Employment — sexual harassment

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United States Court of Appeals For the Seventh Circuit

Civil

Employment — sexual harassment

Where the district court sua sponte injected a new theory of liability into the case during trial, the finding of liability must be reversed.

“We agree with the Defendants that the control theory of liability was injected into the case too late. In support of our ruling, we find Burdett v. Miller, 957 F.2d 1375 (7th Cir. 1992) directly on point. In Miller, we overturned a RICO conviction based on an enterprise theory raised not by the parties, but by the district court when it entered its findings of fact and conclusions of law post trial. The complaint alleged that Miller and his accounting firm were an enterprise that engaged in a pattern of racketeering activity consisting of misleading statements and omissions that violated federal securities laws. Id. at 1379. The plaintiff maintained her enterprise theory throughout the trial. Id. at 1380. In the district court’s findings of fact and conclusions of law, it found the accounting firm had not been involved in the alleged illegal activity, so there was no enterprise consisting of Miller and his accounting firm. Id. at 1379. Instead, the district court found Miller and three of his associates in the fraud constituted a RICO enterprise, even though, during the trial, there was ‘no mention of an enterprise consisting of the four conspirators themselves.’ Id. at 1380. We concluded that although there was extensive evidence concerning Miller’s connection with his three associates, the parties did not consent, within the meaning of Rule 15(b) of the Federal Rules of Civil Procedure, to define the enterprise as consisting of Miller and his three associates during the trial. Id. Indeed, we noted that ‘Miller had no warning that evidence manifestly admissible because relevant to the conspiracy charge would also be used to establish the existence of an enterprise to which no one in the course of this litigation had alluded.’ Id. Accordingly, we held that the district court committed prejudicial error by changing the theory of the case after the close of the evidence, because it ran counter to the spirit of the adversary system and deprived the defendant of the opportunity to rebut the new enterprise theory. Id. In the EEOC’s pre-trial and post-trial motions, it relied solely on the ‘first’ and ‘third situation’ raised in Papa. After completion of post-trial briefing, the district court, sua sponte, injected an entirely new theory of liability based upon a case never cited by either party, EEOC v. Illinois, supra. The district court reframed the issue as ‘whether the defendant so far controlled the plaintiff’s employment relationship that it [is] appropriate to regard [Flipmeastack] as the de facto or indirect employer of the plaintiff.’ In so ruling, the district court deprived the Defendants of presenting contrary evidence. This error is not harmless. It is evident from the district court’s post-trial Decision and Order that had it decided Flipmeastack’s corporate liability strictly from the parties’ written submissions, it would have found Flipmeastack not liable for Shisler’s and Powell’s sexual harassment.”

Affirmed in part, and Reversed in part.

10-3247 EEOC v. Management Hospitality of Racine, Inc.

Appeal from the United States District Court for the Eastern District of Wisconsin, Adelman, J., Young, J.