case, extracts damning admissions.  The defense, relying on those admissions.  In opposition, Plaintiff submits his/her own affidavit addressing and attempting to moderate, qualify, or deny the damning admissions.  Defense asserts that Plaintiff’s affidavit is a so-called “sham” affidavit.  Plaintiff’s counsel argues that it merely “clarifies” the plaintiff’s deposition testimony and should thus be considered.

Sound familiar?

Or, Defendant moves for summary judgment, and Plaintiff files an affidavit attempting to establish disputed material facts.  Defendant says that plaintiff’s affidavit is self-serving.  Plaintiff asserts that all testimony by parties is self-serving, and that her/his self-serving affidavit is no different, and should be considered.

Sound familiar?

How do the courts approach these issues? 

1.      Sham Affidavits

The first example above demonstrates what is sometimes called a “sham” affidavit.  The Fourth Circuit, in Barwick v. Celotex Corp., described the “sham affidavit” rule as follows: [a] genuine issue of material fact is not created where the only issue of fact is to determine which of the two conflicting versions of plaintiff’s testimony is correct.”  736 F.2d 946, 960 (4th Cir. 1984).  Rather than submit such an issue to the factfinder for determination, the Fourth Circuit held that it was appropriate to strike the affidavit.  Id.  Similarly, in Perma Research & Dev. Co. v. The Singer Co., the Second Circuit held that a party cannot create “sham issues of fact” to defeat summary judgment by contradicting earlier deposition testimony in a subsequent affidavit.  410 F.2d 572, 578 (1969); see also Radobenko v. Automated Equip. Co., 520 F.2d 540 (9th Cir. 1975) (“sham issues…should not subject the defendants to the burden of a trial”). 

More recently, however, courts have limited the “sham affidavit” rule to situations where an affidavit seeks to flatly contradict earlier deposition testimony.  In Strickland v. Norfolk S. Ry. Co., the Eleventh Circuit held that it is only appropriate to disregard an affidavit as a sham when “there [is] no way” that conflicting statements could be read together but that “[w]here a fact-finder is required to weigh a deponent’s credibility, summary judgment is simply improper.”  692 F.3d 1151, 1161-62 (11th Cir. 2012).  Similarly, in Kennett-Murray Corp. v. Bone, the Fifth Circuit explained that “a district court must consider all the evidence before it and cannot disregard a party’s affidavit merely because it conflicts to some degree with an earlier deposition.”  622 F.2d 887, 893-94 (5th Cir. 1980).

In other words, counsel trying to explain her client’s deposition testimony should be careful not to outright contradict that testimony, at the risk of having the affidavit labeled a “sham”, and vulnerable to a motion to strike.  Absent such a flat contradiction, however, many courts are inclined to permit any issues of credibility proceed to the factfinder.

2.      Self-Serving Affidavits

More commonly defense counsel will object to a plaintiff’s affidavit as “self-serving” in an attempt to persuade the trial court to exclude it from consideration on summary judgment.  The appellate courts have soundly rejected this approach with increasing finality.  The Seventh Circuit has been particularly vocal on this issue.  For example, in Widmar v. Sun Chemicals Corp., the Seventh Circuit reprimanded recalcitrant lower courts, stating “[w]e remind district courts of our attempts to rid our circuit’s opinions of language critical of the ‘self-serving’ affidavit.”  772 F.3d 457 (7th Cir. 2014).  The court went on to state:

We hope this discussion lays to rest the misconception that evidence presented in a 'self-serving' affidavit is never sufficient to thwart a summary judgment motion. Provided that the evidence meets the usual requirements for evidence presented on summary judgment  including the requirements that it be based on personal knowledge and that it set forth specific facts showing that there is a genuine issue for trial  a self-serving affidavit is an acceptable method for a non-moving party to present evidence of disputed material facts."
Id. at 460, n.1.  The prior year the Seventh Circuit, in Hill v. Tangherlini, expressly overruled some fifteen of its precedents “to the extent that they suggest a plaintiff may not rely on ‘self-serving’ evidence to create a material factual dispute[.]”  724 F.3d 965, 967 n.1 (7th Cir. 2013).  In recent years, the Seventh Circuit has repeated its rule regarding “sham” affidavits on many occasions.  See Berry v. Chicago Transit Auth., 618 F.3d 688, 691 (7th Cir. 2010), quoted in Navejar v. Iyiola, 718 F.3d 692, 69798 (7th Cir. 2013) (reversing summary judgment based on error discounting partys affidavit as self-serving); accord, Darchak v. City of Chicago Bd. of Educ., 580 F.3d 622, 63132 (7th Cir. 2009); Kaba v. Stepp, 458 F.3d 678, 681 (7th Cir. 2006). 

Other circuits have reached a similar conclusion to that of the Seventh Circuit.  See Kenney v. Swift Transp., Inc., 347 F.3d 1041, 1046 (8th Cir. 2003) (Holding that “[Plaintiff’s] testimony [at deposition] is sufficient for a jury to find that [Defendant’s] proffered nondiscriminatory reason for not hiring him is pretextual.”); U.S. One Parcel of Real Property, 904 F.2d 487, 492 (9th Cir. 1990) (self-serving declaration can be used to survive summary judgment if it is not conclusory); Lupyan v. Corinthian Colleges Inc., 761 F.3d 314, 32021 (3d Cir. 2014).  In Price v. Time Inc., the Eleventh Circuit succinctly stated that: “Courts routinely and properly deny summary judgment on the basis of a party's sworn testimony even though it is self-serving[.]”  416 F.3d 1327, 45 (11th Cir. 2005).  In Feliciana v. City of Miami Beach, a criminal case, the Court elaborated that:

[Defendant’s] sworn statements are no more conclusory, self-serving, or unsubstantiated by objective evidence than the [police] officers’ assertions…as a general principle, a plaintiff's testimony cannot be discounted on summary judgment unless it is blatantly contradicted by the record, blatantly inconsistent, or incredible as a matter of law, meaning that it relates to facts that could not have possible been observed or events that are contrary to the laws of nature.
707 F.3d 1244, 1252-53 (11th Cir. 2013). 

Despite the trend towards recognition that “self-serving” affidavits are perfectly admissible, and indeed capable of defeating a motion for summary judgment evening standing alone, many courts continue, without analysis, to strike such affidavits from the record. Hopefully, armed with the arguments and cases herein, practitioners will have better luck in the future in those courts.

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