The U.S. Equal Employment Opportunity Commission must pay a temporary employment agency more than $750,000 in attorneys and expert witness fees in connection with a lawsuit that unjustifiably charged the firm with having a companywide policy of rejecting applicants who are felons in violation of Title VII of the Civil Rights Act of 1964, says an appellate court.
In September 2008, the EEOC filed suit against Memphis, Tenn.-based Peoplemark Inc. charging it with violating Title VII based at least in part on incorrect information conveyed by its vice president and associate general counsel, Judd F. Osten, that it had such a companywide policy, according to Monday's ruling by the 6th U.S. Circuit Court of Appeals in Cincinnati in Equal Employment Opportunity Commission v. Peoplemark Inc.
The EEOC eventually identified 286 individual class members. “The records provided by Peoplemark to the commission indicated, however, that some of the class members did not have felony convictions and others who had felony convictions obtained employment through Peoplemark despite their criminal records,” said the court.
In April 2009, Peoplemark formally informed the EEOC for the first time that Peoplemark denied having a companywide policy of rejecting felon applicants.
By September 2009, it had produced more than 178,000 documents that proved its statement. The parties agreed to dismiss the case in March 2010, and Peoplemark then moved for attorneys' fees, expert fees, sanctions and costs.
Based on a magistrate judge's opinion, the U.S. District Court in Grand Rapids, Mich., awarded Peoplemark $751,942 in attorneys and experts fees. The award reflected attorney's fees generated from Oct. 1, 2009, and all of Peoplemark's expert witness fees.
The EEOC appealed that ruling, claiming the award of any fees was inappropriate under the circumstances of the case, and alternatively argued against how the fees were calculated.
A three-judge panel of the 6th Circuit panel disagreed in a 2-1 ruling.
The majority opinion said that in its 1978 ruling in Christiansburg Garment Co. v. Equal Employment Opportunity Commission, the U.S. Supreme Court said a prevailing defendant in Title VII may be awarded fees if the plaintiffs' claim was “frivolous, unreasonable, or groundless, or … the plaintiff continued to litigate after it clearly became so.”
“To be sure, the Commissioner's case was not groundless when filed, Osten's incorrect statements that there was a companywide policy gave the Commission a basis to file the complaint.”
However, added the ruling, “When discovery clearly indicated Osten's statements belied the facts, the Commission should have reassessed its claim. From that point forward, it was unreasonable to continue to litigate the Commission's pleaded claim because the claim was based on a companywide policy that did not exist.”
The appellate court also held that under Title VII, reasonable attorney's fees include expert fees. In addition, it said charging the EEOC with the total amount of experts' fees, rather than just the total from Oct. 1, as it did with the attorney's fees, was justified. “There is nothing in the statute as written that requires temporal occurrence between expert and attorney's fees,” said the ruling.
“The district court reviewed the expert fees incurred by Peoplemark and found that they were reasonable. Having already found the court was permitted to award expert fees under Christiansburg, the court was within its discretion to award the entirety of Peoplemark's expert fees.”
The dissenting opinion said in the Christiansburg ruling the court's “only goal in awarding fees to defendants, in extremely rare instances, was to prevent frivolous suits or reckless and abusive litigation tactics. I believe that the lower court's interpretation of this case is clearly erroneous and rests on a misinterpretation of the role of the prima facie case in employment discrimination law.
“If I am correct, then the EEOC's case was not meritless at any point during the litigation and the court abused its discretion in awarding fees, on part on that basis,” said the dissenting opinion.
Commenting on the ruling, Ashely Kasarjian, an associate with law firm Snell & Wilmer L.L.P. in Phoenix, said, “This is one of a stream of cases that questions the EEOC's authority to shoot first and ask questions later.”
“What is remarkable in this case is the amount of time and money Peoplemark spent defending against claims that were completely without merit,” Ms. Kasarjian said. “It makes me wonder whether (the EEOC was) even listening.”
A spokesman for the EEOC could not be reached because of the government shutdown.