United States Court of Appeals FOR THE EIGHTH CIRCUIT

___________ Nos. 97-1126 and 97-1220

___________ Lori A. Todd, *
* Plaintiff - Appellee, * * Appeals from the United States
v. * District Court for the * District of Minnesota. Ortho Biotech, Inc., *
* Defendant - Appellant. *

___________ Submitted: October 20, 1997 Filed: March 5, 1998

___________ Before RICHARD S. ARNOLD, Chief Judge, LOKEN and HANSEN, Circuit Judges.

___________ LOKEN, Circuit Judge.

Ortho Biotech, Inc. (“Ortho”), appeals a judgment in favor of its forme r employee, Lori Todd, on her claims of sexual harassment in violation o f Title VII of the Civi lRights Act of 1964, 42 U.S.C. §§ 2000e et seq. (1988), and the Minnesot a Human Rights Act (“MHRA”), M INN

. S TAT . §§ 363.01 et. seq. (1982). Concluding that Ortho took timely and appropriate action to remedy another employee’s attempted rape of Todd at a national sales meeting, and that such action is a complete defense to her claims under Title VII and the MHRA, we reverse.-2-

We summarize the facts as found by the district court. On September 21, 1992, Todd was a sales representative, o r product specialist, working for Ortho’s Minnesota regional office and attending Ortho’s national sales meeting in Boston. After a full day of conferences, Todd stopped at the hospitality suite, where she agreed to go to a jazz club with two other product specialists and James Moreland, O rtho’s Director of Trade Relations. The g roup later went to a local bar, where Moreland drank shots of vodka and exchanged sexually oriented jokes with Todd. B ack at the hotel, their companions returned to the hospitality suite, leaving Todd and Moreland alone in an empty elevator. Morelan d grabbed Todd and attempted to kiss her but she pushed him away, askin g “What are you doin g?” Moreland apologized and suggested Todd accompany him to his room for a complete apology. Todd said that was unnecessary, but complied when Moreland persisted, fearful of upsett ing a high-ranking Ortho official. Once inside the room, Moreland overpowered T odd, pinned her to the bed, and attempted to rape her. When Todd began hyperventilating, Moreland allowed her to escape from the room.

The next evening, Todd reported the attack to another product specialist, who

ur gedher to report the incident to Charles Ball, Ortho’s Director of Managemen t Development. Todd approached Ball the next morning and asked for a priva te meeting, without telling him she had been attacked. Ball agreed to meet at the end of that day’s conferences. Todd attended the scheduled meetings that day, including a skit she found sexually off

ensive. She met Ball in her hotel room that evening, told him about th e attack and, at his urging, also told Craig Mangean, Director of Employee Relations

. Ball was shocked and sym pathetic. Mangean told Todd that she had a right to inform the police, but she declined to do so. She said that Mangean could tell the company attorney of the incident but asked that Moreland’s superiors not be informed. A t Todd’s request, Ball and Mangean accompanied her to dinner. After dinner, Tod d reported the incident to her immediate supervisor, Division Manager John Hess. She

re turnedto her room, where she received a brief phone call from Moreland. Tod d reported the call to Ball, who offered to move her to another room. She declined,-3-

saying she felt safe in her own room. Todd returned to Minnesota the next day, where she later obtained medical attention, including treatment for depression and anxiety.

Officia ls at Ortho’s headquarters in New Jersey contacted Moreland promptl y afte r receiving Todd’s complaint and confronted him early the following week with Todd’ s accusations. Moreland denied assaulting Todd and claimed he was bein g tar geted because he is an African-American. After a three-week investigation, Orth o discharge d Moreland but gave him a severance package worth over $100,000 i n exchange for his release of all claims against Ortho, including Title VII claims.

Todd c ommenced this lawsuit in June 1993 and ceased working for Ortho i n March 1994. The district court tried her Title VII claim to a jury, which awarded Todd $128,000 for lost e arnings and $90,000 for emotional distress. Her MHRA claim was tried to the court, which awarde d Todd $524,000 -- consisting of three times the jury’s lost earnings award, $90,000 for mental suffering, and a $50,000 fine to the State o f Minnesota -- plus $217,440.26 in attorne ys’ fees and costs. Ortho appeals, contending that i t is not liable for sexual harassment under either Title VII or the MHRA because it took prompt and effective action in response to Moreland’s misconduct.

I. The Title VII Claim
Title VII prohibits an employ er from discriminating “against any individual with respect to his compensation, terms, conditions, or privileges of employment” on th e basis of sex. 42 U.S.C. § 2000e-2(a)(1). “[A] plaintiff may establish a vi olation of Title VII by proving that discrimination based on sex has created a hostile or abusive work environment.” Meritor Savings Bank v. Vinson , 477 U.S. 57, 66 (1986). “For sexual harassment to be actionable,” the Court explained, “it must be sufficiently severe o r pervasive to alter the conditions of the victim’s employment and create an abusiv e working environment.” Id. at 67 (quotation omitted). In this case, Ortho quite properly concedes that an attempted rape at a national sales meeting is sufficiently severe-4-

misconduct t o be actionable sexual harassment. The issue, then, is whether Ortho i s liable for Moreland’s misconduct.

In th is circuit, to prevail on a claim of hostile work environment sexua l harassment, a plaintiff must prove that she was a victim of unwanted harassment based upon her sex that affected a term, condition, or privilege of employment, and that the employer knew or should have known of the harassment and failed to take prope r remedial a ction. See Callanan v. Runyun , 75 F.3d 1293, 1296 (8th Cir. 1996)

. However, the district court did not apply that standard. Relying on authority from other circuits, the court instructed the jury that a different stand ard applies if the harassing coworker, here Mr. Moreland, was a “supervisor.” Instruction No. 37 stated:

An employer is liable for the sexual harassment committed by it s supervisor if the supervisor used his act ual or apparent authority to further the harassment, or if he was otherwise aided in accomplishing th e harassme nt

by the existence of his supervisory powers. In such a case , th e employer cannot escape liability by taking some after the fac t remedial action

. (Emphasis a dded). On the other hand, Instruction No. 40 advised the jury that, i f Morela nd was not a supervisor, Ortho would only be liable if Todd proved that Ortho knew or should have known of Moreland’s harassment and failed to take prompt and effective remedial action to stop it. The jury’s special verdict found that Ortho knew of Moreland ’s actionable harassment, that Ortho did not fail to take prompt an d effective remedial action, but that Ortho is liable because Moreland used his authority and position with Ortho to further the harassment.

Since the district court’s decision, we have clarified that the court erred in no t app lying our normal hostile work environment standard. Even when the hostil e environment was created by a supervisor’s sexual harassment, the e mployer is not liable unless it “knew or should have known of the harassment yet failed to take prope r remedial action.” Davis v. City of Sioux City , 115 F.3d 1365, 1368 (8th Cir. 1997);This principle is of no help to Todd in this case because th e district court denied 1 her tardy attempt to amend her complaint to assert a claim of quid pro quo harassment, and she has not challenged that ruling on appeal.
-5- see Spencer v. Ripley County , 123 F.3d 690, 691 (8th Cir. 1997). In D avis , we reversed and reman ded for a new trial because the district court instructed the jury tha t knowledge of a high-level supervisor’s sexual harassment should be imputed to th e employer . Knowledge is not the issue in this case. Rather, the error here is more farreaching, fo r it deprived the employer of a complete defense -- that it took timely and appro priate remedial action to correct serious, one-time misconduct occurring outside the workplac e -- merely because the offender was a “supervisor” who had no direc t authority over the victim. We conclude Instruction No. 37 was reversible error.

As we noted in Davis , 115 F.3d at 1367, a super visor’s liability is imputed to the employer in cases of “quid pro quo” sexual harassment, where sexual favors, fo r example, are directly linked to the grant or denial of an employment benefit. In urging 1

us to affirm, the EEOC as amicus argues that we should adopt the imputed liabilit y stan dard used in quid pro quo cases for hostile environment sexual harassment claims when the harasser is a supervisor. Interestingly, this is a different standard than th e agency urged the Supreme Court to adopt in Meritor

. See 477 U.S. at 70-71. Th e Court in Meritor

said it is “wrong” to “impose absolute liability on employers for the acts of their supervisors, regardless of the circumstances of a p articular case.” 477 U.S. at 73. The EEOC argues that its proposed rul e would not violate this principle because “an employer would not be liable, witho ut notice, where, even though the harasser was a supervisor, he was not in the vi ctim’s chain of command or had no authority over her employment.” But that contention is inconsistent with the district court’s instruction in this case, w hich only required the jury to find that Moreland was an Ortho supervisor, not that he was Todd’s supervisor. The fac t is that Moreland was not in Todd’s “chain of com mand” when he assaulted her, which leaves the EEOC’s support of Todd’ s position with little credibility.-6-

Viewing the question more broadly than the facts of this case, we think it contrary to both the intent of the statute and pri nciples of agency law to impose liability upon an employer for the wrongful act of a s upervisor acting well beyond the scope of his duty, particularly when the harassment complained of is a one -time act committed outside the workplace that the employer co uld not have anticipated. A strict liability standard will not en courage employers to promulgate anti-sexual harassment policies. A rigi d standard of imputed liability wil l discourage employers from aggressively investigating complaints of sexual h arassment by supervisors, complaints which, if proven true, will only red ound to the employer’s financial detriment. And such a standard fails t o encourage and reward employers for taking prompt and effective remedial action t o discipline sexual harassment offenders and to restore for the victim a workplace free of such discrimination. Thus, the strict liability standard is inconsistent with the statute’s ultimate go al, which is to eliminate sex discrimination, not simply to “point a finger at deep poc kets upon the incident of harassing behavior.” Jennifer L. Johnson , Em ployment Law -- Are Employers Strictly Liable for Supervisor Sexual Harassment in the Fifth Circuit [etc.] , 38 S. Tex. L. Rev. 965 (1997).

Ordinar ily, we would remand for a new trial of the Title VII claim, as in Davis

. However, here the jury expressly found that Ortho took proper remedial action afte r learnin g of Moreland’s harassment. We have reviewed the record and conclude tha t finding is well supported by the trial evidence. Because Todd failed to prove thi s essential element of a hostile work environment claim, we reverse this portion of th e judgment and direct that judgment be entered dismissing her Title VII claim. Se e Glasser v. United States , 315 U.S. 60, 80 (1942).

II. The MHRA Claim

Unlike Title VII, the MHRA expressly prohibits sexual harassment i n employment. See M INN

. S TAT . §§ 363.01, subd. 14; 363. 03, subd. 1(2)(c). The statute also defines sexual harassment to include:-7-

conduct or communication [which] has the purpose or effect o f sub stantially interfering with an individual’s employment, publi c accom modations [etc.]; and in the case of employment, [when] th e employ er knows or should know of the existence of the harassment an d fails to take timely and appropriate action.

M INN

. S TAT . § 363.01, subd. 43 (emphasis added). Thus, when we shift ou r consideration of the supervisor harassment issue to Todd’s MHRA claim, we begin with the proposition that Minne sota law is consistent with our Title VII decision in Davis -- “[a]n employer may escape liability for its supervisor’s acts of sexual harassment if it takes t imely and appropriate remedial action.” Fore v. Health Dimensions, Inc. , 50 9 N.W.2d 557, 561 (Minn. App. 1993). To our knowledge, the Minnesota Suprem e Court has no t addressed this issue, but it has adhered to the plain meaning of thi s portion of the statute in cases of co-worker harassment. See McNabb v. Cub Foods , Inc. , 352 N.W.2d 378, 381-82 (Minn. 1984). We believe that Court, li ke the Minnesota Court of Appeals, would allow employers t he “timely and appropriate remedial action” defe nse in cases of supervisor harassment, at least in a case such as this wher e Morelan d was not Todd’s direct supervisor and the one-time harassment occurre d outside their normal wor

kplace. We reject as contrary to the plain language of M INN

. S TAT . § 363.01, subd. 43, the district court’s conclusion that Ortho is liable under the MHRA because Moreland used his authority or position with Ortho to further his sexual harassment.

We mus t therefore turn to the district court’s alternative MHRA holding, tha t Ortho i s liable because it knew of Moreland’s harassment and did not take timely and appropriate remedial action. Without question, Ortho had almost immediate knowledge of M oreland’s sexual assault. Todd reported the assault to Ball, Mangean, and Hes s within forty- eight hours of the incident, and those managers received and acted on her complaint on behalf of Ortho. Thus, we n eed not explore an issue that has troubled the Minnesota courts, na

mely, under what circumstances knowledge of sexual harassment may be imputed

to an employer because the harasser was a supervisor. Compare-8-

Gi uliani v. Stuart Corp. , 512 N.W.2d 589, 595 (Minn. App. 1994), with Weaver v

. Minnesota Valley Lab s., Inc. , 470 N.W.2d 131, 134-35 (Minn. App. 1991). Imputing knowledge of Moreland’s after hours misconduct to Ortho seems unrealistic, but in any event Ball’s prompt

response to Todd’s complaint two evenings later makes the initial timeliness of Ortho’s remedial actions a non-issue.

The real issue of course is whether Ort ho took appropriate remedial action when Todd compl ained of sexual harassment by Moreland, an issue the jury resolved i n Orth o’s favor. The jury’s finding should have resulted in the dismissal of Todd’ s MHRA claim for two reasons: first, MHRA claims should be trie d to the jury in federal court, see Kampa v. White Consolidated Indus., Inc. , 115 F.3d 585, 586 (8th Cir. 1997); and s econd, the jury’s finding on an issue common to both claims is in any even t conclusive, see Bush v. Marshalltown Medical & Surgical Center , 123 F. 3d 1130, 1132 n.2 (8th Cir. 1997). Howe ver, Ortho did not preserve these issues in the district court.

Indetermining whether an employer with knowledge of sexual harassment ha s taken “timely and a

ppropriate remedial action,” the Minnesota courts have focused on three specific types of potential remedial measures -- whether the employer has acted to d iscourage sexual harassment before it happens, for example, by disseminating a sexual harassment policy or establishing a we ll-publicized procedure for resolving such complaints; whether the employer has acted to alleviate the victi m’s plight, for example, by transferri ng her to another shift or job site; and, perhaps most importantly, whether the employer has adequa

tely investigated the complaint and taken suitable disciplinary action ag ainst an offender. See McNabb , 352 N.W.2d at 384; Fore , 509 N.W.2d a t 561; Schlitz v. Holiday Co. , 1996 WL 653974, at *4 (Minn. App. 1996).

In this ca se, Ortho had a published policy against sexual harassment. Afte r hearing Todd’s complaint, Ball and Mangean expressed shock and sympathy, aske d Tod d what she would like them to do, offered to move her to another hotel room, and-9-

helped her return home. I n Minnesota, Ortho offered to pay Todd’s uninsured therapy costs (which she declin ed); urged her to move her therapy day to a work day, with full pay; and granted her substantial paid leave. Ortho’s senior management confronte d Morel and when he returned from the sales conference, investigated Todd’s complaint thoroug hly, and fired Moreland when Todd’s complaint was found to be credible

. These actions are similar to employer responses the Minnesota courts have found to be time ly and appropriate remedial action. See Fore , 509 N.W.2d at 561; Schlitz , 199 6 WL 653974 at *4.

The dist rict court concluded that Ortho did not take timely and appropriat e remedial action primar

ily for three reasons: its investigation of Todd’s complaint took thi rty days, Moreland was given a valuable severance package when terminated, an d Todd’s subsequent requests for transfer and additional leave were not accommodated. In our view , these facts do not justify rejecting the jury’s finding of timely an d ap propriate remedial action. When confronted, Moreland vigorously denied Todd’ s allegat ions. He accused Ortho of race discrimination when it credited Todd’s version of the events in question and threatened litigation if he was terminated. Ortho cannot be faulted for

carefully investigating two conflicting versions of a serious incident that could not be independently corroborated. As Judge Edith Jones explained i n Dornhecker v. Malibu Grand Prix Corp. , 828 F.2d 307, 309-10 (5th Cir. 1987):

Since the demise of the institution of duelin g, society has seldom provided instantan eous redress for dishonorable conduct. . . . Ordinarily, a n organization requires time to respond to embarrassing, emoti onal and often li tigation-spawning claims of sexual harassment. Careers and corporat e ima ge rest on the company’s handling of such charges. . . . [O]ne cannot reasonably demand the employer to ignore its experience with the alleged offender or to examine a charge of sexual harassment based on one side of the story, in a vacuum.

Likewise , we do not fault Ortho for its decision to buy peace with Moreland with a severance package. By terminating this high-ranking minority employee with two-10-

deca des of experience and no complaints on his record on the ground that he sexually harassed a relatively new employee, Ortho showed its comm itment to preventing sexual harassment in its workplace, not timidity in the face of co ntroversy. See Sims v. Brown & Root Indus . Servs., Inc. , 889 F. Supp. 920, 930-31 (W.D. La. 1995), aff’d , 78 F.3d 581 (5th Cir.) (table), cert. denied , 117 S. Ct. 68 (1996). Finally, Ortho’s failure t o accommodate Todd’s later requests for a transfer from Minnesota to Houston and for

alengthy personal leave, and her complaint that some at Ortho treated her as a “nonperson,” cannot nullify Ortho’s timely and appropriate remedial action in response to her complaint of sexual harassment. These subsequent events occur red months after the Morelandassault and were the basis for Todd’s separate Title VII claim of unlawfu l retaliation. The jury found that Ortho did not retaliate.

The j udgment of the district court is reversed and the case is remanded with instr uctions to enter judgment dismissing the complaint. Because Todd is no longer a prevailin g party, the district court’s award of attorney’s fees must be vacated. See 42 U.S.C. § 2000e-5(k); M INN

. S TAT . § 363.14, subd.3.
RICHARD S. ARNOLD, Chief Judge, concurring.
The Court rightly cite s, as one of the principal authorities justifying its decision, Davis v. City of Sioux City , 115 F.3d 1365 (8th Cir. 1997). I dissented in that case, id. at 1369, but I am now bound by it. I therefore concur in the opinion of the Court.
A true copy.

Attest:

CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.