Confusing the means for the ends: how a pro-settlement policy risks undermining the aims of Title VII.

• Author: Friedman, Robert D.

INTRODUCTION I. THE SCOPE AND IMPACT OF SETTLEMENTS A. The Conflict Between Settlements and the Aims of Title VII B. The Role of the EEOC II. THE SPLIT ON SUBSTANTIVE LAW A. A Source of Confusion: Alexander v. Gardner-Denver Co B. Determining the Validity of Different Settlement Methods 1. Fulgence and the Adoption of Federal Law 2. Morgan and the Use of State Law C. The "Voluntary and Knowing" Requirement 1. Pierce and the Adoption of Federal Law 2. Makins and the Application of State Law D. The End Result: General Confusion III. PROCEDURAL PROBLEMS IN SETTLEMENT ENFORCEMENT A. Federal Court Jurisdiction 1. Requesting the Federal Court Retain Jurisdiction 2. Establishing Diversity Jurisdiction 3. Establishing Supplemental Jurisdiction 4. General Federal Question Jurisdiction B. State Sovereign Immunity C. The Counterintuitive Exhaustion Requirement IV. USING FEDERAL LAW A. Impact on the Consequences of Settlements and Doctrinal Confusion B. Impact on Jurisdictional Problems C. Impact on States' Ability to Assert Sovereign Immunity D. Can Federal Law Be Used? 1. Rules of Decision Act 2. Creation of Federal Law Versus Absorption of State Law a. The Uniformity Interest b. The Conflict Between State Law and a Uniquely Federal Interest i. The Uniquely Federal Interest ii. The Existence of a Significant Conflict c. The Effect on Commercial Relationships CONCLUSION INTRODUCTION

When analyzing cases arising from disputes over Title VII (1) settlements, courts often begin with the proposition that Congress intended to encourage voluntary settlement of employment discrimination claims. (2) As a result, courts resolve many issues attendant to the settlement process with the aim of furthering this policy but without proper consideration of the policy's effect on the underlying goals of the statute. Although Title VII suits are not settled significantly more than are other claims, (3) approximately seventy percent of all employment discrimination claims end in settlement, (4) creating a potential for the settlement scheme to undermine or, if properly executed, enhance Title VII's substantive aims. (5) In addition, even before employees bring their claims to court, a significant number of Title VII complaints lodged with the Equal Employment Opportunity Commission (EEOC) (6) are resolved through the EEOC's mandatory "conciliation" process. (7) In this respect, the pro-settlement policy has yielded its intended result. However, simply counting the number of settlements masks the more complicated (and meaningful) question of whether the pro-settlement policy is truly facilitating compliance with the substantive goals of Title VII. (8)

The frequency of employment discrimination settlements has spawned a growing and scattered body of case law on the enforcement of settlement agreementsY Courts have long split on whether to apply federal or state law when considering the validity of a settlement, (10) but their analyses tend to address the issue of a settlement's validity somewhat narrowly. Courts rarely acknowledge the systemic impact of the push to settle. Similarly, their analyses frequently fail to take account of the considerable substantive and procedural obstacles facing employees who seek to enforce or, in some cases, avoid allegedly invalid settlements.

This Comment attempts to connect these two distinct but related problems--the frequency of settlements on the one hand, and the failure of the law governing settlements to account for Title VII's policy aims on the other--and argues that the adoption of federal common law would provide a mechanism for mitigating the current flaws in the administration of Title VII and connected settlements. (11) Part I of this Comment addresses the scope and impact of Title VII settlements and considers the particularly troubling proliferation of confidential settlements. Part II reviews the current split between courts that apply federal law and those that apply state law as the substantive rules of decision governing settlement-enforcement suits. Part III considers the procedural hurdles facing employees who attempt to enforce settlements. The current state of the law creates a number of difficulties for employees who seek to adjudicate their claims in federal court, creates unwarranted challenges for state employees, and imposes an unnecessary administrative exhaustion requirement.

Finally, Part IV argues that the myriad obstacles facing employees suggest that private settlement provides an insufficient remedy and that the current state of affairs creates a significant conflict with the strong federal interests that Title VII endeavors to promote. As a result, this Comment advocates an important but partial solution to this problem--courts should apply federal rules of decision to suits that attempt to enforce Title VII settlements. The suggestion to apply federal common law is made with full awareness of the strong trend against judicial lawmaking in federal courts. Indeed, the aim of Parts I-III is to convince the reader that it is worth waging that uphill battle. Ultimately, this Comment concludes that application of federal common law is justifiable, would help ensure access to federal courts, and would arm those courts with the tools necessary to begin mitigating the negative consequences of the current systemic push to settle.

1. THE SCOPE AND IMPACT OF SETTLEMENTS

   The law governing Title VII settlements and the procedural hurdles it creates for parties to a settlement take on increased importance in light of the sheer volume of settlement agreements. A 2004 study of employment discrimination cases filed in federal court from 1979 through 2000 provides a glimpse of the role settlements play in effectuating Title VII. (12) During the twenty one-year period studied, over 185,000 employment discrimination cases (approximately seventy percent of all employment discrimination cases filed) ended in settlement. (13) Many of these settlements took place under conditions that suggest unequal bargaining power.

   1. The Conflict Between Settlements and the Aims of Title VII

      Though Congress encourages settlement of employment discrimination claims, settlements threaten Title VII's two substantive goals: compensating victims of employment discrimination and deterring future discrimination in the workplace. (14) The impact of settlements on Title VII's deterrence aim is largely a result of contract bargaining dynamics. An employer will offer only enough money or benefits to coax an employee into settling, and the employee is under no obligation to negotiate on behalf of other employees. Hence, the consideration the employee receives--and for which she bargains--is likely to advance the compensation, not the deterrence, goal. (15) Moreover, an employer who is willing to pay can essentially "deregulate by contract," choosing to continue a potentially unlawful practice in the hope that other employees are either willing to settle (16) or willing to refrain from raising complaints in the first place. (17) Employers successful in carrying out such a strategy can delay or entirely avoid true Title VII compliance.

      The frequency of confidential settlements exacerbates the threat to the deterrence aim. One federal magistrate judge estimated that eighty-five to ninety percent of employment discrimination settlements include a confidentiality provision. (18) As the EEOC has argued, substantial public settlements at least signal to employers that they are subject to liability if they do not cease unlawful practices. Even if public settlements are not substantial, an individual employer still risks embarrassment and unfavorable publicity should the settlement be disclosed, as a settlement implies that unlawful activity has occurred. (19) These public and defendant-specific deterrence benefits disappear when parties seal the terms of settlement. (20)

      Settlements also undercut the compensatory aim. Confidential agreements make it more difficult for future plaintiffs to negotiate positive results. (21) Without being able to point to previous prevailing plaintiffs, an employee loses significant leverage when bargaining with her employer. Similarly, although all jury trials are subject to some uncertainty, (22) an employee reviewing a largely undeveloped case law will find it harder to assess the degree of risk involved when deciding whether to reject a settlement she views as offering inadequate compensation for her injuries.

      Furthermore, the prevalence of secret settlements skews public perception and hampers the ability of legislatures and courts to react to the current state of Title VII compliance. As one commentator has bluntly stated, "Because of invisible settlements, no one knows--or has the capacity to determine--what really is going on with employment discrimination litigation." (23) Employers are likely to settle meritorious claims, ever cognizant of the cost and time-consuming nature of trials, (24) as well as the risk of facing a jury. (25) As a result, the less meritorious claims move forward, and plaintiffs' success rate at trial is significantly lower than it would be absent so many settlements. (26) This low success rate creates a perception that Title VII claims are often frivolous. (27) Special interest groups advocating against employment discrimination legislation have used these statistics as ammunition. (28) Moreover, some have argued this perception of frivolity can affect the beliefs of judges presiding over Title VII claims. (29)

      Correcting flaws in employment discrimination legislation also requires significant political capital, and the suppression of meritorious claims caused by settlements makes any (already unlikely) legislative adjustments even more difficult. (30) The move toward settlement--especially secret settlements--hides "real life stories" from the public eye and stifles public awareness of current issues in employment discrimination. (31)

      The frequency...