Federal judge troubled by decision to order sexual harassment case into arbitration

By Karen Kidd | Dec 14, 2018

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PHILADELPHIA — A federal judge who last month ordered a sexual harassment lawsuit against a Maryland-based talent agency into arbitration admitted he was troubled by his seemingly inevitable decision in the case.

In his 25-page memorandum issued Nov. 30, U.S. District Court Judge Gerald Austin McHugh Jr., on the bench in Pennsylvania's Eastern District, referred to a 2013 case that fellow District Judge Berle Schiller previously ordered into arbitration. In the case before him, Rachel Styczynski v Marketsource Inc. and Allegis Group, Inc., McHugh questioned the use of arbitration in similar cases, despite U.S. Supreme Court precedent.

"Like Judge Schiller in Porreca v. Rose Group, I see troubling features in this arbitration agreement that suggest some degree of procedural unconscionability," McHugh said in his memorandum. "But because plaintiff's arguments as to substantive unconscionability have been rejected by higher courts, this is not a case where even a sliding-scale analysis would release Ms. Styczynski from her agreement to arbitrate."

McHugh issued an order referring the dispute to arbitration, stayed the court proceedings, and placed it in civil suspense pending outcome of the arbitration, according to his order released with his memorandum.

McHugh also spent much of the rest of the memorandum reviewing the now almost-routine release of similar cases to arbitration, which he said "underscores why there is legitimate cause for concern when a parallel system of dispute resolution supplants the courts as the primary means of enforcing the law."

McHugh kicked off that review by referring to Porreca v. Rose Group.

"Some five years ago, Judge Schiller of this court faced a similar case and wrote an eloquent opinion enforcing the contract, while expressing his misgivings about the result he was compelled to reach," McHugh said in his memorandum. 

"Like Judge Schiller, I am also bound to order that this case proceed to arbitration. But since his decision was issued, there has been increasing scholarly research into the adequacy and fairness of arbitration as the primary mechanism for enforcing federal laws governing the workplace."

Styczynski had worked about four years for Allegis, described in the memorandum as "the largest privately held talent management firm in the world" and its wholly owned subsidiary MarketSource, according to the background portion of McHugh's memorandum. Styczynski claims she suffered sexual harassment so severe that it created a hostile work environment and she was forced to resign.

McHugh granted Allegis and Market Source's motion to compel arbitration under the terms of the employment contract with Styczynski and referred to U.S. Supreme Court and other federal cases to explain why he had no choice.

"The U.S. Supreme Court has rejected the broad assertion that arbitral panels are inherently favorable to one side, thereby invalidating the argument that a contract requiring arbitration is, on its own, substantively unconscionable," McHugh said in his memorandum.

That makes avoiding arbitration tough for plaintiffs such as Styczynski, who argued arbitration is "an inherently unfair and biased forum that favors the defendant corporation and not her, the victimized individual," the memorandum said. 

"But, the Supreme Court has flatly rejected the general proposition that arbitral panels are inherently biased and declined to indulge the presumption that the parties and the arbitral body conducting a proceeding will be unable or unwilling to retain competent, conscientious and impartial arbitrators."

And yet questions remain about the enforceability of arbitration agreements, including "the degree of inequality in bargaining power," the memorandum said.

"At the time plaintiff was asked to sign the arbitration agreement, she had already been working for defendants for over two years and was being offered a promotion," the memorandum continued. "She could take it or leave it. If she didn't agree to arbitration, she'd lose her job."

McHugh also referred to the "other troubling fact" that Styczynski's signature or acknowledgement of the arbitration agreement isn't required for the agreement to be enforced.  

"Simply by continuing to work, plaintiff triggered the enforcement of the arbitration agreement and was deemed to have consented to, ratified and accepted the," McHugh said in his memorandum. "This provision is worthy of greater scrutiny, but that must wait for another case, because plaintiff here signed, thereby formally accepting the agreement to arbitrate."

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