U.S. Equal Emp't Opportunity Comm'n v. Phase 2 Invs. Inc., CIVIL NO. JKB–17–2463

Citation310 F.Supp.3d 550
Decision Date17 April 2018
Docket NumberCIVIL NO. JKB–17–2463
Parties U.S. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Plaintiff v. PHASE 2 INVESTMENTS INC., et al., Defendants.
CourtUnited States District Courts. 4th Circuit. United States District Court (Maryland)

Amber Trzinski Fox, Debra Michele Lawrence, Maria Salacuse, US Equal Employment Opportunity Commission, Baltimore, MD, for Plaintiff.

John S. Vander Woude, Jeffrey Thomas Johnson, Eccleston and Wolf PC Baltimore Washington Law Center, Hanover, MD, Kevin Michael Kraham, Littler Mendelson PC, Washington, DC, for Defendants.

MEMORANDUM

James K. Bredar, Chief Judge

The Equal Employment Opportunity Commission ("EEOC") brought this Title VII action against two corporations, Defendant Phase 2 Investments Inc. ("Phase 2"), and Defendant CWP West Corp. t/a Mister Car Wash ("Mister"), alleging that a previous corporation, Maritime Autowash, Inc. ("Maritime"), subjected a class of Hispanic employees to a hostile work environment and that both Defendants are liable. Both Defendants have moved to dismiss or in the alternative for summary judgment. (See Phase 2 Mot. Summ. J., ECF No. 15; Mister Mot. Summ. J., ECF No. 23). The EEOC has responded in opposition to both motions (ECF Nos. 19, 25) and both Defendants have replied (ECF Nos. 22, 41).1 Therefore, both motions are ripe for review. No hearing is necessary to resolve either matter. See Local Rule 105.6 (D. Md. 2016). The Court construes both motions as, in part, motions to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1) and as, in part, motions for summary judgment under Rule 56. For the reasons stated below the Court will deny Defendants' motions in their entirety.

I. Background2
a. The Charging Parties' employment, complaints of discrimination, and termination

Maritime was a Maryland corporation that maintained two car washes, including one in Edgewater, Maryland. (Am. Compl. ¶¶ 4, 6, ECF No. 5; Decl. Elmer Escalante ¶ 5, ECF No. 19–1.) A number of Hispanic employees worked at the Maritime facility in Edgewater, including Elmer Escalante, Godofredo Esquivel Platero, Luis Serrano, Jose Luis Dominguez,3 Gabriel Espinoza, Saul Herrera, Santos Villacorta, Eddy Cervantes, and Merced Espinosa Diaz ("the Charging Parties"). (Decls., ECF Nos. 19–1 through 19–9.) The Charging Parties were subjected to harassment and discrimination while working at Maritime. (See Charges of Discrimination, Decl. Rosemarie Rhodes Attachment C, ECF No. 19–10.) They were required to work longer hours with shorter breaks than their non-Hispanic counterparts. (Id. ) They were denied proper equipment for their jobs and paid less than their non-Hispanic colleagues as well. (Id. )

On April 23, 2013, agents from United States Immigration and Customs Enforcement ("ICE") conducted an audit of Maritime. (Aff. David Podrog ¶ 4, ECF No. 15–3.) On May 7, 2013, ICE informed Maritime that thirty-nine of its employees were not authorized to work in the United States, including the nine Charging Parties. (Id. ¶¶ 5–6.) ICE further informed Maritime that, unless the thirty-nine employees could provide valid identification and employment eligibility documentation, Maritime would suffer civil, and perhaps even criminal, penalties if it continued to employ them. (Notice of Suspect Documents 2, ECF No. 15–4.) According to the Charging Parties, after being informed of the employees' status, Maritime General Manager Kyle Decker "held a meeting with the Hispanic employees and told [them] that he and Owner [David] Podrog had made a decision to give those employees without proper documentation $150 so that they could obtain new papers and be re-hired ... under new names." (E.g., Escalante Decl. ¶ 11; Decl. Godofredo Esquivel ¶ 5, ECF No. 19–2.)

After being rehired, on July 27, 2013 the Charging parties and other Hispanic employees complained to David Podrog and Kyle Decker about the mistreatment they had been suffering. (E.g. , Escalante Decl. ¶ 19; Decl. Luis Serrano ¶ 10, ECF No. 19–3.) Decker "indicated" that the employees would only get a thirty minute lunch break that day, and if they did not report back to work at 1:00 pm, they would be fired. (E.g. , Escalante Decl. ¶ 19.) The Charging Parties and other Hispanic employees did not report back to work at 1:00 p.m., and Maritime fired them. (E.g., Escalante Decl. ¶¶ 19–20; Esquivel Decl. ¶¶ 11–12.) (According to David Podrog, Maritime only fired seven of the Charging Parties, as well as other employees identified by ICE, and only because they were unable to provide documentation proving that they were eligible to work. (Podrog Aff. ¶ 12.) )

b. EEOC's investigation

On July 30, 2013 the Charging Parties submitted intake questionnaires to the EEOC. (Intake Questionnaires, Decl. Rosemarie Rhodes Attach. A, ECF No. 19–10.) On February 4, 2014, the Charging Parties signed formal Charges of Discrimination, and notice of these Charges was then sent to Maritime. (See, e.g. , Escalante Charge of Discrimination, ECF No. 15–6 (signed February 4, 2014); Escalante Notice of Charge of Discrimination, Decl. Rosemarie Rhodes Attach. D, ECF No. 19–10 (dated February 25, 2014).) The Charging Parties began their employment at Maritime at different times, and thus their Charges of Discrimination allege different dates for the earliest date on which the alleged discrimination took place, but most of the Charges allege that the latest date on which discrimination took place was July 27, 2013—the date on which the Charging Parties were fired. (E.g. , Escalante Charge of Discrimination; Dominguez Charge of Discrimination, ECF No. 15–9.)4 After receiving the questionnaires and complaints from the Charging Parties, the EEOC began to investigate Maritime.

During the course of its investigation, the EEOC served Maritime with a subpoena, to which Maritime was not responsive. In 2015, the EEOC came to this court to enforce the subpoena. See EEOC v. Maritime Autowash, Inc. , Civ. No. GLR-15-869, 2015 WL 13158495 (D. Md. June 23, 2015). The EEOC, in its Application to Show Cause Why Administrative Subpoena Should Not Be Enforced, alleged that it was investigating unlawful practices arising out of Elmer Escalante's charges. Id. at *1. Maritime argued that because Escalante was not legally authorized to work in the United States, he could not seek relief under Title VII, and therefore the EEOC could not enforce its subpoena. Id. A judge of this court, in a very brief opinion, agreed, and denied the EEOC's Application for an order to show cause. Id. at *2. The EEOC appealed and on April 25, 2016, the Fourth Circuit reversed. See EEOC v. Maritime Autowash, Inc. , 820 F.3d 662. The Fourth Circuit's decision will be discussed in greater detail below, but essentially Judge Wilkinson, writing for the Court, explained that "[n]othing [in Title VII] explicitly bars undocumented workers from filing complaints," and that because the EEOC only needed to show an "arguable or plausible basis for its jurisdiction" at this "very early stage," the subpoena was enforceable. 820 F.3d at 663–66. The Court declined to specifically address the "particular issue that Maritime press[ed]—whether and to what extent Title VII covers undocumented aliens," noting that it was a "novel and complex problem." Id. at 667.

c. Defendants' changes in ownership

While the EEOC was working to enforce its investigatory powers, corporate changes were underway at Maritime. In 2014 Mister began the process of purchasing Maritime's assets. (See Decl. Casey Lindsay ¶ 3, ECF No. 23–2.) Both parties, Maritime and Mister, entered into a letter of intent which specified a purchase price "in excess of $15,000,000." (Id. ¶¶ 3–4.) After signing the letter, "the parties commenced the due diligence process and began negotiating the terms of an asset purchase agreement." (Id. ¶ 5.)

Mister did much to protect itself from any potential liability that Maritime might incur. The purchase was "intentionally structured as an asset acquisition to avoid assuming any existing liabilities of Maritime," (Lindsay Decl. ¶ 7), and the asset purchase agreement ("APA") explicitly provided that, except for any liabilities incurred after the closing date, and any liabilities specifically assumed by Mister, the "Buyer is not assuming or becoming liable for any liabilities of Seller." (APA § 1.3, ECF No. 23–5.) All liabilities that Mister expressly assumed were listed in a Schedule attached to the APA, and this Schedule made no mention of any employment discrimination liability. (See APA Schedule 1.3.) Maritime and Mr. Podrog agreed to indemnify and hold harmless Mister "from and against any damages [and] liabilities ... of any kind or nature whatsoever...arising out of ... any failure by [Maritime] to perform and fully discharge any of the Excluded Liabilities as set forth in this Agreement." (Id. § 8.2.)

Mister also explored Maritime's potential liabilities as part of its due diligence process. (See Decl. Sarah Ross ¶¶ 3–4, ECF No. 23–3.) Mister asked Maritime "to disclose any and all pending lawsuits or claims by employees." (Id. ¶ 3.) Maritime responded in October 2014, by "forward[ing] position statements" its counsel had prepared in response to the Charges of Discrimination that the Charging Parties had filed in 2014. (Id. ¶ 4.) In addition to these position statements, Maritime sent a letter from its counsel "stating that Maritime Autowash had an Employment Practices Liability Insurance policy with $1,000,000 in coverage and that [he] would be 'surprised' if the Claimants' damages would exceed $1,000,000." (Id. ) According to Mister, it never received the actual Charges of Discrimination from Maritime. (Id. ¶ 5.) Mister requested from Maritime, and received, a census of Maritime's "then current employees." (Id. ¶ 6.) This request presumably came after the letter of intent in later 2014, well over a year since the Charging Parties had been terminated by Maritime, and, as one would expect, "[n]one of the due diligence documents provided by Maritime Autowash...

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