Hertz So Good

Can a corporation be held liable for discrimination when neutral decision makers—without any age-based animus—rely on information that is tainted by an employee who harbors age-based discriminatory animus? The First Circuit has answered: yes. Three superiors, whose decision was not motivated by any discriminatory factor or animus, terminated a Hertz branch manager. However, it appeared from the record that a subordinate supervisor, motivated by age-based discriminatory animus, proceeded to craft a plan to "get rid of" the plaintiff because he was "over the hill" and not "their kind." Apparently, the supervisor withheld critical information regarding the issue that resulted in the plaintiff’s termination. If, on remand, the trial court found that the subordinate manipulated the evidence, then the plaintiff had proved his case.

The First Circuit affirmatively adopted the position that a plaintiff may establish corporate liability, even if the decision makers exhibit no discriminatory animus, if the decision is tainted by the unlawful influence of a subordinate. The Court cited opinions from the Fifth, Third and Seventh Circuits that are in accord with this conclusion. Although an age discrimination case, the logic of the decision would apply in any discrimination context. The message to corporations: rein in your wayward supervisors and make sure you investigate their motives. Cariglia v. Hertz Equipment Rental Corp., No. 02-2199 (1^st Cir. April 5, 2004).

Comity in the Brave New World

KPMG-B is a Belgian firm that performs internal audits. When one of its publicly traded clients fell into financial ruin an avalanche of securities fraud cases sprang to life—as is now par for the course in such instances. KPMG-B refused to produce auditing records and work papers in the consolidated securities litigation pending in the Federal District Court, Massachusetts, claiming that to do so would violate Belgian law. A magistrate judge rejected this argument and ordered production. KPMG-B retreated to its home turf, attempting to get a Belgian court to impose penalties on those who try to seek its records. In turn, the plaintiffs moved for an anti-suit injunction in the district court to stop KPMG-B from pursuing the Belgian action. The district court obliged.

The First Circuit upheld the district court ruling and announced its adoption of a standard for courts to use in assessing whether to issue an anti-suit injunction. The Court astutely noted that as "the imperatives of transnational business shrink the size of the globe, the task of devising an effective yet respectful paradigm for easing this friction becomes more and more urgent."

Adopting the traditional "conservative" approach espoused in four sister circuits (Second, Third, Sixth, and D.C. Circuits), the Court set forth the groundwork for its operation. First, as a threshold matter, only parallel suits involving the same parties and issue are "ripe" for an anti-suit injunction. If this threshold is satisfied, courts should then assess the totality of the circumstances. In doing so, international comity must be given "substantial weight." Such considerations "ordinarily establish a rebuttable presumption against the issuance of an order that has the effect of halting foreign judicial proceedings." In doing so, the Court noted the influence of the "global economy" and that "economic interdependence has highlighted the importance of comity."

To rebut the presumption, some factors to consider were also mentioned by the Court. This is a must-read case for any practitioner who deals with foreign-party litigants, particularly when those litigants seek out friendly foreign courts. Quaak v. Klynveld Peat Marwick Goerdeler Bedrijfsrevisoren, No. 03-2704 (1st Cir. March 8, 2004).

Other Notables: Bankruptcy Boo-Hoos Are Not Actual Damages

The Ninth Circuit recently joined the Seventh Circuit in holding that a debtor may not recover damages for emotional distress under 11 U.S.C. 362(h) when a creditor violates the automatic stay that follows from a bankruptcy petition. Plaintiffs relied on an opinion from the District of Rhode Island Bankruptcy Court, in which the court ordered a creditor to pay emotional distress damages on account of "willful and malicious violations of the automatic stay." The Ninth Circuit found the Seventh Circuit view of the issue persuasive, and held otherwise. In re Dawson, No. 02-16903 (9^th Cir. May 18, 2004); see also In re Fisher, 144 B.R. 237, 239 (Bankr. D.R.I. 1992).

Agency Employment Based On Licensing?

Can an agency, for purposes of the Age Discrimination in Employment Act (ADEA), be regarded as the employer of those whom it licenses and regulates? The First Circuit employed its common law agency principle approach to determine whether an employment relationship existed between a port authority and the harbor pilots it licenses and regulates. This approach is followed in other circuits, but the writer notes that another cadre of circuits uses a hybrid approach. Using its test, the First Circuit concluded that the pilots function as independent contractors and the port authority was merely a licensing and regulatory agency overseeing them; thus, no employment relationship existed. Camacho v. Puerto Rico Ports Authority, No. 03-2113 (1^st Cir. May 21, 2004); see also, e.g., Mangram v. Gen. Motors Corp., 108 F.3d 61, 62-63 (4^th Cir. 1997) (using hybrid approach).

NH Bar Member, Eric Cioffi, is an attorney at the appellate law firm of Greines, Martin, Stein & Richland, LLP, Los Angeles, Calif. Contact him at ecioffi@gmsr.com.

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