09-4509-cv (XAP) _________________________________________________________ IN THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT _________________________________________________________ MARTHA DIANE TOWNSEND, Plaintiff-Cross-Appellee, KARLEAN VICTORIA GREY-ALLEN, Plaintiff-Appellant, v. BENJAMIN ENTERPRISES, INC., Defendant-Appellee-Cross-Appellant. _________________________________________________________ On Appeal from the U.S. District Court for the Southern District of New York _________________________________________________________ BRIEF OF THE U.S. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION AS AMICUS CURIAE IN SUPPORT OF CROSS-APPELLEE TOWNSEND AND IN FAVOR OF AFFIRMANCE _________________________________________________________ P. DAVID LOPEZ EQUAL EMPLOYMENT General Counsel OPPORTUNITY COMMISSION VINCENT J. BLACKWOOD Office of General Counsel Acting Associate General Counsel 131 M Street, NE, Room 5SW24L CAROLYN L. WHEELER Washington, DC 20507 Assistant General Counsel (202) 663-4055 GAIL S. COLEMAN gail.coleman@eeoc.gov Attorney TABLE OF CONTENTS Table of Authorities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii Statement of Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Statement of the Issues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Statement of the Case. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 A. Statement of Facts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 B. District Court Decision. . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Summary of Argument. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Argument. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 A. The district court correctly held that an employer is strictly liable for sexual harassment when the harasser is high enough in the corporate hierarchy to be the company's alter ego. . . . . . . . . . . . 8 B. The evidence supports the jury's finding that Hugh Benjamin, part-owner and sole vice president of a family business, was the company's alter ego. . . . . . . . . . . . . . . . . . . . . 13 Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Certificate of Compliance Anti-Virus Certification Form Certificate of Service TABLE OF AUTHORITIES Cases Ackel v. Nat'l Comm's, Inc., 339 F.3d 376 (5th Cir. 2003). . . . . . . . . 3-4, 9 Burlington Industries, Inc. v. Ellerth, 524 U.S. 742 (1998). . . . . . . . . . .4 Dees v. Johnson Controls World Servs., Inc., 168 F.3d 417 (11th Cir. 1999). . . . . . . . . . . . . . . . . . . . . . . . 10 Faragher v. City of Boca Raton, 524 U.S. 775 (1998). . . . . . . . . . . . passim Harris v. Forklift Systems, Inc., 510 U.S. 17 (1993). . . . . . . . . . . . 4 Hunter v. Allis-Chalmers Corp., 797 F.2d 1417 (7th Cir. 1986). . . . . . . . . 11 Johnson v. West, 218 F.3d 725 (7th Cir. 2000). . . . . . . . . . . . . . . 4, 10 Kolstad v. American Dental Ass'n, 527 U.S. 526 (1999). . . . . . . . . . . . 8-9 Kotcher v. Rosa & Sullivan Appliance Ctr., Inc., 957 F.2d 59 (2d Cir. 1992). . . . . . . . . . . . . . . . . . . . . . . . 9, 14 Meritor Savings Bank, FSB v. Vinson, 477 U.S. 57 (1986). . . . . . . . . . . . 8 Mallinson-Montague v. Pocrnick, 224 F.3d 1224 (10th Cir. 2000). . . . . . 10, 14 Passantino v. Johnson & Johnson Consumer Prods., Inc., 212 F.3d 493 (9th Cir. 2000). . . . . . . . . . . . . . . . . . . . . . . . 4, 10 Torres v. Pisano, 116 F.3d 625 (2d Cir. 1997). . . . . . . . . . . . 9, 11, 14 Statutes and Rules Fed. R. App. P. 29(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 Title VII of the Civil Rights Act of 1964 42 U.S.C. § 2000e et seq. . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Other Authority EEOC Enforcement Guidance: Vicarious Employer Liability for Unlawful Harassment by Supervisors, 1999 WL 33305874 (June 18, 1999). . . . . . . . . . . . . . . . . . . . . 10-11 STATEMENT OF INTEREST The Equal Employment Opportunity Commission ("EEOC") is charged by Congress with interpreting, administering, and enforcing Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq. This case considers whether a high-ranking corporate official may be so entwined with his company that his sexual harassment of a subordinate subjects the company to strict liability for his actions. Given the importance of this issue to effective enforcement of Title VII, the EEOC offers its views to the Court. The EEOC files this brief pursuant to Rule 29(a) of the Federal Rules of Appellate Procedure. STATEMENT OF THE ISSUES 1. Did the district court correctly hold that a company is strictly liable for sexual harassment when the harasser is high enough in the corporate hierarchy to be the company's alter ego? 2. Does the evidence support the jury's finding that Hugh Benjamin was the alter ego of Benjamin Enterprises where he was part- owner of the family business, he was the company's sole vice president, he supervised 100-150 employees, and he oversaw all operations in the field? STATEMENT OF THE CASE A. Statement of Facts Defendant Benjamin Enterprises, Inc. is a family-owned business that provides job and life skills training to people seeking entry-level jobs and then places, supervises, and mentors them in jobs with other employers. (J.A. 558, 1035.) The company was founded by Michelle Benjamin, who serves as president and is a shareholder. (J.A. 1064-66.) Her husband, Hugh Benjamin, is also a shareholder and serves as the company's sole vice president. (J.A. 1030, 1035, 1066.) All remaining shares are held by the couple's two grown children. (J.A. 1066.) Hugh is "second in command" at Benjamin Enterprises. (J.A. 1030- 31, 1037-38, 1069.) As vice president of operations, he oversees all operations of the company outside its small headquarters. (J.A. 1032, 1034, 1140, 1176-77.) This responsibility includes supervising 100-150 employees in the field, including all of the field managers and all of their intermediate supervisors. (J.A. 1033, 1140, 1290.) Hugh also makes decisions regarding specific business operations, solicits new customers, hires and fires employees, and assists Michelle with employee performance reviews. (J.A. 562, 1070-71, 1137-38, 1177, 1202.) Although Michelle can overrule Hugh's decisions, Hugh is generally responsible for what happens in the field. (J.A. 1177-78.) Hugh and his wife share an office and they "collaborate" on major decisions. (J.A. 1069-70.) The human resources director perceived that "they d[o] things together." (J.A. 905.) The instant appeal stems from employee Martha Townsend's claim that Hugh sexually harassed her. (J.A. 14, 20.) Benjamin Enterprises sought summary judgment, arguing that even if Hugh did harass Townsend, the company has an affirmative defense to liability. (R.18, Memo at 2-3 (citing Faragher v. City of Boca Raton, 524 U.S. 775 (1998)).). According to Benjamin Enterprises, it acted reasonably to prevent and promptly correct any harassment, and Townsend unreasonably failed to take advantage of preventive or corrective opportunities. (Id.) Townsend cross-moved for partial summary judgment, arguing that Benjamin Enterprises was not entitled to invoke the Faragher affirmative defense because Hugh is the company's alter ego. (R.20, Memo at 8.) B. District Court Decision The district court observed that this Court has not addressed whether an employer may rely on the Faragher affirmative defense when the alleged harasser is the company's alter ego. (J.A. 547, 549.) The court noted, however, that the Fifth, Seventh, and Ninth Circuits have barred the affirmative defense in such a situation. (Id. (citing Ackel v. Nat'l Comm's, Inc., 339 F.3d 376 (5th Cir. 2003); Johnson v. West, 218 F.3d 725 (7th Cir. 2000); Passantino v. Johnson & Johnson Consumer Prods., Inc., 212 F.3d 493 (9th Cir. 2000)).) Based on its own analysis of Faragher, the district court concluded that the Fifth, Seventh, and Ninth Circuits are correct. (J.A. 549-50.) As the district court noted (J.A. 549), before announcing the new affirmative defense, the Faragher Court discussed the development of Title VII case law. The Court observed that the standard for determining employer liability had not arisen previously because, in the earlier cases, liability was clear. In Harris v. Forklift Systems, Inc., 510 U.S. 17 (1993), for instance, "the employer was held liable because 'the individual charged with creating the abusive atmosphere was the president of the corporate employer, who was indisputably within that class of an employer organization's officials who may be treated as the organization's proxy.'" Faragher, 524 U.S. at 789. The district court further noted the Supreme Court's contemporaneous emphasis that "Title VII should be interpreted based on agency principles." (J.A. 550 (citing Burlington Industries, Inc. v. Ellerth, 524 U.S. 742, 754 (1998) (companion case to Faragher)).) Based on this language in the Supreme Court opinions, the district court concluded that when a corporate employer's alter ego engages in sexual harassment, the company is strictly liable. (J.A. 550.) The district court held that it could not resolve on summary judgment "whether Hugh Benjamin held a sufficiently high position in the corporation's hierarchy such that the Faragher-Ellerth defense is unavailable." (Id.) The court then denied the cross-motions for summary judgment as well as Benjamin Enterprises's motion for reconsideration. (Id.; J.A. 558.) The case proceeded to trial. Prior to deliberations, the district court instructed the jury: "[A]n employer is strictly liable for hostile work environment sexual harassment by a supervisor when the supervisor's role is more than a mere supervisor and is actually identical to that of the employer. In other words, where an employee serves in a supervisory position and exercises significant control over an employee's hiring, firing, or conditions of employment, that individual operates as the alter ego of the employer, and the employer is strictly liable for any unlawful employment practices of the individual without regard to whether the employer knew of the individual's conduct." (J.A. 1355-56.) The court also instructed the jury: "[I]f you determine from all of the circumstances that Hugh Benjamin's role in the corporation was not sufficiently elevated within the corporate hierarchy to be considered the employer's alter ego, then the employer's liability is not automatic and you must make additional findings . . . ." (J.A. 1356.) The jury found in favor of Townsend. (J.A. 1379.) Where the verdict form asked whether Hugh was employed in a position sufficiently elevated within the corporation to be viewed as the employer's alter ego, the foreperson indicated "Yes." (Id.) Based on this finding, the jury held Benjamin Enterprises automatically liable for Hugh's sexual harassment. (J.A. 1379-80.) Benjamin Enterprises moved to set aside the jury's verdict or, in the alternative, for a new trial. (R.51, Motion.) The district court denied this motion. (J.A. 1576.) It first affirmed its earlier holding that the Faragher affirmative defense is unavailable where the harasser is the employer's alter ego. (J.A. 1579.) It then held that "the evidence presented at trial fully supports the jury's application of the proxy doctrine." (Id.) Reciting evidence from Hugh's testimony, the court concluded, "no reasonable jury could have found that Hugh was not employed in a position sufficiently elevated within the corporate hierarchy for his actions to be imputed automatically to the employer." (J.A. 1583.) The district court rejected Benjamin Enterprise's assertion that the jury instructions had authorized strict liability based upon a finding that Hugh was an ordinary supervisor. (Id.) The court quoted the jury instructions and held that they were correct. (Id.) In any event, the court added, any error would be harmless because the evidence at trial "clearly established" that Hugh was the company's alter ego. (Id.) SUMMARY OF ARGUMENT The district court correctly ruled that this Court's long-standing alter ego doctrine remains intact. The Supreme Court has expressed its belief in the doctrine's "continued vitality," and every court of appeals to consider the issue has agreed. The affirmative defense that is now available to employers faced with liability for harassment by low-level supervisors does not apply when a harasser is so highly placed within a company that he is the company's alter ego. The court properly instructed the jury on the alter ego doctrine, and the jury reasonably concluded from the evidence that Hugh Benjamin is an alter ego of Benjamin Enterprises. The imposition of strict liability on Benjamin Enterprises for Hugh's harassment of a subordinate should be affirmed. ARGUMENT A. The district court correctly held that an employer is strictly liable for sexual harassment when the harasser is high enough in the corporate hierarchy to be the company's alter ego. The district court correctly held that an employer may not invoke the Faragher affirmative defense when the alleged harasser is the employer's alter ego. The Supreme Court said as much in Faragher, where it matter-of- factly noted that the president of a corporation is "indisputably within that class of an employer organization's officials who may be treated as the organization's proxy." 524 U.S. at 798. The Faragher Court said it was "[not] exceptional" that the employer was held liable in an early case involving sexual harassment by a corporation's president, and noted, "the soundness of the result[ ] . . . and [its] continuing vitality . . . was confirmed by this Court's only discussion to date of standards of employer liability, in Meritor [Savings Bank, FSB v. Vinson, 477 U.S. 57 (1986)]." Faragher, 524 U.S. at 789, 791. The Court then announced: "Meritor's statement of the law is the foundation on which we build today." Id. at 792. The Supreme Court again affirmed the continued vitality of the alter ego doctrine in Kolstad v. American Dental Association, 527 U.S. 526 (1999). There, the Court said that an employer might have to pay punitive damages for the actions of the acting head of its Washington office if the plaintiff could show that he was serving in a "managerial capacity." The Court made a point, however, of noting that the interim executive director - whose actions could also subject the employer to punitive damages -- was serving in the association's "highest position." Id. at 546. This fact would not have been relevant if the Supreme Court believed that it had overruled the alter ego doctrine in Faragher. Prior to Faragher, the alter ego doctrine applied in this Circuit. In Torres v. Pisano, 116 F.3d 625 (2d Cir. 1997), this Court said that a supervisor may hold a sufficiently high position "in the management hierarchy of the company for his actions to be imputed automatically to the employer." Id. at 634-35 & n.11 (cited with approval in Faragher, 524 U.S. at 728). This Court earlier said much the same thing in Kotcher v. Rosa & Sullivan Appliance Center, Inc., 957 F.2d 59 (2d Cir. 1992), where it observed that "at some point . . . the actions of a supervisor at a sufficiently high level in the hierarchy would necessarily be imputed to the company." Id. at 64. Post-Faragher, the Fifth, Seventh, Ninth, Tenth, and Eleventh Circuits have all continued to impose strict liability on an employer when a harasser is sufficiently high in the corporate hierarchy. See Ackel v. Nat'l Comm's, Inc., 339 F.3d 376, 382 (5th Cir. 2003) (reading Faragher and Ellerth to permit strict liability when "the harassing employee is a proxy for the employer"); Mallinson-Montague v. Pocrnick, 224 F.3d 1224, 1232 (10th Cir. 2000) ("an alter ego instruction is appropriate in those situations 'where the agent's high rank in the company makes him or her the employer's alter ego'"); Johnson v. West, 218 F.3d 725, 730 (7th Cir. 2000) ("Faragher suggests that the following officials may be treated as an employer's proxy: a president, owner, proprietor, partner, corporate officer, or supervisor 'holding a sufficiently high position in the management hierarchy of the company for his actions to be imputed automatically to the employer'"); Passantino v. Johnson & Johnson Consumer Prods., Inc., 212 F.3d 493, 517 (9th Cir. 2000) ("the [Faragher] defense remains inapplicable as a defense to punitive damages when the corporate officers who engage in illegal conduct are sufficiently senior to be considered proxies for the company"); Dees v. Johnson Controls World Servs., Inc., 168 F.3d 417, 421-22 (11th Cir. 1999) (Faragher permits strict liability when "the supervisor holds such a high position in the company that he could be considered the company's 'alter ego'"). The holdings in these cases are consistent with the EEOC's Enforcement Guidance, which has recognized since 1999 that Faragher did not change the law on alter ego liability. See EEOC Enforcement Guidance: Vicarious Employer Liability for Unlawful Harassment by Supervisors, 1999 WL 33305874, at *17-18 (June 18, 1999). The Guidance instructs that "an employer is liable for unlawful harassment whenever the harasser is of a sufficiently high rank to fall 'within that class . . . who may be treated as the organization's proxy.'" Id. § VI(A), at *18 (quoting Faragher, 118 S. Ct. at 2284). The Guidance further explains that "[i]n such circumstances, the official's unlawful harassment is imputed automatically to the employer." Id. Imposition of strict liability based on the actions of a high-ranking official is a logical corollary to Faragher's affirmative defense. By allowing the defense only where a company has reasonably tried to prevent and promptly correct harassment, the Supreme Court sought to maximize employers' efforts at prevention. Faragher, 524 U.S. at 805-07. Employers have failed at this goal when someone at the top of the corporate hierarchy engages in harassment. After all, as this Court has long recognized, "since the acts of a corporation are acts of human beings, to say that the 'corporation' has committed some wrong . . . simply means that someone at the decision-making level in the corporate hierarchy has committed the wrong." Torres, 116 F.3d at 634 n.11 (quoting Hunter v. Allis-Chalmers Corp., 797 F.2d 1417, 1422 (7th Cir. 1986)). While it is undoubtedly true that Michelle Benjamin would not knowingly have permitted her husband to engage in sexual harassment, Benjamin Enterprises makes too much of this point. (Benj. Ent. Br. at 35.) The EEOC presumes that no rational employer would knowingly tolerate sexual harassment. Depending on the circumstances, however, an employer that would not actually endorse harassment may nonetheless be liable when it occurs. Not wanting harassment to occur is not the same as acting reasonably to prevent it. See Faragher, 524 U.S. at 806 (recognizing employer's "affirmative obligation to prevent violation"). The fact that Hugh Benjamin's boss is also his wife should have no bearing on their Title VII obligations, because all employers, whether married to the harasser or not, presumably want to avoid Title VII liability. Curiously, Benjamin Enterprises concedes that an employer will always be liable when a high-ranking officer engages in sexual harassment. "If a company's highest-level executives show disregard for the laws against harassment," it says, "then the employer will not be able to prove the first prong of the Faragher/Ellerth defense: that it 'exercised reasonable care to prevent and correct promptly any sexually harassing behavior.'" (Benj. Ent. Br. at 30.) This concession renders Benjamin Enterprises's objection to the alter ego doctrine hard to understand. Somewhere near the top of the corporate hierarchy, even Benjamin Enterprises sees that a high-ranking official merges with the company. The relevant issue in any given case is whether the harasser in question falls within that narrow category. B. The evidence supports the jury's finding that Hugh Benjamin, part-owner and sole vice president of a family business, was the company's alter ego. The district court correctly upheld the jury's finding that Hugh is a proxy for Benjamin Enterprises. There was enough evidence in this case from which the jury could reasonably find that Hugh was sufficiently high in the corporation for his acts necessarily to also be those of Benjamin Enterprises. The jury learned that Benjamin Enterprises is a family owned business. (J.A. 1035.) While Hugh's wife, Michelle, is the president and a shareholder, Hugh is the vice president and is also a shareholder. (J.A. 1035, 1064, 1066.) Michelle and Hugh share an office and normally make decisions collaboratively. (J.A. 1069-70.) They have divided responsibilities so that Hugh is in charge of operations while Michelle is primarily an administrator. (J.A. 1036.) Hugh oversees everything involving clients. (J.A. 1038, 1176-77.) He supervises 100-150 employees in the field, including all of the field managers and all of their intermediate supervisors. (J.A. 1033, 1140, 1290.) He has the authority to make decisions for the company without Michelle's active involvement. (J.A. 1070-71.) Hugh's independence and authority, as well as his partial ownership of the company, distinguish his situation from that of other individuals who have not been considered proxies for their employers. Unlike in Torres and Kotcher, where the highest ranking supervisor at a remote location was not sufficiently high in the company because he was not also a member of upper management, Hugh was one of only two upper management officials in a company of 100-150 employees. Compare J.A. 1030-31, 1037-38, 1069, 1140 with Torres, 116 F.3d at 634; Kotcher, 957 F.2d at 64. Other employees believed that he and Michelle "did things together" (J.A. 912), and Hugh even described himself as "second in command." (J.A. 1030-31.) The district court is correct that no reasonable jury could have found Hugh not to be the company's alter ego. (J.A. 1583.) The court likely could have made this same ruling at summary judgment as a matter of law. Cf. Mallinson-Montague, 224 F.3d at 1232 n.7 (not deciding "whether, even in light of undisputed evidence, the question of whether a high-ranking manager is his or her employer's alter ego is a question of fact for the jury or of law for the court"). In an abundance of caution, the district court sent the question to the jury. (J.A. 550.) Whether the jury's finding is reviewed under the clearly erroneous standard or whether the district court's subsequent confirmation of the finding is reviewed de novo, the outcome should be the same. In light of the undisputed evidence, Hugh was, in fact, Benjamin Enterprises's alter ego. Accordingly, the imposition of vicarious liability should be affirmed. CONCLUSION The district court correctly recognized that Faragher did not overrule this Court's long-held alter ego doctrine. The jury instructions properly explained that an employer is not strictly liable for sexual harassment by an ordinary supervisor, but is strictly liable when harassment is carried out by someone sufficiently high in the corporate hierarchy to be considered the employer's alter ego. After hearing the evidence, the jury concluded that Hugh Benjamin is high enough in the corporate hierarchy to be an alter ego of Benjamin Enterprises. The evidence supports this finding of fact. For the foregoing reasons, the EEOC respectfully asks this Court to affirm the jury's imposition of strict liability. Respectfully submitted, P. DAVID LOPEZ General Counsel VINCENT J. BLACKWOOD Acting Associate General Counsel CAROLYN L. WHEELER Assistant General Counsel s/ Gail S. Coleman ______________________________ GAIL S. COLEMAN Attorney U.S. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION Office of General Counsel 131 M Street, NE, Room 5SW24L Washington, DC 20507 202-663-4055 CERTIFICATE OF COMPLIANCE Pursuant to Rule 32(a)(7)(C) of the Federal Rules of Appellate Procedure, and Rule 32(a) of the Second Circuit Rules, I certify that this brief was prepared with Microsoft Office Word 2003 and that it uses Times New Roman type, size 14 point. I further certify that this brief contains 3,142 words, from the Statement of Interest through the Conclusion and signature block, as determined by the Microsoft Office Word 2003 word- count function. s/ Gail S. Coleman ____________________________ GAIL S. COLEMAN Attorney U.S. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION Office of General Counsel 131 M Street, NE, Room 5SW24L Washington, DC 20507 (202) 663-4055 gail.coleman@eeoc.gov ANTI-VIRUS CERTIFICATION FORM (Second Circuit Local Rule 32(a)(1)(E)) CASE NAME: Townsend v. Benjamin Enterprises DOCKET NUMBER: 09-4509-cv (XAP) I, Gail S. Coleman, certify that I have scanned for viruses the PDF version of the Amicus Brief that was submitted in this case as an email attachment to briefs@ca2.uscourts.gov and that no viruses were detected. NAME AND VERSION OF ANTI-VIRUS DETECTOR USED: Trend Micro OfficeScan Client for Windows, Version 10.5. s/ Gail S. Coleman _____________________________ GAIL S. COLEMAN Attorney U.S. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION Office of General Counsel 131 M Street, NE, Room 5SW24L Washington, DC 20507 (202) 663-4055 gail.coleman@eeoc.gov CERTIFICATE OF SERVICEI I, Gail S. Coleman, hereby certify that I filed one original and six copies of the foregoing amicus brief with the Court by first-class mail, postage pre-paid, on this 27th day of May, 2011. I also certify that I submitted the amicus brief in PDF format as an e-mail attachment to civilcases@ca2.uscourts.gov, and that I e-mailed a copy of the PDF version to all parties. I further certify that I served two paper copies of the foregoing amicus brief this 27th day of May, 2011, by first-class mail, postage pre-paid, to the following counsel of record: Stephen Bergstein Richard Gregg Kass Bergstein & Ulrich, LLP Bond, Schoeneck & King PLLC 15 Railroad Ave. 330 Madison Ave. Chester, NY 10918 New York, NY 10017 s/ Gail S. Coleman _________________________ GAIL S. COLEMAN Attorney U.S. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION Office of General Counsel 131 M Street, NE, Room 5SW24L Washington, DC 20507