TABLE OF CONTENTS

Table of Authorities.......................................................................................... ii

Suggestion for Rehearing En Banc................................................................... iv

Statement of the Issues..................................................................................... 1

Statement of the Case....................................................................................... 1

A. Statement of Facts............................................................................. 1

B. Panel Decision................................................................................... 5

C. Dissenting Opinion............................................................................ 7

Argument.......................................................................................................... 8

A. The panel’s decision conflicts with controlling law by imposing a stringent new pleading standard on disparate impact claims and by awarding fees against the EEOC for its failure to anticipate this unprecedented requirement. 9

B. The panel’s award of expert witness fees to a prevailing defendant for expenses incurred before a Title VII case is deemed “frivolous, unreasonable, or without foundation” is a precedent-setting error of exceptional public importance..................................................... 13

Conclusion...................................................................................................... 15

Addendum: Panel Opinion

Certificate of Service

TABLE OF AUTHORITIES

Cases

Allen v. Highlands Hosp. Corp., 545 F.3d 387 (6th Cir. 2008)....................... 10

Ashcroft v. Iqbal, 556 U.S. 662 (2009).............................................................. v

Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007).................................... v, 9

Carter v. Ford Motor Co., 561 F.3d 562 (6th Cir. 2009)........................... 11-12

Christiansburg Garment Co. v. EEOC, 434 U.S. 412 (1978).... iv, v, 1, 8, 13-15

Davis v. Cintas, 717 F.3d 476 (6th Cir. 2013)................................................. 10

Evans-Marshall v. Bd. of Educ. of Tipp City Exempted Sch. Dist.,

624 F.3d 332 (6th Cir. 2010).......................................................................... 11

Lowery v. Jefferson County Bd. of Educ., 586 F.3d 427 (6th Cir. 2009)............ v

Paschal v. Flagstar Bank, 297 F.3d 431 (6th Cir. 2002)................................. 14

Sensations, Inc. v. City of Grand Rapids, 526 F.3d 291 (6th Cir. 2008)........... vi

Serrano v. Cintas Corp., 699 F.3d 884 (6th Cir. 2012)............................... 9, 12

Smith v. City of Jackson, Miss., 544 U.S. 228 (2005)....................................... 10

Swierkiewicz v. Sorema N.A., 534 U.S. 506 (2002)................... iv, v, 7, 9, 11, 12

Statutes

42 U.S.C. § 2000e-2(k)(1)(A)(i)...................................................................... 10

42 U.S.C. § 2000e-5(k)................................................................................... 13

Rules

Fed. R. App. P. 35........................................................................................... vi

Fed. R. Civ. P. 8.................................................................................... v, 11, 13

Fed. R. Civ. P. 15............................................................................................ 13

6th Cir. I.O.P. 35............................................................................................. vi

SUGGESTION FOR REHEARING EN BANC

The panel majority decision radically departs from settled standards for awards of attorney’s fees to prevailing defendants as articulated in Christiansburg Garment Co. v. EEOC, 434 U.S. 412 (1978), and does so based on a hindsight reading of the EEOC’s complaint that disregards controlling standards governing notice pleading as articulated in Swierkiewicz v. Sorema N.A., 534 U.S. 506 (2002), and other recent Supreme Court and Sixth Circuit decisions. Further, the panel’s ruling on expert fees conflicts with Title VII’s fees provision, is unsupported by any authority, and conflicts with Christiansburg’s policy rationale.

Relying on the sworn statements of Peoplemark’s designated official, the EEOC’s complaint alleged that Peoplemark “maintain[s] a policy which prohibits the hiring of any person with a criminal record.” The complaint also alleged that the policy “has had and continues to have a disparate impact on African American applicants” in violation of Title VII. During discovery, the EEOC learned for the first time that some Peoplemark officials have made occasional, possibly unauthorized, exceptions to the no-felon rule. The EEOC notified the court and Peoplemark that its expert would continue to examine the impact of Peoplemark’s criminal record screen as applied. A sharply divided panel concluded that “the alleged companywide policy did not exist” and held that the EEOC’s continued challenge to the policy as applied was frivolous.

The panel thus effectively awarded fees against the Commission because the EEOC failed either to (1) anticipate and include in its original complaint a challenge to all possible permutations of Peoplemark’s policy; or (2) amend the complaint to include facts revealed for the first time in discovery. Both of these explanations impose an unprecedented and unwarranted pleading standard for disparate impact claims. See Fed. R. Civ. P. 8 (requiring only a short and plain statement showing entitlement to relief); Swierkiewicz, 534 U.S. at 512 (federal rules do not impose a “heightened pleading standard” for employment discrimination suits); see also Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (plaintiffs need allege only a “plausible” claim); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 563 (2007) (same). Prior to the panel’s decision, no court has required a plaintiff to plead detailed factual allegations regarding all theoretical variations of a claim.

Finally, the panel’s decision conflicts with Christiansburg, which emphasizes that attorney’s fees should rarely be awarded against civil rights plaintiffs. Christiansburg, 434 U.S. at 422; see also Lowery v. Jefferson County Bd. of Educ., 586 F.3d 427, 437 (6th Cir. 2009) (fees against losing plaintiffs in a civil rights action are reserved for “truly egregious cases of misconduct”); Sensations, Inc. v. City of Grand Rapids, 526 F.3d 291, 303 (6th Cir. 2008) (attorney’s fees are inappropriate when “plaintiff ha[d] an arguable basis for pursuing his or her claim.”). The EEOC reasonably pursued a plausible claim, and the panel ruled otherwise based solely on an unduly crabbed and hindsight reading of the EEOC’s complaint.

The imposition of fees in this case threatens to undercut the vigorous enforcement of Title VII and the issues raised are therefore of exceptional importance. Moreover, reconsideration is necessary to ensure that this Court’s decision is consistent with Supreme Court and Sixth Circuit precedent. Accordingly, the EEOC respectfully requests panel rehearing or rehearing en banc. See generally Fed. R. App. P. 35(a)-(b) (standards for rehearing en banc); 6th Cir. I.O.P. 35 (same).

STATEMENT OF THE ISSUES

1. Did the panel disregard the central rule of Christiansburg Garment Co. as well as binding precedent on pleading requirements in holding that the EEOC’s complaint, which alleged that Peoplemark discriminated against African American applicants by “maintaining a policy which prohibits the hiring of any person with a criminal record,” made it frivolous for the EEOC to challenge the racial impact of the policy as applied?

2. Did the panel violate Christiansburg Garment Co. by requiring the EEOC to pay all of Peoplemark’s expert witness fees, including those incurred before the court deemed the litigation to have become unmeritorious?

STATEMENT OF THE CASE

A. Statement of Facts

Peoplemark is a temporary employment placement agency that refers individuals for placement with client-employers. It has offices in Michigan, Tennessee, Kentucky, and Florida. (Slip Op. at 2)

In May 2005, Sherri Scott filed a charge of discrimination with the EEOC alleging that Peoplemark’s Michigan office refused to refer her for employment because of her race and her felony conviction record. (Id.) During the EEOC’s investigation, Judd Osten, Peoplemark’s vice president and associate general counsel, repeatedly told the EEOC that Peoplemark screens out “ALL applicants” with felony conviction records because “customers have indicated they will not accept for assignment . . . any employee with a record of a felony conviction.” (R.126-3, Osten 7/1/05 Ltr., Page ID #2296 (emphasis in original); see also R.126-4, Osten 10/31/05 Ltr., Page ID #2299 (same); R.126-5, Osten 6/12/06 Ltr., Page ID #2302 (same); R.126-6, Osten 12/1/06 Ltr., Page ID #2304 (same))

Department of Justice statistics show that the conviction rate for blacks is three to four times greater than the representation of blacks in the adult population or the civilian labor force nationally. (R.38, Privilege Log, Page ID #1523) Relying on these statistics, Peoplemark’s representations about its no-felony policy, and cover sheets from employment applications, the EEOC identified almost 300 black applicants with felony convictions whom it believed Peoplemark had not referred for employment due to its no-felony policy. (R.24, EEOC Brief, Page ID# 88-92; R.137, Order, Page ID #3049) Attempts to conciliate the dispute were unsuccessful, and on September 29, 2008, the EEOC filed this lawsuit. The EEOC’s complaint alleged:

Since at least May 2005, Defendant Employer has engaged in unlawful employment practices at all of its facilities in violation of Section 703(a) of Title VII, 42 U.S.C. § 2000e-2(a). The Defendant’s unlawful employment practices include maintaining a policy which prohibits the hiring of any person with a criminal record. Such policy has had and continues to have a disparate impact on African American applicants.

(R.1, Complaint, Page ID #2)

In April 2009, for the first time, Peoplemark denied having a blanket no-felony policy. (R.126-18, Peoplemark Responses, Page ID #2379) Three months later, it moved for dismissal not because the EEOC was challenging a nonexistent policy, but on the ground that the EEOC’s complaint was too “conclusory.” (R.40-1, Memo, Page ID #370) The district court denied the motion to dismiss. The court said, “The EEOC theory of relief is no mystery, and its Complaint lays it out in plain and simple terms as required by Rule 8.” (Docket Entry of 7/7/09)

Protracted discovery disputes delayed the EEOC’s receipt of Peoplemark’s records. In July 2009, when Peoplemark first turned over its electronic database, the EEOC discovered that Peoplemark had hired some individuals with felony records in some of its offices.[1] (R.81, EEOC Supp. Br., Page ID #1470) Notwithstanding this discovery, Vice President and Associate General Counsel Judd Osten continued to state under oath as late as December 2009 (two months after the date when the district court said the EEOC should have known otherwise) that he knew and it was generally known throughout the company that Peoplemark’s general practice was not to hire felons because its clients would not want to employ felons. (R.126-8, Osten Dep., Page ID #2311-12)

In October 2009, in response to an inquiry by the court about how the EEOC’s expert could prove the impact of a blanket policy that did not exist, the EEOC informed Peoplemark and the court that it “no longer contends that Defendant’s application of its practice is ‘categorical’ as originally represented [to EEOC] by Peoplemark.” The EEOC said that “there is still a need to review data from all . . . Peoplemark locations, including applicant flow data and current work force data, and [to] conduct an adverse impact analysis to determine whether the manner in which convictions are used at each facility has a disparate impact on [black] applicants.” (R.81, EEOC Supp. Br., Page ID #1470)

The EEOC’s expert informed the EEOC that she would be unable to complete her report by the court-imposed deadline. The court nevertheless required the EEOC to submit the report six weeks earlier than the expert said was possible. (R.101, Order, Page ID #1675) Without the expert analysis, the EEOC believed it could not demonstrate the extent of the disparate impact on black applicants in this case. Accordingly, the EEOC and Peoplemark jointly moved to dismiss the case. (R.117, Jt. Motion, Page ID #1952) The EEOC took this step because of an anticipated inability to submit its proof, not because its case lacked foundation legally or factually.

Peoplemark moved for attorney’s fees, expert fees, sanctions, and costs in excess of $1.3 million. (R.122-2, Peoplemark Memo, Page ID #1984) In March 2011, the magistrate awarded Peoplemark $751,942.48, saying that the complaint had turned out to be without foundation from the beginning. (R.137, Order, Page ID #3049) The existence of a “blanket policy” against hiring felons, the magistrate said, was “the very gravamen” of the EEOC’s claim. (Id. at Page ID #3052-53) The district court affirmed the magistrate’s order. (R.147, Order, Page ID #3258) “Although a disparate impact claim can exist absent a blanket hiring policy,” the court said, “that is not how the EEOC either pled or pursued this case.” (Id. at Page ID #3260) Because discovery revealed the lack of a blanket policy by October 1, 2009, the court held, it was unreasonable for the EEOC to maintain this action after that point. (Id.) The district court awarded attorney’s fees dating from October 1, 2009, and expert witness fees in their entirety. (Id. at Page ID #3265)

B. Panel Decision

The panel affirmed the fee award. (Slip Op. at 2) The panel acknowledged that “Osten’s incorrect statements that there was a companywide policy gave the Commission a basis to file the complaint.” (Id. at 10.) However, it said, when discovery showed that Peoplemark had hired some felons, the EEOC should have reassessed its case. “[T]he Commission pleaded a specific employment practice --a companywide policy of denying employment opportunities to felons. That policy did not exist, and the claim the Commission pleaded could not be proved.” (Id.) Whether the EEOC could have pleaded other claims, the panel said, was irrelevant. (Id.)

Although the panel approved the award of attorney’s fees only after the date when the district court said the EEOC should have abandoned the case, it approved the award of expert witness fees incurred prior to that date. (Id. at 11-13) “There is nothing in [Title VII],” the panel said, “that requires temporal concurrence between expert and attorney’s fees.” (Id. at 13) Unlike attorneys, the panel said, “experts cannot wait and see if a disposition motion is granted or if a case becomes frivolous before beginning their work.” (Id. at 14) Accordingly, the panel held, “so long as the prevailing party acted reasonably in hiring the expert, the fees incurred were reasonable, the work conducted was reasonable, and the standard from Christiansburg permits an award of expert fees, a court should be permitted to award a prevailing party’s expert fees independent of limitations on the award of attorney’s fees.” (Id.)

C. Dissenting Opinion

Judge Carr (district judge sitting by designation) disagreed that this litigation had ever become “frivolous, unreasonable, or without foundation.” (Dissent at 17) Title VII plaintiffs, he said, “are free to develop their theories of the case as they receive and process discovery.” (Id. at 53) Requiring the EEOC to amend the factual allegations in its complaint while discovery was ongoing, he added, “attempts to retroactively impose the heightened pleading standard that the Supreme Court rejected in Swierkiewicz.” (Id.)

The dissent noted that the record does not indicate how many felons Peoplemark actually hired. (Id. at 50 n.20) “A report showing that Peoplemark hired a minimal amount of felons would actually be consistent with the EEOC’s original assertion that Peoplemark had a blanket policy of not hiring felons, which was imperfectly implemented at its four offices throughout the country. . . . ,” Judge Carr said. “That the policy may have been randomly ignored or disregarded did not undercut its existence.” (Id.)

Judge Carr criticized the district court for denying the EEOC an additional six weeks to file its expert report. “Because the lower court did not grant the request for a very modest amount of time to finish the work on the report, neither it nor we can say that in fact there was ‘no there there’ to the agency’s claim of discrimination. While her report may have confirmed that assessment, it may also have provided the sine qua non evidence of discrimination in placement sufficient to enable the EEOC to prevail.” (Id. at 17 n.1)

ARGUMENT

The panel’s decision upholds an award of fees that Christiansburg authorizes only for pursuit of frivolous litigation based on an overly narrow construction of the EEOC’s complaint, and based entirely on the type of hindsight reasoning that Christiansburg expressly condemns. See Christiansburg, 434 U.S. at 422 (using hindsight logic when awarding attorney’s fees would penalize “all but the most airtight claims”). The complaint referred to a policy prohibiting the hiring of “any person with a criminal record” because Peoplemark’s vice president and associate general counsel repeatedly told the EEOC that the company had just such an absolute rule. Nothing in the complaint foreclosed a simultaneous challenge to Peoplemark’s application of the rule.

Hindsight reasoning that the complaint should have specifically mentioned a challenge to the rule “as applied” as well as the general policy identified by Peoplemark’s designated representative runs afoul not only of Christiansburg’s prohibition of such reasoning, but also of the Supreme Court’s mandate that pleading requirements should not be confused with evidentiary proof. Swierkiewicz, 534 U.S. at 510. The decision contradicts the most basic concept of notice pleading, whereby a plaintiff need only plead a “plausible” claim and may then support the claim with “any set of facts consistent with the allegations in the complaint.” Twombly, 550 U.S. at 563 (emphasis added); see also Serrano v. Cintas Corp., 699 F.3d 884, 897 (6th Cir. 2012), cert. denied, 134 S. Ct. 92 (2013) (Twombly “does not require heightened fact pleading of specifics”).

The panel also held, with no precedent and contrary to legal authority, that a district court may award expert witness fees to a prevailing defendant in a Title VII case for expenses incurred before the district court deemed the litigation to have become unmeritorious. This holding erroneously treats expert witness fees as if they are independent of attorney’s fees although Title VII plainly says otherwise.

By holding that Peoplemark is entitled to fees, the panel’s decision rewards Peoplemark for applying a discriminatory policy only some of the time, and penalizes the EEOC for reasonably challenging the policy not only as Peoplemark described it but also as Peoplemark actually applied it. The EEOC’s complaint identified Peoplemark’s consideration of felony convictions as the “specific employment practice” responsible for a disparate impact on black applicants.[2] See Allen v. Highlands Hosp. Corp., 545 F.3d 387, 403 (6th Cir. 2008) (“plaintiffs that allege discrimination based on a theory of disparate impact . . . must ‘isolate and identify the specific employment practices that are allegedly responsible for any observed statistical disparities’”). Whether Peoplemark considered criminal records all of the time or only some of the time, use of this racially weighted factor could be a violation of Title VII. Peoplemark knew that if the EEOC could demonstrate a disparate impact on black applicants, the company could avoid liability only by showing that its practice was job related and consistent with business necessity. 42 U.S.C. § 2000e-2(k)(1)(A)(i).

There is no support for the panel’s conclusion that this litigation morphed into something completely different once the EEOC learned that Peoplemark had occasionally hired individuals with criminal records, thereby rendering the initial complaint retroactively deficient. Peoplemark has never disputed that it has a policy of screening out applicants with criminal records. Nor has it ever disputed that the analysis required for the EEOC to prove a disparate impact or for Peoplemark to prove potential defenses is identical regardless of whether Peoplemark applies the policy universally or partially. Peoplemark has not alleged and could not allege that it did not receive fair notice of the EEOC’s focus on its policy as applied, or that it suffered any prejudice from the EEOC’s “as applied” challenge. The relevant question was, and had always been, whether Peoplemark’s consideration of felony convictions had a disparate impact on black applicants.

The evolution in the EEOC’s theory of the case is typical of complex disparate impact litigation. It is “often the case,” this Court has recognized, “[that] discovery will confirm the accuracy of some allegations and disprove others.” Evans-Marshall v. Bd. of Educ. of Tipp City Exempted Village Sch. Dist., 624 F.3d 332, 336 (6th Cir. 2010). In this case, discovery disproved the absolute nature of the no-felony rule that Peoplemark itself had sworn to be true.

Precisely because litigation can be unpredictable and discovery is necessary to illuminate the exact contours of claims, the federal rules require courts to construe pleadings liberally. See Fed. R. Civ. P. 8(e) (“pleadings must be construed so as to do justice”); see also Swierkiewicz, 534 U.S. at 512 (noting the necessity of discovery to “unearth[ ] relevant facts and evidence”); Carter v. Ford Motor Co., 561 F.3d 562, 569 (6th Cir. 2009) (“the district court is obligated to make a determined effort to understand what the pleader is attempting to set forth and to construe the pleading in his or her favor, whenever the interest of justice so requires”). This rule applies to employment discrimination complaints just as it applies to other complaints, Swierkiewicz, 534 U.S. at 508, and means that plaintiffs need not plead their theory of the case, Serrano, 699 F.3d at 898.

Here, it was always clear to the parties and the court that the EEOC was challenging Peoplemark’s use of felony records as a screening tool. (See Slip Op. at 11 n.5 (panel acknowledges that the EEOC arguably stated a plausible claim).) Peoplemark had notice of the challenged employment practice from the outset of litigation. When the EEOC discovered that Peoplemark had overstated the use of its own policy, it reasonably zeroed in on the effect of Peoplemark’s policy as applied. Peoplemark has not and cannot point to any prejudice from this action.

In contrast, if the EEOC had shifted the focus of its impact claim from the use of felony convictions as a screening device to, for instance, reliance on high school diplomas as a qualification standard, the panel majority could have reasonably said that the litigation was no longer consistent with the complaint. Peoplemark would have had no notice that the EEOC was looking at its reliance on high school diplomas and would have had to prepare a new and unrelated defense.

That, however, is not what the EEOC did. The focus of this lawsuit – felony convictions – remained the same throughout the litigation. The EEOC therefore reasonably believed that it could continue to pursue the case as pleaded, and no rule or precedent said otherwise. See Fed. R. Civ. P. 15 (permitting but not requiring amendment of complaint at any time). Even if the EEOC was mistaken about this belief – which it emphatically does not concede -- the panel had no basis for awarding fees. See Christiansburg, 434 U.S. at 423-24 (attorney’s fees may not be awarded to prevailing defendant in Title VII case if plaintiff acted reasonably); see also Fed. R. Civ. P. 8(f) (“all pleadings shall be so construed as to do substantial justice”). The very existence of Judge Carr’s vigorous dissent highlights the reasonableness of the EEOC’s conduct.

The panel’s decision incorrectly states that “nothing in the statute as written

. . . requires temporal concurrence between expert and attorney’s fees.” (Slip Op. at 13) In fact, Title VII expressly makes expert witness fees a subset of attorney’s fees. 42 U.S.C. § 2000e-5(k) (“in any [Title VII] action . . . the court, in its discretion, may allow the prevailing party . . . a reasonable attorney’s fee (including expert fees)”); see Paschal v. Flagstar Bank, 297 F.3d 431, 437 (6th Cir. 2002) (under 42 U.S.C. § 1988, which applies the same legal standard as Title VII, see Hensley v. Eckerhart, 461 U.S. 424, 433 n.7 (1983), expert witness fees are part of attorney’s fees). The limitations that the Supreme Court imposed on attorney’s fees to prevailing defendants in Christiansburg are therefore equally applicable to expert witness fees: Neither may be awarded for expenses incurred prior to the time the district court deems the litigation to have become frivolous. Christiansburg, 434 U.S. at 421-22.

The panel’s explanation for treating expert witness fees differently – that
“experts cannot wait and see if a disposition motion is granted or if a case becomes frivolous before beginning their work” (Slip Op. at 14), applies equally to attorneys. Contrary to the panel’s assumption that experts are “unlike attorneys” in this regard, (id.), surely Peoplemark’s attorneys invested many hours and dollars in research, writing, and depositions prior to the date when the district court deemed the litigation unmeritorious. Neither the district court nor the panel, however, has suggested that the EEOC should pay for this subset of attorney’s fees. Expert fees are no different.

The panel may have ruled as it did because it focused on “a prevailing party,” not a prevailing defendant. (Id.) As the Supreme Court explained, however, the equities behind awarding fees to a prevailing plaintiff and a prevailing defendant are quite different under Title VII. Christiansburg, 434 U.S. at 418-19. The Supreme Court deliberately made the standard for awarding fees to a prevailing defendant difficult to meet because Title VII plaintiffs “‘vindicat[e] a policy that Congress considered of the highest priority.’” Id. at 416. The panel’s unprecedented ruling vastly increases a plaintiff’s potential exposure to fees and thereby increases the possible chilling effect on meritorious litigation in direct violation of the Supreme Court’s instructions.

CONCLUSION

The panel’s decision wrongly imposes attorney’s fees against the EEOC for litigation that was well-founded, and the precedent is likely to deter future plaintiffs from bringing meritorious civil rights actions. The EEOC respectfully asks this Court to grant panel rehearing or rehearing en banc.

Respectfully submitted,

P. DAVID LOPEZ /s/ Gail S. Coleman

General Counsel Attorney EQUAL EMPLOYMENT

LORRAINE C. DAVIS OPPORTUNITY COMMISSION

Acting Associate General Counsel Office of General Counsel

131 M Street, NE, Room 5SW24L

CAROLYN L. WHEELER Washington, DC 20507

Assistant General Counsel (202) 663-4055

gail.coleman@eeoc.gov

[1] In depositions taken in December 2009 and January 2010, Peoplemark’s managers said that some offices do not hire felons and others do. (R.126-9, Duff Dep., Page ID #2315-18; R.126-10, Patterson Dep., Page ID #2323-24; R.126-11, Taylor Dep., Page ID #2327-33; R.126-12, Cady Dep., Page ID #2336-40)

[2] The focus on felony convictions distinguishes this case from those that point to a hiring process generally, not singling out which aspect of the hiring process has an adverse impact. See Smith v. City of Jackson, Miss., 544 U.S. 228, 241 (2005) (“not enough to simply allege that there is a disparate impact on workers, or point to a generalized policy that leads to such an impact”); Davis v. Cintas, 717 F.3d 476, 480, 487-88 (6th Cir. 2013) (challenge to subjective hiring system, which included 16 separate steps, is too general); Allen v. Highlands Hosp. Corp., 545 F.3d 387, 404 (6th Cir. 2008) (plaintiffs “have simply ‘point[ed] to a generalized policy,’ as opposed to specific practice”).