United States: Federal Court Leaves Opportunity For A "Compelling" Exhaustion Argument

Last Updated: August 22 2018
Article by Gerald L. Maatman Jr. and Lauren E. Becker

Seyfarth Synopsis: The U.S. District Court for the District of New Jersey recently issued a ruling with respect to Defendants' "compelling" exhaustion argument that Plaintiffs failed to exhaust administrative remedies with respect to their disparate treatment and disparate impact theories of Title VII claims relied on to support their motion for class certification, as those claims were outside the scope of Plaintiffs' underlying EEOC charges. In rejecting Defendants' argument, the Court invited Defendants to raise their argument more appropriately on a motion for summary judgment. The decision is an important one for employers facing employment discrimination class actions.

Case Background

In Smith v. Merck & Co., No. 13-CV-2970, 2018 U.S. Dist. LEXIS 129126 (D.N.J. July 31, 2018), a former Merck & Co. employee filed a charge of discrimination with the Equal Employment Opportunity Commission ("EEOC"), individually and on behalf of a class of similarly-situated employees, alleging that Merck violated Title VII of the Civil Rights Act of 1964 ("Title VII"), 42 U.S.C. § 2000e, and other state and federal laws. Id. at 2. After receiving a Right-To-Sue Notice from the EEOC, Plaintiff filed a Complaint in the U.S. District Court for the District of New Jersey against Merck & Co. raising claims consistent with those alleged in her EEOC charge.

Plaintiff twice amended her Complaint. First, she added several more named plaintiffs, each of whom had filed administrative charges with the EEOC on behalf of a class. The Second Amended Complaint added named Defendants, Merck Sharp & Dohme, Corp. and Intervet, Inc., and fourteen causes of action. Id. at 3.

Plaintiffs moved for class certification based on disparate treatment and disparate impact. Defendants filed their own motion for partial judgment on the pleadings under Federal Rule of Civil Procedure 12(c), which permits a party to secure a dismissal after the pleadings close without delaying trial. Id. at 6. Defendants argued that Plaintiffs failed to exhaust their administrative remedies with regards to the disparate impact and disparate treatment claims, as required by Title VII, because those claims were not supported by the pleadings or underlying EEOC charges. Id. at 5. Instead, Defendants argued that the disparate impact and treatment claims were "newly asserted challenges," based on at least four policies that Plaintiffs obtained and learned about during discovery. Id. at 4. At the EEOC charge stage, Plaintiffs had not asserted disparate treatment by evidencing a facially neutral policy that adversely impacted Plaintiffs. Id. Instead, Plaintiffs' EEOC charges asserted discrimination exclusively based on the actions of individual managers. Id. Plaintiffs' disparate impact claim failed, Defendants' argued, because neither the EEOC charges nor the Complaint supported "discrimination based on high-level facially neutral policies that Merck allegedly implemented to discriminate" against Plaintiffs. Id. at 5.

Plaintiffs argued that the EEOC charges supported their motion for class certification, the requirements of which "are separate from, and more stringent than, the administrative exhaustion standard for Title VII cases." Id. at 5.

The Court's Decision

On July 31, 2018, the Court denied Defendants' motion for partial judgment on the pleadings, without ruling on the exhaustion defense. Id. at 9.

First, the Court addressed the standard by which courts in the Third Circuit determine a motion for partial judgment on the pleadings. Id. at 6. Specifically, the Court viewed all facts and inferences garnered from the pleadings in the light most favorable to plaintiffs and would grant Defendants' motion only where it "clearly establish[ed]" that there were no remaining issues of material fact. Id.

Then the Court articulated Title VII's exhaustion requirements. Id. at 7-9. Specifically, before filing a Title VII action in federal court, plaintiffs first must exhaust administrative remedies by filing an administrative charge of discrimination with the EEOC, and then either resolving the claim with the EEOC or obtaining a right-to-sue letter. Id. at 7. According to the Court, these "essential" elements of Title VII's "statutory plan" are designed to promote judicial efficiency and provide employers adequate notice of the claims that may be filed against them. Id. at 7-8.

To rule on Defendants' exhaustion argument, the Court opined that it would have to assess the appropriate scope of the federal court action, as defined by the EEOC's investigations into Plaintiffs' claims. Id. at 8. Specifically, the Court would have to assess whether Plaintiffs' disparate treatment and disparate treatment claims "should have been included in a reasonable investigation conducted by the EEOC, based upon the information contained in the Charge." Id. at 8-9. If found to be outside the scope of Plaintiffs' EEOC claims, then Plaintiffs had failed to exhaust their administrative remedies with respect to the disparate treatment and disparate impact claims, which rendered those claims insufficiently ripe to be heard by the Court. Id.

The Court declined to conduct the exhaustion analysis as Rule 12(c) prohibits consideration of separate motion papers when determining a motion for partial judgment on the pleadings. Id. at 9. Nonetheless, the Court indicated a willingness to consider Defendants' "compelling" exhaustion argument, if raised on Defendants' own motion for summary judgment, which it characterized as the "appropriate procedural vehicle." Id. at n. 3.

Implications For Employers

The Court, if it chose to do so, could have converted the motion on the pleadings to a motion for summary judgment sua sponte. Alternatively, it could have decided the motion under Rule 12(c) because the matters outside of the pleadings are public record. Nonetheless, the Court's recognition of Defendants' "compelling" exhaustion argument is significant because it indicates the Court's likely ruling, if and when Defendants pursue the argument in a motion for summary judgment.

Employers and class action attorneys should pay close attention to the scope of discrimination litigation at the class certification stage, particularly where Plaintiffs' raise claims in federal litigation that fall outside the scope of those raised in support of an administrative charge of discrimination before the EEOC.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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