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When filing lawsuits, employees not entitled to ‘Two bites at the apple’

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in Employment Law,Firing,Human Resources

by Ron Chapman, Jr., Ogletree Deakins

A recent federal appellate court ruling should give some comfort to employers in Texas and other states in the 5th Circuit. It said the EEOC cannot seek monetary relief or reinstatement on behalf of four workers who brought and lost a state court action based on the same set of facts.

According to the court, “The EEOC’s public interest does not justify giving the [workers] two chances to receive make-whole relief.” (EEOC v. Jefferson Dental Clinics, PA, No. 06-10090, 5th Cir., 2007)

The factual background

Carol Cantu, Linda Householder, Heather Scooter and Esmeralda Jimenez, all employees of Jefferson Dental Clinics (JDC), filed a discrimination charge with both the EEOC and the Texas Commission on Human Rights, alleging violations of Title VII of the Civil Rights Act of 1964 and state law.

Three of the women alleged that their supervisor at JDC’s Dallas office made sexual comments and inappropriately touched them, while the fourth witnessed the alleged misconduct.

About two weeks later, the workers filed a lawsuit in state court against JDC, its president and one of its former employees. The suit sought damages for intentional infliction of emotional distress, negligent retention and wrongful discharge. All of this was based on the same circumstances described in the workers’ EEOC charges.

The state trial court ruled in favor of JDC, leaving the women with no payment for their alleged injuries and vindicating their employer.

Before the state court lawsuit had reached trial, however, the EEOC filed an action in federal court seeking monetary and injunctive relief for the four workers.

After JDC won the state court lawsuit, it asked the trial judge assigned to the federal case to dismiss the EEOC’s claims, arguing that they were barred by the “doctrine of res judicata.”

Under this legal principle, “a final judgment by a court of competent jurisdiction is conclusive upon the parties in any subsequent litigation involving the same cause of action.”

The bad news for the employer: The trial judge denied JDC’s request to dismiss the case, finding that the doctrine of res judicata did not apply because the EEOC was not involved in the state court action.

Noting the inherent unfairness in permitting the parties to “indirectly receive a second bite at the apple,” however, the judge authorized an immediate appeal to the 5th U.S. Circuit Court of Appeals (which has jurisdiction over Texas) and stayed the EEOC’s lawsuit pending that ruling.

The law

In a unanimous decision, the 5th Circuit ruled that while the EEOC’s suit was not entirely barred by the doctrine of res judicata, the agency’s claim for monetary or “make-whole” relief (such as back pay, compensatory and punitive damages, or reinstatement) was.

“In the context of make-whole relief,” the court wrote, “the interests of the EEOC stack up poorly against the principle of res judicata.”

In this case, the court found, the EEOC was seeking monetary relief for employees who already had initiated their own litigation. Therefore, the agency’s interest in enforcement on behalf of the public “does not justify giving the plaintiffs two chances to receive make-whole relief.”

The 5th Circuit held that the EEOC can proceed with the suit and seek general injunctive relief, not related specifically to these four individuals.

According to the court, the issuance of an injunction may benefit the public generally or other JDC workers, but should not directly benefit the four former workers.

Thus, the 5th Circuit returned the case to the lower court with instructions to enter summary judgment in favor of JDC on the claims for back pay, damages and reinstatement, but allowing further proceedings on the EEOC’s claims for injunctive relief.

The practical impact

This ruling should comfort employers. Under the district court’s ruling, most employers would probably have declined to settle with an individual who had a pending EEOC charge for fear that the EEOC would still pursue litigation.

In contrast, this 5th Circuit ruling prohibits such an attempt at “double recovery” and makes it safer to settle individual claims.

While the EEOC may still pursue litigation on behalf of other employees and may ask for a court order halting the alleged discriminatory action, you won’t have to worry about the employees you already settled with.   

_______________________________________

Ron Chapman, Jr., is a shareholder in the Dallas office of Ogletree, Deakins, Nash, Smoak & Stewart, P.C. He has a keen appreciation for the impact of this case, as he represented JDC in both the state and federal lawsuits and argued the case to the 5th Circuit. You can contact him at (214) 987-3800 or via email at ron.chapman@ogletreedeakins.com.

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