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Interference On The Defense? Tenth Circuit Reinstates EEOC’s Formerly Dismissed Claim

Posted in EEOC Litigation

By Gerald L. Maatman, Jr. and Alex W. Karasik

Seyfarth Synopsis:  After a federal district court dismissed the EEOC’s unlawful-interference claim against a private college that had sued a former employee for allegedly breaching a settlement agreement by filing an EEOC charge, the Tenth Circuit reversed the dismissal of the EEOC’s unlawful-interference claim, citing the employer’s introduction of a new case theory relative to the EEOC’s still-pending retaliation claim.

This ruling serves a cautionary tale for employers regarding the timing of their assertion of new case theories in EEOC litigation involving multiple claims.

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After CollegeAmerica resolved a dispute with a former employee by entering into a settlement agreement, upon belief that the employee breached the settlement agreement, CollegeAmerica sued the employee in state court.  Id. at *1-2.  Thereafter, the EEOC sued CollegeAmerica in federal court alleging that CollegeAmerica’s interpretation and enforcement of the settlement agreement was unlawfully interfering with statutory rights of the former employee and the EEOC.  Following the U.S. District Court for the District of Colorado’s dismissal of the EEOC’s claim for unlawful-interference with statutory rights, on appeal in EEOC v. CollegeAmerica Denver Inc., No. 16-1340, 2017 U.S. App. LEXIS 17094 (10th Cir. Sept. 5, 2017), the Tenth Circuit reversed the dismissal, holding that the EEOC’s unlawful-interference claim should not have been dismissed as moot in light of a new theory asserted by CollegeAmerica prior to its trial regarding the EEOC’s pending retaliation claim.

Employers should keep this ruling in mind when preparing trial theories that may have implications on claims that had previously been dismissed as moot.

Case Background

The EEOC brought a claim for unlawful-interference with statutory rights, which the District Court ultimately dismissed as moot.  Regarding the EEOC’s retaliation claim, which remained for trial, CollegeAmerica presented a new theory against the employee: that she had breached the settlement agreement by reporting adverse information to the EEOC without notifying CollegeAmerica.  In response, the EEOC argued that by presenting this new theory, CollegeAmerica was continuing to interfere with the statutory rights of the former employee and the EEOC.  As such, the EEOC appealed the dismissal of its unlawful-interference claim, arguing that the claim was no longer moot in light of CollegeAmerica’s new theory.

The Tenth Circuit’s Decision

The Tenth Circuit reversed the dismissal of the of the EEOC’s unlawful-interference claim.  First, the Court instructed that in determining whether a claim is moot, a special rule applies when the defendant voluntarily stops the challenged conduct.  Id. at *4-5.  When the conduct stops, the claim will be deemed moot only if two conditions exist: (1) it is absolutely clear the allegedly wrongful behavior could not reasonably be expected to recur, and (2) interim relief or events have completely and irrevocably eradicated the effects of the alleged violation.  In arguing that the case was moot, CollegeAmerica submitted two declarations from its general counsel assuring that CollegeAmerica would not take the “positions known to trouble the EEOC.”  Id. at *6.  In response, the EEOC argued that the declarations should not be relied upon since CollegeAmerica presented a new theory after the filing of the declarations–that the employee had breached the settlement agreement by reporting adverse information to the EEOC without notifying CollegeAmerica–an argument that continued CollegeAmerica’s unlawful interference with statutory rights.  The Tenth Circuit held that because CollegeAmerica planned to present its new theory in its state court suit, the potential for CollegeAmerica to repeat its allegedly wrongful behavior remained, and CollegeAmerica thus did not satisfy its burden of demonstrating the absence of a potential for reoccurrence.  Id.

Next, the Tenth Circuit rejected CollegeAmerica’s argument that the case was moot because the outcome “would not affect anything in the real world.”   Id. at *7.  The Tenth Circuit noted that in its state court suit, CollegeAmerica planned to argue that the employee breached the settlement agreement by reporting adverse information to the EEOC without notifying CollegeAmerica. The EEOC alleged that this argument would constitute unlawful-interference with the employee’s rights, and thus sought a permanent injunction prohibiting CollegeAmerica from unlawfully interfering with the statutory rights of the employee and the EEOC.  The Tenth Circuit accepted the EEOC’s argument, holding that if the EEOC prevailed on the merits and obtained an injunction, CollegeAmerica could not present its new theory in the state court suit against the employee, which “would constitute an effect in the real world.”  Id.

Finally, the Tenth Circuit declined to consider CollegeAmerica’s argument that the EEOC’s unlawful-interference claim brought under 29 U.S.C § 626(f)(4) failed as a matter of law since it could not be used as an affirmative cause of action, noting the District Court had not yet ruled on the issue and therefore it was to consider that issue on remand.  Id. at *7-8.  The Tenth Circuit also refused to consider CollegeAmerica’s argument that the EEOC sought overly broad, unauthorized injunctive and declaratory relief, explaining it would not consider this issue since it was raised on appeal for the first time.  Accordingly, the Tenth Circuit reversed and remanded the District Court’s dismissal of the EEOC’s unlawful-interference claim.

Implications For Employers

For employers facing litigation, this ruling provides an important lesson: when considering the defense of one claim, it is imperative to be cognizant of how that argument can impact the defense of another claim, even if the other claim has been dismissed.  Further, this decision illustrates the EEOC’s willingness to combat employers who bring causes of action against former employees who may have breached settlement agreements by asserting discrimination claims.  As such, employers should be cautious when suing former employees who later file EEOC charges, and must exercise further caution when considering how their strategies to defend one claim may affect another.

Readers can also find this blog post on our Workplace Class Action Blog here.