Equal Employment Opportunity Commission v. Indiana Bell Telephone Co., Inc 99-1155 IN THE UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT No. 99-1155 EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Plaintiff-Appellee, v. INDIANA BELL TELEPHONE CO., INC., d/b/a AMERITECH INDIANA, and AMERITECH CORPORATION, Defendants-Appellants. On Appeal from the United States District Court for the Southern District of Indiana, Indianapolis Division Honorable Larry J. McKinney, Judge EN BANC BRIEF OF THE EQUAL EMPLOYMENT OPPORTUNITY COMMISSION AS APPELLEE C. GREGORY STEWART General Counsel PHILIP B. SKLOVER Associate General Counsel CAROLYN L. WHEELER Assistant General Counsel GEOFFREY L.J. CARTER Attorney EQUAL EMPLOYMENT OPPORTUNITY COMMISSION Office of General Counsel 1801 L Street, NW. Washington, D.C. 20507 (202) 663-4728 TABLE OF CONTENTS TABLE OF AUTHORITIES . . . . . . . . . . . . . . . . . . . . iii INTRODUCTION 1 STATEMENT OF FACTS 4 STATEMENT OF ISSUES FOR EN BANC BRIEF 6 ARGUMENT 7 I. AMERITECH'S EVIDENCE ABOUT ARBITRATION AND ITS COLLECTIVE BARGAINING AGREEMENT IS INADMISSIBLE AS A MATTER OF LAW ON THE ISSUE OF LIABILITY . . . . . . . . . . . . . . . . 7 A. Ameritech's arbitration evidence is inadmissible as a matter of law on the issue of liability because evidence about Ameritech's state of mind is not relevant to the question of whether Ameritech acted negligently . . . . . . . . . . . . . . . . . . . . . 7 Ameritech's arbitration evidence is inadmissible as a matter of law on the issue of liability because no jury may find that it was "reasonable" for an employer to believe that the terms of a collective bargaining agreement altered its Title VII duties to prevent and respond to sexual harassment . . . . . . . . . . . 10 II. AMERITECH'S EVIDENCE ABOUT ARBITRATION AND ITS COLLECTIVE BARGAINING AGREEMENT IS INADMISSIBLE AS A MATTER OF LAW ON THE ISSUE OF PUNITIVE DAMAGES . . . . . . . . . . . . . . 16 A. Ameritech's arbitration evidence is inadmissible as a matter of law on the issue of punitive damages because, as presented, the evidence improperly invites the jury to accept an invalid defense to punitive damages . . . . . . . . . . . . . . . . . . . . . . 16 B. Ameritech's arbitration evidence is also inadmissible because, where the alleged obstacles presented by the collective bargaining agreement and the risk of arbitration arose because of Ameritech's prior malice or reckless indifference to Title VII rights, the doctrine of equitable estoppel bars Ameritech from proffering the arbitration evidence as a partial or complete defense to punitive damages . . . . . . . 22 III. THERE IS NO ALTERNATIVE BASIS FOR ALLOWING AMERITECH TO PRESENT ITS ARBITRATION EVIDENCE TO A JURY . . . . . . . . . . 25 CONCLUSION 28 CERTIFICATE OF COMPLIANCE CERTIFICATE OF SERVICE TABLE OF AUTHORITIES CASES PAGE(S) Alexander v. Gardner-Denver Co., 415 U.S. 36 (1974) . . . . . . 11 Baskerville v. Culligan International Co., 50 F.3d 428 (7th Cir. 1995) . . . . . . . . . . . . . . . . . . . . . . 9 Bomba v. Belvidere, Inc., 579 F.2d 1067 (7th Cir. 1978) . . . . 23 Cada v. Baxter v. Healthcare Corp., 920 F.2d 446 (7th Cir. 1991) . . . . . . . . . . . . . . . . . . . . . 23 Cange v. Stotler and Co., 826 F.2d 581 (7th Cir. 1987) . . . . . 23 EEOC v. Board of Governors of State Colleges and Univs., 957 F.2d 424 (7th Cir. 1992) . . . . . . . . . . . . . . . 11 EEOC v. County of Calumet, 686 F.2d 1249 (7th Cir. 1982) . . . . 12 EEOC v. Indiana Bell Telegraph Co., 214 F.3d 813 (7th Cir. 2000). . . . . . . . . . . . . . . . . . . . . 2, 27 Eckles v. Consolidated Rail Corp., 94 F.3d 1041 (7th Cir. 1996) . . . . . . . . . . . . . . . . . . . . . . 13 Ettus v. Orkin Exterminating Co., 233 Kan. 555, 665 P.2d 730 (1983) . . . . . . . . . . . . . . . . . . . 20 Glus v. Brooklyn E. Dist. Terminal, 359 U.S. 231 (1959) . . . 23 Kolstad v. American Dental Association, 527 U.S. 526 (1999) . . . . . . . . . . . . . . . . . 17, 19 20, 21 Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137 (1999) . . . 26 Marshall v. El Paso Natural Gas Co., 874 F.2d 1373 (10th Cir. 1989) . . . . . . . . . . . . . . . . . . . . . 20 Meritor Savings Bank, FSB v. Vinson, 477 U.S. 57 (1986) . . . 21 Merriweather v. Family Dollar Stores of Indiana, Inc., 103 F.3d 576 (7th Cir. 1996) . . . . . . . . . . . . . . . 22 Nottelson v. Smith Steel Workers D.A.L.U. 19806, 643 F.2d 445 (7th Cir. 1981) . . . . . . . . . . . . . . . . . . . . 12, 13 Perry v. Harris-Chernin, Inc., 126 F.3d 1010 (7th Cir. 1997) . . 8 Reeves v. Sanderson Plumbing Products, 120 S. Ct. 2097 (2000) . . . . . . . . . . . . . . . . . . 4 Smith v. Wade, 461 U.S. 30 (1983) . . . . . . . . . . . . . . 21 Trans World Airlines v. Hardison, 432 U.S. 63 (1977) . . . 12, 13 Warfel v. Cheney, 157 Ariz. 424, 758 P.2d 1326 (Ariz. Ct. App. 1988) . . . . . . . . . . . . . . . . . . 19 Wright v. Universal Maritime Service Corp., 525 U.S. 70 (1998) . . . . . . . . . . . . . . . . . . . 11 Zimmerman v. Cook County Sheriff's Department, 96 F.3d 1017 (7th Cir. 1996) . . . . . . . . . . . . . . . . . . . . . . 8 STATUTES 42 U.S.C. § 1981a(b)(1) . . . . . . . . . . . . . . . . . . . . 16 42 U.S.C. § 2000e-2(h) . . . . . . . . . . . . . . . . . . . . 13 OTHER AUTHORITIES Fed. Rule Evid. 402 . . . . . . . . . . . . . . . . . . . . . . 8 W. Page Keeton et al., Prosser and Keeton on the Law of Torts (5th ed. 1984) . . . . . . . . . . . . . . . . . . . . . . 9 Restatement (Second) of Torts (1958) . . . . . . . . . . . . 9, 10IN THE UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT No. 99-1155 EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Plaintiff-Appellee, v. INDIANA BELL TELEPHONE CO., INC., d/b/a AMERITECH INDIANA, and AMERITECH CORPORATION, Defendants-Appellants. On Appeal from the United States District Court for the Southern District of Indiana, Indianapolis Division Honorable Larry J. McKinney, Judge EN BANC BRIEF OF THE EQUAL EMPLOYMENT OPPORTUNITY COMMISSION AS APPELLEE INTRODUCTION On February 21, 1995, plaintiff-appellee Equal Employment Opportunity Commission ("Commission" or "EEOC") commenced this action alleging that Indiana Bell Telephone Co., et al. ("Ameritech") subjected Lori Everts and similarly situated female employees to sexual harassment. See EEOC Appellee Brief at 3. The case was tried before a jury for nine days, beginning on September 15, 1997, and the jury returned a verdict for the Commission, awarding compensatory and punitive damages based on the claims of Everts, Debbie Wentland, and Wendy Pollard. See id. Ameritech appealed, and argued (among other things) that the district court committed reversible error when it excluded Ameritech's evidence about its fears about arbitration and the terms of the collective bargaining agreement (Ameritech's "arbitration evidence"). See Ameritech's Opening Brief as Appellant at 22-36. By a 2 to 1 vote, a panel of this Court accepted Ameritech's argument, reversing the judgment in favor of the Commission on the ground that the district court should have admitted Ameritech's arbitration evidence on the issues of both liability and punitive damages. See EEOC v. Indiana Bell Tel. Co., 214 F.3d 813, 825 (7th Cir. 2000). On September 6, 2000, this Court granted the Commission's petition for rehearing en banc and vacated the panel opinion. This Court also directed the parties to file "new briefs limited to the issues of whether, as a matter of law, evidence regarding arbitration and a company's collective bargaining agreement is inadmissible in a Title VII suit to show: 1) that an employer's response to sexual harassment was reasonable for the purpose of determining employer liability; and 2) that the employer did not act with the state of mind necessary for the imposition of punitive damages." September 6, 2000 Order. The analysis below will demonstrate that the evidence Ameritech sought to present in this case about arbitration and the collective bargaining agreement was inadmissible as matter of law on both liability and punitive damages. On the issue of employer liability, Ameritech's arbitration evidence is inadmissible as a matter of law because if it is state of mind evidence, as Ameritech has contended, the arbitration evidence is irrelevant to whether Ameritech engaged in negligent conduct in failing to prevent and remedy the sexual harassment in this case. Further, no jury could find that it was "reasonable" for Ameritech to believe that the terms of a collective bargaining agreement altered or affected its duties under Title VII to prevent and respond to sexual harassment in the workplace. Ameritech's arbitration evidence is also inadmissible as a matter of law on the issue of punitive damages. Ameritech's arbitration evidence, as presented, is inadmissible because it improperly would invite the jury to hold that the reckless indifference Ameritech's managerial staff showed to the claimants' Title VII rights is mitigated or excused because of the obstacles allegedly created by the risk of arbitration, where neither Title VII nor Supreme Court precedent authorizes such a defense. In addition, Ameritech's arbitration evidence is inadmissible under the doctrine of equitable estoppel. Specifically, because Ameritech created the alleged problems with the risk of arbitration by acting with reckless indifference on earlier occasions when it had an opportunity to address the harassment in the workplace, the doctrine of equitable estoppel bars Ameritech from benefitting from its wrongdoing by now proffering evidence about arbitration as a partial or complete defense to punitive damages.<1> STATEMENT OF FACTS<2> In this case, a jury returned a verdict for the Commission and awarded compensatory and punitive damages against Ameritech for the sexual harassment of Debbie Wentland, Lori Everts, and Wendy Pollard. The claims against Ameritech stem from a long history of sexually offensive conduct that former Ameritech employee Gary Amos ("Amos") directed at several of his female co-workers. From 1975 to November 21, 1991, Amos sexually harassed at least thirteen of his female co-workers at Ameritech. See EEOC Appellee Brief at 5-9 (discussing Amos' sexual harassment of Brenda Huckeba, Jackie Robertson, Shirley Shelton, Jacqueline Stine, Janie Kern, Mary Bufford, Kathleen Kragenbrink, Cheryl Cromlich, Sherrie Green, Jo Ellen Eichman, Karen Roeling, Debbie Murray and Rhonda Latham). The evidence at trial established that Amos, as part of his pattern of misconduct, exposed his penis to and/or rubbed his erect penis against at least nine of these individuals. See id. at 5-8. Each of these women complained to Ameritech, and almost all of their complaints were placed in Amos' personnel file. See id. at 6-9. Despite this history, Ameritech only issued warnings or did nothing to discipline Amos for his misconduct, except in 1990, when it suspended Amos for two weeks and revoked his sales award after six women complained about Amos' harassment. See id. at 5-9. Amos continued sexually harassing his female co-workers after November 21, 1991. In 1992, Jennifer Rice complained that Amos rubbed himself against her, rubbed her neck, and made inappropriate comments about her body. See id. at 9. Again, Ameritech simply warned Amos and allowed him to remain in the office. See id. Amos thus was able to sexually harass Wentland in 1992 (on one occasion rubbing his erect penis through his pants while he spoke with her), causing her to complain to Ameritech on November 25, 1992. See id. at 10. Ameritech decided to fire Amos for his misconduct, but did not do so because the employees responsible for implementing the decision went on vacation and missed the contractual 30-day time limit for taking such action. See id. at 10-11. After botching the effort to fire Amos after Wentland's complaint, Ameritech's officials (EEO Coordinator Monica Sharp, Labor Relations Manager Joyce Leck, and legal department attorney Anthony Prather) agreed that when they received the next complaint against Amos, they would immediately suspend him pending investigation to avoid missing any deadlines. See id. at 11. Although that opportunity arose in April 1993, when Ameritech learned that Everts had filed a charge of discrimination asserting that she was being sexually harassed by Amos, Ameritech did not investigate. See id. at 11-12. Instead, Ameritech concluded that Everts' complaint was without merit and did not discipline Amos. See id. at 12-13. Ameritech did suspend Amos for thirty days in June 1993, when he wrote a note to supervisor Patricia Wolter that read: "Patti, you look so sexy today." Id. at 13 (Tr. 386-87). Again, however, Ameritech allowed Amos to return to the office, where in late 1993, he began harassing Pollard by touching and grabbing her hair and shoulders, staring at her, and showing her pictures of topless women and women in lingerie. See id. at 13-14. Ameritech finally fired Amos in March 1994 after Pollard saw Amos masturbating his fully exposed penis while sitting at his desk. See id. at 14-15. STATEMENT OF ISSUES FOR EN BANC BRIEF 1. Whether, as a matter of law, evidence regarding arbitration and a company's collective bargaining agreement is inadmissible in a Title VII case to show, for the purpose of determining employer liability, that an employer's response to sexual harassment was reasonable, where the evidence is not relevant to whether the employer fulfilled its duty under Title VII to prevent and remedy sexual harassment in the workplace, and no jury could find that it was reasonable for an employer to believe that its collective bargaining agreement altered its Title VII duties to prevent and remedy sexual harassment. 2. Whether, as a matter of law, evidence regarding arbitration and an employer's collective bargaining agreement is inadmissible in a Title VII case to show that the employer did not act with the state of mind necessary for a jury to award punitive damages, where the evidence, as presented, is proffered to support an invalid defense to punitive damages, and should be barred under the doctrine of equitable estoppel to prevent the employer from benefitting from its own wrongdoing. ARGUMENT I. AMERITECH'S EVIDENCE ABOUT ARBITRATION AND ITS COLLECTIVE BARGAINING AGREEMENT IS INADMISSIBLE AS A MATTER OF LAW ON THE ISSUE OF LIABILITY A. Ameritech's arbitration evidence is inadmissible as a matter of law on the issue of liability because evidence about Ameritech's state of mind is not relevant to the question of whether Ameritech acted negligently Throughout the various stages of this appeal, Ameritech has argued that its arbitration evidence must be considered on the issue of liability because it illuminates its state of mind and judgment during the times when it was presented with a complaint about Amos' sexual harassment. See, e.g., Ameritech's Opening Brief as Appellant at 23-24 (arguing, on the issue of liability, that it was "Ameritech's judgment" that "it was best to discipline Amos . . . in a way that would successfully survive the arbitration process"); Ameritech's Answer to Petition for Rehearing at 13 (same); Ameritech's En Banc brief at 26-27 (same). Accepting, for the sake of argument, Ameritech's own characterization of its arbitration evidence,<3> that evidence is irrelevant as a matter of law on the issue of liability because: (1) liability for coworker harassment is governed by a negligence standard; (2) negligence is a type of unreasonable conduct; and (3) state of mind evidence has no bearing on the issue of conduct. Under the law of this Circuit, there is no dispute that in a coworker sexual harassment case such as this one, an employer is liable when it has been "negligent either in discovering or remedying the harassment." Perry v. Harris-Chernin, Inc., 126 F.3d 1010, 1013 (7th Cir. 1997). See also Zimmerman v. Cook County Sheriff's Dep't, 96 F.3d 1017, 1018 (7th Cir. 1996) (employers may be held liable for negligently failing to discover and prevent harassment); Ameritech's En Banc Brief at 25 (acknowledging this standard). Given this legal standard, Ameritech's arbitration evidence must be relevant to the issue of negligence to be admissible on the issue of liability. See Fed. Rule Evid. 402 ("Evidence which is not relevant is not admissible."). As a matter of law, however, the arbitration evidence proffered in this case is not relevant to the issue of negligence because "[n]egligence is conduct, and not a state of mind." W. Page Keeton et al., Prosser and Keeton on the Law of Torts § 31, at 169 (5th ed. 1984). See also Restatement (Second) of Torts § 282 (1958) (explaining that "negligence is conduct which falls below the standard established by law for the protection of others against unreasonable risk of harm"). Thus, although Ameritech urges this Court to allow it to tell the jury that its concerns about arbitration provided it with a good reason for (improperly) delaying in taking appropriate action to prevent and remedy the ongoing sexual harassment in the workplace, Ameritech's explanation about its state of mind is irrelevant because the essence of negligence "is not necessarily the absence of solicitude for those who may be adversely affected by one's actions but instead behavior which should be recognized as involving unreasonable danger to others." Prosser and Keeton on the Law of Torts § 31, at 169. See also Restatement (Second) of Torts § 283 (explaining that an actor must conform to the standard of conduct "of a reasonable man under like circumstances" to avoid being negligent). Because negligence is conduct and not a state of mind, this Court in Baskerville v. Culligan International Co., 50 F.3d 428, 432-33 (7th Cir. 1995), correctly rejected the proposition that it might be "reasonable" for an employer to ignore charges of sexual harassment if the charges were made against one of the employer's "highly valued" employees. As this Court indicated, an employer's state of mind in such a circumstance is irrelevant because, when assessing whether an employer is liable in a coworker sexual harassment case, the issue is whether the employer's conduct was reasonable in light of the legal duty of care owed to the employees victimized by the harassment. See id. at 433. Applying that rule to this case, Ameritech's arbitration evidence is inadmissible as a matter of law on the issue of liability, because the evidence is proffered to illuminate Ameritech's state of mind, and thus is not relevant to whether Ameritech's conduct met the legal duty of care it owed under Title VII to its female employees who endured Amos' sexual harassment. The jury properly found that Ameritech's conduct was negligent insofar as Ameritech failed to prevent and remedy Amos' sexual harassment of Wentland, Everts and Pollard, and because Ameritech's arbitration evidence is irrelevant to that issue, the jury's verdict should stand. B. Ameritech's arbitration evidence is inadmissible as a matter of law on the issue of liability because no jury may find that it was "reasonable" for an employer to believe that the terms of a collective bargaining agreement altered its Title VII duties to prevent and respond to sexual harassment In its en banc brief, Ameritech does not contest the proposition, argued above and in the Commission's petition for rehearing at 9-12, that state of mind evidence has no bearing on whether an employer's conduct is negligent. Instead, Ameritech argues that the district court should have allowed the jury to consider its arbitration evidence on the issue of liability as a "fact or circumstance" underlying the question of whether Ameritech's response to Amos' sexual harassment of his female coworkers was reasonable. See Ameritech's En Banc Brief at 25-28. This Court should reject Ameritech's argument because it runs headlong into well established Supreme Court precedent holding that an employer's Title VII duties (and an employee's Title VII rights) cannot be waived or altered by the terms of a collective bargaining agreement. For over twenty-five years, it has been clear that "there can be no prospective waiver of an employee's rights under Title VII" by a union that agrees to the terms of a collective bargaining agreement, or otherwise. See Alexander v. Gardner-Denver Co., 415 U.S. 36, 51 (1974). See also Wright v. Universal Maritime Serv. Corp., 525 U.S. 70, 75-76 (1998) (reaffirming this holding in Alexander). In Alexander, the Supreme Court explained that, while "a union may waive certain statutory rights related to collective activity, such as the right to strike," Title VII "stands on a plainly different ground" because "it concerns not majoritarian processes, but an individual's right to equal employment opportunities." 415 U.S. at 51 (internal citations omitted). "Title VII's strictures are absolute and represent a congressional command that each employee be free from discriminatory practices. Of necessity, the rights conferred can form no part of the collective bargaining process since waiver of these rights would defeat the paramount congressional purpose behind Title VII." Id. Consistent with the Supreme Court's analysis in Alexander, this Court also has held that "unions cannot waive employees' ADEA or Title VII rights through collective bargaining." EEOC v. Board of Governors of State Colleges and Univs., 957 F.2d 424, 431 (7th Cir. 1992). See also Nottelson v. Smith Steel Workers D.A.L.U. 19806, 643 F.2d 445, 452 (7th Cir. 1981) ("It is well settled, however, that Title VII rights cannot be bargained away and that a collective bargaining agreement therefore does not of itself provide a defense for Title VII violations."). Indeed, this Court has explained that employee rights under federal laws like Title VII cannot be waived or altered through collective bargaining because a contrary rule would "leave[] many workers in the unionized sector of the economy vulnerable to job discrimination," as implementation of the federal anti-discrimination laws in a unionized workplace would become "sporadic and unpredictable" due to the variance in the negotiations between the union and management. EEOC v. County of Calumet, 686 F.2d 1249, 1256-57 (7th Cir. 1982) (relying on Title VII precedent and reaching these conclusions in the context of the ADEA). See also Appendix ("App.") to Ameritech's Opening Brief as Appellant at 24, 30-31 (district court voicing similar reasoning as its basis for excluding Ameritech's arbitration evidence). The principle that the requirements of Title VII cannot be waived or altered by a collective bargaining agreement is not altered or undermined by the narrow line of cases holding that Title VII and the Americans with Disabilities Act ("ADA") do not require an employer to interfere with the bona fide seniority rights of some employees to accommodate the religious or disability based needs of others. See Trans World Airlines v. Hardison, 432 U.S. 63, 81-82 (1977) (discussing Title VII religious accommodation and seniority rights). See also Eckles v. Consolidated Rail Corp., 94 F.3d 1041, 1051 (7th Cir. 1996) (discussing reasonable accommodation under the ADA and seniority rights). In fact, as this Court explained in Nottelson, 643 F.2d at 452, the Supreme Court's holding in Hardison is based on the fact that Title VII itself expressly indicates that its provisions do not require the abrogation of the rights of other employees under a bona fide seniority system. See also 42 U.S.C. § 2000e-2(h) (not an unlawful employment practice for an employer to follow a bona fide seniority or merit system); Hardison, 432 U.S. at 81-82 (discussing 42 U.S.C. § 2000e-2(h) and explaining that Title VII itself affords seniority systems special treatment).<4> Contrary to Ameritech's argument at page 29 of its en banc brief, there is no basis or authority for an employer (or a court) to believe that this narrow exception (recognized in Title VII itself) for bona fide seniority rights extends to the myriad of other terms or provisions that may appear in a collective bargaining agreement. Because the Supreme Court has held that an employee's Title VII rights cannot be waived or altered by the terms of a collective bargaining agreement, it follows that a court cannot allow an employer to present evidence about its collective bargaining agreement on the issue of liability in a sexual harassment case such as this one. As previously noted, the Supreme Court's decision in Alexander establishes that Title VII rights and responsibilities cannot be altered by a collective bargaining agreement. Given that basic principle, it is clear that a jury cannot rely on or consider the terms of a collective bargaining agreement when assessing whether an employer satisfied its statutory duties under Title VII. Similarly, a jury cannot find that it is "reasonable" for an employer to believe, contrary to the clear precedent established by Alexander and its progeny, that the terms of a collective bargaining agreement might affect or alter the employer's responsibilities under Title VII. To illustrate why this is so, suppose an employer and a union sign a collective bargaining agreement stating that sexual harassment is permissible in the workplace. Obviously, an agreement of this nature would not exempt the employer from complying with Title VII and taking appropriate steps to prevent and remedy sexual harassment. Further, it is clear that a court cannot permit a jury to entertain the proposition that it might be "reasonable" for an employer to alter or forgo its efforts to comply with Title VII based on the terms of the agreement purporting to permit sexual harassment in the workplace. To allow an employer to present such an argument to a jury would enable the employer to ask the jury to find, contrary to Supreme Court precedent, that there is merit to the proposition that the terms of a collective bargaining agreement may alter an employer's duties under Title VII. Undoubtedly, such a finding would be improper, because the jury could only accept the employer's argument by nullifying controlling precedent to the contrary. Ameritech's arbitration evidence is inadmissible as a matter of law on the issue of liability because, as in the example above, Ameritech may not present evidence that effectively would ask the jury to hold that the terms of a collective bargaining agreement may have altered Ameritech's Title VII duties to prevent and respond to Amos' harassment of his female coworkers. In proffering its arbitration evidence, Ameritech argues, in effect, that the jury should be allowed to consider whether it was "reasonable" for Ameritech to believe that its Title VII responsibilities to deal with Amos and his sexual misconduct may have been altered by the terms of its collective bargaining agreement. In so arguing, however, Ameritech, like the hypothetical employer above, improperly seeks to invite the jury to find merit in the proposition that a collective bargaining agreement may have such an effect on an employer's Title VII responsibilities to prevent and remedy sexual harassment, notwithstanding the Supreme Court's (and this Court's) holdings that an employer's Title VII duties cannot be altered in this manner. Because it clearly would be improper for a jury to make such a finding, Ameritech's arbitration evidence is inadmissible as a matter of law. II. AMERITECH'S EVIDENCE ABOUT ARBITRATION AND ITS COLLECTIVE BARGAINING AGREEMENT IS INADMISSIBLE AS A MATTER OF LAW ON THE ISSUE OF PUNITIVE DAMAGES In its en banc brief at page 20, Ameritech argues that it should have been allowed to present its arbitration evidence to the jury to explain, in relation to the issue of punitive damages, what its state of mind was in failing to deal adequately with Amos' sexual harassment in the workplace. This Court should reject Ameritech's argument because, in proffering the arbitration evidence in this case, Ameritech: (1) improperly seeks to invite the jury to accept an invalid defense to punitive damages, and (2) improperly seeks to benefit from a defense that was created entirely from Ameritech's own wrongdoing. The discussion below will demonstrate that both of these inherent problems with Ameritech's arbitration evidence render the evidence inadmissible as a matter of law. A. Ameritech's arbitration evidence is inadmissible as a matter of law on the issue of punitive damages because, as presented, the evidence improperly invites the jury to accept an invalid defense to punitive damages Under the Civil Rights Act of 1991, a party may recover punitive damages if the party demonstrates that the employer "engaged in a discriminatory practice . . . with malice or reckless indifference to the federally protected rights of an aggrieved individual." 42 U.S.C. § 1981a(b)(1). The Supreme Court recognized this basic standard in Kolstad v. American Dental Association, when it observed that Congress intended to make punitive damages available in cases of intentional discrimination where the employer acted "with 'malice or reckless indifference to [the plaintiff's] federally protected rights.'" 527 U.S. 526, 535 (1999) (quoting 42 U.S.C. § 1981a(b)(1)) (brackets in original). The Supreme Court also stated that "[t]he terms 'malice' or 'reckless' ultimately focus on the actor's state of mind." Kolstad, 527 U.S. at 535. In proffering its arbitration evidence, Ameritech describes the evidence as admissible on the issue of its state of mind. This Court should reject Ameritech's argument, however, because it is clear that Ameritech in fact proffers its arbitration evidence to support an invalid defense to punitive damages. In Kolstad, the Supreme Court made it clear that an employer may be liable for punitive damages in circumstances (to name two) where the employer "acts recklessly in employing [a] malfeasing agent," or "where an employee serving in a 'managerial capacity' committed the wrong while 'acting in the scope of employment.'" 527 U.S. at 542-43 (relying on Restatement (Second) of Agency § 217 C (b)-(c)). The Supreme Court also recognized one, and only one, defense to an award of punitive damages based on a showing of malice or reckless indifference: where the discriminatory actions of the employer's managerial agents are contrary to the employer's "good faith efforts to comply with Title VII." Kolstad, 527 U.S. at 545-46. The good faith defense does not apply in this case because Ameritech has never argued that it is entitled to the defense (thereby waiving the issue), and moreover has not pointed to any evidence establishing its good faith efforts.<5> Having no recognized defense to punitive damages, Ameritech attempts, in proffering its arbitration evidence, to invite the jury improperly to accept the purported obstacles created by the risk of arbitration as a fig leaf for its pre-existing reckless indifference to the Title VII rights of its female employees. Specifically, contrary to Ameritech's argument in its en banc brief at pages 20-21, Ameritech's arbitration evidence does not negate or mitigate the evidence showing that Ameritech acted with malice or reckless indifference. Ameritech was not motivated by its fears about arbitration when it: recklessly failed to deal properly with Amos after Rice complained, recklessly allowed the 30-day time limit to expire without terminating Amos as it planned after Wentland complained, and recklessly took no action on Everts' EEOC charge despite having planned earlier to suspend Amos pending investigation the next time it received a complaint. Instead, Ameritech's arbitration evidence goes to a concern that only arose after Ameritech already had acted with reckless indifference to the Title VII rights of its female employees by failing to prevent or remedy Amos' campaign of harassment. Given this sequence of events, Ameritech's arbitration evidence is inadmissible as a matter of law because a jury cannot accept it as a defense to the punitive damages that should be awarded based on Ameritech's recklessly indifferent actions occurring before the purported concerns about arbitration arose.<6> See supra p. 17 (discussing Kolstad and the available defenses to punitive damages). Finally, none of Ameritech's arguments save it from the fact that its arbitration evidence is inadmissible. First, the cases that Ameritech cites for the proposition that courts have admitted defense evidence negating or mitigating the state of mind for punitive damages are inapposite. See Ameritech's En Banc Brief at 22. The cases Ameritech lists do not apply because, as discussed above, Ameritech's arbitration evidence does not negate or mitigate the evidence showing that it acted with malice or reckless indifference before its alleged concerns about arbitration arose. Given that Ameritech's arbitration evidence is deficient in this regard, the district court properly excluded it. See Warfel v. Cheney, 157 Ariz. 424, 758 P.2d 1326, 1333-34 (Ariz. Ct. App. 1988) (trial court may exclude evidence about a defendant's state of mind on the issue of punitive damages where evidence would not establish state of mind at the time of the misconduct). See also Marshall v. El Paso Natural Gas Co., 874 F.2d 1373, 1381 (10th Cir. 1989) (affirming district court's decision to exclude defendant's evidence that it sought to repair the harm caused by its actions because the evidence was not relevant to whether defendant's state of mind at the time of its misconduct warranted punitive damages); Ettus v. Orkin Exterminating Co., 233 Kan. 555, 665 P.2d 730, 739-43 (1983) (indicating that, depending on the circumstances of a case, a court may either grant or deny a defendant's request to present evidence of its settlement offers for the purpose of persuading the jury on the issue of punitive damages).<7> Second, there is no merit to Ameritech's argument that its arbitration evidence is admissible because it was not clear that an employer should not consider the terms of a collective bargaining agreement when assessing its Title VII responsibilities. See Ameritech's En Banc Brief at 23-24. As a preliminary matter, Ameritech's argument fails because Ameritech erroneously neglects to focus on the clearly established requirements of Title VII. As stated in Kolstad, 527 U.S. at 535, "[t]he terms 'malice' or 'reckless indifference' pertain to the employer's knowledge that it may be acting in violation of federal law." Ameritech cannot plausibly argue that it was not aware that it might have been violating Title VII's prohibition of sex discrimination in the form of sexual harassment. See generally Meritor Savings Bank, FSB v. Vinson, 477 U.S. 57 (1986) (recognizing sexual harassment as a type of sex discrimination). Nor can Ameritech plausibly argue that it was not aware that it "may [have been] acting in violation of federal law" in failing to prevent or remedy Amos' sexual harassment of his female coworkers. Further, although the malice or reckless indifference language in the Civil Rights Act of 1991 can be traced to the Supreme Court's decision in Smith v. Wade, 461 U.S. 30 (1983), see Kolstad, 527 U.S. at 535-36 (drawing this connection), it does not follow that Congress intended for punitive damages only to be available where an employer's awareness of the illegality of its actions is so high that it could not meet the qualified immunity standard for government officials sued under 42 U.S.C. § 1983. Indeed, the fact of the matter is that the Supreme Court articulated the applicable standard in Kolstad, when it explained that punitive damages are available when an employer acts with the "knowledge that it may be acting in violation of federal law." 527 U.S. at 535 (emphasis added).<8> Ameritech cannot plausibly argue that it lacked this level of awareness. In any event, Ameritech is simply wrong in suggesting that there is a question, outside of the bona fide seniority rights context, about whether the terms of a collective bargaining agreement may alter or affect an employer's Title VII responsibilities. Indeed, as described above in Section I(B), it has been clear for over twenty-five years that employee rights under Title VII cannot be waived or altered through the collective bargaining process. See supra pp. 10-15. Ultimately, Ameritech's arguments miss the mark - the arbitration evidence is inadmissible as a matter of law on the issue of punitive damages because Ameritech presents the evidence for the improper purpose of creating a defense designed to entice a jury to forgive its earlier, pre-existing malice or reckless indifference. Because the relevant case law does not permit such a defense, Ameritech's arbitration evidence is inadmissible as a matter of law. B. Ameritech's arbitration evidence is also inadmissible because, where the alleged obstacles presented by the collective bargaining agreement and the risk of arbitration arose because of Ameritech's prior malice or reckless indifference to Title VII rights, the doctrine of equitable estoppel bars Ameritech from proffering the arbitration evidence as a partial or complete defense to punitive damages Ameritech's arbitration evidence is also inadmissible as a matter of law because the doctrine of equitable estoppel bars a party like Ameritech from benefitting from its wrongdoing. "The federal doctrine of equitable estoppel reflects a 'deeply rooted' principle of law, 'older than the country itself,' that courts will not permit a party to assert a defense . . . if the defense would enable a party to take advantage of his wrongdoing." Cange v. Stotler and Co., 826 F.2d 581, 586 (7th Cir. 1987) (quoting Glus v. Brooklyn E. Dist. Terminal, 359 U.S. 231, 232-33 (1959)). See also Bomba v. Belvidere, Inc., 579 F.2d 1067, 1070 (7th Cir. 1978) (explaining that the doctrine of equitable estoppel takes its life from "the equitable principle that no man will be permitted to profit from his own wrongdoing in a court of justice"). As this Court has indicated, the doctrine of equitable estoppel is so deeply rooted in our jurisprudence "that it should be implied into every federal cause of action absent some affirmative indication that Congress expressly intended to exclude the application of equitable estoppel." Bomba, 579 F.2d at 1070 (discussing and accepting this proposition). See also Cada v. Baxter v. Healthcare Corp., 920 F.2d 446, 451 (7th Cir. 1991) (describing equitable estoppel as a "general equity principle"). The doctrine of equitable estoppel clearly applies in cases brought under the federal laws prohibiting employment discrimination, as this Court has held that the doctrine may be invoked to defeat a defendant's invocation of the statute of limitations as a defense. See Cada, 920 F.2d at 451-52 (discussing equitable estoppel in an ADEA case). The doctrine should also apply here. To prevent Ameritech from benefitting from its wrongdoing, the doctrine of equitable estoppel should render Ameritech's arbitration evidence inadmissible as a matter of law. Ameritech has stated that the jury should be allowed to hear evidence about the collective bargaining agreement and the risk of arbitration because those concerns guided its actions after Wentland's and Wolter's complaints. See Ameritech's Opening Brief as Appellee at 31-32. In so arguing, however, Ameritech seeks to present evidence of concerns that, at best, arose as a result of Ameritech's own wrongdoing. Specifically, Ameritech's alleged concerns about arbitration after Wentland's complaint did not arise until after the company recklessly failed to deal with Amos after Rice complained, and recklessly allowed the 30-day deadline for discipline after Wentland's complaint to expire despite having determined that Amos should finally be discharged. See supra p. 5. Similarly, Ameritech's concerns about arbitration in connection with Wolter's complaint did not arise until after Ameritech recklessly chose not to investigate the allegations in Everts' EEOC charge, notwithstanding Ameritech's earlier plan (developed after it mishandled Wentland's complaint) to immediately suspend Amos pending investigation the next time someone complained about his sexual misconduct. See supra pp. 5-6. Putting this series of events together with the fact that Ameritech engaged in this malfeasance despite being aware of similar complaints about Amos by thirteen other women, many of whom complained that Amos exposed his penis to and/or rubbed his penis against them, Ameritech's (reckless) wrongdoing is clear. Further, given that Ameritech's own recklessness produced its later-developing concerns about arbitration (i.e., the alleged problems with arbitration arose because Ameritech recklessly failed to prevent and/or remedy the harassment on earlier occasions), the doctrine of equitable estoppel should bar Ameritech from using the arbitration evidence, created by its wrongdoing, to head off a well justified award of punitive damages. Accordingly, this Court should hold that the doctrine of equitable estoppel renders Ameritech's arbitration evidence inadmissible as a matter of law. III. THERE IS NO ALTERNATIVE BASIS FOR ALLOWING AMERITECH TO PRESENT ITS ARBITRATION EVIDENCE TO A JURY In this case, the Commission consistently has argued that Ameritech is liable for the sexual harassment of Wentland, Everts and Pollard because Ameritech failed to take appropriate steps to prevent and remedy the harassment in the workplace. See EEOC Appellee Brief at 28-34. The Commission also consistently has argued that punitive damages are appropriate because Ameritech acted with malice or reckless indifference to the Title VII rights of its female employees by failing to deal appropriately with Amos and his misconduct, despite knowing of Amos' lengthy history of sexual harassment. See EEOC Appellee Brief at 35-39.<9> In its en banc brief, Ameritech argues that the district court should have allowed it to present its arbitration evidence to avoid leaving the jury with the wrong impression. This Court should reject Ameritech's argument. Initially, the weakness of Ameritech's argument is indicated by its decision to lead with the theory that the jury was misled about why Amos was not terminated in June 1993 after writing the offensive note to Wolter. See Ameritech's En Banc Brief at 45. Although Ameritech argues that it should have been allowed to present its arbitration evidence to explain why it did not discharge Amos or otherwise impose a higher level of discipline on him after the Wolter incident, the fact of the matter is that the arbitration evidence on this issue has no bearing on whether Ameritech acted with malice or reckless indifference in failing to deal properly with Amos on earlier occasions, such as when Rice (February 1992), Wentland (November 1992) and Everts (April 1993) complained. Further, contrary to Ameritech's claim on page 45 of its en banc brief, there is no evidence that an arbitrator "would have reinstated" Amos if Ameritech fired him after the Wolter incident. Ameritech cites to the opinion testimony of Ameritech employees Ivan Jahns and Anthony Prather (see id., citing Tr. 1076-77, 1081-82), but neither is qualified as a witness to testify with any certainty that an arbitrator would have reinstated Amos if Ameritech had discharged him. See Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 147, 153-54 (1999) (explaining that all expert testimony must be relevant and reliable to be admissible, and agreeing that the reliability requirement applies to the expert witness' theory and analysis). In any event, the jury was not misled. Ameritech was able to argue (and did argue) that Amos' letter to Wolter was prompted by jokes and sexual innuendo in the office, that Ameritech did not believe this conduct warranted termination, and that it suspended Amos for 30 days, the longest suspension possible. See Tr. 1350-52 (Ameritech's closing argument). The arbitration evidence Ameritech now seeks to include will not add anything of value or relevance to Ameritech's case. This Court also should reject Ameritech's argument that the jury was misled about why it did not terminate Amos after Wentland's complaint. Although Ameritech suggests that it was prevented from telling the jury why it did not terminate Amos after Wentland complained, that assertion is without merit because Ameritech expressly contended in its closing argument that the 30-day time limit in the collective bargaining agreement barred it from terminating Amos. See Tr. 1327 (arguing that EEO Coordinator Monica Sharp missed the 30-day time limit, and that because of that missed deadline, "the contract precluded her from taking any action" against Amos); Tr. 1352 (arguing, concerning Wentland's complaint, that Ameritech "couldn't terminate Gary Amos because of the union contract"). As Judge Rovner recognized in her dissenting opinion, no one ever maintained that Ameritech could have terminated Amos despite the 30-day time limit. See EEOC v. Indiana Bell Tel. Co., 214 F.3d 813, 829-30 & n.1 (7th Cir. 2000) (rejecting Ameritech's suggestion that the jury was kept in the dark about the reason for Ameritech's decision not to fire Amos after Wentland complained) (Rovner, J., dissenting). The jury was therefore left with the very impression that Ameritech claims it was prevented from establishing: that once Ameritech missed the deadline for imposing discipline after Wentland complained, Ameritech could not have terminated Amos.<10> Under these circumstances, Ameritech's arbitration evidence remains inadmissible. CONCLUSION For the foregoing reasons, and for the reasons stated in the Commission's response brief and petition for rehearing en banc, this Court should uphold the district court's decision to exclude Ameritech's arbitration evidence on the issues of liability and punitive damages. Because the jury's verdict is supported by the evidence and because there is no basis for reversal, the Commission respectfully requests that this Court affirm the district court's decision to enter judgment in favor of the Commission based on the jury's verdict. Respectfully submitted, C. GREGORY STEWART General Counsel PHILIP B. SKLOVER Associate General Counsel CAROLYN L. WHEELER Assistant General Counsel GEOFFREY L.J. CARTER Attorney EQUAL EMPLOYMENT OPPORTUNITY COMMISSION Office of General Counsel 1801 L Street, NW Washington, D.C. 20507 October 16, 2000 (202) 663-4728 CERTIFICATE OF COMPLIANCE I certify that this brief complies with the type-volume limitation set forth in FRAP 32(a)(7)(B). This brief contains 7,512 words. GEOFFREY L.J. CARTER CERTIFICATE OF SERVICE I, Geoffrey L.J. Carter, hereby certify that on this 16th day of October, 2000, two copies of the attached en banc brief, and one copy of the attached petition on digital media, were sent by overnight mail, postage prepaid, to the following counsel of record: Kenneth J. Yerkes, Esq. Michael A. Moffatt, Esq. Stanley C. Fickle, Esq. Blake J. Burgan, Esq. Barnes & Thornburg 11 South Meridian St. Indianapolis, IN. 46204 GEOFFREY L.J. CARTER Attorney EQUAL EMPLOYMENT OPPORTUNITY COMMISSION Office of General Counsel 1801 L Street, NW Washington, D.C. 20507 October 16, 2000 (202) 663-4728 1 In its original brief as appellee, the Commission explained that courts, in their discretion, may limit or exclude state of mind evidence that an employer proffers in an effort to avoid punitive damages, particularly where the evidence is speculative and unreasonable. See EEOC Appellee Brief at 44-46. The Commission also explained that if a court reviewing such an evidentiary ruling determines that a district court abused its discretion, the reviewing court must still affirm if the district court's ruling did not have a substantial influence over the jury verdict, and therefore was harmless. See id. at 49-51. The Commission stands by these principles and its argument that the district court's decision to exclude Ameritech's arbitration evidence should stand as a valid exercise of its discretion, or alternatively as harmless error. See id. at 44-51. The Commission submits, however, that Ameritech's arbitration evidence is also inadmissible as a matter of law for the reasons set forth in this brief. 2 The following statement of facts is drawn from the more detailed statement in the Commission's response brief as appellee, filed on April 2, 1999. The Commission notes that, because Ameritech has appealed from the district court's denial of its motion for judgment as a matter of law, this Court "must draw all reasonable inferences in favor of the nonmoving party," (the Commission), refrain from making credibility determinations or weighing the evidence, and "disregard all evidence favorable to the moving party that the jury is not required to believe." Reeves v. Sanderson Plumbing Prods., 120 S. Ct. 2097, 2110 (2000) (discussing the review standard under Rule 50 of the Federal Rules of Civil Procedure). 3 The Commission does not concede that Ameritech's arbitration evidence is the type of state of mind evidence that would be admissible on the issue of punitive damages. Instead, Ameritech's arbitration evidence is inadmissible as a matter of law on the issue of punitive damages because, as presented, the evidence has no bearing on whether Ameritech acted with reckless indifference to the Title VII rights of its female employees when it repeatedly failed to prevent or remedy Amos' sexual harassment. See infra pp. 15-25. Rather, the concerns about arbitration arose after the events that establish Ameritech's negligence (and recklessness) in dealing with complaints about Amos' harassing conduct, and thus the evidence is inadmissible. 4 In Eckles, 94 F.3d at 1049 n.13, a panel of this Court stated that the Supreme Court's decision in Hardison did not depend on Title VII's seniority provision. The panel in Eckles did not discuss this Court's earlier decision in Nottelson, 643 F.2d at 452, which states that the Supreme Court in Hardison held that "Title VII itself" protects the rights of employees under a bona fide seniority system. In any event, the fact remains that there is no basis for holding, outside of the bona fide seniority or merit system context, that the terms of a collective bargaining agreement may affect an employee's rights under Title VII. 5 It is also questionable whether the good faith defense is available at all in a case where the employer recklessly employed a malfeasant agent like Amos. The rule that punitive damages may be awarded where an employer recklessly employs a malfeasant or unfit agent is found in Restatement (Second) of Agency § 217 C(b). The Supreme Court announced the good faith defense to address the "perverse incentives" created by the "scope of employment" language in Restatement (Second) of Agency § 217 C(c). Arguably, therefore, the good faith defense is only available where the scope of employment rules are at issue (i.e., in a Restatement (Second) of Agency § 217 C(c) case). 6 To illustrate, consider the fact that the jury in this case likely determined that Ameritech acted with reckless indifference to Title VII rights when it failed to deal appropriately with Amos after Rice complained in early 1992, and allowed the 30-day deadline for imposing discipline to expire after Wentland's complaint, despite having determined that it should fire Amos for his misconduct. See supra p. 5 (summarizing this evidence). Under Kolstad, 527 U.S. at 542, the jury correctly awarded punitive damages for Ameritech's reckless indifference in employing a malfeasant agent (Amos) and in failing to prevent and remedy the harassment despite its opportunities to do so. In that context, Ameritech's arbitration evidence is inadmissible as a matter of law because the alleged concern about arbitration developed after the fact, and cannot operate as a complete or partial defense to the jury's finding of malice or reckless indifference. 7 In this connection, the Commission notes that, contrary to Ameritech's suggestion in its en banc brief at 22, courts have held that there are limits on what evidence a defendant may present in an attempt to avoid being held liable for punitive damages. As noted above, those limits preclude a defendant from presenting "state of mind" evidence that does not address its mental state at the time of the misconduct. 8 This language in Kolstad states the controlling law on the legal standard for punitive damages under the Civil Rights Act of 1991. This Court accordingly should reject Ameritech's argument that punitive damages are only available under the Civil Rights Act of 1991 where "the application of law to the facts at hand was so clear . . . that reasonably competent people would have agreed on its application." See Ameritech's En Banc Brief at 23. Although Ameritech's argument tracks language in the decision in Merriweather v. Family Dollar Stores of Indiana, Inc., 103 F.3d 576, 582 (7th Cir. 1996) (quoting Williamson v. Handy Button Machine Co., 817 F.2d 1290, 1296 (7th Cir. 1987)), the Supreme Court resolved any lingering questions about the standard for punitive damages under the Civil Rights Act of 1991 when it issued its decision in Kolstad. 9 Ameritech is wrong when it suggests that the Commission did not argue that Ameritech could have transferred Amos as a means of remedying the harassment. See Ameritech's En Banc Brief at 42-43. The Commission argued that Ameritech's response to Amos' harassment was woefully inadequate, and a jury reasonably could have found that Ameritech's discouragement of Amos' suggestion that he transfer was part of Ameritech's negligence and reckless indifference in failing to properly address Amos' harassment. See Tr. 1106-07 (Supervisor Brian Bauer telling Amos, in early 1992, that transferring from the office would not be the answer to resolving the problems with Amos' misconduct); EEOC's Brief as Appellee at 36-37 (discussing Ameritech's handling of Amos' suggestion that he transfer). 10 Ameritech attempts to get around this problem by arguing that the jury was not informed that reinstatement "would have resulted" if Ameritech had discharged Amos despite having missed the 30-day time limit. This proffered distinction is without merit. Ameritech argued that the collective bargaining agreement barred it from terminating Amos once it missed the 30-day time limit. See supra p. 25. There is no point to adding, as Ameritech seeks to do here, that any attempt at termination would not have succeeded because "reinstatement would result." See Ameritech's En Banc Brief at 46.