magnifier-1714172__340By Gerald L. Maatman, Jr. and Alex W. Karasik

Seyfarth Synopsis:  The Sixth Circuit recently affirmed a U.S. District Court’s decision granting the EEOC’s application to enforce a subpoena in a disability discrimination investigation, finding that company-wide information regarding the employer’s use and disclosure of medical information was relevant to the investigation of a single employee’s charge of discrimination. The ruling underscores the challenges faced by employers in objecting to EEOC subpoenas.

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As we discussed in recent blog posts (here, here, and here), the EEOC has been aggressive in issuing expansive subpoenas that seek company-wide information from employers, as opposed to limiting the subpoena to seek information about an individual charging party.  In the latest round of EEOC versus employer subpoena litigation, in EEOC v. United Parcel Service, Inc., No. 16-2132, 2017 U.S. App. LEXIS 10280 (6th Cir. June 9, 2017), the U.S. Court of Appeals for the Sixth Circuit affirmed a decision of the U.S. District Court for the Eastern District of Michigan granting the EEOC’s application to enforce a subpoena that sought company-wide information, even though investigation concerned a single employee’s charge of discrimination.

This ruling provides yet another example of courts setting the bar low when considering what is “relevant” for purposes of the scope of an EEOC subpoena.  As such, employers can and should expect the EEOC to continue to be aggressive in firing off far-reaching subpoenas as it investigates high-stakes systemic discrimination claims.

Case Background

A UPS operations manager filed an EEOC charge claiming that UPS discriminated and retaliated against him in violation of the Americans With Disabilities Act of 1990 (“ADA”).  Id. at *1-2.  In particular, he claimed that UPS published confidential medical information about him and other employees on its intranet page.  Id. at *2.  The EEOC began an investigation into the employee’s claims, which resulted in the Commission issuing a subpoena that requested information about how UPS stored and disclosed employee medical information.  UPS opposed the subpoena, claiming that the requested information was irrelevant to his charge.  The EEOC thereafter filed an application to enforce the subpoena.  The District Court granted the EEOC’s application, and UPS appealed to the Sixth Circuit.

The Sixth Circuit’s Decision

The Sixth Circuit affirmed the District Court’s grant of the EEOC’s application to enforce the subpoena.  First, the Sixth Circuit explained that a subpoena enforcement proceeding is a summary process designed to expeditiously decide whether a subpoena should be enforced, and that the purpose is not to decide the merits of the underlying claim.  Id. at *4 (citation omitted).  Citing the U.S. Supreme Court’s recent ruling in McLane v. EEOC, 137 S. Ct. 1159, 1170 (2017), which we blogged about previously here, the Sixth Circuit further instructed that it would review the District Court’s decision to enforce the subpoena under an abuse of discretion standard.  Id.

After noting that in the Title VII context the Sixth Circuit has held that the EEOC is entitled to evidence that focuses on the existence of patterns of racial discrimination in job classifications or hiring situations other than those that the EEOC’s charge specifically targeted, the Sixth Circuit opined that it saw “no reason to hold differently with respect to discrimination on the basis of disability.”  Id. at *5 (citations omitted).  Further, “so long as a charge alleges unlawful use of medical examinations and inquiries, evidence of patterns of such unlawful use is relevant to the charge under investigation.”  Id.  UPS argued that the EEOC was only entitled to information regarding similarly-situated employees.  The Sixth Circuit rejected this argument, noting that there was no such restriction under the ADA.   Id.

UPS further argued that the EEOC’s requested information was overbroad because the databases referenced in the EEOC’s subpoena contained information about employees from other regions in the United States and Canada, including one database where the Charging Party’s information never appeared.  The Sixth Circuit rejected this argument, noting that the breach of confidentiality that the employee described in his amended charge was not limited to himself since he alleged that “all other employees subject to Health and Safety incident action/reports have had their confidentiality breached in the same manner as me.”  Id. at *6.  The Sixth Circuit further determined that the EEOC was entitled to search for evidence that showed a pattern of discrimination other than the specific instance of discrimination described in the charge.  Id.

Turning to UPS’s argument that the amended charge was not valid because it “appears to have been amended for an illegitimate purpose — to obtain documents that the subpoena otherwise could not reach,” the Sixth Circuit held that UPS forfeited this argument since it did not raise it before the District Court.  Id.  Further, the Sixth Circuit rejected UPS’s argument that the EEOC’s subpoena was overbroad because it provided no temporal scope, noting that regardless of when UPS developed the criteria for posting content on its intranet site, this piece of evidence may provide insight into how UPS categorizes information as confidential.  Id. at *7.  Finally, the Sixth Circuit dismissed UPS’s argument that producing the requested information would be unduly burdensome, noting that UPS did not identify how producing the requested evidence would be difficult, especially considering that both parties acknowledged it could be produced electronically.  Accordingly, the Sixth Circuit held that the District Court did not abuse its discretion in ordering UPS to comply with the subpoena, and it affirmed the District Court’s decision.  Id. at *7-8.

Implications For Employers

Armed with yet another decision holding that an expansive EEOC subpoena was relevant to an investigation, the further emboldened EEOC likely will continue to seek far-reaching, company-wide information in its investigations, including those that stem from a single employee’s charge of discrimination.  Despite this recent trend of unfavorable rulings, employers should not let their guard down when confronted with broad EEOC subpoenas.  Rather, employers must carefully scrutinize each EEOC subpoena and aggressively attack its relevance when appropriate.

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

 

armor-158430__340By Gerald L. Maatman, Jr. and Alex W. Karasik

Seyfarth Synopsis:  In a sexual harassment lawsuit brought by the EEOC, the Sixth Circuit affirmed a U.S. District Court’s grant of an employer’s motion for summary judgment after finding that the harassing employee was not a supervisor under Title VII, and therefore the company was not vicariously liable for his actions. It is a decidedly pro-employer ruling.

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In EEOC v. AutoZone, Inc., No. 16-6387 (6th Cir. June 9, 2017), the EEOC alleged that AutoZone was liable under Title VII for a store manager’s alleged sexual harassment of three female employees.  After the U.S. District Court for the Western District of Tennessee granted the employer’s motion for summary judgment, the EEOC appealed.  The Sixth Circuit affirmed the District Court’s grant of summary judgment, finding that because the store manager did not take any tangible employment action against his co-workers and had no authority to do so, he was not a supervisor under Title VII, and thus AutoZone was not vicariously liable for the conduct alleged.  The Sixth Circuit further held that even if the store manager was found to be a supervisor under Title VII, AutoZone established an affirmative defense to liability.

For employers facing EEOC lawsuits alleging that they are vicariously liable for sexual harassment claims brought against employees with managerial job titles, yet who have limited authority to take tangible employment actions, this ruling can be used as a blueprint to attack such claims in motions for summary judgment.

Case Background

In May 2012, AutoZone transferred a store manager to its Cordova, Tennessee location.  Id. at 2.  The store manager could hire new hourly employees and write up employees at the store for misbehaving, but could not fire, demote, promote, or transfer employees.  Authority over firing, promoting, and transferring rested with the district manager for the store.

After an employee claimed that the store manager made lewd comments to her, AutoZone internally investigated the allegations.  As part of AutoZone’s internal investigation, two other female employees who worked at the Cordova location confirmed that the store manager made lewd sexual comments.  Despite his denial of the allegations, AutoZone ultimately transferred and terminated the store manager.  Thereafter, the EEOC brought a lawsuit alleging that AutoZone subjected the three female employees to sexual harassment.  Following discovery, AutoZone moved for summary judgment.  The District Court granted AutoZone’s motion for summary judgment, finding that the store manager was not a supervisor under Title VII and therefore AutoZone was not vicariously liable for his actions.  The EEOC appealed the District Court’s grant of summary judgment to the Sixth Circuit.

The Sixth Circuit’s Decision

The Sixth Circuit affirmed the District Court’s grant of AutoZone’s motion for summary judgment.  First, the Sixth Circuit instructed that under Title VII, if the harassing employee is the victim’s co-worker, the employer is liable only if it was negligent in controlling working conditions, or in other words, if the employer knew or should have known of the harassment yet failed to take prompt and appropriate corrective action.  Id. at 4 (internal quotation marks and citation omitted).  However, if the harasser is the victim’s supervisor, a non-negligent employer may become vicariously liable if the agency relationship aids the victim’s supervisor in his harassment.  Id.  The Sixth Circuit further explained that an employee is a “supervisor” for purposes of vicarious liability under Title VII if he or she is empowered by the employer to take tangible employment actions against the victim.  Id.

Applied here, the Sixth Circuit found that AutoZone did not empower the store manager to take any tangible employment action against his victims since he could not fire, demote, promote, or transfer any employees.  Id. at 5.  Further, the Sixth Circuit held that the store manager’s ability to direct the victims’ work at the store and his title as store manager did not make him the victims’ supervisor for purposes of Title VII.  The Sixth Circuit also noted that while the store manager could initiate the disciplinary process and recommend demotion or promotion, his recommendations were not binding, and his ability to influence the district manager did not suffice to turn him into his victims’ supervisor.  Id. at 5-7.  Finally, the Sixth Circuit held that the store manager’s ability to hire other hourly employees was irrelevant since he did not hire the employees he harassed.  Id. at 7.

After finding that the store manager was not a supervisor for purposes of Title VII, the Sixth Circuit further held that even if he was found to be a supervisor, AutoZone established an affirmative defense to liability.  The defense has two elements: (1) that the employer exercised reasonable care to prevent and promptly correct any sexually harassing behavior; and (2) that the harassed employees unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer or to avoid harm otherwise.  Id.  The Sixth Circuit held that AutoZone met the first element by utilizing an appropriate anti-harassment policy to prevent harassment, and by transferring and later terminating the store manager promptly after it investigated the allegations.  Regarding the second element, the Sixth Circuit held that AutoZone satisfied this prong since the victims failed to report the store manager’s behavior for several months.  The Sixth Circuit thus held that AutoZone established an affirmative defense to liability.  Accordingly, the Sixth Circuit affirmed the District Court’s grant of AutoZone’s motion for summary judgment.  Id. at 10.

Implications For Employers

Employers often utilize employees that may be “managers” in title, yet do not have the authority to take tangible employment actions.  When those employers are sued by the EEOC for the conduct of managers with limited authority, this ruling can be used to argue that such employees are not “supervisors” under Title VII, and therefore the employer is not vicariously liable for their actions.  Nonetheless, given the EEOC’s aggressiveness in attempting to use the theory of vicarious liability to hold “deep-pockets” large-scale employers liable for the conduct of employees, employers would be prudent to invest in harassment-prevention training to minimize the likelihood of such behavior occurring.  But in the event that such incidents of harassment arise and lead to EEOC lawsuits, employers can use this decision to tailor their arguments to focus on the authority of the harasser, as opposed to his or her job title.

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

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

Seyfarth Synopsis: In one of the first two ever transgender discrimination cases brought by the EEOC, a federal court in Michigan granted the employer’s motion for summary judgment, finding the employer met its burden in demonstrating that it is exempt under the Religious Freedom Restoration Act, while the EEOC failed to suggest a less restrictive alternative in its challenge of the employer’s gender-specific dress code policy.

In one of the first two ever transgender discrimination cases brought by the EEOC, the government alleged that a funeral home wrongfully terminated its former funeral director for being transgender, for transitioning from male to female, and/or for not conforming to the employer’s gender-based preferences regarding its dress code.  The funeral home argued it was exempt under the Religious Freedom Restoration Act (“RFRA”).  In EEOC v. R.G. & G.R. Harris Funeral Homes, Inc., No. 14-13710 (E.D. Mich. Aug. 18, 2016), after the EEOC and employer R.G. & G.R. Harris Funeral Homes, Inc. (“the Funeral Home”) both moved for summary judgment, Judge Cox of the U.S. District Court for the Eastern District of Michigan granted the Funeral Home’s motion and denied the EEOC’s motion.  The court also dismissed the EEOC’s claim that the Funeral Home engaged in an unlawful employment practice by providing work clothes only to males, noting that the EEOC had not done a full investigation of this claim that it uncovered during its wrongful termination investigation.

Although transgender discrimination litigation is not yet explicitly covered under Title VII, this ruling is monumental in terms of shaping the landscape for an evolving area of law that will profoundly impact employers in years to come.

Case Background

The Funeral Home is a closely-held, for-profit corporation operating three funeral homes in Michigan.  Id. at 7.  Owner and operator Thomas Rost has been a Christian for over sixty-five years.  Id. at 15.  While the Funeral Home does not officially affiliate with a religion, its website contains scripture and various bible verses are dispersed at its locations.  Id.  The Funeral Home has a strict employee dress code policy with several requirements, including that men must wear suits and women must wear jackets and skirts/dresses.  Id. at 8-9.

The claimant was hired in 2007.  Id. at 9.  In 2013, the claimant provided the Funeral Home with a letter stating he intended to begin transitioning his gender to female following return from a vacation.  Id. at 10.  Although the claimant intended to abide by the gender-specific dress code by wearing a skirt during the transition, Rost fired the claimant, stating “this is not going to work out.”  Id. at 11.

The claimant filed a charge of sex discrimination with the EEOC.  During its investigation, the EEOC discovered that male employees at the Funeral Home were provided with work clothing and that female employees were not.  The EEOC filed suit against the Funeral Home on September 25, 2014, asserting two claims.  Id. at 12.  First, it asserted a wrongful termination claim, alleging the claimant was fired because the claimant is transgender, because of the claimant’s transition from male to female, and/or because the claimant did not conform to the Funeral Home’s sex or gender-based preferences, expectations, or stereotypes.  Second, the EEOC alleged that the Funeral Home engaged in an unlawful employment practice by providing work clothes to male but not female employees.  The parties filed cross-motions for summary judgment.

The Decision

The court granted summary judgment in favor of the Funeral Home as to the wrongful termination claim, and dismissed the EEOC’s claim regarding the work clothes being provided only to males.  Id. at 55-56.  First, the Funeral Home asserted that its enforcement of its sex-specific dress code cannot constitute impermissible sex stereotyping under Title VII.  The court rejected this argument, opining that “[t]his evolving area of the law – how to reconcile this previous line of authority regarding sex-specific dress/grooming codes with the more recent sex/gender-stereotyping theory of sex discrimination under Title VII – has not been addressed by the Sixth Circuit.”  Id. at 25-26.

On the heels of the Supreme Court’s decision in Burwell v. Hobby Lobby Stores, Inc., 134 S. Ct. 2751 (2014), the Funeral Home also argued that the RFRA prohibited the EEOC from applying Title VII to force the Funeral Home to violate its sincerely held religious beliefs.  Id. at 26.  The RFRA prohibits the “‘Government [from] substantially burden[ing] a person’s exercise of religion even if the burden results from a rule of general applicability’ unless the Government ‘demonstrates that application of the burden to the person—(1) is in furtherance of a compelling governmental interest; and (2) is the least restrictive means of furthering that compelling governmental interest.’”  Id. at 27 (quoting 42 U.S.C. §§ 2000bb–1(a), (b)).  The EEOC conceded that the Funeral Home’s religious beliefs were sincerely held.  Id.  Accordingly, citing Rost’s testimony that permitting employees to dress inconsistent with their biological sex would violate his religion and pressure him to relinquish his business, the court found that “the Funeral Home met its initial burden of showing that enforcement of Title VII, and the body of sex-stereotyping case law that has developed under it, would impose a substantial burden on the ability of the Funeral Home to conduct business in accordance with its sincerely-held religious beliefs.”  Id. at 32.

After finding that the Funeral Home demonstrated that enforcement of Title VII would be a substantial burden to its religious exercise, the EEOC then needed to meet its two-part test: (1) application of the burden is in furtherance of a compelling government interest; and (2) is the least restrictive means of furthering that compelling government interest.  The court assumed without deciding that the EEOC met its first burden, therefore proceeded to analyze the least restrictive means burden.  Id. at 36.  Quoting Hobby Lobby, the court noted that the “least-restrictive means standard is exceptionally demanding.”  134 S. Ct. at 2780.

Rejecting the EEOC’s conclusory argument that Title VII is narrowly tailored, the court noted that the EEOC did not provide “a focused ‘to the person’ analysis of how the burden on the Funeral Home’s religious exercise is the least restrictive means of clothing gender stereotypes at the Funeral Home under the facts and circumstances presented here.”  Id. at 38.  Further, noting the EEOC had been proceeding as if gender identity or transgender status was protected under Title VII, the court opined that the EEOC appeared to have taken the position that the only acceptable solution would be for the Funeral Home to allow the claimant to wear a skirt while working as a funeral director.  Id. at 39.

Finding that the EEOC failed to offer or even explore any solutions that could have worked under the facts of this case, the court rejected the EEOC’s approach and questioned “[i]f the EEOC truly has a compelling governmental interest in ensuring that [the claimant] is not subject to gender stereotypes in the workplace in terms of required clothing at the Funeral Home, couldn’t the EEOC propose a gender-neutral dress code (dark-colored suit, consisting of a matching business jacket and pants, but without a neck tie) as a reasonable accommodation that would be a less restrictive means of furthering that goal under the facts presented here?”  Id. at 38-41.  Accordingly, the court held that the EEOC did not meet its demanding burden, thus entitling the Funeral Home to RFRA exemption from Title VII.

As to the second claim, the EEOC alleged that the Funeral Home violated Title VII by providing a clothing allowance and/or work clothes to male employees but failing to provide such assistance to female employees.  Id. at 45.  Relying on EEOC v. Bailey, 563 F.2d 439 (6th Cir. 1977), the Funeral Home argued that the EEOC may include in a Title VII suit only claims that fall within an “investigation reasonably expected to grow out of the charge of discrimination.”  Id. at 45-46.  Applying Bailey, the court concluded that the EEOC investigation here uncovered possible unlawful discrimination (1) of a kind not raised by the claimant; and (2) not affecting the claimant.  Id. at 54-55.  Thus, the court instructed that the proper procedure would be the filing of a charge by a member of the EEOC and for a full EEOC investigation of that new claim of discrimination.  Accordingly, the court dismissed the EEOC’s clothing allowance claim without prejudice.  Id. at 56.

Implications For Employers

With an increasingly diverse workforce employing more transgender employees, employers would be wise to adopt an inclusive mentality in order allow their business to nurture a broader range of perspectives while also protecting against potential discrimination liability.  As this was a favorable ruling for the employer, businesses with sincerely held religious beliefs can use this as a template to seek protection under RFRA exemptions when defending against various discrimination claims, including those brought on behalf of transgender employees.  Until Title VII eventually incorporates transgender discrimination, the EEOC will continue to bring sex discrimination claims on behalf of transgender employees, but will use this opinion to remedy flaws in their strategy, for instance, in their approach to the least restrictive means test for gender-based dress code policies.

Instead of taking a reactionary approach and waiting for Title VII to evolve or for the EEOC to remedy their case theories, employers should be proactive in revising their policies to be gender-neutral when possible and contemplative of any employment requirement that might affect transgender employees.  As both employees and laws change, employers should follow suit now before having to pay to defend one later.

Our loyal blog readers can also find this post on our EEOC Countdown Blog here.

sixth-circuit2By Gerald L. Maatman, Jr. and Jennifer A. Riley

Whereas Wal-Mart scored a major victory for employers in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), its saga continues as former class members continue to pursue class claims in regional forums.  As we previously have discussed (here, herehere and here), former Dukes plaintiffs have attempted to pursue follow-on lawsuits with varying degrees of success.

Recently, in Phipps, et al. v. Wal-Mart Stores, Inc.,, No. 13-6194 (6th Cir.), the U.S. Court of Appeals for the Sixth Circuit reversed the U.S. District Court for the Western District of Tennessee and found that plaintiffs’ class claims were not time-barred.  As a result, the plaintiffs can pursue class certification of the same gender discrimination claims formerly at issue in Dukes.

The decision is an important read for employers. It strikes a blow to the impact of orders denying class certification and may open the door for losing plaintiffs to shop different class certification theories in different forums.

Background

On June 8, 2001, six named plaintiffs filed suit under Title VII in the Northern District of California on behalf of all former and current female employees of Wal-Mart Stores nationwide.  Id. at 2-3.  The plaintiffs sought certification of a nationwide class of current and former female employees under Rule 23(b)(2), or alternatively, under Rule 23(b)(3).  Id. at 3.  In 2004, the district court certified a nationwide class under Rule 23(b)(2).  Id.  In 2007, the Ninth Circuit affirmed the district court’s certification of a nationwide class under Rule 23(b)(2) for current employees and remanded for the district court to consider certification of punitive damages classes under Rule 23(b)(2) or Rule 23(b)(3) and certification of former employees classes under Rule 23(b)(3).  Id.

The Supreme Court granted certiorari and, in June 2011, issued its landmark decision, reversing certification of a nationwide class of current employees under Rule 23(b)(2).  The Supreme Court held, among other things, that the plaintiffs did not demonstrate questions of law or fact common to the class because they failed to provide “significant proof” of a nationwide policy or other “specific employment practice” that affected 1.5 million class members in the same way.  Id. at 4.

Thereafter, plaintiffs promptly filed a motion in the California district court to extend tolling of the statute of limitations.  The district court granted the motion and directed all class members who had not filed administrative charges with the EEOC to do so on or before May 25, 2012.  The plaintiffs then amended their California case to narrow the scope of the proposed class to current and former female employees who had been subjected to gender discrimination within California regions.  Id. at 5.  In addition, plaintiffs filed suits in four other jurisdictions – including Tennessee, Texas, Florida, and Wisconsin – to bring individual and class claims concerning other Wal-Mart regions.  Id.

In Tennessee, three unnamed class members filed their own lawsuit asserting individual and putative class claims under  Rule 23(b)(2) and Rule 23(b)(3) on behalf of current and former female employees in Wal-Mart “Region 43” – a region allegedly centered in Middle and Western Tennessee, and including portions of Alabama, Arkansas, Georgia, and Mississippi.  All three plaintiffs had filed administrative charges with the EEOC within the deadline ordered by the district court, and they filed suit within 90 days of receiving right-to-sue letters.

Wal-Mart moved to dismiss the putative class claims under Rule 12(b)(6), arguing that Sixth Circuit precedent prohibited tolling for any purported class action brought after a previous denial of class certification.  The district court agreed and dismissed the class claims with prejudice, but certified its decision for interlocutory appeal.  Id. at 6.

The Sixth Circuit’s Opinion

The timely filing of a class action complaint normally tolls the statute of limitations for all members of the putative class until a court decides that the suit is not appropriate for class treatment.  Id. at 7.  At that point, the putative class members can move to intervene as plaintiffs in the pending action or can file their own lawsuits. Id.

In Phipps, Wal-Mart argued that, because the Supreme Court already had rejected class certification of plaintiffs’ claims in Dukes, tolling was not available for plaintiffs’ rebooted class theory.  The Sixth Circuit disagreed.

With respect to their Rule 23(b)(3) claims, the Sixth Circuit found that, when plaintiffs initiated their action in Tennessee, no court in any jurisdiction had denied certification of a Rule 23(b)(3) class of current and former female employees.  Id. at 13.  Indeed, the original motion for class certification under Rule 23(b)(3) filed by the Dukes plaintiffs remained pending in the California district court after the Supreme Court issued its decision.  Id.at 15.

With respect to their Rule 23(b)(2) claims, the Sixth Circuit held that the issue was not whether the class action was timely filed but whether plaintiffs’ class claims were precluded by the Supreme Court’s decision inDukes.  It found no preclusion.  Plaintiffs, for the first time, sought certification of a regional class under Rule 23(b)(2) for themselves and all other current Wal-Mart employees in Region 43.  Id. at 18.  “These substantive claims are within the scope of those asserted by the nationwide class in Dukes, . . . but the class seeks neither relitigation nor correction of the earlier class claims.”  Id.

The Sixth Circuit rejected Wal-Mart’s argument that it is unfair to permit absent class members to “stack” one class action onto another, noting that “this form of argument flies in the face of the rule against non-party preclusion.”  Id. at 21.  “We follow the Supreme Court’s lead and trust that existing principles in our legal system, such as stare decisis and comity among courts, are suited to and capable of address these concerns.”  Id.

Implications

In Phipps, the Sixth Circuit allowed former class members to re-assert the same class claims that the Supreme Court rejected in Dukes, primarily because plaintiffs invoked a different rule and certification theory (Rule 23(b)(3)) on behalf of a smaller group of class members (Region 43).  As such, the Sixth Circuit’s opinion seemingly opens the door for plaintiffs who lose class certification in one forum to file the same claims in other forums, “stack” their tolling periods, and “shop” different class certification theories in the hopes of exhausting their opponents or obtaining more favorable rulings.  If successful, such plaintiffs can raise the stakes for defendants by subjecting them to never-ending series of lawsuits involving claims that, because of extended tolling, reach back years or even decades.  It remains to be seen whether Wal-Mart will seek further review of the Sixth Circuit’s decision or, if plaintiffs proceed with their motion for class certification, whether the district court indeed will resolve the matter based on principles of “stare decisis and comity.”  Stay tuned.

US-CourtOfAppeals-6thCircuit-SealBy Christopher M. Cascino and Gerald L. Maatman, Jr.

In EEOC v. Ford Motor Co., No. 12-2484 (6th Cir. Apr. 10, 2015), a case we blogged about previously here and here, the U.S. Court of Appeals for the Sixth Circuit upheld summary judgment in favor of Ford and against the EEOC in an Americans With Disabilities Act (“ADA”) failure to accommodate lawsuit. The Sixth Circuit held that the person on whose behalf the EEOC brought suit was not qualified within the meaning of the ADA because the accommodation proposed by the EEOC of allowing her to telecommute up to four days per week was unreasonable. The Sixth Circuit also held that the EEOC did not provide evidence sufficient to allow a trier of fact to find that Ford retaliated against the charging party for bringing an EEOC charge.

The Sixth Circuit’s ruling represents an important win for employers and a significant defeat for the EEOC as the Commission attempts to make telecommuting a reasonable accommodation option for more and more jobs.

Case Background

Jane Harris was a resale buyer for Ford, serving as an intermediary between steel suppliers and the companies that use steel to produce parts for Ford. Id. at 2. Her job was “highly interactive.” Id. As part of her job duties, she was required to meet with suppliers at their sites and Ford employees at Ford’s site, and was further required to meet with Ford employees and suppliers “at a moment’s notice.” Id. at 2-3. In Ford’s judgment, this made “a resale buyer’s regular and predictable attendance in the workplace . . . . essential to being a fully functioning member of the resale team.” Id. at 3.

Throughout her six-year tenure as a retail buyer, Harris had irritable bowel syndrome, an illness that caused her to have severe fecal incontinence. Id. at 3-4. Because of this incontinence and the stress that it caused her, Harris frequently missed work and would otherwise often come in late and leave early. Id. at 3. Her performance suffered, and she ended up ranked in the bottom 10% of her peers for two consecutive years. Id.

Ford tried several accommodations to assist Harris, but none solved her performance problems. Id. at 4. Harris then proposed that she be allowed to work up to four days per week from home as an accommodation. Id. Ford concluded that, out of Harris’ ten job responsibilities, four could not be performed from home, four could not effectively be performed from home, and the two other responsibilities were “not significant enough to support telecommuting.” Id. at 5. Ford thus concluded that the only way a telecommuting accommodation could work would be if it were on a set schedule and if Harris could come to Ford’s worksite as needed on days scheduled for telecommuting. Id. Harris could not agree to that. Id.

Since Harris’ proposed accommodation would not work, Ford offered her other accommodations, including moving her closer to the restroom and jobs more suited for telecommuting. Id. Harris turned these accommodations down, sent an email claiming that the denial of her accommodation request violated the ADA, and filed a charge with the EEOC. Id.

After filing the charge, Harris’ performance continued to slide and, after Harris failed to complete a Performance Enhancement Plan intended to improve her subpar performance, Harris was terminated. Id. at 5-6.

The EEOC filed suit against Ford, claiming that Ford failed to accommodate Harris’ disability and that Ford terminated Harris in retaliation for her decision to file a charge with the EEOC. Id. at 6. The district court granted summary judgment in favor of Ford, finding that “working from home up to four days per week is not a reasonable accommodation under the ADA and that the evidence did not cast doubt on Ford’s stated reason for terminating Harris’ employment: poor performance.” Id. A divided Sixth Circuit panel reversed the district court, after which the Sixth Circuit agreed to hear the case en banc. Id.

The Sixth Circuit’s En Banc Ruling

The Sixth Circuit began its discussion by pointing out that any accommodation that involves removing an “essential function” from a job “is per se unreasonable.” Id. at 7. It then considered whether on-site attendance was essential to Harris’s job.

The Sixth Circuit concluded that “regularly attending work on-site is essential to most jobs.” Id. at 8-9. It concluded this based on numerous U.S. Court of Appeals decisions holding that this is the case, as well as EEOC regulations and informal guidance suggesting that on-site attendance is normally essential. Id. at 7-9. It further concluded that on-site attendance is even more essential in “interactive” jobs like Harris’ job. Id. at 7-8. It thus concluded that Harris’ proposed accommodation was unreasonable. Id. at *10.

The Sixth Circuit also rejected each of the EEOC’s arguments as to why summary judgment was not appropriate. The Sixth Circuit held that Harris’ testimony that she could perform her job functions from home could not create a “genuine dispute of fact” because courts should not “credit the employee’s opinion about what functions are essential” since, if they did, “every failure-to-accommodate claim involving essential functions would go to trial.” Id. at 11 (emphasis in original).

The Sixth Circuit found the fact that other resale buyers telecommuted did not make Harris’ proposed accommodation reasonable because she was requesting a much larger accommodation than Ford had given to any of its other resale buyers. Id. at 11-12. The other resale buyers who telecommuted did so on one set day per week and agreed to come in on their telecommuting day if needed, while the EEOC argued that Harris should have been allowed to telecommute up to four days per week on an unscheduled basis without an agreement to come in on telecommuting days on an as-needed basis. Id. at 12. The Sixth Circuit found the difference between the telecommuting Ford gave to other resale buyers and the telecommuting requested by Harris and the EEOC to be so different that it found the EEOC’s arguments in this regard to be “legally and factually unsupported.” Id.

The Sixth Circuit also criticized the EEOC’s position because it would create a perverse incentive for employers to deny limited telecommuting as an accommodation for their employees so that they would not have to grant other employees far more expansive telecommuting accommodations:

[I]f the EEOC’s position carries the day, once an employer allows one person the ability to telecommute on a limited basis, it must allow all people with a disability the right to telecommute on an unpredictable basis up to 80% of the week (or else face trial). That’s 180-degrees backward. It encourages — indeed, requires — employers to shut down predictable and limited telecommuting as an accommodation for any employee. A good deed would effectively ratchet up liability, which would undermine Congress’ stated purpose of eradicating discrimination against disabled persons.

Id. (emphasis in original).

Finally, the Sixth Circuit rejected the EEOC’s argument that advances in technology themselves are enough to create an issue of fact as to whether on-site attendance was an essential function of Harris’s job. It first pointed out that the fact of advancing technology “in the abstract” is not proof that technological advances “made [Harris’s] highly interactive job one that can be effectively performed at home.” Id. at 13. It then discussed the fact that “email, computers, telephone, and limited video conferencing . . . . were equally available when courts around the country uniformly held that on-site attendance is essential for interactive jobs,” thus finding that these technologies do not make on-site work attendance non-essential in interactive jobs. Id. Based on this analysis, the Sixth Circuit upheld the district court’s decision to grant summary judgment to Ford on the EEOC’s failure to accommodate claim.

The Sixth Circuit then considered whether Ford retaliated against Harris for making a charge with the EEOC. While agreeing that the timing of Harris’ discharge “seem[ed] suspicious,” it found that “temporal proximity cannot be the sole basis for finding pretext.” Id. at 16. The Sixth Circuit concluded that the other evidence suggesting pretext was insufficient to create a genuine issue of fact. It found that Harris’ meetings with a non-decisionmaker could not prove pretext because “[a]ctions by non-decisionmakers cannot alone prove pretext. Id. at*17. It next found that Harris’ poor performance review after the charge could not establish pretext because it was as poor as her last pre-charge performance review. Id. at 18. Finally, the Sixth Circuit held that Harris’ testimony that the Performance Enhancement Plan she failed to complete was designed to “ensure her failure” did not create an issue of fact because it was “so utterly discredited by the record that no reasonable jury could believe it.” Id. at 19. Based on this analysis, the Sixth Circuit also upheld the district court’s decision to grant summary judgment to Ford on the EEOC’s retaliation claim.

Implications For Employers

This case is a significant win for employers and a significant loss for the EEOC as it attempts to expand telecommuting as a reasonable accommodation under the ADA. Employers can use this ruling to support their position in ADA actions brought by the EEOC as well as private plaintiffs who assert that telecommuting is a reasonable accommodation under the ADA. Of special interest is the Sixth Circuit’s observation that “email, computers, telephone, and limited video conferencing . . . . were equally available when courts around the country uniformly held that on-site attendance is essential for interactive jobs,” which can be used to undercut inevitable arguments by ADA plaintiffs that on-site attendance is outdated in light of technological advances. Moreover, employers can use this case when ADA plaintiffs claim they should have been given a more extensive version of an accommodation given to another employee.  Specifically, employers can argue that the degree of the accommodation matters and that allowing plaintiffs to use such an argument would create a perverse incentive for employers to deny accommodation requests.

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

imagesBy Pam Devata, John Drury, and Robert Szyba

On March 13, 2015, the Solicitor General of the United States filed an amicus brief opposing the petition for writ of certiorari filed in Spokeo, Inc. v. Robins, No. 13-1339 (U.S.). The Spokeo petition poses a question with a significant impact on the future scope of consumer and workplace-related class actions: whether Congress can confer standing on a plaintiff who suffers no concrete harm, but who instead alleges only a statutory violation? To date, ten different amicus briefs have been filed urging the Supreme Court to grant review.

Case Background

In July 2010, Plaintiff Thomas Robins filed a purported class action under the Fair Credit Reporting Act (“FCRA”) against Spokeo, Inc., a search engine that compiles publicly available information on individuals into a searchable database. Robins alleged that the search results associated with his name included inaccurate information about him, in violation of the FCRA. Robins did not allege that he suffered actual damages, but only that he was entitled to statutory damages because the FCRA created a private right of action where inaccurate consumer information is reported. The district court dismissed Robins’ complaint, finding that a mere violation of the FCRA does not confer standing “where no injury in fact is properly pled.” 2011 WL 11562151, at *1. In February 2014, the U.S. Court of Appeals for the Ninth Circuit reversed, holding that the “violation of a statutory right is usually a sufficient injury in fact to confer standing” and that “a plaintiff can suffer a violation of the statutory right without suffering actual damages.”  742 F.3d 409, 413.

In May 2014, Spokeo filed its petition for writ of certiorari to the U.S. Supreme Court. Spokeo posed this question: “Whether Congress may confer Article III standing upon a plaintiff who suffers no concrete harm and who therefore could not otherwise invoke the jurisdiction of a federal court, by authorizing a private right of action based on a bare violation of a federal statute.”  Spokeo’s petition identified a circuit split. The Fifth and Sixth Circuits agree with the Ninth Circuit’s Spokeo decision and permit plaintiffs to maintain lawsuits without “injury-in-fact” and based solely on an alleged statutory violation. The Seventh Circuit also has signaled that it agrees with this position. In contrast, the Second, Third and Fourth Circuits have held that Congress cannot create standing by statute alone, and the mere deprivation of a statutory right is insufficient to confer standing.

The Solicitor General Opposes The Grant Of Certiorari

In October 2014, the Supreme Court invited the Solicitor General to file an amicus brief on behalf of the United States. The Supreme Court frequently follows the Solicitor General’s recommendation to grant or deny certiorari. In its opposition to certiorari, the Government essentially recommends that the Supreme Court avoid the broader question of Congressional power to create statutory standing and instead focus on the specifically alleged injury in Spokeo – the public dissemination of inaccurate personal information – and the specific statute at issue – the FCRA. The Government’s position is that a concrete harm exists where a defendant unlawfully disseminates inaccurate personal information. Although the Second, Third and Fourth Circuits have rejected the concept of “statutory standing,” they each did so under other federal statutes.

Implications for Employers

Given the Solicitor General’s recommendation, the Supreme Court may deny certiorari and maintain the uncertain status quo. As a consequence, in some circuits, plaintiffs will be allowed to maintain private causes of action for alleged violations of federal statutes — even where the plaintiffs themselves suffered no actual injury.

If certiorari is granted, the Supreme Court’s ultimate decision will have a significant impact on the future of consumer, workplace, and other class actions. Its impact may reach other federal statutes that authorize private rights of action or statutory damages, such as the Truth in Lending Act, the Fair Debt Collection Practices Act, the Employee Retirement Income Security Act, and the Americans With Disabilities Act. If Spokeo is reversed, plaintiffs would be required to plead and establish actual injury, and not just a violation of the underlying statute. Such a result would undoubtedly limit the number of viable class actions under the FCRA and other federal statutes.

The resolution of the Spokeo petition and appeal stands to dramatically affect employers, consumer reporting agencies, and other corporate defendants. Although the United States’ opposition makes a grant of certiorari less likely, it speaks volumes that ten separate amicus briefs have been filed on behalf of seventeen different companies, trade associations, and other organizations (including the National Association of Professional Background Screeners, Chamber of Commerce of the United States, eBay, Facebook, Google, Yahoo, and leading consumer reporting agencies). Their support for resolution of the Spokeo question — whether Congress can confer standing through statute alone — may tip the scales in favor of the grant of certiorari. For the time being, employers will have to wait and see whether the Supreme Court will ultimately entertain this important question.

By Caroline A. Keller  and Gerald L. Maatman Jr.

While the ADA does not explicitly list telecommuting as a reasonable accommodation, the EEOC guidelines for disability accommodations under the ADA indicate that allowing employees to work from home is required: “An employer must modify its policy concerning where work is performed if such a change is needed as a reasonable accommodation, but only if this accommodation would be effective and would not cause an undue hardship.” While the courts initially seemed reluctant to follow this position, the U.S. Court of Appeals for the Sixth Circuit recently held in EEOC v. Ford Motor Company, No. 12-2484 (6th Cir. Apr. 22, 2014) that “communications technology has advanced to the point that it is no longer an ‘unusual case where an employee can effectively perform all work-related duties from home.’” Id. at 19. The Sixth Circuit concluded that there was a genuine dispute of material fact regarding whether plaintiff could perform all of her job duties from a remote location, and accordingly, reversed the district court’s grant of summary judgment on the failure-to-accommodate claim, as well as plaintiff’s retaliation claim. Id.

This ruling is important for employers in EEOC litigation.

Background

From 2003 to 2009, Jane Harris worked as a resale buyer for Ford, serving as an intermediary between steel suppliers and the companies that use steel to produce parts for Ford. Id. at 2, 6. Her job duties involved some individual tasks, but the essence of the job was group problem-solving, which required that a buyer be available to interact with members of the resale team, suppliers and others in the Ford system when problems arose. Id. at 2. Harris’ reviews showed that she was a consistently competent employee who could afford to improve in some areas. Id. at 3. 

Throughout her entire period of employment with Ford, Harris suffered from irritable bowel syndrome (“IBS”), an illness that causes fecal incontinence, causing her to accumulate absences. Id. at 3. Over time her symptoms worsened and she began taking intermittent FMLA leave. Id. After first allowing Harris to telecommute on a trial basis, Harris’s supervisor determined that Harris was unable to establish regular and consistent work hours and Harris again accumulated excessive absences. Id. at 4. In 2009, Harris formally requested that she be allowed to telecommute as an accommodation for her IBS. Id. at 5. After Harris rejected several alternatives offered by Ford, including moving Harris’s cubicle closer to the restroom or seeking another job within Ford more suitable for telecommuting, Ford declined her request determining that Harris’s position required in-person communication. Id. at 5, 10. Subsequently, in April 2009, Harris filed a charge of discrimination with the EEOC. Id. at 6. Thereafter, Harris’s performance review categorized her as a “lower achiever” and she was placed on a 30 day performance improvement plan and subsequently terminated for failure to meet the plan’s objectives. Id. In 2011 the EEOC filed a complaint in the U.S. District Court for the Eastern District of Michigan, alleging that Ford violated the ADA by failing to accommodate Harris’s disability and by retaliating against her for filing a charge with the EEOC. Id. Ford moved for summary judgment on both claims, and the district court granted summary judgment. Id.

The Sixth Circuit’s Opinion

The Sixth Circuit first examined whether Harris met the requirements for her failure-to-accommodate claim. Id. at 7. After finding Harris indisputably disabled under the ADA, the Sixth Circuit found that Harris had presented evidence to establish that she was qualified on two alternative bases: (a) she was qualified for the position after the elimination of the requirement that she be physically present at Ford facilities, or (b) she was qualified for the position with a telecommuting accommodation. Because Harris provided sufficient evidence to create a genuine dispute of material fact as to her qualification for the resale buyer position, the burden was shifted to Ford to prove that either (i) the physical-presence requirement is an essential function of Harris’s job or (ii) the telecommuting arrangement would create an undue hardship. Id. at 8.

The Sixth Circuit found that Ford failed to demonstrate either. Although the Sixth Circuit recognized that regular attendance at the workplace is undoubtedly essential for most positions, attendance at the workplace can no longer be assumed to mean attendance at the employer’s physical location, as it once was. Id. at 9-10. Thus, the question was not whether “attendance” was an essential job function for a resale buyer, but whether physical presence at the Ford facilities was truly essential. The Sixth Circuit determined that advancing technology has diminished the necessity of in-person contact to facilitate group conversations; thus, positions that require a great deal of teamwork are not inherently unsuitable to telecommuting arrangements. Id. at 10. The Sixth Circuit concluded that the EEOC offered enough evidence to dispute Ford’s conclusion that Harris’s position required face-to-face interactions at Ford and with clients. Id. at 10-11. Similarly, the Sixth Circuit explained that while it may have previously concluded that telecommuting would not be an acceptable reasonable accommodation for most jobs, the class of cases in which an employee can fulfill all requirements of the job while working remotely has greatly expanded and the EEOC presented sufficient evidence to create a genuine factual dispute as to whether Harris was one of those employees who can effectively work from home. Id. at 11. In rejecting Ford’s argument that Harris’s previous attendance issues demonstrated she was not a suitable candidate for telecommuting, Ford could not use Harris’s past attendance issues as a basis to deny her accommodation because her absences were related to her disability. Id. at 15-16. Finally, the Sixth Circuit opined that the alternatives offered by Ford did not reasonably accommodate her disability. Id. at 17.

Turning to Harris’s retaliation claim, the Sixth Circuit found that when viewed in a light favorable to Harris, the evidence suggested that Harris’s performance failings did not actually motivate Ford’s decisions to discipline her and terminate her employment. Although many of Harris’s performance deficiencies were ongoing problems, they prompted a negative review only after Harris filed her EEOC  charge. Id. at 21. The Sixth Circuit held that the evidence presented created a genuine dispute as to whether Ford was truly motivated by retaliatory intent or by a reasoned business decision to terminate an underperforming employee. Id. at 22. As a result, the Sixth Circuit reversed the district court’s grant of summary judgment to Ford, and remanded for further proceedings. Id.

Implications For Employers

This ruling demonstrates that more courts may be willing to follow the EEOC’s lead in finding that telecommuting is a viable ADA reasonable accommodation for many more jobs as technology continues to advance, particularly where the company policy includes a telecommuting option upon request and approval. As noted by the dissent, however, this could lead to companies tightening their telecommuting policies in order to avoid legal liability and fewer employees benefiting from generous telecommuting policies. Id. at 32. In the meantime, employers, when presented with the alternative of telecommuting as a reasonable accommodation of an indisputably disabled employee, should more carefully consider this alternative, and if rejected, clearly document why this alternative is not feasible for the position.

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

 

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.

By Eric Lloyd, Gerald L. Maatman, Jr., and Laura J. Maechtlen

While Wal-Mart scored a major victory for employers in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), the former class members are continuing to try and regain some of the ground they lost. As reported here, herehere and here, several district courts have considered whether or not the claims of former Dukes plaintiffs who filed follow-on lawsuits after the landmark decision are time-barred, with varying results. The U.S. District Court for the Western District of Tennessee dismissed the plaintiffs’ claims as time-barred in Phipps, et al. v. Wal-Mart Stores, Inc., No. 3:12-CV-01009, 2013 WL 752152 (W.D. Tenn. 2013), but encouraged appellate review in its order.  Now, the Sixth Circuit has agreed to entertain an interlocutory appeal on this issue in Phipps, et al. v. Wal-Mart Stores, Inc., No. 13-6194 (6th Cir.), and a showdown in the U.S. Supreme Court may be forthcoming.

Background

As previously discussed, in March 2013, the Western District of Tennessee, in Phipps, et al. v. Wal-Mart Stores, Inc., No. 3:12-CV-01009, 2013 WL 752152 (W.D. Tenn. Feb. 20, 2013), dismissed the class claims of former Dukes plaintiffs on the ground that they were time-barred under Andrews v. Orr, 851 F.2d 146, 149 (6th Cir. 1988). By way of background, Andrews held that the tolling principle of American Pipe & Constr. Co. v. Utah, 414 U.S. 538, 554 (1974) — namely, that the commencement of a class action lawsuit suspends the statute of limitations as to putative members of the failed class — applied only to the initiation of new individual actions, and not new class actions.  Andrews, 851 F.2d at 149 (“[T]he pendency of a previously filed class action does not toll the limitations period for additional class actions by putative members of the original asserted class.”).

But the district court in Phipps did not stop there (to the chagrin of Wal-Mart and employers everywhere). Instead, it invited the Sixth Circuit to consider whether Andrews remained viable in light of subsequent cases. It was thus not surprising when the district court certified the question of whether the plaintiffs’ claims were time-barred for interlocutory review in June 2013, nor when the Sixth Circuit accepted the appeal in September 2013.

The Issues On Appeal

The Phipps plaintiffs/appellants filed their opening appellate brief on November 12, 2013.  Not surprisingly, they largely followed the roadmap for overturning Andrews laid out by the district court. 

The plaintiffs/appellants contend that two U.S. Supreme Court cases, Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 130 S. Ct. 1431 (2010), and Smith v. Bayer, 131 S. Ct. 2368 (2011), obviated Andrews and thus, their claims are timely under American PipePltfs.’ Brief at 17-26. In Shady Grove, the Supreme Court held that plaintiffs must be permitted to pursue their claims as a class action so long as they meet the criteria of Federal Rule of Civil Procedure 23.  Id. at 23 (citing Shady Grove). Bayer, as interpreted by the plaintiffs/appellants, stands for the proposition that “one court’s denial of class certification cannot bar members of the failed class from pursuing the same claims in a second class action.” Id. at 18. When considered in tandem, the plaintiffs/appellants submit that Shady Grove and Bayer supersede Andrews because: (1) they cannot be bound by the failed class certification effort in Dukes; and (2) they retained their American Pipe rights to pursue their claims individually and must be permitted to pursue their claims collectively if they meet the requirements of Rule 23. Id. at 12-13.

This argument strikes us as paradoxical. Plaintiffs/appellants went to great lengths in their opening brief to explain that their claims, which concern alleged discrimination at the regional level, differ from the claims asserted in Dukes, which concerned alleged discrimination at the national level. Id. at 8-10. Assuming that the newly asserted claims are in fact different from those at issue in Dukes, would they not be time-barred? Indeed, by plaintiffs’/appellants’ own words, Bayer applies to the “same claims in a second class action.” See id. at 18 (emphasis added). Yet plaintiffs/appellants contend that they are not pursuing the same claims in their follow-on action. Is Bayer even relevant then? The Sixth Circuit will likely want clarification on this head-scratcher.

Covering all of their bases, the plaintiffs/appellants also argue that their claims are timely even if Andrews remains good law. In In Re Vertrue Mktg. & Sales Pracs. Litig., 719 F.3d 474 (6th Cir. 2013), the Sixth Circuit held that American Pipe tolling was not precluded where no court had previously ruled on certification of the proposed class. Id. at 479-80. The plaintiffs/appellants argue that Vertrue thus provides that their claims are protected by American Pipe because they have never been the subject of a prior class certification ruling. Pltfs.’ Brief at 31-32. Cognizant that their argument inevitably leads one to ask, “What about Dukes?” — indeed, their reliance upon Bayer invites such commentary alone — the plaintiffs/appellants submit that no court has issued a ruling on certification of their regional class.  Id. at 31-33.  [It bears noting that the Southern District of Florida rejected a similar “regional versus national” distinction, as reported here.]

It strikes us that plaintiffs’/appellants’ Vertrue argument suffers from the same flaw as their Bayer/Shady Grove argument. How does American Pipe help plaintiffs/appellants if purportedly different claims are at issue? Wal-Mart would be well-served to attack plaintiffs’/appellants’ position on the ground of this apparent inconsistency.

Conclusion

The Sixth Circuit’s ruling in Phipps may be a precursor to a reevaluation of the American Pipe rule in the Supreme Court. Stay tuned – we will report back with new developments as they arise.

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

On October 7, 2013 the U.S. Court of Appeals for the Sixth Circuit upheld a district court’s award of $751,942.48 against the EEOC in the case of EEOC v. Peoplemark, Inc., No. 11-2582 (6th Cir. Oct. 7, 2013). This decision marks yet another significant win for employers faced with the EEOC’s “shoot-first, aim later” litigation tactics as well as yet another defeat for the EEOC in a high profile case based on a purported (and unfounded) disparate impact theory of liability stemming from an employer’s use of background checks.

Background

As we previously blogged, the EEOC alleged in this case that Peoplemark’s policy of not hiring individuals with a criminal record had a disparate impact on African-Americans. Id. at 1. The problem with the EEOC’s theory was its assertion that Peoplemark had a blanket no-hire policy; this was simply not true.  In fact, of the 286 individuals the EEOC purported to represent in this case, only 22% actually had been hired and placed by Peoplemark. Id. at 4-6. Significantly, the district court found that even after the EEOC knew that was the case, it proceeded with the litigation anyway. It was only after the EEOC failed to designate a statistical expert per a scheduling deadline that it finally folded and agreed to dismiss the case pursuant to a stipulation that allowed Peoplemark to seek fees as a prevailing party. Id. at 5.

In its Motion for Fees, Costs, and Sanctions, Peoplemark argued that the EEOC had deliberately caused the company to incur attorneys’ fees and expert fees when it should have known that the company did not have the blanket no-hire policy. Both a magistrate judge and district court judge agreed, finding that if the EEOC had done a reasonable investigation, it should have known that Peoplemark had, in fact, hired a number of the allegedly injured individuals, thereby undercutting the EEOC’s central “blanket policy” position. Id. at 6-8. As such, the district court entered an award against the EEOC totaling $751,942.28, which included $219,350.70 in attorneys’ fees, $526,172 in expert witness fees, and $6,419.78 in other expenses. Id. at 6.

Sixth Circuit’s Decision

On appeal, the Sixth Circuit rejected the EEOC’s argument that the district court abused its discretion when it imposed attorneys’ and expert fees. Id. at 9. Although holding that the EEOC’s case was not groundless when it was first filed, the Sixth Circuit held that, “when discovery clearly indicated Osten’s [Peoplemark’s Vice President] statements belied the facts, the Commission should have reassessed its claim.” Id. at 10. As such, the Sixth Circuit held that, “from that point forward, it was unreasonable to continue to litigate the Commissioner’s pleaded claim because the claim was based on a companywide policy that did not exist.” Id. Citing the longstanding case of Christiansburg Garment Co. v. EEOC, 434 U.S. 412 (1978), the Sixth Circuit held that a fee award against the EEOC was appropriate since the EEOC “could not prove a prima facie case because its claim was groundless…” Id. 

Agreeing with the district court, the Sixth Circuit held that the EEOC should be held liable for Peoplemark’s fees from October 1, 2009 through the end of the litigation because by this point, the EEOC “should have known it could not prove its claim as pleaded.” Id. at 12. Finally, the Sixth Circuit also upheld the grant of expert fees to Peoplemark since the retention of an expert was necessary to mount a defense against the EEOC’s claims. Id. at 14.

In a strongly worded 50-page dissent, the Honorable James G. Carr reasoned that the district court abused its discretion in awarding Peoplemark attorneys’ fees and expert fees since, in his belief, the EEOC’s claims were not “frivolous, unreasonable, or groundless, or that the [EEOC] continued to litigate after it clearly became so.” Id. at 17. As Judge Carr stated in a footnote, “Most simply put, my disagreement with the majority’s analysis and result arises from my different reading, as explained in this dissent of the record. Where the majority sees mis-focus and dilatoriness on the part of the EEOC, I see an effort to gain information to refocus and reassess the defendant’s conduct and practices, and, as importantly, obstructive tactics on the defendant’s part that needless, but successful, ate up much of the time the court allocated for discovery.” Id.  at fn. 1. 

Despite Judge Carr’s dissent, and his belief as to the lack of unreasonableness demonstrated by the EEOC, the Sixth Circuit fully upheld the $751,942.48 award against the EEOC.

Implications For Employers

EEOC v. Peoplemark, Inc. joins cases like EEOC v. Bloomberg L.P., EEOC v. Freeman, and EEOC v. CRST, that demonstrate a growing intolerance for the EEOC’s “shoot-first, aim later” tactics in large-scale pattern or practice cases. This decision provides employers with even more ammunition with which to challenge unreasonable and groundless claims advanced by the EEOC.

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