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Employee Fails to Present Sufficient Facts to Show Employer Fraudulently Induced Her to Sign Separation Agreement


Pucilowski v. Spotify USA, Inc - Second Circuit Court of Appeals


Facts:  Valerie Pucilowski (“Pucilowski”) worked at Spotify as a user researcher.  During her employment with Spotify, she was diagnose with major depression, generalized anxiety disorder, and attention deficit hyperactivity disorder.  As a result, she sometimes worked from home.  After suffering a head injury and concussion, she took two weeks leave from her job and was apparently terminated three days after she returned to work.

In doing so, she signed a separation agreement which provided her with two months’ salary in exchange for her waiving, among other things, any Family Medical Leave Act (“FMLA”) claims against Spotify.  Pucilowski thereafter proceeded to file suit against Spotify on the grounds that the separation agreement was not enforceable because she claimed Spotify fraudulently induced her to sign the separation agreement and took advantage of her mental condition when she was presented with the agreement.

The district court dismissed her lawsuit on the grounds that her agreement to the terms in the separation agreement was “knowing and voluntary.”  In addition, the court held that Pucilowski had failed to show that her mental condition and concussion prevented her from understanding the agreement.  (New York law, which controls this case, requires a party demonstrate that they were completely unaware of the nature of the transaction and the other side should have, or did know, of this shortcoming.)  Pucilowski subsequently appealed the district court’s dismissal of her case.

Holding:  The Court of Appeals made quick work of this one, jumping straight into the facts.  In particular, the Court noted that Pucilowski was given 14 days to consider whether to sign the separation agreement (and apparently only took 11 days to do so.)  As well, she was given an additional 7 days to revoke the agreement once she signed.  Going one step further, the agreement also included a provision that she “consulted counsel or had the opportunity to consult counsel” about the agreement.

Under a totality of the circumstances view of the situation, the Court found that Pucilowski could not point to any tangible facts to establish that she had been fraudulently induced to sign the agreement.  To the contrary, Pucilowski’s own physical had written in a letter dated February 8, 2019 that “her prognosis is quite good” and could likely return to her “usual potential” in two weeks.  Given that the agreement was signed nearly a month later, the Court held that Pucilowski had failed to establish how her mental condition and concussion had prevented her from understanding the agreement and her waiver of any FMLA claims.

Judgment:  The Court of Appeals affirmed the district court’s dismissal of the employee’s claim that she was fraudulently induced to sign a separation agreement based upon her mental condition on the grounds that the language of the agreement was clear and direct and the employee failed to present sufficient facts to show that she had been taken advantage of or failed to understand what she was signing.

The Takeaway:  I caution readers to not use this case as the standard that employers can run roughshod over employees in these sort of situations.  Rather, I call attention to this case for the simple reasoning that the Court of Appeals was somewhat limited in their review of the district court’s dismissal.  At the district court level, Pucilowski had failed to meet her burden to show she was fraudulently induced into signing the separation agreement.  Had Pucilowski presented more information (or had the agreement been written differently, had there been a shorter timeframe in which she had been presented with the agreement and when she signed it, etc.) at the district court level, it is possible the Court of Appeals could have hung their hat on someone…anything really…to find enough facts presented to allow the fraudulent inducement claim to proceed.

Date:  November 10, 2022

Opinion:  https://www.ca2.uscourts.gov/decisions/isysquery/75f81fe9-1634-44bf-b8f8-4816844cb3f7/1/doc/22-869_so.pdf#xml=https://www.ca2.uscourts.gov/decisions/isysquery/75f81fe9-1634-44bf-b8f8-4816844cb3f7/1/hilite/

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