A federal appeals court has revived an Internal Revenue Service employee’s retaliation claim against the agency. But the court also affirmed dismissal of her breach-of-settlement-agreement claim, ruling that Congress has not waived the federal government’s immunity for such claims stemming from employment discrimination cases. 

In a split ruling on January 2, the U.S. Court of Appeals for the Sixth Circuit in Taylor v. Geithner both reversed dismissal of Sheryl Taylor’s retaliation claim and affirmed dismissal of her breach-of-settlement agreement claim.

The case concerns Taylor’s July 2005 settlement agreement to resolve an Equal Employment Opportunity Commission (EEOC) precomplaint of discrimination brought in April of that year.

The deal called for the IRS to remove records of Taylor’s three-day suspension from certain files and barred Taylor from further litigation about that claim. The agreement also outlined a process for Taylor to report noncompliance with the settlement agreement to the IRS.

Taylor started applying for promotions and transfers in early 2004 until her promotion in September 2006.

In October 2008, Taylor filed suit, naming Timothy Geithner as defendant in his capacity of secretary of the Department of Treasury. Taylor claimed that her supervisor’s retaliatory actions against her included written reprimands, a three-day suspension without pay and numerous negative references. She claimed these actions caused her to be rejected for 52 positions within the IRS. She also claimed a breach of the 2005 settlement agreement.

In July 2011, Judge Samuel Mays Jr. of the Western District of Tennessee ruled that an EEOC regulation “supports the conclusion that district courts lack jurisdiction” over breach-of- settlement cases. Mays also ruled that the only adverse employment action against Taylor was the three-day suspension. He held that it wasn’t retaliatory because there’s no evidence that it was linked to her protected activity—filing the complaints. Taylor appealed the ruling.

Judge Karen Nelson Moore wrote the Sixth Circuit majority opinion, joined by Senior Judge Gilbert Merritt. Judge David McKeague joined in part and wrote a separate concurring-in-part and dissenting-in-part opinion.

On an issue of first impression for the circuit, the court held that “Congress has not expressly waived sovereign immunity for breach-of- settlement-agreement claims” brought against the federal government as employer under Title VII of the Civil Rights Act of 1964. Moore wrote that “we find Geithner’s arguments to be more persuasive given the specificity with which Congress must waive sovereign immunity and the lack of such an express waiver in the plain language of the statute and regulation.”

Moore noted that the Fourth, Ninth and Tenth circuits have concluded that Congress did not waive sovereign immunity in rulings about different aspects of the regulation and the statute.

On the retaliation issue, Moore wrote that while evidence of many of the supervisor’s alleged actions is inadmissible or unauthenticated, there’s enough evidence for Taylor to make a prima facie case: “Taylor applied for and was rejected from fifty-two jobs during the same two-year period as when she engaged in protected activity by filing several discrimination complaints. Although we do not have the exact dates on which she applied for each of these jobs, the numbers allow us to assume that she applied for an average of at least two positions per month during the same time period in which she filed three discrimination complaints.”

The appeals court remanded that retaliation claim to the district court.

In his separate opinion, McKeague agreed with the majority on the sovereign immunity but disagreed on the retaliation claim. He wrote that Taylor hasn’t submitted admissible evidence on “the timing of the alleged applications, whether she was even qualified for the jobs she applied for, whether the jobs were promotions or offered some other material benefit to Taylor, or whether in fact she really was rejected.”

Taylor’s lawyer, David Shapiro, a partner at Washington-based Swick & Shapiro, said he and his client are happy the case is going back to district court. “We think that she’ll get her day in court, finally.”

On the sovereign immunity issue, Shapiro said that limiting the jurisdiction of district courts based on an EEOC regulation doesn’t seem logical, “but every circuit that has done that has considered the question. so it’s not surprising that the Sixth Circuit would go along.”

The Treasury Department did not respond to requests for comment. Through a spokesperson, the U.S. Attorney’s Office in the Western District of Tennessee in Memphis declined to comment. Assistant U.S. Attorney Harriett Miller Halmon argued for the government.

Sheri Qualters can be contacted at squalters@alm.com.