Corporate Rules | Student Dignity | Disability Discrimination

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Majority Shareholders Failed To Treat Female Minority Shareholder With Dignity And Respect

majority shareholders failed to treat

In Straka v. Arcara Zucarelli Lenda & Associates CPAs, P.C., plaintiff, a female minority shareholder, and experienced accountant in a closely held professional corporation – an accounting firm – sought dissolution of the corporation, alleging corporate oppression. A Supreme Court in Erie County ruled that, among other things, by failing to treat the female minority shareholder with equal dignity and respect as male shareholders forming the majority, the majority male shareholders engaged in such oppressive actions as could provide a basis to dissolve the corporation.

In so ruling, the Court noted that the case raised the “question of whether disrespectful and unfairly disproportionate treatment of a female shareholder by the male majority in a closely held corporation constitutes corporate ‘oppression’” within the meaning of New York’s Business Corporation Law § 1104-a(a)(1).

The Court recognized that a “minority shareholder may petition the Court for dissolution of the corporation in which he or she owns at least 20% of the outstanding shares, and where the majority shareholders have engaged in illegal, fraudulent, or oppressive actions towards the petitioning shareholder (Business Corporation Law § 1104-a[a][1] ). The term “oppressive” has not been statutorily defined, but ‘disappointment alone should not necessarily be equated with oppression.’ Instead, the Court of Appeals has held that ‘oppression should be deemed to arise only when the majority’s conduct substantially defeats expectations that, objectively viewed, were both reasonable under the circumstances and were central to the petitioner’s decision to join the venture.’ ‘A court considering a petition alleging oppressive conduct must investigate what the majority shareholders knew, or should have known, to be the petitioner’s expectations in entering the particular enterprise.’”

The Court found that the accounting firm “and indeed, any shareholder of any corporation, should know that a female shareholder reasonably expects to be treated with equal dignity and respect as male shareholders forming the majority.” The Court concluded that the petitioner was not. “The shareholders’ slow and inadequate response to Urbanek’s demeaning behavior marginalized Straka, as did the lack of respect provided to her as the head of IT at the corporation.” Furthermore, two of the male shareholders promised but failed to foster collaboration by the former staff members” of their former corporation.

The Court went further and found that the petitioner’s “reasonable expectation for fair compensation was frustrated by the use of the earnings matrix,” that was used to allocate corporate profits as salaries to certain shareholders as opposed to dividends. “When the majority shareholders of a close corporation award de facto dividends to all shareholders except a class of minority shareholders, such a policy may constitute ‘oppressive actions’ and serve as a basis for an order made pursuant to section 1104-a of the Business Corporation Law dissolving the corporation.’”

While the Court concluded that the petitioner had “proven oppressive conduct and was entitled to relief under the Business Corporation Law, it noted New York’s highest Court has held that “once oppressive conduct is found, consideration must be given to the totality of circumstances surrounding the current state of corporate affairs and relations to determine whether some remedy short of or other than dissolution constitutes a feasible means of satisfying both the petitioner’s expectations and the rights and interests of any other substantial group of shareholders.”

The Court considered the “size and nature of the business of the corporation,” and found that a buyout of the petitioner’s shares, rather than dissolution, “would satisfy her expectations and the rights of the remaining shareholders.”

“Dignity for All Students Act” Does Not Provide Private Right of Action

dignity for all students act

In Eskenazi–Mcgibney v. Connetquot Central School District, a public school student brought an action against his School District, asserting causes of action for, among other things, a Dignity for All Students Act (“DASA”) violation based on alleged bullying and harassment by a fellow student. The Supreme Court, Suffolk County, denied the District’s motion to dismiss for failure to state cause of action. The District appealed and the Second Department of the Appellate Division held that DASA does not provide a “private right of action,” and dismissed that claim.

As the Appellate Court framed it, the appeal provided it with “an occasion to consider whether the Dignity for All Students Act creates a private right of action in favor of a student injured by a school’s failure to enforce its policies prohibiting discrimination and harassment.”

By way of background, the complaint alleged that the student was a learning-disabled high school student attending Connetquot High School and Eastern Suffolk BOCES, and was repeatedly bullied and harassed by a fellow student, including multiple physical assaults and death threats. The assaults and threats allegedly occurred at the high school, at BOCES, on the school bus, and on a school trip. The plaintiffs, the student and his parents, alleged that they repeatedly made complaints to the school district and BOCES teachers and officials, and that they received assurances that the matter would be dealt with, but the other student was not disciplined and the bullying and harassment continued.

In addressing the DASA issue, the Appellate Court said that “DASA prohibits discrimination, harassment, and bullying by public school employees or students on school property or at a school function. It requires school districts to create policies, procedures, and guidelines intended to create a school environment that is free from harassment, bullying, and discrimination, including guidelines ‘relating to the development of measured, balanced and age-appropriate responses to instances of harassment, bullying or discrimination by students.’”

It also stated that “DASA does not expressly provide for civil damages to a student who has been the victim of such harassment, bullying, or discrimination. Thus, an injured student can seek civil relief based on a violation of DASA only if a private right of action may be fairly implied in the statutory provisions and their legislative history. A private right of action ‘may be fairly implied when (1) the plaintiff is one of the class for whose particular benefit the statute was enacted; (2) recognition of a private right of action would promote the legislative purpose of the governing statute; and (3) to do so would be consistent with the legislative scheme.’ The third factor is generally the most critical because ‘the Legislature has both the right and the authority to select the methods to be used in effectuating its goals, as well as to choose the goals themselves. Thus, regardless of its consistency with the basic legislative goal, a private right of action should not be judicially sanctioned if it is incompatible with the enforcement mechanism chosen by the Legislature or with some other aspect of the over-all statutory scheme.’”

After reviewing DASA’s legislative history, the Appellate Court found “that finding a private right of action under the act would be inconsistent with the legislative scheme. As noted above, DASA requires school districts to create and implement certain policies, procedures, and guidelines aimed at creating an educational environment in which children can thrive free of discrimination and harassment. In a letter to the Governor, Senator Thomas Duane described DASA as focusing ‘on the education and prevention of harassment and discrimination before it begins rather than punishment after the fact.’ The letter stated that under the existing regime, school districts were paying ‘a high cost in civil damages for failure to prevent bullying,’ thereby suggesting that implementing DASA would alleviate such costs. Similarly, the Assembly sponsor of the bill also advised the Governor that ‘the Legislature intends DASA to be primarily a preventive, rather than punitive, measure; it should therefore be implemented accordingly, with the emphasis on proactive techniques such as training and early intervention to prevent discrimination and harassment.’”

Thus, the Court concluded that the “legislative history plainly demonstrates that the Legislature did not intend to provide for civil damages for a violation of DASA, and that recognizing one would be inconsistent with the legislative scheme. As recognized by one federal court, DASA does not prevent a student from bringing other statutory claims against a school district, and thus, holding that DASA does not provide a private right of action does not leave students without enforcement mechanisms and remedies. Because there is no private right of action under DASA, the Supreme Court should have granted those branches of the defendants’ respective motions which were pursuant to CPLR 3211(a)(7) to dismiss the cause of action alleging a violation of DASA insofar as asserted against each of them” by the student.

Employee Failed to Sufficiently Allege Disability Discrimination Claim

employee failed to sufficiently allege disability

In Laface v. Eastern Suffolk BOCES, an employee brought an action against the county Board of Cooperative Educational Services (“BOCES”), and the BOCES’ administrators, alleging that transfers of his assignment among BOCES’ facilities constituted discrimination in violation of, among other things, the Americans with Disabilities Act. Although the federal District Court held that the employee sufficiently alleged his health condition constituted an “impairment” within the meaning of the Americans With Disabilities Act (“ADA”), it held that the employee failed to sufficiently allege that his impairment limited a major life activity, as required to state an ADA claim.

At the time of the decision, plaintiff Laface was employed by BOCES as a Custodial Worker I. He had been assigned to the Gary D. Bixhorn Technical Center (“BTC”) at 350 Matra Avenue in Bellport, New York for 30 years. During his tenure at BTC, Laface worked from 7:00 a.m. to 3:00 p.m. during the workweek and was supervised by two others. At an unknown time, Laface developed a condition that causes stress and anxiety and prevented him from traveling further than 10 miles from his home. He had previously informed one of his supervisors as well as BOCES’ Human Resources Department of his traveling restriction prior to the events that led to his complaint.

Thereafter, on or about October 17, 2016, Laface was notified that he was reassigned to the H.B. Ward Campus (“HBW”) in Riverhead, New York, effective on October 28, 2016. The letter did not provide an explanation as to why BOCES was transferring Laface. HBW is located more than 10 miles from the Laface’s residence.

According to his complaint, Laface’s impending transfer caused him enormous anxiety and prevented him from being able to continue to work. Unable to drive to HBW without his condition flaring up, Laface began a period of sick leave beginning on October 28, 2016. On or about November 22, 2016, Laface received a letter from the School Personnel Officer, which directed him to report to BOCES Human Resources Department for a meeting on November 28, 2016. Laface’s last day of documented sick leave was November 27, 2016, the day before the meeting. He reported to the November 28, 2016 meeting and requested “a reasonable accommodation for his documented disability.” She “refused to engage in the required interactive process … to identify a reasonable accommodation for Plaintiff’s travel/driving restrictions and stated to Plaintiff that BOCES was not going to accommodate him.”

The HR Department again met with the Laface on December 23, 2016, along with his union representative. At that meeting, Laface was accused of being uncooperative in refusing to answer questions and he was informed that he was to report to HBW using public transportation rather than remain at BTC. Following the December 23, 2016 meeting, Laface was placed on paid administrative leave. Ultimately, Laface never reported to his assignment at HBW. On or about January 19, 2017, Laface received a letter ordering him to report to Jefferson Academic Center (“JAC”) for a temporary work assignment beginning on February 1, 2017. The letter further informed Laface that he was assigned to work from 10:00 a.m. to 6:00 p.m. at JAC during the regular workweek and indicated that JAC is less than 10 miles from Laface’s residence. Laface began working at JAC as instructed and continues to report to this temporary work assignment, which he contends involves different work and added responsibilities, including additional manual labor.

Throughout this time there were vacant custodial positions at BTC, including Laface’s original position.

To establish a case of discrimination under the ADA, a plaintiff first “must show: (1) his employer is subject to the ADA; (2) he is disabled within the meaning of the ADA; (3) he is otherwise qualified to perform the essential functions of his job; and (4) he suffered an adverse employment action because of his disability.”

The Court explained that to determine whether or not a plaintiff suffers from a disability, “the Supreme Court compels district courts to follow a three-step process to conclude: ‘(1) whether plaintiff had an impairment; (2) whether the impairment affected a ‘major life activity’ within the meaning of the ADA; and (3) whether that major life activity was substantially limited by the impairment.’ If he fails to satisfy any of these three prongs, the Plaintiff’s discrimination claim must be dismissed.”

As for Laface’s physical or mental impairment, that he suffers from stress and anxiety which precludes him from driving more than 10 miles from his home, the Court noted that “‘stress and depression are conditions that may or may not be considered impairments, depending on whether these conditions result from a documented physiological or mental disorder.’ The Defendants contend that he suffers from job-related stress or anxiety. However, Laface describes his condition as more than just anxiety or stress resulting from his job. The complaint states that the Plaintiff’s driving restriction is due to his psychological disorder. He does not argue that this restriction is limited to work-related driving. At the pleading stage, Laface has successfully alleged that he suffers from an impairment within the meaning of the ADA.”

As for whether Laface’s impairment “substantially limits a major life activity,” the Court noted that in “‘deciding whether a particular activity is a ‘major life activity,’ the Court asks whether that activity is a significant one within the contemplation of the ADA, rather than whether that activity is important to a particular plaintiff.’ ‘The touchstone for determining an activity’s inclusion under the statutory rubric is its significance.’ ‘Major life activities’” include ‘caring for oneself, performing manual tasks, seeing, hearing, eating, sleeping, walking, standing, sitting, reaching, lifting, bending, speaking, breathing, learning, reading, concentrating, thinking, communicating, interacting with others, and working.’ This list is illustrative, not exhaustive. In this Circuit, courts have previously ruled that sitting, standing, sleeping, lifting and reaching are major life activities.”

Although Laface alleged that he is unable to drive or commute to a job that is further than 10 miles from his residence, the Court noted that “this Circuit has repeatedly held that driving is not a major life activity” within the meaning of the ADA, and that “being unable to use public transportation as an alternative to driving does not rise to the level of a major life activity. This restriction more closely resembles the limitations found in the regulations or the jurisprudence of this Circuit which are not considered major life activities rather than those which have been found to qualify as such.”

The Court dismissed the ADA claim.

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