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1212 Restaurant Group, LLC, D/B/A the v. Demetri Alexander and the City of Chicago

September 29, 2011

1212 RESTAURANT GROUP, LLC, D/B/A THE
STATE ROOM, RUSSELL SCALISE AND SCOTT SCHWAB, PLAINTIFFS-APPELLANTS,
v.
DEMETRI ALEXANDER AND THE CITY OF CHICAGO COMMISSION ON HUMAN RELATIONS, DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Cook County No. 09 CH 16337 Honorable William Maki, Judge Presiding.

The opinion of the court was delivered by: Justice Sterba

JUSTICE STERBA delivered the judgment of the court, with opinion.

Presiding Justice Lavin and Justice Pucinski concurred in the judgment and opinion.

OPINION

¶ 1 Defendant-appellee Demetri Alexander filed a complaint with the Chicago Commission on Human Relations (Commission) against plaintiffs-appellants Russell Scalise, Scott Schwab and the 1212 Restaurant Group (1212), alleging harassment and wrongful termination on the basis of, inter alia, perceived sexual orientation. Following a hearing on these claims, the Commission found that although Alexander was not terminated on the basis of perceived sexual orientation, he was subjected to harassment and a hostile work environment on that basis. The Commission awarded Alexander $35,000 in emotional injury damages, $140,000 in punitive damages, and $84, 473.06 in attorney fees and costs. The circuit court upheld the Commission's findings and awards. On appeal, Scalise, Schwab and 1212 contend that the circuit court erred in finding that Alexander was subject to a hostile work environment because: (1) the relevant ordinance applies only to adverse employment actions, not hostile work environment claims; (2) Alexander lacked standing because he was not a member of a protected class; (3) 1212 was Alexander's only employer, and, therefore Scalise and Schwab had no duty to prevent the harassment; moreover, Scalise cannot be held liable for Schwab's actions; (4) the Commission improperly shifted the burden of proof; (5) the Commission reached clearly erroneous conclusions in assessing the credibility of the witnesses; (6) the Commission improperly concluded that occasional statements by Schwab constituted a hostile work environment; and (7) the Commission improperly concluded that Scalise participated in and had knowledge of the alleged harassment. Scalise, Schwab and 1212 further contend that the emotional injury award and the award of attorney fees and costs were arbitrary and capricious, and that the punitive damages award was an abuse of discretion. For the following reasons, we affirm the judgment of the circuit court.

¶ 2 BACKGROUND

¶ 3 In 1998, Alexander, a well-known Chicago restaurateur with approximately 35 years of experience in the restaurant industry, entered into a partnership with Richard Daniels to design and operate an elegant restaurant at 1212 North State Street in Chicago. Alexander and Daniels obtained a lease and began the build out of the restaurant but did not have sufficient funds to complete the project. They were subsequently introduced to Scalise, a commodities trader who wanted to invest in the project. Scalise agreed to provide the financing in exchange for an 85% ownership interest in the venture. Daniels retained a 15% ownership interest in the venture.

¶ 4 Scalise formed 1212, a limited liability company, and 1212 entered into an employment agreement with Alexander. Under the agreement, Alexander was to be employed as the "restaurant creative director and front house manager" for the restaurant. Alexander was entitled to base compensation, additional compensation tied to the restaurant's performance, and a minority ownership interest in the venture upon Scalise recouping his investment. The employment agreement provided that Alexander would report to Schwab as the designee of Scalise. Scalise orally agreed to give Schwab, a fellow commodities trader, a 5% minority ownership interest in the venture after Scalise recouped his investment.

¶ 5 During the build out of the restaurant, Alexander had various responsibilities which included: consulting with the architect, contractor and graphic designer; purchasing necessary items and equipment for the restaurant; and assisting in the hiring and training of restaurant staff. In July of 1999, a piece of heavy restaurant equipment was dropped on Alexander's foot, resulting in a severe crush injury which required Alexander to undergo multiple surgeries, walk with crutches and wear various special devices on his foot. The restaurant opened for business in April 2000. On June 12, 2000, Scalise terminated Alexander's employment with 1212.

¶ 6 On September 8, 2000, Alexander filed a complaint with the Commission against Scalise, Schwab and 1212, alleging harassment and wrongful termination on the basis of race, disability and perceived sexual orientation. The Commission did not find substantial evidence to sustain the disability claim, and Alexander did not present any evidence at the subsequent hearing on his claim that the alleged harassment was based on his opposition to race discrimination at the restaurant, leading the Commission to conclude that he had abandoned that claim.

¶ 7 A hearing on the complaint was held over a period of 6 days in July and August 2005. At the hearing, Alexander testified that during the course of his employment, Scalise and Schwab made offensive comments to him on a consistent basis, suggesting that he was homosexual. They called him names using derogatory terms for someone who is homosexual, and regularly accused him in graphic terms of engaging in homosexual acts with various individuals. The comments were made in front of restaurant staff, contractors, and, on some occasions, restaurant customers. Alexander testified that Schwab also left approximately 8 to10 messages on his home answering machine over the course of a year, in which Schwab made similar comments and accusations.

¶ 8 Alexander testified that on nearly a daily basis, Schwab or Scalise called him "fag," "faggot," "queer," "sissy," "homo," and "dicksucker." Schwab also called him "Marybeth," and "buttercup." After the restaurant opened, Alexander was talking with some female customers at the restaurant's bar when Scalise walked over and said to him in front of the customers, "What are you talking to those girls for, you know you don't like girls, you know you just like to suck dick." On another occasion, Alexander asked Scalise in the restaurant's kitchen if he had seen Chili Pepper, a famous female impersonator who was a customer at the restaurant. Scalise responded, "[Chili Pepper] has got to be your honey. You've got to be taking it in the ass from him." In another incident, Scalise observed Alexander talking to Jason Clark, an openly gay restaurant host. He then asked Alexander if his "sissy lover" was helping him and if he was"going to go to the washroom now and blow him." When Alexander later told Scalise that he wanted to hire Clark for a host position, Scalise told him: "We don't want any more gays, we've already got you, one dick sucker is enough."

¶ 9 Alexander testified that Schwab repeatedly accused him of having sex with Steven Gaither, the restaurant's graphic artist. Schwab made these comments approximately two to three times per week and every time Gaither was mentioned in a business discussion. On one occasion after Alexander returned from Gaither's office, Schwab said that he was "glad [he] could tear [Alexander] away from Gaither's dick." An audio tape containing three of the messages Schwab left on Alexander's answering machine was admitted into evidence. In one of the messages, Schwab said, "If you can break away from Gaither's cock, give me a call." In another message, Schwab said, "Do you eat lunch from [unintelligible] while you are sticking Gaither in the ass, let me know." In the third message, Schwab said, "Are you fucking Gaither in the ass [unintelligible]."

¶ 10 Alexander testified that he first asked Schwab to stop making the comments in June 1999 because they made him uncomfortable. In July 1999, Alexander told Scalise that Schwab was calling him names, alluding to his sexuality, and making him uncomfortable. Alexander asked Scalise if he would talk to Schwab about it and Scalise said that he would. After that, Alexander said that the comments escalated. In the summer of 1999 during the restaurant build out, if Alexander was seen standing in front of the restaurant talking to a man, Scalise and Schwab would ask Alexander if that was his honey and if he was "sucking him off."

¶ 11 Alexander stated that he asked Scalise and Schwab to stop making the comments at least 10 to 20 times throughout the entire term of his employment but the comments never stopped. He said the comments made him feel completely humiliated and demoralized. He suffered from vomiting, diarrhea and nausea. He had difficulty sleeping and saw a doctor who prescribed Xanax. Alexander said that he could not say with certainty what Schwab and Scalise thought about his sexual orientation, but that his impression was that they thought he was homosexual based on the names they called him and the comments they made. Alexander testified that he is not, in fact, homosexual.

¶ 12 Jeffrey Ingraffia testified that his friend Daniels introduced him to Alexander when Daniels and Alexander were discussing their plans for the restaurant. Before the restaurant opened, Ingraffia would stop by every few weeks. In the fall of 1999, Ingraffia and Daniels agreed to meet at the restaurant, where they spoke to Alexander about the design plans. While Alexander was explaining what type of drapes the restaurant would have, Scalise came over and said that was not how the drapes were going to be. Ingraffia testified that Scalise called Alexander a "cocksucker" and a "fag." Ingraffia said that the incident was very unpleasant and made him feel uncomfortable. After the restaurant opened in April 2000, Ingraffia was waiting at the bar for some friends and he saw Scalise at the bar. Ingraffia asked another employee if Alexander was around because he wanted to congratulate him and Scalise said, "He's in the back sucking somebody's dick."

¶ 13 Daniels testified that around July 1999, he and Alexander had weekly meetings with Scalise and Schwab. At the first meeting, Alexander, Scalise and Daniels walked together to the restaurant where they planned to meet and Alexander stopped to talk to someone outside the restaurant. Scalise and Daniels went in and sat down at a table. Scalise looked out the front window at Alexander and the person he was talking to and said to Daniels, "This guy is a total fag. And he's probably sucking that guy's dick." On cross examination, Daniels was asked about his deposition in which he said that Scalise said, "I think [Alexander] is fucking [that guy] in the ass." Daniels said that it was his recollection that his testimony at the deposition accurately reflected what Scalise said.

¶ 14 Daniels visited the restaurant several times a week during the build out and testified that Schwab and Scalise degraded Alexander every time Daniels was there. Schwab frequently called Alexander "sissy" and "Marybeth" and it was apparent to Daniels that it was not done in jest but with antagonism. In one particular incident just a few months before the opening of the restaurant, Alexander was describing the drapes to Daniels and Ingraffia and Scalise walked over and started shouting at Alexander and calling him a "dick sucking sissy."

¶ 15 Daniels testified that during the build out, Alexander worked on construction issues such as arranging for workers to build the stainless steel bar. He also worked on the design of the restaurant and acquired things for the restaurant such as kitchen equipment. Daniels was satisfied with Alexander's job performance both during the build out and after the restaurant opened. Daniels testified that Ken Sheridan was hired as a "back of the house" manager a few months before the opening of the restaurant. Daniels said that his understanding was that Alexander and Sheridan were to have distinct roles.

¶ 16 Daniels learned that Alexander had been fired from Schwab. He said that Schwab initially told him that Alexander had been fired because he had not come to work for two weeks. Daniels responded that he found that hard to believe because every time he went to the restaurant or friends and family members of his went to the restaurant, Alexander was there. Daniels testified that Schwab then said Alexander had been fired because he was coming to work "coked up and yelling" at the employees. Daniels said that he called Alexander and asked him about the allegations and Alexander said they were not true. A few months after Alexander was terminated, the restaurant closed.

¶ 17 Sheridan testified that he was hired in September 1999 as the general manager of the restaurant. Sheridan did not know Alexander personally before he started working at the restaurant, but he knew of Alexander's reputation for attracting celebrities and being responsible for some of the "hotter" nightclubs or restaurants in the city. Sheridan understood Alexander's role as being responsible for the creativity and concept behind the restaurant and the person who would be interacting with guests and ensuring the service was what it needed to be. Sheridan was aware of Alexander's injury and had seen Alexander on crutches and wearing a special protective shoe. Sheridan testified that Schwab called Alexander a "gimp" and told him to "lose the shoe." Sheridan also heard Schwab say that Alexander could not go back for another surgery because then he would be on crutches and they could not have him limping or "being a gimp" at the restaurant. Sheridan felt that the comments were malicious and that Schwab was not joking. Sheridan stated that Scalise said he did not want any "faggot" working for the restaurant and he did not want any "faggot" in the restaurant. When discussing the possibility of hiring Clark, who was openly gay, as a host, Scalise said that they did not want to hire him because "he's a faggot and he'll bring faggots in here and that's not the environment we want."

¶ 18 Sheridan heard Schwab and Scalise make inappropriate comments to or about Alexander on a regular basis. He initially thought it was merely inappropriate but as time went on he came to believe that it was intentional and malicious. Sheridan told Schwab and Scalise that he thought the comments were inappropriate. He testified that Alexander was called "pussy," "faggot," and "cocksucker." Whenever Alexander had been with Gaither, he was asked when he returned if he had been "out sucking Gaither's dick" or if he "takes it in the ass from Gaither." Sheridan could not recall whether Scalise made any of the comments, but he heard Schwab make them. The comments were made on a regular basis in front of Sheridan, Alexander and possibly other managers. The comments regarding Gaither were made constantly and whenever there was a conversation related to Gaither. Sheridan testified that he did not think Alexander was homosexual, but he thought that Scalise and Schwab believed that to be the case.

¶ 19 Sheridan testified that he and Alexander had an ongoing disagreement over job responsibilities and whether Sheridan worked under Alexander. Sheridan understood that he was the general manager and was in charge of everything except the front desk, the decor, the menu and the kitchen once the restaurant opened. During the build out, Sheridan said that eventually he had to meet with tradesmen early in the morning, set schedules, and ensure that people were paid for the work they did because Alexander was not fulfilling those responsibilities. Sheridan testified that although it was Alexander's responsibility to train the host stand, he did not perform that function. Sheridan said that he and Alexander had an argument about Sheridan's ability to make decisions. Sheridan felt that Alexander did not respect his background because he had previously worked for theme restaurants such as the Rainforest Cafe.

¶ 20 By the time the restaurant opened, Sheridan's relationship with Alexander had deteriorated and he brought his concerns about the operation to Scalise and Schwab. During these conversations, Schwab would call Alexander a "cunt" or "pussy." Sheridan sensed a lot of animosity toward Alexander, and said that Schwab and Scalise asked him if it was possible to get rid of Alexander. In another conversation with Schwab and Scalise, Sheridan testified that Scalise said that he could have it released in the papers that Alexander was fired for stealing from them. Shortly before Alexander was fired, Sheridan resigned as general manager because the working relationship with Alexander became too difficult. After his resignation, Sheridan had an altercation with Scalise in which Scalise threatened to kill Sheridan and his family.

¶ 21 Schwab testified that he acted as Scalise's designee in exchange for a future interest in the venture. During the build out, Schwab put in 20 to 30 hours a week at the restaurant. He did not receive compensation for the hours he worked. Schwab testified that he became frustrated with Alexander and admitted that he called him names as his frustration grew. Schwab stated that the word "faggot" is not in his vocabulary, but he could not say that he did not use it. He also said that the words "fag" and "homo" were not in his vocabulary. Schwab said that the name he remembered calling Alexander was "Marybeth." Schwab acknowledged that he may have called Alexander "cunt," "queer," "queen," or "sissy." He denied calling Alexander "pussy," "dicksucker" or "cocksucker." Schwab said that the reason he called Alexander "Marybeth" is because Alexander would leave long messages on Schwab's cell phone complaining about everyone at the restaurant and that Schwab told him that if he was going to whine like a little girl, Schwab would call him "Marybeth."

ΒΆ 22 Schwab stated that there was never any sexual connotation associated with the name calling, and said that he knew Alexander was not homosexual. He explained that his knowledge was based on the fact that Alexander had a girlfriend, a daughter and an ex-wife, although Schwab acknowledged that this did not preclude someone from being homosexual. Schwab stated that Alexander never complained to him about any of the name calling and said that if Alexander had complained, he would have stopped. Schwab acknowledged that when he could not find Alexander and then received a message that Alexander was with Gaither, he would make remarks about Alexander engaging in sex acts with Gaither. Schwab said that he never intended for ...


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