United States Supreme Court to Hear Case Involving Massive Fee Award Against EEOC

In August of 2013 a rather unprecedented fee award was handed down by a federal Judge in Iowa against the EEOC.  In that case, Judge Linda R. Reade, then chief judge for the Northern District of Iowa, awarded CRST Van Expedited $4.7 million in fees and costs stemming from a suit filed by the EEOC in 2007.  The EEOC had originally claimed that the trucking company’s female employees had been subjected to sexual harassment constituting a hostile work environment, and had filed a class action suit on their behalf.

However, approximately a year into the case the EEOC had failed to identify even the number of individuals in the class, something that shouldn’t have been a difficult task with such a limited pool.  At one point the Court ordered that the EEOC produce all defendants for deposition, ruling against the EEOC’s argument to enforce numerical limits on depositions.  The EEOC made many mistakes in the litigation of this case.  The employer also succeeded on certain key determinations that helped sink the EEOC’s case.  Crucially, the Court rejected the agency’s argument that certain “lead drivers” were supervisors.

Judge Reade dismissed what she characterized as the agency’s claims that the company had a pattern or practice of harassment, and ultimately barred the agency from pursuing relief on behalf of those female employees.  In dismissing the case, she took the most issue with the fact that the EEOC had failed to investigate some of the individual claims prior to filing the lawsuit, which she characterized as having “wholly abandoned its statutory duties.”  This “failure to conciliate” would later be a key issue on appeal.

On its first appeal to the 8th Circuit, the Court upheld much of Judge Reade’s decision, but remanded the claims of two individuals.  That was, however, far fewer than the 255 individuals for whom the EEOC had at one time sought to pursue class claims, or the 154 it had suggested later in the process.  On remand the lower court again found that the class action could not survive, and found that CRST was entitled to its attorneys’ fees and costs.

Ultimately the EEOC settled only one woman’s case, for $50,000.  On the other hand, 67 claims had been dismissed.  By any measure you could suggest that the Defendant had prevailed, settling one claim, achieving dismissal of 67, and ultimately avoiding a class once suggested to include 255 members.  The district court certainly felt so, because in finding that the Defendant was entitled to fees and costs it essentially found that the EEOC never should have brought the dismissed claims at all.

A $4.7 million fee award may seem high, and it is certainly rare to see the EEOC hit with such a large award, but it is worth noting that the fees were actually calculated using discounted rates.  The Defendant’s attorneys, based in Chicago, instead used rates based upon Cedar Rapids.  That resulted in a fee calculation of approximately half of what it would have been at the actual rate.

Again the EEOC appealed to the 8th Circuit.  On the case’s second trip to the appellate court, the issue became whether CRST was a “prevailing party,” as it must be in order to recover its fees and costs.  The EEOC argued that it had succeeded by settling the single claim for $50,000.  But the Court found that the EEOC had advanced claims for more than the one woman who had settled.  The EEOC argued that it had withdrawn all but that single settled case prior to the lower court’s disposition, but the Court rejected that argument.

For its part, CRST argued that the lower court’s dismissal of the EEOC’s “pattern and practice” claims constituted adjudication on the merits.  However, the Court denied that argument as well, finding that the EEOC had not advanced a pattern and practice suit, but that the lower court had assumed that the EEOC’s suit included pattern and practice claims.  The Defendant countered that by arguing that the 67 claims dismissed by the lower court made it a prevailing party.  The Court found that the dismissal did not constitute a ruling on the merits.

The real issue behind the Court’s finding was a novel question, of whether a failure to conciliate charges was a jurisdictional issue.  The Court found held that the failure to conciliate was a “non-jurisdictional prerequisite to the filing of a lawsuit.”  In other words, dismissal due to failure to conciliate was not an adjudication on the merits.  The Court reversed the district court, with the result being that CRST was not entitled to that $4.7 million it had been awarded by Judge Reade.

This issue will now go before the United States Supreme Court, who has accepted review of this case.  It will be interesting to see whether the high Court reaches the same conclusions as the 8th Circuit.  In any case, we will update our readers once the Court has heard the case.

The St. Louis employment attorneys at McMahon Berger have been representing employers across the country in labor and employment matters, including all aspects of discrimination and harassment litigation, for nearly sixty years, and are available to discuss these issues and others.  As always, the foregoing is for informational purposes only and does not constitute legal advice regarding any particular situation as every situation must be evaluated on its own facts. The choice of a lawyer is an important decision and should not be based solely on advertisements.

Learn more aboutMichael Powers
Michael represents the interests of management in all facets of labor and employment law, with an emphasis on employment litigation. He defends employers against discrimination claims brought under both Federal and State laws. He works on behalf of management to investigate and respond to employee claims before administrative agencies.