TABLE OF AUTHORITIES................................................................... iv
GLOSSARY............................................................................................ vii
INTRODUCTION.................................................................................... 1
ARGUMENT............................................................................................ 2
I. The
district court erred in dismissing Jai and SGI for failure to state a claim of
successor liability on notice grounds.................... 2
A. Jai
and SGI misapprehend the legal standards.......................... 3
1. Rule
8(a)(2) does not require pleading specific facts or each factor of the MacMillan/Trujillo
test.......................................... 3
2. Successor
liability determinations are generally not conducive to Rule 12(b)(6) dismissal
because they are often fact-specific, as is the case here................................................. 5
3. Notice
is not required for successor liability.......................... 8
B. EEOC
adequately pled that Jai had constructive notice of the pending EEOC charges............................................................... 10
1. EEOC
preserved its constructive notice argument.............. 11
2. EEOC’s
complaint plausibly pled that Jai had constructive notice of the pending
charges................................................. 13
C. EEOC
plausibly pled successor liability against SGI............... 16
1. EEOC
plausibly pled that SGI had constructive notice of the pending EEOC suit
against Whitten Inn Taos and/or El Camino Lodge.......................................................................... 16
2. There
are no “fundamental predicates” for successor liability beyond the MacMillan/Trujillo
test........................... 24
3. EEOC
plausibly pled the remaining successor liability factors........................................................................................ 26
II. Title
VII’s numerosity requirement does not apply to successors and, in any event,
EEOC plausibly pled that each had fifteen employees............................................................................................... 29
III. The
court abused its discretion in awarding $35,000 in compensatory damages against
RW2.................................................. 33
A. The
only relevant issue on appeal is whether the compensatory damage award was so
low as to constitute an abuse of discretion....................................................................... 33
B. RW2
cannot challenge the default judgment or the damages award based on numerosity
because it never challenged the default judgment below and never appealed
either one......... 36
C. The
district court’s $35,000 compensatory damage award was an abuse of discretion.................................................................. 40
CONCLUSION...................................................................................... 45
CERTIFICATE OF COMPLIANCE.................................................... C-1
CERTIFICATE OF PRIVACY REDACTIONS.................................. C-2
CERTIFICATE OF HARD COPIES BEING EXACT REPLICA....... C-3
CERTIFICATE OF VIRUS SCAN....................................................... C-4
CERTIFICATE OF SERVICE.............................................................. C-5
Cases:
Arbaugh v. Y&H Corp., 546
U.S. 500 (2006).......................................... 30
Ashcroft v. Iqbal, 556 U.S. 662
(2009)........................................... 4, 28, 31
Bell Atl. Corp. v. Twombly, 550
U.S. 544 (2007)....................................... 4
Bryant v. Aiken Reg’l Med. Ctrs.
Inc., 333 F.3d 536 (4th Cir. 2003)...... 40
Brzozowski v. Corr. Physician
Servs., Inc., 360 F.3d 173 (3d Cir. 2004) 27
Clifton
v. MARS Telecom, Inc., No. 95-2364-JWL,
1996 WL
157288 (D. Kan. March 5, 1996) ...................................... 30
EEOC v. 786 S. LLC, 693 F. Supp.
2d 792 (W.D. Tenn. 2010)............. 22
EEOC v.
786 S. LLC, No. 2:07-CV-02621-JPM,
2010 WL
4628101 (W.D. Tenn. Nov. 8, 2010)................................. 23
EEOC v.
Anchor Sign Corp., No. CIV 88-68-N,
1988 WL
141031 (E.D. Va. July 22, 1988)........................................ 30
EEOC v.
Labor Sols. of Ala. LLC,
242 F.
Supp. 3d 1267 (N.D. Ala. 2017)........................................... 4, 5
EEOC v.
MacMillan Bloedel Containers, Inc.,
503
F.2d 1086 (6th Cir. 1974).................................................... passim
Erickson
v. Pardus, 551 U.S. 89 (2007)..................................................... 4
Gen. Tel. Co. of NW, Inc. v. EEOC,
446 U.S. 318 (1980)........................ 33
Gamez v.
Country Cottage Care & Rehabilitation,
377 F.
Supp. 2d 1103 (D.N.M. 2005).................................................. 9
Guarcas
v. Gourmet Heaven, LLC, No. 15-056ML,
2016 WL
7632844 (D.R.I. Nov. 30, 2016)............................. 19, 21, 23
Heavenly
Hana LLC v. Hotel Union & Hotel Indus. of Haw. Pension Plan,
891
F.3d 839 (9th Cir. 2018)........................................................ 15,
16
Howard Johnson Co. v. Detroit Local
Joint Exec. Bd., 417 U.S. 249 (1974)................................................................................................................... 5
Hyster v.
Ethel Hedgeman Lyle Academy, No. 4:08-CV-1664,
2009 WL
1850912 (E.D. Mo. June 29, 2009)..................................... 39
Jackson
v. AML Constr. & Design Grp., No. 16-cv-1847,
2017 WL
2812823 (D. Colo. June 29, 2017)...................................... 42
Members
of Bd. of Admin. of Toledo Area Indus. UAW Ret. Income Plan v. OBZ,
Inc.,
348 F. Supp. 3d 635 (N.D. Ohio 2018)............................... 15, 16
Montgomery v. City of Ardmore,
365 F.3d 926 (10th Cir. 2004)............ 37
Musikiwamba v. ESSI, Inc., 760
F.2d 740 (7th Cir. 1985)................ 22, 28
NLRB v. S. Harlan Coal, Inc., 844 F.2d 380 (6th Cir. 1988)............. 14, 15
Olcott v. Del. Flood Co.,
327 F.3d 1115 (10th Cir. 2003)........................ 37
Puerta v. United States, 121
F.3d 1338 (9th Cir. 1997).......................... 15
Richison v. Ernest Grp., Inc.,
634 F.3d 1123 (10th Cir. 2011).......... 11, 12
Steele v. Voyale Corp., 88 F.
App’x 916 (6th Cir. 2004)................... 41, 44
Smith v. Nw. Fin. Acceptance, Inc.,
129 F.3d 1408 (10th Cir. 1997)...... 42
Swierkiewicz v. Sorema N.A., 534
U.S. 506 (2002)................................... 4
Tripodi v. Welch, 810 F.3d 761
(10th Cir. 2016)......................... 37, 38, 41
Trujillo v. Longhorn Mfg. Co.,
694 F.2d 221 (10th Cir. 1982)........ passim
Valdez v. Celerity Logistics, Inc.,
999 F. Supp. 2d 936 (N.D. Tex. 2014)......................................................................................................... 9,10,14
Wallace
v. DM Customs, Inc., No. 8:04-cv-115-T-23TBM,
2006 WL
2882715 (M.D. Fla. Oct. 6, 2006)....................................... 31
Walker v.
Faith Techs., Inc., 344 F. Supp. 2d 1261 (D. Kan. 2004)........ 27
Wheeler v. Snyder Buick, Inc.,
794 F.2d 1228 (7th Cir. 1986).......... 21, 22
Wiggins v. Spector Freight Sys., Inc.,
583 F.2d 882 (6th Cir. 1978)....... 22
Wulf v. City of Wichita, 883
F.2d 842 (10th Cir. 1989).......................... 43
Statutes:
42 U.S.C. § 1981a(b)(3)(A)............................................................... 37,
39
42 U.S.C. § 2000e(b)......................................................................... 31,
36
42 U.S.C. § 2000e-5(b)............................................................................ 34
Rules:
Fed. R. Civ.
P. 8(a)................................................................................... 3
Fed. R. Civ.
P. 12(b)(6)......................................................................... 4,
5
D.N.M.LR-Civ.
83.7................................................................................. 8
Other:
Claiborne
Barksdale, Successor Liability Under the National Labor Relations Act and
Title VII, 54 Tex. L. Rev. 707 (1976)......................... 31
Black’s Law Dictionary (10th ed. 2014)............................................... 15
“EEOC-Br. __” refers to EEOC’s opening brief.
“App. Vol. __ at ___” refers to EEOC’s
Appendix.
“Supp.-App. Vol. __ at __” refers to EEOC’s
Supplemental Appendix.
“SGI-Resp. __” refers to SGI’s response brief.
“SGI-App. __” refers to SGI’s Appendix.
“RW2/Jai-Resp. __” refers to RW2/Jai’s response
brief.
“RW2/Jai-App. __” refers to RW2/Jai’s
Appendix.
“SAC” refers to the Second Amended Complaint.
“TAC” refers to the Third Amended Complaint.
“FAC” refers to the Fourth Amended Complaint.
EEOC has engaged in six years of litigation to
secure relief for eleven victims of discrimination and retaliation at RW2’s
Taos hotel. Although EEOC obtained a default judgment against RW2 and Jai and a
$35,000 compensatory damage award against RW2, those victims have yet to see any
money. In its brief, RW2 seeks to evade the consequences of the sanction-based default
judgment by insisting that EEOC is not entitled to any award, while Jai denies
it should be considered a successor. Both proclaim it “not feasible” for them
to pay a damages award because they have closed their businesses and left New
Mexico. RW2/Jai-Resp. 37.
SGI, meanwhile, points the finger back at RW2
and Jai. Unlike its predecessors, SGI states, it started “promoting equality in
the workplace.” SGI-Resp. 30. SGI claims Jai’s protestations should not be
believed: Jai “never denied” it “had prior notice of the dispute” and “misled”
SGI, and the approximately $2.3 million Jai received from the hotel’s sale is
“clearly sufficient to provide adequate monetary relief.” Id. at ix, 15,
16, 29. In short, the three parties argue, none should bear responsibility for
the discrimination and retaliation.
EEOC’s opening brief explained that the successor
liability doctrine has developed to ensure otherwise—that discrimination
victims have a way to obtain relief. Here, EEOC argued that it pled plausible
claims of successor liability against both Jai and SGI, including that each had
notice of either the charges underlying this lawsuit or the lawsuit itself. As
for RW2, EEOC contended that the $35,000 compensatory damage award—averaging
only $3,181 per individual—fell woefully short of satisfying Title VII’s
remedial objectives or compensating the employees, constituting an abuse of
discretion. Nothing in either response brief convincingly counters these
arguments.
As EEOC stated, the successor liability doctrine
is rooted in equity. EEOC-Br. 29-31. Courts, including this one, adopted it
under Title VII based on the realization that failing to impose liability for a
predecessor’s discriminatory acts “could emasculate the relief provisions of
Title VII by leaving the discriminatee without a remedy or an incomplete
remedy.” EEOC v. MacMillan Bloedel Containers, Inc., 503 F.2d 1086, 1091
(6th Cir. 1974). The “primary concern” of successor liability “is to provide
the discriminatee with full relief.” Id. at 1092.
Neither Jai nor SGI disputes the purpose of the
successor liability doctrine, but both insist it is inapplicable here. Their
response briefs follow the same leitmotiv: they cannot be held liable as
successors because the facts do not satisfy the MacMillan/Trujillo
test. This argument founders because it misapprehends this case’s procedural
posture. The district court ruled on a motion to dismiss, not on summary
judgment. That dismissal was premature, as EEOC plausibly pled notice and the
other successor liability factors. EEOC-Br. 35-52.
EEOC asserted that it satisfied Rule 8(a)(2) because
the complaint plausibly pled a claim of successor liability against Jai and
SGI. EEOC-Br. 28-29 (citing Ashcroft v. Iqbal, 556 U.S. 662, 668 (2009);
Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007)); see also Erickson v. Pardus, 551 U.S. 89, 93 (2007)
(complaint must provide “fair notice” of claim and “grounds upon which it
rests” but does not require “[s]pecific facts”).
Further, EEOC argued, the district court ran afoul of Swierkiewicz v.
Sorema N.A., 534 U.S. 506 (2002), and applied a heightened pleading
standard by effectively turning the fact-specific MacMillan/Trujillo factors
into specific pleading requirements. EEOC-Br. 35-38. SGI dismisses this
argument in a cursory footnote, SGI-Resp. 15 n.7, while Jai misunderstands it,
RW2/Jai-Resp. 32-33. EEOC’s point was not, as Jai suggests, that courts can never
dismiss successor liability claims on Rule 12(b)(6). Rather, Swierkiewicz
dictates that a plaintiff need not plead each non-dispositive factor of the
fact-specific MacMillan/Trujillo test to survive a motion to dismiss. Swierkiewicz,
534 U.S. at 512 (prima facie case should not be transposed into rigid pleading
standard).
Jai cites EEOC v. Labor Solutions of Alabama
LLC, 242 F. Supp. 3d 1267, 1281 (N.D. Ala. 2017), but that case did not
hold that a plaintiff must plead notice or every MacMillan factor.
Instead, the court observed, “there is no set criteria” for determining
successor liability. Id. at 1274. Accordingly, it dismissed EEOC’s
claim after determining that, unlike in this case, EEOC pled “very few facts”
relevant to successor liability, and the successor was formed a year after the
predecessor ceased operations. Id. at 1281.
EEOC argued that because successor liability
determinations are so fact-specific, they are usually best made at summary
judgment or afterwards. EEOC-Br. 37-38; Howard Johnson Co. v. Detroit Local
Joint Exec. Bd., 417 U.S. 249, 256 (1974) (Given the “difficulty of a
successorship question, the myriad factual circumstances and legal contexts in
which it can arise ... emphasis on the facts of each case … is especially
appropriate.”); Trujillo v. Longhorn Mfg. Co., 694 F.2d 221, 225 (10th
Cir. 1982) (successor liability depends on facts and circumstances).
Jai’s and SGI’s briefs actually underscore this
point, as both rely on depositions and declarations in denying they had notice
or that they are liable as successors. RW2/Jai-Resp. 25, 36; SGI-Resp. 27-31. At
issue here is not whether the evidence established successor liability,
but whether EEOC pled sufficient facts, accepted as true, to plausibly
allege it. Because RW2 and Jai refused to produce Whitten and Patel for
deposition, or to supplement discovery requests, EEOC could not complete
discovery or obtain the evidence needed to assess successorship liability factually.
Jai baselessly accuses
EEOC of never having had any interest in conducting discovery or uncovering the
facts as to notice or damages. RW2/Jai-Resp. 34. Early in the litigation,
EEOC served a number of discovery requests on Jai (and RW2), repeatedly sought
to depose Whitten and Patel, and arranged depositions for eight aggrieved
individuals. R.169 at 3-5, R.181 at 2-3(detailing discovery history); R.169,
Ex. 2(3/22/17 email re: scheduling Whitten/Patel depositions); R.169, Ex. 5(7/28/17
email requesting confirmation of Whitten/Patel deposition dates); R.134 (motion
to compel financial information); App. Vol.1 at 12-15(docket). In August 2017,
Jai’s counsel abruptly vacated the aggrieved individuals’ depositions and deferred
Patel’s and Whitten’s, stating his intent to withdraw as counsel. R.169, Ex.6-7;
R.161-4. Counsel, who represented all defendants, filed a motion to withdraw
due to Jai’s (and Whitten’s) lack of communication and moved to vacate the
September 2017 settlement conference. R.160, R.172; R.187 at 2.
Over EEOC’s objections, the court granted
counsel’s motion to withdraw, and it ordered Jai and RW2 to obtain new counsel,
supplement discovery, and schedule Patel’s and Whitten’s depositions. R.177.
The court then denied Jai’s motion to dismiss, concluding EEOC plausibly pled
notice. R.178 at 10. When RW2 and Jai failed to adhere to the court’s order,
EEOC filed a motion for civil contempt. R.181.
This history shows that it was Jai (and
RW2), not EEOC, whose tactics delayed this litigation. See R.187 at 7
(RW2 and Jai’s failure to obtain counsel brought litigation to a “standstill”;
noting Jai’s failure to produce financial information). Jai’s complaint that
EEOC did not “conduct any discovery before the default hearing” is mystifying
since EEOC had no reason to conduct discovery after the default order—the only
remaining issues concerned damages, not liability. Nor could EEOC
realistically have conducted discovery, as Jai (and RW2) went two years without
counsel until September 2019, when current counsel made a limited appearance
for the Rule 55(b) hearing. App. Vol.1 at 15, 18(docket); R.187 at 6(magistrate’s
2017 proposed findings) (“There is no way that plaintiff can move forward with
this case until RW2 and Jai retain counsel.”). As Judge Kelly observed, “[o]f
course, business entities would require counsel to represent them.” App. Vol.2
at 300 (citing D.N.M.LR-Civ. 83.7.).
Jai suggests EEOC is to blame for the
twenty-two-month delay between the default order and the hearing. RW2/Jai-Resp.
34. But the case was twice reassigned during this period through no action by
EEOC, and Jai fails to explain how EEOC could have prodded the court into
setting the hearing date more expeditiously. Not until Jai submitted its 2019
prehearing brief did it file any pleading seeking to aside the default judgment
or upend the district court’s 2017 successor liability ruling.
EEOC argued that notice is an important factor
but not a dispositive one, making it error to dismiss the complaint for not
pleading it. EEOC-Br. 38-40 (citing cases holding that no one factor controls).
In support, EEOC cited Gamez v. Country Cottage Care & Rehabilitation,
377 F. Supp. 2d 1103 (D.N.M. 2005), which held that a fact issue existed as to
successor liability, even in the absence of notice. Jai nevertheless maintains
that notice is “essential.” RW2/Jai-Resp. 24, 28-31; SGI-Resp. 13-17
(suggesting notice is required). According to Jai, Gamez is inapposite
because it was decided on summary judgment. RW2/Jai-Resp. 31. But that
procedural posture only strengthens Gamez as support for EEOC, since
evidence of successor liability could have been adduced by then, yet, the court
held, its absence still did not warrant dismissal. 377 F. Supp. 2d at 1123-24.
Jai’s position therefore finds no support in Gamez.
Jai cites Valdez v. Celerity Logistics, Inc.,
999 F. Supp. 2d 936 (N.D. Tex. 2014), RW2/Jai-Resp. 24, but Valdez did
not hold that notice is always required. While characterizing notice as
important and observing that it would ordinarily be inappropriate to impute
successor liability without notice, the court also described the successor
liability inquiry as a “flexible, multifaceted approach” that is “at bottom an
equitable doctrine.” Id. at 944. The Valdez complaint, unlike
this one, included no allegations concerning notice (id. at 945
& n.11)—and, moreover, lack of notice was not the sole ground for the
court’s dismissal of the complaint. Id. at 946 (noting complaint failed
to allege whether predecessor could provide relief or how equities weighed).
Finally, the court permitted the plaintiffs to replead successor liability,
supporting EEOC’s argument that if this Court finds EEOC’s notice allegation as
to Jai insufficient, it should allow EEOC to file a (third) amended complaint
as to Jai. EEOC-Br. 49.
Assuming, arguendo, that notice is
required, EEOC plausibly pled that Jai had constructive notice. EEOC’s opening
brief explained that the district court’s dismissal was based on an unduly
restrictive view of the constructive notice standard. EEOC-Br. 40-46. Properly
interpreted, the standard permits liability to be imposed when a successor
could have learned of a claim with reasonable diligence.
Jai first asserts that EEOC “abandons any actual
notice claim.” RW2/Jai-Resp. 18. This is a red herring; EEOC never limited its
pleading or argument to “actual” notice, and Jai does not dispute that
constructive notice can satisfy the standard. Whether Whitten denied telling
Patel about the discrimination charges prior to the sale is therefore not
dispositive. RW2/Jai-Resp. 25 (citing response to request for admission).
Moreover, RW2’s reliance on its response to a request for admission is itself
misplaced in evaluating whether EEOC’s complaint plausibly pled notice.
Jai contends that EEOC “never pled—nor argued”
constructive notice “during the underlying proceedings” and therefore
“forfeited” this argument by “raising it for the first time on appeal.”
RW2/Jai-Resp. 21 (citing Richison v. Ernest Grp., Inc., 634 F.3d
1123, 1127 (10th Cir. 2011)). Jai’s argument is factually and legally baseless.
Jai first suggests, incorrectly, that EEOC’s
complaint specified “actual notice,” thereby foreclosing “constructive notice.”
RW2/Jai-Resp. 18-19, 21-22. EEOC alleged that Patel was Jai’s “registered
agent” and that “[t]hrough Patel, Jai … had notice of the Charges filed with
the Commission.” App. Vol.1 at 24(¶15). Thus, EEOC pled that Patel was the
conduit through which Jai had notice, whether actual or constructive.
Jai then complains that EEOC “invent[ed] a
history of constructive notice,” which EEOC “never argued” prior to this
appeal, but EEOC’s filings demonstrate otherwise. RW2/Jai-Resp. 18, 21-22. In
responding to Jai’s motion to dismiss, EEOC argued that “it is reasonable to
infer that … Jai knew” of the charges and cause findings “at the time it
purchased the Taos Hotel, either from RW-2 or through its own due
diligence,” citing two cases invoking the constructive notice standard.
R.107 at 6. EEOC is not raising a “back-up theory on appeal,” as in Richison,
634 F.3d at 1127, but is instead reasserting the same constructive
notice argument, based on due diligence, that it made below. Richison is
therefore inapposite.
Jai next maintains that EEOC waived its
constructive notice argument by not repleading notice in the TAC or FAC.
RW2/Jai-Resp. 21. The procedural history of this case demonstrates the
infirmity of this argument. In 2017, the district court denied Jai’s
motion to dismiss the SAC, ruling that EEOC plausibly pled that “Jai had notice
of the present case.” R.178 at 10. The court decidedly did not have “concern”
about EEOC’s notice allegations, as Jai asserts (RW2/Jai-Resp. 21-22). EEOC
therefore had no reason to expand its notice allegations against Jai in the TAC
or FAC. Jai’s position is also somewhat ironic given that, until it filed its
prehearing brief in 2019, Jai never disputed that it had notice. In its
motion to dismiss the SAC, Jai asserted that whether it had notice was
“immaterial.” R.96 at 5 (motion); R.110 at 3 (reply); R.178 at 11 (order).
EEOC argued that the complaint plausibly pled
constructive notice as to Jai. EEOC-Br. 46-49. Jai contends that notice of EEOC
charges cannot be “rationally inferred from a newspaper story about a
purchase.” RW2/Jai-Resp. 25, 26-27. But this was only one component of EEOC’s
allegations that Jai had notice “through Patel.” App. Vol.1 at 24(¶15). The
complaint also averred: (1) the charges were pending for years prior to Patel’s
announcement that he bought the hotel; and (2) prior to the October 2, 2014,
newspaper article announcing Patel’s ownership, EEOC had notified RW2 of its
cause findings and conciliation failure. App. Vol.1 at 22-24(¶¶3-8, 14-15).
EEOC argued that these facts supported the reasonable inference that, had Patel
asked Whitten about potential liabilities or done a reasonably diligent
internet search, he would have learned of the charges. Jai does not address
EEOC’s argument (EEOC-Br. 46-48) that this satisfies the due diligence
standard.
Jai instead disputes that Whitten told Jai
about the charges. RW2/Jai-Resp. 25. This misses the point of constructive
notice, which permits notice to be imputed without actual notice. See NLRB v. S. Harlan Coal,
Inc.,
844 F.2d 380, 385-86 (6th Cir. 1988) (lack of evidence that predecessor or
anyone else told successor of pending unfair labor charges did not invalidate
NLRB finding of successor’s knowledge where other evidence suggested he “had
knowledge, or reasonably should have known” of unfair labor practices
(emphasis added)).
Jai misunderstands EEOC’s reference to the
YouTube video and 2009 New York Daily News article, EEOC-Br. 47 n.10, which
EEOC included merely to illustrate that any reasonably diligent internet search
would have alerted Patel to the underlying employment dispute. See S. Harlan
Coal, 844 F.3d at 386-87 (“Significant newspaper coverage only strengthens the view
that [successor’s president] knew or reasonably should have known of the unfair
labor practices.”). And contrary to Jai’s understanding, nothing precludes EEOC
from elaborating on appeal on the arguments it made below. See, e.g.,
Puerta v. United States, 121 F.3d 1338, 1341-42 (9th
Cir. 1997) (“An argument is typically elaborated more articulately, with more
extensive authorities, on appeal than in the less focused and frequently more
time pressured environment of the trial court, and there is nothing wrong with
that.”).
Jai suggests incorrectly that finding
constructive notice here would impose “strict liability.” RW2/Jai-Resp. 26. Constructive
notice is not tantamount to strict liability because successors are deemed to
have notice only of “facts that one using reasonable care or diligence should
have,” and, of course, notice does not by itself establish successor liability.
Heavenly Hana LLC v. Hotel Union & Hotel Indus. of Haw. Pension Plan,
891 F.3d 839, 845 (9th Cir. 2018) (quoting Constructive Knowledge,
Black’s Law Dictionary (10th ed. 2014)); see also Members of Bd. of Admin.
of Toledo Area Indus. UAW Ret. Income Plan v. OBZ, Inc., 348 F. Supp. 3d
635, 646-47 (N.D. Ohio 2018) (constructive notice standard does not impose
strict liability). Jai offers no response to EEOC’s argument that this due
diligence standard is consistent with the purposes of Title VII and the
successor liability doctrine because it encourages “purchasers to make
reasonable inquiries into the existence of” liabilities, enabling them to
account for any they find in the purchase price and ensuring that Title VII
victims obtain relief. Heavenly Hana, 891 F.3d at 846; EEOC-Br. 41-43.
EEOC argued that it plausibly pled SGI had constructive
notice when it bought the hotel, which suffices under the MacMillan/Trujillo
test. EEOC-Br. 50-52. EEOC averred:
· SGI’s
president, Russell Harper, was experienced in hotel purchasing, App. Vol.1 at
61(¶35h);
· the
purchase agreement included a thirty-day “due diligence” period to review the
hotel’s “liabilities,” id. at 60, 62(¶¶35d,k);
· the
sale included all of Jai’s assets, including “all 122 rooms, office, lobby
furnishings,” “maintenance equipment,” and “phone numbers,” id. at 60-61(¶35e);
· this
lawsuit was pending for two years before the purchase, id. at 61(¶35g);
· Harper
“was in a hurry” to close the sale and “did not complete a thorough review”
during the due-diligence period, id. at 62(¶35l);
· Harper
searched the internet for “Whitten Inn Taos and/or El Camino Lodge” but mainly
looked at “customer reviews,” id. (¶35m);
· Harper
admitted he “didn’t search the internet for history for the past names of the
hotel on Google,” although it would not have taken long to do so, id.(¶35n);
· a
simple Google search for “Whitten Inn Taos” would have revealed this suit “and
the underlying dispute with the employees,” id.(¶35o);
· the
EEOC charges had “long been filed” prior to SGI’s purchase, id. at
62-63(¶35p); and
· Harper
admitted “he could have discovered … this pending EEOC lawsuit by proper
diligence but was in a hurry to close the sale,” id. at 63(¶35q).
EEOC contended that these allegations satisfied
the due diligence standard at the pleading stage by alleging that SGI could
have learned of this action had Harper asked Jai about potential liabilities or
done a reasonably diligent internet search. EEOC-Br. 51.
SGI apparently agrees that constructive notice
could suffice but says EEOC insufficiently pled it. SGI-Resp. 17. Quoting the
district court, SGI first disputes that a pending lawsuit establishes
constructive notice. SGI-Resp. 18. But SGI fails to counter EEOC’s argument
that notice can be imputed when a lawsuit is a matter of public record.
EEOC-Br. 41-43, 47-48, 51; see, e.g., Guarcas v. Gourmet Heaven, LLC,
No. 15-056ML, 2016 WL 7632844, at *8 (D.R.I. Nov. 30, 2016) (notice can be
inferred from pleading that “litigation is a matter of public record” and “the
expectation that normal due diligence … would uncover such matters”). See supra
at 16.
SGI maintains there was “no reason” for Harper
to have searched the internet for “Whitten Inn Taos” because under Jai’s
ownership it was “El Camino Lodge.” SGI-Resp. 18. But this lawsuit’s case
caption includes “El Camino Lodge,” so it is more than plausible that a
reasonably diligent search for the hotel’s name under Jai’s ownership would
have revealed this suit. Additionally, EEOC pled that Harper searched for
customer reviews for “Whitten Inn-Taos.” App. Vol.1 at 62(¶35m). These facts,
which must be credited, make it plausible that Harper also should have searched
for potential liabilities for “Whitten Inn-Taos.” Given the complaint’s
allegations that Jai owned the hotel for only two years, it is even more
reasonable that Harper should have looked for information regarding Jai’s
predecessor.
SGI complains (SGI-Resp. 19-22) that EEOC
improperly relied on facts from Harper’s deposition not alleged in the FAC.
EEOC’s citation to Harper’s deposition was in no way an “implicit[] acknowledg[ement]”
of the FAC’s inadequacy. Id. at 20. Far from it, Harper’s testimony
underscores that the district court erred in dismissing this case, even under
its view of the constructive notice standard, because the facts pled raised “a
reasonable expectation that discovery w[ould] reveal evidence” of red flags
that SGI ignored. EEOC-Br. 51. In other words, the proof was in the pudding:
there were discoverable facts showing that Harper had a reason to dig
deeper into the hotel’s liabilities.
Pointing the finger at Jai, SGI asserts that
EEOC “knew that SGI had conducted its due diligence inquiry but had been misled
by Jai.” SGI-Resp. 16; id. at 28-29 n.17. SGI cites Harper’s testimony
that Whitten and Patel “absolutely” should have disclosed the lawsuit and its
broker’s declaration stating that Jai’s broker assured him there were no
liabilities. Id. at 16, 28-29 n.17. Again, SGI’s reliance on facts to
refute that it had constructive notice is—as SGI itself says—improper,
underscoring the district court’s error in dismissing this case on the
pleadings. SGI-Resp. 19-20.
In any event, EEOC’s constructive notice
argument is not contingent upon whether Jai (or Whitten) told SGI about the
lawsuit, but on whether SGI failed to perform a reasonably diligent search. A
successor’s “blind[] accept[ance]” of a seller’s “false representation that
there were no pending claims” does not defeat constructive notice where, as
here, the complaint was a matter of public record and other evidence should
have alerted the successor to the suit with “minimal due diligence.” Guarcas,
2016 WL 7632844, at *8. Further, Jai’s failure to obtain counsel and its
subsequent default precluded EEOC from deposing Patel or completing discovery
as to Jai, which could have yielded evidence that Jai did not mislead SGI.
Either Patel or Jai’s broker might testify that the hotel was
undervalued, as Whitten himself testified, or that other “red flags”
surrounding the sale should have prompted SGI to do a reasonably diligent
search for the hotel’s liabilities. EEOC-Br. 12; R.234-1 at 13. Such evidence
would undermine the statements of SGI’s broker that the hotel was not
undervalued, Jai’s broker withheld information about the lawsuit, and the sale
raised no “red flags.” SGI-App. at 1-3.
SGI also misrepresents the relevant legal
authority. For example, it claims (SGI-Resp. 17 n.8) that Wheeler v. Snyder
Buick, Inc., 794 F.2d 1228 (7th Cir. 1986), overruled Musikiwamba
v. ESSI, Inc., 760 F.2d 740 (7th Cir. 1985). SGI is incorrect; the Wheeler
court itself disavowed doing any such thing.
EEOC-Br. 44-45. Then, without explanation, SGI declares that EEOC “wholly miscited”
Wiggins v. Spector Freight Sys., Inc., 583 F.2d 882 (6th Cir. 1978).
SGI-Resp. 17 n.9. But EEOC stated correctly that Wiggins suggests that
notice is satisfied where EEOC charges are pending. EEOC-Br. 45-46.
SGI maintains that EEOC’s reliance on EEOC
v. 786 S. LLC, 693 F. Supp. 2d 792 (W.D. Tenn. 2010), was misplaced because
the court’s subsequent opinion “essentially overturned” it. SGI-Resp. 17 n.9.
SGI is incorrect. EEOC cited 786 South for two propositions: (1) the
presence of all nine MacMillan factors is not a prerequisite for
successor liability; and (2) constructive notice may suffice where EEOC charges
have been filed. EEOC-Br. 39, 48. Nothing in the court’s subsequent opinion
overturned these principles.
To the contrary, the subsequent 786 South
opinion supports EEOC’s position. After denying summary judgment and holding a
hearing, the district court concluded that the lack of notice is “not
dispositive.” No. 2:07-CV-02621-JPM, 2010 WL 4628101, at *3 (W.D. Tenn.
Nov. 8, 2010). The court then went on to weigh all the factors, ultimately
declining to impose successor liability. Id. at *4. Moreover, the court
observed, the successor in that case offered “reasonable explanations for the
lack of due diligence,” id., whereas here SGI offers only that Jai
misled it. Given Harper’s testimony that the hotel was undervalued and that a
brief internet search would have alerted him to this suit, this is no excuse. EEOC-Br.
12-13;
at 20-21; Guarcas, 2016 WL 7632844, at *8.
SGI maintains that “the fundamental predicates”
for holding it liable as a successor are absent. SGI-Resp. 9-13. While its
approach is somewhat unclear, SGI appears to be repackaging the MacMillan/Trujillo
factors as a threshold argument that it would be inequitable to hold SGI
liable. SGI-Resp. 12-13 (arguing that absence of select MacMillan/Trujillo factors
precludes liability). But this argument puts the cart before the horse; while a
court may decide after weighing the MacMillan/Trujillo factors
that the equities weigh against successor liability, no authority we know of
precludes the analysis in the first place.
SGI focuses on the absence of a sudden change
in the employment relationship, arguing that there was none here because RW2
fired the claimants years earlier. SGI-Resp. 10. The crux of SGI’s argument is
apparently that a second successor cannot be held liable. But it cites no
authority for this proposition, we are aware of none, and other successor
liability cases involve multiple successors. See Valdez, 999 F. Supp. 2d
936 (FLSA case with three consecutive successors).
Courts originally adopting the successor
liability doctrine were undoubtedly concerned about the effects of “sudden
change[s]” in company ownership. Still, it does not follow that multiple
successors cannot be held liable for a predecessor’s unlawful conduct simply
because a company has changed hands more than once. A hard-and-fast rule cutting
off successor liability, without weighing the equities, would undermine the
objectives of the successor liability doctrine under Title VII. See supra
at 2-3.
From the claimants’ perspective, there was
a “sudden change” in the employment relationship when RW2 sold the hotel to
Jai. EEOC-Br. 30. SGI would have the claimants’ interests go unprotected—and
any discrimination go unremedied—simply because, for reasons beyond their
control, RW2 sold the hotel to Jai, who resold it to SGI. And, of course, Jai
maintains it cannot be liable either, meaning that, according to Jai and SGI, no
successor can be held liable. This Court should not entertain their attempt
at an end run around MacMillan and Trujillo.
SGI argues that EEOC insufficiently pled the
remaining successor liability factors. SGI-Resp. 22-31. The earlier-assigned
district court judge rejected this argument, as should this Court. See R.199
at 8-10.
SGI criticizes EEOC for failing to plead more
specific facts, given EEOC’s “ample investigative tools” and “conciliation
process.” SGI-Resp. 26. This is another red herring; EEOC is not required to
investigate or conciliate as to successors. See R.178 at 17 (EEOC not
obliged to exhaust administrative remedies against SGI); MacMillan, 503
F.2d at 1093 (successor need not be named in charge).
SGI misconstrues the second MacMillan
factor, claiming it pertains to the successor’s ability to pay prior to
purchase. SGI-Resp. 24 n.14. Trujillo makes clear this factor
concerns present ability to pay. 694 F.2d at 225 (affirming finding of
predecessor’s inability to pay where the “sale agreement covered substantially
all of the predecessor’s physical assets” and “no current financial
statement” of predecessor was offered) (emphasis added). EEOC satisfied this
factor by pleading RW2 and Jai “are unable to provide … relief.” App. Vol.1 at
58(¶28). Factually, SGI cannot in good faith contest this factor, as RW2 and
Jai have repeatedly represented they are insolvent. RW2/Jai-Resp. 5, 38; Walker
v. Faith Techs., Inc., 344 F. Supp. 2d 1261, 1269 (D. Kan. 2004) (fact
issue as to predecessor’s ability to pay where it “filed for bankruptcy … and
is no longer in business”); Brzozowski v. Corr. Physician Servs., Inc., 360 F.3d
173, 178 (3d Cir. 2004) (successor liability claim may be added
where predecessor’s “financial debacle” made it “unable to satisfy the
plaintiff’s monetary claims”).
EEOC plausibly pled the remaining MacMillan/Trujillo
factors, which concern continuity of business operations. See Trujillo,
694 F.2d at 224 n.3. The complaint satisfied the fourth factor (“same plant”)
by pleading that SGI “substantially continued the business operations” at the
same “hotel building at the same physical location … at 615 Paseo del Pueblo
Sur, Taos, New Mexico.” App. Vol.1 at 59(¶¶31-32). The averment that SGI “has
jobs with substantially the same working conditions” using “at least some of
the same machinery and equipment” satisfies the seventh and eighth factors.
App. Vol.1 at 59(¶¶33-34). The ninth factor, whether the successor “produces
the same product,” Trujillo, 694 F.2d at 224 n.3, was satisfied by the
pleading that SGI, RW2, and Jai are all involved in the “same business of
operating a hotel.” App. Vol.1 at 59(¶35).
SGI contends EEOC did not plead the fifth and
sixth factors, same work force and personnel. SGI-Resp. 23-24. But no single
factor is required. EEOC-Br. 36-40. Moreover, “less continuity is required”
where, as here, EEOC seeks only monetary relief. Musikiwamba, 760 F.2d
at 751.
SGI makes the overarching argument that the
complaint’s allegations made “on information and belief” were proven incorrect
by Harper’s deposition testimony. SGI-Resp. 27-31. But the standard for
evaluating a motion to dismiss for failure to state a claim rests on whether
the complaint alleges sufficient facts, accepted as true, to state a
plausible claim for relief. Iqbal, 556 U.S. at 678. SGI similarly
asserts that EEOC knew when filing the FAC, after Harper’s deposition, that
“there was no substantial continuity of business operations.” SGI-Resp. at 31. This
is simply untrue. Harper’s testimony does not disprove the complaint’s factual
allegations; it offers only his view of some of the evidence. Until EEOC is
able to complete discovery, the facts are unknown. For instance, EEOC might
learn during additional discovery whether, as Harper says, it used totally
different personnel policies.
In any event, the legal significance of much of
Harper’s testimony is unclear. For example, SGI cites no case establishing that
Harper’s post-purchase repairs to the roof and the air-conditioning system, or
his purchase of upgraded housekeepers’ carts or pool equipment, defeats the
fourth factor (same plant) or the eighth factor (same machinery, equipment,
production methods). And Harper’s testimony does nothing to undermine the ninth
factor (produces same product), as his testimony confirms that the hotel was in
the same business as before: offering overnight accommodations. Harper’s
deposition testimony therefore does not undermine the FAC’s allegations of
successor liability regarding SGI.
Jai and SGI argue they are not “employers” under
Title VII because they lack fifteen employees, suggesting successor liability
fails. RW2/Jai-Br. 35-36; SGI-Resp. 27-28 & n.16. Judgment cannot be
affirmed on this basis.
SGI cites two outdated district court cases to support
its argument that Title VII’s numerosity requirement is “jurisdictional.” SGI-Resp.
28. The Supreme Court has since held otherwise. Arbaugh v. Y&H Corp.,
546 U.S. 500, 516 (2006) (numerosity “not a jurisdictional issue”).
Accordingly, numerosity is subject to forfeiture. Id. at 510-11. SGI
never raised this issue below, thereby forfeiting it. See R.186, R.192,
R.203, R.208 (SGI’s filings).
SGI’s and Jai’s argument, premised on a
misunderstanding of successor liability, also lacks merit. EEOC seeks to hold
Jai and SGI liable not for their own actions as “employers” but as successors
to RW2. Neither Jai nor SGI cites any case holding that a successor must
meet the fifteen-employee requirement, and we are aware of none.
Such a requirement would be irreconcilable with Title VII’s requirement that
employers have fifteen employees for twenty or more weeks “in the current or
preceding calendar year,” which refers to the year the unlawful employment
action took place. 42 U.S.C. § 2000e(b). For successor liability
purposes, therefore, only RW2, not Jai or SGI, must satisfy the numerosity
requirement. See Wallace
v. DM Customs, Inc., No. 8:04-cv-115-T-23TBM, 2006 WL
2882715, at *12–13 (M.D. Fla. Oct. 6, 2006); Claiborne Barksdale, Successor Liability
Under the National Labor Relations Act and Title VII, 54 Tex. L. Rev. 707,
731 n.118 (1976) (“If the predecessor but not the successor has fifteen
employees, [Title VII] will … cover the successor.”) (case citation omitted).
In any event, as the district court recognized,
EEOC plausibly pled that Jai and SGI “employed more than 15 employees.” App. Vol.1
at 24(¶18) (Jai), 58(¶29) (SGI); see R.199 at 9. These well-pled factual
allegations must be accepted as true. Iqbal, 556 U.S. at 678. Jai
disputes that it had fifteen employees, citing the declaration of a payroll
employee. RW2/Jai-Resp. 36; App. Vol.2 at 229. On a motion to dismiss for
failure to state a claim, however, the declaration is irrelevant, and, moreover,
other evidence renders the point disputed. See R.221-27 (listing fifteen
hotel employees at Whitten Inn “as of May 20, 2014,” the month the hotel was
sold to Jai, App. Vol.2 at 182). Ultimately, whether Jai had fifteen employees
is a factual question that, if relevant, can only be resolved after discovery.
SGI claims EEOC knew from Harper’s deposition
that SGI lacks fifteen employees. SGI-Resp. 5 n.4, 27. But Harper’s testimony
that SGI employed ten to twelve employees in May 2017 is not dispositive of this
factual question; more discovery would be needed, which EEOC was never able to
pursue. For instance, EEOC could request SGI’s payroll and/or tax records to
determine how many employees it actually had.
Finally, insofar as Jai suggests it cannot be
liable as a successor because RW2 did not have fifteen employees, that
argument fails for the reasons discussed infra at 38-39.
In its brief, RW2 denies any wrongdoing,
portrays itself as a victim of baseless government harassment, and fills its
appendix with employee testimonials about Larry Whitten’s character. See
RW2/Jai-Resp. 38, 45; RW2/Jai-App. 132-54. RW2 accuses the aggrieved
individuals of “invent[ing]” their accounts of discrimination and retaliation
“to harm RW2.” RW2/Jai-Resp. 4. It asserts that EEOC was “fully aware” RW2 lacked
fifteen employees and pursued litigation only because RW2 “refused to confess
to false charges of racism, discrimination, and retaliation.” RW2/Jai-Resp.
4-5. Even though RW2’s accusations are unfounded and irrelevant to this appeal,
we respond briefly to its troubling attacks.
“When the EEOC acts, albeit at the behest of and
for the benefit of specific individuals, it acts also to vindicate the public
interest in preventing employment discrimination.” Gen. Tel. Co. of NW, Inc.
v. EEOC, 446 U.S. 318, 326 (1980). Here, eight employees filed charges with
EEOC, claiming Whitten discriminated based on race, color, national origin, and
retaliated against them when they protested the discrimination. EEOC-Br. 7; see,
e.g., RW2/Jai-App. 15-20 (six charges). The employees alleged that Whitten
forbade Spanish speaking in his presence, required employees to Anglicize their
names, “referred to one dark skinned employee as ‘buckwheat,’” and fired
employees who complained of the discrimination. Id. Pursuant to its
statutory duty, 42 U.S.C. § 2000e-5(b), EEOC investigated the allegations,
found reasonable cause to believe they were true, and attempted conciliation
with RW2. EEOC-Br. 7. EEOC proceeded diligently with this suit, including
making the aggrieved individuals available for deposition to testify about their
allegations. What brought this case to a standstill was RW2’s (and Jai‘s)
failure to obtain representation or comply with the court’s orders. See
supra at 14-15; R.187 at 6 (“RW2[’s] … failure to retain replacement counsel
has prejudiced EEOC by causing considerable delay.”).
RW2 complains EEOC “did not diligently pursue a
damage hearing allowing 10 years to pass.” RW2/Jai-Resp. 45. But, as explained supra
at 8, twenty-two months—not ten years—passed between RW2’s default order and
the hearing, for reasons that had nothing to do with EEOC. App. Vol.1 at 53. RW2’s
suggestion that EEOC knew RW2 was an innocent victim is not supported by the
record. EEOC need not credit Whitten’s denials of discrimination and retaliation
over the aggrieved individuals’ accounts; otherwise, EEOC would never be able
to find reasonable cause, much less sue an employer. Moreover, the aggrieved
individuals’ declarations provide evidentiary support for the complaint’s
discrimination and retaliation allegations, negating RW2’s contention that EEOC
concocted or contorted their stories out of a desire to run RW2 into the ground.
App. Vol.1 at 162-71; App. Vol.2 at 231-32.
For instance, Martín Gutierrez stated that
Whitten asked him to Anglicize his name, “criticized and condemned [him] for
talking Spanish,” and called his “girlfriend at the time, Michelle Martinez,
‘buckwheat’ because she had a very dark complexion.” App. Vol.1 at 162. Susana
Gutierrez, the Housekeeping Supervisor, said that Whitten “belittled” the
housekeepers on a “daily” basis and “regularly put [them] down for not knowing
and for not speaking English while being in the USA.” App. Vol.1 at 166. Victor
Cardenas described how Whitten moved him from “front desk clerk to work in the
back helping to clean rooms, doing laundry or maintenance work because Larry
Whitten considered my accent too thick and too strong for the customers to
understand,” although Cardenas had worked at the front desk for three years
without a problem; Whitten accused him, as well as other Hispanic co-workers
and customers, of “being a drug dealer and a drug user.” App. Vol.1 at 169.
RW2 contends that EEOC’s “appeal must fail”
because EEOC did not “allege or establish at the hearing” that it satisfied
Title VII’s definition of “employer” at 42 U.S.C. § 2000e(b).
RW2/Jai-Resp. 35. It uses its numerosity argument to attack both the default
judgment and the award of compensatory damages under 42 U.S.C.
§ 1981a(b)(3)(A). Id. at 35-36. Each argument fails.
The district court entered a sanction-based
default order, which RW2 never challenged below. Cf. Tripodi v. Welch,
810 F.3d 761, 764 (10th Cir. 2016) (defendant challenged default judgment by
filing Rule 60(b) and Rule 55(c) motions). Nor did it appeal the judgment,
precluding RW2’s challenge to the default judgment on any ground. Olcott
v. Del. Flood Co., 327 F.3d 1115, 1125 (10th Cir. 2003) (stating that
“[a]fter the entry of default, Defendants were not entitled to raise
merits-based argument before the district court” and the “entry of a default
judgment precludes Defendants from raising such arguments on appeal”).
RW2 now reframes its numerosity attack by
asserting that, because EEOC did not establish that RW2 employed fifteen
employees, it was not entitled to any damages. But RW2’s failure to appeal the
compensatory damages award precludes it from challenging it now. See
Montgomery v. City of Ardmore, 365 F.3d 926, 944 (10th Cir. 2004) (appellee
who did not file cross-appeal cannot “‘attack the decree with a view either to
enlarging his own rights thereunder or of lessening the rights of his adversary.’”)
(citation omitted).
Even if RW2 had appealed the judgment or the
compensatory damages award, its argument would fail. RW2 essentially bases its
argument on the sufficiency of the pleadings. This Court rejected a similar
challenge in Tripodi, where the defaulting defendant “mount[ed] a
roundabout attack” on the judgment on appeal “by questioning the sufficiency of
the pleadings.” 810 F.3d at 764. This Court explained that although a
defaulting defendant can challenge “the legal sufficiency of the admitted
factual allegations,” the default “relieve[s] [the plaintiff] from having to
prove the complaint’s factual allegations.” Id. at 765 (affirming
default judgment).
Accordingly, RW2’s default relieved EEOC of
having to prove the complaint’s factual allegation that “at all relevant times
Whitten Inn … employed more than 15 employees.” App. Vol.1 at 23(¶12). This
well-pled factual allegation must be accepted as true, and the default order
must be enforced. See Tripodi, 810 F.3d at 766 (“fairness requires”
enforcing default judgment). And because RW2’s default established that it had
fifteen employees, EEOC was entitled under 42 U.S.C. § 1981a(b)(3)(A) to
the minimal damage award for the smallest employers, of up to $50,000 per
person. RW2 cites Hyster v. Ethel Hedgeman Lyle Academy, No.
4:08-CV-1664, 2009 WL 1850912 (E.D. Mo. June 29, 2009), RW2/Jai-Resp. 36, but it
only buttresses EEOC’s argument. The Hyster court awarded each plaintiff
$50,000 after a default judgment, but not more, because plaintiffs had not
proved the employer had 500+ employees. 2009 WL 1850912, at *2.
In any event, there was at least a fact question
presented at the Rule 55(b) hearing as to whether RW2 had fifteen employees.
RW2 argued that it did not (App. Vol.2 at 259) and submitted supporting
evidence, see RW2/Jai-Resp. 36, but the record also contains contrary
evidence. See R.221-26 (sixteen employees for RW2’s “Taos Current
Employees”); R.221-27 (fifteen “Taos Employees” “as of May 20, 2014”). Because
the district court awarded compensatory damages against RW2, it implicitly
concluded (if it needed to) that RW2 employed the requisite number of employees
under 42 U.S.C. § 1981a(b)(3)(A) to support the award. RW2’s contention
that EEOC “was well aware” it did not meet the numerosity requirement,
RW2/Jai-Resp. 37, is therefore both untrue and unsupported by the record.
RW2 asserts that EEOC did not justify its
argument that the compensatory damages award was so low as to constitute an
abuse of discretion. RW2/Jai-Resp. 39. But EEOC supported its argument with
caselaw and evidence, which RW2 ignores. As identified in EEOC’s opening brief,
the eleven aggrieved individuals’ declarations detail the stress, anxiety,
depression, shame, humiliation, vomiting, sleeping problems, homelessness, and
even suicidal thoughts caused by RW2’s treatment. EEOC-Br. 17-21, 55-57, 63-64.
RW2 asserts some declarations were unsigned, RW2/Jai-Resp. 16, but this is incorrect.
App. Vol.1 at 162-171; App. Vol.2 at 231-32.
RW2 submits that it did not cause the
claimants’ emotional harm. RW2/Jai-Resp. 39-40. RW2 first contends that EEOC
bore the burden of establishing causation. Id. (citing Bryant v. Aiken
Reg’l Med. Ctrs. Inc., 333 F.3d 536, 546-47 (4th Cir. 2003)). It is unclear
why RW2 relies on Bryant, a Fourth Circuit decision not involving a
default judgment, when this Court has held that, on default, well-pled factual
allegations are deemed admitted and the defendant “forfeits his … ability to
contest those facts.” Tripodi, 810 F.3d at 764. Here, EEOC pled that
RW2’s discriminatory and retaliatory acts caused the claimants’ emotional harm.
See App. Vol.1 at 33, 34. By its default, RW2 admitted these facts, and
is precluded from arguing otherwise. See Steele v. Voyale Corp.,
88 F. App’x 916, 918 (6th Cir. 2004) (default precluded defendant from offering
evidence at Rule 55(b) hearing that plaintiff’s conduct caused her emotional
distress).
In any event, the declarations establish
causation. Each claimant described how Whitten’s conduct caused their
emotional, and even physical, distress. App. Vol.1 at 162-171; App. Vol.2 at
231-32. For instance, Jose Dale Quintana stated that Whitten’s “No Spanish”
policy was “stressful” and made him “fear[]” losing his job; after his
termination he suffered “a huge depression” and “was placed on Xanax.” App. Vol.1
at 165. Jennie Valdez stated that “because of being terminated, it was
very devastating not getting a steady paycheck which caused financial strain.” Id.
at 170. The remaining declarations likewise make clear that RW2 caused the
emotional distress described.
RW2 suggests that evidence from a medical or
psychological professional was necessary for compensatory damages.
RW2/Jai-Resp. 40. This is incorrect, as even it concedes. Id. at 39; see
Smith v. Nw. Fin. Acceptance, Inc., 129 F.3d 1408, 1417 (10th Cir. 1997)
(absence of “testimony of a treating physician or psychologist” does not mean
“evidence supporting [plaintiff’s] compensatory damage claim is
insubstantial”). RW2 further suggests EEOC was obligated to call each claimant
to testify at the hearing, but it cites no authority for that proposition and
fails to explain how EEOC could have accomplished that during the ninety
minutes (originally only sixty minutes) the district court set for the hearing.
Regardless, the claimants’ declarations sufficed to establish a basis for the compensatory
damages. See Jackson v. AML Constr. & Design Grp., No. 16-cv-1847, 2017 WL 2812823 at *2 (D. Colo. June 29, 2017)
(“detailed affidavits” can support damages award upon default).
RW2 states that EEOC’s request for a
“‘fact-intensive inquiry’” following ten years “is not well taken.”
RW2/Jai-Resp. 41. It is unclear what RW2 means here, since EEOC requested no
such thing. EEOC is not requesting remand for additional factual development of
the claimants’ emotional distress allegations; EEOC’s argument is that on
this record, with these facts, the district court’s award was so low as to
constitute an abuse of discretion.
Citing Wulf v. City of Wichita, 883 F.2d
842 (10th Cir. 1989), RW2 asserts that it is impermissible to attack a damage
award “by referencing other comparable jury verdicts.” RW2/Jai-Resp. 41. But Wulf
did exactly that: it ordered that the plaintiff’s damages be reduced to no more
than $50,000 after comparing the damages awarded to other cases. 883 F.2d at
875. EEOC’s reliance on damages awarded in other cases is therefore permissible
to show that the $3,181-per-claimant award here was woefully insufficient.
RW2 asserts that the claimants’ declarations
“vary wildly,” RW2/Jai-Resp. 43, but this only underscores the district court’s
error: it awarded an arbitrarily low figure despite the acute emotional
distress of a number of claimants, including depression, anxiety, vomiting, and
suicidal thoughts. EEOC-Br. 17 n.7. Mocking Martín Gutierrez and questioning
the legitimacy and underlying cause of his emotional distress, RW2 posits that
additional employee testimony would be fruitless. RW2/Jai-Resp. 43 (referring, inter
alia, to Gutierrez’s criminal record and drug use). This is a strawman
argument; EEOC never argued that additional testimony is needed, and RW2’s
default precludes this attack in any case. Steele, 88 F. App’x at 917.
RW2 asserts that the “relatively short time
frame” of the unlawful acts and the “obvious” business need for the No-Spanish
policy support the low damages award. RW2/Jai-Resp. 44. But it fails to
address, much less engage with, EEOC’s argument on these points. As EEOC
explained, regardless of whether Whitten’s No-Spanish policy operated as a
categorical ban or as a narrower policy against speaking Spanish in his presence,
it lacked a legitimate basis as implemented and, along with the racial slurs
and other discriminatory conduct, contributed to a hostile work environment.
EEOC-Br. 57-65. Nor does RW2 refute EEOC’s argument that the district court
failed to account for the harm caused by the racial slurs, Whitten’s status as
the “alter ego” of RW2, or the retaliatory terminations, which caused
significant harm. Id. at 61-65.
RW2 maintains that district courts retain broad
discretion in assessing compensatory damages. RW2/Jai-Resp. 44. That discretion
is not limitless, however. Compensatory damages are awarded to make individuals
whole for the harm they suffered, and to further Title VII’s objective of
eradicating discrimination. EEOC-Br. 54. The cumulative award here failed to
achieve either goal.
The district court judgment 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
(phone)
Annenoel.Occhialino@eeoc.gov
