Fifth Circuit Revives Title VII Suit Against Corporate Parent Not Identified in Underlying EEOC Charge | Practical Law

Fifth Circuit Revives Title VII Suit Against Corporate Parent Not Identified in Underlying EEOC Charge | Practical Law

In EEOC v. Simbaki, Ltd., the US Court of Appeals for the Fifth Circuit vacated the district court's grant of summary judgment for the corporate parent of a restaurant chain where only one of its franchise stores and that franchise's owner were named in the two underlying Equal Employment Opportunity Commission (EEOC) charges alleging sexual harassment. The court acknowledged that generally a defendant not named in an underlying EEOC charge would be entitled to summary judgment because failing to name a party in a charge, especially when assisted by counsel, usually constitutes a failure to exhaust administrative remedies. However, courts of appeals recognize exceptions to the named-party requirement and the Fifth Circuit, as a matter of first impression, held that plaintiffs should be permitted to argue that the exceptions apply to them, even though they were represented by counsel when they filed the EEOC charges that failed to name a party. The court remanded the case to the district court for further proceedings.

Fifth Circuit Revives Title VII Suit Against Corporate Parent Not Identified in Underlying EEOC Charge

by Practical Law Labor & Employment
Published on 24 Sep 2014 • USA (National/Federal)
In EEOC v. Simbaki, Ltd., the US Court of Appeals for the Fifth Circuit vacated the district court's grant of summary judgment for the corporate parent of a restaurant chain where only one of its franchise stores and that franchise's owner were named in the two underlying Equal Employment Opportunity Commission (EEOC) charges alleging sexual harassment. The court acknowledged that generally a defendant not named in an underlying EEOC charge would be entitled to summary judgment because failing to name a party in a charge, especially when assisted by counsel, usually constitutes a failure to exhaust administrative remedies. However, courts of appeals recognize exceptions to the named-party requirement and the Fifth Circuit, as a matter of first impression, held that plaintiffs should be permitted to argue that the exceptions apply to them, even though they were represented by counsel when they filed the EEOC charges that failed to name a party. The court remanded the case to the district court for further proceedings.
On September 17, 2014, in EEOC v. Simbaki, Ltd., the US Court of Appeals for the Fifth Circuit vacated the district court's grant of summary judgment for the corporate parent of a restaurant chain where only one of its franchise stores and that franchise's owner were named in the two underlying Equal Employment Opportunity Commission (EEOC) charges alleging sexual harassment. The court acknowledged that generally a defendant not named in an underlying EEOC charge would be entitled to summary judgment because failing to name a party in a charge usually constitutes a failure to exhaust administrative remedies. However, courts of appeals recognize exceptions to the named-party requirement and the Fifth Circuit, as a matter of first impression, held that plaintiffs should be permitted to argue that the exceptions apply to them, even if they were represented by counsel when they filed EEOC charges that failed to name a party. The court remanded the case to district court for further proceedings. (No. 13-20387, (5th Cir. Sept. 17, 2014).)

Background

Berryhill Baja Grill & Cantina is a restaurant chain with multiple locations, each of which is either a:
  • Corporate store owned by Berryhill Hot Tamales Corporation (Berryhill Corporate).
  • Franchise location operated by third-party owners.
In 2003, Laura Baatz and Kimberly Kulig both became employed by a Berryhill franchise store in Texas (Berryhill Montrose), owned by Phillip Wattel. While employed, both women were subjected to substantial sexual harassment by Wattel. Among their allegations were that Wattel:
  • Groped, bit and slapped them (sometimes hard enough to cause bruises).
  • Harassed them verbally.
  • Asked them to sign napkins giving him permission to grab their bottoms.
  • Kissed them without permission and exposed himself to them.
Wattel conceded (among other concessions) that:
  • Berryhill Montrose was a "grab-assy place."
  • He bit Kulig and patted her bottom multiple times, once spanking her so hard that she bruised.
  • He asked Baatz to have a child with him, but (he claimed) not in a "meaningful" way.
  • He invited Baatz to join him on his boat, with the invitation "Pants okay, but not necessary." Wattel argued that he was being helpful, by advising Baatz about the weather.
  • After receiving sexual harassment complaints, Wattel posted a sign stating, "Notice: sexual harassment in this area will not be reported. However, it will be graded." Wattel claimed the sign was a joke intended to lighten the mood
Baatz quit allegedly because of Wattel's sexual harassment, but later returned. In 2008, Baatz's employment ended after an incident in which she left the bar to pick up heart medicine to treat palpitations she claimed were brought on by the harassment. Baatz claims she quit, while Montrose claimed she was fired. Kulig was fired after a disagreement with Wattel. Company policy precluded here from seeking employment at other Berryhill restaurants without approval from the owner or manager of her original restaurant. She later returned to Montrose, but quit when Wattel's harassing conduct did not improve.
Kulig and Baatz filed charges with the EEOC (in Fall 2007 and Spring 2008, respectively) against "Berryhill Baja Grill." Both charges listed a Montrose Boulevard address for the company, and listed Wattel as the owner and the individual responsible for the harassment. The charges did not mention Berryhill Corporate, but the EEOC served notices to Berryhill Corporate (addressed to CEO Jeff Anon), referring to charges against "your organization." Berryhill Corporate's Director of Operations responded to the EEOC charges, claiming that Berryhill Corporate was not a party, and requesting its removal from the EEOC investigation.
The EEOC determined that Wattel had violated Title VII with his sustained sexual harassment of Baatz and Kulig. The EEOC filed suit against Berryhill Montrose. Kulig and Baatz intervened in the lawsuit to add Wattel and Berryhill Corporate (alleging it was a joint or single employer with Berryhill Montrose) as defendants.
Berryhill Corporate moved for summary judgment, arguing that:
  • Kulig and Baatz failed to exhaust their administrative remedies against Berryhill Corporate because they did not specifically name Berryhill Corporate in their EEOC charges.
  • Kulig and Baatz could not show that Berryhill Corporate was liable under Title VII.
The district court granted summary judgment for Berryhill Corporate, dismissing the lawsuit. The district court held that:
  • Kulig and Baatz failed to exhaust their administrative remedies against corporate because they did not specifically name Berryhill Corporate in their EEOC charges.
  • Since Kulig and Baatz were represented by counsel, they could not invoke any of the exceptions to Title VII's named party requirement, which are only available to pro se parties.
After granting summary judgment, the district court removed Berryhill Corporate from the suit. Kulig and Baatz appealed to the Fifth Circuit, arguing that:
  • The district court erred in determining that Kulig and Baatz failed to name Berryhill Corporate in their EEOC charges.
  • Even if they did not name Berryhill Corporate in their charges, the court erred when determining that only pro se parties can invoke the exceptions to Title VII's named-party requirement.

Outcome

The Fifth Circuit vacated the district court's grant of summary judgment for Corporate and remanded the case back to district court for further proceedings. Specifically, the Fifth Circuit held that:
  • Kulig and Baatz did not name Berryhill Corporate in their EEOC charges for it to properly be named a party in this lawsuit.
  • There is no rule or reason requiring courts to preclude parties represented by counsel from invoking the judicially-recognized exceptions to the named-party requirement of Title VII.
The Fifth Circuit noted that:
  • There is a general rule that parties not named in an EEOC charge cannot be sued under Title VII.
  • Courts liberally construe Title VII's naming requirement to avoid placing unnecessary procedural obstacles (such as hyper-technical readings of charges) before claimants.
  • Courts have recognized parties' occasional accidental use of a company's trade name in an EEOC charge even though the company is informally referred to in the charge and found that the company was named in the charge.
  • Kulig and Baatz claimed that their use of Berryhill Corporate's trade name, Berryhill Baja Grill, in the EEOC charges satisfies Title VII's named party requirement, making Berryhill Corporate a party.
  • It would be improper to deem a party named in a charge simply because the EEOC notified them of the charge.
  • Kulig and Baatz did not discuss the behavior of Berryhill Corporate in their charges, repeatedly referring only to Berryhill Montrose.
    Despite Kulig and Baatz's claims that they named Berryhill Corporate in the charges because the EEOC provided notices to Berryhill Corporate stating that the charges were filed against "your organization," it is inappropriate to look at a post-charge notice to determine if a party was properly named. The Supreme Court previously held that courts cannot look to a post-charge notification to determine what constitutes a charge (Federal Express Corp. v. Holowecki, 552 U.S. 389, 403-404 (2008).
In concluding, as a matter of first impression for federal circuit courts, that there is no reason to preclude parties represented by counsel from invoking the judicially-recognized exceptions to the named-party requirement of Title VII, the Fifth Circuit first identified the exceptions to the named-party requirement that circuit courts recognize and what standards apply to those exceptions. The Fifth Circuit noted that:
  • The Third Circuit uses a four factor test to determine whether the party that appeared before the EEOC adequately represented the interests of the unnamed party, so that the unnamed party could be sued despite not being named in the charge. The factors are whether:
    • the unnamed party's role could be attained (through reasonable effort by the complainant) at the time of the EEOC filing;
    • the named and unnamed parties' interests are so similar that it would be unnecessary (for the purpose of conciliation and compliance) to name the unnamed party in the EEOC proceedings;
    • the unnamed party's absence from the EEOC proceedings resulted in actual prejudice to its interests; and
    • the unnamed party has represented to the complainant that its relationship with the complainant is to be through the named party.
    (Glus v. G.C. Murphy Co., 562 F.2d 880 (3d Cir. 1978).)
  • The Seventh Circuit accepts the Third Circuit's Glus test, but also recognizes an actual notice exception, through which certain parties with actual notice of the EEOC proceedings may be sued (Eggleston v. Chicago Journeymen Plumbers’ Local Union No. 130, U.A., 657 F.2d 890, 905-06 (7th Cir. 1981). The Seventh Circuit has held that the actual notice exception is justified because it accomplishes the named party requirement's purposes of providing:
    • Some warning to the employer of the conduct about which the employee is complaining; and
    • an opportunity to attempt conciliation.
    (Alam v. Miller Brewing, 709 F.3d 662, 666 (7th Cir. 2013); Eggleston, 657 F.2d at 905.)
  • Other circuits follow one of these two Circuits or base their exceptions on other factors such as whether the unnamed party should have anticipated it would be named in a suit (Viswanathan v. Leland Stanford Junior Univ., 1 F.App'x 669 (9th Cir. 2001)).
  • The Fifth Circuit has followed a combination of the Third and Seventh Circuits and looks to determine whether a party can meet either of the following:
    • The Third Circuit test (Glus) for whether there is a sufficient identity of interest.
    • The Seventh Circuit test (Eggleston) for whether there was actual notice of the EEOC charge; and an opportunity to participate in conciliation.
The Fifth Circuit found that allowing parties represented by counsel to invoke the exceptions is more consistent with:
  • The court's treatment of pro se litigants, which is to construe their filings liberally, but still require them to abide by federal court rules.
  • The court's practice of liberally construing requirements of Title VII in consideration of its remedial purpose. The exceptions were created to allow Title VII suits to proceed where the named-party requirement has been met, despite a failure to name the defendant in the EEOC charge. Presence of counsel should not determine whether a party can invoke the exceptions.

Practical Implications

The Fifth Circuit expands the pool of litigants who may invoke the exceptions to the named-party requirement to include parties who were represented by counsel when filing the underlying deficient EEOC charges. It is not clear how much of an effect this will have on the court's review of Title VII litigation, as litigants will still need to demonstrate that exceptions apply permitting them to maintain lawsuits against previously unnamed parties.