Employment Law, Publications

EEOC Hit Twice in Three Months for Pursing Frivolous Claims

March 24, 2014

Two recent court rulings have stuck the Equal Employment Opportunity Commission (“EEOC”) with a legal bill for $5.4 million for bringing frivolous claims.  On August 1, 2013, the United States District Court for the Northern District of Iowa, on remand from a decision of the Eighth Circuit Court of Appeals, ordered the EEOC to pay the legal fees of a defendant against which it was determined to have brought frivolous claims.  The price tag -- $4.7 million.  Less than three months later, the Sixth Circuit Court of Appeals slapped the Commission with another bill to compensate a defendant for what was determined to be yet another frivolous claim.  In that instance, the total cost was $750,000.

In EEOC v. CRST Van Expedited, Inc., the EEOC brought a sweeping Title VII claim against the transportation company CRST Van Expedited, Inc. in which it alleged that CRST engaged in severe and pervasive sexual harassment in its new driver training program against the named plaintiff and further subjected 270 similarly situated female employees to hostile work environments.  Although the original claims were filed in 2007, the putative class of 270 similarly situated women was not disclosed until October 2008.  It was alleged by CRST that the EEOC did not have a good faith basis for naming so many allegedly aggrieved persons and accused the EEOC of adopting a policy of “naming everyone first and asking questions later.”   The court took the EEOC at its word that it had a good faith belief that each and every one of the approximately 270 women had an actionable claim for sex discrimination.

Despite the affirmations by the EEOC, the agency, in January 2009, reduced the number of the putative class to 150 women.  By August 2009, 255 of the individual claims had been dismissed or withdrawn based on various reasons such as:  discovery sanctions, statute of limitations, judicial estoppel, a lack of evidence, failure to report and a failure by the EEOC to adequately investigate and/or conciliate the claims.  As a result, the court determined that the EEOC’s actions in pursuing its claims were unreasonable, and contrary to the procedures outlined by Title VII.  Particularly, it found that the EEOC’s failure to exhaust administrative pre-requisites and to properly investigate its claims was its ultimate downfall.  The court noted that the fact that the EEOC could name one plaintiff with a valid claim did not give it the right to include frivolous claims in that same complaint by artfully crafting the pleadings and including the language “similarly situated employees.”  In finding that the EEOC had asserted multiple and distinct claims against CRST and lost those claims on the merits, the District Court for the Northern District of Iowa found CRST to be a prevailing party as to those claims.  Accordingly, on remand, it awarded CRST fees and costs in the amount of $4,694,442.14.

On October 7, 2013, the Sixth Circuit Court of Appeals followed suit and upheld a decision by the United States District Court for the Northern District of Ohio hitting the EEOC with another bill for fees because the Agency continued to litigate claims it knew or should have known were meritless.  This time, the mistake cost the EEOC $751,942.48.

In 2008, the EEOC filed a class action suit against Peoplemark, Inc., a staffing agency.  In its suit, the EEOC alleged that Peoplemark had a blanket company-wide policy of denying jobs to individuals with felony records and that this practice had a disparate impact on African-Americans.  The EEOC’s claim was premised on a Vice President of Peoplemark purportedly telling the Agency that the policy existed.  In April of 2009, Peoplemark denied the existence of the policy.  In July 2009, Peoplemark’s e-data base produced to the EEOC, pursuant to discovery, similarly demonstrated that no such policy existed and that Peoplemark had in fact referred and placed felons for jobs.  Nonetheless, the EEOC persisted.  Although by October 1, 2009, the EEOC recanted its theory that Peoplemark had a categorical company-wide policy of rejecting felons, it continued to argue that the consideration of felony records had a disparate impact on African-Americans.  In February 2010, after the EEOC filed its expert report, the court granted Peoplemark’s motion for summary judgment.  Thereafter, Peoplemark sought its attorneys and experts fees.

The District Court found that the EEOC was unreasonable in continuing to litigate its claim after receiving evidence that the policy upon which it had relied was untrue.  In upholding the lower court’s decision, the Sixth Circuit Court of Appeals agreed that a good investigation should have shown that the EEOC could not make its case before filing suit and that it should have realized that its theory of liability as pled was untenable.

In rendering its opinion, the Sixth Circuit Court agreed that the EEOC should have been aware of the fatal flaw in its claim as of October 1, 2009 and awarded attorney’s fees from that point forward.  In addition, the court awarded Peoplemark the entirety of its expert’s fees beginning from the inception of the case.  The court reasoned that once an expert report deadline is set, an expert must promptly begin his or her work to comport with the deadline.  An expert cannot wait to see if a case becomes frivolous before beginning its work.  Until the case is dismissed, the court stated that all of the expert’s work is necessary.  Accordingly, it awarded Peoplemark the entirety of its expert fees of $526,172, attorney’s fees from October 1, 2009 forward in the amount of $219,350.70 and other expenses totaling $6,419.78.

In both cases, the Circuit Courts of Appeal, as well as the respective District Courts, made clear that they will not allow the EEOC to drag its feet and litigate at its own pace all the while ignoring well established protocol and its obligation to properly investigate, conciliate and validate its claims.  Both decisions are proof that such behavior can be costly.

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