The Equal Employment Opportunity Commission (EEOC), the federal agency charged with enforcing Title VII of the Civil Rights Act, has suffered a loss at the hands of the nation’s largest specialty jeweler. Sterling Jewelers, owner of the popular Kay Jewelers brand, had been accused of discriminating against a class of 44 thousand women in both pay and promotion opportunities. On Monday, New York Western District Court Judge Richard Acara followed a Magistrate Judge’s recommendation and dismissed the suit. Judge Acara concluded that the EEOC had not fully investigated the claims and had withheld evidence in discovery. E.E.O.C. v. Sterling Jewelers, Inc., 2014 WL 916450 (W.D.N.Y.).

The EEOC first commenced the action in 2008, alleging that Sterling had engaged in illegal practices “by discriminating against female employees in promotion and compensation, in violation of Title VII, 42 U.S.C. §§ 2000e-2(a) and 2000e-2(k).” Sterling Jewelers, Inc., 2014 WL 916450 *1. In order to satisfy the burden of proof in disparate impact claims, the charging party must show that an employment practice “causes a disparate impact on the basis of race, color, religion, sex, or national origin.” 42 U.S.C. § 2000e-2(a)(1).

However, when the EEOC wishes to file a suit in its own name, it faces additional requirements. It must prove: (1) a timely charge, (2) the fact that it conducted an investigation, (3) issued a reasonable cause determination, and (4) attempted conciliation. E.E.O.C. v. Grane Healthcare Co., 2013 WL 1102880, *3 (W.D. Pa. 2013). “Courts have limited the EEOC’s complaint where it exceeds the scope of the investigation.” E.E.O.C. v. Dots, LLC, 2010 WL 5057168, *2 (N.D. Ind. 2010).

Magistrate Judge McCarthy declined to examine the “adequacy” of the EEOC’s investigation and instead found that no investigation had taken place at all. Sterling Jewelers, Inc., 2014 WL 916450 *3-4. “The EEOC admits that there is ‘little investigative material in the files beyond the charges, Sterling’s responses, and other correspondence.’” Id. *5. Furthermore, the EEOC’s sole investigator after 2007, had “very little memory of what actions he undertook in this investigation conducted over seven years ago[.]” Id.

The only nationwide data offered by the EEOC was a report written by an interested third party. Sterling Jewelers, Inc., 2014 WL 916450 *7-8. However, during discovery, the EEOC asserted a privilege and made the report and surrounding circumstances unavailable to Sterling. Id. Consequently, Magistrate Judge McCarthy held that the “EEOC cannot now be allowed to argue that…it took any steps to verify the reliability of that analysis. Absent such proof, there is no evidence that its investigation was nationwide.” Id. *8.

Even if the EEOC had made the report available to Sterling, the EEOC “‘has the statutory duty to make an independent investigation, reasonable in scope, to determine for itself’ whether the charge has a factual basis.” Sterling Jewelers, Inc., 2014 WL 916450 *8, quoting E.E.O.C. v. Michael Construction Co., 706 F.2d 244, 252-53 (8th Cir. 1983). As a practical consequence of the ruling, on a go forward basis the EEOC will  have to devote more resources to pre-discovery investigations.