If an employee pursues a frivolous or groundless lawsuit, many federal and state employment laws permit courts to award attorney's fees and litigation costs to prevailing employers. However, because of the courts' traditional reluctance to award attorney's fees and costs to prevailing employers, regardless of the merits of employees' lawsuits, most employers consider legal fees and other expenses of defending employment lawsuits as costs of doing business.
Cherry v. Champion International Corp., a July 27, 1999, decision of the Fourth Circuit Court of Appeals, may make it easier for employers to recover some court costs in some cases. In that case, the appeals court ordered a former employee who lost her sexual harassment lawsuit to reimburse the employer $2,473.78 for deposition transcription and copying costs.
Cherry involved a former employee of Champion's Canton, North Carolina pulp mill who sued the company for sexual harassment and intentional infliction of emotional distress in a North Carolina federal district court. The district court dismissed Cherry's case on Champion's pre-trial motion for summary judgment. Specifically, the district court found that Cherry's lawsuit was timely filed with regard to only one of the eight incidents of harassment that she challenged. With regard to the remaining claim, the district court ruled that Champion promptly and thoroughly responded to Cherry's complaints, and "did everything within its power to stop the conduct [Cherry] found offensive and to provide her with other employment opportunities."
Champion asked the district court for the costs of transcribing and videotaping Cherry's deposition and costs incurred in copying documents. Despite the weakness of Cherry's claims, the district court refused to award any costs to Champion, citing Cherry's apparent good faith, her modest means, and the public policies she attempted to advance in pursuing the lawsuit.
The Fourth Circuit reversed the district court's decision, noting that a federal rule of procedure generally requires federal courts to award costs (other than attorney's fees) to prevailing parties in civil cases. Under the Fourth Circuit's interpretation, costs should be awarded to prevailing employers unless the employee is completely unable to pay, or if the employer committed some misconduct worthy of a penalty. Additionally, lower federal courts may consider the limited value of the victory, excessiveness of the costs, or the "closeness and difficulty of the issues decided," in determining whether to grant an unsuccessful employee relief from costs.
According to the Fourth Circuit, none of these factors justified denying Champion some of the costs of successfully defending Cherry's lawsuit. Although it assumed that Cherry had brought the action in goodfaith, the Fourth Circuit ruled that her good faith was not enough to justify denying costs. Moreover, the Fourth Circuit found that Cherry's means were not as modest as she claimed - she and her husband earned between $70,000 and $100,000 per year, which was enough to allow Cherry to buy a new truck and motorcycles upon cashing out her 401(k) plan with Champion. The Fourth Circuit also declined to compare the relative economic status of Cherry and Champion, and ruled that the public policy considerations furthered by Title VII simply were not enough to relieve Title VII plaintiffs of the risks faced by other unsuccessful litigants. Nevertheless, the Fourth Circuit excluded videotaping costs from its award, ruling that the videotaping of Cherry's deposition was not necessary for trial, but merely for the convenience of Champion's attorneys.
The $2,473.78 awarded Champion for deposition transcription and copying costs was certainly only a fraction of the company's overall expenses in defending Cherry's lawsuit and earlier EEOC charge. Nevertheless, Champion's efforts to recoup some of its costs and the Fourth Circuit's ruling help send the message that employees should think twice before pursuing groundless discrimination claims, as a dismissal in the employer's favor may directly impact the employee's pocketbook.