Equal Employment Opportunity Commission v. Aaron Rents, Inc.

Filing 348

ORDER allowing the jury to consider the issue of punitive damages as to Counts 1, 2, 5, 11 and 12. Signed by Judge Michael J. Reagan on 6/3/11. (caa)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ILLINOIS
ASHLEY ALFORD,

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Plaintiff-Intervenor,
vs.
AARON’S RENTS, INC., d/b/a AARON
SALES AND LEASE OWNERSHIP and
RICHARD MOORE,
Defendants.

Case No. 08-cv-0683-MJR

MEMORANDUM and ORDER
REAGAN, District Judge:
The question before the Court is whether Defendants can properly be held
liable for punitive damages on the 6 Counts remaining in this action: Count 1, common
law assault; Count 2, common law battery; Count 5, negligent supervision; Count 8,
intentional infliction of emotional distress; Count 11, retaliation under Title VII; and
Count 12, sexual harassment. Having carefully and thoroughly considered this issue,
the Court now rules as follows.
I.

State law claims
Counts 1, 2, 5 and 8 state causes of action under Illinois law, so the

availability of punitive damages is governed by Illinois law. See Learning Curve Toys,
Inc. v. PlayWood Toys, Inc., 342 F.3d 714 (7th Cir. 2003). Under Illinois law, the Court
must initially decide “whether the facts of a particular case justify the imposition of
punitive damages[.]” Kelsay v. Motorola, Inc., 384 N.E.2d 353, 359 (Ill. 1978). To make
this determination, the Court examines plaintiff’s supported allegations and the
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evidence of record. See Roboserve, Inc. v. Kato Kagaku Co., 78 F.3d 266, 273 (7th Cir.
1996); see also Varilek v. Mitchell Engineering Co., 558 N.E.2d 365, 382 (Ill. App. Ct.
1991). Punitive damages may be recovered in cases where the wrongful act constitutes
“fraud, actual malice, deliberate violence or oppression, or when the defendant acts
willfully, or with such gross negligence as to indicate a wanton disregard of the rights
of others.” Kelsay, 384 N.E.2d at 359.
II.

Counts 1 and 2
In Counts 1 and 2, Ashley Alford alleges assault and battery, respectively,

against Richard Moore. As Alford indicates in her Memorandum in Support of Punitive
Damages (“Alford’s Memorandum”), these counts are based on willful verbal and
physical sexual conduct by Richard Moore. Alford’s Memorandum, pp.2-3. Moore’s
conduct, as alleged by Alford, meets the elements set forth in Kelsay, supra, and
warrants submitting the issue of punitive damages as to these Counts to the jury for its
consideration. See Knierim v. Izzo, 174 N.E.2d 157, 165 (Ill. 1961) (The “outrageous
nature” of the defendant’s alleged conduct was sufficient to allow the jury to make an
award of punitive damages).
III.

Count 5
In Count 5, Alford seeks damages against Aaron’s for improperly

supervising or failing to supervise Moore.
A claim for negligent supervision requires a plaintiff to establish:
(1) that the employer knew or should have known that the employee had
a particular unfitness for the position so as to create a danger of harm to
third persons; (2) that such particular unfitness was known or should have
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been known at the time of the employee's hiring or retention; and (3) that
this particular unfitness proximately caused the plaintiff's injury. HelfersBeitz v. Degelman, 939 N.E.2d 1087, 1091 (Ill.AppCt. 2010) (citing Van
Horne v. Muller, 705 N.E.2d 898, 904 (1998).

The conduct of which Alford complains goes beyond Moore’s conduct to impute
liability to Aaron’s for, inter alia, failing to make adequate inquiries regarding
allegations of sexual harassment despite knowledge of the same by its agent Regional
Manager Brad Martin; deliberately covering up sexual harassment through Martin; and
failing to suspend Moore while allowing known sexual harassment to continue. First
Amended Complaint (FAC), ¶¶ 85 -95.
Alford testified that Martin questioned her about harassment in front of
Moore and later told Moore to “watch [his] back.” From this testimony, a reasonable
trier of fact could find that Martin intended to conceal harassment or to remain willfully
ignorant of it. This alleged intentional cover-up and disregard of sexual harassment is
sufficiently willful or grossly negligent to support submitting the issue of punitive
damages to the jury for its consideration. See Kelsay, 384 N.E.2d at 359; see also
Knierim, 174 N.E.2d 165 (Ill. 1961) (finding that punitive damages may be justified by
actions “characterized by wantonness, malice, [and] oppression.”).
IV.

Count 8
Alford’s claim in Count 8 alleges intentional infliction of emotional

distress,

which

under

Illinois

law

does

not

permit

punitive

damages.

Casey-Beich v. United Parcel Service, Inc., 2008 WL 4471362, at *1 (7th Cir. 2008) (citing
Gragg v. Calandra, 696 N.E.2d 1282, 1290 (1998).
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V.

Count 111
In Count 11, Alford alleges that Aaron’s retaliated against her for

reporting sexual harassment to the Equal Employment Opportunity Commission
(EEOC). More specifically, Alford alleges that she was initially told that she would be
promoted to manager in spite of her lack of a college degree, but after she filed her
EEOC charge, she was told that she would no longer be considered for management
positions.
“Title VII makes it unlawful for any employer to discriminate against an
employee for opposing a practice made unlawful by the Act.” Fine v. Ryan Intern.
Airlines, 305 F.3d 746, 751 (7th Cir. 2002) (citing 42 U.S.C. § 2000e-3(a)). “To prove a
case of retaliation, a plaintiff must show: (1) she engaged in statutorily protected
expression; (2) she suffered an adverse action at the hands of her employer; and (3)
there was a causal link between the two.” Id. at 751-52 (citing Dey v. Colt Constr. &
Dev. Co., 28 F.3d 1446, 1457 (7th Cir.1994)).
Assuming that the jury finds the Aaron’s is liable on Alford’s retaliation
claim, punitive damages are available and appropriate if she has shown that Aaron’s
“engaged in a discriminatory practice or discriminatory practices with malice or with
reckless indifference to [her] federally protected rights.” 42 U.S.C. § 1981a(b)(1). In
Kolstad v. American Dental Ass'n, 527 U.S. 526 (1999), the Supreme Court rejected the
requirement that punitive damages be available only in “extraordinarily egregious”

The Court determined that Alford’s retaliation claim could proceed under Title VII but not under the Illinois
Human Rights Act.
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cases, and instead found an award proper so long as the employer discriminates “in the
face of a perceived risk that its action will violate federal law.” Id. at 533, 536.
As Judge Posner explained in E.E.O.C. v. Indiana Bell Telephone Co., 256
F.3d 516 (7th Cir. 2001), “The minimum requirement for a punitive award is that the
employer “discriminate in the face of a perceived risk that its actions will violate federal
law.” 256 F.3d at 527 (citing Kolstad, 527 U.S. at 536; Gentry v. Export Packaging Co.,
238 F.3d 842, 851-52 (7th Cir. 2001)). But Judge Posner cautioned that this minimum
may not be sufficient because, first, an employer may believe that its conduct is lawful
and, second, “§ 1981a(b) authorizes but does not compel an award of punitive damages.”
Id. (emphasis in original). Judge Posner summed up that circumstances that permit
the issue of punitive damages to go to the jury may not persuade a jury that “the
employer's conduct was not so malicious or so reckless that damages should be added to
the compensatory award.” Id. (emphasis in original).
The Court believes that Judge Posner’s analysis neatly sums up the
current circumstance: Alford’s allegations and the evidence of record are sufficient for
the question of Aaron’s liability in punitive damages for retaliation to go to the jury so
that the jury can determine whether Aaron’s conduct warrants damages above a
compensatory award.
VI.

Count 12
Count 12 alleges that Aaron’s is liable for Moore’s sexual harassment of

Alford.

Specifically, here, Alford claims that Aaron’s, by and through its agents,

Martin, Joe Skortz, John Peterson and Vanessa Adams, failed remediate ongoing sexual
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harassment, including inappropriate and offensive comments, nicknames and touching,
in spite of its knowledge of the same and in spite of Alford’s call to the company’s
sexual harassment hotline. This Count again alleges a deliberate cover-up and willful
ignorance of alleged harassment by Martin. FAC, ¶¶ 202-210.
In order for the jury to assess punitive damages in a Title VII case, a
plaintiff must showthat the defendant acted with malice or with reckless indifference to
intentional discrimination. 42 U.S.C. § 1981a(b)(1);Kolstad, 527 U.S. at 539. Section
1981a(b)(1) provides, “A complaining party may recover punitive damages under this
section against a respondent … if the complaining party demonstrates that the
respondent engaged in a discriminatory practice or discriminatory practices with malice
or with reckless indifference to the federally protected rights of an aggrieved
individual.” 42 U.S.C. § 1981a(b)(1). The terms “malice” and “reckless indifference”
refer to the employer’s knowledge that it may be violating federal law. Cooke v. Stefani
Management Services, Inc., 250 F.3d 564, 568 (7th Cir. 2001); Kolstad, 527 U.S. at 535.
“In the context of § 1981a, an employer must at least discriminate in the face of a
perceived risk that its actions will violate federal law to be liable in punitive damages.”
527 U.S. at 536.
It is undisputed that Aaron’s maintained a sexual harassment hotline and
educated its managers about sexual harassment. Based on Alford’s allegations and
evidence of record, a reasonable trier of fact could conclude that agents of Aaron’s were
aware that Alford had federally protected rights against sexual harassment, and that
Aaron’s, through its agents, deliberately covered up or was willfully blind to intentional
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discrimination in violation of those federally protected rights. The Court concludes that
Alford has sufficiently shown “reckless indifference” with regard to intentional
discrimination under Section 1981a(b)(1).
The Supreme Court in Kolstad, quoting the Restatement of Agency,
outlined the ways a plaintiff may establish agency for the purposes of Title VII:
Punitive damages can properly be awarded against a master or other principal
because of an agent if, but only if:
“(a) the principal authorized the doing and the manner of the act, or
“(b) the agent was unfit and the principal was reckless in employing him, or
“(c) the agent was employed in a managerial capacity and was acting in the
scope of employment, or
“(d) the principal or a managerial agent of the principal ratified or approved the
act.
527 U.S. at 542-3(quoting Restatement (Second) of Agency, § 217 C)).

Aaron’s is

correct in asserting that punitive damages under Title VII, applied to principals for
managerial agents acting within scope of employment under subsection (c), are given
very sparingly. Because the broad language of subsection (c) would result in perverse
incentives to forego efforts to prevent and remedy discrimination, the Supreme Court
modified that subsection so that punitive damages cannot be based vicariously for
discriminatory actions by an agent that are contrary to an employer’s efforts to comply
with Title VII in good faith. 527 U.S. at 545.
In the present case, central to Count 12 is the alleged intentional verbal
and physicalsexual harassmentof Alfordby Moore. Count 12 also alleges that Aaron’s,
through its agents Martin, Skortz, Peterson and Adams, remained willfully blind to

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Moore’s

alleged

ongoing

sexual

harassment,

even

deliberately

preventing

investigations.
A jury could reasonably find that these allegations are supported by the
record. Under subsection (b), the evidence that Moore was unfit for his position as
general manager due to his ongoing sexual harassment of Alford and that Aaron’s was
reckless in continuing to employ him despite this is sufficient to warrant submitting the
punitive damages claim to the jury.
VII.

Conclusion
For the foregoing reasons, the Court FINDS that Defendants can properly

be held liable for punitive damages on Count 1, common law assault; Count 2, common
law battery; Count 5, negligent supervision; Count 11, retaliation under Title VII; and
Count 12. Punitive damages are not available on Count 8, intentional infliction of
emotional distress. Accordingly, the Court will allow the jury to consider the issue of
punitive damages as to Counts 1, 2, 5, 11 and 12.
IT IS SO ORDERED.
DATED this 3rd day of June, 2011

s/Michael J. Reagan
MICHAEL J. REAGAN
United States District Judge

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