Opinion analysis: Title VII defendants can recover attorney’s fees without prevailing “on the merits”

In suits involving Title VII of the Civil Rights Act of 1964, “the court, in its discretion, may allow the prevailing party … a reasonable attorney’s fee.” A defendant seeking attorney’s fees in a Title VII case must show that (1) it is a prevailing party and (2) the plaintiff’s claim was frivolous, unreasonable, or groundless.

On Thursday the Court unanimously held that a defendant seeking attorney’s fees can be a “prevailing party” even without obtaining a favorable judgment “on the merits.” This will resuscitate defendant CRST’s quest to recover over $4 million in attorney’s fees from the Equal Employment Opportunity Commission (EEOC), but the Court’s remand order will further extend the litigation in a case that has been going on for nine years.

Justice Anthony Kennedy’s sixteen-page opinion devotes nine pages to a review of this case’s facts and complex history, and the following is a boiled-down summary. The EEOC sued CRST on behalf of one individual and a class of unidentified employees claiming sexual harassment in violation of Title VII. Although the EEOC eventually named 270 individual women, all but sixty-seven were dropped out of the case. Then the district court dismissed the case as to the remaining sixty-seven because the EEOC had “wholly abdicated” its pre-suit duty to make separate investigations, reasonable cause determinations, or conciliation attempts as to each of them. The district court found that CRST was a prevailing party and that the EEOC’s failure to satisfy its pre-suit obligations was unreasonable, so the court awarded CRST its attorney’s fees. The Eighth Circuit reversed the attorney’s fees award, relying on its rule that, before a defendant can be deemed to have prevailed and thus eligible for fees, there must have been a favorable “judicial determination … on the merits.” There has not been a judgment “on the merits” in this case because no court has made a decision as to whether or not the women were sexually harassed.

The Supreme Court’s rejection of the Eighth Circuit’s on-the-merits requirement was not at all remarkable given that both CRST and the EEOC took the position that the Eighth Circuit’s rule was wrong.

The Court’s decision is notable for what it did not decide. Three questions that tied up the bulk of the briefing and oral argument in this case were sent back to the Eighth Circuit to consider. First, the Court did not weigh in on the EEOC’s proposed rule that, in order to be a “prevailing party,” a defendant must obtain a preclusive judgment. Second, the Court declined to decide whether the district court’s judgment in favor of CRST was in fact preclusive. Third, the Court avoided ruling on the EEOC’s alternative argument that its conduct had not been frivolous, unreasonable, or groundless.

The Court’s refusal to give guidance on these three issues is easy to understand. The EEOC’s fundamental argument changed while the case was pending at the Court – between the certiorari and merits stages. At first the EEOC supported the idea that a defendant must prevail “on the merits.” Then it shifted gears (which the Court pointedly said was at “the eleventh hour”) and argued that a defendant must have obtained a preclusive judgment – that is, one that is “with prejudice” and would prevent the EEOC from refiling its case. The Court had two reactions to this. One was that the EEOC may have forfeited this new argument by not raising it earlier. The other was that there was “inadequate briefing on the issue.” My personal reaction is that CRST’s legal team did a nice job of briefing this issue, and that the Court may actually have been avoiding a four-to-four split on this issue.

As for resolving the parties’ dispute as to whether the district court’s judgment was in fact preclusive, the litigation history was long and complex, and the oral arguments revealed how difficult it was to parse the record to find a clear answer. This is really not the job of the Supreme Court, which Kennedy noted “is a court of final review and not first view.” Sending this issue back to the Eighth Circuit was the prudent thing to do.

The Court showed no interest in deciding whether the EEOC’s actions were frivolous, unreasonable, or groundless. The Eighth Circuit did not address that question, and the Court pointed out that it is a “fact-sensitive issue” that requires a review of the “intricate procedural history” of the case. Again, this is an issue that properly should be tackled first by the court of appeals rather than the Supreme Court.

Even though both parties turned their backs on the Eighth Circuit’s “on the merits” requirement, Kennedy’s opinion explains why the Court itself rejects that position. First is the “common sense” point that plaintiffs and defendants have different objectives. A plaintiff wants a material alteration in the parties’ legal relationship, while a defendant wants to prevent any alteration that favors the plaintiff. So a defendant gets what it wants “whenever the plaintiff’s challenge is rebuffed,” and “may prevail even if the court’s final judgment rejects the plaintiff’s claim for a nonmerits reason.” Second is the lack of any indication that Congress intended to set up an “on the merits” hurdle. Imposing an on-the-merits requirement for a defendant to obtain prevailing party status would undermine Congress’s policy of deterring suits that are without foundation or are frivolous. The Court noted that Christiansburg Garment Co. v. EEOC – which established the “frivolous, unreasonable, or without foundation” standard – was a case in which the defendant prevailed for a non-merits reason. In addition, courts of appeals have applied the Christiansburg standard when claims were dismissed for nonmerits reasons such as mootness and state sovereign immunity.

Justice Clarence Thomas concurred in the Court’s opinion and also wrote a separate one-paragraph opinion. His view is that Christiansburg is “dubious precedent” because it sets up a dual standard for plaintiffs and defendants in Title VII cases. A prevailing plaintiff “ordinarily is to be awarded attorney’s fees in all but special circumstances,” but a prevailing defendant is to be awarded fees only “upon a finding that the plaintiff’s action was frivolous, unreasonable, or without foundation.” On the other hand, the Court refused to adopt a dual standard for interpreting the Copyright Act’s attorney’s fees provision even though the wording is similar to Title VII’s provision. In his concurrence in Fogerty v. Fantasy, Inc., Thomas said of Christiansburg: “I disagree with that analysis.”

Although this case deals specifically with Title VII’s attorney’s fees provision, it is a fair prediction that attorney’s fees provision in many other statutes will be given similar treatment. As the Court pointed out, “Congress has included the term ‘prevailing party’ in various fee-shifting statutes, and it has been the Court’s approach to interpret the term in a consistent manner.”

PLAIN LANGUAGE: The EEOC filed a suit against CRST claiming CRST had allowed sexual harassment of sixty-seven women. However, the EEOC did not comply with its pre-suit duty to investigate, make reasonable cause determinations, and attempt to conciliate as to each of the claims. Because of that, the district court dismissed the case and awarded attorney’s fees to CRST. The Eighth Circuit reversed the attorney’s fees award on the ground that CRST was not a “prevailing party” because there was no judgment “on the merits,” and there was never a judicial decision as to whether the women had been sexually harassed. The Supreme Court reversed, holding that a favorable ruling on the merits is not necessary before finding that a defendant is a prevailing party. However, the Court remanded three other issues to the Eighth Circuit to resolve.