Equal Employment Opportunity Commission v. Philip Services Corp.

Case: 10-20291 Document: 00511401956 Page: 1 Date Filed: 03/04/2011

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit

FILED
March 4, 2011

No. 10-20291 Lyle W. Cayce
Clerk

EQUAL EMPLOYMENT OPPORTUNITY COMMISSION,

Plaintiff - Appellant

v.

PHILIP SERVICES CORPORATION, now known as Philip Holdings, L.L.C.,

Defendant - Appellee

Appeal from the United States District Court
for the Southern District of Texas

Before KING, DeMOSS, and PRADO, Circuit Judges.
HAROLD R. DeMOSS, JR., Circuit Judge:
This appeal asks us to determine whether a party may sue for breach of
an alleged oral contract reached during Title VII’s conciliation process. Because
such action is contrary to the relevant statute and frustrates the purposes of
Title VII, we affirm the district court.
I.
Nine employees of Appellee Philip Services Corporation (PSC) filed
charges with Appellants Equal Employment Opportunity Commission (the
Commission) against PSC, alleging racial discrimination. After finding
 Case: 10-20291 Document: 00511401956 Page: 2 Date Filed: 03/04/2011

No. 10-20291

reasonable cause to support the charges of discrimination, the Commission
initiated the conciliation process with PSC as required by Title VII. See 42
U.S.C. § 2000e-5(b). On February 23, 2009, the parties participated in a
conciliation conference and subsequently exchanged several e-mails negotiating
settlement terms. Approximately two weeks after the conciliation process was
initiated, PSC withdrew from the negotiations. The Commission asserts that it
was reducing the parties’ verbal agreement to writing at the time PSC withdrew
from the conciliation process.
On May 28, 2009, the Commission filed a breach of contract action with
the district court, seeking specific enforcement of the terms of the alleged oral
conciliation agreement. In support of its complaint, the Commission submitted
a declaration asserting that the parties had reached an agreement on injunctive
and monetary relief. The declaration further alleged that a written conciliation
agreement was presented to PSC and that PSC verbally agreed to the terms.
PSC filed a motion to dismiss or, alternatively, a motion for summary judgment.
PSC disputed that a final agreement had been reached. PSC asserted that
shortly after the conciliation process began, it withdrew from the negotiations
because two employees wanted additional monetary relief and PSC was not
prepared to settle the claims with less than all nine employees; none of the
employees had executed final releases; and the Commission had not yet provided
PSC with a proposed written agreement.
The magistrate judge issued a recommendation that the district court
grant PSC’s motion to dismiss on the grounds that Title VII’s confidentiality
provision was an “insurmountable impediment” to the Commission’s attempts
to enforce the oral conciliation agreement. On February 25, 2010, the district
court adopted the magistrate judge’s recommendation and dismissed the
Commission’s suit, finding that “the plain language of the statute makes it clear
that there are no exceptions” to Title VII’s prohibition against using conciliation

2
 Case: 10-20291 Document: 00511401956 Page: 3 Date Filed: 03/04/2011

No. 10-20291

material in subsequent proceedings. On appeal, the Commission asks this court
for a remand to the district court for discovery and a determination of whether
the parties had entered into an oral contract.
II.
We review de novo a district court’s determination on a motion to dismiss
under Rule 12(b)(6), accepting “all well-pleaded facts as true [and] viewing them
in the light most favorable to the plaintiff.” In re Katrina Canal Breaches
Litigation, 495 F.3d 191, 205 (5th Cir. 2007) (quotations and citations omitted).
Title VII requires that the Commission “endeavor to eliminate any such
alleged unlawful employment practice by informal methods of conference,
conciliation, and persuasion.” 42 U.S.C. § 2000e-5(b). The Commission may file
a civil action only if it has first been unable to secure a conciliation agreement
from the employer. See E.E.O.C. v. Agro Distrib., LLC, 555 F.3d 462, 468 (5th
Cir. 2009); see also 42 U.S.C. § 2000e-5(f)(1). Title VII provides that “[n]othing
said or done during and as a part of such informal endeavors may be made
public by the Commission, its officers or employees, or used as evidence in a
subsequent proceeding without the written consent of the persons concerned.”
42 U.S.C. § 2000e-5(b). Title VII imposes sanctions for such disclosure,
subjecting individuals who make public information in violation of this section
to a fine “not more than $1,000 or imprison[ment] for not more than one year,
or both.” Id.
The Commission argues that this court should read the statute as
prohibiting disclosure only in subsequent proceedings on the merits of the
charge, and that a suit to enforce an oral conciliation agreement is not a
subsequent proceeding within the meaning of the statute. The Commission
asserts that this interpretation is consistent with the legislative history and with
Congress’s goal of encouraging settlement of employment disputes through
conciliation. For the following reasons, we disagree.

3
 Case: 10-20291 Document: 00511401956 Page: 4 Date Filed: 03/04/2011

No. 10-20291

A.
By its plain language, the statute does not carve out any exceptions to its
prohibition against disclosure of conciliation material. See 42 U.S.C. § 2000e-5(b)
(“Nothing said or done and as a part of such informal endeavors may be made
public by the Commission . . . or used as evidence in a subsequent proceeding
without the written consent of the persons concerned.” (emphasis added)). The
Commission’s own disclosure rules are nearly identical to the statute. See 29
C.F.R. § 1601.26(a) (“Nothing that is said or done during and as part of the
informal endeavors of the Commission to eliminate unlawful employment
practices by informal methods of conference, conciliation, and persuasion may
be made a matter of public information by the Commission, its officers or
employees, or used as evidence in a subsequent proceeding without the written
consent of the persons concerned.” (emphasis added)). The Commission would
have us read an exception into the statute that is not contemplated by its plain
terms, and we will not presume that Congress intended there to be an exception
to or limitation of the meaning of the statute when it is unambiguous. See, e.g.,
In re Bell Petroleum Servs., Inc., 3 F.3d 889, 919 (5th Cir. 1993). “Information
expressly declared by statute to be confidential is so privileged.” Branch v.
Phillips Petroleum Co., 638 F.2d 873, 879 (5th Cir. Unit A Mar. 1981) (citation
omitted). An inquiry into whether the parties entered into an oral conciliation
agreement violates the clear prohibition against disclosure of what was “said or
done” during conciliation.
The Commission argues that the phrase “subsequent proceeding” should
be limited to subsequent proceedings on the merits. The Commission asserts
that the legislative history of the statute demonstrates that the statute was not
intended to prevent disclosure of conciliation information during a subsequent
specific enforcement action. The Commission directs us to the following:

4
 Case: 10-20291 Document: 00511401956 Page: 5 Date Filed: 03/04/2011

No. 10-20291

It should be noted that this is a ban on publicizing and
not on such disclosure as is necessary to the carrying
out of the Commission’s duties under the statute . . . .
The amendment is not intended to hamper Commission
investigations or proper cooperation with other State
and Federal agencies, but rather is aimed at the
making available to the general public of unproven
charges.

Id. at 879-80 (quoting 110 Cong. Rec. 12723 (1964) (statement of Sen.
Humphrey)) (alteration in original).
The legislative history references 42 U.S.C. § 2000e-5(b) which provides,
in relevant part
[w]henever a charge is filed . . . the Commission shall .
. . make an investigation thereof. . . . Charges shall not
be made public by the Commission. . . . If the
Commission determines after such investigation that
there is reasonable cause to believe that the charge is
true, the Commission shall endeavor to eliminate any
such alleged unlawful employment practice by informal
methods of conference, conciliation, and persuasion.
Nothing said or done during and as a part of such
informal endeavors may be made public by the
Commission, its officers or employees, or used as
evidence in a subsequent proceeding without the
written consent of the persons concerned.

42 U.S.C. § 2000e-5(b). The relevant portion of the statute contains two distinct
non-disclosure provisions: 1) prohibition against disclosure of filed charges and
2) prohibition against disclosure of what was said and done during conciliation.
See id. The statement of Senator Humphrey addresses only the first non-
disclosure provision and indicates Congress’s intent that unproven,
uninvestigated charges not be made known to the general public. See E.E.O.C.
v. Associated Dry Goods Corp., 449 U.S. 590, 599-600 (1981) (discussing Senator
Humphrey’s statement as establishing Congress’s intent with respect to

5
 Case: 10-20291 Document: 00511401956 Page: 6 Date Filed: 03/04/2011

No. 10-20291

unproven charges); Branch, 638 F.2d at 880 (finding that Senator Humphrey’s
statement explained the purpose of the provision that “[c]harges shall not be
made public by the Commisison”). The legislative history does not address the
non-disclosure provision concerning conciliation, and is therefore unpersuasive
when used in an attempt to limit the disclosure of conciliation material in a
subsequent proceeding.
The Commission’s interpretation of the phrase is also contrary to our case
law. In Olitsky v. Spenser Gifts, Inc., 964 F.2d 1471, 1476 (5th Cir. 1992), an
employee attempted to introduce at trial a letter that the Commission objected
to as conciliation evidence barred by the statute. We held that a distinction
exists between “‘factual material related to the merits of the charge and
proposals and counter-proposals of compromise made by the parties during the
EEOC’s efforts to conciliate.” 964 F.2d at 1477 (internal marks and citation
omitted). “[D]isclosure of the former [is] allowable, but disclosure of the latter [is]
not.” Id. Title VII thus prohibits use of conciliation material in subsequent
litigation, even by the parties to the proceeding. See id. What was “said or done”
during conciliation must be revealed to determine the existence of an oral
agreement. Such disclosure is clearly prohibited in a subsequent proceeding to
establish the existence of an oral conciliation agreement.
B.
The Commission also points to our decision in Fulgence v. J. Ray
McDermott & Co., 662 F.2d 1207, 1209 (5th Cir. Dec. 1981), asserting that
Fulgence permits specific enforcement of an oral conciliation agreement. In
Fulgence, we held that “federal law determines the validity of oral agreements
in employment discrimination actions brought pursuant to Title VII.” 622 F.2d
at 1209. Federal law does not require settlement agreements to be reduced to
writing. Id. In reaching that conclusion, we found that a state law’s
“requirement that settlement agreements be reduced to writing might hamper

6
 Case: 10-20291 Document: 00511401956 Page: 7 Date Filed: 03/04/2011

No. 10-20291

a significant federal interest, since Congress has mandated a policy of
encouraging voluntary settlement of Title VII claims.” Id. Although the
Commission’s argument is facially appealing, there is a critical distinction
between Fulgence and the circumstances presented here. There is no express
statutory privilege to prevent disclosure of settlement agreements. The
communications at issue in Fulgence were settlement negotiations subject to
common law. Fulgence does not contemplate or discuss the statutory provision
governing conciliations pursuant to Title VII, and thus is not instructive in this
matter.
The Commission’s reliance on E.E.O.C. v. Safeway Stores, Inc., 714 F.2d
567 (5th Cir. 1983) is likewise unhelpful. In Safeway, the Commission brought
suit seeking specific performance on three written conciliation agreements
entered into between the Commission and the employer. 714 F.2d at 569. The
court found that it had jurisdiction to consider specific enforcement actions on
conciliation agreements because “[i]f conciliation agreements were
unenforceable, there is little question that this primary role of voluntary
compliance would be undermined.” Id. at 573. The Commission asserts that
Safeway stands for the proposition that, in order to affect the primary purpose
of Title VII, oral conciliation agreements must be subject to specific enforcement.
However, the primary issue considered in Safeway was whether the district
court had subject matter jurisdiction over an enforcement action of written
conciliation agreements pursuant to Title VII. Id. at 569. Unlike a determination
of whether the parties entered into an oral contract that necessarily requires an
inquiry into what was “said or done,” written conciliation agreements reflect the
intent of the parties in reaching a settlement. The Commission’s own regulations
recognize the importance of reducing conciliation agreements to writing. See 29
C.F.R. § 1601.24(a) (“Where such conciliation attempts are successful, the terms
of the conciliation agreement shall be reduced to writing and shall be signed by

7
 Case: 10-20291 Document: 00511401956 Page: 8 Date Filed: 03/04/2011

No. 10-20291

the Commission’s designated representative and the parties.” (emphasis added)).
As such, Safeway does not resolve whether a challenge to an alleged oral
conciliation agreement is subject to specific enforcement actions.
C.
Finally, the Commission asserts that prohibiting enforcement of oral
conciliation agreements contravenes the purposes of Title VII, which was
designed to encourage voluntary settlements of employment discrimination
claims. See, e.g., Ricci v. DeStefano, 129 S. Ct. 2658, 2674 (2009) (recognizing
“Congress’s intent that voluntary compliance be the preferred means of
achieving the objectives of Title VII” (internal marks and citations omitted));
Agro Distrib., 555 F.3d at 468 (“Conciliation is the preferred means of achieving
the objectives of Title VII.”) (quoting EEOC v. Pierce Packing Co., 669 F.2d 605,
609 (9th Cir. 1982) (internal marks omitted)); Branch, 638 F.2d at 880 (“The
obvious purpose of the statute’s prohibition on revealing statements made or
actions taken during the Commission’s conciliation efforts is to promote the
congressional policy favoring unlitigated resolution of employment
discrimination claims.”); Hutchings v. U.S. Indus., Inc., 428 F.2d 303, 309 (5th
Cir. 1970) (“[I]t is clear that Congress placed great emphasis upon private
settlement and the elimination of unfair practices without litigation on the
ground that voluntary compliance is preferable to court action.” (internal marks
and citations omitted)). The Commission argues that prohibiting enforcement of
oral conciliation agreements frustrates the ability of the Commission to enter
into and enforce voluntary settlements.
The Commission is certainly correct to emphasize the importance of this
policy, however these policy goals are not realized only through enforcement of
conciliation agreements. Keeping private what is “said or done” during
conciliation is necessary to encourage voluntary settlements. “[T]he prospect of
disclosure or possible admission into evidence of proposals made during

8
 Case: 10-20291 Document: 00511401956 Page: 9 Date Filed: 03/04/2011

No. 10-20291

conciliation efforts would tend to inhibit the kind of free and open
communication necessary to achieve unlitigated compliance with the
requirements of Title VII.” Branch, 638 F.2d at 881. “[D]isclosure of conciliation
materials, even to the parties, would discourage negotiated settlement and
frustrate the intention of Congress.” Id. To establish an oral contract, the
Commission would necessarily have to disclose the proposals and counter-
proposals of compromise made by the parties. Such disclosure is contrary to the
plain language of the statute and frustrates the purpose of encouraging
voluntary settlements. Congress was presumably mindful of the policy goals of
Title VII when it enacted the relevant provisions.
The Commission argues that our holding creates an opportunity for abuse
because “an employer would be free to enter into a conciliation agreement, bide
its time for so long as it benefited from doing so, and then breach the agreement
with no fear of sanction.” Safeway, 714 F.2d at 573. This is not as significant a
concern as the Commission makes it out to be. Upon revocation of an alleged
settlement agreement, the Commission is permitted to bring suit on the merits,
so long as a good faith attempt at conciliation is made. See, e.g., Agro Distrib.,
555 F.3d at 468 (finding that the EEOC has fulfilled its statutory duty to
attempt conciliation if it “(1) outline[s] to the employer the reasonable cause for
its belief that Title VII has been violated, (2) offer[s] an opportunity for
voluntary compliance; and (3) respond[s] in a reasonable and flexible manner
to the reasonable attitudes of the employer.” (citation omitted)). Moreover, our
decision does not leave the Commission unable to seek enforcement of a
conciliation agreement, nor does it hamper its ability to resolve employment
disputes through voluntary compliance. This court has clearly established that
a written conciliation agreement is enforceable by the parties in a specific
enforcement action in the federal courts. However, we hold that when, as here,
the Commission is seeking a determination of whether the parties entered into

9
 Case: 10-20291 Document: 00511401956 Page: 10 Date Filed: 03/04/2011

No. 10-20291

an oral contract, such action necessarily requires an inquiry into what was said
or done and is in direct violation of the statute.
III.
In the nearly fifty years since Title VII has been in effect, the parties have
not identified and this court has not found any federal action seeking to enforce
an oral conciliation agreement. Yet this is certainly not the first time in which
a party has changed its mind or reneged on a verbal settlement agreement.
Should this court permit actions seeking to establish an oral conciliation
agreement, we would certainly see an increase in such actions and would risk a
decrease in the open communication necessary to reach voluntary settlements
during the conciliation process. See Branch, 638 F.2d at 881. Neither of these
outcomes further Congress’s policy goals when establishing Title VII. See id.
For the foregoing reasons, we affirm the decision of the district court.
AFFIRMED.

10