Table of
Authorities............................................................................... iv
Statement of
Prior or Related Appeals.................................................. v
Statement of Jurisdiction......................................................................... 1
Statement of the
Issues............................................................................ 2
Statement of the
Case.............................................................................. 2
A.
Course of Proceedings............................................................... 2
B. Statement
of the Facts................................................................ 3
1. Factual Background............................................................ 3
2. Procedural History.............................................................. 7
C.
District Court Decisions and Hearing.................................... 14
1. Order Dismissing SGI...................................................... 14
2.
Rule 55(b) Hearing........................................................... 16
3. Findings of Fact and Conclusions of Law..................... 24
Summary of
Argument......................................................................... 25
Argument............................................................................................... 28
I. The district court erred in dismissing Jai and SGI for failure to
state a claim of successor liability on notice grounds............. 29
A. It is well established that the successor liability doctrine applies
under Title VII..................................................................... 29
B. The EEOC plausibly pled successor liability against Jai and SGI
including, if required, that each had constructive notice.................................................................................................................. 35
1. The district court improperly applied a heightened pleading
standard........................................................................ 35
2. Notice is only one factor informing the successor liability
inquiry.......................................................................... 38
3. Even if notice is required, EEOC pled constructive notice,
which suffices under the MacMillan/Trujillo test....... 40
II.
The district court abused its discretion in awarding only $35,000 in
compensatory damages for the eleven aggrieved individuals. 52
Conclusion.............................................................................................. 66
Statement
Regarding Oral Argument................................................. 68
Addendum.................................................................................................
Memorandum
Opinion and Order Dismissing
Fourth
Amended Complaint................................................... Add.-1
Findings of
Fact and Conclusions of Law on Default Hearing....................................................................................................... Add.-12
Final Judgment… ................................................................... Add.-30
Certificate
of Compliance................................................................... C-1
Certificate
of Privacy Redaction......................................................... C-2
Certificate
of Paper Copies................................................................. C-3
Certificate
of Virus Scan..................................................................... C-4
Certificate
of Service............................................................................ C-5
Table of Authorities
Page(s)
Cases
Ashcroft v. Iqbal,
556 U.S. 662 (2009).................................................. 28, 36
Bates v. Pac. Maritime Ass’n,
744 F.2d 705 (9th Cir. 1984).................................... 32, 33
Bautista v. Beyond Thai Kitchen, Inc.,
No. 14-4335, 2015 WL 5459737 (S.D.N.Y. Sept. 17, 2015)......................................................................... 41, 48
Bell Atl. Corp. v. Twombly,
550 U.S. 544 (2007)............................................ 28, 36, 51
Bixler v. Foster,
596 F.3d 751 (10th Cir. 2010)........................................ 28
Blackburn v. Martin,
982 F.2d 125 (4th Cir. 1992).......................................... 66
Cobb v. Contract Transp., Inc.,
452 F.3d 453 (6th Cir. 2006).............................. 34, 37, 39
Criswell v. Delta Air Lines, Inc.,
868 F.2d 1093 (9th Cir. 1989).................................. 34, 37
Dodoo v. Seagate Tech., Inc.,
235 F.3d 522 (10th Cir. 2000)........................................ 65
EEOC v. 786 S.
LLC,
693 F. Supp. 2d 792 (W.D. Tenn. 2010)................. 39, 48
EEOC v. Fairbrook Med. Clinic, P.A.,
609 F.3d 320 (4th Cir. 2010).......................................... 65
EEOC v. MacMillan
Bloedel Containers, Inc.,
503 F.2d 1086 (6th Cir. 1974)................................. passim
Forde v. Kee Lox Mfg. Co.,
584 F.2d 4 (2d Cir. 1978)............................................... 32
Gamez v. Country Cottage Care & Rehab.,
377 F. Supp. 2d 1103 (D.N.M. 2005)...................... 37, 39
Golden State Bottling Co. v. NLRB,
414 U.S. 168 (1973).................................................. 29, 30
Goodpaster v. ECP Am. Steel, LLC.,
No. 09-59, 2012 WL 5267971 (N.D. Ind. Oct. 24, 2012)............................................................................ 41, 42, 51
Guarcas v. Gourmet Heaven, LLC,
No. 15-056, 2016 WL 7632844 (D.R.I. Nov. 30, 2016) 38, 51
Jackson v. Lockie Corp.,
108 F. Supp. 2d 1164 (D.N.M. 2000).......... 37, 40, 43, 48
Khalik v. United Air Lines,
671 F.3d 1188 (10th Cir. 2012)................................ 36, 37
Landgraf v. USI Film Prods.,
511 U.S. 244 (1994).................................................. 54, 55
Lipscomb v. Techs., Servs., & Info.,
Inc.,
No. 09-3344, 2011 WL 691605 (D. Md. 2011).............. 48
Maldonado v. City of Altus,
433 F.3d 1294 (10th Cir. 2006)............................... passim
McDonnell Douglas Corp. v. Green,
411 U.S. 792 (1973).................................................. 35, 36
Montes v. Vail Clinic, Inc.,
497 F.3d 1160 (10th Cir. 2007)................................ 58, 61
Musikiwamba v. ESSI, Inc.,
760 F.2d 740 (7th Cir. 1985)................................... passim
In re Nat’l Airlines, Inc.,
700 F.2d 695 (11th Cir. 1983)........................................ 32
Prince v. Kids Ark Learning Ctr., LLC,
622 F.3d 992 (8th Cir. 2010).................................... 32, 34
Quirindongo Pacheco v. Rolon Morales,
953 F.2d 15 (1st Cir. 1992)............................................ 50
Rego v. ARC Water Treatment Co. of Pa.,
181 F.3d 396 (3d Cir. 1999)............................... 32, 33, 42
Rivera-Rivera v. Medina & Medina,
Inc.,
898 F.3d 77 (1st Cir. 2018)............................................ 64
Robinson v. Sinclair Broad. Grp., Inc.,
182 F. Supp. 3d 742 (W.D. Mich. 2016)....................... 49
Rojas v. TK Commc’ns, Inc.,
87 F.3d 745 (5th Cir. 1996)...................................... 32, 33
Sallis v. Portfolio Ambassador East, LLC,
No. 07-CV-2911, 2008 WL 4425876 (N.D. Ill. Sep. 25, 2008)......................................................................... 38, 44
Scott v. Sopris Imports Ltd.,
962 F. Supp. 1356 (D.Colo. 1997)................................. 39
Shell v. Henderson,
622 F. App’x 730 (10th Cir. 2015)........................... 49, 50
Smith v. Northwest Fin. Acceptance, Inc.,
129 F.3d 1408 (10th Cir. 1997)...................................... 65
Steele v. Voyale Corp.,
88 F. App’x 916 (6th Cir. 2004).................................... 53
Swierkiewicz v. Sorema
N.A.,
534 U.S. 506 (2002)....................................... 29, 35, 36, 37
Trs. of Chi. Plastering Inst. Pension
Tr. v. Elite Plastering Co.,
603 F......................................................................... 15,
44
Trujillo v. Longhorn Mfg. Co.,
694 F.2d 221 (10th Cir. 1982)................................. passim
U.S. EEOC v. Phase 2 Invs. Inc.,
310 F. Supp. 3d 550 (D. Md. 2018)............................... 40
Walker v. Faith Techs., Inc.,
344 F. Supp. 2d 1261 (D. Kan. 2004)............................ 34
Wheeler v. Snyder Buick, Inc.,
794 F.2d 1228 (7th Cir. 1986)...................... 15, 32, 44, 45
Wiggins v. Spector Freight Sys., Inc.,
583 F.2d 882 (6th Cir. 1978). App.......................... 45, 47
Statutes
28 U.S.C. § 1291.................................................................... 1
28 U.S.C. § 1331.................................................................... 1
42 U.S.C. §1981a(b)(1)........................................................ 16
42 U.S.C. § 1981a(b)(3)....................................................... 54
42 U.S.C. § 1981a(b)(3)(A)................................................. 54
42 U.S.C. § 2000e-5............................................................... 1
42 U.S.C. §§ 2000e et seq...................................................... 8
Other
Authorities
29 C.F.R. § 1606.7(a)........................................................... 59
29
C.F.R. § 1606.7(b).......................................................... 24
Fed. R. App. P. 4(a)(1)(B).................................................... 1
Fed. R. Civ. P. 8(a)(2)................................................... 28,
36
Fed. R. Civ. P. 12(b)(6)................................................ passim
Fed. R. Civ. P. 55(b)..................................................... passim
Fed. R. Civ. P. 55(b)(2)........................................... 11, 16, 49
Statement of Prior
or Related Appeals
There
are no prior or related appeals.
The Equal Employment Opportunity Commission
(“EEOC”) sued Roark-Whitten Hospitality 2, LP, d/b/a Whitten Inn (“RW2”) for
discrimination based on race, national origin, and color, and for retaliation
in violation of Title VII of the Civil
Rights Act of 1964, 42 U.S.C. §§ 2000e et seq. R.1. The EEOC later added Jai Hanuman,
LLC, d/b/a Whitten Inn Taos and/or El Camino Lodge (“Jai”), and SGI, LLC, d/b/a
El Camino Lodge (“SGI”), as defendants under a successor liability theory. App. Vol. 1 at 21-38, 54-76. The district court had jurisdiction
under 28 U.S.C. § 1331 and 42 U.S.C. § 2000e-5. On December 30,
2019, the district court entered final judgment.
App. Vol. 2 at 315. The EEOC timely filed a notice of appeal on February 27, 2020.
App. Vol. 2 at 317; see Fed. R. App. P. 4(a)(1)(B). This Court has
jurisdiction pursuant to 28 U.S.C. § 1291.
1. Whether the district court erred in
dismissing Jai and SGI from the case under Rule
12(b)(6) on notice grounds, given that there is no set formula to determine
successor liability and, in any event, the EEOC’s complaint pled constructive
notice.
2. Whether the district court abused its
discretion in awarding only a collective $35,000 in compensatory damages for
eleven aggrieved individuals who attested that RW2’s discrimination and
retaliatory terminations caused them anxiety, stress, and humiliation, and, for
some, financial strain, vomiting, homelessness, headaches, depression, and
suicidal thoughts.
This is an employment discrimination and
retaliation case against a hotel and its two successors in interest. The EEOC
originally sued RW2 for discrimination based on race, color, and national
origin, and for retaliation against a group of Hispanic and minority employees.
R.1 The EEOC alleged that RW2 subjected
the aggrieved individuals to a hostile work environment and discrimination, and
then fired or constructively discharged them after they protested the
discriminatory treatment. Id.
Because RW2 sold the hotel to Jai, which resold
it to SGI, the EEOC added Jai and SGI as defendants under a successor liability
theory. App. Vol. 1 at 21-40, 54-75. When
RW2 and Jai failed to secure counsel or respond to discovery, the district
court entered a sanction-based default order against them. App. Vol. 1 at 52-53. Another judge later
assigned to the case (Judge Paul Kelly Jr., sitting by designation), set aside
the default order against Jai and later dismissed both Jai and SGI for failure
to adequately plead the notice element for successor liability. App. Vol. 1 at 133; App. Vol. 2 at 298. After a Rule 55(b) hearing, the district court awarded
a collective $35,000 in compensatory damages for the eleven victims. App. Vol. 2 at 312. The EEOC appealed. App. Vol. 2 at 317.
The Second Amended complaint
makes the following allegations. In July 2009, RW2 bought the Paragon Hotel in
Taos, New Mexico. App. Vol. 1 at 26 (¶
27). Some of the employees had worked at the hotel for years or even decades
prior to the sale. See, e.g., App. Vol.
1 at 27 (¶ 38) (General Manager Kathy Archuleta/18 years); App. Vol. 1 at 27 (¶ 41) (Maintenance
Manager Dale Quintana/21 years); App. Vol.
1 at 28 (¶ 44) (Assistant Housekeeping Supervisor Jennie Valdez/24 years);
App. Vol. 1 at 30 (¶ 71) (Executive
Housekeeper Rebecca Del Palacio/8 years). Shortly after the purchase, RW2’s
owner, Lawrence Whitten, held a meeting with hotel staff and observed that
nearly all of them were “Spanish.” App.
Vol. 1. at 26 (¶¶ 30-31). He told them “that many, if not most … would not
make it as Whitten employees.” App. Vol. 1
at 27 (¶ 32). Whitten announced that employees “were not allowed to speak
Spanish in his presence” because “he did not understand Spanish.” App. Vol. 1 at 27 (¶ 34). He told a manager at
another hotel he owned in South Carolina that he “would not tolerate Spanish at
his property in Taos.” App. Vol. 1 at 27 (¶ 36).
Whitten treated the Hispanic employees less
favorably than Anglo employees. For instance, he set unreasonably short time
periods for the Hispanic housekeepers, but not the Anglo housekeeper, to clean
rooms. App. Vol. 1 at 28 (¶¶ 45-46).
Whitten made Hispanic employees park on the periphery of the parking lot, but he
permitted the Anglo housekeeper to park closer to the hotel. App. Vol. 1 at 28 (¶¶ 47-48).
In early August, Whitten moved Victor Cardenas
from his position as Front Desk Clerk to maintenance/housekeeping “because of
his accent.” App. Vol. 1 at 28 (¶¶ 49-50).
Whitten directed Marcos Jeantette, a Front Desk Clerk, to use the Anglicized
version of his name, “Mark,” at work, but Jeantette refused. App. Vol. 1 at 28 (¶¶ 51, 53, 54). On
August 8, Whitten asked Jeantette, who is light-skinned, if he was a “white
boy”; Jeantette answered that his father was Hispanic. App. Vol. 1 at 28-29 (¶¶ 52, 55). Whitten
fired Jeantette the next day. App. Vol. 1
at 29 (¶56).
Whitten told Martín Gutierrez, the Night
Auditor, to go by “Martin” when he was at work, without the Spanish accent on
the last syllable. App. Vol. 1 at 29 (¶¶
57, 60). Whitten also directed Gutierrez not to “speak with an accent.” App. Vol. 1 at 29 (¶ 61). Gutierrez lived
with his girlfriend, Front Desk Clerk Michelle Martinez; Whitten called her
“Buckwheat,” a reference “to her dark skin.” App.
Vol. 1 at 29 (¶¶ 58, 59). Whitten asked other employees to Anglicize their
names. See also App. Vol. 1 at 166
(S.Gutierrez Decl.) (Whitten told her to change her name from “Susana” to
“Susan” to “sound more Anglo”).
Whitten made offensive racial and ethnic
comments. App. Vol. 1 at 31 (¶ 80).
He called Hispanic housekeepers who could not speak English “wetbacks.” Id. at ¶ 80a. He referred to
African-Americans, including a maintenance man, as “niggers.” Id. at ¶ 80b. After firing several
Hispanic housekeepers, Whitten said “he was ‘glad to get rid of all the
Mexicans.’” Id. at ¶ 80c.
On August 13, Gutierrez complained about the
no-Spanish policy. App. Vol. 1 at 29 (¶ 62).
On August 16, Whitten fired Gutierrez and Martinez. Id. at ¶ 63. The next day, a group of
Hispanic employees called a meeting with Whitten to object to the
discriminatory treatment and policies. Id.
At the end of the meeting, Whitten fired four more Hispanic employees, although
he rescinded one of the terminations. Id.
at ¶¶ 64-67 (Cardenas returned to work for a few weeks but then resigned). By
September 14, 2009, all but one of the Hispanic employees present at the July
31, 2009, meeting had been fired or had resigned. App. Vol. 1 at 27 (¶ 33).
Eight employees filed charges of discrimination
with the EEOC alleging Title VII
violations. App. Vol. 1 at 21-22 (¶¶ 1, 3).
After an investigation, the EEOC informed RW2 of its determination that there
was reasonable cause to believe that RW2 subjected the aggrieved individuals to
unlawful discrimination in violation of Title
VII. App. Vol. 1 at 22-23 (¶¶ 4-6). On
September 19, 2013, the EEOC notified RW2 that informal conciliation efforts
had been unsuccessful. App. Vol. 1 at 23 (¶ 8).
On September 30, 2014, the EEOC filed this Title VII enforcement action against RW2. R.1. The EEOC alleged discrimination based on
race, color, and national origin as well as retaliation and sought relief for
the eight charging parties and other aggrieved Hispanic and minority employees.
R.1; 42
U.S.C. §§ 2000e et seq. A few days after the EEOC filed suit, it learned
that RW2 had sold the hotel and that there was a new owner. App. Vol. 1 at 24 (¶ 15). Accordingly, the
EEOC amended its complaint to add a successor liability claim against “XYZ”
corporation. R.4. Upon learning that Jai
was the entity that had purchased the Whitten Inn, the EEOC filed a Second
Amended Complaint adding Jai as a successor. App.
Vol. 1 at 24-25. The complaint alleged that Jai had “notice of the Charges
filed … that are subject of this lawsuit” through David Patel, its registered
agent, who reported on October 5, 2014, “to news agencies that he was the new
owner” of the hotel, renamed El Camino Lodge. App.
Vol. 1 at 24 (¶ 15).
Jai did not own the hotel for long, selling it
in September 2016 to SGI. App. Vol. 1 at
58 (¶ 27). The EEOC moved to file a Third Amended Complaint to add SGI as a
successor. R.86. While that motion was
pending, Jai filed a motion to dismiss the Second Amended Complaint, arguing
that successor liability would be inequitable as to Jai because it no longer
owned the hotel. R.96. The district court
denied Jai’s motion. R.178. In its order,
the court discussed the factors for determining successor liability under Title VII, including whether the successor had
notice of the claim. R.178 at 7-10 (citing
Trujillo v. Longhorn Mfg. Co., 694
F.2d 221, 224-25 (10th Cir. 1982), and EEOC
v. MacMillan Bloedel Containers, Inc., 503 F.2d 1086, 1094 (6th Cir.
1974)). Here, the district court ruled, “the EEOC pleaded plausible factual
allegations of successor employer liability against Jai, and thus stated a
claim of successor employer liability.” R.178
at 10; see also R.178 at 10-12
(finding that the EEOC adequately pled successor liability under MacMillan/Trujillo
nine-factor test).This included a plausible
allegation that “Jai had notice of the present case.” R.178 at 10. The district court also permitted
the EEOC to amend its complaint to add SGI, ruling that “the EEOC has stated a
claim against SGI for successor liability.” R.178
at 17. The EEOC later filed its Third Amended Complaint, adding SGI. R.179.
RW2 and Jai, who were represented by the same
counsel, stopped communicating with their attorney, and on August 15, 2017, he
filed a motion to withdraw. R.160. The
magistrate judge granted the motion, but she expressed concern about how long
the case had been pending and ordered RW2 and Jai to obtain new counsel by
October 2, 2017. R.177. If they failed to
do so, the magistrate warned, they could be sanctioned “up to and including a
recommendation … to enter a default judgment.” R.177
at 2. The magistrate also ordered that Whitten and Patel be deposed within two
months and that outstanding discovery responses be supplemented. Id.
RW2 and Jai failed to obtain new counsel or
comply with the discovery orders by the October 2, 2017, deadline. The EEOC
filed a contempt motion requesting a default judgment. R.181. Whitten informed the court that he
lacked funds to obtain counsel but offered to pay a collective $35,000 to the
charging parties, pending a bank loan. App.
Vol. 1 at 161. Patel informed the court that Jai was unable to retain a lawyer.
See R.187 at 3.
The magistrate judge recommended that the
district court grant the EEOC’s contempt motion and enter the default judgment.
R.187. The magistrate reasoned that the
failure to obtain counsel had prejudiced the EEOC and interfered with the
judicial process. R.187 at 6-7. Noting
Whitten’s settlement offer of $35,000, the magistrate judge said that “if Mr.
Whitten can secure funds to honor a settlement offer, he can secure funds to
obtain counsel.” Id. at 9. Neither
RW2 nor Jai filed objections. The district court adopted the magistrate’s
proposed findings, stating that a default judgment “on all issues of liability
is entered” against RW2 and Jai. App. Vol.
1 at 53. The court stated that it would hold a Rule
55(b)(2) hearing “for the purpose of determining the amount of damages.” Id.
SGI filed a motion to dismiss, arguing that the
complaint failed to adequately plead successor liability, including that it had
notice of the lawsuit when it bought the hotel.
R.186. On July 30, 2018, the district
court granted the motion to dismiss, agreeing with SGI that the EEOC failed to
allege that SGI had notice of the EEOC’s lawsuit when it purchased the hotel. R.199 at 8. But the court allowed the EEOC to
file a Fourth Amended Complaint to add factual allegations establishing notice,
a “key element of a claim for successor liability.” R.199 at 9.
The EEOC was able to depose SGI’s owner,
Russell Harper. R.234-1. Harper knew that
Jai’s owner “was eager to sell” the hotel. R.234-1
at 9. Although he bought the hotel for $2.3 million, he thought it should have
been selling for between $3 and $3.5 million. R.234-1
at 13 (“It’s like, Man, now this isn’t adding up.”). He also said it was a
“darn good deal, almost too good to be real,” and had he known about the EEOC’s
lawsuit, the price “would’ve made sense.” Id.
Harper acknowledged that the contract had a 30-day “due diligence” period,
but he said he was “in a hurry” to close the sale. R.234-1 at 8. Harper admitted that he never
did an internet search for “Whitten Inn Taos” or “El Camino Lodge,” although it
“wouldn’t take very long” to do so. R.234-at
at 12.
The EEOC filed its Fourth Amended Complaint in
August 2018. App. Vol. 1 at 54. The
complaint included detailed factual allegations pertaining to SGI’s notice of
this lawsuit: In September 2016, SGI contracted with Jai to purchase the hotel.
App. Vol. 1 at 59 (¶ 35a). The
agreement warned that after expiration of a thirty-day “due diligence” period,
SGI released Jai from “all claims, actions, [and] causes of action” in
connection with the hotel. Id. App.
Vol. 1 at 60, 62 (¶¶ 35c, 35k). The “due diligence” period allowed SGI “to
review the … liabilities … necessary” for the hotel’s operation. App. Vol. 1 at 60 (¶ 35d). SGI’s
president was experienced in hotel purchasing and as the result of his due
diligence, he negotiated a $300,000 discount for repairs. App. Vol. 1 at 61-62 (¶¶ 35h-g). He “was
in a hurry to buy the hotel and did not complete a thorough review of the
business during the due diligence period.” App.
Vol. 1 at ¶ 35l. He admitted that he failed to do an internet
search with the hotel’s previous names although “it would not have taken him
very long” to do so. Id. at ¶ 35n.
“[A] simple search on Google for ‘Whitten Inn Taos’ would reveal information
about the EEOC’s lawsuit.” Id. at ¶
35o. Both the EEOC charges and suit were a matter of public record prior to the
sale, and SGI’s president admitted that he had the duty to perform due
diligence and “could have discovered the fact of this pending lawsuit by proper
diligence[.]” App. Vol. 1 at 62-63 (¶¶ 35p-q).
Finally, SGI had constructive notice of EEOC’s suit when it bought the hotel. App. Vol. 1 at 63 (¶ 35r).
SGI filed a Rule
12(b)(6) motion to dismiss for failure to state a claim, again arguing that it
lacked notice. App. Vol. 1 at 78-84. Six
months later the case was reassigned to Judge Paul Kelly Jr., sitting by
designation from this Court. R.214.
The district court granted SGI’s motion to
dismiss. App. Vol. 1 at 133. The court
noted that in Trujillo this Court
adopted MacMillan’s nine-factor inquiry for determining successor
liability under Title VII. App. Vol. 1 at 137. The court observed that
“the nine MacMillan factors can be
distilled into a three-factor test” looking at notice, the predecessor’s
ability to pay, and continuity of business operations. App. Vol. 1 at 138.
The court assumed that constructive, rather than
actual, notice suffices, but even so, it ruled, the EEOC failed to plausibly
allege that SGI had constructive notice of this suit. App. Vol. 1 at 139-40. The court rejected the
EEOC’s argument that notice should be imputed because SGI would have discovered
the suit with a due diligence inquiry, stating that the EEOC did not plead any
facts that “would have given [SGI] notice to inquire further” about the purchase.
App. Vol. 1 at 141-42 (citing Trs. of Chi. Plastering Inst. Pension Tr. v.
Elite Plastering Co., 603 F. Supp. 2d 1143, 1151 (N.D. Ill. 2009), and Wheeler v. Snyder Buick, Inc., 794 F.2d
1228, 1236 (7th Cir. 1986)). To the EEOC’s observation that a simple search on Google
could have revealed information about the pending EEOC suit, the court
responded that it was “extremely hesitant to require a particular internet
search tool, let alone impose a methodology for such searches.” App. Vol. 1 at 141. In the court’s view,
requiring a successor to “uncover an employment dispute involving a
predecessor’s predecessor, with little or no knowledge of circumstances that
mandate further inquiry, would turn constructive notice into
needle-in-a-haystack notice.”
App. Vol. 1 at 142.
On October 3, 2019, the district court held a Rule 55(b)(2) hearing on damages as to RW2 and
Jai. App. Vol. 2 at 233. An attorney made
a limited appearance to represent RW2 and Jai, who had both been without
counsel since September 2017. R.218; R.219.
Pursuant to Rule
55(b)(2) and the court’s hearing notice, the EEOC’s prehearing brief focused on
damages.
App. Vol. 1 at 144-53. As the EEOC noted, Title VII limits compensatory and punitive
damages to a combined total of $50,000 per employee for employers of RW2’s
size. 42 U.S.C. §1981a(b)(1). App. Vol. 1 at 149. The EEOC requested $50,000
per claimant, with $45,454.54 allocated to compensatory damages and the
remainder to punitive damages, “for a total of $500,000.05” to be distributed
among the eleven aggrieved individuals. Id.
In support of its request for compensatory
damages, the EEOC submitted declarations from the eleven aggrieved individuals.
App. Vol. 1 at 162-71. The declarations
describe in poignant detail the shame, sadness, anxiety, and stress arising
from Whitten’s discrimination and retaliatory terminations. For instance, Martín Gutierrez stated
that he felt “humiliated,” “angry,” “ashamed” and “embarrassed” when Whitten
forbade them from speaking Spanish, told him to Anglicize his name, and called
his co-worker and girlfriend, Michelle
Martinez, “Buckwheat” because of her “very dark complexion.” App. Vol. 1 at 162. Martinez, who was only
seventeen years old, said she was “very scared and embarrassed” and “afraid”
when working for Whitten. App. Vol. 2 at 231.
When she realized that Whitten called her “Buckwheat” not because of her front
teeth but because of the color of her skin, she felt “embarrassed and angry” as
well as “degraded.” Id. When
Whitten yelled at her, she had “stomachaches.” Id. She even “suffered headaches from
crying because [she] dreaded going to work when Whitten took over.” Id.
Another employee, Kathy Archuleta, recounted
that Whitten gave Anglos preferential treatment, such as better parking
privileges, and said that “he didn’t want Mexicans working there” and told her
not to hire any. App. Vol. 1 at 167.
Whitten was “very intimidating.” Id.
She felt “nervous and anxious”; working for Whitten was so stressful that she “would
literally vomit all the time.” Id.
Victor Cardenas stated that when Whitten took over the hotel, he moved Cardenas
from Front Desk Clerk (his job for three years) to maintenance/housekeeping because
Cardenas’s “accent was too thick and too strong for the customers.” App. Vol. 1 at 169. This made Cardenas feel “very
sad and humiliated” as well as “degraded.” Id.
Whitten called Cardenas, and other Hispanic workers and customers, “drug
dealers.” Id. Cardenas described
himself as “anxious” and “nervous” working for Whitten, and he developed
“difficulty at night sleeping.” Id.
Several employees explained how hard it was to
comply with the no-Spanish policy and its impact on them. Susana Gutierrez, the
Supervisor of Housekeeping, stated that the policy caused her “and all the
housekeeping department lots of anxiety, shock, and fear because the
housekeeping department at the time were all primarily Spanish speakers knowing
very little English.” App. Vol. 1 at 166. Because
“the words would just come out in Spanish,” she was nervous and afraid. Id. Whitten “belittled” them on a daily
basis and “regularly put [them] down for not knowing and for not speaking
English while being in the USA.” Id.
Jose Dale Quintana stated, “[w]hen Larry Whitten implanted the No Spanish
Policy, I felt a great loss. … I … became fearful of losing my job. It was
especially stressful for me because Spanish was my first language and the words
just came out[.]” App. Vol. 1 at 165.
The declarations also detail the emotional, and
even physical, toll that being fired had on the employees. For example, Maria
Tafoya, who was nineteen years old and had lived at the hotel before Whitten
fired her, became “homeless on the spot, losing everything as well as [her]
self-respect and [her] dignity.” App. Vol.
1 at 171. When he fired Tafoya, Whitten called the police to escort her out, in
front of her co-workers, making her feel “worthless.” Id. Being fired caused Tafoya anger issues
and anxiety attacks, and she became depressed and had suicidal thoughts. Id. Jose Dale Quintana, fired after
twenty-one years on the job, had a similar experience after his termination. App. Vol. at 1 at 165. Quintana “suffered from
anxiety and was placed on Xanax,” became depressed, and had “great difficulty
sleeping because [he] was always worried about money.” Id. When Martín Gutierrez was fired, he felt
“humiliated,” suffered two to three migraines a day for six months, and eventually
“ended up homeless.” App. Vol. 1 at 163. After
Whitten fired Rebecca del Palacio, she was anxious and worried about paying her
bills. App. Vol. 1 at 168. Jennie Valdez
had “lots of trouble sleeping” and was “always worried about paying the bills”;
her firing was “very devastating.” App.
Vol. 1 at 170. After Martinez’s termination, she “could not sleep from being
worried.” App. Vol. 2 at 231.
RW2 and Jai filed a joint prehearing brief. App. Vol. 2 at 172. Jai argued, inter
alia, that the complaint failed to adequately plead the notice factor of
successor liability, requiring dismissal of the complaint under Rule 12(b)(6). App. Vol. 2 at 179-80. Although more
than a year had passed since the sanction-based default order, they also
insisted that a damage award “makes no sense” because no Title VII violation occurred. App. Vol. 2 at 181.
At the hearing, the EEOC’s attorney emphasized
that because it was a default hearing, the facts alleged in the Second Amended
Complaint must be accepted as true. App.
Vol. 2 at 242-43. Highlighting the complaint’s allegations of discrimination, he
noted that Whitten referred to African-American employees as “niggers”; called Hispanic
housekeepers who did not speak English “wetbacks”; called Martinez “Buckwheat” because of her dark skin
color; mocked employees’ accents in an effort to “ridicule … and intimidate
them”; required employees to Anglicize their names; and forbade renting rooms
to “certain customers who were either African American or Hispanic.” App. Vol. 2 at 241-43. The EEOC’s attorney
also highlighted the factual allegations of retaliation, observing that Whitten
fired Jeantette and the other Hispanic employees because they protested the
discriminatory treatment. App. Vol. 2 at 243-44.
The EEOC’s attorney invoked this Court’s
decision in Maldonado v. City of Altus,
433 F.3d 1294 (10th Cir. 2006), a case involving an English-only rule, as the
complaint’s “primar[y]” authority. App.
Vol. 2 at 238. He emphasized that Whitten was the president of RW2 and “the one
who implemented the policies and procedures that prevented the Hispanic and
other minority employees from speaking Spanish in his presence.” App. Vol. 2 at 239. The EEOC’s attorney elaborated
that “the EEOC doesn’t attempt to say [that] is wrong, that if [Whitten is]
communicating with one of his Spanish-speaking employees, that they speak
English. That is not the gravamen of the case.” Id. Rather, he explained, “[t]he policy
spread to anywhere, at pretty much at any time, on the premises, or at least as
perceived by the aggrieved individuals in the case, because they were in fear
of speaking Spanish because they didn’t know when they would be in the presence
of Mr. Whitten again .…” Id.
EEOC’s counsel repeatedly emphasized that the
sanction-based default judgment against RW2 and Jai foreclosed their
merits-based argument—woven into their pretrial brief and argument at the
hearing—that Whitten did not violate Title
VII. App. Vol. 2 at 288. Defendants’
counsel maintained that damages were not warranted and that the complaint
insufficiently pled notice as to Jai.
3. Findings of Fact and
Conclusions of Law
After the hearing, the district court issued
findings of fact and conclusions of law. App.
Vol. 2 at 298-314. The court set aside the default judgment against Jai, ruling
that the complaint “simply does not state a plausible claim against Jai as to
successor liability on the notice element.”
App. Vol. 2 at 308-09.
Turning to RW2, the court stated that, according
to the EEOC, the “gravamen of the case is a ‘No Spanish’ policy allegedly
implemented by Mr. Whitten.” App. Vol. 2
at 310-11. The court ruled that Whitten had an “obvious” business need for
employees to speak English in his presence. App.
Vol. 2 at 311-12 (citing Montes v. Vail
Clinic, Inc., 497 F.3d 1160, 1171 (10th Cir. 2007); 29 C.F.R. § 1606.7(b)). The court
acknowledged the complaint’s allegations that Whitten used racial slurs,
ridiculed employees’ accents, treated Hispanic and Black employees and
customers poorly, and fired most of the victims after the meeting. App. Vol. 2 at 312. However, “[i]n light of
the relatively short time frame in which the actions occurred” and “the stated
basis of the gravamen of the” complaint (an evident reference to the no-Spanish
policy), the court awarded only a collective $35,000 in compensatory damages. Id. Although the court did not explain how
it arrived at this figure, it is the exact amount that Whitten offered the EEOC
in 2017 to settle the case. App. Vol. 1 at
161.
More than a decade ago, Lawrence Whitten
purchased a distressed hotel in Taos, New Mexico. He swiftly made clear to the
Hispanic employees that he disapproved of their Hispanic names, their accents,
and their speaking Spanish. He required them to Anglicize their names, mocked
their accents, forbade them from speaking Spanish in his presence, called them
racially offensive names such as “wetback,” “nigger,” and “Buckwheat,” and
denied them privileges afforded his Anglo employees. When the Hispanic
employees protested, he fired them.
For these reasons, the EEOC brought this Title VII enforcement action against RW2 for
discrimination based on national origin, race, and color, as well as
retaliation. After learning the hotel was sold, and resold, the EEOC added claims
of successor liability against Jai and SGI. At its core, this appeal is about
the EEOC’s effort through six years of litigation to obtain relief for the victims
of Whitten’s unlawful treatment.
The EEOC brought successor liability claims against
Jai and SGI in an attempt to secure relief for the eleven victims, which is the
purpose of the equitable successor liability doctrine. According to the district
court, however, the EEOC failed to state a claim of successor liability as to
either entity because, under this Court’s nine-factor successor liability test,
the EEOC failed to plausibly plead one factor: notice. But the EEOC is not
required at the pleading stage to allege facts establishing each element of the
nine-factor test, particularly where this Court has held there is no set
formula to determine successor liability and no single factor is dispositive.
In any event, the complaint plausibly pleads that Jai had constructive notice
of the charges of discrimination and that SGI had constructive notice of this
lawsuit, both of which satisfy the notice factor.
After entering a sanction-based default
judgment against RW2 and holding a Rule
55(b) hearing, the district court awarded a collective $35,000 in compensatory
damages. That award, which averaged only $3,181 per individual, was so low as
to constitute an abuse of discretion. The eleven affidavits submitted at the hearing
attested to the significant emotional and mental distress caused by Whitten’s
discriminatory and retaliatory treatment. According to the employees, some of
whom had worked for years at the hotel, working for Whitten caused them shame,
humiliation, stress, and anxiety; one employee found working for Whitten so
stressful that she “would literally vomit all the time.” After Whitten fired
them, the employees endured financial strain and anxiety, and some suffered
homelessness, headaches, depression, and even suicidal thoughts. RW2 offered nothing
at the hearing to rebut this evidence. Because the award of $35,000 fell far
short of compensating the claimants for their emotional, and even physical,
harm, it constituted an abuse of discretion.
In separate orders, the district court dismissed
the EEOC’s claims of successor liability against Jai and SGI for failure to
state a claim under Rule 12(b)(6). App. Vol. 2 at 308-09 (dismissing Jai), App. Vol. 1 at 133-143 (dismissing SGI). This
Court reviews de novo a district court’s dismissal under Rule 12(b)(6) for failure to state a claim. Bixler v. Foster, 596 F.3d 751, 756 (10th
Cir. 2010).
Under Federal Rule of Civil Procedure
8(a)(2), a pleading must
contain a “short and plain statement of the claim showing that the pleader is
entitled to relief.” In order to “survive a motion to dismiss, a complaint must
contain sufficient factual matter, accepted as true, to ‘state a claim for
relief that is plausible on its face.’” Ashcroft
v. Iqbal, 556 U.S. 662, 668 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007)). The plausibility standard, however, is not a probability standard;
rather, it “simply calls for enough fact[s] to raise a reasonable expectation
that discovery will reveal evidence of illegal[ity].” Twombly, 550 U.S. at 556. A complaint need
not plead facts establishing a prima facie case of discrimination. Swierkiewicz v. Sorema N.A., 534
U.S. 506, 511 (2002).
The district court failed to adhere to these
standards when it dismissed Jai and SGI. Viewed under the proper legal
standards, the EEOC’s complaint plausibly alleged successor liability,
including, if required, that each entity had constructive notice. The district
court’s orders of dismissal should therefore be reversed.
This Court has long recognized the successor
liability doctrine, which is an equitable doctrine imposing liability on
successor corporations for their predecessor’s unlawful acts. See Trujillo, 694 F.2d at 225. Its application
under Title VII can be traced back to
labor law. See Golden State
Bottling Co. v. NLRB, 414 U.S. 168 (1973). In Golden State, the Supreme Court stated
that “[t]o further the public interest involved in effectuating the policies of
the [National Labor Relations] Act … we are persuaded that one who acquires and
operates a business of an employer found guilty of unfair labor practices in
basically unchanged form” and has notice of the unfair practices “should be
held responsible for remedying” it. Id.
at 171 n.2 (internal citation and quotation marks omitted). While the Court
acknowledged that doing so imposed liability on successors who had not
themselves violated the law, it stated, “in balancing the equities involved
there are other significant factors which must be taken into account.… When a
new employer is substituted in the employing industry there has been no real
change in the employing industry insofar as the victims of past unfair labor
practices are concerned, or the need for remedying those unfair labor practices.”
Id. (internal citation and quotation
marks omitted).
Relying on Golden
State, the Sixth Circuit in EEOC v.
MacMillan Bloedel Containers, 503 F.2d 1086 (1974), applied the successor
liability doctrine to Title VII. The court
reasoned that failing to hold a successor liable under Title VII “for the discriminatory practices of
its predecessor could emasculate the relief provisions of Title VII by leaving the discriminatee without
a remedy or with an incomplete remedy. In the case where the predecessor
company no longer had any assets, monetary relief would be precluded. Such a
result could encourage evasion in the guise of corporate transfers of
ownership.” Id. at 1091-92. The Sixth
Circuit added that “the equities of the matter favor successor liability
because it is the successor who has benefited from the discriminatory
employment practices of its predecessor.” Id.
at 1092.
Emphasizing that a successor’s liability “must
be determined on a case by case basis,” the MacMillan
court set out nine factors to consider when determining successorship
liability: “1) whether the successor company had notice of the charge, 2) the
ability of the predecessor to provide relief, 3) whether there has been a
substantial continuity of business operations, 4) whether the new employer uses
the same plant, 5) whether he uses the same or substantially the same work
force, 6) whether he uses the same or substantially the same supervisory
personnel, 7) whether the same jobs exist under substantially the same working
conditions, 8) whether he uses the same machinery, equipment and methods of
production and 9) whether he produces the same product.” Id. at 1091, 1094.
Although, of course, MacMillan itself is not binding precedent
outside of the Sixth Circuit, it effectively became the lead case on successor
liability under Title VII. Since MacMillan, every court of appeals to
consider the issue, including this one, has relied on MacMillan or its progeny to hold that the
doctrine of successor liability applies under Title
VII. See Forde v. Kee Lox Mfg.
Co., 584 F.2d 4, 5-6 (2d Cir. 1978); Rego
v. ARC Water Treatment Co. of Pa., 181 F.3d 396, 401 (3d Cir. 1999); Rojas v. TK Commc’ns, Inc., 87 F.3d 745,
750 (5th Cir. 1996); Wheeler v. Snyder
Buick, Inc., 794 F.2d 1228, 1236 (7th Cir. 1986); Prince v. Kids Ark Learning Ctr., LLC, 622
F.3d 992, 994-95 (8th Cir. 2010); Bates
v. Pac. Maritime Ass’n, 744 F.2d 705, 709-10 (9th Cir. 1984); In re Nat’l Airlines, Inc., 700 F.2d 695,
698 (11th Cir. 1983). We are aware of no contrary authority among the federal
courts of appeals.
In Trujillo,
this Court relied on MacMillan
to hold that the successor liability doctrine applies to Title VII, stating: “[t]he reasoning of the
Sixth Circuit is convincing and we endorse the application of the MacMillan factors in analyzing a successor
corporation’s liability under Title VII.”
694 F.2d at 225. Again echoing MacMillan, the Trujillo Court stressed that “the ‘nature
and extent of [successor] liability is subject to no formula, but must be
determined upon the facts and circumstances of each case.’” Id. (quoting MacMillan, 503 F.2d at 1092). Accordingly,
in Trujillo, this Court held that
the successor was liable for its predecessor’s Title
VII violation, observing that such liability would not work “an unfair hardship
on the company.” Id. (noting that
successor purchased nearly all of predecessor’s assets and had notice of EEOC
complaint).
As the district court recognized below, some
courts have distilled MacMillan’s nine factors into three factors that
consider whether: (1) the successor had notice of the claim; (2) the
predecessor is able (or was able) to provide the required relief; and (3) there
was sufficient continuity of business operations. App. Vol. 1 at 138 (citing Gamez v. Country Cottage Care & Rehab.,
377 F. Supp. 2d 1103, 1116 (D.N.M. 2005) and Wheeler, 794 F.2d at 1236); see also,
e.g., Rego, 181 F.3d at 402
(recognizing three distilled factors); Rojas,
87 F.3d at 750 (same); Bates, 744
F.2d at 709-10 (same). This formulation focuses on
the first three MacMillan factors
(notice, predecessor’s ability to provide relief, and continuity of
operations), while the remaining six MacMillan
factors “provide a foundation for analyzing the third criterion—whether there
is sufficient continuity of operations between the successor and predecessor to
justify successor liability.” Walker v.
Faith Techs., Inc., 344 F. Supp. 2d 1261, 1267 (D. Kan. 2004). “Because the
origins of successor liability are equitable, fairness is a prime consideration
in its application.” Criswell v. Delta
Air Lines, Inc., 868 F.2d 1093, 1094 (9th Cir. 1989) (imposing successor
liability in ADEA action). This Court,
however, has not adopted a three-factor formulation of the successor liability
standard, and continues to apply Trujillo’s nine-factor test.
The district court’s sole basis for dismissing the
successor liability claims against Jai and SGI was the EEOC’s purported failure
to adequately plead notice. That dismissal constituted reversible error for
three reasons: 1) the district court improperly applied a heightened pleading
standard; 2) notice is not necessarily required for successor liability, an
equitable doctrine; and 3) even if it were, the EEOC plausibly pled that Jai
and SGI had constructive notice of the charges and claims, which satisfies the
notice factor.
The district court dismissed SGI and Jai from
the case because the EEOC ostensibly failed to plead a single factor out of a multi-factor
inquiry used to determine successor liability. That analysis contradicts Swierkiewicz, wherein the Supreme Court
unanimously rejected the notion that complainants must plead facts establishing
a prima facie case under McDonnell
Douglas Corp. v. Green, 411 U.S. 792 (1973), in order to satisfy Rule 8(a)(2). In Swierkiewicz, the Court explained that the
“prima facie case under McDonnell
Douglas … is an evidentiary standard, not a pleading requirement.” Swierkiewicz, 534 U.S. at 510. Requiring
plaintiffs to plead a prima facie case would also be inappropriate, the Court
added, because McDonnell Douglas
does not apply to every case, and even when applicable, its precise
requirements vary. Id. at 511. The
Tenth Circuit, like other courts of appeal, has continued to apply this aspect
of Swierkiewicz even after Iqbal and Twombly. See, e.g., Khalik v. United Air Lines, 671 F.3d 1188,
1192 (10th Cir. 2012) (“[T]he 12(b)(6) standard does not require that
Plaintiff establish a prima facie case in her complaint[.]”).
The district court ran afoul of Swierkiewicz by turning the MacMillan factors for assessing successor
liability into pleading requirements. Just as the Supreme Court held in Swierkiewicz with respect to the McDonnell Douglas prima facie case
elements, nothing in either Trujillo or
MacMillan suggests that the
successor liability factors were intended to be pleading requirements either.
And, like the McDonnell Douglas
prima facie case, the applicability of the MacMillan
factors also varies from case to case. See, e.g., Cobb v. Contract Transp., Inc., 452 F.3d 543,
554 (6th Cir. 2006) (“[A]ll nine [MacMillan]
factors will not be applicable to each case.”); Criswell, 868 F.2d at 1095 (determination
of successor liability is “highly fact-specific”). To be sure, this Court has
said that the elements of a claim “help to determine whether [a complaint] has
set forth a plausible claim,” Khalik,
671 F.3d at 1192, but it contravenes Swierkiewicz
to hold, as the district court did, that the failure to plead facts
plausibly alleging a single factor informing the successor liability
analysis warrants dismissal.
The fact-specific nature of the successor
liability inquiry makes it generally inappropriate to dismiss a complaint under
Rule 12(b)(6) for failure to adequately
allege successor liability, as underscored by the absence of decisions doing
so. Review of the caselaw suggests that courts typically wait until summary
judgment, or after a trial, to rule on successor liability issues. See, e.g.,
Trujillo, 694 F.2d at 222
(post-trial ruling); MacMillan, 503
F.2d at 1088 (summary judgment); Gamez,
377 F. Supp. 2d at 1107 (summary judgment); Jackson
v. Lockie Corp., 108 F. Supp. 2d 1164, 1169 (D.N.M. 2000) (summary
judgment). The district court judge initially assigned to the case took this
approach, stating when she denied Jai’s motion to dismiss that “several facts relevant
to the MacMillan test … may only be
determined through discovery,” including “whether Jai had notice of the claim.”
R.178 at 12 n.3; see also Guarcas v. Gourmet Heaven, LLC, No.
15-056, 2016 WL 7632844, at *8 (D.R.I. Nov. 30, 2016) (“At the Fed. R. Civ. P. 12(b)(6) stage, courts are
forgiving of claimants who struggle to demonstrate notice before engaging in
discovery.”), report and recommendation adopted, No. 15-00056, 2017 WL 127868 (D.R.I. Jan. 3,
2017); Sallis v. Portfolio Ambassador
East, LLC, No. 07-CV-2911, 2008 WL 4425876, at *5 (N.D. Ill. Sep. 25,
2008) (“[W]hether and when Portfolio had notice of the [claim] is a question of
fact that is not appropriately resolved based on the pleadings, especially
since relevant facts regarding communications between Omni and Portfolio are
likely beyond Plaintiff’s purview prior to discovery.”).
Even if a complaint must plead the mandatory
elements for successor liability, dismissal under Rule 12(b)(6) was error because notice is not
an absolute prerequisite to successor liability. To the contrary, this Court
stated in Trujillo that “the
‘nature and extent of [successor] liability is subject to no formula, but
must be determined upon the facts and circumstances of each case.’” 694 F.2d at 225 (quoting MacMillan, 503 F.2d at 1092) (emphasis
added). The MacMillan/Trujillo factors are just that—factors—not a
mandatory nine-point checklist that must be completed in order to impose
successor liability. See Cobb, 452
F.3d at 554 (nine factors are not relevant to every case); EEOC v. 786 S. LLC, 693 F. Supp. 2d
792, 795 (W.D. Tenn. 2010) (“The presence of all nine sub-factors is not
essential to a finding of successor liability.”). “No one factor is
controlling. A court must look to all of them and make its decision by
balancing the interests of the injured employee and the national policy against
discrimination.” Musikiwamba v. ESSI,
Inc., 760 F.2d 740, 750 (7th Cir. 1985).
Thus, successor liability can be imposed even in
the absence of notice. See id. (notice
is critical but no one MacMillan factor
is controlling); Gamez, 377 F.
Supp. 2d at 1123-24 (fact question existed as to successor liability, even
though successor lacked notice of EEOC charge); but see Scott v. Sopris Imports Ltd., 962 F. Supp.
1356, 1360 (D. Colo. 1997) (lack of notice “is dispositive”). Because notice,
although important, is not the sine qua non of successor liability, the
district court necessarily committed reversible error in dismissing for the
EEOC’s failure to adequately plead it.
Here, the district court assumed, correctly,
that constructive notice suffices. App.
Vol. 1 at 139. But the court erred by dismissing the complaint at the pleading
stage based on an overly strict application of the “constructive notice”
standard. While there is not extensive case law on the subject, courts have
articulated the standard for constructive notice in a range of ways. Most tend
to speak in terms of “due diligence”—i.e., whether a successor could have known
of a claim’s existence “with the exercise of reasonable diligence.” Jackson, 108 F. Supp. 2d at 1168. See,
e.g., Musikiwamba, 760 F.2d at
752 (no notice where successor exercises “due diligence” but fails to discover
lawsuit filed on same day as purchase; “[n]ormally, the burden” is “on the
successor to find out from the predecessor all outstanding potential and actual
liabilities”); U.S. EEOC v. Phase 2
Invs. Inc., 310 F. Supp. 3d 550, 570 (D. Md. 2018) (in noting applicability
of due diligence standard, stating, “Courts look to notice in this context to
protect innocent purchasers that were themselves blindsided, not to reward
purchasers that choose to enter deals blindly”); Bautista v. Beyond Thai Kitchen, Inc., No.
14-4335, 2015 WL 5459737, at *8 (S.D.N.Y. Sept. 17, 2015) (in FLSA case, stating that defendants “exercised
little, if any, diligence concerning” restaurant’s liabilities; defendants
could have asked accountant or chef about problems at the restaurant); Goodpaster v. ECP Am. Steel, LLC., No.
09-59, 2012 WL 5267971, at *4 (N.D. Ind. Oct. 24, 2012) (“a complete failure to
ask about prospective liabilities … can hardly constitute due diligence” with
respect to potential liabilities).
The concept of due diligence places the burden
on the successor to make reasonable inquiries about prospective liabilities. Using
this notion as the measure of constructive notice makes sense in light of both
the remedial purpose of Title VII and the
equitable purpose of the successor liability doctrine. See MacMillan 503 F.2d at 1091-92 (failing to
hold successor liable for predecessor’s discriminatory practices “could
emasculate the relief provisions of Title
VII by leaving the discriminatee without a remedy or an incomplete remedy”); Trujillo, 694 F.3d at 225 (equities
favored imposing successor liability because it was the successor who benefited
from the predecessor’s discriminatory practices); Rego, 181 F.3d at 401 (“The policy
underlying the [successor liability] doctrine is ‘to protect an employee when
the ownership of his employer suddenly changes.’”) (citing and quoting Rojas, 87 F.3d at 750); Goodpaster, 2012 WL 5267971, at *4-5 (due
diligence requires asking about potential liabilities; otherwise, “too many
victims of employment discrimination [would go] uncompensated”), at *4 n.3
(successors should not be able to avoid liability “by playing an unspoken but
mutually understood game of ‘don’t ask, don’t tell’”). The “due diligence”
standard strikes the right balance between relief to victims and fairness to
successors by encouraging successors to make “reasonable inquiries” into
potential liability, which can be accounted for in the purchase price. Heavenly
Hana, 891 F.3d at 846; see also Musikiwamba, 760 F.2d at 752 (“The basis
of the notice requirement is that the successor has some time to negotiate a
change in the purchase agreement to reflect the potential liability of a
lawsuit[.]”).
Here, the district court appeared to reject the
“due diligence” standard based on its misunderstanding of what it entails. In
its order dismissing SGI, the court mused that “[i]f the simple existence of a
lawsuit were enough to impute constructive notice,” prospective purchasers
would have to “search infinite court dockets, using all possible names of their
predecessors to determine whether potential liabilities may arise. Courts
should be reluctant to impose due diligence requirements that are the product
of 20-20 hindsight.” App. Vol. 1 at 141. Contrary
to the district court’s understanding, due diligence is not “a strict liability
standard.” Heavenly Hana, 891 F.3d
at 847. Rather, it is a due diligence standard: it permits notice to be
imputed only where the successor’s “reasonable diligence” would have
revealed the underlying claim. Jackson,
108 F. Supp. 2d at 1168 (emphasis added).
The district court further opined, “The notice
analysis does not turn on the diligence exercised. Rather, it turns on whether
there were facts and circumstances of which a party had a duty to take notice.”
App. Vol. 1 at 142. In other words, the
district court required for constructive notice that there be “some facts”
prompting a prospective buyer to “perform [due] diligence.” Id.; see also App. Vol. 2 at 310 (concluding that Jai lacked
notice, despite complaint’s allegations that Patel had constructive notice of
EEOC charges). Not only does this alternative standard make little sense (since
apparently even the existence of a pending EEOC lawsuit did not suffice to meet
it), but the district court relied for support on one cherry-picked Seventh
Circuit case and one district court case that have contrary case law within
their jurisdictions. See App. Vol.
2 at 141 (dismissing SGI and citing Wheeler,
794 F.2d at 1237 & n.9, and Trs. of
Chi. Plastering Inst. Pension Tr., 603 F. Supp. 2d at 1151); but see,
e.g., Musikiwamba, 760 F.2d at
752 (burden normally on successor “to find out from the predecessor all
outstanding potential and actual liabilities”); Sallis, 2008 WL 4425876, at *5 (applying
due diligence standard to establish constructive notice).
In fact, the district court’s characterization
notwithstanding, Wheeler does not
reject the due diligence standard at all. Wheeler
expressly acknowledged that in Musikiwamba
the Seventh Circuit had “strongly embraced” not only the “essential” nature of
the successor liability doctrine in employment discrimination cases but the
“liberalization of that concept in favor of victims of discrimination in
employment.” 794 F.2d at 1237.
Accordingly, the Wheeler court
stated, “[w]e are not prepared
to hold that absence of timely actual knowledge is a bar to successor liability
in every case.” Id. Rather,
the court held that successor liability was not warranted because of the
circumstances of that case, which included the availability of substantial
relief from the predecessor. Id.
In emphasizing the importance of the notice
requirement, the district court also relied on Wiggins v. Spector Freight Sys., Inc., 583
F.2d 882, 886 (6th Cir. 1978). App. Vol. 1
at 138-39 (order dismissing SGI). Ironically, Wiggins suggests that constructive notice exists
if EEOC charges were pending at the time of purchase. See Wiggins, 583 F.2d at 886 (notice factor
would have been satisfied if successor had actual notice or if EEOC
charges were pending at the time of purchase). Nothing in Wiggins suggests, as the district court
held, that some additional “facts” are required to prompt a prospective buyer
to perform its due diligence. App. Vol. 1
at 141.
Viewed under the correct
interpretation of the “due diligence” standard, the complaint plausibly pled
that Jai had constructive notice. Although this is, of course, not
determinative, we note that the district court judge originally assigned to the
case found that the EEOC plausibly alleged that “Jai had notice of the present
case.” R.178 at 10. She was correct.
The Second Amended Complaint alleged that on October 5, 2014—five years after
the charges were filed, and after the EEOC notified RW2 of its reasonable cause
finding and the failure of conciliation—David Patel (Jai’s registered agent) reported
that he was the new owner of the Whitten Hotel. App. Vol. 1 at 23-24 (¶¶ 6, 8, 14, 15). The
complaint added that “[t]hrough Patel, Jai … had notice of the Charges filed
with the Commission that are the subject of this lawsuit.” App. Vol. 1 at 24 (¶ 15). The EEOC further
alleged that RW2 operated the hotel as the “Whitten
Inn.” App. Vol. 1 at 23-24.
These facts, and the reasonable inferences to
be drawn from them, plausibly suggest that Patel could have discovered the eight
pending EEOC charges, as well as the reasonable cause finding, and failure of
conciliation notice, had he asked Whitten about any outstanding liabilities. At
a minimum, it is plausible that an internet search using the hotel’s name would
have alerted him to the employees’ widely publicized allegations of
discrimination and retaliation. This satisfies the due
diligence standard. See Wiggins, 583
F.2d at 886 (suggesting notice could have been satisfied with evidence that
EEOC charges were pending); Musikiwamba,
760 F.2d at 752 (normally, successor bears burden of “find[ing] out from the predecessor
all outstanding potential and actual liabilities”); 786 South, 693 F. Supp. 2d at 795 (“It is well accepted
that constructive notice may suffice … at least where the relevant charges have
been filed with the EEOC.”); see also Bautista, 2015 WL 5459737, at *2, *8
(defendants failed to exercise due diligence where they did not ask about
potential liabilities and plaintiff had been negotiating FLSA claim with predecessor’s attorney prior
to purchase); Lipscomb v. Techs.,
Servs., & Info., Inc., No. 09-3344, 2011 WL 691605, at *8 (D. Md. Feb.
18, 2011) (constructive notice satisfied where “due diligence” would have
revealed EEOC charge filed during purchase negotiations).
The facts pled thus distinguish this case from
others in which EEOC charges were not pending before the purchase and, unsurprisingly,
the courts found no notice. See Jackson,
108 F. Supp. 2d at 1168 (stating that “there is no evidence that [successor]
knew or with the exercise of reasonable diligence could have known prior to its
purchase” of the plaintiff’s Title VII
claim where EEOC charge was filed “after the purchase”); Robinson v. Sinclair Broad. Grp., Inc.,
182 F. Supp. 3d 742, 747 (W.D. Mich. 2016) (no notice where employer lacked
actual notice and plaintiff filed EEOC charge after purchase occurred). Additionally,
had the EEOC been able to depose Patel—which it was unable to do because Jai
disobeyed the court’s order to permit the deposition—the EEOC could have asked
him if “some facts” (such as an unexpectedly low purchase price, or a hurry to
sell) should have prompted a reasonably diligent search of potential
liabilities.
Finally, if this Court concludes that the
complaint did not plausibly allege notice, the EEOC should be permitted to
amend it. After concluding that the complaint plausibly alleged notice as to
Jai, Chief Judge Armijo ordered default entered against Jai and said she would
hold a Rule 55(b)(2) hearing as to
damages. App. Vol. 1 at 53. Judge Kelly’s
notice setting the hearing date also referred only to damages. R.216 (setting default hearing “on relief”). The
EEOC thus “reasonably assume[d] that [its] only obligation in that hearing was
to prove damages.” Shell v. Henderson,
622 F. App’x 730, 733 (10th Cir. 2015) (district court abused its discretion in
failing to warn plaintiff that Rule 55(b)
hearing would address liability). Judge Kelly never warned the EEOC that he was
reconsidering the notice issue, although he chastised the EEOC for failing to
address notice at the hearing. See App.
Vol. 2 at 310 (“Nothing in the SAC or the default hearing” suggested
that Jai had notice) (emphasis added). That constituted reversible error. See
Shell, 622 F. App’x at 733-34
(remanding where district court failed to notify plaintiff that Rule 55(b) hearing would address merits); Quirindongo Pacheco v. Rolon Morales, 953
F.2d 15, 16 (1st Cir. 1992) (same).
The district court also erred in concluding
that the EEOC failed to plausibly plead that SGI had notice. The complaint’s
allegations against SGI are robust. As detailed supra at 12-13, the EEOC
plausibly and specifically alleged that a reasonably diligent search would have
alerted SGI to this lawsuit, which was pending for two years before SGI
purchased the hotel from Jai. The complaint alleged, inter alia, that
SGI’s president failed to do a Google search for “Whitten Inn Taos,” which
would have alerted him to the “lawsuit and the underlying dispute with the
employees.” App. Vol. 1 at 62 (¶ 35o).
The complaint alleged that the president admitted that under the terms
of the contract “he had the duty to act and perform his duty of due diligence,”
and that had he done so, “he could have discovered … this pending lawsuit.” App. Vol. 1 at 63 (¶ 35q). These
allegations more than sufficed to satisfy the due diligence standard at the
pleading stage, as they allege that SGI could have learned of this pending lawsuit
had the president simply asked Jai about potential liabilities, or if he had
done a reasonably diligent internet search. See supra at 47-48
(citing cases); see also Guarcas, 2016 WL 7632844, at *8 (“A pleading establishing that the
litigation is a matter of public record in a court docket permits the inference
of notice.”); Goodpaster, 2012 WL
5267971, at *4 (constructive notice established where successor “took no steps
at all to discover” pending ADEA suit).
The facts pled, and the reasonable inferences to
be drawn from them, also raised “a reasonable expectation that discovery
w[ould] reveal evidence” of red flags that SGI ignored. Twombly, 550 U.S. at 556. This satisfied
even the district court’s narrow view of the due diligence standard as
requiring “some facts” to trigger a due diligence inquiry. App. Vol. 1 at 141. This expectation actually
came to pass, as SGI’s president testified at his deposition that the purchase
price was between $700,000 and $1,200,000 less than he had expected and was a
“darn good deal, almost too good to be real.” See supra at 12. Further,
he knew that Jai’s owner was in a hurry to sell. Id. Although EEOC did not include these
facts in the Fourth Amended Complaint, their existence underscores the district
court’s legal error in ruling—even under its view of the due diligence standard—that
the complaint failed to state a claim under Rule
12(b)(6).
The district court awarded a collective $35,000
in compensatory damages against RW2. App.
Vol. 2 at 312. That minimal award was so low as to constitute an abuse of
discretion. See Olcott, 327 F.3d at
1124 (reviewing default judgment for abuse of discretion and stating, ”We will
not disturb the court’s decision without a clear showing that the decision was
based on a clearly erroneous factual finding or that it manifests a clear error
of judgment.”).
Where, as here, a default judgment is entered, a
plaintiff’s well-pleaded allegations of fact are admitted, and the defendant is
barred from challenging them on appeal. See id.
at 1125; see also Steele v. Voyale
Corp., 88 F. App’x 916, 917 (6th Cir. 2004) (in Title VII case, affirming exclusion at Rule 55(b) hearing of defendant’s evidence undermining
the plaintiff’s claim that her termination caused her emotional distress). Accordingly,
the well-pleaded facts in the Second Amended Complaint concerning the
discrimination and retaliation are admitted.
At the Rule
55(b) hearing, the EEOC offered unrebutted evidence of the significant
emotional—and even physical—harm the discrimination and retaliation caused the
eleven aggrieved individuals. That evidence warranted a compensatory damage
award far higher than $35,000 (averaging only $3,181 per individual), making
the award an abuse of discretion. The district court offered no explanation for
how it settled on $35,000, although that happens to be exactly what Whitten
offered to settle the case in 2017. However the district court arrived at this
figure, it fell woefully short of compensating the eleven aggrieved individuals
for the emotional distress inflicted by Whitten’s treatment.
Compensatory damages are available under 42 U.S.C. § 1981a(b)(3) to compensate for
“emotional pain, suffering, inconvenience, mental anguish, [and] loss of
enjoyment of life[.]” They were not originally available under Title VII, but Congress amended the statute to
permit their recovery as part of the 1991
Civil Rights Act. In so doing, it aimed to “further Title VII's ‘central
statutory purposes of eradicating discrimination throughout the economy and making
persons whole for injuries suffered through past discrimination.’” Landgraf v. USI Film Prods., 511 U.S. 244,
254-55 (1994) (discussing compensatory and punitive damages) (quoting Albemarle Paper Co. v. Moody, 422 U.S. 405,
421 (1975)). The statutory cap for a combined award of compensatory and
punitive damages for an employer of Whitten’s size is $50,000 per employee. 42 U.S.C. § 1981a(b)(3)(A).
Citing Whitten’s discriminatory and retaliatory
actions and the emotional distress described in the eleven declarations, the
EEOC requested compensatory damages of at least $45,454.54 per individual. App. Vol. 1 at 149; see App. Vol. 2 at 241-43. The district court awarded
a fraction of that: a collective $35,000, which averages out to just
$3,181.81 per aggrieved individual. That amount does not account for the
significant “pain, suffering, inconvenience, mental anguish, [and] loss of
enjoyment of life” the victims described. Nor is it sufficient to further Title
VII’s goal of eradicating discrimination and making employees whole. See Landgraf, 511 U.S. at 254.
As discussed supra at 16-21, the
individuals attested that Whitten’s discriminatory treatment and retaliatory
firings caused stress, anxiety, shame, humiliation, anxiety, low self-esteem,
and—for some—vomiting, relationship strains, sleeping problems, headaches, anxiety,
depression, stomachaches, financial strain, and homelessness. For instance,
Martín Gutierrez stated that he felt “embarrassed of [his] culture and [his]
own race” after Whitten told him to Anglicize his name and prohibited them from
speaking “Spanish at work anymore especially in front of him and the
customers.” App. Vol. 1 at 162. Hearing
Whitten call his girlfriend, Michelle
Martinez, “Buckwheat” due to her dark complexion made Gutierrez angry and sad;
after Whitten fired him, Gutierrez did not like to go out in public and had
daily “severe migraine headaches” for six months. Id.
The district court offered only two justifications
for the minimal award: (1) “the relatively short time frame” the victims worked
for Whitten; and (2) the court’s view that the “gravamen” of the complaint was
the “No Spanish” policy. App. Vol. 2 at 312.
Neither proffered reason supports such an arbitrarily low award of compensatory
damages. To be sure, the victims, several of whom had worked at the hotel for
years or decades before RW2 purchased it, worked for Whitten for less than two
months. But this was because Whitten either fired them after they complained of
the discriminatory treatment, or they were constructively discharged. And each
individual offered evidence that working for Whitten, even briefly, caused them
emotional pain and mental suffering.
Kathy Archuleta, for instance, recounted that Whitten
gave Anglo (but not Hispanic) employees days off and parking privileges, said
“he didn’t want Mexicans working there,” and told her not to hire Mexican
workers. App. Vol. 1 at 167. She “dreaded
going to work,” finding it so stressful that she “would literally vomit all the
time.” Id. As Archuleta’s
declaration illustrates, this was not a workplace with a few casually
inoffensive comments; it was a workplace riddled with severe hostility towards
Hispanic employees and customers.
And, insofar as Whitten’s “no-Spanish” policy, as implemented
in this case, contributed to the hostile work environment, that only bolsters
support for a significant award of compensatory damages. As the EEOC’s attorney
explained at the hearing, the employees never knew when Whitten might be
around, leaving them in constant fear of getting in trouble for speaking
Spanish “in his presence.” App. Vol. 2 at
239. The employees’ declarations confirm that the discrimination, including the
“no-Spanish” policy, caused them significant emotional distress. Jose Dale
Quintana explained that the “No-Spanish” policy made him fearful that he would
lose his job “because Spanish was [his] first language and the words just came
out.” App. Vol. 1 at 165. Susana Gutierrez
told a similar story, stating that because she is a native Spanish speaker who
knows “little English,” she felt “nervous all the time because the words would
just come out in Spanish and [she] was always afraid to get in trouble.” App. Vol. 1 at 166. The policy caused her and
the staff “lots of anxiety, shock, and fear,” and Whitten “belittled” them and
“regularly put [them] down for not knowing and for not speaking English while
being in the USA.” Id.
(Whitten called them “awful names” that no one had ever called her).
It appears that the district court may have
also discounted the emotional distress caused by the no-Spanish policy because,
in the court’s view, the policy did not itself violate Title VII. App.
Vol. 2 at 311 (stating that Whitten had an “obvious” business need for it). But
this Court has long recognized that “English-only instructions … can, in
certain circumstances, ‘create[ ] a hostile atmosphere for Hispanics in their
workplace’ and thus violate Title VII” as
intentional discrimination. Montes,
497 F.3d at 1170 (quoting Maldonado,
433 F.3d at 1304) & n.15. In Maldonado,
this Court held that a jury could find that the English-only policy in that
case, which effectively prohibited Spanish if any non-Spanish speakers were
present, contributed to a hostile work environment. 433 F.3d at 1305-06. This Court stated that
the plaintiff had “produced evidence that the English-only policy created a
hostile atmosphere for Hispanics in their workplace … all the Plaintiffs stated
that they had experienced ethnic taunting as a result of the policy,” which
“made them feel like second-class citizens.” Id. at 1304. This Court further reasoned
that “the very fact that the City would forbid Hispanics from using their
preferred language could reasonably be construed as an expression of hostility
towards Hispanics,” at least in the absence of a legitimate purpose for the
restrictions. Id. at 1305. Accordingly,
this Court explained, forbidding employees from speaking Spanish during breaks
or in private conversations, if non-Spanish speakers were present, would
support an “inference of hostility” unless there was a “legitimate reason” for
the restriction. Id.
Here, much like the policy in Maldonado, the EEOC’s complaint and
claimants’ declarations suggest that the No-Spanish policy effectively operated
as a blanket ban on speaking Spanish, thereby “creat[ing] a hostile atmosphere
for Hispanics in their workplace.” Id.
at 1304. See generally 29
C.F.R. § 1606.7(a) (guideline stating that an English-only rule applied “at all
times” may create an atmosphere of inferiority, isolation, and intimidation
based on national origin and presumptively violates Title VII). As in Maldonado, where the policy was
accompanied by ethnic taunting and made the employees feel like “second-class citizens,”
in this case the policy was coupled with racial slurs and disparate treatment that
made the employees feel inferior. For instance, Michelle Martinez stated the
policy made her feel “bad about [her]self” and that Whitten “looked down on
us.” App. Vol. 2 at 231. Rebecca del
Palacio stated that the policy was “very offensive” and that Whitten made her
feel “degraded like I was lower than him because I was Hispanic.” App. Vol. 1 at 168.
Even viewing the policy more narrowly, however,
it is far from clear why Whitten broadly prohibited his employees from speaking
any Spanish in his presence, even when they were not addressing him. The
policy seemingly banned employees from speaking Spanish to each other or to
family or friends, by phone or in person. Whitten never explained why he needed
such a broad policy, supporting the conclusion that the no-Spanish policy
contributed to a hostile work environment. See generally Maldonado, 433 F.3d at 1305 (reasonable to
infer that English-only policy was “an expression of hostility to Hispanics” if
“there was no apparent legitimate purpose for the restrictions”).
To be sure, a targeted, narrow English-only
rule might not create or contribute to a hostile work environment where, as in Montes, it was unaccompanied by racial
slurs and disparate treatment. But when an English-only rule is implemented by
a company owner who calls his Hispanic housekeepers who do not speak English
“wetbacks,” calls another Hispanic employee “Buckwheat” because of her dark
complexion, and ridicules employees for their Spanish accents, the policy acts
to humiliate, degrade, anger, and embarrass, and communicates that Hispanic
employees are inferior. App. Vol. 1 at 29,
31 (¶¶59, 80); see Maldonado, 433
F.3d at 1308 (finding jury question as to intentionally discriminatory hostile
work environment based on English-only policy where, inter alia, mayor
referred to the Spanish language as “garbage”). The employees’ declarations
underscore this. See, e.g., App.
Vol. 1 at 170 (Valdez) (discussing no-Spanish policy and discriminatory
treatment and stating “Whitten was very intimidating and attacked our
culture”); App. Vol. 1 at 166 (S. Gutierrez)
(no-Spanish policy “caused me and all the housekeeping department lots of
anxiety, shock, and fear”; Whitten “belittled” us and “regularly put [us] down
for not knowing and for not speaking English while being in the USA”).
The district court’s cursory compensatory
damages analysis, and its undue focus on the no-Spanish policy, glossed over the
other serious allegations of discrimination that warranted a sizable
compensatory damage award. Early in its order, the court acknowledged that the
complaint includes allegations that Whitten “used racial epithets, ridiculed an
employee’s accent, treated Hispanic and Black employees and customers poorly,
and otherwise treated the employees of color differently from White employees.”
App. Vol. 2 at 311 (citing R.87, ¶¶ 78-83). In fact, the complaint
lays bare the odious nature of Whitten’s slurs, which included “wetback,”
“nigger,” and “Buckwheat.” Given the backdrop against which Whitten imposed his
“No-Spanish” policy, the employees understandably interpreted it as another
manifestation of Whitten’s anti-Hispanic animus and part of the overall hostile
work environment. And their declarations make clear that working in such an
environment, even briefly, inflicted substantial emotional distress and mental
anguish, which lingered long after their fleeting employment with Whitten
ended.
The district court’s award also constituted an
abuse of discretion because it fails to account for the emotional, and
physical, harm caused by the retaliatory terminations. As discussed supra
at 20-21, being fired caused the claimants significant distress. Nineteen-year-old
Maria Tafoya became “homeless on the spot, losing everything as well as [her]
self-respect and [her] dignity,” and she became depressed and suicidal. App. Vol. 1 at 171. Jose Dale Quintana, fired
after twenty-one years on the job, “suffered from anxiety and was placed on
Xanax,” went through a “huge depression,” and had “great difficulty sleeping
because [he] was always worried about money.” App.
Vol. 1 at 165. Martín Gutierrez felt “humiliated,” suffered two to three
migraines a day for six months, endured financial difficulty, and eventually
became homeless. App. Vol. 1 at 162-63.
Rebecca del Palacio was anxious and worried about paying her bills. App. Vol. 1 at 168. Marcos Jeantette “felt
betrayed and angry when Whitten fired [him] based on the color of [his] skin
and not on [his] work or what [he] could offer.” App. Vol. 1 at 164. Being fired was a “traumatic
experience” for Susana Gutierrez. App.
Vol. 1 at 166. After his termination, Victor Cardenas was “ashamed to go out in
public” and mostly talked only to Kathy Archuleta. App. Vol. 1 at 169. Jennie Valdez, who worked
twenty-four years at the hotel, felt “cheated” and found it “very devastating”
to go without a pay check; she had sleeping issues and financial strain. App. Vol. 1 at 170. Michelle Martinez, only
seventeen years old, also had sleeping problems “from being worried.” App. Vol. 2 at 231.
The district court also erred in failing to
accord any significance to Whitten’s status as the owner of the company. App. Vol. 2 at 239, 243 (emphasizing that
Whitten was “the president”). This enhanced the severity of Whitten’s treatment
and, necessarily, the emotional impact of it. See generally Rivera-Rivera v. Medina & Medina, Inc.,
898 F.3d 77, 95-96 (1st Cir. 2018) (jury question existed as to retaliatory
hostile work environment perpetrated by co-owner, who screamed at plaintiff,
intimidated her, and threatened to fire her); EEOC v. Fairbrook Med. Clinic, P.A., 609
F.3d 320, 329 (4th Cir. 2010) (jury could find that harassment’s severity “was exacerbated by the fact that [the
harasser] was not only Waechter’s immediate supervisor but also the sole owner”
of the medical clinic). Because there was no one above Whitten to whom they
could complain about the no-Spanish policy, racial slurs, mocking remarks, and
disparate treatment—and because Whitten fired those who did complain—the
employees understandably found that working for Whitten caused them “lots of
stress,” “anxiety,” and “fear,” leaving them “sad,” “angry,” “fearful,”
“embarrassed,” “humiliated,” and “degraded.” See supra at 17 n.8.
The inadequacy of the collective $35,000 award here
is underscored by comparison to compensatory damage awards this Court has
affirmed in other cases with similar (and even less severe) evidence of
emotional distress. See, e.g., Dodoo
v. Seagate Tech., Inc., 235 F.3d 522, 532 (10th Cir. 2000) (affirming
$125,000 award where plaintiff “testified that he has trouble sleeping and
wakes up with his heart pounding, not knowing where he is” and felt his hard
work went unrecognized); Smith v.
Northwest Fin. Acceptance, Inc., 129 F.3d 1408, 1416 (10th Cir. 1997)
(upholding $200,000 award where plaintiff’s harm included “nausea, migraines,
humiliation, degradation, loss of self-respect, sleeplessness, consumption of
sleeping pills, frequent crying, loss of a loan officer career, and stress in
Plaintiff’s relationship with her daughter”). Cf. Blackburn v. Martin, 982 F.2d 125, 132
(4th Cir. 1992) (Secretary’s denial of compensatory damages under Energy Reorganization Act constituted an abuse
of discretion where employee’s termination caused “loss of self-esteem and
emotional problems,” including stress). Accordingly, the award constituted an
abuse of discretion, warranting remand to the district court for reassessment.
For the foregoing reasons, the judgment of the
district court should be vacated and the case remanded for further proceedings.
Respectfully submitted,
SHARON FAST
GUSTAFSON
General Counsel
JENNIFER S.
GOLDSTEIN
Associate
General Counsel
ELIZABETH E.
THERAN
Assistant
General Counsel
s/Anne Noel
Occhialino
ANNE NOEL
OCCHIALINO
Senior Appellate
Attorney
Equal Employment
Opportunity Commission
Office of
General Counsel
131 M St. N.E.,
5th Fl.
Washington, D.C.
20507
(202) 663-4724
Annenoel.Occhialino@eeoc.gov
