Chipotle Case Tests Trigger for Avoiding Harassment Arbitration

A Chipotle Mexican Grill Inc. employee’s ability to pursue in court, not arbitration, claims relating to her alleged workplace rape will turn on the Eighth Circuit’s determination of when a sexual harassment dispute “arises” under a 2022 law.

At issue before the panel on Wednesday is whether a lower court correctly ruled that the worker can avoid arbitration under the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act, which President Joe Biden signed into law on March 3, 2022.

Under the EFAA, a party can opt out of arbitration when they’re pursuing allegations based on a sexual harassment or assault “dispute or claim that arises or accrues on or after the” law’s enactment date.

“Dispute,” “claim,” “arises,” and “accrues” aren’t defined in the act and district courts have grappled with how to interpret those terms. The issue is important because the EFAA was a rare amendment of the Federal Arbitration Act, which employee advocates have long criticized as being used to deny workers their right to a trial in open court on sex and other bias claims.

“The question is what needs to have happened after the effective date of the statute for it to apply,” Eniola Famuyide’s lawyer Nicholas J. Nelson of CrossCastle PLLC told Bloomberg Law. The rights of a significant number of people will be affected by the US Court of Appeals for the Eighth Circuit’s ruling on that question, Nelson said.

Novel Issue

No federal circuit has addressed the issue, to his understanding, Nelson said. Chipotle Mexican Grill and Chipotle Services Inc. similarly say that when a dispute arises for EFAA purposes is “a matter of first impression.”

The US District Court for the District of Minnesota found Famuyide’s dispute with Chipotle didn’t arise until she served the companies with a state court lawsuit, which occurred after the EFAA’s effective date, allowing her to pursue her claims in court.

The court rejected Chipotle’s argument that the dispute arose when the harassment and assault allegedly occurred. Chipotle also says that if there was no dispute at that point, one surely arose when Famuyide complained to her supervisor or when she allegedly was threatened with retaliation for complaining or when the sides exchanged letters regarding Famuyide’s allegations, all of which occurred before the EFAA’s effective date.

Other federal district courts have addressed the issue, including the Southern District of Florida and the District of Utah, which found the dispute arose in those cases when the worker filed a pre-suit bias charge with an administrative agency.

The issue doesn’t involve “complex legal argument,” attorney Alexander D. del Russo told Bloomberg Law. It’s instead “about the plain meaning of words,” said del Russo who is with Carlton Fields PA, which represented the defendant in the Southern District of Florida case.

Three Possibilities

The judge in del Russo’s case said dispute under the EFAA relates to “arises” and claim relates to “accrues,” citing the law’s use of a double disjunctive, the attorney said. Thus, there are three possibilities for when a dispute can arise or a claim can accrue, he said.

They are when the adverse act occurs, when the worker files a charge with the Equal Employment Opportunity Commission or a state agency, or when a lawsuit is filed, del Russo said. Under federal law and the law in most states, a worker claiming sexual harassment must first file an administrative charge. Putting the focus on when the charge is filed “is the middle ground” and seems proper in most cases, he said.

In Famuyide’s case, Judge Donovan W. Frank said there was no dispute until she started a state court suit, because it was only then that a disagreement between her and Chipotle clearly existed.

When an adverse act occurs doesn’t seem like the right point, because the employer might agree with the worker’s allegations, del Russo said. It’s also possible a bias charge might not be disputed, because it could be successfully conciliated by the agency, del Russo said. Ultimately, cases may be decided on a fact-specific basis, he said.

Staking Out Positions

Like del Russo, employee-side attorney Julia Elmaleh-Sachs said whether filing a charge is enough to show a dispute under the EFAA can depend on the circumstances. Elmaleh-Sachs is with Crumiller PC, which represented the worker in the District of Utah case.

The charge proceeding before the Utah state agency “was contested,” Elmaleh-Sachs said. But filing a charge can be more of a formality that just needs to be observed so a worker can sue, she said.

It’s a different situation when the employee and employer have staked out their positions before an administrative agency, the lawyer said. At that point, there is a factual dispute.

Elmaleh-Sachs said she doesn’t think there’s a dispute for EFAA purposes until the employer pushes back on the employee’s charge. An administrative agency is different than a court. A court proceeding is necessarily adversarial, while agencies overseeing employment discrimination laws investigate and ensure legal compliance, she said.

Congress’ use of the disjunctive “or” in the EFAA signals that the statute could mean a couple of different things, Elmaleh-Sachs said. The judge in the District of Utah case “didn’t really disagree.” She just said a dispute arose before the EFAA’s effective date, because the plaintiff filed a charge prior to then, Elmaleh-Sachs said.

‘Got It Right’

The lower court in Famuyide’s case “got it right” when it ruled that a dispute can’t arise until both sides have expressed their disagreement through either words or actions, employee-side attorney Laura A. Farley said. That reflects “the simple concept that you can’t have a unilateral dispute,” she said. Farley is with Nichols Kaster PLLP and isn’t involved in Famuyide’s case.

Chipotle’s primary argument on appeal is that the lower court “failed to follow the weight of authority that a dispute arises when the alleged misconduct first occurred.” The companies cited Black’s Law Dictionary, which they said defines a “lawsuit” as something that grows out of a dispute.

A dispute therefore is separate from and exists prior to a lawsuit, and multiple courts have held that a dispute arises at the time of the alleged misconduct, the companies said.

The lower court properly found Chipotle’s argument conflates an injury with a dispute, Farley said. To have a dispute, there needs to be disagreement, and “you can’t have a disagreement until both sides have expressed their positions,” she said.

Filing an administrative bias charge “puts things in a bit of a different light,” Farley said. By filing a charge, the worker is taking the issue to a third-party, she said.

The EFAA’s legislative history and purpose back the district court’s reading of when a dispute arises, she said.

There’s usually a point up to which the parties are just talking about a situation, Famuyide’s lawyer, Nelson, said. A dispute can later arise out of those discussions, which is what happened here, he said.

Famuyide “is looking forward to her day in court on appeal and is confident that the Eighth Circuit will” give her arguments fair consideration, Nelson said.

Lewis Brisbois Bisgaard & Smith LLP and Martenson, Hasbrouck & Simon LLP represent the defendants. Chipotle didn’t respond to requests for comment.

Judges Steven M. Colloton, Bobby E. Shepherd and David R. Stras will hear the appeal.

The case is Famuyide v. Chipotle Mexican Grill, Inc., 8th Cir., No. 23-03201, oral argument 5/8/24.