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Equal Employment Opportunity Commission v. Sidley Austin Brown & Wood

October 24, 2002


Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 01-C-9635--Joan Humphrey Lefkow, Judge.

Before Posner, Easterbrook, and Diane P. Wood, Circuit Judges.

The opinion of the court was delivered by: Posner, Circuit Judge


In 1999, Sidley & Austin (as it then was) demoted 32 of its equity partners to "counsel" or "senior counsel." The significance of these terms is unclear, but Sidley does not deny that they signify demotion and constitute adverse personnel action within the meaning of the anti-discrimination laws. The EEOC began an investigation to determine whether the demotions might have violated the Age Discrimination in Employment Act. After failing to obtain all the information it wanted without recourse to process, the Commission issued a subpoena duces tecum to the firm, seeking a variety of documentation bearing on two distinct areas of inquiry: coverage and discrimination. The reason for the inquiry about coverage is that the ADEA protects employees but not employers. E.g., Simpson v. Ernst & Young, 100 F.3d 436, 443 (6th Cir. 1996); see 29 U.S.C. §§ 623(a)(2), (a)(3), 630(f). To be able to establish that the firm had violated the ADEA, therefore, the Commission would have to show that the 32 partners were employees before their demotion.

Sidley provided most of the information sought in the subpoena that related to coverage (but no information relating to discrimination, though Sidley claims that the demotions were due to shortcomings in performance rather than to age), but not all. It contended that it had given the Commission enough information to show that before their demotion the 32 had been "real" partners and so there was no basis for the Commission to continue its investigation. The Commission applied to the district court for an order enforcing the subpoena. The court ordered the firm to comply in full, and the firm appeals. The order to comply was a final order appealable under 28 U.S.C. § 1291 because it terminated the judicial proceeding. The only relief sought was enforcement of the subpoena, and so when enforcement was ordered the EEOC had gotten everything it wanted. CFTC v. Collins, 997 F.2d 1230, 1232 (7th Cir. 1993); United States v. Construction Products Research, Inc., 73 F.3d 464, 469 (2d Cir. 1996).

The Commission also appears to be seeking information on whether Sidley may be forcing other partners whom the Commission suspects may also be employees within the meaning of the age discrimination law to retire on account of their age, contrary to the abolition of mandatory retirement by the age discrimination law. But the parties appear to have assumed that if the 32 are (as Sidley contends) employers, so are all of Sidley's other partners. So we need not consider the mandatory-retirement issue separately.

The law firm's argument proceeds in three steps: (1) the question whether the 32 demoted partners are within the ADEA's coverage is a jurisdictional question, which once answered against the Commission requires that the investigation cease; (2) the target of a subpoena need comply only up to the point at which it has produced evidence that establishes that there is no jurisdiction; (3) the Commission has no jurisdiction in this case because a partner is an employer within the meaning of the federal anti-discrimination laws if (a) his income included a share of the firm's profits, (b) he made a contribution to the capital of the firm, (c) he was liable for the firm's debts, and (d) he had some administrative or managerial responsibilities--and all these things, the firm argues, have been proved.

The facts as developed so far reveal the following:

The firm is controlled by a self-perpetuating executive committee. Partners who are not members of the committee have some powers delegated to them by it with respect to the hiring, firing, promotion, and compensation of their subordinates, but so far as their own status is concerned they are at the committee's mercy. It can fire them, promote them, demote them (as it did to the 32), raise their pay, lower their pay, and so forth. The only firmwide issue on which all partners have voted in the last quarter century was the merger with Brown & Wood and that vote took place after the EEOC began its investigation. Each of the 32 partners at the time of their demotion by the executive committee had a capital account with the firm, averaging about $400,000. Under the firm's rules, each was liable for the firm's liabilities in proportion to his capital in the firm. Their income, however, was determined by the number of percentage points of the firm's overall profits that the executive committee assigned to each of them. Each served on one or more of the firm's committees, but all these committees are subject to control by the executive committee.

Sidley can obtain no mileage by characterizing the coverage issue as "jurisdictional." It is the law that the EEOC cannot protect employers; and it is also the law that like any agency with subpoena powers the EEOC is entitled to obtain the facts necessary to determine whether it can proceed to the enforcement stage. EEOC v. United Air Lines, Inc., 287 F.3d 643, 651 (7th Cir. 2002); Commodity Trend Service, Inc. v. CFTC, 233 F.3d 981, 986-87 (7th Cir. 2000); SEC v. Brigadoon Scotch Distributing Co., 480 F.2d 1047, 1052-53 (2d Cir. 1973). Among these are facts bearing on whether the 32 demoted partners were employees within the meaning of the age discrimination law. The Commission is entitled to the information that it thinks it needs in order to be able to formulate its theory of coverage before the court is asked to choose between the Commission's theory and that of the subpoenaed firm. Only if, as in Reich v. Great Lakes Indian Fish & Wildlife Comm'n, 4 F.3d 490 (7th Cir. 1993), the information that the subpoenaed firm resists furnishing is not even arguably relevant, because it is evident at the outset that whether the agency has any business conducting the investigation depends on a pure issue of statutory interpretation, can the court resolve the issue then and there without insisting on further compliance with the subpoena. See also EEOC v. Shell Oil Co., 466 U.S. 54, 64-65 (1984); FTC v. Miller, 549 F.2d 452, 460-61 (7th Cir. 1977); FTC v. Ken Roberts Co., 276 F.3d 583, 586-87 (D.C. Cir. 2001); EEOC v. Karuk Tribe Housing Authority, 260 F.3d 1071, 1076-77 (9th Cir. 2001); EEOC v. Ocean City Police Dept., 820 F.2d 1378, 1380 (4th Cir. 1987) (en banc), vacated on other grounds, 486 U.S. 1019 (1988). The issue in Great Lakes was whether the Fair Labor Standards Act applies to game wardens on Indian reservations. If, as we held, it did not, the continued investigation of the wardens' employer was all burden and no benefit, making insistence on compliance with the Labor Department's subpoena unreasonable. See EEOC v. United Air Lines, Inc., supra, 287 F.3d at 653.

Great Lakes does not hold, as Sidley argues, that characterizing a threshold issue as "jurisdictional" takes a case out of the general rule (on which see Oklahoma Press Publishing Co. v. Walling, 327 U.S. 186, 212-14 (1946); Endicott Johnson Corp. v. Perkins, 317 U.S. 501, 508-09 (1943); EEOC v. Peat, Marwick, Mitchell & Co., 775 F.2d 928, 930-31 (8th Cir. 1985); FTC v. Ken Roberts Co., supra, 276 F.3d at 585-87) that enforcement of a subpoena cannot be resisted on the ground that the information the agency is seeking would not justify an enforcement action. The cases are legion that there is no general exception to the rule for issues going to the agency's jurisdiction. See, e.g., FTC v. Feldman, 532 F.2d 1092, 1095-96 (7th Cir. 1976); FTC v. Ken Roberts Co., supra, 276 F.3d at 585-87; United States v. Sturm, Ruger & Co., 84 F.3d 1, 5-6 (1st Cir. 1996). As explained in United States v. Construction Products Research, Inc., supra, 73 F.3d at 470, "at the subpoena enforcement stage, courts need not determine whether the subpoenaed party is within the agency's jurisdiction or covered by the statute it administers; rather the coverage determination should wait until an enforcement action is brought against the subpoenaed party." Sidley gains nothing, therefore, from characterizing the coverage issue as jurisdictional, and so we need not decide whether the characterization is correct.

But the cases leave intact the principle that a subpoena may be challenged as unreasonable. And one basis on which it may be found unreasonable is that, as in Great Lakes, the agency clearly is ranging far beyond the boundaries of its statutory authority. As the Supreme Court explained in United States v. Morton Salt Co., 338 U.S. 632, 652 (1950), "of course a governmental investigation into corporate matters may be of such a sweeping nature and so unrelated to the matter properly under inquiry as to exceed the investigatory power. But it is sufficient if the inquiry is within the authority of the agency, the demand is not too indefinite and the information sought is reasonably relevant." In Endicott Johnson Corp. v. Perkins, supra, 317 U.S. at 509, the Court noted that "the evidence sought by the subpoena was not plainly incompetent or irrelevant to any lawful purpose of the Secretary in the discharge of her duties under the Act, and it was the duty of the District Court to order its production for the Secretary's consideration"--implying therefore that had the evidence sought by the subpoena been "plainly incompetent or irrelevant to any lawful purpose," enforcement would have been denied. See also United States v. Construction Products Research, Inc., supra, 73 F.3d at 471.

Great Lakes was such a case; this one is not (not yet anyway, though it may become one, as we shall point out later). But the difference is not, as implied in EEOC v. Karuk Tribe Housing Authority, supra, 260 F.3d at 1077-78, that Great Lakes involved an issue of jurisdiction and this case a "mere" issue of coverage and that there should be a special rule if not for jurisdictional defects then at least for "patent" jurisdictional defects. "Patent" is important to the issue of reasonableness, but not "jurisdictional." The Commission has the same right to obtain information bearing on its jurisdiction as to obtain any other information that it needs in order to decide whether there has been a violation of one of the laws that it enforces, while the recipient of the subpoena has the same right to challenge the subpoena as unreasonable because of lack of coverage as it does to complain that the subpoena is unreasonable because the recipient is outside the agency's jurisdiction. Suppose Sidley were conceded to have only eight employees, when an employer must have at least 20 employees in order to be subject to the ADEA. 29 U.S.C. § 630(b). It would not follow that Sidley could not complain about the subpoena unless the issue were characterized as jurisdictional. The distinction for which Karuk contended would complicate litigation pointlessly by forcing judges to distinguish between jurisdictional and nonjurisdictional limitations on agencies' powers and to decide on which side of the line coverage issues belong. So, to repeat, whether the coverage issue in this case should be characterized as jurisdictional is irrelevant.

The case law dealing with challenges to subpoenas contains the statement that the EEOC's "investigative authority is tied to charges filed with the Commission; unlike other federal agencies that possess plenary authority to demand to see records relevant to matters within their jurisdiction, the EEOC is entitled to access only to evidence 'relevant to the charge under investigation.' " EEOC v. Shell Oil Co., supra, 466 U.S. at 64; see also EEOC v. United Air Lines, Inc., supra, 287 F.3d at 650. But this was said with reference to Title VII; the ADEA's grant of investigative authority to the Commission is not cabined by any reference to charges. 29 U.S.C. § 626(a); 29 C.F.R. § 1626. Anyway the Supreme Court has held that the Commission can file its own charges of violation of Title VII. EEOC v. Shell Oil Co., supra, 466 U.S. at 69-70. So it is doubly irrelevant that none of the 32 demoted partners has filed a charge.

A remarkable feature of the way the case has been argued is that neither party has addressed the question why some or all members of partnerships should for purposes of the federal antidiscrimination laws be deemed employers and so placed outside the protection of these laws. That question might be avoidable if the laws contained an exemption for discrimination against partners; we might then simply look to the definition of the term in federal or state law. And if we looked there, we would find that Sidley was indeed a partnership and the 32 demoted partners were indeed partners before their demotion. Sidley has complied with all the formalities required by Illinois law to establish and maintain a partnership; the 32 were partners within the meaning of the applicable partnership law.

Although the EEOC does not concede that the 32 are bona fide partners even under state law, it is emphatic that their classification under state law is not dispositive of their status under federal antidiscrimination law. The antidiscrimination laws do not exempt partnerships from coverage (Sidley concedes that) or deny partners, as such, the protection of the laws. Employers are not protected by discrimination laws such as Title VII and the ADEA, but are partners employers? Always? Always for purposes of Title VII or the ADEA, or the other federal laws that prohibit employment discrimination? Statutory purpose is relevant. When the Supreme Court in Robinson v. Shell Oil Co., 519 U.S. 337, 346 (1997), was faced with the question whether "employee" in Title VII includes a former employee, it looked to "consistency with a primary purpose of antiretaliation provisions: Maintaining unfettered access to statutory remedial mechanisms. The EEOC quite persuasively maintains that it would be destructive of this purpose of the antiretaliation provision for an employer to be able to retaliate with impunity against an entire class of acts under Title VII." And when in Papa v. Katy Industries, Inc., 166 F.3d 937 (7th ...

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