Fourth Circuit Reverses Summary Judgment in Third Party Harassment Claim

In a recent decision, the Fourth Circuit has joined other circuits in holding that a negligence standard applies to third party harassment claims under Title VII, an issue the United States Supreme Court has yet to reach.  In Freeman v. Dal-Tile Corp., et al., No. 131481 (4th Cir. April 29, 2014), the Fourth Circuit concluded that a black female former employee had triable racial and sexual harassment claims under Title VII based on evidence that her employer failed to respond adequately to harassment from a customer.

Dal-Tile is a company that manufactures, distributes, and markets ceramic tile and natural stone products. In 2006, Freeman began working for Marble Point, Inc., a stone yard ultimately acquired by Dal-Tile in 2008. Freeman thus became an employee of Dal-Tile in 2008 and began working in the position of General Office Clerk, but did many of the functions of a Customer Service Representative. She was subsequently promoted to the role of Sales Consultant and then her position was changed to Customer Service Representative. Freeman’s claims of harassment were based on the behavior of Timothy Koester, an independent sales representative for VoStone, Inc., a kitchen and bath remodeling center in which the owner of Freeman’s initial employer, Marble Point, held an ownership interest. Freeman and Koester had regular and consistent contact—more than once a day.

Back in 2006, Freeman had overheard Koester asking who “these two black b*****es” were in a photograph in Freeman’s supervisor Wrenn’s office. Freeman asked Wrenn who Koester was and Wrenn responded that he was “an a**hole” but that she did not think he would do it again. Freeman told Koester the next day that his language had made her uncomfortable and asked him not use that language any more.

On other occasions, Koester made comments about women he had been with and also inappropriately discussing another employee’s daughters. Koester also held Freeman’s phone to his buttocks and passed gas on it. Then, in June 2009, Koester called Freeman to ask her to cover a customer appointment for him because he had been partying the night before. He said he could not come into the office and that he was “as f**ked up as a n****r’s checkbook.” Freeman told her supervisor Wrenn and one of the co-owners of Vo-Stone, both of whom laughed about the incident and took no action. In July 2009, while on speaker phone, Freeman heard Koester describe her to his daughter as “the black b**** over at Marble Point.” Freeman told Koester not to call her that again and told Wrenn about it. Again, Wrenn seemed disinterested and took no action. Following the July incident, Freeman reported Koester’s remarks to Cathy Diksa, a Human Resources representative. Diksa promised that Koester would be banned from the facility permanently, however, the company lifted the ban and instead just prohibited Koester from talking with Freeman. Based on her concerns about having to continue to interact with Koester, Freeman took a leave of absence in September 2009 and eventually resigned in December 2009. Freeman testified that she resigned because of depression and anxiety related to her concern about encountering Koester at work.

After filing a charge with the EEOC asserting discrimination on the basis of sex and race, Freeman filed a lawsuit in the Eastern District of North Carolina, asserting claims for racial hostile work environment under 42 U.S.C. § 1981, racial and sexual hostile work environment under Title VII, discriminatory discharge under 42 U.S.C. § 1981, and obstruction of justice (because Dal-Tile failed to issue litigation holds after receiving her initial EEOC charge). The district court granted Dal-Tile’s motion for summary judgment, including as to the racial and sexual hostile work environment claims. The district court found that Freeman had not presented sufficient evidence to create genuine dispute of material fact as to whether the harassment was objectively severe or pervasive and that even if it was, Dal-Tile was still entitled to summary judgment because Freeman could not establish that liability could be imputed to Dal-Tile. The district court used a negligence standard adopted from an unpublished opinion of the Fourth Circuit-that “an employer is liable [for the actions of a third party] ‘if it knew or should have known of the harassment and failed to take appropriate actions to halt it.’” Freeman, p. 11. The district court found that Dal-Tile did not have actual or constructive knowledge of the harassment because no reasonable fact-finder could conclude that Freeman’s statements to her supervisor Wrenn constituted a formal or informal complaint. Furthermore, the district court found that even if were to assume that the statements were complaints, it was undisputed that Freeman knew there were other avenues she could have pursued if she was not satisfied with Wrenn’s response. The district court also found that Dal-Tile’s response to Koester’s behavior was adequate as a matter of law.

The Fourth Circuit reversed the district court’s ruling regarding Freeman’s claims of a hostile work environment under both Title VII and 42 U.S.C. § 1981. The Fourth Circuit explained that in order to reverse the summary judgment ruling on the hostile work environment claims, it must find that the evidence would allow a reasonable jury to conclude that the harassment was (1) unwelcome; (2) based on her gender or race; (3) sufficiently severe or pervasive to alter the conditions of her employment and create an abusive atmosphere; and (4) imputable to Dal-Tile. Id., p. 14. The Fourth Circuit found that Freeman had complained of the harassment to Wrenn, Human Resources, and Koester himself and thus a reasonable jury could find that both the sex-based and race-based harassment were unwelcome. Secondly, the Fourth Circuit found that the evidence would allow a reasonable jury to conclude that the harassment was based on Freeman’s sex or race as Koester, pointing out a number of grounds, including that Koester frequently used the word “b****,” made lewd and inappropriate comments, used racial slang frequently, referred to Freeman as a “black b****” and made other comments of a clearly racial nature. Id., p. 15. The Fourth Circuit further found that a reasonable jury could find the harassment to be severe or pervasive, under an objective and subjective analysis. Id., p. 18.

The Fourth Circuit then addressed the question of whether Freeman could establish a basis for imputing liability to Dal-Tile, formally adopting the negligence standard for analyzing an employer’s liability utilized by the district court and stating that “an employer is liable under Title VII for third parties creating a hostile work environment if the employer knew or should have known of the harassment and failed ‘to take prompt remedial action reasonably calculated to end the harassment.’” Id., p. 20 (quoting Amirmokri v. Baltimore Gas & Elec. Co., 60 F.3d 1126, 1131 (4th Cir. 1995)). Here, the Fourth Circuit found, a reasonable jury could find that Dal-Tile knew or should have known of the harassment. Id., p. 21. Freeman’s supervisor Wrenn knew of the major incidents and also knew about the on-going harassment (and even testified herself that she knew Koester used the word “b****” in the office and frequently made sexual comments. The Fourth Circuit explained that:

This evidence, if proven true, shows that Dal-Tile, through its agent Wrenn, had actual knowledge of the harassment and that Freeman found it offensive, as shown by Freeman’s frequent complaints and her negative reaction to his behavior. However, even if Wrenn did not have actual knowledge that Freeman was offended by Koester’s behavior, at the very least, she should have known it: Wrenn was aware of Koester’s ongoing inappropriate behavior and comments, had received several complaints about the harassing incidents from Freeman, had witnessed Freeman crying from the harassment, and knew incendiary terms like “n****r” and “black b****” had been used in the presence of a black, female employee.

Id., p. 22. Thus, concluded the Fourth Circuit, a reasonable jury knew or should have known of Koester’s harassment. Furthermore, the Fourth Circuit found that Freeman had created a triable issue of fact as to whether Dal-Tile’s response was adequate, particularly because Dal-Tile had done nothing until Freeman complained to Human Resources and then, although initially telling Freeman that Koester was banned from Dal-Tile, lifted the ban and allowed him to keep coming on the premises. Id., p. 23. The Fourth Circuit determined that a reasonable jury could conclude that Dal-Tile failed to take prompt remedial action reasonably calculated to end the harassment. Id., p. 24.