(Reuters) - Under a ruling Tuesday by the 10th U.S. Circuit Court of Appeals, the Equal Employment Opportunity Commission can go back to court to argue that CollegeAmerica Denver illegally interfered with the statutory rights of a former employee whom the company is suing for the return of a $7,000 bonus. The appeals court concluded that even though CollegeAmerica expressly promised not to pursue the legal strategy that first provoked the EEOC’s concern, the commission’s claim was not moot because CollegeAmerica developed another theory that implicated its former employee’s statutory rights.
The specifics of the case are much more interesting than the 10th Circuit opinion – written by Judge Robert Bacharach for a panel that also included Judges Paul Kelly and Michael Murphy – describes. According to appellate briefs by the EEOC and CollegeAmerica, the case began when Debbi Potts resigned as the director of CollegeAmerica’s Cheyenne, Wyoming branch in 2012. Potts and the multicampus school (a nonprofit offering post-secondary degrees in business, IT and healthcare) fell into a dispute over unemployment benefits and a $7,000 bonus Potts claimed she was owed.
Eventually, Potts and CollegeAmerica reached an agreement. The school paid her the bonus and dropped its opposition to her unemployment benefits. In return, Potts agreed not to disparage CollegeAmerica publicly or privately and not to contact government regulators “with the purpose of filing any complaint or grievance that shall bring harm to CollegeAmerica.”
Several months later, CollegeAmerica was contacted by another former employee. He reported that he’d received “disturbing” and “inappropriate” emails from Potts, who claimed the school was in big trouble and its owner was crazy. CollegeAmerica regarded the emails as a breach of Potts’ promise not to disparage the school. Its general counsel sent Potts a letter demanding that she return the $7,000 bonus CollegeAmerica had agreed to pay in their 2012 settlement and warning that the school would sue if she didn’t give the money back.
Potts, in turn, went to the EEOC and state regulators, claiming she’d been forced out of her job and paid a less desirable severance package because of her age. (She had not previously alleged age discrimination, according to CollegeAmerica.) A week after the EEOC asked CollegeAmerica to respond to Potts’ allegations, the school sued her in state court in Larimer County, Colorado.
Things escalated from there. The EEOC notified CollegeAmerica in December 2013 that it had determined the state court suit against Potts to be retaliatory. It also said the school was violating Potts’ rights under the Age Discrimination in Employment Act because CollegeAmerica’s settlement with its former employee barred her from giving information to regulators. In April 2014, the EEOC sued CollegeAmerica in federal court in Denver. The complaint claimed both that CollegeAmerica had interfered with Potts’ right to file EEOC charges against her former employer and that the school retaliated against Potts by suing her in state court for the return of the $7,000 bonus.
CollegeAmerica insisted that it never regarded Potts’ settlement as a waiver of her right to initiate or cooperate with an age discrimination proceeding. According to the school, its state court suit was based on Potts’ disparaging comments to her former colleague – not on her report to regulators. In August 2014, after amending its state court complaint, CollegeAmerica’s GC specifically said in an affidavit in the EEOC’s federal case that the school would not assert Potts breached their settlement by cooperating with the EEOC.
Based on the school’s representations, U.S. District Judge Lewis Babcock of Denver dismissed the EEOC’s interference claim. The agency and CollegeAmerica went to trial on the EEOC’s retaliation claim in July 2016. The jury determined the CollegeAmerica’s state court suit against Potts was not retaliation for her age discrimination allegations. (The state suit has been stayed until the federal case concludes.)
On appeal, the EEOC alleged that CollegeAmerica reneged on its promise not to interfere with Potts’ statutory rights. In a pretrial filing on the retaliation claim, the EEOC said, CollegeAmerica advanced a new theory that Potts breached their settlement agreement by going to the EEOC without providing advance or simultaneous notice to the school. CollegeAmerica’s assertion of this new theory, according to the EEOC, proves Judge Babcock should not have deemed its interference claim to be moot. And unless the 10th Circuit agreed, the EEOC warned, it would be “too easy for a defendant to stop its unlawful activity temporarily in order to avoid an adverse judgment and then resume the activity after the enforcement action has been terminated.”
CollegeAmerica, represented by Wheeler Trigg O’Donnell, denied the EEOC’s assertions. It didn’t take a position on Potts’ rights to avoid judgment, the school said, and it did not reverse course on its representations to Judge Babcock. “Not only has the college not asserted that Potts has waived any rights, but Potts has clearly not been deterred or chilled from exercising her rights—she filed three (baseless) claims with the EEOC and actively cooperated with the EEOC through trial, sitting at counsel table with the EEOC’s attorneys throughout the entire trial,” the school said in its brief to the 10th Circuit.
But the appeals court sided with the EEOC. In defending against the EEOC’s retaliation claim, the 10th Circuit said, “CollegeAmerica presented a new theory against Ms. Potts: that she had breached the settlement agreement by reporting adverse information to the EEOC without notifying CollegeAmerica.” Moreover, the appeals court said, CollegeAmerica “apparently plans to present (the new theory) in the state-court suit against Ms. Potts.”
The EEOC believes that theory illegally interferes with Potts’ statutory rights and wants an injunction to prohibit any such interference, the 10th Circuit continued. So even if Judge Babcock correctly held the EEOC’s original interference claim was mooted by CollegeAmerica’s representations, the appeals court said, CollegeAmerica’s assertion of a new legal theory made the controversy live again.
“If the EEOC prevails on the merits and obtains an injunction, CollegeAmerica could not present its new theory in the state-court suit against Ms. Potts,” the 10th Circuit said. “The inability to present this theory would constitute an effect in the real world, preventing dismissal based on mootness.”
The decision remands the case to the trial court.
I left a phone message for CollegeAmerica counsel Raymond Martin of Wheeler Trigg but didn’t hear back.