Young v. Chao

Background

Cheryl Young, representing herself, had prevailed on administrative employment-discrimination claims against the Department of Transportation. The Equal Employment Opportunity Commission ordered the agency to reinstate her to an equivalent position and provide back pay. After the agency offered a position that Young considered not equivalent, she pursued enforcement proceedings. The EEOC ultimately found that the position was sufficiently similar and that Young was entitled to back pay only through March 17, 2017.

Young then brought this federal action seeking de novo review, meaning a new judicial determination of the claims rather than limited review of the administrative decision. In an earlier order, the court held that Young did not have to return the money she had received before pursuing this action. The court also allowed the Secretary to bring a counterclaim for the funds if Young failed to prevail or obtained a smaller award.

The Secretary alleged that the agency had paid Young $60,000 in compensatory damages, $196,177.84 in attorney fees and costs, and various amounts of back pay, including payments made directly to Young and to her Thrift Savings Plan accounts. The Secretary asserted two counterclaims: unjust enrichment and a claim under the Federal Debt Collection Procedures Act, 28 U.S.C. §§ 3001–3308.

Arguments

Young argued that the unjust-enrichment counterclaim was a compulsory counterclaim that the Secretary had waived by not including it in the answer. She also argued that the claim was barred by a prior ruling, lacked an allegation that the underlying judgment had been reversed or avoided, and was unavailable because federal regulations provided another remedy for recovering overpaid back pay.

Young treated the Federal Debt Collection Procedures Act counterclaim as a request for preliminary relief and argued that the Secretary had not satisfied the requirements for such relief. She also argued that the Secretary had not adequately alleged either that a debt currently existed or that the Department of Transportation had not violated Title VII or the Age Discrimination in Employment Act.

The Secretary maintained that the earlier order authorized the counterclaims and that he was not seeking a final right to the funds unless Young lost this case or obtained a smaller judgment. He argued that any amount Young would owe in that event would qualify as a debt covered by the Federal Debt Collection Procedures Act.

Court’s analysis

The court applied Rule 12(b)(6), which tests whether a pleading states a legally sufficient and plausible claim. At this stage, the court generally accepts well-pleaded factual allegations as true and views them favorably to the party opposing dismissal.

For unjust enrichment, the court construed the counterclaim as contingent on Young’s failure to prevail or on her receiving less than the administrative award. The court held that this claim was an appropriate way to present the Secretary’s potential right to reimbursement. It concluded that the Secretary had alleged enough by stating that the agency paid Young money under the administrative order. The court did not require the Secretary to plead facts disproving the elements of Young’s claims, reasoning that the Secretary’s answer was the appropriate place to deny those allegations.

For the Federal Debt Collection Procedures Act counterclaim, the court again treated the claim as contingent on Young’s failure to prevail. The court stated that an obligation to return the funds in that event would fit the statute’s broad definition of a debt. Although the court noted uncertainty about whether the statute itself creates an affirmative claim for relief, it found no basis to dismiss the counterclaim because the statute appeared to govern collection procedures for such funds.

Ruling and effect

The court denied Young’s motion to dismiss the unjust-enrichment counterclaim and denied her motion to dismiss the Federal Debt Collection Procedures Act counterclaim. It therefore denied the motion to dismiss the Secretary’s counterclaims. Young was ordered to answer the counterclaims by May 31, 2022. The court stated that the ruling did not determine whether the Secretary would ultimately recover funds, whether Young would prevail on the merits, or whether the Secretary would be entitled to preliminary relief. Any request for preliminary relief would require a separate motion.