U.S. Equal Employment Opportunity Commission v. Sherwood Food Distributors, LLC

Filing 57

Memorandum Opinion and Order. This Court finds that Defendant is in civil contempt for violating the Decree. Plaintiff showed through clear and convincing evidence that Defendant had specific knowledge of its responsibilities and still fail ed to comply with the definite order by the Court to pay payroll tax liability, and to ensure that award checks were sent to Claimants by December 14, 2021. Defendant has not demonstrated that it exhausted all reasonable steps they could have taken i n order to comply with the Decree, nor has Defendant offered any evidence as to why it cannot comply. Defendant's attempt to read into the Decree a requirement to be given a breakdown of payments and an opportunity to make payments in installmen ts is unpersuasive. Defendant's intentions to eventually comply are irrelevant to its violation. Defendant argues that they should only be responsible for paying the initial $361,890.68 and should not be required to pay the additional $ ;46,858.55 resulting from the 3.8% tax increase. But for the Defendant's own delay, the amount of taxes owed would not have increased. This Court finds that because Defendant failed to prove that its delay was caused by reasons outside of i ts control, it is appropriate for them to pay the increase in back-pay tax liability. Defendant is hereby ordered to pay the full amount of $408,749.23 within thirty (30) days of this Order. Defendant is also responsible for paying any additional costs incurred by the Administrator's fulfillment of his duties that exceed the $35,000 expected in the Decree. IT IS SO ORDERED. Judge Donald C. Nugent on 2/23/2022. re 44 . (M,S)

Case: 1:16-cv-02386-DCN Doc #: 57 Filed: 02/24/22 1 of 7. PageID #: 905

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION

CASE NO.

1:16 CV 02386

UNITED STATES EQUAL
EMPLOYMENT OPPORTUNITY

COMMISSION,
Plaintiff,

JUDGE DONALD C. NUGENT

SHERWOOD FOOD

DISTRIBUTORS,LLC.,
MEMORANDUM OPINION
AND ORDER

Defendant.

This matter is before the Court on the United States Equal Employment Opportunity
Commission's ("Plaintiff') Emergency Motion for Civil Contempt Sanctions(ECF #44).
Plaintiff alleges that Sherwood Food Distributors, LLC("Defendant")is in civil contempt for

failure to issue payment of its payroll tax liabilities as required by a Consent Decree ("Decree")
entered into by the parties. Defendant filed a Response in Opposition and Plaintifffiled a reply
(ECF #46,47). This matter is now fully briefed and ready for disposition. For the reasons set
forth herein, this Court finds that Defendant's failure to pay its payroll tax liabilities prior to
December 14,2021 constitutes civil contempt. However,Plaintiffs request for additional
sanctions is denied.

I. Bacl^round

On September 27, 2016, Plaintiff filed suit against Defendant for a violation of Title VII

of the Civil Rights Act of 1964 ("Title VII"). Plaintiff sought to correct alleged discriminatory
employment practices and provide relief to the female applicants adversely impacted by
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Defendant's hiring practices. The Parties entered a Decree on October 16, 2018. The Decree
required Defendant to place $3,600,000 into a Qualified Settlement Fund ("QSF") account

administered by a third-party (the "Administrator") within thirty days ofentry ofthe Decree. EOF
#43f20. These funds were to provide monetary reliefto individuals that Plaintiff determined were
subjected to Defendant's alleged discrimination. Id. The monetary relief constitutes both back pay

and other monetary damages available under Title VII. Id. Plaintiff was given the authority to
determine what type of monetary relief would be paid to the Eligible Claimants("Claimants"). Id.
Plaintiff alleges that Defendant is presently violating the Decree by refusing to pay its
payroll tax liability and therefore preventing the distribution ofthe $3,600,000 to eligible claimants

by December 14,2021. ECF #44. In relevant part, the Decree states that Defendant is responsible
for paying its share of all applicable pay roll taxes and that the Administrator would inform
Defendant "of the amounts of back pay distributed to each person from the QSF and all other
information necessary for [Defendant]to satisfy its payroll tax liabilities." ECF #43

22,30. The

Administrator notified Defendant's counsel on December 1,2021 ofthe amount Defendant owed

in payroll taxes and provided notice that payment of the payroll taxes must be received on
December 10,2021 for the award checks to be timely distributed. ECF #44-1. Coimsel for Plaintiff

communicated with Defendant's counsel in an attempt to compel the payment ofthe payroll taxes;

however. Defendant advised Plaintiffthat it would not make the payroll tax payment. Ex. D.
On January 27, 2022 this Court held a Motion Hearing regarding Plaintiff's motion for

civil contempt. Upon Defendant's request for a break-down ofthe individual payments to be made
to the Claimants, the Court continued the hearing until January 31, 2022. Prior to the start of the

January 31®* hearing,the Administrator notified the Defendant that its total payroll taxes owed had
increased from $361,890.68 to $408,749.23 due to the Ohio Department of Jobs and Family

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Services' increase in QSF state unemployment tax rate from 2.7% in 2021 to 6.5% in 2022. At the

January 3P' hearing the parties were ordered to submit proposed findings offact and conclusion
oflaw, which were subsequently submitted on February 10,2022.(ECF #55, 56).
11. Legal Standard

In order to establish that a defendant is in civil contempt, the movant must show by clear

and convincing evidence that the defendant "violated a definite and specific order of the court
requiring it to perform" or that the defendant acted with knowledge ofthe court's order. Electrical

Workers Pension Trust Fund ofLocal Union #58 v. Garys Elec. Serv. Co.,340 F.3d 373, 379(6"'
Cir. 2003)(quoting NLRB v. Cincinnati Bronze, Inc., 829 F.2d 585, 591 (6*^ Cir. 1987)); J.L.
Spoons, Inc. v. Morckel, 314 F. Supp. 2d 746, 762 (N.D. Ohio 2004). In the case of a consent
decree, "the 'scope of a consent decree must be discerned within its four comers, and not by

reference to what might satisfy the purpose ofone ofthe parties to it' or by what'might have been
written had the plaintiffestablished his factual claims and legal theories in litigation.'"Firefighters
Loc. Union No. 1784 v. Stotts, 467 U.S. 561,574(1984)(quoting United States v. Armour & Co.,
402 U.S. 673,681-82(1971)).
The intent of the defendant in disobeying the court order is not relevant to a finding of

contempt. J.L. Spoons, Inc., 314 F. Supp. 2d at 762 (quoting Nettis Environmental, Ltd. v. IWI,
Inc., 46 F. Supp. 2d 722, 726(N.D. Ohio 1992). Once the movant has made a showing of clear

and convincing evidence,the burden shifts to the defendant to show that they are "presently unable
to comply with the court's order" through a categorical and detailed explanation oftheir inability
to comply for reasons outside of their control. Electrical Workers Pension Trust Fund, 340 F.3d

at 379(quoting Rolex Watch U.S.A., Inc. v. Crowley,74 F.3d 716,720(6^ Cir. 1996)). Ifthe court
finds that the defendant has not taken "all reasonable steps within [its] power to comply with the

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court's order" a finding of contempt is appropriate. JL.Spoons, Inc., 314 F. Supp. 2d at 762
(quoting Harrison v. Metropolitan Gov't ofNashville & Davidson County, Tenn., 80 F.Sd 1107,

1112(6"^ Cir), cert denied, 519 U.S. 863,136 L. Ed. 2d 111,117 S. Ct. 169(1996)).
III.Analysis

First,in order to establish a finding ofcivil contempt,the movant must show that Defendant
violated a definite and specific order ofthe court. Electrical Workers Pension TrustFund,340 F.3d

at 379. This must he done through clear and convincing evidence. Id. Here, the Decree explicitly
stated numerous times that Defendant was responsible for payroll tax liability. ECF #43, TffTf 22,

30, 31. The Decree also specified that distribution of the settlement funds must be completed by
December 14, 2021. Plaintiff has shown through email communications that Defendant was

informed of its payroll tax duties by the Administrator in accordance with the Decree and that
Defendant did not, and has not,timely paid. This is clear and convincing evidence that payroll tax

is a definite and specific order ofthe court and that refusing to pay is a violation ofsaid order. As
such,the burden then shifts to the Defendant to show that they took all reasonable steps to comply
and that they are presently unable to comply for reasons outside oftheir control.Electrical Workers
Pension Trust Fund,340 F.3d at 379; J.L. Spoons, 314 F. Supp. 2d at 762.
Second, Defendant has not satisfied its burden to demonstrate that it took all reasonable

steps to comply. Although Defendant argues that it attempted to negotiate a solution with Plaintiff,
this is not sufficient by itself. Attempting to negotiate an extension ten days before a deadline that

Defendant has heen aware of for more than three years is insufficient, absent extenuating
circumstances or evidence of exhausting other reasonable steps taken throughout the time period.
Upon Plaintiff's unwillingness to negotiate. Defendant should have complied with the Decree and

the Administrator's request for payment. Defendant was aware that Plaintiff was required to

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disperse the funds to claimants by December 14, 2021 and was made aware of the amount owed
by the Administrator as required by the Decree. Defendant was also aware that Plaintiff had sole

discretion to determine the type of damages to be paid. As a result, Defendant's argrunent that
Plaintiff has failed to explain why the remaining funds will be distributed as back pay is not good
reason for Defendant delaying compliance. Defendant pointed out that they paid the required
payroll tax liabilities for the disbursements made in June 2019 and are exceeding the non-monetary
requirements concerning the hiring offemale workers; however,this is irrelevant regarding actions

presently taken by Defendant to delay compliance vdth the Decree's December 14"^ deadline and
is further proof that Defendant was fully aware of its payroll tax responsibilities. During the
hearing on January 27, 2022, Defendant further argued that they had not yet paid the payroll tax

liability because they had not been given a break-down of the individual payments to be made to
each Claimant. A four-comers reading of the Decree did not require the EEOC to provide this

information. However,it was given to the Defendant later that day and the Defendant has still not
paid.

Third, Defendant has failed to satisfy its burden of giving a detailed explanation as to why
it cannot presently comply with the Decree and pay the $408,749.23 in payroll taxes. Defendant
has made no claim that it does not presently have the funds to pay,nor has there been any evidence
offered of Defendant's financial situation. Even if Defendant could prove financial hardship, it is
not an excuse for failure to comply. United States v. Work Wear Corp., 602 F.2d 110, 116 (6th

Cir. 1979). In lieu of offering evidence regarding an inability to pay. Defendant has requested the
ability to pay its tax liability in equal installments. Defendant argues that some ofthe checks issued
to the Claimants may go unclaimed and therefore it should be able to seek refunds of the taxes

paid on those checks. If Defendant wanted such an arrangement, it should have presented it for

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consideration at the Decree negotiations. This arrangement cannot be read into the Decree's four

comers and has no bearing on its initial refusal to comply with the Decree. Finally, Defendant has
failed to produce evidence illustrating that its non-compliance was through no fault of its own.
Instead, Defendant blamed Plaintiff for conducting their investigation too slowly. As a result.
Defendant has failed to prove that its current situation prevents it from complying with the Decree.
IV.Conclusion

This Court finds that Defendant is in civil contempt for violating the Decree. Plaintiff
showed through clear and convincing evidence that Defendant had specific knowledge of its
responsibilities and still failed to comply with the definite order by the Court to pay payroll tax
liability, and to ensure that award checks were sent to Claimants by December 14,2021. Defendant
has not demonstrated that it exhausted all reasonable steps they could have taken in order to comply
Avith the Decree, nor has Defendant offered any evidence as to why it caimot comply. Defendant's

attempt to read into the Decree a requirement to be given a breakdown of payments and an
opportunity to make payments in installments is unpersuasive. Defendant's intentions to

eventually comply are irrelevant to its violation. Defendant argues that they should only be
responsible for paying the initial $361,890.68 and should not be required to pay the additional
$46,858.55 resulting from the 3.8% tax increase. But for the Defendant's own delay, the amoimt
of taxes owed would not have increased. This Court finds that because Defendant failed to prove

that its delay was caused by reasons outside of its control, it is appropriate for them to pay the

increase in back-pay tax liability. Defendant is hereby ordered to pay the full amount of
$408,749.23 within thirty (30) days of this Order. Defendant is also responsible for paying any

additional costs incurred by the Administrator's fulfillment of his duties that exceed the $35,000
expected in the Decree.

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IT IS SO ORDERED.

(JhuZI
Donald C. Nugent

/

United States District ou dge

DATED:

Jl