Ragone v. Atlantic Video, No. 08-4666 (2d Cir. Feb. 17, 2010); DeRosa v. National Envelope Corp., No. 08-2562 (2d Cir. Feb. 17, 2010)

| Feb 16, 2010 | Daily Developments in EEO Law |

Today, a pair of Second Circuit opinions: the first affirming an order compelling arbitration of a Title VII, state- and NYC-law sex harassment and retaliation case, but with an asterix; and the other reversing summary judgment in an ADA case, where the district court erroneously applied the rule of judicial estoppel to a state disability benefit form.

Ragone v. Atlantic Video, No. 08-4666 (2d Cir. Feb. 17, 2010):  The plaintiff begins the appeal, inauspiciously, by belaboring the facts of her case, though (as the Second Circuit reminds us) the arbitration issue “takes no account of the merits of claims asserted in the complaint.” She had a written arbitration agreement with one defendant, Atlantic Video (AVI), but not with a second defendant, ESPN, who was a client of AVI and used the plaintiff’s services as a make-up artist. The harassment alleged was committed by male ESPN talent who used the studio. The district court compelled arbitration, relying in part on the defendants’ express waiver of provisions of the contract that might otherwise be deemed substantively unconscionable (such as shortening the limitations period, imposing loser-pays fee shifting, and limiting appeal rights).

The Second Circuit affirms, holding that it was unnecessary to consider whether the offensive terms were severable where, as in this case, the employer did not seek to invoke them.

“The severability clause . . . has no relevance to this appeal. According to its terms, the severability clause applies ‘[i]n the event that any provision of this Agreement, or the application of such provision shall be held by a court of competent jurisdiction to be contrary to law . . . .’ The district court, however, did not hold any provision of the arbitration agreement to be contrary to law. Rather, it resolved all questions of potentially unenforceable terms by holding that these terms were either moot, would be interpreted in a manner consistent with the FAA, or had been waived. Thus, the district court did not trigger any application of the severability clause and, as a result, the question of whether or not the clause can “save” the arbitration agreement is not properly raised on this appeal.”

Moreover, applying New York law, the court sanctions the after-the fact waivers:  “New York courts have accepted offers by parties to waive the enforcement of certain provisions of arbitration agreements, and have evaluated those agreements as modified by the parties’ after-the-fact waivers. Because unconscionability is an equitable defense to the enforcement of harsh or unreasonable contract terms, a party cannot complain when the defendant through its waivers declines to enforce any potentially unconscionable term.” [Citations omitted.] Nevertheless, the panel issues a “note of caution” that the employee’s unconscionability argument might have succeeded had the employer attempted to invoke the suspect clauses: “had the defendants not waived enforcement, it is at least possible that Ragone would be able to demonstrate that these provisions were incompatible with her ability to pursue her Title VII claims in arbitration, and therefore void under the FAA.”

Finally, the panel affirms that the arbitration agreement encompasses claims against non-signatory ESPN:

“In this case, there is likewise no question that the subject matter of the dispute between Ragone and AVI is factually intertwined with the dispute between Ragone and ESPN. It is, in fact, the same dispute: whether or not Ragone was subjected to acts of sexual harassment which were condoned by supervisory personnel at AVI and ESPN. Moreover, . . . there is the presence of the further necessary circumstance of a relationship between Ragone and ESPN that justifies sending this entire dispute to arbitration. Ragone admits that she knew from the date of her employment by AVI that she would work with and be supervised by ESPN personnel in the ordinary course of her daily duties. This knowledge that she would extensively treat with ESPN personnel is sufficient to demonstrate the existence of a relationship between Ragone and ESPN that allows the latter to avail itself of the arbitration agreement between Ragone and AVI. Accordingly, we affirm the district court’s conclusion that Ragone is properly estopped from avoiding arbitration with ESPN.”

DeRosa v. National Envelope Corp., No. 08-2562 (2d Cir. Feb. 17, 2010): The unanimous decision in Cleveland v. Policy Management Systems Corp., 526 U.S. 795 (1999), ought to have solved the issue of when to apply judicial estoppel to an employee’s claim for government disability benefits, but the issue recurs in the case law. Here, the employee worked in call center until an accident left him disabled; the employer allowed him an accommodation for two years (to work at home), but — as so often occurs in these cases — new management came in and withdrew the accommodation.  He was terminated because he could not return to work. The company, according to the summary judgment record, encouraged the employee to seek state disability benefits.  And so:

“After his termination Deros applied for Social Security Disability Insurance (‘SSDI’) benefits. DeRosa’s application, filed November 2004, included the sentences ‘I became unable to work because of my disabling condition on October 13, 2004’ and ‘I am still disabled.’ In a subsequent portion of his application, Deros answered the question, ‘[h]ow do your illnesses
injuries or conditions limit your ability to work?’ He replied ‘[c]an’t write, type, sit, stand, walk &lift, reach, grab, bend.’ DeRosalso explained that his disability caused a change in his job duties in that he ‘could no longer commute, had to work from home.’ A different form, issued by the New York State Office of Temporary and Disability Assistance (‘NYSOTDA’), and signed by DeRosa in December 2004, included the topic ‘Social Activities’ and within that topic asked ‘Do you spend time with others? (In person, on the phone, on the computer, etc.) [] YES []NO If ‘YES’, describe the kinds of things you do with others.’ DeRosa checked ‘yes’ in answer to the question, and elaborated by writing ‘family and social gathering. Spoke on the phone and worked with computer.’ Within the same topical group of questions, the form included the question ‘Describe any changes to your social activities since your illnesses, injuries, or conditions began.’ Deros answered that he was ‘no longer able to speak on phone or work with computer [due] to pain.'”

The district court held that the employee’s answers on these forms estopped him from arguing that he could perform the essential functions of the call-center job.  The Second Circuit, though, reverses, holding that there was no fundamental conflict between his applications for benefits and his litigation position, and that they could be logically reconciled:

“[T]he context in which a statement is made is important. Here, DeRosa stated that the work effect of his disabilities was that he ‘could no longer commute’ to work, but ‘had to work from home.’ Indeed, he did so for two years until his employer withdrew the home-work option. It was only in response to a question about his social activities that DeRosa made the statements relied on to support estoppel. Fairly construed, those statements related to his social interactions, not his capability to perform the essential functions of his job if permitted to work from home. With the context of the statements thus understood, the apparent contradiction between DeRosa’s statements that he is limited in social circumstances, but still able to perform the conditions of his employment with a no-longer-available accommodation, is reconcilable. DeRosa may well have experienced significant pain when he used the computer and phone while he worked for National Envelope from home, but he may have been able to endure that much pain, particularly as it was necessary to maintaining his job with the granted accommodation of home – work. His response to the social question may have indicated only that the work experience left him with no ability to tolerate further pain from social, optional activities. The response did not indicate an inability – or an unwillingness – to work from home despite some pain.”

While acknowledging that the forms could be construed, as the employer urged, to be in conflict with the employee’s assertion that he was qualified to perform the essential functions of his former job, the issue was one for a jury rather than calling for the hammer of judicial estoppel.

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