Favorable judgment on merits not required to be ‘prevailing’ party, SCOTUS says

By Kathy Kapusta — In a case interpreting a statutory provision allowing district courts to award attorneys’ fees to defendants in employment discrimination actions under Title VII, Justice Kennedy, writing for the Supreme Court, held that a defendant need not obtain a favorable judgment on the merits in order to be a “prevailing” party.

The Court reversed an Eighth Circuit decision holding that a Title VII defendant can be a prevailing party only by obtaining a “ruling on the merits” and that the district court’s dismissal of the EEOC’s claims against CRST Van Expedited, including those on behalf of 67 women that it found to be barred based on the Commission’s failure to adequately investigate or attempt to conciliate, was not a ruling on the merits. “Common sense undermines the notion that a defendant cannot ‘prevail’ unless the relevant disposition is on the merits,” the Court observed, noting that plaintiffs and defendants come to court with different objectives and that a defendant has fulfilled its primary objective whenever the plaintiff’s challenge is rebuffed, irrespective of the precise reason for the court’s decision (CRST Van Expedited, Inc. v. EEOC, May 19, 2016, Kennedy, A.).

EEOC suit. In 2007, the EEOC filed a sweeping Title VII suit against trucking company CRST, after a female driver alleged that two male trainers sexually harassed her during an over-the-road training trip. During its investigation, the agency discovered that four other women had filed charges against the company. It ultimately informed the company that it found reasonable cause to believe it subjected the employee and a class of prospective employees to sexual harassment. After conciliation efforts failed, the EEOC sued CRST under Section 706 of Title VII, alleging it was responsible for severe or pervasive sexual harassment in its new-driver training program. The agency claimed CRST subjected approximately 270 similarly situated female employees to a hostile work environment.

In a series of rulings, the district court barred the EEOC from pursuing relief for individual claims on behalf of all but 67 of the women, based variously on discovery sanctions; the statute of limitations; judicial estoppel; CRST’s lack of knowledge of the alleged harassment; insufficient evidence of severe or pervasive sexual harassment; failure to report harassment; and because the EEOC failed to investigate, issue a reasonable cause determination, and conciliate the claims of a number of putative class members. It also found that the Commission had not established a pattern or practice of tolerating sexual harassment.

Attorneys’ fees vacated. Dismissing the suit, the district court held that CRST was the prevailing party. Finding that the Commission’s failure to satisfy its pre-suit obligations on behalf of the final 67 women was unreasonable, it subsequently awarded the company over $4 million in attorneys’ fees. On appeal, the Eighth Circuit reversed only the dismissal of claims on behalf of two women and vacated the attorneys’ fee award, finding that CRST was no longer a prevailing defendant because the Commission still asserted live claims against it.

On remand, the Commission settled the claim on behalf of one claimant and withdrew the other. CRST again sought attorneys’ fees, and the district court again awarded it more than $4 million. Holding that a Title VII defendant can be a prevailing party only by obtaining a ruling on the merits, the Eighth Circuit again reversed. It reasoned that because Title VII’s pre-suit requirements are not elements of a Title VII claim, the dismissal of the claims regarding the 67 women on the ground that the Commission failed to investigate or conciliate was not a ruling on the merits and CRST did not prevail on those claims.

Merits decision not required. In reversing and remanding the Eighth Circuit, the High Court found no indication that Congress intended that defendants should be eligible to recover attorney’s fees only when courts dispose of claims on the merits. “The congressional policy regarding the exercise of district court discretion in the ultimate decision whether to award fees does not distinguish between merits-based and nonmerits-based judgments,” the Court stated, noting that as it explained in Christiansburg Garment Co. v. EEOC, one purpose of the fee-shifting provision is “to deter the bringing of lawsuits without foundation.”

Thus, said the Court, it has interpreted the statute to allow prevailing defendants to recover whenever the plaintiff’s claim was frivolous, unreasonable, or groundless. “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. Imposing an on-the-merits requirement for a defendant to obtain prevailing party status would undermine that congressional policy by blocking a whole category of defendants for whom Congress wished to make fee awards available,” the Court wrote.

Noting that various courts of appeals have applied the Christiansburg standard when claims were dismissed for nonmerits reasons, the Court here explained that in cases like these, significant attorney time and expenditure may have gone into contesting the claim, and Congress “could not have intended to bar defendants from obtaining attorney’s fees” on the basis that, although the litigation was resolved in their favor, they were nonetheless not prevailing parties.

Preclusive judgment. As to the Commission’s argument that a defendant must obtain a preclusive judgment in order to prevail, the Court declined to decide this issue, noting that the Commission changed its argument between the certiorari and merits stage and may have forfeited the preclusion argument by not raising it earlier.

The court left the ultimate decision on attorneys’ fees for the Eighth Circuit to consider.

Justice Thomas’ concurrence. In a separate opinion, Justice Thomas agreed that the Court correctly vacated the Eighth Circuit’s ruling and joined its opinion in full. He asserted, however, his belief that Christiansburg “is a ‘dubious precedent’ that I will ‘decline to extend’ any further.”

Impact on employers. Commenting on the decision, Employment Law Daily advisory board member David Wachtel (Trister, Ross, Schadler & Gold, PLLC) noted that the CRST decision “should not result in an increase in fee awards for employers, or discourage employees from filing suits, because the Court leaves intact the requirement that a defendant can only obtain fees after showing that the employee’s position was ‘frivolous.’” Only Justice Thomas expressed a desire to overturn that heightened standard for defendants, he observed.

“EEOC seems to have survived to fight another day. In the Court of Appeals, they may argue that CRST did not prove that the case was frivolous, or that CRST does not get fees because it did not obtain a judgment with preclusive effect,” he stated, noting that the Court mentioned that the latter argument might get knocked out because it was not raised until EEOC’s Supreme Court brief.

“It sounds strange that the Court, about 16 years ago, rejected the ‘catalyst theory’ for plaintiffs and now accepts it–or something like it—for defendants. But whether that holding is one-sided or not, I believe it won’t change the number of cases employees file,” Wachtel suggested.

Source: Employment Law Daily Newsfeed