E.E.O.C. v. Rath Packing Co.

Decision Date09 October 1984
Docket NumberNos. 84-1217,84-1458 and 85-1501,AFL-CIO,s. 84-1217
Parties40 Fair Empl.Prac.Cas. 580, 39 Empl. Prac. Dec. P 35,956, 54 USLW 2509 EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Appellee, v. The RATH PACKING COMPANY, Appellants. District Local 431 Amalgamated Meatcutters and Butcher Workman of North America,
CourtU.S. Court of Appeals — Eighth Circuit

Ronald R. Peterson, Chicago, Ill., and Steven A. Weidner, Waterloo, Iowa, for appellants.

Lorraine C. Davis, Washington, D.C., for appellee.

Before LAY, Chief Judge, and ROSS and McMILLIAN, Circuit Judges.

McMILLIAN, Circuit Judge.

Rath Packing Company (Rath) appeals and the Equal Employment Opportunity Commission (EEOC) cross-appeals from a final judgment entered in the District Court for the Southern District of Iowa in an action brought pursuant to 42 U.S.C. Sec. 2000e et seq. (1982) (Title VII). The district court found that Rath's subjective hiring practices resulted in discrimination against women and were not justified by business necessity. The district court upheld Rath's no-spouse rule as justified by business necessity. The district court awarded backpay, post-judgment interest and affirmative injunctive relief. EEOC v. Rath Packing Co., No. 77-57-D, slip op. at 7 (S.D.Iowa Feb. 10, 1984).

For reversal Rath argues that (1) the action should have been automatically stayed under 11 U.S.C. Sec. 362(a) of the Bankruptcy Act, (2) the district court abused its discretion in denying a stay under 11 U.S.C. Sec. 105 and 28 U.S.C. Sec. 1651, (3) the district court's judgment violated 11 U.S.C. Secs. 362(b)(5), 502(b) and 1129 because the judgment enforces a money judgment and imposes post-judgment interest, (4) the district court erred in finding a lack of business necessity for Rath's hiring practices, and (5) the district court abused its discretion in awarding backpay in light of Rath's precarious financial condition. Rath also appeals a final order entered on March 14, 1985, denying Rath's Fed.R.Civ.P. 60(b) motion.

EEOC on cross-appeal argues that the district court erred (1) as a matter of law and fact in concluding that Rath's no-spouse rule was justified by business necessity, (2) in denying retroactive seniority, prejudgment interest, and full costs to EEOC, and (3) in not calculating the class backpay award on the basis of the availability of female workers in the general population of Louisa County, Iowa.

For the reasons discussed below, we affirm in part, reverse in part and remand this case for further proceedings consistent with this opinion.

Rath, an Iowa corporation, is engaged in the business of slaughtering hogs and processing the meat products obtained from the hogs. Rath has its principal plant in Waterloo, Iowa, and a limited operation in Columbus Junction, Iowa. The Columbus Junction plant, the subject of this litigation, is divided into 12 departments: hog kill, hog cut, loading, sanitation, trim, inedible rendering, yards, smoking, curing, packing, maintenance and miscellaneous gang. More than half of the job classifications at the Columbus Junction plant for the period from September 1, 1970, to August 31, 1979, were in the kill and cut departments. These jobs were considered the least desirable jobs in the plant but were the highest paid.

Rath's Columbus Junction facility employed approximately 250 persons; 50% of the employees were related to one another and 95% were male. The population of Columbus Junction is approximately 1500 persons.

Stipulated statistics established that 554 persons applied to Rath for employment from January 1, 1973, to February 15, 1978. During this period seven (or 7.39%) of the 95 female applicants (who were not spouses of current employees) were hired. Twenty-six additional female applicants were denied employment because they were spouses of current employees. Information concerning applications filed after February 15, 1978, is not available.

The United Food and Commercial Workers, 1 AFL-CIO (formerly Amalgamated Meatcutters and Butchers Workmen of North America), District Local No. 431 (Union), was the exclusive bargaining representative for plant employees at the Columbus Junction plant. The collective bargaining agreements governing the plant required that where possible Rath would promote or transfer from within rather than hire from without. When a vacancy occurred, the vacancy was posted so that employees in that department could bid. If there were no bids, persons in other departments could bid. If no one in another department bid, then the employee with the least seniority in the department where the vacancy occurred was "forced to" the job. If there was no employee to "force to" the job, then a new employee was hired. Rath had no established procedure for giving notice of vacancies to the public.

Rath's office manager, Walter McFarland, was responsible for accepting and maintaining applications and selecting applicants for employment. The plant superintendent had the authority to overrule McFarland's choice of applicants but seldom did so. Rath had no written or otherwise established selection guidelines and McFarland was unable to identify what information was deemed significant in evaluating and selecting applicants. McFarland expressly discounted age, height, weight, prior experience, and work history as being critical in the selection of new employees. McFarland, however, stressed the importance of getting the right person for the job because the person could be assigned to any job in the plant.

In August 1973 Rath prospectively implemented a no-spouse rule prohibiting the employment of spouses of Rath employees. From approximately 1966 to the time of trial, Rath employed seven married couples at the Columbus Junction plant.

EEOC filed this suit in September 1977. The suit was based on a charge filed on December 15, 1975, by Mary Turner, who alleged that Rath unlawfully refused to employ her because of her sex. EEOC alleged in its complaint that Rath refused to hire women at its Columbus Junction plant and that Rath's policy of not hiring spouses of employees excluded a disproportionate number of women from employment. EEOC sought injunctive relief, full backpay with interest, and costs.

The action was bifurcated and separate trials on liability and relief were held. After a four day trial in July 1980 on liability, the district court found that Rath discriminated against women in hiring from 1971 forward and that three women who testified at trial established individual claims of disparate treatment. The district court concluded, however, that Rath had shown a business necessity for the no-spouse rule.

The case was referred to a special master in 1982 for relief proceedings. In January 1983 Rath closed its Columbus Junction plant. 2 In April of 1983 the trial on relief was held. The special master recommended a class backpay award of $1,015,901, injunctive relief, and retroactive seniority for rejected female applicants. The special master further recommended that prejudgment interest not be granted. No recommendation was made concerning costs because one item of costs was compensation for the services of the special master.

After the special master issued his report and recommendations, Rath filed a petition in the bankruptcy court for reorganization under Chapter 11 of the Bankruptcy Act. The district court held that Rath's bankruptcy petition did not automatically stay the Title VII proceedings, In re Rath Packing Co., 37 B.R. 614, 616-17 (S.D.Iowa 1984), and accordingly proceeded to consider the special master's recommendations and to enter final judgment.

The district court adopted the special master's recommendations to grant injunctive relief and to deny prejudgment interest. The district court awarded class-based backpay ($1,000,000) and post-judgment interest but denied retroactive seniority. The district court ordered that costs be shared equally between EEOC and Rath.

Rath and EEOC subsequently appealed the judgment of the district court. On October 9, 1984, the appeal was argued before this court. In February 1985 Rath filed a Rule 60(b) motion and requested that its appeal before this court be held in abeyance pending a decision on the motion. On February 22, 1985, this court ordered the district court to certify its ruling on the Rule 60(b) motion and ordered that the appeal be held in abeyance. On March 14, 1985, the district court denied Rath's 60(b) motion. On April 22, 1985, the order holding the appeals in abeyance was vacated, and the appeal from the denial of the 60(b) motion was consolidated with the pending appeals.

Automatic Stay Under 11 U.S.C. Sec. 362(a)

Rath argues that the district court erred in refusing to stay those portions of the Title VII proceedings related to backpay, seniority, and interest because Sec. 362(a) provides for an automatic stay of such proceedings. In support of its position, Rath argues that the automatic stay is one of the fundamental debtor protections provided by the Bankruptcy Act and is inapplicable only where a governmental unit sues to protect the public safety and health. Relying on Missouri v. Bankruptcy Court, 647 F.2d 768, 776 (8th Cir.1981), cert. denied, 454 U.S. 1162, 102 S.Ct. 1035, 71 L.Ed.2d 318 (1982), Rath argues that an action brought by EEOC, although a regulatory agency, is stayed by the automatic stay provision because it is primarily directed to making aggrieved persons financially whole.

EEOC argues that this action comes within the exception to the automatic stay provision because it is a Title VII action brought to enforce federal laws prohibiting discrimination in the work place. EEOC argues that suits under Title VII are guided by "an overriding public interest in equal employment opportunity asserted through direct federal enforcement." General Telephone Co. v. EEOC, 446 U.S. 318, 326, 100 S.Ct. 1698,...

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