By Christopher DeGroff and Gerald L. Maatman, Jr.
The U.S. Court of Appeals for the Eighth Circuit gave the EEOC a potential reprieve from a stunning $4.467 million fees and expenses award this past week in EEOC v. CRST Van Expedited, Inc., Case Nos. 09-3764, 09-3765 & 10-1682 (8th Cir. Feb. 22, 2012), but in the process the decision dealt the agency a significant blow to the way it litigates class-like cases. As such, the ruling ought to be required reading for any corporate counsel facing the EEOC in litigation.
The Commission filed suit on September 27, 2007 on behalf of a charging party and “a class of approximately 270 similarly situated female employees” who the EEOC alleged had suffered sexual harassment in violation of Title VII. Id. at 2. The charging party later intervened in the lawsuit, as did two other individual plaintiffs. CRST moved for summary judgment on a number of grounds, including that the alleged victims were not subjected to conduct rising to the level of harassment and had not availed themselves of the company’s complaint mechanisms. CRST also argued that certain class members and the EEOC were precluded from pursuing the claim because of a failure to disclose the claims in earlier bankruptcy proceedings. Importantly, CRST also sought dismissal of all claims based on the EEOC’s failure to identify, investigate, and conciliate on behalf of dozens of its purported “class” members. Id. at 14. The District Court ruled in CRST’s favor and dismissed the entire action. It subsequently entered a whopper of a fee sanction award – of nearly $4.5 million against the EEOC – in EEOC v. CRST Van Expedited, Inc., 257 F.R.D. 513 (N.D. Iowa 2010).
Key Holdings Of The Eighth Circuit
On appeal, in a 2 to 1 ruling over a vigorous dissent, the Eighth Circuit affirmed in part, and reversed in part.
Significantly, the Eighth Circuit affirmed the District Court’s holding that the EEOC had failed to adequately conciliate on behalf of 67 purported class members before filing suit. Id. at 24. In reaching its decision, the Eighth Circuit acknowledged that “the EEOC enjoys wide latitude in investigating and filing suits relate to charges of discrimination,” but that the EEOC “must discover [its class members] during the course of its investigation.” Id. at 19-20. It noted that the EEOC’s pre-litigation conciliation efforts were limited, as reflected in its Letter of Determination that provided CRST with no notice as to the size of the class of employees who it claimed suffered sexual harassment. Id. at 21. Specifically, during the conciliation process, the EEOC did not (and could not) provide the employer with the names of the class members or even a general indication of the size of the class. Id. As a result, the Eighth Circuit established a critical distinction between facts developed during the EEOC’s pre-lawsuit administrative investigation (upon which the Commission may sue) as opposed to “new facts” learned during the discovery phase of the lawsuit, which the EEOC may not use “as a fishing expedition” to uncover more claims. Id. at 20-21.
The Eighth Circuit further noted that the EEOC’s complaint also failed to identify the number of alleged similarly-situated employees, and that only after the commencement of the lawsuit and through discovery did the EEOC seek to ascertain the size of the class. Id. at 21-22. The Eighth Circuit agreed with the District Court finding that the EEOC’s litigation strategy was “untenable” because it forced CRST to litigate a “moving target” of allegedly aggrieved persons and created a risk for “never-ending” discovery. Id. at 22.
The Eighth Circuit also determined that the EEOC had not reasonably investigated the class allegations of harassment during its investigation and, thus, failed to provide the employer with an opportunity to meaningfully conciliate those claims. Id. at 22-23. In short, the Eighth Circuit decision admonished that the EEOC cannot use discovery as a way to find its class members, but instead the EEOC must identify its class members during its investigation and then must conciliate those claims. Id. at 24.
On the other hand, the Eight Circuit reversed the District Court’s grant of summary judgment on the EEOC’s claims as to the charging party who had failed to disclose her claims in bankruptcy proceedings, holding that the EEOC sued in its own capacity, and was not bound to a judicial estoppel theory applicable to the claimant/intervenor. It also reversed the District Court’s grant of summary judgment against one claimant because a genuine issue of material fact existed regarding the severity or pervasiveness of the alleged harassment she suffered. Id. at 43. Because the Eighth Circuit reversed these portions of the District Court’s case, it also determined that CRST was not a “prevailing party” in the case at large, and reversed the award of fees and expenses. Id. at 53. It did so without prejudice, however, leaving the possibility for a future fee award. Id.
In sum, the Eighth Circuit affirmed in part, reversed in part, and remanded the case to the District Court for further proceedings consistent with the Eighth Circuit’s holdings.
The EEOC’s Immediate Reaction To The Ruling
We were in attendance at a recent meeting of the ABA Section of Labor and Employment Law where EEOC General Counsel David Lopez gave a presentation. His remarks included his reactions to the Eighth Circuit’s ruling on the same day as his presentation; his comments were reported in BNA’s Class Action Report last night (subscription required). Mr. Lopez asserted that the Eighth Circuit’s decision is “unprecedented,” and “rewards employers for recalcitrance” in the investigative stage. In essence, Mr. Lopez followed the reasoning of the dissent. Mr. Lopez also asserted that the EEOC is presently reviewing the case to determine “what our next steps are and how it will affect our work.” He warned that employers may see more aggressive investigations and subpoena actions if the EEOC is required to name every claimant at the charge stage.
Clearly, the Eighth Circuit grabbed the attention of the Commission’s decision-makers at its highest levels.
Implications Of The Eight Circuit’s Ruling
The impact of EEOC v. CRST could be profound. The decision will put significant pressure on the EEOC to identify each and every class member it seeks to represent before filing suit – something it rarely does in practice.
As a tactical matter, employers should invoke the EEOC v. CRST decision, and push the EEOC to identify all class members throughout the investigatory process. Arguably, this decision arguably applies only to representative cases (or “Section 706″ actions) - not pattern and practice cases (under “Section 707″) where the EEOC is claiming that discrimination is a company’s “standard operating procedure.” As we have noted in other recent posts here and here, a different set of rules apply to pattern or practice claims. Ultimately, EEOC v. CRST represents a potential game-changing decision for employers targeted by the EEOC in class-like representative actions.