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Supreme Court attorneys' fees ruling hits home with EEOC suits

Supreme Court attorneys' fees ruling hits home with EEOC suits

A U.S. Supreme Court ruling that holds a defendant does not need to win a case based on its merits to be considered the “prevailing” party and therefore entitled to attorneys' fees, will help employers in challenging EEOC litigation, experts say.

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

So, the case was remanded 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 while training 270 women.

On the case's long, convoluted path, the U.S. District Court in Cedar Rapids dismissed the cases of all but 67 of the women on a variety of grounds. It then barred the remaining 67 women on the ground that the Commission had not satisfied its presuit requirements before filing the lawsuit.

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

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

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

Because of the circuit court split over this issue, 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.

The Supreme Court, however, “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.

The court, however, did not issue a final ruling on the matter because, it said, the EEOC had introduced a new argument that a defendant must obtain a “preclusive judgment,” or a final judgment no longer subject to appeal, 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 is a clear victory for employers,” said Kevin M. Kraham, a shareholder with Littler Mendelson P.C. in Washington, D.C. The Supreme Court “clearly and unequivocally” provided “unambiguous instruction that a defendant should be able to recover atones fees when a court rejects the plaintiff's claim of discrimination, and that a win is a win, regardless of how the win comes about.”

“The practical impact here is that employers will have available an additional way to challenge the commission's pre-suit conduct,” Mr. Kraham said. “In other words, if the EEOC were fulfilling its statutory mandate by investigating first, and then conciliating, instead of suing first, and then investigating, we wouldn't find ourselves where we are,” Mr. Kraham said.

“Congress wanted to relieve employers of the burdens associated with fending off frivolous lawsuits, and the Supreme Court provided a means to an end for employers to address these types of suits,” he said.

Miriam R. Nemetz, a partner with Mayer Brown L.L.P. in Washington, D.C., said however, the ruling will not have “a huge impact as a practical matter. Defendants are only entitled to attorneys fees in a pretty narrow range of cases, so I don't see an explosion of defendants getting awards of attorneys' fees in employment cases.”

It is helpful, she added, however, in suggesting the EEOC could be subject to attorneys' fees if it does not satisfy presuit obligations, said Ms. Nemetz.

It “is important as part of a constellation of cases establishing what defendants can do or what remedies they may have, if they feel the EEOC has not satisfied its conciliation obligations,” Ms. Nemetz said.

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