Articles | Oct 20, 2023

Western District Case Notes: October 20, 2023

The Daily Record

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Agreements to Arbitrate

In Oldacre v. ECP-PF CT Operations, 22-cv-577-JLS-HKS (May 15, 2023), plaintiff commenced a putative class action against defendant—an operator of fitness centers—claiming that defendant violated New York Labor Law § 191 by paying him, and other manual workers, on a bi-weekly rather than weekly basis.  Defendant moved to compel arbitration of the named plaintiff’s claim based on an arbitration clause contained in the gym membership agreement that it offers as a “perk” to its employees.  Plaintiff opposed, arguing that the arbitration clause in the gym membership agreement did not cover employment disputes, and that defendant failed to show that plaintiff agreed to arbitrate claims related to his employment.  In response, defendant argued that the issue of arbitrability had to be decided by an arbitrator because the agreement delegated that authority to the arbitrator, and plaintiff had not challenged the enforceability of the delegation provision.  Observing first that there is a general presumption that the issue of arbitrability should be resolved by the courts, the Court then noted that the presumption can be overcome if the parties have “clearly and unmistakably” delegated that authority to an arbitrator.  In that scenario, a court may not override the contract, and has no power to decide the arbitrability issue “even if the court thinks that the argument that the arbitration agreement applies to a particular dispute is wholly groundless.”  The Court then found that the plain language of the delegation provision showed that plaintiff had clearly and unmistakably delegated questions of arbitrability to the arbitrator.  Finally, because plaintiff did not challenge the delegation provision itself, defendants’ motion to compel arbitration was granted since a challenge to another provision of the arbitration clause in which the delegation provision is found does not prevent a court from enforcing a delegation provision.

Joinder of Non-Diverse Defendants

In Kelly v. Snap-On Inc., 21-cv-729-LJV (May 22, 2023), plaintiff was injured when he was struck by a vehicle driven by one defendant who plaintiff alleged was an agent for other corporate defendants.  Plaintiff commenced two actions, first an action against one corporate defendant alleging that, as owner of the vehicle, it was liable for the driver’s negligence.  Plaintiff then commenced a second action against two related corporate defendants based on claims of negligent hiring and training and a theory of respondent superior.  Before plaintiff could move to consolidate the two actions, defendants in the second action removed it to federal court based on complete diversity.  Plaintiff moved for leave to amend the complaint to add the driver, whose citizenship would defeat diversity, and then to remand the lawsuit back to state court.  The Court granted both motions, ruling first that, because the allegations against the driver and the corporate defendants arose out of the same transaction or occurrence, joinder of the driver was permissible under Rule 20(a).  The Court disagreed with defendants that, in order to join the driver, plaintiff also had to satisfy the standard for amending a complaint under Rule 15 (and, in turn, a motion to dismiss under Rule 12(b)(6)).  Turning to whether joinder also would comport with fundamental fairness, the Court concluded it did because plaintiff had waited only two months after removal to seek to join the driver, no prejudice would result to defendants, denying the joinder would risk multiple litigations in state and federal court, and plaintiff’s motivation for the joinder was facially not impermissible.  Finding that the four factors relevant to fundamental fairness weighed in favor of plaintiff, the Court granted the motion to join the driver and remanded the lawsuit to state court.

Motion for Stay Pending Appeal in Separate Action

In City of Buffalo v. Smith & Wesson Brands, Inc., 23-cv-66-FPG (June 8, 2023), the Cities of Buffalo and Rochester brought claims against various firearm manufacturers and distributors seeking to hold them liable for allegedly causing gun violence in their communities.  Because the constitutionality of the statute underlying one of plaintiffs’ claims is currently at issue in a separate litigation pending before the Second Circuit, defendants sought a stay of proceedings pending the Second Circuit’s determination in that separate litigation, which plaintiffs opposed.  Noting that it has authority to stay proceedings pending disposition of another case that could affect the outcome, the Court then considered the five-factor test governing the analysis and concluded that a stay was warranted, primarily because the Second Circuit’s decision in the separate litigation will likely provide helpful guidance on the constitutionality and applicability of the statute underlying plaintiffs’ central claim in this litigation. Further, the Court found that it would be an inefficient use of the time and resources of the Court and parties to “tread the same ground” shortly in advance of a binding decision from the Second Circuit that may significantly impact this litigation.  Finally, the Court observed that the only potentially countervailing factor is prejudice to plaintiffs, but because they were seeking only monetary—and not equitable—relief for their claims, plaintiffs’ assertion that a delay of several months would cause “extreme prejudice” was “belied by the kind of relief they have chosen to seek” and could be remedied by pre-judgment interest.  As a result, defendants’ motion was granted, and the matter was stayed pending the Second Circuit’s resolution of the separate litigation.

Motion to Stay (First-Filed Rule)

In Nelson v. G.Skill USA, Inc., 22-cv-6175-FPG (May 8, 2023), a putative class action brought under the consumer protection laws of multiple States based on defendant’s allegedly misleading advertising, defendant moved to stay the action pending resolution of a parallel putative class action against it for similar claims, which is pending in the Central District of California.  In support of its motion, defendant argued that the California action was filed first, and both actions involve substantially the same issues, so judicial economy would be promoted by staying this later-filed suit.  Plaintiff opposed, primarily arguing that the California court may not be able to exercise personal jurisdiction over defendant for the New York plaintiffs’ claims, such that rulings in the California action would not have preclusive effect on the issues and claims in this action.  In deciding the motion, the Court first noted that the Second Circuit has long followed the “first-filed rule” in deciding whether a case should be stayed or dismissed in favor of a case pending in another federal court and, under that rule, where two actions involve substantially the same issues, the first should have priority unless there are special circumstances which justify giving priority to the second.  The Court then found that no such special circumstances existed, rejecting as “unpersuasive” plaintiff’s suggestion that the California court might lack jurisdiction over New York plaintiffs’ claims asserted in the California action.  This is because, while the California court might lack “specific jurisdiction” over defendant for claims occurring in New York, defendant is a California corporation with its principal place of business there, meaning it is subject to “general jurisdiction” in California for any claim against it, even if all the incidents underlying the claim occurred in a different State.  And because plaintiff offered no basis for departing from the first-filed rule, defendant’s motion to stay the action was granted.

Employment Discrimination

In Weiss v. Premier Technologies, 22-cv-6349-DGL (May 9, 2023), plaintiff sued two defendants for employment discrimination under state and federal law.  Plaintiff had worked as a sales representative for one defendant, who in turn was an official retailer for the second defendant.  The second defendant moved to dismiss the complaint on grounds that the complaint did not plausibly allege that it was plaintiff’s employer, and therefore it could not be liable for unlawful discrimination.  The Court denied the motion, ruling instead that the complaint contained sufficient allegations of employee discipline, supervision, and control to plausibly allege that the second defendant was plaintiff’s “joint employer.”  In the course of that ruling, the Court rejected documentary evidence submitted by the second defendant on grounds such extraneous evidence was inappropriate on a motion to dismiss.

Private Nuisance and Negligence Claims

In South Buffalo Development LLC v. PVS Chemical Solutions, Inc., 21-cv-1184-WMS (May 30, 2023), plaintiff, who owned 10 parcels of contiguous property adjacent to defendant’s chemical plant, had previously sued defendant under a single state tort theory and concerning only a single parcel of property.  Plaintiff then sought leave to amend and add private nuisance and negligence claims with respect to all 10 parcels, claiming that noxious odors emanating from the chemical plant interfered with plaintiff’s use and enjoyment of those properties.  The Court granted leave, but only with respect to the new private nuisance claim.  Plaintiff alleged that defendant emitted the odors outdoors to the ambient air and public sewer system, which arguably impact the public at large instead of relatively few persons as required in New York for a plausible private nuisance claim.  The Court, however, concluded that other allegations, such as that defendant’s emissions subject plaintiff, its tenants and employees to pervasive odors and permeate plaintiff’s ten properties, might not exceed the “relatively small number” of plaintiffs permitted for a private nuisance claim.  On the other hand, the Court concluded that the amended claim did not plausibly allege a negligence claim because, in New York, a plaintiff may not seek compensation for purely economic loss, but rather must first claim either physical injury or property damage, neither of which plaintiff had alleged here.

Expert Disclosures

In Mittlefehldt v. Travelers Property Casualty Ins. Co., on the same day defendant moved for summary judgment, plaintiff moved for leave to disclose a rebuttal expert witness.  The Court previously had issued a case management order which set forth deadlines for expert disclosures, expert depositions, and summary judgment motions.  Plaintiff did not disclose any experts, and defendant disclosed four experts and then timely filed a summary judgment motion on the corresponding deadline.  The Court refused to grant leave to plaintiff to serve a rebuttal expert disclosure, holding first that Rule 26(b)(2)(D)(ii), which requires that a rebuttal expert must be disclosed within thirty days of the earlier expert disclosure, did not offer relief to plaintiff notwithstanding that his application was made only 34 days after receiving defendant’s expert disclosures.  According to the Court, this rule applies only in the absence of a case management order otherwise addressing the dates of expert disclosures, making plaintiff’s application considerably more tardy.  Moreover, plaintiff failed to show diligence in pursuing the aspect of his case to which the subject rebuttal expect pertained.  The Court determined that plaintiff should have been aware that the issue to be addressed by the rebuttal expert would be central to the litigation as early as when defendant served its answer and affirmative defenses, and that plaintiff at least should have sought leave soon after defendant served its expert disclosures, which also addressed the issue, rather than waiting for the summary judgment deadline.

Kevin M. Hogan is the Managing Partner at Phillips Lytle LLP. He concentrates his practice in litigation, intellectual property and environmental law. He can be reached at khogan@phillipslytle.com or (716) 847-8331.

Sean C. McPhee is a partner with Phillips Lytle LLP where he focuses his practice on civil litigation, primarily in the area of commercial litigation. He can be reached at smcphee@phillipslytle.com or (716) 504-5749.

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