Arbaugh, Jenifer v. Y & H Corp., d/b/a The Moonlight Cafe (02/22/2006)

Questions presented: Does section 701(B) of Title VII of the Civil Rights Act limit the subject matter jurisdiction of the federal courts, in limiting its application to employers with 15 or more employees, or does it only raise an issue going to the merits of the Title VII claim?

BY ALISON LAPP, MEDILL NEWS SERVICE

No one said working as a waitress and bartender in New Orleans' Garden District was going to be easy, but Jenifer Arbaugh apparently expected some standards of decency to be upheld.

She remained in the employ of the Y & H Corp., which does business in New Orleans as the Moonlight Café, even as one of its owners allegedly made lewd comments about her breasts and touched himself in front of her. But when Yalcin Hatipoglu, the owner, reached his hand up her skirt and grabbed her, as she alleges he did, Arbaugh decided she'd had enough, according to her attorney, Jeffrey Schwartz. She had worked for the company from May 2000 until February 2001.

Arbaugh left her job under what she claims was "constructive discharge," a condition that exists when an employer creates a work setting so intolerable that it predictably would cause any reasonable person in the employee's position to quit.

She filed suit in November 2001 against Hatipoglu and the restaurant in the U.S. District Court for the Eastern District of Louisiana under Title VII of the federal Civil Rights Act of 1964, which outlaws discrimination in employment on the basis of sex, among other things. A jury found in her favor and awarded her $5,000 in back pay, $5,000 in compensatory damages and $30,000 in punitive damages.

Though the Y & H Corp. did not dispute during the jury trial that it qualified as an employer under Title VII's definition – having at least 15 employees for 20 or more weeks during the time period in question – it did so two weeks after the judgment was entered. It requested that the case be dismissed, arguing that the district court did not have jurisdiction to hear the case because the restaurant did not qualify as an employer.

The district court agreed that it had never had jurisdiction to hear the case and issued an order vacating the jury's verdict. It also noted that it was likely too late, by then more than two years after leaving the job, for Arbaugh to bring state claims against the Y & H Corp.

Arbaugh appealed to the 5th Circuit Court of Appeals, claiming that the employer definition does not determine jurisdiction and that the Y & H Corp. met the criteria for an employer during the relevant time period anyway.

In unanimously affirming the district court's decision, a 5th Circuit panel ruled that it had to follow precedent, which indicated that a defendant must meet the legal definition of an employer for a court to have jurisdiction to hear the case.

It went on to rule that none of the parties Arbaugh claimed should be included in the 15 employees required in the employer definition -- the restaurant's delivery drivers, its owners and their wives -- actually qualified as employees. Therefore, the Y & H Corp. did not have 15 employees during the time Arbaugh worked there, it did not qualify as an employer and no federal court had jurisdiction to hear a Title VII suit brought against the restaurant.

"Because it is undisputed that Y & H did not employ the requisite 15 employees without the inclusion of the drivers, the owners, or their wives, defendants are not subject to liability under Title VII," Judge Harold DeMoss wrote for the panel.

Other circuit courts have ruled differently on the jurisdictional matter, which is why, Schwartz said, the U.S. Supreme Court needs to resolve the issue. Schwartz argued that the definition of an employee should be decided as one of the facts of the case, rather than as a jurisdictional matter of law. Five circuits have agreed with him in their rulings, he said, and they "insist" federal statutory definitions of employers are not jurisdictional.

Brett Prendergast, attorney for the restaurant, countered that some of these circuit courts have been inconsistent in their rulings.

"A review of the case law from the 7th, 11th and District of Columbia circuits reveals that any such insistence from these circuits is not very insistent," he wrote. "The actual split … is not between the circuits but instead between certain panels in certain circuits."

Schwartz maintains that the employer definition issue goes to the merits of the case and should be decided by a jury, not a judge. Interpreting it as a jurisdictional matter threatens the efficient and predictable conduct of civil litigation, he said.

If the employer definition is jurisdictional, "a defendant can postpone raising that issue until after it knows the outcome of a trial on the merits," Schwartz said. If it's not jurisdictional, he said, then it would be one of the merits for the jury to decide and would not lead to prolonged litigation.

Prendergast replied that finding the employee definition to be jurisdictional would have no greater consequences than finding it to be a matter of fact.

"A plaintiff would be obligated to investigate prior to filing suit the number of employees that his employer had regardless of whether the question was jurisdictional or related to the merits," he said. "Many of the potential problems relative to the … jurisdiction issue would be avoided by simple pre-litigation investigation."

Most basically, Schwartz contends that Arbaugh should be granted jurisdiction because she made a nonfrivolous claim under the appropriate federal statute.

"When we filed this suit in federal court under federal law, we did it believing that action would lend us jurisdiction," he said.

On May 16, 2005, the U.S. Supreme Court agreed to hear the case, and on Feb. 22, 2006, the justices sided with Arbaugh, holding 8-0 that Title VII employee threshold does not circumscribe federal subject matter jurisdiction.

Writing for the Court, Justice Ruth Bader Ginsburg noted that the restaurant could always bring up in the suit, once in federal court, that one of the requisite facts needed to prevail (that 15 or more employees worked there) was not proven.

Justice Samuel Alito, who was not on the Court when the case was argued orally, did not participate in the decision.