4th Circuit penalizes EEOC for unwarranted delays in discrimination case

Employers covered under the federal antidiscrimination laws have to deal with either their local or state discrimination agency and the Equal Employment Opportunity Commission (EEOC) when a charge of discrimination is filed against them. While those interactions are often seamless and conflict-free, they sometimes take a different path. The 4th Circuit was recently called on to review the EEOC's conduct in pursuing and investigating an employee's discrimination claims and found it lacking. Read on to see how the 4th Circuit handled the situation.

Background

In January 2003, Michael Quintois filed a charge of discrimination with the EEOC against his former employer, Propak Logistics, Inc., a provider of commercial warehousing, transportation, packaging, and shipping services. Quintois, a supervisor at Propak's facility in Shelby, North Carolina, alleged that the company terminated his employment based on his "American" national origin after he complained that it hired only Hispanic workers for certain supervisory positions. The EEOC notified Propak of the Title VII discrimination charge.

Based on Quintois' discrimination charge, the EEOC initiated an investigation of Propak that lasted nearly six years. The investigation included extensive periods of delay and inactivity. Although Propak responded to the discrimination charge in May 2003, the EEOC didn't interview Quintois about its response until May 2004. The agency also delayed interviewing Kathy Ponder, a Propak manager responsible for hiring decisions at the Shelby facility, until April 2004.

In September 2004, the EEOC designated the matter as a "class case." However, the district court later found that Propak didn't receive notice of that procedural decision until about four years later, in September 2008. Although the EEOC scheduled and conducted two witness interviews between October 2004 and March 2005, little other investigative activity occurred during that period.

The evidence also indicated that the EEOC didn't contact Propak for about two years between June 6, 2005, and June 7, 2007. In June 2007, the agency contacted the company about speaking with Ponder, but it was unable to interview her because she had left her job and her whereabouts were unknown. In addition to the EEOC, the U.S. Department of Justice (DOJ) conducted an investigation of Propak based on Quintois' allegations. That investigation, which lasted about one year, ended in November 2005 without any charges being brought.

During the course of the EEOC's inquiry, Quintois requested a "right- to-sue" authorization. After the agency granted his request, he filed a lawsuit against Propak in March 2008. The case was dismissed about four months later with the agreement of the parties. In September 2008, the EEOC concluded its investigation of Propak and issued a "determination letter."

The EEOC stated that it had found reason to conclude that Propak violated Title VII by failing to hire a class of non-Hispanic job applicants because of their race or national origin. In the letter, the EEOC invited Propak to participate in informal conciliation to resolve the matter in accordance with its statutory mandate to engage in such efforts.

In attempting to conciliate the matter, the EEOC proposed certain remedial measures at Propak's facilities in North Carolina and South Carolina. The measures would have required the company to offer certain employment opportunities, provide training for supervisors and managers, and post certain notices in those locations. By this time, however, Propak had closed all of its facilities in both states, rendering it impossible to implement the remedial measures.

EEOC finally files suit

Despite the factual background outlined above, the EEOC initiated a lawsuit against Propak in federal district court in August 2009, more than 6½ years after Quintois filed his discrimination charge. The agency alleged in its complaint that between October 2002 and June 2004, Propak violated Title VII by refusing to hire a class of non- Hispanic individuals at the Shelby facility on the basis of national origin. The EEOC sought certain injunctive relief, including an order requiring Propak to institute policies and programs to benefit non- Hispanics to mitigate the effects of the allegedly unlawful employment practices. It also sought monetary relief on behalf of the affected class of non-Hispanic job applicants.

Propak filed a motion to dismiss the lawsuit, arguing, among other things, that it should be barred under the doctrine of laches (i.e., an unreasonable delay in pursuing a right or claim in a way that harms the opposing party). The district court denied the request and ordered the parties to engage in discovery (pretrial fact-finding) on the issue of whether Propak had been harmed by the EEOC's extensive delay in initiating the litigation.

At the conclusion of the discovery period, Propak made another request for dismissal, again asserting the defense of laches. This time, the district court granted the company's motion, concluding that the EEOC's delay in initiating the lawsuit was "unreasonable." In reaching that conclusion, the court emphasized the fact that "there were significant periods when the EEOC took little or no action toward completing the investigation."

The district court held that Propak suffered harm as a result of the EEOC's unreasonable delay. The court observed that certain important witnesses, including the site managers for the Shelby facility during the relevant time period, were no longer employed by Propak and "locating them would be difficult, if not impossible." The court also stated that even if the witnesses could be located, they likely would have "faded memories" of the things that happened more than five years before the complaint was filed.

Company requests attorneys' fees

After the district court entered its judgment in favor of Propak, the EEOC filed a timely notice of appeal. The agency later sought dismissal of the appeal, and the court granted its request. The court also considered Propak's request for $192,602.95 in attorneys' fees it incurred after the EEOC filed the complaint. The court awarded the company nearly the entire amount it requested.

The district court held that the EEOC acted "unreasonably" in filing the complaint and in continuing the litigation in light of the developing evidence. According to the court, "By the time the EEOC determined to bring this action, it was abundantly clear that a lawsuit would be moot[,] and thus it was unreasonable to have filed it." The court held that injunctive relief wasn't available because Propak had closed the Shelby plant and its other North Carolina facilities, and an award of monetary damages was unlikely because the EEOC knew before filing the complaint that it couldn't identify the class of alleged victims.

The court also held that the EEOC's continued pursuit of the litigation following discovery was unreasonable because "it was again reaffirmed [during discovery] that purported victims and witnesses could not be located [and] the facilities were closed." The court concluded that the EEOC unreasonably continued to pursue the litigation after learning that the relevant employment records "were no longer in existence."

In deciding the amount of attorneys' fees to award, the court analyzed Propak's request in detail despite the EEOC's failure to contest the amount sought by the company. The court ultimately awarded Propak $189,113.50. The EEOC filed a timely appeal challenging the award.

4th Circuit's opinion

The EEOC asked the 4th Circuit to hold that federal courts are not permitted to apply the equitable defense of laches in a lawsuit filed by an agency of the federal government. Conceding that it failed to raise this argument before the district court, the EEOC nevertheless maintained that it would be "unjust" to permit an award of attorneys' fees incurred by a company asserting a laches defense. Alternatively, the agency argued that the district court impermissibly relied on its earlier laches determination in awarding attorneys' fees and made erroneous factual findings in deciding the fee award. The 4th Circuit rejected the EEOC's arguments.

A litigant generally must pay its own attorneys' fees unless there's a statutory or enforceable contractual provision allowing attorneys' fees to be awarded to the prevailing party. Title VII contains a statutory fee-shifting mechanism that gives district courts the discretion to award reasonable attorneys' fees to a prevailing party. Although Title VII doesn't place different burdens on plaintiffs and defendants seeking an award of attorneys' fees, the U.S. Supreme Court has set forth a heightened standard that applies to a prevailing defendant ("frivolous, unreasonable, or without foundation").

According to the U.S. Supreme Court, an award of attorneys' fees to a prevailing defendant is a "conservative tool, to be used sparingly" in cases in which the plaintiff initiated or continued to litigate a claim that he "knew or should have known was groundless, frivolous, or unreasonable." Further, a decision about whether attorneys' fees should be awarded to a prevailing defendant under standards set forth by the Supreme Court "is peculiarly within the province of the trial judge who is on the scene and able to assess the oftentimes minute considerations which weigh in the initiation of a legal action."

The 4th Circuit rejected the EEOC's argument on the laches defense because the district court's holding in that regard was based on the agency's unjustified delay in bringing the lawsuit and the resulting harm to Propak's ability to defend itself. That decision rested primarily on the unavailability of key witnesses and documents the company needed to support its defense.

Instead, the district court awarded attorneys' fees chiefly based on its finding that the EEOC's lawsuit was effectively moot (not actionable) at its inception. In reaching that conclusion, the court emphasized that when the complaint was filed, the EEOC failed to identify the class of victims who could be entitled to monetary relief, and injunctive relief wasn't available because Propak had closed its facilities in North Carolina. Those findings, which were central to the court's conclusion that the EEOC unreasonably initiated the lawsuit, weren't material to its decision regarding the laches defense. Thus, the court's fee award reflected proper consideration of the Supreme Court's standard because it assessed whether the EEOC acted unreasonably in initiating the litigation.

The 4th Circuit also concluded that the district court was entitled to consider the lack of remedies available to the EEOC as a result of its inability to identify any potential victims. The court found no merit in the agency's assertion that it was entitled to maintain an action seeking relief against Propak, despite the fact that it became aware, nine months before filing the complaint, that the company no longer operated any facilities in North Carolina. The fees awarded by the trial court were upheld.

Lessons for employers

Employers shouldn't read too much into this opinion. Nevertheless, it does put the EEOC on notice that it must move at due speed when investigating a discrimination charge and have a good basis on which to proceed with the case if it decides to file a lawsuit. A prompt response to an administrative agency's reasonable and relevant requests for information can be helpful in showing that you did your part in the investigation process while the agency slow-walked the case on its end and had little or no evidence to support its discrimination theories or damages. In the right circumstances, courts will consider well-crafted arguments about why you should recoup some of your attorneys' fees when such a recovery is statutorily permitted.

The author may be reached at rmorgan@mcnair.net.

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