Developments in the Second Circuit: 1996-97
| Publication year | 2021 |
| Pages | 109 |
72 CBJ 109. Developments in the Second Circuit: 1996-97
This survey of decisions from the United States Court of Appeals for the Second Circuit covers the time period of October 1, 1996, to September 30, 1997. During that period, the Second Circuit decided 1,688 appeals on the merits, though it published its decision in only 27 percent of those cases. (fn1) As surprising as that statistic may seem, it is perhaps even more surprising that only four circuits - the First, Seventh, Eighth, and District of Columbia Circuits - published a higher percentage of their decisions. Civil cases were by far the most common type of appeal on the Second Circuit's docket, accounting for 785 of the appeals terminated on the merits. Criminal appeals ranked second, accounting for 440 decisions, and prisoner petitions ranked third, with 303 decisions. (fn2) Approximately 350 appeals decided by the Second Circuit in 1996-1997 arose from cases in the United States District Court for the District of Connecticut. The Second Circuit reversed the judges of the District of Connecticut roughly 6 percent of the time, which is about the same as that for the Second Circuit as a whole.
It would not be possible in this survey to discuss all of the noteworthy Second Circuit decisions issued during this time period. This article, therefore, focuses upon a mix of decisions that should be of general interest to Connecticut practitioners. The survey covers seven broad areas of law: Arbitration Law and Procedure; Constitutional Law; Corporate and Securities Law; Criminal Law and Procedure; Intellectual Property; jurisdiction and Procedure; and Labor and Employment. While many cases address multiple or overlapping areas of law, the decisions have been categorized according to their most significant issues and contexts. Thus, cases addressing issues of constitutional law in a criminal context, for example, appear in the Criminal Law and Procedure section. I.
Alternative dispute resolution is on the rise in state and federal courts, and the Second Circuit has been at the forefront in construing the Federal Arbitration Act ("FAA"), which requires state and federal courts to enforce arbitration agreements in most instances. As is evident in three key decisions, the Second Circuit last year continued its long-standing promotion of the "strong federal policy favoring arbitration." (fn3)
A. Waiver
The Second Circuit's most significant arbitration decision during this period is Doctor's Associates, Inc. v. Distajo, (fn4) where the court upheld a judgment compelling arbitration. Although fact specific, Distajo's importance lies in the court's recognition that parties to a contract containing an arbitration clause may make the reasonable business decision to litigate some disputes and arbitrate others. Under Distajo, a decision to litigate one arbitrable dispute does not waive for all time a party's right to arbitrate other unrelated disputes.
Despite its tangled procedural history, the essential facts of Distajo are relatively straightforward. Doctor's Associates, Inc., ("DAI") is the national franchisor of Subway sandwich shops. DAI's affiliates lease the real estate where the shops operate and sublet the premises to franchisees. The leasing companies had filed eviction actions in various state courts against several franchisees, seeking, in most instances, to recover delinquent rent. Several months after the eviction actions were filed, the franchisees filed claims in state court against DAI, alleging violations of the franchise agreements and seeking millions of dollars in damages. When the franchisees refused to arbitrate their state court claims, DAI filed petitions to compel arbitration under Section 4 of the FAA. The District Court granted DAI's petitions and enjoined the franchisees from pursuing their state court actions. (fn5)
The franchisees raised a number of defenses to DAI's petitions to compel, among them that DAI had waived its right to arbitrate by engaging in litigation of the eviction actions. In prior decisions, the Second Circuit had established the general standard that "waiver of the right to arbitrate occurs when a party engages in protracted litigation that results in prejudice to the opposing party." (fn6) Writing for a unanimous panel, judge Feinberg announced a refinement of that standard:
[O]nly prior litigation of the same legal and factual issues as those the party now wants to arbitrate results in waiver of the right to arbitrate .... Finding waiver where a party has previously litigated an unrelated yet arbitrable dispute would effectively abrogate an arbitration clause once a party had litigated any issue relating to the underlying contract containing the arbitration clause. (fn7)
Because it found that the eviction actions and the defendants' state court claims had neither common legal issues nor the same core facts, the Second Circuit concluded that DAI had not sought to litigate the issues it was now seeking to arbitrate. The Distajo court therefore held that DAI had not waived its right to arbitrate the franchisees' state court claims and affirmed the District Court's order compelling arbitration and enjoining the franchisees from prosecuting their state court lawsuits. (fn8)
B. Employment Disputes.
With arbitration of employment-related disputes on the rise, the Second Circuit also made it clear that it will uphold agreements to arbitrate against efforts by either employers or employees to avoid arbitration or vacate the results. In DiRussa v. Dean Witter Reynolds, Inc., (fn9) the court held that the arbitrators' failure to award attorney's fees to a successful age discrimination claimant, where such fees were required by federal law, was not grounds to modify or vacate the arbitration award. DiRussa petitioned the court to vacate the award on the grounds that the arbitrators had shown manifest disregard of the law or exceeded their authority in failing to award him attorney's fees. However, the Second Circuit held that to vacate an award on the basis of "manifest disregard of the law," a court must find that the arbitrators knew of the law and chose to ignore it, and that the law was well-defined and clearly applicable to the case. Although the federal statutory requirement that attorney's fees be given to a successful plaintiff is a well-defined, clearly applicable law, there was no evidence that the arbitrators knew that an award of attorney's fees was mandatory under the statute. The court noted that while it would be prudent for arbitrators to familiarize themselves with applicable statutes, "their failure to do so did not constitute manifest disregard of the law." (fn10)
In Saint May Home, Inc. v. Service Employees International Union, (fn11) a case on appeal from the District of Connecticut (Arterton, J.), the Second Circuit refused to vacate an arbitration award reinstating a nursing home employee who was dismissed after being arrested at work for possession of marijuana with intent to sell. The employer argued on appeal that the arbitrator acted without authority, and, alternatively, that even if the arbitrator was within his authority, the award should be vacated as a violation of public policy. The Second Circuit held that because the parties' collective bargaining agreement left the decision of whether a particular offense constituted just cause for discharge to the arbitrator, the award was clearly within the arbitrator's authority. As with DiRussa, the Second Circuit's focus in St. Mary was limited to the authority of the arbitrator to reach the decision, and not the correctness of the decision itself. (fn12)
More important, in addressing the employer's second argument, the St. Mary court took a very limited view of the public policy basis for vacating an arbitration award. Although it noted that the employer had indeed shown that there was 61 a strong [general] public policy against the use, possession, and sale of drugs," the court focused its inquiry on a much narrower issue: whether there was a explicit, well-defined public policy reflected in the law that required "permanent dismissal in all cases when drug related conduct occurs in the workplace." (fn13) Finding that the employer had shown no evidence of such an explicit public policy, the court upheld the arbitrator's award.
During the 1996-1997 period, the Second Circuit decided noteworthy constitutional law cases in the areas of freedom of association,(fn14) freedom of expression,(fn15) free exercise of religion, (fn16) the establishment clause, (fn17) standing, (fn18) and access to the Courts. (fn19) However, the court's decisions on the ex post facto clause and the scope of First Amendment protection for public employees deserve particular attention.
A. Sex Offender Notification Laws.
In 1997, the Second Circuit joined the Third Circuit as the only federal appellate courts to address the ex post facto issues raised by sex offender statutes ("Megan's Laws"). (fn20) In fact, the Second Circuit decided two Megan's Law cases during the 1996-1997 period. In Doe v. Pataki, (fn21) the court upheld retroactive application of both notification and registration provisions of New York's Megan's Law, reversing the district court's judgment as to the notification provision. The district court had found that the notification provision, which provides for three levels of notification depending upon the risk of re-offense (to law enforcement officials, vulnerable populations, and the general public), constituted punishment such that its application to persons convicted prior to the date of enactment would violate the ex post facto clause. In an opinion written by judge Newman, the Second Circuit reversed, holding that under the two-part inquiry...
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