Wafra Wins Second Circuit Appeal Affirming Dismissal of High-Stakes Employment Discrimination Claim

Paul, Weiss achieved a major victory for investment management firm Wafra Inc. when the U.S. Court of Appeals for the Second Circuit affirmed the dismissal of a $45 million age discrimination suit filed against Wafra and its CEO. The opinion is the Circuit’s first to apply the Supreme Court’s 2020 decision in Comcast Corp. v. National Association of African American-Owned Media that established a “but for” causation standard to an age discrimination suit at the pleading stage.

In May 2018, Wafra terminated Frank Lively, its former real estate head, following a complaint by his direct report that he had sexually harassed and discriminated against her. Lively sued Wafra in federal district court in the Southern District of New York, alleging that Wafra used the harassment complaint and its subsequent investigation as pretext to improperly terminate him on the basis of his age, thereby denying him millions of dollars in unearned salary and carried interest compensation. Lively also alleged that Wafra retaliated against him for supposedly reporting an age-related comment made to him by Wafra’s CEO.

Rather than file a Rule 12(b) motion to dismiss, given that such motions are rarely granted in employment discrimination cases, Paul, Weiss filed an answer on behalf of Wafra that described the harassment complaint and investigation and attached documentary evidence of Lively’s harassment—much of which had been authored by Lively himself. Paul, Weiss then filed a Rule 12(c) motion for judgment on the pleadings, which allowed the judge to consider all pleadings, including defendants’ answer. In July 2020, U.S. District Judge H. Paul Oetken granted Wafra’s motion for judgment on the pleadings on all claims and denied Lively’s motion to amend his complaint. Based on the pleadings taken together, Judge Oetken held that the complaint was “devoid of facts plausibly alleging but-for causation” because the only non-conclusory allegation of discrimination, the purported age-related comment, was made six months before Lively was terminated, while the “far more plausible cause of Lively’s termination,” the sexual harassment complaint, immediately preceded Lively’s termination.

In a 25-page opinion, a Second Circuit panel unanimously affirmed the dismissal. Although the court found that the district court improperly relied on the documents attached to Wafra’s answer to the extent that it accepted Wafra’s allegations to be true, it affirmed the district court’s conclusion that Lively failed to plausibly allege that he would not have been terminated but for his age. In doing so, the Second Circuit held that the Supreme Court’s recent Comcast decision clarified that the “but for” causation standard for discrimination claims applies not only at trial, but at the pleading stage as well.

Litigation partner Brette Tannenbaum argued the appeal. The Paul, Weiss team also included litigation of counsel Martin Flumenbaum.