Supreme Court Holds a Party May be Entitled to Attorneys' Fees Absent a Favorable Ruling on the Merits

On May 19, 2016, the U.S. Supreme Court issued its decision in CRST, Inc. v. EEOC, which addressed the definition of a “prevailing party” who may be awarded attorneys’ fees in Title VII cases.  Although the Court ultimately remanded the case to the Eighth Circuit on other grounds, it unanimously held that a favorable ruling on the merits of a Title VII case is “not a necessary predicate to find that a defendant has prevailed.”  A boon to employers, this decision enables defendants to recover attorneys’ fees and costs under Title VII for frivolous, unreasonable, or groundless claims when such claims are disposed of on any grounds, regardless of whether those grounds are merit-based or procedural.

The Supreme Court’s decision is the latest in an ongoing saga involving a suit the EEOC filed against a trucking company, CRST Van Expedited, Inc. (“CRST”), claiming that CRST violated Title VII by subjecting approximately 270 female employees to a hostile work environment.  The district court granted summary judgment in favor of CRST on the majority of claims.  Most of them were dismissed based on the EEOC’s failure to meet its statutory pre-suit obligations to conduct a reasonable investigation and bona fide conciliation of these claims. The district court awarded CRST over $4 million in attorneys’ fees and costs after concluding that the EEOC “wholly abandoned its statutory duties” to investigate and conciliate before suing the employer.  The district court also ruled that the EEOC’s failure to satisfy its pre-suit obligations was unreasonable, therefore making an award of attorney’s fees appropriate. 

The EEOC appealed the district court’s dismissal of claims brought by 107 of the class members to the Eighth Circuit, arguing, in part, that the district court had abused its discretion in awarding CRST attorneys’ fees and costs.  The Eighth Circuit reversed the lower court’s grant of summary judgment on the EEOC’s claims as to two of the class members.  The court also vacated the district court’s award of attorneys’ fees and costs, reasoning that CRST was not a “prevailing party” under Title VII and, therefore, was not entitled to such an award.  The remainder of the case was remanded for further proceedings to determine whether individual claims were frivolous, unreasonable, or groundless.

On remand, after the EEOC withdrew its claim on behalf of one of the two remaining claimants, the parties settled the last claimant's claims and jointly moved for an order of dismissal.  The settlement agreement specifically provided that it did not preclude CRST from pursuing attorneys’ fees and costs.  After the district court granted the motion to dismiss, CRST filed a bill of costs and moved for an award of attorneys’ fees.  The EEOC argued that CRST was not a “prevailing party” because a majority of claims had been dismissed for non-merits reasons, including the EEOC’s failure to investigate and conciliate the claims before filing suit.  However, the district court rejected the EEOC’s argument, holding that dismissal of claims due to the EEOC’s failure to satisfy its pre-suit obligations was, indeed, a dismissal on the claim’s merits, thus qualifying CRST as a “prevailing party” under Title VII.  Accordingly, the district court granted the employer $4,694,442.14 in attorneys’ fees, expenses, and costs.

The EEOC again appealed.  It argued – and the Eighth Circuit agreed – that the district court erred in awarding CRST attorneys’ fees, expenses, and costs because the dismissal of claims based on deficiencies in the EEOC’s pre-suit processing did not equate to a merits-based decision, a necessary prerequisite for such an award.  The Eighth Circuit held, in part, that because Title VII’s pre-suit requirements – namely, the EEOC’s duties to investigate and conciliate – are not elements of a Title VII claim, the dismissal of claims on this ground did not constitute a ruling on the merits required to deem CRST a “prevailing party.”

In May 2015, CRST petitioned the Supreme Court for review after the entire Eighth Circuit refused to revisit the appellate panel’s decision to overturn the attorneys’ fee award. On December 4, 2015, the U.S. Supreme Court agreed to consider the case, certifying the question of whether a favorable ruling on the merits of a claim is a necessary predicate to find that a defendant is a “prevailing party” for purposes of granting the defendant an award of attorneys’ fees and costs under 42 U.S.C. § 2000e-5(k).

In its May 19, 2016, decision, the Supreme Court reconciled a circuit split that resulted from the Eighth Circuit’s decision regarding the definition of “prevailing party.” The Supreme Court stated that “a defendant need not obtain a favorable judgment on the merits in order to be a ‘prevailing party’ under Title VII.”  The Court noted that Congress had not intended that defendants should be eligible to recover for costs and fees only when courts disposed of cases on their merits and reasoned:

Common sense undermines the notion that a defendant cannot “prevail” unless the relevant disposition is on the merits.  Plaintiffs and defendants come to court with different objectives.  A plaintiff seeks a material alteration in the legal relationship between the parties.  A defendant seeks to prevent this alteration to the extent it is in the plaintiff’s favor.  The defendant, of course, might prefer a judgment vindicating its position regarding the substantive merits of the plaintiff’s allegations.  The defendant has, however, fulfilled its primary objective whenever the plaintiff’s challenge is rebuffed, irrespective of the precise reason for the court’s decision.  The defendant may prevail even if the court’s final judgment rejects the plaintiff’s claim for a nonmerits reason.

Additionally, the Court amplified its previous decision in Christianburg Garment Co. v. EEOC, 434 U.S. 412 (1978), emphasizing that Title VII permits prevailing defendants to recover whenever the plaintiff’s claim was “frivolous, unreasonable, or groundless,” given that one purpose of the fee-shifting provision of Title VII is to deter plaintiffs from bringing meritless claims. 

However, despite its reasoning that a defendant may be entitled to attorneys’ fees and costs even if the case is not disposed of on its merits, the Court declined to make a determination on the EEOC’s eleventh-hour argument that a defendant must obtain a preclusive judgment in order to prevail.  Due to inadequate briefing on the issue and a dispute over whether the district court’s judgment was, in fact, preclusive, the Court remanded these legal and factual issues to the Eighth Circuit to consider.  It also declined to reconsider whether, even if CRST were a prevailing party, the EEOC’s claims were frivolous, unreasonable, or groundless, which would thereby preclude CRST from being awarded fees and costs. 

Despite the Supreme Court’s remand, its decision is a victory for prevailing defendant-employers, who will now be able to recover fees and costs regardless of the bases upon which a plaintiff’s claims have been dismissed.  The decision also draws into focus the EEOC’s obligations related to pre-suit investigations and conciliation of claims prior to commencing a lawsuit.  The EEOC’s compliance with its own obligations has been the subject of scrutiny the last several years.  This decision provides a clear warning to the EEOC to take those obligations seriously or risk being on the hook for fees.  

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.