Labor & Employment Law Daily Wrap Up, PROCEDURE—S.D.N.Y: Employee’s FMLA retaliation claims precluded by New York state court proceedings, (Aug 19, 2025)

By Todd Harrison, J.D.

However, his FMLA interference claim was allowed to proceed as there was no identity of issue between any facts decided in the prior proceedings and this claim.

Partially granting a motion to dismiss the FMLA claims brought by a former vice president of engineering for an online manufacturer and retailer of licensed sportswear, a federal district court in New York determined that his FMLA retaliation claim was subject to collateral estoppel based on state court proceedings related to his initial complaint with the New York State Division of Human Rights (DHR) alleging discrimination on the basis of familial status and retaliation for opposition to discrimination in violation of the NYSHRL, the NYCHRL, and the FMLA. The court denied the motion to dismiss his FMLA interference claim, finding that the state court proceedings did not necessarily decide any issue that would have conclusively resolved the claim (Robbins v. Candy Digital Inc., No. 23-cv-10619 (LJL) (S.D.N.Y. Aug. 18, 2025)).

Candy Digital is a digital collectibles company. Fanatics is an online manufacturer of and retailer of licensed sportswear. Fanatics owns a controlling stake in Candy Digital. The employee in this case was hired as vice president of engineering at Candy Digital on or around November 1, 2021. Fanatics’ CTO conducted the final interview with the employee and he would not have been hired without the CTO’s approval.

Adoption. At some unspecified point prior to May 2022, the employee adopted his sister’s six-year-old daughter after his sister died suddenly. On or about May 12, after the final hearing on his daughter’s adoption, the employee notified his superiors of his intent to take parental leave for 12 weeks later that year pursuant to the FMLA.

Candy Digital denied his request for leave on the grounds that he was not eligible for leave because he had not yet worked at the company for one year. The employee reiterated that he intended to take leave at some point in the future and no earlier than November 2, 2022. Candy Digital did not inform the employee of his future FMLA eligibility or of his current rights under Candy Digital’s policies, which stated that he was eligible for paid parental leave within one year of welcoming a new child.

Termination. In July 2022, Candy Digital terminated the employee. He was told the decision was not based on his performance. He was replaced by an employee with the same responsibilities who did not have children.

DHR complaint. Subsequently, the employee filed a complaint with the DHR against Candy Digital alleging discrimination on the basis of familial status and retaliation for opposition to discrimination in violation of the NYSHRL, the NYCHRL, and the FMLA.

During the course of the DHR investigation, the parties provided information and documents, including evidence that Candy Digital retained at least 41 parent/caregiver employees, including five at the employee’s level or higher. Further, of 15 employees terminated in July 2022, seven did not have families or were not caregivers. DHR determined there was no probable cause to believe Candy Digital had engaged in the unlawful discrimination and retaliation of which the employee complained.

State court proceedings. On August 21, 2023, the employee petitioned the New York Supreme Court for review, alleging the DHR investigation was a “sham” which “failed to include interviews of all parties, proper discovery, or review of clear and convincing evidence of discrimination and retaliation.” As relief, he sought an order vacating and annulling the DHR order and permitting him to commence litigation by filing a discrimination claim against Candy Digital.

The New York Supreme Court upheld DHR’s order on January 21, 2025, determining that it was not arbitrary or capricious, made in violation of lawful procedures, or affected by an error of law. Accordingly, the employee’s petition was dismissed.

Federal court proceedings. The original complaint in the present case was filed on December 5, 2023. It stated claims for FMLA retaliation and FMLA interference against both Candy Digital and Fanatics. After some procedural back and forth, the court here was tasked with considering two motions. Candy Digital moved to dismiss the complaint for failure to state a claim due to collateral estoppel arising from the earlier New York state proceeding. Fanatics argued the complaint contained insufficient factual allegations to find that it was an employer for FMLA purposes.

Collateral estoppel. First, the court addressed Candy Digital’s motion because, if granted in whole, it would be fully dispositive of the claims against Fanatics. According to Candy Digital, both of the employee’s FMLA claims were precluded by findings made by the DHR in reaching its “no probable cause” determination. In response, the employee contended that this argument was an improper second motion to dismiss and could not be resolved without converting the motion into one for summary judgment. He further asserted that collateral estoppel should not apply because he was denied a full and fair opportunity to litigate his claims before the DHR and the issues resolved by the DHR were not identical or substantially similar to those presented in his federal FMLA complaint.

As to the employee’s summary judgment argument, the court found that it need not convert Candy Digital’s motion to one for summary judgment in order to decide whether the employee’s claims were barred by collateral estoppel, explaining that if the judgment of the New York Supreme Court necessarily decided the issue in question and provided the employee for full and fair litigation in compliance with the requirements of due process, it has preclusive effect in the instant litigation.

Identity of issue. In order for collateral estoppel to apply, the party claiming estoppel must demonstrate that the issue in question was decided in a prior proceeding. That inquiry requires an understanding of what a plaintiff is required to allege in the present proceeding and what was decided in the state court proceedings.

Here, the court found the issues on which the employee’s FMLA retaliation claim hinges—whether the adverse employment actions he suffered resulted from the exercise of his rights under the FMLA—were necessarily determined in the state proceedings. He had asserted before the DHR that he was “discriminated and retaliated against based upon his notice to exercise his rights to take parental leave, which he made on or around May 12, 2022”. The DHR explicitly rejected that claim, finding that Candy Digital articulated a legitimate, nondiscriminatory reason for its decision and that the employee failed to show this reason was pretextual.

Although the employee was correct that the state proceedings did not explicitly address his FMLA claims and that FMLA leave is not protected under New York law, the court explained that the preclusive effect of a state court judgment or administrative order does not depend upon whether the claims in the prior state proceeding are identical to those asserted in the subsequent federal action. Instead, issue preclusion turns upon whether an issue decided in the first action is dispositive of the same issue that is necessary for the claim in the second action.

In this instance, continued the court, the DHR order found expressly, and the New York Supreme Court confirmed, that the employee was terminated on the basis of his work performance and conduct, not as a result of the allegations contained in his DHR complaint. That finding is incompatible with one that the employee was terminated or mistreated as retaliation for any other activity, said the court.

FMLA interference. A different conclusion was reached by the court with regard to the employee’s claim for FMLA interference. Here, the court found no identity of issue between any facts decided in the prior proceedings and this claim. Instead, the DHR and the New York Supreme Court ruled on the propriety of the employee’s termination, findings that are irrelevant to the establishment of liability from denial of an FMLA leave request and failure to properly inform. Accordingly, the motion to dismiss this claim on the grounds of collateral estoppel was denied.

Opportunity to litigate. Turning to the question of whether the employee was given full and fair opportunity to litigate, the court here noted that the New York Supreme Court ruled that the DHR “gave a full and fair opportunity to both parties to present their claims and subsequent rebuttals.” This ruling itself is a finding entitled to issue preclusive effect, explained the court.

Due process. As to the employee’s argument that the DHR proceeding denied him due process, the court was not moved, noting that he had brought the same objections in this motion as he had before the New York Supreme Court, which found that the DHR decision was not “made in violation of lawful procedures, or affected by any error of law.” As such, the motion to dismiss the claim for FMLA interference on the grounds of collateral estoppel was granted.

Fanatics. Finally, the court considered Fanatics’ motion to dismiss on the grounds that the complaint failed to plead that it was an employer for purposes of the FMLA. The court denied the motion, finding that the employee had pled sufficient facts to allege that Fanatics and Candy Digital operated as a single integrated employer.

The case is No. 23-cv-10619 (LJL).

Judge: Liman, L.

Attorneys: Madyson Nucci (Adelman Matz) for Charles Robbins. Aislinn Sydney McGuire (Kauff McGuire & Margolis) for Candy Digital Inc. Robert Mossman Tucker (Ogletree Deakins) for Fanatics, LLC and Fanatics Holdings, Inc.

Companies: Candy Digital Inc.; Fanatics, LLC; Fanatics Holdings, Inc.

Cases: Procedure CoverageLiability EmployeeLeave Retaliation StateLawClaims NewYorkNews