Workplace Class Action Blog

Discovery Before Conditional Certification? Not So Much.

Posted in Class Discovery, Uncategorized

By Gerald L. Maatman, Jr. and Gina R. Merrill

Deciding yet another discovery battle in Wellens v. Daiichi Sankyo Inc., Case No. 3:13-CV-00581 (N.D. Cal. April 11, 2014), the U.S. District Court in the Northern District of California has shut down defendant’s request to secure discovery regarding the 17 opt-in putative class members. (We first blogged on the last discovery battle here.) The decision emphasizes the lenient standard for conditional certification of classes under the Equal Pay Act (“EPA”) and is a stark reminder that courts routinely certify a proposed class without affording defendants a meaningful opportunity to explore facts that might weigh against class treatment.

Background

The putative class in Wellens v. Daiichi Sankyo Inc. consists of female pharmaceutical sales employees. The complaint accuses the company of undercompensating women sales employees as compared to men and imposing a glass ceiling on female advancement. The complaint brings claims under Title VII and the EPA as well as California state law claims.

The company sought discovery regarding the 17 putative class members who have opted-in to the class, specifically seeking written discovery responses regarding all of the women and the depositions of ten of them. Plaintiffs opposed the discovery requests and, last month, filed a motion for conditional collective action certification of the EPA class. That motion is pending.

The Court’s Decision

Emphasizing the “lenient” standard for conditional certification under the FLSA, the Court refused to allow Daiichi the requested discovery. The Court recited the familiar two-step process for maintaining a collective action under the FLSA consisting of: (i) a first stage during which the Court applies a “fairly lenient standard” to determine whether putative class members are similarly situated, and (ii) after discovery is complete, the defendant moves to decertify, thus inviting the court to make a factual determination as to whether the putative class members are similarly situated. The Court quoted approvingly decisions holding that at the first stage the plaintiff has only a “very light burden.”

Since plaintiffs have only a “very light burden,” the Court held that Daiichi’s attempt to discover facts showing that the individuals are not similarly situated was unnecessary at this stage of the litigation. The Court explained that the requested evidence would be relevant to the second stage of the class certification analysis, when Daiichi inevitably moves to decertify the class, but would be “premature” at this stage. While the decision acknowledged that some other courts have allowed discovery regarding opt-in plaintiffs prior to conditional certification, the Court did not engage in any meaningful analysis of those decisions, instead simply stating that, “[i]n this case, the requested discovery … is premature.”   

The Court also seemed moved by plaintiffs’ argument that allowing the depositions of opt-in class members prior to conditional certification might cause some individuals to be deposed on multiple occasions — at this stage regarding the EPA claims, and at a later date regarding the Title VII claims — and the Court was disinclined to require plaintiffs to defend out-of-state depositions more than once.

Implications For Employers

No matter how strong an employer’s arguments opposing class certification may be, courts routinely apply the “lenient standard” to conditionally certify classes that have little chance of surviving a decertification motion. (See here for our prior reporting on one such case.) The effect of this “lenience” is to force defendants to undergo costly discovery or pay a premium to settle a case that ultimately does not deserve to be tried on a class basis. The decision of the Northern District of California, while not a class certification decision, follows suit and reflects an unwillingness by many courts to allow defendants to effectively present their case against class treatment at the initial stages of litigation.

Rise Of The Zombie Lawsuit: Fifth Circuit Revives Former Dukes Class Member’s Individual Claims Against Her Former Employer

Posted in Class Certification

By Laura J. Maechtlen and Kathryn “Chris” Palamountain 

As we previously reported, following the re-booting of discrimination claims by a member of the former class in Dukes et al. v. Wal-Mart Stores, Inc., a Texas federal district court judge dismissed the individual and class claims of that plaintiff.  On appeal, the Fifth Circuit reversed the dismissal of the named plaintiff’s individual (but not class) claims and remanded for further proceedings. The Fifth Circuit’s ruling is a good read for appellate issues stemming from workplace class actions.

Case Background

Plaintiff Stephanie Odle and six other named plaintiffs filed suit on behalf of themselves and approximately 50,000 female Wal-Mart employees, alleging that they were subjected to gender discrimination as a result of specific policies and practices in Wal-Mart’s regions located in whole or in part in Texas. Odle, et al. v. Wal-Mart Stores, Inc., No. 3:11-CV -2954 (N.D. Tex.). Specifically, Plaintiffs alleged gender discrimination by denying equal opportunities for promotion to management track positions, and denying equal pay for both hourly retail store positions and for salaried management positions. On October 15, 2012, U.S. District Judge O’Connor dismissed all class claims, reasoning that the lawsuit was not timely filed, and not protected by tolling principles. Specifically, the District Court found the named plaintiff Stephanie Odle’s individual claims, and the class claims, could not benefit from the Supreme Court’s 1974 decision in American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974), which can allow former class members who either intervene or file individual claims in another forum to toll otherwise time-barred claims. In his ruling, Judge O’Connor relied on the Fifth Circuit’s 1985 decision in Salazar-Calderon v. Presidio Valley Farmers Association, 765 F.2d 1334 (5th Cir. 1985) (Calderon I), which restricted tolling to subsequent individual lawsuits and not class actions. Judge  O’Connor reasoned that he was bound by Calderon I and, alternatively, and that the cases the plaintiffs cited — including Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Co., 130 S. Ct. 1431 (2010), and Smith v. Bayer Corp., 131 S. Ct. 2368 (2011) — were merely “illuminating.” See Odle, et al., No. 3:11-CV -2954, at 12-16 (N.D. Tex. Oct. 15, 2012). Thus, the plaintiffs’ class claims did not benefit from American Pipe tolling, and the claims filed by Odle and the class were dismissed. Plaintiffs then timely filed a motion requesting that Judge O’Connor certify his October 15 ruling for interlocutory review on the issue of tolling.   

Although Judge O’Connor acknowledged that the Fifth Circuit “disfavors” interlocutory appeals and allows certification only in “exceptional” cases, he agreed with plaintiffs in a January 7, 2013 order and certified the case for review. See Odle, et al., No. 3:11-CV -2954 (N.D. Tex. Jan. 7, 2012). The District Court determined that a controlling question of law was involved, and an immediate appeal would materially advance the ultimate termination of the litigation. Id. at 4-5. 

Fifth Circuit Decision

The Fifth Circuit Panel wrote a lengthy description of Odle’s involvement in litigation against Wal-Mart, pointing out that Odle and other plaintiffs filed the Dukes litigation a month after the EEOC issued Odle a right-to-sue letter, that the class representatives sought certification under Rule 23b)(2) and (b)(3), and that the California district court certified a Rule 23 (b)(2) class, but it neither considered nor addressed the Rule 23 (b)(3) request. The Fifth Circuit Panel also noted that, on appeal from the certification order, the Ninth Circuit ruled that employees like Odle, who were no longer working for Wal-Mart when Dukes was filed, lacked standing to pursue injunctive relief under Rule 23 (b)(2), yet “may be eligible to receive back pay and punitive damages.” Odle at 4 (citing Dukes v. Wal-Mart Stores, Inc., 603 F.3d 571, 623 (9th Cir. 2010).    In fact, the Ninth Circuit had remanded back to the district court with instructions that the district court could “in its discretion, certify a separate Rule 23(b)(3) class of former employees” like Odle for such relief.  Before the California district court could address that issue, the case was stayed on appeal to the Supreme Court, which eventually decertified the nationwide Rule 23 (b)(2) class.  Odle at 5. The Fifth Circuit Panel also noted that Odle filed her Texas action by the tolling extension the California district court granted to all former Dukes class members who had an EEOC notice of their right to sue. Odle at 6. The Panel’s framing of the facts seemingly portends the legal conclusion to come. 

Turning from the facts towards analysis, the Fifth Circuit Panel stated that class actions, like other lawsuits, are subject to statutes of limitations, but that the American Pipe tolling jurisprudence aimed “to balance the competing interests of class action … efficiency  … [with] those of statutes of limitation” that protect “against stale claims.” Odle at 8. On one hand, the filing of a class action would toll the running of a statute of limitations for all asserted class members. Odle at 9. On the other, if certification is denied or a class is decertified, “tolling ceases.”  Id.  The Fifth Circuit Panel then had to distinguish Circuit precedent, specifically, the follow on litigation to the Calderon I decision, upon which the District Court relied.  The Fifth Circuit Panel found that the follow-on case, Calderon II, 863 F.2d 384 (5th Cir. 1989), was distinguishable because it involved the Circuit’s “second go-around with the same putative class action.”  Odle at 10.  The Fifth Circuit Panel additionally found that Calderon II is distinguishable from Odle’s action because the district court in Dukes initially certified the class and, even after the Ninth Circuit removed former employees like Odle from that class, it remanded with instructions to consider “for the first time — the carved-out class of former employees under a different subsection, viz., Rule 23(b)(3).”  Odle at 11-12 (emphasis in original and stating also that “[t]he face that the California district court did not consider, much less deny, certification of the class of former employees…is a crucial distinction”).  In other words, the Fifth Circuit did not view the Ninth Circuit’s refusal to allow former employees like Odle to remain in the Rule 23(b)(2) class the California district court did certify to be a “final adverse determination” for tolling purposes.  Odle at 14. 

Implications For Employers

Whether this decision sets the right balance in terms of guarding against “stale claims” remains to be seen.  The “undead” nature of this case is heightened by the fact that Odle began working for Wal-Mart in 1991, and Wal-Mart was first notified of her discrimination claims in October 1999, following her termination.  Thus, even the most recent evidence relevant to her individual claims is nearly 15 years old.  One cannot help but wonder whether at least some of the witnesses relevant to her claims are actually dead.  When dealing with litigation holds, prepare for the possibility of a long-haul and consider securing the testimony of the most relevant witnesses in an admissible form before proceedings drag on too long.

Sixth Circuit Affirms Dismissal Of EEOC Credit Check Case And Rejects “Homemade” Method Of Determining Race By “Eye-Balling” Photos

Posted in EEOC Litigation

By Gerald L. Maatman, Jr. and Jennifer A. Riley

Today, less than three weeks after oral argument, the Sixth Circuit affirmed a lower court order granting summary judgment in favor of Kaplan in one of the EEOC’s most high profile cases – - EEOC v. Kaplan Higher Education Corp., No. 13-3408 (6th Cir. April. 9, 2014).

The EEOC brought suit against Kaplan for using credit checks in its hiring process – “the same type of background check that the EEOC itself uses” the Sixth Circuit pointed out – claiming that the practice had a disparate impact on African Americans. Id. at 2.

On January 28, 2013, Judge Patricia A. Gaughan of the U.S. District Court for the Northern District of Ohio granted summary judgment in favor of Kaplan, finding that the EEOC’s statistical evidence of disparate impact was not reliable and not representative of Kaplan’s applicant pool as a whole. (Read more about that ruling here.) 

The Sixth Circuit found no abuse of discretion. The EEOC’s “homemade” methodology for determining race – by asking its “race raters” to label photographs – was, in the Sixth Circuit’s words, “crafted by a witness with no particular expertise to craft it, administered by persons with no particular expertise to administer it, tested by no one, and accepted only by the witness himself.” Id. at 7.

Background

The EEOC filed suit against Kaplan alleging that Kaplan’s use of credit checks causes it to screen out more African-American applicants than white applicants, creating a disparate impact in violation of Title VII. Id. at 2. 

In support of its allegations, the EEOC relied on statistical data compiled by Kevin Murphy.  Because Kaplan’s credit check process was race-blind, the EEOC subpoenaed records regarding Kaplan’s applicants from state departments of motor vehicles. Id. at 3. Thirty-six states and the District of Columbia provided color copies of approximately 900 drivers’ license photos. 

Murphy assembled a team of five “race raters” and directed them to review the photos and classify them as “African-American,” “Asian,” “Hispanic,” “White,” or “Other.”  Murphy also provided the raters with applicant names. Id. at 3-4. 

Based on the results of this “race rating,” Murphy opined that, in a sample of 1,090 (out of 4,670 applicants), the percentage of black applicants who were flagged for review based upon their credit histories was higher than the percentage of white applicants who were flagged.  Id. at 4.

The district court excluded Murphy’s testimony as unreliable for two reasons. First, the EEOC presented “no evidence” that Murphy’s methodology satisfied any of the factors that courts typically consider in determining reliability under Federal Rule of Evidence 702; and second, as Murphy himself admitted, his sample was not representative of Kaplan’s applicant pool as a whole. Id. at 2. The district court granted summary judgment in favor of Kaplan, and the EEOC appealed.

The Sixth Circuit’s Opinion

The Sixth Circuit affirmed. The Sixth Circuit noted that, as the proponent of expert testimony, the EEOC bears the burden of proving its admissibility. Id. at 5. It determined that the district court did not abuse its discretion in finding that the EEOC failed to make such a showing.   

The EEOC argued that the district court erred in finding that it had “wholly fail[ed]” to provide evidence that its technique had been tested or had any “known or potential rate of error.” Id. The EEOC contended that it provided such support in the form of “anecdotal corroboration.” That is, as to 57 applicants, Murphy cross-checked his raters’ classifications with racial identifications provided by a DMV or Kaplan. Id.

The Sixth Circuit noted that the EEOC’s cross-check yielded an 80% match – “an unimpressive correlation in case where a few percentage points (in credit-check fail rates for blacks and whites) might make the difference between significant liability and none.” Id. In any event, as Murphy himself conceded, a mere 57 instances of anecdotal corroboration is “not enough” to establish the reliability of his photo rating methodology. Id. at 5-6. 

As the Sixth Circuit found, “[t]he EEOC’s case goes downhill from there.” Id. at 6. The EEOC failed to present evidence that its technique was subjected to peer review or publication, failed to show that Murphy employed standards to control “the technique’s operation,” and presented no evidence that Murphy’s race-rating methodology was “generally accepted in the scientific community.” Id. at 6-7. “[T]he raters themselves had no particular standard in classifying each applicant; instead, they just eyeballed the DMV photos.” Id. at 6.

Finally, as an independent ground for excluding Murphy’s testimony, the district court found “no indication” that Murphy’s group of 1,090 applicants was representative of the applicant pool as a whole. Id. at 7. The Sixth Circuit noted that, “[i]nstead there is a strong indication to the contrary: Murphy’s group had a fail rate of 23.8%, whereas the GIS applicant pool had a fail rate of only 13.3%.” Id. It held that an unrepresentative sample “by definition” might skew the respective fail rates of black and white applicants in the larger pool – “and thus is not a reliable means to demonstrate disparate impact.” Id.

Implications

In its opinion, the Sixth Circuit staunchly critiqued the EEOC’s “do as I say, not as I do” litigation tactics. It noted (in the first line of its opinion) that the EEOC “sued the defendants for using the same type of background check that the EEOC itself uses.” Id. at 2. It also noted, as the district court observed, that “the EEOC itself discourages employers from visually identifying an individual by race and indicates that visual identification is appropriate ‘only if an employee refuses to self identify.’” Id. at 7.

Readers can also find this post on our EEOC Countdown blog here.

U.S. Chamber of Commerce Testifies Before Senate HELP Committee on Paycheck Fairness Act

Posted in Class Action Litigation

By Paul H. Kehoe

Earlier this week, the U.S. Senate Committee on Health, Education, Labor & Pensions (HELP) held an important full committee hearing on The Paycheck Fairness Act (S. 84), which would expand the scope of the Equal Pay Act in an effort to resolve alleged pay disparities between men and women. Seyfarth’s Camille Olson testified at the hearing on behalf of the U.S. Chamber of Commerce, where she serves as Chairwoman of its policy advisory committee on equal employment opportunity. Olson appeared on a panel of Senate witnesses which included professor Deborah Thompson Eisenberg from the University of Maryland’s Francis King Carey School of Law; ReShonda Young, a small business owner and manager from Iowa; and Kerri Sleeman, a mechanical engineer from Michigan.

Representing the Chamber, the world’s largest business federation of more than 3 million businesses and organizations of every size, industry sector and geographical region, Olson raised three primary concerns over the Paycheck Fairness Act. According to Olson’s testimony, the Chamber strongly opposes the Act because, if passed, it would further expand remedies under the Equal Pay Act to:

1)    Impose harsher, “lottery-type” penalties of unlimited compensatory and punitive damages, upon all employers, regardless of size, and without a showing of intentional sex discrimination;

2)    Effectively eliminate the factor other than sex defense; and

3)    Provide a more attorney-friendly class action device, among other amendments.  

Following this Senate HELP Committee hearing, Senate Majority Leader Harry Reid (D-Nev.) has scheduled a Senate floor vote for Tuesday, April 9. Olson’s testimony, notably, marks the third time that a Seyfarth attorney has testified before Congress regarding the Paycheck Fairness Act.

Fourth Circuit Upholds Decision In Favor Of EEOC: Age Was “But-For” Cause Of Disparate Treatment Of Older Employees’ Retirement Plan Contributions

Posted in EEOC Litigation

By Matthew Gagnon and Gerald L. Maatman, Jr.

The EEOC has taken some high-profile hits lately, see here and here, but in EEOC v. Baltimore County, No. 13-1106 (4th Cir. Mar. 31, 2014), the EEOC scored a victory against Baltimore County, Maryland, which had an employee retirement benefit plan that the EEOC alleged unlawfully discriminated against older workers in violation of the Age Discrimination in Employment Act (ADEA), 29 U.S.C. §§ 621-634. The Fourth Circuit held that it is unlawful to require older employees to contribute a larger percentage of their salaries to a retirement plan that bases retirement eligibility on years of service rather than meeting a specified retirement age. 

Background

In 1945, Baltimore County established a retirement benefit plan that provided that employees were eligible to retire and receive pension benefits at age 65, regardless of the length of their employment. Baltimore Cnty., at 4. The plan was funded, in part, from contributions by employees who contributed a fixed percentage of their annual salaries to the plan. Id. at 5. To ensure that all employees received the same level of benefits, contribution rates were based on, among other things, the number of years that an employee would contribute to the plan before being eligible to retire at age 65. Id. Older employees therefore ended up paying a greater percentage of their salaries to the plan. Id. at 6.

Over the years, the County modified its plan so that correctional officers became eligible to retire after only 20 years of service, regardless of age, or at age 65 with five years of service. Id. at 6-7. Two correctional officers filed charges of discrimination with the EEOC, alleging that the disparate contribution rates discriminated against them on the basis of age. Id. at 7-8.

The County actually won on summary judgment back in 2009. The District Court held that the plan’s disparate contribution rates were not motivated by age, but rather by the number of years remaining until an employee reached retirement age. The different contribution rates were permissible because older new-hires had less time to accrue earnings on their contributions and because of the “time value” of money. EEOC v. Baltimore Cnty., No. 07-CV-2500 (D. Md. Jan. 21, 2009). The Fourth Circuit vacated that judgment, holding that the District Court had considered only the age-based retirement eligibility requirement, and had failed to consider the plan’s separate provision for service-based eligibility. EEOC v. Baltimore Cnty., No. 09-1688 (4th Cir. June 25, 2010). On remand, the District Court granted partial summary judgment in favor of the EEOC. EEOC v. Baltimore Cnty., No. 07-CV-2500 (D. Md. Oct. 17, 2012).

Fourth Circuit Decision

The County’s primary argument on appeal was that the District Court had failed to apply the factors identified by the Supreme Court in Kentucky Retirement Systems v. EEOC, 554 U.S. 135 (2008). But the Fourth Circuit held that that case was inapplicable to the District Court’s analysis because it presented a different question: whether “pension status” unlawfully constituted a “proxy for age.” In that case, the plan treated employees differently based on their pension status rather than on their age. But Baltimore County’s plan required different contribution rates explicitly in accordance with employees’ ages at the time of their enrollment in the plan. The employee’s eligibility to retire (i.e., “pension status”) therefore had no bearing on the disparate treatment in that case, i.e., that older employees were required to contribute a higher percentage of their salaries to the plan than younger employees. Baltimore Cnty., at 13-15.

An employer violates the ADEA by relying on a facially discriminatory policy where age is the “but-for” cause of disparate treatment of older employees. Accordingly, the only question in Baltimore County was whether the disparate contribution rates were lawfully based on a reasonable factor other than age. Id. at 15. While there may have been some basis for such disparate treatment at the plan’s inception – when the only basis for reaching retirement eligibility was reaching retirement age – that justification disappeared when the plan was modified to allow employees to retire based solely on a set number of years of service. Id. 

Under the terms of the plan, correctional officers were eligible for retirement after 20 years of service. So a 20-year-old and a 40-year-old would both be eligible to retire after 20 years, but the 40-year-old would still have to contribute more of his or her income to the plan over the same twenty years to receive the same retirement benefits. Because the plan required older employees to contribute more of their income to the plan regardless of whether they chose to retire after reaching retirement age or after working the required number of years, the number of years until retirement age could not be the basis for the disparate rates. Id. at 15-16. Accordingly, the disparate rates were not motived by anything other than age, and were a violation of the ADEA. Id.

Implications For Employers

This case demonstrates the complexities and potential pitfalls employers face while trying to navigate the ADEA. It often makes sense to treat older and younger employees differently under a retirement plan in order to ensure that all employees receive the same level of plan benefits. But employers must be aware that any such differences will be considered facially discriminatory and therefore must be based on a reasonable factor other than age. The plan must be carefully structured so that any age-based disparities are actually justified by the different financial considerations that might apply to older employees when calculating plan benefits and contributions.

Readers can also find this post on our EEOC Countdown blog here.

Alabama District Court Dismisses EEOC Claims Challenging Employer’s No Dreadlocks Policy

Posted in EEOC Litigation

By Gerald L. Maatman, Jr. and  Kathryn “Chris” Palamountain

Employing reasoning adopted by a number of other courts, the U.S. District Court for the Southern District of Alabama recently dismissed the EEOC’s claim that an employer’s policy prohibiting employees from wearing dreadlocks violated Title VII – the case of EEOC v. Catastrophe Management Solutions, No. 13-00476-CB-M, 2014 WL 47758 (S. D. Ala. Mar. 27, 2014). In its ruling, the Court confirmed that “employers’ grooming policies are outside the purview of Title VII,” and it further rejected the EEOC’s argument that the definition of race under Title VII should be read expansively to encompass more than immutable physical characteristics unique to a particular group.   

Background To The Case

The case arose after Chastity Jones, an African-American applicant received an offer of employment from defendant. At the time of the job offer, the employer had a grooming policy, which provided in part that “hairstyles should reflect a business/professional image” and prohibited “excessive hairstyles or unusual colors.” Id. at 1-2. The employer interpreted the policy as prohibiting the wearing of dreadlocks, and thus it conditioned its offer on Jones cutting off her dreadlocks. When Jones declined to do so, defendant withdrew the offer of employment. The EEOC filed suit, alleging that application of the policy to prohibit dreadlocks violated Title VII and that defendant intentionally discriminated on the basis of race. Id. at 2. The employer moved to dismiss for failure to state a claim upon which relief can be granted. 

The EEOC’s Arguments

The EEOC argued that the employer had refused to hire Jones because she was black and that a policy that prohibits dreadlocks is racially discriminatory on its face because dreadlocks were determinant of racial identity. The EEOC also urged the Court to adopt an expansive definition of race under Title VII that would encompass “both physical and cultural characteristics, even when those cultural characteristics are not unique to a particular group.” Id. at 8. As an apparent fallback position, the EEOC argued that dismissal was inappropriate because it should be allowed to present expert testimony on three factual predicates:  1) “that Blacks are primary wearers of dreadlocks”; 2) that dreadlocks are “a reasonable and natural method of managing the physiological construct of Black hair”; and 3) that dreadlocks have a “socio-cultural racial significance” for blacks. Id. at 9. 

The Court’s Ruling

The Court rejected the EEOC’s arguments and dismissed the EEOC’s complaint. First, the Court identified a number of decisions addressing policies that restricted hairstyles and finding that such policies were non-discriminatory. Id. at 6-7. Agreeing with these decisions, the Court held that a “hairstyle, even one more closely associated with a particular ethnic group, is a mutable characteristic.” Id. at 8. The Court also rejected the EEOC’s arguments regarding “socio-cultural racial significance,” noting that culture and race are different concepts and that “Title VII does not protect against discrimination based on traits, even a trait that has socio-cultural racial significance.” Id. at 10. 

Implications For Employers

This decision further reinforces an employer’s right to establish and enforce grooming policies and describes some parameters on the application of those policies. In addition, when facing EEOC charges which attempt to expand race discrimination under Title VII beyond immutable characteristics, this decision provides support for a defense that mutable characteristics, including traits that have purported “socio-cultural racial significance,” may not be protected as a matter of law. 

Readers can also find this post on our EEOC Countdown blog here.

Victory At Last: Fourth Circuit Orders EEOC To Pay Up On Hefty Attorneys’ Fees Award

Posted in EEOC Litigation

By Christopher DeGroff, Gerald L. Maatman, Jr., and Lily M. Strumwasser

This week the Fourth Circuit put its foot down on a decision almost eleven years in the making, ordering the government to pay Propack Logistics $189,113.50 in attorneys’ fees.  This welcome news brings the EEOC’s long battle in EEOC v. Propak Logistics Inc., Case No. 13-CV-1687 (4th Cir. 2014) to an end. 

After the EEOC took a stunning eight years to investigate a charge of discrimination, the Commission finally filed suit in 2009, which the U.S. District Court for the Western District of North Carolina subsequently dismissed in August 2012.  Ever since, the EEOC and Propak have battled over attorneys’ fees and costs.  After all is said and done, Propak came out on top yet again:  defeating both the EEOC’s discrimination claims and securing hefty attorneys’ fees.

Background

We first reported on this case here in 2012.  By way of background, in EEOC v. Propak Logistics, Inc., Case No. 09-CV-311 (W.D.N.C. Aug. 7, 2012), the EEOC claimed Propak refused to hire non-Hispanic applicants and employees for non-management positions at a Wal-Mart distribution center.  Before the lawsuit was filed, and beginning in 2003, the EEOC investigated a discrimination charge from an applicant.   The investigation included an initial interview with the Charging Party in August 2003, an interview of Propak’s witness in August 2003, several requests for information from Propak from May 2003 to September 2008, interviews with Propak’s management in April 2004, interviews of potential class members in May and June 2006, and subpoenas issued by the EEOC to third-party entities in late 2007.  Id. at 12-13.

Nearly five years after the initial charge was filed, the EEOC issued a right to sue letter to the Charging Party in February 2008.  Curiously, the letter was issued before the EEOC completed its the investigation into the Charging Party’s allegations.  This is rare because as a result, the EEOC made no finding as to the allegations contained in the Charging Party’s Charge of Discrimination at the time it issued the right to sue letter.  Id. at 7.  The Charging Party later filed suit, and the Court dismissed his claims.  Shortly thereafter, the EEOC concluded its investigation and issued a letter of determination finding reasonable cause of discrimination, and “conciliation failure” as declared by the Commission. The EEOC then filed its lawsuit in August 2009 — almost a full year after it declared conciliation failure, and seven years after the Charging Party filed a charge of discrimination. Id.

Propack filed a motion for summary judgment relying on the defense of laches.  To prevail on the equitable defense of laches, the Court reasoned that Propak was required to prove:  (1) lack of diligence by the EEOC, and (2) that Propak suffered undue prejudice as a result.  Id. at 16.  The U.S. District Court for the Western District of North Carolina granted the motion. The Court found that the EEOC dealt Propak “a double-fisted blow” and reasoned that the Commission’s delay in investigating the alleged discrimination was unreasonable.  The Court later granted Propak’s request for attorneys’ fees and ordered the EEOC to pay Propak $189,113.50 in fees and $61.20 in costs.  The Court’s decision reiterated its position that the EEOC was unreasonable in filing a case after an eight-year investigation.

The Fourth Circuit’s Decision

The EEOC appealed the District Court’s grant of attorneys’ fees and costs claiming that the District Court abused its discretion in reaching its decision.  The EEOC argued that it had a reasonable basis for believing it could defeat Propak’s defense, and that it had valid support for its position that the defense of laches did not bar the EEOC from filing is lawsuit.  Case No. 13-CV-1687 (4th Cir. 2014) at 9-10.  Thus, the EEOC claimed that it should not be required to pay Propak $189,113.50 in attorneys’ fees.

The EEOC struck out again when the Fourth Circuit concluded that the District Court did not abuse its discretion in holding that the EEOC acted unreasonably in initiating the litigation.  The Fourth Circuit explained that it “disagree[s] with the EEOC’s argument that the district court engaged in ‘hindsight logic’ in explaining its award of attorneys’ fees.”  Id. at 13.  The Fourth Circuit explained that the record lacks any description of the substance of the EEOC’s alleged interviews with potential class members, or of any other interviews that may have been conducted to identify the class of purported victims.  Id. at 16.  The record also failed to establish that any of the people who received contact letters from the EEOC fell within the EEOC’s definition of the target class.  Id. at 17.  For these reasons, the Fourth Circuit did not have a “definite and firm” conviction that the District Court mistakenly awarded Propak attorneys’ fees.  Accordingly, the three-judge panel affirmed the District Court’s judgment and grant of fees to Propak.

Implications For Employers

Employers across the nation can relate to the pains of dealing with such long investigations spearheaded by the EEOC.  In this case, the long hard fight was worth it for Propak – who eventually prevailed against the Commission.  Through challenging the EEOC’s investigative techniques, Propak also put a spotlight back on the EEOC’s often misguided tactics in pursuing systemic investigations.  The Fourth Circuit’s ruling gives employers one more piece of ammunition to use against the EEOC when it drags its feet for years during investigations – an all-to-common occurrence.

Readers can also find this post on our EEOC Countdown blog.

Court Issues $22,900 Sanction Award Against The EEOC For Spoliation

Posted in EEOC Litigation

By Gerald L. Maatman, Jr. and Howard M. Wexler

In a case we previously blogged about, EEOC v. Womble Carlyle Sandridge & Rice, LLP, 13-CV-46 (E.D.N.C. Mar. 24, 2014), Magistrate Judge L. Patrick Auld held the EEOC liable for spoliation sanctions based on the “negligence, if not gross negligence” exhibited by the charging party it brought suit on behalf of – one Ms. Charlesetta Jennings (“Ms. Jennings”).  When served with the bill of costs by Womble Carlyle, the EEOC objected to the amount as unreasonable.  In his decision, Judge Auld rejected the EEOC’s argument and ordered the EEOC responsible for $22,900 as the reasonable costs incurred by Womble Carlyle.

Background

The EEOC filed suit on behalf of Ms. Jennings in 2013 alleging that Womble Carlyle failed to accommodate her disability and subsequently terminated her employment because of the disability in violation of the Americans With Disabilities Act (“ADA”).  Id. at 1.  As the EEOC sought back pay on behalf of Ms. Jennings, Womble Carlyle served document demands and interrogatories designed to determine whether she properly mitigated her damages by seeking alternative employment. While being deposed in September 2013, Ms. Jennings testified that she had previously maintained a detailed log chronicling her efforts to obtain alternative employment while she was receiving unemployment insurance benefits; however, once these benefits ended in February 2013, she shredded the log. Further, she testified that she discarded additional material regarding her efforts to obtain employment in June of 2013 – which was after the EEOC had already filed its lawsuit on behalf of Ms. Jennings in January 2013.

Based on Ms. Jennings’ destruction of these documents, Womble Carlyle sought sanctions for spoliation of evidence, which the Court granted and ordered the EEOC to reimburse Womble Carlyle its costs and fees associated with having to bring the spoliation motion.  Id. at 2.  As a result, Womble Carlyle submitted a Statement of Expenses totaling $29,651.  Id.  The EEOC contested the $29,651 amount as unreasonable on several grounds, including its position that Womble Carlyle attorneys “duplicated their efforts” during discovery and that it should not have to pay for the time spent by one attorney reviewing the work of another, where both attorneys are experienced litigators.  Id. at 3-4.

The Court’s Decision

As the EEOC objected to the number of hours spent by Womble Carlyle attorneys in relation to the spoliation motion, Judge Auld held it was up to Womble Carlyle to “document the need to have devoted the amount of time for which it seeks compensation” through the submission of “reliable billing records, and…exercise of billing judgment” to deduct time “not properly shown to have been incurred in pursuit of the matter at issue or that is otherwise not reasonable in amount of necessarily incurred.”  Id. at 3.

Judge Auld rejected the EEOC’s contention that Womble Carlyle attorneys unnecessarily duplicated their efforts in drafting discovery and that it should not be forced to pay for the time spent by one attorney reviewing the work of another attorney “where both attorneys are experienced litigators.”  Id. at  5.  In doing so, Judge Auld held that after his review, the billing records of Womble Carlyle’s attorneys were reasonable given the nature of the sanction motion and were not duplicative.  Id.

Additionally, Judge Auld rejected the EEOC’s request that the Court should reduce by two-thirds the amount of costs since the Court only awarded monetary sanctions and did not grant the other two forms of relief requested by Womble Carlyle: dismissal of the back pay claim, and an adverse inference jury instruction (which the court reserved judgment on until trial).  Id. at 6.  Judge Auld held that “the fact that the undersigned Magistrate Judge declined to recommend one form of sanction…should not reduce the amount of the recommended sanction of reasonable expenses.”  Id.

 Judge Auld, however, did reduce Womble Carlyle’s cost application by $6,600 because it failed to demonstrate why it spent 12 more hours on an 11 page reply brief with 6 exhibits than it spent on an 18-page opening brief with 16 exhibits. Id. at 7.  Additionally, Judge Auld reduced the cost award by $151 based on certain block billing entries which were insufficient to meet Womble Carlyle’s burden to support its fee request. Id. at 9.  As a result, Judge Auld held the EEOC liable for a total of $22,900 of Womble Carlyle’s costs and fees associated with the spoliation motion.  Id. at 10.

Implications For Employers

As this case demonstrates, decisions made regarding the preservation of evidence issues at the beginning of, and even leading up to, litigation can have very serious implications, whether in the form of sanctions, an adverse inference at trial or even outright dismissal.  This decision (and Judge Auld’s prior decision) should be added to employers’ defense toolkits, as the preservation of documents and information is a two-way street that employees (and the EEOC) must also follow once litigation is reasonably foreseeable – or proceed at their own peril.

Readers can also find this post on our EEOC Countdown blog.

What’s Good For The Goose … Court Turns Table On EEOC In Subpoena Ruling

Posted in EEOC Litigation

By Christopher DeGroff and Michael Fleischer

A Win For Transparency

Yesterday, in the U.S. District Court for the District of Massachusetts, the Court turned the tables on the EEOC on a controversial subpoena issue. The EEOC has traditionally used broad subpoenas attempting to extract sensitive and expansive information from employers in cases around the country. (Click here and here to read more.) But here, the EEOC attempted to limit the records the employer could obtain from subpoenas of its own. The Court, however, wouldn’t bite on the EEOC’s argument, and denied the EEOC’s Motion to Quash Chipotle’s subpoenas seeking employment records from claimant’s former and current employers to aid in its defense.

Case Background And Holding

Now for the details: in EEOC v. Chipotle Mexican Grill, Inc., Case No. 1:13-cv-11503-FDS (D.Mass.), the EEOC sued Chipotle on behalf of a former employee alleging that the employee was unlawfully terminated due to her disability. During discovery, Chipotle served several third party subpoenas on the claimant’s other employers seeking her personnel files, wage records, and other records pertaining to her employment (including applications and resumes). Chipotle sought these records in order to defend itself, in part, by demonstrating that the claimant failed to mitigate her damages. Although the EEOC admitted that its claimant’s wage records were relevant to a failure to mitigate defense, and provided the claimant’s W-2s to Chipotle, the EEOC nevertheless insisted that the Court throw out subpoenas as to the claimant’s personnel files, applications, and resumes.

At yesterday’s motion hearing in Boston, the EEOC argued that Chipotle’s subpoenas were overreaching, were not reasonably calculated to lead to the discovery of admissible evidence, and were not necessary for Chipotle’s failure to mitigate defense. Chipotle, on the other hand, stressed that the claimant’s applications and resumes were necessary to support Chipotle’s defense, as the documents would show the claimant’s employment qualifications, efforts to obtain employment, and would be an essential tool for its expert economist to determine what jobs Plaintiff was qualified for and how many of those jobs were available.

Although the EEOC argued that Chipotle could obtain this information during the claimant’s deposition, the Court refused to restrict Chipotle’s access to  only depositions and noted that the Federal Rules of Civil Procedure provided for broad discovery. The Court denied the EEOC’s motion to quash finding that Chipotle’s third party subpoenas for the Plaintiff’s employment records were relevant to Chipotle’s defense but declined to comment on their admissibility.

Implications For Employers

Employers are often frustrated by what they often view as an asymmetric playing field: the EEOC demands to be treated like any other litigant for some issues, but often argues that it should be treated differently (and more favorably) in others because it is a “law enforcement agency.” This case is a quiet but meaningful win for an employer attempting to obtain the same sort of discovery that it would from virtually any other private litigant.  Employers should be encouraged that some jurisdictions like the Court here will rule to keep the playing field even.

Readers can also find this post on our EEOC Countdown blog here.

New York City Agrees To Pay $98 Million To Settle High Profile FDNY Discrimination Class Action

Posted in Settlement Issues

By Gerald L. Maatman Jr. and Howard M. Wexler

On March 18, 2014 the U.S. Department of Justice (“DOJ”) announced that New York City agreed to pay $98 million to settle a workplace class action originally brought by the DOJ in 2007 alleging that certain civil service tests administered by the FDNY were discriminatory against African-American and Hispanic applicants. In addition to this large monetary sum, the settlement also provides for systemic relief meant to transform the way in which the FDNY recruits firefighters going forward.

The settlement is the largest employment discrimination class action settlement for 2014 thus far.

Background Of The Case

As we previously blogged here and here, the United States originally filed this lawsuit against the City in 2007, alleging that the City’s entry-level firefighter exams and applicant ranking had an unlawful disparate impact on African-American and Hispanic applicants. The Vulcan Society and several individuals intervened in the lawsuit alleging similar claims of disparate impact and also alleging disparate treatment on behalf of a putative class of African-American, entry firefighter candidates. The Court agreed with Plaintiffs, finding that the City’s procedures for screening and selecting entry-level firefighters violated Title VII, the Equal Protection Clause, and the Civil Rights Act of 1866, along with New York state and local law. Consequently, the Court issued an order requiring the City to develop a non-discriminatory test for entry-level firefighter applicants. In 2013 the Second Circuit vacated the grant of summary judgment for disparate treatment liability, but upheld the injunctive relief order.

Settlement Terms

As set forth in the DOJ press release, New York City will pay a total of approximately $98 million to resolve allegations that the FDNY engaged in a pattern or practice of employment discrimination against African-American and Hispanic applicants for the entry-level firefighter position by using two discriminatory written tests in 1999 and 2002. The parties have yet to agree on the method in which the settlement fund will be distributed among class members; however, according to the DOJ “the parties have committed to streamline the claims process and to expedite the distribution of monetary relief to eligible claimants.”

In addition to the money that the City has agreed to pay, the Court has already ordered several changes to remedy the city’s discriminatory hiring practices included among them the use of an entry-level firefighter exam jointly developed by the parties as well as the appointment of a court monitor to oversee the FDNY’s hiring reforms.

Implications For Employers

Although it appears that the approval of the consent decree (which is still subject to a fairness hearing) is a formality, anything is possible given the number of twists and turns this case has taken over the years. Either way, cases such as this serve as a reminder that multi-million dollar settlements in class action cases such as this are not unusual and that whether it is the Department of Justice or the EEOC, the government is focused on forcing employers to make systemic changes to the way in which they do business as well as seeking monetary relief for class members.