Frey v. Hotel Coleman, 091118 FED7, 17-2267

Docket Nº:17-2267
Party Name:BOGUSTAWA FREY, Plaintiff-Appellant, v. Hotel Coleman, et al., Defendants-Appellees.
Judge Panel:Before Wood, Chief Judge, and Bauer and Rovner, Circuit Judges.
Case Date:September 11, 2018
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit

BOGUSTAWA FREY, Plaintiff-Appellant,


Hotel Coleman, et al., Defendants-Appellees.

No. 17-2267

United States Court of Appeals, Seventh Circuit

September 11, 2018

Argued May 23, 2018

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. l:12-cv-06284 - John J. Tharp, Jr., Judge.

Before Wood, Chief Judge, and Bauer and Rovner, Circuit Judges.


Before we can attend to any other issues in an employment discrimination case, we must first determine who, in fact, employed the plaintiff. This question, which seems as though it ought to be simple on its face, continues to confound litigants and courts. This case presents issues regarding the employer/employee relationship that arise in the not-so-uncommon scenario where one employer hires another entity to manage the day-to-day operations of an enterprise. In such a case, one entity provides the paycheck but another entity does all of the other tasks one ordinarily associates with an employer-hiring, firing, training, supervising, evaluating, assigning, et cetera.


In this case, Hotel Coleman, Inc. owned a Holiday Inn Express franchise in Algonquin, Illinois (the Hotel). Hotel Cole-man hired Vaughn Hospitality, Inc. to run the daily operations of the Hotel. According to the terms of the hotel management agreement between the two entities, Vaughn Hospitality was responsible for hiring, supervising, directing, and discharging employees, and determining the compensation, benefits and terms and conditions of their employment. Hotel Coleman agreed that it would "not give direct instructions to any employee of [Hotel Coleman] or to [Vaughn Hospitality] employees whose instructions may interfere, undermine, conflict with or affect in any manner the authority and chain of command as established by [Vaughn Hospitality]." R. 92-2 at 5 (Page ID 1533). Frey and the other staff members who worked at the Hotel were on Hotel Coleman's payroll, and the management agreement stated that all personnel "are in the employ of" the Hotel. R. 92-2 at 2 (Page ID 1529). Michael Vaughn (Vaughn) and his wife owned Vaughn Hospitality. Michael Vaughn served as its president and was the only person on its payroll with the exception of a bookkeeper who worked for eight weeks in 2008 and sixteen weeks in 2009. Other than the hotel management agreement between the two entities, there was no affiliation between Vaughn Hospitality and Hotel Coleman. They were distinct and unrelated legal entities that maintained separate financial records, filed separate tax returns, and did not share bank accounts or common ownership. Frey v. Intercontinental Hotels Grp. Res., Inc., No. 12 CV 06284, 2015 WL 5921580, at *2 (N.D. 111. Oct. 9, 2015); R. 97 at 3 (Page ID 1987) (hereinafter Frey, (employer decision)); See also R. 71 at ¶9 (Page ID 869).

Vaughn hired the plaintiff, Bogustawa Frey, in August 2008, to work in the Hotel's guest services department. Frey alleged that, shortly after Vaughn hired her, he began to subject her to unwelcome and inappropriate sexual comments and advances. Because this is an appeal of a ruling on summary judgment that Vaughn Hospitality was not Frey's employer, and a jury verdict for Frey on a retaliation claim, we report Frey's allegations and the remaining facts in the light most favorable to Frey and in a manner that is consistent with the jury verdict. Love v. JP Cullen & Sons, Inc., 779 F.3d 697, 701 (7th Cir. 2015) (facts on summary judgment must be taken in the light most favorable to the non-moving party); Tart v. III. Power Co., 366 F.3d 461, 464 (7th Cir. 2004) ("Once a jury has spoken, we are obliged to construe the facts in favor of the parties who prevailed under the verdict.")

According to Frey, Vaughn subjected her to comments such as the following: he could have any woman he wanted; she should put a penny in a jar every time she had sex with her husband; she had a sexy body. He also asked her if he could touch her stomach, invited her to join him in a hotel room, and told her he wanted to have phone sex with her. Frey v. Hotel Coleman, No. 12 CV 06284, 2017 WL 2215013, at *1 (N.D. 111. May 18, 2017) (hereinafter Frey (damages decision)); R. 162 at 2 (Page ID 2515). Frey objected to the comments and complained to the housekeeping manager, but when that manager informed Vaughn, he laughed off the complaints and the behavior went unchecked.

After Frey informed Vaughn that she was pregnant (in June 2009), Vaughn reduced her hours on the schedule, rescinded a promise he had made to promote her to a sales manager position with a much higher salary, assigned her to work the night shift without paying her the extra amount normally associated with that position, failed to consider her for a front desk position which would have paid an additional $3 per hour, and asked her to perform duties that she complained were difficult for her due to her pregnancy. He also told her that her pregnancy would ruin her sexy body and that her sex life with her husband was over. Frey (damages decision), 2017 WL 2215013, at *l-2; R. 162 at 2-3 (Page ID 2515-16). During Frey's maternity leave, which began in March 2010, she filed a charge with the Equal Employment Opportunity Commission (EEOC) and the Illinois Department of Human Rights based on Vaughn's conduct. One week after she returned from maternity leave, Vaughn fired her for allegedly stealing another employee's cell phone. Frey filed a claim of retaliatory discharge with the EEOC and the Illinois Department of Human Rights against the Hotel, Holiday Inn Express, Vaughn Hospitality, Michael Vaughn and another Hotel employee.

Hotel Coleman sold the Hotel in August 2010, and the new owners did not retain Vaughn Hospitality to manage the Hotel. Two employees who worked in guest services or at the Hotel's front desk continued working for the Hotel, but both left within a year.

Frey filed a claim in the Circuit Court of Cook County pursuant to Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et. seq., and the Illinois Human Rights Act, 775 ILCS § 5/1-101 et. seq., alleging sexual harassment, hostile work environment, pregnancy discrimination, and retaliatory discharge against the Holiday Inn Express, Intercontinental Hotels Group Resources, Inc., Hotel Coleman, and Vaughn Hospitality. Intercontinental Hotels successfully removed the case to federal court, and then successfully moved to be dismissed from the case.

In the federal district court, Frey moved for summary judgment against Hotel Coleman as to all counts and Vaughn Hospitality moved for summary judgment asserting that it was not an employer as defined under Title VII and the Illinois Human Rights Act. The district court granted Frey's motion against Hotel Coleman in full.1 The court, accepting Vaughn Hospitality's argument that it was not an employer, granted it summary judgment with respect to Frey's sexual harassment and pregnancy discrimination claims and her retaliation claim under Title VII, but allowed Frey's state claim for retaliation to proceed. Under the Illinois Human Rights Act, a retaliation claim does not require an employer/employee relationship between the plaintiff and defendant. 775 ILCS § 5/6-101 (A).

The case then advanced to trial on Frey's claim under the Illinois Human Rights Act that Vaughn Hospitality had retaliated against her for filing a charge of discrimination. The jury found in favor of Frey and awarded her $45, 000 in compensatory damages, and the district court awarded her $13, 520 in back pay damages-the amount she had claimed in the Joint Pre-trial Memorandum. The district court also awarded pre-judgment interest at the average prime rate from May 2010 to May 2017, compounded monthly for a total judgment on Frey's IHRA retaliatory discharge claim of $73, 699.51 for which Hotel Coleman and Vaughn Hospitality are jointly and severally liable. The district court also entered judgment against Hotel Coleman for $142, 930.51.

On appeal, Frey challenges the district court's conclusion on summary judgment that Vaughn Hospitality was not Frey's employer-a ruling we review de novo. Smith v. Castaways Family Diner, 453 F.3d 971, 975 (7th Cir. 2006). Frey also challenges the amount of the district court's award of back pay and prejudgment interest, both of which lie within a district court's discretion and can be overturned only where that discretion has been abused. First Nat. Bank of Chicago v. Standard Bank & Jr., 172 F.3d 472, 480 (7th Cir. 1999).


A. Was Vaughn Hospitality Frey's employer?

On appeal, Frey asks us to find that the district court erred in determining that Vaughn Hospitality was not Frey's employer. It is undisputed that Hotel Coleman employed Frey. It signed and funded her paychecks, issued her a W-2 for each year of...

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