The lead case today will be of particular interest to employment litigators, but the “Quick Hits” also involve the arbitrability of claims brought to FINRA; the scope of the FAA’s partiality basis for vacatur; and, in a subject dear to all arbitrators, arbitrable immunity.
Title VII and the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (“EFAA”)
The predominant issue presented to date under the EFAA has dealt with the application of the Act’s start date to the facts of the particular case. Doe v. Saber Healthcare Group, 2024 U.S. Dist. LEXIS 94955 (M.D. Pa. May 29, 2024), however, addresses the broader question of what type of claim falls within the statute’s parameters.
Plaintiff in Doe, a lesbian of color, alleged that defendants treated her differently from other employees because of her sexual orientation. In the complaint, she alleges harassment and a hostile work environment, wrongful discharge, and compensation discrimination in violation Title VII of the 1964 Civil Rights Act and Pennsylvania’s Equal Pay Act. Defendants moved to compel arbitration under their Mutual Dispute Resolution Agreement, which called for arbitration of claims for the violation of federal statutes and sexual harassment. District Judge Munley finds that the arbitration agreement is valid and that Doe’s claims fall within the scope thereof.
However, the court finds that the EFAA bars arbitration. Applying the Third Circuit’s standard in Guidotti v. Legal Helpers Debt Resolution, LLC., 716 F. 3d 764 (3rd Cir. 2013), Judge Munley treats the defendants’ request to compel as a motion to dismiss under the standards of Fed. R. Civ. P. 12(b)(6). Thus, she accepts the plaintiff’s allegations as true.
The court, then, parses the definitions contained in the EFAA. One of plaintiff’s claims is that a patient assaulted her. Since the incident did not fall within one of the defined “sexual acts” enumerated in the act, see 18 U.S.C. § 2246(2), the court holds that the EFAA’s prohibition against mandatory arbitration of “sexual assault disputes” does not apply. However, Judge Munley denies the motion to compel arbitration by virtue of the EFAA’s prohibition of mandatory arbitration of “sexual harassment dispute[s].” She holds that Doe’s supervisor’s and co-employees’ deprecating response to the assault and changes in her working conditions after her supervisor learned of plaintiff’s fiancée established a hostile work environment. Judge Munley holds that such conduct violates Title VII and, therefore, since the EFAA defines a “sexual harassment dispute” as “a dispute relating to conduct that is alleged to constitute sexual harassment under applicable Federal, Tribal, or State law,” the EFAA applies. Further, she holds that the court, not an arbitrator, must resolve the entire case, not just the sexual harassment claims, citing 9 U.S.C. § 402(a)(‘no predispute arbitration agreement . . . shall be valid or enforceable with respect to a case . . . which relates to the sexual harassment dispute.”)(bolding in opinion).
The court goes through a three-part analysis of the applicability of the EFAA – the formation of the agreement, a consideration of whether the dispute falls within the scope thereof, and a finding of whether the EFAA applies to the allegations. Thus, it provides a good framework for considering a motion to compel in a dispute which may be subject to the Act. However, it is also a good case for the notebook of a plaintiff’s lawyer who wants a broad application of the statute’s applicability.
Quick Hits –
Arbitral immunity
In Anderson v. T-Mobile, 2024 U.S. Dist. LEXIS 94404 (W.D. Tenn. May 28, 2024), Judge Parker holds that arbitral immunity, which provides protection when “the arbitrator is acting in his official capacity to resolve issues” also protects an arbitral institution. Therefore, he holds that the AAA is immune from suit for allegedly failing to provide an arbitrator, since that function is “within the AAA’s duties.”
FINRA’s Refusal to Accept an Arbitration
Gaskill v. Securities and Exchange Commission, 2024 U.S. App. LEXIS 12845 (D.C. Cir. May 28, 2024)(per curiam)(Srinivasan, Chief Judge, and Henderson and Rao, Judges) upholds the SEC’s decision that FINRA’s Director acted properly in denying access to the FINRA arbitration process, where he found that the purpose of the proposed proceeding was to collaterally attack an earlier award. Arbitration panels had previously refused to expunge customer complaints from the plaintiffs’ BrokerChecks. In a second application, the brokers claimed that those prior awards were “based on false accusations. . . .” Since “all awards rendered by the Code are final and are not subject to review or appeal,” see FINRA Rules 12904(b); 13904(b), the court holds that the Director acted within his authority in rejecting the new arbitration demands, FINRA Rules 12203(a); 13203(a).
Arbitrator Partiality; Improper Execution of Arbitrator Duties; Federal Arbitration Act
In Subway International, B.V. v. Subway Russia Franchising Co., LLC., 2024 U.S. Dist. LEXIS 94901 (S.D. N.Y. May 28, 2024)(Rakoff, J.), Plaintiff sought to vacate an adverse award arising out of Subway’s termination or nonrenewal of its Master Franchise Agreement, alleging that the arbitrator’s rejection of certain claims and refusal to credit certain evidence demonstrated her partiality in favor of SIBV. The case is fact-specific, but demonstrates the difficulty of using the partiality and improper execution provisions of the FAA as a backdoor for challenging the merits of an arbitrator’s award. Judge Rakoff denies the motion to vacate and confirms the award.
Have a good weekend.
David Reif, FCIArb
Reif ADR
Dreif@reifadr.com
Reifadr.com
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