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Equal Employment Opportunity Commission v Kaplan Higher Education Corporation

Case No. 13-3408 (C.A. 6, Apr. 9, 2014)

In this case the EEOC sued the defendants for using the same type of background check that the EEOC itself uses. The EEOC’s personnel handbook recites that “[o]verdue just debts increase temptation to commit illegal or unethical acts as a means of gaining funds to meet financial obligations.” Because of that concern, the EEOC runs credit checks on applicants for 84 of the agency’s 97 positions. The defendants (collectively, “Kaplan”) have the same concern; and thus Kaplan runs credit checks on applicants for positions that provide access to students’ financial-loan information, among other positions. For that practice, the EEOC sued Kaplan.

Specifically, the EEOC alleges that Kaplan’s use of credit checks causes it to screen out more African-American applicants than white applicants, creating a disparate impact in violation of Title VII of the federal Civil Rights Act. See 42 U.S.C. § 2000e-2(a)(1), (a)(2), (k). Proof of disparate impact is usually statistical proof in the form of expert testimony; and here the EEOC relied solely on statistical data compiled by Kevin Murphy, who holds a doctorate in industrial and organizational psychology. For two reasons, however, the district court excluded Murphy’s testimony on grounds that it was unreliable. First, the EEOC presented “no evidence” that Murphy’s methodology satisfied any of the factors that courts typically consider in determining reliability under Federal Rule of Evidence 702; and second, as Murphy himself admitted, his sample was not representative of Kaplan’s applicant pool as a whole. The district court therefore granted summary judgment to Kaplan. The EEOC now argues that the district court “erred”—a telling, oft-repeated, and mistaken choice of word here—when it excluded Murphy’s testimony. We reject the EEOC’s arguments and affirm.

Kaplan offers undergraduate and graduate degrees to students across the country. Some of Kaplan’s students obtain financial aid through programs operated by the United States Department of Education; and consequently, some of Kaplan’s employees have access to those students’ financial information. The Department has regulations that circumscribe the manner in which Kaplan can access and use students’ information. Violations of those regulations can bring severe penalties.
 

 

Judge(s): Raymond Kethledge
Jurisdiction: U.S. Court of Appeals, Sixth Circuit
Related Categories: Bankruptcy , Civil Rights , Constitutional Law , Contracts , Employment , Energy / Utilities , Expert Witness , Technology
 
Circuit Court Judge(s)
Deborah Cook
Damon Keith
Raymond Kethledge

 
Trial Court Judge(s)
Patricia Gaughan

 
Amicus Lawyer(s) Amicus Law Firm(s)
Anastasia Boden Pacific Legal Foundation

 
Appellant Lawyer(s) Appellant Law Firm(s)
Kate Northrup U.S. Equal Employment Opportunity Commission

 
Appellee Lawyer(s) Appellee Law Firm(s)
Pamela Devata Seyfarth Shaw LLP
Matthew Gagnon Seyfarth Shaw LLP
Gerald Maatman, Jr. Seyfarth Shaw LLP
Jennifer Riley Seyfarth Shaw LLP
David Rowland Seyfarth Shaw LLP

 

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whites) might make the difference between significant liability and none. but more to the point, kaplan higher education corporation, found that “[t]here is no indication” that murphy’s group of 1,090 applicants is in any “way no. 13-3408 eeoc v. kaplan, et al. page 7 murphy’s methodology flunked them all. two factors we consider together. “ordinarily, a key fallacy that pervades the agency’s entire argument on appeal, to wit: that it was kaplan’s (or the equal employment opportunity commission, relied solely on statistical data compiled by kevin murphy, who holds a doctorate in industrial separately to review each applicant’s drivers’ license photograph and then classify the person’s provided records that identified an applicant’s race. thirty-six states and the district of scrutiny of the scientific community is a component of ‘good science,’ in part because it the district court thereafter excluded murphy’s testimony in a meticulously reasoned gis pool of 4,670 were. court should not have considered the factor. the argument is meritless: “submission to the which kaplan can access and use students’ information. violations of those regulations can here.) but murphy’s sample overrepresented “fails” generally: 23.8% of the applicants in his pertinent consideration is whether the theory or technique has been subjected to peer review and id. at 594. the district court found that the eeoc “wholly fail[ed]” to provide evidence in v. accepted only by the witness himself. the district court did not abuse its discretion in excluding disparate impact is usually statistical proof in the form of expert testimony; and here the eeoc telling, oft-repeated, and mistaken choice of word here—when it excluded murphy’s testimony. (and has been) tested.” daubert, 509 u.s. at 593. similarly, “in the case of a particular “kaplan”) have the same concern; and thus kaplan runs credit checks on applicants for positions to run credit checks on applicants for senior-executive positions, accounting and other positions kethledge, circuit judge. in this case the eeoc sued the defendants for using the consensus. for some reason murphy also provided the raters with each applicant’s name— this factor, and undisputedly there is none. before us, the eeoc simply argues that the district murphy’s testimony. classifications with racial identifications provided by a dmv, finding 95.7% agreement between bring severe penalties. rule 702 provides that “[a] witness who is qualified as an expert by knowledge, skill, hoc decision as to whether to move forward with the application. the credit-check process is purposes of litigation—though the record contains no indication that murphy has any particular generally daubert, 509 u.s. at 593. on this point the eeoc offers no response—perhaps also troubled by an affirmative breakdown in murphy’s controls: “the ‘race raters’ were provided ‘representative’ of the applicant pool as a whole.” op. at 18. instead there is a strong indication the eeoc countered at oral argument that there is “no evidence” that the raters considered any the eeoc calls “race rating”—by which murphy purported to identify the race of each person in overlooks murphy’s own concession that the raters themselves had no particular standard in question to be answered” in determining whether a technique is reliable is “whether it can be enough “to establish the reliability of my photo rating methodology.” the district court was well for the northern district of ohio at cleveland murphy filed yet another report on december 21, 2012, this time in response to kaplan’s motion kaplan has used several vendors for its credit checks, but murphy focused upon the factors set forth by the supreme court in daubert v. merrell dow pharmaceuticals, inc., the technique’s operation.” id. at 594. the eeoc responds that the relevant standard was no. 13-3408 four of five raters agreed upon a particular applicant’s race, the applicant was so classified for payments, has any garnishments on earnings, has outstanding civil judgments exceeding $2,000, other requirements, the testimony “is based on sufficient facts and data” and “is the product of which, the eeoc concedes, the raters were supposed to disregard when classifying an and credit-check results for a total of 1,090 applicants, of whom 803 had been racially classified appeal from the united states district court per murphy’s “rating” process. in that sample of 1,090 applicants (out of a total of 4,670 the district court’s judgment is affirmed. file name: 14a0071p.06 _________________ for the sixth circuit │ department of education; and consequently, some of kaplan’s employees have access to those homemade methodology, crafted by a witness with no particular expertise to craft it, increases the likelihood that substantive flaws in methodology will be detected[,]” id.; and the correlation in case where a few percentage points (in credit-check fail rates for blacks and who were flagged. (that is essentially the basis upon which the eeoc claims disparate impact practice, the eeoc sued kaplan. testimony on grounds that it was unreliable. first, the eeoc presented “no evidence” that 509 u.s. 579 (1993). but the district court has “broad latitude” as to which factors to consider in applicants for whom gis provided data), the percentage of black applicants who were flagged the district court also found that the eeoc “present[ed] no evidence” that murphy’s as murphy himself candidly conceded, a mere 57 instances of anecdotal corroboration is not administered by persons with no particular expertise to administer it, tested by no one, and used internally by kaplan. that cross-check yielded an 80% match—an unimpressive information. the credit checks are performed by a third-party vendor, which reports, among month after the district court said there would be no more reports. we consider it now only some of its executives had engaged in self-dealing, by hiring relatives as vendors. in response, maatman, jr., david j. rowland, pamela q. devata, jennifer a. riley, matthew j. gagnon, because the district court did. murphy says that, as to 47 applicants, he cross-checked his raters’ │ corporation, d/b/a kaplan university, means of gaining funds to meet financial obligations.” because of that concern, the eeoc runs reliable principles and methods[.]” fed. r. evid. 702(b), (c). as the proponent of expert decided and filed: april 9, 2014 │ commission, washington, d.c., for appellant. gerald l. maatman, jr., seyfarth shaw no. 13-3408 eeoc v. kaplan, et al. page 5 sample was not representative of kaplan’s applicant pool as a whole. the district court therefore of kaplan’s students obtain financial aid through programs operated by the united states sample of 1,090 were rejected because of their credit history, whereas only 13.3% of the total race, so the eeoc subpoenaed records from the departments of motor vehicles. eleven states fail rate of only 13.3%. on this point, suffice it to say that an unrepresentative sample by 1 district court’s) burden to show that murphy’s testimony was inadmissible, rather than the other things, whether the applicant has ever filed for bankruptcy, is delinquent on child-support the two. murphy also says that, for another 10 applicants, he cross-checked his raters’ _________________ race in one of five ways: “african-american,” “asian,” “hispanic,” “white,” or “other.” if the district court also found that murphy’s methodology lacked “standards controlling joiner, 522 u.s. 136, 139 (1997). because, as the district court observed, “the eeoc itself discourages employers from visually or has a social-security number that does not match the number the credit bureau has on file. if reliability under federal rule of evidence 702; and second, as murphy himself admitted, his murphy then proceeded to file additional reports, contrary to the terms of the district ┐ │ testimony, the eeoc bears the burden of proving its admissibility. nelson v. tenn. gas pipeline │ experience, training, or education may testify in the form of an opinion or otherwise if[,]” among employee refuses to self identify.’” op. at 16. by kaplan’s expert—murphy submitted a third report, which kaplan moved to strike, but which racially blind: the vendor does not report the applicant’s race with her other information. recites that “[o]verdue just debts increase temptation to commit illegal or unethical acts as a scientific technique, the court ordinarily should consider the known or potential rate of error.” applicant’s race. that provide access to students’ financial-loan information, among other positions. for that the names of the applicants,” which—for a methodology purportedly based exclusively on visual to the contrary: murphy’s group had a fail rate of 23.8%, whereas the gis applicant pool had a eeoc describes as “anecdotal corroboration” of the reliability of his race-rating process. │ the larger pool—and thus is not a reliable means to demonstrate disparate impact. of title vii of the federal civil rights act. see 42 u.s.c. § 2000e-2(a)(1), (a)(2), (k). proof of proponent has the burden of establishing that the pertinent admissibility requirements are met a publication.” daubert, 509 u.s. at 593. again the district court found no evidence in support of opinion. we review that exclusion deferentially, for an abuse of discretion. gen. elec. co. v. the eeoc’s case goes downhill from there. in determining reliability, “[a]nother no. 1:10-cv-02882—patricia a. gaughan, district judge. murphy filed his expert report on may 1, 2012 and then a revised report on august 17, applicant’s file for “review.” at that point, kaplan typically reviews the file and makes an ad financial-aid officers had stolen payments that belonged to students. kaplan also learned that kaplan’s concerns became reality about a decade ago, when it discovered that some of its argued: kate northrup, united states equal employment opportunity district court had good reason to think that such scrutiny might have detected flaws here. we need not belabor the issue further. the eeoc brought this case on the basis of a │ the district court reluctantly permitted in an october 5 order, with the admonition that “[n]o 2012, both per the district court’s scheduling order. the revised report included the putative race kaplan, inc., and iowa college acquisition of the applicants’ names in classifying them by race. but that argument merely illustrates a kaplan implemented a number of measures to prevent these abuses. one of those measures was before: keith, cook, and kethledge, circuit judges. argued: march 20, 2014 for review, based upon their credit histories, was higher than the percentage of white applicants co., 243 f.3d 244, 251 (6th cir. 2001). assembled a team of five “race raters,” each of whom has experience in what the eeoc calls classifying each applicant; instead, they just eyeballed the dmv photos. the district court was purposes of murphy’s statistics. for 11.7% of the photographs, the raters failed to reach that kaplan offers undergraduate and graduate degrees to students across the country. some nelson, 243 f.3d at 251; fed. r. evid. 702 advisory comm. notes, 2000 amendments (“the finally, as an independent ground for excluding murphy’s testimony, the district court we reject the eeoc’s arguments and affirm. expertise in constructing methodologies to identify race by visual means. in any event, murphy support of either of these factors. op. at 13. in response, the eeoc argues that we can find that within its “broad latitude[,]” kumho, 526 u.s. at 142, to find these factors unmet. no. 13-3408 eeoc v. kaplan, et al. page 6 columbia provided color copies of drivers’ license photos for approximately 900 applicants. murphy’s methodology satisfied any of the factors that courts typically consider in determining no. 13-3408 eeoc v. kaplan, et al. page 4 identification of race—might “create an unintended bias on the part of the panel.” op. at 16. granted summary judgment to kaplan. the eeoc now argues that the district court “erred”—a a particular case. kumho tire co. v. carmichael, 526 u.s. 137, 142 (1999). │ │ further expert reports are allowed.” yet murphy filed another report on november 8, 2012, two identifying an individual by race and indicates that visual identification is appropriate ‘only if an plaintiff-appellant, seyfarth shaw llp, chicago, illinois, for appellees. anastasia p. boden, pacific opinion here, the district court considered every one of the daubert factors—and found that with access to company financials or cash, and positions with access to student financial-aid weeks before summary-judgment briefing was due. in that report, murphy provided what the no. 13-3408 eeoc v. kaplan, et al. page 2 gis data for 4,670 applicants. that data, as discussed above, did not include the applicant’s murphy’s requirement that four of five raters agree on an applicant’s race. but that response > legal foundation, sacramento, california, for amicus curiae. llp, chicago, illinois, for appellees. on brief: kate northrup, united states equal an applicant’s credit history includes any of the enumerated items, the vendor flags the pursuant to sixth circuit i.o.p. 32.1(b) specifically to exclude his testimony as unreliable under rule 702. same type of background check that the eeoc itself uses. the eeoc’s personnel handbook by preponderance of the evidence”). the dispute in this case concerns the reliability, or lack thereof, of the process—which no. 13-3408 eeoc v. kaplan, et al. page 3 applications screened by one vendor, general information services (“gis”). murphy obtained more african-american applicants than white applicants, creating a disparate impact in violation eeoc’s burden to show that his testimony was admissible. the law says the contrary. see in determining whether an expert’s methodology is reliable, courts frequently consider counsel specifically, the eeoc alleges that kaplan’s use of credit checks causes it to screen out ┘ those drivers’ license photos. the process was crafted by murphy himself, specifically for defendants-appellees. definition might not be representative of the respective fail rates of black and white applicants in students’ financial information. the department has regulations that circumscribe the manner in employment opportunity commission, washington, d.c., for appellant. gerald l. support in murphy’s “anecdotal corroboration”—set forth in his november 8 report, submitted a race by visual means—since, undisputedly, they have none. murphy directed each rater court’s scheduling order. on september 5, 2012—in response to a critical analysis of his work race-rating methodology “is generally accepted in the scientific community.” op. at 16; see but that term assuredly does not refer to the raters’ experience with methodologies to identify recommended for full-text publication and organizational psychology. for two reasons, however, the district court excluded murphy’s united states court of appeals classifications with racial information provided by peoplesoft, a personnel-software program _________________ “multicultural, multiracial, treatment outcome research”—a term undefined by the eeoc here. _________________ credit checks on applicants for 84 of the agency’s 97 positions. the defendants (collectively,


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