United States Court of Appeals,
Eleventh Circuit.
No. 95-6141.
Erica Benson SPLUNGE, Sandra Calhoun, Tisha Scott, Jo Catherine
Smoot, Plaintiffs-Appellees,
v.
SHONEY'S, INC., Defendant-Appellant.
Oct. 10, 1996.
Appeal from the United States District Court for the Middle
District of Alabama. (No. CV 93-D-690-E, Ira DeMent, District
Judge.
Before EDMONDSON and DUBINA, Circuit Judges, and FARRIS*, Senior
Circuit Judge.
EDMONDSON, Circuit Judge:
The Plaintiffs here brought Title VII actions against
Shoney's, Inc., alleging sexual harassment. The jury rendered a
verdict in favor of Plaintiffs on the hostile environment claims.
We affirm the judgment on compensatory damages but reverse the
award of punitive damages.
I. Facts and Procedural Background
Plaintiff-Appellees are female former employees of the Captain
D's restaurant in Alexander City, Alabama. The restaurant is owned
and operated by Defendant-Appellant Shoney's. The events giving
rise to this case occurred between September 1991 and May 1992.
The trial was mainly about the conduct of four Shoney's
employees: McClellan (area supervisor, with responsibility for
multiple restaurants); Johns (store manager at the plaintiffs'
*
Honorable Jerome Farris, Senior U.S. Circuit Judge for the
Ninth Circuit, sitting by designation.
Captain D's); Webber (assistant manager); and Smith (dining room
supervisor). According to the evidence, the listed employees
grabbed Plaintiffs, commented extensively on their physical
attributes, showed them pornographic photos and videotapes, offered
them money for sex, favored other employees who had affairs with
them, speculated as to the plaintiffs' sexual prowess, and so on.
Shoney's does not contest here that the environment in which each
plaintiff worked was hostile by Title VII standards. Instead,
Shoney's contends that whatever environment existed, Shoney's, Inc.
cannot be held liable in damages.
The parties stipulated that Shoney's had a sexual harassment
policy in effect during the relevant period, but they disagreed on
whether the policy was posted at the restaurant at which Plaintiffs
worked. They also entered into stipulations agreeing that
McClellan and Johns were "lower management" at Shoney's and that,
before complaining to the EEOC, Plaintiffs never complained about
the alleged sexual harassment to anyone higher-ranking than
McClellan at Shoney's, Inc. Plaintiffs' immediate superiors were
the offending employees; these superiors were obviously aware of
their own misconduct. "Higher management" (starting with regional
director Cort Harwood, who occasionally visited the restaurant, and
extending up the corporate hierarchy) was never informed until
another employee—not involved in this litigation—informed a
vice-president, through a lawyer, that she too was being harassed.
That VP promptly investigated the allegations brought by the
employee, and his investigation resulted in the immediate
termination of McClellan and Johns.
The four plaintiffs sued for sexual harassment. After the
jury verdict for Plaintiffs, Defendant moved, per Rule 50, for a
judgment in Defendant's favor. The district court denied the
motion. Defendant asserts the district court erred in concluding
that Shoney's had sufficient notice (actual or constructive) of the
hostile environment to which Plaintiffs were subjected; because
Shoney's had no such knowledge, the argument goes, it cannot be
held liable in compensatory damages. Defendant also contends that
Shoney's did not act with the level of malice or reckless disregard
for Plaintiffs' rights necessary to sustain the punitive damages
award under the Civil Rights Act of 1991.
II. Discussion
A. Compensatory Damages
The Supreme Court announced in Meritor Savings Bank, FSB v.
Vinson, 477 U.S. 57, 106 S.Ct. 2399, 91 L.Ed.2d 49 (1986), that
sexual harassment could arise in two ways: by quid pro quo
propositions by superiors acting under color of their corporate
authority, or by the creation of a hostile environment by superiors
or coworkers. Holding the company strictly liable for the acts of
its employees "is illogical in a pure hostile environment setting"
because there, "the supervisor acts outside the scope of actual or
apparent authority to hire, fire, discipline, or promote." Steele
v. Offshore Shipbuilding, Inc., 867 F.2d 1311, 1316 (11th
Cir.1989). Therefore, hostile environment liability on the part of
an employer exists only where "the corporate defendant knew or
should have known of the harassment and failed to take prompt
remedial action against the supervisor." Id. (emphasis added).
Here, McClellan, Johns, Smith, and Webber doubtlessly knew of
the hostile environment; and no contention is made that any
manager higher up than these people actually knew of the hostile
environment. The issue is thus whether the notice to the
corporation required by Steele existed where all the supervisors
with whom Plaintiffs had regular contact were offenders and where
the company failed (by not posting the sexual harassment policy) to
provide Plaintiffs with guidance on how to contact upper-level
managers.
The jury verdict holding Shoney's liable will be upheld
because there was sufficient evidence that Shoney's (through its
"higher management") had at least constructive notice of the
hostile environment. See Henson v. City of Dundee, 682 F.2d 897,
905 (11th Cir.1982) ("The employee can demonstrate that the
employer knew of the harassment by showing that she complained to
higher management of the harassment, or by showing the
pervasiveness of the harassment, which gives rise to the inference
of knowledge or constructive knowledge.") (citations omitted).
The hostile environment in this case was so pervasive and
managers at the restaurant were so inextricably intertwined in this
environment that higher management could be deemed by a jury to
have constructive knowledge. So, the district court did not err on
the question of compensatory damages. The evidence here of
harassment is extremely extensive, and that so many employees were
involved indicates that the events at Captain D's were not cloaked
in secrecy. Therefore, the district court's conclusion that the
evidence was enough to show that Shoney's higher management had
constructive knowledge was not error. See generally Reich v.
Department of Conservation and Natural Resources, 28 F.3d 1076,
1082 (11th Cir.1994) (reviewing question of constructive knowledge
as question of fact "for clear error").
And, Shoney's cannot complain about its lack of notice: a
reasonable jury could find that Shoney's sexual harassment policy
was never communicated to Plaintiffs. The Supreme Court stated in
Meritor Savings Bank, FSB v. Vinson, 477 U.S. 57, 106 S.Ct. 2399,
91 L.Ed.2d 49 (1986), that "Petitioner's contention that
respondent's failure [to complain to higher management] should
insulate it from liability might be substantially stronger if its
procedures were better calculated to encourage victims of
harassment to come forward." See also Sparks v. Pilot Freight
Carriers, Inc., 830 F.2d 1554, 1560 (11th Cir.1987) (noting that
under Meritor, employer may shield itself from liability only by
"enacting an explicit policy against sexual harassment and an
effective grievance procedure ") (emphasis added). Thus, the award
of compensatory damages stands.
B. Punitive Damages
Defendant argues that even if Shoney's had constructive
knowledge of the hostile environment, the constructive knowledge
still does not satisfy the requirement of the Civil Rights Act of
1991 that, before Plaintiffs can collect punitive damages from the
company, they must show the company acted with malice or reckless
indifference to Plaintiffs' federal rights.1 The district judge
1
Under the Civil Rights Act of 1991, 42 U.S.C. § 1981a,
punitive damages are available where "the complaining party
demonstrates" that the employer "engaged in ... discriminatory
rejected this argument of Defendant. But, we conclude that not
enough evidence supports the determination that Shoney's acted with
malice or reckless indifference to Plaintiffs' federally protected
rights; and so we reverse the award of punitive damages.
The record fails to show, first, that no member of Shoney's
management higher up the corporate hierarchy than the harassing
employees themselves acted with the state of mind required by
section 1981a. The plain language of section 1981a, which refers
to malicious or reckless acts, compels the conclusion that Shoney's
mere "constructive knowledge" of the harassment cannot support
punitive damages.
One court has defined malice, for section 1981a purposes, as
meaning "with an intent to harm," and recklessness as "with serious
disregard for the consequences of [one's] actions." Canada v. Boyd
Group, Inc., 809 F.Supp. 771, 781 (D.Nev.1992). We accept these
definitions and conclude that they do not reach the employer with
only constructive knowledge, at least when that constructive
knowledge flows from negligence, as opposed to willful blindness.
As one court has written:
[A]lthough the defendant should have had knowledge of the
pervasive hostile working environment which existed,
nonetheless, it cannot be said that its failure to act earlier
was in any way a reckless or callous disregard of or
indifference to the rights of plaintiff Marina Dombeck or
other persons. It was a negligent failure to conduct a more
extensive investigation and to provide for earlier remedial
measures which would have eliminated the hostile environment.
Dombeck v. Milwaukee Valve Co., 823 F.Supp. 1475, 1480
practices with malice or with reckless indifference to the
federally protected rights of an aggrieved individual."
(Emphasis added.) This restriction does not apply to the
recovery of compensatory damages.
(W.D.Wis.1993) (declining to assess punitive damages against
employer) (emphasis added.) Dombeck was vacated on the ground that
the Civil Rights Act of 1991 should not have been applied
retroactively, but its reasoning has continued merit. Therefore,
considering the plain language of the statute and the limited case
law, we conclude that, at least ordinarily, constructive knowledge
alone is insufficient to authorize the award of punitive damages
under section 1981a.
Here, Shoney's had "constructive knowledge" of the hostile
environment only because it failed to exercise a reasonable level
of vigilance. No evidence shows Shoney's failed to become aware of
the hostile environment because of any established policy of
willful blindness; Shoney's had a general policy against sexual
harassment and did investigate the complaints it received.
Therefore, we decline to hold that Shoney's constructive knowledge
of the acts of its employees renders it liable in punitive damages
under the Civil Rights Act of 1991.
And, we also decline to hold that, in the instant
circumstances, the state of mind of the harassing employees counts
as the state of mind of Shoney's, the corporate employer, for
punitive damages purposes. This decision is consistent with those
of other courts who have overturned a punitive damages award
imposed on an employer for the hostile environment created by an
employee, when that employee's acts were not authorized or
approved, implicitly or explicitly, by the company.
For example, in Patterson v. PHP Healthcare Corp., 90 F.3d
927, 943 (5th Cir.1996), the Fifth Circuit decided that the
harassing employee's "actions may be attributed to PHP Healthcare
for purposes of compensatory damages, given his supervisory role as
project manager." Id. Still, the court concluded that punitive
damages could not be assessed against the company. The Fifth
Circuit announced that it reached this conclusion because the
company did nothing to countenance or approve the harassment:
All of the discriminatory acts in this case were solely acts
of Kennedy [the harassing employee]. Kennedy was not a
corporate officer of PHP Healthcare but was the "project
manager".... The record is completely void of evidence
showing that [PHP] took part in any discriminatory conduct
much less any "malicious" or "reckless" conduct. The
existence of the employment handbook setting forth a policy of
non-discrimination is at least prima facie evidence of
awareness on the part of [PHP] of the federally protected
rights of [the plaintiffs]; and there is nothing in this
record which purports to show that [PHP] took any action which
was inconsistent with that policy. Similarly, there is
nothing [to] show that [PHP] had knowledge of Kennedy's
malicious or reckless conduct, or authorized, ratified, or
approved Kennedy's actions.
Id. at 943; see also Dombeck, 823 F.Supp. at 1480. The same can
be said for this case.2 Here, we conclude that Plaintiffs failed
2
Some acknowledgment for the conclusion that the harassing
employees' state of mind is not Shoney's state of mind is
provided by the stipulation entered into by Plaintiffs before
trial. There, Plaintiffs agreed, as later recalled in court by
the district judge, that "Mr. Johns and Mr. McClellan [the
higher-ranking of the harassing employees] were both lower
management for Shoney's." Plaintiffs suggest this stipulation
should be ignored "to insure there is a just result." We note,
however, that stipulations are not to be disregarded lightly.
See Laird v. Air Carrier Engine Service, Inc., 263 F.2d 948, 953
(5th Cir.1959) ("Those statements or agreements which dispense
with proof of facts are made with respect to the impending trial
and until withdrawn are not merely evidence as in the case of an
ordinary admission. They are absolutely binding. As long as
they stand, they foreclose the matter altogether.").
Stipulations to pure questions of law are of course not binding
on courts. See Noel Shows, Inc. v. United States, 721 F.2d 327,
330 (11th Cir.1983). The stipulation here may involve a mixed
question of law and fact. But to the extent the stipulation
constitutes a representation of fact on the named employees'
roles in the Shoney's management structure—we believe that is the
to show that Shoney's acted with the state of mind required for the
imposition of punitive damages under section 1981a.
The decision of the district court is AFFIRMED in part and
REVERSED in part.
substance of it—that representation is not to be disregarded
lightly.
Splunge v. Shoney's Inc.
Combined Opinion