The Fifth Circuit Refuses to Extend Title VII to Sexual Orientation or Transgender Status

downloadOver the past two years, the Second, Sixth, and Seventh Circuits have construed Title VII of the Civil Rights Act of 1964 to prohibit employers from discriminating on the basis of either sexual orientation or transgender status.

Last year, the U.S. District Court for the Southern District of Texas, when confronted with the issue, referenced the other circuits and ruled that it assumed that an employee’s “status as a transgender woman place[d] here under the protections of Title VII.”  See Wittmer v. Phillips 66 Co., 304 F. Supp. 3d 627, 634 (S.D. Tex. 2018). This past week, the Fifth Circuit Court of Appeals affirmed the district’s grant of summary judgment against the transgender employee, but clarified that in the Fifth Circuit (which covers Texas, Louisiana and Mississippi), Title VII affords no protections against discrimination by employers on the basis of transgender status or sexual orientation.

Specifically, the Fifth Circuit invoked its own opinion from 1979 stating that it remains the binding  precedent in this circuit.  See Blum v. Gulf Oil Corp., 97 F.2d 936 (5th Cir. 1979) (holding that Title VII does not prohibit discrimination on the basis of sexual orientation).  Furthermore, despite the amicus briefs from the EEOC and the National Center for Lesbian Rights asking the Fifth Circuit to hold that Title VII prohibits discrimination on the basis of transgender status, the court of appeals did not grant their request.

The Fifth Circuit affirmed the grant of summary judgment for Phillips 66 because the employee failed to present sufficient evidence to support a prima facie case of discrimination, and because the employee failed to present a genuine issue of material fact concerning pretext.  The evidence in this cased showed that Wittmer conditional job offer was revoked because the background check showed that she had been terminated by her previous employer, which contradicted her representations to Phillips 66 during her job interview.

BOTTOM LINE: The question of whether Title VII of the 1964 Civil Rights Act covers LGBTQ employees continues to percolate in the courts, and at least three petitions involving this issue are pending in the U.S. Supreme Court.  While the law in this area continues to develop, it may be wise for companies confronted with this issue to take a cue from Phillips 66, which sidestepped the issue of transgender protections under Title VII and instead focused on the lack of evidence that the employee experienced any discrimination in its job application process and that the company had a legitimate non-discriminatory reason to revoke the job offer.

Leiza Dolghih is a partner at Lewis Brisbois Bisgaard & Smith LLP in Dallas, Texas and a Co-Chair of the firm’s Trade Secrets and Non-Compete Disputes national practice.  Her practice includes commercial, intellectual property and employment litigation.  You can contact her directly at Leiza.Dolghih@LewisBrisbois.com or (214) 722-7108.

The Fifth Circuit Issues Its First Decision on the Defend Trade Secrets Act

trade secrets label on folder

Two and a half years after the Defend Trade Secrets Act (DTSA) became effective, the Fifth Circuit has issued its first opinion addressing the statute.  Earlier this month, the Court ruled that: (1) a party must “prevail” before it can recover any attorney’s fees under the DTSA and (2) a plaintiff’s dismissal of its claims without prejudice does not confer the “prevailing party” status on defendants. 

Dunster Live, LLC v. Lonestar Logos Management Company, LLC involved a situation where the plaintiff, Dunster, having lost an injunction hearing in a trade secrets case in federal court, wanted to dismiss the case without prejudice and refile it in a state court sans the DTSA claim.  Under 41(a)(2) of the Federal Rules of Civil Procedure, if a defendant has already answered the lawsuit or filed a motion for summary judgment, plaintiff is required to file a motion with the court asking for a permission to dismiss its claims without prejudice. The district court granted Dunster’s motion to dismiss, and the plaintiff proceeded to file an almost identical trade secrets lawsuit but without the DTSA claim in a state court.

After the dismissal, Lonestar sought to recover its attorney’s fees of over $600,000 on the basis that Dunster had brought its federal lawsuit in “bad faith.” The district court denied Lonestar’s request for attorney’s fees holding that a dismissal without prejudice of Dunster’s claims did not make Lonestar a “prevailing party” under the DTSA.

Lonestar furter argued that Dunster sought to evade paying attorneys fees by strategically seeking a dismissal without prejudice once it realized that its lawsuit was doomed, and that the DTSA’s “bad faith” provision supported a fee award even when a defendant had not officially prevailed.  The DTSA’s provision upon which Lonestar relied states the following:

[i]f a claim of the misappropriation is made in bad faith, which may be established by circumstantial evidence, a motion to terminate an injunction is made or opposed in bad faith, or the trade secret was willfully and maliciously misappropriated, [a court may] award reasonable attorney’s fees to the prevailing party.  18 U.S.C. 1836(b)(3)(D).

The district court rejected this argument as well denying Lonestar’s request for attorney’s fees.

The Fifth Circuit affirmed the district court’s ruling finding that a dismissal without prejudice under the DTSA did not confer the status of a “prevailing party” on Lonestar, similar to other federal statutes that allow prevailing parties to recover attorney’s fees, such as the Equal Access to Justice Act, Patent Act, Civil Rights Act, or Individuals with Disabilities Education Act.

The Court also rejected Lonestar’s argument that the DTSA only required a showing of “bad faith” by a plaintiff in filing a lawsuit and not a showing that a defendant was a “prevailing party.”  It explained that “[a]llowing bad faith alone to support a fee award would improperly read the concluding language of Section 1836(b)(3)(D) – ‘the prevailing party’ – out of the statute.”  Thus, a party seeking attorney’s fees under the DTSA must establish both: (1) that it is a prevailing party and (2) one of the three qualifying scenarios described in 1836(b)(3)(D).

TAKEAWAY:  With the DTSA becoming effective on May 11, 2016, plaintiffs in Texas now have a choice of whether to seek redress for trade secrets misappropriation in state courts or federal courts.  Dunster makes it clear that as long as plaintiff has brought its DTSA claim in good faith in federal court, it may have a chance to change the strategy down the road and explore its claims in state court without facing the penalty of having to pay defendant’s attorneys fees as the result of dismissing its federal lawsuit without prejudice.

Leiza Dolghih is a partner at Lewis Brisbois Bisgaard & Smith LLP in Dallas, Texas and a Co-Chair of the firm’s Trade Secrets and Non-Compete Disputes national practice Her practice includes commercial, intellectual property and employment litigation.  You can contact her directly at Leiza.Dolghih@LewisBrisbois.com or (214) 722-7108.

Failure to Define “Fee” in a Contract Results in a $5.5M Award Against Yahoo!

Bracket.jpgIn 2014, Yahoo! wanted to sponsor a perfect bracket contest in connection with the NCAA Men’s Basketball Tournament, with a $1 billion prize for any contestant who correctly predicted the winner of all 63 games. It entered into a contract with SCA Promotions, Inc., which provides risk management for marketing and prize promotions.  

The contract contained two invoices at the end, according to which the fee for the entire contract was $11 million.  It also contained a cancellation fee that Yahoo! would have to pay SCA if it cancelled the contract before a certain date. 

After signing the contract, Yahoo! decided to co-sponsor another $1 billion perfect bracket contest with Warren Buffett and Berkshire Hathaway and cancelled the contract with SCA.  

SCA sued claiming that Yahoo! owed it $5.5 million – a half of $11 million – as the cancellation fee.  Yahoo! argued that the cancellation “fee” meant half of the amount that Yahoo! had prepaid on the contract in the beginning, i.e. $550,000. The parties’ arguments came down to the interpretation of the following provision in the contract:

Cancellation fees: Upon notice to SCA to be provided no later than fifteen (15) minutes to Tip-Off of the initial game, Yahoo may cancel the contract. In the event the contract is cancelled, Yahoo will be entitled to a refund of all amounts paid to SCA subject to the cancellation fees set forth in this paragraph. … Should the signed contract be cancelled between January 16, 2014 and February 15, 2014, a cancellation penalty of 50% of the fee will be paid to SCA by Sponsor. . . 

The Fifth Circuit Court of Appeals ruled in favor of SCA finding that the cancellation “fee” referred to the entire fee for the contract, i.e. $11 million.  In reaching that conclusion, it looked at the entire contract, analyzed other provisions that mentioned “fee,” and reached the conclusion that Yahoo’s! argument rendered other provisions in the contract meaningless; therefore, it could not be the right interpretation. 

BOTTOM LINE:  When contractual language is not clear, a lot of times, courts will look at the intent of the parties in entering into the contract and analyze the entire contract to make sure that its interpretation of the disputed clause does not contradict or render other parts of the contract meaningless. Thus, the issue of contractual interpretation is rarely as straightforward as the parties think.

If you end up with a contract that is less than clear and you face potential litigation, you should consult with an attorney experienced in contract disputes to determine how likely is your interpretation to hold up in court. 

Leiza represents companies in business and employment litigation.  If you need assistance with a business or employment dispute contact Leiza for a confidential consultation at Leiza.Dolghih@lewisbrisbois.com or (214) 722-7108 or fill out the form below.

A Minority Employee Must Be “Clearly Better Qualified” For Promotion to Succeed in an Employment Discrimination Claim

what-do-you-mean-that-i-am-not-koalafied

Just before the New Year’s Eve, the Fifth Circuit Court of Appeals topped off 2014 with yet another pro-employer decision. In Martinez v. Texas Workforce Commissionthe Court found that a Mexican-American employee failed to show that he was passed over for promotion because of his national origin and not because he was the lesser qualified candidate.

The Court of Appeals explained that where an employer offers a reason or reasons for promoting a white employee over a minority one, in order to show that these reasons are just a pretext, the minority employee must show that he is “clearly better qualified” such that “the qualifications are so widely disparate that no reasonable employer would have made the same decision.” Thus, Martinez had to show that his qualifications were so much better than the qualifications of the white employee who was promoted over him, that no reasonable employer would have promoted that employee over Martinez. If that sounds like a tough standard to meet for employees – it is.

The Court of Appeals clarified that employers may weigh the qualifications of prospective employees, so long as they are not motivated by race.  Thus, just because one employee has better education, work experience, and longer tenure, does not necessarily establish that he is clearly better qualified. An employer, for example, may value specific experience, such as military service, more than general experience or years of service at the company. Likewise, an employee’s experience in a particular department does not necessarily make him “clearly better clarified” than another employee who does not have such experience.

The Court of Appeals also affirmed many employers’ practice of scoring employees’ interview performances, finding that where the candidates are asked an identical set of questions and are scored based on the similarity of their answers to a model answer, their interview scores may serve as a legitimate basis for the employer’s decision whether to promote a particular employee. An employer must, however, provide evidence as to how the interviewers arrive at their scores.

CONCLUSION: In the the Fifth Circuit, which covers Texas, Louisiana, and Mississippi, once an employer shows that it had a legitimate non-discriminatory reason or reasons for promoting one employee over another, the employee who claims employment discrimination under Title VII must show that he or she was “clearly better qualified” for the promotion such that no reasonable employer would have made the same promotion decision.

Leiza Dolghih frequently advises employers on how to handle troublesome employees, assists with responding to EEOC charges, and litigates employment disputes. For more information, e-mail Leiza.Dolghih@GodwinLewis.com.

Foreign Plaintiff v. Foreign Defendant Destroys Diversity even if the Plaintiff’s Principal Place of Business is in Texas

The Fifth Circuit Court of Appeals started the new year with a quick civil procedure lesson, ruling yesterday in Vantage Drilling Company v. Hsin-Chi Su that lawsuits of foreign corporations with a principal place of business in Texas against foreign defendants belong in state, not federal, courts. This ruling is in line with the Second, Sixth, and Ninth Circuit Courts of Appeals, all of whom have previously held that a plaintiff’s incorporation abroad destroys diversity jurisdiction in a lawsuit against a foreign defendant, even if the plaintiff’s principal place of business is in the United States.

Plaintiff Vantage Drilling Company is an offshore drilling contractor that provides drilling units, related equipment, and work crews to major oil and natural gas companies around the world. It is incorporated in the Cayman Islands, with a principal place of business in Houston, Texas. Defendant Su, who served on Vantage’s board of directors, is a Taiwanese citizen.

After Vantage sued Su in a Texas state court for breach of fiduciary duty, fraud, and number of other business torts, Su timely removed the case to federal district court on the basis of diversity jurisdiction pursuant to 28 U.S.C. §1332(a), which states that:

(a) The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between

(1) citizens of different States;

(2) citizens of a State and citizens or subjects of a foreign state, except that the district courts shall not have original jurisdiction under this subsection of an action between citizens of a State and citizens or subjects of a foreign state who are lawfully admitted for permanent residence in the United States and are domiciled in the same State;

(3) citizens of different States and in which citizens or subjects of a foreign state are additional parties; and

(4) a foreign state, defined in §1603(a) of this title, as plaintiff and citizens of a State or of different States.

Vantage moved for remand arguing that its Cayman Island’s incorporation and Su’s Taiwanese citizenship destroyed diversity jurisdiction because there were aliens present on both sides of the litigation. The district court denied the motion to remand and reasoned that although Vantage had dual citizenship in the United States and Cayman Islands, it was “fully Texan” because it had no employees or operations in the Cayman Islands and its headquarters and primary operations were in Texas, where it “hire[d]local workers, [bought]local supplies, rent[ed] local buildings, donate[d] to local charities, and serve[d] local customers.” Su, on the other hand, in the district court’s opinion, was a “fully foreign party.” Analogizing to human citizens for whom “[r]emoval is proper if the dual national’s dominant nationality is American irrespective of [his/her] other affiliations,” the district court held that Vantage could not “rely[] on its foreign charter to avoid a national court despite the predominant reality of its existence.” Vantage filed an interlocutory appeal, resulting in a reversal of the district court by the Fifth Circuit.

The Court of Appeals explained that pursuant to 28 U.S.C. §1332(c)(1), a corporation is deemed a citizen of “every State and foreign state” in which it is incorporated and the “State or foreign state” where it has its principal place of business. Thus, undeniably, Vantage is a citizen of the Cayman Islands, where it is incorporated. Since Su is also a foreign citizen, the complete diversity is lacking and “there can be no diversity jurisdiction.”

Importantly, the Fifth Circuit rejected Su’s argument that the presence of bias in a state forum against a fully foreign defendant is a factor to be considered in the diversity analysis. Thus, the fact that Vantage had substantial business dealings in Texas, while Su did not, did not justify a finding of a diversity jurisdiction where both parties were foreign.

PRACTICAL IMPLICATIONS: Sometimes, incorporating a company or a subsidiary in a foreign jurisdiction makes business sense from the standpoint of taxation or corporate governance. However, a company that follows that route should keep in mind that should a dispute arise with a foreign party, the company might be forced to give up federal forum and all the advantages that come with it and litigate the case in a state court, especially if the case involves  only state law claims. In this case, as a plaintiff, Vantage preferred to be in state court, but this might not always be the case.

Leiza litigates non-compete and trade secrets lawsuits in a variety of industries in federal and state courts. For a consultation regarding a dispute involving a noncompete agreement or misappropriation of trade secrets, contact Leiza at Leiza.Dolghih@lewisbrisbois.com or (214) 722-7108 or fill out the form below.

The Fifth Circuit Allows Class Arbitration Waivers in Employment Agreements

Last week, the Fifth Circuit Court of Appeals joined the Ninth, Second and Eighth Circuits in holding that class arbitration waivers in employment agreements are enforceable, notwithstanding the right of employees to engage in concerted activities under the National Labor Relations Act (NLRA). The ruling has been lauded as an enormous victory for employers, even though the National Labor Relations Board (NLRB) remains free to ignore the opinion and continue to strike down class arbitration waivers.

Under the Mutual Arbitration Agreement (MAA) at issue in D.R. Horton, Inc. v. National Labor Relations Board: (1) employees waived their right to a trial in court; (2) all disputes between D.R. Horton and employees had to be resolved by final and binding arbitration; and (3) the arbitrator did “not have the authority to consolidate the claims of other employees” and did “not have the authority to fashion a proceeding as a class or collective action or to award relief to a group or class of employees in one arbitration proceeding.” The combined effect of these three provisions was that D.R.Horton’s employees could not pursue class or collective claims in an arbitral or judicial forum. Instead, their only recourse for any employment disputes was individual arbitration.

When a former D. R. Horton’s superintendent and a number of similarly situated employees attempted to initiate a nationwide class arbitration arising out of D.R.Horton’s alleged violations of overtime provisions of the Fair Labor Standards Act (FLSA), the company responded that the MAA prohibited a collective arbitration, but that the employees could proceed with individual proceedings. The superintendent then filed an unfair labor practice charge alleging that the class-action waiver violated the NLRA. The (NLRB) agreed and found that the MAA violated Section 8(a)(1) of the NLRA for two reasons. First, it required employees to waive their right to maintain joint, class, or collective employment related actions in any form. Second, the employees could reasonably interpret the language of the MAA as precluding or restricting their right to file charges with the NLRB. Last week, the Fifth Circuit rejected the Board‘s first reason, but agreed with the second.

It explained that while Section 7 of the NRLA creates a right on behalf of employees to “engage in [ ] concerted activities for the purpose of collective bargaining or other mutual aid or protection,” it does not create a substantive right to use class action procedures. In fact, the U.S. Supreme Court and several Circuit Courts of Appeals have previously recognized that there is no substantive right to class or collective procedures under the Age Discrimination and Employment Act or the FLSA. On the other hand, using Section 7 of the NRLA to invalidate an agreed waiver of a class arbitration would violate the Federal Arbitration Act (FAA), which requires that any arbitration agreement be enforced according to its terms. The Fifth Circuit found that neither NRLA’s legislative history nor its language authorized it to override the FAA. Absent an explicit language of a congressional intent to override the FAA in the NLRA, the Act’s mandate that an arbitration agreement must be enforced according to its terms – here, with a class arbitration waiver – must be followed.

Although the Fifth Circuit found that class arbitration waiver provisions do not violate the NLRA, the MAA in this case contained the following language, which did violate the statute: the employee “knowingly and voluntarily waives the right to file a lawsuit or other civil proceeding relating to Employee’s employment . . . .” (emphasis in original). Because this statement would lead employees to reasonably believe that they were prohibited from filing unfair labor practice charges with the NLRB, the Court of Appeals ordered that D.R. Horton should clarify in the agreement that employees retain access to the NLRB regardless of their agreement to arbitrate disputes.

CONCLUSION: While the Fifth Circuit’s rejection of the NLRB‘s ruling in D.R. Horton is lauded as a victory for employers, it does not guarantee that the NLRB will allow the use of class waivers in mandatory arbitration agreements. The Board regularly treats Circuit Court decisions with which it disagrees as non-binding in any other case. Thus, it may continue to reject such waivers despite the ruling.

Although the battle over class arbitration waivers in employment agreements is far from over, all employers need to review their arbitration agreements and make sure that the language used there does not convey the impression to employees that they are prohibited from filing administrative charges with the NLRB.

For more information regarding the enforcement or drafting of arbitration agreements in Texas, contact Leiza Dolghih.

The ADA Does Not Require a Nexus Between a Requested Accommodation and an Essential Job Function – Says the Fifth Circuit

The Fifth Circuit Court of Appeals recently ruled in Feist v. State of Louisiana, that a “reasonable accommodation” under the Americans with Disabilities Act (ADA), does not need to “relate to the performance of essential job functions.” In reversing the district court, the Court of Appeals held that an accommodation could be reasonable even if it does not relate to the essential job functions as long as it makes the workplace “readily accessible to and usable” by a disabled employee, or, alternatively, it allows an employee with a disability to “enjoy equal benefits and privileges of employment as are enjoyed by [the employer’s] other similarly situated employees without disabilities.” Thus, the district court erred by requiring a nexus between the employee’s requested accommodation, a reserved parking space, and her job functions as an assistant attorney general.

The ADA prohibits covered employers from “discriminat[ing] against a qualified individual on the basis of disability.” 42 U.S.C. § 12112(a). Discrimination includes failure to make “reasonable accommodations to the known physical or mental limitations of an otherwise qualified individual with a disability . . . unless such covered entity can demonstrate that the accommodation would impose an undue hardship.” 42 U.S.C. § 12112(b)(5)(A). According to the Fifth Circuit Court of Appeals, a plaintiff asserting a discrimination claim under the ADA, must show the following:

  • s/he is a “qualified individual with a disability;”
  • the disability and its consequential limitations were “known” by the covered employer; and
  • the employer failed to make “reasonable accommodations” for such known limitations.

The district court in Feist held that the plaintiff established the first two elements, but failed to show that the requested accommodation was “reasonable” because she had failed to demonstrate that not having a reserved parking spot limited her ability to perform “the essential functions of her job” as an assistant attorney general. The Court of Appeals, however, ruled that “the ADA, and all available interpretive authority” indicated that “reasonable accommodations” were not restricted to modifications that enabled performance of essential job functions.

Under the ADA, a reasonable accommodation may include:

(A) making existing facilities used by employees readily accessible to and usable by individuals with disabilities; and

(B) job restructuring, part-time or modified work schedules, reassignment to a vacant position, acquisition or modification of equipment or devices, appropriate adjustment or modifications of examinations, training materials or policies, the provision of qualified readers or interpreters, and other similar accommodations for individuals with disabilities. 42 U.S.C. § 12111(9)(A).

Moreover, the ADA implementing regulations define “reasonable accommodation” as follows:

(i) Modifications or adjustments to a job application process that enable a qualified applicant with a disability to be considered for the position such qualified applicant desires; or

(ii) Modifications or adjustments to the work environment . . . that enable an individual with a disability who is qualified to perform the essential functions of that position; or

(iii) Modifications or adjustments that enable a covered entity’s employee with a disability to enjoy equal benefits and privileges of employment as are enjoyed by its other similarly situated employees without disabilities. 29 C.F.R. § 1630.2(o)(1) (emphasis added).

Thus, the Court of Appeals concluded that a modification that enables an individual to perform the essential function of a position is only one of three categories of reasonable accommodation.

What does this mean for Texas business owners? When addressing an accommodation request by an employee with a disability, the employer should not deny the request simply because the accommodation does not relate to the employee’s essential job functions.  The employer should further consider whether the accommodation will allow the employee to enjoy the same benefits and privileges that other similarly situated employees without disabilities enjoy.  If the answer to that question is “yes,” then the employer will have to provide the accommodation, unless it creates an undue hardship.

Leiza Dolghih is a partner at Lewis Brisbois Bisgaard & Smith LLP in Dallas, Texas and a Co-Chair of the firm’s Trade Secrets and Non-Compete Disputes national practice.  His practice includes commercial, intellectual property and employment litigation.  You can contact her directly at Leiza.Dolghih@LewisBrisbois.com or (214) 722-7108.

Defamatory Statements Made In Another State: Can You Sue In Texas?

These days, virtually anybody can write something online and have it go viral in a matter of hours. A person’s or a business’s reputation can be ruined in a matter of days by somebody’s thoughtless or malicious remarks. So, what is a person to do? Sometime, a lawsuit for defamation might be an answer. However, when a defamatory and damaging statement is made online, one question arises with frequency – where can the defamed party file the lawsuit? Obviously, it is more convenient to file it in the state where the defamed party lives or conducts business, but is that always possible?

The Fifth Circuit Court of Appeals recently considered whether Louisiana plaintiffs could file a lawsuit in their home state against California defendants who made allegedly defamatory statements about the plaintiffs online. Because the Louisiana long-arm statute is coextensive with the Due Process Clause limits, just like the Texas long-arm statute, the Court of Appeals’s analysis, applies to Texas as well.

In Herman v. Cataphora, the plaintiffs’ steering committee in In Re: Chinese-Manufactured Drywall Products Liability Litigation in the Eastern District of Louisiana hired Cataphora for litigation support. When their relationship soured, Cataphora filed and won a breach of contract lawsuit against the steering committee in the Northern District of California. Afterwards, a technology counsel for Cataphora gave an interview to Above the Law about the lawsuit and stated (presumably referring to the plaintiffs’ steering committee) that “[t]hese guys are the worst of hypocrites you can possibly find. They claim to be trying to help the little guy, but what they are doing is trying to put more money in their own pockets.” The interview took place in California and was quoted on the Above the Law website, which is published by Breaking Media, Inc., headquartered in new York.

Two of the steering committee members sued Cataphora and the technology counsel in the Eastern District of Louisiana for defamation and interference with prospective advantage. The defendants moved to dismiss for lack of personal jurisdiction or to transfer to a proper venue. Without holding an evidentiary hearing, the district court dismissed the case due to lack of personal jurisdiction and ordered a transfer under 28 U.S.C. § 1406(a) to the Northern District of California. The plaintiffs appealed the dismissal order.

The Fifth Circuit held that Louisiana lacked personal jurisdiction over the defendants and explained that when it comes to defamatory statements, the main question is whether the statements are directed at the forum state. Even when a plaintiff feels the harm from the defamatory statements in his home state, it is not enough to gain personal jurisdiction over the defendants in another state, if the statements focus on activities and events outside the forum state.  Thus, even if the plaintiffs in Herman made a prima facie showing that the harm caused by the defendants’ statements would be felt in Louisiana where they practiced law, this was not enough, and “[w]ithout a showing that the statements’ focal point was Louisiana . . . the district court lacked personal jurisdiction over the defendants.” Specifically, the following factors were lacking to establish specific personal jurisdiction over the defendants in Louisiana:

  • Louisiana was not the “focal point” of both the article itself and the harm suffered
  • There was nothing in the comments that explicitly or implicitly connected the parties’ dispute to Louisiana
  • There was no evidence that the statements or the article itself were directed at Louisiana residents
  • There was no evidence that Above the Law had a disproportionately high Louisiana readership

Due to these factors, the Court of Appeals proceeded to remand the case back to the trial court and order it to transfer the controversy to the Northern District of California.

BOTTOM LINE: Unless a defendant who makes defamatory statements about a business or person located in Texas also happens to have “continuous and systematic contacts” with Texas, i.e., general personal jurisdiction, a plaintiff in this state will have to show that the defamatory remarks were directed at Texas, or Texas activities were the “focal point” of such remarks, in order to be able to sue the defendant in Texas.  Plaintiffs, of course, always have an option of suing defendants in their home states.

Leiza Dolghih is a partner at Lewis Brisbois Bisgaard & Smith LLP in Dallas, Texas and a Co-Chair of the firm’s Trade Secrets and Non-Compete Disputes national practice.  His practice includes commercial, intellectual property and employment litigation.  You can contact her directly at Leiza.Dolghih@LewisBrisbois.com or (214) 722-7108.

Important Employment Law Cases to Follow in 2013

Vance v. Ball State University (7th Cir. 2011) – Who is a “Supervisor” under Title VII? 

The U.S. Supreme Court will resolve a split between federal appellate courts regarding the definition of a “supervisor” for purposes of liability under Title VII. Specifically, the Court will decide whether “supervisor” under Title VII includes only those employees who have the power to “hire, fire, demote, promote, transfer, or discipline” or whether it includes any employee who has “the authority to direct and oversee the harassed employee’s daily work.”

The decision is of tremendous importance to employers, who are strictly liable for harassment inflicted by supervisors, but are liable for harassment by employees only when they were negligent  in either discovering or remedying such harassment.   If the Supreme Court expands the definition of “supervisor” to include anybody who has the authority to direct and oversee an employee’s daily work, the potential for strict liability for employers will expand significantly.

D.R. Horton Inc. v. NLRB (NLRB, 2012) – Are Class Action Waivers in Arbitration Agreements Unlawful? 

The Fifth Circuit is going to review the decision by the NLRB in D.R. Horton  that an arbitration agreement requiring employees to waive “as a condition of employment” their right to bring a joint, class or collective action violated Section 8(a)(1) of the National Labor Relations Act, which protects the rights of employees to engage in concerted, protected activity.  The controversial NLRB decision called into question the growing practice of including class action waivers in employee arbitration agreements and is likely to reach the U.S. Supreme Court.

This is a significant case for employers because it impacts an employers’ ability to contract with its employees up front, as a condition of employment, over the issue of whether its employees may bring class or collective actions, which are notoriously expensive to litigate, expensive to settle, and financially risky to try in court.

Genesis HealthCare v. Symczyk (3rd. Cir. 2011) – Does Offering to Pay the Lone Plaintiff’s FLSA Claim Moot the Lawsuit Before Other Class Members Can Be Added? 

In this important Fair Labor Standards Act (“FLSA”) case, the U.S. Supreme Court will resolve another split among the federal appellate courts when it determines whether an FLSA collective action becomes moot after the named plaintiff receives an offer of judgment that provides full relief.   The Third Circuit Court of Appeals held that such an offer does not moot a putative action.  By contrast, the Ninth and Eleventh Circuits have held that a full offer of judgment to the named plaintiff does moot a putative collective action.

The Court’s resolution of this circuit split is expected to impact an important tool that employers have relied upon in an effort to confront the recent deluge of collective wage-and-hour litigation – the payoff of the plaintiff’s claim before a class action is certified.  The decision could greatly limit the ability of plaintiffs to use discovery to determine the existence of other similarly situated individuals, and will determine whether defendants can avoid a collective action by satisfying the claims of individual plaintiffs before they can join other members of their class.

University of Texas Southwestern Medical Center v. Nassar (5th Cir. 2012) – What is the Causation Requirement in a Title VII Retaliation Claim? 

The U.S. Supreme Court has agreed to decide whether Title VII’s retaliation provision, and similarly worded statutes, require a plaintiff to prove a more arduous but-for causation – that an adverse action would not have been taken by an employer but for a retaliatory motive – or instead require proof only that the employer had a mixed motive, meaning that a retaliatory motive was one of several reasons for the adverse employment action.  The Court’s decision is expected to provide much-desired clarity on the standard of proof.

Leiza Dolghih is a partner at Lewis Brisbois Bisgaard & Smith LLP in Dallas, Texas and a Co-Chair of the firm’s Trade Secrets and Non-Compete Disputes national practice.  His practice includes commercial, intellectual property and employment litigation.  You can contact her directly at Leiza.Dolghih@LewisBrisbois.com or (214) 722-7108.

Employer Can Access Employee’s Cell Phone under the Stored Communications Act

In December, the Fifth Circuit Court of Appeals in Garcia v. City of Laredo, et al. found that an employer who accessed its employee’s cell phone without her permission did not violate the Stored Communications Act.

The employer, a city police department, terminated the employee after it discovered images and text messages on her cell phone that violated the departmental rules. The police department investigators actually downloaded a video and photographs from the employee’s cell phone before calling her to a disciplinary meeting at which she was fired.  The employee sued the City of Laredo claiming that all the text and data stored on her personal cell phone were protected by the Stored Communications Act and the employer violated it when it accessed the data without her permission.

The Fifth Circuit Court of Appeals, however, found that the Act, which protects electronic data, only covers information stored by an electronic communication service provider, and does not reach information stored on a cell phone. The Fifth Circuit noted that this interpretation was consistent with other courts, who had previously held that the Act applied to service providers such as phone companies and Internet or email providers, but did not apply to an individual’s computer, laptop or mobile device.

WHAT DOES THIS MEAN?  This means that while an employer cannot access your Facebook account, for example, or your cell phone records without your permission, the information that you choose to keep on your cell phone or an iPad is fair game (at least in Texas).

The moral of the story is: Don’t leave your phones or iPads lying around at work unless you want your employer to see your personal information.

Leiza Dolghih is a partner at Lewis Brisbois Bisgaard & Smith LLP in Dallas, Texas and a Co-Chair of the firm’s Trade Secrets and Non-Compete Disputes national practice.  His practice includes commercial, intellectual property and employment litigation.  You can contact her directly at Leiza.Dolghih@LewisBrisbois.com or (214) 722-7108.