IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT ________________________________________ Nos. 06-10871 & 06-10916 ________________________________________ EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Plaintiff-Appellant-Cross-Appellee v. STOCKS, INC., doing business as CAFE ITALIA and CIA CHOW INC. Defendant-Appellee-Cross-Appellant. __________________________________________________ On Appeal from the United States District Court for the Northern District of Texas, No. 3-04-CV-2109-H, The Honorable Barefoot Sanders, S.J., Presiding __________________________________________________ BRIEF OF THE UNITED STATES EQUAL EMPLOYMENT OPPORTUNITY COMMISSION AS APPELLANT __________________________________________________ RONALD S. COOPER General Counsel U.S. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION VINCENT J. BLACKWOOD Office of General Counsel Acting Associate General Counsel 1801 L Street, N.W., Room 7018 Washington, D.C. 20507 CAROLYN L. WHEELER (202) 663-4772 Assistant General Counsel joseph.seiner@eeoc.gov JOSEPH A. SEINER Attorney STATEMENT REGARDING ORAL ARGUMENT The Commission believes that oral argument would materially assist this Court in resolving the issue presented here — the ability to seek punitive damages. This issue is both complicated and important to the Commission's statutory obligation of enforcing Title VII of the Civil Rights Act of 1964. The Commission therefore believes that a discussion of this and related issues at oral argument would be beneficial to the Court. TABLE OF CONTENTS Table of Authorities . . . . . . . . . . . . . . . . . . . . .iii Statement of Jurisdiction. . . . . . . . . . . . . . . . . . . .1 Statement of the Issue . . . . . . . . . . . . . . . . . . . . .2 Statement of the Case. . . . . . . . . . . . . . . . . . . . . .2 Statement of the Facts . . . . . . . . . . . . . . . . . . . . .3 A. Background.. . . . . . . . . . . . . . . . . . . . .3 B. Proceedings Below. . . . . . . . . . . . . . . . . .6 Standard of Review . . . . . . . . . . . . . . . . . . . . . . .8 Summary of Argument. . . . . . . . . . . . . . . . . . . . . . .9 Argument . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 THE DISTRICT COURT ERRED IN FAILING TO SUBMIT A PUNITIVE DAMAGES CLAIM TO THE JURY . . . . . . . . . . . . . . 11 A. The Illegal Retaliation was Perpetrated by Management Employees.13 B. The Company Knew that its Actions Were in Violation of Title VII.16 C. Cafe Italia has not Satisfied its Burden of Showing that the Company Acted in Good Faith.. . . . . . . . . . . . . . . 21 D. Relief.. . . . . . . . . . . . . . . . . . . . . . 22 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Certificate of Service Certificate of Compliance Addendum (unpublished decisions cited in brief) TABLE OF AUTHORITIES Federal Cases Anderson v. G.D.C., Inc., 281 F.3d 452 (4th Cir. 2002). . . . . . . . . . . . . . . 15 Black v. Fidelity & Guaranty Insurance Underwriters, Inc., 582 F.2d 984 (5th Cir. 1978). . . . . . . . . . . . . . . 23 Bruso v. United Airlines, Inc., 239 F.3d 848 (7th Cir. 2001). . . . . . . . . . . 16, 19, 21 Davey v. Lockheed Martin, 301 F.3d 1204 (10th Cir. 2002). . . . . . . . . . . . . . 22 Deffenbaugh-Williams v. Wal-Mart, 188 F.3d 278 (5th Cir. 1999). . . . . . . . . . . 15, 21, 22 Dossett v. First State Bank, 399 F.3d 940 (8th Cir. 2005). . . . . . . . . . . . . . . .8 EEOC v. Heartway Corporation, 466 F.3d 1156 (10th Cir. 2006). . . . . . . . . . .19, 24-25 EEOC v. Wal-Mart Stores, Inc., 35 Fed. Appx. 543, No. 00-16887 (9th Cir. May 16, 2002) (unpublished) . . . . . . . . . . 24 EEOC v. Wal-Mart, 187 F.3d 1241 (10th Cir. 1999). . . . . . . . . . . . 15, 18 Hardin v. Caterpillar, 227 F.3d 268 (5th Cir. 2000). . . . . . . . . . . .12, 23-24 Knowlton v. Teltrust Phones, Inc., 189 F.3d 1177 (10th Cir. 1999). . . . . . . . . . . . . . 23 Kolstad v. American Dental Association, 527 U.S. 526 (1999) . . . . . . . . . . . . . . . . . passim Lowery v. Circuit City Stores, Inc., 206 F.3d 431 (4th Cir. 2000). . . . . . . . . . . . . 17, 20 MacGregor v. Mallinckrodt, 373 F.3d 923 (8th Cir. 2004). . . . . . . . . . . . . . . 21 McDonough v. City of Quincy, 452 F.3d 8 (1st Cir. 2006). . . . . . . . . . . . .8, 21, 25 McInnis v. Fairfield Communities, Inc., 458 F.3d 1129 (10th Cir. 2006). . . . . . . . . . . . . . 17 Ogden v. Wax Works, Inc., 214 F.3d 999 (8th Cir. 2000). . . . . . . . . . . . . . . 17 Passantino v. Johnson & Johnson Consumer Prods., Inc., 212 F.3d 493 (9th Cir. 2000). . . . . . . . . . . . . . . 21 Pride Ford v. Motors Ins. Corp., 80 Fed.Appx. 329, No. 02-60956 (5th Cir. Nov. 5, 2003) (unpublished)8 Romano v. U-Haul In'l, 233 F.3d 655 (1st Cir. 2000). . . . . . . . . . . . . . . 18 Rubinstein v. Adm'rs of the Tulane Educ. Fund, 218 F.3d 392 (5th Cir. 2000). . . . . . . . . . . . . 12, 16 Schexnayder v. Bonfigilio, 167 Fed.Appx. 364, 2006 WL 25963, No. 05-30221 (5th Cir. Jan. 5, 2006) (unpublished). . . . 16 Thompson and Wallace v. Falconwood Corp., 100 F.3d 429 (5th Cir. 1997). . . . . . . . . . . . . . . .8 U.S. v. Space Hunters, Inc., 429 F.3d 416 (2d Cir. 2005) . . . . . . . . . . . . . . . .9 Zimmermann v. Assocs. First Capital Corp., 251 F.3d 376 (2d Cir. 2001) . . . . . . . . . 16, 19, 21, 22 Federal Statutes 28 U.S.C. § 1291 . . . . . . . . . . . . . . . . . . . . . . . .1 28 U.S.C. § 451. . . . . . . . . . . . . . . . . . . . . . . . .1 28 U.S.C. § 1331 . . . . . . . . . . . . . . . . . . . . . . . .1 28 U.S.C. § 1337 . . . . . . . . . . . . . . . . . . . . . . . .1 28 U.S.C. § 1343 . . . . . . . . . . . . . . . . . . . . . . . .1 28 U.S.C. § 1345 . . . . . . . . . . . . . . . . . . . . . . . .1 42 U.S.C. § 1981a. . . . . . . . . . . . . . . . . . . . 1, 11-12 42 U.S.C. § 2000e-5(f) . . . . . . . . . . . . . . . . . . . . .1 Other Authorities Fed. R. App. Proc. 4(a). . . . . . . . . . . . . . . . . . . 1, 3 Restatement (Second) of Agency . . . . . . . . . . . . . . . . 13 Restatement (Second) of Torts. . . . . . . . . . . . . . . . . 14 1 L. Schlueter & K. Redden, Punitive Damages . . . . . . . . . 14 STATEMENT OF JURISDICTION The district court had jurisdiction over this Title VII sexual harassment and retaliation suit brought by the Equal Employment Opportunity Commission (EEOC or Commission) against Stocks, Inc. d/b/a Cafe Italia (Cafe Italia) pursuant to 28 U.S.C. §§ 451, 1331, 1337, 1343, and 1345. Doc No. 1, Complaint; Record on Appeal (ROA) at 14-15.<1> This action was authorized and instituted pursuant to Section 706 of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e- 5(f)(1) and (3), and Section 102 of the Civil Rights Act of 1991, 42 U.S.C. § 1981a. Id. On April 26, 2006, the district court entered final judgment following a jury trial. Doc. No. 61, Final Judgment; ROA at 677; Record Excerpts (RE) at Tab 5. On June 12, 2006, the court entered an order denying the timely post-judgment motions of Cafe Italia and the Commission. See Doc. No. 69, Order; ROA at 767-69; RE at Tab 6. On August 9, 2006, the Commission filed a timely notice of appeal. Doc. No. 70, Notice of Appeal; ROA at 770; RE at Tab 2; Fed. R. App. Proc. 4(a). On August 23, 2006, Cafe Italia filed a timely cross-appeal. Doc. No. 76, Notice of Appeal; ROA at 772; RE at Tab 3; Fed. R. App. Proc. 4(a). This Court has jurisdiction to review the district court judgment under 28 U.S.C. § 1291. STATEMENT OF THE ISSUE Whether the district court erred in failing to submit a punitive damages claim to the jury where the Commission provided sufficient evidence to satisfy the elements set forth by the Supreme Court in Kolstad v. American Dental Association, 527 U.S. 526 (1999). STATEMENT OF THE CASE On September 29, 2004, the EEOC filed a complaint in the U.S. District Court for the Northern District of Texas alleging that the defendant had subjected Ashley Bridges to a sexually hostile work environment and retaliated against her in violation of Title VII. Doc. No. 1, Complaint; ROA at 14-17. At the close of a three-day trial held on April 3-5, 2006, the district court submitted these issues to the jury, but refused, over the Commission's objection, to submit a punitive damages claim to the jury. Trial Transcript Volume (Tr) III at 2-7, 15-16; RE at Tab 7.<2> After deliberating, the jury returned a split verdict. The jury concluded that the Commission had not established that Cafe Italia should be liable for sexual harassment, but determined that the company had illegally retaliated against Bridges. TrIII at 68-69; ROA at 646, 652; RE at Tab 4. The jury awarded the Commission $10,000 in compensatory damages. TrIII at 69; ROA at 653; RE at Tab 4. On April 26, 2006, the court entered judgment and awarded post-judgment interest. Doc. No. 61, Final Judgment; ROA at 677; RE at Tab 5. On May 4, 2006, the EEOC moved to amend the judgment to include injunctive relief, and on May 10, 2006, the Commission further moved for a new trial on the issue of punitive damages. Doc. Nos. 62 & 65, EEOC Motions; ROA at 678, 708. On May 8, 2006, Cafe Italia moved for judgment notwithstanding the verdict. Doc. No. 63, Cafe Italia Motion; ROA at 700. On June 12, 2006, the district court denied all the post-judgment motions. Doc. No. 69, Order; ROA at 767-69; RE at Tab 6. On August 9, 2006, the Commission filed a timely notice of appeal. See Doc. No. 70, Notice of Appeal; ROA at 770; RE at Tab 2; Fed. R. App. Proc. 4(a). On August 23, 2006, Cafe Italia filed a timely cross-appeal. See Doc. No. 76, Notice of Appeal; ROA at 772; RE at Tab 3; Fed. R. App. Proc. 4(a). STATEMENT OF THE FACTS A. Background Ashley Bridges began working for Cafe Italia as a waitress on May 15, 2003. Trial Transcript Volume I (TrI) at 84, 110. Cafe Italia is an upscale Italian restaurant that offers a fine dining experience, and employs approximately fifteen to twenty servers. TrI at 82-83. Bridges reported to Scott Jones, the majority owner of the restaurant, and received work assignments from Dino Pucci, the general manager, and Tony Lemus, the assistant manager. TrI at 85, 112-13; Trial Transcript Volume II (TrII) at 84-85. Bridges was an excellent employee who was told by management that she was a "great server," that "they could always depend on [her] if they needed a shift covered," and that she was "reliable." TrI at 92-93. Within a few weeks after Bridges started working at Cafe Italia, Julio Cabrera, a twenty-five percent owner in the company and server at the restaurant, began making sexual comments to her. TrI at 86, 95; TrII at 63-64. Cabrera continued to make frequent sexual comments to Bridges throughout her employment. TrI at 95-100. Bridges told Cabrera that she did not appreciate these comments and to stop. TrI at 99-100. Cabrera also inappropriately touched Bridges repeatedly. TrI at 102-04. Cafe Italia did not have a written sexual harassment policy in place and Bridges never received an employee handbook. TrI at 109. Bridges, however, did complain to Cabrera "[e]very time he touched me, every time he made a comment." TrI at 111. In September 2003, Bridges also complained to the general manager, Dino Pucci, about Cabrera's conduct, but the touching and comments persisted despite this complaint. TrI at 112-13, 155-56.<3> Bridges felt "like nobody was listening" to her. TrI at 154. On November 26, 2003, Cabrera and a server that Bridges was dating got into a disagreement and Bridges attempted to break it up. TrI at 113-17, 135-36; TrII at 126. Cabrera told Bridges "to fuck off." TrI at 117. Bridges told Cabrera that she "couldn't stand working with him" because of his sexually harassing behavior, and also told the assistant manager, Tony Lemus, about Cabrera's sexual harassment and comments. TrI at 117-18.<4> Despite this further complaint to Lemus, however, the harassment continued. TrI at 119. Shortly after this incident, Bridges talked with Dino Pucci, the general manager, who stated that because she "had threatened the restaurant" and "had brought up the sexual harassment," her shifts were being cut. TrI at 120-21. Scott Jones, the majority owner of the restaurant, made the ultimate decision that he "wanted [Bridges] suspended" and therefore reduced her shifts. TrII at 111-12. Bridges was only scheduled for one shift during the week she spoke to Pucci, and she had previously been working approximately ten shifts per week. TrI at 104, 120-21, 132. The assistant manager, Lemus, also told Bridges that her shifts were being cut because she "complained about the sexual harassment." TrI at 121-22<5> Bridges filed a charge of sex discrimination and retaliation with the EEOC on December 9, 2003. TrI 124. Ten minutes after she left the EEOC office after filing her charge, she received a call from Pucci, the general manager, indicating that she "was no longer employed at Cafe Italia." TrI at 125. B. Proceedings Below On September 29, 2004, the EEOC filed a complaint in the U.S. District Court for the Northern District of Texas alleging that the defendant had subjected Bridges to a sexually hostile work environment and retaliated against her in violation of Title VII. See Doc. No. 1, Complaint; ROA at 14-17. At the close of a three-day trial held on April 3-5, 2006, the Commission argued that it was entitled to a punitive damages jury instruction. Trial Transcript Volume III (TrIII) at 2-3. Both parties had submitted proposed jury instructions that included a punitive damages interrogatory, but the district court omitted punitive damages from the final jury charge. See Doc. No. 31 at p. 14 and Doc No. 32 at p. 8, Proposed Jury Instructions of EEOC (ROA at 272-73; RE at Tab 8) and Cafe Italia (ROA at 287-88; RE at Tab 9); Doc. No. 54, Final Jury Instructions (ROA at 639; RE at Tab 4); TrIII at 2-7; RE at Tab 7. The Commission argued that it had satisfied all of the elements under the Supreme Court's decision in Kolstad to warrant such an instruction, maintaining that, "by failing to have a sexual harassment policy, by failing to train any of its managers or workers on sex harassment, by failing to post a notice, by knowing about the law" and acting in contravention to it, the defendant acted with malice or reckless disregard. TrIII at 2-3; RE at Tab 7. The Commission also argued that a punitive damages instruction was appropriate because the company "knew that retaliation was against the law." TrIII at 4; RE at Tab 7. And, "[d]espite this knowledge," the company reduced Bridges' schedule and terminated her. Id. The district court, however, concluded that a punitive damages instruction was not warranted because the court did not "think [the company] acted at the level of malicious conduct." TrIII at 3-7; RE at Tab 7. In light of this ruling, the Commission also asked that the court give the jury the punitive damages question as an advisory ruling to save the issue from being retried should the court's decision be reversed on appeal. TrIII at 15-16; RE at Tab 7. The district court denied this request as well. TrIII at 16; RE at Tab 7. The jury found that the Commission had not established that Cafe Italia should be liable for sexual harassment, but determined that the company had illegally retaliated against Bridges, and awarded $10,000 in compensatory damages. TrIII at 68-69; ROA at 646, 652-53; RE at Tab 4. The court entered judgment and awarded post-judgment interest. See Doc. No. 61, Final Judgment; ROA at 677; RE at Tab 5. The court also denied all post-judgment motions. See Doc. No. 69, Order; ROA at 767-69; RE at Tab 6. Specifically, the court refused to grant the company's motion for judgment notwithstanding the verdict on the Commission's retaliation claim because the court found "the jury's verdict of retaliation to be reasonable from the evidence presented." Doc. No. 69 at 2, Order; ROA at 768; RE at Tab 6. In rejecting the Commission's post-trial motions, the district court declined to revisit its decision on punitive damages, and also refused to enter any injunctive relief in the case. Doc. No. 69 at 2-3, Order; ROA at 768- 69; RE at Tab 6. STANDARD OF REVIEW The district court's refusal to submit the punitive damages issue to the jury was based on a misapplication of the controlling legal standards, and this Court should review the district court's decision de novo. See Thompson & Wallace v. Falconwood Corp., 100 F.3d 429, 434 (5th Cir. 1997) (because jury charge was effectively a directed verdict, it is reviewed de novo); Pride Ford v. Motors Ins. Corp., No. 02-60956, 80 Fed.Appx. 329, 330 (5th Cir. Nov. 5, 2003) (unpublished) ("district court's refusal to allow the jury to consider punitive damages" is reviewed de novo); McDonough v. City of Quincy, 452 F.3d 8, 23 (1st Cir. 2006) ("We review de novo the decision to decline a punitive damages instruction."); Dossett v. First State Bank, 399 F.3d 940, 953 (8th Cir. 2005) ("We review de novo a district court's grant of a judgment as a matter of law [on the issue of whether to submit punitive damages to the jury]."); U.S. v. Space Hunters, Inc., 429 F.3d 416, 427 (2d Cir. 2005) ("We review de novo a district court's refusal to submit the issue of punitive damages to a jury."). SUMMARY OF ARGUMENT A jury has already determined that Cafe Italia illegally retaliated against Bridges when it reduced her shifts and subsequently terminated her for her harassment complaints. That jury should further have been permitted to consider whether the company's illegal actions were performed with malice or reckless indifference to Bridges' federally protected rights under Title VII. The district court therefore erred in failing to submit a punitive damages instruction to the jury. Under the Supreme Court's decision in Kolstad, a plaintiff is entitled to assert a punitive damages claim where the plaintiff can demonstrate that the employer's illegal actions were committed by a managerial agent acting within the scope of his employment, and that the company discriminated in the face of a perceived risk that its actions would violate federal law. There can be no question here that the illegal retaliation found by the jury was conducted by management at Cafe Italia. Scott Jones, the majority owner of the restaurant, made the ultimate decision effectively to suspend Bridges by reducing her shifts. The general manager, Dino Pucci, told Bridges that because she "had threatened the restaurant" and "had brought up the sexual harassment," her shifts were being cut and she would only be allowed to work one shift a week. The assistant manager, Tony Lemus, also told Bridges that her shifts were being cut because she complained about the sexual harassment. Thus, all levels of management participated in the illegal retaliation. Similarly, management's knowledge of the relevant statutory prohibitions demonstrates that the company retaliated against Bridges in the face of a perceived risk that it was violating the law. Indeed, the majority owner Scott Jones testified that he had not disciplined Bridges or reduced her shifts when she complained about the harassment in September 2003 because he knew that such a retaliatory action would be illegal. And, general manager Dino Pucci testified that he had training in sexual harassment, and knew "what to do when faced with a complaint of sexual harassment." Pucci also testified that he understood the "laws and rules and regulations regarding sexual harassment." This knowledge of the prohibition against retaliation and awareness of antidiscrimination laws is sufficient under the case law to impute liability for punitive damages to the company. Finally, Cafe Italia is unable to carry its burden of demonstrating that it acted in good faith when it illegally retaliated against Bridges. The company presented no evidence at trial that it had a written antidiscrimination policy in place at the restaurant where Bridges worked or that the company attempted to educate its employees about discrimination or retaliation in any way. Rather, the defendant's evidence consists largely of its conclusory statements that, while there was no written policy, the company had "[z]ero tolerance" for harassment. Such evidence is far less than that necessary to show that the company's actions were taken in good faith. In sum, the Commission demonstrated at trial that management employees illegally retaliated against Bridges and did so with clear knowledge of the prohibitions against retaliation and with an awareness of the antidiscrimination laws and regulations. The jury, which already found that the company illegally retaliated against Bridges, should further have been permitted to consider whether punitive damages against the company were appropriate. This Court should therefore remand this case to the district court for a limited trial on the issue of punitive damages. ARGUMENT THE DISTRICT COURT ERRED IN FAILING TO SUBMIT A PUNITIVE DAMAGES CLAIM TO THE JURY The Civil Rights Act of 1991 provides that an individual who proves intentional discrimination in violation of Title VII may recover compensatory and punitive damages in addition to equitable relief. See 42 U.S.C. § 1981a(a)-(b). The statute provides that punitive damages may be awarded "if the [plaintiff] demonstrates that the [defendant] engaged in a discriminatory practice . . . with malice or with reckless indifference to the federally protected rights of an aggrieved individual." 42 U.S.C. § 1981a(b)(1). In Kolstad, the Supreme Court discussed the appropriate standard for punitive damages. The Court held that liability for punitive damages turns on the defendant's state of mind, not on the nature of the defendant's discriminatory conduct. 527 U.S. at 535. All that a plaintiff need prove to be eligible for punitive damages, the Court held, is that the employer "discriminate[d] in the face of a perceived risk that its actions [would] violate federal law." Id. at 536. In meeting this threshold, the "plaintiff must impute liability" to the employer. Id. at 539-40. Additionally, the Court carved out a defense for employers if they "engage in good faith efforts to comply with Title VII." Id. at 544. Interpreting Kolstad, this Court has held that a plaintiff can obtain punitive damages where the discriminatory act "was committed by a managerial agent acting within the scope of employment" and "the bad act complained of was committed with malice or with reckless indifference to the complainant's federal rights." Rubinstein v. Adm'rs of the Tulane Educ. Fund, 218 F.3d 392, 406 (5th Cir. 2000). Under Kolstad, there is no requirement that plaintiffs "make an additional showing of egregiousness." Rubinstein, 218 F.3d at 406; Hardin v. Caterpillar, 227 F.3d 268, 270 (5th Cir. 2000) (discussing application of Kolstad and noting that the decision "made clear that malice did not require proof of ‘egregious' conduct"). The district court's decision refusing to instruct the jury on punitive damages does not properly analyze either the statutory standard or the relevant Supreme Court and Fifth Circuit case law. See TrIII at 2-7. A. The Illegal Retaliation was Perpetrated by Management Employees. In Kolstad, the Supreme Court clarified when, under the rules of agency, an employer is liable for punitive damages based on the malice or reckless indifference of one of its agents. Kolstad, 527 U.S. at 540-45. In clarifying this standard, the Court applied the general common law of agency, using the Restatement (Second) of Agency as its "starting point." Id. at 542. In particular, the Court focused on section 217 C(c) of the Restatement (Second) of Agency, which (as one of four circumstances where "an agent's misconduct may be imputed to the principal for purposes of awarding punitive damages") allows for "liability for punitive awards where an employee serving in a ‘managerial capacity' committed the wrong while ‘acting in the scope of employment.'" Id. at 542-43 (quoting Restatement (Second) of Agency § 217 C(c)). In analyzing § 217 C(c), the Supreme Court defined the meaning of the term "managerial capacity." Id. at 543. The Court explained that, although no satisfactory definition of the term was available, courts assessing whether an employee met the definition should make a fact-intensive inquiry, reviewing "‘the type of authority that the employer has given to the employee, [and] the amount of discretion that the employee has in what is done and how it is accomplished.'" Id. (quoting 1 L. Schlueter & K. Redden, Punitive Damages, §4.4(B)(2)(a), p. 181 (3d ed. 1995)). The Court noted that the examples provided in the Restatement (Second) of Torts § 909 suggested that an employee must be "important," but rejected the notion that the employee must be "the employer's ‘top management, officers or directors,' to be acting ‘in a managerial capacity.'" 527 U.S. at 543 (quoting 1 L. Schlueter & K. Redden, Punitive Damages, §4.4(B)(2)(a), p. 181). In this case, Jones, Pucci, and Lemus' willful retaliation must be imputed to the company under the agency principles set forth in Kolstad. There can simply be no question that the retaliation was committed by managerial employees acting within the scope of their employment. Scott Jones, the majority owner of the restaurant, made the ultimate decision that he "wanted [Bridges] suspended" and therefore reduced her shifts. TrII at 111-12. It is also evident that Jones participated in any termination decision. TrI at 219; TrII at 93.<6> The general manager, Dino Pucci, had authority to discipline employees and was the "go-to person" who was primarily in charge of the workforce. TrI at 178-79. Pucci told Bridges that because she "had threatened the restaurant" and "had brought up the sexual harassment," her shifts were being cut and she would only be allowed to work one shift a week. TrI at 120-21. Pucci also informed Bridges only minutes after she filed her formal charge with the EEOC that she was being terminated by the company. TrI at 125. The assistant manager, Tony Lemus, also told Bridges that her shifts were being cut because she "complained about the sexual harassment." TrI at 121-22. Thus, there can be no question that the decisionmakers in this case were managerial agents acting on behalf of the company, as all levels of management participated in the illegal discrimination. See, e.g., Deffenbaugh-Williams v. Wal- Mart, 188 F.3d 278, 285 (5th Cir. 1999) ("sufficient evidence to survive JMOL exists that [district manager] was a requisite ‘managerial agent'" for purposes of imputing liability under Kolstad); Anderson v. G.D.C., Inc., 281 F.3d 452, 461 (4th Cir. 2002) (holding that general manager/dispatcher was "unquestionably a managerial employee [for purposes of imputing liability under Kolstad]. The evidence at trial established that he possessed authority to hire and fire drivers and to impose lesser forms of discipline, including docking a driver's wages."); EEOC v. Wal-Mart, 187 F.3d 1241, 1246-47 (10th Cir. 1999) (assistant manager who had "independent authority to suspend her subordinates" and could "make hiring and firing recommendations" was a manager for purposes of imputing liability for punitive damages). B. The Company Knew that its Actions Were in Violation of Title VII. The jury found that Cafe Italia illegally retaliated against Bridges. The jury should further have been permitted to determine whether this illegal retaliation "was committed with malice or with reckless indifference to the complainant's federal rights." Rubinstein, 218 F.3d at 406. A plaintiff can demonstrate malice or reckless indifference by showing that the company "discriminate[d] in the face of a perceived risk that its actions [would] violate federal law." Kolstad, 527 U.S. at 535. Thus, "a jury may award punitive damages pursuant to Title VII merely if the employer knew it may have been violating the law." Schexnayder v. Bonfigilio, No. 05-30221, 167 Fed.Appx. 364, 368, 2006 WL 25963 (5th Cir. Jan. 5, 2006) (unpublished) (emphasis in original). Other circuits have also made clear that an employer's knowledge of federal antidiscrimination laws is sufficient to establish that the employer's illegal acts were committed with malice or reckless indifference. See, e.g., Bruso v. United Airlines, Inc., 239 F.3d 848, 858 (7th Cir. 2001) (plaintiff can demonstrate employer's requisite mental state "by demonstrating that the relevant individuals knew of or were familiar with the antidiscrimination laws and the employer's policies for implementing those laws"). There are many methods through which a plaintiff can establish that a defendant had knowledge of the relevant federal antidiscrimination laws. One of the clearest ways of establishing this knowledge is to demonstrate that the company's managerial agents had received training on preventing employment discrimination. See Zimmermann v. Assocs. First Capital Corp., 251 F.3d 376, 385 (2d Cir. 2001) ("[W]e agree with [the district court] that [the manager's] acknowledgment of training in ‘equal opportunity' permits an inference of the requisite mental state."); Ogden v. Wax Works, Inc., 214 F.3d 999, 1010 (8th Cir. 2000) (a manager "testified to his familiarity with the [harassment] policy, and claimed he received ‘extensive training on sexual harassment issues' in conjunction with his M.B.A. A jury could therefore infer [this manager] had knowledge of Title VII's proscriptions, and given this knowledge, reasonably conclude he acted in the face of a perceived risk that his actions would violate federal law."); Lowery v. Circuit City Stores, Inc., 206 F.3d 431, 443-44 (4th Cir. 2000) ("The record contains evidence that [the manager] knew taking race into account in making significant employment decisions such as denying promotions violates federal law. Specifically, a reasonable juror could infer that [the manager] had knowledge of the existence of federal anti-discrimination laws from [defendant's] evidence that it required every person in management to attend a week-long training seminar that included education on the federal anti- discrimination laws."). Similarly, a manager's acknowledgement of the existence of antidiscrimination policies at the company or of a general understanding of antidiscrimination laws is sufficient to satisfy the knowledge requirement. See McInnis v. Fairfield Cmtys., Inc., 458 F.3d 1129, 1138 (10th Cir. 2006) (company manager "specifically testified that he understood that employees have a right to complain formally or informally about sexual harassment. A reasonable jury could therefore have concluded that at least one managerial agent . . . was aware of the relevant federal prohibitions and nevertheless retaliated against [the plaintiff]."); Romano v. U-Haul Int'l, 233 F.3d 655, 669-70 (1st Cir. 2000) (evidence that immediate supervisor knew that termination was discriminatory and that company president was aware of anti-discrimination policies was sufficient for reasonable jury to conclude that actions "were taken with reckless disregard to [plaintiff's] federal rights"); Wal-Mart, 187 F.3d at 1246 ("reasonable jury could have concluded that [defendant] intentionally discriminated against [plaintiff] in the face of a perceived risk that its action would violate federal law" where manager who was responsible for employee's improper suspension "testified that he was familiar with the accommodation requirements of the ADA and its prohibition against discrimination and retaliation in the workplace"). There can be no doubt here that Cafe Italia's managers had knowledge of Title VII's prohibition against retaliation, and therefore acted with malice or reckless disregard in reducing Bridges' shifts and firing her. Indeed, the majority owner of the company, Scott Jones, testified that he had not disciplined Bridges or reduced her shifts when she complained about the harassment in September 2003 because he knew that such a retaliatory action would be illegal. See TrII at 113. In this regard, Jones specifically testified: that would have been a stupid business decision [to discipline Bridges for complaining], wouldn't it have? I mean, you know, then she'd [go] to the EEOC. But I knew better. Id. Jones was therefore aware of the prohibition against retaliation in November and December 2003, when he reduced Bridges' shifts and when the company ultimately terminated her employment. Similarly, general manager Dino Pucci testified that in a prior job he had training in sexual harassment, and knew "what to do when faced with a complaint of sexual harassment." TrI at 176-77, 205. Pucci further testified that he understood the "laws and rules and regulations regarding sexual harassment." TrI at 205. As the Tenth Circuit has recently stated, where "there is sufficient evidence for the jury to decide whether an employer intentionally and illegally discriminated on the basis" of a protected characteristic, and "there is evidence that the employer knew the requirements" of the statute, it is "proper for a punitive damages instruction to go to the jury." EEOC v. Heartway Corp., 466 F.3d 1156, 1169 (10th Cir. 2006); see also Zimmerman, 251 F.3d at 385 (training in equal opportunity sufficient to impute "requisite mental state"); Bruso, 239 F.3d at 858 (7th Cir. 2001) (knowledge of or familiarity with antidiscrimination laws and employer policies sufficient to demonstrate requisite mental state). In addition to the clear testimony that Cafe Italia was aware of its obligations under Title VII not to retaliate, the evidence at trial demonstrated that the company's actions were either malicious or performed with reckless indifference to Bridges' rights. Indeed, the company openly acknowledges that Bridges was disciplined because of her allegedly threatening to bring a sexual harassment claim. In this regard, Scott Jones testified that he placed Bridges on a reduced shift because of her alleged threat to bring a sexual harassment suit against the company. TrII at 112. Through this reduced schedule, Jones hoped that Bridges would "have learned her lesson." Id. In addition, general manager Dino Pucci testified that Bridges was placed on a reduced shift because of her threat about the sexual harassment. TrI at 196. And, assistant manager Tony Lemus testified that he told Bridges that her shifts were being reduced "because she had made a sexual harassment complaint," which he later clarified to mean her alleged threat of filing a sexual harassment lawsuit. TrII at 36, 38, 46. Lemus even acknowledged that he advised Bridges that she "shouldn't use the term sexual harassment." TrII at 36. Based on these admissions, the jury could reasonably have inferred that in reducing Bridges' schedule and ultimately terminating her, the company was, with clear knowledge of the law, retaliating against her for her protected opposition to illegal activity. See, e.g., Lowery, 206 F.3d at 443-46 (manager's actions and knowledge of federal employment law sufficient to support jury award on punitive damages). Because the jury could have come to that conclusion, it was reversible error for the district court to refuse to give it that opportunity. See McDonough v. City of Quincy, 452 F.3d 8, 23 (1st Cir. 2006) (reversing district court's refusal to give punitive damages instruction in retaliation case where jury found that retaliation had occurred and retaliating officials had reason to know of discrimination laws). C. Cafe Italia has not Satisfied its Burden of Showing that the Company Acted in Good Faith. Cafe Italia cannot argue on appeal that a punitive damages instruction is inappropriate because it acted in good faith. See Kolstad, 527 U.S. at 544 (creating a defense where employers can demonstrate that they "engage in good faith efforts to comply with Title VII"). This Court has determined that the defendant has the burden of proof on the issue of good faith. See Deffenbaugh- Williams, 188 F.3d at 286 (the evidence elicited by defendant "does not suffice to establish, as a matter of law, [defendant's] good faith in requiring its managers to obey Title VII"). Accord MacGregor v. Mallinckrodt, 373 F.3d 923, 931 (8th Cir. 2004); Zimmermann, 251 F.3d at 385; Bruso, 239 F.3d at 858; Passantino v. Johnson & Johnson Consumer Prods., Inc., 212 F.3d 493, 516 (9th Cir. 2000). Cafe Italia failed to meet its burden here. The company presented no evidence at trial that it had a written antidiscrimination policy in place at the restaurant where Bridges worked or that the company attempted to educate its employees about discrimination or retaliation in any way. Rather, the defendant's evidence in this regard consists largely of its conclusory statements that, while there was no written policy, the company had "[z]ero tolerance" for harassment. TrI at 205. Such evidence is insufficient to prove this defense. Deffenbaugh- Williams, 188 F.3d at 286 (Defendant's "only evidence" was that defendant "encourages employees to contact higher management with grievances. Plainly, such evidence does not suffice to establish, as a matter of law, [defendant's] good faith in requiring its managers to obey Title VII."); Davey v. Lockheed Martin, 301 F.3d 1204, 1209 (10th Cir. 2002) ("at a minimum, an employer must at least adopt anti-discrimination policies and make a good faith effort to educate its employees about these policies and [the statute's] prohibitions"); Zimmermann, 251 F.3d at 385 (the Kolstad defense "requires an employer to establish both that it had an antidiscrimination policy and made good faith effort to enforce it"). Nonetheless, in a separate trial on the punitive damages issue, Cafe Italia would be able to argue to the jury that it had acted in good faith. At this stage of the proceedings, however, the company has simply not satisfied its burden of establishing this defense. D. Relief. The jury in this case properly found that Cafe Italia illegally retaliated against Bridges in violation of Title VII. Because the Commission satisfied the Kolstad elements, the jury should further have been permitted to consider whether punitive damages were appropriate. After being denied the opportunity to present the punitive damages issue to the jury, the Commission asked that the court present the question to the jury for advisory purposes only. TrIII 15-16; RE at Tab 7. The district court denied this request. TrIII at 16; RE at Tab 7. Had the court agreed to present the issue for an advisory ruling, the jury's recommendation could be instated and the issue would not need to be retried. This case should be remanded to the district court for a new trial limited to the issue of punitive damages. See, e.g., Black v. Fidelity & Guaranty Ins. Underwriters, Inc., 582 F.2d 984, 991 (5th Cir. 1978) ("the plaintiff is entitled to a new trial limited to the issue of punitive damages"); Knowlton v. Teltrust Phones, Inc., 189 F.3d 1177, 1187-88 (10th Cir. 1999) (remanding "for the specific purpose of submitting to a jury the issue of punitive damages" where "the district court erred when it ruled that there was no evidence from which a jury could make a reasonable inference that [the defendant] acted recklessly and with disregard for [plaintiff's] federally protected civil rights"). The entire case would not need to be retried on remand, as the issues of liability and relief are entirely separable. See Hardin, 227 F.3d at 272-73 (finding "the issues of intent, of damages for emotional injury, and of punitive damages" inseparable in case arising partially under Pregnancy Discrimination Act but noting that "we do not suggest that punitive damages may not walk alone in other contexts"). In this case, the jury found against the Commission on the harassment claim, and that issue would not need to be revisited on remand. Similarly, the evidence which would demonstrate the company's malice or reckless indifference — the managers' knowledge of the statutory prohibitions of discrimination and retaliation — is different from that which established the company's underlying liability. See Heartway, 466 F.3d at 1171 (affirming liability after jury trial in employment discrimination case and remanding "for a new trial, solely on the issue of punitive damages."); EEOC v. Wal-Mart Stores, Inc., No. 00-16887, 35 Fed. Appx. 543, 546-47 (9th Cir. May 16, 2002) (unpublished) (remanding for separate trial on punitive damages issue and stating that "the EEOC is entitled to present the finding of facts implicit in the first jury's finding that Wal-Mart intentionally discriminated against [plaintiff] on the basis of her pregnancy. . . . [The defendant] is prohibited from making any argument or eliciting any testimony that would contradict any of these findings."). In Hardin, this Court concluded that liability and damages issues were too intertwined to permit a second trial limited to punitive damages, in part because "their expression in a verdict is a meld." Hardin, 227 F.3d at 272. See McDonough, 452 F.3d at 24 (discussing Hardin's analysis of the "potential overlap" of compensatory and punitive damages). In evaluating the degree to which issues of compensatory and punitive damages are intertwined and create a risk of double recovery "for the reprehensibility of the defendants' conduct" in a second trial limited to punitive damages, the First Circuit recently noted that this problem would be negligible where the compensatory damages award is relatively low. McDonough, 452 F.3d at 24-25. In this case, the Commission received only $10,000 in compensatory damages, suggesting there is little risk of a "double" recovery if a second jury decides on a sum the company should be required to pay to effectuate the deterrent purposes of the punitive damages provision. Cf. Heartway, 466 F.3d at 1160, 1171 (remanding for separate trial solely on punitive damages issue in employment discrimination case where compensatory damages of $20,000 and backpay of $1,240 were awarded). If there is any question about the propriety of a second trial limited to punitive damages, it should be resolved by the district court, which is in the best position to determine whether such a proceeding would be problematic. See Heartway, 466 F.3d at 1171. CONCLUSION The evidence in the record would permit a reasonable jury to find that Cafe Italia acted with malice or with reckless indifference to Bridges' federally protected rights. The district court therefore erred by removing the question of punitive damages from the jury. For the reasons stated above, the EEOC respectfully asks this Court to remand this case to the district court for a new trial limited to the issue of punitive damages. Respectfully submitted, RONALD S. COOPER General Counsel U.S. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION VINCENT J. BLACKWOOD Office of General Counsel Acting Associate General Counsel 1801 L Street, N.W., Room 7018 Washington, D.C. 20507 CAROLYN L. WHEELER (202) 663-4772 Assistant General Counsel joseph.seiner@eeoc.gov ____________________________ JOSEPH A. SEINER Attorney CERTIFICATE OF SERVICE I, Joseph Seiner, hereby certify that I filed one original and seven copies of the foregoing brief and one copy of the digital version of the brief on diskette with this Court this 5th day of December, 2006, by causing it to be sent via Federal Express next business day service. I also certify that I served two copies of the foregoing brief and one copy of the digital version of the brief on diskette this 5th day of December, 2006, by causing them to be sent via Federal Express next business day service to the following counsel of record: L Randall Yazbeck 5050 Quorum Drive Suite 140 Dallas, TX 75254 ________________________________ Joseph A. Seiner Attorney U.S. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION Office of General Counsel 1801 L Street, N.W., Room 7018 Washington, D.C. 20507 (202) 663-4772 joseph.seiner@eeoc.gov December 5, 2006 CERTIFICATE OF COMPLIANCE This brief complies with the type-volume limitation of Fed. R. App. P. 32(a)(7)(B) because it contains 6,139 words, excluding the parts of the brief exempted by Fed. R. App. P. 32(a)(7)(B)(iii). This brief complies with the typeface requirements of Fed. R. App. P. 32(a)(5) and the type style requirements of Fed. R. App. P. 32(a)(6) because it has been prepared in a proportionally spaced typeface using Microsoft Word 2003 in Times New Roman 14 point. Joseph A. Seiner Attorney U.S. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION Office of General Counsel 1801 L Street, N.W., Room 7018 Washington, D.C. 20507 (202) 663-4772 joseph.seiner@eeoc.gov ADDENDUM UNPUBLISHED DECISIONS IN: Pride Ford v. Motors Ins. Corp., No. 02-60956, 80 Fed.Appx. 329 (5th Cir. Nov. 5, 2003) Schexnayder v. Bonfigilio, No. 05-30221, 167 Fed.Appx. 364, 2006 WL 25963 (5th Cir. Jan. 5, 2006) EEOC v. Wal-Mart Stores, Inc., No. 00-16887, 35 Fed. Appx. 543 (9th Cir. May 16, 2002) *********************************************************************** <> <1> All record citations are to the document numbers as they appear on the district court docket sheet, as well as to the page of the Record on Appeal. Where applicable, the Commission also cites to the Record Excerpts submitted with its opening brief. <2> All citations to the trial transcript specifically reference the volume of the transcript and the page number. <3> Pucci had authority to discipline employees and was the “go-to person” who was primarily in charge of the workforce. TrI at 178-79. <4> Cafe Italia maintains that Bridges had threatened to sue the restaurant if Cabrera did not “back off” of the other server who was in an altercation with Cabrera. TrI at 218; TrII at 111. Bridges “adamantly den[ies]” having threatened the restaurant in this manner. TrI at 117-18, 137. Bridges testified that she never indicated that she was going to sue the restaurant for sexual harassment. TrI at 117-18. <5> As an assistant manager, Lemus had significant authority at the restaurant. TrII at 40. Lemus could discipline employees with the approval of the majority owner of the company. TrII at 18. Additionally, the record reflects that Lemus trained Bridges, would create the work schedules for employees, and would fill in for the general manager. TrI at 201, 207; TrII at 121. Lemus also testified that when on duty he would “[m]anage the entire restaurant,” and that he was the servers’ immediate supervisor. TrII at 17, 19. <6> Although the defendant denies that Bridges was discharged by the company, the jury may have concluded otherwise.