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Health club giant 24 Hour Fitness was hit for $3.5 million for sexual harassment in a private arbitration decision that was unsealed Friday in Contra Costa County Superior Court in California. The unsealing of the arbitration award and the details of the case, from a forum favored by businesses precisely because of its confidential nature, gave the plaintiffs cause to cheer. “The wrongdoing of companies like 24 Hour Fitness deserves public scrutiny. That’s why we fought it,” said Jean Hyams, an attorney at Oakland’s Boxer & Gerson who represented plaintiff Cynthia Malek. A private arbitrator put 24 Hour Fitness on the hook for damages in September 2003, ruling that the company had subjected Malek to sexual harassment and retaliation. But the arbitration continued for several more months as the two sides sparred over whether the award and certain details of the case could be made public. “The expectation on the part of the company, and I think most of the employees that go through this process, is that it be confidential,” said Garry Mathiason, a partner at Littler Mendelson who represented 24 Hour Fitness for part of the case. The company was interested in keeping the case confidential because of privacy concerns for employees named in the case who were not parties, said Mathiason. The fight culminated with a 12-page decision by arbitrator Barbara Chvany, who said that 24 Hour Fitness had no compelling reason to keep the award under wraps. “The fact that an arbitration proceeding is private, in the sense that the public has no right to access and does not finance the proceeding, does not mean there are legal grounds to seal the record in its entirety, thereby preventing a party from disseminating information concerning the proceeding,” Chvany wrote. Based on that order, Contra Costa County Superior Court Judge Peter Spinetta unsealed the case, which had been filed with the court for confirmation. The dispute was tried before a private arbitrator pursuant to the mandatory pre-dispute arbitration contract that San Ramon-based 24 Hour Fitness required its employees to sign. Malek, a corporate sales manager between 1995 and 1997, alleged that she was subjected to sexual harassment by managers, salesmen and personal trainers at the club. She described incidents in which she was groped and “humped” by male employees, and on one occasion pinned in a closet. According to Malek’s complaint, the harassers were never disciplined because they were deemed big money makers for the company. After Malek reported the harassment, she was written up for various transgressions and ultimately terminated for not being a team player. The arbitrator awarded Malek $1.18 million in compensatory damages and $1.25 million in punitive damages. The arbitrator also awarded $1.1 million in attorney fees. Littler’s Mathiason said he respected the finality of the arbitration decision although he feels the arbitrator got it wrong and that the damages awarded are dramatically out of proportion to what the plaintiff suffered. Whether or not arbitration awards are confidential is unresolved, said Paul Cane Jr., an employment law partner at Paul, Hastings, Janofsky & Walker. “Certainly the proceedings themselves are confidential in that you’re not going to have spectators watching,” said Cane. “But I think it’s an open question whether the final result of the arbitration can be made confidential or not.” The arbitration agreement that Malek signed contained no specific language requiring the proceedings to be confidential. Cliff Palefsky, a San Francisco plaintiffs attorney, said it’s not unusual to have to contest an attempted gag order in mandatory arbitration employment cases. But he said he was grateful that the plaintiffs in this case spent the time to “complete the process.” “When you’re talking about public policy cases,” Palefsky said, “you simply cannot allow the defendant to mandate confidentiality.”

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