Posted: Thursday, April 28, 2011 10:00 AM
Judge asked to 'pierce corporate veil' in interest of justice
A nursery owner and his wife would be personally liable for a $150,000 settlement of a sexual harassment lawsuit if their company goes bankrupt or is otherwise unable to make the payment.
As part of a settlement between the U.S. Equal Employment Opportunity Commission and Willamette Tree Wholesale of Molalla, Ore., a financial judgment would be entered against Raymond and Marguerite Gannon if their nursery fails to comply with the deal.
The EEOC, which enforces federal laws against employment discrimination, initially filed a legal complaint against the nursery about two years ago.
According to the agency, the company fired several farmworkers who complained about sexual harassment, thereby violating their civil rights.
During the litigation, the EEOC asked a federal magistrate judge to "pierce the corporate veil" of Willamette Tree, which would expose the owner and his wife to liability for any potential financial judgment in the case.
Shareholders are generally protected from a corporation's liabilities, but a court may hold them responsible in the interest of justice -- if the company is basically the owners' alter ego, the agency said.
The agency said it was worried the nursery would file for bankruptcy protection, citing Raymond Gannon's statements about the company being in "horrible" financial condition.
Gannon had said that bankruptcy "is an option that's on the table" and that he had consulted with an attorney on the matter, according to a deposition transcript filed by EEOC.
The EEOC claimed the company's corporate veil should be pierced because "Mr. Gannon uses Willamette Tree's assets as his own, funnels and pays his personal debts through Willamette Tree, funds an entirely separate business through Willamette Tree, and generally milks and undercapitalizes Willamette Tree," the agency said in a court filing.
For example, the agency said Raymond Gannon had borrowed more than $350,000 from the company which "he has made no effort to repay," and that the nursery has paid the balance on the couple's credit cards.
The judge declined to pierce the company's corporate veil because the request was premature.
He said the EEOC could make the request again if an award was granted to the plaintiffs after trial, which was scheduled for mid-April.
Though Willamette Tree's corporate veil was never technically pierced, the settlement deal has the same effect because the Gannons must back up the $150,000 payment, said Carmen Flores, an attorney for EEOC.
The farmworkers decided to settle shortly before trial because reliving the events would be painful and because the possibility of an award was uncertain, Flores said.
"You never know what a jury is going to award. It could be a ton of money or it could be a dollar," she said.
Capital Press was unable to reach an attorney that represented Willamette Tree Wholesale.
The EEOC alleged in the lawsuit that a female worker was raped about once or twice a week by a supervisor for the duration of her employment, which ended in March 2007 after nearly four months.
The agency said the alleged victim's sister was also subjected to groping and lewd comments by a supervisor. The sister was fired about a year later along with her husband and her brother when they complained about the harassment, according to EEOC.
Willamette Tree denied committing any unlawful employment practices.
The company argued the lawsuit should be dismissed because the alleged rape victim had not complained to state labor officials within the required 300 days after the last incident of alleged harassment, according to court documents.
U.S. Magistrate Judge Paul Papak refused to dismiss the case, ruling that the woman was entitled to an expanded time frame for making her complaint.
The judge ruled that the woman had failed to make a timely complaint due to mental incapacity, characterized by post-traumatic stress, depression and suicidal thoughts, as well as fear of harm from her former supervisor.