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Court Weighs Affirmative Defenses in EEOC's Age Discrimination Suit Against Kelley Drye

Thursday, August 4, 2011

Adam Brown | Bloomberg LawEEOC v. Kelley Drye & Warren, LLP, No. 10-cv-00655, 2011 BL 192527 (S.D.N.Y July 25, 2011)EEOC v. Kelley Drye & Warren, LLP, No. 10-cv-00655, 2011 BL 192528 (S.D.N.Y July 25, 2011) The U.S. District Court for the Southern District of New York recently struck a number of affirmative defenses in an age discrimination suit filed by the Equal Employment Opportunity Commission (EEOC) on behalf of a partner at the law firm Kelley Drye & Warren, LLP (KD). KD's partnership agreement requires that all partners, upon reaching the age of 70, take a passive role in the firm's management and relinquish any equity interest they have in the firm in exchange for a compensation structure based exclusively on discretionary annual bonuses. Eugene T. D'Ablemont, a former equity partner at KD who converted to this "Life Partner" status in 2000, filed a complaint with the EEOC challenging KD's policy. The EEOC subsequently commenced an action against KD, alleging that the firm's Life Partner compensation policy "unlawfully discriminates against D'Ablemont and other attorneys who continue to practice at KD after reaching the age of 70 by undercompensating them solely on the basis of age." KD filed an answer in which it asserted 19 affirmative defenses. The EEOC then moved to strike nine of those affirmative defenses and for partial summary judgment on a tenth affirmative defense, which sought to offset any damages owed to D'Ablemont by various payments he received from either KD or third parties. On July 25, 2011, the Court issued two separate opinions, the first addressing the EEOC's motion to strike and the second addressing its motion for partial summary judgment. In its first opinion, the Court explained that striking affirmative defenses for legal insufficiency is disfavored and that "a motion to strike should not be used as an opportunity for the determination of disputed, substantial questions of law." Nevertheless, the Court struck KD's affirmative defense that the EEOC's claims were untimely because, as a settled matter of law, the EEOC is not bound by any of the statutory limitations periods and filing requirements that apply to private parties suing under the Age Discrimination in Employment Act (ADEA), 29 U.S.C. §§ 621–34. The Court also struck KD's affirmative defense that the EEOC's claims were barred as to any charges of discrimination not contained in D'Ablemont's complaint to the EEOC. Because the EEOC's enforcement authority is not derivative of the legal rights of the individual complainants, "[t]he content of an individual complainant's charge does not limit the scope of a lawsuit brought by the EEOC." Thus, the EEOC had the authority to raise claims not specifically included in D'Ablemont's complaint, including claims made on behalf of other individuals. The Court, however, declined to strike KD's affirmative defense asserting that the punitive damages and damages for non-pecuniary losses sought by the EEOC are not recoverable under the ADEA. Because the courts of appeals have taken different positions regarding the availability of compensatory and punitive damages in ADEA actions, the Court found it inappropriate to resolve the issues on a motion to strike. Similarly, the Court refused to strike KD's equitable defenses of waiver, estoppels, laches, and unclean hands resulting from certain "actions and/or inactions by the EEOC and/or D'Ablemont," as well as its general defense that "D'Ablemont's compensation as a Life Partner has been entirely non-discriminatory, non-retaliatory and fair" in light of the specific circumstances of his employment and various benefits he received during the relevant time period. Despite the fact that the EEOC had independent investigative authority, D'Ablemont's conduct was still relevant to the EEOC's entitlement to relief on his behalf. Because the answer contained sufficient factual allegations about D'Ablemont's employment conduct, the Court denied the motion to strike these defenses. In a separate opinion, the Court addressed KD's affirmative defense seeking to offset any damages owed to D'Ablemont by amounts he received through third-party retainer agreements, as well as client development funds and legal services provided to him by the firm. Specifically, in addition to his compensation as a Life Partner, D'Ablemont continued to receive compensation under retainer agreements with two longstanding firm clients for which he had served as lead counsel. KD asserted that under the terms of its partnership agreement, the payments D'Ablemont received under the retainer agreements were property of KD and should be "included in [the] revenue calculations . . . [used to determine] partner compensation." Although the EEOC asserted that it would not base any of its damages claims on work D'Ablemont performed for these clients, the Court held that factual disputes remained concerning the proper treatment of such payments under KD's partnership agreement. Accordingly, the Court denied the motion for summary judgment "insofar as the EEOC [sought] dismissal of the affirmative defense as it relate[d] to third-party payments." With respect to the client development funds provided to D'Ablemont, the Court found that the record clearly indicated that KD voluntarily paid these funds to D'Ablemont and that they were a type of business expense "that KD does not treat as compensatory." Similarly, there was no evidence in the record that the legal services provided by the firm qualified as compensation. Accordingly, the Court granted the EEOC's motion dismissing KD's request for an offset on these bases.

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