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Corporations Owned or Operated by Religious Organizations Exempt From MHRA

26 Jul 2024

ABSTRACT: The Eastern District Court of Appeals finds that the Missouri Human Rights Act exempts employers from liability if they are corporations and associations owned or operated by religious or sectarian organizations.

Jeanette Layton originally filed a complaint with the Missouri Commission on Human Rights, alleging age discrimination against Mercy Health and Mercy Hospitals East Communities. After Layton made a timely request for a right-to-sue letter, the Commission responded instead that they lacked jurisdiction because Mercy Health was operated by the Roman Catholic church, and thus was exempt as a religious organization employer under the Missouri Human Rights Act. Layton then filed a petition for a writ of mandamus to compel the Commission to rescind closure of its file and to issue Layton a notice of right-to-sue. The circuit court granted the writ. The Commission and Mercy Health appealed, and the Court of Appeals affirmed the circuit court's judgment ordering the Commission to issue Layton a right-to-sue letter and to close its proceedings relating to the complaint after the 180-day period had passed.

At the direction of the Court of Appeals, the circuit court commenced bifurcated proceedings, to first determine whether Mercy Health was operated by a religious organization, and therefore exempt from MHRA coverage. Mercy then moved for summary judgment, arguing that as a corporation operated by a religious organization, they were excluded from the statute's coverage. Summary judgment was granted, and this appeal followed.

The appeals court noted that the term “employer” under the Missouri Human Rights Act does not include corporations and associations owned or operated by religious or sectarian organizations. The court emphasized that, a 2017 amendment to the MHRA which changed the operative language from "owned and operated" to "owned or operated”, was critical to the decision. This amendment was adopted by the legislature after the Missouri Supreme Court decision in Farrow v. Saint Francis Med Ctr., which had held that non-profit corporations cannot be “owned” under Missouri law..

Because there was no dispute that Mercy Health was operated by the Roman Catholic church, there was no genuine material issue of fact, and the appeals court upheld the trial court's grant of summary judgment.

Employers should be aware that even if they are exempt from claims of discrimination under the Missouri Human Rights Act, they may not be exempt under other applicable federal or state anti-discrimination laws. Employers should contact an attorney for advice on dealing with specific scenarios regarding their status within the Missouri Human Rights Act and other applicable statutes.

Summary Judgment Victory for Elevator Company Client in Jackson County, MO

24 Jul 2024

In a case heard in Jackson County, Missouri, our client, a defendant elevator service company, faced allegations from a plaintiff who claimed she was injured after the elevator she was riding abruptly stopped due to an electrical short from a defective cable. Our client had been recently hired to perform maintenance and modernization on the building's elevators. The plaintiff also sued the prior elevator maintenance company and the building's property manager/owner.

Throughout the case, the plaintiff was claiming millions of dollars in damages. All four parties filed for summary judgment. Our motion was supported by admissions from the plaintiff's expert, who conceded during deposition that our client had no actual notice of any issues with the component in question before the incident.

In July, after hearing oral arguments in June, the judge granted our summary judgment motion and denied the others. The court concluded that no facts in the record supported a finding that our client could have caused or reasonably foreseen the incident.

Traditional Equitable Principles Guide NLRB Section 10(j) Preliminary Injunctions

23 Jul 2024

ABSTRACT: The Supreme Court rejects special injunction rules for NLRB cases, applying traditional equitable framework.

Supreme Court Makes it More Difficult for the NLRB to Obtain Preliminary Injunctions

It will now be more difficult for the National Labor Relations Board to obtain preliminary injunctive relief on behalf of aggrieved employees in pending Board cases. On June 13, 2024, in Starbucks Corporation, Petitioner v. Kathleen McKinney, Regional Director, the United States Supreme Court determined that courts must evaluate petitions for § 10(j) preliminary injunctions made by the National Labor Relations Board (“NLRB”), using the well-known traditional four-factor test, which requires a plaintiff to make a clear showing that: (1) the plaintiff is likely to succeed on the merits; (2) is likely to suffer irreparable harm in the absence of preliminary relief; (3) the balance of equities tips in the plaintiff’s his favor; and (4) that the requested injunction is in the public interest. Winter, 555 U.S. 7, 20-22. This holding is expected to make it much more difficult for the NLRB to obtain quick preliminary injunctions against employers during the pendency of administrative enforcement proceedings, which proceedings often take years to bring to a final resolution.

The Starbucks Case

The decision arises out of a much-publicized group of Starbucks employees seeking to unionize in 2022.Six employees at a Memphis, Tennessee Starbucks location announced plans to unionize and created an organizing committee. Several employees invited a local television station news crew to the store, after hours and in violation of company policy, to support their efforts to unionize, resulting in termination of several employees. The union working with the employees filed charges with the NLRB, alleging unlawful interference with the employees’ right to unionize and discrimination against union supporters. The NLRB then issued an administrative complaint against Starbucks, which resulted in the Regional Director filing a §10(j) petition in the United States District Court for the Western District of Tennessee and seeking a preliminary injunction that would require Starbucks to reinstate the terminated employees, among other requested relief.

The National Labor Relations Act (the “Act”) allows the NLRB to bring in-house enforcement proceedings against employers for engaging in alleged unfair labor practices. Section 10(j) of the Act authorizes the NLRB to seek, and a federal district court to issue, a preliminary injunction while administrative enforcement proceedings take place. The statutory language stated an injunction could issue as the district court deems “just and proper.” A circuit split emerged regarding the standard for when an injunction is “just and proper,” and whether § 10(j) created a special, relaxed standard for issuance of an injunction. The question presented to the United States Supreme Court by the Starbucks case was whether the traditional four-factor test for a preliminary injunction established in Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7 (2008), governs the NLRB’s petitions under §10(j), which the Supreme Court ultimately answered in the affirmative.

District Court’s Analysis

In considering the NLRB’s § 10(j) petition, the district court applied a two-part test previously established by the Sixth Circuit. The Sixth Circuit test requires the Court to determine whether “there is reasonable cause to believe that unfair labor practices have occurred,” and whether injunctive relief is “just and proper.” See McKinney v. Ozburn-Hessey Logistics, LLC, 875 F.3d 333, 339 (2017). Here, the District Court granted an injunction to the NLRB under this test, which decision was subsequently affirmed by the Sixth Circuit. Under the Sixth Circuit’s standard, the Board only needed to determine that the unfair labor practice charge appeared to have merit. The Court had previously held that reasonable cause exists where a charging party’s legal theory was substantial and not frivolous. As the Court pointed out, it would be difficult to imagine a scenario in which a district court would find that a party’s legal theory was frivolous.

Analysis of the Majority Opinion

The Supreme Court first noted that a preliminary injunction is an “extraordinary” equitable remedy that is “never awarded as of right.” Winter, 555 U. S., at 24. In fact, it is well-established that the purpose of a preliminary injunction is to preserve the relative positions of the parties until a trial on the merits can be held. Generally, absent a clear mandate from Congress, courts must adhere to the traditional four-factor Winter test. The Supreme Court ultimately determined that nothing in the text of §10(j) overcomes the presumption that the four traditional criteria govern a preliminary-injunction request by the NLRB.

Again, §10(j) authorizes a district court “to grant to the Board such temporary relief . . . as it deems just and proper.” The Supreme Court did not understand this statutory directive to jettison the normal equitable rules. Rather, the Court explained the phrase “just and proper” calls upon the discretion that courts have traditionally exercised when faced with requests for equitable relief.

The Supreme Court pointed out that §10(j)’s text does not compare to the language that Congress has used in the past when it intended to depart from the traditional equitable rules. The Court noted historically some statutes have increased the burden for obtaining an injunction, while others expressly relieved the party moving for an injunction from showing that he or she can satisfy one of the traditional criteria. For example, there is a lower standard where the President and Attorney General petition the district court to enjoin strikes in certain industries or when there is a threat to national health or safety. At the other end of the spectrum, there is a heightened showing in criminal appeals dealing with prison conditions. Trademark cases also generally have a relaxed standard given the interests at stake.

To the contrary, §10(j), however, does not include any specific directive that demonstrates Congress intended to alter the traditional four-part test. For this reason, the Supreme Court held, because nothing in the text of §10(j) overcomes the presumption that traditional equitable principles apply, district courts considering the NLRB’s request for a preliminary injunction are in fact required to apply the Winter four-part test.

In arguing its cause, the NLRB focused on the fact Congress made the Board responsible for deciding charges of unfair labor practices. Further, it pointed out Congress required that courts of appeals review the NLRB’s final decisions with due deference. The NLRB argued these factors support the application of the Sixth Circuit’s less exacting reasonable-cause standard. Rejecting the Board’s argument, the Supreme Court cautioned the Sixth Circuit’s reasonable-cause standard substantively lowers the burden for obtaining a preliminary injunction by requiring courts to defer to the NLRB’s preliminary view of the facts, law, and equities.

The NLRB further argued the traditional four factor test risks replacing the Board’s adjudicatory authority by allowing the district court to conduct an independent assessment of the merits and equitable factors. While the Supreme Court acknowledged that §10(j) proceedings are different from traditional preliminary-injunction proceedings in that the NLRB and not the district court, adjudicate the claims, the Supreme Court rejected this NLRB’s concern, noting no matter what evidence the district court considers or how deep it dives into the merits, the NLRB remains free to reach its own legal conclusions and develop its own record in its administrative proceedings. Further, it held, since irreparable harm and the other equitable factors are not part of the unfair-labor-practice claim, the district court’s assessment of those factors is wholly irrelevant to the NLRB’s adjudicatory authority.

Ultimately, the Supreme Court held that district courts must apply the traditional four factors articulated in Winter when considering the NLRB’s requests for a preliminary injunction under §10(j).

Key Takeaways

This Supreme Court’s decision is viewed as a win for employers, weakening the NLRB’s ability to easily obtain preliminary injunctions in favor of employees, while lengthy administrative enforcement proceedings are pending.

While district courts may now be less likely to grant injunctive relief, the decision is unlikely to deter the Board from seeking injunctions in the future. In 2022, the Board’s general counsel Jennifer Abruzzo called 10(j) injunctions among the most important tools for enforcing labor rights. She encouraged the aggressive use of 10(j) injunctions to spur voluntary interim settlements to maintain the status quo pending Board proceedings.

The decision in no way affects the burden or standard of proof in Board proceedings as it concerning claimed retaliation against employees. The decision was also issued before the Supreme Court’s Loper Bright v. Raimondo decision discarding the Chevron doctrine, so it remains to seen the degree to which courts will defer to the Board’s “labor law expertise” when interpreting the National Labor Relations Act.

Billing Specialist, Kansas City

19 Jul 2024

Our Kansas City office has an opportunity in the accounting department for a highly motivated and skilled billing specialist. View the job description here.

CFPB has joined the game – Identifies Consumer risks in virtual worlds and video games

17 Jul 2024

ABSTRACT: The Consumer Financial Protection Bureau has turned the gaze of its regulatory authority onto the video games industry as financial products and services become a bigger part of virtual entertainment.

The Consumer Financial Protection Bureau (“CFPB”) has vowed to monitor non-traditional markets where financial products and services may be offered, including video games and virtual worlds. In April, the CFPB released an Issue Spotlight identifying a number of concerning issues regarding gaming markets and virtual worlds.

The Issue Spotlight does not impose legal obligations on video game companies or the entities overseeing virtual worlds, nor does it give an official interpretation of any law or regulation. However, the CFPB encourages those entities to evaluate their legal obligations and responsibilities and act accordingly.

The CFPB estimates that the value of the global gaming industry is $250 billion annually, and that figure is expected to surpass $320 billion by 2026. As the value of the gaming and virtual worlds industry has increased, digital assets associated with them have become increasingly valuable. The CFPB says operators often take a “buyer beware” approach that leaves aggrieved games little-to-no recourse when problems arise.

Key Findings from the Issue Spotlight

Financial services providers have begun entering the gaming industry in the form of payment processing, money transmission, and even loans as the value of assets flowing in and out gaming marketplaces increase. With the rise in the value of gaming assets, users report an increasing number of hacking attempts, account theft, scams, and unauthorized transactions that result in lost access; the CFPB is critical of gaming and virtual world operators not providing the kinds of consumer protections that apply to traditional banking and payment systems.

The CFPB also recognizes that gaming publishers often collect huge amounts of surveillance data about from their users. The data collected includes location data, social media data, and behavioral data, such as how a player responds to personalized incentives. The CFPB identified consumer risks and potential harm related to user data being sold, bought, or traded between companies, including transferring data for purposes outside of game play. The CFPB also identified using collected data to monetize game play in a manner that may take advantage of consumers’ proclivities to entice more spending as an area of concern.

The CFPB identified a number of ways operators can make money on user data including microtransactions, discriminatory pricing, and advertising. The CFPB highlighted the use of behavioral, biometric, and personal data to manipulate prices and availability of goods or services and obscuring the real value of the same as a particular area of concern. The CFPB questioned whether proper privacy regulations are being adhered to and whether consumers were fully aware of how their data is being used by operators.

Additional Concerns Highlighted by the Issue Spotlight

The CFPB analyzed concerns arising form gaming assets having substantial monetary value and highlighted issues related to account vulnerability, money laundering, and fraud. The monetary value of player accounts and/or ability to cash-out gaming assets has led to an influx of phishing attempts and reports of account theft. Industry experts consider young gamers especially at risk to phishing attempts because of both their social media activity and lack of awareness about social engineering tactics. The CFPB highlighted the limited recourse operators provide for players reporting hacking attempts, account theft, scam, unauthorized transactions or losing access to game currencies and virtual items. Some gamers have reported that pursuing fraud related recourse from their financial institutions has resulted in play accounts being locked or terminated.

The capacity to transfer and convert crypto assets or gaming assets to fiat currency has given rise to using gaming platforms and virtual worlds as a vehicle for money laundering. The CFPB notes that ill gotten money can be used to buy gaming assets which can be converted back into fiat currency; the transfers can obfuscate the trail of illegally acquired funds.

The CFPB has explicitly highlighted the wide popularity of video games and virtual worlds with young players as a basis for extra concern regarding these issues.

Conclusion

The role of banks and consumer finance products within gaming is evolving, and as it does the CFPB will seemingly look to expand its regulatory authority to include overseeing the financial services and products available in virtual worlds and video games.

Baker Sterchi attorneys can help companies assess their liabilities related to the CFPB’s regulatory overwatch. If you would like to learn more about this issue or our firm contact Baker Sterchi’s financial services practice group.

Successful Defense in Construction Dispute Garnishment

15 Jul 2024

Plaintiff homeowners sued their former contractor for alleged faulty construction work. The insured contractor failed to notify our insurance client of the lawsuit, or the subsequent default judgment entered against it. Subsequently, the Plaintiffs pursued a garnishment action against our client, seeking to collect more than $235,000 in accordance with the default judgment. The matter proceeded to a bench trial in the District Court of Pratt County, Kansas. After submitting pre-trial briefs, Baker Sterchi appeared on behalf of our insurance client, arguing that the insurance did not provide coverage because our client was prejudiced by the contractor's lack of notice, thereby denying them the opportunity to evaluate or defend against the claims. The Judge agreed with our argument, denying Plaintiffs’ Motion for Judgment Against Garnishee.

Right to Arbitration, Maybe Not. Courts Must Resolve Conflict of Arbitration Provisions when Parties Enter Multiple Contracts

11 Jul 2024

ABSTRACT: Who decides whether the parties have agreed to arbitrate? The Supreme Court determines that a court must decide which contract’s arbitration provision applies when parties have entered into multiple contracts with conflicting arbitration agreements.

In May, the Supreme Court issued a decision in COINBASE, INC. v. SUSKI determining that a court must resolve conflicts regarding which contract governs where the parties have agreed to multiple conflicting contracts.

Coinbase is an operator of a cryptocurrency exchange platform. Suski, and other respondents, was a user of Coinbase’s cryptocurrency platform.

The First Contract

Coinbase users entered into a User Agreement when they created their accounts. The User Agreement contained an arbitration provision with a delegation clause[1], detailing that an arbitrator must decide disputes under the contract, including whether a given disagreement is subject to the arbitration agreement.

The Second Contract

Coinbase ran a promotional sweepstakes for its user. The Official Rules for the promotional sweepstakes included a forum selection clause which provided that California courts “shall have sole jurisdiction of any controversies” regarding the promotion.

The Underlying Litigation

Class action litigation, in the U.S. District Court for the Northern District of California, was commenced against Coinbase related to the promotional sweepstakes alleging numerous violations of California’s consumer protection laws. Coinbase moved to compel arbitration based upon the User Agreement. The District Court determined that the Official Rules for the promotion controlled over the issues of the class action dispute, and denied the motion to compel arbitration. The Ninth Circuit affirmed the District Court; the Supreme Court agreed to hear the case to resolve a novel kind of dispute regarding arbitrability, calling this a fourth order dispute.

The Fourth Order Dispute

The Court’s opinion explained that parties can form multiple levels of agreement regarding arbitration, and thus can have different levels of dispute needing resolution. The merits of the dispute is a first-order disagreement. Whether the parties have agreed to arbitrate the merits of the underlying dispute is a second-order dispute. A third-order dispute is a question of who has the primary authority to decide the question of arbitrability. Here, the Court needed to resolve what happens if parties have multiple contracts that conflict regarding the third-order dispute.

The Court’s Opinion

Justice Jackson, relying on basic legal principles of contract law, delivered the opinion of a unanimous court holding that where parties have agreed to two conflicting contracts, a court must answer the question of which contract controls the dispute. Arbitration is a matter of contract and consent; disputes are subject to arbitration if, and only if, the parties actually agreed to arbitrate those disputes. Before either the delegation provision or the forum selection clause can be enforced, a court needs to determine what the parties have actually agreed to. In this case, the court must resolve which contract controls the dispute; the Supreme Court affirmed the District Court’s and Ninth Circuit’s determination that the Official Rules governed over the dispute, and therefore the matter was properly before a California court pursuant to the forum selection clause.

Specifically, the Supreme Court concluded that a court, not an arbitrator, must decide whether the parties’ first contract is superseded by their second.

What to Expect

What does the Court’s decision mean for you? The Coinbase decision is a good reminder to be vigilant and exacting in preparing your contract documents. When preparing subsequent documents make sure you don’t contradict your own desired outcome.

[1] A delegation clause identifies the person responsible for resolving questions of whether the dispute requires arbitration under the arbitration agreement.

Litigation Associate, Kansas City

11 Jul 2024

Our Kansas City office has an opportunity for an associate with at least five years of experience in all phases of insurance defense and insurance coverage cases. View the job description here.

Two Baker Sterchi Professionals Recognized as Missouri Lawyers Media Unsung Legal Heroes

10 Jul 2024

Baker Sterchi Cowden & Rice professionals Beau Gailey and Stephanie Henshaw have been named 2024 Unsung Legal Heroes by Missouri Lawyers Media. This award is presented annually to recognize law firm professionals who consistently go above and beyond the call of duty, often behind the scenes.

Gailey, IT Operations Manager, was recognized in the information technology category. He has been with Baker Sterchi for three years. Located in the firm’s Kansas City office, he oversees network infrastructure and system functionality, ensuring they are secure and reliable while also supporting users with various technology issues.

Henshaw, recognized in the accounting category, has been with Baker Sterchi for 11 years. Currently Director of Accounting, she started as a staff member in the accounting department and rose through the ranks. Based out of the firm’s Kansas City office, Henshaw oversees a team of nine employees. Outside the firm, she is a member of the Kansas City Association of Legal Administrators and served as the SurePoint User Chair in the Kansas, Missouri, and Oklahoma regions from 2021-2023.

Gailey, Henshaw and other recipients of the 2024 Unsung Legal Heroes Award are featured in a special section of Missouri Lawyers Weekly published on July 10.

Nick Ruble Cited in Bloomberg Law Article Regarding FTC Non-Compete Rule

08 Jul 2024

Baker Sterchi Member Nick Ruble is cited in a Bloomberg Law article titled "Early Court Loss for FTC Noncompete Ban Signals States in Charge" concerning the ruling from the Northern District of Texas granting a preliminary injunction barring enforcement of the FTC Rule seeking to ban most non-compete agreements. The article points out that enforcement of non-competes is now left to the states. Ruble noted that courts in Missouri and Kansas have exercised greater scrutiny of the legitimate business interests supporting non-compete agreements.

Located in Baker Sterchi’s Kansas City office, Ruble is an experienced employment and labor law attorney and Vice-Chair of Baker Sterchi’s Employment & Labor Practice Group. He is also a steering committee member of ALFA International’s Labor & Employment Practice Group, Co-Chair of the Kansas City Metropolitan Bar Association’s Labor & Employment Committee, and a member of Defense Research Institute’s Employment and Labor Law Committee. Ruble received his Juris Doctor from the University of Missouri – Kansas City School of Law and is admitted to practice in Kansas and Missouri.

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