No. 10-20291 _________________________________________________________ IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT _________________________________________________________ EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Plaintiff/Appellant, v. PHILIP SERVICES CORPORATION, Defendant/Appellee. _________________________________________________________ On Appeal from the United States District Court for the Southern District of Texas _________________________________________________________ REPLY BRIEF OF THE EQUAL EMPLOYMENT OPPORTUNITY COMMISSION P. DAVID LOPEZ General Counsel VINCENT J. BLACKWOOD Acting Associate General Counsel JULIE L. GANTZ Attorney EQUAL EMPLOYMENT OPPORTUNITY COMMISSION Office of General Counsel Appellate Services 131 M St., N.E., 5th Floor Washington, D.C. 20507 (202) 663-4718 TABLE OF CONTENTS TABLE OF AUTHORITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . iii INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 ARGUMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 CERTIFICATION OF COMPLIANCE CERTIFICATE OF SERVICE TABLE OF AUTHORITIES CASES Angelou v. African Overseas Union, 33 S.W.3d 269 (Tex. App. Houston [14th Dist.] 2000). . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Branch v. Phillips Petroleum, 638 F.2d 873 (5th Cir. 1981). . . . . . . . . . . . 6 Coachmen Indus. v. Willis of Ill., 565 F. Supp. 2d 755 (S.D. Tex. 2008). . . . . 3 Culliver v. Taylor, 503 F.3d 397 (5th Cir. 2007). . . . . . . . . . . . . . . . . 3 EEOC v. Safeway Stores, Inc., 714 F.2d 567 (5th Cir. 1983). . . . . . . . . 4-5, 8 EEOC v. Univ. of Pittsburgh, 643 F.2d 983 (3rd Cir. 1981). . . . . . . . . . . . 10 Ebbert v. DaimlerChrysler Corp., 319 F.3d 103 (3rd Cir. 2003). . . . . . . . . 10 Fulgence v. J. Ray McDermott & Co., 662 F.2d 1207, 1209 (5th Cir. 1981). . . . . .6 John Wood Group USA, Inc. v. ICO, 26 S.W.3d 12 (Tex. App. Houston [1st Dist.] 2000). . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Olitsky v. Spencer Gifts, 842 F.2d 123 (5th Cir. 1988). . . . . . . . . . . . . . 6 Sunbeam Appliance Co. v. Kelly, 532 F. Supp. 96 (N.D. Ill. 1982). . . . . . . . .10 STATUTES Title VII of the Civil Rights Act of 1964 42 U.S.C. § 2000e-5(b). . . . . . . . . . . . . . . . . . . . . . . .passim INTRODUCTION The district court granted PSC's motion to dismiss this breach of contract action based on its view that the EEOC may never enforce an oral conciliation agreement resolving Title VII charges, even if the parties had agreed to settle the charges. We explained in our opening brief that the court's ruling is based on an overly expansive reading of § 706(b) of Title VII that is inconsistent with this Court's precedent and would frustrate Congress's intention that the EEOC resolve discrimination charges without resort to litigation whenever possible. In its brief as appellee, PSC ignores the fact that that this is an appeal from a motion to dismiss and implies that the question of whether it agreed to settle the charges is before this Court. On the issue that is before the Court, PSC basically repeats the argument it made below and either ignores the arguments in our opening brief or mischaracterizes them. We submit this reply brief to refocus the Court's attention on the legal issue actually before the Court and to clarify the arguments made in our opening brief. ARGUMENT 1. In our opening brief, we emphasized that the only issue before this Court is whether the district court erred in holding that oral conciliation agreements are always unenforceable. Ignoring that this is an appeal from a motion to dismiss, PSC sets out its version of the facts surrounding the conciliation efforts and then, throughout its brief, contends either that the Commission's arguments, if accepted, would force PSC to enter into a contract to which it never agreed or that they would bind the company to a conciliation agreement that the agency could later reject with impunity. See PSC Br. at 9 (this case addresses whether the EEOC can "force PSC to enter into a settlement [to] which it neither agreed [n]or executed in writing"); id. at 4 ("conciliation efforts reached an impasse and the parties never reached agreement"); id. at 6 ("the parties had not reached or entered into an agreement"); id. at 7 (terms of agreement not finalized); id. at 9 ("EEOC is precluded from seeking enforcement of any purported verbal conciliation agreement"); id. at 10 (accepting the EEOC's position will "turn every conciliation session into a potential 'he said/she said' situation where the federal government could use its full power and resources to coerce an employer into accepting a settlement which it might otherwise not be willing to accept"); id. at 11 ("no binding conciliation agreement exists"); id. at 22 (employer can be bound but the EEOC "by its own regulations and procedures, cannot be bound until an agreement is signed and approved by an appropriate EEOC Director"). However, the district court did not rule on the question of whether the parties reached an agreement to settle the charges at issue, and the parties have not yet conducted discovery on that question. Because this is an appeal from a motion to dismiss, the Court must accept the Commission's allegations in its complaint as true and assume that the parties entered into valid conciliation agreements. See, e.g., Culliver v. Taylor, 503 F.3d 397, 401 (5th Cir. 2007) (court accepts as true the well-pleaded factual allegations in the complaint). Should this Court reverse the district court's order of dismissal, the Commission will have to prove on remand that valid settlement agreements were reached. Before PSC can be compelled to comply with the agreements, we will have to show that all of the elements of a contract were present, including an offer, acceptance, a meeting of the minds, each party's consent to the terms, execution of the contract, and consideration. See, e.g., Coachmen Indus. v. Willis of Ill., 565 F. Supp. 2d 755, 765 (S.D. Tex. 2008); Angelou v. African Overseas Union, 33 S.W.3d 269, 278 (Tex. App. Houston [14th Dist.] 2000). Furthermore, contrary to PSC's assertion, the Commission is not arguing in this appeal that PSC could be bound by a conciliation agreement that the Commission was still free to reject. See PSC Br. at 22-23. Whether the Commission obtained a sufficiently high level of approval to bind the EEOC goes to the question of whether there was a valid agreement. See John Wood Group USA, Inc. v. ICO, 26 S.W.3d 12, 16 (Tex. App. Houston [1st Dist.] 2000) ("The intent of the parties to be bound is an essential element of an enforceable agreement and is often a question of fact."). As noted above, that question was not addressed below and is not germane to this appeal. The Commission's regulations and Compliance Manual provisions directing EEOC investigators to obtain approval of conciliation agreements from a district director do not establish, as PSC implies, that the agreements in this case, which were negotiated by the Regional Attorney of the Houston District Office and not an EEOC investigator, were not binding on the Commission. 2. In our opening brief, we argued that the district court's ruling that § 706(b)'s prohibition on using anything "said or done" during conciliation in subsequent proceedings applies to this breach of contract action cannot be reconciled with this Court's decision in EEOC v. Safeway Stores, Inc., 714 F.2d 567 (5th Cir. 1983), permitting the Commission to enforce conciliation agreements in federal court. We argued that the district court's view that Safeway Stores is not controlling because the agreements in that case were in writing fails for two reasons. First, we pointed out that because a written conciliation agreement is something "done during" conciliation, this Court's holding that such an agreement is enforceable necessarily implies that § 706(b) does not prohibit the EEOC from using things "said or done" in conciliation efforts in a subsequent action to enforce a conciliation agreement. PSC offers no response to this point. We also argued that the district court's assumption that a written conciliation agreement can be enforced by reference to the terms of the written agreement without reference to anything said during negotiations is belied by the facts of Safeway Stores. In that case, the district court relied on testimony about settlement negotiations to determine what the parties intended when they negotiated a written addendum to the agreements, and whether the defendant had breached the parties' written agreements. See EEOC Br. at 15 (describing Safeway Stores, 714 F.2d at 570). PSC's only response to this point is to note that the defendant did not raise a § 706(b) objection in Safeway Stores. See PSC Br. at 17. This response implies that PSC agrees that under the district court's analysis, a respondent that has signed a written conciliation agreement could use § 706(b) to preclude the Commission from offering any evidence beyond the terms of the agreement to establish a breach of the agreement. But without using evidence about settlement negotiations such as that relied on by the Safeway Stores court, the Commission's ability to enforce even written conciliation agreements would be limited to blatant breaches of unambiguous agreements. Whenever there is a dispute about the meaning of a term, the Commission would be unable to offer evidence about what the parties said during negotiations to shed light on the meaning of the term. Accordingly, PSC's response supports our argument that the district court's holding that § 706(b) applies to actions to enforce conciliation agreements would undermine the Congressional priority of encouraging voluntary settlements of Title VII disputes. See EEOC Br. at 11-12. We argued that the better reading of § 706(b) would construe the phrase "subsequent proceeding" as limited to subsequent proceedings testing the merits of a discrimination charge. This interpretation is consistent with the provision's legislative history and respects the primacy of conciliation in the Title VII enforcement framework. Such a reading would encourage free negotiations in the conciliation process yet give assurances that any agreement entered into would be legally binding. See EEOC Br. at 16, 18. We argued that Branch v. Phillips Petroleum, 638 F.2d 873 (5th Cir. 1981) and Olitsky v. Spencer Gifts, 842 F.2d 123 (5th Cir. 1988), relied upon by the district court, do not require a contrary holding. We pointed out that those two cases involved "subsequent proceedings" concerning the merits of discrimination claims and did not address the breach of contract action at issue here. See EEOC Br. at 17-18. PSC has no meaningful response to this argument except to argue that the same "absolute" bar should apply and that these cases invalidate the Commission's position. See PSC Br. at 14-15. However, Title VII's enforcement scheme making conciliation and voluntary compliance the principal method of resolving disputes and the legislative history offered in our opening brief stating that the confidentiality provision is aimed at "unproven charges" of discrimination or preventing "the dispute" from being fully exposed to public view "when a court suit is filed" support the interpretation of § 706(b) we offered in our opening brief. See EEOC Br. at 18-19. PSC asserts that EEOC's interpretation would "chill" conciliation and that it would be "illogical" to have a different rule for an action to enforce a conciliation agreement than for an action on the merits alleging discrimination. See PSC Br. at 18. PSC's contention that the need to keep conciliation negotiations confidential "is equally important whether the EEOC is suing an employer on the merits or to enforce a purported settlement," PSC Br. at 14, is nonsensical. Clearly there is a distinction. It is obvious why a free and fair exchange in conciliation efforts would be inhibited if statements made during that process could be used to establish the merits of a discrimination claim. But it is far from clear why the potential disclosure of what went on in settlement negotiations in a subsequent action to enforce an agreement would inhibit a respondent from participating fully in negotiations. On the contrary, the district court's rule that makes enforcement of conciliation agreements difficult or impossible is much more likely to discourage parties from taking the conciliation process seriously. A rational party would not conciliate if its efforts to resolve a dispute could not be enforced. See Safeway Stores, 714 F.2d at 574 ("If agreements between an employer or union and the Commission voluntary to comply with measures to eliminate discrimination in employment could be abrogated with impunity, there would be no rational reason for the EEOC to enter into such agreements."). 3. We argued in our opening brief that the EEOC regulation stating that conciliation agreements "shall be reduced to writing" and the Compliance Manual provision directing the EEOC investigator to tell the respondent that the EEOC "is seeking a written agreement" do not preclude the Commission from enforcing a valid oral conciliation agreement that has been breached before being committed to writing. See EEOC Br. at 19-20. In response, PSC recites provisions in the EEOC's Compliance Manual to support the proposition that the agency's practice is to obtain written conciliation agreements. PSC Br. at 21-22. None of this bolsters PSC's position or explains why the Commission cannot enforce an otherwise valid conciliation agreement before it is written down and signed. We acknowledged in our opening brief that the EEOC's regulations and Compliance Manual make known that our standard practice is to enter into written conciliation agreements. We noted, however, that the complaint alleges that the agency was in the process of committing the terms of the oral agreements to writing at the time PSC repudiated them. See RE-Tab 6, ROA-19 (Complaint at 15) ("[T]he Commission accepted the distribution of the monetary portion of the settlement and commenced preparation of the individualized written conciliation Agreements memorializing the oral agreements reached resolving the individual and class claims both as to the monetary and nonmonetary terms."). None of the provisions recited in PSC's brief establishes that an otherwise valid oral conciliation agreement can be breached with impunity until it is written. PSC's argument seems based on the assumption that, because the procedures described in the Compliance Manual direct an investigator to obtain approval from his or her district director before finalizing a compliance agreement, an oral agreement can never be binding on the Commission and thus can never be enforceable. See PSC Br. at 22 ("[T]he EEOC, by its own regulations and procedures, cannot be bound until an agreement is signed and approved by an appropriate EEOC Director."). However, the Compliance Manual provisions relied on by PSC relate to the procedures to be followed where an investigator negotiates a conciliation agreement on behalf of the Commission. Even assuming that these provisions establish that the Commission does not consider itself bound to an oral agreement negotiated by an investigator until it has been approved by a district director, this does not establish that the Commission did not consider itself bound by the agreements in this case that were negotiated by the Regional Attorney of the Houston District Office. The EEOC's Compliance Manual is a procedural guide for the agency's investigators and attorneys. See Ebbert v. DaimlerChrysler Corp., 319 F.3d 103, 115 (3rd Cir. 2003) ("Moreover, as a 'compliance manual,' by definition it is an instruction to agency personnel. It, thus, reflects how the EEOC wishes its employees to act in light of the statute, not necessarily what the statute itself requires of complainants.") (emphasis in original). The agency "need not follow the procedures outlined in its compliance manual in every case." EEOC v. Univ. of Pittsburgh, 643 F.2d 983, 986 n.4 (3rd Cir. 1981); see also Sunbeam Appliance Co. v. Kelly, 532 F. Supp. 96, 99 (N.D. Ill. 1982) ("[P]rocedures set forth in the EEOC Compliance Manual are internal guidelines for use of the agency."). Here, the complaint alleges that the EEOC deviated from its normal practice of having conciliation agreements negotiated by an investigator at the request of PSC. Therefore, the provisions of the manual describing the routine for obtaining agency approval for agreements negotiated by an agreement do not foreclose the Commission from establishing in this case that it was bound by the oral agreements negotiated by the Regional Attorney and, accordingly, can enforce these oral contracts. CONCLUSION For the foregoing reasons and for the reasons discussed in our opening brief, the judgment of the district court should be reversed and the case remanded for further proceedings. Respectfully submitted, P. DAVID LOPEZ General Counsel VINCENT J. BLACKWOOD Acting Associate General Counsel ____________________________ JULIE L. GANTZ Attorney EQUAL EMPLOYMENT OPPORTUNITY COMMISSION Office of General Counsel 131 M St., N.E. Washington, D.C. 20507 (202) 663-4718 CERTIFICATE OF COMPLIANCE This brief complies with the type-volume limitation of Fed. R. App. P. 32(a)(7)(B) because it contains 2,513 words, excluding the parts of the brief exempted by Fed. R. App. P. 32(a)(7)(B)(iii). This brief complies with the typeface requirements of Fed. R. App. P. 32(a)(5) and the type style requirements of Fed. R. App. P. 32(a)(6) because it has been prepared in a proportionally spaced typeface using Microsoft Word 2003 in Times New Roman 14 point. ____________________________ JULIE L. GANTZ Attorney EQUAL EMPLOYMENT OPPORTUNITY COMMISSION Office of General Counsel 131 M Street, N.E. Washington, D.C. 20507 (202) 663-4718 Dated: September 9, 2010 CERTIFICATE OF SERVICE I, Julie L. Gantz, hereby certify that I electronically filed the foregoing brief via CM/ECF on September 9, 2010. I also certify that I served two copies of the foregoing brief by First Class mail to the following counsel of record: David W. Garland EPSTEIN BECKER GREEN, P.C. One Gateway Center, 13th Floor Newark, NJ 07102 David L. Barron Norasha L. Williams EPSTEIN BECKER GREEN WICKLIFF & HALL Wells Fargo Plaza 1000 Louisiana Street, Suite 5400 Houston, TX 77002 ______________________________ Julie L. Gantz Attorney EQUAL EMPLOYMENT OPPORTUNITY COMMISSION Office of General Counsel 131 M Street, N.E. Washington, D.C. 20507 (202) 663-4718 *********************************************************************** <> <1> We noted in our opening brief that oral agreements to settle legal disputes are generally enforceable. We offered this Court's decision in Fulgence v. J. Ray McDermott & Co., 662 F.2d 1207, 1209 (5th Cir. 1981), and other court of appeals decisions for this general proposition. See EEOC Br. at 13-14 and cases cited. While PSC does not dispute that oral agreements are generally enforceable, it criticizes us for relying on these cases, implying erroneously that we argued that they resolve the question of whether § 706(b) requires a different result with respect to Title VII conciliation agreements. See PSC Br. at 19. We cited these cases only to emphasize that the district court's decision dictates that, notwithstanding Congress's clear intent that voluntary resolution of Title VII claims be strongly encouraged, it created in § 706(b) a rule that makes Title VII conciliation agreements harder to enforce than agreements to settle other legal disputes. iii 12