by Joshua B. Rosenzweig (Winter 2018)

In the civil court systems of the United States — whether it be a state court or the federal court system — the “American Rule” is typically followed with respect to attorney’s fees. The American Rule provides that each party is responsible for paying its own attorney’s fees. However, there are a few exceptions to this general rule:

  • Where there is a specific statute that grants specific authority to award attorney’s fees;
  • Where a contract specifically allows the assessment of attorneys against the other party; or
  • If a court finds that a party proceeded in a frivolous manner.

The frivolity of the position of the Equal Employment Opportunity Commission (“EEOC”) became the main issue involved when it brought suit against CVS Pharmacy, Inc. in 2014, which prompted a review of whether the EEOC owed CVS attorney’s fees for bringing the action.

In EEOC v. CVS Pharmacy, Inc. 809 F.3d 335 (7th Cir. 2015), the EEOC filed a complaint against CVS, alleging CVS used a severance agreement to impede its employees’ exercise of their rights under Title VII. The severance agreement at issue included broad release language and a covenant not to compete, but also attempted to carve out certain, obscure exceptions that the EEOC claimed would deter individuals from cooperating with the EEOC.

Tonia Ramos, who had signed and accepted the CVS’ severance agreement, filed a charge against CVS in 2011. The EEOC dismissed the charge and provided Ramos with a “right to sue letter,” but did not pursue a claim on her behalf. Instead, the EEOC filed a complaint under Section 707(a) of Title VII claiming that CVS had engaged in a pattern or practice of resistance to the rights afforded by Title VII. (42 U.S.C. § 2000 e-6).

Title VII provisions, namely Sections 706 and 707(e), require that the complaining party engage in a procedure known as “conciliation” prior to the filing of a lawsuit so as to see if an acceptable solution can be reached prior to the filing of a lawsuit. According to the EEOC, Section 707 (a) does not require such a procedure to take place prior to the filing of a lawsuit, and therefore, the EEOC filed its complaint without attempting to find a pre-suit resolution.

At the trial level, the judge awarded summary judgment to CVS, because the court found that the EEOC failed to conciliate though it should have. The court awarded CVS $307,902.30 in attorney’s fees, claiming that the EEOC should have realized before filing suit that EEOC regulations required initial conciliation before proceeding with an enforcement action.

The Seventh Circuit was asked to review whether the award of attorney’s fees was warranted. The Seventh Circuit reviews an award of attorney’s fees for an “abuse of discretion” by the district court. The Seventh Circuit took a “fresh look at the reasonableness of the EEOC’s legal theory, but [would] defer to the district court’s assessment of the case’s procedural history and factual foundations.”

Title VII allows for the shifting of attorney’s fees to the prevailing party, but those awards are generally only made in “exceptional” cases. The Seventh Circuit found that a district court may award fees to a prevailing defendant only upon a finding that the plaintiff’s action was frivolous, unreasonable or without foundation, even though not brought in subjective bad faith. The Seventh Circuit noted that appellate courts are cautioned not to exhibit “post   hoc reasoning” when determining the reasonableness of a claim.

In reversing the district court’s decision to award attorney’s fees to CVS, the 7th Circuit engaged in a step-by-step review of the EEOC’s case. Ultimately, the Seventh Circuit concluded there was no frivolity to the EEOC’s position. Rather, the Seventh Circuit indicated a more nuanced review of Sections 706 and 707, and its subsections, of Title VII was required in this particular instance.

Specifically, the Seventh Circuit noted that both Section 707(a) and 707(e) concern “pattern or practice claims.” Section 707(e) requires that conciliation procedures be followed when determining if an employer has engaged in a pattern or practice of discrimination. However, Section 707(a), which concerns claims involving a pattern or practice of resistance to the full enjoyment of any rights secured by Title VII, does not have the same procedural requirement.

CVS claimed that the EEOC’s actions were improper since the charge upon which the lawsuit was originally filed, the charge by Ramos under Section 707(e), required the EEOC to follow the conciliation procedures identified in Section 706. However, the Seventh Circuit held that the Ramos’ charge was dismissed, and therefore, the Ramos claim was not the basis for the complaint filed by the EEOC.

The Seventh Circuit noted that a reading of the whole complaint revealed it was a 707(a) claim, and therefore, carried no requirement to follow the conciliation steps first. Therefore, though CVS won the underlying case, the compliant was not frivolous and thus did not merit an award of attorney’s fees.

In general, courts in this country follow the American Rule where each party pays its own attorney’s fees. However, in limited circumstances, fees may be shifted from the prevailing party to the other party if a statute or contract allows for such shifting. Additionally, an award of fees may be shifted if the reviewing court finds that one party has acted frivolously in advancing a particular claim.

However, as evidenced by the CVS case, the reviewing court will likely review any order for attorney fees against the EEOC with great scrutiny, affirming the fact that attorney’s fees in favor of a successful defendant are exceedingly rare.