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Court trims fees in EEOC’s failed severance suit against CVS Pharmacy

By Lisa Milam-Perez, J.D.

A federal district court in Illinois trimmed an attorneys’ fee award to CVS Pharmacy after the retailer successfully defended a high-profile EEOC case alleging that the releases in its severance agreements effectively chilled terminated employees from filing EEOC charges (EEOC v. CVS Pharmacy, Inc., January 18, 2017, Darrah, J.).

The underlying litigation. In closely watched case, the EEOC had alleged that CVS Pharmacy violated Title VII by offering severance packages that could deter terminated employees from filing charges with the agency or participating in EEOC proceedings. The EEOC refused the company’s effort to conciliate a suit brought on behalf of a female store manager who signed a broad release and then filed a discrimination charge. Because it was proceeding under Section 707(a), the EEOC contended it was not bound by the pre-suit procedural requirements of Section 706.

In a December 2015 opinion, the Seventh Circuit affirmed the lower court’s grant of summary judgment in the employer’s favor, rebuffing the EEOC’s contention that it had statutory authority to sue without engaging in conciliation—or even alleging that an employer engaged in discrimination or retaliation—when acting pursuant to Section 707(a) of the statute. And, because the EEOC did not allege that CVS actually discriminated or retaliated against claimants by offering the severance agreement with its broad release, the commission failed to state a claim. The EEOC’s petition for en banc rehearing was denied and, on remand, the district court entertained CVS’ fee request.

Fees to prevailing party? In deciding whether a prevailing defendant is entitled to recoup fees and costs, courts consider: “(1) whether the suit is one of first impression; (2) whether there is or was a real threat of injury to the plaintiff; and (3) whether the record supports a finding that the plaintiff’s action was frivolous,” the latter being at issue here.

Frivolous factual premise? Allegations that a pattern or practice claim is frivolous, in particular, are subject to careful scrutiny, the court noted. CVS contended the EEOC’s case was frivolous because it was unreasonable to assert, as a factual matter, that the terms of the company’s severance agreement amounted to a pattern or practice of resistance to rights under Title VII. On the merits, both the district court and appeals court concluded that the severance agreement at issue had a carve-out provision ensuring that former employees retained their right to file a complaint with the EEOC. However, the district court was not ready to concluded that the EEOC’s argument to the contrary—that “a combination of factors would lead a former employee to believe that they were precluded from exercising their rights under Title VII”—was unreasonable. The court disagreed that the EEOC’s factual premise was frivolous.

Unreasonable legal premise? Also, CVS urged that it was unreasonable for the EEOC to file suit without first conciliating. But, as the EEOC pointed out, other courts have held the commission had no duty to conciliate Section 707 claims. Yet the EEOC’s own regulations demand it, the court said, rejecting the EEOC’s reasoning that the conciliation requirement applies only when the commission alleges unlawful employment practices, which was not alleged here, or when the EEOC is proceeding under a charge, which was not the case here either.

Fee amount reasonable? The EEOC didn’t quibble with the hourly rate, but it did push back on the number of work hours claimed by the prevailing defendants, arguing the hours billed were excessive, and the billable records insufficient and lacking in detail, so that it was impossible to discern which attorney hours were expended defending frivolous claims (vs. non-frivolous claims). The commission also challenged the amount expended at the trial vs. appellate stage, noting CVS requested twice as much for its appeal than for its motion to dismiss. Without any clear reason for the disparity, the trial court saw fit to reduce the number of billable hours requested for the appeal from 754.3 hours to 300 hours—thus granting the employer’s motion for fees in part, and denying in part.