Knowlton v. Teltrust Phones, Inc.

F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
AUG 16 1999
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT

PIERRE KNOWLTON,

Plaintiff-Appellee
Cross-Appellant,

v. No. 97-4154 and 97-4162

TELTRUST PHONES, INC., a Utah
corporation,

Defendant-Appellant
Cross-Appellee.

Appeal from the United States District Court
for the District of Utah
(D.C. No. 95-CV-93)

Lincoln W. Hobbs, of Winder & Haslam, P.C., Salt Lake City, Utah, (Gerry B.
Holman of Winder & Haslam, P.C., and Steven E. Swenson and Christie Babalis
of Teltrust, Inc., Salt Lake City, Utah, with him on the briefs) for Appellant.

Erik Strindberg, of Cohne, Rappaport & Segal, P.C., Salt Lake City, Utah, (Ralph
E. Chamness and Brian F. Roberts with him on the brief) for Appellee.

Before BRISCOE, BARRETT, and MURPHY, Circuit Judges.

MURPHY, Circuit Judge.
 A jury found appellant, Teltrust Phones, Inc. (“Teltrust Phones”), liable for

the sexual harassment of Ms. Pierre Knowlton, awarding her $75,000 in

compensatory damages. On appeal, Teltrust Phones argues that: (1) the district

court erred in sanctioning it for failing to comply with a discovery order; (2) there

was insufficient evidence to support the jury’s finding of a “single employer”; and

(3) Teltrust, Inc. and Teltrust Communication Services, Inc. (“TCSI”) should not

have been included in this suit because they were not named as parties in

Knowlton’s complaint to the EEOC. Exercising jurisdiction pursuant to 28

U.S.C. § 1291, this court affirms.

Appellee Knowlton cross-appeals the district court’s grant of a directed

verdict dismissing Knowlton’s punitive damages claim. 1 This court reverses and

remands.

I. BACKGROUND

In September 1992, Knowlton, a sales representative for Teltrust Phones,

complained to the management of Teltrust, Inc. 2 that Mark Neihart, her

In light of this court’s conclusion that Teltrust Phones’ appeal fails,
1

Knowlton’s cross-appeal asserting abuse of discretion by the district court in
denying her motion to amend her complaint to include TCSI and Teltrust, Inc. is
moot.
2
Teltrust Phones and TCSI are subsidiaries of Teltrust, Inc.

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supervisor, had sexually harassed her since she was hired in October 1990.

Neihart’s behavior included constant use of vulgar language, telling sexually

explicit jokes, talking about the sexual conduct of the management, making both

sexually charged and insulting comments about other female employees, telling

Knowlton about the details of his sex life with his wife, discussing the size of his

penis, pretending to masturbate in front of Knowlton, and sending messages to

Knowlton’s pager which read “696969.” On the occasions Knowlton’s husband

sent flowers to her office, Neihart speculated about her husband’s infidelity or

Knowlton’s sexual skills. Neihart also placed in Knowlton’s desk a radish cut in

the shape of a vagina, garnished with cheese spread.

Neihart also repeatedly propositioned Knowlton, told her about fantasies he

had about the two of them, asked her about the clothing she slept and exercised

in, and requested that she give him oral sex. His propositions escalated after

Knowlton married and they began to affect her work performance. He refused to

approve contracts Knowlton had obtained with new clients unless she would agree

to perform oral sex, resulting in a number of her contracts not being approved. He

also required Knowlton, but not others, to sell phones which generated

significantly less in commission.

Upon hearing Knowlton’s complaint, Teltrust Inc.’s management

transferred Neihart to another position within the company. Fearing continued

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interaction with Neihart and retaliation, Knowlton resigned from Teltrust Phones

and filed a complaint with the Utah Anti-Discrimination Division/EEOC

(“UADD/EEOC”), claiming she was sexually harassed while employed with

Teltrust Phones. After receiving a right-to-sue notice from the UADD/EEOC,

Knowlton filed a complaint in federal district court against Teltrust Phones. 3 A

jury found that Teltrust Phones, TCSI, and Teltrust, Inc. constituted a single

employer, and awarded Knowlton $75,000 in compensatory damages.

II. SANCTION

Approximately three months before trial, Knowlton served upon Teltrust

Phones a third set of interrogatories and a Request for Production of Documents. 4

Teltrust Phones did not respond to the interrogatories or file objections to the

discovery request in violation of Rules 33(b)(3) and 34(b) of the Federal Rules of

3
Upon stipulation, the parties agreed to have a magistrate judge preside
over the trial. See 28 U.S.C. § 636(c).
4
Teltrust Phones argues that this discovery request was served after the
discovery deadline. Despite Teltrust Phones’ best efforts to obfuscate the issue,
however, it appears that the discovery deadline was indeed extended to February
or March 1997. Teltrust Phones’ statement that “there is no document in the file
which reflects the Court’s extension of discovery deadlines,” is simply
unpersuasive in light of the following: during an April 11, 1997, conference about
jury instructions, the presiding judge stated that he “had extended [the discovery
deadline] and [Knowlton’s discovery request] was filed 30 days prior to the cutoff
date for discovery”; Teltrust Phones itself served Knowlton with discovery
requests in January of 1997; and the Pretrial Order, dated March 18, 1997, stated
that “[d]iscovery is being completed.” (emphasis added).

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Civil Procedure. 5 Consequently, Knowlton filed a motion to compel a week

before trial, and Teltrust Phones responded almost exclusively with objections.

The district court ordered an immediate hearing and at the hearing granted the

motion to compel, warning Teltrust Phones that failure to comply would result in

a sanction, consisting of a jury instruction that Teltrust Phones had failed to

provide the information and the jury could infer that the evidence would have

been unfavorable to Teltrust Phones.

Despite the court’s order, Teltrust Phones failed to produce much of the

information sought. In response, Knowlton filed a Motion for Default Judgment,

pursuant to Rule 37(b). Teltrust Phones made numerous arguments about the

timing of the discovery request and its effort to comply with the request.

Nevertheless, the court ruled that the information provided by Teltrust Phones

was unresponsive to both Knowlton’s request and the court’s order. The court

also concluded, however, that granting Knowlton’s motion for default judgment

would be too severe a sanction. Instead, the court instructed the jury as it had

warned. The jury instruction stated the following:

5
Rule 33(b)(3) states that the “party upon whom the interrogatories have
been served shall serve a copy of the answers, and objections if any, within 30
days after the service of the interrogatories.” Rule 33(b)(4) further provides:
“Any ground [for objection] not stated in a timely objection is waived . . . .” Rule
34(b) similarly provides: “The party upon whom the request [for production of
documents] is served shall serve a written response within 30 days after the
service of the request.”

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 Teltrust Phones, Inc., has failed to give Pierre Knowlton
evidence within its exclusive control that is relevant and material to
the determination of whether [Teltrust Phones], Teltrust, Inc., and
[TCSI] constituted a single employer. Therefore, in determining
whether the three entities were a single employer and whether to
include all three entities’ employees in your calculation [of the
number of employees], you must presume that the evidence which
Teltrust Phones, Inc. would not provide would have weighed against
Teltrust Phones, Inc. and in favor of Pierre Knowlton.

Discovery sanctions are reviewed for an abuse of discretion, considering

the totality of the circumstances. 6 See National Hockey League v. Metropolitan

Hockey Club, Inc., 427 U.S. 639, 640, 642 (1976); Oklahoma Federated Gold &

Numismatics, Inc. v. Blodgett, 24 F.3d 136, 139 (10th Cir. 1994). The district

court’s discretion is limited by the requirement that the sanction be both “‘just’”

and “‘related to the particular claim which was at issue.’” See Ehrenhaus v.

Reynolds, 965 F.2d 916, 920-21 (10th Cir. 1992) (quoting Insurance Corp. of

Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 707 (1982)).

6
Deeming the establishment of certain facts under Federal Rules of Civil
Procedure 37(b)(2)(A) can be tantamount to a default judgment, which in turn
triggers a greater degree of scrutiny. See, e.g., Ehrenhaus v. Reynolds, 965 F.2d
916, 920-21 (10th Cir. 1992) (“[W]e recognize that dismissal represents an
extreme sanction appropriate only in cases of willful misconduct.”); Ingalls
Shipbuilding, Inc. v. United States, 857 F.2d 1448, 1450-51 (Fed. Cir. 1988). The
sanction here, however, did not prevent Teltrust Phones from fully presenting its
case to the jury. See Chilcutt v. United States, 4 F.3d 1313, 1320 (5th Cir. 1993)
(“Because the court’s ruling did not preclude the Government from presenting its
case in chief, the sanction was a far cry from a default judgment.”).

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 Teltrust Phones advances several arguments. First, Teltrust Phones argues

that it complied with the court’s order when it delivered to Knowlton four

consolidated financial reports on April 10, 1997. Relatedly, Teltrust Phones

argues that the information sought by Knowlton was cumulative and irrelevant.

This court is unable, however, to determine whether the magistrate judge abused

his discretion on these bases because Teltrust Phones has failed to provide an

adequate record for review. There are no citations to the record and this court can

find no evidence in the record of Teltrust Phones’ answer to Knowlton’s third

request for interrogatories, or of the financial statements allegedly provided on

April 10, 1997. Teltrust Phones’ failure to provide an adequate record on appeal

renders review of its compliance with the court’s order impossible, and requires

that this court disregard these particular challenges to the district court’s sanction.

See 10th Cir. R. 10.3(B) (“When the party asserting an issue fails to provide a

record sufficient for considering that issue, the court may decline to consider

it.”); 10th Cir. R. 30.1(A)(3) (“The court need not remedy any failure of counsel

to provide an adequate appendix.”); see also McEwen v. City of Norman, 926 F.2d

1539, 1550 (10th Cir. 1991) (failure to designate relevant record requires court to

hold that appellant did not meet burden of proving that ruling was abuse of

discretion).

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 The same record deficiency dictates the resolution of Teltrust Phones’

argument that the information sought by Knowlton had already been provided and

was, in any event, publicly available. Teltrust Phones acknowledges only the

information sought by Knowlton which related to the directors, officers, and

shareholders of the various Teltrust entities, failing to address whether it had

answered other questions in Knowlton’s third interrogatory, such as the identity

of the person to whom Richard Heath, the supervisor of the man who sexually

harassed Knowlton, reported during 1992; the person who was responsible for

employee relations during 1991 and 1992; and the identity of the entity which

employed Knowlton prior to Teltrust Phones’ incorporation in June 1991. This

information was relevant in determining single-employer status. See Frank v.

U.S. West, Inc., 3 F.3d 1357, 1362-64 (10th Cir. 1993) (noting information useful

in proving interrelation of operations and centralized control of labor relations).

Because the record does not contain Teltrust Phones’ response to the

interrogatories, this court is deprived of an essential tool to assess whether

Teltrust Phones indeed complied with the court’s order and whether the court’s

order constituted an abuse of discretion.

Teltrust Phones further argues that Knowlton failed to raise Teltrust

Phones’ discovery deficiencies in its proposed pretrial order, subsequently

adopted by the court on March 31, 1997, in which Knowlton specifically

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requested “that the Court specify what, if any, additional discovery will be

allowed and when it must be conducted.” Teltrust Phones asserts that this failure

caused it “to believe there was no need to produce any further financial

documents than had already been provided.” Teltrust Phones does not explain

and this court cannot understand how the language of the pretrial order has any

bearing on Teltrust Phones’ failure to comply with the court’s April 8, 1997,

order compelling complete responses to Knowlton’s third set of interrogatories.

Finally, Teltrust Phones argues that prior to making a motion to compel

discovery, Knowlton failed to file a statement of informal discovery-dispute

resolution with the court, a requirement by local rule. See Rules of Practice for

the District of Utah 204-1(g) (Michie 1996) (currently codified at 37-1(b)).

Teltrust Phones, however, did not raise this issue until its post-verdict motion for

a new trial. By failing to timely raise the issue to the district court, Teltrust

Phones waived the issue below. See Fed. R. Civ. P. 50 advisory comm. note,

1991 amend. (“A post-trial motion for judgment can be granted only on grounds

advanced in the pre-verdict motion.”); Anderson v. United Tel. Co. of Kan., 933

F.2d 1500, 1503 (10th Cir. 1991). This court will not review issues not timely

raised below, except in exceptional circumstances not applicable here. See Rhine

v. Boone, No. 98-6353, 1999 WL 459312, *1 (10th Cir. July 7, 1999) (citing

Walker v. Mather, 959 F.2d 894, 896 (10th Cir. 1992)).

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 This court has no basis to perceive Teltrust Phones’ discovery conduct any

differently than the magistrate judge did. The sanction levied after warning was

both just and tailored to the single-employer claim and did not constitute an abuse

of discretion by the district court.

III. SINGLE-EMPLOYER STATUS

Teltrust Phones argues that insufficient evidence was produced to support

the jury’s finding of single-employer status between Teltrust Phones, the named

defendant in this suit, TCSI, a fellow subsidiary, and their parent corporation,

Teltrust, Inc. “When a jury verdict is challenged on appeal, our review is limited

to determining whether the record--viewed in the light most favorable to the

prevailing party--contains substantial evidence to support the jury’s decision.”

Thunder Basin Coal Co. v. Southwestern Pub. Serv. Co., 104 F.3d 1205, 1212

(10th Cir. 1997) (quotation omitted). Because the jury “has the exclusive

function of appraising credibility, determining the weight to be given to the

testimony, drawing inferences from the facts established, resolving conflicts in

the evidence, and reaching ultimate conclusions of fact,” this standard of review

is quite deferential to the jury’s verdict. Kitchens v. Bryan County Nat’l Bank,

825 F.2d 248, 251 (10th Cir.1987).

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 Review of sufficiency of the evidence necessarily includes consideration of

the discovery instruction imposed as a sanction. By instructing the jury that it

must presume the discovery which Teltrust Phones failed to produce supported a

finding of single-employer status, the district court imposed a sanction which

stopped short of a default sanction available under Rule 37(b)(2)(A). See Fed. R.

Civ. P. 37(b)(2)(A) (providing an alternative sanction that the facts “shall be

taken to be established” in favor of the party seeking discovery (emphasis

added)); see also Charles Alan Wright, et. al., Federal Practice & Procedure

§ 2289 (2d ed. 1994) (“The court is not limited to the kinds of orders specified in

Rule 37(b)(2) . . . .”). For this instruction to be a sanction at all, Knowlton’s

burden of producing evidence of single-employer status must be deemed satisfied.

Because the sanction was not a default, however, the presumption was rebuttable.

The Tenth Circuit has not yet adopted a test for determining when a parent

company is liable under Title VII for its subsidiary’s discriminatory conduct. See

Lockard v. Pizza Hut, Inc., 162 F.3d 1062, 1070 (10th Cir. 1998) (applying but

declining to adopt single-employer test); Frank, 3 F.3d at 1362 (declining to

adopt any one of four tests used by courts in determining when a parent

corporation is liable for the acts of its subsidiary). Both parties and the district

court, however, assumed the application of the single-employer test, also referred

to as the integrated-enterprise test or the true-economic-realities test. See

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Lockard, 162 F.3d at 1069. Consequently, that test, right or wrong, controls this

appeal. See Frank, 3 F.3d at 1362 (“[W]e today apply the integrated enterprise

test because [both parties] concede that this test best applies to the facts of this

case.”). The single-employer test rests on four factors: (1) interrelation of

operations; (2) centralized control over labor relations; (3) common management;

and (4) common ownership or financial control. See id. at 1362. All four factors,

however, are not necessary for single-employer status. Rather, the heart of the

inquiry is whether there is an absence of an arm’s-length relationship among the

companies. See, e.g., Swallows v. Barnes & Noble Book Stores, Inc., 128 F.3d

990, 996 (6th Cir. 1997); Lihli Fashions Corp. v. NLRB, 80 F.3d 743,747 (2d Cir.

1996).

Taking into consideration the presumption of single-employer status,

Teltrust Phones’ meager efforts to rebut that presumption during trial, and the

affirmative evidence offered by Knowlton, 7 this court concludes that the jury’s

Teltrust Phones has conceded that Teltrust, Inc. wholly owned both
7

subsidiaries, and all three Teltrust companies were governed by the same persons
as their officers and members of their board of directors. Interrelation of
operations is clear because the three entities shared a building, phone system,
reception area, office equipment, accounting department, personnel manager,
personnel handbook, and payroll accounts. Moreover, the business of the three
entities was addressed in single, common meetings of the board of directors.
With regard to the centralization of labor relations, the appropriate inquiry is:
“What entity made the final decisions regarding employment matters related to
the person claiming discrimination?” See Frank v. U.S. West, Inc., 3 F.3d 1357,
1363 (10th Cir. 1993) (quotation omitted) (emphasis added). Lyle Keys and Jerry

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determination of single-employer status was overwhelmingly supported by the

evidence. 8

IV. TELTRUST, INC. AND TCSI AS PARTIES

Teltrust Phones challenges the inclusion of Teltrust, Inc. and TCSI in this

suit because neither party was named in the EEOC charge filed by Knowlton. As

a general rule, a plaintiff must file a charge against a party with the EEOC before

she can sue that party under Title VII. See Civil Rights Act of 1964, 42 U.S.C. §

2000e-5(f)(1) (“[A] civil action may be brought against the respondent named in

the [EEOC] charge . . . by the person claiming to be aggrieved . . . .”); Johnson v.

Palma, 931 F.2d 203, 209 (2d Cir. 1991). Nevertheless, a Title VII action may

proceed against a defendant not named in the EEOC charge when “there is a clear

identity of interest between the unnamed defendant and the party named in the

administrative charge.” Johnson, 931 F.2d at 209; see also McKinnon v. Kwong

Wah Restaurant, 83 F.3d 498, 505 (1st Cir. 1996); Sedlacek v. Hach, 752 F.2d

Romney conducted an investigation, removed Neihart from his position with
Teltrust Phones and simultaneously hired him with TCSI, and resolved all other
matters related to Knowlton’s complaint in their capacity as chairman/CEO and
President, respectively, of Teltrust, Inc., the parent corporation. Moreover, the
companies shared a single employment manual and human resources manager.
8
Because this court affirms the jury’s finding of single-employer status,
jurisdiction under Title VII existed and the issue of whether Teltrust Phones
employed 15 or more employees during the relevant time period need not be
addressed.

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333, 336 (8th Cir. 1985). This identity-of-interest exception satisfies a Title VII

purpose that the defendant have notice of the charge and the EEOC have an

opportunity to attempt conciliation. See Romero v. Union Pac. R.R., 615 F.2d

1303, 1311 (10th Cir. 1980).

Courts typically employ a four-factor test to determine whether an identity

of interest exists. 9 Such an analysis, however, is unnecessary in a case such as

this in which this court has upheld the jury’s finding that the named and unnamed

parties constitute a single-employer. Cf. Romero, 615 F.2d at 1312 (“Depending

on the facts, additional factors may be relevant.”). When a court has already

determined that the entities are so entwined as to justify holding the parent

corporation liable for the subsidiary’s actions, it would be anomalous to not also

conclude that the parent had sufficient identity of interest to have been notified of

the suit. See Sedlacek, 752 F.2d at 336 (holding that because the defendants had

been proved to constitute a single employer, “notice to one was notice to the

9
The factors are: (1) whether the role of the unnamed party could have been
ascertained at the time of the filing of the EEOC complaint through reasonable
effort by the complainant; (2) whether the interests of a named party are so
similar to the unnamed party’s that it would be unnecessary to include the
unnamed party in the EEOC proceedings for the purpose of obtaining voluntary
conciliation and compliance; (3) whether the unnamed party’s absence from the
EEOC proceedings resulted in actual prejudice; and (4) whether the unnamed
party has in some way represented to the complainant that its relationship with the
complainant is to be through the named party. See, e.g., Cook v. Arrowsmith
Shelburne, Inc., 69 F.3d 1235, 1241-42 (2d Cir. 1995); Romero v. Union Pac.
R.R., 615 F.2d 1303, 1312 (10th Cir. 1980).

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other”); Eggleston v. Chicago Journeymen Plumbers’ Local Union No. 130, 657

F.2d 890, 906 (7th Cir. 1981) (deciding, independent of four-factor test, that

given substantial interrelationship of the two entities, “the [unnamed party] knew

or should have known of the EEOC charge” and was given an opportunity to

participate in conciliation proceedings).

Because Teltrust, Inc., TCSI, and Teltrust Phones constitute a single

employer, Knowlton’s failure to name Teltrust, Inc. and TCSI in the EEOC charge

does not preclude their inclusion in this suit. Both entities were on notice early in

the suit that Knowlton sought to prove single-employer status among the various

Teltrust entities. 10

V. PUNITIVE DAMAGES

In his order denying Knowlton’s motion to amend her complaint to
10

include Teltrust, Inc. and TCSI, Magistrate Judge Samuel Alba noted that in a
January 13, 1993, letter to the UADD/EEOC, Knowlton’s counsel had written:

While it may be, as stated by Teltrust, that Teltrust Phones,
Inc. is a subsidiary of Teltrust, Inc. those entities, for the purpose of
the Act, are treated as one. It is our understanding that Lyle Keys
owns, at least a controlling interest, in Teltrust, Inc. and is directly
responsible for the management of both. Further, both entities are
located in the same building, share common facilities and equipment
and have a common management structure.

Knowlton continued to press for single-employer status throughout discovery and
trial, vitiating Teltrust, Inc. and TCSI’s claims of lack of notice.

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 The district court granted Teltrust Phones’ motion for directed verdict on

punitive damages from the bench on April 11, 1997, holding that Knowlton had

failed to make a showing of actual malice or reckless indifference to her federally

protected rights. Review of the district court’s grant of a motion for judgment as

a matter of law is de novo, applying the same standard as the district court. See

Pack v. Kmart Corp., 166 F.3d 1300, 1303 (10th Cir. 1999). Judgment as a

matter of law is appropriate only “[i]f during a trial by jury a party has been fully

heard on an issue and there is no legally sufficient evidentiary basis for a

reasonable jury to find for that party.” Fed. R. Civ. P. 50(a)(1); see also Davis v.

United States Postal Serv., 142 F.3d 1334, 1339 (10th Cir. 1998) (“[A] court may

grant the motion only if the evidence points but one way and is susceptible to no

reasonable inferences which may support the opposing party’s position.”

(quotation omitted)). We construe the evidence and inferences therefrom in a

light most favorable to Knowlton, the nonmoving party. See Wilson v. Tulsa

Junior College, 164 F.3d 534, 536 (10th Cir. 1998).

The Civil Rights Act of 1991 provides: “A complaining party may recover

punitive damages . . . against a respondent . . . if the complaining party

demonstrates that the respondent engaged in a discriminatory practice or

discriminatory practices with malice or with reckless indifference to the federally

protected rights of an aggrieved individual.” 42 U.S.C. § 1981a(b)(1); see also

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Baty v. Willamette Indus., Inc., Nos. 97-3299, -3305, 1999 WL 191184, at *10-11

(10th Cir. Apr. 7, 1999). The plaintiff’s burden of proof is a preponderance of the

evidence. See Karnes v. SCI Colo. Funeral Servs., Inc., 162 F.3d 1077, 1080-81

(10th Cir. 1998).

The Supreme Court has clarified that the malice or reckless indifference

inquiry is directed at the employer’s state of mind. See Kolstad v. American

Dental Assoc., No. 98-208, 1999 WL 407481, *5-8 (June 22, 1999). Thus, a

plaintiff need only prove that her employer discriminated against her “in the face

of a perceived risk that its actions will violate federal law.” Id. at *5. She need

not show egregious or outrageous discrimination independent of the employer’s

state of mind. See id. at *5-6. Although this circuit has not yet determined

comprehensively what a plaintiff seeking punitive damages must prove in order to

show that her employer acted with the requisite mental state, our previous cases

are consistent with Kolstad’s admonition that malice or reckless indifference

relates to the employer’s state of mind and not necessarily to its actions. See

Baty, 1999 WL 191184, * 10-11 (plaintiff’s showing that management did not

respond to her complaints despite knowledge of serious problems with

harassment, that management conducted a sham investigation to appease plaintiff,

and that management employees condoned harassment evinced malice or reckless

indifference sufficient to warrant the award of punitive damages).

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 The evidence at trial showed that prior to Knowlton’s complaint, the

Teltrust entities’ management was well aware of Neihart’s inappropriate

interaction with female co-workers. 11 Jolynn Curtis-Leach testified that prior to

firing her, Neihart pinned her up against a wall and made a sexual advance.

Curtis-Leach spoke with Mickey Adams-Grames, then-CFO and Vice President of

Teltrust, Inc., about Neihart’s harassment. According to Curtis-Leach, the

harassment stopped for a while but reoccurred when Adams-Grames was

terminated from Teltrust, Inc in March 1991.

Adams-Grames testified that in the fall of 1990, she had spoken with Keys,

Romney, and other members of management several times about Neihart’s

inappropriate behavior, including the Curtis-Leach incident. Romney, President

of the three companies, responded by stating: “[Jolynn’s] overreacting. She’s too

emotional. The women in this company are always too emotional.” According to

11
Teltrust Phones argues that some of the testimony relied upon by
Knowlton predates § 1981a(b)(1)’s adoption on November 21, 1991, and
consequently cannot be used pursuant to Landgraf v. USI Film Products, 511 U.S.
244 (1994) (holding that punitive damages provided under the Civil Rights Act of
1991 may not be retroactively recoverable). Teltrust Phones’ argument, however,
is unavailing. Testimony elicited from witnesses about Neihart’s inappropriate
conduct predating November 21, 1991, does not form the basis of Knowlton’s
claim. Rather, the testimony showed that the management of Teltrust was well
aware of Neihart’s propensity to harass women as of November 22, 1991, one
year before Knowlton complained that Neihart sexually harassed her. See also
Hennessy v. Penril Datacomm Networks, Inc., 69 F.3d 1344, 1349 (7th Cir. 1995)
(holding that Landgraf does not prohibit the jury from hearing about pre-Act
conduct which provides context and background).

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Adams-Grames, “the complaints about the behavior of the men in the company

were almost at the point of being ridiculous.” This “rampant” behavior included

telling dirty jokes, using dirty language, and yelling at female employees.

Hostility to women appeared not to be limited to Neihart. Upon joining Teltrust,

Inc., Romney told Adams-Grames that “no fucking woman will ever tell me how

to run my business.”

Richard Heath, general manager of Teltrust Phones and Neihart’s

immediate supervisor, spoke with Romney and Keys about Neihart’s inappropriate

behavior prior to Knowlton’s complaint. Heath testified that on a “few dozen”

occasions he heard Neihart use foul language and make comments containing

sexual references to fellow coworkers. Neihart’s use of foul language included an

incident in which he said to a female coworker that she should give some clients a

“blow job.” When Heath learned about the incident, he chastised Neihart,

“Shame on you. That’s very inappropriate.” Even though he was concerned that

Neihart’s language would offend some employees, Heath never formally

reprimanded Neihart. At trial, Heath agreed with the statement that “when

[Knowlton’s] complaint came up, [Keys and Romney] had already been put on

notice that Mr. Neihart had a problem with his conduct in the office.”

Upon hearing about Knowlton’s allegations of sexual harassment on

September 12, 1992, Keys immediately discharged Neihart from Teltrust.

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Romney, however, effectuated his plan to hire Neihart for TCSI the same day. In

his new position with TCSI, located just one floor above Teltrust Phones, Neihart

was given a larger office and an $8,000 raise.

Although Neihart was moved upstairs, Knowlton had frequent need to go

there. Knowlton informed Keys that she was concerned about her continued

contact with Neihart and her consequent fears for her safety. In addition to the

pattern of behavior exhibited by Neihart during their working relationship,

Knowlton feared further contact with Neihart as a result of his retaliatory threats

that he would “get even” with her. Keys’ response to her concern about

continuing contact with Neihart was simply that he was “very disappointed to . . .

be advised [she was] apparently still unsatisfied with the actions . . . taken in

response to [her] allegations.”

This evidence would support a finding that prior to Knowlton’s complaint,

the management of Teltrust, Inc. was unmistakably aware that the environment at

the three Teltrust entities, and specifically Neihart’s behavior, was rife with foul

language, sexual innuendo, and sexual advances which could reasonably be

labeled as sexual harassment. Moreover, the management’s reaction to

Knowlton’s complaint was unresponsive because she was assured continued

contact with Neihart. Accordingly, the district court erred when it ruled that there

was no evidence from which a jury could make a reasonable inference that

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Teltrust acted recklessly and with disregard for Knowlton’s federally protected

civil rights.

VI. CONCLUSION

The district court’s order granting Teltrust Phones’ motion for a directed

verdict is REVERSED, and REMANDED for the specific purpose of submitting

to a jury the issue of punitive damages. 12 This court AFFIRMS in all other

respects.

We note that the first jury determined that the Teltrust entities, as a single
12

employer, employed 200 employees during the relevant time. The jury awarded
Knowlton $75,000, leaving the next jury with the option to award Knowlton up to
$25,000, if any, in punitive damages. See 42 U.S.C. § 1981a(3)(b) (establishing
compensatory and punitive damages award limit at $100,000 for companies with
more than 100 but less than 201 employees).

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