Courts’ Stances on #MeToo Law’s Pleading Standard Sow Confusion

A legal divide among federal district courts is growing over the proper standard for determining when a recent federal law banning forced arbitration of workplace sexual misconduct claims is applicable.

Congress reshaped the litigation landscape in 2022 after it passed the bipartisan Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act to curb the use of mandatory predispute arbitration pacts in employment contracts, allowing alleged victims of workplace harassment to get their day in court. This marked a significant win for the #MeToo social justice movement.

Since then, district courts have been grappling with a slew of legal disputes over the law’s applicability, including the appropriate pleading standard for sexual assault or harassment claims that should fall under the arbitration exemption. Depending on how strict that pleading standard is, plaintiffs may encounter significant obstacles in defeating their employer’s motion to enforce the arbitration agreement at issue.

“Uncertainty never is helpful to parties in terms of making planning decisions regarding how” to approach their cases, said Sarah Rudolph Cole, a law professor at Ohio State University and director of the school’s Program on Dispute Resolution.

That lack of clarity stems from some judges finding that the EFAA applies when a worker alleges plausible claims, which must have enough factual details and be capable of surviving a motion to dismiss. But other courts have held that the claims need only be non-frivolous, with the sufficiency of the allegations reserved for later adjudication.

The plausible showing is favored by the defense bar because it demands more substantial claims from plaintiffs and eliminates weaker allegations much earlier before they request a dismissal, attorneys said.

Until federal appellate courts weigh in and provide guidance, inconsistent rulings on the pleading standard to invoke EFAA coverage will persist and muddy the legal landscape for litigants, they said.

“It’s not as if the plaintiff will get another chance to plead, so I do think it’s important in the first instance for the plaintiff to provide allegations that would pass a higher bar,” said Troy L. Kessler, co-founder of Kessler Matura PC. “It forces plaintiff attorneys like myself to continue providing robust and fulsome allegations” when drafting complaints, even if “we argue that non-frivolous must apply.”

Diverging Reasonings

Employers have found success in compelling arbitration in some cases by arguing that the allegations at issue describe sex discrimination, not sexual harassment.

And for claims that do meet the EFAA’s definition, they argued that the plausibility standard is essential to prevent workers from bringing false and meritless sexual misconduct claims to court. Judge Paul A. Engelmayer of the Southern District of New York endorsed this argument in Yost v. Everyrealm Inc., which has been widely cited by other federal trial courts that applied the plausibility standard, including most recently the Eastern District of North Carolina.

“Requiring a sexual harassment claim to be capable of surviving dismissal at the threshold of a litigation fully vindicates the purposes of the EFAA,” Engelmayer’s 2023 order said. Otherwise, “it would invite mischief, by incenting future litigants bound by arbitration agreements to append bogus, implausible claims of sexual harassment to their viable claims, in the hope of end-running these agreements.”

The term “alleged” in the EFAA is best read to implicitly incorporate the plausibility standard established by the US Supreme Court’s Bell Atlantic Corp. v. Twombly and Ashcroft v. Iqbal decisions, rather than a “sanctionably frivolous” standard that the plaintiff sought, he said.

But other judges have disagreed.

In Diaz-Roa v. Hermes Law PC, Judge Lewis Liman of the Southern District of New York applied the non-frivolous standard and ruled last year that Rule 11 of the Federal Rules of Civil Procedure already bars litigants from filing false or frivolous claims.

Moreover, the Supreme Court’s Bell v. Hood decision instructing lower courts to dismiss claims that are “wholly insubstantial and frivolous” or appear “to be immaterial” serves to filter out such cases and determine arbitrability, he said.

‘Procedural Mechanisms’

Employers’ attempts to simultaneously use motions to compel arbitration and challenge the pleadings of a complaint as conclusory and vague have attracted the attention of worker-side lawyers and some judges who applied the non-frivolous standard.

They argued that the defense is improper under federal court rules because the focus should be on the question of arbitration.

Motions to dismiss or strike a claim are the appropriate “procedural mechanisms that defendants are supposed to use if they think that the allegations of a complaint are insufficient,” said Lauren Teukolsky, founder of California-based plaintiff-side firm Teukolsky Law PC.

The plausibility standard then becomes the default at the motion to dismiss stage of litigation, when courts sometimes allow plaintiffs to amend their allegations.

Courts not requiring the plausibility standard “are on the right track” because holding plaintiffs to a high pleading bar in a motion to enforce an arbitration agreement risks denying them that second chance they’d otherwise get at the dismissal stage, Cole said.

“What Congress wanted is unclear” in the EFAA, but “plausibility isn’t quite right” as it undercuts congressional intent to keep workplace misconduct that’s alleged to constitute sexual harassment in court, the law professor said.