EEOC v. IN Bell Telephone Co.

• Decision Date: 27 June 2001
• Docket Number: No. 99-1155,99-1155
• Citation: 256 F.3d 516
• Parties: (7th Cir. 2001) Equal Employment Opportunity Commission, Plaintiff-Appellee, v. Indiana Bell Telephone Company, Incorporated, doing business as Ameritech Indiana, and Ameritech Corporation, Defendants-Appellants
• Court: U.S. Court of Appeals — Seventh Circuit

Page 516

256 F.3d 516 (7th Cir. 2001)

Equal Employment Opportunity Commission, Plaintiff-Appellee, v. Indiana Bell Telephone Company, Incorporated, doing business as Ameritech Indiana, and Ameritech Corporation, Defendants-Appellants.

No. 99-1155

In the United States Court of Appeals For the Seventh Circuit

Argued November 29, 2000

Decided June 27, 2001

Appeal from the United States District Court for the Southern District of Indiana, Indianapolis Division. No. IP 95-217-C-M/S--Larry J. McKinney, Chief Judge. [Copyrighted Material Omitted]

[Copyrighted Material Omitted] Before Flaum, Chief Judge, and Posner, Easterbrook, Manion, Kanne, Rovner, Diane P. Wood, Evans, and Williams, Circuit Judges.^*

Easterbrook, Circuit Judge.^**

We reheard this case en banc to address two questions on which we solicited supplemental briefs from the parties:

whether, as a matter of law, evidence regarding arbitration and a company's collective bargaining agreement is inadmissible in a Title VII suit to show: 1) that an employer's response to sexual harassment was reasonable for the purpose of determining employer liability; and 2) that the employer did not act with the state of mind necessary for the imposition of punitive damages.

The court now holds that this evidence is not relevant to liability and therefore is inadmissible under Fed. R. Evid. 402 with respect to that subject, but that the evidence is relevant to the propriety and amount of punitive damages, see Fed. R. Evid. 401, and therefore is admissible on that issue unless its probative value is "substantially outweighed" by other factors. Fed. R. Evid. 403. Because the district judge thought the evidence irrelevant across the board, we remand for an appropriate exercise of discretion under Rule 403--and, if necessary, a new trial limited to punitive damages.

I

Gary Amos worked for many years in Ameritech's coin center and its small business unit. Most of the other employees in both places were women, and Amos behaved offensively among them. As long ago as 1975 Barbara Huckeba complained to her supervisor that Amos had exposed himself to her on three occasions. Ameritech's response was to fire Huckeba, "explaining" that Huckeba was more likely to find satisfactory employment elsewhere than was Amos. Two other co-workers also complained in 1975 about sexually offensive conduct; unlike Huckeba, they kept their jobs. So did Amos, who was not disciplined. The record establishes other misconduct in 1988, 1989, 1990, 1991, 1992, 1993, and 1994, including Amos's telling female co-workers that he was in love with them, flashing them, sending notes with sexual messages or propositions, grabbing them and rubbing their hair or buttocks (some times with his hands, sometimes with his erect penis), and allowing himself to be seen masturbating at his desk.

In 1989 a flashing incident led to a warning but no other discipline. In 1990 six women complained; five of the six informed Ameritech that Amos had pressed his erect penis against them. Amos was suspended for two weeks by a supervisor who neglected to read Amos's personnel file and thus was unaware of his history of similar conduct. Complaints lodged by women in 1991 and 1992 did not lead to discipline. Although supervisors told Amos to desist, the misconduct continued. But on December 18, 1992, Ameritech's equal employment opportunity coordinator recommended that Amos be fired. That recommendation had to be approved by Ameritech's labor relations manager, who was on vacation. By the time the labor relations manager returned and reviewed the file, more than 30 days had elapsed since Amos's most recent documented misconduct--and the collective bargaining agreement between Ameritech and its union required discipline to occur within 30 days. So once again Ameritech did nothing concrete, though it did tell Amos that any further misconduct could result in suspension or discharge. "Further misconduct" was not long in coming; fresh complaints in February 1993 led to another investigation, at the end of which Ameritech did--nothing, yet again. All through 1993 Amos directed a stream of sexually charged comments and notes to his female co-workers, brushed against them deliberately (sometimes with an erection), showed them pictures of partially undressed women, commented on their clothing, and so on. Their complaints within Ameritech's hierarchy were ineffectual. Another public-masturbation incident in March 1994 at last produced Amos's removal.

Amos's co-workers did not turn outside the company until April 1993, when Lori Everts filed with the eeoc a charge of discrimination. The eeoc was sufficiently disturbed by Ameritech's pattern of neglect that it has litigated as the champion of Everts and the other women. Conduct more than 300 days before that charge cannot be reached under Title VII of the Civil Rights Act of 1964, though earlier events may be considered to place the more recent ones in context. Another significant date is November 21, 1991, when the Civil Rights Act of 1991 took effect. The 1991 Act authorizes compensatory and punitive damages for sex discrimination. 42 U.S.C. sec.1981a. Because it is not retroactive, see Landgraf v. USI Film Products, 511 U.S. 244 (1994), only Ameritech's conduct (and injuries female workers sustained) after that date can lead to compensatory or punitive damages.

Before trial Ameritech informed the district judge that it planned to defend in part on the theory that the collective bargaining agreement tied its hands and thus excused its failure to discharge Amos until 1994. Ameritech wanted to argue not only that the delay at the end of 1992 foreclosed discipline but also that, if it had fired Amos any earlier than March 1994, an arbitrator might well have concluded that Ameritech lacked "just cause" and reinstated Amos. According to Ameritech, one arbitrator recently had done just that with another employee discharged for making women's working lives miserable, and it feared a repetition. The judge, however, issued a pretrial order excluding this proposed theory of defense and its associated evidence.

The jury concluded that, by tolerating Amos's misconduct, Ameritech had engaged in sex discrimination, in violation of Title VII. It awarded three of Amos's co-workers a total of $15,000 in compensatory damages and $1,050,000 in punitive damages. The district judge reduced the punitive damages to a total of $635,000, and the eeoc has not challenged this reduction on appeal. A panel of this court unanimously concluded that Ameritech's supine posture despite ample knowledge made it answerable for Amos's misconduct. 214 F.3d 813, 820-22 (7th Cir. 2000). See also Burlington Industries, Inc. v. Ellerth, 524 U.S. 742, 759 (1998) (explaining the circumstances under which an employer's feckless responses to intentional misconduct by an employee means that the misconduct is attributed to the firm). The panel also held that Ameritech's decision not to protect its female workers from Amos's abusive treatment adversely affected their conditions of employment on account of sex, because Amos's misconduct was sufficiently severe and frequent, indeed that the evidence supported punitive damages as well. Ibid. See also Clark County School District v. Breeden, 121 S. Ct. 1508, 1509-10 (2001); Oncale v. Sundowner Offshore Services, Inc., 523 U.S. 75, 78, 81-82 (1998); Harris v. Forklift Systems, Inc., 510 U.S. 17, 21 (1993); Meritor Savings Bank, FSB v. Vinson, 477 U.S. 57, 72 (1986). But a majority of the panel held that the district judge erred in foreclosing Ameritech's proposed defense, 214 F.3d at 822-25, and it remanded for a new trial. We have reheard the case en banc to consider that subject. The remainder of the panel's decision, vacated on the grant of rehearing en banc, is now reinstated and stands as the opinion of the full court on all issues other than those discussed below.

II

Ameritech contends that the 30-day, just-cause, and arbitration provisions of the collective bargaining agreement demonstrate that its actions were reasonable, and thus that Amos's misconduct should not be attributed to the employer. Its argument has two principal strands: first, Amos's reinstatement (if an arbitrator should conclude that he should not have been fired) could be costly to the company in terms of back pay; second, reinstatement could be costly to Amos's co-workers because it would make Amos that much harder to get rid of in the future. The second line of argument also implies an adverse effect for women who worked elsewhere in the company. An arbitrator's award reinstating Amos might impede efforts to remove harassers throughout the firm, and might correspondingly embolden these men for as long as the current (or a similarly worded) collective bargaining agreement lasts. These are serious concerns, and given the posture of the case we must assume that Ameritech could establish them to a jury's satisfaction. Nonetheless, neither of these reasons is sufficient to defeat liability under Title VII. Three principal considerations lead to this conclusion.

A

Ameritech supposes that both the collective bargaining agreement and the system of arbitration were imposed on it by forces outside its control, and that it therefore cannot be liable for what arbitrators do (or for what Ameritech itself does in anticipation of what arbitrators may do). Not so.

A collective bargaining agreement is just an employment contract, with organized rather than individual workers. No collective bargaining agreement is imposed on an employer; it is an agreement, and the firm has consented to every part of the arrangement. Employers cannot by their consent (in or out of a collective bargaining agreement) avoid duties under federal law. This would be clear enough with an individual contract of employment. Suppose Ameritech hired a new manager under a contract prohibiting the manager's discharge for a term of years unless the...