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PLAINTIFF’S INABILITY TO SHOW ACTUAL OUT-OF-POCKET LOSS REQUIRED DISMISSAL OF THE FRAUDULENT-INDUCEMENT CAUSE OF ACTION.

The First Department, over a two-justice dissent, determined the complaint alleging fraudulent inducement was properly dismissed for failure to allege out-of-pocket damages. Plaintiff was hired as an at will employee to develop a ramen cuisine for defendant restaurant chain (Chipotle). Plaintiff subsequently learned defendant had entered an agreement with another chef to develop ramen cuisine, the deal had fallen apart and would probably end in litigation. Plaintiff alleged, had he known about the undisclosed agreement with another chef he would not have entered the agreement with Chipotle. Although it was anticipated at the outset plaintiff would work for defendant for three years, and thereafter be entitled to certain specified additional compensation, plaintiff was an at will employee and had been compensated for the work he completed before he was terminated. Therefore, the First Department held, plaintiff could not demonstrate the out-of-pocket loss required for a “fraudulent inducement” cause of action:

 

The facts alleged, even when viewed in a light most favorable to plaintiff, do not give rise to a reasonable inference that he sustained calculable damages based on defendants’ actions. Plaintiff’s employment was at will, and he has no claim of reasonable reliance on representations concerning continued employment … . Any claim that he was deprived of the promised Chipotle stock cannot succeed, given that is undisputed that the express terms of the parties’ agreement required him to be an employee for three years. Nor can he seek damages based on the alleged profits that would have been realized had there been no fraud. When a claim sounds in fraud, the measure of damages is governed by the “out-of-pocket” rule, which states that the measure of damages is “indemnity for the actual pecuniary loss sustained as the direct result of the wrong” … . In other words, damages are calculated to compensate plaintiffs for what they lost because of the fraud, not for what they might have gained in the absence of fraud … . Additionally, plaintiff’s claim that he would have received better remuneration had he partnered with a different entity is inherently speculative and would require any factfinder to engage in conjecture … . Connaughton v Chipotle Mexican Grill, Inc., 2016 NY Slip Op 00273, 1st Dept 1-19-16

 

FRAUD (OUT-OF-POCKET DAMAGES REQUIREMENT)/DAMAGES (FRAUDULENT INDUCEMENT CAUSE OF ACTION MUST BE SUPPORTED BY ALLEGATIONS OF OUT OF POCKET LOSS)/CONTRACT LAW (FRAUDUENT INDUCEMENT CAUSE OF ACTION MUST BE SUPPORTED BY ALLEGATIONS OF OUT OF POCKET LOSS)/EMPLOYMENT LAW (FRAUDULENT INDUCEMENT, AT WILL EMPLOYEE CANNOT RECOVER AS DAMAGES COMPENSATION EMPLOYEE WOULD HAVE RECEIVED IN THE FUTURE BUT FOR THE FRAUD)

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PROOF REQUIREMENTS FOR RACIAL DISCRIMINATION UNDER THE NEW YORK CITY HUMAN RIGHTS LAW EXPLAINED; PLAINTIFF’S ACTION SHOULD HAVE BEEN DISMISSED.

The First Department, in a full-fledged opinion by Justice Acosta, determined plaintiff, who had brought a racial-discrimination action under the New York City Human Rights Law,  was unable to show that the employer’s reasons for terminating her were pretextual. The court held that the phrase “a leopard does not change its spots” and the term “tirade,” used in reference to plaintiff’s behavior, did not have discriminatory meanings. With respect to the proof requirements under the NYC Human Rights Law (“City HRL”), the court explained:

How the City HRL’s distinctive substantive definitions, standards, and frameworks interact with existing standards for summary judgment has been the subject of some confusion … . As with any other civil case, a discrimination plaintiff must produce enough evidence to preclude the moving defendant from being able to prove that (1) no issues of material fact have been placed in dispute by competent evidence, and (2) a reasonable jury (resolving all inferences that can reasonably be drawn in favor of the non-moving party) could not find for the plaintiff on any set of facts under any theory of the case. But recognizing that the general evidentiary standard remains the same in discrimination cases does not permit a court to apply the standard in a manner that ignores the distinctiveness of City HRL causes of action. All the general standard does, in other words, is provide the template that says, “Defendant must prove that no reasonable jury can conclude X.” The “X” depends on the cause of action.

Thus, the only substantive requirement in a City HRL case where the plaintiff goes the “pretext” route is for the plaintiff to produce some evidence to suggest that at least one reason is “false, misleading, or incomplete.” A plaintiff who satisfies this requirement may well have produced less evidence than would be required under the state and federal laws. But he or she will have produced enough evidence to preclude the defendant from proving that no reasonable jury could conclude that any of the defendant’s reasons was pretextual. In other words, the general evidentiary standard comfortably co-exists with the distinctive substantive framework that must be applied to City HRL claims. Cadet-Legros v New York Univ. Hosp. Ctr., 2015 NY Slip Op 08984, 1st Dept 12-6-15

MONTHLY COMPILATION INDEX ENTRIES FOR THIS CASE:

EMPLOYMENT LAW (NYC HUMAN RIGHTS LAW RACIAL DISCRIMINATION ACTION DISMISSED)/HUMAN RIGHTS LAW, NEW YORK CITY (PROOF REQUIREMENTS EXPLAINED)/DISCRIMINATION (NYC HUMAN RIGHTS LAW ACTION DISMISSED)/ MUNICIPAL LAW (DISCRIMINATION ACTION UNDER THE NEW YORK CITY HUMAN RIGHTS LAW)

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Petitioner, Who Was Required to Work in the “Work Experience Program [WEP]” to Receive Public Assistance, Was an “Employee” Entitled to Minimum Wage Under the Fair Labor Standards Act (FLSA)

The Court of Appeals, in a full-fledged opinion by Judge Lippman, over an extensive dissenting opinion by Judge Abdus-Salaam (in which Judge Pigott concurred), determined petitioner, who received public assistance from New York City and was therefore required to work 35 hours per week in the Work Experience Program (WEP), was an “employee” entitled to the minimum wage under the Fair Labor Standards Act (FLSA). Petitioner, after completing the WEP, won $10,000 in the state lottery. Under the lottery rules, the state sought one-half of the lottery proceeds as reimbursement for the public assistance paid to petitioner. Petitioner argued that the reimbursement reduced the amount the state paid him for his WEP work below the minimum wage required by the FLSA. The Court of Appeals agreed with petitioner’s argument. The bulk of the opinion and the dissent dealt with the propriety of finding petitioner was an “employee” entitled to the minimum wage protections of the FLSA:

… [W]e must apply the economic reality test and, under that test, the City should be considered Carver’s employer. The City had the power to hire and fire WEP workers, in that it was the City’s responsibility to assign public assistance recipients to a WEP agency and the City could dismiss workers from WEP based upon their performance. Additionally, the City and its WEP agencies supervise and control the work schedule of the workers. Furthermore, the City and its agencies, such as HRA, maintain the employment records of the WEP workers. While the Social Services Law, not the WEP agencies or the City, determines the rate and method of payment of WEP workers, that is simply one factor. The economic reality test “encompasses the totality of the circumstances” … . Matter of Carver v State of New York, 2015 NY Slip Op 08451, CtApp 11-19-15

 

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Plaintiff’s Allegations of a Hostile Work Environment and Retaliation Were Not Sufficient As a Matter of Law

The Third Department determined that plaintiff’s action against her employer (UPS) alleging sexual harassment, rising to the level of a hostile work environment, and retaliation for complaining about it, was properly dismissed. Although the complaint alleged several instances of crude and improper language and physical contact, the allegations did not, as a matter of law, describe a “hostile work environment.” Nor were the allegations of retaliation sufficient as a matter of law:

A party alleging the existence of a sexually hostile work environment must demonstrate that “‘the workplace is permeated with discriminatory intimidation, ridicule, and insult that is sufficiently severe or pervasive to alter the conditions of the victim’s employment and create an abusive working environment'” … . To determine whether a hostile work environment exists, we must consider “all the circumstances, including ‘the frequency of the discriminatory conduct; its severity; whether it is physically threatening or humiliating, or a mere offensive utterance; and whether it unreasonably interferes with an employee’s work performance'” … . The test is both subjective and objective; that is, a plaintiff must demonstrate that the conditions of his or her employment were altered as a result of the conduct he or she perceived to be abusive and that the conduct created an environment that a reasonable person would find to be hostile or abusive … . * * *

A valid claim for retaliation under the Human Rights Law exists where a party demonstrates “that (1) [he or] she has engaged in protected activity, (2) [his or] her employer was aware that [he or] she participated in such activity, (3) [he or] she suffered an adverse employment action based upon [his or] her activity, and (4) there is a causal connection between the protected activity and the adverse action”… . Minckler v United Parcel Serv., Inc., 2015 NY Slip Op 07882, 3rd Dept 10-29-15

 

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Under the Circumstances Plaintiff Could Not Strictly Comply with the Whistleblower Statute by Complaining to the Very People Involved in the Wrongful Conduct—Plaintiff Entitled to Back Pay and Prejudgment Interest for Retaliatory Demotion

The Court of Appeals, in a full-fledged opinion by Judge Abdus-Salaam, determined that plaintiff had complied with the whistleblower statute and was entitled to prejudgment interest on his award for retaliatory demotion. The statute, Civil Service Law  75-b, requires that any allegedly wrongful act first be reported to the “appointing authority.” However, in this case, the “appointing authority” were the very people plaintiff alleged committed the wrongful act. In this circumstance plaintiff’s complaints to his immediate superiors and then to the inspector general were deemed to comply with the statute. The Court of Appeals also reasoned that, because the purpose of the whistleblower statute is to make whistleblowers whole, the award of prejudgment interest under the statute is proper:

Under these particular circumstances, strict compliance with the reporting requirements of Civil Service Law § 75-b would not serve the purpose of the statute. Rather, courts should use their discretion in determining whether the overall actions of the plaintiff constitute a good faith effort to report the misconduct. In cases such as this — where the appointing authority is the one engaging in the alleged misconduct — an employee’s good faith effort to report the misconduct should be evaluated with attention to the employee’s practical inability to report to the appointing authority. The “good faith” provision in the statute affords courts the discretion to determine whether a plaintiff has met its requirements and appears to adequately account for situations like the one presented here. * * *

Here, an overall view of the comprehensive package of remedies listed in Labor Law § 740 (5), including undefined “compensation” and “remuneration,” demonstrates that the Legislature sought to make a whistleblowing plaintiff whole, which would include an award of prejudgment interest.  … [B]ecause the remedies listed in the statute appear to seek to make a whistleblowing plaintiff whole, awarding prejudgment interest would serve that purpose. By demoting plaintiff rather than awarding him a planned promotion and significant raise, defendants deprived plaintiff of access to what would have been a higher salary for a period of over 10 years. Awarding back pay with interest would serve to make plaintiff whole; thus, he is entitled to such a recovery. Tipaldo v Lynn, 2015 NY Slip Op 07698, CtApp 10-22-15

 

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Community College Retaliated Against Union for Its Advocacy

The Third Department upheld Supreme Court’s finding that a community college (petitioner) retaliated against the union (NIEU) in violation of the Civil Service Law by refusing to hire union employees for second jobs (for which union members received overtime pay). The court explained the relevant analytical criteria:

To prove its claim that petitioner [community college] engaged in an improper practice, NIEU was required to establish that it was engaged in activities protected by the Taylor Law (see Civil Service Law § 200 et seq.), that petitioner knew of these activities, and that it took the challenged action because of the activities … . “If the charging party proves a prima facie case of improper motivation, the burden of persuasion shifts to the party charged to establish that its actions were motivated by legitimate business reasons” … . Here, the parties agree that NIEU’s advocacy on the overtime issue was a protected activity and that petitioner was aware of NIEU’s advocacy. Their dispute focuses on whether petitioner’s decision to stop hiring NIEU members for second jobs was improperly motivated. Matter of Hudson Val. Community Coll. v New York State Pub. Empl. Relations Bd., 2015 NY Slip Op 07731, 3rd Dept 10-22-15

 

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Criteria for Whether Public Employer/Employee Dispute Is Arbitrable Explained

The Second Department determined the village’s petition to stay arbitration was properly denied. The firefighters’ union filed a grievance when the town decided to lay off six bargaining unit members and assign bargaining unit work to nonbargaining unit volunteers. Supreme Court determined the parties had agreed to arbitrate these matters in the collective bargaining agreement (CBA). The court explained the criteria for determining whether a public employer/employee dispute is arbitrable:

” The determination of whether a dispute between a public sector employer and employee is arbitrable is subject to [a] two-prong test'” …” Initially, the court must determine whether there is any statutory, constitutional, or public policy prohibition against arbitrating the grievance'”  … . “If there is no prohibition against arbitrating, the court must examine the parties’ collective bargaining agreement and determine if they in fact agreed to arbitrate the particular dispute” … .

Here, the petitioner argued that arbitration of layoffs of union-member firefighters is prohibited by public policy. Regarding a violation of public policy, “a dispute is not arbitrable if a court can conclude “without engaging in any extended factfinding or legal analysis” that a law “prohibit[s], in an absolute sense, [the] particular matters [to be] decided’ by arbitration”‘ … . The petitioner failed to point to any law or public policy that would prohibit arbitration of the grievance. * * *

The grievances were reasonably related to the general subject matter of the CBA and, therefore, the petitioner’s management rights granted under Article XVII, and “the question of the scope of the substantive provisions of the CBA [are] a matter of contract interpretation and application reserved for the arbitrator” … . Matter of Village of Garden City v Local 1588, Professional Firefighters Assn., 2015 NY Slip Op 07672, 2nd Dept 10-21-15

 

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Former Parking Enforcement Officer Entitled to Hearing Re: Whether Town Abolished Her Civil Service Position in Bad Faith

The Second Department determined petitioner was entitled to a hearing re: whether the town acted in bad faith in abolishing her position as a parking enforcement officer. Just prior to her termination, the town hired four parking enforcement officers who were not required to take the civil service examination:

In light of NY Constitution, article V, § 6, a public employer may abolish a civil service position when the “discontinuance of the position would promote efficiency and economy,” provided that the employer acts in good faith … . The Court of Appeals has stated that “[a] public employer may abolish civil service positions for the purpose of economy or efficiency, as long as the position is not abolished as a subterfuge to avoid statutory protection afforded civil servants before they are discharged'” … . Where a public employer has abolished a civil service position, an employee challenging that determination has the burden of proving that the employer engaged in a bad faith effort to circumvent the Civil Service Law … .

Here, it is undisputed that four new part-time parking enforcement officers were hired in 2011; one of those employees was hired in October 2011, only a month before the petitioner was informed that her position would likely be abolished. Further, the Town and Town Board submitted no evidence as to whether the decision to abolish the petitioner’s position was made by Town Board resolution, or by some other means. Pursuant to the doctrine of legislative equivalency, a civil service position “created by a legislative act can only be abolished by a correlative legislative act” … . Here, the record does not indicate the specific mechanism by which the petitioner’s position was abolished. Additionally, although the Town submitted some evidence showing that it undertook various cost-cutting measures in connection with its 2012 budget, the record contains no evidence as to any legislative or other deliberations underlying the determination at issue here. Matter of Colabella v Town of Eastchester, 2015 NY Slip Op 07656, 2nd Dept 10-21-15

 

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Negligent Supervision and Retention and Respondeat Superior Causes of Action Against City Department of Education (DOE) Should Not Have Been Dismissed—Complaint Alleged Sexual Abuse of Student By Teacher

The Second Department determined the causes of action against the City of New York Department of Education (DOE) alleging negligent supervision and retention of a teacher, as well as liability based upon respondeat superior, should not have been dismissed. The complaint alleged the sexual abuse of a student by a teacher, Watts, over the course of two years. The DOE failed to demonstrate it did not have actual or constructive notice of the teacher’s propensity for sexual abuse. Although the respondeat superior theory did not apply to the teacher (who acted outside the scope of employment) other employees, who were acting within the scope of employment, may have been negligent:

“Schools have a duty to adequately supervise the students in their care, and may be held liable for foreseeable injuries proximately related to the absence of adequate supervision” … . “The standard for determining whether the school has breached its duty is to compare the school’s supervision and protection to that of a parent of ordinary prudence placed in the same situation and armed with the same information” … . “Where the complaint alleges negligent supervision due to injuries related to an individual’s intentional acts, the plaintiff generally must demonstrate that the school knew or should have known of the individual’s propensity to engage in such conduct, such that the individual’s acts could be anticipated or were foreseeable” … . “Actual or constructive notice to the school of prior similar conduct generally is required” … . Similarly, in order to establish a cause of action based on negligent retention of an employee, “it must be shown that the employer knew or should have known of the employee’s propensity for the conduct which caused the injury” … .

Here, the moving defendants failed to establish, prima facie, that the DOE had no specific knowledge or notice of Watts’ propensity to engage in the misconduct alleged in the complaint … . * * *

The Supreme Court also should have denied that branch of the moving defendants’ motion which was for summary judgment dismissing the cause of action alleging liability based upon a theory of respondeat superior insofar as asserted against the DOE. “Under the doctrine of respondeat superior, an employer may be vicariously liable for the tortious acts of its employees only if those acts were committed in furtherance of the employer’s business and within the scope of employment” … . Here, the DOE may not be held liable under a theory of respondeat superior for the alleged misconduct committed by Watts, as it is undisputed that those acts were not committed in furtherance of the DOE’s business and within the scope of Watts’ employment … . However, as the plaintiffs correctly contend, the complaint adequately alleged that other employees of the DOE were negligent in the performance of their respective duties, and that such negligence constituted a proximate cause of the infant plaintiff’s injuries. In this regard, the moving defendants failed to establish, prima facie, that these other employees were not acting within the scope of their employment …, that they were not negligent, or that any such negligence was not a proximate cause of the alleged injuries … . Nevaeh T. v City of New York, 2015 NY Slip Op 07642, 2nd Dept 10-21-15

 

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Termination for Insubordination Proper

The Fourth Department determined that petitioner, the former chief operator of a city water treatment plant, was properly terminated for insubordination. Petitioner complained directly to the NYS Department of Health about a supervisor’s decision, thereby allegedly violating directives concerning the chain of command. Matter of Gaffney v Addison, 2015 NY Slip Op 07372, 4th Dept 10-9-15

 

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