Spencer v. International Shoppes, Inc. et al
ORDER denying 162 Motion for Summary Judgment. This matter is set for a Pre-Trial Conference on October 23, 2012. SEE ATTACHED ORDER. Ordered by Magistrate Judge A. Kathleen Tomlinson on 9/28/2012. (Sofio, Lisa)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
- against CV 06-2637 (AKT)
INTERNATIONAL SHOPPES, INC., and
MICHAEL HALPERN, personally and as
President of International Shoppes, Inc.,
A. KATHLEEN TOMLINSON, Magistrate Judge:
Plaintiff Arleigh Spencer (“Spencer” or “Plaintiff”) commenced this action on May 26,
2006 against International Shoppes, Inc. (“ISI”) and Michael Halpern (“Halpern”), personally
and as President of ISI (collectively, “Defendants”), alleging race and age based discrimination
and retaliation. Defendants previously moved for summary judgment seeking dismissal of all of
Plaintiff’s claims. Judge Seybert granted their motion in part, dismissing the ADEA and Title
VII discrimination claims, the Title VII retaliation claim and the race discrimination claim under
§ 1981. However, Judge Seybert denied the portion of the motion which sought dismissal of
Plaintiff’s claims for retaliatory commencement of litigation pursuant to Title VII of the Civil
Rights Act of 1964 (“Title VII”), New York Executive Law § 296 et seq. (“NYHRL”), and 42
U.S.C. § 1981. DE 90 (“Sum. J. Op.”); Spencer v. International Shoppes, Inc., No. 06-CV2637, 2010 WL 1270173 (E.D.N.Y. March 29, 2010) (“Spencer I”). As a result of that decision,
the claims based on Defendants’ alleged retaliatory commencement of litigation are the only
claims remaining in this case.1
In the Statement of Material Facts section of Plaintiff’s Memorandum of Law in
Opposition to Summary Judgment, Plaintiff describes several acts of retaliation beginning in
On January 11, 2011 the parties consented to this Court’s jurisdiction for all purposes
pursuant to 28 U.S.C. § 636(c) and Fed. R. Civ. P. 73. DE 120. While the case was proceeding,
the Hon. Ute Wolff Lally, Justice of the New York State Supreme Court, Nassau County
rendered her decision after trial of ISI and Michael Helpern’s suit against Arleigh Spencer in
state court. A copy of that decision is attached as Exhibit B to the Certification of Daniel C.
Ritson, Esq. in Support of Defendants’ Motion for Summary Judgment [DE 162-1] (“Ritson
Cert.”). In that decision, Justice Lally dismissed seven of the eight causes of action brought by
ISI and Halpern, leaving only the Sixth Cause of Action for defamation per se by Spencer
against Halpern. Defendants’ counsel then wrote this Court requesting that the Court dismiss
Plaintiff’s remaining claim in federal court in light of Justice Lally’s decision. At a September
21, 2011 Conference, I advised counsel that I would need briefing on this issue and would
therefore treat Defendants’ letter as a request for a pre-motion conference. See DE 159. After
hearing from counsel regarding the effect of the state court action, I set a briefing schedule for
Defendants’ proposed motion to dismiss the instant case. Id.
Thereafter, Defendants filed their motion, denominated as a second motion for summary
judgment. Having considered Defendants’ Memorandum of Law in Support of Motion for
Summary Judgment [DE 162-9] (“Defs.’ Mem.”), Plaintiff’s Memorandum of Law in
Opposition to Summary Judgment [DE 163-3] (“Pl’s. Mem.”), Defendants’ Reply Memorandum
of Law in Further Support of Motion for Summary Judgment [DE 164] (“Defs.’ Reply Mem.”),
as well as the supporting affidavits, certain deposition transcripts, and the parties’ Local Civil
September 25, 2003. Pl’s Opp. [DE 163-3] at 4-7. In light of Judge Seybert’s decision,
however, these claims are not before the Court.
Rule 56.1 Statements (“Defs.’ Stmt.” [DE 162-10] and “Pl’s. Counterstmt.” [DE 163-4]), the
Court DENIES Defendants’ motion for summary judgment for the reasons that follow.
The following facts are taken from Judge Seybert’s findings in Spencer I2 and the
relevant decisions issued and submissions made in the allegedly retaliatory litigation. For
purposes of this motion, the facts are construed in the light most favorable to Spencer as the
party opposing summary judgment, with any factual disputes resolved in Spencer’s favor. See
Capobianco v. City of New York, 422 F.3d 47, 50 (2d Cir. 2001).
Plaintiff’s Employment at ISI
Spencer, a fifty-three year old African-American male, began working at ISI as a payroll
clerk on September 27, 1999. Sum. J. Op. at 2. During the course of his employment, Spencer
was promoted to payroll coordinator, and received annual pay raises from 2000 to 2002,
although he had been notified at his initial job interview that the company had no policy
requiring such raises. Id. Prior to August of 2002, Spencer’s employment was without incident.
Id. at 3.
On August 8, 2002, Spencer notified Halpern, his boss, as well as the President of ISI, of
a “phantom employee” scheme. Id. In this alleged scheme, the wife of an ISI employee was
listed on the payroll although she did not work there, and hours attributed to the employee’s wife
were actually worked by the ISI employee. As a result, the ISI employee did not receive
overtime pay that he had earned. When the scheme was disclosed, two ISI employees were
disciplined for their involvement. Spencer received a written warning for failing to make a
As this Court has previously ruled, Judge Seybert’s factual findings made in connection
with her summary judgment decision are law of the case. DE 125 at 3-4.
timely disclosure of the scheme to senior management despite his alleged knowledge of the
scheme for a substantial period of time. Id.
Spencer was also disciplined for multiple payroll accounting irregularities (which
Spencer disputes), including his failure to: “(1) make proper tax withholdings from employees’
paychecks, including his own; (2) properly pay back a loan taken from ISI’s 401(k) account;
(3) account for several unauthorized salary advances; and (4) process some garnishments on his
checks.” Id. at 4. In December of 2003, Spencer received an additional written warning for
conducting personal business during company time, a charge he also disputes. Id. He was then
suspended without pay for three days for improperly changing the terms of his loan repayment
schedule. Id. at 4-5. Eventually, Spencer was given a “last chance” warning that any further
violations of company policy would result in his termination. Id. at 5.
Approximately one month after the “last chance” warning, Spencer delayed delivery of
the payroll checks one day from Thursday to Friday. Id. The parties dispute whether Spencer’s
action was in violation of ISI policy. Id. Spencer was terminated on June 1, 2004 because,
according to the Defendants, his action with respect to the late delivery of the payroll checks
violated his “last chance” warning. Id. at 6.
In October of 2003, Spencer sent a memorandum to ISI management in which he claimed
that he had been subject to a hostile work environment. Id. at 8. ISI conducted an investigation.
Id. Spencer then filed a complaint against Defendants with the New York State Division of
Human Rights (“DHR”) on May 18, 2004 alleging discrimination on the basis of his age and
race. Id. On July 22, 2004, Spencer filed a supplemental DHR complaint asserting that he was
terminated in retaliation for filing the initial complaint. Id. at 8-9. The DHR dismissed the
complaint on January 31, 2006, finding that there was no probable cause to believe that
Defendants engaged in the asserted unlawful discriminatory practices alleged by the Plaintiff.
Id. at 9.
Defendants’ State Court Action Against Spencer and Related Events
On July 28, 2004, Halpern and ISI, along with two other companies (the “State Court
Plaintiffs”), filed an action against Spencer in the New York State Supreme Court, Nassau
County, alleging defamation, defamation per se, prima facie tort, duress, and fraudulent
concealment (the “State Court Lawsuit”). See State Court Lawsuit Complaint, attached as
Ex. 13 to the Certification of Peter J. Famighetti [DE 163 - 163-2] (“Famighetti Cert.”). The
allegations centered around statements Spencer made regarding the phantom employee scheme
and Spencer’s harassment complaints. Id. The lawsuit sought $6.5 million in damages, as well
as punitive damages. Sum. J. Op. at 11.
After the State Court Lawsuit was filed, Spencer made additional statements regarding
the phantom employee scheme. On November 8, 2004, Spencer sent a letter to the
Unemployment Insurance Appeal Board seeking a reversal of its decision to affirm the order of a
Department of Labor Administrative Law Judge disqualifying Spencer from receiving
unemployment benefits due to misconduct. Id. at 9, 11. In that letter, Spencer stated that ISI and
Halpern engaged in unlawful activity with respect to the phantom employee scheme. Id. On
January 3, 2005, Spencer also set letters regarding the phantom employee scheme to United
States Senators Hillary Clinton and Charles Schumer. Id. at 11.
On March 1, 2005, the Supreme Court, Nassau County granted Spencer’s motion to
dismiss the State Court Lawsuit on the grounds that Spencer could not be held liable for making
statements which were true. See March 1, 2005 Order, Famighetti Cert., Ex. 15. The court also
denied the State Court Plaintiffs’ two motions for leave to amend seeking to add claims based on
the statements made to the Unemployment Appeals Insurance Board and Senators Clinton and
Schmumer. See id., Exs. 14, 15. On November 8, 2006 the Supreme Court of the State of New
York, Appellate Division, Second Department reversed the trial court’s orders granting the
motion to dismiss and denying the motions to amend on the grounds that whether or not the
alleged defamatory statements were substantially true could not be determined as a matter of law
on the record presented. International Shoppes, Inc. v. Spencer, 34 A.D.3d 429, 430, 825
N.Y.S.2d 483 (2d Dep’t 2006). Accordingly, the Second Department reinstated the dismissed
claims, and granted Defendants leave to add four additional defamation claims which arose after
the initiation of litigation. Id. at 429-30.
The case ultimately proceeded to trial on the following causes of action:
Second Cause of Action: defamation per se with respect to Halpern based on
Spencer statements to Halpern, including “you are an asshole – I should have
sued your ass before;”
Third Cause of Action: defamation per se with respect to ISI predicated on
Spencer’s statement that the “company is committing fraud” and “is doing things
that are illegal;”
Fourth Cause of Action: fraudulent concealment of the “phantom employee”
Fifth Cause of Action: defamation per se with respect to ISI based on Spencer’s
letter to the Unemployment Insurance Appeals Board;
Sixth Cause of Action: defamation per se with respect to Halpern based on
Spencer’s letter to the Unemployment Insurance Appeals Board;
Seventh Cause of Action: defamation per se with respect to ISI based on
Spencer’s letter to Senators Schumer and Clinton; and
Eighth Cause of Action: defamation per se with respect to Halpern premised on
Spencer’s statement in the letter to the Senators that he was “ostracized, singled
out and harassed by upper management mainly the president.”
See Aug. 19, 2011 Order (“State Ct. Trial Order”) at 4-8, attached as Ex. B to the Ritson
On August 19, 2011, after a bench trial, Justice Ute Wolff Lally issued a decision on the
merits. Id. Justice Lally found that Spencer lacked credibility and therefore she resolved any
conflicts in testimony in favor of the State Court Plaintiffs. Id. at 2. With regard to the First
Cause of Action, the court found that this portion of the pleading appeared to be “nothing more
than a recitation of jurisdictional and lead-in allegations.” Id. at 4. The court dismissed the
Second Cause of Action on the grounds that “a reasonable listener would understand that the
statement ‘you are an asshole – I should have sued your ass before’ conveyed an opinion rather
than a fact.” Id. at 5. With respect to the Third, Fifth, and Seventh Causes of Action, Justice
Lally found that the content was substantially true since a managerial employee at ISI did devise
and carry out a phantom employee scheme that was illegal. Id. at 5-7. Therefore, the court
dismissed the claims because truth constitutes an absolute defense to defamation per se. Id. The
Fourth Cause of Action was dismissed because the State Court Plaintiffs failed to prove that
Spencer knew about the phantom employee scheme prior to disclosing it. Id. at 5-6. The court
noted that the State Court Plaintiffs did not produce any witnesses to support this claim and the
Disciplinary Notice they introduced was self-serving and without probative value. Id. The
Eighth Cause of Action was likewise dismissed because the claim of being ostracized or singled
out did not rise to the level of defamation per se and because a reasonable person would not
understand the claim of harassment to be referring to a crime. Id. at 7-8.
The State Court Plaintiffs succeeded on the Sixth Cause of Action. That claim was based
on the following language from the letter Spencer sent to the Unemployment Insurance Appeals
Michael Halpern the president of the company is trying to fool this
division with misleading information in reference to the phantom
employee. Mr. Mody [sic], who worked 67.5 hours per week, was
forced to accept regular wages in lieu of overtime pay and it is an
outraged [sic] and injustice of management. If I didn’t not stumble
on the fraud it would have continue [sic]. Mr. Mody a subordinate
had to be encouraged by management… Mr. Halpern is nervious
[sic] and has a right to be. This act is criminal and for the
president not to terminate anyone speaks for itself.
Id. at 6. Justice Lally ruled as follows regarding the letter:
It accuses the plaintiff, Michael Halpern, of fraud and a criminal
act. One employee’s wrongdoing which was quickly corrected by
the president of the corporation upon discovery is not truthful
when asserted against him. [Spencer] admitted that Michael
Halpern had no knowledge of the phantom employee until so
informed by the defendant and the problem had been corrected
within a month. Therefore, it was a was a false statement
published without privilege or authorization to a third party,
constituting a serious crime.
Id. at 7.
In sum, the State Court Plaintiffs were successful on only one of their claims – the
defamation per se claim asserted by Halpern regarding statements made by Spencer in his letter
to the Unemployment Insurance Board of Appeals. In a separate hearing regarding damages,
Justice Lally denied the State Court Plaintiffs’ requests for compensatory damages because they
failed to offer any proof of such damges at trial. See Nov. 22, 2011 Decision, DE 169. The
court, however, assessed punitive damages in the amount of $3,000 against Spencer based solely
on the Sixth Cause of Action. Id. In reaching this figure, the court noted that Spencer engaged
in “evasive and deceptive tactics” regarding his sources of income. Id.
Procedural History of the Instant Action
On May 26, 2006, Spencer filed the Verified Complaint in this Court. DE 1. Judge
Seybert dismissed several of the causes of action because they were time-barred and granted
Plaintiff leave to amend to add additional claims. See DE 12.
On April 26, 2007, Spencer filed an Amended Complaint. DE 13. Discovery closed in
November of 2008 [DE 91] and Defendants filed their first motion for summary judgment on
June 8, 2009. See DE 84. On March 29, 2010, in Spencer I, Judge Seybert granted Defendants’
motion with respect to the race discrimination claims, age discrimination claim, and retaliatory
termination claims; however, summary judgment was denied with respect to the Title VII,
NYHRL, and § 1981 retaliation claims based on Defendants’ filing of the State Court Lawsuit.
See Sum. J. Op. Thereafter, Defendants filed a motion for reconsideration regarding the
retaliatory litigation claims [DE 92] which Judge Seybert denied. See DE 101.
On January 11, 2011, the parties consented to the jurisdiction of a United States
Magistrate Judge for all purposes. DE 120. Jury selection was set to begin May 16, 2011, with
the trial to follow immediately. Electronic Order dated Jan. 31, 2011. The trial, however, was
adjourned due to, inter alia, the pendency of the State Court Lawsuit. Soon after the trial of the
State Court Lawsuit concluded, Plaintiff’s counsel advised the Court that Plaintiff had suffered a
stroke which he claims was the result of stress from the State Court Lawsuit. See DE 150.
Accordingly, Plaintiff’s counsel moved to re-open discovery for the limited purpose of
investigating the stroke and to make an assessment regarding damages and whether Plaintiff
would attempt to link the purported stroke to his damages claims. Id. The Court granted
Spencer’s motion solely for this purpose. DE 152.
On September 2, 2011, Defendants filed a two-page letter motion seeking dismissal of
this action in light of what Defendants characterized as a decision in favor of ISI and Halpern
and against Spencer in the State Court Lawsuit. DE 155. The Court denied the motion, but
granted Defendants’ request to treat the submission as a pre-motion conference letter. See
Electronic Order dated September 13, 2011. A pre-motion conference was held on September 21,
2011 and a briefing schedule was established for the instant motion. DE 159. At that conference,
Plaintiff discussed voluntarily withdrawing his claims against Defendant Halpern and the parties
were encouraged to resolve this issue prior to serving the summary judgment motion papers. Id.
The Court notes that no stipulation or other document reflecting the withdrawal of claims against
Halpern has been filed.
Plaintiff included a cross-motion for summary judgment in his opposition to Defendants’
motion for summary judgment. DE 163-3 at 17. The cross-motion was based on certain
statements allegedly made by Defendant Halpern which Plaintiff claimed resolved any issues of
fact regarding Halpern’s motive for filing the State Court Lawsuit. Id. Plaintiff subsequently
moved to withdraw the cross-motion [DE 165] and the Court has granted that motion. See
Electronic Order dated September 28, 2012.
STANDARD OF REVIEW
Summary Judgment Standard
Rule 56 of the Federal Rules of Civil Procedure dictates that a “court shall grant
summary judgment if the movant shows that there is no genuine dispute as to any material fact
and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). The moving
party bears the initial burden of establishing the absence of any genuine issue of material fact.
See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986); Holcomb v. Iona Coll., 521 F.3d
130, 137 (2d Cir. 2008). A fact is “material” when it may affect the outcome of the suit.
Anderson, 477 U.S. at 248. To determine whether the moving party has satisfied this burden, the
Court is required to view the evidence and all factual inferences from that evidence in the light
most favorable to the non-moving party. Doro v. Sheet Metal Workers’ Int’l Ass’n, 498 F.3d 152,
155 (2d Cir. 2007); Woodman v. WWOR-TV, Inc., 411 F.3d 69, 75 (2d Cir. 2005).
Where the movant shows a prima facie entitlement to summary judgment, “the burden
shifts to the nonmovant to point to record evidence creating a genuine issue of material fact.”
Salahuddin v. Goord, 467 F.3d 263, 273 (2d Cir. 2006). “[T]he nonmovant cannot rest on
allegations in the pleadings and must point to specific evidence in the record to carry its burden
on summary judgment.” Id.; see also McPherson v. N.Y. City Dep’t of Educ., 457 F.3d 211, 215
n.4 (2d Cir. 2006) (“[S]peculation alone is insufficient to defeat a motion for summary
judgment.”); Byrnie v. Town of Cromwell, Bd. of Educ., 243 F.3d 93, 101 (2d Cir. 2001) (“Even
where facts are disputed, in order to defeat summary judgment, the non-moving party must offer
enough evidence to enable a reasonable jury to return a verdict in its favor”). Summary
judgment is mandated if the non-moving party fails to make a showing sufficient to establish the
existence of an element essential to that party’s case and on which that party will bear the burden
of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); see also Dobbs v. Dobbs,
No. 06-CV-6104, 2008 WL 3843528, at *1 (S.D.N.Y. Aug. 14, 2008) (“The Court’s goal should
be to isolate and dispose of factually unsupported claims”) (internal quotation marks omitted).
With respect to employment discrimination cases, the Second Circuit has advised trial
courts to “be cautious about granting summary judgment to an employer when . . . its intent is in
issue,” and “affidavits and depositions must carefully be scrutinized for circumstantial proof
which, if believed,” would allow the plaintiff to prevail. Gallo v. Prudential Residential Servs.,
Ltd. P’Ship, 22 F.2d 1219, 1223 (2d Cir. 1994) (emphasis added). Summary judgment is,
however, “appropriate even in discrimination cases for . . . the salutary purposes of summary
judgment – avoiding protracted, expensive and harassing trials – apply no less to discrimination
cases than to other areas of litigation.” Weinstock v. Columbia Univ., 224 F.3d 33, 41 (2d Cir.
Retaliation claims under Title VII, NYHRL and § 1981 are treated similarly. See, e.g.,
Bermudez v. City of New York, 783 F. Supp. 2d 560, 576 (S.D.N.Y. 2011) (citing McMenemy v.
City of Rochester, 241 F.3d 279, 283 n.1 (2d Cir. 2001)); Bazile v. City of New York, 215 F. Supp.
2d 354, 393 (S.D.N.Y. 2002). These claims are analyzed using the burden-shifting framework
laid out by the Supreme Court in McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S. Ct.
1817 (1973). See Terry v. Ashcroft, 336 F.3d 128, 141 (2d Cir. 2003) (“The McDonnell Douglas
burden shifting analysis . . . applies to retaliation claims brought pursuant to Title VII.”); Pratt v.
Hustedt Chevrolet, No. 05-CV-4148, 2009 WL 805128, at *10 (E.D.N.Y. Mar. 27, 2009).
Under the McDonnell Douglas burden-shifting scheme, plaintiff bears the initial burden
of making out a prima facie case for retaliation. 411 U.S. at 802. To make a prima facie
showing of retaliation, the plaintiff must demonstrate that (1) he engaged in a protected activity
under Title VII [or NYSHRL or § 1981]; (2) the employer was aware of this activity; (3) the
employer took adverse action against the plaintiff; and (4) the existence of a causal connection
between the protected activity, i.e., “that a retaliatory motive played a part in the adverse
employment action.” E.g., Kessler v. Westchester County Dept. of Social Servs., 461 F.3d 199,
205-06 (2d Cir. 2006).
Once the plaintiff has established a prima facie case, the burden shifts to the employer to
articulate a legitimate, nondiscriminatory reason for the employment action. Weinstock., 224
F.3d at 42. “The defendant must clearly set forth, through the introduction of admissible
evidence, reasons for its actions which, if believed by the trier of fact, would support a finding
that unlawful discrimination was not the cause of the employment action.” St. Mary’s Honor
Ctr. v. Hicks, 509 U.S. 502, 507, 113 S. Ct. 2742 (1993) (internal quotation marks omitted;
emphasis in original). “Upon the defendant’s articulation of such a non-discriminatory reason
for the employment action, the presumption of discrimination arising with the establishment of
the prima facie case drops from the picture.” Weinstock, 224 F.3d at 42. In order for the case to
continue, the plaintiff must come forward with evidence that the defendant’s proffered, nondiscriminatory reason is a pretext for actual discrimination. Id.
Plaintiff claims that the State Court Lawsuit initiated by Defendants violates the anti-
retaliation provisions of Title VII, the NYHRL, and 42 U.S.C. § 1981. Judge Seybert previously
analyzed this claim in Spencer I and found that Plaintiff established a prima facie case of
retaliation. Specifically, Judge Seybert found that: (1) Spencer’s filing of a complaint with the
DHR is protected activity; (2) Defendants had knowledge of that activity; (3) Defendants took
adverse action against Plaintiff by commencing the State Court Lawsuit; and (4) a causal nexus
exists between the filing of the DHR complaint and the initiation of the State Court Lawsuit.
Sum. J. Op. at 27-31. After concluding that Plaintiff established a prima facie case of retaliation,
Judge Seybert held the following regarding the next step in the McDonnell Douglas framework –
i.e., whether Defendants had a legitimate, non-retaliatory reason for filing the lawsuit:
. . . Defendants offer as their legitimate, non-discriminatory reason
for filing its litigation that the litigation is not frivolous. In support
of this argument, Defendants only offer the Second Department’s
decision, reversing the lower court’s decision that granted
Spencer’s motion to dismiss on several claims. See 34 A.D.3d 429,
825 N.Y.S.2d 483 (App. Div. 2006). Plaintiff argues that the
litigation is frivolous for a variety of reasons. (See Opp’n 18-20.)
At this time, it is rather unclear why Defendants initiated the
litigation. Even if the litigation is not frivolous, it still may be
considered retaliatory if motivated, even partially, by a retaliatory
animus. See Gordon v. New York City Bd. of Educ., 232 F.3d 111,
117 (2d Cir. 2000) (“Title VII ‘is violated when a retaliatory
motive plays a part in adverse employment actions ... whether or
not it was the sole cause.”) (quoting Cosgrove v. Sears, Roebuck &
Co., 9 F.3d 1033, 1039 (2d Cir. 1993)).
Given the considerable time between when the claims arose and
when Defendants filed suit-almost two years-and the several issues
surrounding Defendants’ suit that are raised by Plaintiff and
unanswered by Defendants, there are genuine issues of fact
regarding Plaintiff’s claims for retaliatory commencement of
litigation against Defendants. Of particular concern, is the “chilling
effect of a state lawsuit upon an employee’s willingness to engage
in protected activity” where the complainant seeks very large
damages, here, over six million dollars. Bill Johnson’s
Restaurants, Inc. v. National Labor Relations Board, 461 U.S.
731, 741, 103 S.Ct. 2161, 76 L.Ed.2d 277 (1983).
Id. at 31-32.
As this Court has previously held, Judge Seybert’s findings and conclusions are law of
the case and will not be re-visited absent “intervening development of law or fact that renders
reliance on Judge Seybert’s earlier ruling inadvisable.” See DE 125 at 4 (citing Calabrese v.
CSC Holdings, Inc., No. 02-CV-5171, 2009 WL 425879, at * 6 (E.D.N.Y. Feb. 19, 2009);
accord Fogel v. Chestnutt, 668 F.2d 100, 109 (2d Cir. 1981) (quoting Zdanok v. Glidden, 327 F.
2d 944, 953 (2d Cir. 1964)) (noting that law of the case can be revisited and disregarded “only
when the court has a ‘clear conviction of error’ with respect to a point of law on which its
previous decision was predicated.”).
The only intervening development since Spencer I is the issuance of the State Court
Lawsuit Trial Order which dismissed six of Defendants’ claims on the merits, found one claim to
be procedurally defective, and held that Defendants met their burden of proof on a single
defamation per se claim, which relates only to Defendant Halpern. See State Ct. Trial Order.
Defendants argue that in light of this decision, it is indisputable that the State Court Lawsuit was
reasonably based and Defendants therefore had a legitimate, non-discriminatory reason for filing
the suit. As discussed in greater detail below, the Court disagrees for two independent reasons:
(1) the relevant inquiry is not whether the lawsuit was ultimately meritorious, but rather whether
the suit was brought with retaliatory intent, and (2) even if the sole inquiry was whether the suit
had merit, Defendants were not successful on seven of the eight asserted claims.
Reasonably-Based Litigation can be Retaliatory if it is Motivated, Even
Partially, by a Retaliatory Animus
Defendants argue that the standard set forth by the United States Supreme Court in Bill
Johnson’s Restaurants, Inc. v. National Labor Relations Board, 461 U.S. 731, 103 S. Ct. 2161
(1983), a National Labor Relations Act (“NLRA”) case, applies here and, under that standard,
Defendants’ successful litigation of one of their eight claims in the State Court Lawsuit
precludes liability under the anti-retaliation laws, regardless of their motivation for pursuing the
lawsuit. In Bill Johnson’s, the Supreme Court considered whether a state-court civil suit brought
by an employer, commenced with retaliatory intent, could be enjoined as a violation of the
NLRA. Id. at 733. The Supreme Court held that the “filing and prosecution of a well-founded
[state court] lawsuit [brought by an employer] may not be enjoined as an unfair labor practice [in
violation of the NLRA], even if it would not have been commenced but for the plaintiff’s desire
to retaliate against the defendant for exercising rights protected by the Act.” Id. at 743. The
Supreme Court further held, regarding completed lawsuits, that “the filing of a meritorious law
suit, even for a retaliatory motive, is not an unfair labor practice.” Id. at 747. In contrast, Judge
Seybert held in Spencer I that “[e]ven if the litigation is not frivolous, it still may be considered
retaliatory if motivated, even partially, by a retaliatory animus.” See Sum. J. Op. at 32 (citing
Gordon, 232 F.3d at 117 (“Title VII ‘is violated when a retaliatory motive plays a part in adverse
employment actions ... whether or not it was the sole cause.”)). Defendants make no attempt to
reconcile the two holdings and, in fact, completely ignore Spencer I, despite the fact that it is the
law of the case. For the reasons that follow, the Court finds that Bill Johnson’s is inapplicable
here and the Court therefore adheres to the standard set forth in Spencer I.
First, Bill Johnson’s was an NLRA case and the Supreme Court has never held that the
test established in that case should be applied in the employment discrimination context.
Durham Life Insurance Co. v. Evans, 166 F.3d 139, 157 (3d Cir. 1999) is instructive on this
point. In that case, the Third Circuit rejected the defendant-employer’s argument that the
retaliation claim should be dismissed unless the allegedly retaliatory litigation lacked a
reasonable basis under Bill Johnson’s. The court held that Bill Johnson’s was inapplicable
because that case “construed a specific, ambiguous provision of the NLRA defining unfair labor
practices” and its “reasoning has not been extended to Title VII, in part because the prohibition
on retaliation is so explicit and the public policy behind the retaliation provision so compelling.”
Id.; see also Bryant v. Military Dep’t of Missisippi, 597 F.3d 678, 692 (5th Cir. 2010) (declining
to apply Bill Johnson’s standard to federal civil rights claims). The Court finds these decisions
compelling and persuasive.
The proposition that the Bill Johnson’s standard is inapplicable in the employment
discrimination context is strengthened by the Supreme Court’s decision in Burlington Northern
& Santa Fe Railway Co. v. White, 548 U.S. 53, 126 S. Ct. 2405 (2006). There, the Supreme
Court clarified the broad scope of Title VII’s anti-retaliation provision and held that this
provision covers any materially adverse action by an employer “which in this context means it
well might have dissuaded a reasonable worker from making or supporting a charge of
discrimination.” Id. at 68. The Court explained that this standard, which focuses “on the
materiality of the challenged action and the perspective of a reasonable person in the plaintiff’s
position . . . will screen out trivial conduct while effectively capturing those acts that are likely to
dissuade employees from complaining or assisting in complaints about discrimination.” Id. at
69-70. Indeed, in the context of a retaliatory litigation claim, one court in this District has
observed that “after Burlington, a plaintiff can prevail on a retaliation claim if she can ‘show that
a reasonable employee would have found the challenged action materially adverse, which in this
context means that it well might have dissuaded a reasonable worker from making or supporting
a charge of discrimination.’” Illiano v. Mineola Union Free School Dist., 585 F. Supp. 2d 341,
352 (E.D.N.Y. 2008) (quoting Kessler v. Westchester County Dept. of Social Services, 461 F.2d
199, 207 (2d Cir. 2006)); see Walsh v. Irving Stern’s Costumes, No. 05-CV-2515, 2006 WL
2380379, at *3 (E.D. Pa. Aug. 15, 2006).3
Courts in this Circuit evaluate allegedly retaliatory litigation by conducting a factspecific inquiry into the employer’s intent as instructed by Burlington Northern, rather than
focusing solely on the merits of the litigation as the Court did in Bill Johnson’s. For example, in
Penberg v. Healthbridge Management, the court analyzed whether the defendant’s counterclaim
for breach of fiduciary duty and its decision to pursue sanctions for destruction of evidence
The Court notes that Burlington Northern cited Bill Johnson’s, but only as an example of
the fact that courts have interpreted retaliation provisions to protect against a broader scope of
conduct than the primary substantive provisions of various statutes. 548 U.S. at 66-67. In Judge
Seybert’s Summary Judgment Opinion, she also cited Bill Johnson’s, this time to reflect the
Supreme Court’s recognition of the “chilling effect of a state lawsuit upon an employee’s
willingness to engage in protected activity.” See Sum. J. Op. at 32. Neither of these references
can be construed as adopting the Bill Johnson’s standard for evaluating retaliatory litigation in
the employment discrimination context.
contained on plaintiff’s computer constituted retaliation for the employee’s discrimination suit.
See 823 F. Supp. 2d 166, 192 (E.D.N.Y. 2011). Although the defendant argued that it had
legitimate reasons for filing its counterclaim and pursuing sanctions, the court declined to grant
summary judgment because, inter alia, “the timing of defendant’s counterclaim and related
demands on plaintiff . . . raised a triable issue of fact regarding whether defendant added its
counterclaim with retaliatory intent.” Id. at 193.
Similarly, the court in Mohamed v. Sanofi-Aventis Pharmaceuticals also considered
whether the counterclaims asserted by the defendants based on the plaintiff’s breach of his
tuition assistance contract were filed with retaliatory intent. No. 06-CV-1504, 2009 WL
4975260, at *25 (S.D.N.Y. Dec. 22, 2009). Although defendants’ motion for summary judgment
was granted, the Court reached that determination because the plaintiff failed to offer evidence
showing that the “[d]efendants had the specific intent to interfere with [p]laintiff’s protected
rights.” Id. For example, the court considered the fact that the company had sought tuition
assistance reimbursement from other employees and had demanded repayment from plaintiff
prior to the commencement of his discrimination lawsuit. Id. Notably, while the court also
denied the plaintiff’s motion for judgment as a matter of law on the allegedly retaliatory
counterclaims, the court did not consider this fact in its analysis of the retaliation claim. Id. at
*25-26; see also Nesselrotte v. Allegheny Energy, Inc., No. 06-CV-1390, 2009 WL 703395, at
*14 (W.D. Pa. Mar. 16, 2009) (denying summary judgment on plaintiff’s retaliation claim
because, inter alia, the temporal proximity of the defendant’s decision to sue plaintiff’s
husband’s company raised an issue of fact); Illiano, 585 F. Supp. 2d at 352 (denying motion to
dismiss claim based on retaliatory defamation suit where employer threatened to sue plaintiff if
she sought to vindicate her rights); Torres v. Gristede’s Operating Corp., 628 F. Supp. 2d 447,
473 (S.D.N.Y. 2008) (holding in FLSA case that bad faith or groundless legal proceedings are
The Court acknowledges that unlike the case at bar, the cases above did not involve a
fully litigated case that was found to be meritorious on one of multiple claims. What is
noteworthy is that none of the cases utilize the Bill Johnson’s standard, nor do they suggest that
an employer’s success on the merits of the claim will absolve the employer from liability under
the anti-retaliation laws. Rather, following Burlington Northern (and consistent with Spencer I),
the courts have conducted a fact-specific inquiry into the intent of the employer.
In support of their position, Defendants cite Spiegel v. Schulmann, 604 F.3d 72 (2nd Cir.
2010) which they argue is the “only relevant case in the Second Circuit.” Defs.’ Mem. at 9.
Spiegel, however, is inapposite. In Spiegel, the Second Circuit affirmed the district court’s
decision to decline to enjoin an allegedly retaliatory state court lawsuit, finding that the
plaintiffs’ conclusory statements that the state lawsuit was patently frivolous were insufficient to
warrant an injunction. 604 F.3d at 78-79. Although not specifically stated in the Second
Circuit’s per curiam decision, the standard for injunctive relief is more stringent than the
standard for summary judgment on a retaliation claim – a party requesting injunctive relief must
demonstrate irreparable harm and actual success on the merits. See Ognibene v. Parkes, 671
F.3d 174, 182 (2d Cir. 2012). Moreover, there are significant First Amendment concerns
involved with enjoining litigation which are not as strong in a suit for damages. Significantly,
Bill Johnson’s recognized this reality, and as a result, established a different standard for
pending and completed actions. See White v. Lee, 227 F.3d 1214, 1235 (9th Cir. 2000)
(discussing two different standards). Spiegel also considered, without actually deciding, the
effect of the All Writs and Anti-Injunction Acts, which prohibit a district court from granting an
injunction staying a state court proceeding except in limited circumstances, 604 F.3d at 78, a
concern not applicable here. Finally, it is worth noting that the sole case cited by the Second
Circuit in Spiegel which dealt with retaliatory litigation, EEOC v. Levi Strauss, 515 F. Supp.
640, 644 (D.C. Ill. 1981), focused on the intent behind the filing of the litigation, not its merits.
The court held:
[I]t cannot be concluded that all defamation actions in the wake of
sexual harassment charges filed before the Commission are
violations of Title VII. Rather, those suits initiated in state court in
good faith and as an attempt to rehabilitate the employer’s
reputations which may have been tarnished by the charges are not
necessarily violations of the Act. In order to establish the
propriety of an injunction, the Commission must demonstrate that
the action was filed for improper, i.e. retaliatory, purposes. EEOC
v. Virginia Carolina Veneer Corp., 495 F.Supp. 775 (W.D.Va.
1980). In its complaint, the EEOC has alleged that Von Buskirk's
action was filed for retaliatory purposes. That allegation, which
must be proved at a hearing but which is taken as true here, is
sufficient to defeat Von Buskirk’s motion to dismiss.
Id. at 644.
The remainder of the cases cited by Defendants are all out-of-circuit and out-of-state
actions which are not binding on this Court and are, in any event, unpersuasive in this context.
For example, in Hasan v. Foley & Lardner, LLP, No. 04-CV-5690, 2007 WL 2225831, at *10
(N.D. Ill. Jul. 26, 2007), the court addressed whether the threat of a lawsuit was an adverse
employment action. Whether or not the State Court Litigation is an adverse employment action
is not before this Court. Moreover, the case relied on in Hasan for the proposition that a lawsuit
is not an adverse employment action was decided before Burlington Northern. Pre-Burlington
Northern cases addressing this issue have been called into question in light of the expansive
definition of adverse employment action set forth in that case. See Mohamed, 2009 WL
4975260, at *24 (“In the wake of Burlington Northern, there is now a ‘substantial question’ as to
the validity of precedent holding that a post-termination lawsuit or counterclaim may not be an
adverse employment action.”).
Defendants’ reliance on Beltran v. Brentwood North Healthcare Center, LLC, 426 F.
Supp. 2d 827, 835 (N.D. Ill. 2006), is also unavailing. Beltran, an FLSA case, was also
dismissed on the grounds that the allegedly retaliatory action – the filing of a counterclaim – was
not an adverse employment action. It is worth noting that the court explicitly distinguished the
filing of a counterclaim from the situation where an employer files a separate lawsuit against the
employee because “unlike initiating litigation against an employee, filing a counterclaim will not
chill plaintiffs from exercising and enforcing their statutory rights because by the time the
employer files its counterclaims, plaintiffs have already made their charges and initiated the
lawsuit.” Id. at 834.4 While the court did address the plaintiff’s argument that the retaliation
claim should be sustained because the counterclaim was baseless, the court stated that it was
merely assuming, without deciding, that the Bill Johnsons’s standard applied. Id.
Ergo v. International Merchant Services, Inc., 519 F. Supp. 2d 765 (N.D. Ill. 2007), also
an FLSA case, involved the assertion of a compulsory counterclaim by the employer, as well as a
separate lawsuit. Compulsory counterclaims are distinguishable from the filing of separate
litigation or permissive counterclaims.5 As to the separate lawsuit, the court applied the Bill
In recognizing the distinction drawn by the court in Beltran, this Court is not taking the
position that a counterclaim can never be retaliatory.
The Court also notes that the foregoing cases, like the instant case, are different from
retaliatory litigation cases under the FLSA involving compulsory counterclaims. In FLSA
retaliation cases, courts have been more tolerant of an employer’s filing of compulsory
counterclaims and have found that such conduct cannot constitute retaliation unless the
counterclaim is totally baseless. See Torres, 628 F. Supp. 2d at 474 (“[A] compulsory
counterclaim is not actionable for retaliation unless it is totally baseless.”); Eng-Hatcher v.
Sprint Nextel Corp., No. 07-CV-7350, 2008 WL 4865194 (S.D.N.Y. Oct. 31, 2008) (citing Ergo
v. International Merchance Servs., Inc., 519 F. Supp. 2d 765, 781 (N.D. Ill. 2007) (“[W]here an
Johnson’s standard because it did not see any “principled distinction between [Bill Johnson’s]
and the facts presented here.” 519 F. Supp. 2d at 781. For the reasons set forth above – that Bill
Johnson’s is aimed at a different public policy context, namely, NLRA cases and that Burlington
Northern requires a more expansive interpretation of retaliation for employment discrimination
cases – this Court respectfully disagrees with that particular finding in Ergo. See Nesselrotte v.
Allegheny Energy, Inc., No. 06-CV-1390, 2007 WL 3147038, at *12 n.25 (W.D. Pa. Oct. 25,
2007) (discussing Ergo and Burlington Northern). The Court also notes that Hasan, Beltran,
and Ergo are all from the Seventh Circuit, which has adopted a unique presumption against
finding litigation conduct to be retaliatory. See Bernstein, Adam J., Retaliatory Litigation
Conduct After Burlington Northern & Santa Fe Railway Company v. White, 42 Colum. J.L. Soc.
Probs. 91, 97-101, 108, 111 (2008).
Finally, Bryant v. Military Department of Mississippi, 597 F.3d 678 (5th Cir. 2010) did
not involve a discrimination statute, but rather the prohibition on conspiracies to interfere with a
federal officer’s discharge of his duties under 42 U.S.C. § 1985(1). In any event, Bryant did not
apply Bill Johnson’s, but rather applied a similar test set forth in Professional Real Estate
Investors, Inc. v. Columbia Pictures Industries, 508 U.S. 49, 57, 113 S.Ct. 1920 (1993). Id. at
692. Although the Professional Real Estate Investors test also looks to the merits of the
underlying litigation, the approach in Bryant is noteworthy in that the court did not automatically
assume that Bill Johnson’s or Professional Real Estate Investors applied to the particular statute
at issue, i.e. § 1985(1). The court does not address the state court cases cited by Defendants.
employer seeks to amend a pleading to assert a compulsory counterclaim to avoid the risk of
being foreclosed from raising the claim in a subsequent action, that conduct cannot constitute
retaliation, unless the counterclaim is ‘totally baseless.’”).
Applying the correct standard – which looks to whether retaliatory intent played a motive
in the filing of the State Court litigation (see Gordon, 232 F.3d at 117) – the Court concludes
that, notwithstanding the decision in the State Court Lawsuit, there are genuine issue of fact
which preclude summary judgment. Indeed, all of the issues of fact identified in Spencer I
remain unresolved. It is still unclear whether the high amount of damages Defendants sought in
the State Court Lawsuit was designed to deter Plaintiff from pursuing his discrimination claims.
Moreover, the “considerable amount of time between when the claims arose and when
Defendants filed suit –almost two years” remains an issue (S.J. Op. at 32) as does the close
proximity in time – less than two months – between Spencer’s filing of a complaint with the
DHR and the commencement of the State Court Lawsuit. See id. at 28 n.4. Halpern’s testimony
does not provide any clarification. After discussing Spencer’s general litigiousness, Halpern
testified as follows:
How does that make you feel?
It’s just a problem I have to deal with.
How do you deal with it?
Try to make it go away.
How do you make it go away?
You are talking about now?
Any time. Yes. [Objection]
I just want him off my plate.
How do you do that?
Well, coming to this deposition, I am telling you what
happened. We hire attorneys and they represent us and we
hope that they bring out all the facts of the case and that
one day a Judge will take a look at everything and say, you
know, something; International Shoppes was wrong and
not Mr. Spencer.
Is that why you filed a lawsuit?
Because the company was harmed
Famighetti Cert., Ex. 3 at 63-64. Moreover, the Court notes that Defendants failed to present
any evidence of their compensatory damages in the State Court Lawsuit. DE 169. This factor
leaves open the question whether Defendants were actually harmed by Spencer’s allegedly
defamatory statements and whether the litigation was motivated by retaliatory animus.
Even if the Standard Urged by Defendants was Correct, Summary Judgment
is Still Inappropriate
Even if the Court were to adopt Defendants’ argument – that the filing of a meritorious
lawsuit is lawful, even if the suit was commenced with a retaliatory motive – the Court would
still deny summary judgment. As noted, Defendants filed multiple claims in the State Court
Litigation. The original complaint asserted seven causes of action (see Famighetti Cert., Ex. 13),
and the amended complaint asserted eight causes of action, although the state court found one of
them to be procedurally defective, see St. Ct. Trial Order at 4.
The Court points out that the only cause of action found to be meritorious, the sixth cause
of action, pertained solely to Defendant Halpern. See id. at 5-6. As such, ISI had no meritorious
claims and Halpern’s successful litigation of the sixth cause of action has no bearing on whether
ISI’s claims were retaliatory.6
Although the claim alleged only defamation per se against Halpern, it is unclear to the
Court whether the claim was brought in the name of both Halpern and ISI. The amended
complaint is not part of the record before the Court, and while Justice Lally referred to the plural
“plaintiffs” in discussing the sixth cause of action in the trial order (see St. Ct. Trial Order at 56), she referred to the singular “plaintiff” in her damages decision. See DE 169. Even if the
Moreover, Defendants ignore the fact that they were not successful on seven of their
eight claims. Indeed, based on the reasoning of Justice Lally, any one of these claims could have
been dismissed on summary judgment, which is the standard Bill Johnson’s established for
determining whether a claim had a “reasonable basis.” See 461 U.S. at 744-46. As to the second
cause of action, the state court held that a reasonable listener would have found that the
statement at issue was an opinion as opposed to a fact. See St. Ct. Trial Order at 3-4. The third,
sixth, and seventh defamation per se causes of action were dismissed because they were
substantially true. The state court reached this conclusion based on the undisputed fact that a
managerial employee of ISI was carrying out a phantom employee scheme. Id. at 5-7. As to the
fourth cause of action for fraudulent concealment, the claim was dismissed because Defendants’
offered no evidence to support their conclusory accusation that Spencer had knowledge of the
fraud. Id. at 5-6. Finally, the eighth cause of action was dismissed because the claim of being
ostracized or singled out did not rise to the level of defamation per se and because a reasonable
person would not understand the claim of harassment to be referring to a crime. Id. at 7-8.
Finally, the Court notes that the successful claim, the sixth cause of action, was not
asserted in the original complaint filed. Thus, Defendants’ success on that claim has no bearing
on whether the original complaint filed in the State Court Lawsuit was retaliatory. The original
complaint also contained claims based on Spencer’s alleged filing of a false harassment claim
and threat of groundless legal action. See State Ct. Complaint at 9-10, Famighetti Cert., Ex. 14.
These claims raise special concerns about whether Defendants were seeking to dissuade Spencer
claim were technically brought in the name of ISI and Halpern, the Court is unaware of any basis
on which ISI could assert a claim for defamation per se on behalf of Halpern.
from pursuing his discrimination complaint since they sought to impose liability upon him for
that very decision. See Burlington Northern, 548 U.S. at 68.
Based on the foregoing information, even assuming Defendants cannot be held liable for
pursuing the sixth cause of action, the outcome of that claim does not affect Defendants’ liability
for the other six causes of action. Spencer was forced to defend against all of the claims and
faced the prospect of a large potential damage award. Although the Court does not have a copy
of the amended complaint filed in the State Court Lawsuit, the original complaint sought either
$50,000 or $1,000,000 for each cause of action. See Famighetti Cert., Ex. 14. Because
defendants do not address whether it is possible to separate out the potential harm caused by the
six failed claims from the one successful claim, it would be inappropriate to grant summary
judgment on that portion of the claim. Thus, even when the standard urged by Defendants is
applied, summary judgment is not warranted.
For the foregoing reasons, the Court DENIES Defendants’ motion for summary judgment
on Plaintiff’s retaliatory commencement of litigation claims brought pursuant to Title VII,
NYHRL, and § 1981.
This matter is set for a Pre-Trial Conference on October 23, 2012 at 1:30 p.m.
Dated: Central Islip, New York
September 28, 2012
/s/ A. Kathleen Tomlinson
A. KATHLEEN TOMLINSON
U.S. Magistrate Judge
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