Federal Court Sends Strong Signal to EEOC in Dismissal of Credit Check Case

Last January, a Cleveland federal-court judge dismissed a race discrimination lawsuit brought by the Equal Employment Opportunity Commission against Kaplan Higher Learning. In that case, the EEOC challenged Kaplan’s use of credit reports in its hiring process as having a systemic disparate impact based on race. To support its claim, the agency retained an expert witness to rate (i.e, guess) the unknown races of various job applicants based on how they appeared in Department of Motor Vehicles records. The district court excluded the expert, concluding that his “opinion” was nothing more than guesswork that resulted in inherently unreliable data. With no expert testimony to support its claim, the court dismissed the EEOC’s lawsuit.

Yesterday, in a terse opinion issued a mere 20 days after oral argument, the 6th Circuit affirmed the district court’s dismissal. Here is the entirety of the 6th Circuit’s legal analysis:

We need not belabor the issue further. The EEOC brought this case on the basis of a homemade methodology, crafted by a witness with no particular expertise to craft it, administered by persons with no particular expertise to administer it, tested by no one, and accepted only by the witness himself. The district court did not abuse its discretion in excluding Murphy’s testimony.

This case sends a strong signal to the EEOC that it cannot use junk science to further its agenda of eliminating systemic discrimination. What is so striking of the opinion is the brevity of the Court’s four-line analysis. That the 6th Circuit could make quick work of such an important issue speaks volumes of how little it thought of the EEOC’s litigation strategy.

Yet, the Kaplan case is less about whether credit histories disparately impact African Americans than it is about how the EEOC chose to prove its case. Kaplan did not win this case so much as the EEOC lost it by using junk science to support its claim. Employers should see this case for what it is — a stinging rebuke of the EEOC’s litigation tactics — and nothing more. Employers should not take this case as a license to deploy screening practices that might disparately impact applicants based on race, lest you end up the receiving end of the next EEOC lawsuit.