Sharon M. Porcellio
Sharon M. Porcellio ()

This quarter the Western District of New York decided two cases dealing with novel legal issues. It dismissed claims of nationwide discrimination because it found that the Equal Employment Opportunity Commission failed to conduct a nationwide investigation prior to commencing a nationwide class action. In the second, the court found that the plaintiffs’ obligation to pay nursing home bills was not a “debt” for purposes of the Fair Debt Collection Practices Act.

EEOC’S Failure

U.S. Magistrate Judge Jeremiah J. McCarthy issued a somewhat complex report, Recommendation and Order in Equal Employment Opportunity Commission (EEOC) v. Sterling Jewelers, No. 08-CV-00706, 2014 U.S. Dist. Lexis 304 (Jan. 2, 2014), dismissing the EEOC’s nationwide class action discrimination claims where it failed to conduct the required nationwide investigation of the defendant’s employment practices prior to commencing this suit. The EEOC brought a civil lawsuit against Sterling on behalf of 19 female employees and similarly situated employees, specifically alleging that Sterling engaged in a nationwide pattern or practice of discrimination. Sterling moved for summary judgment as to the claims of nationwide discrimination arguing that the EEOC did not conduct an investigation that was nationwide in scope.

As discussed in more detail below, the court first found that it had the authority to review the EEOC’s investigation, at least with regard to the scope of the investigation. More specifically, the court looked at whether the EEOC conducted a nationwide investigation prior to bringing a lawsuit claiming the employer engaged in a pattern or practice of nationwide discriminatory conduct. Based on the admissible evidence presented by the EEOC, the court found that the EEOC’s investigation was not nationwide in scope, and therefore, dismissed that portion of the lawsuit alleging nationwide discriminatory practices. The EEOC may still pursue those claims which related to the 19 individuals.

The EEOC’s Authority to Bring a Civil Action. Generally, the EEOC has the authority to bring litigation to obtain relief for victims of employment discrimination and to ensure compliance with the statutes it is charged with enforcing. However, prior to commencing any action, the EEOC is obligated to carry out certain administrative duties, and the burden is on the EEOC to show that it has done so. In particular, the EEOC has the burden to establish the following four conditions have been met: (1) the existence of a timely complaint of discrimination, (2) the completion of an investigation conducted by the EEOC, (3) the issuance of a reasonable cause determination, and (4) attempted conciliation prior to suit.1

Specifically with regard to the investigation element, the EEOC may bring suit only concerning issues or conduct discovered during the course of its investigation. Accordingly, the scope of a lawsuit brought by the EEOC is limited to the scope of its investigation. The EEOC is prohibited from using the discovery process to uncover additional violations or discriminatory conduct. Therefore, in reaching his decision, Judge McCarthy noted that the court’s role is limited to determining whether an investigation occurred as well as the scope of that investigation but that it is not within the court’s power to review the sufficiency of the EEOC’s pre-suit investigation.

In this case, then, the court could consider whether the EEOC investigated claims of discrimination on a nationwide basis, but could not look at whether the steps taken to investigate were sufficient (e.g., did the EEOC interview an appropriate number of witnesses, or properly review the employer’s employment data).

The EEOC’s Pre-Suit Investigation. Here, 19 female employees, on behalf of themselves and similarly situated employees, filed charges with the EEOC alleging sex discrimination in pay and/or promotions. The employees worked at Sterling’s stores in New York, Florida, California, Massachusetts, Missouri, Nevada, Indiana and Texas. The charges were all transferred and consolidated with a single investigator in the EEOC’s Buffalo office.

Assumably in furtherance of the EEOC’s conciliation obligations, the parties engaged in mediation. As a part of that process, Sterling and the EEOC entered into an agreement which stated that no information disclosed during the course of the mediation was to be used in, among other things, a court proceeding.

Accordingly, during the parties’ mediation, the plaintiffs disclosed a statistical analysis of Sterling’s pay and promotion data which had been prepared by an expert retained by the plaintiff’s counsel. The parties thereafter modified the mediation agreement to allow the expert’s statistical analysis to be included in the EEOC’s investigative file. However, the parties agreed that the analysis did not lose its mediation privilege.

As the mediation was unsuccessful, the EEOC investigator thereafter sent a letter to the parties asking for any additional information they wished to provide before the EEOC made its final determination. Plaintiffs provided a letter with various exhibits, including statistical information; at his deposition, the EEOC investigator, however, did not recall receiving the letter and was not sure that he ever reviewed it as a part of his investigation.

Then, in January 2008, the EEOC issued its determination finding that Sterling had subjected the plaintiffs and similarly situated employees to a pattern or practice of sex discrimination in regard to pay and promotion. The letter indicated that the EEOC had relied on a statistical analysis of pay and promotion data that had been provided by Sterling—although it did not provide any detail as to what that analysis was. The EEOC then commenced a class action suit, alleging that Sterling engaged in unlawful employment practices in its stores nationwide.

Judge McCarthy’s Report and Recommendation. McCarthy recommended dismissal of all class action claims because he found the EEOC had failed to present evidence of a nationwide investigation. To begin with, the EEOC investigative file contained very little information outside that provided by the parties. Further, the EEOC investigator assigned to the consolidated claims could only remember investigating Sterling’s stores in Massena, N.Y., and Tampa, Fla. While the investigator testified that he investigated all of the claims as class action claims, McCarthy found the term “class” to be ambiguous, since the investigator did not specify whether he meant a local, regional or nationwide class.

The only other evidence to which the EEOC pointed in support of its assertion that it conducted a nationwide investigation was the statistical analysis performed by the plaintiffs’ expert. McCarthy noted, however, that the EEOC had invoked the deliberative privilege2 with respect to that document, and therefore, could not now rely on its existence, or any steps taken to confirm the validity of that report, in support of its position that it conducted a nationwide investigation. Indeed, McCarthy emphasized that the EEOC could not use the deliberative privilege as both a sword and a shield. The court also noted that the parties had agreed the analysis was protected by the mediation privilege, raising a question as to whether it could be used at all in the civil litigation.

Accordingly, reviewing only that information which the EEOC did not withhold from Sterling during the discovery process, McCarthy concluded that there was no evidence that the EEOC conducted a nationwide investigation prior to commencing this action. Thus, McCarthy recommended dismissal of the EEOC’s claim of nationwide sex discrimination, leaving only the individual claims.

The deadline to object to the Report and Recommendation and seek review by District Court Judge Richard J. Arcara is Jan. 21. At the time this piece was written, the EEOC had not yet sought review of the Report and Recommendation.

Nursing Home Expenses

In Eades and Pike v. Kennedy, PC. Law Offices, No. 12-CV-6680, 2013 U.S. Dist. LEXIS 170407 (Dec. 3, 2013), U.S. Senior District Judge David G. Larimer issued a decision concluding that a statutorily imposed filial support obligation to pay parental/spousal nursing home expenses is not a debt for purposes of the Fair Debt Collection Practices Act3 (FDCPA).4 In that case, one of the plaintiffs, Levere Pike, placed his wife in the Corry Manor nursing home, which is located in Pennsylvania. At the time his wife entered Corry Manor nursing home, Mr. Pike signed a contract which stated that Mrs. Pike’s assets would be used to pay for her care. After Mrs. Pike died, Corry Manor attempted to collect $8,000 from Mr. Pike for certain services provided to Mrs. Pike during her time at Corry Manor. The monies were not paid and Corry Manor subsequently hired Kennedy PC. Law Offices to attempt to collect the debt from Mr. Pike, as well as his daughter, Joni Eades.

Kennedy’s collection efforts consisted of sending a single correspondence and at least one telephone call. Plaintiffs did not pay the debt, and Kennedy eventually filed a lawsuit in Pennsylvania against the plaintiffs. Plaintiffs then brought this suit against Kennedy, alleging, among other things, that Kennedy had violated the FDCPA.

The FDCPA was enacted to protect consumers from abusive, deceptive and unfair debt collection practices. Indeed, the FDCPA’s stated purpose is to “eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses.”5 The FDCPA applies to “debt collectors” which is defined as “any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts….”6 Further, the term “debt” is defined by the statute, in relevant part, as “any obligation…of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes….”7

The plaintiffs claimed in this case that because the $8,000 debt arose from the contract with Corry Manor, it was a debt for purposes of the FDCPA and Kennedy’s actions were in violation of that statute.

Kennedy argued that the $8,000 debt was not contractual in nature, but instead was a financial obligation imposed by statute, and therefore, the FDCPA did not apply. In particular, it argued that under Pennsylvania law, the plaintiffs were statutorily liable for the cost of Mrs. Pike’s care under the Pennsylvania Indigent Statute, which sets forth that a spouse and child “have the responsibility to care for and maintain or financially assist an indigent person, regardless of whether the indigent person is a public charge.”8 Additionally, Kennedy cited to Pennsylvania case law standing for the proposition that a nursing home could bring suit under the statute against a child of an indigent resident for services provided to that resident.9

The district court noted that while there was no case law on point concerning the Pennsylvania law or a similar statute, it noted that “statutorily-imposed filial support obligations” are not debts for purposes of the FDCPA. Larimer cited to a Western District of New York case which held that child support obligations are not debts for purposes of the FDCPA as they are statutorily imposed.10 Since the plaintiffs did not, and could not, point to any contrary authority, the court concluded that the obligation imposed by the Pennsylvania Indigent Statute simply does not create a debt for purposes of the FDCPA. Thus, plaintiffs failed to state a claim under the FDCPA.

It is interesting to note that although there were two separate obligations to pay the nursing home for services rendered to Mrs. Pike (i.e. the contractual agreement with Corry Manor and the Pennsylvania Indigent Statute), the court focused on the obligation created by the Pennsylvania statute, seemingly ignoring any obligation that may have been created under the agreement with Corry Manor, in concluding that the debt was not a debt for purposes of the FDCPA.

Plaintiffs have appealed the district court’s decision to the U.S. Court of Appeals for the Second Circuit.

Sharon M. Porcellio is a partner at Bond, Schoeneck & King. She can be reached at sporcellio@bsk.com. Erin S. Torcello, an associate with the firm, assisted with the preparation of this article and can be reached at estorcello@bsk.com.

Endnotes:

1. 42 U.S.C. §2000e-5(b).

2. The deliberative privilege protects from disclosure during the civil litigation process, those communications or materials created by the Executive Branch of the government as a part of an agency’s decision-making process. See NLRB v. Sears, Roebuck & Co., 421 U.S. 132, 150-151 (1975).

3. 15 U.S.C. §1692 et seq.

4. The district court dismissed the action on jurisdictional grounds but went on to decide the additional issues raised in defendant’s motion to dismiss.

5. 15 U.S.C. §1692(e).

6. 15 U.S.C. §1692a(6).

7. 15 U.S.C. §1692a(5).

8. 23 Pa.C.S. §4603(a)(1)

9. Five Star Quality Care v. Yablonski, No. AR08-016828 , 2009 Pa. Dist. & Cnty. Dec. LEXIS 12, at *7 (Pa. County Ct. 2009).

10. Adymy v. Erie County Child Support Enforcement Unit, 03-CV-0955, 2006 U.S. Dist. LEXIS 25025, at *9-*10 (W.D.N.Y. May 2, 2006).