In a recent opinion, the U.S. District Court for the Northern District of Texas held that an Equal Employment Opportunity Commission (“EEOC”) action brought against an employer for alleged violations of Title VII of the Civil Rights Act of 1964 is excepted from the automatic stay by 11 U.S.C.§ 362(b)(4) (police and regulatory power exception).

The district court held that the whether the claim was excepted from the automatic stay depended upon, whether the EEOC’s primary purpose in bringing the action was to protect public policy and welfare, or whether the claim is based on the debts of private parties.

Acknowledging that the Fifth Circuit Court of Appeals has not addressed whether an EEOC enforcement action under Title VII falls within Section 362(b)(4)’s exception to the automatic stay provision, the district court followed the Fourth Circuit’s reasoning in EEOC v. Mclean, 834 F.2d 398, 402 (4th Cir. 1987):

Of the relief sought by the EEOC in this case, first and foremost is its request for a permanent injunction, which is not limited in application to the individuals named in the EEOC’s pleadings. There is also no indication from the EEOC’s pleadings that it brought this action to protect a pecuniary governmental interest in Shepherd’s property, and, while the EEOC seeks monetary relief on behalf of specific individuals, it is also vindicating the public interest by seeking to prevent discrimination in the workplace under Title VII. In other words, there is no indication that the EEOC’s primary purpose in bringing this action was to recover property from Shepherd’s bankruptcy estate, whether on its own claim, or based on the debts of private parties.

Moreover, the EEOC is not seeking to enforce a money judgment; rather, it seeks to prosecute its Title VII claims against Defendant in this action for purposes of preventing Shepherd from engaging in religious discrimination in the future and to also obtain a money judgment on behalf of the named employees. The EEOC also acknowledges that it will not be able to use this proceeding to enforce any money judgment entered against Shepherd. Accordingly, the court determines that the public policy and pecuniary interest tests are satisfied, and that this action falls within the EEOC’s police and regulatory powers. Section 362(b)(4), therefore, applies, and the EEOC is entitled to prosecute its claims and requests for relief in this court notwithstanding Defendant’s bankruptcy proceeding.

Read the full opinion here.