Ninth Circuit rebuffs SpaceX bid to force arbitration of harassment claims

In a split decision, the appellate panel rejected SpaceX's argument that sexual harassment claims must meet federal pleading standards to avoid being sent to arbitration.PASADENA, Calif. (CN) — The Ninth Circuit on Tuesday rejected SpaceX’s attempt to force eight fired employees to arbitrate their wrongful retaliation claims, finding the claims stem from their concerns about sexual harassment at Elon Musk’s rocket business.In a split decision, the appellate panel upheld last year’s ruling by a trial judge in Los Angeles who had concluded that the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (EFAA) applied to the employees’ claims and, as such, rejected SpaceX’s request to compel arbitration.While SpaceX argued on appeal that the EFAA requires sexual harassment claims to be substantial enough to survive a motion to dismiss for failure to state a claim, the Ninth Circuit panel found the law only requires that the complaint describes conduct asserted to be a basis for a sexual harassment claim.“Congress could have easily drafted the EFAA to require courts to send sexual harassment disputes to arbitration only when the complaint ‘fails to state a claim upon which relief may be granted’ or ‘fails to state facts which, if true, would constitute sexual harassment,’” U.S. Circuit Judge Michelle Friedland wrote for the panel.The fact that Congress didn’t chose to adopt those readily available and apparent alternatives is strong evidence that Congress did not intend to import the federal pleading standard into the EFAA, the Barack Obama appointee added.The eight employees were fired in 2022 after they send an open letter to SpaceX management to express their concern that Musk’s lewd social media posts normalized and encouraged sexual banter, sexual harassment, and gender discrimination at SpaceX, which at the time was still headquartered in Hawthorne, California.“Musk knowingly and purposefully created an unwelcome hostile work environment based upon his conduct of interjecting into the workplace vile sexual photographs, memes, and commentary that demeaned women and/or the LGBTQ+ community,” they claim in their complaint first filed two years ago in Los Angeles County Superior Court and subsequently removed to federal court in LA.One of the posts they cite in their lawsuit involves Musk announcing his idea to create a Texas university similar to MIT which he would call “TITS” and where “Ds [women’s bra size] would get degrees,” accompanied by an altered photo rendering a rocket to appear to be a giant penis.The plaintiffs say Musk ordered them to be fired soon after they circulated their open letter.“We are delighted with the Ninth Circuit’s ruling,” Anne Shaver, an attorney for the plaintiffs, said in an email. “This well-reasoned decision not only vindicates the right of our eight clients to proceed in open court on their sexual harassment claims against Musk and SpaceX, it clarifies the appropriate pleading standard under the EFAA for all victims of sexual harassment.”Representatives of SpaceX didn’t immediately respond to a request for comment.While U.S. Circuit Judge Danielle Forrest, a Donald Trump appointee, joined Friedland in rejecting SpaceX’s appeal, U.S. Circuit Judge Eric Tung, also a Trump appointee, dissented and said the panel should have reversed the trial judge’s ruling.According to Tung, his colleagues opened the door to disgruntled employees’ creating a sexual harassment dispute on frivolous grounds and thereby evading their arbitration agreements.“Under the majority’s test, a plaintiff can escape an arbitration agreement if his complaint so much as purports to allege a sexual harassment dispute,” Tung wrote. “In other words, the majority accepts a plaintiff’s bare legal assertion, no matter how mistaken.”Subscribe to our free newslettersOur weekly newsletter Closing Arguments offers the latest about ongoing trials, major litigation and rulings in courthouses around the U.S. and the world, while the monthly Under the Lights dishes the legal dirt from Hollywood, sports, Big Tech and the arts.Additional Reads