Like Horseshoes and Hand Grenades - Close Is Enough for Arbitration Clause in Texas

Reversing the lower courts refusal to compel arbitration, the Texas Supreme Court today dealt with the scope of such agreements when a former employee sued for defamation. In re Dillard Department Stores, Inc. (Tex. 1/27/06). The arbitration agreement in question applied to "claims arising from employment that were violations of the law ... or personal injuries arising from termination. "

Plaintiff first argued that "personal injuries" does not include defamation. Unfortunately for her, the Court found that Texas courts have interpreted "personal injury" to include injury to reputation. More importantly, even if an argument could be made that the phrase pertained only to bodily injuries that would not be enough. The standard for interpreting the scope of an arbitration agreement, which the Supreme Court reiterates again today, is that it must be enforced "unless it can be said with positive assurance that an arbitration clause is not susceptible of an interpretation which would cover the dispute at issue."

Plaintiff also argued that since her defamation claim was based on post-termination comments, it was excluded since the arbitration agreement covered only "claims arising from employment". The Court:

We disagree. Martinez's claims are tied to her termination. Martinez alleges defamation based on comments made near the time of her termination and she seeks damages including "loss of earnings and earning capacity." Any damages in this case could be viewed as intertwined with her employment and termination, and any ambiguity as to whether "arising from" should mean intertwined, or occurring as a direct result from, is resolved in favor of arbitration.

Although the Court certainly didn't say it this way, given the mandate that a dispute is not covered by an arbitration agreement only if there is "positive assurance" that there is "no interpretation" that would include it, it appears that just like in horseshoes and hand grenades, close does count in Texas.

Retaliation - THE Most Serious Claim? Another MDV Might Make You Think So

And it would probably be hard to convince the management of Vacation Sales Associates, a subsidiary of The Breeden Company, otherwise, as they are digesting the end of a five day jury trial in federal court in Norfolk. The result of the retaliation claim of Pamela DePaoli as reported in the Virginian-Pilot, Jury awards $7.7 million in wrongful firing case.

Ms. DePaoli had been one of the leading times share sales people, earning upwards of $100,000 a year. When she was passed over for promotions three times in a row, she filed age and gender discrimination complaints with the EEOC. Sometime after her charge was filed she was terminated -- because her sales figures plummeted according to the company; in retaliation for filing the discrimination charges according to Ms. De Paoli. The first round goes to Ms DePaoli as the jury found retaliation and awarded her $2.5 million in compensatory damages, $5 million in punitive damages and $200,000 in back pay.

Plaintiff's counsel John Loeschen of Roanoke said he told the jury "you need to award an amount that's going to give people notice." Mission accomplished.

Major Chamber of Commerce Victory - Now Back On Hold

The 9th Circuit yesterday granted hearing en banc on a case previously touted as a major legal victory by the United States Chamber of Commerce, way back in 2002 when the Chamber obtained a favorable district court ruling that California legislation prohibiting spending of any state funds to "promote, assist or deter" union organizing (relatively neutral sounding words that overlay a complex piece of statutory regulation designed to force neutrality on many employers regardless of whether state funds are actually used for such purpose) was pre-empted by the NLRA. The legislation, then known as AB 1889, was enacted in 2000.

From that original opinion to yesterday's ruling has not been an easy or quick course. The first panel decision, unaminously affirming the district court was decided in 2004. After a motion for rehearing was filed, a 2nd panel opinion, this time a split decision, also found the statute preempted. That opinion, Chamber of Commerce v. Lockyer (9th Cir. 9/5/05) has now been relegated to the legal dustbin except as it may be adopted by the en banc court.

NLRA premption is one of those murkiest of legal areas and one that has received more than its fair share of Supreme Court attention over the years. At the Cuttiong Edge of Labor Law Preemption: A Critique of Chamber of Commerce v. Lockyer, an article by Stephan Befort, of the University of Minnesota Law School, written after the district court opinion illustrates the complexity of this area. Professor Befort, quite presciently it now appears, argued that the 9th Circuit and "perhaps ultimately the Supreme Court should seize this opportunity for 'litigating elucidation' to add policy-driven clarity to the frontier of NLRA preemption analysis."

While the 9th Circuit still has a turn at the bat thanks to yesterday's ruling, no doubt the Supreme Court will at least have a chance to weigh in if it so desires.

Timeline to an MDV

9/11

11/01 Transportation Security Administration created as part of the Dept. of Transportation

03/03 TSA moved to new Department of Homeland Security

10/03 Betty Younis terminated by TSA

07/04 Younis files retaliation lawsuit under Title VII against TSA in W.D. of Kentucky

01/06 Federal jury awards fired TSA employee $1.15 million

According to the AP report, Younis complained about not receiving the same pay as a male employee and was then isolated with no responsibilites for 11 weeks before she was terminated. Her lawyer David Leightty -- Younis "saw this as a victory for the little person."

Just a little over 4 years after inception to your first MDV -- welcome to the real world of being an employer.

What Was This Mother Thinking?

Sometimes cases grab your attention just because 0f the conduct of those involved. In affirming summary judgment for the employer in a sexual harassment/retaliation case the 11th Circuit plowed no new legal ground. Instead it found the plaintiff, a seasonal cashier, had failed to establish a causal relation between a drop in hours after Christmas, which she had been told would happen when she was hired for the holiday season, and sexual harassment by a manager, which plaintiff conceded did not rise to the level of severe or pervasive. Cotton v. Cracker Barrel Old Country Store (11th Cir. 1/4/06) [pdf].

Although the opinion doesn't state how old the plaintiff was, what it does provide is the testimony the plaintiff's mother gave about the conduct of the harassing manager BEFORE her daughter interviewed and accepted the position:

Walker [harassing manager] had given Kourtney [plaintiff] and her mother [Pam] free food at the restaurant, put his hand on Pam Cotton’s leg, and invited Pam Cotton to spend a weekend with him in Gulf Shores. Pam Cotton stated that, when Walker asked Cotton to interview for a position at Cracker Barrel, he said to Kourtney “make sure you wear something sexy to the interview.” Cotton’s mother stated that just before the interview Walker “jokingly said . . . [Kourtney Cotton] can get all the hours she wants if [Pam Cotton] [went] out with [Walker], and stuff like that.” Pam Cotton also testified that, before the incident in the stockroom, Walker invited her to a Cracker Barrel storage building and promised to give her “anything [she] wanted out of there.”

Certainly advance notice of one's crude behavior does not excuse the manager's conduct in any sense, legal or otherwise, but you have to wonder -- what was this mother (and daughter) thinking when she accepted the position?

SOX - Strictly Domestic According to 1st Circuit

Finding itself the first appellate court to address the question, the 1st Circuit had no difficulty in finding Sarbanes Oxley's whistleblower protection under Section 806 has no extraterritorial application. Carnero v. Boston Scientific Corp. (1st Cir. 1/5/06). The Court relied on the Supreme Court's presumption that laws passed by Congress are limited to the territorial jurisdiction of the United States absent a clearly expressed contrary intent, first articulated in Foley Bros., Inc. v. Filardo, 336 U.S. 281, 285 (1949). The Court affirmed the dismissal of the the SOX claim of an employee claiming he had been improperly terminated for reporting that two Boston Scientific Corp. Latin American subsidiaries, by which he was directly employed, were creating false invoices and inflating sales figures.

Although clearly important for those companies with foreign operations, the opinion also addressed a much broader reaching question -- would the conduct have been covered assuming it had occurred within the United States. The argument the Court seemed to be going out of its way to address, since it was not raised by either party, was whether the fact that Carnero was employed by subsidiaries of Boston Scientific Corp., not the parent company, would preclude coverage since the whistleblowers protected under the literal language of SOX are "employees of publicly traded companies."

Although Carnero alleged he was employed by the publicly traded company, due to its oversight of its two subsidiaries and his contacts with it, the Court found there might well be an alternative way to liability:

Moreover, apart from that, the fact that he was employed by BSC's subsidiaries may be enough to make him a BSC "employee" for purposes of seeking relief under the whistleblower statute. The DOL regulations pertaining to the whistleblower provision of the Sarbanes-Oxley Act define "employee" as someone "presently or formerly working for a [publicly-traded] company or company representative" (emphasis supplied). The latter term is defined as including a "contractor . . . or agent of a company." See 29 C.F.R. § 1980.101 (2005). If BSA and BSB were agents of BSC, as seems quite possible, their own employee would fit this definition of the parent's "employee." Hence Carnero, by virtue either of his own asserted contacts with BSC or his direct employment by its subsidiaries, or both, may well be an "employee" of BSC for purposes of 18 U.S.C. § 1514A.

Although the comment may be dicta, it should give pause to those who had hoped for a more restricted reading of SOX.

College Football - Two Teams Are Left Playing

Dateline - Austin - Home of the Texas Longhorns.

Blogging (and life) will resume following the game (and an appropriate period for celebrating.)