Category: Litigation

A More Conservative SCOTUS Slated to Hear Remand Question in Baltimore Climate Suit

With the confirmation of Justice Amy Coney Barrett on October 26, the Supreme Court that will review a Fourth Circuit decision affirming the remand of Baltimore City’s ongoing climate suit is significantly more conservative than the Supreme Court that granted certiorari just a few weeks prior.[1] Justice Barrett, a self-proclaimed textualist and a prior clerk to the late Justice Antonin Scalia, is expected to give strong preference to the plain language meaning of federal statutes, regardless of the policy ramifications. This will likely favor Petitioners, whose certiorari petition relied on a plain language reading of the relevant federal statute.

Petitioners—major energy companies—had removed the case to federal court on multiple jurisdictional grounds, including federal officer jurisdiction under 28 U.S.C. § 1442. After the U.S. District Court for Maryland ordered remand, Petitioners appealed to the Fourth Circuit Court of Appeals based on an exception to the federal statutory prohibition on such appeals where removal is based on the federal officer provision. See 28 U.S.C. § 1447(d).  On March 6, 2020, the Fourth Circuit affirmed the district court’s rejection of the federal officer basis for removal but declined to review the other jurisdictional arguments, ruling them outside the purview of the Section 1447(d) exception. Mayor & City Council of Baltimore v. BP P.L.C., 952 F.3d 452 (4th Cir. 2020). The Petitioners sought certiorari on the issue of whether the Fourth Circuit improperly declined to review the other bases for removal. The Supreme Court granted certiorari on October 2, 2020.

The Supreme Court will address a question that has split nine federal circuit courts. The Fifth, Sixth, and Seventh Circuits have found that the Section 1447(d) exception allows for appellate review of all issues subject to an eligible remand order. The Second, Fourth, Eighth, Ninth, and Eleventh Circuits have found review is limited to the jurisdictional issue that forms the basis of the exception for an otherwise non-appealable remand order, i.e., removal based on federal officer jurisdiction or civil rights claims.[2]

While limited to an arcane jurisdictional question regarding the proper scope of appellate review of federal remand orders, the Supreme Court’s review of the case will have significant implications for the dozens of ongoing lawsuits for climate-related damages across the country. As cities and states pursue their claims, there will continue to be procedural battles over whether the cases should be heard in state or federal court, and federal appellate review of remand orders could play a significant role in deciding the proper forum for such suits. In turn, it will be either state or federal judges who review the substantive merit of such claims, including whether federal or state common law should be applied to interstate climate torts and whether federal environmental statutes preempt such tort claims.

[1] Justice Samuel A. Alito Jr. recused himself from consideration of the petition.  Presumably, he will also recuse himself from consideration of the appeal on the merits.

[2] There are currently two exceptions: one for federal officers and one for civil rights claims. See 28 U.S.C. § 1447(d) (citing id. §§ 1442, 1443).

© 2020 Beveridge & Diamond PC
For more articles on environmental litigation, visit the National Law Review Environmental, Energy & Resources section.

Objecting During Closing Arguments

We’ve all been there. Opening statements are over, the evidence is closed and you just killed it with your closing argument. Nothing left to do but relax, let your guard down a bit and listen to your opponent’s closing argument.  Right?  Wrong!!!

While you may be tempted to zone out while your opponent sums up his case, you must remain on high alert for inappropriate statements or colloquy during closing arguments and be prepared to object. In civil litigation, it can be a million-dollar mistake.

The Supreme Judicial Court is set to consider whether such a mistake will cost Wendy’s and one of its suppliers an opportunity to set aside a $150,000 verdict rendered against it based on improper “reptile-based” remarks made by plaintiff’s counsel during closing arguments.  This morning, the Court will hear oral arguments in Fitzpatrick v. Wendy’s Old Fashioned Hamburgers of New York and decide whether a trial judge applied the correct legal standard in declaring a mistrial after the jury rendered its verdict.  A Suffolk Superior Court jury previously found Wendy’s liable for severe dental injuries suffered by Meaghan Fitzpatrick when she bit into a hamburger that contained a bone fragment.

Before jury deliberations began, the defendants moved for a mistrial based on inappropriate statements made by plaintiff’s counsel. Defendants argued that Plaintiff’s counsel violated the “golden rule” by calling upon the jury to place themselves in the plaintiff’s position and to “be the voice of the community,” and send the defendants a message. Judge Heidi Brieger deferred ruling on the motion until after the jury returned a verdict for $150,000. Judge Brieger subsequently declared a mistrial, the case was retried, and a new jury returned a verdict for $10,000.

While the motion for a mistrial was an alert decision, as “reptile based” comments during closing arguments are almost universally prohibited everywhere, the failure to assert an objection immediately after they were made could prove to be a costly mistake for the defense. The Appeals Court appeared to focus on that very fact when it reversed Judge Brieger’s decision in 2019, holding that the defendants’ renewed motion for a mistrial should have been treated under the standard for granting a motion for a new trial.

The timeliness of an objection during summation is crucial to your case, and waiting until your opponent has finished, or after the judge has charged the jury is generally viewed as too late.  Some of us had mentors who taught us that nothing that is said during closing argument constitutes evidence. And our mentors were right.  Accordingly, many trial attorneys suddenly become potted plants during their opponents’ summations and choose politeness over their obligations to their clients.  They say nothing, even in the face of clear violations of some of the most basic rules of closing arguments: i.e., engaging in character assassinations of the plaintiff or other trial witnesses, arguing facts not in evidence, injecting personal opinions on credibility, appealing to the conscience of the jurors to send a message to the community, etc.  Objecting during your opponent’s closing argument when it is warranted is not rude or unprofessional – but it’s borderline malpractice if you don’t.  These are cardinal rules that cannot be forgotten about during summation and objections must be raised as soon as they are violated.

The Supreme Judicial Court will likely focus on the defendants’ failure to object in a timely fashion when it decides whether Judge Brieger applied the proper legal standard in granting a mistrial following the jury’s verdict.  Stay tuned.

©2020 CMBG3 Law, LLC. All rights reserved.
For more articles on corporate law, visit the National Law Review Corporate & Business Organizations section.

Revisiting Force Majeure and Other Contractual Considerations Amid COVID-19

In addition to the tragic human toll that it has caused, the coronavirus pandemic has also wreaked havoc on businesses throughout world, leaving countless companies and individuals unable to perform their contractual obligations. While many businesses have reopened since our last client alert on this topic, others have experienced new interruptions amid new spikes in COVID cases. As a result, force majeure and its common law relatives—the doctrines of impossibility and frustration of purpose—remain poised to become a focus of business litigation for years to come.

Force Majeure

Once a party to a contract has made a promise to perform, it must fulfill its promise even where unforeseen circumstances, including an act of God, make performance burdensome, difficult, or more expensive. If the party fails to perform, it usually is responsible for damages to the other party.

However, if the contract contains a force majeure provision, unexpected events could provide a defense to a party’s failure to perform. While it is tempting to assume that the global catastrophic effects of COVID-19 would easily invoke force majeure, the validity of the defense, which courts will narrowly construe, relies upon the specific language of the applicable force majeure provision and the factual circumstances of the parties’ contract. Simply put, because force majeure is a matter of contract, the language in the parties’ agreement determines when and to what extent force majeure will excuse performance in that particular contract.

This is best illustrated by an examination of a typical provision that became the subject of a recent dispute involving a lease to operate a restaurant and catering facility at a state-owned park: It provides:

If either State Parks or Lessee shall be delayed or prevented from the performance of any act required by this Lease by reason of acts of God, weather, earth movement, lockout or labor trouble, unforeseen restrictive governmental laws, regulation, acts or omissions, or acts of war or terrorism which directly affects the Licensed Premises and/or facilities and services of Jones Beach State Park, riot or other similar causes, without fault and beyond the reasonable control of the party obligated, performance of such act, including payment of all License Fees and R & R deposits due, shall be permanently excused for the period of the delay and the period for the performance of such act shall be extended for a period equivalent to the period of such delay, at which time all payments due shall be resumed.

Like nearly every other force majeure clause, this example includes a list of triggering events that might excuse performance. Assuming a party claims that, during the peak of the coronavirus and the effects of government shutdown orders—or now with spikes in the virus potentially leading to new interruptions—it cannot perform its obligations, this clause might serve to excuse performance because it includes “unforeseen restrictive governmental laws” as a triggering event.

But had that language not been included, the application of this type of provision to COVID-19 becomes far less clear. While the pandemic may seem like an act of God, courts have historically defined that term narrowly. Texas courts, for example, have long defined it as “accidents produced by physical causes which are irresistible; as, for example, winds and storms, or a sudden gust of wind, by lightning, inundations, or earthquakes, sudden death or illness.”[1] Similarly, New York views an act of God as “an unusual, extraordinary and unprecedented event,” denoting “those losses and injuries occasioned exclusively by natural causes, such as could not be prevented by human care, skill and foresight.”[2] As pandemic-related litigation unfolds it remains to be seen whether an inability to perform based on COVID-19 would be considered an act of God. Even if the illness itself is deemed an act of God, performance-impeding issues like restrictions on business openings may be labeled a human reaction to the virus, not the act of God itself.

Other triggering events that may apply to COVID-related performance include the obvious—pandemics, epidemics and disease outbreaks—as well as events like labor shortages, where employees are not available to work due to stay-at-home orders or illness spread within a factory. The bottom line is that, in order to provide an effective defense, the force majeure provision must generally include a triggering event that applies to the COVID-related basis for nonperformance.

Many force majeure provisions also include “catch call” language such as “or other similar causes,” as in the example provided above. Catch-all provisions must be interpreted within the context of the provision as a whole, and the legal maxim of ejusdem generis may apply: the catch-all will be interpreted to include only items of the same kind as those listed. Thus, a force majeure provision listing storms, earthquakes, floods “and similar events” may not be interpreted to include events related to COVID-19. On the other hand, some contracts provide more expansive catch all language, capturing any event outside of the reasonable control of the parties.

Courts analyzing attempts to rely upon catch-all language, including in Texas and New York, may also consider the foreseeability of the triggering event.[3] Given prior epidemics and pandemics, including the 2009 H1N1 pandemic, it remains to be seen how courts will determine the foreseeability of COVID-19.

The presence of an applicable triggering event is only the first step in the process of determining whether a party has a valid defense to nonperformance. Unless the force majeure provision provides otherwise, courts generally require that performance be rendered impossible, and not merely more difficult or expensive. For example, a party obligated to manufacture a product may not be able to invoke force majeure where sourcing a component has been made more difficult, but not impossible, due to the pandemic. Issues of causation must also be considered, and language appearing in typical force majeure provisions stating that nonperformance must be “by reason of” or “caused by” requires a showing of direct causation.

These issues aside, parties seeking to invoke a force majeure provision must carefully consider what performance is actually excused. For example, force majeure language in commercial leases will typically exclude the payment of rent, meaning that even amidst the occurrence of a triggering event, rent must still be paid. Parties must also think about what happens when the force majeure event ends. By way of illustration, the example provided above makes clear that performance is excused only during the “period of the delay.”

Parties attempting to rely upon a force majeure provision must also follow any applicable notice provisions or risk losing the ability to invoke the defense. Depending upon the contractual language, force majeure provisions typically mandate that notice be provided within a certain period of time following the force majeure event, and some require that period updates on the force majeure condition be provided.

In litigation arising from the effects of COVID-19, courts have already begun to tackle issues related to force majeure and impossibility. For example, in Palm Springs Mile Associates, Ltd. v. Kirkland’s Stores, Inc., a federal court in Florida cast doubt on a tenant’s ability to claim that a COVID-related force majeure event prevented it from paying rent, observing that “Kirkland . . . has failed to point to factual allegations in the complaint that show the government regulations themselves actually prevented Kirkland from making rent payments.”[4] Similarly, in Future St. Ltd. v. Big Belly Solar, LLC, a Massachusetts court rejected an argument by a distributor of solar recycling bins that it could not perform its contractual obligations due to COVID-19.[5] These cases highlight the need to establish causation between the force majeure event and the performance at issue.

Alternatives to Force Majeure

Parties to contracts without force majeure provisions are not without a remedy, as the common law doctrines of impossibility and frustration of purpose may provide a defense to nonperformance. Impossibility is exactly as it sounds, and excuses performance where it has become objectively impossible. In addition, the impossibility must be the result of an event that was unforeseen and could not have been addressed by the contract. Similar to force majeure provisions discussed above, mere economic difficulty or burden is not enough to invoke impossibility.

In some circumstances, applying these narrow standards to COVID-related nonperformance will be straightforward, as in the case of a vendor who was unable to provide event services on a specified date due to the government’s stay at home orders. But the analysis becomes murkier in other hypothetical scenarios, such as a purchasing party to a real estate contract who claims that shut down orders made a scheduled closing impossible. The seller may assert that the closing could have taken place virtually, or that the purchaser is now trying to escape a contract that has become an economic burden. Such factual issues are likely to be the subject of future litigations. It is worth noting that some courts also recognize the doctrine of impracticability, although there is little functional difference between impracticability and impossibility.

Short of impossibility, frustration of purpose may also provide an avenue to relief. This doctrine, also narrowly construed, provides a defense to nonperformance where a change in circumstances makes one party’s performance virtually worthless to the other, frustrating the purpose of making the contract. As explained by one court, “the frustrated purpose must be so completely the basis of the contract that, as both parties understood, without it, the transaction would have made little sense.”[6]

Practical Considerations

Based upon the nuances discussed above, parties seeking to invoke force majeure or common law doctrines to excuse performance should keep several practical considerations in mind:

  • Provide timely notice of the force majeure event, and consider doing so even if it is not required;
  • Communicate with the counterparty;
  • Maintain detailed records related to non-performance, including a timeline of events leading to the inability to perform, copies of relevant government orders and pronouncements, efforts to avoid the force majeure event or identify alternative means for nonperformance, and efforts to negotiate substituted performance.

Similar steps should be taken by the party who will be defending against the invocation of force majeure:

  • Provide a timely response to any notice, and be sure to keep responses realistic, professional and performance-oriented, keeping in mind that any response will likely be filed with the court should litigation occur;
  • Keep detailed records relating to the nonperformance, including a timeline of events that may provide a counter-narrative, the availability of alternative means for non-performance and, perhaps most importantly, evidence of damages.

Drafting Considerations Going Forward

Parties currently negotiating contracts should also be sure to address the implications of the ongoing pandemic. Drafting considerations amid COVID-19 include:

  • Defining the triggering events to include (or exclude) events such as “disease”, “pandemic”, “epidemic”, “public health crisis” and “state of emergency”;
  • Avoiding overreliance upon “act of God”;
  • Considering the effect of doctrines like ejusdem generis;
  • Crafting language making it clear what will happen at the end of the force majeure event, including whether the event permits termination versus a temporary suspension of performance; and
  • Considering whether to address disruptions to supply chains, labor force and/or access to financing.

[1] Morgan v. Dibble & Seeligson, 29 Tex. 107, 111 (1867).

[2] Prashant Enterprises Inc. v. State, 206 A.D.2d 729, 730 (3d Dep’t 1994).

[3] See, e.g, TEC Olmos, LLC v. ConocoPhillips Co., 555 S.W.3d 176, 182 (Tex. App. 2018); Goldstein v. Orensanz Events LLC, 146 A.D.3d 492, 44 N.Y.S.3d 437 (2017).

[4] Palm Springs Mile Associates, Ltd. v. Kirkland’s Stores, Inc., No 20-21724, 2020 WL 5411353 (S.D. Fla. Sept. 8, 2020).

[5] Future St. Ltd. v. Big Belly Solar, LLC, No. 20-CV-11020-DJC, 2020 WL 4431764, at *6 (D. Mass. July 31, 2020).

[6] Crown IT Servs., Inc. v. Koval-Olsen, 11 A.D.3d 263, 265 (1st Dep’t 2004).

© 2020 Bracewell LLP
For more articles on the pandemic, visit the National Law Review Coronavirus News section.

Anheuser-Busch Not Liable for False Advertising for Pointing Out to Consumers that Miller Lite and Coors Light Use “Corn Syrup”

Anheuser-Busch and Molson Coors produce some of the best-selling light beers in the United States — Bud Light, and Miller Lite and Coors Light, respectively — and regularly attack each other with witty ad campaigns. During Super Bowl LIII, Anheuser-Busch unveiled an advertisement campaign focused on the idea that Bud Light is made using rice as opposed to corn syrup. The Bud Light advertisements called attention to Miller Lite and Coors Light’s use of corn syrup as a source of sugar for the fermentation process. In response, Molson Coors advertised that its beer tastes better because of the corn syrup, which is not the same as high-fructose corn syrup used in other consumer products. Molson Coors also filed a lawsuit arguing that Anheuser-Busch violated Section 43 of the Lanham Act “by implying that a product made from corn syrup also contains corn syrup.”

Section 43 of the Lanham Act deals with false advertising and states that “[a]ny person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities, shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.” After Super Bowl LIII, Molson Coors filed a federal lawsuit claiming Anheuser Busch’s high-profile ads duped consumers into thinking that Miller Lite and Coors Light contained corn syrup, when in reality corn syrup is merely used as a “brewing fermentation aid” that does not end up in the final product.  Molson Coors Bev. Co. USA LLC v. Anheuser-Busch Cos., LLC, 957 F.3d 837 (7th Cir. 2020).

The district court found that Anheuser Busch’s did not violate the Lanham Act and Molson Coors appealed to the Seventh Circuit. The appellate court framed the issue as a simple one: whether the true statement made in Anheuser-Busch’s advertisements—“their beer is made using corn syrup and ours isn’t”—wrongly implies that “their beer contains corn syrup.”

Molson Coors acknowledged that both Miller Lite and Coors Light are made using corn syrup and that Bud Light is not. Molson also acknowledged that corn syrup is listed as an ingredient in both Miller Lite and Coors Light. Molson, however, insisted that the list of ingredients is not the same as what the finished product “contains.” The Seventh Circuit found that although it is possible for an ingredient list to be treated as “inputs” instead of a list of what is in the finished product, the common usage of an ingredients list equates to the constituents of the product. Additionally, Anheuser-Busch never advertised that the rival products “contain” corn syrup, but consumers could infer as much from the statements made. But the Seventh Circuit found that consumers could infer the same thing from Molson’s own ingredient list. The court could not hold that it was false or misleading for a rival to make a statement that a competitor makes about itself.

In rejecting the false advertising claims, the appeals court said Molson Coors “brought this problem on itself” by listing corn syrup in its ingredients. Whether the use of corn syrup is a bad thing is for “consumers rather than the judiciary to decide.” The Seventh Circuit ruled that Anheuser-Busch did not violate the Lanham Act’s ban on false advertising by running Bud Light ads that mocked Miller Lite and Coors Light for using corn syrup. The court noted that “[l]itigation should not be a substitute for competition in the market,” which is what Molson Coors was trying to do in this case. The court even seemed to suggest that “[i]f Molson Coors does not like the sneering tone of Anheuser-Busch’s ads, it can mock Bud Light in return.”

COPYRIGHT © 2020, STARK & STARK
ARTICLE BY Gene Markin of Stark & Stark
For more articles on corn syrup litigation, visit the National Law Review Litigation / Trial Practice section.

Q&A with Danish Hamid of DLA Piper on Recent Committee on Foreign Investment in the United States (CFIUS) Developments

Danish (DAA-n’sh) Hamid is a partner with DLA Piper’s Washington DC office. For the past 20 years, he has led an international practice that focuses on the intersection of corporate, compliance, and investigations matters. More recently, Hamid finds himself spending a significant amount of his time advising US and non-US clients on the national security implications of their foreign investment deals and whether those transactions could raise concerns with the Committee on Foreign Investment in the United States (CFIUS). CFIUS is an interagency committee chaired by US Treasury Secretary and is responsible for screening foreign investments in US businesses and certain real estate to determine whether such transactions can impair US national security. If CFIUS identifies material concerns, it can advise parties to restructure or withdraw from their deal or recommend that the US President block or unwind the transaction. Hamid has conducted numerous CFIUS due diligence reviews, advised clients on CFIUS risk-mitigation strategies, and has successfully represented parties with filings before CFIUS. He regularly speaks and writes on CFIUS matters with the goal of clarifying the regulatory complexities in this area for a non-lawyer audience. Hamid also brings a unique perspective with respect to CFIUS concerns given that he has led M&A deals in the past as a corporate lawyer and has now transitioned towards a more regulatory-focused practice. With this in mind, the NLR asked Hamid to provide the following insights regarding recent CFIUS developments:

CFIUS has been empowered by the Department of the Treasury with more staff and funding to monitor transactions not voluntarily reported. What does this mean for companies who are involved or accepting foreign investment?

The fact that CFIUS is devoting greater resources and budget towards monitoring non-notified transactions means that CFIUS may ask parties involved in those deals to explain why they did not submit a filing to CFIUS. If that explanation is not compelling, CFIUS may direct them to submit a filing and possibly apply a more rigorous review standard with respect to that filing. CFIUS may also impose a civil penalty on transaction parties (in some cases up to the value of the investment itself) if they did not file mandatory filing on their own initiative prior to closing if one was otherwise required. Relevant regulations permit CFIUS to impose that penalty on any transaction party that violates the mandatory filing requirement. Given these circumstances, transaction parties conduct CFIUS due diligence reviews to determine whether their deals will trigger a mandatory CFIUS filing or merit a voluntary submission to CFIUS.

CFIUS had an increased jurisdiction scope under Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) in January of 2020. What impact has this had on the landscape in the intervening months?

CFIUS’s expanded jurisdiction under FIRRMA has caused more transaction parties to consider whether their deals trigger a filing. We have also observed an increase in the number of filings with CFIUS.

CFIUS has set up a webpage to accept tips and other information from the public on transactions not reported to the agency–how does this change the landscape?  Is it important for companies to be aware of this formalizing of a previously informal process? 

The fact that CFIUS is now actively seeking public tips on non-notified transactions is a relevant factor that transaction parties will need to evaluate when deciding whether to submit a CFIUS filing. There is a risk that CFIUS may receive public tips from a variety of sources such as disgruntled employees of US target companies or competitors to foreign investors in or acquirers of US businesses.

On Friday, Aug. 14, 2020, the president signed an executive order (EO) demanding the unwinding of a Chinese company’s acquisition of what would become TikTok–in your opinion, is this a sign of things to come?  What does this indicate about the current landscape of CFIUS and transactions with companies with access to American’s personal data?

It may be early to conclude if this is a sign of things to come. However, it has certainly captured the attention of CFIUS practitioners. Of course, separate from the EO, FIRRMA and recent regulations already made it fairly clear that CFIUS is interested in foreign investments in certain US companies that maintain or access sensitive data regarding US citizens.

Do you anticipate any major changes with CFIUS in light of the 2020 election?

Yes, we anticipate further regulatory developments impacting CFIUS. Just recently, the Treasury Department issued new regulations that went into effect on October 15th and have the potential of expanding the circumstances that trigger mandatory CFIUS filings. Those new rules seek to better align the CFIUS regime with US export controls by requiring parties to submit a mandatory CFIUS filing with respect to certain foreign investments in or acquisitions of US businesses involved with critical technologies for which a US regulatory authorization would otherwise be required. In addition, US export controls are evolving, which will invariably impact the CFIUS regime.

Copyright ©2020 National Law Forum, LLC
For more articles on CFIUS, visit the National Law Review Antitrust & Trade Regulation section.

Employment Litigation Is on the Decline, but Expect More Wage and Hour Claims

A recent Lex Machina study (available via signup here) noted that the number of federal employment cases filed in the second and third quarter of 2020 was down. Not surprisingly, harassment and discrimination cases showed the biggest decrease, by almost 20%, likely due to the increase in remote work and decrease in actual interaction between workers.

However, Family and Medical Leave Act (FMLA) claims and wage and hour cases under the Fair Labor Standards Act (FLSA) were down only slightly.  A crystal ball is not needed to predict that FLSA claims are likely to increase. One obvious reason is the increase in remote work.  A change from office to remote work makes it harder to actually observe when someone is working.  And, for a large number of workers, especially those impacted by changes to school or child care, work schedules may have shifted, such as more early or late work, in order to accommodate other demands on their time, and those changes may contribute to poor or difficult tracking.

Other aspects of the FLSA also make challenges more likely.  One is the timing for filing a lawsuit. Pursuing federal harassment or discrimination claims requires first filing an administrative charge, which in most states typically has to be filed within 300 days (in some states it is 180 days).  In contrast, FLSA claims can be filed up to three years after the alleged violation (but may be limited to a two-year period depending on circumstances).

Another difference is the potential for individual liability.  Title VII does not allow for individual liability, but the FLSA does.  The financial distress of a company might deter some harassment claims, but that is less likely for FLSA claims, since individuals can be sued and may be jointly liable.  Finally, unlike harassment claims, FLSA claims cannot be easily waived in a release.  FLSA claims are not properly waived unless there is approval from the Department of Labor or a court.

In short, employers should not interpret the decline in litigation as a decreased need for vigilance, especially for FLSA (and state wage and hour) claims.

The potential for such claims begs the question of what should companies be doing now?  Below are a few suggestions:

  • If you have not already done so, reassess your procedures for timekeeping.Do they allow for or adequately address current work circumstances, in which many employees are teleworking?If not, make adjustments – in writing.If applicable, communicate the temporary nature of the changes.
  • Regularly remind nonexempt employees to follow established procedures regarding time tracking, which may include some of the following:
    • Reporting all time worked (and a reminder to either not work outside of scheduled hours or being sure to report the additional work time).
    • Asking for approval for overtime (but remember, even if not approved, overtime must be paid at time and a half of the regular rate) or otherwise communicating about the need for overtime.
  • Remind managers or supervisors to notice if someone seems to be working outside of normal hours, especially if it is a pattern (like frequent late night or weekend emails). And they should assess whether time reports are too regular (reflecting working Monday to Friday, 8-12 and 1-5).If so, the information is probably only reflecting the schedule for work, not the actual time the employee is working.
© 2020 Foley & Lardner LLP
For more articles on employment litigation, visit the National Law Review Labor & Employment section.

Lessons From Above: SCOTUS Declines to Review a Class Arbitrability Case (the Issue Had Been Delegated to an Arbitrator)

In its restraint, SCOTUS has shown us the mischief that arbitrators may do if parties are lax in setting boundaries in their agreement to arbitrate.  By declining to grant certiorari regarding the Second Circuit’s most recent decision in Jock v. Sterling Jewelers, Inc., 2019 U.S. App. LEXIS 34205 (2d Cir. Nov. 18, 2019), cert. den., No. 19-1382, 2020 U.S. LEXIS 4133 (Oct. 5, 2020), SCOTUS reminds us of the significance of the doctrine of judicial deference to the authorized decisions of an arbitrator.

In Jock, the ultimate issue was formidable — class arbitrability.  And the subsidiary issues were and are daunting. For example,

(1) parties to an arbitration agreement can delegate the class arbitrability issue (is class arbitration permitted?) to an arbitrator in the first instance, but would that delegation bind non-appearing putative class members, who are of course not parties to the operative arbitration agreement?

(2) who decides that delegation issue?

(3) would an arbitrator’s determination that class arbitration is permitted bind (a) non-appearing putative class members or (b) an unwilling respondent vis-à-vis those non-appearing putative class members?

The Second Circuit held that an arbitrator had acted within her authority in “purporting to bind the absent class members to class procedures,” 2019 U.S. App. LEXIS 34205 at *14, and that that determination therefore would stand “regardless of whether [it] is, as the District Court believes, ‘wrong as a matter of law.’”  Id.  Indeed, the Second Circuit had framed its inquiry as “whether the arbitrator had the power, based on the parties’ submissions or the arbitration agreement, to reach a certain issue” and “not whether the arbitrator correctly decided that issue.”  Id. at *8-*9, citing Oxford Health Plans LLC v. Sutter, 569 U.S. 564, 569 (2013).

Thus, the Court of Appeals did not review the merits of the arbitrator’s Class Determination Award (“CDA”), but rather defended it from scrutiny on the merits.  Instead, the Second Circuit focused on the delegation question — did the parties clearly and unmistakably delegate the class arbitrability issue to the arbitrator for determination in the first instance?

The first lesson:  if the issue of class arbitrability is delegated to an arbitrator for determination in the first instance, the resulting award becomes a hardened target with respect to its legal merits.  It may be challenged on the narrow grounds for vacatur set out in Section 10(a) of the Federal Arbitration Act (“FAA”), 9 U.S.C. § 10(a), and it then benefits from the deference accorded to all arbitral awards.  Consequently, a decision concerning class arbitrability that might be reversed on de novo review if issued by a court will likely be left undisturbed if issued by an arbitrator.

That lesson alone is important to any company that uses a form arbitration clause in many substantially similar contracts – e.g, employment, consumer, financial, or insurance agreements.  It highlights the urgency of getting one’s form(s) of arbitration agreement in order, including the advisability (i) to state clearly whether arbitrability issues – and class and/or collective arbitrability issues in particular – are to be determined by a court or an arbitrator in the first instance, and (ii) to expressly prohibit class and collective arbitration if bilateral arbitration is the sole desired structure for dispute resolution.

To illustrate the point, consider that SCOTUS decided in Lamps Plus, Inc. v. Varela, 139 S.Ct. 1407, 2019 U.S. LEXIS 2943 (U.S. Apr. 24, 2019), that when a court is deciding the matter under the FAA in the first instance, neither silence nor ambiguity in an arbitration agreement regarding the permissibility of class arbitration is a sufficient basis to find that the parties agreed to permit class arbitration.  And SCOTUS implied that incorporation by reference of institutional rules such as those of the American Arbitration Association (“AAA”), including its Supplementary Rules for Class Arbitration, is not a sufficient basis to infer an agreement to permit class arbitration.  (The AAA’s Supplementary Rules are expressly consistent with that. See R-3.)

But, as the Second Circuit pointed out, the parties in Lamps Plus had agreed that a court, not an arbitrator, should resolve the class arbitrability question, and so the District Court’s decision in Lamps Plus was subject to de novo review on appeal, rather than the deferential review that applies concerning a motion to vacate an arbitrator’s award.  See, 2019 U.S. App. LEXIS 34205 at *18.

In the Jock case, on the other hand, the class arbitrability issue had been delegated to an arbitrator for determination in the first instance:  (1) the appearing arbitrating parties had “squarely presented to the arbitrator” the issue of whether the controlling arbitration agreement permitted class arbitration, id. at *6, in effect resolving the delegation issue via an ad hoc agreement; (2) the operative arbitration agreement provided that the arbitrator shall decide questions of arbitrability and procedural questions, see id. at *12-*13; and (3) the operative arbitration agreement incorporated the AAA’s arbitration rules, including the delegation provision (see R-3) of its Supplementary Rules for Class Arbitration, which “evinces agreement to have the arbitrator decide the question of class arbitrability,” id. at *12, citing Wells Fargo Advisors, LLC v. Sappington, 884 F.3d 392, 396 (2d Cir. 2018).  The Second Circuit justifiably took these manifestations to be “clear and unmistakable evidence” of an intent by the appearing parties to delegate the class arbitrability issue to an arbitrator.

The wild card question, however, was whether the non-appearing putative class members should be deemed bound by that delegation.

It is worth recalling that the Jock case has a lengthy history in the Southern District of New York and the Second Circuit, having bounced back and forth between those courts several times already.  In an earlier go-round, after an arbitrator had “certified” a class of 44,000 employee claimants (including 250 active claimants),1 the District Court denied respondent Sterling’s motion to vacate that CDA, but the Second Circuit reversed and remanded, noting that it had not previously squarely determined “whether the arbitrator had the power to bind absent class members to class arbitration given that they…never consented to the arbitrator determining whether class arbitration was permissible under the agreement in the first place.”  2019 U.S. App. LEXIS 34205 at *6.  On remand, the District Court then vacated the arbitrator’s CDA.  But the Second Circuit reversed again, this time based principally on the appellate court’s determination that the arbitrator had been authorized to adjudicate class arbitrability in the first instance, and so the District Court’s review of that award was therefore limited by (a) the narrow grounds for vacatur set out in FAA § 10(a)(4) and (b) the requisite deferential standard of review of such awards.

In that decision, which SCOTUS eventually let stand, the Second Circuit arguably could have addressed a number of issues:

(1) did the parties to the operative arbitration agreement delegate the class arbitrability issue to an arbitrator?

(2) did the non-appearing members of a putative class too delegate the class arbitrability issue to the particular arbitrator in the pending arbitral proceeding?

(3) are the non-appearing putative class members, who were not parties to the operative arbitration agreement, bound by that arbitrator’s decision regarding class arbitrability?

(4) should the District Court have vacated the arbitrator’s CDA?

The Second Circuit first determined that the class arbitrability issue had been delegated to an arbitrator.  It also decided that the District Court should not have vacated the CDA because the arbitrator had the authority, based on the delegation, to resolve the class arbitrability issue in the first instance, and the merits of that determination therefore were not up for review even if the District Court believed that it had been wrongly decided as a matter of law.

Finally, the Second Circuit decided– and this was novel– that the arbitrator had the authority to reach the class arbitrability issue even with respect to the non-appearing putative class members.  2019 U.S. App. LEXIS 34205 at *15.  Thus, the appellate court decided that, in the circumstances, the non-signatory “absent class members” (a) were deemed to have delegated the class arbitrability issue to the particular arbitrator in the proceeding in question, and (b) were bound by her determination that class arbitration was permitted.

The court’s rationale was:  (1) each of the non-appearing putative class members respectively had made an arbitration agreement with respondent Sterling Jewelers that was substantially identical to the agreement upon which the appearing arbitration participants relied; (2) they thereby consented to, and indeed “bargained for,” an arbitrator’s authority to decide the class arbitrability issue, see id. at *11, *14; (3) that constituted an express contractual consent to delegation by the non-appearing putative class members, see id. at *17; and (4) even if the non-appearing class members had not expressly agreed to “this particular arbitrator’s authority,” id. at *15, that did not matter because judicial class actions routinely bind absent members of mandatory or opt-out classes, id. at *15-*16.  (But of course, arbitration is not litigation, and Fed. R. Civ. P. 23 does not apply in arbitrations.)

Notably, this rationale appears to be inconsistent with the skepticism in this regard expressed by Justice Alito in his concurring opinion in the Oxford Health case.  Justice Alito had opined that an arbitrator’s interpretation of an arbitration agreement generally “cannot bind someone who has not authorized the arbitrator to make that determination,” and that “it is difficult to see how an arbitrator’s decision to conduct class proceedings could bind absent class members who have not authorized the arbitrator to decide on a class-wide basis when arbitration procedures are to be used.”  Oxford Health Plans, LLC v. Sutter, 133 S.Ct. at 2072 (Alito, J., concurring).  Thus too, “an arbitrator’s ‘erroneous interpretation’ of a contract that does not authorize class procedures cannot bind absent class members who have ‘not authorized the arbitrator to make that determination.’”  2019 U.S. App. LEXIS 34205 at *10-*11, citing Oxford Health Plans LLC v. Sutter, 569 U.S. 564, 574 (2013) (Alito, J., concurring).

Nevertheless, SCOTUS let the Jock decision, with all it entails, stand.  And we are left to puzzle out what further lessons SCOTUS intended to convey in this regard.

1 The arbitrator “certified” an arbitration class solely for purposes of injunctive and declaratory relief, and it was an opt-out class (which is usually certified for class action litigations seeking money damages) rather than an opt-in class (which might have lent more justification to the CDA) or a mandatory class.

©1994-2020 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
ARTICLE BY Gilbert A. Samberg  of Mintz
For more articles on litigation, visit the National Law Review ADR / Arbitration / Mediation section.

Civil Rights Lawsuit Filed to Strike Down EO 13950

On October 29, 2020, the National Urban League and the National Fair Housing Alliance (represented by the NAACP Legal Defense and Education Fund, Inc.) filed a complaint challenging the constitutionality of Executive Order (EO) 13950 and asking for injunctive and declaratory relief. The plaintiffs, on behalf of themselves and a proposed class that includes federal contractors that the EO impacts, brought the lawsuit against the president, the secretary of Labor, and the U.S. Department of Labor (DOL).

The plaintiffs summarize the EO 13950 as follows:

In short, EO 13950 prohibits any federal contractor from engaging in speech, including the provision of certain training to its employees, that may foster belief in certain concepts that President Trump has deemed divisive, but which are widely-accepted, historically-based concepts that have been used for years in trainings and programs across the country in corporate, public sector, and educational settings.

They request relief based on several constitutional principles falling under the First and Fifth Amendments to the United States Constitution.

First Amendment Allegations

The plaintiffs contend that the order prohibits and censors protected speech, chills future protected speech, and vests the DOL with unfettered enforcement discretion in violation of the First Amendment to the United States Constitution.

In support of the censorship argument, the plaintiffs focus on the EO’s restrictions on whether and how covered organizations can include certain topics in their diversity and inclusion trainings. What the EO describes as “divisive concepts” and restricts, the plaintiffs contend, are fundamental to the public interest and constitute protected speech. Pointing to vague language in the order that they argue precludes reasonable employers and the DOL, as the enforcement agency, from understanding what speech constitutes noncompliance, the plaintiffs state that the order provides “no objective way to determine which activities are permitted and which are prohibited, creating a broad chilling effect and inviting unpredictable, uneven, and potentially selective enforcement.” The plaintiffs assert that the order lacks necessary parameters and, consequently, chills protected speech and vests the DOL with “unfettered discretion,” which the First Amendment prohibits.

The complaint sets forth a sequence of events leading to the issuance of EO 13950 that the plaintiffs claim is relevant to the First Amendment analysis and “reveal[s] the order’s clear purpose to restrict, if not, prohibit the expression of viewpoints.”

The plaintiffs also identify several post-order actions that they argue have created “uncertainty and confusion” surrounding the order. In this regard, the plaintiffs reference:

  • public statements by the president of the United States and administration officials;
  • the EO’s “radical departure from other executive orders and from [the] usual procedures [for enacting executive orders]”;
  • the executive branch’s action in discontinuing diversity trainings altogether;
  • the Office of Management and Budget’s September 28, 2020, memo, “Ending Employee Trainings that Use Divisive Propaganda to Undermine the Principle of Fair and Equal Treatment for All”;
  • the Office of Federal Contract Compliance Programs’ (OFCCP) October 7, 2020, frequently asked questions and the agency’s October 22, 2020, request for information.

The plaintiffs conclude that the order even threatens to chill speech that the order permits “because many federal contractors will choose to err on the side of caution and decline to discuss any matters that even remotely bear on issues of race or sex, for fear of violating the broad prohibitions in the Order.”

Fifth Amendment Allegations

The plaintiffs contend that the same facts and authorities underlying the First Amendment claim also establish Fifth Amendment violations. The plaintiffs claim that the EO is “unconstitutionally vague” and deprives people of color, women, and the LGBTQ community of equal protection and violates their due process rights. They argue that “[r]ace and sex-based discrimination against individuals who are people of color, women, and/or LGBTQ community were [sic] a substantial or motivating factor behind the issuance of EO 13950, in violation of the Fifth Amendment.” The complaint alleges that the order’s stated rationale is merely “pre-textual and meant to obfuscate its impermissible discriminatory purpose,” pointing to facts supporting the First Amendment analysis, the inconsistency between the order’s stated goals for workforce economy and efficiency and its effect to the contrary, and the foreseeable certainty of its disparate impact on people of color, women, and/or LGBTQ individuals.

Takeaways for Employers

This lawsuit and other potential legal challenges to EO 13950 are significant in a number of respects.

  • The order does not apply to contracts executed before November 22, 2020. In the meantime, lawsuits like this one signal to companies (and their employees) that there is some doubt about the order’s constitutionality, accuracy, enforceability and impact. The present legal challenge also highlights that there is at least some possibility the order will be struck down or modified before OFCCP has a meaningful opportunity to enforce it. To that extent, companies may conclude that overhauling their diversity programs in response to the order would be premature.
  • Constitutional challenges may bring to the surface the level of public concern over a statute, ordinance, or executive order. An organization’s internal departments may benefit from context related to the possible views of EO 13950 of their markets (e.g., customers, clients, communities). To the extent this complaint’s arguments align with company-stated values, this development may address concerns regarding a company’s possible withdrawal from diversity and inclusion efforts.
  • A complaint seeking to strike down the order may result in disclosure of additional information about how the administration intends to apply the order. At a minimum, employers will have more insight than they do now. In addition, the lawsuit may result in an interpretation of the order that clarifies for contractors the scope of their trainings and whether they can continue (even if they require some modifications).

Guidance and legal information about EO 13950 is evolving quickly, and employers can expect many further developments in the coming days and weeks.

© 2020, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.
For more articles on civil rights, visit the National Law Review Civil Rights section.

Driven To The Edge: Saga Of Uber And Lyft Litigation Continues As Court Of Appeal Affirms Order Forcing Driver Reclassification

On Thursday, October 22, 2020, the California Court of Appeal denied Uber and Lyft’s request to overturn a recent California Superior Court’s preliminary injunction ordering the companies to reclassify their drivers as employees, rather than independent contractors. With the appeal garnering Amicus Curiae briefs from more than 50 different organizations—ranging from the U.S. Chamber of Commerce to Mothers Against Drunk Driving—the decision marks the most recent entry in the highly watched ongoing litigation against the companies over their compliance with A.B. 5. With California’s upcoming vote on Proposition 22, however, many are left wondering what, if any, impact the denial might have on Uber, Lyft, or the gig economy as a whole.

The litigation involves a recent complaint filed by the California Labor Commissioner alleging, in relevant part, that Uber and Lyft violated California’s recently enacted legislation, A.B. 5, by classifying their app-based drivers as independent contractors, rather than employees. Under A.B. 5, companies are required to classify their workers as employees unless the companies can show:

  • The workers are generally free from the company’s direction and control over how they perform their work;
  • The workers are not engaged in the type of work the company usually engages in in its regular course of business; and
  • The workers are engaged in an established trade or professions separate and apart from the company itself.

Whether or not Uber and Lyft’s app-based drivers satisfy this test has been a hotly debated point of dispute. For Uber and Lyft, however, the consequences of being found to not pass this test are potentially dire, as an adverse decision on this point would force the companies to restructure their entire business model by changing the classification of their app-based drivers from independent contractors to employees.

The appeal was motivated by a California Superior Court’s recent decision to issue a preliminary injunction that ordered Uber and Lyft to begin this reclassification process, even prior to the suit’s resolution—a decision signaling that the Superior Court believed the companies to be fighting an uphill battle they would ultimately loose. In light of the order, Uber and Lyft promptly appealed the decision, citing in relevant part, the grave harm that the order would cause by necessitating “substantial changes to…organizational structure, hiring processes, software tools and management systems, and company culture.” To adapt to these forced changes, the companies explained that they would likely need to “reduce the number of drivers” allowed to use the platform, “control the drivers’ time…by having them work scheduled shifts,” and “prohibit drivers…from unilaterally rejecting or cancelling rides.” Unfortunately, Uber and Lyft’s arguments ultimately fell on deaf ears, as the Court of Appeal affirmed the lower court’s ruling forcing the companies to reclassify their app-based drivers—although the order isn’t set to take effect for at least 30 days.

Proposition 22 could save Uber and Lyft from this fate long before those 30 or so days are up. Currently set for the November 3rd ballot, Proposition 22, would exempt certain gig-economy companies, like Uber and Lyft, from the strictures of A.B. 5 while simultaneously allowing for a new middle ground between independent contractor and employee classification. The ballot initiative would do this: (a) allowing app-based drivers to maintain their traditional independent contractor status; while also (b) providing them with new and added benefits not previously available to independent contractors—a compromise that could inhere to the benefit of both parties.

If successful, Proposition 22 could stop the California Labor Commissioner’s suit in its tracks. As a result, only time will tell if the recent Court of Appeal ruling will ultimately have any impact on Lyft, Uber, or the gig economy generally.

©2020 Greenberg Traurig, LLP. All rights reserved.
For more articles on Uber & Lyft, visit the National Law Review Corporate & Business Organizations section.

Why Employees at Religious Organizations May Not Be Protected Against Discrimination

In Demkovich v. St. Andrew the Apostle Parish, the Seventh Circuit recently held in a 2-1 decision that the ministerial exception does not preclude church ministerial employees from asserting hostile work environment claims.

Supreme Court Rulings Clarify Ministerial Exception in Employment Discrimination Cases

The decision in Demkovich was preceded by two significant Supreme Court cases that clarified the reach of the ministerial exception by explaining the test for determining which employees of a religious institution are considered ministers. In the 2012 case Hosanna-Tabor Evangelical Lutheran Church & School v. EEOC, in a unanimous decision, the Court recognized that the ministerial exception bars ministerial employees from bringing employment discrimination claims against their religious employers. The issue was whether a teacher in a religious school who taught secular subjects should be considered a minister. The Court held, based on several specific facts about the teacher’s duties and status, that she was in fact a minister in the church’s view and thus was barred from bringing her claim that she was fired because of her disability. The ministerial exception bars all types of employment discrimination claims brought by ministers alleging discrimination under Title VII, the Age Discrimination in Employment Act, and the Americans with Disabilities Act, at issue in Hosanna-Tabor. Although it appears to protect bad actors, the ministerial exception serves to ensure that the ecclesiastical authority to select and control who will minister to the faithful is not undermined by the state.

More recently, this past July, in a 7-2 decision in Our Lady of Guadalupe v. Morrissey-Berru, the Court held that the primary consideration in determining whether a claim was barred by the ministerial exception turned on the tasks the employee performed. Hence, in determining whether two parochial school teachers who taught fifth and sixth grade classes and claimed they were fired—in one instance because of her age and in the other because she had breast cancer—could assert an age discrimination or a disability claim, the court determined they could not assert such claims, because the tasks they performed were vital religious duties such that the ministerial exception would apply. Specifically, the Court held that both teachers educated their students in the Catholic faith and guided them to live according to that faith.

As explained in the Demkovich decision, these Supreme Court decisions analyzed termination decisions by the religious schools and held that courts could not allow ministerial employees to challenge such decisions regardless of the reasons for their terminations. Demkovich, on the other hand, would determine whether the ministerial exception should apply to bar hostile work environment cases that did not involve such tangible employment action.

Applying the Ministerial Exception in Hostile Work Environment Cases

In September 2012, Mr. Demkovich began working as the Music Director, Choir Director, and Organist for the Archdiocese of Chicago and St. Andrew Parish in Calumet City. His supervisor, Saint Andrews Pastor, Reverend Jacek Dada, often made derogatory comments about Mr. Demkovich’s being an openly homosexual man engaged to a same-sex partner. Mr. Dada called Mr. Demkovich a bitch and his nuptials a fag wedding. Mr. Dada, also aware that Mr. Demkovich suffered from diabetes and a metabolic syndrome that caused weight gain, made additional remarks about his weight—urging him to walk his dog to lose weight, complaining about the cost of keeping him on the parish’s health and dental insurance, and commenting that he needed to lose weight because Mr. Dada did not want to preach at Mr. Demkovich’s funeral. After enduring prolonged verbal abuse, Mr. Demkovich was finally terminated in September 2014 after marrying his same-sex partner.

Mr. Demkovich initiated a Title VII, ADA, and wrongful termination claim. The defendants, Saint Andrews Parish and the Archdiocese of Chicago, moved to dismiss arguing the suit was barred by the ministerial exception. The district court granted the defendant’s motion, holding all the claims were barred. Mr. Demkovich filed an amended complaint dropping his wrongful termination claim, but seeking damages for a hostile work environment caused by discriminatory remarks and insults based on his disability and sex. The district court dismissed his hostile work environment claims based on sex, sexual orientation, and marital status because even though the claims were not barred by the ministerial exception, their adjudication would lead to excessive entanglement in matters of faith. The district court certified the following legal question for review by the Seventh Circuit: “Under Title VII and the Americans with Disabilities Act, does the ministerial exception ban all claims of a hostile work environment brought by a plaintiff who qualifies as a minister, even if the claim does not challenge a tangible employment action?”

Hostile environment claims do not involve challenges to employment decisions made by religious officials, so the resolution of the question in Demkovich turned on whether litigating the claim would nevertheless result in excessive entanglement between church and state. The Demkovich court discussed both procedural and substantive entanglement. The court concluded there would be no undue procedural entanglement, which refers to the operation of the entire legal process. The church’s concern about the intrusive nature of litigation is shared by all litigants and thus concern of excessive entanglement would not bar hostile work environment claims by ministers any more than by the non-ministerial employees of a church. Next, the court discussed substantive entanglement, analyzing whether civil courts can decide substantive questions of law while avoiding issues of faith. The court discussed a variety of cases allowing claims against churches involving tax disputes, property disputes, tort claims, and application of the Fair Labor Standards Act to church employees. As in those cases, the court determined it was possible for a court to rule on a harassment claim without getting into matters of religious faith. Mr. Demkovich faced ongoing harassment in part due to his sexual orientation. The church argued that all comments made about Mr. Demkovich were motivated by church doctrine and the manner Reverend Dada expressed these beliefs were shielded from judicial scrutiny. The church also argued that haranguing Mr. Demkovich about his health was within his supervisor’s purview in implementing the proper formation of a member of the clergy. Although the district court had accepted the church’s argument in part, dismissing his sexual orientation claim, the court of appeals was not as persuaded that the risk of substantive entanglement was so great that hostile work environment cases should be dismissed without further inquiry. The court emphasized that Reverend Dada could have expressed the church’s views on gay marriage and obesity without being personally abusive, so the content of his religious reprimands did not excuse compliance with valid, neutral laws against harassment.

Courts Split on Reach of Ministerial Exception

The Seventh Circuit decision to narrow the reach of the ministerial exception deepens a split among the circuit courts of appeal. The Seventh Circuit now has joined the conclusion the Ninth Circuit reached in 2004 in Elvig v. Calvin Presbyterian Church, holding that the ministerial exception does not categorically bar ministers’ hostile work environment claims where the religious employer denies or disavows the conduct. At the same time, the Seventh Circuit has rejected the Tenth Circuit’s opposite conclusion in a 2010 case Skrzypczak v. Roman Catholic Diocese of Tulsa, holding that the ministerial exception bars all hostile work environment claims. Because of this lack of uniformity in applying the ministerial exception, ministerial employees who are victimized by any type of harassment constituting a hostile environment should consult an employment attorney to determine whether they can pursue a claim against their religious employer.

Katz, Marshall & Banks, LLP
For more articles on labor discrimination, visit the National Law Review Labor & Employment section.