Equal Emp't Opportunity Comm'n v. Roark-Whitten Hospitality 2, LP

• Decision Date: 10 March 2022
• Docket Number: No. 20-2023,20-2023
• Citation: 28 F.4th 136
• Parties: EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Plaintiff - Appellant, v. ROARK-WHITTEN HOSPITALITY 2, LP, d/b/a Whitten Inn and Jai Hanuman, LLC, d/b/a Whitten Inn Taos and/or El Camino Lodge; SGI, LLC, d/b/a El Camino Lodge, Defendants - Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

28 F.4th 136

EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Plaintiff - Appellant,

v.ROARK-WHITTEN HOSPITALITY 2, LP, d/b/a Whitten Inn and Jai Hanuman, LLC, d/b/a Whitten Inn Taos and/or El Camino Lodge; SGI, LLC, d/b/a El Camino Lodge, Defendants - Appellees.

No. 20-2023

United States Court of Appeals, Tenth Circuit.

FILED March 10, 2022

Anne N. Occhialino, Senior Appellate Attorney (Sharon F. Gustafson, General Counsel, Jennifer S. Goldstein, Associate General Counsel, and Elizabeth E. Theran, Assistant General Counsel, with her on the briefs), Equal Employment Opportunity Commission, Office of General Counsel, Washington, DC, appearing for Appellant.

Paul E. Frye (W. Gregory Kelly, with him on the brief), Frye & Kelly, P.C., Albuquerque, New Mexico, appearing for Appellee SGI, LLC.

Patrick J. Rogers, Patrick J. Rogers, LLC, Albuquerque, New Mexico, appearing for Appellees Roark-Whitten Hospitality, 2, LP, and Jai Hanuman, LLC.

Before MATHESON, BRISCOE, and EID, Circuit Judges.

BRISCOE, Circuit Judge.

Plaintiff Equal Employment Opportunity Commission (EEOC) filed this action under Title VII of the Civil Rights Act of 1964 and Title I of the Civil Rights Act of 1991 against defendant Roark-Whitten Hospitality 2 (RW2) seeking relief for what the EEOC alleged were unlawful employment practices by RW2 on the basis of race, color, national origin, and retaliation. Those unlawful employment practices allegedly occurred after RW2 purchased and began operating a hotel in Taos, New Mexico in 2009. The aggrieved employees were all employed at the hotel prior to RW2's purchase, and were all either terminated or constructively discharged at some point after the purchase. After the action was initiated, the EEOC filed amended complaints seeking to add as defendants two additional entities, Jai Hanuman, LLC (Jai), which purchased the hotel from RW2 in 2014, and SGI, LLC (SGI), which purchased the hotel from Jai in 2016.

The district court dismissed the EEOC's claims against SGI on the grounds that the EEOC failed to adequately allege a basis for successor liability against SGI. As for RW2 and Jai, the district court, acting pursuant to a motion for civil contempt filed by the EEOC, entered default judgment against them and then conducted a hearing on the issue of damages. After conducting that hearing, the district court dismissed the EEOC's claims against Jai on the grounds that the EEOC failed to adequately allege a basis for successor liability against Jai, and it ordered RW2 to pay compensatory damages to the EEOC in the total amount of $35,000.

The EEOC now appeals, raising two general issues. First, the EEOC argues that the district court erred in dismissing its claims against defendants SGI and Jai. Second, the EEOC argues that the district court erred in awarding only $35,000 in compensatory damages for the eleven aggrieved individuals. Exercising jurisdiction pursuant to 28 U.S.C. § 1291, we reverse the district court's dismissal of the EEOC's claims against defendant SGI, affirm the district court's dismissal of the EEOC's claims against defendant Jai, reverse the district court's damage award against defendant RW2, and remand for further proceedings.

I

In July 2009, RW2 acquired the Paragon Hotel in Taos, New Mexico, and renamed it the Whitten Inn.¹ Although it is unclear from the record precisely what role Larry Whitten (Whitten) played in RW2, it appears to be undisputed that he was the effective owner of the Whitten Inn. Whitten's business model was to purchase distressed hotels and then sell them for a profit.

At the time Whitten acquired the hotel in Taos, the hotel had several longtime Hispanic employees. This included: Kathy Archuleta, the general manager of the hotel, who had worked at the hotel for eighteen years and had been general manager for ten years; Dale Quintana, who served as the hotel's maintenance manager and had worked at the hotel for approximately twenty-one years; and Jennie Valdez, who was the assistant housekeeping supervisor and had worked at the hotel for approximately twenty-four years.

On or about July 31, 2009, shortly after acquiring the hotel in Taos, Whitten met with the employees of the hotel. Whitten observed that nearly all of the employees were, in his words, "Spanish." Aplt. App., Vol. 1 at 26. Whitten informed the employees that many, if not most, of them would not make it as Whitten employees. Whitten also announced a new rule that employees of the hotel would not be allowed to speak Spanish in his presence. Whitten explained that the reason for the rule was because he did not understand Spanish.

Whitten set unreasonably short time periods for Valdez and the other Hispanic housekeepers to complete their duties. In contrast, the one Caucasian housekeeper who worked at the hotel was not expected to meet the same time standards that Whitten imposed on the Hispanic housekeepers.

Within a month after acquiring the hotel, Whitten fired or demoted three Hispanic employees who worked as front desk clerks. Specifically, in early August 2009, Whitten told employee Victor Cardenas that he could no longer work the front desk because of his accent, and Whitten directed Cardenas to instead work in maintenance and housekeeping. Also in early August 2009, Whitten told Marcos Jeantette, a light-skinned Hispanic male, that he needed to use the name "Mark" when he was at work. Jeantette refused to do so. On August 8, 2009, Whitten asked Jeantette if he was a "white boy." Id . at 29. Jeantette explained that his father was Hispanic. The next day, August 9, 2009, Whitten fired Jeantette. Lastly, Whitten called Michelle Martinez, another of the Hispanic front desk clerks, "Buckwheat," in reference to her dark skin. Id . On August 16, 2009, Whitten fired Martinez.

Whitten also fired another Hispanic employee, Martín Gutierrez, on August 16, 2009. Gutierrez worked at the hotel as a night auditor. Whitten told Gutierrez that when he was at work he should pronounce his name as "Martin," without the Spanish accent on the last syllable. Whitten also told Gutierrez that he should not speak with an accent at work. Gutierrez objected to Whitten's no-Spanish policy. Whitten responded by terminating Gutierrez's employment.

On August 17, 2009, Kathy Archuleta, Dale Quintana, Jennie Valdez, and Victor Cardenas called a meeting with Whitten to object to what they perceived as discriminatory policies and treatment. At the conclusion of the meeting, Whitten fired Archuleta, Quintana, Valdez, and Cardenas. Although Whitten advised Valdez that she could re-apply, she did not do so. Following the meeting, Whitten rescinded the termination of Cardenas and allowed him to continue working in the maintenance/housekeeping department. Cardenas subsequently resigned his employment on September 14, 2009.

On August 30, 2009, Rebecca del Palacio, who had been employed by the hotel for over eight years and who worked as an executive housekeeper, was informed that her wages would be reduced. Del Palacio resigned in response.

By September 14, 2009, all but one of the Hispanic employees who were present at the initial meeting on July 31, 2009, had been fired or had resigned.

Aside from terminating the employment of multiple Hispanic employees, Whitten treated Hispanic hotel employees differently from Caucasian hotel employees. For example, shortly after acquiring the Whitten Hotel, Whitten required all Hispanic employees at the Taos hotel to park on the far perimeter of the front parking lot, but allowed the one Caucasian housekeeper to park closer to the hotel. Whitten allowed Caucasian employees to use the hotel pool, but minority employees were not allowed to do so. Whitten also allowed Caucasian employees to bring their children to work, but did not allow Hispanic employees to do so.

Whitten made offensive racial and ethnic comments in the workplace. Those included:

• Referring to Hispanic housekeepers who could not speak English as "wetbacks";

• Referring to African Americans, including a hotel maintenance employee, as "niggers";

• Saying, after firing several Hispanic housekeepers, that he was "glad to get rid of all the Mexicans";

• Calling a Hispanic employee "Paco" or "Sancho" rather than the employee's real name;

• Calling Michelle Martinez "Buckwheat."

Id . at 31.

Whitten also engaged in other acts that were perceived by his employees to be racist in nature. For example, he paid several Hispanic employees their final wages in the form of rolled pennies. On at least one occasion, Whitten discarded applications based solely on the applicant's race, color, or ethnicity. And on at least one occasion, Whitten told hotel employees not to rent rooms to Black and Hispanic customers.

In May 2014, defendant Jai Hanuman, LLC (Jai) purchased the Whitten Inn from RW2 and renamed it the El Camino Lodge. Approximately two years later, on September 9, 2016, defendant SGI, LLC (SGI) purchased the hotel from Jai. Id . at 121 (purchase agreement).

II

Eight former employees of the hotel filed charges of discrimination with the EEOC alleging Title VII violations. By letter dated July 11, 2013, the EEOC sent notice of its reasonable-cause determinations to RW2 and other related entities.

On September 30, 2014, the EEOC filed a complaint against RW2 in federal district court on behalf of several individuals alleging discrimination based on race, color, and national origin, in violation of Title VII of the Civil Rights Act of 1964, 42 U.S.C. §§ 2000e et seq . More specifically, the complaint alleged that RW2 subjected the aggrieved individuals to a hostile work environment and disparate treatment, and then fired or constructively discharged them after they protested the discriminatory treatment.

Not long after it filed its complaint, the EEOC learned that RW2 had sold the hotel to another entity. Consequently, on December 22, 2014, the EEOC filed an amended complaint adding as a defendant "[t]he unknown owner and/or XYZ Company(s)/Corportaions [sic]." ECF No. 4 at 2....