On August 7, 2012, Judge Martin Reidinger of the U.S. District Court for the Western District of North Carolina “knocked out” the EEOC’s lawsuit against Propak Logistics, Inc. (“Propak”) - in EEOC v. Propak Logistics Inc., No. 1:09-CV-311 (W.D.N.C. Aug. 7, 2012), - due to the EEOC’s unreasonable and prejudicial delay in prosecuting the suit. The Court found the EEOC dealt Propak a “double fisted blow” by delaying the initiation of the lawsuit, as the passage of time hindered Propak’s ability to prevail on the merits while at the same time inflating the potential damages Propak faced if it did not prevail.

This ruling is a win for any employer forced to go head to head with the EEOC as it gives employers an additional strategy to use to potentially dismiss a suit against them. Further, it establishes good case law on the laches defense.

Facts of the Case

In EEOC v. Propak Logistics, Inc., the EEOC brought an action pursuant to Title VII of the Civil Rights Act of 1964 (“Title VII”) alleging Propak refused to hire non-Hispanic persons for non-management positions at a Wal-Mart distribution center.

Before the lawsuit was filed, and beginning in 2003, the EEOC conducted an investigation of the charge of discrimination. The investigation included an initial interview with the Charging Party in August 2003, an interview of Propak’s witness in August 2003, several requests for information from Propak during the period of May 2003 to September 2008, interviews with Propak’s management in April 2004, interviews of potential class members in May and June 2006, and subpoenas issued by the EEOC to third-party entities in late 2007. Id. at 6-15. Nearly five years after the initial charge was filed, the EEOC issued a right to sue letter to the Charging Party in February 2008. Id. at 11. Following dismissal of a lawsuit filed by the Charging party, a letter of determination from the EEOC finding reasonable cause of discrimination, and “conciliation failure” as declared by the Commission, the EEOC filed its lawsuit in August 2009 — almost one year after it declared conciliation failure, and seven years after the Charging Party filed a charge of discrimination. Id. at 12-13.

Propak filed a motion for summary judgment on the defense of laches, arguing that the EEOC’s delay was unreasonable and materially prejudiced Propak’s defense of the lawsuit.

The Court’s Ruling

To prevail on the equitable defense of laches, the Court reasoned that Propak was required prove: (1) lack of diligence by the EEOC, and (2) that Propak suffered undue prejudice as a result. Id. at 16.

In analyzing the first prong, the Court noted that “lack of diligence” is satisfied where a plaintiff’s delay is unreasonable. Id. The EEOC conceded that there was an almost seven year delay between the filing of the initial charge of discrimination and the filing of its lawsuit, but argued that the delay was not “unreasonable” because it was actively investigating the charge throughout the seven year period. Id. The Court rejected the EEOC’s argument, noting that there is not a particular period of time that is per se unreasonable, but that seven years was too lengthy. Id. at 18. The Court determined that even fairly consistent activity by the EEOC during an investigation would not be sufficient to avoid laches if the nature and quality of the investigation do not justify the delay. Id. The Court then noted that, in the case of Propek, there were significant periods where the EEOC took little or no action toward completing the investigation, and compared the EEOC’s lengthy investigation to an investigation of the same charge conducted by the Department of Justice, which was initiated and completed in less than one year. Id. at 19. Based on all the evidence, the Court concluded that the EEOC’s delay was unreasonable. Id. at 21.

Next, the Court considered whether Propak was prejudiced by the unreasonable delay. Id. at 21. The Court noted that the “classic” elements of undue prejudice include unavailability of witnesses, changed personnel, and the loss of pertinent records. Id. at 21-22. In support of its position, Propak argued that its two key witnesses, hiring mangers during the relevant period, as well as other former employees, were no longer with the company and could not be located. Id. at 22. Additionally, the personnel records for the Charging Party were no longer available. Id. at 24. Although the EEOC argued Propak was obligated by regulation to gather and retain the records of all its employees until the charge was completely resolved, the Court found this argument unavailing noting,“[a]s a matter of law, [Propak] does not have an obligation to maintain its employee records indefinitely after the filing of a charge with the EEOC. Id. at 25.

Finally, Propak argued that the EEOC’s delay in prosecuting the suit increased Propak’s potential liability for back pay to a class of individuals. Id. at 27. Because the EEOC delayed in its investigation, the potential back pay award for each class member increased daily. Id. Taking Propak’s arguments into consideration, the Court noted that “the EEOC has dealt [Propak] a double-fisted blow. The passage of time has hindered [Propak] in [its] ability to prevail on the merits while at the same time inflating the potential damages [Propak] face[s] if [it] do[es] not prevail.” Id. Finding sufficient evidence of material prejudice, the Court dismissed the EEOC’s lawsuit against Propak with prejudice.

Implications For Employers

The Court’s ruling in EEOC v. Propak Logistics, Inc. punctuates a trend of judicial intolerance for lengthy EEOC delays in pursing lawsuits against employers. Employers faced with several “rounds” of EEOC investigations, and lengthy delays during the administrative process, can use this case (among others), to achieve a “total knockout” of EEOC litigation.

Readers can also find this post on our new EEOC Countdown Blog here.