2002-18

UNITED STATES COURT OF APPEALS - NINTH CIRCUIT

A. Employers May Require Employees To Sign Agreements To Arbitrate Title VII Claims As A Condition Of Employment.

Overturning one of its own precedents, the Ninth Circuit has held that employers may require employees to sign agreements to arbitrate Title VII claims as a condition of their employment. (EEOC v. Luce, Forward, Hamilton and Scripps, 2000 Daily Journal D.A.R.10089 (9/3/02).)⁽¹⁾ This opinion overrules the much-criticized Ninth Circuit decision in Duffield v. Robertson Stephens & Co., (9th Cir. 1998) 144 F.3d 1182 that held employers could not compel prospective employees to give up their right to litigate a Title VII action in a judicial forum as a condition of employment.

The law firm of Luce, Forward, Hamilton, & Scripps refused to hire plaintiff Donald Lagatree as a full time legal secretary after he refused to sign an agreement to arbitrate claims arising from his employment. The Equal Employment Opportunity Commission ("EEOC"), on behalf of Lagatree, sued Luce Forward for retaliation in violation of Title VII, the Americans with Disabilities Act ("ADA"), the Age Discrimination in Employment Act ("ADEA"), and the Equal Pay Act ("EPA").⁽²⁾ The EEOC asserted that (1) Duffield precluded Luce Forward from requiring Lagatree to sign the arbitration agreement, and (2) Luce Forward's refusal to hire Lagatree constituted unlawful retaliation against him for asserting his constitutional right to a jury trial. Based on Duffield, the district court enjoined Luce Forward from requiring employment applicants to arbitrate Title VII claims and from enforcing existing agreements to arbitrate such claims.

The Ninth Circuit panel was critical of the analysis and holding in Duffield, but stated that it could not reconsider or overrule a decision of a prior three judge panel unless an intervening Supreme Court decision undermined an existing precedent in the Ninth Circuit. The court found the requisite precedent in Circuit City Stores v. Adams (2001) 532 U.S. 105, an opinion that "implicitly overruled Duffield." The court asserted that "the Supreme Court [in Circuit City] so directly undermined the reasoning behind Duffield, that we conclude it has lost its status as valid precedent." Although Duffield was not expressly repudiated in Circuit City, the court held that Circuit City's "unambiguous proclamation that 'arbitration agreements can be enforced under the FAA without contravening the policies of congressional enactments giving employees specific protection against discrimination prohibited by federal law' cannot be reconciled with Duffield's holding that Congress intended Title VII, one such 'congressional enactment,' to preclude compulsory arbitration of discrimination claims."

The Ninth Circuit emphasized that, under Circuit City, the right to a judicial forum is not a substantive right afforded by statute. When a party agrees to arbitrate a statutory claim, it agrees to resolve the claim in an arbitral, rather than a judicial forum. Finding that Duffield no longer remained good law, the court held that Luce Forward could require compulsory arbitration as a condition of employment and could enforce the agreements against current employees as long as the agreements complied with the principles of traditional contract law, including the doctrine of unconscionability.

The court next addressed the EEOC's claim that Luce Forward retaliated against Lagatree by not hiring him after he refused to sign the arbitration agreement. To prevail on the retaliation claim, the EEOC had to prove that (1) Lagatree engaged in a protected activity, (2) he suffered an adverse employment decision, and (3) there was a causal link between the protected activity and the adverse employment decision. The court found that Lagatree could not establish that his refusal to sign the arbitration agreement was a protected activity.

Lagatree's refusal was not protected opposition conduct under Title VII's statutory "opposition clause" that prohibits employers from retaliating against an applicant or employee for opposing any practice made an unlawful employment practice. Based on the legal precedent at the time Lagatree refused to sign the compulsory arbitration agreement, the court found he could not have reasonably believed that Luce Forward's arbitration policy was an unlawful employment practice. Likewise, his refusal to sign the agreement did not constitute participation in a statutorily authorized proceeding. The EEOC argued that while Lagatree did not file or threaten a civil action, he reserved his right to bring a civil action in a judicial forum by refusing to sign the agreement. The court dismissed this argument finding that none of the federal anti-retaliation statutes afforded a right to a judicial forum.

B. Airline Company's Summary Judgment Reversed in Case Where The Employee's Website Was Accessed Under False Pretenses.

The Ninth Circuit has overturned a grant of summary judgment in a case where Hawaiian Airlines, Inc.'s management accessed a pilot's website allegedly without authorization. (Konop v. Hawaiian Airlines, Inc. (2002) Daily Journal D.A.R. 9709 (8/23/02).)⁽³⁾

Robert Konop, a pilot for Hawaiian Airlines, created a website where he posted bulletins critical of the airline, its officers, and the incumbent union, the Air Line Pilots Association ("ALPA"). Konop controlled access to the website limiting its use to certain individuals, mostly pilots and other employees of Hawaiian. Two pilots who were included on a list of authorized users, Gene Wong and James Gardner, gave Hawaiian's vice president, James Davis, permission to use their names to access the website. When Konop learned that the airline was accessing the website, he sued the employer under the federal Wiretap Act, the Stored Communications Act ("SCA"), the Railway Labor Act ("RLA"), and state tort law. Konop also alleged that Hawaiian placed him on medical suspension in retaliation for his opposing the proposed labor concessions, in violation of the RLA. The district court granted summary judgment to Hawaiian on all of the claims except for retaliation. Hawaiian prevailed on the remaining claim at trial.

With respect to the Wiretap Act claim, an offense occurs if one intentionally "intercepts" any wire, oral, or electronic communication. The court found that the website was an "electronic communication" and website owners such as Konop create an electronic document and send it to a server where it is stored. The appellate court held that for a website to be "intercepted" in violation of the Wiretap Act, it must be acquired during transmission, not while it is in electronic storage. The court concluded that Davis's conduct did not constitute an interception and affirm summary judgment on this claim.

It is a violation of the SCA to intentionally access "without authorization a facility through which electronic communication service is provided . . . and thereby obtain []... access to a wire or electronic communication while it is in electronic storage in such system." An exception from liability under the SCA, however, occurs where the conduct is "authorized . . . by a user of that service with respect to a communication of or intended for that user." Although Wong and Gardener consented to Davis using Konop's website, the court never made a finding whether Gardener and Wong "were users" under the act. The statute defines a user as one who uses the service and is duly authorized to do so. Since there was no evidence whether Wong had ever used the website and the evidence as to Gardner was unclear, the court concluded that neither Wong nor Gardener was a user at the time Davis was authorized to view the website. Accordingly, the court reversed on this claim.

The court also reversed Hawaiian's summary judgment on the RLA claims. Konop's RLA claims are based on Hawaiian's alleged violation of the Act by (1) accessing Konop's website under false pretenses, (2) disclosing the website's contents to the rival union faction, and (3) threatening to sue Konop for defamation based on statements on the website. The district court dismissed these claims finding that it lacked jurisdiction because the dispute was grounded in the collective bargaining agreement. The appellate court, however, found that these allegations were independent violations of the RLA and were not dependant upon or grounded in the CBA. Accordingly, the claims were not subject to mandatory arbitration and the federal court had subject matter jurisdiction of the claim.

The defamation aspect of the RLA was also reversed. The alleged defamatory statements included references to the president of Hawaiian questioning his competence, claiming that he did his "dirty work . . . like the Nazis during World War II," and asserting that he employed a "Soviet negotiating style." The court found the statements regarding the Nazis and the Soviets as simply "rhetorical hyperbole" protected by federal labor laws. With respect to the critical and insulting language, the court noted that federal labor law gives a union "license to use intemperate, abusive, or insulting language without fear of restraint or penalty."

C. There is No Federal Question Jurisdiction Over A Lawsuit For Damages Brought Under California's Disabled Person's Act.

The Ninth Circuit affirmed dismissal of a lawsuit for lack of jurisdiction, finding that federal question jurisdiction over a state law claim is not created just because violation of federal law is an element of the state law claim. (Wander v. Kaus (2002) Daily Journal D.A.R 9588 (8/21/02).)⁽⁴⁾

Doug Wander, a quadriplegic, sued Jack and Irene Kaus, the former owners of Mangrove Square business complex, claiming that each time he entered the Square, he encountered architectural barriers that prevented his access to the building. He alleged that the structural access barriers discriminated against the disabled in violation of Title III of the Americans With Disabilities Act ("ADA") and various California Statues including the Disabled Persons Act ("DPA") (Civ. Code, § 54, et seq.). He sought injunctive relief under the ADA and damages under the DPA.

The Kauses transferred ownership of Mangrove Square to new owners in June 2000. They moved to dismiss the lawsuit and plaintiff conceded that his request for injunctive relief became moot when the Kauses ceased to own the property. He maintained, however, that his claim for damages under the DPA, which was premised on the Kauses' alleged violation of the ADA, was sufficient for the federal court to retain jurisdiction since the DPA incorporates the federal ADA. Affirming the trial court's dismissal for lack of subject matter jurisdiction, the court found that since damages are not recoverable under Title III of the ADA - injunctive relief being the only relief available - the statute did not evidence a congressional intent to permit plaintiff to pursue his state DPA damage claim in federal court.

D. Wheelchair-Bound Student Fails To Establish Disability Discrimination Claim Against College.

In Bird v. Lewis & Clark College (2002) Daily Journal D.A.R. 10084 (9/3/02), the Ninth Circuit affirmed a jury verdict in favor of Lewis & Clark College, finding that the college made numerous efforts to accommodate plaintiff's disability and affirming that the District Court did not abuse its discretion in refusing to order the school to withhold her grades.⁽⁵⁾

While Bird was a student at Lewis & Clark, she was involved in an accident that left her confined to a wheelchair. When the college learned of her injury, it rebuilt parts of the campus to make it more wheelchair accessible for her, including installing ramps at her dormitory, changing inside doors, and remodeling the bathrooms. She subsequently applied for and was accepted to the college's Spring 1996 overseas program in Australia. Although the overseas program did not conform to all of plaintiff's special needs, the college provided her with alternative modes of transportation in Australia when necessary and accessible living quarters for her. There were, however, several field trips that could not accommodate a wheelchair-bound individual and, thus, she was unable to participate in all of the activities. At the end of the quarter, she received one A, two C-minuses, and one D as her grades.

Bird sued the college, alleging various causes of action including violation of the Rehabilitation Act and violation of Title III of the ADA, as well as breach of fiduciary duty. Plaintiff contended that while she was in Australia, the college discriminated against her on the basis of disability by failing to provide her with wheelchair access. Plaintiff's claims for equitable relief - including her request that the college be enjoined from distributing her grades - were tried to the court and resolved in favor of the college. Her remaining claims, including her claim for damages under the Rehabilitation Act were tried to the jury. The jury found in favor of the college on all claims, except the breach of fiduciary claim for which it awarded plaintiff $5,000.

On appeal, plaintiff contended she was entitled to the equitable relief she sought, including an order enjoining the college from releasing her grades for the semester she participated in the program. She argued that she should prevail on either her ADA or Rehabilitation claim because the college failed to provide wheelchair access on several occasions. The court noted, however, that compliance with the acts does not depend on the number of locations that are accessible but, rather, whether the program "'"when viewed in its entirety, is readily accessible to and usable by individuals with disabilities."'" The court examined the numerous instances of accommodation by the college, such as hiring two helpers to assist plaintiff, paying for her to fly to locations while other students took trains and buses, and providing her a smaller second wheelchair to make accessability easier for her. The court stated that "the college did not necessarily fail to make reasonable modifications simply because some aspects of the program did not conform to Bird's expectations." Because Bird's claim for injunctive relief is premised on a finding of disability discrimination, and because the jury verdict contained no such finding nor did the evidence compel such a finding, the court affirmed the District Court's decision in refusing to enjoin the school from distributing her grades.

The court also affirmed the judgment on the breach of fiduciary duty claim. The college contended in its cross-appeal that a reasonable jury could not conclude from the evidence that plaintiff had a fiduciary relationship with the college. Under Oregon law, no fiduciary duties are implied unless the parties are in a special relationship. The court found that the record contained ample evidence to support a finding of a fiduciary relationship. For example, the college assured plaintiff on several occasion that the overseas program would accommodate her disability and that adequate facilities would be available in most cases for the outdoor trips. Plaintiff had reason to trust the school's assurances because shortly after her injury, the college worked with her to modify her dormitory and classroom facilities to make them wheelchair accessible. The court held that based on these facts, the jury could have concluded that a special relationship existed between the parties.

CALIFORNIA SUPREME COURT

A. Defendant Who Moves Under Anti-SLAPP Statute To Strike A Cause Of Action Does Not Have To Prove Plaintiff's Subjective Intent.

The California Supreme Court issued three decisions on August 29, 2002 regarding Code of Civil Procedure section 425.16, the anti-SLAPP statute. In the first case, the court held that for a defendant to obtain dismissal of a strategic lawsuit against public participation ("SLAPP") pursuant to Code of Civil Procedure section 425.16, the defendant need not demonstrate that the action was brought with the intent to chill its exercise of Constitutional speech or petition rights. Equilon Enterprises, LLC v. Consumer Cause, Inc. (2002) Daily Journal D.A.R. 9945 (8/29/02)⁽⁶⁾

Defendant Consumer Cause, Inc. served Shell Pipe Line Corporation and Texaco, Inc., the predecessors-in-interest to Equilon Enterprises, LLC, with a notice of intent to sue for alleged violations of Proposition 65 arising out of alleged groundwater pollution by Shell and Texaco gas stations. Equilon did not ask Consumer Cause to clarify its Proposition 65 notice but, instead, sued for declaratory and injunctive relief, seeking a declaration that the notice failed to comply with the California Code of Regulations. Equilon also sought injunctive relief barring Consumer Cause from filing its proposed Proposition 65 enforcement action. Consumer Cause filed an anti-SLAPP motion to strike the complaint. The trial court granted the motion and dismissed the action. The Court of Appeal affirmed and the California Supreme Court granted Equilon's petition for review.

Code of Civil Procedure section 425.16, the anti-SLAPP statute, provides that:

"A cause of action against a person arising from any act of that person in furtherance of the person's right of petition or free speech under the United States or California Constitution in connection with a public issue shall be subject to a special motion to strike, unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim." (Code Civ. Proc., ¶ 425.16, subdivision (b)(1).)

The statute also provides that the phrase "act in furtherance of a person's right of petition or free speech under the United States or California Constitution in connection with a public issue" includes any oral or written statements or writings made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law; (2) any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law. (Id., subdivision (e).)

The court observed that the courts of appeal have divided over the question of whether a defendant who moves under Section 425.16 to strike a cause of action must, in order to prevail, demonstrate that the cause was brought with the intent of chilling the defendant's exercise of Constitutional speech or petition rights. The Supreme Court held that a defendant has no such burden. There is no such requirement in the statutory language implying or even suggesting an intent-to-chill proof requirement. Rather, the Legislative concern is that the cause of action arises from an act "in furtherance of the Constitutional right to petition or free speech."

The court concluded by setting forth the two-step process in which a trial court must engage in ruling on an anti-SLAPP motion to strike. The court must first decide whether defendant has made a threshold showing that the challenged cause of action is one arising from a protected activity. Defendant has the burden of demonstrating that the act or acts of which plaintiff complains were taken "in furtherance of the defendant's right of petition or free speech under the United States or California Constitution in connection with a public issue." If such a showing has been made, the court must then determine whether plaintiff has demonstrated a probability of prevailing on the claim, by considering the pleadings and the supporting and opposing affidavits submitted. Applying this two-step process in the instant case, the court concluded that the pleadings and affidavits establish that Equilon's action for declaratory and injunctive relief arose from Consumer Cause's activity in furtherance of its Constitutional rights of speech or petition, i.e., the filing of the Proposition 65 intent to sue notices. Since the trial court also found that Equilon had not established a probability of prevailing on its claim, the court properly granted the motion.

B. Municipality's State Court Action Is Not Subject To Anti-SLAPP Motion To Strike Where The Suit Is Based On The Constitutionality Of A City Ordinance.

In the second anti-SLAPP opinion, the Supreme Court found the City of Cotati's state court declaratory relief action regarding the constitutionality of a mobile home park rent stabilization ordinance, filed in response to a federal court declaratory relief action by the park owners concerning the same ordinance, was not a strategic lawsuit against public participation ("SLAPP") and, thus, was not subject to dismissal under Code of Civil Procedure section 425.16. (City of Cotati v. Cashman (2002) Daily Journal D.A.R. 9950 (8/29/02).)⁽⁷⁾

The city enacted an ordinance creating a mobile home park rent stabilization program. Cashman and other mobile home park owners sued the City in federal court, seeking declaratory relief, an injunction, and damages allegedly resulting from the ordinance. The owners sought determination of whether the ordinance constituted an uncompensated regulatory taking in violation of the Fifth and Fourteenth Amendments to the United States Constitution. Thereafter, the City sued the owners in state court, seeking declaratory relief and a determination that the ordinance was valid, enforceable, and applied to the owners. The owners moved to strike the City's complaint under the anti-SLAPP statute, asserting that the City's action arose from the owners' filing of their earlier federal action and, thus, fell within the scope of the anti-SLAPP statute. The trial court ruled in favor of the owners, finding that the City's action was filed shortly after the owners' federal action, involved the same contention made by the owners and named only the owners as defendants. The Court of Appeal reversed and the California Supreme Court affirmed the judgement of the Court of Appeal.

The court considered two issues: (1) whether a defendant, in order to prevail on an anti-SLAPP motion, must demonstrate that the lawsuit was intended to chill the defendant's free speech or petition rights; and (2) whether a moving defendant must show that the action has the effect of chilling such rights. Relying on its companion opinion in Equilon, the court held that defendants seeking relief under the anti-SLAPP statute did not have to meet either burden. In the instant case, however, because the City's action arose from the underlying controversy regarding the validity of the City's ordinance, rather than from the owners' federal lawsuit, the City's action was not subject to a special motion to strike under Section 425.16.

C. Lawsuit Based On A Defendant's Counter-Claims Filed In Prior And Unrelated Suit Is One "Arising From" Activity Protected By The Anti-SLAPP Statute.

In the last of its three anti-SLAPP opinions, the California Supreme Court reversed the Court of Appeal's judgment denying an anti-SLAPP motion, finding that while the defendant's counter claims filed in a prior and unrelated lawsuit did "arise from" activity protected by the anti-SLAPP statute, the Court of Appeal failed to consider whether plaintiffs' fraud and contract claims have the minimal merit required to survive an anti-SLAPP motion. (Navellier v. Sletten (2002) Daily Journal D.A.R. 9954 (8/29/02).)⁽⁸⁾

Navellier Management, Inc. ("NMI") organized the Navellier Series Fund, an investment company for which defendant Kenneth G. Sletten served as an independent trustee. NMI contracted with the Fund to provide investment advice and administrative services. Sletten and other independent trustees terminated NMI's contract and Sletten subsequently sued NMI in federal court for breach of various fiduciary duties. Thereafter, Sletten and NMI entered into an agreement that would return NMI as investment advisor to the Fund and, as part of the agreement, Sletten signed a general release of claims. Navellier then filed an amended complaint in the federal action. Sletten filed counter-claims, but the federal court ultimately dismissed the counter-claims. At trial, the jury returned a defense verdict in favor of Sletten.

NMI then filed a state action, alleging that Sletten had committed fraud in misrepresenting his intention to be bound by the release and, further, had committed breach of contract by filing counter-claims in the federal action. Sletten then filed a anti-SLAPP motion to strike the action. The trial court denied the motion and the Court of Appeal affirmed finding that the action was outside the scope of the "arising from" prong of the anti-SLAPP statue because it was not brought primarily to chill the exercise of free speech or petition rights.

The Court applied the two-step process for determining whether the action was a strategic lawsuit against public participation. The Court found that Sletten met the threshold burden of demonstrating that plaintiffs' action arose from the type of activity that is protected by the anti-SLAPP statue. The fraud cause of action was based on Sletten's negotiation and repudiation of the release, an act the Court characterized as involving statements or writings made in connection with an issue "under consideration or review by a judicial body" and "made before a judicial proceeding." The Court found, however, that because the Court of Appeal did not consider the second step of the process, i.e., whether plaintiffs established a probability of prevailing, the Court remanded the cause of action to permit the Court of Appeal to consider whether the plaintiffs' fraud and contract claims have the minimal merit required to survive an anti-SLAPP motion.

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1. Opinion by J. Trott; J. Fitzgerald (sitting by designation) concurring, J. Pregerson dissenting.

2. Lagatree also brought a wrongful termination action in state court that was dismissed. (Lagatree v. Luce, Forward, Hamilton & Scripps (1999) 74 Cal.App.4th 1105.)

3. Opinion by J. Boochever; J. Paez, concurring; partial concurrence and partial dissent by J. Reinhardt.

4. Opinion by J. Silverman; J. Hawkins and J. Restani (sitting by designation) concurring.

5. Opinion by J. Goodwin; J. Nelson and J. W. Fletcher concurring.

6. Opinion by J. Werdegar; C.J. George, J. Kennard, J. Baxter, J. Chin, J. Brown and J. Moreono.

7. Opinion by J. Werdegar; C.J. George, J. Kennard, and J. Moreono concurring; concurring opinion by J. Brown; J. Baxter and J. Chin concurring.

8. Opinion J. Werdegar; C.J. George, J. Kennard, and J. Moreono concurring; dissenting opinion by J. Brown; J. Baxter and J. Chin concurring.

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