Most employers feel intimidated and unmatched when served with notice from a government agency of a possible violation of any number of workplace laws protecting employee rights. The substantial weight of the federal or state government often strikes fear into an employer—and perhaps justifiably so. Some agencies employ aggressive tactics hoping that employers will quickly capitulate. Although cooperation with an agency’s investigation is usually a good idea, an even better one is to immediately contact legal counsel. They can act as buffer that keeps the agency from overstepping its statutory bounds. Just as important, your best legal counsel will be prepared if circumstances require the company to go on the offensive.
Long-standing court decisions and federal rules of procedure allow companies to recover their attorney fees and costs upon prevailing in a lawsuit against a government agency. This article will discuss cases in which companies have successfully opposed overzealous agencies.
Fees Against the EEOC
Under Title VII of the Civil Rights Act of 1964, as amended, a district court may award attorney fees to “the prevailing party.” See 42 U.S.C. §2000e-5(k). Prevailing defendants may recover attorney fees whenever the plaintiff’s claim was “frivolous, unreasonable, or groundless,” or if “the plaintiff continued to litigate after it clearly became so.” CRST Van Expedited v. EEOC, 136 S. Ct. 1642 (2016); Christiansburg Garment v. EEOC, 434 U.S. 412, 422 (1978). Frivolous cases have been described as those with obvious results, “wholly without merit,” brought in the face of abundant contrary legal authority or without any evidentiary support. See e.g., C.W. v. Capistrano, 784 F.3d 1237, 1245 (9th Cir. 2015). Courts apply the same standard against the Equal Employment Opportunity Commission (EEOC) as against other litigants. EEOC v. Peoplemark, 732 F.3d 584, 590 (6th Cir. 2013).
Notably, the U.S. Supreme Court recently held that a favorable ruling on the merits is not a necessary predicate to finding that a defendant is a prevailing party. In the case in question, the district court dismissed an EEOC lawsuit, because the commission failed to satisfy pre-suit requirements before filing the lawsuit against the employer. Ultimately, the Supreme Court upheld an award of more than $4 million in attorney fees to the employer. Thus, an employer that obtains a dismissal of an agency’s lawsuit without even reaching the merits of the case may be entitled to recover its attorney fees and costs.
Several other cases illustrate that employers can successfully fight back against governmental agencies:
• In a recent ADA (Americans With Disabilities Act) case in California, EEOC v. Placer Arc, 2016 U.S. Dist. Lexis 75995 (E.D. Cal. June 10, 2016), the district court denied the prevailing company defendant’s request for attorney fees, but granted its request for taxable costs of $19,696.
• Similarly, in EEOC v. Peoplemark, supra, the U.S. Court of Appeals for the Sixth Circuit affirmed the district court’s award of attorney fees, expert fees, and expenses in the amount of $751,942 when the EEOC pursued a groundless lawsuit against an employer.
• In EEOC v. Global Horizons, 100 F. Supp. 3d 1077 (E.D. Washington 2015), the court granted the prevailing defendant’s motion for attorney fees as the EEOC pursued a frivolous theory of joint-employer liability, sought frivolous remedies, and disregarded the need to have a factual predicate to assert a plausible basis for relief under Title VII against the defendants.
• In EEOC v. CVS Pharmacy, 809 F.3d 335 (7th Cir. 2015), the U.S. Court of Appeals for the Seventh Circuit affirmed a lower court’s determination to toss the EEOC’s “pattern or practice” lawsuit under Section 707 of Title VII against CVS for the EEOC’s failure to attempt to resolve the matter before filing the lawsuit. The court ruled that the EEOC was “required to comply with all of the pre-suit procedures” in Section 706 when pursuing charges under Section 707 challenging CVS’s severance agreements. Id. at 342. In March 2016, the Seventh Circuit declined to revisit its order or take on the issue en banc and the EEOC failed to file a petition for certiorari to the Supreme Court by the deadline. In September 2016, an Illinois federal judge lifted a stay on CVS’s motion for attorney fees as the prevailing party on its dismissal motion, on which we are awaiting a decision.
Fees Against the NLRB
Frustrated that the NLRB continued to litigate a case it was not going to win, the U.S. Court of Appeals for the D.C. Circuit ordered the agency to pay almost $18,000 in attorney fees that a Michigan healthcare system spent defending against the National Labor Relations Board’s (NLRB) “suicide mission” in pursuing the litigation. See Heartland Plymouth Court v. NLRB, 650 Fed. Appx. 11 (D.C. Cir. 2016). The NLRB’s conduct exemplified its long-standing policy of “nonacquiescence,” whereby it doggedly adheres to its own administrative decisions even in the face of contrary rulings decisions by federal courts on the same issues, with the NLRB answering only to the U.S. Supreme Court. The D.C. Circuit Court recently issued a blistering decision noting that the NLRB’s practice of nonacquiesence with the country’s federal courts which have tried to corral the agency’s authority can become an “instrument of oppression.”
Fees Against the DOL
The EAJA (Equal Access to Justice Act) provides two paths for recovering attorney fees from the government. First, under 28 U.S.C. §2412(b), the federal government may be liable for attorney fees “to the same extent that any other party would be liable under common law.” The general rule in federal courts and under the common law is that litigants are responsible for their own attorney fees. See Alyeska Pipeline v. Wilderness Soc’y, 421 U.S. 240, 257 (1975). Courts can, however, award attorney fees when a party has “acted in bad faith, vexatiously, wantonly, or for oppressive reasons” or when a litigant has “conferred a substantial benefit on a class of persons.” F.D. Rich v. United States, 417 U.S. 116, 129-30 (1974). The common law rule allows for attorney fees under either standard. Aleyska, 421 U.S. at 257. Thus, §2412(b) essentially applies these common-law bad-faith and common fund exceptions to the government. Baker v. Bowen, 839 F.2d 1075, 1080 n.3 (5th Cir. 1988).
Second, 28 U.S.C. §2412(d) allows courts to award attorney fees “unless the court finds that the position of the United States was substantially justified or that special circumstances make an award unjust.” Section 2412(d) does not apply to high net worth individuals or corporations and limits attorney compensation to $125 per hour absent special factors. 28 U.S.C. §§2412(d)(2)(A)-(B).
For example, in Gate Guard v. Perez, 792 F.3d 554 (5th Cir. 2015), the court awarded attorney fees under the bad faith provision as the government’s conduct of a FLSA (Fair Labor Standards Act) investigation and prosecution of the case was oppressive and legally frivolous. Id. at 561. (The Department of Labor’s (DOL) lead investigator deliberately shredded his notes, instigated an investigation he was unqualified to undertake, surprised a low-level employee when he knew the company’s attorneys would not be present, came to a conclusion after interviewing just three witnesses out of hundreds, inflated damages calculation, and broke protocol in presenting his findings.)
In addition, employers may attempt to seek attorney fees from malicious government prosecution pursuant to 28 U.S.C. §1927. This statute provides that “[a]ny attorney or other person admitted to conduct cases in any court of the United States or any territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorney fees reasonably incurred because of such conduct.”
When a knock on the company door by government agencies may remain an anxiety-inducing experience, employers would do well to remember that they possess a range of legal means to stop—or at least slow down—government agencies that doggedly pursue unwarranted investigations and prosecutions.