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SMITH v. BRADY

August 6, 1990

Teresa SMITH, Plaintiff,
v.
Nicholas BRADY, Secretary of the Treasury; Internal Revenue Service; Lawrence Gibbs, Commissioner of Internal Revenue; Frank Miceli, San Francisco District Director of the Internal Revenue Service, Defendants



The opinion of the court was delivered by: SMITH

 FERN M. SMITH, UNITED STATES DISTRICT JUDGE.

 This is an action for a declaratory judgment on the issue of whether the waiver of the United States' sovereign immunity from interest on back pay awards, contained in the Back Pay Act, 5 U.S.C. § 5596, applies to actions filed under Title VII. The matter came before the Court for hearing on the parties' cross motions for summary judgment on June 27, 1990. For the reasons discussed herein, the Court hereby grants summary judgment in favor of the plaintiff.

 FACTS

 In 1977, the plaintiff filed a claim of race and sex discrimination against her employer, the Internal Revenue Service ("IRS"), alleging that she had been denied a step promotion that she was due to receive. She pursued her claim through the internal Equal Employment Opportunity ("EEO") channels of the IRS. In 1980, shortly before her claim was to be heard by an EEO hearing officer, the plaintiff was offered a settlement by the IRS. The agency offered her the promotion, but informed her in writing that, under the applicable law and regulations of the agency, she was not entitled to a retroactive promotion for the three years that her action had been pending. Relying on this representation, the plaintiff accepted the terms of the settlement.

 Seven years later in April of 1987, the plaintiff learned that the IRS's representation about the availability of a retroactive promotion had been patently false. In fact, retroactive promotions were available under the IRS's own regulations. In June of 1987, the plaintiff filed a second EEO complaint against the IRS alleging that she had been deliberately misled as part of a pattern of on-going discrimination in the agency. She requested promotional back pay for the period between 1977 and 1980, plus interest.

 At some point in late 1987, the IRS offered the plaintiff the requested back pay without interest. She rejected the offer, claiming that she was entitled to interest on the back pay award. The IRS then dismissed her claim for lack of prosecution. In March of 1988, the Equal Employment Opportunity Commission ("EEOC") Office of Review and Appeals affirmed the IRS's dismissal of the plaintiff's claim on the grounds that she had been offered full and complete relief and had rejected the settlement offer. See, 29 C.F.R. § 1613(a)(7)(1987).

 In April of 1988, the plaintiff requested that the EEOC reconsider her claim in light of the December 22, 1987 amendment to the Back Pay Act, which provides that any back pay awarded to a federal employee under the provisions of the Back Pay Act be payable with interest. See, 5 U.S.C. § 5596(b). The EEOC issued an opinion on July 11, 1988 granting the plaintiff's request for reconsideration. In its opinion, the EEOC agreed with the plaintiff that she had not been offered full relief by the terms of the IRS settlement offer because she was entitled to interest on her back pay award under the new amendment to the Back Pay Act.

 In January of 1989, the IRS tendered a settlement offer to the plaintiff that included all requested back pay and interest. On March 6, 1989, before the plaintiff had accepted the settlement, the IRS withdrew the offer, stating that it had received a directive from the Department of the Treasury that it could not pay interest on any back pay awards to EEO claimants. Documents submitted by the plaintiff in support of this motion indicate that the Department of the Treasury ("DOT") has taken the position that the amendment to the Back Pay Act does not constitute a waiver of sovereign immunity from the payment of interest on back pay awards received in actions filed under the anti-discrimination statutes, including Title VII. In keeping with this position, the DOT has informed its agencies that settlement agreements may not provide for monetary awards that would exceed the amount of back pay, without interest, to which the claimant would be entitled if granted full relief. Although the DOT acknowledges that the EEOC is now awarding interest on back pay, pursuant to the 1987 amendment to the Back Pay Act, the DOT has told its agencies to disregard any award of interest.

 Faced with a clear statement by the IRS and DOT that she will not be paid interest on her back pay award, even if interest is awarded by the EEOC, the plaintiff filed this action in May of 1989 against the DOT, the IRS, and officials therein. She seeks a declaration by this Court that the amendment to the Back Pay Act, authorizing federal agencies to pay interest on back pay awards, applies to Title VII actions. This is the only issue in the case and it is now before the Court on the parties' cross motions for summary judgment.

 ANALYSIS

 I. Waiver of Sovereign Immunity.

 The United States is immune from suit unless it consents to be sued and waives its sovereign immunity. Library of Congress v. Shaw, 478 U.S. 310, 315, 92 L. Ed. 2d 250, 106 S. Ct. 2957 (1986); United States v. Testan, 424 U.S. 392, 47 L. Ed. 2d 114, 96 S. Ct. 948 (1976). In Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e-16, Congress waived the United States' immunity from suit for employment discrimination based on race, color, religion, sex, or national origin. The statute provides that any victim of such discrimination may be awarded hiring, reinstatement, back pay, or other appropriate remedy. 42 U.S.C. § 2000e-16(b). The statute did not, however, waive the United States' traditional immunity from payment of interest. Library of Congress v. Shaw, 478 U.S. 310, 323, 92 L. Ed. 2d 250, 106 S. Ct. 2957 (1986). Prior to 1987, therefore, there was no authority in the law for requiring the United States to ...


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