Pacheco v. Mineta
448 F.3d 783, 2006 WL 1195989 (2006)
Rule of Law:
A federal employee must exhaust administrative remedies by explicitly or implicitly raising a disparate-impact claim in their EEO charge, which requires identifying a neutral employment policy and its disproportionately adverse effect on a protected class; a prevailing party's good faith alone is an insufficient reason to deny an award of costs under Federal Rule of Civil Procedure 54(d)(1).
Facts:
- Carlos Pacheco was an Air Traffic Controller Specialist with the Federal Aviation Administration (FAA) in Corpus Christi, Texas.
- In December 1999, the Corpus Christi Air Tower announced a supervisor-level vacancy.
- Pacheco applied for the vacancy but was ultimately passed over for promotion in February 2000 by a less-experienced applicant.
- Warren Meehan, the Corpus Christi Facility manager, had recently implemented a new promotion system based on 23 specified employee attributes rather than years of experience, and this system was used for the first time for the December 1999 vacancy.
- The supervisors of the seven candidates whose names had been forwarded by HRMD, including Pacheco, were interviewed by a three-member panel and asked to rate their supervisee on each of the 23 attributes; Pacheco was ranked sixth out of seven employees.
- Pacheco timely contacted an equal opportunity counselor and then filed a formal administrative complaint on April 29, 2000, with the Equal Opportunity Office (EEO) of his employer, the Department of Transportation (DOT), alleging he was discriminated against based on his race (Hispanic) and was not selected for the supervisor's job, mentioning earlier incidents of perceived discrimination.
- The DOT's Office of Civil Rights accepted for investigation the claim "Whether the FAA treated you differently, based on your national origin (Hispanic), when you were not selected for a supervisor’s job on February 28, 2000," and Pacheco did not object to this framing.
Procedural Posture:
- Carlos Pacheco filed a lawsuit in the United States District Court for the Western District of Texas against Norman Mineta, Secretary of the Department of Transportation (DOT), alleging disparate-treatment and disparate-impact discrimination under Title VII.
- The district court granted summary judgment against Pacheco on his disparate-treatment claim, dismissing it with prejudice.
- The district court dismissed Pacheco's disparate-impact claim for lack of subject-matter jurisdiction, pursuant to Rule 12(b)(1), finding he had failed to exhaust his administrative remedies.
- Despite the DOT's summary judgment victory, the district court initially ordered that each party bear its own costs pursuant to Rule 54(d)(1).
- The DOT filed a motion for a new trial and to amend judgment, arguing that the court erred in denying an award of costs to the prevailing party without any explanation.
- The district court then ruled that Pacheco "brought this action in good faith" and accordingly denied the DOT’s motion to award costs.
- Pacheco, as plaintiff-appellant, appealed the district court’s Rule 12(b)(1) dismissal of his disparate-impact claim for failure to exhaust administrative remedies.
- The government (DOT), as defendant-appellant, cross-appealed the district court’s ruling with respect to costs.
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Issue:
1. Does a federal employee exhaust administrative remedies for a Title VII disparate-impact claim when their EEO charge facially alleges disparate-treatment discrimination, identifies no neutral employment policy, and complains only of past incidents of disparate treatment? 2. Is a losing party's good faith in bringing a lawsuit, by itself, a sufficient reason for a district court to deny costs to the prevailing party under Federal Rule of Civil Procedure 54(d)(1)?
Opinions:
Majority - Garwood, Circuit Judge
No, a federal employee does not exhaust administrative remedies for a Title VII disparate-impact claim when their EEO charge facially alleges disparate-treatment discrimination, identifies no neutral employment policy, and complains only of past incidents of disparate treatment. The court affirmed the district court's dismissal, holding that Pacheco's administrative charge was too narrow to have reasonably triggered an EEO disparate-impact investigation. While administrative charges are construed liberally in light of Title VII's purpose, the scope of a complaint is ultimately defined by what an EEOC investigation can reasonably be expected to grow out of it (Sanchez v. Standard Brands, Inc.). Pacheco's charge complained that he was passed over for promotion in favor of a "good old boy," which explicitly signals intentional, disparate-treatment discrimination. Crucially, the charge failed to identify any facially neutral employment policy (unlike the eight-year experience rule in Gomes v. Avco) that would form the basis of a disparate-impact claim, which requires evaluating the policy's effects and business justifications. Furthermore, all three incidents mentioned in Pacheco's charge were examples of disparate-treatment discrimination, providing a context of intentional discrimination against him. No, a losing party's good faith in bringing a lawsuit is not, by itself, a sufficient reason for a district court to deny costs to the prevailing party under Federal Rule of Civil Procedure 54(d)(1). The court vacated the district court's ruling on costs and remanded for redetermination. Rule 54(d)(1) creates a strong presumption that the prevailing party will be awarded costs, and denying costs is "in the nature of a penalty," requiring the court to articulate a good reason for doing so (Schwarz v. Folloder). While other circuits have identified various reasons to deny costs (e.g., losing party's limited financial resources, misconduct by prevailing party, difficult legal issues), every circuit that has expressly considered the question has ruled that good faith alone is insufficient (e.g., Teague v. Bakker; Cherry v. Champion). All federal litigants are obligated to bring suit in good faith, and allowing good faith alone to defeat costs would effectively render Rule 54(d)(1) meaningless for typical cases. Therefore, the district court abused its discretion by denying costs solely on the basis of Pacheco's good faith.
Analysis:
This case clarifies the administrative exhaustion requirements for disparate-impact claims under Title VII, emphasizing the need for an EEO charge to at least implicitly identify a neutral employment policy for investigation. It limits plaintiffs' ability to bring broad disparate-impact claims in federal court if their initial administrative complaint focused solely on individualized disparate treatment. Furthermore, the ruling establishes a clear standard for denying costs under Rule 54(d)(1) in the Fifth Circuit, aligning with other circuits by holding that a losing party's good faith alone is an insufficient basis, thereby strengthening the presumption that prevailing parties are entitled to costs and reducing judicial discretion to deny them without more specific, articulated reasons.
