Attorney’s fees award and winning on the merits

Do employers have to win on the merits to recover attorney’s fees?

On May 19, 2016, the U.S. Supreme Court considered whether an employer must win an employment discrimination case on the merits in order to recover attorney’s fees. In CRST Van Expedited, Inc. v. EEOC (2016) ___U.S.___ [___L.Ed.2d___], the high court interpreted a federal law allowing trial courts to award fees to “the prevailing party.”

In this case, the employer is a trucking company that has a required training program. In 2005, a new female driver filed a charge of dis­crimination with the Equal Employment Opportunity Commission alleging that two male trainers sexually harassed her during a training trip.

The Commission filed a case on behalf on the female driver and other similarly situated women. The trial court dismissed the Commission’s pattern-or-practice claim. Next, the trial court ruled that claims on behalf of all but 67 of the women were barred on a variety of grounds. Finally, the trial court prevented the Commission from seeking relief for the remaining 67 women on the ground that the Commission had not satisfied its pre-lawsuit obligations to investigate and conciliate.

The trial court then dismissed the case, decided that CRST was a prevailing party, and awarded CRST its attorney’s fees based on the failure to investigate and conciliate. A Court of Appeals reversed that decision on grounds that before an employer can be a prevailing party there must have been a favorable judicial determination on the merits. That appellate decision conflicts with decisions of three other Courts of Appeals.

The Supreme Court reviewed the section of the federal employment discrimination law (Title VII) that authorizes an award of attorney’s fees. “In any action or proceeding under this subchapter the court, in its discretion, may allow the prevailing party, other than the [Equal Employment Opportuni­ty] Commission or the United States, a reasonable attorney’s fee (including expert fees) as part of the costs, and the Commission and the United States shall be liable for costs the same as a private person.” Accordingly, before deciding whether to award attorney’s fees a court must determine whether the party seeking fees has prevailed.

The Supreme Court reviewed previous decisions finding that the critical factor for the prevailing party question is the material alteration of the legal relationship of the parties. When an employee wins a judgment on the merits or a court-ordered consent decree, that employee is the prevailing party because she has received a judicially sanctioned change in the legal relationship of the parties. The high court noted, however, that it had not set forth in detail how courts should determine whether an employer has prevailed.

The Supreme Court found that common sense undermines the notion that an employer cannot “prevail” unless it wins on the merits. The parties come to court with different objectives: an employee seeks a material alteration in the legal relationship between the parties; an employer seeks to prevent this alteration to the extent it is in the employee’s favor. The employer might prefer a judgment vindicating its position regarding the merits of the employee’s allegations. But the employer fulfills its primary objective whenever the employee’s challenge is rebuffed, even if the court’s final judgment rejects the employee’s claim for a non-merits reason.

The Supreme Court also determined that Congress did not intend that employers can only recover attorney’s fees when courts dispose of claims on the merits. Instead, one purpose of the attorney’s fees provision is to deter the bringing of law­suits without foundation. The Supreme Court previously interpreted the statute to allow prevailing employers to recover their fees whenever the employee’s claim was frivolous, unreasonable, or groundless. The high court concluded that Congress must have intended that an employer could recover fees expended in frivolous, unreasonable, or groundless litigation when the case is resolved in the employer’s favor, whether on the merits or not.

Posted by deanroyerlaw