By Courtney Bohl and Laura J. Maechtlen

On June 28, 2012, Judge Thomas D. Schroeder of the U.S. District Court for the Middle District of North Carolina gave employers an additional tool for combating an increasingly common EEOC practice of dragging out investigations and the initiation of lawsuits. Judge Schroeder’s decision in EEOC v. PBM Graphics Inc., Case No. 1:11-CV-805 (M.D.N.C. June 28, 2012), addressed, among other issues, prejudice employers may face when the EEOC unreasonably delays pursing a Title VII claim. Judge Schroeder’s opinion is important for employers facing EEOC litigation after lengthy investigations into Title VII violations and seeking to utilize the doctrine of laches.

Background Of EEOC v. PBM Graphics Inc.

In October 2005, the EEOC filed a charge against PBM Graphics Inc. (“PBM”) alleging PBM engaged in employment discrimination by favoring Hispanic workers over non-Hispanic workers in its work-assignment practices. Id. at 35. The EEOC subsequently sent PBM notice of the charge and began its investigation. Id. at 35-36. During the EEOC’s investigation, the EEOC sent PBM numerous requests for information relating to the allegations in the charge. Id. at 36-37. PBM received and responded to the EEOC’s requests for information for more than four years – from December 2005 through February 2010. Id. at 35-42. In late February 2010, the EEOC concluded its investigation, finding evidence that PBM had discriminated against individuals on the basis of race or national origin. Id. at 42. The EEOC issued its Letter of Determination and invited PBM to conciliate. Id. Conciliation efforts failed and, in September 2011, almost six years after the initial charge was filed, the EEOC brought suit against PBM alleging PBM engaged in a pattern or practice of discrimination of favoring Hispanic workers over non-Hispanic workers in violation of Title VII. Id. at 47.

PBM moved for summary judgment on the grounds, among other things, that the equitable doctrine of laches barred the EEOC’s suit. Id. at 57.

The Court’s Ruling

In considering PBM’s motion for summary judgment, the Court noted that Congress did not establish a statute of limitations for civil actions brought by the EEOC, but where the EEOC’s inordinate delay in litigating a dispute significantly prejudices an employer courts have the authority to “locate a just result.” Id. at 57. The defense of laches requires a defendant to prove lack of diligence by the party against whom the defense is asserted, and prejudice to the party asserting the defense. Id. at 57-58. As to the first element, the Court noted the EEOC waited nearly six years between the filing of the charge and the commencement of the lawsuit. Id. at 61. Additionally, the EEOC failed to account for why it needed such lengthy amounts of time to conduct the investigation. Id. Because of this, the Court held this delay was not only lengthy, but unreasonable. Id. at 62. PBM thus satisfied the first element.

As to the second element, the Court was unable to find PBM was prejudiced on the present facts because the EEOC had yet to fully explain its theory of its case, disclose how it calculated evidence of discrimination, or disclose which employees were allegedly discriminated against. Id. at 65. The Court noted that although PBM pointed to particular employees who had faded memories of events, passed away, and left its employment, in the absence of more concrete information from the EEOC about the type of proof it will use to establish its case, PBM could not determine whether these faded memories, deaths, and departures will result in specific prejudice to its ability to mount a credible defense. Id. at 65-66. The Court acknowledged PBM’s argument may have merit and was reluctant to subject PBM to a costly and potentially lengthy discovery period when serious issues of equity could prevent the Court from ever reaching the merits of the case. Id. at 66. Therefore, the Court ordered a period of limited discovery confined to two issues, including: (1) the EEOC’s theory of the case, and (2) any prejudice to PBM. Id.  at 69. Once limited discovery was completed, the Court stated PBM could renew its motion for summary judgment or elect to abandon it. Id.

Implications For Employers

The Court’s ruling in EEOC v. PBM Graphics Inc. makes clear the EEOC cannot investigate claims for lengthy periods of time without running the risk that its claims may be dismissed under the equitable doctrine of laches. The Court’s ruling acknowledges the significant prejudice employers may face if the EEOC drags its feet during the investigation process and specifically discusses the possibility that claims may be dismissed when the EEOC fails to diligently purse its case. EEOC v. PBM Graphics Inc. and similar cases not only give employers a potential way to dismiss the EEOC’s discrimination claims, but also give employers a bargaining chip to use during the conciliation process before litigation has begun. By informing the EEOC of the possibility its claims may be dismissed under the equitable doctrine of laches, the EEOC may be more willing consent to a conciliation agreement, thereby helping the employer avoid costly litigation.