Todd v. Ortho Biotech, Inc.

• Decision Date: 05 March 1998
• Docket Number: 97-1220,Nos. 97-1126,s. 97-1126
• Citation: 138 F.3d 733
• Parties: 76 Fair Empl.Prac.Cas. (BNA) 341, 72 Empl. Prac. Dec. P 45,239 Lori A. TODD, Plaintiff--Appellee, v. ORTHO BIOTECH, INC., Defendant--Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 733

138 F.3d 733

76 Fair Empl.Prac.Cas. (BNA) 341,

72 Empl. Prac. Dec. P 45,239

Lori A. TODD, Plaintiff--Appellee, v. ORTHO BIOTECH, INC., Defendant--Appellant.

Nos. 97-1126, 97-1220.

United States Court of Appeals Eighth Circuit.

Submitted Oct. 20, 1997.

Decided March 5, 1998.

David F. Herr, Minneapolis, MN, argued, Howard B. Tarkow, Susan E. Oliphant and Cynthia F. Gilbertson, on the brief, for Defendant-Appellant.

David A. Allgeyer, Minneapolis, MN, argued, Ansis V. Viksnins and Theresa H. Tostengard, on the brief, for Plaintiff-Appellee.

Before RICHARD S. ARNOLD, Chief Judge, LOKEN and HANSEN, Circuit Judges.

LOKEN, Circuit Judge.

Ortho Biotech, Inc. ("Ortho"), appeals a judgment in favor of its former employee, Lori Todd, on her claims of sexual harassment in violation of Title VII of the Civil Rights Act of 1964, 42 U.S.C. §§ 2000e et seq. (1988), and the Minnesota Human Rights Act ("MHRA"), MINN.STAT. §§ 363.01 et. seq. (1982). Concluding that Ortho took timely and appropriate action to remedy another employee's attempted rape of Todd at a national sales meeting, and that such action is a complete defense to her claims under Title VII and the MHRA, we reverse.

We summarize the facts as found by the district court. On September 21, 1992, Todd was a sales representative, or product specialist, working for Ortho's Minnesota regional office and attending Ortho's national sales meeting in Boston. After a full day of conferences, Todd stopped at the hospitality suite, where she agreed to go to a jazz club with two other product specialists and James Moreland, Ortho's Director of Trade Relations. The group later went to a local bar, where Moreland drank shots of vodka and exchanged sexually oriented jokes with Todd. Back at the hotel, their companions returned to the hospitality suite, leaving Todd and Moreland alone in an empty elevator. Moreland grabbed Todd and attempted to kiss her but she pushed him away, asking "What are you doing?" Moreland apologized and suggested Todd accompany him to his room for a complete apology. Todd said that was unnecessary, but complied when Moreland persisted, fearful of upsetting a high-ranking Ortho official. Once inside the room, Moreland overpowered Todd, pinned her to the bed, and attempted to rape her. When Todd began hyperventilating, Moreland allowed her to escape from the room.

The next evening, Todd reported the attack to another product specialist, who urged her to report the incident to Charles Ball, Ortho's Director of Management Development. Todd approached Ball the next morning and asked for a private meeting, without telling him she had been attacked. Ball agreed to meet at the end of that day's conferences. Todd attended the scheduled meetings that day, including a skit she found sexually offensive. She met Ball in her hotel room that evening, told him about the attack and, at his urging, also told Craig Mangean, Director of Employee Relations. Ball was shocked and sympathetic. Mangean told Todd that she had a right to inform the police, but she declined to do so. She said that Mangean could tell the company attorney of the incident but asked that Moreland's superiors not be informed. At Todd's request, Ball and Mangean accompanied her to dinner. After dinner, Todd reported the incident to her immediate supervisor, Division Manager John Hess. She returned to her room, where she received a brief phone call from Moreland. Todd reported the call to Ball, who offered to move her to another room. She declined, saying she felt safe in her own room. Todd returned to Minnesota the next day, where she later obtained medical attention, including treatment for depression and anxiety.

Officials at Ortho's headquarters in New Jersey contacted Moreland promptly after receiving Todd's complaint and confronted him early the following week with Todd's accusations. Moreland denied assaulting Todd and claimed he was being targeted because he is an African-American. After a three-week investigation, Ortho discharged Moreland but gave him a severance package worth over $100,000 in exchange for his release of all claims against Ortho, including Title VII claims.

Todd commenced this lawsuit in June 1993 and ceased working for Ortho in March 1994. The district court tried her Title VII claim to a jury, which awarded Todd $128,000 for lost earnings and $90,000 for emotional distress. Her MHRA claim was tried to the court, which awarded Todd $524,000--consisting of three times the jury's lost earnings award, $90,000 for mental suffering, and a $50,000 fine to the State of Minnesota--plus $217,440.26 in attorneys' fees and costs. Ortho appeals, contending that it is not liable for sexual harassment under either Title VII or the MHRA because it took prompt and effective action in response to Moreland's misconduct.

I. The Title VII Claim

Title VII prohibits an employer from discriminating "against any individual with respect to his compensation, terms, conditions, or privileges of employment" on the basis of sex. 42 U.S.C. § 2000e-2(a)(1). "[A] plaintiff may establish a violation of Title VII by proving that discrimination based on sex has created a hostile or abusive work environment." Meritor Savings Bank v. Vinson, 477 U.S. 57, 66, 106 S.Ct. 2399, 2405, 91 L.Ed.2d 49 (1986). "For sexual harassment to be actionable," the Court explained, "it must be sufficiently severe or pervasive to alter the conditions of the victim's employment and create an abusive working environment." Id. at 67, 106 S.Ct. at 2405 (quotation omitted). In this case, Ortho quite properly concedes that an attempted rape at a national sales meeting is sufficiently severe misconduct to be actionable sexual harassment. The issue, then, is whether Ortho is liable for Moreland's misconduct.

In this circuit, to prevail on a claim of hostile work environment sexual harassment, a plaintiff must prove that she was a victim of unwanted harassment based upon her sex that affected a term, condition, or privilege of employment, and that the employer knew or should have known of the harassment and failed to take proper remedial action. See Callanan v. Runyun, 75 F.3d 1293, 1296 (8th Cir.1996). However, the district court did not apply that standard. Relying on authority from other circuits, the court instructed the jury that a different standard applies if the harassing co-worker, here Mr. Moreland, was a "supervisor." Instruction No. 37 stated:

An employer is liable for the sexual harassment committed by its supervisor if the supervisor used his actual or apparent authority to further the harassment, or if he was otherwise aided in accomplishing the harassment by the existence of his supervisory powers. In such a case, the employer cannot escape liability by taking some after the fact remedial action.

(Emphasis added). On the other hand, Instruction No. 40 advised the jury that, if Moreland was not a supervisor, Ortho would only be liable if Todd proved that Ortho knew or should have known of Moreland's harassment and failed to take prompt and effective remedial action to stop it. The jury's special verdict found that Ortho knew of Moreland's actionable harassment, that Ortho did not fail to take prompt and effective remedial action, but that Ortho is liable because Moreland used his authority and position with Ortho to further the harassment.

Since the district court's decision, we have clarified that the court erred in not applying our normal hostile work environment standard. Even when the hostile environment was created by a supervisor's sexual harassment, the employer is not liable unless it "knew or should have known of the harassment yet failed to take proper remedial action." Davis v. City of Sioux City, 115 F.3d 1365, 1368 (8th Cir.1997); see Spencer v. Ripley County, 123 F.3d 690, 691 (8th Cir.1997). In Davis, we reversed and remanded for a new trial because the district court instructed the jury that knowledge of a high-level supervisor's sexual harassment should be imputed to the employer. Knowledge is not the issue in this case. Rather, the error here is more far-reaching, for it deprived the employer of a complete defense--that it took timely and appropriate remedial action to correct serious, one-time misconduct occurring outside the workplace--merely because the offender was a "supervisor" who had no direct authority over the victim. We conclude Instruction No. 37 was reversible error.

As we noted in Davis, 115 F.3d at 1367, a supervisor's liability is imputed to the employer in cases of "quid pro quo" sexual harassment, where sexual favors, for example, are directly linked to the grant or denial of an employment benefit. ¹ In urging us to affirm, the EEOC as amicus argues that we should adopt the imputed liability standard used in quid pro quo cases for hostile environment sexual harassment claims when the harasser is a supervisor. Interestingly, this is a different standard than the agency urged the Supreme Court to adopt in Meritor. See 477 U.S. at 70-71, 106 S.Ct. at 2407-08. The Court in Meritor said it is "wrong" to "impose absolute liability on employers for the acts of their supervisors, regardless of the circumstances of a particular case." 477 U.S. at 73, 106 S.Ct. at 2408. The EEOC argues that its proposed rule would not violate this principle because "an employer would not be liable, without notice, where, even though the harasser was a supervisor, he was not in the victim's chain of command or had no authority over her employment." But that contention is inconsistent with the district court's instruction in this case, which only required the jury to find that Moreland was an Ortho supervisor, not that he was Todd's supervisor. The fact is that Moreland was not in Todd's "chain of command" when he assaulted her, which leaves the EEOC's support of Todd's position with little credibility.

Viewing the question more broadly than the facts of this case, we think it contrary to...