Equal Employment Opportunity Commission v. Olson's Dairy Queens, Inc.

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 91-6027
_____________________
EQUAL EMPLOYMENT OPPORTUNITY COMMISSION,
Plaintiff-Appellant,
Cross-Appellee,
versus
OLSON'S DAIRY QUEENS, INC.,
Defendant-Appellee,
Cross-Appellant,
DAVID T. LOPEZ,
Appellee-Cross-Appellant.
_______________________________________________________
Appeal from the United States District Court for
the Southern District of Texas
(CA H 86 3777)
_______________________________________________________
(March 9, 1993)
Before REAVLEY, KING and WIENER, Circuit Judges.
PER CURIAM:1
The Equal Employment Opportunity Commission (EEOC) appeals
the district court's judgment that Olson's Dairy Queens, Inc.
(Olson's) had not committed unlawful employment discrimination
1
Local Rule 47.5 provides: "The publication of opinions
that have no precedential value and merely decide particular
cases on the basis of well-settled principles of law imposes
needless expense on the public and burdens on the legal
profession." Pursuant to that Rule, the court has determined
that this opinion should not be published.
and awarding Olson's attorney's fees. We reverse and render as
to Olson's liability and remand for determination of damages.
I. BACKGROUND
The relevant facts underlying EEOC's complaint are outlined
in the district court's opinion. 803 F. Supp. 1215, 1217-18.
Our departure from the district court's recitation, and
ultimately its opinion, is based largely upon the testimony of
the EEOC's expert witness, Dr. Mahlon Straszheim, and Olson's
expert witness, Dr. Ira Chorush.
A. DR. STRASZHEIM'S STUDY.
Dr. Straszheim analyzed the extent to which Olson's actual
hiring patterns produced a different black-nonblack employee mix
than would be expected if Olson's hiring policies were entirely
race-neutral. He did so by two distinct means.
1. External Availability Analysis.
The first approach, which was the focus of the district
court's opinion, was to compare Olson's hiring history with the
percentage of black food preparation and service workers in the
relevant labor market from which Olson's draws its work force.
Dr. Straszheim, relying on years of experience in labor,
transportation, and urban economic analysis, determined that the
relevant labor market was the metropolitan Houston area -- more
specifically, the Houston Standard Metropolitan Statistical Area,
or "SMSA," as defined by the United State Bureau of the Census.
Using detailed census data for the Houston SMSA, Dr.
Straszheim determined that blacks comprise roughly 25.2% of the
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food preparation and service workers in the Houston SMSA. By
comparison, only 8.1% of employees of known race hired by Olson's
between 1978 and 1987 were black.
Dr. Straszheim refined the Houston SMSA figures to
account for travel time to and from Olson's locations and the
average travel times for black food preparation and service
workers reported in the census data. He also distinguished
between the Spring Branch (6 locations), Bellaire (2 locations),
and Katy (1 location) labor markets. Based upon the demographics
of each of these distinct markets and the relevant travel times,
Dr. Straszheim concluded that blacks comprised 19.8% of the
relevant labor pool for Olson's Spring Branch and Bellaire
locations, and 8.1% for the Katy store. By comparison, blacks
comprised 6.5% of hires of known race at Olson's six Spring
Branch stores, 12.3% of hires of known race at Olson's two
Bellaire-area stores, and 9.4% of hires of known race at Olson's
Katy location.
Employing standard statistical techniques, Dr.
Straszheim concluded that there was less than one chance in
100,000 (.00001) that Olson's observed hiring patterns in the
Spring Branch stores could have resulted from truly race-neutral
hiring practices, and less than three chances in one thousand
(.0026) that Olson's observed hiring patterns in the Bellaire
stores could have resulted from truly race-neutral hiring
practices. Dr. Straszheim found no statistically significant
difference between the number of blacks hired in the Katy store
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and the number which would be expected based upon black
representation in the relevant labor market.
2. Applicant Flow Analysis.
As a separate and distinct means of assessing the race-
neutrality of Olson's hiring practices, Dr. Straszheim compared
the percentage of blacks among Olson's applicants of known race
to the percentage of blacks among Olson's hired employees of
known race. The results of this analysis were completely
disregarded by the district court's opinion and largely ignored
by Olson's own expert, as well as by Olson's counsel in his
argument to this court.
Between 1984 and 1987, the period for which rejected
applications were available, blacks constituted 29.6% of the
roughly 1,800 applicants of known race. In the Spring Branch
market, 30.1% of the applicants of known race for the relevant
period were black; 39.5% in the Bellaire market; and 27.6% in the
Katy market. By comparison, roughly 13.2% of the persons of
known race hired by Olson's Spring Branch stores during the same
time period were black, while blacks constituted 27.3% and 11.1%
of the hires of known race for Olson's Bellaire and Katy
locations, respectively, for the same period.
In light of the racial mix of actual applications made
to each of the stores, Dr. Straszheim concluded that the
likelihood that Olson's observed hiring patterns resulted from
truly race-neutral hiring practices was less than one chance in
ten thousand (.0001) for the Spring Branch stores, less than
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seven chances in one thousand (.0070) for the Bellaire stores,
and less than two chances in one thousand (.0020) in the Katy
store.
B. DR. CHORUSH'S STUDY.
Dr. Chorush testified that he had requested data from
Olson's Spring Branch stores for April 1990. He found that, of
the 60 employees working at the six Spring Branch locations in
April 1990, more than one-half lived within one mile of the store
at which they worked, and more than 80 percent lived within three
miles. He testified that many of Olson's Spring Branch area
employees were high school students and that many were employed
part time. Dr. Chorush did not quarrel with Dr. Straszheim's
depiction of Olson's Spring Branch area employees as
predominantly nonblack. Based upon his observations, Dr. Chorush
concluded that "most persons willing to accept positions at
Olson's are young, seeking part-time employment and residing
within a very short distance of the restaurant." Id.
II. DISCUSSION
A. EEOC'S COMPLAINT.
To prevail on its claim of disparate treatment, the EEOC
must establish by a preponderance of the evidence that a pattern
of intentional discrimination existed in Olson's hiring of black
applicants. That is, the EEOC must show that racially
discriminatory hiring was Olson's regular, rather than unusual,
practice. International Brotherhood of Teamsters v. United
States, 431 U.S. 324, 360, 97 S. Ct. 1843, 1867 (1977)
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("Teamsters"). If the EEOC establishes a prima facie violation,
it is incumbent upon Olson's to articulate a legitimate,
nondiscriminatory reason for its hiring patterns. Id.; McDonnell
Douglas Corp. v. Green, 411 U.S. 792, 802, 93 S. Ct. 1817, 1824
(1973). If Olson's articulates an acceptable rationale, the EEOC
bears the burden of showing that Olson's explanation is a pretext
for unlawful discrimination. Teamsters, 431 U.S. at 362 n.50, 97
S. Ct. 1868 n.50; McDonnell Douglas, 411 U.S. at 804, 93 S. Ct.
at 1825.
1. Prima Facie Violation.
The EEOC may establish a prima facie violation of Title
VII through statistical evidence, evidence of Olson's treatment
of individual job applicants and employees, or both. See
Hazelwood Sch. Dist. v. United States, 433 U.S. 299, 97 S. Ct.
2736 (1977); see also Pouncy v. Prudential Ins. Co., 668 F.2d
795, 802 (5th Cir. 1982) ("When the statistical showing is
sufficiently strong in a disparate treatment action, the
plaintiffs' prima facie case can be made without additional
evidence establishing that the defendant purposefully treated
minorities protected under Title VII less favorably than other
persons."). EEOC presented both statistical and anecdotal
evidence. While we do not dispute the district court's
assessment of the anecdotal testimony of rejected applicants
Kathy Richie, Angela Burks, Ruby Cantu, Lillie Lewis, and Jessica
J. Jones, we hold that the district court erred both in its
assessment of the statistical evidence offered by the EEOC and in
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its conclusion that the EEOC failed to establish a prima facie
violation of Title VII.
The district court correctly observes that "[t]he
usefulness of statistical data in assessing discriminatory
practices depends . . . on the validity of the basic reference
population as the pole star being compared to the work force of
the employer," 803 F. Supp. at 1220-21, and that, "[i]n a
disparate treatment case, the statistical evidence must be
``finely tuned' to compare the employer's relevant workforce with
the qualified populations in the relevant labor market." Id. at
1221 (quoting Krodel v. Young, 748 F.2d 701, 709 (D.C. Cir.
1984)). However, we disagree with the district court's
conclusion that the EEOC's statistical evidence fails to raise a
claim of intentional discrimination. First, Dr. Straszheim's
"external availability" methodology is sufficiently similar to
that approved by the court in United States v. Pasadena Indep.
Sch. Dist., 43 Fair Emp. Prac. Cas. (BNA) 1319, 1987 WL 9919
(S.D. Tex. Apr. 18, 1987) (DeAnda, C.J.) ("Pasadena I.S.D."), to
beg the question why the court found it so lacking here.
Second, the travel times which the district court found
"simply untenable," 803 F. Supp. at 1219, were confirmed by the
census data, which was, in turn, legitimized by the actual
applications received by Olson's. We do not understand how the
district court can completely discount the possibility that
prospective employees will travel further than a few blocks to
work at Olson's when it was presented with evidence of hundreds
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of applications from job seekers not residing in the immediate
vicinity of an Olson's location.
Third, Dr. Chorush's analysis, which the district court
found "persuasive," id., is fundamentally unsound. Dr. Chorush's
analysis considers only a portion of Olson's work force at only
one point in time, presuming that what was true for the Spring
Branch stores in April 1990 must be true for all Olson's
locations over the entire period under dispute. Dr. Chorush
begins with the presumption that one can describe Olson's labor
market by describing Olson's work force; thus, he concludes,
since most of Olson's Spring Branch employees are white teenagers
living a short distance from the store, then white teenagers
living a short distance from the store constitute Olson's
available labor force. This is wholly at odds with the
fundamental premise of employment discrimination law. In order
to test for discriminatory hiring, we evaluate an employer's work
force in terms of the available labor pool, not the other way
around. The fact that Olson's April 1990 Spring Branch work
force was predominantly white teenagers living close to the store
does not mean that there were not qualified applicants who were
not white teenagers living close to the store.
Finally, the district court's assessment of the EEOC's
statistical evidence completely disregards the "applicant flow"
analysis conducted by Dr. Straszheim. Dr. Chorush "opin[ed]"
that Olson's could "expect" to draw its work force from a given
area. Id. By contrast, Dr. Straszheim analyzed the actual
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applications. The district court found, based upon Dr. Chorush's
testimony, that "[a]pplicants for employment [at Olson's] are
therefore likely to be substantially different from those
actually holding employment in the food preparation and service
classification [of the Census]." Id. However, Olson's own
applications indicate that blacks not living within the immediate
vicinity of Olson's locations comprise a higher percentage of
applicants than was suggested by Dr. Straszheim's census-based
analysis.
Guided by this circuit's previous admonition that the
"most direct route to proof of racial discrimination in hiring is
proof of disparity between the percentage of blacks among those
applying for a particular position and the percentage of blacks
among those hired," Hester v. Southern Ry., 497 F.2d 1374, 1379
(5th Cir. 1974), we conclude that the district court clearly
erred when it held, without fully considering the "applicant
flow" analysis offered by the EEOC's expert, that the EEOC had
failed to provide ample statistical evidence to establish a prima
facie violation of Title VII.2 To the contrary, we find the
record replete with evidence to establish such a violation.
2. Olson's Rationale.
The district court summarily accepted, without
description or explanation, Olson's articulated nondiscriminatory
2
We also express concern for the short shrift which the
district court gave the EEOC's "external availability" analysis,
especially when we consider the dearth of countervailing evidence
offered by Olson's expert.
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reasons for its hiring and found that the EEOC failed to show
that those articulated reasons were a pretext disguising
discrimination. 803 F. Supp. at 1223. We disagree with the
district court's assessment of Olson's proffered explanation.
The record clearly demonstrates that any explanation which the
district court may have perceived to be facially
nondiscriminatory is, in fact, mere pretext.
Discarding Mr. Watson's statement that Olson's
customers prefer to be served by persons of their own "culture,"
the only other "reasons" which may be gleaned from Olson's case
are (1) the proximity of an applicant's residence to the
restaurant, and (2) the racial make-up of the Spring Branch
school district. While the former might conceivably satisfy the
McDonnell Douglas-Teamsters test if there was a showing that
proximity to the restaurant was either a critical factor or even
a stated criteria in Olson's hiring guidelines, that showing was
not made or even attempted. This leaves only the intimation that
people from nearby were hired because only people from nearby
would apply. However, we know that is not true, based upon Dr.
Straszheim's review of Olson's applications. As for the second
explanation, the racial make-up of the Spring Branch school
district explaining the racial make-up of the employees, aside
from ignoring conditions at the Bellaire and Katy stores and in
their surrounding neighborhoods, presumes that Olson's potential
work force is composed of area high school students. However,
while it may be true that Olson's employees are predominantly
10
area high school students, the applications make it clear that
Olson's available labor force includes many persons who are not
area high school students.
B. OLSON'S ATTORNEY'S FEES.
42 U.S.C. § 2000e-5(k) allows the district court to grant
the prevailing party in a Title VII action to recover reasonable
attorney's fees. Because we render judgment for the EEOC on
liability, it is the EEOC who prevails and not Olson's.
Notwithstanding that, we are compelled to express our puzzlement
at how the district court could look at this record and find that
the EEOC's complaint was "frivolous, unreasonable, or without
foundation," Christiansburg Garment Co. v. EEOC, 434 U.S. 412,
421, 98 S. Ct. 694, 700 (1978), particularly in light of the
district court's denial of Olson's two pre-trial motions for
summary judgment and of Olson's Rule 41(b) motion for dismissal,
which was offered at the close of the EEOC's case-in-chief.
III. CONCLUSION
We REVERSE and RENDER judgment in favor of the EEOC on the
question of Olson's liability. We return this matter to the
district court in order to proceed to the damages stage of this
employment discrimination class action, see Teamsters, 431 U.S.
at 361-62, 97 S. Ct. at 1867-68; Richardson v. Byrd, 709 F.2d
1016, 1021 (5th Cir. 1983).
REVERSED AND RENDERED IN PART; CAUSE REMANDED.
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