August 18, 2025|Publications
August 18, 2025 | United States District Court for the Southern District of New York | Unpublished Opinion
Executive Summary
In an unpublished decision, Judge Lewis J. Liman of the Southern District of New York issued a mixed ruling on motions to dismiss in a case involving Candy Digital, Inc. and Fanatics, LLC. Plaintiff Charles Robbins alleged retaliation and interference under the Family and Medical Leave Act (FMLA) after he was terminated following notice of his intent to take parental leave. He further alleged that Fanatics was his joint employer because of its involvement in Candy Digital’s hiring and employment policies. The defendants argued that the claims were barred by collateral estoppel following a prior New York Division of Human Rights determination of no probable cause, affirmed by the New York Supreme Court. Judge Liman ruled that collateral estoppel barred Robbins’ FMLA retaliation claim but not his FMLA interference claim. He also held that Robbins plausibly alleged a joint employer relationship between Candy Digital and Fanatics, allowing that claim to proceed.
Relevant Background
Robbins began working as Vice President of Engineering at Candy Digital in November 2021. According to his complaint, he informed Candy leadership in May 2022 that he planned to take parental leave later that year following the adoption of his niece. He alleged that, around this time, Candy’s Head of Talent Acquisition exchanged internal messages suggesting that leadership wanted him removed from the company. Robbins further alleged that he was terminated two months later and replaced by another employee without children.
Robbins also claimed that Candy executives expressed hostility toward employees with families and that several other parents on his engineering team were terminated around the same time. Candy Digital denied those allegations and presented human resources records reflecting performance-related issues.
Robbins filed a complaint with the New York Division of Human Rights, which conducted an investigation. The agency concluded there was no probable cause to believe Candy had engaged in discrimination or retaliation, citing records that the company retained numerous parent employees and had nondiscriminatory reasons for its decisions. Robbins then sought review in the New York Supreme Court. That court upheld the agency’s determination, finding it was not “arbitrary or capricious.”
After these state proceedings rejected his claims, Robbins nevertheless pursued a federal lawsuit. He reasserted his FMLA theories and attempted to bring Fanatics into the case by alleging that it could be treated as his joint employer based on supposed involvement in Candy Digital’s hiring and employment policies.
Decision
The court first addressed Candy Digital’s argument that Robbins could not re-litigate his retaliation claim because state authorities had already rejected it. Judge Liman agreed.
The New York Division of Human Rights had investigated Robbins’ complaint and issued a no probable cause finding. The New York Supreme Court affirmed that outcome, holding it was not “arbitrary or capricious, made in violation of lawful procedures, or affected by an error of law.” Once a state court reviews and upholds such a determination, federal courts must give it the same preclusive effect under the Full Faith and Credit statute, 28 U.S.C. § 1738. See Kremer v. Chem. Constr. Corp., 456 U.S. 461, 466 (1982). As Judge Liman explained, Robbins “could not succeed on his FMLA claim consistently with the judgment of the NYHRD that there is no reason to believe he was terminated on the basis of his adoption and request for parental leave.” In other words, the retaliation claim was barred before it reached federal court.
The result was different for Robbins’ interference claim. To state a claim for FMLA interference, a plaintiff must allege: “(1) that she is an eligible employee under the FMLA; (2) that the defendant is an employer as defined by the FMLA; (3) that she was entitled to take leave under the FMLA; (4) that she gave notice to the defendant of her intention to take leave; and (5) that she was denied benefits to which she was entitled under the FMLA.” Graziadio v. Culinary Inst. of Am., 817 F.3d 415, 424 (2d Cir. 2016). Robbins alleged that Candy Digital denied his leave request and failed to inform him of his future eligibility. Judge Liman concluded those issues had not been “actually and necessarily decided” in the state proceedings, which focused only on the reasons for Robbins’ termination. The interference claim was therefore allowed to proceed.
Turning to Fanatics, the court denied its motion to dismiss. To determine whether related entities operate as a “single integrated enterprise,” courts in the Second Circuit consider “(1) interrelation of operations, (2) centralized control of labor relations, (3) common management, and (4) common ownership or financial control.” Cook v. Arrowsmith Shelburne, Inc., 69 F.3d 1235, 1240 (2d Cir. 1995). Although no single factor is dispositive, “centralized control of labor relations” is the most significant. Turley v. ISG Lackawanna, Inc., 774 F.3d 140, 156 (2d Cir. 2014).
Judge Liman pointed to allegations that Fanatics’ Chief Technology Officer conducted Robbins’ final interview and controlled whether he was hired, that Fanatics reviewed and modified Candy Digital’s employment policies, and that Fanatics executives supervised Candy employees on joint projects. On that basis, the court concluded “it is sufficient at this early stage that Plaintiff has alleged Fanatics Defendants’ control over the policies lying at the core of his remaining claim of FMLA interference.” The joint employer allegations were therefore sufficient to proceed beyond the pleading stage.
Looking Forward
The decision carries two important takeaways for franchisors, multi-unit franchisees, and employers.
- Collateral estoppel can foreclose relitigation of claims where an administrative agency and state court have already ruled. Employers that maintain strong documentation and present performance-based reasons for employment actions may be able to rely on preclusion as a defense. This should be considered when determining how to participate in an administrative agency investigation.
- Allegations of joint employment remain a live risk. Even without ultimate findings, the court permitted claims to proceed against Fanatics based on allegations of hiring involvement, policy review, and oversight. For franchisors and parent companies, the decision illustrates how claims of control over employment decisions—even if disputed—can be enough to survive early dismissal.
While Robbins’ retaliation claim was shut down, his interference and joint employer allegations keep the case alive. The ruling reflects both the value of prior agency proceedings and the continuing challenges large employers face in avoiding joint employer exposure.
Thomas O’Connell is a Shareholder at Buchalter APC and Chair of the firm’s Franchise Practice Group. For questions about this article or media inquiries, you can contact Tom at toconnell@buchalter.com.
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