IN THE UNITED STATES COURT OF APPEALS
                     FOR THE FIFTH CIRCUIT
            ________________________________________

                    Nos. 06-10871 & 06-10916
            ________________________________________

EQUAL EMPLOYMENT OPPORTUNITY 
COMMISSION, 

          Plaintiff-Appellant-Cross-Appellee

     v.

STOCKS, INC., doing business as CAFE ITALIA
and CIA CHOW INC.

          Defendant-Appellee-Cross-Appellant.
      __________________________________________________

        On Appeal from the United States District Court 
    for the Northern District of Texas, No. 3-04-CV-2109-H,
        The Honorable Barefoot Sanders, S.J., Presiding
       __________________________________________________
                                
          BRIEF OF THE UNITED STATES EQUAL EMPLOYMENT
              OPPORTUNITY COMMISSION AS APPELLANT
       __________________________________________________

RONALD S. COOPER                        
General Counsel                    U.S. EQUAL EMPLOYMENT 
                                   OPPORTUNITY COMMISSION
VINCENT J. BLACKWOOD               Office of General Counsel
Acting Associate General Counsel   1801 L Street, N.W., Room 7018
                                   Washington, D.C.  20507
CAROLYN L. WHEELER                 (202) 663-4772
Assistant General Counsel          joseph.seiner@eeoc.gov   
                                   
JOSEPH A. SEINER                   
Attorney                      

               STATEMENT REGARDING ORAL ARGUMENT
                                
     The Commission believes that oral argument would materially assist this
Court in resolving the issue presented here  the ability to seek punitive damages. 
This issue is both complicated and important to the Commission's statutory
obligation of enforcing Title VII of the Civil Rights Act of 1964.  The
Commission therefore believes that a discussion of this and related issues at oral
argument would be beneficial to the Court.



                       TABLE OF CONTENTS
                                
Table of Authorities . . . . . . . . . . . . . . . . . . . . .iii

Statement of Jurisdiction. . . . . . . . . . . . . . . . . . . .1

Statement of the Issue . . . . . . . . . . . . . . . . . . . . .2

Statement of the Case. . . . . . . . . . . . . . . . . . . . . .2

Statement of the Facts . . . . . . . . . . . . . . . . . . . . .3

     A.     Background.. . . . . . . . . . . . . . . . . . . . .3

     B.     Proceedings Below. . . . . . . . . . . . . . . . . .6

Standard of Review . . . . . . . . . . . . . . . . . . . . . . .8

Summary of Argument. . . . . . . . . . . . . . . . . . . . . . .9

Argument . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

THE DISTRICT COURT ERRED IN FAILING TO SUBMIT A 
PUNITIVE DAMAGES CLAIM TO THE JURY . . . . . . . . . . . . . . 11

     A.     The Illegal Retaliation was Perpetrated by Management Employees.13

     B.     The Company Knew that its Actions Were in Violation of Title VII.16

     C.     Cafe Italia has not Satisfied its Burden of Showing that the Company   
             Acted in Good Faith.. . . . . . . . . . . . . . . 21

     D.     Relief.. . . . . . . . . . . . . . . . . . . . . . 22

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Certificate of Service
Certificate of Compliance
                                
Addendum (unpublished decisions cited in brief)
                      TABLE OF AUTHORITIES
Federal Cases

Anderson v. G.D.C., Inc., 
     281 F.3d 452 (4th Cir. 2002). . . . . . . . . . . . . . . 15

Black v. Fidelity & Guaranty Insurance Underwriters, Inc., 
     582 F.2d 984 (5th Cir. 1978). . . . . . . . . . . . . . . 23

Bruso v. United Airlines, Inc., 
     239 F.3d 848 (7th Cir. 2001). . . . . . . . . . . 16, 19, 21

Davey v. Lockheed Martin, 
     301 F.3d 1204 (10th Cir. 2002). . . . . . . . . . . . . . 22

Deffenbaugh-Williams v. Wal-Mart, 
     188 F.3d 278 (5th Cir. 1999). . . . . . . . . . . 15, 21, 22

Dossett v. First State Bank, 
     399 F.3d 940 (8th Cir. 2005). . . . . . . . . . . . . . . .8

EEOC v. Heartway Corporation, 
     466 F.3d 1156 (10th Cir. 2006). . . . . . . . . . .19, 24-25

EEOC v. Wal-Mart Stores, Inc., 
     35 Fed. Appx. 543, No. 00-16887 
     (9th Cir. May 16, 2002) (unpublished) . . . . . . . . . . 24

EEOC v. Wal-Mart, 
     187 F.3d 1241 (10th Cir. 1999). . . . . . . . . . . . 15, 18

Hardin v. Caterpillar, 
     227 F.3d 268 (5th Cir. 2000). . . . . . . . . . . .12, 23-24

Knowlton v. Teltrust Phones, Inc., 
     189 F.3d 1177 (10th Cir. 1999). . . . . . . . . . . . . . 23

Kolstad v. American Dental Association, 
     527 U.S. 526 (1999) . . . . . . . . . . . . . . . . . passim

Lowery v. Circuit City Stores, Inc., 
     206 F.3d 431 (4th Cir. 2000). . . . . . . . . . . . . 17, 20

MacGregor v. Mallinckrodt, 
     373 F.3d 923 (8th Cir. 2004). . . . . . . . . . . . . . . 21

McDonough v. City of Quincy, 
     452 F.3d 8 (1st Cir. 2006). . . . . . . . . . . . .8, 21, 25

McInnis v. Fairfield Communities, Inc., 
     458 F.3d 1129 (10th Cir. 2006). . . . . . . . . . . . . . 17

Ogden v. Wax Works, Inc., 
     214 F.3d 999 (8th Cir. 2000). . . . . . . . . . . . . . . 17

Passantino v. Johnson & Johnson Consumer Prods., Inc., 
     212 F.3d 493 (9th Cir. 2000). . . . . . . . . . . . . . . 21

Pride Ford v. Motors Ins. Corp., 
     80 Fed.Appx. 329, No. 02-60956 (5th Cir. Nov. 5, 2003) (unpublished)8

Romano v. U-Haul In'l, 
     233 F.3d 655 (1st Cir. 2000). . . . . . . . . . . . . . . 18

Rubinstein v. Adm'rs of the Tulane Educ. Fund, 
     218 F.3d 392 (5th Cir. 2000). . . . . . . . . . . . . 12, 16

Schexnayder v. Bonfigilio, 
     167 Fed.Appx. 364, 2006 WL 25963,
     No. 05-30221 (5th Cir. Jan. 5, 2006) (unpublished). . . . 16

Thompson and Wallace v. Falconwood Corp., 
     100 F.3d 429 (5th Cir. 1997). . . . . . . . . . . . . . . .8

U.S. v. Space Hunters, Inc., 
     429 F.3d 416 (2d Cir. 2005) . . . . . . . . . . . . . . . .9

Zimmermann v. Assocs. First Capital Corp., 
     251 F.3d 376 (2d Cir. 2001) . . . . . . . . . 16, 19, 21, 22
                        Federal Statutes
28 U.S.C.  1291 . . . . . . . . . . . . . . . . . . . . . . . .1

28 U.S.C.  451. . . . . . . . . . . . . . . . . . . . . . . . .1

28 U.S.C.  1331 . . . . . . . . . . . . . . . . . . . . . . . .1

28 U.S.C.  1337 . . . . . . . . . . . . . . . . . . . . . . . .1

28 U.S.C.  1343 . . . . . . . . . . . . . . . . . . . . . . . .1

28 U.S.C.  1345 . . . . . . . . . . . . . . . . . . . . . . . .1

42 U.S.C.  1981a. . . . . . . . . . . . . . . . . . . . 1, 11-12

42 U.S.C.  2000e-5(f) . . . . . . . . . . . . . . . . . . . . .1
                       Other Authorities
Fed. R. App. Proc. 4(a). . . . . . . . . . . . . . . . . . . 1, 3
                                
Restatement (Second) of Agency . . . . . . . . . . . . . . . . 13
                                
Restatement (Second) of Torts. . . . . . . . . . . . . . . . . 14
                                
1 L. Schlueter & K. Redden, Punitive Damages . . . . . . . . . 14
       
                         
                   STATEMENT OF JURISDICTION
     The district court had jurisdiction over this Title VII sexual harassment and
retaliation suit brought by the Equal Employment Opportunity Commission
(EEOC or Commission) against Stocks, Inc. d/b/a Cafe Italia (Cafe Italia) pursuant
to 28 U.S.C.  451, 1331, 1337, 1343, and 1345.  Doc No. 1, Complaint; Record
on Appeal (ROA) at 14-15.<1> This action was authorized and instituted pursuant to
Section 706 of the Civil Rights Act of 1964, as amended, 42 U.S.C.  2000e-
5(f)(1) and (3), and Section 102 of the Civil Rights Act of 1991,                           
42 U.S.C.  1981a.  Id.  On April 26, 2006, the district court entered final
judgment following a jury trial.  Doc. No. 61, Final Judgment; ROA at 677;
Record Excerpts (RE) at Tab 5.  On June 12, 2006, the court entered an order
denying the timely post-judgment motions of Cafe Italia and the Commission.  See
Doc. No. 69, Order; ROA at 767-69; RE at Tab 6.  On August 9, 2006, the
Commission filed a timely notice of appeal.  Doc. No. 70, Notice of Appeal; ROA
at 770; RE at Tab 2; Fed. R. App. Proc. 4(a).  On August 23, 2006, Cafe Italia
filed a timely cross-appeal.  Doc. No. 76, Notice of Appeal; ROA at 772; RE at
Tab 3; Fed. R. App. Proc. 4(a).  This Court has jurisdiction to review the district
court judgment under 28 U.S.C.  1291.  
                     STATEMENT OF THE ISSUE
     Whether the district court erred in failing to submit a punitive damages
     claim to the jury where the Commission provided sufficient evidence to
     satisfy the elements set forth by the Supreme Court in Kolstad v. American
     Dental Association, 527 U.S. 526 (1999).
     
                     STATEMENT OF THE CASE
     On September 29, 2004, the EEOC filed a complaint in the U.S. District
Court for the Northern District of Texas alleging that the defendant had subjected
Ashley Bridges to a sexually hostile work environment and retaliated against her
in violation of Title VII.  Doc. No. 1, Complaint; ROA at 14-17.  At the close of a
three-day trial held on April 3-5, 2006, the district court submitted these issues to
the jury, but refused, over the Commission's objection, to submit a punitive
damages claim to the jury.  Trial Transcript Volume (Tr) III at 2-7, 15-16; RE at
Tab 7.<2>
     After deliberating, the jury returned a split verdict.  The jury concluded that
the Commission had not established that Cafe Italia should be liable for sexual
harassment, but determined that the company had illegally retaliated against
Bridges.  TrIII at 68-69; ROA at 646, 652; RE at Tab 4.  The jury awarded the
Commission $10,000 in compensatory damages.  TrIII at 69; ROA at 653; RE at
Tab 4.   On April 26, 2006, the court entered judgment and awarded post-judgment
interest.  Doc. No. 61, Final Judgment; ROA at 677; RE at Tab 5.   On May 4,
2006, the EEOC moved to amend the judgment to include injunctive relief, and on
May 10, 2006, the Commission further moved for a new trial on the issue of
punitive damages.  Doc. Nos. 62 & 65, EEOC Motions; ROA at 678, 708.  On
May 8, 2006, Cafe Italia moved for judgment notwithstanding the verdict.  Doc.
No. 63, Cafe Italia Motion; ROA at 700.  On June 12, 2006, the district court
denied all the post-judgment motions.  Doc. No. 69, Order; ROA at 767-69; RE at
Tab 6.  On August 9, 2006, the Commission filed a timely notice of appeal.  See
Doc. No. 70, Notice of Appeal; ROA at 770; RE at Tab 2; Fed. R. App. Proc. 4(a). 
On August 23, 2006, Cafe Italia filed a timely cross-appeal.  See Doc. No. 76,
Notice of Appeal; ROA at 772; RE at Tab 3; Fed. R. App. Proc. 4(a).
                     STATEMENT OF THE FACTS
     A.   Background
     
     Ashley Bridges began working for Cafe Italia as a waitress on May 15,
2003.  Trial Transcript Volume I (TrI) at 84, 110.  Cafe Italia is an upscale Italian
restaurant that offers a fine dining experience, and employs approximately fifteen
to twenty servers.  TrI at 82-83.  Bridges reported to Scott Jones, the majority
owner of the restaurant, and received work assignments from Dino Pucci, the
general manager, and Tony Lemus, the assistant manager.  TrI at 85, 112-13; Trial
Transcript Volume II (TrII) at 84-85.  Bridges was an excellent employee who was
told by management that she was a "great server," that "they could always depend
on [her] if they needed a shift covered," and that she was "reliable."  TrI at 92-93.  
     Within a few weeks after Bridges started working at Cafe Italia, Julio
Cabrera, a twenty-five percent owner in the company and server at the restaurant,
began making sexual comments to her.  TrI at 86, 95; TrII at 63-64.  Cabrera
continued to make frequent sexual comments to Bridges throughout her
employment.  TrI at 95-100.  Bridges told Cabrera that she did not appreciate these
comments and to stop.  TrI at 99-100.  Cabrera also inappropriately touched
Bridges repeatedly.  TrI at 102-04.  Cafe Italia did not have a written sexual
harassment policy in place and Bridges never received an employee handbook.  
TrI at 109.  Bridges, however, did complain to Cabrera "[e]very time he touched
me, every time he made a comment."  TrI at 111.  In September 2003, Bridges also
complained to the general manager, Dino Pucci, about Cabrera's conduct, but the
touching and comments persisted despite this complaint.  TrI at 112-13, 155-56.<3>
Bridges felt "like nobody was listening" to her.  TrI at 154.  
     On November 26, 2003, Cabrera and a server that Bridges was dating got
into a disagreement and Bridges attempted to break it up.  TrI at 113-17, 135-36;
TrII at 126.  Cabrera told Bridges "to fuck off."  TrI at 117.  Bridges told Cabrera
that she "couldn't stand working with him" because of his sexually harassing
behavior, and also told the assistant manager, Tony Lemus, about Cabrera's sexual
harassment and comments.  TrI at 117-18.<4> Despite this further complaint to
Lemus, however, the harassment continued.  TrI at 119.  
     Shortly after this incident, Bridges talked with Dino Pucci, the general
manager, who stated that because she "had threatened the restaurant" and "had
brought up the sexual harassment," her shifts were being cut.  TrI at 120-21.  Scott
Jones, the majority owner of the restaurant, made the ultimate decision that he
"wanted [Bridges] suspended" and therefore reduced her shifts.  TrII at 111-12. 
Bridges was only scheduled for one shift during the week she spoke to Pucci, and
she had previously been working approximately ten shifts per week.   TrI at 104,
120-21, 132.  The assistant manager, Lemus, also told Bridges that her shifts were
being cut because she "complained about the sexual harassment."  TrI at 121-22<5>  
     Bridges filed a charge of sex discrimination and retaliation with the EEOC
on December 9, 2003.  TrI 124.  Ten minutes after she left the EEOC office after
filing her charge, she received a call from Pucci, the general manager, indicating
that she "was no longer employed at Cafe Italia."  TrI at 125.  
     B.   Proceedings Below
     On September 29, 2004, the EEOC filed a complaint in the U.S. District
Court for the Northern District of Texas alleging that the defendant had subjected
Bridges to a sexually hostile work environment and retaliated against her in
violation of Title VII.  See Doc. No. 1, Complaint; ROA at 14-17.  At the close of
a three-day trial held on April 3-5, 2006, the Commission argued that it was
entitled to a punitive damages jury instruction.  Trial Transcript Volume III (TrIII)
at 2-3.  Both parties had submitted proposed jury instructions that included a
punitive damages interrogatory, but the district court omitted punitive damages
from the final jury charge.  See Doc. No. 31 at p. 14 and Doc No. 32 at p. 8,
Proposed Jury Instructions of EEOC (ROA at 272-73; RE at Tab 8) and Cafe Italia
(ROA at 287-88; RE at Tab 9); Doc. No. 54, Final Jury Instructions (ROA at 639;
RE at Tab 4); TrIII at 2-7; RE at Tab 7.  
     The Commission argued that it had satisfied all of the elements under the
Supreme Court's decision in Kolstad to warrant such an instruction, maintaining
that, "by failing to have a sexual harassment policy, by failing to train any of its
managers or workers on sex harassment, by failing to post a notice, by knowing
about the law" and acting in contravention to it, the defendant acted with malice or
reckless disregard.  TrIII at 2-3; RE at Tab 7.  The Commission also argued that a
punitive damages instruction was appropriate because the company "knew that
retaliation was against the law."  TrIII at 4; RE at Tab 7.  And, "[d]espite this
knowledge," the company reduced Bridges' schedule and terminated her.  Id. 
     The district court, however, concluded that a punitive damages instruction
was not warranted because the court did not "think [the company] acted at the
level of malicious conduct."  TrIII at 3-7; RE at Tab 7.  In light of this ruling, the
Commission also asked that the court give the jury the punitive damages question
as an advisory ruling to save the issue from being retried should the court's
decision be reversed on appeal.  TrIII at 15-16; RE at Tab 7.  The district court
denied this request as well.  TrIII at 16; RE at Tab 7.  
     The jury found that the Commission had not established that Cafe Italia
should be liable for sexual harassment, but determined that the company had
illegally retaliated against Bridges, and awarded $10,000 in compensatory
damages.  TrIII at 68-69; ROA at 646, 652-53; RE at Tab 4.  The court entered
judgment and awarded post-judgment interest.  See Doc. No. 61, Final Judgment;
ROA at 677; RE at Tab 5.  The court also denied all post-judgment motions.  See
Doc. No. 69, Order; ROA at 767-69; RE at Tab 6.  Specifically, the court refused
to grant the company's motion for judgment notwithstanding the verdict on the
Commission's retaliation claim because the court found "the jury's verdict of
retaliation to be reasonable from the evidence presented." Doc. No. 69 at 2, Order;
ROA at 768; RE at Tab 6.  In rejecting the Commission's post-trial motions, the
district court declined to revisit its decision on punitive damages, and also refused
to enter any injunctive relief in the case.  Doc. No. 69 at 2-3, Order; ROA at 768-
69; RE at Tab 6.
                       STANDARD OF REVIEW
     The district court's refusal to submit the punitive damages issue to the jury
was based on a misapplication of the controlling legal standards, and this Court
should review the district court's decision de novo.  See Thompson & Wallace v.
Falconwood Corp., 100 F.3d 429, 434 (5th Cir. 1997) (because jury charge was
effectively a directed verdict, it is reviewed de novo); Pride Ford v. Motors Ins.
Corp., No. 02-60956, 80 Fed.Appx. 329, 330 (5th Cir. Nov. 5, 2003)
(unpublished) ("district court's refusal to allow the jury to consider punitive
damages" is reviewed de novo); McDonough v. City of Quincy, 452 F.3d 8, 23 (1st
Cir. 2006) ("We review de novo the decision to decline a punitive damages
instruction."); Dossett v. First State Bank, 399 F.3d 940, 953 (8th Cir. 2005) ("We
review de novo a district court's grant of a judgment as a matter of law [on the
issue of whether to submit punitive damages to the jury]."); U.S. v. Space Hunters,
Inc., 429 F.3d 416, 427 (2d Cir. 2005) ("We review de novo a district court's
refusal to submit the issue of punitive damages to a jury.").
                      SUMMARY OF ARGUMENT
     A jury has already determined that Cafe Italia illegally retaliated against
Bridges when it reduced her shifts and subsequently terminated her for her
harassment complaints.  That jury should further have been permitted to consider
whether the company's illegal actions were performed with malice or reckless
indifference to Bridges' federally protected rights under Title VII.  The district
court therefore erred in failing to submit a punitive damages instruction to the jury.
     Under the Supreme Court's decision in Kolstad, a plaintiff is entitled to
assert a punitive damages claim where the plaintiff can demonstrate that the
employer's illegal actions were committed by a managerial agent acting within the
scope of his employment, and that the company discriminated in the face of a
perceived risk that its actions would violate federal law.  There can be no question
here that the illegal retaliation found by the jury was conducted by management at
Cafe Italia.  Scott Jones, the majority owner of the restaurant, made the ultimate
decision effectively to suspend Bridges by reducing her shifts.  The general
manager, Dino Pucci, told Bridges that because she "had threatened the
restaurant" and "had brought up the sexual harassment," her shifts were being cut
and she would only be allowed to work one shift a week.  The assistant manager,
Tony Lemus, also told Bridges that her shifts were being cut because she
complained about the sexual harassment.  Thus, all levels of management
participated in the illegal retaliation.  
     Similarly, management's knowledge of the relevant statutory prohibitions
demonstrates that the company retaliated against Bridges in the face of a perceived
risk that it was violating the law.  Indeed, the majority owner Scott Jones testified
that he had not disciplined Bridges or reduced her shifts when she complained
about the harassment in September 2003 because he knew that such a retaliatory
action would be illegal.  And, general manager Dino Pucci testified that he had
training in sexual harassment, and knew "what to do when faced with a complaint
of sexual harassment."  Pucci also testified that he understood the "laws and rules
and regulations regarding sexual harassment."  This knowledge of the prohibition
against retaliation and awareness of antidiscrimination laws is sufficient under the
case law to impute liability for punitive damages to the company.
     Finally, Cafe Italia is unable to carry its burden of demonstrating that it
acted in good faith when it illegally retaliated against Bridges.  The company
presented no evidence at trial that it had a written antidiscrimination policy in
place at the restaurant where Bridges worked or that the company attempted to
educate its employees about discrimination or retaliation in any way.  Rather, the
defendant's evidence consists largely of its conclusory statements that, while there
was no written policy, the company had "[z]ero tolerance" for harassment.  Such
evidence is far less than that necessary to show that the company's actions were
taken in good faith.
     In sum, the Commission demonstrated at trial that management employees
illegally retaliated against Bridges and did so with clear knowledge of the
prohibitions against retaliation and with an awareness of the antidiscrimination
laws and regulations.  The jury, which already found that the company illegally
retaliated against Bridges, should further have been permitted to consider whether
punitive damages against the company were appropriate.  This Court should
therefore remand this case to the district court for a limited trial on the issue of
punitive damages. 
                            ARGUMENT
        THE DISTRICT COURT ERRED IN FAILING TO SUBMIT A 
               PUNITIVE DAMAGES CLAIM TO THE JURY
                                
     The Civil Rights Act of 1991 provides that an individual who proves
intentional discrimination in violation of Title VII may recover compensatory and
punitive damages in addition to equitable relief.  See 42 U.S.C.  1981a(a)-(b). 
The statute provides that punitive damages may be awarded "if the [plaintiff]
demonstrates that the [defendant] engaged in a discriminatory practice . . . with
malice or with reckless indifference to the federally protected rights of an
aggrieved individual."  42 U.S.C.  1981a(b)(1).  In Kolstad, the Supreme Court
discussed the appropriate standard for punitive damages.  The Court held that
liability for punitive damages turns on the defendant's state of mind, not on the
nature of the defendant's discriminatory conduct.  527 U.S. at 535.  All that a
plaintiff need prove to be eligible for punitive damages, the Court held, is that the
employer "discriminate[d] in the face of a perceived risk that its actions [would]
violate federal law."  Id. at 536.  In meeting this threshold, the "plaintiff must
impute liability" to the employer.  Id. at 539-40.  Additionally, the Court carved
out a defense for employers if they "engage in good faith efforts to comply with
Title VII."  Id. at 544.  
     Interpreting Kolstad, this Court has held that a plaintiff can obtain punitive
damages where the discriminatory act "was committed by a managerial agent
acting within the scope of employment" and "the bad act complained of was
committed with malice or with reckless indifference to the complainant's federal
rights."  Rubinstein v. Adm'rs of the Tulane Educ. Fund, 218 F.3d 392, 406 (5th
Cir. 2000).  Under Kolstad, there is no requirement that plaintiffs "make an
additional showing of egregiousness."  Rubinstein, 218 F.3d at 406; Hardin v.
Caterpillar, 227 F.3d 268, 270 (5th Cir. 2000) (discussing application of Kolstad
and noting that the decision "made clear that malice did not require proof of
egregious' conduct").  The district court's decision refusing to instruct the jury on
punitive damages does not properly analyze either the statutory standard or the
relevant Supreme Court and Fifth Circuit case law.  See TrIII at 2-7.
     A.   The Illegal Retaliation was Perpetrated by Management Employees.
     In Kolstad, the Supreme Court clarified when, under the rules of agency, an
employer is liable for punitive damages based on the malice or reckless
indifference of one of its agents.  Kolstad, 527 U.S. at 540-45.  In clarifying this
standard, the Court applied the general common law of agency, using the
Restatement (Second) of Agency as its "starting point."  Id. at 542.  In particular,
the Court focused on section 217 C(c) of the Restatement (Second) of Agency,
which (as one of four circumstances where "an agent's misconduct may be
imputed to the principal for purposes of awarding punitive damages") allows for
"liability for punitive awards where an employee serving in a managerial
capacity' committed the wrong while acting in the scope of employment.'"  Id. at
542-43 (quoting Restatement (Second) of Agency  217 C(c)).
     In analyzing  217 C(c), the Supreme Court defined the meaning of the term
"managerial capacity."  Id. at 543.  The Court explained that, although no
satisfactory definition of the term was available, courts assessing whether an
employee met the definition should make a fact-intensive inquiry, reviewing "the
type of authority that the employer has given to the employee, [and] the amount of
discretion that the employee has in what is done and how it is accomplished.'"  Id.
(quoting 1 L. Schlueter & K. Redden, Punitive Damages, 4.4(B)(2)(a), p. 181 (3d
ed. 1995)).  The Court noted that the examples provided in the Restatement
(Second) of Torts  909 suggested that an employee must be "important," but
rejected the notion that the employee must be "the employer's top management,
officers or directors,' to be acting in a managerial capacity.'" 527 U.S. at 543
(quoting 1 L. Schlueter & K. Redden, Punitive Damages, 4.4(B)(2)(a), p. 181).  
     In this case, Jones, Pucci, and Lemus' willful retaliation must be imputed to
the company under the agency principles set forth in Kolstad.  There can simply be
no question that the retaliation was committed by managerial employees acting
within the scope of their employment.  Scott Jones, the majority owner of the
restaurant, made the ultimate decision that he "wanted [Bridges] suspended" and
therefore reduced her shifts.  TrII at 111-12.  It is also evident that Jones
participated in any termination decision.  TrI at 219; TrII at 93.<6>  The general
manager, Dino Pucci, had authority to discipline employees and was the "go-to
person" who was primarily in charge of the workforce.  TrI at 178-79.  Pucci told
Bridges that because she "had threatened the restaurant" and "had brought up the
sexual harassment," her shifts were being cut and she would only be allowed to
work one shift a week.  TrI at 120-21.  Pucci also informed Bridges only minutes
after she filed her formal charge with the EEOC that she was being terminated by
the company.  TrI at 125.  The assistant manager, Tony Lemus, also told Bridges
that her shifts were being cut because she "complained about the sexual
harassment."  TrI at 121-22.  
     Thus, there can be no question that the decisionmakers in this case were
managerial agents acting on behalf of the company, as all levels of management
participated in the illegal discrimination.  See, e.g., Deffenbaugh-Williams v. Wal-
Mart, 188 F.3d 278, 285 (5th Cir. 1999) ("sufficient evidence to survive JMOL
exists that [district manager] was a requisite managerial agent'" for purposes of
imputing liability under Kolstad);  Anderson v. G.D.C., Inc., 281 F.3d 452, 461
(4th Cir. 2002) (holding that general manager/dispatcher was "unquestionably a
managerial employee [for purposes of imputing liability under Kolstad].  The
evidence at trial established that he possessed authority to hire and fire drivers and
to impose lesser forms of discipline, including docking a driver's wages.");  EEOC
v. Wal-Mart, 187 F.3d 1241, 1246-47 (10th Cir. 1999) (assistant manager who had
"independent authority to suspend her subordinates" and could "make hiring and
firing recommendations" was a manager for purposes of imputing liability for
punitive damages). 
     B.   The Company Knew that its Actions Were in Violation of Title VII. 
     The jury found that Cafe Italia illegally retaliated against Bridges.  The jury
should further have been permitted to determine whether this illegal retaliation
"was committed with malice or with reckless indifference to the complainant's
federal rights."  Rubinstein, 218 F.3d at 406.  A plaintiff can demonstrate malice
or reckless indifference by showing that the company "discriminate[d] in the face
of a perceived risk that its actions [would] violate federal law." Kolstad, 527 U.S.
at 535.  Thus, "a jury may award punitive damages pursuant to Title VII merely if
the employer knew it may have been violating the law." Schexnayder v. Bonfigilio,
No. 05-30221, 167 Fed.Appx. 364, 368, 2006 WL 25963 (5th Cir. Jan. 5, 2006)
(unpublished) (emphasis in original).  
     Other circuits have also made clear that an employer's knowledge of federal
antidiscrimination laws is sufficient to establish that the employer's illegal acts
were committed with malice or reckless indifference.  See, e.g., Bruso v. United
Airlines, Inc., 239 F.3d 848, 858 (7th Cir. 2001) (plaintiff can demonstrate
employer's requisite mental state "by demonstrating that the relevant individuals
knew of or were familiar with the antidiscrimination laws and the employer's
policies for implementing those laws").
     There are many methods through which a plaintiff can establish that a
defendant had knowledge of the relevant federal antidiscrimination laws.  One of
the clearest ways of establishing this knowledge is to demonstrate that the
company's managerial agents had received training on preventing employment
discrimination.  See Zimmermann v. Assocs. First Capital Corp., 251 F.3d 376,
385 (2d Cir. 2001) ("[W]e agree with [the district court] that [the manager's]
acknowledgment of training in equal opportunity' permits an inference of the
requisite mental state."); Ogden v. Wax Works, Inc., 214 F.3d 999, 1010 (8th Cir.
2000) (a manager "testified to his familiarity with the [harassment] policy, and
claimed he received extensive training on sexual harassment issues' in
conjunction with his M.B.A.  A jury could therefore infer [this manager] had
knowledge of Title VII's proscriptions, and given this knowledge, reasonably
conclude he acted in the face of a perceived risk that his actions would violate
federal law."); Lowery v. Circuit City Stores, Inc., 206 F.3d 431, 443-44 (4th Cir.
2000) ("The record contains evidence that [the manager] knew taking race into
account in making significant employment decisions such as denying promotions
violates federal law. Specifically, a reasonable juror could infer that [the manager]
had knowledge of the existence of federal anti-discrimination laws from
[defendant's] evidence that it required every person in management to attend a
week-long training seminar that included education on the federal anti-
discrimination laws.").
     Similarly, a manager's acknowledgement of the existence of
antidiscrimination policies at the company or of a general understanding of
antidiscrimination laws is sufficient to satisfy the knowledge requirement.  See
McInnis v. Fairfield Cmtys., Inc., 458 F.3d 1129, 1138 (10th Cir. 2006) (company
manager "specifically testified that he understood that employees have a right to
complain formally or informally about sexual harassment.  A reasonable jury
could therefore have concluded that at least one managerial agent . . . was aware of
the relevant federal prohibitions and nevertheless retaliated against [the
plaintiff]."); Romano v. U-Haul Int'l, 233 F.3d 655, 669-70 (1st Cir. 2000)
(evidence that immediate supervisor knew that termination was discriminatory and
that company president was aware of anti-discrimination policies was sufficient
for reasonable jury to conclude that actions "were taken with reckless disregard to
[plaintiff's] federal rights"); Wal-Mart, 187 F.3d at 1246 ("reasonable jury could
have concluded that [defendant] intentionally discriminated against [plaintiff] in
the face of a perceived risk that its action would violate federal law" where
manager who was responsible for employee's improper suspension "testified that
he was familiar with the accommodation requirements of the ADA and its
prohibition against discrimination and retaliation in the workplace").
     There can be no doubt here that Cafe Italia's managers had knowledge of
Title VII's prohibition against retaliation, and therefore acted with malice or
reckless disregard in reducing Bridges' shifts and firing her.  Indeed, the majority
owner of the company, Scott Jones, testified that he had not disciplined Bridges or
reduced her shifts when she complained about the harassment in September 2003
because he knew that such a retaliatory action would be illegal.  See TrII at 113.  
In this regard, Jones specifically testified: 
     that would have been a stupid business decision [to discipline Bridges 
     for complaining], wouldn't it have?  I mean, you know, then she'd [go] 
     to the EEOC.  But I knew better.
     
Id.
     Jones was therefore aware of the prohibition against retaliation in
November and December 2003, when he reduced Bridges' shifts and when the
company ultimately terminated her employment.  Similarly, general manager Dino
Pucci testified that in a prior job he had training in sexual harassment, and knew
"what to do when faced with a complaint of sexual harassment."  TrI at 176-77,
205.  Pucci further testified that he understood the "laws and rules and regulations
regarding sexual harassment."  TrI at 205.  As the Tenth Circuit has recently
stated, where "there is sufficient evidence for the jury to decide whether an
employer intentionally and illegally discriminated on the basis" of a protected
characteristic, and "there is evidence that the employer knew the requirements" of
the statute, it is "proper for a punitive damages instruction to go to the jury."
EEOC v. Heartway Corp., 466 F.3d 1156, 1169 (10th Cir. 2006);  see also
Zimmerman, 251 F.3d at 385 (training in equal opportunity sufficient to impute
"requisite mental state"); Bruso, 239 F.3d at 858 (7th Cir. 2001) (knowledge of or
familiarity with antidiscrimination laws and employer policies sufficient to
demonstrate requisite mental state). 
     In addition to the clear testimony that Cafe Italia was aware of its
obligations under Title VII not to retaliate, the evidence at trial demonstrated that
the company's actions were either malicious or performed with reckless
indifference to Bridges' rights.  Indeed, the company openly acknowledges that
Bridges was disciplined because of her allegedly threatening to bring a sexual
harassment claim.  In this regard, Scott Jones testified that he placed Bridges on a
reduced shift because of her alleged threat to bring a sexual harassment suit
against the company.  TrII at 112.  Through this reduced schedule, Jones hoped
that Bridges would "have learned her lesson."  Id.  In addition, general manager
Dino Pucci testified that Bridges was placed on a reduced shift because of her
threat about the sexual harassment.  TrI at 196.  And, assistant manager Tony
Lemus testified that he told Bridges that her shifts were being reduced "because
she had made a sexual harassment complaint," which he later clarified to mean her
alleged threat of filing a sexual harassment lawsuit.  TrII at 36, 38, 46.  Lemus
even acknowledged that he advised Bridges that she "shouldn't use the term
sexual harassment." TrII at 36. 
     Based on these admissions, the jury could reasonably have inferred that in
reducing Bridges' schedule and ultimately terminating her, the company was, with
clear knowledge of the law, retaliating against her for her protected opposition to
illegal activity.  See, e.g., Lowery, 206 F.3d at 443-46 (manager's actions and
knowledge of federal employment law sufficient to support jury award on punitive
damages).  Because the jury could have come to that conclusion, it was reversible
error for the district court to refuse to give it that opportunity.  See McDonough v.
City of Quincy, 452 F.3d 8, 23 (1st Cir. 2006) (reversing district court's refusal to
give punitive damages instruction in retaliation case where jury found that
retaliation had occurred and retaliating officials had reason to know of
discrimination laws).
     C.   Cafe Italia has not Satisfied its Burden of Showing that the Company
          Acted in Good Faith.
     
     Cafe Italia cannot argue on appeal that a punitive damages instruction is
inappropriate because it acted in good faith.  See Kolstad, 527 U.S. at 544
(creating a defense where employers can demonstrate that they "engage in good
faith efforts to comply with Title VII").  This Court has determined that the
defendant has the burden of proof on the issue of good faith.  See Deffenbaugh-
Williams, 188 F.3d at 286 (the evidence elicited by defendant "does not suffice to
establish, as a matter of law, [defendant's] good faith in requiring its managers to
obey Title VII").  Accord MacGregor v. Mallinckrodt, 373 F.3d 923, 931 (8th Cir.
2004); Zimmermann, 251 F.3d at 385; Bruso, 239 F.3d at 858; Passantino v.
Johnson & Johnson Consumer Prods., Inc., 212 F.3d 493, 516 (9th Cir. 2000). 
     Cafe Italia failed to meet its burden here.  The company presented no
evidence at trial that it had a written antidiscrimination policy in place at the
restaurant where Bridges worked or that the company attempted to educate its
employees about discrimination or retaliation in any way.  Rather, the defendant's
evidence in this regard consists largely of its conclusory statements that, while
there was no written policy, the company had "[z]ero tolerance" for harassment. 
TrI at 205.  Such evidence is insufficient to prove this defense.  Deffenbaugh-
Williams, 188 F.3d at 286 (Defendant's "only evidence" was that defendant
"encourages employees to contact higher management with grievances.  Plainly,
such evidence does not suffice to establish, as a matter of law, [defendant's] good
faith in requiring its managers to obey Title VII."); Davey v. Lockheed Martin, 301
F.3d 1204, 1209 (10th Cir. 2002) ("at a minimum, an employer must at least adopt
anti-discrimination policies and make a good faith effort to educate its employees
about these policies and [the statute's] prohibitions"); Zimmermann, 251 F.3d at
385 (the Kolstad defense "requires an employer to establish both that it had an
antidiscrimination policy and made good faith effort to enforce it").  Nonetheless,
in a separate trial on the punitive damages issue, Cafe Italia would be able to argue
to the jury that it had acted in good faith.  At this stage of the proceedings,
however, the company has simply not satisfied its burden of establishing this
defense.
     D.   Relief.
     The jury in this case properly found that Cafe Italia illegally retaliated
against Bridges in violation of Title VII.  Because the Commission satisfied the
Kolstad elements, the jury should further have been permitted to consider whether
punitive damages were appropriate.  After being denied the opportunity to present
the punitive damages issue to the jury, the Commission asked that the court
present the question to the jury for advisory purposes only.  TrIII 15-16; RE at Tab
7.  The district court denied this request.  TrIII at 16; RE at Tab 7.  Had the court
agreed to present the issue for an advisory ruling, the jury's recommendation could
be instated and the issue would not need to be retried.
     This case should be remanded to the district court for a new trial limited to
the issue of punitive damages.  See, e.g., Black v. Fidelity & Guaranty Ins.
Underwriters, Inc., 582 F.2d 984, 991 (5th Cir. 1978) ("the plaintiff is entitled to a
new trial limited to the issue of punitive damages"); Knowlton v. Teltrust Phones,
Inc., 189 F.3d 1177, 1187-88 (10th Cir. 1999) (remanding "for the specific
purpose of submitting to a jury the issue of punitive damages" where "the district
court erred when it ruled that there was no evidence from which a jury could make
a reasonable inference that [the defendant] acted recklessly and with disregard for
[plaintiff's] federally protected civil rights"). 
     The entire case would not need to be retried on remand, as the issues of
liability and relief are entirely separable.  See Hardin, 227 F.3d at 272-73 (finding
"the issues of intent, of damages for emotional injury, and of punitive damages"
inseparable in case arising partially under Pregnancy Discrimination Act but
noting that "we do not suggest that punitive damages may not walk alone in other
contexts").  In this case, the jury found against the Commission on the harassment
claim, and that issue would not need to be revisited on remand.  
     Similarly, the evidence which would demonstrate the company's malice or
reckless indifference  the managers' knowledge of the statutory prohibitions of
discrimination and retaliation  is different from that which established the
company's underlying liability.  See Heartway, 466 F.3d at 1171 (affirming
liability after jury trial in employment discrimination case and remanding "for a
new trial, solely on the issue of punitive damages."); EEOC v. Wal-Mart Stores,
Inc., No. 00-16887, 35 Fed. Appx. 543, 546-47 (9th Cir. May 16, 2002)
(unpublished) (remanding for separate trial on punitive damages issue and stating
that "the EEOC is entitled to present the finding of facts implicit in the first jury's
finding that Wal-Mart intentionally discriminated against [plaintiff] on the basis of
her pregnancy. . . . [The defendant] is prohibited from making any argument or
eliciting any testimony that would contradict any of these findings."). 
     In Hardin, this Court concluded that liability and damages issues were too
intertwined to permit a second trial limited to punitive damages, in part because
"their expression in a verdict is a meld."  Hardin, 227 F.3d at 272.  See
McDonough, 452 F.3d at 24 (discussing Hardin's analysis of the "potential
overlap" of compensatory and punitive damages).  In evaluating the degree to
which issues of compensatory and punitive damages are intertwined and create a
risk of double recovery "for the reprehensibility of the defendants' conduct" in a
second trial limited to punitive damages, the First Circuit recently noted that this
problem would be negligible where the compensatory damages award is relatively
low.  McDonough, 452 F.3d at 24-25.  In this case, the Commission received only
$10,000 in compensatory damages, suggesting there is little risk of a "double"
recovery if a second jury decides on a sum the company should be required to pay
to effectuate the deterrent purposes of the punitive damages provision.  Cf.
Heartway, 466 F.3d at 1160, 1171 (remanding for separate trial solely on punitive
damages issue in employment discrimination case where compensatory damages
of $20,000 and backpay of $1,240 were awarded).  If there is any question about
the propriety of a second trial limited to punitive damages, it should be resolved
by the district court, which is in the best position to determine whether such a
proceeding would be problematic.  See Heartway, 466 F.3d at 1171.
     
     
     
     
     
     
                           CONCLUSION
     The evidence in the record would permit a reasonable jury to find that Cafe
Italia acted with malice or with reckless indifference to Bridges' federally
protected rights.  The district court therefore erred by removing the question of
punitive damages from the jury.
     For the reasons stated above, the EEOC respectfully asks this Court to
remand this case to the district court for a new trial limited to the issue of punitive
damages.
                         Respectfully submitted,
RONALD S. COOPER                        
General Counsel                    U.S. EQUAL EMPLOYMENT 
                                   OPPORTUNITY COMMISSION
VINCENT J. BLACKWOOD               Office of General Counsel
Acting Associate General Counsel   1801 L Street, N.W., Room 7018
                                   Washington, D.C.  20507
CAROLYN L. WHEELER                 (202) 663-4772
Assistant General Counsel          joseph.seiner@eeoc.gov   
                                   
____________________________
JOSEPH A. SEINER                   
Attorney

                     CERTIFICATE OF SERVICE
                                
     I, Joseph Seiner, hereby certify that I filed one original and seven copies of
the foregoing brief and one copy of the digital version of the brief on diskette with
this Court this 5th day of December, 2006, by causing it to be sent via Federal
Express next business day service.  I also certify that I served two copies of the
foregoing brief and one copy of the digital version of the brief on diskette this 5th
day of December, 2006, by causing them to be sent via Federal Express next
business day service to the following counsel of record:
                    L Randall Yazbeck
                    5050 Quorum Drive
                    Suite 140
                                        Dallas, TX 75254




                              ________________________________
                              Joseph A. Seiner
                              Attorney
                              U.S. EQUAL EMPLOYMENT 
                                   OPPORTUNITY COMMISSION
                              Office of General Counsel
                              1801 L Street, N.W., Room 7018
                              Washington, D.C. 20507
                              (202) 663-4772
                              joseph.seiner@eeoc.gov


December 5, 2006

                   CERTIFICATE OF COMPLIANCE
     This brief complies with the type-volume limitation of Fed. R. App. P.
32(a)(7)(B) because it contains 6,139 words, excluding the parts of the brief
exempted by Fed. R. App. P. 32(a)(7)(B)(iii).
     This brief complies with the typeface requirements of Fed. R. App. P.
32(a)(5) and the type style requirements of Fed. R. App. P. 32(a)(6) because it has
been prepared in a proportionally spaced typeface using Microsoft Word 2003 in
Times New Roman 14 point.

                              
                              Joseph A. Seiner
                              Attorney
                              U.S. EQUAL EMPLOYMENT 
                                   OPPORTUNITY COMMISSION
                              Office of General Counsel
                              1801 L Street, N.W., Room 7018
                              Washington, D.C. 20507
                              (202) 663-4772
                              joseph.seiner@eeoc.gov
                              
                            ADDENDUM
                                
                                
                                
                                
                   UNPUBLISHED DECISIONS IN:


Pride Ford v. Motors Ins. Corp., 
     No. 02-60956, 80 Fed.Appx. 329 (5th Cir. Nov. 5, 2003) 
                                
                                
Schexnayder v. Bonfigilio, 
     No. 05-30221, 167 Fed.Appx. 364, 
     2006 WL 25963 (5th Cir. Jan. 5, 2006) 

                                
EEOC v. Wal-Mart Stores, Inc., 
     No. 00-16887, 35 Fed. Appx. 543 (9th Cir. May 16, 2002)


***********************************************************************
<<FOOTNOTES>>

<1> All record citations are to the document numbers as they appear on the district 
court docket sheet, as well as to the page of the Record on Appeal.  Where applicable, 
the Commission also cites to the Record Excerpts submitted with its opening brief.

<2> All citations to the trial transcript specifically reference the volume of the 
transcript and the page number.

<3> Pucci had authority to discipline employees and was the go-to person who was 
primarily in charge of the workforce.  TrI at 178-79.

<4> Cafe Italia maintains that Bridges had threatened to sue the restaurant if Cabrera 
did not back off of the other server who was in an altercation with Cabrera.  TrI at 
218; TrII at 111.  Bridges adamantly den[ies] having threatened the restaurant in this 
manner.  TrI at 117-18, 137.  Bridges testified that she never indicated that she was 
going to sue the restaurant for sexual harassment. TrI at 117-18.  

<5> As an assistant manager, Lemus had significant authority at the restaurant.  TrII at 
40.  Lemus could discipline employees with the approval of the majority owner of the 
company.  TrII at 18.  Additionally, the record reflects that Lemus trained Bridges, 
would create the work schedules for employees, and would fill in for the general 
manager.  TrI at 201, 207; TrII at 121.  Lemus also testified that when on duty he would 
[m]anage the entire restaurant, and that he was the servers immediate supervisor.  
TrII at 17, 19.  

<6> Although the defendant denies that Bridges was discharged by the company, the jury 
may have concluded otherwise.