By Gerald L. Maatman, Jr. and Alex W. Karasik

Seyfarth SynopsisAfter a federal district court dismissed the EEOC’s unlawful-interference claim against a private college that had sued a former employee for allegedly breaching a settlement agreement by filing an EEOC charge, the Tenth Circuit reversed the dismissal of the EEOC’s unlawful-interference claim, citing the employer’s introduction of a new case theory relative to the EEOC’s still-pending retaliation claim.

This ruling serves a cautionary tale for employers regarding the timing of their assertion of new case theories in EEOC litigation involving multiple claims.

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After CollegeAmerica resolved a dispute with a former employee by entering into a settlement agreement, upon belief that the employee breached the settlement agreement, CollegeAmerica sued the employee in state court.  Id. at *1-2.  Thereafter, the EEOC sued CollegeAmerica in federal court alleging that CollegeAmerica’s interpretation and enforcement of the settlement agreement was unlawfully interfering with statutory rights of the former employee and the EEOC.  Following the U.S. District Court for the District of Colorado’s dismissal of the EEOC’s claim for unlawful-interference with statutory rights, on appeal in EEOC v. CollegeAmerica Denver Inc., No. 16-1340, 2017 U.S. App. LEXIS 17094 (10th Cir. Sept. 5, 2017), the Tenth Circuit reversed the dismissal, holding that the EEOC’s unlawful-interference claim should not have been dismissed as moot in light of a new theory asserted by CollegeAmerica prior to its trial regarding the EEOC’s pending retaliation claim.

Employers should keep this ruling in mind when preparing trial theories that may have implications on claims that had previously been dismissed as moot.

Case Background

The EEOC brought a claim for unlawful-interference with statutory rights, which the District Court ultimately dismissed as moot.  Regarding the EEOC’s retaliation claim, which remained for trial, CollegeAmerica presented a new theory against the employee: that she had breached the settlement agreement by reporting adverse information to the EEOC without notifying CollegeAmerica.  In response, the EEOC argued that by presenting this new theory, CollegeAmerica was continuing to interfere with the statutory rights of the former employee and the EEOC.  As such, the EEOC appealed the dismissal of its unlawful-interference claim, arguing that the claim was no longer moot in light of CollegeAmerica’s new theory.

The Tenth Circuit’s Decision

The Tenth Circuit reversed the dismissal of the of the EEOC’s unlawful-interference claim.  First, the Court instructed that in determining whether a claim is moot, a special rule applies when the defendant voluntarily stops the challenged conduct.  Id. at *4-5.  When the conduct stops, the claim will be deemed moot only if two conditions exist: (1) it is absolutely clear the allegedly wrongful behavior could not reasonably be expected to recur, and (2) interim relief or events have completely and irrevocably eradicated the effects of the alleged violation.  In arguing that the case was moot, CollegeAmerica submitted two declarations from its general counsel assuring that CollegeAmerica would not take the “positions known to trouble the EEOC.”  Id. at *6.  In response, the EEOC argued that the declarations should not be relied upon since CollegeAmerica presented a new theory after the filing of the declarations–that the employee had breached the settlement agreement by reporting adverse information to the EEOC without notifying CollegeAmerica–an argument that continued CollegeAmerica’s unlawful interference with statutory rights.  The Tenth Circuit held that because CollegeAmerica planned to present its new theory in its state court suit, the potential for CollegeAmerica to repeat its allegedly wrongful behavior remained, and CollegeAmerica thus did not satisfy its burden of demonstrating the absence of a potential for reoccurrence.  Id.

Next, the Tenth Circuit rejected CollegeAmerica’s argument that the case was moot because the outcome “would not affect anything in the real world.”   Id. at *7.  The Tenth Circuit noted that in its state court suit, CollegeAmerica planned to argue that the employee breached the settlement agreement by reporting adverse information to the EEOC without notifying CollegeAmerica. The EEOC alleged that this argument would constitute unlawful-interference with the employee’s rights, and thus sought a permanent injunction prohibiting CollegeAmerica from unlawfully interfering with the statutory rights of the employee and the EEOC.  The Tenth Circuit accepted the EEOC’s argument, holding that if the EEOC prevailed on the merits and obtained an injunction, CollegeAmerica could not present its new theory in the state court suit against the employee, which “would constitute an effect in the real world.”  Id.

Finally, the Tenth Circuit declined to consider CollegeAmerica’s argument that the EEOC’s unlawful-interference claim brought under 29 U.S.C § 626(f)(4) failed as a matter of law since it could not be used as an affirmative cause of action, noting the District Court had not yet ruled on the issue and therefore it was to consider that issue on remand.  Id. at *7-8.  The Tenth Circuit also refused to consider CollegeAmerica’s argument that the EEOC sought overly broad, unauthorized injunctive and declaratory relief, explaining it would not consider this issue since it was raised on appeal for the first time.  Accordingly, the Tenth Circuit reversed and remanded the District Court’s dismissal of the EEOC’s unlawful-interference claim.

Implications For Employers

For employers facing litigation, this ruling provides an important lesson: when considering the defense of one claim, it is imperative to be cognizant of how that argument can impact the defense of another claim, even if the other claim has been dismissed.  Further, this decision illustrates the EEOC’s willingness to combat employers who bring causes of action against former employees who may have breached settlement agreements by asserting discrimination claims.  As such, employers should be cautious when suing former employees who later file EEOC charges, and must exercise further caution when considering how their strategies to defend one claim may affect another.

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

thYGT7TBUXBy Gerald L. Maatman, Jr. and Reanne Swafford-Harris

Seyfarth Synopsis: Relief sought in age discrimination litigation is limited to the specific remedies described in the Age Discrimination in Employment Act (“ADEA”).

In a ruling on April 26, 2016, in K.H., et al., v. Secretary of The Department of Homeland Security, Case No. 15-CV-02740 (N.D. Cal. Apr. 26, 2016), Judge Jon S. Tigar of the U.S. District Court for the Northern District of California issued an order granting in part and denying in part the U.S. Department of Homeland Security’s Motion to Dismiss and/or Strike portions of Plaintiffs’ First Amended Complaint.  Judge Tigar dismissed with prejudice any claim of relief sought by Plaintiffs that was not a specific remedy under the ADEA.

Case Background

In 2015, the named Plaintiff, K.H., a 47-year-old Federal U.S. Air Marshal (“FAM”), filed the complaint on behalf of himself and an estimated 300 other air marshals, alleging that air marshals over the age of 40 were disproportionately affected when the Transportation Security Administration (“TSA”), an agency within the Department of Homeland Security (“DHS”), closed six field offices with the highest percentage of older FAMs.  The Plaintiffs were given as little as 10 days to decide whether they would accept job reassignments, some of which were cross-country.

The Plaintiffs’ complaint – brought for relief on a collective action basis – included claims for all relief possible under the ADEA, including lost wages, a bid for “any relief that this court deems appropriate,” and two paragraphs describing the disruption the closures had on the FAMs’ families and their health.  The DHS asked the Court to dismiss the suit on the basis that it was brought on a theory of disparate impact, which is not recognized under the ADEA.  It further asserted that K.H.’s damages claim failed because monetary relief under the ADEA is limited to lost wages and K.H. did not lose his job as a result of the field office closures.

The Ruling

In his ruling, Judge Tigar dismissed the lost wages claims of four air marshals without prejudice, and dismissed the FAMs’ bid for “any relief that this court deems appropriate” with prejudice.  Id. at 8. Judge Tigar determined that the air marshals could only pursue relief for: legal costs, reinstatement, promotion, and unpaid minimum wages or overtime, as those are the specific remedies described in the ADEA.  Accordingly, the Court also dismissed with prejudice, Plaintiffs’ compensatory damages claim for alleged age discrimination.  At the same time, however, Judge Tigar declined to dismiss the two paragraphs of the complaint describing the negative effects of the closures, agreeing with Plaintiffs that these paragraphs were not requesting compensation for the alleged effects.

Implications For Employers

Lay-offs and personnel decisions impacting large groups of workers are “custom-made” situations where collective actions may be brought by plaintiffs under the ADEA. The ruling in K.H., et al. is a win for employers in that it limits the claims of relief that plaintiffs may seek from employers in age discrimination suits.

Connecticut-sealBy Gerald L. Maatman, Jr. and Alex W. Karasik

Anti-discrimination laws command that “thou shall not retaliate…” The recent ruling in EEOC v. Day & Zimmerman NPS, Inc., Case No. 15-CV-01416 (D. Conn Apr. 12, 2016), is a case study in how employers can be taken to task for allegedly retaliating against workers who claim discrimination.

In this case, the EEOC brought an ADA action against the employer defendant, alleging it retaliated against an employee by sending a letter, which identified the employee and discussed his discrimination charge, to 146 other Day & Zimmerman NPS, Inc. (“DZNPS”) employees who belonged to the same union.  The EEOC also alleged that the letter interfered with the rights of 146 current and former employees under the ADA to communicate with the EEOC regarding potential unlawful discrimination.  After defendant moved to dismiss the ADA retaliation and interference claims, Judge Victor A. Bolden of the U.S. District Court for the District of Connecticut denied the employer’s motion to dismiss on the grounds that the EEOC’s allegations were sufficient to state plausible claims for retaliation and interference under Sections 503(a) and 503(b) of the ADA.

This ruling serves as a cautionary tale for employers facing discrimination charges brought by employees, and shows the breadth of anti-discrimination prohibitions on retaliation.

It illustrates how widespread internal communication regarding such charges could potentially be viewed as retaliation or interference under the ADA in the context of a motion to dismiss.

Case Background

In October 2012, a DZNPS employee, who was a member of Local 35 of the International Brotherhood of Electrical Workers (“Local 35”) filed a charge of discrimination with the EEOC, alleging that his employer failed to accommodate his disability reasonably and unlawfully terminated his employment.  In March 2014, the EEOC sought information from DZNPS as part of its investigation of the employee’s charge, including the names and contact information of other electricians who had worked for DZNPS at the Millstone Power Station in Waterford, Connecticut in the fall of 2012.

In June 2014, before providing the requested information to the EEOC, DZNPS sent a letter to approximately 146 individuals, all of whom were members of Local 35 and all of whom had worked or continued to work for DZNPS.  In the June 2014 letter, DZNPS identified the allegedly aggrieved employee by name and indicated that he had filed a charge of discrimination on the basis of disability.  The letter identified his union local, the medical restrictions on his ability to work, and the accommodation he had requested.  It further informed the recipients of their right to refuse to speak to the EEOC investigator and offered them the option to have DZNPS counsel present if they chose to speak to the EEOC.  Id. at 2-3.

On May 20, 2015, the EEOC issued a Letter of Determination to DZNPS, finding reasonable cause to believe that the ADA had been violated.  Following unsuccessful conciliation, the EEOC filed a complaint on September 28, 2015.  The EEOC alleged that since at least June 2014, DZNPS engaged in unlawful employment practices with respect to a group of electricians hired to work at the Millstone Power Station, in violation of Sections 503(a) and 503(b) of the ADA.  Id. at 3.  Thereafter, DZNPS moved to dismiss the complaint.

The Ruling

Judge Bolden denied DZNPS’s motion to dismiss without prejudice, holding that the EEOC’s claims of retaliation and interference under the ADA may proceed.  Pursuant to Section 503(a) of the ADA, the EEOC alleged that defendant unlawfully retaliated against the employee because he filed a charge of discrimination with the EEOC.  Id. at 4.  The Court noted that to plead a retaliation claim sufficiently in an employment discrimination context, the Second Circuit has held that “the plaintiff must plausibly allege that: (1) defendants discriminated—or took an adverse employment action—against him, (2) ‘because’ he has opposed any unlawful employment practice.”  Id. at 5 (quoting Vega v. Hempstead Union Free Sch. Dist., 801 F.3d 72, 90 (2d Cir. 2015)).  Defendant argued that the ADA retaliation claim should be dismissed because the EEOC’s claims failed on both prongs.  Id.  First, defendant argued that the EEOC had not alleged that DZNPS took any adverse employment action against the employee.  Second, defendant argued that even if the EEOC had plausibly alleged an adverse employment action, it did not allege facts showing that the action was caused by the employee’s protected activity.  Id. at 5.

The Court rejected both of defendant’s arguments.  First, the Court noted how case law authorities have routinely held that when an employer disseminates an employee’s administrative charge of discrimination to the employee’s colleagues, a reasonable fact-finder could determine that such conduct constitutes an adverse employment action.  Id. at 6.  As to the second prong, the Court held that the three-month gap between when the June 2014 letter was sent and when the EEOC contacted DZNPS to request names and contact information for other electricians who had worked for defendant in the Fall of 2012 provided sufficient temporal proximity to satisfy the causation prong.  Id. at 7-8.  Specifically, the Court found it was plausible that the first opportunity to retaliate against the employee, whom they had already terminated, was when the EEOC provided a list of fellow union members to whom defendant could disseminate the potentially damaging EEOC charge.  Id.  Accordingly, denying the motion to dismiss, the Court noted that it could not conclude as a matter of law that defendant’s disclosure of the details of the employee’s EEOC disability discrimination charge in the June 2014 letter could not plausibly have been a retaliatory act in violation of the employee’s rights under the ADA.  Id. at 8.

In regards to the ADA Section 503(b) interference claim asserted by the EEOC, the Court initially noted that neither the Supreme Court nor the Second Circuit has yet outlined a test for an interference claim under the ADA.  Id. at 9.  Thereafter, the Court found that while it was true that the EEOC did not allege any direct evidence of DZNPS’s intent behind the June 2014 letter, the issue of an employer’s intent is a question of fact that cannot be resolved on a motion to dismiss.  Further, the Court held that “the disclosure of sensitive personal information about an individual could well dissuade that individual from making or supporting a charge of discrimination under the ADA. Therefore, the Court reasonably could infer that the letter could have the effect of interfering with or intimidating [the employee] and the letter’s recipients with respect to communicating with the EEOC about potential disability discrimination by [d]efendant.”  Id. at 10.  Accordingly, the Court denied defendant’s motion to dismiss the retaliation and interference claims brought under the ADA, while also deferring to rule on DZNPS’s arguments regarding the available prayers for relief.  Id. at 13-14.

Implications For Employers

This ruling is instructive as to why employers should exercise restraint when considering whether to internally disclose information about charges of discrimination filed by an employee, especially on a widespread basis.  Courts may view such conduct as obstructive to employees’ rights to file charges with administrative agencies.  Accordingly, employers should carefully limit internal communication about such charges to avoid creating the perception that they are retaliating against employees who bring charges or interfering with other employees’ rights to file future charges.

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

Seal_of_the_U_S__District_Court_for_the_Northern_District_of_TexasBy Gerald L. Maatman Jr. and Christina M. Janice

In an order recently issued in James Robinson III, et al. v. General Motors Company, et al., Case No. 15-CV-158-Y (N.D. Tex. Oct. 21, 2015), Judge Terry R. Means of the U.S. District Court for the Northern District of Texas denied class certification to two employees of General Motors Company (“GM”), who sought to represent a nationwide class of employees seeking unpaid leave to observe religious holy days. The Court further granted GM’s motion to dismiss the class action complaint, but granted Plaintiffs leave to file an amended complaint.

This case is instructive for employers defending class actions and dealing with requests for religious accommodation in the workplace.

Case Background

In 2008, two employees of GM’s Arlington, Texas facility began making requests for unpaid leave to observe their respective religious holy days. GM employee James Robinson, III (“Robinson”) alleged that he requested and received unpaid leave for religious holy days, including Saturdays. Id. at 1 – 2. GM employee Chris Scruggs (“Scruggs”) alleged that he requested but was denied unpaid leave for religious holy days until GM began granting his requests for unpaid leave in 2010. Id. at 2. The two plaintiffs are of different faith communities; Robinson a member of the Seventh Day Sabbatarian community of Tyler Sabbath Fellowship, and Scruggs a member of Messianic Jewish Beth Yeshua Congregation. Id. at 1 – 2.

Plaintiffs alleged that in 2013 GM began denying Robinson’s requests for unpaid leave to observe holy days and, once Robinson’s attorney identified Scruggs as another employee being denied similar unpaid leave, that GM resumed denial of Scruggs’ requests for unpaid leave to observe holy days. Id. Plaintiffs filed their class action complaint against GM in March 2015, alleging that GM violated Title VII of the Civil Rights Act of 1964 by denying them the religious accommodation of unpaid leave to observe their respective holy days, despite the availability of volunteers to cover their shifts. The lawsuit demanded damages and a class-wide injunction ordering GM to allow unpaid leave on holy days, to inquire about the availability of volunteer coverage, and to seek no-cost methods of allowing religious leave. Id. at 2 – 3.

Plaintiffs sought certification of a class of “all General Motors workers within the United States subject to the 2011 UAW-GM National Agreement and who may seek unpaid leave for a holy day because of a religious belief.” Id. at 5. GM opposed the motion by arguing that the class that Plaintiffs purported to represent constituted an impermissible “hypothetical – – i.e., the possibility that GM employees may seek unpaid religious leave at some time the future,” and would require individualized inquiries not suited for class treatment. Id. (emphasis in original.)

The Court’s Decision

Finding that the Plaintiffs’ class definition “includes any GM employees who might request unpaid religious leave in the future,” the Court determined that the class was not adequately defined or ascertainable. Id. at 6. (emphasis in original.)  Noting that in this case the Court would be required to evaluate each class member’s religion, that religion’s holy days, and the days each member requested for leave, the Court determined that Plaintiffs failed to identify common questions of law or fact applicable to the class, and further failed to prove numerosity. Id. at 6, n. 1. The Court further observed that “[c]lass relief is most appropriate where the issues in the case turn on questions of law or fact ‘applicable in the same manner to each member of the class’” Id. (internal citations omitted).  The Court’s order, however, allows Plaintiffs until November 23, 2015, to file an amended complaint, and the opportunity to propose a definition of a more ascertainable class. Id. at 7.

Implications For Employers   

Religious accommodation under Title VII requires employers to engage in factual inquiries to determine if a requested accommodation is appropriate under Title VII or similar state law. For this reason, and as illustrated by the ruling in Robinson, these individualized factual inquiries precluded class-wide treatment of religious accommodation claims. Carefully articulating neutral policies and managing to consistent procedures for investigating and responding to requests for religious accommodation best enable employers both to respond to the needs of an increasingly diverse workforce, and to develop internal business records that may help avoid costly litigation.

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

A recent Texas Court of Appeals case involving claims of human trafficking of workers recruited in the Philippines and brought to work in Texas provides insight into how principles of international comity may be applied in Texas state courts in the class action context. This ruling – Villareal v. International Plant Services, LLC, Case No. 01-13-00310 (Ct. App. 1st Dist. Tex. Oct. 28, 2014) – is instructive for agencies that recruit foreign workers and their counsel.

It also demonstrates to extent to which workplace class actions are on the increase for alleged abuses against workers across international borders.

Case Background

The Plaintiffs were recruited under a highly regulated program governed by the Migrant Workers and Overseas Filipino Act of 1995, a law which provides that the Filipino National Labor Relations Commission (NLRC) “original and exclusive jurisdiction to hear and decide…claims arising out of an employer-employee relationship…involving Filipino workers for overseas deployment….” Republic Act 8042, s 10 (2004) (Phil.). Given the jurisdictional language of this statute, it is unremarkable that, after the Plaintiffs filed claims in Texas state court, defendants moved to dismiss on grounds that the court should decline to exercise jurisdiction based upon principles of international comity. The trial court granted the motion and the Plaintiffs appealed.

The Appellate Decision Reversing The Dismissal Of Plaintiffs’ Claims

The threshold issue on appeal was the standard of review that the Court of Appeals would apply to the trial court’s decision. Defendant argued that because the underlying issue was jurisdictional, a de novo standard of review should apply. Plaintiffs countered that because dismissal based on comity is “voluntary and not obligatory,” an abuse of discretion standard should apply. Foreshadowing the substantive outcome, the Court of Appeals cited Fifth Circuit and Texas Supreme Court authority to find that the abuse of discretion standard applied. Id. at 7.

Turning to the comity issue, the Court of Appeals noted that both state and federal courts apply Sections 402 and 403 of the Restatement (Third) of the Foreign Relations Law of the United States to “determine whether dismissal based on principles of international comity is appropriate.” Id. at 9. Under the Restatement, the factors used to determine whether an exercise of jurisdiction would be unreasonable include the following: (1) the extent to which the challenged activity takes place or has a direct effect in the territory; (2) connection between the regulating state and the person principally responsible for the activity regulated; (3) the nature of the regulated actions; (4) whether the regulation upsets justifiable expectations; (5) importance of the regulation to the international economic system; (6) the extent to which the regulation is consistent with traditions of the international system; (7) extent of another state’s interest in regulating the activity; and (8) the likelihood of conflict. Id. at 11-12. Noting that the Texas Supreme Court has not yet expressly adopted the Restatement, the Court of Appeals nevertheless decided that the Restatement provided a proper analytical framework. Id. at 12.

In applying the factors, the Court of Appeals repeatedly found that, for most of the factors, each side presented some evidence relevant to the factor that supported their respective positions. However, the existence of some evidence supporting Plaintiffs’ position on most factors “does not support a conclusion that the district court’s exercise of jurisdiction would be unreasonable.” Id. at 15. In other words, since Plaintiffs could provide some argument to support their position on many of the factors, the Court of Appeals concluded that “the exercise of jurisdiction over this case by Texas is not unreasonable, and, accordingly, that the trial court erred in dismissing the case.” Id. at 21.

Implications For Recruiters

Given the somewhat factual nature of the evaluation of the factors, one could argue that this case could be limited to its facts. However, the fact that the Court of Appeals set up a framework in which the existence of arguments for both sides in essence prevents a trial court from declining to exercise jurisdiction based on comity appears to put a thumb on the scale of state law rather than the law of a foreign sovereign.

By Gerald L. Maatman, Jr.

On September 22, 2014, in EEOC v. Vicksburg Healthcare LLC, et al., Case No. 3:13-CV-895 (S.D. Miss. Sept. 22, 2014), Judge Keith Starrett the U.S. District Court for the Southern District of Mississippi granted defendant’s motion to dismiss an EEOC lawsuit for lack of personal jurisdiction and insufficient service of process. The EEOC had filed a disability discrimination claim on behalf of a nurse who worked at hospital owned by a subsidiary of defendant. The Court held that the EEOC, which sued a subsidiary hospital in Mississippi and its Tennessee-based parent corporation, did not put forth prima facie evidence of the necessary factors to satisfy personal jurisdiction requirements for the parent corporation in Mississippi. While this ruling is favorable for non-Mississippi parent corporations who operate subsidiaries in Mississippi, it has larger significance for employers. It shows that nationwide jurisdiction is not a given when the EEOC sues. Additionally, the ruling provides the framework for how to prevent liability by avoiding personal jurisdiction.

Case Background

The EEOC filed an action on behalf of Beatrice Chambers alleging disability discrimination under Title I of the Americans With Disabilities Act of 1990. Id. at 1. The complaint named Community Health Systems, Inc. (“CHSI”) and Vicksburg Healthcare, LLC (“VHL”) as Defendants, alleging that both CHSI and VHL have been continuously doing business as River Region Medical Center (“River Region”) in Vicksburg, Mississippi. Id. The EEOC alleged that the Defendants terminated Chambers, who worked as a nurse at River Region for approximately 36 years, because of her unspecified disability, and additionally failed to provide her with reasonable accommodations in violation of the ADA. Id. at 1-2. VHL was a subsidiary of CHSI, which was incorporated in Delaware and had its principal place of business in Tennessee. Id. at 2. While VHL admitted doing business as River Region and admitted employing Chambers, CHSI denied doing business as River Region and denied employing Chambers. Id. Further, in its motion to dismiss, CHSI asserted the affirmative defenses of lack of personal jurisdiction, insufficient process, and insufficient service of process. Id           

The Court’s Decision

In granting CHSI’s motion to dismiss, the Court held that the issue of personal jurisdiction was controlling. Id. The EEOC has the burden of establishing a prima facie case for personal jurisdiction. Id. at 5. The Court noted that a non-resident defendant is amenable to being sued in Mississippi if: (1) Mississippi’s long-arm statute confers jurisdiction over the defendant; and (2) the exercise of personal jurisdiction comports with the requirements of federal due process. Id. at 3. The Mississippi long arm statute consists of three prongs, including: (i) the contract prong; (ii) the tort prong; and (iii) the doing-business prong. It was undisputed that the “doing-business” prong was case dispositive. Id.

CHSI submitted an affidavit from its Senior Vice President and Chief Litigation Counsel to the effect that it did not conduct business in Mississippi and that it lacked sufficient minimum contacts to be hauled into court in Mississippi. Id. at 6. The affidavit confirmed that CHSI is a holding company with no employees; CHSI indirectly owned subsidiaries including VHL; CHSI neither operated nor controlled the day-to-day operations of River Region; CHSI and River Region maintained separate banking records and did not co-mingle funds; CHSI did not employ nor have control over any River Region staff; CHSI never made any employment decisions regarding Chambers; CHSI and River Region observed corporate formalities (including no overlap between the Board of Trustees of River Region and the Board of Directors of CHSI; the respective Boards of River Region and CHSI each convened separate meetings; and the Boards maintained separate minutes and records); and CHSI is not qualified to do business in Mississippi, owns no property there, has no offices there, does not market there, and does not pay taxes there. Id. at 6-7. Following well-established precedent, the Court found this aggregation of factors to be dispositive. It held that the EEOC lacked personal jurisdiction to sue CHSI in Mississippi. Id. at 7.

The Court rejected the EEOC’s three arguments in opposition of dismissal.  Id. at 7-8. First, the EEOC argued that the 10-K form submitted by CHSI to the SEC demonstrated CHSI’s intent to do business in Mississippi as it often used language such as “we” when referring to the hospital. Id. at 8. The Court rejected this argument, noting that the 10-K form also contained a provision saying the hospitals are expressly owned and operated by the subsidiaries. Id. Next, the EEOC mistakenly speculated that the River Region employee handbook contained references to CHSI. Id. at 9-10. The Court cited an affidavit from CHSI’s litigation counsel clarifying that the entity referred to in the handbook was a different indirect subsidiary, and not the parent corporation. Id. at 10. Finally, the EEOC erroneously relied on another case involving CHSI – Bass v. Community Health Systems, Inc., Case No. 2:00cv193 (N.D. Miss.). Id. at 12. The Court noted that no facts from that case illustrated that CHSI should be amenable to personal jurisdiction. Id.

Implications For Employers

 When out-of-state parent corporations conduct business in Mississippi through subsidiaries, it is imperative that they observe corporate formalities to clearly maintain the parent-subsidiary relationship. Further, in documents such as 10-K forms and employee handbooks, employers must explicitly indicate that subsidiaries, and not the parent, own and operate local entities. If parent corporations follow the teachings of EEOC v. Vicksburg Healthcare, LLC, et al., they can avoid unwittingly submitting to personal jurisdiction in Mississippi courts while their subsidiaries do business there.

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

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

There continues to be growing firestorm of litigation initiated by the EEOC over hiring checks based on criminal backgrounds. In one of the most high profile cases addressing this issue (that we previously blogged about here and here,) Judge Sam R. Cummings of the U.S. District Court for the Northern District of Texas issued an decision in State of Texas v. EEOC, Case No.5:13-CV-255 (N.D. Tex. Aug. 20, 2014), granting the EEOC’s motion to dismiss a lawsuit brought against it by the State of Texas regarding the its “Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Under Title VII.”

Texas argued that the EEOC did not have the authority to issue the Guidance and that the EEOC’s position that Title VII trumps conflicting state laws violates its state sovereignty. Judge Cummings rejected the State’s arguments in this first-of-its-kind attack on the EEOC’s authority.

Case Background

In April 2012, the EEOC issued guidance urging businesses to avoid a blanket rule against hiring individuals with criminal convictions, reasoning that such rules could violate Title VII if they create a disparate impact on particular races or national origins. Like various other states, Texas has enacted statutes prohibiting the hiring of felons in certain job categories.  In November 2013, Texas sued the EEOC, seeking to enjoin the enforcement of this guidance, which Texas has nicknamed the “Felon Hiring Rule.” Id. at 2. In March of this year, Texas amended its complaint to include more specific allegations of injury. Id. For example, Texas alleged that the EEOC’s issued a right-to-sue letter to an applicant who had been rejected by the Texas Department of Public Safety after disclosing on his application that he had been convicted of a felony (unauthorized use of a motor vehicle). Texas claims that the job involved “access to sensitive personal information for all 26 million Texans.”

The EEOC offered three primary arguments as to why Texas’ lawsuit should be dismissed, including: (1) lack of jurisdiction because the EEOC’s guidance is not legally binding and does not constitute a final agency action; (2) Texas lacks standing to pursue its claims given that the guidance has no binding authority; and (3) Texas’ claims are not ripe. Id.

The Court’s Decision

Judge Cummings based his decision entirely on a lack of subject matter jurisdiction. Because “Texas does not allege that any enforcement action has been taken against it by the Department of Justice (as the EEOC cannot bring enforcement actions against states) in relation to the Guidance,” Judge Cummings held that there is not a “substantial likelihood” that Texas “will face future Title VII enforcement proceedings from the Department of Justice arising from the Guidance.” Id. at 7. As standing to bring suit “cannot be premised on mere speculation” Judge Cummings determined that Texas lacked the necessary standing to maintain its suit against the EEOC.

While acknowledging that the EEOC did in fact issue a right-to-sue letter to an applicant who was rejected by the Texas Department of Public Safety who believed he was discriminated against based on a prior felony conviction, that was still not enough for the Court since “there are no allegations that any enforcement action has been taken by the EEOC or Department of Justice” based on Texas’ “felony conviction” rule. Id. Accordingly, since the Guidance is not a final agency action and because no enforcement proceeding is pending against Texas, Judge Cummings dismissed the case as “seeking a premature adjudication in the abstract without any actual facts and circumstances relating to the employment practices at issue.” Id. at 7-8.

Implications For Employers

While Judge Cummings’ decision is a blow to one of the most high profile challenges to the EEOC’s Guidance, the dismissal is solely based on procedural grounds and is in no way an acceptance of the Guidance and/or the litigation initiated by the EEOC over hiring checks based on criminal backgrounds.

Furthermore, while the EEOC may have won the battle in round one of this lawsuit, the war is likely far from over. To this end, employers obtained strong ammunition to use going forward based on certain arguments advanced by the EEOC in pursuing the dismissal of Texas’ case.  In furtherance of its lack of standing argument, the EEOC admitted that the Guidance is neither “legally binding” nor does it carry with it any “legal consequences.” As such, to the extent the EEOC attempts to rely upon the Guidance moving forward as the basis for prosecuting disparate impact cases focused on criminal background checks, particularly in cases where the EEOC alleges that an employer willfully violated Title VII, employers need only turn to the EEOC’s representations to the U.S. District Court for fodder in their own defense. It remains to be seen whether Texas will appeal this ruling. Stay Tuned!

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

wdwas.jpgBy Gerald L. Maatman, Jr. and Jennifer A. Riley

On June 6, 2013, Judge Benjamin H. Settle of the U.S. District Court for the Western District of Washington issued an opinion in Canada v. Meracord, LLC, No. 12-5657 (W.D. Wash. June 6, 2012), and denied defendants’ motion to dismiss plaintiff’s claims. 

In a cursory opinion, Judge Settle held that an unaccepted offer of judgment – even for the full amount of the named plaintiff’s individual claim – did not moot plaintiff’s class action. 

Judge Settle refused to apply the Supreme Court’s recent decision in Genesis Healthcare Corp. v. Symczyk, 133 S.Ct. 1523 (2013), wherein the Supreme Court found that, following an offer of judgment, a plaintiff lacked any interest in an FLSA collective action that would preserve her claims.     

Judge Settle’s decision demonstrates that, notwithstanding Genesis, a Circuit split over the impact of offers of judgment remains intact and the viability of this common defense tactic for eliminating low-value claims remains uncertain in the context of class action litigation.

Background Facts

Plaintiffs Marie Johnson-Peredo, Dinah Canada, and Robert Hewson filed a class action against numerous defendants alleging, among other claims, violations of the Racketeering Influenced and Corrupt Organizations Act, the Washington Debt Adjusting Act, and the Washington Consumer Protection Act. Id. at 1-2.

On April 25, 2013, Defendants served Johnson-Peredo an offer of judgment for $13,058.46, plus attorneys’ fees, costs, and expenses.  Johnson-Peredo did not accept, but the Defendants nevertheless moved to dismiss her claims as moot. Id. at 2.

The District Court’s Opinion

The district court denied Defendants’ motion to dismiss and held that the offer of judgment did not moot the action. 

The district court relied on the Ninth Circuit’s opinion in Pitts v. Terrible Herbst, Inc., 653 F.3d 1081, 1091-92 (9th Cir. 2011), wherein the Ninth Circuit held that an accepted offer of judgment – for the full amount of the named plaintiff’s individual claim – made before a motion for class certification – “does not moot a class action.”  Id.

The court rejected Defendants’ argument that Pitts was abrogated by the Supreme Court’s opinion in Genesis

In Genesis, plaintiff brought a collective action claiming that her employer failed to pay for work performed during meal breaks in violation of the FLSA. Id. at 3. Plaintiff received a full offer of judgment for the amount of her claim but failed to accept the offer within the allotted time. The Supreme Court held that, because no other putative collective action member had opted in, plaintiff “had no personal interest in representing putative, unnamed claimants, nor any other continuing interest that would preserve her suit from mootness.” Id. at 3. Thus, the case as a whole had to be dismissed when her own claim became moot.

The district court declined to apply Genesis because it found “nothing to indicate that the specific holding extends beyond FLSA collective actions.” Id. It also declined to certify its ruling for appeal noting that Defendants failed to meet their burden under the collateral order doctrine.  Id.

Implications

Judge Settle’s opinion demonstrates that, notwithstanding Genesis, the Circuit split regarding whether an unaccepted offer of judgment makes a claim moot remains intact. If other courts follow suit, the effect of this common defense tactic in the class action context will continue to vary by Circuit.

ball and bat.jpgBy Gerald L. Maatman, Jr. and Kathryn Palamountain

As discussed here, in the wake of the U.S. Supreme Court’s decertification of a nationwide class in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), former class members have filed a number of follow-on class actions against Wal-Mart. We have also blogged  here and here that district courts have dismissed class claims in a couple of those suits as untimely. In the past week, yet another court has dismissed a Wal-Mart follow-on class action, but this one reached the same result using a different analysis.  

This case, entitled Ladik, et al. v. Wal-Mart Stores, Inc., No. 13-CV-123, (W.D. Wis. Feb. 20, 2013), was filed by present and former female Wal-Mart retail store employees who were former members of the Dukes class. Their pay and promotion gender discrimination claims are substantially similar to those being litigated in Dukes, but these plaintiffs narrowed their class claims to “Region 14”— a region that includes stores in Wisconsin, Illinois, Indiana, and Michigan.

Shortly after the case was filed, Wal-Mart brought a motion to dismiss the class allegations. Wal-Mart based its motion on two independent arguments. First, Wal-Mart contended that, during the pendency of the Dukes action, the statute of limitations for the plaintiffs’ class claims was not tolled under American Pipe & Constr. Co. v. Utah, 414 U.S. 538 (1974). As a result, the claims were untimely. In American Pipe, the U.S. Supreme Court held “the commencement of a class action suspends the applicable statute of limitations as to all asserted members of the class who would have been parties had the suit been permitted to continue as a class action.” Id. at 554. The Supreme Court later clarified that this tolling rule applied to any class member who later filed an individual action, not just those who intervened in the same action. See Crown, Cork & Seal Co. v. Parker, 462 U.S. 345 (1983). The Supreme Court did not address whether the tolling rule would apply to class members who later filed class claims in a federal court. Wal-Mart argued that such subsequently filed claims are not entitled to tolling.

Rejecting Wal-Mart’s argument, the Court in Ladik stated that “once a plaintiff has filed a complaint that is timely under American Pipe, the tolling issue is resolved, regardless whether the plaintiff wishes to proceed individually or as a class.” Slip Op.. at 11. Reasoning that the tolling rule was designed to avoid the needless filing of repetitive claims, the Court found that limiting tolling to subsequently filed individual actions would simply encourage the filing of multiple collective actions. In an apparent effort to address arguments related to abuse of process, the Court noted that the “merits” of repetitive class claims “can be addressed through application of principles of stare decisis and issue preclusion.” Id. at 12. As Wal-Mart had not argued preclusion, the Court did not address it. 

The Court then addressed Wal-Mart’s second argument: that the class claims should be dismissed because plaintiffs failed to identify a common question of law or fact in their complaint. Attempting to distinguish their class claims from the ones in Dukes, plaintiffs pointed to the geographical limitations on their proposed class. The Court did not find this difference meaningful, stating that such limitations “simply have created a smaller version of the same problem.” Id.  at 16. Finding that plaintiffs “must show a policy or practice at the regional level that applies to the entire class,” the Court observed that “plaintiffs point to nothing in their complaint that is different from the allegations in Dukes.” Id. More specifically, the Court stated that the plaintiffs “do not even attempt to distinguish the common questions they identify from those found lacking in Dukes” and that “most of their alleged common questions still related to ‘nationwide policies,’ not any policies of Region 14.” Id. at 18-19. Given such substantial similarities, the Court found that plaintiffs could not distinguish their proposed class from the one the Supreme Court rejected, and dismissed the class claims. Id. at 22.  

Implications For Employers

The Ladik decision illustrates that courts are utilizing different approaches in addressing the “re-booted” cases filed in the wake of Wal-Mart Stores, Inc. v. Dukes, but this decision is particularly noteworthy for its distinct tolling analysis. The defense has continued a streak of successes with respect to the follow-on class claims by former class members, but some decisions leave room for plaintiffs in other stacked class actions to play ball.

cellPhone.pngBy Gerald L. Maatman, Jr. and Jennifer A. Riley

On April 18, 2013, Judge George H. Wu of the U.S. District Court for the Central District of California dismissed potentially costly class action claims against the Los Angeles Lakers in Emanuel v. Los Angeles Lakers, Case No. CV-12-9936-GW (C.D. Cal. Apr. 18, 2013), at the pleading stage.

In Emanuel, Judge Wu closely evaluated plaintiff’s class claims under the Telephone Consumer Protection Act (“TCPA”) at the outset of litigation and, applying a common sense approach, found them insufficient to warrant discovery.   

We previously have reported other successful attempts to defeat class claims at the pleading stage (read more here). Although not a workplace class action, Emanuel demonstrates that pleading stage attacks are tactics that employers should keep in their arsenals for use in appropriate cases. 

Factual Background

Plaintiff David Emanuel filed a putative class action against the Los Angeles Lakers claiming that the team violated the TCPA by sending him and others unsolicited text messages. Id. at 1. 

During a Lakers game on October 13, 2012, the team displayed the following message at the Staples Center: “TEXT your message to 525377.” Id. After seeing the message, Plaintiff sent a text message: “I love you Facey. Happy Date Night” to the Lakers “for the sole purpose of having Defendant put a personal message on the scoreboard.” Id. 

Shortly thereafter, Plaintiff allegedly received an “unsolicited text message” from the same number: “Thnx! Txt as many times as u like. Not all msgs go on screen. Txt ALERTS for Lakers News alerts  Msg&Data Rates May Apply. Txt STOP to quit. Txt INFO for info.” Id.

Plaintiff claimed that the Lakers used an automatic telephone dialing system to generate the text and did so “to attempt to solicit business” from Plaintiff. Id. Defendant moved to dismiss and, in the alternative, for summary judgment.

The Court’s Opinion

The Court granted Defendant’s motion to dismiss with prejudice finding that the challenged message was not actionable under the TCPA. 

To state a claim under the TCPA, plaintiff must allege that (1) defendant called a cellular telephone number, (2) using an automatic telephone dialing system, (3) without the recipient’s prior express consent. Id. at 2. Penalties for certain TCPA violations begin at $500 and can be tripled to $1,500 for each unsolicited text message. 

Applying a “common sense” reading of the TCPA, the Court found that, by sending his original message, Plaintiff “expressly consented” to receiving a confirmatory text message from the Lakers. Id.

The Court noted that, indeed, when Plaintiff sought to display his love for “Facey” on the Staples Center jumbotron via text, “it is difficult to imagine how he could have been certain that the Lakers received his message without a confirmative response.” Id. 

Further, while the impact of Defendant’s message is not crucial for a TCPA analysis, the Court noted that, by informing Plaintiff that “not all msgs go on screen,” Defendant’s message “provided Plaintiff with information relevant to his request.” Id. at 3.

Implications

Sending unsolicited text messages can be a costly violation of the TCPA, with fines ranging from $500 to $1,500 for each unsolicited message. Emanuel demonstrates that, in some cases, courts will apply common sense in the class action context. And defendants can use pleading-stage attacks to rid themselves of costly class litigation, under the TCPA or otherwise, at the earliest opportunity, before incurring the expense of class-wide discovery.