Editor’s Note: Danny Cevallos (@CevallosLaw) is a CNN legal analyst and a personal injury and criminal defense attorney admitted to practice in Pennsylvania and the U.S. Virgin Islands. The opinions expressed in this commentary are his.
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Danny Cevallos: Defense embarks on strategy to keep sex harassment case out of court
Cevallos: Does it matter whether Roger Ailes signed Gretchen Carlson's contract, which has arbitration clause?
A lot has happened since Gretchen Carlson filed her sexual harassment lawsuit against Fox News chief Roger Ailes on July 6 – indeed, the case is not even in the same court anymore.
After the defense team launched its counteroffensive, it’s an open question which judge will hear the case – or whether it will be heard in any court at all.
Last week the defense removed the case from New Jersey state court to federal court in that state.
Now, it has filed a request to have the case moved from New Jersey entirely, to federal court in New York.
And ultimately, the defense is seeking to have the case forced into private arbitration, out of any court, and any public proceeding. These strategic maneuvers by the defense could derail the plaintiff’s high-profile case, sending it to legal oblivion, before it ever gets to a jury.
Carlson filed the lawsuit in New Jersey Superior Court, alleging, among other things, that Ailes “unlawfully retaliated against Carlson and sabotaged her career because she refused his sexual advances and complained about severe and pervasive sexual harassment.”
Ailes denied the allegations and said that “this is a retaliatory suit for the network’s decision not to renew her contract.”
Strategic moves
The defense’s strategy so far is multifaceted and impressive.
First, the defense “removed” the case out of state court. Removal is a defensive maneuver that unilaterally forces a plaintiff’s case out of her chosen forum in state court, and up to the federal district court in the same geographic district. Only a small category of cases can be “removed” because federal courts are very limited in the kinds of cases they can hear.
Federal jurisdiction in a case such as this – involving “diversity” jurisdiction – requires that a minimum dollar amount be involved ($75,000) as well as “complete diversity” between the parties, which means here the plaintiff and defendant must be from different states.
Not surprisingly, federal courts aren’t huge fans of removal, and the extra burden on their dockets. Federal courts admittedly resolve all doubts in favor of sending these cases back down to state court if they can.
Similarly, plaintiffs choose state court for strategic reasons, so plaintiffs generally hate to be “removed” to federal court – it throws them off their game. And if Carlson’s team hated being “removed,” it is not going to like the rest of the defense’s master strategy either.
Next, the defense is seeking to move the case from federal court in New Jersey to a different federal venue: federal court in New York.
It is important to distinguish “venue” from “jurisdiction” here. Jurisdiction deals with the power of a court to hear a given case. Venue is somewhat less important; it is primarily a matter of convenience to the litigants.
If a court doesn’t have jurisdiction over the subject matter, it can’t hear the case. Period. By contrast, just because there is a better venue somewhere else, doesn’t necessarily mean the court has to transfer the case to that somewhere else.
These venue motions are harder to win, but the defense makes a strong case here, too, arguing that the defendant doesn’t live in New Jersey, the plaintiff doesn’t live there, the alleged conduct didn’t happen there and – perhaps the most compelling – the plaintiff is not suing under New Jersey law.
She is only suing under a New York City discrimination law, a law that requires that the conduct have a nexus to … New York City. If the defense successfully moves the case to federal court in New York, then it’s on to stage three: The defense will seek a ruling that the case shouldn’t be in court at all.
What arbitration is all about
Ailes’ attorneys claim that Carlson violated the arbitration clause in her employment agreement with Fox News when she filed directly against Ailes in any courthouse. They point to an apparent arbitration clause in Carlson’s employment contract with Fox News. Arbitration means two parties to an agreement give up a right they would otherwise have to go to court to resolve their disputes, opting for a private, streamlined proceeding before a neutral arbitrator.
Courts love arbitration; it frees up their own clogged dockets, by barring would-be litigants. Who doesn’t like less work? Not surprisingly then, federal law and courts alike presumptively and openly favor the enforcement of arbitration agreements.
Corporate defendants love arbitration agreements, too. The private nature of the process avoids disclosure of sensitive facts. And according to a 2011 study by Alexander Colvin cited by The Washington Post, employers do well at arbitration against employees.
Who doesn’t like arbitration agreements? Employees. Individuals. You. Yet, as you sit here reading this, I guarantee that you are bound by at least 10 different arbitration agreements. Even if you don’t have an employment contract, you have signed, or clicked, or otherwise agreed to arbitration clauses in everything from consumer electronics, to home renovations, to medical malpractice. Did you download Pokemon Go? Congratulations: You’ve agreed to arbitration.
Arbitration is promoted as a cheaper, less formal alternative to a full-blown jury trial. Instead of a courtroom and a judge, there is usually a conference room, and one or more non-robed arbitrators. The informality of arbitration is touted as its advantage – and equally criticized as its failure. Plaintiffs often see the arbitration process as too “chummy” with corporate defendants.
Arbitrators insist they are always neutral – and indeed, the ones I’ve encountered were fair and impartial. Still, there’s likely some subtle – even unconscious – gravitational pull for a private arbitration company toward a corporate defendant who represents repeat business – as opposed to an individual plaintiff that the arbitrator will never see again.
That’s potentially one reason why Carlson filed suit against only Ailes – to avoid the arbitration agreement in her contract with Fox News. But her choice not to arbitrate doesn’t necessarily mean she can avoid having to arbitrate.
When an employer claims that an employee breached an arbitration agreement by filing suit in court, the test applied by a court is (1) whether a valid agreement to arbitrate exists, and (2) whether the claim is within the scope of that agreement.
Had Carlson filed her lawsuit against Fox News, it seems likely that the arbitration clause cited by the defendant in his papers would apply. But what about the fact that Carlson’s agreement is with Fox News and not with Ailes?
Does it matter whether Ailes signed the contract?
In responding, Carlson’s attorneys will likely cite appellate decisions where courts refused to compel contractually mandated arbitration because the individual defendant sued had not actually signed the specific contract containing the arbitration clause.
It’s true that in general, a party cannot be required to participate in arbitration unless it has agreed to submit to the arbitration.
On the other hand, courts hold that traditional principles of contract and agency law may justify subjecting nonsignatories of the contract to arbitration if, for example, the nonparty (here, Ailes) is an agent of the party (here, Fox News). Courts recognize several other legal theories binding nonsignatories to arbitration agreements, too.
That’s the defense’s position. It has filed for a stay – like a “pause” – of the court case, so that the case can be sent to arbitration. They argue that New Jersey and New York state courts both reject the tactic of suing a corporate officer instead of the corporation itself to avoid arbitration.
Parenthetically, this is another smart move by the defense: asking for a “stay” instead of an outright dismissal.
The plaintiff can appeal a dismissal; she may not be able to appeal a stay. A stay further traps the plaintiff in a legal “phantom zone” as this case tumbles through the litigation universe, on the way to arbitration.
This case is even further complicated by the New Jersey federal court having to determine which laws apply. The case is in federal court in New Jersey, which might mean New Jersey federal or state law can apply. But if, for example, the parties agreed in their contract to settle disputes under New York law, then that might affect which law governs the “arbitrability” of the case.
Overall, the defendants have a good chance of sending this back to arbitration. The courts’ open preference for arbitration, combined with a willingness to include people in arbitration agreements who didn’t sign them, means this case may not stay in any court but be banished to a private proceeding, away from prying eyes.
Danny Cevallos (@CevallosLaw) is a CNN legal analyst and a personal injury and criminal defense attorney admitted to practice in Pennsylvania and the U.S. Virgin Islands. The opinions expressed in this commentary are his.