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Equal Employment Opportunity Commission v. Danny's Restaurant, LLC

United States District Court, S.D. Mississippi, Northern Division

September 25, 2018

EQUAL EMPLOYMENT OPPORTUNITY COMMISSION PLAINTIFF
v.
DANNY'S RESTAURANT, LLC AND DANNY'S OF JACKSON, LLC F/K/A BABY O'S RESTAURANT, INC. D/B/A DANNY'S DOWNTOWN CABARET DEFENDANTS

          ORDER ON MOTION FOR PARTIAL SUMMARY JUDGMENT AS TO SUCCESSOR LIABILITY

          HENRY T. WINGATE UNITED STATES DISTRICT JUDGE.

         Before the court is the Motion for Partial Summary Judgment as to Successor Liability filed by the Plaintiff, United States Equal Opportunity Commission (hereafter “EEOC”) [doc. no. 79]. Defendant, Danny's of Jackson LLC (hereafter “Danny's of Jackson” or “Defendant”) opposes the motion. The parties have completed their briefing on the motion and this court is prepared to rule.

         This lawsuit is an enforcement action brought by the EEOC under the auspices of Title VII of the Civil Rights Act of 1964[1], as amended, and the Civil Rights Act of 1991, to correct allegedly unlawful employment practices of the Defendant based on race. The suit seeks relief on behalf of Ashley Williams and a class of Black female exotic dancers (hereafter referred to collectively as ‘complainants') who worked at Danny's Downtown Cabaret and allegedly were subjected to disparate terms and conditions of employment based on their race.

         Defendant insists that it is not liable for the alleged violations of Title VII, because, inter alia, the complainants did not work at its club during the time it (Danny's of Jackson) owned and operated the business. Defendant Danny's of Jackson claims that Baby O's Restaurant, Inc. (hereafter Baby O's”), operated the establishment in 2013, around the time period complained of in the EEOC charge, and that Danny's of Jackson only began operating the club after that period, upon purchasing the assets from Baby O's in April of 2016.

         Plaintiff EEOC, disagreeing, brings this motion asking the court for partial summary judgment in its favor on that key question: whether Danny's of Jackson is the successor in interest and liability to Baby O's, the predecessor entity which operated the strip club prior to April 11, 2016. Plaintiff asserts that no genuine issue of fact exists regarding any of the predicates necessary for the imposition of successor liability. Additionally, Plaintiff contends that in a prior judicial proceeding, Danny's of Jackson actually conceded that it is the successor in interest to Baby O's for Title VII purposes and is, therefore, judicially estopped from contending otherwise.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         Danny McGee Owens (hereafter “Owens”) is presently the only member of Danny's of Jackson, LLC, Defendant herein. Owens, who was the owner of a similar club featuring adult entertainement in Memphis, Tennessee, brought that concept to the Jackson, Mississippi area, and opened “Danny's”, a strip club located on Lakeland Drive. The club moved from Lakeland Drive to its current downtown Jackson location, according to the deposition testimony of Lesli Stovall, who identified herself as Owens' girlfriend during that time. “It was - the original one was Danny's on Lakeland Drive. And then there was a dispute with the city about, you know, the location and it being able to be an adult entertainment. And that's when we moved to the downtown building where it is right now.” Stovall Dep. [doc. no. 79-3 at p. 11].

         As the result of a felony conviction for, in Owens' own words, “money laundering, for gambling, racketeering, I don't know, I guess.” Owens Dep.23:5-7[doc. no. 79-1 at p.14], Owens was incarcerated from around 1992 until 2016. While he was in prison, the corporations that owned the strip club went through several name changes, but the strip club, itself, continued to operate in the same way, at the same location and under the same name, “Danny's Downtown Cabaret.” The names of the corporations changed, the incorporators changed, and the officers changed; but all of these incorporators and officers had close personal ties with Owens. See Owens Dep. 73-74 [doc. no. 79-1 at pp. 43-44].

         “Southwest Street and Rankin Street Restaurants of Jackson, Inc., ” incorporated in 1998, is one of the many such companies that Owens and his family incorporated. James Cooper, Owens' stepfather, was listed as the incorporator and registered agent of Southwest Street and Rankin Street Restaurants of Jackson, Inc, Articles of Incorporation, [doc. no. 79-6] and Owens' former girlfriend, Lesli Stovall, was president. Articles of Amendment, [doc. no. 79-7]. As previously discussed, Owens, himself, was in prison during this time. Under the corporate ownership of Southwest Street and Rankin Street Restaurants of Jackson, Inc., ” “Danny's Downtown Cabaret” continued to operate as a strip club in downtown Jackson, at 995 S. West Street, which is on the corner of S. West Street and Rankin Street.

         In 2005, the corporation changed its legal name from “South West Street and Rankin Street Restaurants of Jackson, Inc.” to “Baby O's Restaurant, Inc.” hereafter (“Baby O's”). Articles of Amendment [doc. no. 79-8 at p.5]. The newly formed corporation, Baby O's, continued to operate the strip club at 995 S. West Street in Jackson, Mississippi, as “Danny's Downtown Cabaret, ” commonly referred to as “Danny's” or “Danny's Downtown.”

         Owens' former girlfriend, Lesli Stovall, testified in her deposition that Baby O's was formed to hold the club for Owens while he was in prison. Stovall Dep., pp.38-39 [doc. no. 79-3 at pp.12-13]. In her deposition, Stovall stated that she was named as president because she could be trusted to turn the company back over to Owens upon his release from prison. Based on the evidence provided, Stovall appears to have been only a straw owner. She did not pay any money or contribute any assets to the corporation Stovall Dep. 94:6-20 [doc. no. 79-3 p.34]; nor did she receive any compensation from the corporation. Stovall Dep. 121-22 [doc. no. 79-3 pp. 40-41].

         Stovall also testified to not having any role in the corporate decision-making and her role at the club was that of a dancer. She stated the following in her deposition:

A: .... But as far as like business of the club, I was just a dancer ..... well I did manage one night a week because we were short a manager, so I did manage one night a week.... but I mean as far as anything else, I mean, the people that pretty much ran the day to day, I would say was his [Owens'] mother, Shirley Cooper, and Blake's [Owens' son's] mother....Pat Owens. I'm just saying they're the ones that did all the paperwork, all the banking, filed taxes.

Stovall Dep. [doc. no. 79-3 pp.18-19].

         Baby O's owned and operated the strip club beginning in 2005, when the corporate name was changed to Baby O's. Owens' son, Danny “Dax” Owens, (hereafter “Dax”), acted as general manager during much of this time, including the period relevant to the complaints of discrimination that are the genesis of this lawsuit. Although Owens was incarcerated from about 1992 until 2016, several former managers and employees testified by deposition that Owens remained deeply involved in the operations of the club. Alison Wade and Brittany Rayner, former dancers at the club and complainants herein, both testified that while he was incarcerated, Owens was emailed nightly reports and that Owens called the “door girls” every night to inquire as to how many black people were in the club, how many dancers were there, etc. B. Raynor Dep. 62:25-63:1 [doc. no. 79-15 pp.18-19]. Wade Dep. Exhibit N, 24:11-24 [doc. no. 79-14 at pp. 8-9].

         In April of 2016, Lesli Stovall and Baby O's purportedly transferred the assets of Baby O's Restaurant, Inc., to Danny's of Jackson, LLC and Danny M. Owens. Bill of Sale and Assignment and Assumption Agreement [doc. no. 79-12]. Danny's of Jackson continues to operate the strip club as “Danny's Downtown Cabaret”, at the same West Street address in downtown Jackson today.

         EEOC alleges that Danny's of Jackson LLC, the current owner of Danny's is the successor in interest to Baby O's Restaurant, Inc., the former owner of Danny's. As earlier stated, these Defendants quarrel with this contention.

         On August 2, 2013, Ashley Williams filed with the EEOC her accusatory charge alleging discrimination. Williams EEOC charge Exhibit Q [doc. no. 79-17]. Dax acknowledges that he informed his father of the charge of discrimination. Dax Owens Affidavit, Exhibit R. [doc. no. 81-11].

         The EEOC issued a Letter of Determination[2] on June 2, 2016, finding reasonable cause to believe that the Defendants had violated Title VII [doc. no. 81-13]. Efforts at conciliation failed and on July 29, 2016, the EEOC issued to Defendants a Notice of Failure of Conciliation. On behalf of the complainants, the EEOC filed the instant lawsuit on September 30, 2016.

         This suit initially was brought against Danny's Restaurant, LLC as well as against Danny's of Jackson, LLC. Danny's Restaurant, LLC did not file an answer nor enter an appearance in this cause, however, and the Clerk of Court entered default against it on August 24, 2017 [doc. no. 41].

         EEOC alleges that Baby O's was formerly doing business as Danny's Downtown Cabaret and that Danny's of Jackson continues to own and operate Danny's Downtown Cabaret. Plaintiff seeks, inter alia, injunctive relief; back pay for Ashley Williams, the complainant terminated by the Defendants; compensation for past and future pecuniary and non-pecuniary losses; and other affirmative relief to make all of the complainants whole. Plaintiff also asks for punitive damages for what it alleges to be malicious and reckless conduct.

         II. SUMMARY JUDGMENT STANDARD

         Summary judgment is appropriate if “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a); Copeland v. Nunan, 250 F.3d 743 (5th Cir. 2001); see also Wyatt v. Hunt Plywood Company, Inc., 297 F.3d 405, 408-09 (2002). When assessing whether a dispute to any material fact exists, all of the evidence in the record must be considered, but the court must refrain from making credibility determinations or weighing the evidence. Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000); instead, the court is to “draw all reasonable inferences in favor of the nonmoving party.” Id.; Wyatt, 297 F.3d at 409. All evidence and the reasonable inferences to be drawn therefrom must be viewed in the light most favorable to the party opposing the motion. United States v. Diebold, Inc. 369 U.S. 654, 655 (1962).

         A party, however, cannot defeat summary judgment with conclusory allegations, unsubstantiated assertions, or “only a scintilla of evidence.” TIG Ins. Co. v. Sedgwick James of Wash. 276 F.3d 754, 759 (5th Cir. 2002); S.E.C. v. Recile, 10 F.3d 1093, 1097 (5th Cir. 1997); Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir.1994). Summary judgment is appropriate if a reasonable jury could not return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

         III. DISCUSSION

         A. THE LAW OF SUCCESSOR LIABILITY

         The successorship doctrine derives from labor law principles. The policy protects employees in cases involving the purchase of assets by one corporate entity from another. The United States Supreme Court has held that the acquiring company will be obligated to negotiate under a preexisting collective bargaining agreement if “substantial continuity” in the business enterprise is proven before and after the change in ownership. John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 551, 84 S.Ct. 909, 915 (1964). In finding “substantial continuity, ” the Supreme Court, in Fall River Dyeing & Finishing Corp. v. NLRB, 482 U.S. 27 (1987), said that where the second company had acquired most of the seller's real property, machinery and equipment, as well as much of its inventory and materials, had introduced no new product line, and the employees' jobs did not change, that evidence was sufficient to prove “substantial continuity”, such that the second company was successor to the first and thereby obligated to bargain with the union representing its predecessor's employees. Id. 482 U.S. at 40, 43-47, 107 S.Ct. at 2234, 2236-38. See generally, Southward v. South Central Ready Mix Supply Corp., 7 F.3d 487, 493-96 (6th Cir. 1993).

         The successor liability doctrine was first applied in the employment discrimination context by the Sixth Circuit Court of Appeals in Equal Employment Opportunity Comm'n v. MacMillan Bloedel Containers, Inc., 503 F.2d 1086, 1093 (6th Cir. 1974). An employee of the Flintkote Company filed charges with the EEOC alleging race and sex discrimination. At some point after the EEOC had notified Flintkote that EEOC had reasonable cause to believe that Flintkote had engaged in unlawful employment practices, ...


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