Three Circuits, In Addition to the Fourth Circuit, Reject Defense Efforts to Decapitate FLSA Collective Actions and/or Class Actions

Yesterday, we discussed the 4th Circuit’s recent rejection of a defense effort to decapitate an FLSA collective action in Simmons v. United Mrtg. & Loan Inv., LLC, 634 F.3d 754 (4th Cir. 2011).  The 4th Circuit is not alone by any means in rejecting defense efforts to “pick off” the plaintiff(s) in FLSA collective actions, either by tendering full relief or by conveying a Rule 68 offer of judgment that provides for full relief.  

In Symczyk v. Genesis HealthCare Corp., No. 10-3178, 2011 U.S. App. LEXIS 18114 (3d Cir. Aug. 31, 2011), the 3rd Circuit, with Judge Scirica writing for the panel, reversed the District Court’s holding that the plaintiff’s FLSA action was mooted by the defendants’ Rule 68 offer of judgment.  Defendants’ offer of judgment provided for all of plaintiff’s alleged damages, “plus attorneys’ fees, costs, and expenses as determined by the court,” was made prior to plaintiff’s motion for preliminary certification, and was rejected by plaintiff.  Id. at *2 (quotations omitted); Symczyk v. Genesis HealthCare Corp., No. 09-5782, 2010 U.S. Dist. LEXIS (E.D. Pa. May 19, 2010).  In finding that the Rule 68 offer did not moot the case, Judge Scirica was plain-spoken in his disdain for the defense tactic of “picking off” the plaintiff(s) in order to prevent  a collective action from proceeding.  Judge Scirica noted that Rule 68 was designed to “encourage settlement and avoid litigation” but that, in the case of representative actions, it could be “manipulated to frustrate rather than to serve these salutary ends.”  Symczyk, 2011 U.S. App. LEXIS 18114 at *17-*18.  Later, Judge Scirica dismissed defendants’ argument that plaintiff’s case could be mooted by a Rule 68 offer before other plaintiffs “opted-in” to the suit, stating that “[a]lthough defendants’ logic has some surface appeal, reliance on the watershed event of an opt-in to trigger application of the special mootness rules that prevail in the representative action context incentivizes the undesirable strategic use of Rule 68 that prompted our holding in [Weiss v. Regal Collections, 385 F.3d 337 (3d Cir. 2004)].”  Id. at *28.  In Weiss v. Regal Collections, then-Chief Judge Scirica held that a Rule 68 offer of judgment does not moot the claims of a class representative under Civil Rule 23.  Weiss, 385 F.3d at 339.

About three weeks prior to the 3rd Circuit’s ruling in Symczyk, the 9th Circuit addressed these issues in Pitts v. Terrible Herbst, Inc., No. 10-15965, 2011 U.S. App. LEXIS 16368 (9th Cir. Aug. 9, 2011).  In Pitts, plaintiff brought a state-law class action alongside a collective action under the FLSA.  Before plaintiff moved for certification of the class and collective actions, defendant presented plaintiff with an offer of judgment pursuant to Rule 68 for $900 (plaintiff claimed only $88.00 in damages for himself) “plus costs and a reasonable attorney’s fee.”  Id. at *3.   Plaintiff refused defendant’s offer and defendant moved to dismiss plaintiff’s claims as moot.  Id.  The District Court held that defendant’s offer of judgment mooted the action because plaintiff had failed to timely seek class certification, and entered judgment in favor of plaintiff for $900, with $3,500 for plaintiff’s attorney.  Id. at *4; Pitts v. Terrible Herbst, Inc., No. 09-00940 (D. Nev. April 1, 2010).  On appeal to the 9th Circuit, Judge Bybee, writing for the panel, held that defendant’s unaccepted offer of judgment did not moot plaintiff’s case because plaintiff’s claim was “transitory in nature and may otherwise evade review.”  Pitts, 2011 U.S. App. LEXIS 16368 at *20.  The 9th Circuit explained that subsequent certification of the class by the District Court would relate back to the filing of the complaint, seeing no reason to restrict the relation-back doctrine to cases involving inherently transitory claims.  Id. at *20.  Judge Bybee elaborated that “[w]here, as here, a defendant seeks to ‘buy off’ the small individual claims of the named plaintiffs, the analogous claims of the class – though not inherently transitory – become no less transitory than inherently transitory claims.”  Id. at *20-*21 (emphasis in original).

On March 31, 2011, the 10th Circuit also addressed these issues in Lucero v. Bureau of Collection Recovery, Inc., 639 F.3d 1239 (10th Cir. 2011).  In Lucero, the plaintiff had filed a Rule 23 class action complaint alleging violations of the Fair Debt Collection Practices Act and certain state laws.  At the same time defendant served its answer, it also served plaintiff with a Rule 68 offer of judgment, offering damages plus “reasonable attorneys’ fees and costs incurred to that date.”  Id. at 1241.  Prior to the close of discovery on the issue of class certification, defendant moved to dismiss for lack of subject matter jurisdiction.  Id.  After defendant’s motion to dismiss, but prior to the District Court’s ruling, plaintiff filed his motion for class certification.  Id.; Lucero v. Bureau of Collection Recovery, Inc., 716 F. Supp. 2d 1085 (D.N.M. 2010).  The District Court granted defendant’s motion to dismiss, concluding that “jurisdiction is not present over a case where no class has been certified but the defendant has satisfied the plaintiff’s demand for relief.”  Lucero, 639 F.3d at 1241 (internal quotations omitted); Lucero, 716 F. Supp. 2d 1085.  On appeal, the 10th Circuit reversed, holding that “a named plaintiff in a proposed class action for monetary relief may proceed to seek timely class certification where an unaccepted offer of judgment is tendered in satisfaction of the plaintiff’s individual claim before the court can reasonably be expected to rule on the class certification motion.”   Lucero, 639 F.3d at 1250.  Judge Kelly, writing for the unanimous panel, relies, in part, on Justice Rehnquist’s concurrence in Deposit Guaranty Nat’l Bank v. Roper, 445 U.S. 326, 341 (1980), in which Justice Rehnquist stated as follows:

The distinguishing feature here is that the defendant has made an unaccepted offer of tender in settlement of the individual putative representative's claim. The action is moot in the Art. III sense only if this Court adopts a rule that an individual seeking to proceed as a class representative is required to accept a tender of only his individual claims. So long as the court does not require such acceptance, the individual is required to prove his case and the requisite Art. III adversity continues. Acceptance need not be mandated under our precedents since the defendant has not offered all that has been requested in the complaint (i.e., relief for the class) and any other rule would give the defendant the practical power to make the denial of class certification questions unreviewable. Roper, 445 U.S. at 341 (Rehnquist, J. concurring) (emphasis in original).

Judge Kelly’s opinion in Lucero also provides a good discussion of the applicable Supreme Court jurisprudence bearing on these issues, i.e., Sosna v. Iowa, 419 U.S. 393 (1975) (once a class has been certified, the expiration of a named plaintiff’s claim will not moot the action on appeal); Gerstein v. Pugh, 420 U.S. 103 (1975) (Court extends its rationale to the pre-certification context); Roper, 445 U.S. 326 (Court holds that an offer of judgment to a named plaintiff made while a certification motion is pending will not moot the action); and U.S. Parole Comm’n v. Geraghty, 445 U.S. 388 (1980) (Court holds that a named plaintiff, released from prison while a certification motion is pending, may appeal a denial of class certification despite the mootness of his individual claim).

We will continue our discussion on the decapitation tactic in tomorrow’s blog.

Fourth Circuit Rejects Defense Attempt to Decapitate FLSA Collective Action

In Simmons v. United Mortg. & Loan Inv., LLC, 634 F.3d 754 (4th Cir. 2011), the Fourth Circuit faced the question of whether the contents of a letter from defense counsel to plaintiffs’ counsel, clarified by a follow-up letter, rendered moot plaintiffs’ claims for unpaid overtime wages in an FLSA collective action.  The District Court found the case to be moot, and the Court of Appeals vacated and remanded that decision.  Here, defense counsel sent a letter to plaintiffs’ counsel in which he stated that he was authorized “without admitting legal liability or fault, to offer each opt-in plaintiff full relief in this case.”  The letter went on to state:

Each opt-in plaintiff will be compensated fully upon receipt of an affidavit stating the dates on which overtime was worked, the total hours they worked each week of their employment up to the date of their termination, the total amount of back pay they claim is owed to them, and a statement explaining how the calculation of overtime amounts claimed was done. My clients will also pay taxable costs and reasonable attorney's fees supported by time records properly describing the work done and the hours reasonably worked which can be either agreed upon by the parties or submitted to the Court for resolution.

This offer requires that the parties enter a settlement agreement specifying that all claims will be waived and released, this action will be dismissed with prejudice, the settlement will be kept confidential and there will be no admission of liability or disclosure of the settlement terms. I will provide you with the information my client has that is necessary to prepare the affidavits.

This offer of full relief moots this case since there no longer remains any active case or controversy between the parties. This offer remains open for five days after receipt on May 23, 2008. Thereafter, if this offer is not accepted, I will file a motion to dismiss the case as moot.  Simmons, 634 F.3d at 760-61.

            Based upon the blanket nature of the defendants’ offer, the District Court held that the action was moot.  On appeal, plaintiffs argued that the defense letter did not comply with Civil Rule 68 regarding offers of judgment.  The Court of Appeals agreed with plaintiffs that the letter did not constitute a Rule 68 offer of judgment because an offer of judgment, if accepted, is to be public and not sealed; whereas the letter required the plaintiffs to keep the fact of settlement and the terms of settlement confidential. 

            Having found that the correspondence did not constitute a Rule 68 offer of judgment, the Court of Appeals went on to state that the doctrine of mootness is constitutional in nature and, therefore, not constrained by the formalities of Rule 68.  Nonetheless, the Court held that the defendants’ settlement offer did not render the plaintiffs’ FLSA claims moot. 

            The first basis for the court’s holding was that the offer of “full relief in this case” did not offer that judgment be entered against the defendants, but rather only offered for the parties to enter into a settlement agreement.  The Court recognized that a judgment is preferable to a contractual promise, such as a settlement agreement, as the District Courts have inherent power to compel defendants to satisfy judgments, but lack the power to enforce the terms of a settlement agreement absent jurisdiction over a breach of contract action for failure to comply with the agreement.   

            The second basis for the Appellate Court’s reversal was the conditional nature of the offer.  The correspondence conditioned the offer upon the plaintiffs submitting affidavits stating “the dates on which overtime was worked, the total hours they worked each week of their employment up to the date of termination, the total amount of back pay they claim is owed to them, and a statement explaining how the calculation of overtime amounts claimed was done.”  In addition, the offer stated that the defendants would provide the plaintiffs the information the defendants possessed “that is necessary to prepare the affidavits.”  The Court found that the unspecified information raised many unanswered questions, which made the offer ambiguous, and thus ineffective at mooting the plaintiffs’ FLSA claims. 

            Finally, the Court based its decision upon the defendants’ offer being predicated on a requirement of confidentiality, noting that if the plaintiffs litigated the case to judgment, they would be entitled to an unsealed judgment in their favor, without obligation on their part to keep the facts of such judgment confidential.

            Later this week, we will discuss the response of other courts to defense attempts to decapitate FLSA collective actions. 

Retired Associate Justice Souter Underscores the Importance of Careful Drafting of Non-Competes

In EMC Corp. v. Arturi, No. 11-1001, 2011 U.S. App. LEXIS 17834 (1^st Cir. August 26, 2011), retired Associate Justice Souter authored the panel’s opinion in this diversity action in which the employer sought a preliminary injunction against its former employee, to enjoin competition with EMC, solicitation of its customers and remaining employees, and possession and use of confidential business information gained while employed. The underlying agreement restricted the former employee’s activities for one year. As the one year period had elapsed before an injunction could be issued, the District Court, while granting relief as to the confidential information, denied an injunction with respect to competition and solicitation on the ground that the one year period had elapsed.

The panel affirmed, relying on a decision from the Commonwealth of Massachusetts’ highest court in All Stainless, Inc. v. Colby, 364 Mass. 773, 308 N.E.2d 481, 485 (1974) as well as its own 1978 decision in A-Copy Inc. v. Michaelson, 599 F.2d 450, 452 (1^st Cir.) in which it reversed an order enjoining competition by a former employee where said order had been issued after the expiration of a one-year period of restriction set forth in the employment contract. In A-Copy, the court stated that “when the period of restraint has expired, even when the delay was substantially caused by the time consumed in legal appeals, specific relief is inappropriate and the injured party is left to his damages remedy.” Id. at 452 (citing All Stainless).

Justice Souter did note that an employer might be able to distinguish All Stainless if the employee had taken affirmative steps to conceal his acts of breach, citing Exeter Group Inc. v. Sivan, No. 0628-BLS2, 2005 WL 1477735, 2005 Mass. Super. LEXIS 257 (Mass. Super. Ct. March 24, 2005). But, the facts here did not support such an affirmative defense.

Most telling is Justice Souter’s observation that “EMC could have contracted, as the district judge noted, for tolling the term of the restriction during litigation, or for a period of restriction to commence upon preliminary finding of breach.” Unfortunately, the underlying agreement here contained no such language.

In contrast with the law of Massachusetts, see Homan, Inc. v. A1 AG Servs., 175 Ohio App. 3d 51, 58 (Ohio Ct. App. 2008), holding that “a covenant not to compete may not expire while the enforceability of that contract is being litigated.”

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Second Circuit Rejects New Haven’s Post-Ricci Argument that Justice Kennedy’s One Sentence of Dicta Established a Symmetrical Companion, that is, an Employer May Defeat a Disparate-Impact Claim if it had a “Strong Basis in Evidence” that it Would Have Been Subject to Disparate-Treatment Liability

On August 15, 2011, a panel of the Second Circuit in Briscoe v. City of New Haven, 2011 U.S. App. LEXIS 16834 (2d Cir. Aug. 15, 2011), rejected the City’s argument that Justice Kennedy’s language in Ricci v. DeStefano, 129 S. Ct. 2658, 174 L. Ed. 490 (2009) established a symmetrical companion to Ricci’s holding that a disparate-treatment claim is avoidable based upon concerns about disparate-impact liability only if there was a “strong basis in evidence” of such liability.  Ricci, 129 S. Ct. at 2677.  The City had seized upon the following sentence in Justice Kennedy’s opinion:

Our holding today clarifies how Title VII applies to resolve competing expectations under the disparate-treatment and the disparate-impact provisions.  If, after it certifies the test results, the City faces a disparate-impact suit, then in light of our holding today it should be clear that the city would avoid disparate-impact liability based on the strong basis in evidence that, had it not certified the results, it would have been subject to disparate-treatment liability.  Ricci, 129 S. Ct. at 2681.

Relying on that sentence, the City argued in Briscoe, that Ricci’s “strong basis in evidence” test for a disparate-treatment claim applies equally to a disparate-impact claim.  As stated, the panel rejected the argument.  The Briscoe opinion was written by Chief Judge Jacobs, who, interestingly, was among the dissenters from the Second Circuit’s denial of rehearing in Ricci.  503 F.3d 88 (2d Cir. June 12, 2008).  It was that strong dissent that many believe captured the Supreme Court’s attention, resulting in the grant of certiorari, and ultimately the reversal of the Second Circuit and District Judge Arterton.  

            Presumably, yet another petition for rehearing will be filed, now in Briscoe, and it remains uncertain whether the full Court will adopt the Briscoe panel’s decision.  Earlier this year, another panel of the Second Circuit, in United States v. Brennan, 2011 U.S. App. LEXIS 9455 (2d Cir. May 5, 2011) held that they need not consider Justice Kennedy’s dicta and the potential contours of the doctrine.  Circuit Judge Raggi concurred, but cautioned that “majority opinion…yields an abundance of dicta that could confuse future consideration of judgments actually based on Ricci.”  Id. at *218-19.  Indeed, the panel in Briscoe, citing Judge Raggi’s concurrence, noted that they had “no need to consider, much less invite adherences to, the extended dicta as to the potential contours of the doctrine for a disparate-treatment claim offered in [United States v. Brennan].”  Briscoe, 2011 U.S. App. LEXIS 16384 at *13 n.6 citing Brennan, 2011 U.S. App. LEXIS 9455 at *123-137, *168-88 (2d Cir. May 4, 2011); Id. at *218-19 (Raggi, J. concurring in the judgment).

            On September 20, 2011, the Third Circuit will hear oral argument on another case implicating the “reverse Ricci” defense, NAACP v. North Hudson Regional Fire & Rescue, 742 F. Supp. 2d 501 (D.N.J. Sept. 21, 2010) appeal docketed Nos. 10-3965, 10-3983 (3d Cir. 2011).  In North Hudson, NAACP argues that the Third Circuit should adopt the reasoning of the Briscoe panel, and affirm the lower court opinion of Judge Debevoise.  The North Hudson litigation focuses on that jurisdiction’s residency requirement for initial employment in its paid fire department.  In North Hudson, the district court found that, when one combined the population of North Hudson with three neighboring counties, there was a statistically significant adverse impact that could not be justified under the statutory business necessity test.  The City argued that North Hudson is a “reverse Ricci” case, that is, it should be permitted to defend against the NAACP’s adverse-impact claim by contending that there is a “strong basis in evidence” of disparate treatment liability if it eliminated the residency requirement.  The expert testimony seemingly established that elimination of the residency requirement would significantly reduce the representation of Hispanics in North Hudson’s fire department and, while increasing the representation of African Americans, it would also significantly increase the representation of Caucasians.  The NAACP has argued on appeal that Briscoe governs, contending, in part, that the language of Title VII precludes the adoption of a symmetrical companion to Ricci in defense of a disparate-impact claim. 

Tenth Circuit follows Gardner-Denver, finding that 14 Penn Plaza does not trump the plaintiff

In Mathews v Denver Newspaper Agency LLP, 2011 U.S. App. LEXIS 11454 (10th Cir. May 17, 2011), a panel of the Tenth Circuit issued its revised opinion. Its earlier opinion of March 16, 2011 is found at 2011 U.S. App. LEXIS 5142. Judge Murphy, writing for the panel, concludes that plaintiff's statutory employment discrimination and retaliation claims may be litigated despite a prior ruling by an arbiter on plaintiff’s contractual claims which were coterminous with his statutory claims.

The collective bargaining agreement provides as follows:

The Employer and the Union acknowledge continuation of their policies of no discrimination against employees and applicants on the basis of age, sex, race, religious beliefs, color, national origin or disability in accordance with and as required by applicable state and federal laws.

Plaintiff was demoted and grieved the demotion. Apparently, the initial grievance referenced state and federal discrimination and retaliation laws. That initial grievance was amended to remove any reference to said statutes, and the question of discrimination was stated, by agreement of the parties, to the arbiter as follows: “[D]id GRIEVANT’S demotion violate contractual provisions prohibiting discrimination?” The arbiter ruled against Mathews and, thereafter, Mathews sued under Title VII among other statutes. The district court found that the arbiter’s decision was preclusive, relying on the Supreme Court’s decision in 14 Penn Plaza LLC v. Pyette, 129 S. Ct. 1456 (2009). The district court’s ruling can be found at 2009 U.S. Dist. LEXIS 37697 (D. Colo. May 4, 2009). The soTenth Circuit reversed, holding the fact that “Mathew’s contractual rights and statutory rights were coterminous is of no moment: As the Supreme Court has recently reaffirmed, ‘[b]ecause the collective-bargaining agreement gave the arbitrator “authority to resolve only questions of contractual rights,” his decision could not prevent the employee from brining the Initial Title VII claim in federal court “regardless of whether certain contractual rights are similar to, or duplicative of, the substantive rights secured by Title VII.” Fourteen Penn Plaza, 129 S.Ct. at 1467 (emphasis added) (quoting Alexander v. Gardner-Denver Co., 415 U.S. 36 (1974)).”

The Tenth Circuit panel went on to affirm summary judgment on plaintiff’s discriminatory demotion claim, finding that plaintiff was judicially estopped from being able to establish his qualifications for the position in question. The court, applying Cleveland v. Policy Mgmt. Sys. Corp., 526 U.S. (1999), found that plaintiff’s unequivocal testimony in a SSA disability milieu that he was totally disabled was “a paradigmatic case for judicial estoppel.” For a different take on this issue, see Solomon v. Vilsack, 628 F.3d 555 (D.C. Cir. 2010).

In contrast, the court denied summary judgment on plaintiff’s retaliatory demotion claim, refusing to adopt the “strong evidence” standard articulated by the Second Circuit in Collins v. N.Y. City Transit Authority, 305 F.3d 113, 119 (2d Cir 2002) wherein that court held that for a plaintiff to survive a motion for summary judgment following an adverse decision from an arbiter, the plaintiff “must present strong evidence that the decision was wrong as a matter of fact - e.g. new evidence not before the tribunal – or that the impartiality of the proceeding was somehow compromised.” Instead of adopting the Second Circuit’s “strong evidence” standard, the Tenth Circuit rejected such a per se standard for a case-by-case evaluation, including an evaluation of the “degree of procedural fairness in the arbitral forum, adequacy of the record with respect to the issue of discrimination, and the special competence of particular arbitrators.” Barrentine v. Arkansas-Best Freight Sys, Inc., 450 U.S. 728, 743 n.22 (1981) (quoting Gardner-Denver 450 U.S. at 60 n.21).

The petition for rehearing filed by defendant Denver Newspaper Agency LLP was directed at the ongoing debate regarding the elements of a prima facie case of retaliation. The Tenth Circuit followed the three-part showing required by Timmerman v. U.S. Bank, 483 F.3d 106, 1122-23 (10^th Cir. 2007) which requires a showing that (1) plaintiff engaged in protected activity; (2) plaintiff suffered an adverse employment action;* (3) there is a causal connection between the protected activity and the adverse action. The debate on rehearing was whether in a retaliation case, the Tenth Circuit panel would reject Timmerman and adopt a standard that some circuits have used which requires, in addition to the three elements above, that plaintiffs demonstrate that they are “qualified for the position at issue, or, if already employed, [had] met the employer’s legitimate work expectations.” Volosek v. Wis. Dep’t of Agric., Trade & Consumer Prot., 344 F.3d 680, 692 (7^th Cir. 2003). See also contrasting decisions on this question from the Fifth Circuit: Holtzclaw v. DSC Commc’ns Corp., 255 F.3d 254, 259-60 (5^th Cir. 2001) (finding that qualification for the job is an element of a prima facie case of ADEA retaliation); EEOC v. Dunbar Diagnostic Servs., Inc., 92 F. App’x 83, 84-85 (5^th Cir. 2004) (refusing to require plaintiff to demonstrate qualification for the position as part of prima facie case in a wrongful discharge case), the appellee’s petitioned panel for rehearing and appellant’s response to same contain citations to and discussion of all of the many court decisions that have addressed this cutting edge debate.

Judge Murphy, who wrote for the panel, was joined by Judges McKay and O’Brien. 

For more discussion on this topic, see Garland’s Digest, Paul Mollica’s Daily Developments in EEO Law, Nelson Cary’s post at Vorys on Labor, and Richard Renner at the Whistleblowers Protection Blog. For a discussion of the District Court’s ruling see the Workplace Prof Blog.

 *While the court described Timmerman as requiring an “adverse employment action,” undoubtedly the court merely used the incorrect phraseology, and would require adherence to the Supreme Court’s holding in Burlington Northern & Santa Fe Ry. v. White, 548 U.S. 53 (U.S. 2006) where the court requires in a retaliation case, not an adverse action, but rather “a materially adverse action.” In Shaw v. Tulsa Dynaspan Arrow Concrete, 2001 WL 263205 at *4 (10^th Cir. Jan. 28, 2001), the Tenth Circuit held that the prima facie case of retaliation requires a showing that a reasonable employee would have found the challenged action materially adverse, quoting Haynes v. Level 3 Communications, LLC, 456 F.3d 1215, 1228 (10^th Cir. 2006).

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Agreements To Maintain Confidential Information

In News America Marketing In-Store, LLC v. Emmel, 2011 U.S. App. LEXIS 11810 (11th Cir. June 8, 2011), the defendant former employee, Robert Emmel, while still employed with the plaintiff former employer, News America, felt that the News America was engaged in various unlawful activity.  He reported the alleged wrongdoing to U.S. Senator Sarbanes and to the SEC, and sent both the senator and the SEC a number of News America company documents to support his claims.  Later, but before News America discovered Emmel’s external disclosures of company documents, the relationship between Emmel and News America soured, and News America terminated Emmel.  Emmel was offered a job with another employer, and needed a letter from News America certifying that he was not bound under any non-compete agreement.  News America agreed to provide such a letter, but only in exchange for Emmel signing a nondisclosure agreement (NDA), which provided that:

Emmel agrees that he will not disparage, denigrate or defame the Company and/or related persons, or any of their respected business products, practices, or services.  Emmel further agrees that he will maintain in complete confidence, and not discuss, share, reveal, disclose or make available to any third party or e  ntity any “Confidential Information” of the Company.”

Emmel signed the NDA on December 21, 2006, but only after he mailed a number of additional News America company documents to a staffer for the U.S. Senate’s Finance Committee on December 20, 2006 – one day before he signed the NDA.  News America later learned of Emmel’s various disclosures of company documents to outside parties and sued Emmel for breach of contract.

News America made two arguments – (1) that certain documents in place when Emmel was employed by News America created non-disclosure obligations – such as News America’s “Standards of Business Conduct Policy”; and (2) that Emmel breached the December 21, 2006 NDA by virtue of the mailing Emmel sent out on December 20, 2006.

Both the District Court and the Eleventh Circuit rejected News America’s first argument, and held that the employment documents in question did not impose contractual nondisclosure obligations on Emmel.

But, the District Court agreed with News America’s second argument, granted News America summary judgment on that aspect of News America’s contract breach claim, and issued a permanent injunction barring Emmel from making any further disclosures of News America’s confidential information.  The court reasoned that, while Emmel mailed out the documents in question the day before he signed the NDA, it was undisputed that the recipient did not receive the package until after Emmel had signed the NDA.  The court found it “significant” that Emmel didn’t do anything to prevent the disclosure after he had signed the NDA – for example, he did not warn the recipient not to view the documents.  The court reasoned that Emmel thereby breached the NDA.

The Eleventh Circuit reversed, based on the verb tense which was used in the NDA.  That is, the NDA provided that Emmel “will not disparage…” – i.e., it was written in the future tense, and therefore did not cover any of Emmel’s past conduct which predated his signature of the NDA.  The court reasoned that nothing indicated that the parties intended the agreement to apply retroactively, or to provide any assurances about past actions.  The court ultimately agreed with Emmel’s arguments that “[t]o capture his pre-contract conduct… the promises would have needed to be phrased in the present perfect tense – i.e., ‘Emmel agrees he has not disparaged… and that he has maintained in complete confidence’ News America’s confidential information,” and that the District Court’s ruling “disregards the basic rule that a contract operates only prospectively from execution absent language of retroactive effect.”

Needless to say, the decision vividly highlights the paramount importance of careful drafting when it comes to writing contracts, employment agreements, employment policies, settlement agreements, and other such documents.
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Tenth Circuit follows Gardner-Denver, finding that 14 Penn Plaza does not trump the plaintiff.

In Mathews v Denver Newspaper Agency LLP, No. 09-1233 (May 17, 2011 10^th Cir.), a panel of the Tenth Circuit issued its revised opinion. Its earlier opinion of March 16, 2011 is found at 2011 U.S. App. LEXIS 5142. Judge Murphy, writing for the panel, concludes that plaintiff's statutory employment discrimination and retaliation claims maybe litigated despite a prior ruling by an arbiter on plaintiff’s contractual claims which were coterminous with his statutory claims.

The collective bargaining agreement provides as follows:

The Employer and the Union acknowledge continuation of their policies of no discrimination against employees and applicants on the basis of age, sex, race, religious beliefs, color, national origin or disability in accordance with and as required by applicable state and federal laws.

Plaintiff was demoted and grieved the demotion. Apparently, the initial grievance referenced state and federal discrimination and retaliation laws. That initial grievance was amended to remove any reference to said statutes, and the question of discrimination was stated, by agreement of the parties, to the arbiter as follows: “[D]id GRIEVANT’S demotion violate contractual provisions prohibiting discrimination?” The arbiter ruled against Mathews and, thereafter, Mathews sued under Title VII among other statutes. The district court found that the arbiter’s decision was preclusive, relying on the Supreme Court’s decision in 14 Penn Plaza LLC v. Pyette, 129 S. Ct. 1456 (2009). The district court’s ruling can be found at 2009 U.S. Dist. LEXIS 37697 (D. Colo. May 4, 2009). The soTenth Circuit reversed, holding the fact that “Mathew’s contractual rights and statutory rights were coterminous is of no moment: As the Supreme Court has recently reaffirmed, ‘[b]ecause the collective-bargaining agreement gave the arbitrator “authority to resolve only questions of contractual rights,” his decision could not prevent the employee from brining the Initial Title VII claim in federal court “regardless of whether certain contractual rights are similar to, or duplicative of, the substantive rights secured by Title VII.” Fourteen Penn Plaza, 129 S.Ct. at 1467 (emphasis added) (quoting Alexander v. Gardner-Denver Co., 415 U.S. 36 (1974)).”

The Tenth Circuit panel went on to affirm summary judgment on plaintiff’s discriminatory demotion claim, finding that plaintiff was judicially estopped from being able to establish his qualifications for the position in question. The court, applying Cleveland v. Policy Mgmt. Sys. Corp., 526 U.S. (1999), found that plaintiff’s unequivocal testimony in a SSA disability milieu that he was totally disabled was “a paradigmatic case for judicial estoppel.” For a different take on this issue, see Solomon v. Vilsack, 628 F.3d 555 (D.C. Cir. 2010).

In contrast, the court denied summary judgment on plaintiff’s retaliatory demotion claim, refusing to adopt the “strong evidence” standard articulated by the Second Circuit in Collins v. N.Y. City Transit Authority, 305 F.3d 113, 119 (2d Cir 2002) wherein that court held that for a plaintiff to survive a motion for summary judgment following an adverse decision from an arbiter, the plaintiff “must present strong evidence that the decision was wrong as a matter of fact - e.g. new evidence not before the tribunal – or that the impartiality of the proceeding was somehow compromised.” Instead of adopting the Second Circuit’s “strong evidence” standard, the Tenth Circuit rejected such a per se standard for a case-by-case evaluation, including an evaluation of the “degree of procedural fairness in the arbitral forum, adequacy of the record with respect to the issue of discrimination, and the special competence of particular arbitrators.” Barrentine v. Arkansas-Best Freight Sys, Inc., 450 U.S. 728, 743 n.22 (1981) (quoting Gardner-Denver 450 U.S. at 60 n.21).

The petition for rehearing filed by defendant Denver Newspaper Agency LLP was directed at the ongoing debate regarding the elements of a prima facie case of retaliation. The Tenth Circuit followed the three-part showing required by Timmerman v. U.S. Bank, 483 F.3d 106, 1122-23 (10^th Cir. 2007) which requires a showing that (1) plaintiff engaged in protected activity; (2) plaintiff suffered an adverse employment action;* (3) there is a causal connection between the protected activity and the adverse action. The debate on rehearing was whether in a retaliation case, the Tenth Circuit panel would reject Timmerman and adopt a standard that some circuits have used which requires, in addition to the three elements above, that plaintiffs demonstrate that they are “qualified for the position at issue, or, if already employed, [had] met the employer’s legitimate work expectations.” Volosek v. Wis. Dep’t of Agric., Trade & Consumer Prot., 344 F.3d 680, 692 (7^th Cir. 2003). See also contrasting decisions on this question from the Fifth Circuit: Holtzclaw v. DSC Commc’ns Corp., 255 F.3d 254, 259-60 (5^th Cir. 2001) (finding that qualification for the job is an element of a prima facie case of ADEA retaliation); EEOC v. Dunbar Diagnostic Servs., Inc., 92 F. App’x 83, 84-85 (5^th Cir. 2004) (refusing to require plaintiff to demonstrate qualification for the position as part of prima facie case in a wrongful discharge case), the appellee’s petitioned panel for rehearing and appellant’s response to same contain citations to and discussion of all of the many court decisions that have addressed this cutting edge debate.

Judge Murphy, who wrote for the panel, was joined by Judges McKay and O’Brien.

For more discussion on this topic, see Garland’s Digest, Paul Mollica’s Daily Developments in EEO Law, Nelson Cary’s post at Vorys on Labor, and Richard Renner at the Whistleblowers Protection Blog. For a discussion of the District Court’s ruling see the Workplace Prof Blog.

*While the court described Timmerman as requiring an “adverse employment action,” undoubtedly the court merely used the incorrect phraseology, and would require adherence to the Supreme Court’s holding in Burlington Northern & Santa Fe Ry. v. White, 548 U.S. 53 (U.S. 2006) where the court requires in a retaliation case, not an adverse action, but rather “a materially adverse action.” In Shaw v. Tulsa Dynaspan Arrow Concrete, 2001 WL 263205 at *4 (10^th Cir. Jan. 28, 2001), the Tenth Circuit held that the prima facie case of retaliation requires a showing that a reasonable employee would have found the challenged action materially adverse, quoting Haynes v. Level 3 Communications, LLC, 456 F.3d 1215, 1228 (10^th Cir. 2006).

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Do Twombly and Iqbal Apply to Affirmative Defenses?

This blog visited this issue back on July 21, 2010. Recently, Judge Cacheris of the Eastern District of Virginia issued a thoughtful opinion on this issue, diverging from the unanimous view of all other reported district court decisions within the Fourth Circuit, holding that Twombly and Iqbal do not apply to affirmative defenses. In Lopez v. Asmar’s Mediterranean Food, Inc., 2011 U.S. Dist. LEXIS 2265 (E.D. Va. Jan. 10, 2011) Judge Cacheris, predicated his decision on a reading of the Civil Rule at issue. The Judge notes that Twombly and Iqbal are predicated on the Supreme Court’s construction of Civil Rule 8(a)(2); whereas the rule governing affirmative defenses is contained in Civil Rule (8)(b)(1)(A), the language of which is significantly different than the language of 8(a)(2). Civil Rule 8(a)(2) requires that “claims for relief,” including complaints, contain

a short and plain statement of the claim showing that the pleader is entitled to relief.

(emphasis added). In contrast, Civil Rule 8(b)(1)(A) governing civil defenses requires that a responding party

state in short but plain terms its defenses to each claim asserted against it.

As Judge Cacheris notes, Civil Rule 8(b)(1)(A) omits the language requiring a “showing that the pleader is entitled to relief.” The absence of that language led the court in Lopez to conclude that Twombly and Iqbal’s reasoning does not and ought not apply to affirmative defenses. The Court notes that, of course, the plaintiff can explore whatever factual detail supports the affirmative defenses by propounding interrogatories, for example.

In a footnote, the court notes that the Lopez opinion will be the decidedly minority view amongst the district judges in the Fourth Circuit who have addressed this issue. See e.g., Racic v. Dominion Law Assocs., --- F.R.D. ---, 2010 WL 3928702 (E.D.N.C. Oct. 6, 2010); Francisco v. Verizon South, Inc., No. 3:09cv737, 2010 WL 2990159, 2010 U.S. Dist. LEXIS 77083, at *7-8 (E.D. Va. July 29, 2010)(collecting cases); Bradshaw v. Hilco Receivables, LLC, 725 F. Supp. 2d 532, at *3 (D. Md. July 27, 2010); Palmer v. Oakland Farms, Inc., No. 5:10cv00029, 2010 WL 2605179, 2010 U.S. Dist. LEXIS 63265, at *5 (W.D. Va. June 24, 2010). In a follow-on footnote, Judge Cacheris notes that a number of other district judges, outside of the Fourth Circuit, have reached the same conclusion that he does. See e.g., Ameristar Fence Prods., Inc. v. Phoenix Fence Co., No. CV-10-299, 2010 WL 2803907, at *1 (D. Ariz. July 15, 2010); McLemore v. Regions Bank, No. 3:08cv0021, 2010 WL 1010092, at *13 (M.D. Tenn. Mar. 18, 2010); Holdbrook v. SAIA Motor Freight Line, LLC, No. 09-cv-02870, 2010 WL 865380, 2010 U.S. Dist. LEXIS 29377, at *2 (D. Colo. Mar. 8, 2010); Charleswell v. Chase Manhattan Bank, N.A., No. 01-119, 2009 WL 4981730, 2009 U.S. Dist. LEXIS 116358, at *4 (D.V.I. Dec. 8, 2009); Romantine v. CH2M Hill Eng'rs, Inc., No. 09-973, 2009 WL 3417469, 2009 U.S. Dist. LEXIS 98699, at *1 (W.D. Pa. Oct. 23, 2009); First Nat'l Ins. Co. of Am. v. Camps Servs., Ltd., No. 08-cv-12805, 2009 WL 22861, 2009 U.S. Dist. LEXIS 149, at *2 (E.D. Mich. Jan. 5, 2009).

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Upcoming Speaking Engagements

Here is a list of my upcoming speaking engagements:

May 4, 2011 - American Bar Association, Federal Service Labor and Employment Law Committee Midwinter Meeting, Social Media and Privacy in the Workplace

June 10, 2011 - Maryland State Bar Association, Labor and Employment Section, Social Media in the Workplace

July 28-30, 2011 - ALI-ABA, Practitioner Planning Chair, Current Developments in Employment Law: The Obama Years at Mid-Term

July 28, 2011 – ALI-ABA, Current Developments in Employment Law, U.S. Supreme Court Employment Law Developments

July 29, 2011 – ALI-ABA, Current Developments in Employment Law, New Federal Retaliation and Whistleblower Claims (Speakers: Robert B. Fitzpatrick, Robert B. Fitzpatrick, PLLC (Washington, D.C.); Frank C. Morris, Jr., Epstein Becker & Green, P.C. (Washington, D.C.))

July 29, 2011 – ALI-ABA, Current Developments in Employment Law, Emerging Employment Issues Under State Law

July 30, 2011 – ALI-ABA, Current Developments in Employment Law, Moderator, Cutting-Edge Employment Law Issues (Speakers: Judge Ann D. Montgomery, U.S. District Court (Minneapolis, Minnesota); Charlotte Fishman, Pick Up the Pace (San Francisco, California); Richard T. Seymour, The Law Office of Richard T. Seymour, PLLC (Washington, D.C.))

October 5, 2011 – D.C. Bar, Update on Virginia employment cases

I hope you can make it to at least one.

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Can an Employer in the Employment Application Shorten the Statute of Limitations for Anti-Discrimination Claims?

The answer, rather uniformly, is affirmative. Recently, in Dunn v. Gordon Food Services, Inc., 2011 U.S. Dist. LEXIS 13387 (W.D. Ky. Feb. 10, 2011), Chief Judge Russell upheld the employer's shortening of the statute of limitations where the employment application with Ms. Dunn, on its last page, had eleven clauses to which the applicant had to agree as a condition of being considered for employment, and the fourth clause stated that the applicant agreed "that any action or suit against [the employer] arising out of any employment or termination of employment, including but not limited to claims arising under the State or Federal civil rights statutes, must be brought within one year of the event giving rise to the claim or be forever barred."  This clause went on to state that the applicant "waive[d] any statute of limitations to the contrary."  The Court, citing a plethora of authorities, both inside and outside the Sixth Circuit upholding such provisions, sustained the defense motion for summary judgment based on that clause.  See also Ravenscraft v. BNP Media, Inc., No. 09-C-6617, 2010 U.S. Dist. LEXIS 37919, 2010 WL 1541455, at *1 (N.D. Ill. Apr. 15, 2010); PSC Info Group v. Lason, Inc., 681 F. Supp. 2d 577, 587 (E.D. Pa. 2010); Cole v. Federal Exp. Corp., No. CV-06-3485, 2008 U.S. Dist. LEXIS 71431, 2008 WL 4307090, at *9 (E.D. Pa. Sept. 19, 2008); Vincent v. Comerica Bank, No. H-05-2302, 2006 U.S. Dist. LEXIS 28613, 2006 WL 1295494, *5-6 (S.D. Tex. May 10, 2006); Badgett v. Federal Express Corp., 378 F. Supp. 2d 613 (M.D.N.C. 2005); Fink v. Guardsmark, LLC, No. CV 03-1480-BR, 2004 U.S. Dist. LEXIS 16970, 2004 WL 1857114, at *1 (D. Or. Aug. 19, 2004); Johnson v. DaimlerChrysler Corp., No. C.A. 02-69 GMS, 2003 WL 1089394, at *1 (D. Del. Mar. 6, 2003).

Please be sure to visit our website at http://RobertBFitzpatrick.com