Justices Ponder EEOC's Exposure to Attorneys' Fees

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By Kevin McGowan

March 28 — The Equal Employment Opportunity Commission can be liable for an employer's legal fees if an agency discrimination case is dismissed because the EEOC failed to satisfy the mandatory preconditions for its lawsuit, a lawyer for a trucking firm argued to the U.S. Supreme Court March 28.

The justices are reviewing a U.S. Court of Appeals for the Eighth Circuit decision that vacated a $4.7 million award of attorneys' fees and costs to CRST Van Expedited Inc. even though the EEOC's sex discrimination lawsuit against the trucking firm was dismissed.

The Eighth Circuit said no attorneys' fees could be assessed against the EEOC under Title VII of the 1964 Civil Rights Act absent a ruling on the merits of the underlying bias claims .

The court on Dec. 4 granted CRST's petition for review .

The EEOC has stopped defending the Eighth Circuit's reasoning. Instead, the agency argued that after the district court's 2009 order, it remained free to sue again regarding the 67 sexual harassment claims at issue if it satisfied Title VII's preconditions of investigating, making cause determinations on and conciliating those claims.

CRST can't be deemed a “prevailing party” entitled to fees absent a court's dismissal with prejudice of the EEOC's lawsuit, Assistant to the Solicitor General Brian Fletcher told the court.

But at least five justices expressed doubts that dismissal with prejudice is necessary for a Title VII defendant to be a prevailing party.

Even if it were, those justices said the district court's order “barring” the EEOC from pursuing the sex discrimination claims effectively gave CRST a victory ending the lawsuit. There's no reason the employer shouldn't be considered a prevailing party in those circumstances, those justices suggested.

EEOC's New Argument Empty, CRST Says

The EEOC and CRST now “completely agree” the Eighth Circuit's “on the merits” criterion for defendants' attorneys' fees can't be upheld, said Paul Smith, who argued for CRST. The justices therefore should reverse the appeals court's decision, he said.

The court also should give “the back of [its] hand” to the EEOC's argument that dismissal with prejudice is required or that no such dismissal occurred in this case, said Smith, a partner with Jenner & Block in Washington.

Even the EEOC assumed throughout six years of litigation that the district court's 2009 order was a dismissal with prejudice, Smith said.

Perhaps most telling, the EEOC filed a district court motion to reopen the CRST case after the Supreme Court decided Mach Mining LLC v. EEOC, 135 S. Ct. 1645, 126 FEP Cases 1521 (2015) , Smith said.

Such a step would have been unnecessary if the EEOC believed it had always been free to refile the discrimination claims at issue here, Smith said.

The EEOC before the Supreme Court presents an entirely new argument it never raised before the district court or the Eighth Circuit, he said.

The justices should find the agency therefore waived the argument that dismissal with prejudice is required for a fee award, Smith said. Alternatively, the court should rule that prevailing party status under Title VII doesn't depend on that criterion or that even if it does, CRST met the standard, he said.

The court shouldn't take the EEOC's bait and raise a “categorical bar” against Title VII defendants' attorneys' fees if there's no dismissal with prejudice, Smith argued.

Justice Elena Kagan probed the limits of Smith's position. If a court dismisses an agency lawsuit based on a “completely curable” failure to satisfy a precondition, can the court still award the employer its legal fees, she asked.

Given that employers already must meet a tough standard under Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 16 FEP Cases 502 (1978) , it's not clear an additional check needs to be placed on the district court's discretion, Smith said.

“It's not clear to me that we need to have a categorical bar that turns on this issue of with prejudice or without prejudice,” he said.

Under Christiansburg, a court may award fees to a prevailing employer only if it finds the EEOC's position was “frivolous, unreasonable or without foundation.”

Justices Press EEOC's Lawyer

Meanwhile, Fletcher faced tough questioning from Chief Justice John Roberts and Justices Samuel Alito, Stephen Breyer, Sonia Sotomayor and Anthony Kennedy.

If a court's dismissal of an EEOC suit based on failure to satisfy Title VII's preconditions for suit can be a basis for attorneys' fees, then why isn't CRST a “prevailing party,” Breyer asked.

The standard for “prevailing party” for both plaintiffs and defendants is found in Buckhannon Bd. & Care Home, Inc. v. West Va. Dep't of Health and Human Resources, 532 U.S. 598, 11 AD Cases 1300 (2001) , Fletcher replied.

Under Buckhannon, there must be a judicially imposed change in the parties' legal relationship that precludes a future lawsuit on the same claims, Fletcher said.

That didn't occur here because the district court in 2009 didn't dismiss with prejudice the EEOC's sex discrimination claims, he said. Instead, the court order left the EEOC free to pursue those claims against CRST if the agency subsequently satisfied Title VII's investigation, cause determination and conciliation requirements, he said.

An employer defending a Title VII claim generally just wants to maintain the status quo, Sotomayor said. If the defendant achieves that because the EEOC lawsuit is dismissed, why must a defendant also show a change in the parties' legal relationship, she asked.

The federal appeals courts agree the Buckhannon rule applies equally to defendants and plaintiffs, Fletcher replied.

“I don't know where that artificial line comes from,” Roberts said. When he was practicing law, “parties didn't come in and say, I want to win, and I want to win on this ground,” Roberts said. “They said, I want to win. I want the case thrown out.”

But the defendant wants to win in a way that “definitively ends” the litigation, Fletcher said.

“If the defendant wins on a ground that makes clear that the plaintiff can come back to court the next day, or in a different district, or after satisfying a precondition to suit, I don't think the defendant has won in the way that the defendant wants to win,” he said.

Isn't a defendant who secures a court dismissal of a lawsuit a winner under any definition, Alito asked.

Such a defendant certainly would be pleased, but it's not a prevailing party if there remains the possibility the plaintiff could sue again, Fletcher said.

Breyer Seeks Simple Rule

In CRST's case, the attorneys' fees weren't awarded after an interlocutory order, but rather “it's the end” of the litigation, Breyer said.

A rule defining the employer in that circumstance as the prevailing party would be easier for courts to administer, Breyer said. “Why isn't a simple rule the best rule?” he asked. “If the case is over, the defendant won, he is the prevailing party for purposes of that case.”

Then the court could proceed and apply the Christiansburg standard, Breyer said. “I don't see how it would work any unfairness or serious harm” to Title VII's objectives, he said.

But when an employer wins a dismissal without prejudice because the EEOC failed to meet its preconditions to suit, the “dispute really isn't over” because further litigation is possible, Fletcher said.

What if the EEOC or private plaintiff “doesn't come back the next day,” Roberts asked.

“Have you heard of the Hatfields and the McCoys?” Breyer interjected.

If the court adopts the EEOC's standard, potential endless litigation is what the government is suggesting, Breyer said.

If the Buckhannon rule really was giving the courts administrative headaches, that would be apparent by now after the federal courts have applied that rule for 15 years, Fletcher said.

What if a court awarded fees limited to the defendants' time spent opposing the agency omission or practice that caused the dismissal, Roberts asked.

That's a “better and more sensible rule,” but it might be “difficult to fit in” the Title VII attorneys' fees scheme, Fletcher replied.

In this case, the EEOC's “frivolity” caused CRST to incur $4.5 million in legal fees, Roberts said.

The EEOC wasn't “frivolous” in thinking it had satisfied Title VII's preconditions by notifying CRST it was raising classwide claims and trying to conciliate on that basis, Fletcher replied.

What if the EEOC after a court's dismissal for failure to satisfy the Title VII preconditions chooses not to pursue the underlying bias claims, Alito said. Is the employer not entitled to attorneys' fees, he asked.

Yes, the no-fees result again flows from Buckhannon, Fletcher replied. The defendant hasn't secured a court order that “materially alters the parties' legal relationship,” he said.

Mach Mining's Effects Discussed

Roberts asked how Mach Mining affects the analysis when an employer seeks fees after an EEOC lawsuit is dismissed because of its failure to satisfy pre-lawsuit conditions.

The result in Mach Mining, in which the Supreme Court said district courts should grant stays rather than dismiss EEOC discrimination suits if the agency failed to conciliate, means the issue posed in CRST's case “shouldn't come up in future cases,” Fletcher said.

Asked the same question earlier by Justice Ruth Bader Ginsburg, Smith had said Mach Mining is distinguishable because it involved only the agency's alleged failure to conciliate after finding reasonable cause to believe the discrimination charges.

But in CRST's case, the EEOC failed to investigate, make cause determinations or conciliate the 67 discrimination claims that were dismissed, Smith said.

Granting a stay under those circumstances would make little sense because it likely would take the EEOC much longer than a statutory 60-day period to satisfy its obligations to investigate, make cause findings and conciliate each underlying claim, he said.

Did EEOC Waive Argument?

Kagan asked if the EEOC waived its “dismissal with prejudice” argument by never raising it before filing its Supreme Court merits brief.

Both parties before the Eighth Circuit had focused on that circuit's precedent about the necessity for showing a ruling on the merits of the underlying discrimination claim, Fletcher replied.

The EEOC's new argument fits within the broad question on which the Supreme Court granted review, Fletcher said. That issue is whether dismissal based on the EEOC's failure to meet the lawsuit preconditions can support a defendant's attorneys' fee award, he said.

But the EEOC and CRST have an “equal right to refine our arguments” before the Supreme Court, Fletcher said.

The agency's new argument wasn't considered by the courts below or fully briefed by CRST, Kagan said. The justices' usual procedure would be to “kick it back” to the lower court, she said.

The court could remand for the Eighth Circuit to rule on the EEOC's argument, Fletcher acknowledged. But the justices also could resolve the case based on Christiansburg, he said.

The court could affirm denial of attorneys' fees because the EEOC's litigation decisions weren't “unreasonable” under Christiansburg, Fletcher said.

“That seems even worse,” Kagan said. “ I mean, nobody has thought about that.”

To contact the reporter on this story: Kevin McGowan in Washington at kmcgowan@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com

For More Information

Transcript of the oral argument is available at http://src.bna.com/dD1.