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Equal Employment Opportunity Commission v. Nichols Gas & Oil

January 13, 2010


The opinion of the court was delivered by: Charles J. Siragusa United States District Judge



This is an action alleging employment discrimination pursuant to Title VII of the Civil Rights Act of 1964 ("Title VII), as amended, 42 U.S.C. § 2000e et seq. Now before the Court are two motions: 1) a motion [#79] for summary judgment by defendant Townsend Oil Corporation d/b/a Townsend Oil & Propane ("Townsend"); and 2) a cross-motion [#87] for summary judgment by Plaintiff. For the reasons that follow, both applications are granted in part and denied in part.


The subject motions seek a determination as to whether Townsend is subject to successor liability for employment discrimination allegedly committed by defendant Nichols Gas & Oil, Inc. ("Nichols"). Unless otherwise noted, the following are the undisputed facts of this case.

On September 12, 2003, Elisa Foss ("Foss"), a former employee of Nichols, filed a sexual discrimination complaint with the Equal Employment Opportunity Commission ("Plaintiff"). Foss alleged that Nichols' President/Owner, Wayne Nichols ("Mr. Nichols"), subjected her to "unwelcome comments and touching of a sexual nature," and constructively discharged her. (Docket No. [#6], Exhibit A). On June 9, 2005, the EEOC determined that there was sufficient cause to find that Mr. Nichols had subjected Foss and several other female employees to "egregious physical and verbal sexual harassment [and retaliation] which compelled many of them to resign." (Id., Exhibit D). Also on June 9, 2005, the EEOC proposed a conciliation agreement that would have required Nichols to take various action, including: 1) Providing sexual harassment training for employees and supervisors; 2) paying the affected women back pay plus interest; and 3) paying each of the affected women "up to $50,000.00 or the maximum allowable by federal statute in compensatory damages." (Id., Exhibit E).

On June 30, 2005, EEOC provided additional information to Nichols regarding the complaints of discrimination by Foss and "at least ten additional" female employees.

(Id., Exhibit G).*fn1 EEOC informed Nichols that it would settle all claims for $575,500.00. (Id.). Plaintiff has since reduced its total demand to $550,000.00.*fn2

On September 14, 2005, Plaintiff EEOC commenced the subject Title VII action against Nichols. The action, brought on behalf of Foss and the other similarly situated females, none of whom were still employed by Nichols, alleged a hostile work environment, retaliation, and constructive discharge. The Complaint alleged that Nichols, "through its owner," Mr. Nichols, "and some of its male employees," committed the discriminatory acts. The complaint demanded injunctive relief, as well as compensatory and punitive damages.

Subsequently, on or about November 30, 2005, Nichols entered into a "Purchase Agreement" with defendant Townsend. In a prior Decision and Order in this case, the Honorable Marian W. Payson, United States Magistrate Judge, described the Purchase Agreement as follows:

The Agreement was signed by Kevin Brady [("Brady")], as President of Townsend, and Wayne Nichols, in his individual capacity and as President of Nichols Gas & Oil, Inc. The Agreement provided that Townsend would purchase certain specified assets of Nichols, including its tanks, certain trucks and any inventory and supplies selected by Townsend the day before the closing, as well as Nichol's real property. The Agreement further provided that (1) Townsend would have the exclusive right to use the name "Nichols Gas & Oil," (2) Nichols would execute an agreement not to compete with Townsend's business for a period of five years following the sale and deliver its customer list to Townsend, and (3) the parties would execute agreements providing for Wayne Nichol's continued employment and his wife's consulting services after the sale.

A schedule[, Schedule 6.10,] was attached to the Agreement identifying pending or threatened lawsuits, claims and investigations. This action was the only item disclosed on that schedule and was identified as follows: Elisa Foss v. Nichols Gas & Oil, Co.[,] Charge No. 165-2003-00767[,] Date of Filing of EEOC Charge: Sept. 12, 2003[,] Date of Probable Cause Determination: June 9, 2005[,] Complaint filed in United States District Court, Western District of New York on September 14, 2005, Docket No. 06:05-CV-06482-CJS(P). (Decision and Order [#40] at 5) (citations omitted). As part of the agreement, Nichols Gas & Oil and Mr. Nichols agreed to indemnify Townsend for any claims brought against Townsend arising from the EEOC Complaint. (Chandy Declaration [#86], Exhibit B at 9). Nichols further agreed to amend its certificate of incorporation with the State of New York, "changing its name to a name dissimilar to 'Nichols Gas & Oil' to enable [Townsend] to use that name." Id. at 10.

Townsend's President, Brady, learned of the EEOC charge and pending lawsuit prior to the closing. (Brady Deposition at 37-38). Brady also learned that there had been television news coverage of the sexual harassment lawsuit against Nichols. Id. at 38, 96. Brady, though, did not take any steps at that time to investigate the allegations against Nichols. Id. at 40. In fact, Brady claims that he did not learn any of the details of the allegations against Nichols until January 2007. Id. at 43. Brady testified, though, that he had misgivings about the closing, but went ahead anyway:

Q: But you continued with the purchase? . . . Was that based on financial considerations or some other reason?

A: It was based on my desire. I've been trying to get into that market for several years. I think I was blinded. I felt that we were indemnified, and not even knowing the background of all of this, the EEOC, obviously, it was a big mistake.

Id. at 100.

Having decided to proceed with the deal, Brady claims to have decided that Townsend should distance itself from Nichols, and that "there was no value to [the] Nichols Gas & Oil [name]." Id. at 40. Brady considered scrapping the deal, but decided instead to "change completely the structure of the sale." Id. at 41. As to that, Brady testified:

We no longer were gonna purchase the company in its entirety. Okay.

We were not interested in the name, and we were very concerned about the value now of the customer list. We ...

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