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Employers score victory on defense costs in Supreme Court EEOC case

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In a victory for employers, the U.S. Supreme Court has unanimously held that a defendant in an Equal Employment Opportunity Commission case did not need to win a case based on its merits to be considered the “prevailing” party in the case and be awarded attorneys fees.

The U.S. Supreme Court, however, did not issue a final ruling in the CRST Van Expedited Inc. v. Equal Employment Opportunity Commission because the EEOC had presented a new argument for the first time during oral arguments.

As a result, the case was remanded back to the 8th U.S. Circuit Court of Appeals in St. Louis for further proceedings.

The complex litigation began in 2007, when the EEOC charged Cedar Rapids, Iowa-based CRST with sexual discrimination and a hostile work environment in violation of Title VII of the Civil Rights Act of 1964 in connection with its training of 270 women.

From there, the case followed a long, convoluted path. The U.S. District Court in Cedar Rapids dismissed 99 people who did not appear for depositions, and the EEOC dropped 18 other claims.

The District Court then granted summary judgment to CRST on 87 of the remaining 154 plaintiffs in the case, based on various grounds. Following an evidentiary hearing, it dismissed the remaining 67 plaintiffs.

Ultimately, EEOC and CRST agreed the trucking firm would pay $50,000 to settle the claim by the original plaintiff in the case, Monika Starke.

In the course of the extensive litigation, the District Court twice awarded CRST more than $4 million in attorneys fees and was twice reversed by the 8th Circuit.

In reversing the attorneys fees award for the second time, the appeals court said a party can only be considered “prevailing” and entitled to attorneys fees if there had been a ruling on the merits, which was not the case here.

Because of a split over this issue among circuit courts, the Supreme Court agreed to hear the case last year.

“The Court now holds that a favorable ruling on the merits is not a necessary predicate to find that a defendant has prevailed,” said the court in a ruling delivered by Justice Anthony Kennedy.

While a court must determine whether the party seeking fees has prevailed, the Supreme Court “has not set forth in detail how courts should determine whether a defendant has prevailed.” The question of whether CRST is the prevailing party “represents the central issue in this case.”

A favorable judgment on the merits is not necessary for a party to prevail, said the ruling. “Common sense undermines the notion that a defendant cannot 'prevail' unless the relevant disposition is on the merits.”

The defendant has “fulfilled its primary objective when the plaintiff's challenge is rebuffed, irrespective of the precise reason for the court's decision … There is no indication that Congress intended that defendants should be eligible to recover attorneys' fees only when courts dispose of claims on the merits.”

“Congress must have intended that a defendant could recover fees expended in frivolous, unreasonable, or groundless litigation when the case is resolved in the defendant's favor, whether on the merits or not,” the ruling said.

It “could not have intended to bar defendants from obtaining attorneys' fees in these case on the basis that, although the litigation was resolved in their favor, they were nonetheless not prevailing parties.”

New eleventh-hour argument

The court, however, did not issue a final ruling on the matter because, it said, the EEOC had introduced a new argument in the case that a defendant must obtain a “preclusive judgment,” which is a final judgment no longer subject to appeal in the case, in order to prevail.

“The commission's failure to articulate its preclusion theory before the eleventh hour has resulted in inadequate briefing on the issue,” said the Supreme Court in remanding the case to the 8th Circuit for further proceedings.

The EEOC said in a statement, “ We are reviewing the decision and we look forward to presenting our arguments to the Eighth Circuit.”

“It's a victory for employers in the Title VII case … even though the Supreme Court in essence declined to issue a ruling on it and remanded it back to the District Court for further determination,” said Tina R. Syring, a partner at Barnes & Thornburg L.L.P. in Minneapolis, who was not involved in the case.

The only reason it was remanded was “new arguments had been presented during oral arguments, and some of it had not been fully briefed,” said Ms. Syring.

This was a possibility justices had suggested several times during oral argument in the case, she said.