The case is EEOC v. Peoplemark, an appeals ruling decided on 10/7/13 [2013 U.S. App. LEXIS 20408]. We previously reported the district court ruling in this case in a client alert on 11/15/11. The facts of the case are that the EEOC claimed that Peoplemark had a “blanket policy” of excluding felons in the hiring process, and this policy adversely impacted Blacks. The EEOC had a list with 286 names of supposed rejected Black applicants, but 22% of these 286 applicants were, in fact, hired. Additionally, some of the others named in the complaint who had felony conviction records, were, indeed, hired. Therefore, Judge Robert J. Jonker of the Western District of Michigan ruled:
This is one of those cases where the complaint turned out to be without foundation from the beginning. Once the EEOC became aware that its assertion that Peoplemark categorically refused to hire any person with a criminal record was not true, or once the EEOC should have known that, it was unreasonable for the EEOC to continue to litigate on the basis of that claim, thereby driving up defendant’s costs, because it knew it would not be able to prove its case.
In other words, the key ruling by Judge Jonker was that the EEOC knew or should have known that its case was “groundless” beyond a certain date (October 1, 2009) and that it was “unreasonable to continue this burdensome litigation.” Speaking for the majority, 6th Circuit Judge J. McKeague affirmed Judge Jonker’s ruling stating:
To be sure, the Commission'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, the district court did not abuse its discretion by finding that the Commission could only rely on these statements up to a point. 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.
In his dissent, Judge D.J. Carr opined that Peoplemark used obstructive tactics that had a domino effect that made it impossible for the EEOC to correct its expert’s report. Accordingly:
Where the majority sees misfocus and dilatoriness on the part of the EEOC, I see an effort to gain information to refocus and reassess the defendant's conduct and practices, and, as importantly, obstructive tactics on the defendant's part that needlessly, but successfully, ate up much of the time the court allocated for discovery. That success had a domino effect, causing delay in the EEOC's acquisition and assessment of crucial information (which was vastly more extensive than the EEOC had anticipated). That, in turn, plus unanticipated delays in creating the database essential to the expert's analysis, made production of her expert report within the final deadline impossible. Had the court given the expert the additional six weeks to finish her work and submit the report, this situation would not have arisen.
Often, a split ruling at the circuit court level leads to a motion for an en banc review. I expect that motion will be made and likely granted.
Additionally, as reported in the Client Alert on 11/15/11, there are other cases in which the EEOC has lost on similar issues, including a 4.5 million award in EEOC v. Cintas [2011 U.S. Dist. LEXIS 86228] in a pattern or practice suit and a $140,000 award in EEOC v. TriCore (2011) (see https://www.eeoc.gov/eeoc/litigation/briefs/tricore2.txt).
by Art Gutman, Ph.D., Professor, Florida Institute of Technology