Differential Treatment v. Gendered Hostility: Two S.D.N.Y. EFAA Rulings Split on Harassment
The Second U.S. Circuit Court of Appeals’ Sept. 30 holding in Diaz-Roa v. Hermes Law P.C., No. 24-3223 (2d Cir. Sept. 30, 2026), that one properly pleaded sexual harassment claim can keep an entire lawsuit out of arbitration, has sharpened a fundamental threshold question under federal law: What counts as sexual harassment?
Two decisions from Manhattan federal court, both issued shortly before the circuit ruling, provide context and show how differently judges are answering the question of what constitutes a claim under the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021—the EFAA codified at 9 U.S.C. §§ 401-402.
U.S. Magistrate Judge Henry J. Ricardo of the U.S. District Court for the Southern District of New York on Aug. 14 sent to arbitration a discrimination and retaliation suit by a former regional vice president of Salesforce Inc., the San Francisco-based software company best known for its customer relationship management platform. He held that her allegations of gender-based differential treatment did not plausibly plead sexual harassment under the EFAA. Lane v. Salesforce Inc., No. 25-CV-9707 (S.D.N.Y. Aug. 14, 2026).
Less than three weeks later, on Sept. 1, U.S. District Court Judge Analisa Torres of the same court reached the opposite result in a suit by a former data science leader at C3.ai Inc., a Redwood City, Calif.-based enterprise artificial intelligence software company. Applying a more lenient pleading standard and a broader definition of sexual harassment, she held that the EFAA kept the entire case in court. Noorbaloochi v. Krishnan, No. 25 Civ. 7527 (S.D.N.Y. Sept. 1, 2026).
The EFAA lets individuals alleging sexual harassment or sexual assault elect to litigate in court rather than under a predispute arbitration agreement, but only for a case that relates to such a dispute. Sex discrimination allegations alone don’t trigger it.
EFAA case law has moved quickly since those rulings. Along with the Second Circuit’s Diaz-Roa ruling, about six weeks after Lane and four weeks after Noorbaloochi, two other federal appeals courts have held that a properly invoked EFAA election keeps an entire lawsuit in court, not just its harassment claims.
Previously, the Sixth U.S. Circuit Court of Appeals so held in Bruce v. Adams & Reese LLP, 168 F.4th 367 (6th Cir. Feb. 25, 2026). See Caroline Hillier, “EFAA Updates from the 9th, 6th & 2nd Circuits: An Arbitration Restriction’s Judicial Refinement,” CPR Speaks (July 27, 2026) (available here).
The Ninth Circuit followed in Ding v. Structure Therapeutics Inc., 187 F.4th 1231 (9th Cir. Aug. 19, 2026). See Victoria Tan, “9th Cir. Holds EFAA Election Isn’t a One-Shot Deal, Letting CFO’s Claims Avoid Arbitration,” CPR Speaks (Oct. 9, 2026) (available here).
The Second Circuit caught up in September with Diaz-Roa.
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The EFAA cases establishing claims and pleading standards have been streaming through federal and state courts. Diaz-Roa was one of two EFAA rulings the Second Circuit issued in September. In Newton v. LVMH Moët Hennessy Louis Vuitton Inc., No. 25-1697 (2d Cir. Sept. 21, 2026), the court held that the statute does not reach claims that accrued before its March 3, 2022, effective date. And on Oct. 7, a New Jersey appellate panel heard argument in Chen v. New York Jets LLC, No. A-000934-25 (N.J. Super. Ct. App. Div. 2026), on whether a former executive who was not herself the alleged harassment victim can invoke the statute.
CPR Speaks recently described those cases as drawing the EFAA’s boundaries along three lines: how far it reaches, when it applies, and who can invoke it. See Micah Baker, “More EFAA: Mapping the Law’s Boundaries: How Far, How Early, and for Whom?,” CPR Speaks (Oct. 16, 2026) (available here).
Lane and Noorbaloochi address a fourth line: what conduct qualifies as sexual harassment. Diaz-Roa raised the stakes of that question in the Second Circuit. Id. A plaintiff who clears it can now keep her entire suit in court and out of arbitration; one who doesn’t, like Lane, gets no EFAA exemption at all.
That question remains open in the Second Circuit, where two appeals, Owens v. PricewaterhouseCoopers LLC, No. 25-1717 (2d Cir. argued Sept. 21, 2026), and Puris v. TikTok Inc., No. 25-322 (2d Cir. argued Jan. 23, 2026), are pending. On Puris, see Catherine Dirksen, “Second Circuit Examines Application of Arbitration Limits in Sexual Assault and Harassment Cases,” CPR Speaks (Feb. 6, 2026) (available here).
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In Lane, plaintiff and fired Salesforce account executive Tricia Lane signed an arbitration agreement with Salesforce in 2019 and later became a regional vice president. According to her complaint, beginning in February 2024, a new supervisor, Rebecca Temple, treated her worse than the three male regional vice presidents who also reported to Temple, criticizing her work, blaming her for problems that predated her, and excluding her from communications and decisions.
Lane complained to human resources in May 2024 and was placed on a performance improvement plan the same day. Two days later, she filed a detailed complaint accusing Temple of discrimination and of creating a hostile work environment. Salesforce fired her in April 2025.
Lane filed suit in November 2025, alleging discrimination and retaliation based on gender, age, and disability, along with equal pay violations, under federal, New York state, New York City, and New Jersey law. Salesforce moved to compel arbitration. Lane conceded that, but for the EFAA, her claims belonged there.
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Judge Ricardo began with the New York City Human Rights Law (NYCHRL), which the parties agreed has the most lenient standard for sexual harassment liability. Following Yost v. Everyrealm Inc., 657 F. Supp. 3d 563 (S.D.N.Y. 2023), and what he described as the majority approach in the district, he required Lane to plausibly plead a harassment claim rather than merely assert a nonfrivolous one.
Salesforce argued that the conduct had to be sexualized, relying primarily on Singh v. Meetup LLC, 750 F. Supp. 3d 250 (S.D.N.Y. 2024), and other Southern District decisions holding that sexual harassment must be sexual in nature. If those cases were right, Judge Ricardo noted, Lane’s complaint failed, and Lane didn’t argue otherwise.
Lane instead urged the standard in the trial court decision in Owens, 786 F. Supp. 3d 831 (S.D.N.Y. 2025) (available at https://bit.ly/4AjSTXR), where U.S. District Judge Gregory H. Woods defined sexual harassment under the NYCHRL as “unwelcome verbal or physical behavior based on a person’s gender that need not be sexual or lewd in nature.” That is a higher bar than being treated “less well” because of gender, the lenient test for NYCHRL discrimination claims under Mihalik v. Credit Agricole Cheuvreux N. Am. Inc., 715 F.3d 102 (2d Cir. 2013).
The court was careful to cabin its holding. Judge Ricardo assumed without deciding that Owens and its progeny supply the correct standard, and held that Lane’s allegations failed even under it.
He contrasted Owens, where the plaintiff alleged she was yelled at, denigrated in front of subordinates, and verbally threatened, with Judge Woods’ later decision in Waiguchu v. Morgan Stanley & Co. LLC, No. 25-CV-7443 (S.D.N.Y. 2026). In Waiguchu, allegations that a supervisor berated the plaintiff about her work performance in front of others, without using gendered terms, and that supervisors were less friendly and less communicative with the plaintiff than with male colleagues, described differential treatment but not harassment.
Lane’s allegations, Judge Ricardo found, fell on the Waiguchu side. She did not allege shouting, demeaning conduct, or gendered language. A footnote underscored the point: Lane’s brief said Temple “berated” her in front of male peers, but the cited paragraph of her complaint alleged only that Temple “criticized” her.
The allegations “may plausibly plead gender discrimination, but not sexual harassment,” Judge Ricardo wrote. Lane’s Title VII and New Jersey and New York state law claims fared no better because each applies a standard that is no more lenient than the city law’s.
Lane also argued that her retaliation claims independently triggered the EFAA. Under the Second Circuit’s decision in Olivieri v. Stifel, Nicolaus & Co., 112 F.4th 74 (2d Cir. 2024), the EFAA reaches retaliation resulting from a report of sexual harassment. See Catherine Dirksen, “Second Circuit Examines Application of Arbitration Limits in Sexual Assault and Harassment Cases,” CPR Speaks (Feb. 6, 2026) (available here). But the report, Judge Ricardo explained, must be of sexual harassment, not gender discrimination generally.
Lane’s complaint asserted that Salesforce retaliated against her for opposing “unlawful sex discrimination, including sexual harassment.” Judge Ricardo set that label aside as conclusory. Her underlying allegations showed she had complained of feeling unsupported, being targeted, and being treated differently from her younger, male peers. Even under the NYCHRL’s forgiving good-faith, reasonable-belief standard, those complaints didn’t show she believed she was opposing sexual harassment.
With the EFAA inapplicable, the court compelled arbitration and stayed the case, as the U.S. Supreme Court required in Smith v. Spizzirri, 601 U.S. 472 (2024). See Lee Williams & Russ Bleemer, “More Plain Text: Scotus Says FAA Sec. 3 Requires Litigation Stays,” CPR Speaks (May 16, 2024) (available here).
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Sharareh Noorbaloochi joined C3.ai in 2020 and rose to become the company’s highest-ranking woman in data science. She filed suit against the Redwood City, Calif.-based artificial intelligence software company and two former supervisors in September 2025, alleging a hostile work environment, discrimination, and retaliation under New York state and city laws and California’s Fair Employment and Housing Act (FEHA).
According to the order, she alleged that a supervisor refused to acknowledge that she outranked a male subordinate, that she was excluded from planning meetings, and that she was criticized in gendered terms as “emotional.”
She also alleged that she was reprimanded for a comment nearly identical to one a male colleague made without consequence, and that the company failed to meaningfully investigate an anonymous, sexually suggestive note left in her hotel room at a company conference.
After Noorbaloochi told a colleague and two supervisors that she hoped his treatment of her “isn’t because of my gender,” she alleged, the company began compiling negative feedback about her performance. It fired her in May 2025.
Judge Torres took a different path than Judge Ricardo. She adopted the nonfrivolous-claim standard from the district court’s decision in Diaz-Roa, 757 F. Supp. 3d 498 (S.D.N.Y. 2024), rather than Yost’s plausibility test. A motion to compel arbitration, she reasoned, tests “adjudicative capacity, not the merits,” and the EFAA, unlike other statutes, does not require a plaintiff to state a claim for relief.
She also took a broader view of what counts as sexual harassment. Judge Torres held that a sex-based hostile work environment is itself a form of sexual harassment under New York law, and rejected any requirement that the conduct be sexual or lewd. Where Judge Ricardo found that Mihalik didn’t reach a conclusion about the level of gender discrimination that constitutes sexual harassment, Judge Torres cited the case for the NYCHRL’s broad remedial reach.
Pointing to Noorbaloochi’s allegations of differential treatment and gendered criticism, Judge Torres held that she had nonfrivolously alleged a sexual harassment dispute. Under Olivieri, her retaliation claims came with it. The result kept the entire case in court.
The two rulings diverged. Judge Ricardo applied the stricter pleading standard and assumed the narrower Owens definition; Judge Torres applied the lower bar and treated a sex-based hostile work environment as harassment. The facts differed, too: Noorbaloochi alleged gendered criticism and a sexually suggestive note, while Lane, the court found, alleged neither gendered language nor demeaning conduct.
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Read alongside Newton and Diaz-Roa, Lane and Noorbaloochi complete the picture for litigants in the Second Circuit: Newton governs the EFAA’s reach in time, Diaz-Roa how much of a case it covers, and the two district rulings show what a plaintiff must allege to get there, a point on which Southern District Court judges disagree.
Two questions that decide whether a plaintiff gets there remain open in the Second Circuit.
The first is what counts as sexual harassment. Owens itself is on appeal. Law360 reported that the panel appeared skeptical of PricewaterhouseCoopers’ bid to compel arbitration, with one judge saying the firm was advocating an “extraordinary understanding” of the EFAA. Vin Gurrieri, “2nd Circ. Seems Hesitant To Kick PwC Bias Suit To Arbitration,” Law360 (Sept. 21, 2026) (available here).
The Second Circuit is also weighing Puris; neither it nor Owens had been decided at this writing. In Puris, TikTok argued that gender discrimination allegations alone can’t invoke the EFAA, and that retaliation without underlying sexual harassment can’t satisfy it. The first of those questions sits at the center of the split between Lane and Noorbaloochi.
The second open question is the pleading standard. Diaz-Roa expressly declined to choose between Yost’s plausibility requirement and the lower nonfrivolous-claim threshold applied by the district court in that case. Judges in the same courthouse are already applying different tests: Judge Ricardo used Yost; Judge Torres used the district court’s Diaz-Roa standard. The lower bar would not necessarily have changed the result in Lane, where the problem was the kind of conduct alleged rather than how well it was pleaded. But in closer cases, the standard could be decisive.
Unless the Supreme Court steps in, the Second Circuit’s answers to both questions will govern federal courts in New York, Connecticut, and Vermont.
For now, the two rulings show that the facts alleged, not the labels attached to them, drive EFAA outcomes, and that until the Second Circuit rules, so may the standard the judge applies.
The Lane order can be found here, and the parties’ briefs can be found on the court’s docket here. The Noorbaloochi order can be found here.
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The author, a third-year law student at the Northeastern University School of Law in Boston, is a CPR Institute fall intern.
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