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

On March 10, 2014, Judge Richard J. Arcara of the U.S. District Court for the Western District Of New York adopted Magistrate Judge McCarthy’s January 2, 2014 Report, Recommendation, And Order in EEOC v. Sterling Jewelers Inc., Case No. 08-CV-706 (W.D.N.Y. March 10, 2014), and dismissed the EEOC’s entire lawsuit with prejudice. It is a stunning defeat for the EEOC.

We previously highlighted Magistrate Judge McCarthy’s recommendation as one of the first significant decisions of 2014. (Read more here.) Magistrate Judge McCarthy recommended that the Court grant summary judgment in favor of Sterling because the EEOC failed to demonstrate that it investigated its claims of company-wide pay and promotion discrimination on a nationwide basis prior to filing a lawsuit. EEOC v. Sterling Jewelers Inc., Case No. 08-CV-706 (W.D.N.Y. Jan. 2, 2014).

Ruling just one business day after oral argument on the EEOC’s Rule 72 objections, Judge Arcara overruled the EEOC’s objections to Magistrate Judge McCarthy’s recommendation, entered summary judgment in favor of Sterling, and dismissed the EEOC’s case with prejudice. The case was the largest matter pending on the EEOC’s docket. 

Factual Background

Between May 2005 and November 2006, 19 female employees filed charges with the EEOC claiming that Sterling discriminated against them in pay and/or promotions based on their sex.  Id. at 1. The EEOC initially assigned the Charges to five investigators and, in June 2007, transferred and assigned them to a single investigator in its Buffalo office. Id. at 1-2. 

On January 3, 2008, the EEOC issued a Letter of Determination claiming that, through its investigation, it determined that Sterling subjected a “class of female employees with retail sales responsibilities nationwide to a pattern or practice of sex discrimination in regard to promotion and compensation.” Id. at 3. On September 23, 2008, the EEOC filed suit asserting similar claims, i.e., that Sterling “engaged in unlawful employment practices throughout its stores nationwide.” Id. at 4. 

Following discovery, including two depositions of the EEOC investigators, Sterling moved for partial summary judgment, claiming that the EEOC produced no evidence that it conducted a nationwide investigation of Sterling’s employment practices prior to commencing the action. Id. 

The Court’s Opinion

On January 2, 2014, Magistrate Judge Jeremiah McCarthy issued a 20-page Report, Recommendation, and Order recommending that Sterling’s motion be granted.

Magistrate Judge McCarthy rejected the EEOC’s contention that a court may not inquire as to the scope of the EEOC’s pre-lawsuit investigation. He ruled that, while courts will not review the sufficiency of the EEOC’s pre-suit investigation, “courts will review whether an investigation occurred” as well as the “scope of that investigation.” Id. at 6. 

Magistrate Judge McCarthy found no evidence that the EEOC investigated its claims against Sterling on a nationwide basis. He found that the charges themselves – asserted on behalf of the charging parties and “similarly situated women” – did not demonstrate that the EEOC investigated the charges, let alone the scope of any investigation that the EEOC might have conducted. Id. at 9. 

Magistrate Judge McCarthy also rejected the EEOC’s assertion that it satisfied its pre-suit obligation because it received nationwide statistical information from counsel for the charging parties (who commenced a separate lawsuit against Defendant). Id. at 10. He ruled that the EEOC has a statutory duty to make an independent investigation, and the mere gathering of information from others or parroting of information without independent analysis does not fulfill that obligation. Id. at 16.

Further, Magistrate Judge McCarthy ruled that, having invoked privilege to block Sterling’s efforts to discover whatever steps the EEOC might have taken to verify the information that it received from counsel for the charging parties, the EEOC could not reverse course and produce such information in response to Sterling’s motion for summary judgment. Id. at 13-14. 

Judge Arcara overruled the EEOC’s objections to Judge McCarthy’s recommendation, adopted the recommendation in its entirety, and granted Sterling’s motion for partial summary judgment. The Court dismissed the EEOC’s claims of a nationwide pattern or practice of employment discrimination with prejudice. 

Implications For Employers

The EEOC is continuing its initiative to prosecute systemic and large scale lawsuits against employers. The ruling in this case demonstrates that it cannot do so free of its statutory obligations. While the EEOC argued to Magistrate Judge McCarthy and Judge Arcara that the scope of its investigation was beyond judicial review, the Court soundly rejected that argument, recognizing that such a ruling would undermine “if not completely eviscerate Title VII’s integrated, multistep enforcement procedure.” Id. at 5. EEOC v. Sterling demonstrates that some courts will continue to provide an important check on the EEOC’s actions and hold the EEOC to its statutory requirements. 

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