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October Term, 2010

January 24, 2011

Today the Supreme Court issued two decisions, described below, of interest to the business community.

Title VII of the Civil Rights Act—Retaliation Claims

Thompson v. North American Stainless, LP, No. 09-291 (previously discussed in the June 29, 2010 docket report).

Title VII of the Civil Rights Act of 1964 makes it unlawful to retaliate against an employee “because he has made a charge” against his employer under the Act, 42 U.S.C. § 2000e-3(a), and permits “a person claiming to be aggrieved” to file charges against his employer alleging an unlawful employment practice, 42 U.S.C. § 2000e-5(b). Today, in Thompson v. North American Stainless, LP, No. 09-291, the Supreme Court held that (1) Title VII can forbid an employer from retaliating against an individual based on his association with another employee who has engaged in protected activity and (2) victims of such third-party reprisals can sue for redress so long as they remain within the “zone of interests” protected by the statute.

Petitioner Thompson was fired from his job at respondent North American Stainless (NAS) after his fiancée, a fellow employee, filed a sex-discrimination charge against the company with the Equal Employment Opportunity Commission (EEOC). Thompson sued NAS under Title VII, alleging that his termination had been motivated by NAS’s desire to retaliate against his fiancée for filing her claim. The district court granted summary judgment to NAS, on the ground that Title VII “does not permit third party retaliation claims.” Slip op. 1. A divided panel of the Sixth Circuit initially reversed, but the district court’s decision was then affirmed after rehearing en banc. Today’s decision by the Supreme Court reverses the Sixth Circuit’s decision, and in turn the district court’s decision.

Writing for a unanimous Court, Justice Scalia first found “little difficulty concluding that if the facts alleged by Thompson are true, then NAS’s firing of Thompson violated Title VII.” Slip op. 2. In contrast to Title VII’s anti-discrimination provision, the Court explained, the text of the anti-retaliation provision does not specify which employer acts are prohibited. This “textual distinction,” id. at 3, and the purpose of the anti-retaliation provision, supported the Court’s conclusion that the anti-retaliation provision “must be construed to cover a broad range of employer conduct,” id. at 2. Relying on this reasoning as well as its opinion in Burlington Northern & Santa Fe Railway v. White, 548 U.S. 53 (2006), the Court thought it obvious that “a reasonable worker might be dissuaded from engaging in protected activity if she knew that her fiancé would be fired.” Slip op. 3. The Court declined, however, to identify “a fixed class of relationships for which third-party reprisals are unlawful,” finding it sufficient to state that there was no exception in Title VII for third-party reprisals. Id. at 4.

Regarding the “more difficult question” of whether Thompson had standing to sue, slip op. 4, the Court held that a person injured by a third-party reprisal can claim a violation of Title VII so long as he falls within the “zone of interests protected by Title VII,” id. at 7. In formulating this standard, the Court relied on language authorizing suit in the Administrative Procedure Act, 5 U.S.C. § 702, and reconsidered dictum from a prior opinion, which had suggested that all persons who satisfy Article III standing have the right to sue under Title VII. Cf. Trafficante v. Metropolitan Life Insurance Co., 409 U.S. 205, 209 (1972). Applying the “zone of interests” test, the Court found that Thompson had standing to sue here, because his termination was allegedly intended to punish his fiancée, another employee.

In a concurring opinion, Justice Ginsburg, joined by Justice Breyer, observed that the Court’s decision accords with the EEOC’s views and prior practice. Justice Kagan did not participate in the case.

Truth in Lending Act—Regulation Z—Notice of Periodic Rate Increases

Chase Bank USA, N.A. v. McCoy, No. 09-329 (previously discussed in the June 21, 2010 docket report).

Regulation Z, 12 C.F.R. § 226, issued by the Federal Reserve Board pursuant to the Truth in Lending Act, provides that a creditor must give contemporaneous notice to a consumer when certain credit terms are changed. Today, in Chase Bank USA, N.A. v. McCoy, No. 09-329, the Supreme Court held that, under the regulation in effect at the time of the transactions at issue in the case, creditors were not required to give a consumer notice when, pursuant to a cardholder agreement provision providing for an interest rate increase in the event of a delinquency, the creditor increased the customer’s rates because of such a delinquency.

In an opinion authored by Justice Sotomayor, the unanimous Court first concluded that the plain text of the regulatory provision at issue was ambiguous with regard to whether a creditor effects a “change in terms” requiring notice when it exercises its rights under a provision in the cardholder agreement allowing it to increase rates under specific circumstances, including customer delinquency. In light of that ambiguity, the Court looked to the Federal Reserve Board’s own interpretation—advanced in an amicus brief—under which a creditor was not required by the relevant version of the regulation to provide notice. Because that interpretation was neither “plainly erroneous” nor “inconsistent with the regulation,” and there was no indication that the position the Board took in its brief was a “post hoc rationalization,” the Court deferred to the Board under the principles of Auer v. Robbins, 519 U.S. 452 (1997).

The version of Regulation Z at issue in Chase Bank was, as of August 20, 2009, superseded by legislation and regulation requiring creditors to provide notice before raising interest rates in response to delinquencies. The case, nevertheless, is important to credit card issuers and other creditors who may face lawsuits concerning past practices. Chase Bank also clarifies the deference courts must grant to an agency’s interpretation of its own regulations when advanced in a legal brief.

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