EEOC v. MANAGEMENT HOSPITALITY OF RACINE, INC. (E.D.Wis. 8-31-2010)

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507 F.3d at 579).

In the present case, the jury could have reasonably concluded that defendants' policy and complaint mechanism were not reasonably effective. First, the jury heard evidence indicating that all managerial employees at the Racine IHOP failed to carry out their duties under the policy, and thus the jury could have concluded that Flipmeastack had not properly trained its managers about preventing and correcting sexual harassment. See Loughman, 395 F.3d at 407 (finding that "the consistent stream of harassment" at an employer's restaurant suggests that employer's anti-harassment policy was "actually not very effective at all"). Gutierrez violated the policy by engaging in sexual harassment. The other assistant manager at the Racine IHOP, Nadia Del Rio, failed to investigate or report Gutierrez's harassment after Shisler and Powell complained to her. Indeed, Del Rio testified that after Powell complained to her, she determined for herself that the alleged harassment was not serious enough to warrant reporting because Shisler and Powell did not appear to be "afraid" of Gutierrez. Likewise, the general manager, Michelle Dahl, failed to investigate and report Gutierrez's harassment after Shisler and Powell complained to her. Further, the jury heard evidence that Smith had failed to act on a prior complaint

Del Rio testified as follows: Q. You knew that this was a sexual harassment complaint, and sexual harassment complaints are very serious, aren't they? A. Yes. Q. And you must immediately report sexual harassment complaints, shouldn't you? A. Yes. Q. But you didn't? A. But to me it was not sexual harassment, because they were always talking and laughing. And they never look like they were afraid of [Gutierrez]. They never look like they were afraid of [Gutierrez]. They were always talking, laughing, sitting by him. Anywhere he would go, they were all behind him. So to me it was not sexual. To me it was not like they were scared of him. (Trial Tr., Vol. II, at 449.)

by Shisler about the sexual harassment of another server, "Kristin," by the Racine IHOP's former general manager, Charles Hecker. The jury also heard evidence that Smith had himself sexually harassed Michele Dahl by rubbing his fingers on the cleavage area of a picture of Dahl's teenage daughter. Gutierrez testified that he witnessed this incident but failed to report it. In light of all this testimony, the jury could have concluded that no one at the Racine IHOP took the sexual harassment policy seriously, and that the supervisors charged with enforcing the policy were poorly trained. See Clark, 400 F.3d at 350 ("The effectiveness of an employer's sexual harassment policy depends upon the effectiveness of those who are designated to implement it.").

Second, the jury could have concluded that defendants' complaint mechanism was ineffective not just in practice, but on paper as well. The most serious defect was that Flipmeastack included language that could be reasonably understood as discouraging employees from making harassment complaints. After the written policy informs employees that they may complain about harassment to their manager or company representative, the policy states: "I also understand the severity of knowingly making false accusations of discrimination or harassment. Sexual harassment and/or Discrimination are a serious charge and should be taken seriously." (Defs.' Ex. 1026.) Victoria Janmohammed testified that she decided to add this language to the policy after her husband was sued for sexual harassment by a server at one of his other IHOPs. She denied that the language was added as a result of the lawsuit, but because the language was added after the lawsuit was filed the jury could have disbelieved her. In any case, the important point is that employees who read this statement might have been discouraged from making harassment complaints. An employee might have thought that he or she would be disciplined if Flipmeastack investigated the complaint and determined that it was false. The jury could have concluded that an employer who discourages complaints about harassment in this manner has not exercised reasonable care to prevent and correct harassment.

Finally, although this fact is not itself dispositive, I note that Flipmeastack did not establish any kind of hotline or formal complaint mechanism for reporting harassment claims. Where a large organization such as Flipmeastack employs a substantial number of teenagers, it is not unreasonable to expect the organization to "create a clear path for complaints of harassment and other forms of illegal discrimination." V J Foods, 507 F.3d at 579. Such a clear path might consist of a hotline posted in the employee break room that can be used to report harassment and discrimination.Id. In the present case, the complaint mechanism was somewhat informal, in that the sexual harassment policy told employees to report claims to their manager or company representative without specifying any particular point person or manner of lodging a complaint. Although defendants claim that they displayed a poster with instructions for reporting harassment claims in the employee break room, there was conflicting testimony as to whether this poster was actually displayed during the time when Shisler and Powell were harassed. In any event, even assuming that the poster was displayed, the jury was entitled to conclude that the poster did not adequately explain the complaint mechanism. The poster is entitled "IHOP Crisis Management Guidelines" and contains instructions for managing natural disasters, fires, and other events such as outbreaks of food-borne illness and armed robbery. (Defs.' Ex. 1050.) The poster instructs employees to proceed in six steps: (1) remain calm, (2) assess the situation, (3) notify authorities, (4) notify the company, (5) proceed as directed

and (6) refrain from commenting to the media. Oddly, the poster also lists "discrimination claims" as one of the nineteen events for which this six-step process should be used, even though most of the six steps have nothing to do with reporting harassment or discrimination claims. The jury could have concluded that complaints about sexual harassment and discrimination are significantly different than natural disasters and other similar events, and that, in burying information about the mechanism for reporting discrimination claims on a poster designed for dealing with other crises, defendants did not create a clear path for reporting harassment claims.

Defendants argue that, even if their poster was unclear, Shisler and Powell testified that they understood how to report harassment claims. Such testimony is evidence in defendants' favor. However, whether defendants exercised reasonable care is a question that must be answered objectively. Just as a jury may find that a an employer exercised reasonable care even though it did not succeed in preventing sexual harassment, see Caridad v. Metro-Noth Commuter R.R., 191 F.3d 283, 295 (2d Cir. 1999), a jury may find that an employer failed to exercise reasonable care even though some of its employees understood its complaint mechanism.

Based on the above evidence, the jury could have reasonably concluded that defendants did not exercise reasonable care to prevent and correct promptly any sexually harassing behavior. For this reason, I need not consider whether the jury reasonably concluded that defendants failed to establish the second element of their affirmative defense — that Shisler and Powell unreasonably failed to take advantage of any preventive or corrective opportunities provided by defendants or to avoid harm otherwise. Nonetheless, as I explain below, the jury could have reasonably concluded that Shisler and Powell did not act unreasonably.

Defendants argument at trial was that Shisler and Powell acted unreasonably in not reporting Gutierrez's behavior to Steve Smith, the district manager. Defendants argued that had Shisler and Powell gone to Smith, he would have conducted an immediate investigation, as evidenced by the investigation he conducted upon learning that a private investigator was asking questions about harassment at the Racine IHOP. However, the jury could have concluded that Shisler and Powell acted reasonably even though they did not complain to Smith. Both Shisler and Powell activated the sexual harassment complaint mechanism by complaining to their "manager or company representative." Besides asking Gutierrez to stop his harassing behavior, Shisler and Powell each reported Gutierrez's harassment to Nadia Del Rio and Michelle Dahl — each of whom were "managers or company representatives" within the meaning of the sexual harassment policy. Shisler first reported Gutierrez's behavior to Del Rio on March 18, 2005, which was only one day after Gutierrez first propositioned Shisler for sex on the pancake batter, and three days after he told her that she was kinky and liked it rough in bed. After Del Rio failed to take action and the harassment continued, Shisler reported Gutierrez's behavior to the general manager, Michelle Dahl, on March 27, 2005. Only a few days later, on April 3, 2005, Dahl terminated Shisler's employment. From this evidence, the jury could have concluded that Shisler acted reasonably and that she was not required to go directly to Smith.

Powell reported Gutierrez's behavior to Dahl during the first week of April 2005. This was about a month after the harassment commenced. Dahl told Powell that the situation "would be taken care of." (Trial Tr., Vol. II, at 225.) The following week, Del Rio approached Powell and asked her if Gutierrez had been harassing her. Powell said that he had been and told Del Rio that she had already complained to Dahl. Finally, in the last week of April, Powell repeated her complaint to Dahl, and Dahl responded by telling her that she knew what Powell was going to say and that she did not need to say it. Despite these complaints, Gutierrez's harassment continued until he quit his job on May 22, 2005. From this evidence, the jury could have concluded that Powell acted reasonably. Although there was some delay between the time the harassment commenced and the date on which Powell first reported it, the jury was entitled to conclude that the delay was not unreasonable, especially since Powell testified that the harassment became more severe over time. Once Powell reported the harassment to both Dahl and Del Rio and they told her they would take care of it, she had discharged her obligations under the sexual harassment policy. Although Powell might also have complained to Smith once she realized that Dahl and Del Rio had not corrected the problem, only a few weeks had elapsed between the time that Powell complained to Dahl and the date on which Gutierrez left the restaurant. The jury was permitted to conclude that Powell did not act unreasonably in failing to contact Smith during this time period. See Hardy v. Univ. of Ill. at Chicago, 328 F.3d 361, 365 (7th Cir. 2003) (stating that it is for jury to decide whether employee's delay in using employer's complaint mechanism was unreasonable, and that delays of six weeks and three months were not unreasonable as a matter of law).

Accordingly, I conclude that the jury was not required to find that defendants had established their affirmative defense underFaragher and Ellerth.

3. Whether defendants are entitled to a new trial because verdict did not contain question on Faragher/Ellerth affirmative defense.

Defendants argue that they are entitled to a new trial because I did not include a question on the verdict asking specifically whether defendants had established their Faragher/Ellerth affirmative defense. They argue that they were prejudiced by this omission and cite cases dealing with a district judge's failure to include a material issue on a special verdict. See, e.g., U.S. Fire Ins. Co. v. Pressed Steel Tank Co., Inc., 852 F.2d 313, 316 (7th Cir. 1988). However, insofar as the verdict pertained to the hostile work environment claims, it was a general rather than special verdict, in that it did not ask the jury to answer interrogatories about each element of the claims and defenses but simply asked the jury whether it found in favor of plaintiffs or defendants. Thus, cases pertaining to the omission of a material issue from a special verdict are not relevant.

The verdict was a special verdict to the extent that it included interrogatories asking the jury whether claimants were entitled to punitive damages and to separate the amount of compensatory and punitive damages awarded, if any.

In any event, the verdict and jury instructions were not in any way misleading or prejudicial to defendants. The jury instructions, which tracked the Seventh Circuit's pattern instructions, explained all of the elements that the EEOC needed to prove in connection with Shisler and Powell's hostile work environment claims. The instructions told the jury to return a verdict in favor of defendants if it determined that the EEOC had not established all of these elements. The instructions then stated that if the EEOC had established these elements, the jury was to consider whether defendants had established their affirmative defense. The instructions told the jury to return a verdict in favor of defendants if it determined that defendants had established both elements of the defense. Consistently with the instructions, the verdict simply asked the jury whether it found in favor of plaintiff or defendants on each claim.

4. Whether defendants are entitled to a new trial because of admission of evidence regarding sexual harassment of employees other than claimants.

Defendants next argue that they are entitled to a new trial because I admitted evidence regarding the sexual harassment of employees other than Shisler and Powell. Defendants argue that this evidence was irrelevant because it had nothing to do with whether Shisler and Powell experienced sexual harassment. However, as explained above, evidence of other instances of sexual harassment was relevant to defendants' Faragher/Ellerth affirmative defense because it suggested that Flipmeastack's sexual harassment policy was not reasonably effective. See Loughman, 395 F.3d at 407 (evidence of "consistent stream of sexual harassment" suggests that employer's anti-harassment policy was not effective). Thus, this evidence was relevant.

5. Whether jury's award of compensatory damages to Powell was proper.

Defendants argue that the jury's award of $4,000 in compensatory damages to Powell was improper. Defendants contend that, in awarding this amount, the jury must have awarded damages for emotional distress caused by third parties, including Powell's boyfriend and her father. At trial, Powell testified that when she told her boyfriend about Gutierrez's harassment he became angry and physically assaulted her. Powell also testified that when her father learned about the harassment he became upset over the fact that she would not quit her job. This led to an extended period during which Powell and her father did not speak to one another. Powell's father died in a skydiving accident shortly thereafter. Defendants argue that Gutierrez's harassment cannot be deemed the cause of the emotional distress associated with these two events.

To begin with, it is important to point out that Powell's injuries were not limited to the emotional distress associated with her relationships with her boyfriend and father. Rather, Powell also suffered harm in the form of the humiliation and distress caused by Gutierrez's harassment, such as when he propositioned her for sex, pressed his pelvis against her, pulled her hair, and brushed against her breasts and buttocks. Much of this harassment was severe and occurred in front of other customers and employees, and thus the jury could have reasonably awarded her $4,000 as compensation for humiliation and degradation. Cf. United States v. Balistrieri, 981 F.2d 916, 932 (7th Cir. 1992) (stating that "[t]he more inherently degrading or humiliating the defendant's action is, the more reasonable it is to infer that a person would suffer humiliation or distress from that action").

However, even if the jury considered Powell's relationships with her boyfriend and father when computing her damages, the award would be proper. While it is true that defendants cannot be held liable for any emotional distress caused by Powell's boyfriend's assault or her father's untimely death, the jury could properly consider the strain that Gutierrez's harassment placed on Powell's personal relationships. Considering both the humiliation that Powell suffered as a result of Gutierrez's actions along with the strain it placed on her relationships, $4,000 is not excessive. Further, the jury was not required to precisely determine how much of Powell's distress was due to Gutierrez's harassment and how much was due to her father's death and the actions of her boyfriend. Merriweather v. Family Dollar Stores of Ind., Inc., 103 F.3d 576, 581 (7th Cir. 1996) (stating that jury need not quantify how much psychological distress was caused by defendant's actions rather than other events).

6. Whether jury permissibly awarded punitive damages.

Defendants next challenge the jury's award of $100,000 in punitive damages to Powell. A Title VII plaintiff is entitled to punitive damages if the defendant engages in discriminatory practices "with malice or with reckless indifference to [her] federally protected rights." 42 U.S.C. § 1981a(b)(1). This requires proof that the defendant acted "in the face of a perceived risk that its actions will violate federal law."Kolstad v. Am. Dental Ass'n, 527 U.S. 526, 535-36 (1999).

In the present case, defendants do not dispute that the jury reasonably concluded that Gutierrez acted in the face of a perceived risk that his actions violated federal law. However, Gutierrez's state of mind is not automatically imputable to defendants, and defendants can avoid liability for punitive damages if they establish that they made good-faith efforts to comply with Title VII. Id. at 545-46. Here, defendants contend that they made good-faith efforts to comply with Title VII by adopting an anti-harassment policy and complaint mechanism, and that therefore they are immune from liability for punitive damages as a matter of law.

However, the existence of an anti-harassment policy "is not sufficient in and of itself to insulate an employer from a punitive damages award." Bruso v. United Airlines, Inc., 239 F.3d 848, 858-59 (7th Cir. 2001). Otherwise, "employers would have an incentive to adopt formal policies in order to escape liability for punitive damages, but they would have no incentive to enforce those policies." Id.; accord Lampley v. Onyx Acceptance Corp., 340 F.3d 478, 482-83 (7th Cir. 2003); Hertzberg v. SRAM Corp., 261 F.3d 651, 663 (7th Cir. 2001). Further, the jury could have reasonably concluded that defendants' policy did not constitute a good-faith effort to comply with Title VII. As discussed above, Flipmeastack's anti-harassment policy included language warning employees about the "severity" of making false charges of discrimination or harassment. Victoria Janmohammed, the president of Flipmeastack and the person with ultimate authority for defendants' policy, testified that she added this language to the policy after her husband was sued for sexual harassment by an employee at one of his other IHOPs. Although Janmohammed denied that she added this language to the policy as a result of the lawsuit brought against her husband, the jury could have reasonably inferred that Janmohammed was upset by this charge and that she wanted to discourage other such claims. Further, the jury could have concluded that the language about making false claims deterred employees from complaining about harassment out of fear that their complaint would be deemed false and that they would be disciplined for making a false claim.

Moreover, the evidence allowed a reasonable jury to conclude that defendants' efforts to educate their managerial employees about sexual harassment were inadequate. As discussed, although Gutierrez, Del Rio and Dahl all testified that they received sexual harassment training, none of them did what the policy required. Gutierrez engaged in harassment himself and failed to report Smith's harassment of Dahl. Del Rio decided that she did not need to take Powell's complaints about Gutierrez's harassment seriously because Powell did not seem to be afraid of him. Dahl ignored numerous complaints about Gutierrez's harassment. The jury could have concluded that this consistent failure of management to fulfill their duties evinced a lack of effort on the part of Flipmeastack to ensure that its managerial employees actually understood what sexual harassment was and what their responsibilities were under the policy.

Finally, the jury could have inferred from defendants' "crisis management" poster that Flipmeastack had made only a half-hearted attempt to comply with Title VII. As noted, defendants held this poster out as their way of ensuring that all employees knew how to report sexual harassment. Yet, the poster is clearly designed to deal with events such as crime, fires and natural disasters rather than complaints of discrimination or harassment. Although the poster does list "discrimination claims" as one of the nineteen events to which it applies, it lists such claims as part of a list of three "other emergencies" — the other two being fires and "labor union intrusion." The jury could have concluded that defendants added "discrimination claims" to this list as an afterthought rather than as part of a good-faith effort to comply with Title VII.

Accordingly, the jury could have reasonably concluded that defendants' efforts to comply with Title VII fell short of the good-faith effort required to avoid liability for punitive damages.

7. Whether Powell's damages must be reduced pursuant to statutory cap.

Finally, defendants argue that no defendant employed more than 100 employees and that therefore Powell's compensatory and punitive damages must be reduced to $50,000 pursuant to 42 U.S.C. § 1981a(b)(3)(A). However, as explained below, Powell, along with every other employee under the management of Flipmeastack, was "employed" by Flipmeastack. Because Flipmeastack managed at least 201 employees, the statutory cap is no lower than $200,000. Thus, Powell's compensatory and punitive damages are within the applicable statutory cap and need not be reduced.

Defendants have not challenged the jury's award as excessive as a matter of due process, and therefore I do not consider whether the $100,000 award must be reduced for reasons other than the statutory cap.

B. Plaintiff's Motion as to Scope of Remedies

1. Liability for damages

The EEOC argues that all three defendants — MHR, Flipmeastack, and Salauddin Janmohammed — are jointly and severally liable for the $105,000 verdict. Defendants argue that MHR is the entity that employed Shisler and Powell and that therefore MHR is the only party liable for the verdict. However, as explained below, Flipmeastack also employed Shisler and Powell, and therefore it is also liable for the verdict. Further, as the recipient of MHR's assets upon dissolution, Salauddin Janmohammed is personally liable for the verdict in the amount of $15,000.

a. Liability of Flipmeastack

As noted above, at the time of the events that give rise to this suit, Salauddin Janmohammed owned approximately twenty IHOP restaurants, either personally or through various business entities. He was the franchisee of the IHOP where Shisler and Powell worked. Although the franchise agreement between Janmohammed and IHOP listed Janmohammed, individually, as the franchisee of the Racine IHOP, Janmohammed incorporated MHR in connection with the franchise and became its president and sole shareholder. Janmohammed did not formally assign the franchise to MHR, but it was apparently Janmohammed's intent that MHR be the de facto franchisee.

However, MHR did not actually operate the franchise. Janmohammed delegated that function to Flipmeastack. According to Victoria Janmohammed, Flipmeastack's business consists of providing "management consulting" services to all of the IHOPs owned by Salauddin Janmohammed. However, "management consulting" is not an apt description of what Flipmeastack does. Usually, management consultants make recommendations to firms for improving their business, and the firms decide whether to implement the consultants' recommendations. Flipmeastack does not make recommendations to Salauddin Janmohammed about the operation of his IHOPs; rather, it operates them outright. That is, when Janmohammed decides to open a new IHOP, he hires Flipmeastack to staff the restaurants and supervise their day-to-day operations without any input from him whatsoever. Flipmeastack does this through its district managers, each of whom is responsible for several of Janmohammed's restaurants. When Janmohammed opens a new restaurant, Flipmeastack assigns one of its district managers to that restaurant. The district manager hires and supervises the restaurant's general manager, and the general manager then hires and supervises the assistant managers and remaining employees at each store. All restaurant-level employees receive their paychecks from the corporation associated with their restaurant (e.g., MHR), while all district managers and higher employees receive their paychecks from Flipmeastack. Although Flipmeastack does not usually hire the assistant managers and servers, it exercises control over them indirectly through general managers, and also directly, in that district managers will often participate in the management of individual restaurants. At trial, the district manager for the Racine IHOP, Steve Smith, testified that he considered himself the servers' "boss" (Trial Tr., Vol. III, at 539), and stated that he was authorized to hire and fire servers on the spot (id. at 617).

All policies concerning the day-to-day operation of Janmohammed's restaurants — such as employee training, what vendors to use when purchasing food, and store promotions — are formulated and monitored by Flipmeastack. As explained above, Flipmeastack is also in charge of the sexual harassment policy and complaint mechanism at all of Janmohammed's IHOPs.

The Seventh Circuit has recognized that "multiple entities may be considered an employee's `employer' for the purposes of Title VII liability." Tamayo v. Blagojevich, 526 F.3d 1074, 1088 (7th Cir. 2008). In the present case, the parties agree that MHR was one of Shisler and Powell's employers. Whether Flipmeastack was also their employer depends on general principles of agency law.See, e.g., Ellerth, 524 U.S. at 754-55. Although a number of factors are normally considered when determining whether an employer-employee relationship exists, under Title VII the pertinent question is whether "the defendant so far controlled the plaintiff's employment relationship that it [is] appropriate to regard the defendant as the de facto or indirect employer of the plaintiff." EEOC v. Illinois, 69 F.3d 167, 169 (7th Cir. 1995). This approach is sensible, because Title VII is concerned with preventing discrimination in the workplace, and the entity with the greatest ability to prevent and correct such discrimination — i.e., the entity exercising control over the workplace — should be charged with liability for doing so. See Faragher, 524 U.S. at 803 (stating that employer should be held vicariously liable for acts of harassing supervisor because employer has the greatest opportunity to screen supervisors, train them, and monitor their performance); Brewer v. Bd. of Trs. of the Univ. of Ill., 479 F.3d 908, 920 (7th Cir. 2007) (stating that in Title VII context agency principles should be construed in light of practical reason for imposing vicarious liability on employers — to give employers incentive to control their employees).

In the present case, Flipmeastack exercised total control over the employees of the Racine IHOP. As described above, Salauddin Janmohammed, MHR's president, did not in any way participate in the operation of the restaurant. Instead, he hired Flipmeastack to do so, which then hired all of the restaurant's employees and supervised their day-to-day activities. MHR essentially subcontracted responsibility for the Racine IHOP's operations to Flipmeastack, and Flipmeastack then hired employees who were directly answerable to it, even though they received their paychecks from MHR. Indeed, although paychecks were issued by MHR, it was Flipmeastack that determined how much each employee would be paid, and whether the employee would receive a raise. Further, Flipmeastack was responsible for administering the sexual harassment and diversity policy at the Racine IHOP, along with all other policies regarding the operation of the restaurant. Thus, Flipmeastack was an "employer" of Shisler and Powell, even though it did not sign their paychecks. See Carver v. Sheriff of LaSalle County, Ill., 243 F.3d 379, 382 (7th Cir. 2001) (stating that "the source of funds need not coincide with the identity of the employer," and that an entity can be an individual's "employer" even if it does not supply the funds that are used to pay him or her). Accordingly, Flipmeastack is jointly and severally liable for the verdict.

Before moving on, I note that the parties had framed the issue of Flipmeastack's liability in terms of Papa v. Katy Industries, Inc., 166 F.3d 937 (7th Cir. 1999), a case in which the Seventh Circuit was asked to disregard the separate corporate existence of several affiliated companies. The court held that although each separate entity within a set of affiliated companies was entitled to be treated as such, the separate existence of each entity could be disregarded if it would be appropriate to "pierce the corporate veil" or

if the enterprise split itself into separate entities for the purpose of avoided coverage under the antidiscrimination laws.Id. at 940-42. The court also recognized that it would be appropriate to hold a parent company liable for the act of its subsidiary if the parent company "directed the discriminatory act, practice, or policy of which the employee of its subsidiary was complaining." Id. at 941.

Although Papa v. Katy Industries, Inc. has some relevance to the present case, I find that it is not entirely on point. As discussed, the dispositive issue is whether Flipmeastack was one of Shisler and Powell's employers, an issue not addressed inPapa. However, Papa has some relevance, in that it serves as a reminder that a company with a distinct corporate existence can be held liable for its own acts. Id. Thus, although Flipmeastack is a distinct legal entity, it can be held liable for employing Shisler, Powell and Gutierrez and failing to prevent and correct promptly Gutierrez's sexually harassing behavior.

Flipmeastack argues that it did not "direct" Gutierrez to harass Shisler and Powell, and that therefore the "third situation" from Papa does not apply in this case. However, in the context of vicarious liability for sexual harassment that does not result in a tangible employment action, an employer's liability does not arise from the employer's affirmative act but from the employer's failure to act — that is, its failure to prevent or correct the discrimination. Faragher, 524 U.S. at 807;Ellerth, 524 U.S. at 765. In the present case, Flipmeastack's liability does not stem from any corporate affiliation between Flipmeastack, MHR and the Janmohammeds, but from the fact that Flipmeastack had an independent duty to protect its own employees from sexual harassment. Thus, Flipmeastack's liability is based on its own act, even though it did not direct Gutierrez's behavior.

b. Liability of Salauddin Janmohammed

The EEOC next argues that I may pierce MHR's corporate veil and hold Salauddin Janmohammed personally liable for the verdict. However, this issue is somewhat moot due to the fact that MHR sold its assets and has been dissolved. Under Illinois law, shareholders of a dissolved corporation become liable for its debts, to the extent of any distributions they received. 805 Ill. Comp. Stat. 5/12.80; Matos v. Richard A. Nellis, Inc., 101 F.3d 1193, 1195 (7th Cir. 1996). Thus, Janmohammed must personally satisfy any judgment against MHR to the extent of the distributions he received from MHR.

The parties dispute the amount that Janmohammed received when he dissolved MHR. The EEOC contends that Janmohammed received $210,000, the amount that the buyers paid for MHR's assets. Janmohammed contends that he is only liable up to $15,000, since that is the extent of the cash he received from the asset sale. The EEOC seems to concede that Janmohammed did not receive more than $15,000 in cash. However, the EEOC contends that, as part of the sale, the buyers of MHR's assets agreed to assume $195,000 worth of Janmohammed's personal liability to the IHOP corporation. There is some confusion in the record as to whether the assumed liability was the corporation's liability or Janmohammed's personal liability. There is also some confusion over exactly what MHR's assets consisted of. The primary asset was the franchise itself, but the franchise was in Janmohammed's name, not MHR's. On this record, it is impossible to conclude whether Janmohammed received more than $15,000 from the sale of MHR's assets. Because the EEOC has the burden of proof and has not demonstrated by the preponderance of the evidence that Janmohammed received more than $15,000

in distributions from MHR, I determine that the EEOC can collect no more than $15,000 from Janmohammed.

I also note that the EEOC did not request an evidentiary hearing on this issue.

2. Injunctive Relief

Title VII allows a court to award injunctive relief when it finds that the defendant "intentionally engaged in or is intentionally engaging in an unlawful employment practice." 42 U.S.C. § 2000e-5(g)(1). The court may enjoin the unlawful employment practice and also "order such affirmative action as may be appropriate." Id. The decision of whether to invoke injunctive relief is within the district court's discretion, as is the scope of any equitable relief awarded. Bruso, 239 F.3d at 863; EEOC v. Gurnee Inn Corp., 914 F.2d 815, 817 (7th Cir. 1990). In deciding whether to award equitable relief, I am bound by the jury's factual findings on plaintiff's legal claims but may make additional findings of fact as needed. Lebow v. Am. Trans Air, Inc., 86 F.3d 661, 672-73 (7th Cir. 1996); Avitia v. Metro. Club of Chicago, Inc., 49 F.3d 1219, 1231 (7th Cir. 1995).

In the present case, the jury found that defendants intentionally engaged in an unlawful employment practice, and so injunctive relief is authorized. EEOC v. Ilona of Hungary, Inc., 108 F.3d 1569, 1578 (7th Cir. 1997). However, the claimants no longer work for defendants and do not intend to seek future employment at any of their restaurants. Nonetheless, the EEOC requests injunctive relief against Flipmeastack in order to ensure that current and future employees of the restaurants under Flipmeastack's control do not become victims of sexual harassment. In this regard, the EEOC requests an order (1) enjoining Flipmeastack from allowing or failing to promptly prevent and correct sexual harassment of its employees; (2) requiring Flipmeastack to create a new sexual harassment training program for all employees that emphasizes management's responsibility to prevent and correct sexual harassment; (3) requiring Flipmeastack to post a toll-free number for making sexual harassment complaints at all of the restaurants under its control; (4) requiring Flipmeastack to report any complaint of sexual harassment to the EEOC within thirty days and provide a description of the complaint, the investigation that was conducted, and the result of the complaint; (5) requiring Flipmeastack to post a notice regarding this case at all restaurants under its control; and (6) requiring Flipmeastack to maintain records of its compliance with the injunction and to allow the EEOC access to these records on forty-eight hours' notice.

Even though the claimants no longer work for defendants, I conclude that injunctive relief is appropriate because the problems that led to the present suit could possibly persist in the future. See Ilona of Hungary, 108 F.3d at 1578-79 (injunctive relief is warranted when "discriminatory conduct could possibly persist in the future"). As discussed above, in finding defendants liable for the claimants' hostile work environment and awarding Powell punitive damages, the jury implicitly found that defendants' anti-harassment policy, training and complaint mechanism were deficient. Insofar as the jury's findings are not comprehensive, I also find that defendants' efforts to prevent and correct promptly any sexually harassing behavior are deficient. As noted, the policy itself, in warning employees about the severity and seriousness of sexual harassment allegations, seems to discourage harassment complaints and gives the impression that an employee will be disciplined if his or her complaint is not sustained. Further, the "crisis management" poster does not clearly explain Flipmeastack's sexual harassment complaint mechanism. Finally, based on the

testimony at trial, I find that Flipmeastack's managerial employees do not understand their duties under the sexual harassment policy. The EEOC's requested injunction is intended to address these deficiencies, and therefore I conclude that the injunction is warranted. See Gurnee Inn, 914 F.2d at 817 (affirming entry of injunction intended to address deficiencies in employer's anti-harassment policy and grievance procedure).

Defendants argue that injunctive relief cannot extend to the other IHOPs owned by Salauddin Janmohammed and managed by Flipmeastack because they are separate entities and not parties to this case. However, the EEOC asks that the injunction be directed to Flipmeastack, and as explained above, Flipmeastack exercises functional control over all of the restaurants owned by Janmohammed. It is Flipmeastack that supervises all employees at Janmohammed's restaurants and administers the anti-harassment policy and complaint mechanism. Thus, it is Flipmeastack's employment practices that need to be corrected, and so the injunction is appropriately addressed to it.

Defendants contend that Flipmeastack has no authority to, among other things, post notices about the present lawsuit in Janmohammed's restaurants. This would be true if Janmohammed's restaurants terminated their contracts with Flipmeastack and no longer relied on it for management services. However, so long as those restaurants contract with Flipmeastack and delegate control over the workplace to it, Flipmeastack has authority to post the notices required by this injunction, just as it had authority to post the "crisis management" guidelines at the Racine IHOP.

C. Miscellaneous Motions

Two remaining motions filed by defendants require brief discussion. First, defendants move for judgment on Shisler's retaliation claim, which the jury rejected, and on the claims of Rachel Schreier, the claimant who did not appear at trial. To the extent that defendants request an order recognizing that Shisler's retaliation claim was unsuccessful and that Schreier's claims have been dismissed, the motion is granted. However, to the extent that the motion requests entry of a separate judgment on those claims, the motion is denied because the general rule is that when an action presents multiple claims for relief all such claims should be resolved in one final judgment, see, e.g., Dale v. Lappin, 376 F.3d 652, 654 (7th Cir. 2004), and there is no reason to enter a separate judgment in this case. Further, to the extent that the motion requests costs in connection with the unsuccessful claims, the motion is denied because defendants are not "prevailing parties" within the meaning of Federal Rule of Civil Procedure 54(d)(1). Prevailing party status is not awarded on a claim-by-claim basis. Slane v. Mariah Boats, Inc., 164 F.3d 1065, 1068 (7th Cir. 1999). Rather, the prevailing party is the party who obtains substantial relief, even if that party did not win on every claim. In the present case the prevailing party is clearly the EEOC.

Second, defendants move to strike certain materials that the EEOC included in its affidavit in support of its post-verdict motion. These materials were not offered as evidence at trial, and defendants contend that for this reason I may not consider them in connection with the present motions. However, the EEOC submitted these materials to support its equitable claims — claims for which I am the finder of fact. Of course, defendants are

entitled to contest the facts and to insist that I resolve any factual disputes at an evidentiary hearing. But I did not find it necessary to consult the disputed materials, and so no evidentiary hearing was required. Defendants' motion to strike will therefore be denied as moot.

III. CONCLUSION

For the reasons stated,

IT IS ORDERED that the EEOC's post-trial motion is GRANTED. IT IS FURTHER ORDERED that the clerk of court enter judgment in favor of the EEOC and against defendants jointly and severally in the amount of $105,000, provided that the EEOC shall recover no more than $15,000 from Salauddin Janmohammed.

IT IS FURTHER ORDERED that the clerk of court enter the injunction attached to this order as Attachment A.

IT IS FURTHER ORDERED that defendants' motion for judgment as a matter of law and alternative motion for a new trial is DENIED. IT IS FURTHER ORDERED that defendants' motion for entry of judgment and costs regarding the EEOC's unsuccessful claims is GRANTED IN PART and DENIED IN PART, as explained above.

FINALLY, IT IS ORDERED that defendants' motion to strike is DENIED as MOOT.

Dated at Milwaukee, Wisconsin this 31 day of August, 2010.

ATTACHMENT A

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WISCONSIN EQUAL EMPLOYMENT OPPORTUNITY COMMISSION Plaintiff, v. Case No. 06-C-0715 MANAGEMENT HOSPITALITY OF RACINE, INC., d/b/a INTERNATIONAL HOUSE OF PANCAKES, FLIPMEASTACK, INC., and SALAUDDIN JANMOHAMMED, Defendants.

INJUNCTION AGAINST FLIPMEASTACK, INC.

Pursuant to Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e, et seq., the court imposes the following injunctive provisions against Flipmeastack, Inc. ("Flipmeastack") for four years from the date hereof:

1. Flipmeastack is enjoined from allowing a sexually hostile work environment to exist at any restaurant under its management.

2. Flipmeastack is ordered to create a new sexual harassment training program for all employees under its direct or indirect supervision that emphasizes the responsibility of supervisors to prevent and correct promptly and sexually harassing behavior. Further, Flipmeastack is ordered to post, at all restaurants that it manages, a toll-free number for harassment and discrimination complaints by employees and a written anti-harassment and anti-discrimination policy.

3. Within thirty (30) days after entry of this order, Flipmeastack shall provide counsel for the EEOC with a proposal for complying with Paragraph 2, above. The EEOC shall advise the company within thirty (30) days of receipt whether the proposal is acceptable. If the EEOC finds the proposal acceptable, Flipmeastack shall implement it within thirty (30) days of the EEOC's approval. If the EEOC find the proposal unacceptable, it shall identify any deficiencies and make recommendations for correcting them. Flipmeastack will then have ten (10) days to accept or reject the EEOC's recommendations. If Flipmeastack rejects the recommendations and the parties cannot settle their differences within ten (10) days after Flipmeastack communicates its rejection, either party may make a motion to the court for a decision on the proposal.

4. Flipmeastack shall post the attached Notice informing employees of this order in a conspicuous location where such Notice can be easily seen by all employees.

5. Flipmeastack shall report to the EEOC within thirty (30) days of any complaint of sexual harassment at any restaurant subject to its management and provide the EEOC with a description of the complaint, the investigation that was conducted, and the result of the complaint.

6. Flipmeastack shall maintain records of its compliance with the foregoing and shall allow the EEOC access thereto on forty eight (48) hours' notice to Flipmeastack. Jon W. Sanfilippo _______________________________ _______________________________ Date Clerk _______________________________ (By) Deputy Clerk Approved as to form this __ day of August, 2010. _______________________________ LYNN ADELMAN District Judge

Notice to all employees of IHOP restaurants operated by Flipmeastack, Inc.

Flipmeastack, Inc., an operator of IHOP restaurants owned by Salauddin Janmohammed, in a lawsuit brought by the United States Equal Employment Opportunity Commission (EEOC), has been found by a federal jury to have violated Title VII of the United States Civil Rights Act of 1964 by allowing a sexually hostile work environment. The jury awarded a total of $5,000 in compensatory damages to two victims and $100,000 in punitive damages to one of them.

As a result of this lawsuit, the United States District Court for the Eastern District of Wisconsin has placed Flipmeastack, Inc., under an injunction for four years requiring that it not allow a sexually hostile work environment at its IHOP restaurants.

This notice is a reminder that employees have a right to be protected from sexual harassment in the workplace, and may complain of such unlawful discrimination both internally and to the EEOC.

The EEOC enforces the federal laws against discrimination in employment on the basis of race, color, religion, national origin, sex, age or disability. If you believe you have been discriminated against, you may contact the EEOC at (312) 353-8195. The EEOC charges no fees and has a TTD number.

THIS IS AN OFFICIAL NOTICE AND MUST NOT BE DEFACED BY ANYONE

This Notice must remain posted for four years from the date below and must not be altered, defaced or covered by any other material. Any questions aboutPGWest Page 827this Notice or compliance with its terms may be directed to: EEOC, 500 West Madison Street, Suite 2800, Chicago, IL 60661. Dated: ______________________________ ______________________________ Lynn Adelman United States District Court Judge