The Honorable Richard L. Young, Chief Judge of the United 

States District Court for the Southern District of Indiana, sitting

by designation.

In the

United States Court of Appeals

For the Seventh Circuit

No. 10-3247

EQUAL EMPLOYMENT OPPORTUNITY 

COMMISSION,

Plaintiff-Appellee,

v.

MANAGEMENT HOSPITALITY OF RACINE,

INC. d/b/a INTERNATIONAL HOUSE OF PANCAKES,

FLIPMEASTACK, INC. and SALAUDDIN 

JANMOHAMMED,

Defendants-Appellants.

Appeal from the United States District Court 

for the Eastern District of Wisconsin.

No. 06-cv-0715—Lynn S. Adelman, Judge.

ARGUED APRIL 5, 2011—DECIDED JANUARY 9, 2012

Before EASTERBROOK, Chief Judge, BAUER, Circuit Judge,

and YOUNG, District Judge.


2 No. 10-3247

YOUNG, District Judge. The Equal Employment Opportunity Commission (“EEOC”) brought this action on

behalf of two servers, Katrina Shisler and Michelle Powell,

who were employed at an International House of

Pancakes franchise in Racine, Wisconsin (the “Racine

IHOP”), alleging that the servers were sexually harassed

in violation of Title VII of the Civil Rights Act of 1964,

42 U.S.C. §§ 2000e et seq. A jury found in favor

of Shisler and Powell on the hostile work environment

claim, and against the Defendants, Management Hospitality of Racine, Inc. (“MHR”) d/b/a International

House of Pancakes, Flipmeastack, Inc., and Salauddin

Janmohammed. The jury awarded compensatory damages to Shisler and Powell, and awarded punitive

damages to Powell. 

Following the jury verdict, the EEOC filed a document

entitled EEOC’s Post-Trial Motions that addressed

two motions: a motion for judgment against Defendants Flipmeastack and Salauddin Janmohammed and a

motion for an order of injunctive relief. The Defendants filed a Motion for Judgment as a Matter of Law

or Alternatively for a New Trial or Remittitur. By Decision and Order dated August 31, 2010, the district court

denied the Defendants’ motions, granted the EEOC’s

motions, and entered judgment in favor of the EEOC,

and an injunction against Flipmeastack, Inc. This appeal

followed. For the reasons set forth below, we reverse

in part, and affirm in part.
No. 10-3247 3

MHR dissolved, and its assets were sold, after the events 1

giving rise to this case occurred.

I. Background

The recitation of the relevant facts that follow are presented in the light most favorable to the EEOC, as

they relate to the Defendants’ Rule 50 motion and the

jury’s verdict. Molnar v. Booth, 229 F.3d 593, 597 (7th

Cir. 2000). All other facts necessary for resolution of

this appeal, including the facts relevant to the district

court’s conclusion that Flipmeastack was an “employer”

of Shisler and Powell, will be addressed in the Discussion

Section.

A. The Defendants

Janmohammed was the principal owner and

franchisee of twenty-one IHOPs, including the Racine

IHOP. He operated the Racine IHOP under the franchise

name of MHR , and was its president and sole share1

holder. MHR contracted with Flipmeastack, a company

solely owned by Janmohammed’s wife, Victoria

Janmohammed, to provide management consulting

services for his IHOPs. These services included accounting

and payroll, corporate IHOP franchise reporting

and compliance, and human resources assistance. In

addition, Flipmeastack hired the district managers, who,

in turn, hired the general managers of each restaurant

in the district, and oversaw the day-to-day operations
4 No. 10-3247

of those particular restaurants. In 2005, Steve Smith was

the district manager of the Racine IHOP, Michelle

Dahl was the general manager, and Nadia Del Rio and

Rosalio “Junior” Gutierrez were the assistant managers.

The employees of each restaurant, including the general

manager, assistant managers, and servers, were employees

of MHR.

B. The Sexual Harassment Policy

In 2005, Flipmeastack formulated and updated the

Sexual Harassment and Diversity Policy for managers

and employees of MHR. The policy indicated that

“any form of unlawful harassment of co-workers

or members of the public is absolutely forbidden, regardless of whether it is verbal, physical, or visual harassment.”

It also stated that employees “will report any instances

of improper behavior to my manager or company representative.” Victoria Janmohammed confirmed that Gutierrez,

Del Rio, and Dahl were managers or “company representatives” within the meaning of the policy, and that a complaint to any one of those three would be effective. As

the general manager, Dahl was responsible for maintaining a workplace free of sexual harassment and for

reporting instances of sexual harassment to upper management, and Del Rio was responsible for training all

new hires. This training consisted of showing all new hires

a sexual harassment videotape, handing them a copy of

the sexual harassment policy, and asking them to read

and sign it. Both Shisler and Powell viewed the video-
No. 10-3247 5

tape and signed Flipmeastack’s sexual harassment policy.

Shisler’s and Powell’s signed copies of the sexual harassment policy, like all copies signed by IHOP servers, were

locked in a file cabinet. The complaint procedure was

not available in print.

In 2005, corporate IHOP directed that a crisis management guidelines poster be displayed in every

IHOP restaurant. The poster provided a list of telephone numbers in case of an emergency, such as an

armed robbery, flood, earthquake, or “other emergency,”

such as a “discrimination claim.” The poster included

the telephone number of Flipmeastack, the corporate

number of IHOP, and the cell phone number of

Smith. Neither Shisler nor Powell had any recollection

of seeing the poster in the Racine IHOP.

C. The Claimants

Shisler, a teenager, worked at the Racine IHOP on

two different occasions. During her first term of employment in January 2004, Shisler testified that the

general manager of the Racine IHOP, Charles Hecker,

was sexually harassing a female server named Christine.

Shisler gave Smith a written letter informing him of

that fact, and complaining that she and her boyfriend

were receiving unfair work assignments. According

to Shisler, Smith’s response was “passive” and he

never “really sa[id] whether or not he was going to

take care of it.” Shisler never heard from Smith regarding

those issues; however, she testified that Hecker started
6 No. 10-3247

to treat her differently, and “stated things that he only

could have either been told, or read himself in the letter.” After things worsened with Hecker, Shisler

“called the Corporation” and was told she “had to go to

[Smith] about it.” In light of Hecker’s treatment of her,

she did not complain again to Smith. Ultimately,

Hecker fired Shisler.

Her second term of employment began on March 3, 2005.

By this time, Dahl served as the general manager of

the Racine IHOP. Gutierrez, who was approximately

10 years older than Shisler, was relatively new to

the position and worked as the night manager (5:00 p.m.

to 3:00 a.m.), while Shisler worked the second shift

(3:00 p.m. to 11:00 p.m.); consequently, their schedules

overlapped. Shisler testified that whenever she worked

with Gutierrez, he made sexually charged comments

to her, including, “I want to take you in the back and

fuck you over the pancake batter,” “I bet you’re kinky,”

and “you like it rough.” Gutierrez even propositioned

her for three-way sex with his (allegedly) bisexual girlfriend. Gutierrez stared at her body, breasts and

buttocks, like she was “a piece of meat,” rubbed

her shoulders and pressed his body up against hers,

and made her feel very “uncomfortable.” Shisler “told

him to get the fuck away from [her].” She felt “bullied” by

him and felt “dirty” after he told the cooks in Spanish that

he wanted to have sex with her. On March 18, 2005,

Shisler, along with two other servers, reported Gutierrez’s

behavior to Del Rio. Shisler told Del Rio that she

would have to be “blind” if she did not “see it going on.”

Del Rio “blew [them] off,” shook her head, and called

them “silly girls.”
No. 10-3247 7

At some point after Shisler reported Gutierrez’s behavior

to Del Rio, Gutierrez “slap groped” her buttocks as she was

bending over to pick up hot sauce from the floor. Shisler

told Gutierrez to “get the fuck off [her].” On March 27,

2005, Shisler reported Gutierrez’s behavior to Dahl,

who said that this was “none of [her] concern” and then

said “we’re done here.” After her complaints fell on

deaf ears, Shisler “gave up” and kept working “because

[she] needed the money.” On April 3, 2005, Dahl terminated Shisler for violating the Racine IHOP’s coupon

policy, which barred servers from possessing coupons

and giving them to customers. 

Powell, also a teenager, worked at the Racine IHOP

from October or December 2004 until June 2006. Powell

generally worked the first shift (6:00 a.m. to 3:00 p.m.),

so she worked with Gutierrez when their schedules

overlapped—approximately once a week. Powell testified

that in late February 2005, Gutierrez began to make

offensive comments to Powell such as her “ass looked

good in them pants.” Initially, Powell thought Gutierrez’s

comments were “inappropriate,” but “laughed it

off, thinking it was a joke[.]” Powell’s thoughts changed

when “his harassment continued and became more severe,” to the point where “she tried to avoid him at

all costs.” 

Gutierrez pulled her ponytail whenever he could

and told her that she “liked it because [she] would like

[sex] rough.” Gutierrez also whispered in her ear that

he would like to “eat [her] out” and left a voicemail on

Powell’s cell phone asking Powell “to hook up” with him.
8 No. 10-3247

On one occasion while Powell and Gutierrez were in

the kitchen, Gutierrez told the cooks in Spanish “how

badly he wanted to fuck [Powell] and [she] wouldn’t

let him” and then translated what he said to her. He

also told her “he thought [she] would get freaky with

sex.” On another occasion, Gutierrez took Powell into

the dry storage area and pressed himself up against

her while telling her that he “would like to do [her] from

behind.” Powell also recalled that when Gutierrez walked

past her, he would frequently brush up against her breasts

and buttocks. Powell repeatedly objected to Gutierrez’s

behavior, and asked him to “knock it off.” In response,

Gutierrez “seemed to yell at [her] more” or gave her

“harder things to do.”

Powell testified that during the first week of April 2005,

she complained to Dahl that Gutierrez was “sexually

and physically abusing [her] and other female workers”

and “grabbing us and saying dirty things to us.” Although Dahl said she “would take care of it,” Dahl did

nothing to address her complaints. Powell also testified

that Del Rio, prompted by the complaints from

other servers, asked Powell if Gutierrez was treating her

in an inappropriate way. Although Powell responded

“yes,” Del Rio did not report these complaints to upper

management. When Gutierrez continued with his harassing behavior, Powell reported his inappropriate conduct

to Dahl again, but Dahl cut her off by saying that

“[she] didn’t need to hear it.” Eventually, like Shisler,

Powell “learned not to say anything.”
No. 10-3247 9

D. The Investigation

Shisler’s attorney hired Lilly Brown, a private investigator, to obtain information about Shisler’s termination and

to determine whether sexual harassment was occurring at

the restaurant. Between May 10, 2005, and May 25, 2005,

Brown interviewed servers of the Racine IHOP, including

Powell. On May 21, 2005, in the midst of the investigation, Gutierrez quit his position as assistant manager.

On May 23, 2005, Del Rio informed Smith that a private

investigator was asking about Gutierrez’s harassment

of servers. This prompted Smith to conduct his own

investigation. Because Gutierrez had already quit

his position, Smith could not take any corrective action

against him. Smith, however, determined that Shisler

and Powell had complained to Dahl and that Dahl should

have acted on their complaints. Smith determined

that Dahl violated the sexual harassment policy by not

investigating their complaints and terminated her.

E. Dahl’s Lawsuit

Following her termination, Dahl filed a lawsuit against

MHR alleging that Smith sexually harassed her. Her

case was based, in part, on the allegation that Smith rubbed

his finger over the cleavage area of Dahl’s daughter’s

picture. Gutierrez testified that he witnessed the event,

and heard Smith comment, “if only she was 18.” Gutierrez

testified that Smith’s comment made him uncomfortable,

but he did not report this incident because he was fearful he would lose his job. Dahl confronted Smith about this

incident, but Smith told her that if she reported him,
10 No. 10-3247

he would “deny everything.” At any rate, at the trial of

this matter, Smith testified that the case was ultimately

dismissed on summary judgment in December 2008.

F. Jury Trial

The jury trial commenced on November 16, 2009.

The jury heard the accounts noted above from Shisler,

Powell, Smith, Dahl, Del Rio, and Gutierrez, among

others. The jury was asked to determine whether Shisler

and Powell had been subjected to a hostile work environment. The Defendants’ Faragher/Ellerth affirmative

defense was included in the jury instructions, but the

verdict form did not include a specific interrogatory

with respect to the defense. The jury was also asked

to consider whether Shisler was terminated in retaliation

for complaining of sexual harassment. The jury instructions

and verdict form referred to the three Defendants collectively, because the district court reserved ruling on

the corporate liability of Flipmeastack post trial. 

On November 19, 2009, the jury returned a special

verdict form in favor of Shisler and Powell on the sexual

harassment claims, and in favor of the Defendants

on Shisler’s retaliation claim. The jury awarded Shisler

$1,000 in compensatory damages, and awarded Powell

$4,000 in compensatory damages and $100,000 in

punitive damages. 
No. 10-3247 11

G. Post-Trial Motions and Rulings

Following the jury verdict, the Defendants moved

for Judgment as a Matter of Law or for New Trial under

Rule 50(b) of the Federal Rules of Civil Procedure.

In support of their Motion for Judgment as a Matter of

Law, the Defendants argued that no rational jury could

have found Shisler and Powell experienced a hostile

work environment, and that, in any event, they had

established their Faragher/Ellerth affirmative defense.

The Defendants also argued that the jury’s award of

$100,000 in punitive damages must be stricken as against

the great weight of the evidence. In support of their

Motion for New Trial, the Defendants argued that

the district court committed prejudicial error by failing

to include a specific question regarding the Defendants’

affirmative defense on the verdict form, and by admitting “other acts” evidence, over their objection. The Defendants also argued, in the alternative, that the punitive damages award should be reduced pursuant to

the statutory cap of $50,000. 

The EEOC raised two issues in its Post-Trial Motions.

First, it contended that all three Defendants were jointly

and severally liable for the amounts set forth in the jury’s

verdict. Second, it contended that injunctive relief should

be awarded against Flipmeastack and that such other relief

should extend to all of the IHOP restaurants it manages.

In its Decision and Order, the district court denied

the Defendants’ Motion for Judgment as a Matter of Law

and for New Trial or Remittitur. In addition, the district

court granted the EEOC’s Post-Trial Motions, finding
12 No. 10-3247

that Flipmeastack was an employer of Shisler and Powell,

and thus, liable for the $105,000 jury verdict and enjoined

Flipmeastack from, inter alia, “allowing a sexually hostile

work environment to exist in any restaurant under its

management.” 

II. Analysis

A. Defendants’ Motion for Judgment as a Matter of Law

We review de novo the district court’s denial of

the Defendants’ Motion for Judgment as a Matter of Law.

Erickson v. Wisconsin Dep’t of Corrections, 469 F.3d 600,

601 (7th Cir. 2006). “ ‘Our inquiry is limited to the question

whether the evidence presented, combined with all reasonable inferences permissibly drawn therefrom, is sufficient

to support the verdict when viewed in the light

most favorable to the party against whom the motion

is directed.’ ” Wallace v. McGlothan, 606 F.3d 410, 418

(7th Cir. 2010) (quoting Tammi v. Porsche Cars N. Am.,

Inc., 536 F.3d 702, 707 (7th Cir. 2008)). “Credibility determinations, the weighing of the evidence, and the drawing

of legitimate inferences from the facts are within

the province of the jury.” Bogan v. City of Chicago, 644

F.3d 563, 572 (7th Cir. 2011) (internal quotation marks

and citations omitted). We must reverse only if, “on

the basis of the admissible evidence, no rational jury

could have found for the prevailing party.” Id.

(citing Walker v. Bd. of Regents of the Univ. of Wis. Sys.,

410 F.3d 387, 393 (7th Cir. 2005)); see also Emmel v. CocaCola Bottling Co. of Chicago, 95 F.3d 627, 630 (7th Cir.
No. 10-3247 13

1996) (“ ‘[W]e are particularly careful in employment

discrimination cases to avoid supplanting our view of

the credibility or weight of the evidence for that of both

the jury (in its verdict) and in the judge (in not interfering with that verdict.’ ” (quoting Hybert v. Hearst

Corp., 900 F.2d 1050, 1054 (7th Cir. 1990))). 

1. Sexual Harassment Claims

A sexually hostile or abusive work environment is a form

of sex discrimination under Title VII of the Civil Rights

Act of 1964. Meritor Sav. Bank, FSB v. Vinson, 477 U.S. 57,

66 (1986). For sexual harassment to be actionable, a plaintiff must prove conduct that is so severe or pervasive

as “ ‘to alter the conditions of [her] employment and create

an abusive working environment.’ ” Id. at 67 (quoting

Henson v. Dundee, 682 F.2d 897, 904 (11th Cir. 1982)).

In determining whether the harassment rises to this level,

we consider the totality of the circumstances, including

the “ ‘frequency of the discriminatory conduct; its severity;

whether it is physically threatening or humiliating, or

a mere offensive utterance; and whether it unreasonably

interferes with an employee’s work performance.’ ”

Gentry v. Expert Packaging Co., 238 F.3d 842, 850 (7th

Cir. 2001) (quoting Harris v. Forklift Sys., Inc. 510 U.S. 17,

23 (1993)). In evaluating the severity of harassment, we

are guided by prior case precedent:

On one side lie sexual assaults; other physical contact,

whether amorous or hostile, for which there is no

consent express or implied; uninvited sexual solicitations; intimidating words or acts; obscene language or
14 No. 10-3247

gestures; pornographic pictures. On the other side lies

the occasional vulgar banter, tinged with sexual

innuendo, of coarse or boorish workers. 

Baskerville v. Culligan Int’l Co., 50 F.3d 428, 430-31 (7th

Cir. 1995) (internal citations omitted). We also assess

the impact of the harassment on the plaintiff’s work

environment from both a subjective and objective viewpoint; “ ‘one that a reasonable person would find hostile

or abusive, and one that the victim in fact did perceive to

be so.’ ” Gentry, 238 F.3d at 850 (quoting Faragher v. City of

Boca Raton, 524 U.S. 775, 787 (1998)). 

We find that a rational jury could have found that

Shisler was subjected to harassment that was both severe

and pervasive. At the trial of this matter, Shisler testified that Gutierrez engaged in sexually harassing conduct

during every shift that Gutierrez was her assistant manager. His comments to Shisler were highly offensive

and easily surpassed what could reasonably be described

as vulgar banter, tinged with sexual innuendo. He told

her he wanted to “fuck her,” propositioned her for threeway sex with his girlfriend, told her she was “kinky”

and liked “rough” sex, and stared at the intimate parts of

her body “like a piece of meat.” Gutierrez engaged

in physical touching by “slap groping” her buttocks.

Shisler testified that she felt “bullied” by him and that

his comments made her feel “dirty.” Given the age difference between Shisler and Gutierrez and Gutierrez’s

position of authority over her, a rational jury could

have concluded that Gutierrez’s verbal and physical

harassment directed at Shisler created an objectively

hostile and abusive work environment. 
No. 10-3247 15

The Defendants attack Shisler’s credibility by arguing

that on cross-examination, she could only identify three

specific instances of sexually harassing comments

and conduct by Gutierrez over the four-week period

that she worked at the Racine IHOP. As noted, however,

Shisler testified to more than three specific instances

of conduct, and she testified that some form of verbal

harassment occurred on every shift that she worked

with Gutierrez. Although Shisler could not remember

the exact dates that specific instances of sexual harassment

occurred, the jury was entitled to believe Shisler’s version

of events. 

In any event, to prevail, Shisler need not show that

the conduct complained of was both severe and pervasive;

“even one act of harassment will suffice if it is egregious.”

Hostetler v. Quality Dining, Inc., 218 F.3d 798, 808 (7th

Cir. 2000) (citations omitted). A jury could infer that

the three instances that Shisler did testify to—telling her

that he thought she was “kinky” and liked it “rough,”

propositioning her for sex on the pancake batter, and

“slap groping” her buttocks—were sufficiently severe

to support a jury verdict. See Baskerville, 50 F.3d at 431

(noting that even if a plaintiff’s allegations of sexual

harassment are on the line between the merely unpleasant

and the sexually harassing, “the jury’s verdict, whether

for or against the defendant, cannot be set aside in

the absence of trial error”).

The Defendants also suggest that Shisler was not subjectively offended by Gutierrez’s crude comments because

her MySpace page contained a sexually graphic video
16 No. 10-3247

of young males masturbating in the presence of young

females, and contains the comment, “funny as hell.”

The jury was entitled to disregard this video as evidence

that Shisler did not find Gutierrez’s comments

to be offensive. As the district court observed,

“sharing jokes with friends in an online community

is vastly different than being propositioned for sex by a

supervisor at work.” 

Further, there is sufficient evidence in the record showing that Shisler was subjectively offended by Gutierrez’s

comments and conduct because she repeatedly

informed Gutierrez that his conduct was unwelcome

and complained to IHOP managers Del Rio and Dahl.

Accordingly, there is sufficient evidence in the record

from which a rational jury could find that Shisler was

the victim of sexual harassment while an employee at

the Racine IHOP, in violation of Title VII.

We also find a rational jury could have found that Powell

was subjected to a sexually hostile work environment. Powell testified that Gutierrez made inappropriate

comments to her like “your ass looks good in them pants,”

pulled her ponytail and told her she “would like it

rough” and “would get freaky with sex.” He propositioned

her for oral sex, told her he would like to “do her from

behind” as he pressed his pelvis into her body, told the

cooks he wanted to “fuck” her, and left a voicemail message on her phone asking her to “hook up” with

him. Gutierrez touched her breasts and buttocks whenever he could by brushing up against her as he walked

past her. Powell testified Gutierrez’s comments made
No. 10-3247 17

her feel “dirty,” and that she felt worried if she had to

work on the same shift as Gutierrez. Powell also testified

that when she objected to Gutierrez’s treatment of her,

he gave her harder work assignments or “yelled at her

more,” “[s]o she learned just not to say anything.”

Like Shisler, Powell was a teenager at the time. The

age disparity between Powell and Gutierrez, coupled with

Gutierrez’s position of authority over her, could have

led a rational jury to conclude that Gutierrez’s verbal and

physical harassment directed at Powell created an objectively hostile and abusive work environment, and that

Powell reasonably perceived it as such. 

2. The Faragher/Ellerth Affirmative Defense

An employer can be held vicariously liable for a supervisor’s sexual harassment of a subordinate. Generally,

an employer may avoid liability if it can prove the

two elements of the Faragher/Ellerth affirmative defense:

“(a) that the employer exercised reasonable care to prevent

and correct promptly any sexually harassing behavior, and

(b) that the plaintiff employee unreasonably failed to

take advantage of any preventive or corrective opportunities provided by the employer or to avoid harm otherwise.” Burlington Indus., Inc. v. Ellerth, 524 U.S. 742,

765 (1998); Faragher, 524 U.S. at 807. 

a. Defendants’ Preventative Measures

The Defendants contend that they took sexual harassment seriously, and instituted an effective sexual harass-
18 No. 10-3247

ment policy to prevent and promptly correct any instances

of sexual harassment occurring in the workplace.

Victoria Janmohammed testified that the policy was a

“zero tolerance” policy, meaning “we do not tolerate

any sexual harassment, any discrimination. We don’t

even tolerate somebody not investigating.” To this end,

the Defendants required all of their new employees,

including Shisler and Powell, to watch a video educating

them on sexual harassment in the workplace, and to

read and sign their sexual harassment policy. The

Sexual Harassment and Diversity Policy that Shisler and

Powell signed stated the following:

I have watched the Sexual Harassment and Diversity

videos. I am fully aware of our companies [sic] policies

regarding both—zero tolerance for any type of unlawful discrimination and/or harassment. Our company is

committed to providing a work environment that is

free of unlawful behavior in any form. I will lead by

example.

* * *

Any form of unlawful harassment of co-workers or

members of the public is absolutely forbidden, regardless of whether it is verbal, physical, or visual harassment. You must be sensitive to the feelings of others

and must not act in a way that might be considered

offensive to someone else. I will report any instances of

improper behavior to my manager or company representative. The company will take immediate and

appropriate steps to investigate all reports of

improper behavior.
No. 10-3247 19

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.

In addition, the Defendants also note the presence of

the Crisis Management Guidelines Poster in the employee

break room that displayed, in part, Smith’s cell

phone number. Lastly, Defendants point out that as

soon as Del Rio informed Smith that a private investigator

was asking questions about sexual harassment at

the Racine IHOP, he immediately conducted an investigation, took witness statements, determined that the policy

had been violated, and took corrective action by firing

Dahl for her failure to investigate the servers’ allegations.

We find that a rational jury could have concluded

that the Defendants exercised reasonable care by instituting a sexual harassment policy with a reasonable complaint

mechanism, and by engaging in prompt and corrective

action by investigating Shisler’s and Powell’s complaints

of harassment and terminating Dahl. Like the district

court, however, we find that the evidence was sufficient

for a jury to find otherwise. Although the presence of

a sexual harassment policy is encouraged by Title VII,

“the mere creation of a sexual harassment policy will

not shield a company from its responsibility to

actively prevent sexual harassment in the workplace.”

Gentry, 238 F.3d at 847. The policy must provide “a meaningful process whereby an employee can express his or

her concerns regarding an individual within a working

environment.” Id. Case law also requires that the policy’s
20 No. 10-3247

complaint mechanism be reasonable, “and what is reasonable depends on the employment circumstances,

and therefore, among other things, on the capabilities

of the class of employees in question.” EEOC v. V&J

Foods, Inc., 507 F.3d 575, 578 (7th Cir. 2007) (internal

quotation marks and citations omitted). Moreover, the

policy must not only be reasonably effective on paper,

but also reasonably effective in practice. Clark v. United

Parcel Serv., Inc., 400 F.3d 341, 350 (6th Cir. 2005). 

Despite the fact that the Defendants had a sexual harassment policy in place, a rational jury could have found

that the policy and complaint mechanism were not reasonably effective in practice. At trial, the jury heard

evidence indicating that all managerial employees at

the Racine IHOP failed to carry out their duties under

the policy. See Loughman v. Malnati Org., Inc., 395 F.3d

404, 407 (7th Cir. 2005) (finding that “the consistent

stream of harassment at the restaurant suggests that

Malnati’s policy was actually not very effective at all”).

For example, Gutierrez violated the policy by engaging

in sexual harassment. The other assistant manager of

the Racine IHOP, Del Rio, and the general manager of

the Racine IHOP, Dahl, both failed to report Gutierrez’s

harassment after Shisler and Powell complained to

them. Moreover, the jury heard evidence that Smith failed

to investigate Shisler’s prior complaint of harassment

of another female server by the former general manager

of the Racine IHOP, Hecker. The jury also heard evidence

that Smith engaged in inappropriate conduct that could

be described under the policy as sexual harassment,
No. 10-3247 21

by rubbing his finger over the cleavage area of a picture

of Dahl’s teenage daughter and stating, “if only she

was 18.” Gutierrez testified that he witnessed this incident,

but did not report it. A rational jury, faced with this

evidence, could have found that none of the managers

of the Racine IHOP took action under the policy that could

be termed “corrective” or “effective.” 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, although management was required to

take sexual harassment training, the evidence at trial

suggested that the training was inadequate. Del Rio

testified that she did not receive sexual harassment training when she became an assistant manager, even though

she, as the assistant manager, was responsible for

the orientation and training of new employees. Moreover,

even though the policy stated that “any form of unlawful

harassment of co-workers or members of the public

is absolutely forbidden,” Del Rio “blew off” Shisler’s and

Powell’s complaints. Del Rio knew that she had an absolute

duty to report sexual harassment allegations to

upper management, yet she did not report Powell’s

complaints because, in her opinion, Powell did not seem

to be “afraid” of Gutierrez. Similarly, Dahl knew that

she had an absolute duty to report such allegations to

upper management. Yet, in the face of Powell’s allegations

that Gutierrez was “sexually and physically abusing [her]

and other female servers,” she failed to report Powell’s

complaints. On these facts, a rational jury could have

concluded that, not only was the policy and the manage-
22 No. 10-3247

ment training ineffective, but the protections offered

by them were illusory. Gentry, 238 F.3d at 847-50 (upholding jury’s determination that employer failed to take

preventative or corrective action regarding sexual harassment where evidence revealed deficiencies in harassment policy and a failure to respond to complaints). 

Third, “[o]ur cases recognize prompt investigation of

the alleged misconduct as a hallmark of reasonable corrective action.” Cerros v. Steel Tech., Inc., 398 F.3d 944, 954

(7th Cir. 2005) (citations omitted). Here, a rational jury

could have concluded that Smith’s investigation of

Gutierrez’s sexual harassment was not “prompt.” Shisler

complained to management of Gutierrez’s harassment

twice in March 2005, and Powell complained to management three times in April 2005. Smith did not commence

his investigation until May 23, 2005. This is not the type of

response “ ‘reasonably likely to prevent the harassment

from recurring.’ ” Id. (quoting Williams v. Waste Mgmt. of

Ill., 361 F.3d 1021, 1029 (7th Cir. 2004)). In addition, a

rational jury could have believed that an investigation

ensued only because Shisler’s private investigator started

making inquiries of other female servers at the Racine

IHOP. 

Further, a rational jury could have concluded that the

policy was not reasonably effective on paper. As the

district court observed, an employer’s complaint mechanism must provide a clear path for reporting harassment,

particularly where, as here, a number of the servers

were teenagers. See V&J Foods, 507 F.3d at 578 (noting

that because it was part of V&J’s business plan to
No. 10-3247 23

employ teenagers, “the company was obligated to suit

its procedures to the understanding of the average teenager”). Flipmeastack’s sexual harassment policy did

not provide a point person to air complaints to. In fact,

it provided no names or contact information at all. To

the extent the Crisis Management Guidelines Poster

was meant to supplement the sexual harassment policy

in this regard, a rational jury could have concluded that

it did not fulfill this role. First, neither Shisler nor

Powell could recall whether the poster was actually

displayed in the employee break room during the time

that they were harassed. Second, the poster contains instructions on how to deal with natural disasters,

fires, and other events such as food-borne illness. It

also contains the phone numbers of local authorities,

and Flipmeastack’s corporate numbers, including Smith’s

cell phone number. The word “discrimination” is contained on the poster under the heading “other emergencies”; however, the poster does not inform an

employee which company number to call in the event he

or she believes that the sexual harassment policy has

been violated. In addition, the poster did not describe

employees’ rights under Title VII or provide phone numbers for the EEOC or a local civil rights office, and thus,

did not provide a means for the employee to make

an external complaint of discrimination. These facts,

and the inferences reasonably drawn from them,

could have led a rational jury to conclude that the complaint mechanism provided by Flipmeastack’s sexual

harassment policy did not provide a clear path

for reporting harassment. For all of these reasons,

we find that the jury’s determination that the Defend-
24 No. 10-3247

ants did not discharge their duty to effectively prevent and

correct promptly sexual harassment in the workplace,

was not unreasonable.

b. Shisler’s and Powell’s Preventative or Corrective

Action

We now turn to the second element of the Faragher/Ellerth

affirmative defense—i.e., whether Shisler and Powell

unreasonably failed to take advantage of preventative

or corrective measures. The Defendants’ primary argument on appeal is that neither Shisler nor Powell

ever complained to Smith, and there is “no doubt” that

had they done so, “[Smith] would have taken prompt

action to correct sexual harassment.” The Defendants’

argument ignores the terms of the sexual harassment

policy itself, which provided that an employee was

to “report any instances of improper behavior to [the

employee’s] manager or company representative.” As the

creator of the policy, Victoria Janmohammed affirmed this

fact at trial. Shisler and Powell utilized the complaint

mechanism by first asking Gutierrez, an assistant manager,

to stop his harassing behavior. When Gutierrez refused to

stop his harassment, both Shisler and Powell reported

Gutierrez’s harassment to Del Rio and Dahl—each of whom

were managers or company representatives within

the meaning of the policy. 

During the month that Shisler worked at the Racine

IHOP (March 2005), she first reported Gutierrez’s harassment to Del Rio on March 18, 2005. After Del Rio failed

to take action, Shisler reported the harassment to Dahl
No. 10-3247 25

on March 27, 2005. On cross-examination, Shisler testified

that, after she last complained to Dahl, and Dahl “blew

her off,” she could have complained to Smith; however,

Smith did not work that day, and would not be at

the restaurant “until the very next Sunday, possibly.”

Shisler was terminated on April 3, 2005. Given this evidence, a rational jury could have believed that Shisler

did not act unreasonably by failing to report Gutierrez’s

conduct directly to Smith.

In addition, a rational jury could have believed that

Shisler did not feel comfortable reporting Gutierrez’s

harassment to Smith. Shisler testified that Smith failed

to respond to her prior complaint of harassment by

Hecker toward another server in 2004. Shisler also testified

that after she complained to Smith, Hecker began to

treat her more harshly. In light of this prior experience,

a rational jury could have concluded that her decision

not to contact Smith in 2005 was therefore justified. 

Powell first complained to Dahl of Gutierrez’s harassment during the first week of April 2005. Dahl

responded that she “would take care of it.” The following

week, Del Rio asked Powell if Gutierrez had been treating

her inappropriately, and Powell responded in the affirmative. Still, no action was taken. Powell last aired a complaint to Dahl during the last week of April, but Dahl

told her that she “didn’t need to hear it.” While it is true,

as the district court observed, that Powell might

have complained to Smith after it became evident

that neither Dahl nor Del Rio had corrected the problem,

only about three to four weeks elapsed between the
26 No. 10-3247

time that Powell last complained to Dahl and the date that

Gutierrez resigned. A rational jury could have concluded

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, 365-66 (7th Cir. 2003) (stating

that it is for the jury to determine whether employee

unreasonably failed to avail herself of her employer’s

complaint procedures, and employee’s delay of six weeks

to report supervisor’s misconduct after trying to deal

with supervisor directly was not unreasonable as a matter

of law). For all of these reasons, we find that the jury’s

determination that Shisler and Powell took prompt

and appropriate action under the policy was not unreasonable. 

3. Punitive Damages

Punitive damages are available under Title VII when

a plaintiff demonstrates that the defendant engaged

in intentional discrimination “with malice or with reckless

indifference to the federally protected rights of an aggrieved individual.” 42 U.S.C. § 1981a(b)(1). Whether

an award of punitive damages is proper is subject to

a three-part inquiry. Kolstad v. American Dental Ass’n,

527 U.S. 526 (1999). The first two elements require

the plaintiff to show that: (1) the employer acted with

the requisite mental state—i.e., that it acted “in the face of a

perceived risk that its actions will violate the federal

law”; and (2) the employer’s managerial agent recklessly

disregarded the plaintiff’s federally protected rights

while acting within the scope of employment. Id. at 535-36,
No. 10-3247 27

543. Third, an employer may avoid vicarious liability for

a managerial employee’s discriminatory conduct if the

employer can show that it engaged in good faith efforts

to implement an anti-discrimination policy. Id. at 545. The

Defendants challenge only the third element, claiming

that this case presents a “textbook example of responsible

employers implementing and following clear and effective sexual harassment policies.” 

While the Defendants’ sexual harassment policy

is relevant to evaluating whether an employer engaged

in good faith efforts to comply with Title VII, “it is

not sufficient in and of itself to insulate an employer from

a punitive damages award. 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.”

Bruso v. United Airlines, Inc., 239 F.3d 848, 858-59 (7th Cir.

2001) (footnote collecting cases and citation omitted). 

A rational jury could have concluded that the Defendants’ policy was not sufficient to insulate it from

a punitive damages award, because it was ineffective

in advancing the education and protection of the employees’ rights under Title VII. A rational jury could

have concluded that certain policy language—i.e., noting

the “severity of knowingly making a false accusation of

discrimination or harassment”—was inserted to discourage

complaints of sexual harassment. Indeed, Victoria

Janmohammed testified that the language was inserted

after her husband was sued for sexual harassment by

a server at one of his IHOP restaurants. Although
28 No. 10-3247

she denied that the language was inserted into the sexual

harassment policy in reaction to the lawsuit, the jury

was entitled to disbelieve her. In addition, Smith testified

that, once the servers viewed the sexual harassment

video and signed the sexual harassment and diversity

policy, the policy was locked in a file cabinet, not accessible

to the servers without managerial approval. If the managerial approval had to come from a manager who happened

to be the alleged harasser, this could present a significant

hurdle for relief. See V&J Foods, 507 F.3d at 579 (“A

policy against harassment that includes no assurance

that a harassing supervisor can be bypassed in the complaint process is unreasonable as a matter of law.”).

Moreover, the complaint mechanism was mentioned in

the video, but was not available in written form. To the

extent the crisis management poster was meant to address

this issue by providing the name and cell phone number

of Smith, the poster was insufficient to fill the gap

in information for the reasons previously stated regarding

the Defendants’ affirmative defense. 

Further, a rational jury could have concluded that the

Defendants did not engage in good faith efforts to educate

their managerial staff about sexual harassment in the

workplace. Del Rio testified that, although she received

training on sexual harassment when she was a server,

she did not receive additional training after she was

promoted to assistant manager. As Del Rio was in

charge of training all new employees on the Defendants’

sexual harassment policy, her lack of training is troublesome. Moreover, Del Rio received numerous complaints of

Gutierrez’s sexual harassment from Shisler and Powell
No. 10-3247 29

Because MHR is a dissolved corporation, the district court 2

held that Janmohammed had to personally satisfy any judgment

against MHR to the extent of the distributions he received as a

result of the dissolution of MHR. The district court found that he

received $15,000 from the sale of MHR’s assets; thus, he was

liable for that amount of the judgment against MHR. That issue

is not the subject of this appeal.

(among others), but failed to report their complaints, in

part, because she did not think Powell was serious.

Gutierrez and Dahl received training on sexual harassment

as managerial staff; however, neither complied with

the policy by reporting the harassment to upper management. Gutierrez engaged in sexual harassment, and failed

to report Smith when he made inappropriate comments

while admiring a picture of Dahl’s daughter. Dahl received

complaints regarding Gutierrez’s sexual harassment

of servers on numerous occasions, but, like Del Rio,

failed to report those claims to Smith or to upper management at Flipmeastack. Thus, as the district court found,

a rational jury could have concluded that the Defendants’

consistent failure to comply with the sexual harassment

policy evinced a lack of understanding of what constituted sexual harassment under Flipmeastack’s policy

and what their responsibilities were as managerial staff

under the policy. Accordingly, we find that there was

a reasonable basis in the record to permit a jury to find

that the Defendants did not engage in good faith efforts to

comply with Title VII. The jury’s punitive damages award

stands against MHR and Janmohammed; however, for 2

the reasons advanced in Section II.C. of this opinion, the
30 No. 10-3247

punitive damages award against Flipmeastack is remanded

to the district court.

We now turn to the district court’s ruling denying the

Defendants’ motion for new trial.

B. Defendants’ Motion for New Trial Pursuant to FED.R.

CIV. P. 59(a)

Defendants challenge the district court’s denial of their

motion for new trial on two grounds. First, they contend

that the district court abused its discretion by failing

to include the Faragher/Ellerth affirmative defense on

the special verdict form. Second, they contend that the

district court admitted “other acts” evidence that prejudiced the jury against them. We review a district

court’s rulings on a motion for new trial for an abuse

of discretion. Aldridge v. Forest River, Inc., 635 F.3d 870,

877 (7th Cir. 2011). 

1. Special Verdict Form

Whether to “submit special interrogatories (either on

all issues or on a subset of issues like damages) is committed to the sound discretion of the district court.” Cruz

v. Town of Cicero, 275 F.3d 579, 591 (7th Cir. 2001) (citing

Bularz v. Prudential Ins. Co., 93 F.3d 372, 377 (7th Cir. 1996)).

The verdict form asked the jury to decide whether

the Defendants were liable for sexual harassment, but

failed to include an additional interrogatory asking

whether the Defendants were entitled to their
No. 10-3247 31

Faragher/Ellerth affirmative defense. The Defendants

assert that the district court’s failure to include on

the special verdict form any interrogatories related to

their affirmative defense impermissibly took the issue

away from the jury, and constitutes an abuse of discretion.

See United States Fire Ins. Co. v. Pressed Steel Tank Co.,

Inc., 852 F.2d 313, 318 (7th Cir. 1988) (holding that Rule

49(a) of the Federal Rules of Civil Procedure requires

a district court to submit all material issues raised by

the pleadings and the evidence in a special verdict form).

The verdict form in this case was entitled “Special

Verdict Form.” Yet, as the district court described it,

the verdict form was a general verdict form as it pertained

to the Defendants’ liability for sexual harassment, and

a special verdict form as it pertained to damages. We

are not aware of any rule that precludes this type of hybrid verdict form; Rule 49 does not. Our case law requires only that the verdict form not be confusing

or misleading to the jury. Happel v. Walmart Stores, Inc.,

602 F.3d 820, 827 (7th Cir. 2010). In evaluating whether

a verdict form is confusing or misleading, we consider

the verdict form in light of the instructions given to

determine “whether [the jury] had [an] understanding

of the issues and its duty to determine those issues.”

Id. (internal quotation marks and citation omitted).

The Defendants do not challenge the district court’s

instructions to the jury, including the instructions on the

elements of a claim for sexual harassment and the Defendants’ Faragher/Ellerth affirmative defense. The instructions

informed the jury that in evaluating whether the Defen-
32 No. 10-3247

dants were liable for Gutierrez’s sexual harassment of

Shisler and/or Powell, they were to consider whether

the Defendants had proven their affirmative defense by

a preponderance of the evidence. We find that the

verdict form, read in light of the jury instructions, informed the jury that in finding the Defendants’ liable, they

were implicitly rejecting their affirmative defense. Therefore, the district court’s decision not to include a question addressing the Defendants’ affirmative defense on

the liability portion of the verdict form was not an

abuse of discretion. 

2. “Other Acts” Evidence

We review claims of improperly admitted evidence

for an abuse of discretion. Farfaras v. Citizens Bank and

Trust of Chicago, 433 F.3d 558, 564 (7th Cir. 2006). Where

the alleged error of admission occurred during trial,

“we will grant a new trial only if the error had a substantial

influence over the jury, and the result reached was inconsistent with substantial justice.” Id. (internal quotation

marks and citations omitted). “Evidentiary errors satisfy

this standard only when a significant chance exists

that they affected the outcome of the trial.” Old Republic

Ins. Co. v. Employers Reinsurance Corp., 144 F.3d 1077,

1082 (7th Cir. 1998) (citations omitted).

The Defendants object to two pieces of evidence admitted

at trial: (1) Shisler’s testimony that Hecker, the general

manger of the Racine IHOP prior to Dahl, sexually harassed another female server named Christine, and

(2) Dahl’s testimony that Smith sexually harassed her.
No. 10-3247 33

Defendants contend this evidence was “irrelevant and

highly inflammatory” and it “wrongly prejudiced the

jury against defendants.” 

Evidence is relevant if it has “any tendency to make

the existence of any fact that is of consequence to the

determination of the action more probable or less probable

than it would be without the evidence.” FED. R. EVID. 401.

Relevant evidence may be excluded, however, “if its

probative value is substantially outweighed by the

danger of unfair prejudice . . . .” FED. R. EVID. 403. 

Shisler testified that Smith’s response to her report of

Hecker’s harassment was “passive.” She also testified

that, following her report to Smith, Hecker began to assign

her the worst restaurant sections. When she contacted

corporate IHOP, she was informed she had to complain

to Smith. Given her recent experience with Smith,

Shisler decided not to pursue the matter. Contrary to

Defendants’ assertion, Shisler’s testimony regarding

Hecker’s harassment was relevant to the Defendants’

Faragher/Ellerth affirmative defense because, as the district court reasoned, it suggested that Flipmeastack’s

sexual harassment policy was not reasonably effective. 

Dahl testified that she was sexually harassed by

Smith. The district court found that her testimony was

also relevant to the Defendants’ Faragher/Ellerth affirmative defense. The Defendants contend that they were

prejudiced by the admission of Dahl’s testimony,

because her lawsuit against MHR, alleging that Smith

sexually harassed her, was dismissed by the district court

on summary judgment eleven months before the trial of

this matter commenced. 
34 No. 10-3247

The subject of Dahl’s lawsuit was addressed during

Smith’s testimony. He testified that Dahl’s lawsuit was

“dismissed” because “there was no merit to it.” Thus,

any prejudice caused by the admission of Dahl’s testimony

was cured by Smith’s testimony. Accordingly, we find

the admission of Shisler’s and Dahl’s testimony was not

an abuse of discretion.

C. EEOC’s Post-Trial Motions

The EEOC’s Post-Trial Motions include a motion to

find the Defendants jointly and severally liable, and a

motion for injunctive relief against Flipmeastack. We

first address the district court’s order holding

Flipmeastack liable for the sexual harassment of

the claimants. We review the district court’s conclusion

of law de novo. Metavante Corp. v. Emigrant Sav. Bank,

619 F.3d 748, 758-59 (7th Cir. 2010).

1. Corporate Liability

Prior to trial, the EEOC filed a motion in limine regarding corporate liability. The motion asked the district

court to rule, as a matter of law, that Flipmeastack, as an

affiliate corporation of MHR, should be held liable

for Gutierrez’s harassment of Shisler and Powell under

two of the three theories advanced in Papa v. Katy Indus.,

Inc., 166 F.3d 937, 940-41 (7th Cir. 1999) (holding that

an affiliate’s corporate existence may be disregarded,

and the affiliate held to be an employer under Title VII,

in “three situations”; the traditional conditions are present
No. 10-3247 35

to pierce the corporate veil, the affiliate splits itself

into tiny corporations for the express purpose of avoiding

liability under Title VII, and the parent corporation directed the discriminatory act of which the plaintiff

is complaining). The EEOC argued under the “first situation” of Papa that MHR’s corporate liability should

be pierced and that Flipmeastack should be held the

real employer of Gutierrez at the Racine IHOP. It also

argued under the “third situation” of Papa

that Flipmeastack should be held liable for directing

the discriminatory act, because it “was the entity responsible for the inadequate HR policies and practices that

allowed the harassment to occur and continue . . . .”

After the motion was fully briefed, the district court

held a pre-trial conference, the minutes of which state,

“Court to resolve motions in limine on 3 corporate

law issues after trial, if necessary. EEOC may file objection

to this procedure.” Following oral argument, we requested

a transcript of the pre-trial conference from the district

court. Although there was no transcript, the district

court explained, in a written memorandum, that it

chose to rule on the issue of Flipmeastack’s corporate

liability because it believed that if “the facts relating

to corporate structure and the relationship between

the three defendants had been addressed during trial,

the trial would have been much longer and more complicated than it was.” Neither the Defendants nor the EEOC

objected to this procedure.

In its post-trial motion, the EEOC submitted the issue

of Flipmeastack’s corporate liability to the district court

on the same grounds asserted in its motion in limine. In
36 No. 10-3247

the district court’s Decision and Order, it found that

the control theory advanced in EEOC v. Illinois, 69 F.3d

167, 169 (7th Cir. 1995) applied, and that Papa “was

not entirely on point.” Moreover, the district court

rejected the grounds upon which the EEOC based its

claim of Flipmeastack’s corporate liability. It found

that “Flipmeastack is a distinct legal entity,” and

that “Flipmeastack did not direct Gutierrez’s behavior.” 

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
No. 10-3247 37

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. 
38 No. 10-3247

 There is one other issue to address. At oral argument,

we raised concerns regarding the district court’s decision

to remove the corporate liability issue from the province

of the jury. The EEOC submits that the Defendants waived

their right to a jury by failing to object. The record

reflects that the Defendants did not raise an objection to

the district court’s decision to rule on the corporate liability

issue before trial for two reasons. First, the Defendants

understood that the EEOC was seeking to pierce the

corporate existence of MHR and find that Flipmeastack

was an employer of Gutierrez. Second, the Defendants

did not believe that Papa applied to the facts of the

case. Accordingly, we find that the Defendants did

not waive their right to a jury with respect to the control

theory of liability. 

Because the district court injected a new theory of the

case after the time the Defendants could present rebuttal

evidence, and because the district court reserved ruling

on an issue ultimately found to be a question for the

jury, the district court’s ruling with respect to the

corporate liability of Flipmeastack is reversed and remanded for trial.

2. Injunction Against Flipmeastack

The Defendants also object to the district court’s

order enjoining Flipmeastack from “allowing a sexually

hostile work environment to exist in any restaurant

under its management,” and ordering Flipmeastack

to create a new sexual harassment training program, a

new written anti-harassment and anti-discrimination
No. 10-3247 39

policy, and to post a Notice in its restaurants informing

employees of the court’s Order for a period of four years.

Because we reverse the district court’s finding of liability

with respect to Flipmeastack, we need not address

the Defendants’ specific objections. The injunction against

Flipmeastack must be dissolved. 

D. Motion for Remittitur

Lastly, we address the district court’s denial of Defendants’ motion to remit Powell’s punitive damages award

from $100,000 to $50,000 pursuant to 18 U.S.C.

§ 1981(b)(3)(A). In denying the motion, the district

court found that Powell was an employee of Flipmeastack,

and because Flipmeastack managed at least 201 employees,

Powell’s compensatory and punitive damages award

was within the statutory cap. See 18 U.S.C. § 1981a(b)(3)(C)

(providing that the statutory cap for compensatory

and punitive damages “in the case of a respondent who

has more than 200 and fewer than 501 employees in each

of 20 or more calendar weeks in the current or preceding calendar year [is] $200,000”). Because this appeal leaves

the liability of Flipmeastack unresolved, we are unable

to address the propriety of the district court’s ruling.

We therefore remand this issue for the district court

to address if, and when, Flipmeastack is found liable

for the judgment. 

III. Conclusion

We affirm the district court’s denial of the Defendants’

Motion for Judgment as a Matter of Law and Motion
40 No. 10-3247

for New Trial with respect to Defendants, MHR and

Salauddin Janmohammed. We reverse the district court’s

grant of the EEOC’s Post-Trial Motions; the judgment

against Flipmeastack is reversed and remanded, and the

injunction dissolved. Because Flipmeastack’s liability for

Powell’s punitive damages award hinges on the degree of

control Flipmeastack had over the employees of MHR,

the punitive damages award against Flipmeastack, and

the need, if any, to remit that award pursuant to the

statutory cap, are also remanded. The district court

is ordered to conduct proceedings consistent with

this opinion.

1-9-12