Equal Employment Opportunity Commission v. Management Hospitality of Racine, Inc. , 666 F.3d 422 ( 2012 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 10-3247
E QUAL E MPLOYMENT O PPORTUNITY
C OMMISSION,
Plaintiff-Appellee,
v.
M ANAGEMENT H OSPITALITY OF R ACINE,
INC. d/b/a INTERNATIONAL H OUSE OF P ANCAKES,
F LIPMEASTACK, INC. and S ALAUDDIN
JANMOHAMMED ,
Defendants-Appellants.
Appeal from the United States District Court
for the Eastern District of Wisconsin.
No. 06-cv-0715—Lynn S. Adelman, Judge.
A RGUED A PRIL 5, 2011 —D ECIDED JANUARY 9, 2012
Before E ASTERBROOK, Chief Judge, B AUER, Circuit Judge,
and Y OUNG, District Judge.Œ
Œ
The Honorable Richard L. Young, Chief Judge of the United
States District Court for the Southern District of Indiana, sitting
by designation.
2 No. 10-3247
Y OUNG, District Judge. The Equal Employment Opportu-
nity Commission (“EEOC”) brought this action on
behalf of two servers, Katrina Shisler and Michelle Powell,
who were employed at an International House of
Pancakes franchise in Racine, Wisconsin (the “Racine
IHOP”), alleging that the servers were sexually harassed
in violation of Title VII of the Civil Rights Act of 1964,
42 U.S.C. §§ 2000e et seq. A jury found in favor
of Shisler and Powell on the hostile work environment
claim, and against the Defendants, Management Hos-
pitality of Racine, Inc. (“MHR”) d/b/a International
House of Pancakes, Flipmeastack, Inc., and Salauddin
Janmohammed. The jury awarded compensatory dam-
ages to Shisler and Powell, and awarded punitive
damages to Powell.
Following the jury verdict, the EEOC filed a document
entitled EEOC’s Post-Trial Motions that addressed
two motions: a motion for judgment against Defend-
ants Flipmeastack and Salauddin Janmohammed and a
motion for an order of injunctive relief. The Defend-
ants filed a Motion for Judgment as a Matter of Law
or Alternatively for a New Trial or Remittitur. By Deci-
sion and Order dated August 31, 2010, the district court
denied the Defendants’ motions, granted the EEOC’s
motions, and entered judgment in favor of the EEOC,
and an injunction against Flipmeastack, Inc. This appeal
followed. For the reasons set forth below, we reverse
in part, and affirm in part.
No. 10-3247 3
I. Background
The recitation of the relevant facts that follow are pre-
sented in the light most favorable to the EEOC, as
they relate to the Defendants’ Rule 50 motion and the
jury’s verdict. Molnar v. Booth, 229 F.3d 593, 597 (7th
Cir. 2000). All other facts necessary for resolution of
this appeal, including the facts relevant to the district
court’s conclusion that Flipmeastack was an “employer”
of Shisler and Powell, will be addressed in the Discussion
Section.
A. The Defendants
Janmohammed was the principal owner and
franchisee of twenty-one IHOPs, including the Racine
IHOP. He operated the Racine IHOP under the franchise
name of MHR 1 , and was its president and sole share-
holder. MHR contracted with Flipmeastack, a company
solely owned by Janmohammed’s wife, Victoria
Janmohammed, to provide management consulting
services for his IHOPs. These services included accounting
and payroll, corporate IHOP franchise reporting
and compliance, and human resources assistance. In
addition, Flipmeastack hired the district managers, who,
in turn, hired the general managers of each restaurant
in the district, and oversaw the day-to-day operations
1
MHR dissolved, and its assets were sold, after the events
giving rise to this case occurred.
4 No. 10-3247
of those particular restaurants. In 2005, Steve Smith was
the district manager of the Racine IHOP, Michelle
Dahl was the general manager, and Nadia Del Rio and
Rosalio “Junior” Gutierrez were the assistant managers.
The employees of each restaurant, including the general
manager, assistant managers, and servers, were employees
of MHR.
B. The Sexual Harassment Policy
In 2005, Flipmeastack formulated and updated the
Sexual Harassment and Diversity Policy for managers
and employees of MHR. The policy indicated that
“any form of unlawful harassment of co-workers
or members of the public is absolutely forbidden, regard-
less of whether it is verbal, physical, or visual harassment.”
It also stated that employees “will report any instances
of improper behavior to my manager or company represen-
tative.” Victoria Janmohammed confirmed that Gutierrez,
Del Rio, and Dahl were managers or “company representa-
tives” within the meaning of the policy, and that a com-
plaint to any one of those three would be effective. As
the general manager, Dahl was responsible for main-
taining a workplace free of sexual harassment and for
reporting instances of sexual harassment to upper manage-
ment, and Del Rio was responsible for training all
new hires. This training consisted of showing all new hires
a sexual harassment videotape, handing them a copy of
the sexual harassment policy, and asking them to read
and sign it. Both Shisler and Powell viewed the video-
No. 10-3247 5
tape and signed Flipmeastack’s sexual harassment policy.
Shisler’s and Powell’s signed copies of the sexual harass-
ment policy, like all copies signed by IHOP servers, were
locked in a file cabinet. The complaint procedure was
not available in print.
In 2005, corporate IHOP directed that a crisis man-
agement guidelines poster be displayed in every
IHOP restaurant. The poster provided a list of tele-
phone numbers in case of an emergency, such as an
armed robbery, flood, earthquake, or “other emergency,”
such as a “discrimination claim.” The poster included
the telephone number of Flipmeastack, the corporate
number of IHOP, and the cell phone number of
Smith. Neither Shisler nor Powell had any recollection
of seeing the poster in the Racine IHOP.
C. The Claimants
Shisler, a teenager, worked at the Racine IHOP on
two different occasions. During her first term of employ-
ment in January 2004, Shisler testified that the
general manager of the Racine IHOP, Charles Hecker,
was sexually harassing a female server named Christine.
Shisler gave Smith a written letter informing him of
that fact, and complaining that she and her boyfriend
were receiving unfair work assignments. According
to Shisler, Smith’s response was “passive” and he
never “really sa[id] whether or not he was going to
take care of it.” Shisler never heard from Smith regarding
those issues; however, she testified that Hecker started
6 No. 10-3247
to treat her differently, and “stated things that he only
could have either been told, or read himself in the let-
ter.” After things worsened with Hecker, Shisler
“called the Corporation” and was told she “had to go to
[Smith] about it.” In light of Hecker’s treatment of her,
she did not complain again to Smith. Ultimately,
Hecker fired Shisler.
Her second term of employment began on March 3, 2005.
By this time, Dahl served as the general manager of
the Racine IHOP. Gutierrez, who was approximately
10 years older than Shisler, was relatively new to
the position and worked as the night manager (5:00 p.m.
to 3:00 a.m.), while Shisler worked the second shift
(3:00 p.m. to 11:00 p.m.); consequently, their schedules
overlapped. Shisler testified that whenever she worked
with Gutierrez, he made sexually charged comments
to her, including, “I want to take you in the back and
fuck you over the pancake batter,” “I bet you’re kinky,”
and “you like it rough.” Gutierrez even propositioned
her for three-way sex with his (allegedly) bisexual girl-
friend. Gutierrez stared at her body, breasts and
buttocks, like she was “a piece of meat,” rubbed
her shoulders and pressed his body up against hers,
and made her feel very “uncomfortable.” Shisler “told
him to get the fuck away from [her].” She felt “bullied” by
him and felt “dirty” after he told the cooks in Spanish that
he wanted to have sex with her. On March 18, 2005,
Shisler, along with two other servers, reported Gutierrez’s
behavior to Del Rio. Shisler told Del Rio that she
would have to be “blind” if she did not “see it going on.”
Del Rio “blew [them] off,” shook her head, and called
them “silly girls.”
No. 10-3247 7
At some point after Shisler reported Gutierrez’s behavior
to Del Rio, Gutierrez “slap groped” her buttocks as she was
bending over to pick up hot sauce from the floor. Shisler
told Gutierrez to “get the fuck off [her].” On March 27,
2005, Shisler reported Gutierrez’s behavior to Dahl,
who said that this was “none of [her] concern” and then
said “we’re done here.” After her complaints fell on
deaf ears, Shisler “gave up” and kept working “because
[she] needed the money.” On April 3, 2005, Dahl termi-
nated Shisler for violating the Racine IHOP’s coupon
policy, which barred servers from possessing coupons
and giving them to customers.
Powell, also a teenager, worked at the Racine IHOP
from October or December 2004 until June 2006. Powell
generally worked the first shift (6:00 a.m. to 3:00 p.m.),
so she worked with Gutierrez when their schedules
overlapped —approximately once a week. Powell testified
that in late February 2005, Gutierrez began to make
offensive comments to Powell such as her “ass looked
good in them pants.” Initially, Powell thought Gutierrez’s
comments were “inappropriate,” but “laughed it
off, thinking it was a joke[.]” Powell’s thoughts changed
when “his harassment continued and became more se-
vere,” to the point where “she tried to avoid him at
all costs.”
Gutierrez pulled her ponytail whenever he could
and told her that she “liked it because [she] would like
[sex] rough.” Gutierrez also whispered in her ear that
he would like to “eat [her] out” and left a voicemail on
Powell’s cell phone asking Powell “to hook up” with him.
8 No. 10-3247
On one occasion while Powell and Gutierrez were in
the kitchen, Gutierrez told the cooks in Spanish “how
badly he wanted to fuck [Powell] and [she] wouldn’t
let him” and then translated what he said to her. He
also told her “he thought [she] would get freaky with
sex.” On another occasion, Gutierrez took Powell into
the dry storage area and pressed himself up against
her while telling her that he “would like to do [her] from
behind.” Powell also recalled that when Gutierrez walked
past her, he would frequently brush up against her breasts
and buttocks. Powell repeatedly objected to Gutierrez’s
behavior, and asked him to “knock it off.” In response,
Gutierrez “seemed to yell at [her] more” or gave her
“harder things to do.”
Powell testified that during the first week of April 2005,
she complained to Dahl that Gutierrez was “sexually
and physically abusing [her] and other female workers”
and “grabbing us and saying dirty things to us.” Al-
though Dahl said she “would take care of it,” Dahl did
nothing to address her complaints. Powell also testified
that Del Rio, prompted by the complaints from
other servers, asked Powell if Gutierrez was treating her
in an inappropriate way. Although Powell responded
“yes,” Del Rio did not report these complaints to upper
management. When Gutierrez continued with his harass-
ing behavior, Powell reported his inappropriate conduct
to Dahl again, but Dahl cut her off by saying that
“[she] didn’t need to hear it.” Eventually, like Shisler,
Powell “learned not to say anything.”
No. 10-3247 9
D. The Investigation
Shisler’s attorney hired Lilly Brown, a private investiga-
tor, to obtain information about Shisler’s termination and
to determine whether sexual harassment was occurring at
the restaurant. Between May 10, 2005, and May 25, 2005,
Brown interviewed servers of the Racine IHOP, including
Powell. On May 21, 2005, in the midst of the investiga-
tion, Gutierrez quit his position as assistant manager.
On May 23, 2005, Del Rio informed Smith that a private
investigator was asking about Gutierrez’s harassment
of servers. This prompted Smith to conduct his own
investigation. Because Gutierrez had already quit
his position, Smith could not take any corrective action
against him. Smith, however, determined that Shisler
and Powell had complained to Dahl and that Dahl should
have acted on their complaints. Smith determined
that Dahl violated the sexual harassment policy by not
investigating their complaints and terminated her.
E. Dahl’s Lawsuit
Following her termination, Dahl filed a lawsuit against
MHR alleging that Smith sexually harassed her. Her
case was based, in part, on the allegation that Smith rubbed
his finger over the cleavage area of Dahl’s daughter’s
picture. Gutierrez testified that he witnessed the event,
and heard Smith comment, “if only she was 18.” Gutierrez
testified that Smith’s comment made him uncomfortable,
but he did not report this incident because he was fear-
ful he would lose his job. Dahl confronted Smith about this
incident, but Smith told her that if she reported him,
10 No. 10-3247
he would “deny everything.” At any rate, at the trial of
this matter, Smith testified that the case was ultimately
dismissed on summary judgment in December 2008.
F. Jury Trial
The jury trial commenced on November 16, 2009.
The jury heard the accounts noted above from Shisler,
Powell, Smith, Dahl, Del Rio, and Gutierrez, among
others. The jury was asked to determine whether Shisler
and Powell had been subjected to a hostile work environ-
ment. The Defendants’ Faragher/Ellerth affirmative
defense was included in the jury instructions, but the
verdict form did not include a specific interrogatory
with respect to the defense. The jury was also asked
to consider whether Shisler was terminated in retaliation
for complaining of sexual harassment. The jury instructions
and verdict form referred to the three Defendants collec-
tively, because the district court reserved ruling on
the corporate liability of Flipmeastack post trial.
On November 19, 2009, the jury returned a special
verdict form in favor of Shisler and Powell on the sexual
harassment claims, and in favor of the Defendants
on Shisler’s retaliation claim. The jury awarded Shisler
$1,000 in compensatory damages, and awarded Powell
$4,000 in compensatory damages and $100,000 in
punitive damages.
No. 10-3247 11
G. Post-Trial Motions and Rulings
Following the jury verdict, the Defendants moved
for Judgment as a Matter of Law or for New Trial under
Rule 50(b) of the Federal Rules of Civil Procedure.
In support of their Motion for Judgment as a Matter of
Law, the Defendants argued that no rational jury could
have found Shisler and Powell experienced a hostile
work environment, and that, in any event, they had
established their Faragher/Ellerth affirmative defense.
The Defendants also argued that the jury’s award of
$100,000 in punitive damages must be stricken as against
the great weight of the evidence. In support of their
Motion for New Trial, the Defendants argued that
the district court committed prejudicial error by failing
to include a specific question regarding the Defendants’
affirmative defense on the verdict form, and by admitt-
ing “other acts” evidence, over their objection. The Defen-
dants also argued, in the alternative, that the puni-
tive damages award should be reduced pursuant to
the statutory cap of $50,000.
The EEOC raised two issues in its Post-Trial Motions.
First, it contended that all three Defendants were jointly
and severally liable for the amounts set forth in the jury’s
verdict. Second, it contended that injunctive relief should
be awarded against Flipmeastack and that such other relief
should extend to all of the IHOP restaurants it manages.
In its Decision and Order, the district court denied
the Defendants’ Motion for Judgment as a Matter of Law
and for New Trial or Remittitur. In addition, the district
court granted the EEOC’s Post-Trial Motions, finding
12 No. 10-3247
that Flipmeastack was an employer of Shisler and Powell,
and thus, liable for the $105,000 jury verdict and enjoined
Flipmeastack from, inter alia, “allowing a sexually hostile
work environment to exist in any restaurant under its
management.”
II. Analysis
A. Defendants’ Motion for Judgment as a Matter of Law
We review de novo the district court’s denial of
the Defendants’ Motion for Judgment as a Matter of Law.
Erickson v. Wisconsin Dep’t of Corrections, 469 F.3d 600,
601 (7th Cir. 2006). “ ‘Our inquiry is limited to the question
whether the evidence presented, combined with all reason-
able inferences permissibly drawn therefrom, is sufficient
to support the verdict when viewed in the light
most favorable to the party against whom the motion
is directed.’ ” Wallace v. McGlothan, 606 F.3d 410, 418
(7th Cir. 2010) (quoting Tammi v. Porsche Cars N. Am.,
Inc., 536 F.3d 702, 707 (7th Cir. 2008)). “Credibility determi-
nations, the weighing of the evidence, and the drawing
of legitimate inferences from the facts are within
the province of the jury.” Bogan v. City of Chicago, 644
F.3d 563, 572 (7th Cir. 2011) (internal quotation marks
and citations omitted). We must reverse only if, “on
the basis of the admissible evidence, no rational jury
could have found for the prevailing party.” Id.
(citing Walker v. Bd. of Regents of the Univ. of Wis. Sys.,
410 F.3d 387, 393 (7th Cir. 2005)); see also Emmel v. Coca-
Cola Bottling Co. of Chicago, 95 F.3d 627, 630 (7th Cir.
No. 10-3247 13
1996) (“ ‘[W]e are particularly careful in employment
discrimination cases to avoid supplanting our view of
the credibility or weight of the evidence for that of both
the jury (in its verdict) and in the judge (in not inter-
fering with that verdict.’ ” (quoting Hybert v. Hearst
Corp., 900 F.2d 1050, 1054 (7th Cir. 1990))).
1. Sexual Harassment Claims
A sexually hostile or abusive work environment is a form
of sex discrimination under Title VII of the Civil Rights
Act of 1964. Meritor Sav. Bank, FSB v. Vinson, 477 U.S. 57,
66 (1986). For sexual harassment to be actionable, a plain-
tiff must prove conduct that is so severe or pervasive
as “ ‘to alter the conditions of [her] employment and create
an abusive working environment.’ ” Id. at 67 (quoting
Henson v. Dundee, 682 F.2d 897, 904 (11th Cir. 1982)).
In determining whether the harassment rises to this level,
we consider the totality of the circumstances, including
the “ ‘frequency of the discriminatory conduct; its severity;
whether it is physically threatening or humiliating, or
a mere offensive utterance; and whether it unreasonably
interferes with an employee’s work performance.’ ”
Gentry v. Expert Packaging Co., 238 F.3d 842, 850 (7th
Cir. 2001) (quoting Harris v. Forklift Sys., Inc. 510 U.S. 17,
23 (1993)). In evaluating the severity of harassment, we
are guided by prior case precedent:
On one side lie sexual assaults; other physical contact,
whether amorous or hostile, for which there is no
consent express or implied; uninvited sexual solicita-
tions; intimidating words or acts; obscene language or
14 No. 10-3247
gestures; pornographic pictures. On the other side lies
the occasional vulgar banter, tinged with sexual
innuendo, of coarse or boorish workers.
Baskerville v. Culligan Int’l Co., 50 F.3d 428, 430-31 (7th
Cir. 1995) (internal citations omitted). We also assess
the impact of the harassment on the plaintiff’s work
environment from both a subjective and objective view-
point; “ ‘one that a reasonable person would find hostile
or abusive, and one that the victim in fact did perceive to
be so.’ ” Gentry, 238 F.3d at 850 (quoting Faragher v. City of
Boca Raton, 524 U.S. 775, 787 (1998)).
We find that a rational jury could have found that
Shisler was subjected to harassment that was both severe
and pervasive. At the trial of this matter, Shisler testi-
fied that Gutierrez engaged in sexually harassing conduct
during every shift that Gutierrez was her assistant man-
ager. His comments to Shisler were highly offensive
and easily surpassed what could reasonably be described
as vulgar banter, tinged with sexual innuendo. He told
her he wanted to “fuck her,” propositioned her for three-
way sex with his girlfriend, told her she was “kinky”
and liked “rough” sex, and stared at the intimate parts of
her body “like a piece of meat.” Gutierrez engaged
in physical touching by “slap groping” her buttocks.
Shisler testified that she felt “bullied” by him and that
his comments made her feel “dirty.” Given the age differ-
ence between Shisler and Gutierrez and Gutierrez’s
position of authority over her, a rational jury could
have concluded that Gutierrez’s verbal and physical
harassment directed at Shisler created an objectively
hostile and abusive work environment.
No. 10-3247 15
The Defendants attack Shisler’s credibility by arguing
that on cross-examination, she could only identify three
specific instances of sexually harassing comments
and conduct by Gutierrez over the four-week period
that she worked at the Racine IHOP. As noted, however,
Shisler testified to more than three specific instances
of conduct, and she testified that some form of verbal
harassment occurred on every shift that she worked
with Gutierrez. Although Shisler could not remember
the exact dates that specific instances of sexual harassment
occurred, the jury was entitled to believe Shisler’s version
of events.
In any event, to prevail, Shisler need not show that
the conduct complained of was both severe and pervasive;
“even one act of harassment will suffice if it is egregious.”
Hostetler v. Quality Dining, Inc., 218 F.3d 798, 808 (7th
Cir. 2000) (citations omitted). A jury could infer that
the three instances that Shisler did testify to —telling her
that he thought she was “kinky” and liked it “rough,”
propositioning her for sex on the pancake batter, and
“slap groping” her buttocks—were sufficiently severe
to support a jury verdict. See Baskerville, 50 F.3d at 431
(noting that even if a plaintiff’s allegations of sexual
harassment are on the line between the merely unpleasant
and the sexually harassing, “the jury’s verdict, whether
for or against the defendant, cannot be set aside in
the absence of trial error”).
The Defendants also suggest that Shisler was not subjec-
tively offended by Gutierrez’s crude comments because
her MySpace page contained a sexually graphic video
16 No. 10-3247
of young males masturbating in the presence of young
females, and contains the comment, “funny as hell.”
The jury was entitled to disregard this video as evidence
that Shisler did not find Gutierrez’s comments
to be offensive. As the district court observed,
“sharing jokes with friends in an online community
is vastly different than being propositioned for sex by a
supervisor at work.”
Further, there is sufficient evidence in the record show-
ing that Shisler was subjectively offended by Gutierrez’s
comments and conduct because she repeatedly
informed Gutierrez that his conduct was unwelcome
and complained to IHOP managers Del Rio and Dahl.
Accordingly, there is sufficient evidence in the record
from which a rational jury could find that Shisler was
the victim of sexual harassment while an employee at
the Racine IHOP, in violation of Title VII.
We also find a rational jury could have found that Powell
was subjected to a sexually hostile work environ-
ment. Powell testified that Gutierrez made inappropriate
comments to her like “your ass looks good in them pants,”
pulled her ponytail and told her she “would like it
rough” and “would get freaky with sex.” He propositioned
her for oral sex, told her he would like to “do her from
behind” as he pressed his pelvis into her body, told the
cooks he wanted to “fuck” her, and left a voicemail mes-
sage on her phone asking her to “hook up” with
him. Gutierrez touched her breasts and buttocks when-
ever he could by brushing up against her as he walked
past her. Powell testified Gutierrez’s comments made
No. 10-3247 17
her feel “dirty,” and that she felt worried if she had to
work on the same shift as Gutierrez. Powell also testified
that when she objected to Gutierrez’s treatment of her,
he gave her harder work assignments or “yelled at her
more,” “[s]o she learned just not to say anything.”
Like Shisler, Powell was a teenager at the time. The
age disparity between Powell and Gutierrez, coupled with
Gutierrez’s position of authority over her, could have
led a rational jury to conclude that Gutierrez’s verbal and
physical harassment directed at Powell created an objec-
tively hostile and abusive work environment, and that
Powell reasonably perceived it as such.
2. The Faragher/Ellerth Affirmative Defense
An employer can be held vicariously liable for a supervi-
sor’s sexual harassment of a subordinate. Generally,
an employer may avoid liability if it can prove the
two elements of the Faragher/Ellerth affirmative defense:
“(a) that the employer exercised reasonable care to prevent
and correct promptly any sexually harassing behavior, and
(b) that the plaintiff employee unreasonably failed to
take advantage of any preventive or corrective opportuni-
ties provided by the employer or to avoid harm other-
wise.” Burlington Indus., Inc. v. Ellerth, 524 U.S. 742,
765 (1998); Faragher, 524 U.S. at 807.
a. Defendants’ Preventative Measures
The Defendants contend that they took sexual harass-
ment seriously, and instituted an effective sexual harass-
18 No. 10-3247
ment policy to prevent and promptly correct any instances
of sexual harassment occurring in the workplace.
Victoria Janmohammed testified that the policy was a
“zero tolerance” policy, meaning “we do not tolerate
any sexual harassment, any discrimination. We don’t
even tolerate somebody not investigating.” To this end,
the Defendants required all of their new employees,
including Shisler and Powell, to watch a video educating
them on sexual harassment in the workplace, and to
read and sign their sexual harassment policy. The
Sexual Harassment and Diversity Policy that Shisler and
Powell signed stated the following:
I have watched the Sexual Harassment and Diversity
videos. I am fully aware of our companies [sic] policies
regarding both —zero tolerance for any type of unlaw-
ful discrimination and/or harassment. Our company is
committed to providing a work environment that is
free of unlawful behavior in any form. I will lead by
example.
* * *
Any form of unlawful harassment of co-workers or
members of the public is absolutely forbidden, regard-
less of whether it is verbal, physical, or visual harass-
ment. You must be sensitive to the feelings of others
and must not act in a way that might be considered
offensive to someone else. I will report any instances of
improper behavior to my manager or company repre-
sentative. The company will take immediate and
appropriate steps to investigate all reports of
improper behavior.
No. 10-3247 19
I also understand the severity of knowingly
making false accusations of discrimination or harass-
ment. Sexual Harassment and/or Discrimination are
a serious charge and should be taken seriously.
In addition, the Defendants also note the presence of
the Crisis Management Guidelines Poster in the employee
break room that displayed, in part, Smith’s cell
phone number. Lastly, Defendants point out that as
soon as Del Rio informed Smith that a private investigator
was asking questions about sexual harassment at
the Racine IHOP, he immediately conducted an investiga-
tion, took witness statements, determined that the policy
had been violated, and took corrective action by firing
Dahl for her failure to investigate the servers’ allegations.
We find that a rational jury could have concluded
that the Defendants exercised reasonable care by institut-
ing a sexual harassment policy with a reasonable complaint
mechanism, and by engaging in prompt and corrective
action by investigating Shisler’s and Powell’s complaints
of harassment and terminating Dahl. Like the district
court, however, we find that the evidence was sufficient
for a jury to find otherwise. Although the presence of
a sexual harassment policy is encouraged by Title VII,
“the mere creation of a sexual harassment policy will
not shield a company from its responsibility to
actively prevent sexual harassment in the workplace.”
Gentry, 238 F.3d at 847. The policy must provide “a mean-
ingful process whereby an employee can express his or
her concerns regarding an individual within a working
environment.” Id. Case law also requires that the policy’s
20 No. 10-3247
complaint mechanism be reasonable, “and what is reason-
able depends on the employment circumstances,
and therefore, among other things, on the capabilities
of the class of employees in question.” EEOC v. V&J
Foods, Inc., 507 F.3d 575, 578 (7th Cir. 2007) (internal
quotation marks and citations omitted). Moreover, the
policy must not only be reasonably effective on paper,
but also reasonably effective in practice. Clark v. United
Parcel Serv., Inc., 400 F.3d 341, 350 (6th Cir. 2005).
Despite the fact that the Defendants had a sexual harass-
ment policy in place, a rational jury could have found
that the policy and complaint mechanism were not reason-
ably effective in practice. At trial, the jury heard
evidence indicating that all managerial employees at
the Racine IHOP failed to carry out their duties under
the policy. See Loughman v. Malnati Org., Inc., 395 F.3d
404, 407 (7th Cir. 2005) (finding that “the consistent
stream of harassment at the restaurant suggests that
Malnati’s policy was actually not very effective at all”).
For example, Gutierrez violated the policy by engaging
in sexual harassment. The other assistant manager of
the Racine IHOP, Del Rio, and the general manager of
the Racine IHOP, Dahl, both failed to report Gutierrez’s
harassment after Shisler and Powell complained to
them. Moreover, the jury heard evidence that Smith failed
to investigate Shisler’s prior complaint of harassment
of another female server by the former general manager
of the Racine IHOP, Hecker. The jury also heard evidence
that Smith engaged in inappropriate conduct that could
be described under the policy as sexual harassment,
No. 10-3247 21
by rubbing his finger over the cleavage area of a picture
of Dahl’s teenage daughter and stating, “if only she
was 18.” Gutierrez testified that he witnessed this incident,
but did not report it. A rational jury, faced with this
evidence, could have found that none of the managers
of the Racine IHOP took action under the policy that could
be termed “corrective” or “effective.” See Clark, 400 F.3d at
350 (“The effectiveness of an employer’s sexual harassment
policy depends upon the effectiveness of those who are
designated to implement it.”).
Second, although management was required to
take sexual harassment training, the evidence at trial
suggested that the training was inadequate. Del Rio
testified that she did not receive sexual harassment train-
ing when she became an assistant manager, even though
she, as the assistant manager, was responsible for
the orientation and training of new employees. Moreover,
even though the policy stated that “any form of unlawful
harassment of co-workers or members of the public
is absolutely forbidden,” Del Rio “blew off” Shisler’s and
Powell’s complaints. Del Rio knew that she had an absolute
duty to report sexual harassment allegations to
upper management, yet she did not report Powell’s
complaints because, in her opinion, Powell did not seem
to be “afraid” of Gutierrez. Similarly, Dahl knew that
she had an absolute duty to report such allegations to
upper management. Yet, in the face of Powell’s allegations
that Gutierrez was “sexually and physically abusing [her]
and other female servers,” she failed to report Powell’s
complaints. On these facts, a rational jury could have
concluded that, not only was the policy and the manage-
22 No. 10-3247
ment training ineffective, but the protections offered
by them were illusory. Gentry, 238 F.3d at 847-50 (uphold-
ing jury’s determination that employer failed to take
preventative or corrective action regarding sexual harass-
ment where evidence revealed deficiencies in harass-
ment policy and a failure to respond to complaints).
Third, “[o]ur cases recognize prompt investigation of
the alleged misconduct as a hallmark of reasonable cor-
rective action.” Cerros v. Steel Tech., Inc., 398 F.3d 944, 954
(7th Cir. 2005) (citations omitted). Here, a rational jury
could have concluded that Smith’s investigation of
Gutierrez’s sexual harassment was not “prompt.” Shisler
complained to management of Gutierrez’s harassment
twice in March 2005, and Powell complained to manage-
ment three times in April 2005. Smith did not commence
his investigation until May 23, 2005. This is not the type of
response “ ‘reasonably likely to prevent the harassment
from recurring.’ ” Id. (quoting Williams v. Waste Mgmt. of
Ill., 361 F.3d 1021, 1029 (7th Cir. 2004)). In addition, a
rational jury could have believed that an investigation
ensued only because Shisler’s private investigator started
making inquiries of other female servers at the Racine
IHOP.
Further, a rational jury could have concluded that the
policy was not reasonably effective on paper. As the
district court observed, an employer’s complaint mecha-
nism must provide a clear path for reporting harassment,
particularly where, as here, a number of the servers
were teenagers. See V&J Foods, 507 F.3d at 578 (noting
that because it was part of V&J’s business plan to
No. 10-3247 23
employ teenagers, “the company was obligated to suit
its procedures to the understanding of the average teen-
ager”). Flipmeastack’s sexual harassment policy did
not provide a point person to air complaints to. In fact,
it provided no names or contact information at all. To
the extent the Crisis Management Guidelines Poster
was meant to supplement the sexual harassment policy
in this regard, a rational jury could have concluded that
it did not fulfill this role. First, neither Shisler nor
Powell could recall whether the poster was actually
displayed in the employee break room during the time
that they were harassed. Second, the poster con-
tains instructions on how to deal with natural disasters,
fires, and other events such as food-borne illness. It
also contains the phone numbers of local authorities,
and Flipmeastack’s corporate numbers, including Smith’s
cell phone number. The word “discrimination” is con-
tained on the poster under the heading “other emergen-
cies”; however, the poster does not inform an
employee which company number to call in the event he
or she believes that the sexual harassment policy has
been violated. In addition, the poster did not describe
employees’ rights under Title VII or provide phone num-
bers for the EEOC or a local civil rights office, and thus,
did not provide a means for the employee to make
an external complaint of discrimination. These facts,
and the inferences reasonably drawn from them,
could have led a rational jury to conclude that the com-
plaint mechanism provided by Flipmeastack’s sexual
harassment policy did not provide a clear path
for reporting harassment. For all of these reasons,
we find that the jury’s determination that the Defend-
24 No. 10-3247
ants did not discharge their duty to effectively prevent and
correct promptly sexual harassment in the workplace,
was not unreasonable.
b. Shisler’s and Powell’s Preventative or Corrective
Action
We now turn to the second element of the Faragher/Ellerth
affirmative defense —i.e., whether Shisler and Powell
unreasonably failed to take advantage of preventative
or corrective measures. The Defendants’ primary argu-
ment on appeal is that neither Shisler nor Powell
ever complained to Smith, and there is “no doubt” that
had they done so, “[Smith] would have taken prompt
action to correct sexual harassment.” The Defendants’
argument ignores the terms of the sexual harassment
policy itself, which provided that an employee was
to “report any instances of improper behavior to [the
employee’s] manager or company representative.” As the
creator of the policy, Victoria Janmohammed affirmed this
fact at trial. Shisler and Powell utilized the complaint
mechanism by first asking Gutierrez, an assistant manager,
to stop his harassing behavior. When Gutierrez refused to
stop his harassment, both Shisler and Powell reported
Gutierrez’s harassment to Del Rio and Dahl—each of whom
were managers or company representatives within
the meaning of the policy.
During the month that Shisler worked at the Racine
IHOP (March 2005), she first reported Gutierrez’s harass-
ment to Del Rio on March 18, 2005. After Del Rio failed
to take action, Shisler reported the harassment to Dahl
No. 10-3247 25
on March 27, 2005. On cross-examination, Shisler testified
that, after she last complained to Dahl, and Dahl “blew
her off,” she could have complained to Smith; however,
Smith did not work that day, and would not be at
the restaurant “until the very next Sunday, possibly.”
Shisler was terminated on April 3, 2005. Given this evi-
dence, a rational jury could have believed that Shisler
did not act unreasonably by failing to report Gutierrez’s
conduct directly to Smith.
In addition, a rational jury could have believed that
Shisler did not feel comfortable reporting Gutierrez’s
harassment to Smith. Shisler testified that Smith failed
to respond to her prior complaint of harassment by
Hecker toward another server in 2004. Shisler also testified
that after she complained to Smith, Hecker began to
treat her more harshly. In light of this prior experience,
a rational jury could have concluded that her decision
not to contact Smith in 2005 was therefore justified.
Powell first complained to Dahl of Gutierrez’s harass-
ment during the first week of April 2005. Dahl
responded that she “would take care of it.” The following
week, Del Rio asked Powell if Gutierrez had been treating
her inappropriately, and Powell responded in the affirma-
tive. Still, no action was taken. Powell last aired a com-
plaint to Dahl during the last week of April, but Dahl
told her that she “didn’t need to hear it.” While it is true,
as the district court observed, that Powell might
have complained to Smith after it became evident
that neither Dahl nor Del Rio had corrected the problem,
only about three to four weeks elapsed between the
26 No. 10-3247
time that Powell last complained to Dahl and the date that
Gutierrez resigned. A rational jury could have concluded
that Powell did not act unreasonably in failing to contact
Smith during this time period. See Hardy v. Univ. of Ill.
at Chicago, 328 F.3d 361, 365-66 (7th Cir. 2003) (stating
that it is for the jury to determine whether employee
unreasonably failed to avail herself of her employer’s
complaint procedures, and employee’s delay of six weeks
to report supervisor’s misconduct after trying to deal
with supervisor directly was not unreasonable as a matter
of law). For all of these reasons, we find that the jury’s
determination that Shisler and Powell took prompt
and appropriate action under the policy was not unreason-
able.
3. Punitive Damages
Punitive damages are available under Title VII when
a plaintiff demonstrates that the defendant engaged
in intentional discrimination “with malice or with reckless
indifference to the federally protected rights of an ag-
grieved individual.” 42 U.S.C. § 1981a(b)(1). Whether
an award of punitive damages is proper is subject to
a three-part inquiry. Kolstad v. American Dental Ass’n,
527 U.S. 526 (1999). The first two elements require
the plaintiff to show that: (1) the employer acted with
the requisite mental state—i.e., that it acted “in the face of a
perceived risk that its actions will violate the federal
law”; and (2) the employer’s managerial agent recklessly
disregarded the plaintiff’s federally protected rights
while acting within the scope of employment. Id. at 535-36,
No. 10-3247 27
543. Third, an employer may avoid vicarious liability for
a managerial employee’s discriminatory conduct if the
employer can show that it engaged in good faith efforts
to implement an anti-discrimination policy. Id. at 545. The
Defendants challenge only the third element, claiming
that this case presents a “textbook example of responsible
employers implementing and following clear and effec-
tive sexual harassment policies.”
While the Defendants’ sexual harassment policy
is relevant to evaluating whether an employer engaged
in good faith efforts to comply with Title VII, “it is
not sufficient in and of itself to insulate an employer from
a punitive damages award. Otherwise, employers
would have an incentive to adopt formal policies in
order to escape liability for punitive damages, but they
would have no incentive to enforce those policies.”
Bruso v. United Airlines, Inc., 239 F.3d 848, 858-59 (7th Cir.
2001) (footnote collecting cases and citation omitted).
A rational jury could have concluded that the Defen-
dants’ policy was not sufficient to insulate it from
a punitive damages award, because it was ineffective
in advancing the education and protection of the employ-
ees’ rights under Title VII. A rational jury could
have concluded that certain policy language—i.e., noting
the “severity of knowingly making a false accusation of
discrimination or harassment” —was inserted to discourage
complaints of sexual harassment. Indeed, Victoria
Janmohammed testified that the language was inserted
after her husband was sued for sexual harassment by
a server at one of his IHOP restaurants. Although
28 No. 10-3247
she denied that the language was inserted into the sexual
harassment policy in reaction to the lawsuit, the jury
was entitled to disbelieve her. In addition, Smith testified
that, once the servers viewed the sexual harassment
video and signed the sexual harassment and diversity
policy, the policy was locked in a file cabinet, not accessible
to the servers without managerial approval. If the manage-
rial approval had to come from a manager who happened
to be the alleged harasser, this could present a significant
hurdle for relief. See V&J Foods, 507 F.3d at 579 (“A
policy against harassment that includes no assurance
that a harassing supervisor can be bypassed in the com-
plaint process is unreasonable as a matter of law.”).
Moreover, the complaint mechanism was mentioned in
the video, but was not available in written form. To the
extent the crisis management poster was meant to address
this issue by providing the name and cell phone number
of Smith, the poster was insufficient to fill the gap
in information for the reasons previously stated regarding
the Defendants’ affirmative defense.
Further, a rational jury could have concluded that the
Defendants did not engage in good faith efforts to educate
their managerial staff about sexual harassment in the
workplace. Del Rio testified that, although she received
training on sexual harassment when she was a server,
she did not receive additional training after she was
promoted to assistant manager. As Del Rio was in
charge of training all new employees on the Defendants’
sexual harassment policy, her lack of training is trouble-
some. Moreover, Del Rio received numerous complaints of
Gutierrez’s sexual harassment from Shisler and Powell
No. 10-3247 29
(among others), but failed to report their complaints, in
part, because she did not think Powell was serious.
Gutierrez and Dahl received training on sexual harassment
as managerial staff; however, neither complied with
the policy by reporting the harassment to upper manage-
ment. Gutierrez engaged in sexual harassment, and failed
to report Smith when he made inappropriate comments
while admiring a picture of Dahl’s daughter. Dahl received
complaints regarding Gutierrez’s sexual harassment
of servers on numerous occasions, but, like Del Rio,
failed to report those claims to Smith or to upper manage-
ment at Flipmeastack. Thus, as the district court found,
a rational jury could have concluded that the Defendants’
consistent failure to comply with the sexual harassment
policy evinced a lack of understanding of what consti-
tuted sexual harassment under Flipmeastack’s policy
and what their responsibilities were as managerial staff
under the policy. Accordingly, we find that there was
a reasonable basis in the record to permit a jury to find
that the Defendants did not engage in good faith efforts to
comply with Title VII. The jury’s punitive damages award
stands against MHR 2 and Janmohammed; however, for
the reasons advanced in Section II.C. of this opinion, the
2
Because MHR is a dissolved corporation, the district court
held that Janmohammed had to personally satisfy any judgment
against MHR to the extent of the distributions he received as a
result of the dissolution of MHR. The district court found that he
received $15,000 from the sale of MHR’s assets; thus, he was
liable for that amount of the judgment against MHR. That issue
is not the subject of this appeal.
30 No. 10-3247
punitive damages award against Flipmeastack is remanded
to the district court.
We now turn to the district court’s ruling denying the
Defendants’ motion for new trial.
B. Defendants’ Motion for New Trial Pursuant to F ED. R.
C IV. P. 59(a)
Defendants challenge the district court’s denial of their
motion for new trial on two grounds. First, they contend
that the district court abused its discretion by failing
to include the Faragher/Ellerth affirmative defense on
the special verdict form. Second, they contend that the
district court admitted “other acts” evidence that preju-
diced the jury against them. We review a district
court’s rulings on a motion for new trial for an abuse
of discretion. Aldridge v. Forest River, Inc., 635 F.3d 870,
877 (7th Cir. 2011).
1. Special Verdict Form
Whether to “submit special interrogatories (either on
all issues or on a subset of issues like damages) is commit-
ted to the sound discretion of the district court.” Cruz
v. Town of Cicero, 275 F.3d 579, 591 (7th Cir. 2001) (citing
Bularz v. Prudential Ins. Co., 93 F.3d 372, 377 (7th Cir. 1996)).
The verdict form asked the jury to decide whether
the Defendants were liable for sexual harassment, but
failed to include an additional interrogatory asking
whether the Defendants were entitled to their
No. 10-3247 31
Faragher/Ellerth affirmative defense. The Defendants
assert that the district court’s failure to include on
the special verdict form any interrogatories related to
their affirmative defense impermissibly took the issue
away from the jury, and constitutes an abuse of discretion.
See United States Fire Ins. Co. v. Pressed Steel Tank Co.,
Inc., 852 F.2d 313, 318 (7th Cir. 1988) (holding that Rule
49(a) of the Federal Rules of Civil Procedure requires
a district court to submit all material issues raised by
the pleadings and the evidence in a special verdict form).
The verdict form in this case was entitled “Special
Verdict Form.” Yet, as the district court described it,
the verdict form was a general verdict form as it pertained
to the Defendants’ liability for sexual harassment, and
a special verdict form as it pertained to damages. We
are not aware of any rule that precludes this type of hy-
brid verdict form; Rule 49 does not. Our case law re-
quires only that the verdict form not be confusing
or misleading to the jury. Happel v. Walmart Stores, Inc.,
602 F.3d 820, 827 (7th Cir. 2010). In evaluating whether
a verdict form is confusing or misleading, we consider
the verdict form in light of the instructions given to
determine “whether [the jury] had [an] understanding
of the issues and its duty to determine those issues.”
Id. (internal quotation marks and citation omitted).
The Defendants do not challenge the district court’s
instructions to the jury, including the instructions on the
elements of a claim for sexual harassment and the Defen-
dants’ Faragher/Ellerth affirmative defense. The instructions
informed the jury that in evaluating whether the Defen-
32 No. 10-3247
dants were liable for Gutierrez’s sexual harassment of
Shisler and/or Powell, they were to consider whether
the Defendants had proven their affirmative defense by
a preponderance of the evidence. We find that the
verdict form, read in light of the jury instructions, in-
formed the jury that in finding the Defendants’ liable, they
were implicitly rejecting their affirmative defense. There-
fore, the district court’s decision not to include a ques-
tion addressing the Defendants’ affirmative defense on
the liability portion of the verdict form was not an
abuse of discretion.
2. “Other Acts” Evidence
We review claims of improperly admitted evidence
for an abuse of discretion. Farfaras v. Citizens Bank and
Trust of Chicago, 433 F.3d 558, 564 (7th Cir. 2006). Where
the alleged error of admission occurred during trial,
“we will grant a new trial only if the error had a substantial
influence over the jury, and the result reached was incon-
sistent with substantial justice.” Id. (internal quotation
marks and citations omitted). “Evidentiary errors satisfy
this standard only when a significant chance exists
that they affected the outcome of the trial.” Old Republic
Ins. Co. v. Employers Reinsurance Corp., 144 F.3d 1077,
1082 (7th Cir. 1998) (citations omitted).
The Defendants object to two pieces of evidence admitted
at trial: (1) Shisler’s testimony that Hecker, the general
manger of the Racine IHOP prior to Dahl, sexually ha-
rassed another female server named Christine, and
(2) Dahl’s testimony that Smith sexually harassed her.
No. 10-3247 33
Defendants contend this evidence was “irrelevant and
highly inflammatory” and it “wrongly prejudiced the
jury against defendants.”
Evidence is relevant if it has “any tendency to make
the existence of any fact that is of consequence to the
determination of the action more probable or less probable
than it would be without the evidence.” FED. R. E VID. 401.
Relevant evidence may be excluded, however, “if its
probative value is substantially outweighed by the
danger of unfair prejudice . . . .” FED. R. E VID. 403.
Shisler testified that Smith’s response to her report of
Hecker’s harassment was “passive.” She also testified
that, following her report to Smith, Hecker began to assign
her the worst restaurant sections. When she contacted
corporate IHOP, she was informed she had to complain
to Smith. Given her recent experience with Smith,
Shisler decided not to pursue the matter. Contrary to
Defendants’ assertion, Shisler’s testimony regarding
Hecker’s harassment was relevant to the Defendants’
Faragher/Ellerth affirmative defense because, as the dis-
trict court reasoned, it suggested that Flipmeastack’s
sexual harassment policy was not reasonably effective.
Dahl testified that she was sexually harassed by
Smith. The district court found that her testimony was
also relevant to the Defendants’ Faragher/Ellerth affirma-
tive defense. The Defendants contend that they were
prejudiced by the admission of Dahl’s testimony,
because her lawsuit against MHR, alleging that Smith
sexually harassed her, was dismissed by the district court
on summary judgment eleven months before the trial of
this matter commenced.
34 No. 10-3247
The subject of Dahl’s lawsuit was addressed during
Smith’s testimony. He testified that Dahl’s lawsuit was
“dismissed” because “there was no merit to it.” Thus,
any prejudice caused by the admission of Dahl’s testimony
was cured by Smith’s testimony. Accordingly, we find
the admission of Shisler’s and Dahl’s testimony was not
an abuse of discretion.
C. EEOC’s Post-Trial Motions
The EEOC’s Post-Trial Motions include a motion to
find the Defendants jointly and severally liable, and a
motion for injunctive relief against Flipmeastack. We
first address the district court’s order holding
Flipmeastack liable for the sexual harassment of
the claimants. We review the district court’s conclusion
of law de novo. Metavante Corp. v. Emigrant Sav. Bank,
619 F.3d 748, 758-59 (7th Cir. 2010).
1. Corporate Liability
Prior to trial, the EEOC filed a motion in limine regard-
ing corporate liability. The motion asked the district
court to rule, as a matter of law, that Flipmeastack, as an
affiliate corporation of MHR, should be held liable
for Gutierrez’s harassment of Shisler and Powell under
two of the three theories advanced in Papa v. Katy Indus.,
Inc., 166 F.3d 937, 940-41 (7th Cir. 1999) (holding that
an affiliate’s corporate existence may be disregarded,
and the affiliate held to be an employer under Title VII,
in “three situations”; the traditional conditions are present
No. 10-3247 35
to pierce the corporate veil, the affiliate splits itself
into tiny corporations for the express purpose of avoiding
liability under Title VII, and the parent corporation di-
rected the discriminatory act of which the plaintiff
is complaining). The EEOC argued under the “first situa-
tion” of Papa that MHR’s corporate liability should
be pierced and that Flipmeastack should be held the
real employer of Gutierrez at the Racine IHOP. It also
argu ed un d er the “third situation” of P a p a
that Flipmeastack should be held liable for directing
the discriminatory act, because it “was the entity responsi-
ble for the inadequate HR policies and practices that
allowed the harassment to occur and continue . . . .”
After the motion was fully briefed, the district court
held a pre-trial conference, the minutes of which state,
“Court to resolve motions in limine on 3 corporate
law issues after trial, if necessary. EEOC may file objection
to this procedure.” Following oral argument, we requested
a transcript of the pre-trial conference from the district
court. Although there was no transcript, the district
court explained, in a written memorandum, that it
chose to rule on the issue of Flipmeastack’s corporate
liability because it believed that if “the facts relating
to corporate structure and the relationship between
the three defendants had been addressed during trial,
the trial would have been much longer and more compli-
cated than it was.” Neither the Defendants nor the EEOC
objected to this procedure.
In its post-trial motion, the EEOC submitted the issue
of Flipmeastack’s corporate liability to the district court
on the same grounds asserted in its motion in limine. In
36 No. 10-3247
the district court’s Decision and Order, it found that
the control theory advanced in EEOC v. Illinois, 69 F.3d
167, 169 (7th Cir. 1995) applied, and that Papa “was
not entirely on point.” Moreover, the district court
rejected the grounds upon which the EEOC based its
claim of Flipmeastack’s corporate liability. It found
that “Flipmeastack is a distinct legal entity,” and
that “Flipmeastack did not direct Gutierrez’s behavior.”
We agree with the Defendants that the control theory
of liability was injected into the case too late. In support
of our ruling, we find Burdett v. Miller, 957 F.2d 1375
(7th Cir. 1992) directly on point. In Miller, we overturned
a RICO conviction based on an enterprise theory raised
not by the parties, but by the district court when it
entered its findings of fact and conclusions of law
post trial. The complaint alleged that Miller and
his accounting firm were an enterprise that engaged in
a pattern of racketeering activity consisting of mis-
leading statements and omissions that violated fed-
eral securities laws. Id. at 1379. The plaintiff maintained
her enterprise theory throughout the trial. Id. at 1380.
In the district court’s findings of fact and conclusions
of law, it found the accounting firm had not been
involved in the alleged illegal activity, so there was
no enterprise consisting of Miller and his accounting
firm. Id. at 1379. Instead, the district court found Miller
and three of his associates in the fraud constituted a
RICO enterprise, even though, during the trial, there
was “no mention of an enterprise consisting of the four
conspirators themselves.” Id. at 1380. We concluded
that although there was extensive evidence concerning
No. 10-3247 37
Miller’s connection with his three associates, the parties
did not consent, within the meaning of Rule 15(b) of
the Federal Rules of Civil Procedure, to define the enter-
prise as consisting of Miller and his three associates
during the trial. Id. Indeed, we noted that “Miller had
no warning that evidence manifestly admissible because
relevant to the conspiracy charge would also be used
to establish the existence of an enterprise to which no one
in the course of this litigation had alluded.” Id. Accord-
ingly, we held that the district court committed prejudicial
error by changing the theory of the case after the close
of the evidence, because it ran counter to the spirit of
the adversary system and deprived the defendant of
the opportunity to rebut the new enterprise theory. Id.
In the EEOC’s pre-trial and post-trial motions, it relied
solely on the “first” and “third situation” raised in Papa.
After completion of post-trial briefing, the district
court, sua sponte, injected an entirely new theory of liability
based upon a case never cited by either party, EEOC
v. Illinois, supra. The district court reframed the issue
as “whether the defendant so far controlled the plaintiff’s
employment relationship that it [is] appropriate to
regard [Flipmeastack] as the de facto or indirect
employer of the plaintiff.” In so ruling, the district
court deprived the Defendants of presenting con-
trary evidence. This error is not harmless. It is evident
from the district court’s post-trial Decision and Order
that had it decided Flipmeastack’s corporate liability
strictly from the parties’ written submissions, it would
have found Flipmeastack not liable for Shisler’s
and Powell’s sexual harassment.
38 No. 10-3247
There is one other issue to address. At oral argument,
we raised concerns regarding the district court’s decision
to remove the corporate liability issue from the province
of the jury. The EEOC submits that the Defendants waived
their right to a jury by failing to object. The record
reflects that the Defendants did not raise an objection to
the district court’s decision to rule on the corporate liability
issue before trial for two reasons. First, the Defendants
understood that the EEOC was seeking to pierce the
corporate existence of MHR and find that Flipmeastack
was an employer of Gutierrez. Second, the Defendants
did not believe that Papa applied to the facts of the
case. Accordingly, we find that the Defendants did
not waive their right to a jury with respect to the control
theory of liability.
Because the district court injected a new theory of the
case after the time the Defendants could present rebuttal
evidence, and because the district court reserved ruling
on an issue ultimately found to be a question for the
jury, the district court’s ruling with respect to the
corporate liability of Flipmeastack is reversed and re-
manded for trial.
2. Injunction Against Flipmeastack
The Defendants also object to the district court’s
order enjoining Flipmeastack from “allowing a sexually
hostile work environment to exist in any restaurant
under its management,” and ordering Flipmeastack
to create a new sexual harassment training program, a
new written anti-harassment and anti-discrimination
No. 10-3247 39
policy, and to post a Notice in its restaurants informing
employees of the court’s Order for a period of four years.
Because we reverse the district court’s finding of liability
with respect to Flipmeastack, we need not address
the Defendants’ specific objections. The injunction against
Flipmeastack must be dissolved.
D. Motion for Remittitur
Lastly, we address the district court’s denial of Defen-
dants’ motion to remit Powell’s punitive damages award
from $100,000 to $50,000 pursuant to 18 U.S.C.
§ 1981(b)(3)(A). In denying the motion, the district
court found that Powell was an employee of Flipmeastack,
and because Flipmeastack managed at least 201 employees,
Powell’s compensatory and punitive damages award
was within the statutory cap. See 18 U.S.C. § 1981a(b)(3)(C)
(providing that the statutory cap for compensatory
and punitive damages “in the case of a respondent who
has more than 200 and fewer than 501 employees in each
of 20 or more calendar weeks in the current or preced-
ing calendar year [is] $200,000”). Because this appeal leaves
the liability of Flipmeastack unresolved, we are unable
to address the propriety of the district court’s ruling.
We therefore remand this issue for the district court
to address if, and when, Flipmeastack is found liable
for the judgment.
III. Conclusion
We affirm the district court’s denial of the Defendants’
Motion for Judgment as a Matter of Law and Motion
40 No. 10-3247
for New Trial with respect to Defendants, MHR and
Salauddin Janmohammed. We reverse the district court’s
grant of the EEOC’s Post-Trial Motions; the judgment
against Flipmeastack is reversed and remanded, and the
injunction dissolved. Because Flipmeastack’s liability for
Powell’s punitive damages award hinges on the degree of
control Flipmeastack had over the employees of MHR,
the punitive damages award against Flipmeastack, and
the need, if any, to remit that award pursuant to the
statutory cap, are also remanded. The district court
is ordered to conduct proceedings consistent with
this opinion.
1-9-12