EQUAL EMPLOYMENT OPPORTUNITY COMMISSION V. PROPAK LOGISTICS, INC., NO. 13-1687

Decided: March 25, 2014

The Fourth Circuit affirmed the district court’s decision ordering the Equal Employment Opportunity Commission (“EEOC”) to pay attorneys’ fees to Propak Logistics, Inc. (“Propak”) because the EEOC acted unreasonably in filing the complaint.

Michael Quintois, a former supervisor at Propak’s Shelby, North Carolina facility, filed a discrimination charge with the EEOC against Propak in January 2003. Quintois alleged that Propak terminated his employment based on his “American” national original after he complained that the company hired only Hispanic workers for certain supervisory positions. Based on Quintois’ discrimination charge, the EEOC initiated an investigation that lasted nearly six years. Among other things, the EEOC designated the matter as a “class case” in September 2004, yet failed to notify Propak of its procedural decision until about four years later in September 2008. In addition, the EEOC failed to contact Propak for about two years, between June 6, 2005 and June 7, 2007. In June 2007, the EEOC contacted Propak to speak with Kathy Ponder, the Propak manager responsible for hiring decisions at the Shelby, North Carolina facility during the period of Quintois’ employment. Propak, however, no longer employed Ponder and her whereabouts were unknown.

The EEOC concluded its investigation and issued a “determination letter,” in September 2008, which stated the EEOC 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 attempting to conciliate the matter, the EEOC proposed certain remedial measures concerning Propak’s facilities in North Carolina and South Carolina. These measures would have required Propak in these locations to offer certain employment opportunities, to provide training for supervisors and managers, and to post certain notices. By this time, however, Propak had closed all its facilities in those states, thereby rendering implementation of such remedial measures impossible. Propak advised the EEOC of this fact.

Nevertheless, the EEOC initiated a lawsuit in August 2009, seeking certain injective relief, including an order requiring Propak to institute policies and programs to benefit non-Hispanic person in order to mitigate the effects of the allegedly unlawful employment practices. The EEOC also sought monetary relief on behalf of the affected class of non-Hispanic employment applicants. In response, Propak filed a motion to dismiss arguing that the doctrine of laches barred the action. The district court denied the motion and ordered the parties to engage in limited discovery on the issue of whether Propak suffered prejudice resulting from the EEOC’s extensive delay in initiating the litigation. At the conclusion of this discovery period, Propak filed a motion for summary judgment, again based on the doctrine of laches. This time, the district court granted Propak’s motion, concluding that the EEOC’s delay in initiating the litigation was unreasonable. The EEOC initially filed an appeal but later sought dismissal, which the Fourth Circuit granted.

Propak later filed a motion seeking attorneys’ fees incurred by Propak after the EEOC filed the complaint. The district court, relying on Supreme Court precedent, granted the motion, concluding that an award of attorneys’ fees was appropriate because the EEOC knew or should have known that its claim “was frivolous, unreasonable, or groundless.” The district court held that the EEOC acted unreasonably in filing the complaint because by the time the EEOC determined to bring the action it was clear that a lawsuit would be moot. And, the district court alternatively held that the EEOC acted unreasonably in continuing the litigation in view of the developing record because it reaffirmed that purported victims and witnesses could not be located and the facilities were closed. This appeal followed.

On appeal, the Fourth Circuit first discussed Title VII’s fee-shifting mechanism, which gives district courts the discretion to award reasonable attorneys’ fees to a prevailing party. The court observed that a heightened standard applies to a prevailing defendant seeking such an award in a Title VII action. For a prevailing defendant to receive such an award, the court must find that the plaintiff’s action was frivolous, unreasonable, or without foundation. The court then conducted a review for an abuse of discretion.

As an initial matter, the court rejected the EEOC’s request that it consider the issue of whether laches is available as an affirmative defense to an action filed by a United States agency because the EEOC abandoned its appeal of the summary judgment order. Next, the court rejected the EEOC’s contention that the district court improperly based its decision awarding attorneys’ fees on the court’s earlier laches ruling. In so doing, the court recognized that, while the district court referenced its previous findings of delay and prejudice from the summary judgment holding, the two holdings were based on different principles of law. Specifically, the summary judgment holding of laches was based on the EEOC’s unjustified delay in bringing the lawsuit, and on the resulting prejudice affecting Propak’s ability to defend itself in the action. In contrast, however, the district court awarded attorneys’ fees on the basis that the EEOC’s lawsuit effectively was moot at its inception. The district court’s fee award, therefore, reflected proper consideration of the Supreme Court’s standard articulated in Christiansburg Garment Co. v. EEOC, 434 U.S. 412 (1978), because it assessed whether the EEOC acted unreasonably in initiating the litigation.

Next, the court addressed the EEOC’s attack on the district court’s factual finding that the EEOC could not identify individual members of the class of victims eligible for monetary relief. The Fourth Circuit observed that the record showed that the EEOC made efforts to identify the class of victims. The record, however, lacked any indication that such efforts were successful. Thus, the court found no clear error in this factual finding. Lastly, the court rejected the EEOC’s alternative argument that the district court’s factual finding that the EEOC was unable to identify claimants was an “irrelevant consideration.” In doing so, the court noted that it had previously held that an award of attorneys’ fees to a defendant under the Christiansburg standard was justified in part because the plaintiff sought relief that it knew or should have known was unavailable.

The Fourth Circuit, therefore, concluded that the district court did not abuse its discretion in holding that the EEOC acted unreasonably. Consequently, it did not address the district court’s alternative holding that the EEOC’s continued pursuit of litigation was unreasonable in light of the developing record in the case.

Full Opinion

– W. Ryan Nichols

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