In the
United States Court of Appeals
For the Seventh Circuit

Nos. 00-1265 & 00-3189

KENNETH COOKE,

Plaintiff-Appellee, Cross-Appellant,

v.

STEFANI MANAGEMENT SERVICES, INC.,
and TUSCANY RESTORANTE, INC.,

Defendants-Appellants, Cross-Appellees.

Appeals from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 97 C 7604--David H. Coar, Judge.

Argued March 30, 2001--Decided May 14, 2001


  Before FLAUM, Chief Judge, and POSNER and
EVANS, Circuit Judges.

  EVANS, Circuit Judge. In February 1998
Kenneth Cooke was hired as a bartender at
Tuscany Restorante, an upscale restaurant
in Chicago’s Wrigleyville neighborhood.
Tuscany, along with a dozen or so other
restaurants, is owned and operated by
Stefani Management Services, Inc./1 At
the time Cooke was hired, Tuscany was
managed by Fred Lagon. As general
manager, Lagon possessed the power to
hire, fire, and promote Cooke, as well as
schedule his shifts. Cooke claims that
almost immediately after he began working
at Tuscany, Lagon, a homosexual,
subjected him to a litany of sexual
propositions, inappropriate touching, and
nonverbal gestures of a sexual nature.
According to Cooke, this treatment was
unwelcome, offensive, and degrading, and
created an oppressive working
environment. He complained numerous times
to Lagon and to Jennifer Wilson, the
assistant manager of Tuscany, to no
avail. Finally, after Lagon propositioned
him on June 21, 1998, Cooke "basically
got really forceful with [Lagon]," and
told him "no means no . . . and if you
ask me again, there’s going to be some
serious problems." The next day, Lagon
fired Cooke, purportedly for
"inappropriate interactions with
coworkers, superiors, and a neighborhood
restauranteur." Cooke then brought this
single-count, sexual harassment claim
pursuant to Title VII of the Civil Rights
Act of 1964, 42 U.S.C. sec. 2000e et seq.
The case was tried before a jury.

  Stefani’s case contesting liability
consisted mainly of calling a number of
Cooke’s coworkers to testify that they
had never witnessed any harassment. Joy
Soulier, Cooke’s girl friend at the time,
also testified that Cooke shared many
personal matters with her but never
mentioned any inappropriate conduct by
Lagon. In addition, Stefani tried to cast
doubt on Cooke’s assertion that he was
uncomfortable at Tuscany by demonstrating
that he came to the restaurant on his
days off to eat, drink, or socialize with
friends. According to Stefani, this
occurred once or twice per week, but
Cooke maintains he visited Tuscany on his
days off only occasionally, at the
request of Soulier. On at least one
occasion, Cooke went out socially with
Lagon and others. Finally, Stefani
introduced an April 27, 1998, note from
Cooke to Lagon thanking him for a gift of
a bottle of wine, which read: "Fred
Just a note to say ’thanxs’ [sic] for all
you have done. Here’s looking at many
more fun days to come. Thanks again for
the vino! K."

  Stefani also presented evidence
concerning its sexual harassment policy.
The policy when Cooke began working at
Tuscany prohibited sexual harassment and
directed victims of harassment to report
it to Steven Hartenstein, Stefani’s chief
financial officer. In April 1998 the
policy was changed as part of an overall
revision of the company’s employee
handbook. The new policy required the
victim of sexual harassment to
"immediately contact [his or her] manager
and/ or general manager." Stefani held a
management training seminar on sexual
harassment and its new policy, which
Lagon attended.

  As we see it, this was not a slam dunk
case for either side. Stefani’s case--
aided in no small part by Cooke’s "thank
you for the vino" letter--was strong and
could have been accepted by the jury (and
by us, if Cooke were appealing the
result), but Cooke’s version of the
events was not unbelievable as a matter
of law. And what did the jury do? It
returned a general verdict in favor of
Cooke, giving him fairly meager awards of
$7,500 in back pay and lost benefits and
$10,000 in punitive damages. The jury
rejected Cooke’s request for compensatory
damages for humiliation and past and
present emotional suffering. Finally,
after reviewing Cooke’s attorneys fee
petition and Stefani’s objections, the
district court awarded Cooke attorneys
fees of $49,835.38 and $519.80 in costs.
Stefani appeals the court’s denial of its
motion for judgment as a matter of law on
liability and punitive damages, and Cooke
cross-appeals the court’s attorneys fee
award, which gave him significantly less
than he sought.

  A hostile work environment is created by
conduct which has "the purpose or effect
of unreasonably interfering with an
individual’s work performance or creating
an intimidating, hostile, or offensive
working environment." Meritor Sav. Bank,
FSB v. Vinson, 

, 65 (1986)
(quoting 29 C.F.R. sec. 1604.11(a)(3)
(1985)). For hostile work environment
sexual harassment to be actionable under
Title VII, the conduct "must be
sufficiently severe or pervasive ’to
alter the conditions of [the victim’s]
employment and create an abusive working
environment.’" Id. at 67 (citation omit
ted). The employee must subjectively
perceive the harassment as sufficiently
severe and pervasive to alter the terms
or conditions of employment, and this
subjective perception must be objectively
reasonable. Harris v. Forklift Sys.,
Inc., 

, 21-22 (1993). A
plaintiff, however, is not required to
prove that the harassment caused
psychological injury. Id. at 22.

  In order successfully to challenge the
jury’s liability finding, Stefani must
demonstrate that no reasonable jury could
have found for Cooke, even when viewing
the evidence in the light most favorable
to him. See Gile v. United Airlines,
Inc., 

, 372 (7th Cir. 2000).
To that end, Stefani first argues that no
witnesses corroborated Cooke’s
allegations of sexual harassment, so the
jury was unreasonable to believe his
account of his interactions with Lagon.
We give short shrift to this argument
because it asks us to evaluate the
credibility of the witnesses and assess
the weight of the evidence, two tasks
better left to the jury that heard the
testimony given in court. See Tincher v.
Wal-Mart Stores, Inc., 

,
1129 (7th Cir. 1997). Suffice it to say
that the fact that Lagon did not sexually
harass Cooke in the presence of other
Tuscany employees does not negate the
possibility that he did so in their
absence. The jury was entitled to credit
Cooke’s detailed testimony concerning the
numerous incidents of harassment
perpetrated by Lagon.

  Stefani next contends that even if
Cooke’s account of the harassment is
accurate, his actions demonstrate that he
did not subjectively perceive it as
severe or pervasive. In support of this
argument, Stefani points to Cooke’s
allegedly frequent visits to Tuscany on
his days off, his social outing with a
group of people that included Lagon, and
the personal "vino" note. According to
Stefani, if Cooke subjectively perceived
the environment at Tuscany as severely or
pervasively oppressive, he would have
avoided it, and Lagon, at all costs.
Although this argument has some appeal,
we ultimately reject it because the
balance of power between a supervisor and
employee is qualitatively different in a
social setting than it is at work. During
his scheduled shifts, Cooke was not free
to leave Tuscany, or even turn and walk
away from Lagon (an action that could be
considered insubordinate), if he felt
harassed. Not so in a social setting.
Moreover, we will indulge the presumption
that Lagon was more likely to harass
Cooke when he was working alone behind
the bar than when he was accompanied by
friends on a social occasion. Finally,
the jury could have believed that the
fact that Cooke was courteous to Lagon,
his boss, by thanking him for a gift did
not undermine Cooke’s tale of harassment.
In short, none of Cooke’s voluntary
interactions with Lagon satisfy Stefani’s
"herculean burden" of overcoming the
jury’s verdict on liability. See Gile,
213 F.3d at 372./2

  We turn next to the issue of punitive
damages. The standard for awarding
punitive damages in Title VII cases is
set out in the statute, 42 U.S.C. sec.
1981a(b)(1), and the Supreme Court’s
decision in Kolstad v. American Dental
Ass’n, 

 (1999). Section
1981a(b)(1) states that a party may
recover punitive damages if his employer
engaged in intentional discrimination
"with malice or with reckless
indifference to the federally protected
rights of an aggrieved individual." The
terms "malice" and "reckless
indifference" refer to the employer’s
knowledge that it may be violating
federal law, not its awareness that it is
engaging in discrimination. Kolstad, 

. Thus, the employer must
perceive some risk that its actions
violate federal law in order to be liable
for punitive damages. Id. at 536.

  In a case involving vicarious liability,
the plaintiff must also establish a basis
for imputing liability to the employer by
showing that the employee who
discriminated against him was a manager,
acting within the scope of his
employment. Bruso v. United Airlines,
Inc., 

, 858 (7th Cir. 2001).
An employer may escape punitive damages
liability for its manager’s acts,
however, if it can demonstrate a good
faith attempt to establish and enforce an
antidiscrimination policy. According to
Kolstad, "an employer may not be
vicariously liable [for punitive damages]
for the discriminatory employment
decisions of managerial agents where
these decisions are contrary to the
employer’s ’good faith efforts to comply
with Title VII.’" 

 (citation
omitted). Such good faith efforts, if
proven, "demonstrate that the employer
itself did not act in reckless disregard
of federally protected rights, thus
making it inappropriate to punish the
employer for its [manager’s]
contravention of its established
policies." Bruso, 239 F.3d at 858./3

  Stefani--apparently conceding that Lagon
was its manager, acting within the scope
of his employment--focuses its argument
on Kolstad’s good faith defense, pointing
to its sexual harassment policies, the
management seminar on sexual harassment
attended by Lagon, and an antiharassment
poster mounted at Tuscany. Both the pre-
and post-April 1998 policies make clear
that Stefani prohibits sexual harassment
by its employees, and both polices
provide a mechanism for reporting
violations of this directive. Cooke does
not explain his failure to report Lagon’s
conduct to Mr. Hartenstein as required by
the policy in place prior to April 1998.
And although the post-April 1998 policy
directed employees to report incidents of
sexual harassment to their manager or
general manager, and lacked a bypass
provision to address situations in which
the manager was the harasser, common
sense should have led Cooke to report the
harassment to someone superior to Lagon
in the chain of command. See Parkins v.
Civil Constructors of Ill., Inc., 

, 1038 (7th Cir. 1998) ("A
reasonable person, realizing that her
complaints were ineffective, would . . .
seek a remedy elsewhere."). He failed to
do this as well. On this record, there is
simply no evidence that anyone in the
upper management of Stefani had any
inkling that Lagon was engaging in
sexually harassing behavior./4 "[T]he
law against sexual harassment is not
self-enforcing," Perry v. Harris Chernin,
Inc., 

, 1014 (7th Cir.
1997), and without knowledge of Lagon’s
conduct, there is nothing Stefani could
have done--beyond the general policies
and training it did provide--to ensure
compliance with Title VII.

  Cooke attempts to work around the fact
that Stefani lacked actual knowledge of
Lagon’s conduct by imputing knowledge to
the company through Lagon. In Deters v.
Equifax Credit Information Services,
Inc., 

 (10th Cir. 2000),
after the plaintiff was sexually harassed
by several coworkers, she complained to
the manager designated as the company’s
authority responsible for implementing
its antidiscrimination policy, but he
failed to respond. In the lawsuit that
followed, the company sought refuge under
Kolstad, arguing that it was not
responsible for its designee’s failure
adequately to remedy the harassment. The
court held that Kolstad’s good faith
defense was negated, however, because the
company’s designee was informed of the
harassment and acted with malice or
reckless indifference in addressing the
situation. Id. at 1271. Cooke argues that
he reported Lagon’s harassment to the
individual designated in Stefani’s post-
April 1998 sexual harassment policy
(Lagon), so Lagon’s knowledge of the
harassment and his malicious acts should
be imputed to the company.

  Cooke’s reliance on Deters is misplaced
because that case involved a claim of
direct liability, i.e., a claim that the
supervisor failed adequately to remedy
the harassment. See id. at 1270 n.3. In
such a case, the supervisor acts on
behalf of the company in enforcing (or
failing to enforce) its sexual harassment
policy, and it is therefore fair to
attribute his knowledge and acts to the
company. In a vicarious liability case
such as this one, however, the supervisor
directly perpetrated the harassment
through a series of rogue acts motivated
by a desire to amuse himself, not benefit
his employer. If Lagon’s knowledge of the
harassment and malicious intent were
imputed to Stefani, the good faith
defense established by Kolstad could
never be employed in a vicarious
liability case. Because Kolstad itself is
a vicarious liability case, and because
we will not impose punitive damages on an
innocent party, see City of Chicago v.
Matchmaker Real Estate Sales Center,
Inc., 

, 1100 & n.14 (7th
Cir. 1992), this is a conclusion we
cannot reach. Cooke points to no evidence
establishing that Stefani had any actual
knowledge of Lagon’s conduct, so nothing
more by way of good faith efforts to
comply with Title VII could be expected.
Accordingly, we must strike the punitive
damages portion of the jury’s award.

  Finally, we turn to Cooke’s cross-appeal
on the issue of attorneys fees. Cooke’s
attorneys requested $115,955.75 in fees
and $1,039.60 in costs, but the district
court, after subtracting $16,285 in
duplicative and excessive requested fees,
awarded only 50 percent of those amounts:
$49,835.38 in fees and $519.80 in costs.
First, we affirm the court’s $16,285 off-
the-top reduction. The district court’s
memorandum opinion and order sets out its
detailed findings on several instances of
excessive billing by Cooke’s attorneys,
and we find no abuse of discretion in
these findings. Connolly v. National Sch.
Bus Serv., Inc., 

, 595 (7th
Cir. 1999) (standard of review for
attorneys fee award is abuse of
discretion). Second, we find the district
court’s 50 percent limited-success
reduction entirely justified. Cooke
requested nearly $300,000 from the jury
but, after our decision today, will go
home with $7,500, hardly an overwhelming
success. In addition, contrary to Cooke’s
"information and belief," this was not a
groundbreaking, first-time-ever-in-this-
district, same-sex sexual harassment
case, see, e.g., Shermer v. Illinois
Department of Transportation, 

 (7th Cir. 1999), but rather a run-of-
the-mill employment case in which Cooke
himself was the only substantive witness
for his side of the case. In a simple
case with no broad social impact, Cooke’s
attorneys should be happy to receive fees
of nearly seven times the amount of their
client’s recovery. See Cole v. Wodziak,

, 488-89 (7th Cir. 1999)
(expressing view that fee award exceeding
damages is rarely justified).

AFFIRMED in part and REVERSED in part.

FOOTNOTES

/1 Tuscany Restorante, Inc., also appears on our
caption as a defendant because it was so named in
the complaint. It was, however, subsequently
dismissed from the case.

/2 Stefani also suggests, without citing the rele-
vant case law, that it cannot be held vicariously
liable for Lagon’s conduct because Cooke failed
to report the harassment to the company’s CFO as
required by the pre-April 1998 sexual harassment
policy. Two recent Supreme Court cases, Burling-
ton Industries, Inc. v. Ellerth, 

(1998), and Faragher v. City of Boca Raton, 

 (1998), establish an affirmative defense
for employers in hostile environment cases when
one of their supervisors perpetrates the harass-
ment. In such cases, the employer can avoid
liability if it demonstrates (1) that it exer-
cised reasonable care to prevent and promptly
address reports of sexually harassing behavior
and (2) that the employee unreasonably failed to
take advantage of the preventative or corrective
opportunities offered by the employer. Ellerth,
524 U.S. at 765; Faragher, 524 U.S. at 807. But
the Supreme Court was careful to limit this
defense to cases in which no "tangible employment
action" was taken against the employee. Ellerth,
524 U.S. at 765; Faragher, 524 U.S. at 808. In
this case, Lagon’s termination of Cooke was a
"tangible employment action," so the Ellerth/Far-
agher defense cannot protect Stefani from liabil-
ity. See Molnar v. Booth, 

, 601 (7th
Cir. 2000) (tangible employment action taken
against plaintiff bars Ellerth/ Faragher de-
fense). As we discuss infra, however, Stefani’s
sexual harassment policies are relevant to the
issue of punitive damages.

/3 At least one circuit court has held, post-Kol-
stad, that if the manager in question is suffi-
ciently senior, he may be considered a proxy for
the corporation, and punitive damages may be
imposed without regard to the corporation’s good
faith efforts to comply with Title VII. See
Passantino v. Johnson & Johnson Consumer Prods.,
Inc., 

, 517 (9th Cir. 2000); see also
Saxton v. American Tel. & Tel. Co., 

,
536 n.19 (7th Cir. 1993) (pre-Kolstad case apply-
ing same rule for liability purposes). Even if
this rule survives Kolstad, however, it would not
apply to this case. Lagon--who was merely the on-
site manager of one of Stefani’s numerous restau-
rants--did not occupy a position in the corporate
hierarchy such that he could be considered a
proxy for Stefani. See Splunge v. Shoney’s, Inc.,

, 491-92 & n.2 (11th Cir. 1996)
(refusing to impute state of mind of restaurant
manager perpetrating harassment to corporate
owner of restaurant for punitive damages purpos-
es).

/4 Cooke suggests that Stefani was on notice of
Lagon’s inappropriate conduct because upper
management had reprimanded Lagon on one or more
occasions for being "too friendly" with his
staff. Notwithstanding Cooke’s counsel’s evasive
answers to our questions on this issue, it is
clear that Lagon was reprimanded for fraternizing
with his staff, not harassing them. Knowledge of
fraternization, essentially the opposite of
harassment, could not have placed Stefani on
notice that it had a sexual harassment problem
brewing at Tuscany.