                               In the

    United States Court of Appeals
                 For the Seventh Circuit
                     ____________________
No. 17-1828
EQUAL EMPLOYMENT OPPORTUNITY COMMISSION,
                                    Plaintiff-Appellant,

                                 v.

CVS PHARMACY, INC.,
                                                 Defendant-Appellee.
                     ____________________

         Appeal from the United States District Court for the
           Northern District of Illinois, Eastern Division.
              No. 14 C 863 — John W. Darrah, Judge.
                     ____________________

     ARGUED DECEMBER 5, 2017 — DECIDED JUNE 8, 2018
                ____________________

   Before WOOD, Chief Judge, and ROVNER and HAMILTON,
Circuit Judges.
   WOOD, Chief Judge. On the surface, this appeal is about a
fee award entered against the Equal Employment Oppor-
tunity Commission (EEOC or Commission). But there is more
than meets the eye. The award relates to a complaint that the
Commission filed against CVS Pharmacy, Inc., alleging that
CVS was using a severance agreement that chilled its employ-
ees’ exercise of their rights under Title VII of the Civil Rights
2                                                  No. 17-1828

Act of 1964, 42 U.S.C. §§ 2000e et seq. After an investigation,
the Commission filed suit in 2014 against CVS. It contended
that CVS’s use of the severance agreement constituted a “pat-
tern or practice of resistance” to the rights protected by Title
VII, in violation of section 707(a) of the statute. 42 U.S.C.
§ 2000e-6(a).
    The district court rejected this claim on summary judg-
ment, and we affirmed in EEOC v. CVS Pharmacy, Inc., 809 F.3d
335 (7th Cir. 2015). After our decision, the district court
awarded CVS $307,902.30 in attorneys’ fees. It reasoned that
the EEOC should have realized even before filing the suit that
EEOC regulations required initial conciliation before it could
proceed with an enforcement action under section 707(a). But
that was not at all clear at the time the EEOC acted. We con-
clude that the district court’s decision impermissibly rested on
hindsight, and so we reverse.
                               I
    Because we addressed the facts and legal background of
this case at length in our earlier opinion, see 809 F.3d at 336–
38, a brief outline suffices for present purposes. CVS’s sever-
ance agreement came to the attention of the EEOC in 2011 af-
ter a former store manager, Tonia Ramos, filed a charge with
the Commission. Ramos had accepted a severance agreement
that included a broad release of claims and a covenant not to
sue, but which carved out exceptions for “rights that Em-
ployee cannot lawfully waive” and for participation “in a pro-
ceeding with any appropriate federal, state or local govern-
ment agency enforcing discrimination laws.” The EEOC ar-
gued that the agreement’s broad release and obscure excep-
tions could deter signatories from cooperating with the EEOC
or otherwise exercising their retained rights.
No. 17-1828                                                     3

    Ordinarily, if the EEOC thinks that a charge has merit, the
Commission first engages in conciliation with the employer
pursuant to section 706’s procedural requirements. See
42 U.S.C. § 2000e-5(b). If the parties cannot negotiate an ac-
ceptable solution, the Commission has the authority to sue the
employer in federal court, on the employee’s behalf. See id.
§ 2000e-5(f). But the EEOC took a different tack in Ramos’s
case. It abandoned Ramos’s charge of an unlawful employ-
ment practice by issuing her a right-to-sue letter in June 2013.
Eight months later, the EEOC filed suit under section 707(a),
which it believed contained a grant of independent litigation
authority. That section allows for suits against “any person or
group of persons … engaged in a pattern or practice of re-
sistance to the full enjoyment of any of the rights secured by
this subchapter … .” Id. § 2000e-6(a).
    The statute distinguishes between section 706, which al-
lows the EEOC to bring what are essentially individual suits,
and section 707’s class-like “pattern or practice” provisions.
Typically, through section 707(e)’s incorporation of section
706’s procedural requirements, the EEOC must follow the
same pre-suit procedures whether the suit is an individual
one or a pattern-or-practice action. Id. § 2000e-6(e) (“All such
actions shall be conducted in accordance with the procedures
set forth in [section 706] of this title.”). But the EEOC took the
position that a distinction between section 707’s subsections
excused it from doing so in this matter. Section 707(a), unlike
section 707(e), gives the EEOC a right to litigate without an
underlying charge or unlawful employment practice, and (the
EEOC thought) by extension without first conciliating. In
drawing this novel distinction, the EEOC noted the difference
between the language of section 707(a) and section 707(e): the
former refers to a “pattern or practice of resistance,” while the
4                                                       No. 17-1828

latter speaks of a “charge of a pattern of practice of discrimi-
nation.” Id. § 2000e-6(a), (e). The Commission also distin-
guished between section 707(a)’s broad reach to “any person
or group of persons” and section 707(e)’s limitation to em-
ployers. Id. In our opinion on the merits, we rejected the
EEOC’s arguments and held that conciliation is necessary un-
der both sections.
   We are now faced with a different question: whether the
EEOC’s position was far enough afield at the time it was ad-
vanced that a fee award is warranted. The district court
thought so, but only because it believed that the EEOC had
taken a position contrary to its own regulations. (The Com-
mission argued otherwise.) The court did not otherwise ad-
dress the legal foundations of the case. In fact, it ruled that the
EEOC’s factual foundations for bringing suit were reasonable.
CVS argues that the district court erred in this latter finding,
and urges us to affirm on either ground.
                                 II
    We review a district court’s decision to award fees for an
abuse of discretion. Pickett v. Sheridan Health Care Ctr., 664 F.3d
632, 639 (7th Cir. 2011). This deference accounts for the district
court’s “superior understanding of the litigation”; it is de-
signed to avoid “a second major litigation” over attorneys’
fees. Id. (quoting Spellan v. Bd. of Educ. for Dist. 111, 59 F.3d 642,
645 (7th Cir. 1995). But “the justifications for the generally def-
erential standard of review are absent” for questions of law.
Jaffee v. Redmond, 142 F.3d 409, 412 (7th Cir. 1998). As always,
we consider the district court’s legal analysis de novo. Pickett,
664 F.3d at 639; Khan v. Gallitano, 180 F.3d 829, 837 (7th Cir.
1999). As applied here, we take a fresh look at the reasonable-
ness of the EEOC’s legal theory, but we defer to the district
No. 17-1828                                                      5

court’s assessment of the case’s procedural history and factual
foundations.
                                A
    Although section 706(k) of Title VII provides for fee shift-
ing in favor of any “prevailing party,” 42 U.S.C. § 2000e-5(k),
courts have long recognized that fees should be awarded to
prevailing defendants only in exceptional cases. This reflects
the policy underlying the Civil Rights Act—the protections of
Title VII would be undermined if good-faith plaintiffs pursu-
ing reasonable theories were deterred from filing because of
the risk of paying a hefty fee award in defeat. A district court
may award fees to a prevailing defendant only “upon a find-
ing that the plaintiff’s action was frivolous, unreasonable, or
without foundation, even though not brought in subjective
bad faith.” Christiansburg Garment Co. v. EEOC, 434 U.S. 412,
421 (1978). In making this finding, district courts must “resist
the understandable temptation to engage in post hoc reason-
ing … .” Id. at 421–22. We have added that “[i]nnovative, even
persistent advocacy in the face of great adversity must not be
unreasonably penalized with hindsight.” Hamer v. Lake Cnty.,
819 F.2d 1362, 1367 (7th Cir. 1987).
    A review of our cases underscores that fees should be
awarded to prevailing defendants only in limited circum-
stances. When it is the law that makes a case frivolous, we
have emphasized that an “award of fees is only permitted
when litigation proceeds in the face of controlling and unam-
biguous precedent.” Id. at 1368. Fee shifting is unwarranted
for a suit implicating “an issue of first impression in an unset-
tled area of the law.” Reichenberger v. Pritchard, 660 F.2d 280,
288 (7th Cir. 1981). A fee award is also unjustified if it is based
on nothing more than an “aggressive” reading of the EEOC
6                                                     No. 17-1828

guidelines. LeBeau v. Libbey-Owens-Ford Co., 799 F.2d 1152,
1162–63 (7th Cir. 1986). That a defendant spends substantial
time and effort defending against a case also counts against
frivolousness. See Hamilton v. Daley, 777 F.2d 1207, 1214 & n.7
(7th Cir. 1985). Thus, that the EEOC lost on the merits is only
the first step. We now must turn back the calendar and ask
how the EEOC’s theory looked in light of the available stat-
utes, regulations, and case law at the time the action was liti-
gated. Christiansburg, 434 U.S. at 421–22.
                                 B
   As we noted earlier, the linchpin of the EEOC’s legal the-
ory is a subtle textual distinction between section 707(a) and
section 707(e). We reproduce the relevant language here for
ease of comparison:
    [Section 707(a):] Whenever the Attorney General [now
    the Commission] has reasonable cause to believe that
    any person or group of persons is engaged in a pattern or
    practice of resistance to the full enjoyment of any of the
    rights secured by this subchapter, and that the pattern
    or practice is of such a nature and is intended to deny
    the full exercise of the rights herein described, the At-
    torney General may bring a civil action in the appro-
    priate district court of the United States … .
42 U.S.C. § 2000e-6(a) (emphasis added).
    [Section 707(e):] [T]he Commission shall have author-
    ity to investigate and act on a charge of a pattern or prac-
    tice of discrimination, whether filed by or on behalf of a
    person claiming to be aggrieved or by a member of the
    Commission. All such actions shall be conducted in ac-
    cordance with the procedures set forth in section
No. 17-1828                                                       7

   2000e-5 of this title [i.e., section 706 of the Civil Rights
   Act of 1964].
42 U.S.C. § 2000e-6(e) (emphasis added).
    While section 707(e) mandates that the EEOC follow sec-
tion 706’s procedural requirements, section 707(a) says noth-
ing about those procedures (or any others). The EEOC argues
that its inference from the statutory language—that section
706 procedures apply only to section 707(e) proceedings—
was novel, but it had legitimate support. And at this stage, the
Commission reminds us, the EEOC’s legal position did not
have to satisfy a high burden—a colorable legal argument will
do. Comparing the EEOC’s arguments to then-existing law
shows that it met this low bar.
    First, the EEOC had a textual foothold. Section 707(a) al-
lows for suit against “any person or group of persons.” By
comparison, unlawful employment practices can be commit-
ted only by employers, labor organizations, employment
agencies, and similar actors. 42 U.S.C. §§ 2000e-2, 2000e-3.
This makes section 707(a) something of an odd fit for the rest
of the statutory scheme and for the EEOC’s typical enforce-
ment powers. Title II of the statute contains an analogous pro-
vision with identical language, and before section 707(a) en-
forcement power was transferred in 1974 from the Attorney
General to the EEOC, see 42 U.S.C. § 2000e-6(c), the two pro-
visions were interpreted alike. Compare id. § 2000a-5, with id.
§ 2000e-6. See also United States v. Original Knights of Ku Klux
Klan, 250 F. Supp. 330, 349 (E.D. La. 1965) (interpreting both
provisions as a broad grant of authority to seek injunctive re-
lief “against any person, public or private”). Perhaps this
changed with the transfer of power from the Attorney Gen-
8                                                    No. 17-1828

eral to the EEOC, but it is difficult to envision what concilia-
tion with a non-employer would look like. Granted, the EEOC
brought this case against an employer, but the EEOC was en-
titled to test its theory that section 707(a) is distinctive and
does not distinguish between employers and non-employers.
   Second, the EEOC had modest support in our prior case
law. The crucial case noted:
    In the course of amending the enforcement provisions
    of Title VII, Congress also transferred to EEOC author-
    ity previously vested in the Attorney General under
    § 707 of Title VII to institute “pattern or practice” law-
    suits on its own initiative—i.e., without certain of the
    prerequisites to a civil action under § 2000e-5(f).
EEOC v. Harvey L. Walner & Assocs., 91 F.3d 963, 968 (7th Cir.
1996). On the merits appeal in the present case, we said that
this “statement should not be interpreted as permitting the
EEOC to proceed without a charge, as the EEOC contends and
the district court concluded in the decision below.” CVS Phar-
macy, 809 F.3d at 343. The need for that clarification in and of
itself, however, demonstrates that the EEOC had a legal hook
on which to hang its case.
    Third, no case squarely foreclosed the EEOC’s interpreta-
tion. CVS emphasizes that courts have “note[d] that the con-
ciliation requirements do not change depending on whether
the EEOC brings a claim under § 2000e-5 (a § 706 claim) or
§ 2000e-6 (a § 707 pattern-or-practice claim).” Arizona ex rel.
Horne v. Geo Grp., Inc., 816 F.3d 1189, 1201 (9th Cir. 2016). But
these cases all rely on section 707(e), which has always re-
quired the use of the section 706 procedures, including con-
ciliation. No cases before our earlier decision contended with
No. 17-1828                                                        9

the possibility of two different sorts of section 707 pattern or
practice claims. E.g., id.; United States v. State of South Carolina,
445 F. Supp. 1094, 1110–11 (D.S.C. 1977). Indeed, we have
found no case prior to the filing of the present one that at-
tempted to parse the language of sections 707(a) and 707(e) as
the EEOC did. Perhaps the best inference from this silence
was that there is no such distinction, but we cannot say that
the EEOC’s reading was frivolous as a result. Novel interpre-
tations succeed or fail, but the law “grows with clarity for ben-
efit of the public” whatever the outcome. Kohler v. Bed Bath &
Beyond of Cal., LLC, 780 F.3d 1260, 1267 (9th Cir. 2015). For sim-
ilar reasons, we do not hold against the Commission any in-
consistent positions it has taken in other cases as CVS asks.
The Commission is entitled to change its mind as new mem-
bers are appointed and it is confronted with new problems.
    CVS contends that even if these arguments made the
EEOC’s case colorable in the abstract, Tonia Ramos’s charge of
unlawful employment practices renders them legally infirm
as applied to this case. But there is a fallacy in its argument. It
assumes that the EEOC had decided to proceed with Ramos’s
charge. Had it done so, the action would have fallen squarely
within section 707(e) and the section 706 procedures would
have been required. But it did not. Quite to the contrary: the
Commission dismissed Ramos’s charge, and so it cannot pos-
sibly form the basis for this suit. CVS clings to a lone mention
of “unlawful employment practices” in the complaint as evi-
dence that the Commission’s case was “really” brought under
section 707(e), but we are not persuaded. Reading the com-
plaint as a whole, it is plain that this is a section 707(a) action.
   If the district court had otherwise accepted the EEOC’s le-
gal arguments, it surely would have given the Commission
10                                                   No. 17-1828

leave to amend its complaint for the first time to allow it to
delete the offending phrase. See Runnion ex rel. Runnion v. Girl
Scouts of Greater Chi. & Northwest Ind., 786 F.3d 510, 519–20 (7th
Cir. 2015) (“Ordinarily … a plaintiff whose original complaint
has been dismissed under Rule 12(b)(6) should be given at
least one opportunity to try to amend her complaint before
the entire action is dismissed.”). Further, we found in our
merits opinion that “the EEOC has not alleged that CVS en-
gaged in discrimination or retaliation by offering the Agree-
ment to terminated employees … .” CVS Pharmacy, 809 F.3d at
343. Consistent with that opinion, we must assume here that
Ramos’s claim is gone.
    The district court rested its fee award not on the statute,
but on two of the EEOC’s own regulations. Those regulations
require that the Commission first use conciliation to eliminate
any unlawful employment practices, 29 C.F.R. § 1601.24, and
that the Commission “may bring a civil action against any re-
spondent named in a charge” only if conciliation has failed,
id. § 1601.27. But these regulations purport to apply only
when an unlawful employment practice has been alleged or
when the EEOC is proceeding pursuant to a charge. The Com-
mission’s arguments that neither was present here apply just
as well to the regulations as they do to the statute. The district
court erred by failing to interpret the EEOC regulations in the
same light. Regulations that parallel the statutory language
cannot independently render the suit unreasonable.
   Finally, we note that if the real problem with the EEOC’s
case was a failure to conciliate, it is questionable whether a fee
award is appropriate after Mach Mining, LLC v. EEOC,
135 S. Ct. 1645 (2015). Mach Mining holds that where the fail-
No. 17-1828                                                    11

ure to conciliate properly is apparent at the outset of litiga-
tion, the “appropriate remedy is to order the EEOC to under-
take the mandated efforts to obtain voluntary compliance.”
Id. at 1656. Dismissal is still an appropriate remedy if the vio-
lations become apparent later. CRST Van Expedited, Inc. v.
EEOC, 136 S. Ct. 1642, 1648–49 (2016) (approving of a fee
award after the EEOC “used ‘discovery in the resulting law-
suit as a fishing expedition to uncover more violations’”
(quoting EEOC v. CRST Van Expedited, Inc., 679 F.3d 657, 676
(8th Cir. 2012))). CVS incurred legal fees in this case not be-
cause of a failure to conciliate, but because of the novelty of
the EEOC’s claimed independent cause of action under sec-
tion 707(a). Even had the EEOC conciliated, its ability to bring
a pattern or practice of resistance case without underlying dis-
crimination or retaliation would have been at issue, and the
legal arguments the same.
    Our starting point is of course this court’s decision on the
merits. But it takes much more than a loss on the merits to
warrant a fee award. Christiansburg, 434 U.S. at 421 (noting
that “‘meritless’ is to be understood as meaning groundless or
without foundation, rather than simply that the plaintiff has
ultimately lost his case”). We have emphasized the arguments
in favor of the EEOC only to show that its position did not
meet the Christiansburg standard. Obviously, the merits panel
found CVS’s arguments more persuasive. We have no need
here to repeat that analysis. And we freely concede that the
novelty of the EEOC’s claim was a strike against it. On the
other hand, CVS spent, by its own account, at least 823.5 hours
defending this suit. CVS told the district court that the case
involved “novel issues that required deep understanding of
Title VII’s text, structure, and history.” If it takes a “deep un-
derstanding” of the statute to refute a legal theory, one can
12                                                   No. 17-1828

hardly argue with a straight face that the same case was
squarely blocked by controlling authority. Novelty may coun-
sel against adopting the EEOC’s reading of its own powers,
but that same novelty also counsels against awarding fees.
Reichenberger, 660 F.2d at 288.
    As we emphasized at the outset, a fee award can be as-
sessed against a losing plaintiff only if its arguments were
squarely blocked by “controlling and unambiguous prece-
dent.” Hamer, 819 F.2d at 1368. The EEOC’s theory was not
that fruitless. Precedent may not have favored it, but the fee
statute does not punish a civil rights litigant for pursuing a
novel, even if ambitious, theory.
                                C
    While an infirm factual foundation can also support a fee
award, Christiansburg, 434 U.S. at 421, the district court did not
base its ruling on that ground. We agree with its finding that
the EEOC did not act frivolously by arguing that CVS’s sever-
ance agreement might deter former employees from cooper-
ating with the Commission. The EEOC’s factual case centered
on the contrast between the broad language of the contract’s
waiver provisions and the relatively vague exceptions. On the
merits, we noted that it was “unreasonable to construe the
Agreement as restricting the signatory from filing a charge or
otherwise participating in EEOC proceedings.” CVS Phar-
macy, 809 F.3d at 341 n.4. Again, we take that as a given. But
the EEOC was trying to make a more subtle point: the agree-
ment, it feared, would have the practical effect of chilling at
least some former employees—presumably none of them le-
gal experts—from cooperating, whatever the agreement’s le-
gal effect. True, Tonia Ramos’s actual cooperation may count
No. 17-1828                                                   13

as evidence against this theory, but it does not render it frivo-
lous. See Christiansburg, 434 U.S. at 422 (“Decisive facts may
not emerge until discovery or trial.”); Ekanem v. Health & Hosp.
Corp. of Marion Cnty., 724 F.2d 563, 574–75 (7th Cir. 1983) (not-
ing that the “‘pattern or practice’ theory of proof … affords
plaintiffs wide latitude in attempting to establish circumstan-
tial evidence of unlawful intent”). We cannot say at this stage
that the EEOC could not have presented facts in support of its
theory. The district court did not abuse its discretion by find-
ing the suit factually reasonable.
                               III
    Because the EEOC’s suit was neither legally nor factually
frivolous, we REVERSE the district court’s order imposing on
the EEOC the obligation to pay CVS’s fees in part. We REMAND
for the district court to enter an amended judgment consistent
with this opinion.
