gavel on white backgroundBy Christopher M. Cascino and Gerald L. Maatman, Jr.

In EEOC v. New Indianapolis Hotels, LLC, No. 10-CV-1234 (S. D. Ind. Nov. 9, 2015), Judge William T. Lawrence of the U.S. District Court for the Southern District of Indiana granted the EEOC attorneys’ fees for the time it spent trying to enforce a consent decree against an employer.  This ruling is a cautionary tale for employers, both because it shows how far the EEOC is willing to go to enforce consent decrees and provides further support for the EEOC’s position that it can seek attorneys’ fees even though its attorneys do not bill a client.

Case Background

On November 30, 2010, the EEOC brought a Title VII action against New Indianapolis Hotels LLC (“New Indianapolis”).  On September 20, 2012, the EEOC and New Indianapolis settled the case pursuant to a consent decree.  The consent decree provided for a significant amount of injunctive relief.  On March 26, 2014, the EEOC filed  a motion for contempt, arguing that New Indianapolis violated five provisions of the consent decree, including: (1) workplace posting; (2) training of managers; (3) establishment of a new hiring procedure; (4) recordkeeping; and (5) reinstatement of alleged victims of discrimination

After almost a year of contempt proceedings, the Court found that New Indianapolis was in contempt because it had violated all five of the foregoing provisions.  The EEOC moved for attorneys’ fees for the time it spent litigating the motion for contempt.

The Court’s Ruling

The Court began by observing that federal judges have discretion to award attorneys’ fees in contempt actions.  Id. at 2.  It then pointed out that it would consider four factors in deciding whether to award attorneys’ fees, including: “(1) the harm from non-compliance; (2) the probable effectiveness of the sanction; (3) the financial resources of the contemnor and the burden the sanctions may impose; and (4) the offending party’s willfulness in disregarding the Court’s order.”  Id.

With respect to the first factor, the Court found that the violations of the consent decree “had a significant deleterious effect on individual class members.”  Id. at 3.  With respect to the second factor, the Court determined that an award of attorneys’ fees would be effective because it would “provide some remuneration for the time and expenses spent on the litigation.”  Id.  With respect to the third factor, the Court opined that New Indianapolis had failed to provide evidence that the imposition of attorneys’ fees would present a financial hardship.

The Court then addressed New Indianapolis’s argument that its violation was not willful as evidenced by the fact that it immediately complied with the consent decree after the magistrate judge recommended a finding of contempt.  Id. at 4.  The Court said this was “too little, too late,” and that New Indianapolis should have complied with the consent decree before the contempt motion was filed and before the magistrate judge issued his recommendation.  Id.  It thus concluded that an award of fees was appropriate.  Id.

The Court then determined whether the amount of fees requested by the EEOC was reasonable.  It found that the lodestar method – multiplying the hours spent by the EEOC on the contempt motion by a reasonable hourly rate – was the proper method of determining the EEOC’s fees.  Id.  It found that it could determine a reasonable hourly rate by looking to “prevailing market rates in the relevant community.”  Id.  It held that rates $325 and $275 per hour were reasonable for the EEOC’s attorneys, and that a rate of $100 per hour was reasonable for the EEOC’s paralegal.  Id. at 5.  As a result, the Court awarded the EEOC $50,515 in fees.  Id. at 9.

Implications For Employers

Employers involved in EEOC litigation should be wary of what injunctive terms they agree to in settling with the EEOC.  As this case demonstrates, the EEOC is willing to enforce the injunctive terms of consent decrees, so employers should be sure they are willing and able to satisfy the injunctive terms of any settlement with the EEOC before agreeing to them.  In addition, this case will provide further support for the EEOC’s position that, despite the fact its attorneys do not bill any client for their time, it should be entitled to attorneys’ fees in appropriate circumstances.

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

In EEOC v. Consol Energy, Inc. et. al., Case No. 1:13-CV-215 (S.D. W. Va. Aug. 21, 2015), a jury found in favor of the EEOC in its claim brought under Title VII that the employer denied an employee a religious accommodation involving an exemption from using a biometric hand scanner. Prior to trial the parties filed motions in limine concerning certain issues relating to damages, which was held in abeyance pending trial. Id. at 1. Given the EEOC’s trial verdict, the Court then decided the motions and what damages (other than compensatory which was awarded by the jury) should be awarded. Id. at 2. For good measure, the Court also entered a significant injunctive relief award.

The ruling ought to be required reading for any corporate counsel and human resources professional dealing with EEOC litigation issues.

The Court’s Decision On Damages

With respect to monetary damages, the parties disagreed concerning the level of back and front pay the Charging Party should receive. Namely, the EEOC argued that the pension benefits the Charging Party received should not be used as an off-set to any back or front pay award as they are collateral (not paid directly from and entirely by the employer, rather, by a third source). Id. at 3. The collateral source rule provides that compensation from a collateral source should be disregarded in assessing damages.  The employer argued that as the pension plan was 100% employer funded, it is a non-collateral source, and as such, should off-set any economic damages the Charging Party receives. Id. at 4.

The Court agreed with the EEOC and held that the pension benefits are a collateral source as “there has been no evidence that the fund is meant to be used as an indemnifying fund for potential litigation that is not in an employer’s favor” and “there has been no evidence that the applicable collective bargaining agreement contains a provision contemplating a set-off of benefits received in a case such as the one at hand.” Id. at 7.

The employer also argued that the Charging Party’s back and front pay award should be limited as he failed to adequately mitigate his damages. Id. at 11. Namely, that he failed to seek similar employment in the coal mining industry (he only attended a single job fair and didn’t seek similar employment as he did not want to lose his pension payments) and that he failed to apply for available openings in the coal industry that he was “likely aware.” Id. at 12.

The Court found that the Charging Party reasonably mitigated his damages given the limited available positions in the coal mining industry, his personal economic circumstances (he had a wife and two grandchildren to support at the time) and although he was skilled in certain industries, he was limited by his education for higher-paying jobs in his area as well as by his age. Id. at 18-20.

Given the Court’s ruling on damages, it awarded the Charging Party (before interest) $586,860.74 in economic damages. Id. at 39.

The Court’s Decision On Injunctive Relief

The EEOC also sought a company-wide permanent injunction that would dissolve after three years and prohibit the following:  any requirement or rule for the use of a biometric hand scanner will be in conformity with Title VII as long as absent undue hardship on the defendants; provide a complete exemption as an alternative for persons who need such an exemption as a reasonable accommodation; and provide training to all management personnel regarding Title VII within 60 days of the injunction being entered. Id. at 25. In support of its request, the EEOC argued that once a plaintiff prevails in a Title VII case, “injunctions are presumptively appropriate.” Id.

The Court agreed with the EEOC and issued the permanent injunction it sought as “defendants have not met their heavy burden of proving that future discrimination will not occur.” Id. at 33. Although the Court noted that the employer had taken steps to eradicate any discrimination, that is not enough to warrant a denial of the injunction. Id. at 33. Furthermore, the Court found the scope of the injunction reasonable as it targets religious discrimination based on precedential case law and the biometric hand scanning device – which was at issue in the underlying lawsuit. Id. at 35.

Implications for Employers

This decision serves as a good primer on the factors that courts will rely upon in determining what damages are available (and, even if available, should be reduced). Although the Court ruled in favor of the EEOC in this case, employer access to specific types of claimant information can make a critical difference in mounting key defenses, testing claimant credibility, and limiting available damages.

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

By Gerald L. Maatman, Jr. and Laura Maechtlen

In a ruling on December 19, 2014, in EEOC v. Global Horizons, Inc., Case No. 11-CV-257 (D. Haw. Dec. 19, 2014), Judge Leslie Kobayashi of the U.S. District Court for the District of Hawaii entered a default judgment of $8.7 million in the EEOC’s favor against two essentially defunct businesses. While the Court entered the default without any opposition from the defaulted businesses, it is the biggest EEOC judgment of 2014. It brings to a close a chapter in a long and tortured history of litigation involving what the EEOC asserted was its pursuit of “human trafficking” discrimination claims (click here to read more).

Background To The Case

The EEOC brought claims against Defendant Global Horizons, Inc. (“Global Horizons”) and Maui Pineapple, Inc., among others, alleging a pattern or practice of unlawful discriminatory employment practices against foreign migrant workers based on their Asian race and/or Thai national original. The EEOC also asserted claims for harassment and hostile work environment, retaliation, and constructive discharge. The Asian and Thai workers were employed by Global Horizons under the U.S. Department of Labor H2‑A guest worker program to provide farm labor at various locations in California, Hawaii, and Washington. Previously, the Court entered a default judgment against Global Horizons and Maui Pineapple, Inc., as both elected to cease doing business. The Commission had sued other companies that had contracted with Global Horizons to supply workers to their farms and operations; those companies either secured dismissals of the EEOC’s claims against them and/or reached settlements with the EEOC.

Relative to its claims against Global Horizons and Maui Pineapple, the EEOC waived its demand for a jury trial, and the Court ordered the EEOC to file proposed findings of fact and conclusions of law relative to its request for damages and injunctive relief as to the two defaulted Defendants.  Based on that submission, the Court entered findings of fact and conclusions of law relative to the EEOC’s claims against Global Horizons and Maui Pineapple, Inc. on December 19 in a 77-page order.

The Court’s Ruling

The Court entered an award of compensatory damages of $50,000 each to every claimant based on the Defendants’ default and uncontested liability for the pattern or practice of discrimination, a hostile work environment, and retaliation relative to the claimants that Global Horizons brought to work in Hawaii. The Court concluded that the award of $50,000 per claimant was justified due to the egregious and pervasive nature of the discrimination at issue. In total, the Court entered this damages award with respect to 82 claimants represented by the EEOC. Further, the Court entered an award of $100,000 to each claimant for punitive damages based on the conduct at issue.  However, the Court rejected the EEOC’s arguments relative to damages.

The Court specifically rejected the EEOC’s argument that each claimant should receive a total of $300,000 in compensatory and punitive damages. The Court reasoned that “all of the claimants were subjected to deplorable conditions, but the Court notes that the records indicate that some claimants were subject to more brutal treatment than others … [and] the EEOC has chosen to seek damages based on generalized proof …, with anecdotal evidence of specific incidents and that evidence overall does not support the requested damages amounts.” Id. at 68. As a result, the Court entered a total damages award of $12.3 million against Global Horizons, and off-set that amount by $3.6 million (representing the total amount from previous settlements between the EEOC and various other Defendants), and entered a total monetary damages award for the 82 claimants in the amount $8.7 million. Id. at 70. Further, the Court found that Global Horizons and Maui Pineapple were jointly and severally liable to 54 of the claimants (representing the number of claimants who worked at Maui Pineapple’s facilities and who were supplied by Global Horizons), and that joint and several liability totaled $8.1 million.

Injunctive Relief Order

The Court also entered a range of injunctive relief against both Global Horizons and Maui Pineapple, including requirements: (i) to develop, implement, and effectively distribute to all employees a policy and complaint procedure with respect to discrimination and retaliation, and to translate the policies and procedures into the dominant language of the foreign-based employees in their workforce; (ii) to develop and implement a procedure regarding how to conduct, document, and report an investigation of discrimination; (iii) to establish annual, live training sessions for all supervisory employees regarding their rights, responsibilities, and obligations under their employer’s non-discrimination and investigation policy and procedure; (iv) to obligate all farm labor contractors engaged by the companies to agree to be accountable for Title VII compliance; (v) to establish and publicize an employee hotline regarding questions, concerns, or complaints pertaining to housing and working conditions; and (vi) to the extent the company engages recruiters, to require in contracts with recruiters that they comply with all policies and procedures regarding Title VII.  Id. at 71-76.

Implications For Employers

The judgment and injunctive relief may be worth little more than the paper it is written on at this point, since enforcement of the judgment may be impossible. As neither business is a going concern, the injunctive relief is also likely to have no effect. Nonetheless, despite the Court’s rejection of the EEOC’s damages requests, its entry of a monetary award in favor of the Commission is apt to serve as a future set of bargaining demands by the EEOC when it sits at the settlement table and asserts how much money it demands to settle like or similar claims.

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

 

By Dan Klein, Gerald L. Maatman, Jr., and Chris Palamountain

In previous blog postings, we have noted the EEOC’s tactic of seeking to bifurcate Title VII cases in such a way that any punitive damages will be determined after a finding on pattern or practice liability but before any award of individual compensatory damages and litigation of the employer’s defenses to such damages. We also have noted that federal courts in Maryland, New York, and Indiana have rejected this EEOC tactic.  See EEOC v. McCormick & Schmick’s, 2008 U.S. Dist. LEXIS 112283 (D. Md. Nov. 4, 2008); EEOC v. Sterling Jewelers, 2011 U.S. Dist. LEXIS 44255 (W.D.N.Y. April 25, 2011), and EEOC v. New Indianapolis Hotels, Case No. 1:10-CV-1234 (S.D. Ind. Feb. 1, 2012). You can read our take on those decisions here.

Recently, the U.S. District Court in the Eastern District of Louisiana became the  fourth court to reject this EEOC strategy, holding that the EEOC’s position is inconsistent with governing law on punitive damages in EEOC v. Signal Int’l, LLC, Case No. 08-1220, 2013 U.S. Dist. LEXIS 117058 (Aug. 19, 2013). 

In the case, the EEOC asserted four Title VII claims against the employer, including: (1) a § 703 (a) violation for creation and perpetuation of a hostile work environment; (2) a § 703(a) disparate treatment claim for alleged imposition of less favorable terms and conditions of employment on employees of Indian descent;( 3) retaliation claims; and (4) a § 706 pattern or practice claim for both hostile work environment and disparate treatment.  The EEOC sought to bifurcate the case into two phases. The EEOC requested that Phase I involve both adjudication of the EEOC’s pattern and practice claim and a jury determination on its punitive damages claim. Id. at *4. Under the EEOC’s conception of the case, Phase II would involve compensatory damage determinations and the employer’s defenses to any award of compensatory damages. 

The Court granted the EEOC’s request to bifurcate the pattern or practice claim for disparate treatment.  The Court will permit a jury to rule on liability and, if the jury found the employer liable for a pattern or practice of disparate treatment, the Court would determine appropriate injunctive relief during Phase I.  Id. at *1. The Court found that such bifurcation “will aid in the swift and efficient resolution of these claims.” Id. To us, there is nothing radical here – that is the way that pattern or practice claims are handled per Supreme Court case law.

At the same time, the Court declined to permit adjudication of the punitive damages claims during Phase I as proposed by the EEOC, reasoning that because the “Supreme Court has made it clear that any punitive damages determination must be ‘reasonable and proportionate’ to the amount of actual (i.e., compensatory) damages … the EEOC’s proposal that the jury in Phase I determine punitive damages runs afoul of the principles articulated [by the Supreme Court] in State Farm and Philip Morris.” Id. at *4 (citing State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 426 (2003), and Philip Morris USA v. Williams, 549 U.S. 346, 354 (2007)). The Court also found that “[p]unitive damages cannot be assessed merely upon a finding that the defendant engaged in a pattern or practice of discrimination.” Id. at *4. A finding of pattern or practice of discrimination “establishes only that there has been general harm to the group and that injunctive relief is appropriate.” Id. at *5. 

 In essence, the Court determined that the EEOC was requesting to put the cart before the horse. The Court noted that “it would be unfair to ask a jury to determine punitive damages against an employer without determining how many individual employees were actually negatively impacted by the alleged discriminatory conduct.” Id. at *4. It similarly observed that “because punitive damages must be reasonably related to the reprehensibility of the defendant’s conduct and to the compensatory damages awarded to the plaintiffs, recovery of punitive damages must necessarily turn on the recovery of compensatory damages.” Id. at *5. 

Implications For Employers

Employers facing this EEOC bifurcation strategy now have additional authority on which to base their opposition. EEOC v. Signal Int’l, LLC is now the fourth precedent rejecting the EEOC’s tactic. Employers are well served to utilize these defense arguments, for bifurcation with “punitive damages in Phase I” can be a “game-changer” for defense of large-scale EEOC pattern or practice claims.

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

By Gerald L. Maatman, Jr.

I was privileged to present today on cutting-edge class action litigation issues at the American Conference Institute program on Employment Discrimination Litigation. Representatives of the EEOC and the plaintiffs’ class action bar were also in attendance.

In brief, I commented and analyzed a new plaintiffs’ “paradigm” we are seeing from the plaintiffs’ bar.

Class certification law is in flux, especially in the context of employment discrimination litigation. Since Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), and Comcast Corp. v. Behrend, 2013 U.S. LEXIS 2544 (U.S. Mar. 27, 2013), lower federal courts and litigants alike are confronting novel Rule 23 issues, as the plaintiffs’ bar attempts to “re-boot” and find winning certification approaches. The tides certainly seem to be turning, and employers are doing quite well in confronting and defeating these “re-booting” approaches.

BUT, an increasingly popular approach with plaintiffs’ class action lawyers is to down-scale their class claims and craft smaller, tighter cases in an effort to certify at least one issue, even if that one issue is for injunctive relief. Plaintiffs, of course, invoke McReynolds v. Merrill Lynch & Co., 672 F.3d 482 (7th Cir. 2012), perhaps the leading post-Wal-Mart ruling certifying an employment discrimination disparate impact class claim for injunctive relief under Rule 23 (c)(4).

Yet, the iron fist in the silk glove so to speak is the quest for attorneys’ fees and a large pay-out. Plaintiffs angle to certify something – even one issue – and then posit a settlement demand that details a parade of horribles for the employer to defend – a tangent on the “pay us or else…” theory. While under Comcast, a stage II damages proceeding is not apt to be certified, plaintiffs then cite Teamsters v. United States, 431 U.S. 324 (1977), for the notion that individual class members (after a stage I liability finding) are entitled to a presumption that that were discriminated and their individual damages can be heard in mini-trials per Teamsters. They then argue that the mere transaction costs will bury the employer – fees and costs for each hearing; the time spent by company witnesses in preparing and testifying at each mini-hearing; the additional attorneys’ fees plaintiffs’ counsel will earn for each successful hearing; and on and on. They even go so far as to say “we can win this war of attrition” by hiring contract attorneys to do all the preparation work.

The soft under-belly of plaintiffs’ argument is how many actual, living and breathing class members will show up in the courtroom for their stage II hearing. Plaintiffs, for example, will argue there are x-thousands of alleged victim class members, but how many will travel to the court, prepare, and testify is speculation. Maybe some, perhaps a significant number, but nowhere near the size of the class.

This new paradigm is in its embryonic stage. The plaintiffs’ class action bar is refining and re-booting all the time. Defense strategies have to adjust, as the high stakes world of employment discrimination litigation shows no signs of going away.

money.bmpBy Christopher DeGroff, Reema Kapur, and Gerald L. Maatman, Jr.

We previously reported that the United States Equal Employment Opportunity Commission (EEOC) secured a verdict of $240 million in its lawsuit against Hill Country Farms last week. Read our previous blog post here.

The EEOC trumpeted the verdict in a post-trial press release, but did not reveal the fact that the verdict would be reduced due to the caps in the applicable law at issue in the case. We noted that the verdict would be reduced due to statutory damages caps applicable to claims brought under the Americans With Disabilities Act (ADA). On May 14, 2013, the Court did just that and entered an order reducing the jury award for all thirty two claimants to $1.6 million. The Court’s May 14 Order, in addition to its previous award of back wages in the amount of $1.3 million, drastically reduces the total recovery in this case to $2.9 million. In the same order, the Court set the case for a further hearing on June 10, 2013 to address the EEOC’s request for injunctive relief. 

The post-trial briefing in EEOC v. Hill Country Farms case is an example of the aggressive tactics and push-the-envelope arguments that employers facing EEOC-initiated litigation can encounter. 

Background

We discussed the background of this case in previous posts (here and here). 

On May 1, a jury awarded $240 million to thirty two intellectually disabled workers in connection with the EEOC’s claims that Hill Country Farms, their employer, discriminated against them and subjected them to a hostile work environment. Following the verdict, the Court invited briefing from defendant and the EEOC regarding the appropriate judgment award to be entered in the case.

Damages Caps Under The ADA

The ADA imposes a statutory cap — a ceiling — of $50,000 for each claimant in cases where an employer-defendant has more than 14 but fewer than 101 employees. The $50,000 limit is inclusive of compensatory and punitive damages. 

Here, given the size of Hill Country Farms’ workforce at the time of the alleged violations, the “maximum allowable” recovery with respect to each claimant was $50,000, for a total recovery of $1.6 million for all claimants, plus “applicable prejudgment interest.” The Court will determine the proper amount of prejudgment interest at the June 10 hearing.

EEOC’s Request For Injunctive Relief

The EEOC is also seeking injunctive relief. To prove that it is entitled to an injunction, it must show that there is a “threat of irreparable harm” in connection with further violations by Hill Country Farms. However, Hill Country Farms reportedly went out of business in February 2009. So the EEOC will need to convince the Court that injunctive relief is necessary to stop a defunct business that has not employed anyone since 2009 from engaging in future violations of employment laws. The President of Hill Country Farms allegedly admitted at trial that although the company is no longer in business, it remains a “corporation in good standing in the State of Texas.” In other words, while the corporation is no longer operating a business and has no workforce, it remains a legal entity. Thus, the EEOC is maneuvering around the company’s current defunct status by arguing that Hill Country Farms or a successor company could “potential[ly] return to full operations or re-initiat[e]…the business.” If (and when) it resumes operations, the EEOC wants an injunction in place.

Because the potential “threat” that the defendant may resume or re-incorporate a business may occur “any time in the future,” EEOC is requesting ongoing and permanent future injunctive relief. For instance, the EEOC has requested injunctive relief provisions requiring that the defendant must notify the EEOC in writing if (1) the company or its principals or owners “engage in business at any time in the future” of any type or (2) the company or a successor company resumes business activities “similar to those conducted by Hill Country Farms.”

Further, if the company ever resumes business, the EEOC is seeking an order imposing a variety of obligations — including training, reporting, and hiring a mental health professional as a consultant — for five years.

Implications For Employers

It will be interesting to see if the Court accepts the EEOC’s novel argument in favor of injunctive relief in this case, and how it treats the defendant’s arguments opposing the propriety and scope of the relief. Stay tuned.

us-district-court-for-the-southern-district-of-new-york-logo-sdny.jpgBy Anthony Califano and Lynn Kappelman

On December 4, 2012, Judge Kimba Wood of the U.S. District Court for the Southern District of New York partially decertified a class in a disparate impact race discrimination case entitled Gulino v. Bd. of Educ. of City School Dist. of City of New York, No. 96-CV-8414, 2012 U.S. Dist. LEXIS 172687 (S.D.N.Y. Dec. 4, 2012), holding that Plaintiffs’ claims for individualized monetary and injunctive relief cannot proceed on a class-wide basis under Rule 23(b)(2) following the Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011).

Perhaps more interesting, however, is the Court’s decision to bifurcate the liability and damages phases of the remaining class claims in a fashion that will likely become more common in the future. As such, this is a good read for corporate counsel about the future battlegrounds for workplace class action litigation.

Background Of The Case

Purporting to represent a class of African-American and Latino teachers in the New York City public school system, Plaintiffs filed this class action in 1996. Id. at *2. Plaintiffs assert that when the Board of Education of the City School District of the City of New York (“Board”) required teachers to pass certain standardized tests in order to be licensed to teach in the school district, this had a disparate impact on them because of their race and violated Title VII. Id. Plaintiffs and putative class members had not passed the standardized licensing exams so they could not obtain permanent teaching licenses or they had their licenses revoked. Id. at *10. Plaintiffs claimed that the standardized exams had a disparate impact because Caucasian teachers passed the exams “at a statistically significant higher rate than African-American and Latino test-takers.” Id. at *11. Likewise, Plaintiffs asserted that the standardized tests were not justifiable as “job related because they did not measure whether experienced teachers such as Plaintiffs were qualified to teach.” Id

On behalf of themselves and the putative class, Plaintiffs sought three types of relief, including: (1) back pay; (2) a declaratory judgment as to the Board’s liability for disparate impact discrimination under Title VII; and (3) injunctive relief, ordering the Board to give them teaching licenses and seniority rights, and ordering the appointment of a monitor to ensure that the current test does not violate Title VII. Id. at *12-13. In 2001, the Court certified the case as a class action under Rule 23(b)(2). Id. at *21. After dispositive motions, an “epic bench trial,” and a trip to the Second Circuit regarding issues seemingly unrelated to class certification, the case ended up back before the Court. Id. at *8. In July 2011, while the case was pending on remand, the Board filed a motion to decertify the class based on the Supreme Court’s decision in Wal-Mart.  Judge Wood granted the Board’s motion to decertify as to Plaintiffs’ claims for individualized monetary relief and individualized injunctive relief (teaching licenses and seniority rights), but denied the motion as to Plaintiffs’ claims for a declaratory judgment as to the Board’s liability and the injunctive relief which would benefit the class as a whole. Id. at *20, 25. 

The Court’s Ruling

In the wake of Wal-Mart, the Court reasoned that it would be inappropriate to certify the class under Rule 23(b)(2) in those instances where each class member is entitled to different relief requiring individualized determinations. Id. at *25-27. “In order to obtain individualized relief, a putative class must satisfy the requirements of Rule 23(b)(3), which includes greater procedural protections, such as notice and opportunity to opt out.” Id. at *26. Because Rule 23(b)(2) lacks those procedural and due process safeguards, the Supreme Court in Wal-Mart held that it is inappropriate to certify class actions requiring individualized determinations and awards under Rule 23(b)(2). Id. In this case, Plaintiffs clearly were seeking individualized monetary relief in the form of back pay and individualized injunctive relief in the form of teaching licenses and seniority rights. However, the Court noted that Wal-Mart does not address class certification under Rule 23(c)(4)(A), which provides that “‘an action may be brought or maintained as a class action with respect to particular issues.’” Id. at *27 (quoting Fed.R.Civ.P. 23(c)(4)(A)). Here, because the Court’s determination of whether the Board’s tests had a disparate impact under Title VII did not require any individualized determination, it could be determined under either Rules 23(b)(2) or 23(c)(4)(A). Thus, the Court noted that it is appropriate to “bifurcate proceedings by first certifying an ‘injunctive’ class under (c)(4) to determine liability, and then certifying a ‘remedial’ class under (b)(3) to determine damages” if Plaintiffs establish class-wide liability. Id. at *28.

The Court then applied this framework to the three types of relief that Plaintiffs were seeking. First, the Court held that Plaintiffs’ request for a declaration regarding the Board’s liability under Title VII is appropriate for class treatment under Rule 23(b)(2) and (c)(4) at the liability stage because “resolution of the claim will not involve individualized determinations, but rather involves a claim common to the class, the resolution of which will streamline later proceedings for damages and other individual relief.” Id. at *30-31. Second, the Court held that Plaintiffs’ request for monetary relief is inappropriate for class treatment under Rule 23(b)(2), and “unquestionably may be certified only under Rule 23(b)(3).” Id. at *31. The Court went on, however, to allow bifurcation of the proceeding into two phases – a liability phase, which is appropriate for certification under Rule 23(b)(2) and (c)(4), and a later remedial phase in which Plaintiffs may seek class certification under Rule 23(b)(3) if they establish liability. Id. at *32. The Court held that “[t]he reasons for bifurcating liability from remedial issues apply with no less force now than they did prior to Wal-Mart, particularly since individual issues will arise only if the class establishes the employer’s liability.” Id. at *32-33 (internal citations and quotations omitted). Lastly, the Court held that Wal-Mart requires the Court to decertify the class as to Plaintiffs’ claims for injunctions providing teaching certificates to each class member and providing seniority rights to each class member who is still teaching but failed the test.  Id. at *33-34. The Court noted that each class member would be entitled to a different injunction, making class certification inappropriate under Rule 23(b)(2). Id. at *34. On the other hand, Plaintiffs’ request for a monitor to ensure that the current exam is non-discriminatory seeks  “an indivisible injunction benefiting all the class members at once,” and thus complies with Wal-Mart requirements for class certification under Rule 23(b)(2). Id. at *36 (internal citations and quotations omitted).

Implications For Employers

We expect that more and more Plaintiffs’ class action lawyers will begin to adapt and argue for an application of Wal-Mart to bifurcate cases in this fashion where the Plaintiffs are seeking individualized relief, but the liability issues pertain to the class as a whole. Specifically, courts will likely certify classes under Rule 23(b)(2) or (c)(4) as to the liability issues and later, if necessary, allow Plaintiffs to seek class certification at the remedial phase under Rule 23(b)(3).

220px-US-CourtOfAppeals-2ndCircuit-Seal.pngBy Rebecca Bjork and Gerald L. Maatman, Jr.

On October 19, 2012, the Second Circuit declined to put its stamp of approval on the EEOC’s attempt to impose lengthy and severe reporting and remedial requirements on a grocery store owner where one nefarious employee — who happened to serve in the dual role of store manager and owner’s fiancée — repeatedly sexually harassed a class of ten teenage female employees. In EEOC v. KarenKim, Inc., No. 11-3309, 2012 U.S. App. LEXIS 21908 (Oct. 19, 2012), the Second Circuit reported the lurid facts at great length, yet cut to the chase in reaching its legal conclusion that the district court erred in shutting the EEOC’s proposed consent decree proposal down entirely.  

At trial, the jury awarded the class members a total of $10,080 in compensatory damages and $1,250,000 in punitive damages in light of testimony of crude physical and verbal abuse against them by the store manager that continued even after they complained to his fiancée. Id. at *3-6, 8-12. There was no formal complaint procedure for employees to use if concerns arose about their working conditions at the store. Several employees testified that their complaints had not been investigated and no action was taken to remove him from the work environment. According to the Second Circuit, the owner responded to the complaints of crude verbal and physical harassment against her young workers (at the hands of her fiancé, no less), by crying and then doing nothing to stop the harassment. Id. at *8. In other ways, she attempted to prevent them from pursuing their legal remedies in light of the harassment.    

The EEOC’s proposed consent decree contained strict and severe reporting and inspection requirements, among other things, for a term of ten years. It even contained a provision that required the harasser’s photograph to be given to employees along with warnings about his behavior, in case he violated the order by setting foot into the store for any reason other than to sell it produce (under the rubric of his new post-trial job). Id. at *14-15. The district court declined to enter the range of injunctive relief proposed by the EEOC.

The Second Circuit reversed and remanded. Even under a deferential standard of review, it the panel wrote in a per curiam opinion: “we conclude that the district court abused its discretion insofar as it denied the EEOC’s request for injunctive relief specifically directed toward ensuring that [the harasser] is no longer in a position to sexually harass KarenKim employees.” Id. at *21. The Second Circuit recognized that given the personal relationship between the owner and the harasser, it is likely that he would return to the store, absent a court order forbidding him from doing so. Id. at *22. Interestingly, it then offered its opinions as to what might constitute an appropriate injunction on remand even while noting “it is not our role to fashion the specific measures necessary to prevent the recurrence” of the harassment. Id. Simple enough, according to the panel:  don’t hire the guy back, and don’t let him enter the store.   

Of course that was far short of what the EEOC had requested. No doubt the egregious facts of these incidents and the failure to respond by the company led to the punitive damages award by this jury. Nonetheless, the Second Circuit found a way to cut at the joint of the EEOC’s requested injunction to tailor its scope to direct the behavior only to the specific causes of the misconduct in this case: the harasser and his fiancée. As such, the ruling in EEOC v. KarenKin, Inc. is a good case study of the range of permissible injunctive relief in EEOC lawsuits, and how overreaching by the Commission undercuts its ability to secure the types of remedies it often tries to negotiate for in settlement contexts.

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

BlueSeal4.gifBy Gerald L. Maatman, Jr. and Laura Maechtlen

The U.S. District Court for the District of Nevada recently issued an opinion in EEOC v. Prospect Airport Services, Inc., U.S. Dist. LEXIS 103256 (D. Nev. July 25, 2012), which granted the EEOC sweeping injunctive relief and ordered the Defendant to implement steps to deter future violations of sexual harassment. The EEOC immediately trumpeted the ruling with a press release. The ruling provides some important guidance on the extent to which the EEOC can secure injunctive relief, and the threat employers face for such claims in EEOC-initiated litigation.

The Commission brought suit against Prospect Airport Services, a provider of wheelchair assistance services to airline passengers, on behalf of its employee, Rudolpho Lamas, who worked for the Defendant at a Las Vegas airport. The EEOC alleged that a female co-worker sexually harassed Lamas for over a year, and that the Defendant’s general manager failed to respond to Lamas’ complaints. In 2007, the Court dismissed the case on summary judgment. Subsequently, the Ninth Circuit reversed the dismissal and remanded the case for trial. Three days before trial, the parties entered a $75,000 settlement agreement. The Defendant’s payment, however, did not completely dispose of the case. Prospect refused to agree to any prospective relief to prevent future harassment, which forced the EEOC to petition for an injunction. The Court relied on the language of the settlement agreement and the seven year case history in issuing a lengthy order of injunctive relief against the Defendant. 

Background Of The Case

After receiving sexually suggestive notes from a female co-worker, Lamas, a male employee, brought the notes to a general manager working for the Defendant. The general manger allegedly did nothing.  The harassment intensified and the co-worker made verbal advances and gave Lamas a semi-nude photo of herself.  Lamas rebuffed his co-worker’s continual harassment. Lamas also claimed that other employees made remarks about his sexuality. In 2003, after Lamas was allegedly harassed for over a year, he finally resigned.

Two years later, the EEOC filed suit against the Defendant for subjecting Lamas to a hostile work environment in violation of Title VII. Almost immediately, the Defendant took remedial actions to prevent further unlawful conduct at its company. Id. at *7. Years of dispositive motions, appeals, and even trial preparation ensued. Days before trial, the parties reached a $75,000 settlement agreement, leaving only the question of non-monetary sanctions. Id. at *2. The Defendants refused to include any mention of prospective relief to prevent future harassment in its settlement agreement. Subsequently, the EEOC petitioned the Court for an injunction.

The Court’s Ruling

The Court noted two key points. First, Defendant had “taken substantial efforts [during the time since the lawsuit was filed] to ensure compliance with the sexual harassment provisions of Title VII.” Id. at *2. Second, all of the individuals involved with the harassment of Lamas had left Prospect by mid-2006. Id. at *3. However, in the Court’s analysis, these factors did not counsel against the EEOC’s motion.

In passing on the EEOC’s motion, Judge Kent J. Dawson determined that he was “convinced that injunctive relief is necessary in this case.” Id. at *8. Explaining that he could not issue injunctive relief “unless there is a cognizable risk of recurrent violations[.]” Judge Dawson  reasoned that the “Defendant’s failure to responsively investigate and remedy the sexual harassment was not accidental.” Id. at *5, *8. Further, the Court determined that these actions were “insufficient assurances that Defendant will not repeat the violation.” Id. at *7. In efforts to deter sexual harassment violations at the Defendant’s company, the Court enjoined prospective Title VII violations relating to sexual harassment for five years. The Court also ordered the Defendant to develop and implement an anti-harassment policy regarding sexual harassment at all of its facilities; an impartial investigation process of complaints of sexual harassment; disciplinary measures for employees that fail to comply with the investigation process; and mandatory annual training for all supervisors. Id. at *8-10. 

Implications For Employers

The Defendant in EEOC v. Prospect Airport Services, Inc. must abide by the Court’s injunction for five years. That is a long lesson to learn. The ruling is a reminder to employers that monetary settlements do not always dispose of a case, especially litigation with the EEOC. 

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

glass_ceiling.jpgBy Laura Maechtlen and Brian Wong

It is not uncommon for an employer to face vague or overbroad class claims premised on one employee’s injury limited to a specific set of facts. However, in a recent ruling in Singleton v. BP Amoco Chemical Co., No. CVV-12-J-255-5 (N.D. Ala. April 3, 2012), an Alabama federal district court judge limited an individual plaintiff’s attempt to bring Title VII class claims on behalf of a large group of women, finding that the plaintiff lacked standing to represent the group of female employees she sought to include in the putative class. This decision provides an interesting roadmap for employers seeking to challenge a plaintiff’s standing under Title VII.  

Key Facts In The Case

In Singleton, the named plaintiff Debbie Singleton brought suit on behalf of herself and a purported group of similarly situated women, alleging gender discrimination in violation of Title VII of the Civil Rights Act and 42 U.S.C. § 1981a. Singleton had previously worked for BP from 2000 through 2009, and returned to BP as a contract employee in September 2010. In November 2010, Singleton applied for a permanent position, which required her to pass a “WorkKeys” test. Singleton repeatedly failed the test and was not rehired as a permanent employee. After Singleton filed an EEOC charge, however, the employer dispensed with the WorkKeys test in favor of a different applicant process. By the time she filed her complaint, Singleton had taken and passed the new test, and was awaiting an interview for a permanent position.

Nevertheless, in filing suit, Singleton sought to represent a class of all women and applicants affected by the employer’s alleged discriminatory hiring policies and procedures, including prior use of the WorkKeys test to intentionally exclude females from employment. The claim asserted on behalf of the class is that the employer engaged in a general pattern or practice of discrimination against all women employees and applicants in all aspects of employment.

In response, the employer moved to dismiss Singleton’s claims on multiple grounds, arguing that Singleton lacked standing to sue on behalf of purported class members because the plaintiff’s only injury stemmed from the failure to pass one section of the WorkKeys test. Plaintiff argued that her injury in fact was the failure to be hired, which resulted in her failure to pass the test.

The Court’s Analysis Of The Standing Defense

The Court agreed with the employer and recognized that a plaintiff necessarily is limited to the issues as to which the employee is aggrieved, and as such, Singleton lacked standing to assert claims on behalf of a class for purported injuries she did not herself suffer. 

The Court based its holding on the rule that “a claim cannot be asserted on behalf of a class unless at least one named plaintiff has suffered the injury that gives rise to the claim.” Id. at  6. In the context of Title VII, the Court noted “[t]he mere fact that an aggrieved private plaintiff is a member of an identifiable class of persons of the same race or national origin is insufficient to establish his standing to litigate on their behalf all possible claims of discrimination against a common employer.” Id. It further recognized that, if the testing procedures are the basis for the disparity in women hired, as the plaintiff alleged, then only women who were not hired because of the testing procedures could possibly allege an injury from those procedures.

In the end, because Singleton herself was not discouraged from applying for a job with BP, nor barred from positions with defendant, applied for jobs with defendant, and was hired by defendant, more than once, she lacked “standing to assert claims on behalf of females discouraged from applying with [BP], regardless of the reasons for non-application.” Id. at 10. Similarly, the Court held Singleton lacked standing to assert claims on behalf of women allegedly injured before she applied for a permanent position in November 2010 or after the date the employer eliminated the WorkKeys test, or women who were not hired for reasons other than the WorkKeys test. Plaintiff did, however, have standing to represent those females who did not pass the Work Keys test post-2009. Id. at 13.

In addition to “necessarily limit[ing]” the scope of Singleton’s class claims, the Court also dismissed her request for injunctive relief, and denied BP’s motion to dismiss her § 1981a claim. Id.  

Lessons To Be Drawn From The Ruling

This case serves as a reminder to employers that aggressive challenges to a named plaintiff’s standing can be an effective method of narrowing the scope of an improperly broad class discrimination claim. This defense can be asserted up front through a Rule 12 pleading.