2002-2

UNITED STATES SUPREME COURT

A. The United States Supreme Court Allows EEOC To Pursue Victim-Specific Relief Despite Employee's Agreement To Binding Arbitration.

In E.E.O.C. v. Waffle House, Inc., 2002 Daily Journal D.A.R. 485 (January 16, 2002),⁽¹⁾ Eric Baker's employment application with Waffle House contained language whereby the employee agreed that any dispute regarding his employment would be resolved by binding arbitration. Sixteen days after Baker began his employment, he suffered a seizure and was terminated. Baker filed a timely charge of disability discrimination with the EEOC without initiating arbitration proceedings against Waffle House. The EEOC then filed an enforcement action against Waffle House, not only seeking injunctive relief but also requesting an order that Baker be made whole (including reinstatement and payment of back pay, compensatory damages, and punitive damages). Waffle House sought to compel arbitration, which was denied when the trial court made a factual determination that the actual employment contract between Baker and Waffle House did not include an arbitration provision.

On appeal, the Fourth Circuit Court of Appeals made a different determination by concluding that a valid, enforceable arbitration agreement existed. Relying upon the pro-arbitration policies of the Federal Arbitration Act, the Court of Appeals concluded that the enforceable arbitration agreement prohibited the portion of the EEOC's enforcement action which sought victim-specific damages. Its rationale was that the public service provided from the EEOC's enforcement of victim-specific remedies is minimal and outweighed by the strong federal policy favoring arbitration.

The United States Supreme Court reversed and allowed the EEOC to pursue all remedies despite the employee's agreement to arbitrate. The Supreme Court held that the EEOC's right to bring an enforcement action and to recover a variety of remedies (including victim-specific damages) is unaffected by the existence of an arbitration agreement between the employer and the employee.

The Supreme Court's analysis was rudimentary, focusing on ordinary principles of statutory construction and basic elements of contract law. It first relied upon the 1991 amendments to Title VII which allowed "the complaining party" (i.e., private plaintiffs or the EEOC) to recover compensatory as well as punitive damages. The Court described these statutes as "unambiguous." Thus, the EEOC's right to pursue victim-specific damages was statutorily mandated. The Court held that nothing within the straightforward language of the statutes suggested that the existence of an arbitration agreement materially changed the EEOC's statutory function to seek a variety of remedies in any enforcement action.

Moreover, the Supreme Court recognized that "[i]t goes without saying that a contract cannot bind a nonparty." The Supreme Court concluded that nothing within the liberal arbitration policy goals of the FAA suggested that a entity must arbitrate a dispute when it has not agreed to do so. Moreover, nothing with the FAA's public policy goals suggested that restrictions are to be placed on a nonparty's choice of a judicial forum for dispute resolution.

Justice Thomas wrote the dissent, repeatedly emphasizing that the EEOC should not be allowed to do "on behalf of an employee that which an employee has agreed not to do for himself." Justice Thomas argued that the EEOC's ability to obtain victim-specific relief is limited by the actions of the employee: "If an employee signs an agreement to waive or settle discrimination claims against an employer, for example, the EEOC may not recover victim-specific relief on the employee's behalf." Since the EEOC is not able to obtain more relief for the employee than the employee can recover for himself, the arbitration agreement should be given effect.

The majority opinion countered this argument by stating the simple fact that "no question concerning the validity of [the employee's] claim or the character of the relief that could be appropriately awarded in either a judicial or an arbitral forum is presented by this record."

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II. NINTH CIRCUIT COURT OF APPEALS

A. Ninth Circuit Allows Settling Plaintiff To Recover Attorneys Fees As A "Prevailing Party."

In Barrios v. California Interscholastic Federation, 2002 Daily Journal D.A.R. 579 (9^th Cir., January 17, 2002),⁽²⁾ plaintiff Victor Barrios had been a high school assistant baseball coach at Westminster High School for four consecutive seasons. He was also a paraplegic and performed his coaching duties from an athletic wheelchair. In 1999, the umpires and the CIF began to preclude Barrios from coaching on the field, demanding that he take steps to cover all exterior hard surfaces of his wheelchair with polyurethane. Barrios refused to do so and was barred from coaching on the field. After several months of negotiating with Barrios's attorney, the CIF promised to obtain a "variance" on plaintiff's behalf that would allow plaintiff to coach on the field. That variance was not forthcoming, however, and plaintiff continued to be excluded from his coaching duties at several games.

Even after plaintiff's suit for disability discrimination was filed, the CIF continued to represent to the court and to counsel that a variance would be obtained but the CIF was unwilling to sign a written stipulation to that effect. Months went by before a written settlement of the litigation was finally reached. In that settlement, the CIF agreed to allow plaintiff to coach baseball on the field, to pay plaintiff $10,000 in damages, and to specifically reserve the Court's jurisdiction to decide whether any party was a "prevailing party" for purposes of awarding attorneys fees.

A flurry of procedural issues then arose: (1) The district court entered a judgment according to the terms of the settlement; (2) plaintiff filed a motion for his attorneys fees; and, (3) the CIF filed a motion to set aside and vacate the judgment. During this process, plaintiff conceded that the settlement agreement was silent on whether a judgment would be entered or whether the action would be dismissed. Plaintiff also argued defendant had not yet paid the $10,000, so the settlement needed to be enforced by a judgment. The district court nevertheless vacated the judgment and a stipulated dismissal was filed. On plaintiff's motion for attorneys fees, the district court made a finding that plaintiff was the prevailing party but the court then denied plaintiff's motion for attorneys fees on the basis that: (1) the settlement was de minimus because the $10,000 settlement was small and (2) litigation was unnecessary because plaintiff Barrios had been granted relief in the form of a variance prior to the initiation of the lawsuit.

On appeal by plaintiff, the Ninth Circuit Court of Appeals found Barrios was correctly determined to be the prevailing party but it reversed the district court's denial of attorneys fees. The Court rejected the position that a plaintiff "prevails" only when plaintiff receives a favorable judgment on the merits or enters into a court supervised consent decree. The Ninth Circuit held a legally enforceable settlement agreement can also be the basis for a "prevailing party" determination where the relief obtained alters the legal relationship between the parties. The Court explained that "a material alteration of the legal relationship occurs [when] the plaintiff becomes entitled to enforce a judgment, consent decree, or settlement." Therefore, a plaintiff "prevails" when plaintiff can force the defendant to do something he otherwise would not have to do.

The Ninth Circuit also rejected the district court's legal conclusion that the settlement was small. Case law determined an award of $17,500, for example, was sufficient as a matter of law to support an attorneys fees award of $140,000. The Ninth Circuit also rejected the district court's factual finding (that litigation was unnecessary) as not supported by the record. The CIF had said one thing by repeatedly promising a variance but had then acted contrary to its representations by repeatedly excluding plaintiff from the playing field, mandating litigation.

Query: Would the same result be reached where the issue of "prevailing party" is not reserved?

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B. Ninth Circuit Affirms Summary Judgment For The Employer Holding That Employee's Termination Did Not Violate Family And Medical Leave Act.

In Bailey v. Southwest Gas Company, 2002 Daily Journal D.A.R. 629 (9^th Cir., January 18, 2002),⁽³⁾ Baily was employed as a customer service representative for the Gas Company in Nevada where her job duties included responding to complaints from residential customers, turning on and off the gas, and performing minor repairs. She worked the day shift but also was required to work the evening shift one week every three months and she was required to work overtime. In the fall of 1995, after working several hours of overtime on the night shift, Baily had to take a nap because she could not stay awake. The next night shift, Baily informed the dispatcher that she could not locate two customers' addresses and the work orders had to be completed by other employees the next day. When questioned by her supervisor about these incidents, Bailey responded that she could not safely work overtime because she was taking medication that caused drowsiness. Bailey's supervisor asked for a letter from Bailey's doctor giving an explanation.

Several weeks later, Bailey provided a letter from her gastroenterologist that informed the Gas Company that Bailey was on medication that had a side effect of sedation, but the doctor did not indicate the type of prescription drug nor did he specify Bailey's medical problem. The Gas Company then gave Bailey a 3-page letter that explained her rights under the Family Medical Leave Act and that directed Baily to submit a doctor's certification. Bailey responded that she was not sick or disabled and that her problem with overtime was prompted by excessive overtime, not a medical condition. When Bailey finally provided a FMLA certificate from her doctor (after being threatened with termination for failing to provide needed information), the certificate was incomplete, it failed to explain Bailey's medical condition, it certified Bailey as qualified for "full duty," and it provided no other information about how the medication could possibly affect Bailey's ability to perform her job. The Gas Company demanded that Bailey obtain the information necessary for the company to evaluate her ability to perform her job and when she refused, Bailey was terminated for insubordination.

The Ninth Circuit affirmed the summary judgment granted to the Gas Company. It did so based on Bailey's candid admissions during discovery that she did not have a qualifying health condition, she never requested FMLA leave, and that she would not have taken FMLA leave if it had been extended to her. Moreover, the court concluded that the Gas Company did nothing to interfere with Bailey's rights under FMLA because, once Bailey indicated she could not perform her job due to medication, the Gas Company had an obligation to explore Bailey's status under the FMLA and it also had the right under company policies to obtain more information about whether Bailey remained fit for duty. Lastly, in a discussion of retaliation under Nevada law, the Court determined that Bailey failed to establish that her complaints about excessive overtime (the purported public policy violation) were the proximate cause of her termination because the Gas Company did not terminate plaintiff when she complained. Rather, Bailey was not terminated until after she repeatedly refused to cooperate with legitimate requests for medical information.

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C. Ninth Circuit Affirms The Enforcement Of A Settlement Following Plaintiff's Oral Agreement In Open Court.

The litigation in Doi v. Halekulani Corporation, 2002 Daily Journal D.A. R. 461 (9th Cir., January 15, 2002) began as an employee's lawsuit against her employer for sex, race, and age discrimination. Two years after suit was commenced, counsel for both parties came into court and announced on the record that they had agreed to settle the case. The terms of the settlement were placed on the record. On inquiry from the trial judge as to whether plaintiff agreed to the terms of the settlement, plaintiff responded: "Yeah." Doi later refused to sign the formal settlement documents, demanding new settlement terms in a letter directed to Halekulani's president. The court gave Doi additional time to execute the settlement documents and warned her that she may face sanctions in the form of attorneys fees incurred by the defendant if it had to bring a motion to enforce the settlement. After several hearings, and after Doi's retention of a new attorney, the trial court enforced the settlement agreement made in open court and imposed $1,000 in sanctions against her. The Ninth Circuit Court of Appeals agreed with the trial court.

The Ninth Circuit stated the obvious - there is no ambiguity in the response, "yeah." Because plaintiff had affirmatively agreed to the material settlement terms, all of which had been placed on the record, she was bound by her agreement. Moreover, because both parties represented in open court that an agreement had been reached, the Ninth Circuit concluded the district court was not required to conduct an evidentiary hearing to determine whether an agreement existed.

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III. OTHER UNITED STATES COURT OF APPEALS.

A. Seventh Circuit Affirms Summary Judgment For Employer On Employee's Gender Discrimination, Hostile Work Environment Sexual Harassment, And Retaliation Claims, Despite No Formal Harassment Policies.

In Hall v. Bodine Electric Company, 8 D.L.R. A-2 (7^th Cir., January 11, 2002),⁽⁴⁾ Hall was a machine operator and was refused orientation training when she began work in 1994 and was later denied advancement training opportunities. Then, on one occasion in 1999, co-worker Lopez pulled Hall's blouse and t-shirt, exposing Hall's breast. Hall went to report the incident to her supervisor but was unable to do so for a couple of days. Hall then reported the incident to human resources and, for the first time also reported 8 or 9 previous dissimilar incidents involving Lopez. An investigation was immediately commenced by the human resources manager who interviewed Lopez and suspended him pending the outcome of the investigation. The following day, Lopez filed a claim of harassment against Hall alleging that Hall had grabbed Lopez's buttocks while making graphic comments about male genitalia. The human resources manager interviewed 18 people and later concluded that both Lopez and Hall violated the company's rules prohibiting sexual harassment. Both employees were terminated.

The summary judgment for the employer was affirmed on Hall's gender discrimination claims on the basis of the statute of limitations. The Seventh Circuit concluded that all of the specific incidents of failure to train and promote asserted by Hall occurred well outside the statutory time period. Moreover, no incident occurred within the statutory time period that could be linked in any way to the incidents occurring outside the statutory time period.

On Hall's claim of sexual harassment, the court rejected Hall's argument that Lopez was Hall's supervisor for purposes of imposing strict liability on the employer. The court held that the mere fact that Lopez's job included some duty to oversee Hall's job performance did not establish Lopez as in a supervisory relationship. Rather, a supervisor must have the authority to hire, fire, demote, promote or discipline an employee and Lopez had none of those responsibilities.

However, Hall also argued that her employer was directly liable on the ground that it was negligent in discovering Lopez's prior harassment because it failed to implement, publish, and distribute formal sexual harassment policies. The Seventh Circuit rejected this argument stating: "But we have never held that Title VII employers must institute formal sexual harassment policies. Instead, we have focused on whether an employer has a reasonable mechanism in place for 'detecting and correcting harassment.'" Because Bodine had an effective channel (Hall's supervisor - to whom she had complained 3 times - and the human resources department), the court "fail[ed] to see how a formal sexual harassment policy would have been any more effective than the mechanism the company already had in place . . . ."

On Hall's claim of retaliation, the Seventh Circuit iterated the sentiment of many other courts that Title VII protects victims of sexual harassment from retaliation but does not immunize employees from being subsequently disciplined or terminated for inappropriate workplace behavior. Bodine properly terminated Hall and its failure to do so might have constituted a Title VII violation (discrimination against Lopez) and might have subjected the company to future liability for any subsequent harassment complaints made against Hall.

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B. Eleventh Circuit Affirms $25,000 Compensatory Award Based On The Employer's Constructive Knowledge Of Workplace Harassment But Reverses Punitive Damages Award.

In Miller v. Kenworth of Dothan, 7 D.L.R. A-3to A-4 (11th Cir., January 10, 2002),⁽⁵⁾ Bradley Miller, a Mexican-American, was employed in the parts department of a tractor-trailer distributorship. The parts department was composed of 8 technicians and 1 shop foreman, Randy Galpin. Three or four times a day, Galpin used derogatory racial slurs toward Miller, calling him "Spic" and "Wetback." Miller complained to Galpin's supervisor (Brooks, the manager of the Service Department). No action was taken by Brooks and no report was made further up the chain of command. Later, a sales manager overheard another incident of racial slurs directed toward Miller and that incident was ultimately reported to the president. The next day, the Director of Operations reviewed the company's anti-discrimination policy with the employees and warned employees that anyone using slurs would be terminated immediately. The employees were directed to report all further incidents. While Miller's co-workers stopped using derogatory nicknames, Galpin persisted. Miller made no further reports. Miller was fired one month later.

The jury found in favor of plaintiff Miller on his hostile work environment claim awarding $25,000. The jury also found Kenworth acted with malice and reckless indifference and awarded $50,000. Kenworth argued on appeal that it could not be liable for Galpin's conduct because it had no actual or constructive knowledge of the co-worker harassment. The Eleventh Circuit disagreed, concluding that Kenworth had constructive knowledge of the harassment. The manager of the Service Department, Brooks, was one of only two managerial employees permanently assigned to this distributorship and was actually present several times when Galpin shouted ethnic slurs at Miller. On that basis, constructive knowledge of harassment was imputed to the employer. Moreover, the Eleventh Circuit also found that Kenworth failed to take immediate and corrective action against Galpin (it took no action).

On the issue of punitive damages though, the Court readily admitted that Kenworth did not have actual notice of harassment and that punitive damages will ordinarily not be assessed against employers with only constructive knowledge of harassment. Therefore, there was insufficient evidence to support the punitive damages award.

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C. District Of Columbia Circuit Affirms Employer's Summary Judgment In Same-Sex Harassment Claim.

In Davis v. Coastal International Security, Inc, 14 D.L.R. A-6 (D.C. Cir., January 22, 2002),⁽⁶⁾ Wallace Davis claimed that two male co-workers sexually harassed him. Early in his tenure as a supervisor, Davis disciplined co-workers Smith and Allen. Apparently infuriated by this discipline, Smith and Allen engaged in conduct that included repeatedly slashing Davis's tires, threatening to kill Davis, and otherwise taunting Davis in a variety of ways. Six months later, Smith's and Allen's behavior expanded to include vulgar comments and gestures (which the court refused to describe except to identify a crotch-grabbing gesture, kissing noises, and other vulgarities). Davis repeatedly complained to his supervisor about this conduct. Ultimately, the company conducted a full investigation and concluded there was no reliable witness to corroborate one allegation of sexual harassment directed toward Davis The company, nonetheless, reassigned the various parties to different work areas. Davis sued.

The Court of Appeals affirmed the summary judgment in favor of the employer emphasizing the fact that obscene expressions, particularly when uttered by men to men, often have no connection whatsoever with the sexual acts to which they make reference. The appellate court relied upon the United States Supreme Court decision in Oncale v. Sundowner Offshore Services, 523 U.S. 75, 118 S.Ct. 998, 140 L.Ed.2d 201 (1998) in finding that plaintiff failed to establish that the harassment amounted to discrimination because of sex. Same-sex behavior becomes actionable upon proof that (1) it is motivated by actual homosexual desire, (2) the alleged harasser uses sex-specific terms establishing general hostility toward members of the same gender; or (3) direct comparative evidence about how the alleged harasser treated members of both sexes. The Court of Appeal concluded, as did the trial court, that no reasonable jury could or would believe that the behavior of Smith and Allen constituted sexual propositions. Plaintiff's own testimony revealed Smith and Allen were motivated by a workplace grudge, not sexual attraction.

"Although Smith's and Allen's performances were certainly 'tinged with offensive sexual connotations,' we agree with the district court that when their behavior is viewed in light of 'surrounding circumstances,' the two were not sexually propositioning Davis."

Moreover, the Court of Appeals found that plaintiff failed to proffer direct comparative evidence about the treatment of both sexes. Davis's evidence showed that Smith and Allen treated plaintiff differently than all members of the workforce, not that Smith and Allen treated men differently than women.

The Court of Appeals' parting shot was to mention that no legal action would have been necessary if Davis, Smith, and Allen had heeded their project manager's admonition to "act like grown men."

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1. Opinion by J. Stevens in which J. O'Connor, J. Kennedy, J. Souter, J. Ginsburg, and J. Breyer joined. J. Thomas filed a dissenting opinion, in which C.J. Rehnquist and J. Scalia joined.

2. Opinion by J. Tashima; J. Berzon and J. Pregerson, concurring.

3. Opinion by J. Tallman, J. Beezer and J. Trott, concurring.

4. Opinion by C. J. Manion; J. Bauer and J. Easterbrook, concurring.

5. Opinion by J. Tjoflat, J. Birch and, J. Vining, concurring.

6. Opinion by J. Tatel; C.J. Ginsburg and J. Randolph, concurring.

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