Appeals Court SWATs Free Speech for Police

On the bright side, at least he’s still alive.

A panel of the U.S. District Court of Appeals for the Ninth Circuit in San Francisco this week reversed a jury verdict in favor of Brian Hagen, a Eugene Oregon police officer who was removed from the  department’s K-9 team after expressing safety concerns following several  instances involving the accidental discharge of weapons by members of the department’s SWAT team.

The panel ruled that a “public employee [who] reports departmental-safety concerns to his or her supervisors pursuant to a duty to do so ….does not speak as a private citizen and is not  entitled to First Amendment Protection.”

After three instances of accidental discharge of weapons by SWAT team officers in two years, one of which resulted in the actual shooting of a SWAT team member, Hagen became concerned about safety issues related to the K-9 team working with the SWAT team.  When he  repeatedly pressed for information about improvements to the SWAT team’s weapons handling, he was transferred from the K-9 team.

After a trial, a jury unanimously agreed that the City  had deprived Hagen of his First Amendment right to free speech under the U.S. Constitution by retaliating against him for expressing safety concerns. The jury awarded Hagen $50,000 in compensatory damages and $200,000 in punitive damages.

A three-judge panel of the appeals court ruled on Dec. 3 that the lower court improperly denied the City’s  motion for Judgment as a Matter of Law. The appeals court reversed the jury verdict, vacated the damages, and remanded the case back to the lower court with instructions to enter judgment in favor of the defendants on each of Hagen’s claims. 

The  appeals court agreed with the City’s  argument that Hagen failed to establish that he spoke as a private citizen, rather than as a police officer who was “required by [the] City and police department to report safety concerns.”

 The appeals court said Hagen was required to express concerns about officer safety internally and within the police chain of command. Therefore, it said, even construing all evidence in Hagen’s favor, Hagen did not act as a private citizen who was  eligible to First Amendment protection.

The case is Hagen v. City of Eugene, Peter Kerns, Jennifer Bills, Thom Eichhorn, No. 12-35492.

Grocery Store Arbitration Policy “Unconscionable”

Policy Rigged to Protect Employer

Employees today are  increasingly being forced to sign one-sided arbitration agreements that are rigged to protect the employer if something goes wrong.

A panel of the U.S. Court of Appeals for the Ninth Circuit in San Francisco this week put its “foot” down by refusing to enforce a take-it-or-leave-it arbitration agreement that Ralphs Grocery, which is  part of The Kroger Co. of Ohio, required applicants for employment to sign.

The appeals court said the agreement was  both procedurally and substantively “unconscionable” under California contract law. In fact, the panel said,  the agreement was unjustifiably one-sided to such an extent that it “shocked the conscience.”

The panel rejected Ralphs argument that the Federal Arbitration Act (FAA) preempts state law and therefore the policy had to be enforced even if it was unconscionable. The appellate panel said its unconscionability holding is not preempted because it applies to contracts generally and does not disproportionately affect  arbitration agreement.

“If state law could not require some level of fairness in an arbitration agreement, there would be nothing to stop an employer from imposing an arbitration clause that, for example, made its own president the arbitrator of all claims brought by its employees,” said the panel.

Ralphs had sought to compel individual arbitration of a claim by former Zenia Chavarria, a former deli clerk who filed a class action lawsuit against Ralphs’ alleging violations of the California labor laws.  Chavarria had worked at Ralphs for about six months.

The appellate panel cited the following problems with Ralphs arbitration policy:

  •  Signing the agreement was a condition of applying for employment and was presented on a “take it or leave it” basis.
  •  The terms of the arbitration agreement were not disclosed to Chavarria until her employment orientation, three weeks after she had agreed to be bound by the policy and after it went into effect.
  •  The policy’s arbitrator selection process always produces an arbitrator proposed by Ralphs in employee-initiated arbitration proceedings. The policy requires the arbitrator to be a retired state or federal judge and explicitly prohibits the use of an administrator from the American Arbitration Association (“AAA”) or the Judicial Arbitration and Mediation Service (“JAMS”).  The court noted that the AAA and JAMS  have rules and procedures to select a neutral arbitrator.
  •  Ralphs’ arbitration policy required the arbitrator impose significant costs on the employee up front and severely limited the authority of the arbitrator to allocate arbitration costs in the award. The arbitrators had to apportion their fees equally between Ralphs and the employee. The court said this  arbitrator-fee-apportionment provision had the effect of pricing employees out of the dispute resolution process regardless of the merits of their claim.

The evidence showed that  fees for a qualified arbitrator under Ralphs policy ranged from $7,000 to $14,000 per day. Ralphs’ policy requires that an employee pay half of that amount—$3,500 to $7,000—for each day of the arbitration just to pay for her share of the arbitrator’s fee. “This cost likely dwarfs the amount of Chavarria’s claims,” said the appeals court.

Basic contract law holds that contracts can be invalidated for fraud, duress, or unconscionability.

See Chavarria v. Ralphs, No. 11-56673, U.S. 9th Circuit Court of Appeals, Oct. 28, 2013.

Tap on Wrist for ‘Egregious’ Sexual Harassment

Ct Slashes Jury’s Punitive Award

A decision by the U.S. Court of Appeals for the Ninth Circuit  this week raises questions about  the way courts calculate damage awards in discrimination cases.

A three-judge panel of the San Francisco-based court reduced what started out as a $868,750 jury award for punitive damages in a sexual harassment case to $125,000.

The defendant is the American Smelting and Refining Company (ASARCO),  a Sahuarita, Arizona company owned by Grupo Mexico Corp. that is the third largest copper producer in the US, with estimated earnings in excess of $800 million.

The appeals court agreed that ASARCO employee Angela Aguilar was the victim of “particularly egregious” sexual harassment while working for ASARCO from December 19, 2005 to November 8, 2006.  However, the court said it was required to lower the award because the ratio of punitive damages was excessive compared to the $1 the jury awarded Aguilar for compensatory damages .

Punitive damages are supposed to deter the defendant from engaging in future similar conduct. In other words, the punitive damages should be significant enough to get an employer’s attention so that it will change the illegal practices that led to the damages in the first place.   Will a $125,000 punitive damage award compel a billion dollar corporation to eliminate serious  sexual harassment at the Arizona plant? Not likely.

Statutory cap

The jury’s original punitive damage award was actually hit with a double whammy.

The lower court immediately reduced the $868,750 punitive damage assessment to $300,000 pursuant to a statutory cap placed on such awards by the U.S. Congress.  However, the  lower court refused to further reduce the punitive damage award because of the egregious nature of the harassment suffered by Aguilar.  ASARCO had argued the award should be reduced to $2,500.

The appeals court agreed that ASARCO’s conduct supported  a “very large punitive award” but said the U.S. Supreme Court ruled in 1996 that punitive damages must bear a “reasonable relationship”  to compensatory damages under the due process clause of the U.S. Constitution.  If left to stand, the appeals court said, the ratio of $300,000 in punitive damages to $1 in compensatory damages would be among the highest (if not the highest) ratio since 1996.

“The Supreme Court has repeatedly emphasized the importance of the ratio inquiry and we cannot set it aside … [W]e conclude that the highest punitive award supportable under due process is $125,000, in accord with the highest ratio we could locate among discrimination cases.”

One member of the three-judge appellate panel, Judge Andrew D. Hurwitz, issued a partial concurrence/dissent, arguing the court should affirm the earlier $300,000 judgment because it fell within the statutory cap on damages in Title VII cases.

The Harassment

Here’s a very abbreviated account of what Aguilar experienced while working  at ASARCO:

  • Her supervisor, a very large man, asked her out every day and refused to train her or help her when she rejected him. When she asked for help, he would press up against her. She was afraid he might rape her. ASARCO’s HR Department and said there was nothing it could do.  She transferred to another unit.
  • There was no functioning women’s restroom in the building so the company rented a “porta-potty” for Aguilar’s use.  It was vandalized repeatedly with pornographic graffiti directed at her. She reported it to HR and the mill supervisor in 2006 but photos showed that visible pornographic graffiti remained on the toilet in 2007.
  • Another supervisor told Aguilar “your ass is mine” and often gave her conflicting orders, snapping his fingers at her, telling her to watch herself, yelling at her and threatening her with termination.  Needless to say, management did nothing when Aguilar complained. ASARCO maintained in the litigation that the supervisor’s behavior was not motivated by sex but instead by his general boorishness toward everyone.

Aguilar finally quit.

The case, State of Arizona v. ASARCO, was initially filed by Arizona on behalf of Aguilar and the state. Aguilar subsequently filed her own lawsuit.

SLAPP Down: Trump University

Trump you're firedA federal appeals court this week taught Trump University and its founder,  Donald “You’re Fired” Trump, an important lesson about bullying.

A three-judge panel of the U.S. Court of Appeals for the Ninth Circuit in California reinstated a motion to strike a defamation claim filed by Trump University against a former student, Tarla Makaeff,  in a class action lawsuit that accuses Trump University of being an elaborate scam.

Makaeff said the defamation claim violated California’s Anti-SLAPP (Strategic Lawsuits Against Public Participation) statute and was intended to deter her from pursuing her right to free speech. SLAPP refers to lawsuits that masquerade as ordinary lawsuits  but are intended to deter ordinary people from exercising their political or legal rights or to punish them for doing so.

The appeals court also revered a lower court ruling that held Trump University is not a public figure. The appeals court said Trump University, is a “limited public figure” that is subject to a heightened burden of proof in a defamation case.  Trump University must show by clear and convincing evidence that Makaeff’s alleged defamatory statements were made with “actual malice”  –  with knowledge of their falsity or reckless disregard for the truth.

This ruling makes it very unlikely that the university can prevail in the defamation claim.

Trump, a real estate magnate who stars in the TV show, The Apprentice, founded Trump University as a private, for-profit entity, to teach his “insider success secrets.”    Makaeff  attended university seminars that encouraged members of the public to participate in the market for foreclosed properties, which had grown substantially in the wake of the 2007 financial and mortgage crisis.  After paying more than $5,000 to the university, Makaeff, in 2009, began accusing the university in letters and Internet postings of deceptive business practices.

Makaeff said she  wrote her bank and the Better Business Bureau and posted statements on the Internet  “to alert other consumers of my opinions and experience with Trump University,” and to “inform other consumers of my opinion that Trump University did not deliver what it  promised.”   

The appellate panel said Trump University became a “limited purpose public figure” when it conducted an aggressive advertising campaign in which it made controversial claims about its products and services. This campaign included online, social media, local and national newspaper, and radio advertisements for free introductory seminars. Furthermore, Donald Trump denied the university engaged in the practices that were the subject of Makaeff’s alleged discriminatory statements in the forward of  his book, Wealth Building 101.

The appeals court  panel said it had “little difficulty” concluding that a public controversy existed over Trump University’s educational and business practices when Makaeff made her statements about them.  “ By 2007 and 2008, disgruntled Trump University customers were posting complaints on public Internet message boards,”  the panel notes.

“To be clear: Trump University is not a public figure because Donald Trump is famous and controversial … Trump University is a limited public figure because a public debate existed regarding its aggressively advertised educational practices,” the court ruled.  “[H]aving traded heavily on the name and fame of its founder and chairman, Trump University was in no position to complain if the public’s interest in Trump fueled the flames of the legitimate controversy that its business practices engendered.