Discgenics - Memorandum of Law

Case 2:22-cv-00354-JNP Document 24 Filed 08/23/22 PageID.405 Page 1 of 13

LAUREN I. SCHOLNICK (Utah Bar No. 7776) STRINDBERG SCHOLNICK BIRCH HALLAM HALSTAD THORNE 40 South 600 East Salt Lake City, Utah 84106 (T) 801.359.4169 lauren@utahjobjustice.com Julia Elmaleh-Sachs (admitted pro hac vice) Susan K. Crumiller (admitted pro hac vice) Crumiller P.C. 16 Court St, Ste 2500 Brooklyn, NY 11241 (T) 212.390.8480 julia@crumiller.com susan@crumiller.com Attorneys for Plaintiffs UNITED STATES DISTRICT COURT DISTRICT OF UTAH, CENTRAL DIVISION LARA SILVERMAN, PhD and JEFFREY POOLE, Case No. 22-CV-00354-JNP Plaintiffs, -againstDISCGENICS, INC., Defendant.

PLAINTIFFS’ MEMORANDUM OF LAW IN OPPOSITION TO DEFENDANT’S MOTION TO COMPEL ARBITRATION

Case 2:22-cv-00354-JNP Document 24 Filed 08/23/22 PageID.406 Page 2 of 13

TABLE OF CONTENTS PRELIMINARY STATEMENT ....................................................................................................... 1 FACTS ............................................................................................................................................... 3 ARGUMENT ..................................................................................................................................... 4 I.

Per its Plain Language, the Act Applies to the Entirety of Plaintiffs’ Claims; While the

“Claims Accrued” Previously, the “Dispute Arose” After the Act Was Passed ......................... 4 II.

Plaintiffs’ Claims Continue to Accrue Today, and the Court Should Not Split Claims

Between Judicial Forums .............................................................................................................. 7 CONCLUSION.................................................................................................................................. 9

i

Case 2:22-cv-00354-JNP Document 24 Filed 08/23/22 PageID.407 Page 3 of 13

TABLE OF AUTHORITIES Cases ............................................................................................................................................ Page Ammons v. Sentry Ins. Co., 431 F. Supp. 3d 1280, 1284-8 (D.N.M. 2019) .............................................................................. 5 Bailey v. United States, 516 U.S. 137, 146 (1995) ............................................................................................................... 5 Burlington Northern Santa Fe Railroad v. White, 126 S. Ct. 2405, 2414 (2006) ......................................................................................................... 8 Canopy Corp. v. Symantec Corp., 395 F. Supp. 2d 1103, 1107 (D. Utah 2005) ................................................................................. 5 Corley v. United States, 556 U.S. 303, 314 (2009) ............................................................................................................... 4 Gibson v. Giles Chem. Corp., No. 1:20 Civ. 394 (MOC)(WCM), 2022 WL 1446805 (W.D.N.C. May 6, 2022) ...................... 7 Green v. Brennan, 578 U.S. 547 (2016) ....................................................................................................................... 6 Hancock v. Am. Tel. & Tel. Co., 701 F.3d 1248, 1261 (10th Cir. 2012) ........................................................................................... 7 Hansen v. SkyWest Airlines, 844 F.3d 914, 923 (10th Cir. 2016) ............................................................................................... 8 Hibbs v. Winn, 542 U.S. 88, 101 (2004) ................................................................................................................. 4 Hoery v. United States, 324 F.3d 1220, 1222 (10th Cir. 2003) ........................................................................................... 7 Kankam v. University of Kansas Hospital Authority, No. 07 Civ. 2554 (EFM) (D. Kan. Jan. 26, 2009) ......................................................................... 6 Khalifah v. Brennan, No. 19 Civ. 2240 (JAR) (KGG) (D. Kan. Mar. 2, 2020) .............................................................. 6 Krumme v. Westpoint Stevens Inc., 238 F.3d 133, 140 (2d Cir. 2000) .................................................................................................. 6

ii

Case 2:22-cv-00354-JNP Document 24 Filed 08/23/22 PageID.408 Page 4 of 13

Lister v. City of Wichita, 666 F. App’x 709, 712 (10th Cir. 2016) ........................................................................................ 6 Marquez v. New Mexico, 214 F. App’x 855, 856 (10th Cir. 2007) ........................................................................................ 6 Martinez-Hill v. University of California Board of Regents, No. Civ. 00-272 MV/LFG-ACE, (D.N.M. Oct. 4, 2000) ............................................................. 6 Northern Natural Gas Company v. L.D. Drilling, Inc., No. 08-1405-WEB, (D. Kan. Nov. 6, 2009) ................................................................................. 8 Page v. United States, 729 F.2d 818, 821 (D.C. Cir. 1984)............................................................................................... 7 Showalter v. Weinstein, 233 F. App’x 803, 804 (10th Cir. 2007) ........................................................................................ 4 Sizova v. Nat’l Inst. of Stands. Tech., 282 F.3d 1320, 1325 (10th Cir. 2002) ........................................................................................... 4 Sprietsma v. Mercury Marine, 537 U.S. 51, 63 (2003) ................................................................................................................... 4 Stark-Romero v. National Railroad Passenger Co., No. 09 Civ. 295 (MV) (RLP), (D.N.M. Mar. 31, 2010) ............................................................... 8 Statutes 9 U.S.C. § 402 ................................................................................................................................ 1, 8 Pub. L. No. 117-90, § 3, 136 Stat 26, 28 (2022)............................................................................... 1

iii

Case 2:22-cv-00354-JNP Document 24 Filed 08/23/22 PageID.409 Page 5 of 13

Plaintiffs Lara Silverman and Jeffrey Poole respectfully submit this Memorandum of Law in opposition to Defendant DiscGenics, Inc.’s (“DiscGenics”) Motion to Compel Arbitration, Dkt. No. 13, (the “Motion”).

PRELIMINARY STATEMENT On March 3, 2022, Congress enacted the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (the “Act”). By passing the Act, Congress intended to end the practice of burying sexual-harassment claims “in the basement of arbitration.” Cong. Rec. S628 (daily ed. Feb. 10, 2022) (statement of Sen. Lindsey Graham). The Act provides that in “any dispute or claim that arises or accrues on or after the date of enactment of this Act [which] relates to” sexual harassment or assault, if the plaintiff so chooses, “no predispute arbitration agreement . . . shall be valid or enforceable with respect to a case which is filed under Federal [law].” 9 U.S.C. § 402; Pub. L. No. 117-90, § 3, 136 Stat 26, 28 (2022).

Despite its breadth, the bill sailed smoothly through the legislative process, gathering support from 53 cosponsors, passing the House by a 335-97 margin and winning approval in the Senate three days later by unanimous consent. In signing the bill into law, President Biden described the importance and purpose of this groundbreaking legislation, and how forced arbitration enables patterns of abuse to continue unremediated: Between half and three quarters of all women report that they have faced some form of sexual harassment in the workplace. And too often, they’re denied a voice and fair chance to do anything about it. Today we send a clear and strong message that we stand with you for safety, dignity, and for justice . . . [U]nder forced arbitration, proceedings are conducted in secret, often by arbitrators selected and paid for by the employer. And the outcomes of the arbitration are usually hidden from the public and the employees and coworkers . . . And when it comes to sexual harassment and assault, forced arbitration shielded perpetrators, silenced survivors, and enabled employers to sweep episodes of sexual assault and harassment under

1

Case 2:22-cv-00354-JNP Document 24 Filed 08/23/22 PageID.410 Page 6 of 13

the rug. And it kept survivors from knowing if others have experienced the same thing, in the same workplace, at the hands of the same person.1 Indeed, the secretive nature of arbitration “has allowed outrageous violations, in some cases years of sexual harassment and predation, to remain hidden from view and therefore to continue.”2 Several weeks after the President signed this legislation into law, on March 24, 2022, Plaintiffs in this action received letters from the Equal Employment Opportunity Commission granting them a “Right to Sue” in federal court, as is jurisdictionally required to assert Title VII claims. On May 23, 2022, Plaintiffs filed their lawsuit.

Defendant now argues that the Act does not apply to Plaintiffs’ lawsuit because Plaintiffs’ “claims accrued” before the Act’s enactment.3 However, Defendant woefully ignores that the Act also applies to “any dispute or claim that arises or accrues” after the Act’s enactment (emphasis added). Here, while Plaintiffs’ claims accrued for purposes of Title VII in June and July 2021, a dispute between the parties did not arise until after the date of enactment.

It is clear from the legislative history and the plain text of the Act that this broad scope was no accident, and squarely applies in this case, where the federal courts did not even have jurisdiction over Plaintiffs’ claims until after the Act was passed. Given the clear language of the Act, Plaintiffs did not expect that Defendant would attempt to force them to litigate their claims

1 Remarks by President Biden at Signing of H.R. 4445, “Ending Forced Arbitration of Sexual

Assault and Sexual Harassment Act of 2021”, The White House (March 3, 2022), https://www.whitehouse.gov/briefing-room/speeches-remarks/2022/03/03/remarks-by-presidentbiden-at-signing-of-h-r-4445-ending-forced-arbitration-of-sexual-assault-and-sexual-harassmentact-of-2021/.

2 Terri Gerstein, Forced Arbitration is Unjust and Deeply Unpopular. Can Congress End It?, Slate (Mar. 1, 2019), https://slate.com/news-and-politics/2019/03/congress-forced-arbitrationfair-act.html.

3 Defendant does not dispute that Plaintiffs’ allegations constitute or “relate to” a “sexual harassment dispute” and therefore fall within the scope of the Act. See Dkt. No. 13 at p. 10.

2

Case 2:22-cv-00354-JNP Document 24 Filed 08/23/22 PageID.411 Page 7 of 13

behind closed doors. They were wrong. By filing this Motion, Defendant demonstrates once again that it holds little regard for victims of a sexually harassing hostile work environment.

Defendant’s baseless attempt to force Plaintiffs into secret arbitration proceedings when Congress has expressly legislated to the contrary is appalling. This Court should deny Defendant’s Motion.

FACTS Plaintiffs stipulate to the Facts set forth in the Motion. However, additional facts have transpired which are relevant to this motion, including as recently as August 12, 2022, and which Plaintiffs intend to amend their Complaint to include. See Dkt. No. 23. These facts indicate postemployment continuing retaliation against Plaintiffs by Defendant.

1.

As an owner of 2,500 shares of DiscGenics Series C preferred shares which were

purchased by Poole in August 2020, Poole received shareholder notifications throughout the entirety of his employment with Defendant, as required by the shareholder agreement between Poole and Defendant. Since the termination of his employment, Poole has not received a single shareholder notification. Dkt. No. 2 at ¶ 187; Dkt. No. 23-1 at ¶ 231. Meanwhile, other shareholders have received multiple notifications since June 2021, including one as recently as August 18, 2022. Dkt. No. 23-1 at ¶ 232. This indicates that Defendant has deliberately withheld these notifications from Poole, as a retaliatory measure. Id. 2.

In or around September 2021, Flanagan told third party consultant Chris Lyons, without

any basis whatsoever, that “the more [he] learned, the more [he] was convinced that [Plaintiffs] were having an inappropriate relationship.” Id. at ¶ 233.

3.

On August 12, 2022, Defendant threatened to file “counterclaims for defamation and/or

tortious interference” against Plaintiffs on the basis of unspecified statements by Plaintiffs. Id. at

3

Case 2:22-cv-00354-JNP Document 24 Filed 08/23/22 PageID.412 Page 8 of 13

¶ 234; see also Dkt. No. 23-3. When asked to identify the allegedly defamatory statements, Defendant failed and refused to do so. Id. ARGUMENT I.

Per its Plain Language, the Act Applies to the Entirety of Plaintiffs’ Claims; While the “Claims Accrued” Previously, the “Dispute Arose” After the Act Was Passed Plaintiffs’ “dispute” did not arise until May 23, 2022, when Plaintiffs filed the underlying

complaint. In the alternative, Plaintiffs’ “dispute” arose, at the earliest, on March 24, 2022 (after the Act’s enactment) when Plaintiffs received their Right to Sue letters, enabling them to initiate their lawsuit.4 Defendant argues the Act does not apply because a Title VII claim for constructive discharge or wrongful termination arises or accrues “when the employee resigns as a result of what she deems to be intolerable discrimination” or the date of the termination. Dkt. No. 13 at p.

10. However, the date the claim accrued is not the only relevant date for statutory purposes, since the Act applies to any case in which the claim accrued or the “dispute arose” on or after the effective date, as here. Defendant’s attempt to conflate the two terms, which are clearly enumerated separately in the Act, is unavailing.

Congress would not have included both phrases – “claim accrued” and “dispute arose” – in the same sentence had it intended for both to have the same meaning. “A statute should be construed so that effect is given to all its provisions, so that no part will be inoperative or superfluous, void or insignificant.” Hibbs v. Winn, 542 U.S. 88, 101 (2004) (quoting Corley v.

United States, 556 U.S. 303, 314 (2009)); Sprietsma v. Mercury Marine, 537 U.S. 51, 63 (2003)

4 Administrative exhaustion is a prerequisite to filing an action under Title VII. Showalter v.

Weinstein, 233 F. App’x 803, 804 (10th Cir. 2007); Sizova v. Nat’l Inst. of Stands. Tech., 282 F.3d 1320, 1325 (10th Cir. 2002).

4

Case 2:22-cv-00354-JNP Document 24 Filed 08/23/22 PageID.413 Page 9 of 13

(interpreting word “law” broadly could render word “regulation” superfluous in preemption clause applicable to a state “law or regulation”); see also Bailey v. United States, 516 U.S. 137, 146 (1995) (“We assume that Congress used two terms because it intended each term to have a particular, nonsuperfluous meaning.”); id. (rejecting interpretation that would have made “uses” and “carries” redundant in statute penalizing using or carrying a firearm in commission of offense).5 When a dispute “arises” is different than when a claim “accrues.” If an insured driver’s car is stolen and she files a claim for theft with her insurance carrier, the insurance claim accrues on the day of the theft, but the dispute does not arise until the insurance carrier notifies the driver that it is declining to cover the theft. See e.g., Ammons v. Sentry Ins. Co., 431 F. Supp. 3d 1280, 1284-8 (D.N.M. 2019) (“This case arises from the theft of Plaintiffs’ vehicle, which was stolen from an auto repair shop on November 22, 2018 . . . The parties dispute whether Plaintiffs are entitled to recover punitive damages under their UM property damage coverage for the actions of the unknown thief.”). Similarly, a contract claim accrues when the contract is violated; a dispute about the violation does not arise until the parties conclude that they disagree about the resolution. See e.g., Canopy Corp. v. Symantec Corp., 395 F. Supp. 2d 1103, 1107 (D. Utah 2005) (“The parties’ main dispute with respect to the breach of contract claim involves the proper interpretation of the Agreement’s term provision.”). See also Krumme v. Westpoint

5 Though Congress used the verbs interchangeably with the nouns, the subject “claim” is

generally connected with the verb “accrues”, and the subject “dispute” is generally connected with the verb “arises.” In common usage, disputes “arise” whereas claims “accrue.” In a Casetext federal case search, “dispute” comes within five words of “arise” in over 1,000 cases, but within five words of “accrue” in only 61 cases. Furthermore, the structure of §3 of the Act also supports this pairing because “dispute” is the first subject and “arises” is the first verb of the sentence.

5

Case 2:22-cv-00354-JNP Document 24 Filed 08/23/22 PageID.414 Page 10 of 13

Stevens Inc., 238 F.3d 133, 140 (2d Cir. 2000) (“A circumstance (such as a dispute) “arises” when it “spring[s] up, originate[s], . . . [or] come[s] into being.”).

This distinction is further supported by Black’s Law Dictionary, which specifically defines dispute as “an assertion of a right, claim, or demand on one side, met by contrary claims or allegations on the other.”6 Notably, in Title VII cases, courts in this Circuit use the words “dispute” and “claim” to signify different things. In Khalifah v. Brennan, No. 19 Civ. 2240 (JAR) (KGG), at *1 (D. Kan. Mar. 2, 2020), the court used the word “claim” to mean the employment discrimination lawsuit and the term “dispute” to signify motion practice related to a motion to dismiss: “This dispute arises out of Plaintiff Asya Khalifah’s claim of employment discrimination and retaliation by her former employer . . . Before the Court is Defendant’s Motion to Dismiss for failure to state a claim and lack of jurisdiction.” Id. (emphasis added). See also Kankam v. University of Kansas Hospital Authority, No. 07 Civ. 2554 (EFM), at *1 (D. Kan. Jan. 26, 2009); Martinez-Hill v. University of California Board of Regents, No. Civ. 00-272 MV/LFG-ACE, at *1 (D.N.M. Oct. 4, 2000); Marquez v. New Mexico, 214 F. App’x 855, 856 (10th Cir. 2007) (same).

Defendant cites to three cases in support of its contention that the Act does not apply, but none are availing. See Dkt. No. 13 at p. 10. Green v. Brennan, 578 U.S. 547 (2016) involved only a statute of limitations period, and thus relates only to claim accrual, which is not relevant here given the Act’s additional “dispute” language. Lister v. City of Wichita, 666 F. App’x 709, 712 (10th Cir. 2016) also only involves claim accrual, and is therefore equally inapposite.

Defendant cites Gibson v. Giles Chem. Corp., No. 1:20 Civ. 394 (MOC)(WCM), 2022 WL

6 A dispute is a “conflict or controversy,” “an assertion of a right, claim, or demand on one side,

met by contrary claims or allegations on the other.” Black’s Law Dictionary, 2nd ed.

6

Case 2:22-cv-00354-JNP Document 24 Filed 08/23/22 PageID.415 Page 11 of 13

1446805, at *1 (W.D.N.C. May 6, 2022), for the undisputed proposition that any dispute or claim arising or accruing before the Act’s enactment are not subject to the Act. Plaintiffs do not dispute that in a case such as Gibson, where the lawsuit was filed in December 2020 – i.e., well before the enactment of the Act – the Act would not apply.

In this matter, even if Plaintiffs’ claims accrued in June 2021, a “dispute . . . filed under Federal law” could not possibly have arisen prior to Plaintiffs’ very ability to assert their claims in federal court, i.e., March 24, 2022, when they received their Right to Sue letters. A more traditional analysis would date the dispute on May 23, 2022, when Plaintiffs filed their lawsuit in court.7 In any event, the “dispute arose” well after the March 3, 2022 enactment of the Act. II.

Plaintiffs’ Claims Continue to Accrue Today, and the Court Should Not Split Claims Between Judicial Forums Under federal law, “for continuing torts . . . the claim continues to accrue as long as

tortious conduct continues.” Hoery v. United States, 324 F.3d 1220, 1222 (10th Cir. 2003).

Indeed, “[i]t is well-settled that [w]hen a tort involves continuing injury, the cause of action accrues” when “the tortious conduct ceases.” Page v. United States, 729 F.2d 818, 821 (D.C. Cir. 1984) (collecting cases) (internal quotations omitted). The Tenth Circuit distinguishes hostile work environment claims – which do support a continuing violation theory – from “discrete acts of retaliation.” See Hansen v. SkyWest Airlines, 844 F.3d 914, 923 (10th Cir.

7 In the alternative, on July 26, 2022, Defendant filed this Motion; in doing so, Defendant created

a joint dispute whereby it responded to Plaintiffs’ claim and explicitly disagreed with some portion of it (i.e., this Court’s jurisdiction). A motion to compel arbitration in response to the filing of a lawsuit in court creates a dispute in that one party has asserted a right, claim or demand, which has been “met by contrary claims or allegations on the other.” Black’s Law Dictionary, 2nd ed.; see also Hancock v. Am. Tel. & Tel. Co., 701 F.3d 1248, 1261 (10th Cir. 2012) (noting that a motion to compel arbitration creates a genuine “dispute” similar to summary judgment if the parties dispute the existence of an agreement to arbitrate).

7

Case 2:22-cv-00354-JNP Document 24 Filed 08/23/22 PageID.416 Page 12 of 13

2016). But under the plain language of the Act, any retaliatory acts postdating March 3, 2022 “relate to” Plaintiffs’ original claims of sexual harassment; therefore, a “predispute arbitration agreement” is not enforceable with respect to these acts of retaliation. 9 U.S. Code § 402(a).

Here, the tortious conduct has not ceased. Defendant continues to retaliate against Plaintiffs post-employment8 by, inter alia, withholding subsequent shareholder notifications from Plaintiff Poole, spreading baseless rumors in the industry about Plaintiffs’ “inappropriate relationship”, and threatening baseless counterclaims for defamation and tortious interference on August 12, 2022, well after enactment of the Act. See Dkt. No. 2 at ¶ 187; Dkt. No. 23-1 at ¶¶ 231-234.

Permitting Plaintiffs to litigate the retaliation claim based upon the more recent acts, while forcing them to arbitrate the earlier claims separately, would yield an absurd result. It is well-established that splitting claims between courts or judicial forums is “undesirable for purposes of judicial economy and res judicata.” Stark-Romero v. National Railroad Passenger Co., No. 09 Civ. 295 (MV) (RLP), at *23 (D.N.M. Mar. 31, 2010); see also Northern Natural Gas Company v. L.D. Drilling, Inc., No. 08-1405-WEB, at *25-26 (D. Kan. Nov. 6, 2009) (“This judicially created rule against claim splitting is based upon varied and justifiable concerns: preserving judicial economy and convenience; avoiding repetitive or fragmented litigation; and protecting a party from multiple harassment and expense over the same claim.”) (internal citations omitted).

Certainly, in the matter at bar, it would be repetitive and inconvenient for the parties to litigate Defendant’s recent acts of retaliation against Plaintiffs separate and apart from the

8 It is black letter law that retaliation by an employer is not limited to acts that occurred during

employment. Burlington Northern Santa Fe Railroad v. White, 126 S. Ct. 2405, 2414 (2006).

8

Case 2:22-cv-00354-JNP Document 24 Filed 08/23/22 PageID.417 Page 13 of 13

underlying hostile work environment and retaliation claims in their initial 65-page complaint. It would not be judicially economic nor convenient to litigate the retaliation claim in the instant venue and the remainder of the claims in arbitration. Because the arbitration agreements at issue are indisputably unenforceable as per the Act – at the very least – with regards to these postemployment retaliatory acts, this claim must be litigated in federal court. As such, in the interest of judicial economy and convenience, the entirety of Plaintiffs’ claims should be litigated before this Court.

CONCLUSION Plaintiffs respectfully request that this Court deny Defendant’s Motion in its entirety.

Dated: Brooklyn, New York August 23, 2022 Respectfully submitted,

______________________ Julia Elmaleh-Sachs Susan K. Crumiller Crumiller P.C. 16 Court St, Ste 2500 Brooklyn, NY 11241 (212) 390-8480 Julia@crumiller.com Susan@crumiller.com Admitted Pro Hac Vice Lauren I. Scholnick (Utah Bar No. 7776) Strindberg Scholnick Birch Hallam Harstad Thorne 40 South 600 East Salt Lake City, Utah 84102 (801) 359-4169 lauren@utahjobjustice.com

9