A divided 9th Circuit Court of Appeal published an important decision that opens the door to employees in arbitration getting their claims into Court under the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (“EFAA”). This case also illustrates the importance of compliance with California Code of Civil Procedure 1281.98 (“1281.98”) and paying arbitration fees timely. The employer’s misstep of untimely payment of arbitration fees opened the door to Dr. Ding withdrawing from arbitration and later filing her claims in Court.
This decision, essentially, allows employees to test-drive their claims in an arbitration — take discovery, gauge the arbitrator, assess their odds (at the employer’s expense) -- and bail out for court if they don’t like how the arbitration is moving by adding a sex discrimination claim.
The Arbitration/Lawsuit
In early 2022, Dr. Ding, a former CFO, commenced a JAMS arbitration against her former employer within several months after the termination of her employment, claiming discrimination due to her national origin and having been the victim of domestic violence. For over one year, the parties actively engaged in arbitration, including hearings, discovery and discovery disputes. During discovery, Dr. Ding uncovered emails, board directives and complaints from males that she later used to form the basis for sex discrimination allegations under California law.
After the employer’s late payment of JAMS’ fees, Dr. Ding gave notice that she was withdrawing from the arbitration. About six months later, she filed a complaint in Superior Court asserting a sex discrimination claim.
Her former employer removed the case to the Northern District and brought a motion to compel arbitration. While the district court ruled that 1281.98 was preempted, it also held that Dr. Ding could proceed in court under EFAA under a “plausible” allegation of sexual discrimination.
The Appeal
This divided opinion leaves open the door to further appellate proceedings, including a potential petition for certiorari to the United States Supreme Court. Thus, it might not be the final word on this issue.
The Dissent
The dissent makes the very compelling argument that Dr. Ding elected to pursue her claims in arbitration and should be bound by her election, as EFAA does not provide the right to multiple forum elections to a plaintiff. The dissent argued that choosing arbitration waived the inconsistent option of proceeding in court. Further, the dissent pointed to the recognized caselaw that substantial litigation of a dispute in one forum waives the right to litigate in another forum. While those cases arose in the context of a party litigating in court before seeking to compel arbitration, the dissent correctly concluded that the principle should apply equally in this situation.
The Majority
The majority, however, concluded that the text of EFAA does not limit a plaintiff’s right to proceed in Court under EFAA and distinguished the argument by pointing out that Dr. Ding’s original arbitration claims were not related to sex discrimination, but were predicated on discrimination and harassment based on national origin and domestic violence victimhood. The majority concluded, therefore, that she only made a single election under EFAA when she filed her sexual discrimination complaint in court.
That said, the majority did not eliminate the concept of waiver via litigation or delay as a defense to EFAA, “a court may find waiver where a plaintiff is aware of the facts giving rise to a sexual harassment claim and either unduly delays in bringing such a claim through intentional acts or decides to pursue that claim in arbitration rather than court.” Here, however, the majority concluded that the District Court had decided that Dr. Ding was not aware of her sex discrimination claims and thus did not intentionally choose not to include that claim at the outset of the arbitration.
Finally, the majority explained how, under California law, once Dr. Ding alleged a sex discrimination claim under FEHA, doing so precluded arbitration pursuant to EFAA.
Takeaways
- It is not enough for employers to have strong and enforceable arbitration agreements with employees.
- Employers in California arbitrations must ensure that they comply with 1281.98 to ensure timely payment of arbitration fees.
- As arbitration of non-sexual harassment claims can be litigated for months or years, discovery could end up supporting a subsequent allegation of sexual harassment or sex discrimination that could send claims to court under EFAA.
- Waiver remains a viable defense to EFAA and a record that a plaintiff was aware of facts supporting sexual harassment or sex discrimination claims prior to arbitration will support the argument that the plaintiff elected to arbitrate the claims and waived the right pursue such claims in court.
Please contact Dan M. Forman or your favorite CDF attorney to discuss arbitration agreements, arbitrations or other discrimination claims that employers may be facing and to discuss techniques and practices to avoid such claims.
