United States District Court, N.D. California
U.S. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Plaintiff, and UMME-HANI KHAN, Plaintiff-Intervenor,
ABERCROMBIE & FITCH STORES, INC., d/b/a HOLLISTER CO., HOLLISTER CO. CALIFORNIA, LLC, Defendants
[Copyrighted Material Omitted]
For U.S. Equal Employment Opportunity Commission, Plaintiff: Jonathan T. Peck, William Robert Tamayo, U.S. EEOC, San Francisco, CA; Marcia L. Mitchell, Sirithon Thanasombat, U.S. Equal Employment Opportunity Comm'n, San Francisco, CA; Marsha Jade Chien, Legal Aid Society-Employment Law Center, San Francisco, CA.
For Umme-Hani Khan, Intervenor Pla: Christopher Ho, Marsha Jade Chien, Legal Aid Society-Employment Law Center, San Francisco, CA; Zahra Aslam Billoo, CAIR SFBA, Santa Clara, CA.
For Abercrombie & Fitch Stores, Inc., doing business as Hollister, Hollister Co. California, LLC, Defendant: Amarra Autumn Lee, LEAD ATTORNEY, Douglas Evans Dexter, Farella Braun Martel LLP, San Francisco, CA; Diego F. Acevedo, LEAD ATTORNEY, Farella Braun & Martel LLP, San Francisco, CA; Daniel Clark, PRO HAC VICE, Samantha Alyson Stilp, PRO HAC VICE, Vorys, Sater, Seymour & Pease, Columbus, OH; Daniel John Clark, Mark Arnold Knueve, Vorys, Sater, Seymour and Pease LLP, Columbus, OH.
For Hollister Co. California, LLC, Defendant: Amarra Autumn Lee, LEAD ATTORNEY, Douglas Evans Dexter, Farella Braun Martel LLP, San Francisco, CA; Diego F. Acevedo, LEAD ATTORNEY, Farella Braun & Martel LLP, San Francisco, CA; Daniel John Clark, Vorys, Sater, Seymour and Pease LLP, Columbus, OH; Samantha Alyson Stilp, Vorys, Sater, Seymour and Pease, Columbus, OH.
For Council on American-Islamic Relations, California (CAIR-CA), Miscellaneous: Aliah A Abdo, San Jose, CA; Marsha Jade Chien, Legal Aid Society-Employment Law Center, San Francisco, CA.
Order Granting Plaintiffs' Motion for Partial Summary Judgment and Denying Defendants' Cross-Motion for Partial Summary Judgment
YVONNE GONZALEZ ROGERS, UNITED STATES DISTRICT COURT JUDGE.
Pending before the Court are cross-motions for partial summary judgment. Plaintiff U.S. Equal Employment Opportunity Commission (" EEOC" ) filed this action
against Defendants  on June 27, 2011 alleging discrimination on the basis of religion in violation of Title VII, 42 U.S.C. section 2000e-2(a)(1). (Dkt. No. 1.) On September 9, 2011, Plaintiff-Intervenor Umme-Hani Khan (" Khan" ) filed a Complaint in Intervention for Damages and Injunctive and Declaratory Relief for Employment Discrimination.  (Dkt. No. 28.)
The EEOC and Khan (collectively, " Plaintiffs" ) have jointly filed a Motion for Partial Summary Judgment (" Motion" ), seeking judgment in their favor as to (i) liability on the claims regarding religious accommodation and (ii) Abercrombie's sixth, eighth, and tenth affirmative defenses based on failure to exhaust administrative remedies, undue hardship, and infringement upon Abercrombie's right to commercial free speech, respectively. (Dkt. No. 97.) Abercrombie opposes Plaintiffs' Motion, and filed a Cross-Motion for Partial Summary Judgment (" Cross-Motion" ) seeking (i) dismissal of the EEOC's claims on the grounds the EEOC failed to conciliate in good faith and (ii) summary judgment on Plaintiffs' claims for injunctive relief and punitive damages. (Dkt. No. 103.) On June 18, 2013, the Court held oral argument on the pending motions. (Dkt. No. 117.) 
Having carefully considered the papers submitted and the pleadings in this action, the arguments of counsel, and for the reasons set forth below, the Court hereby Grants Plaintiffs' Motion for Partial Summary Judgment and Denies Defendants' Cross-Motion for Partial Summary Judgment.
I. Factual and Procedural Background
A. Abercrombie and the Look Policy
Defendant Abercrombie & Fitch, Inc. operates retail stores across the country under the brand names Abercrombie & Fitch, Hollister Co., abercrombie kids and Gilly Hicks. (UMF No. 2.)  Employees who work in both the stock room and on the sales floor to restock merchandise are titled " Impact" or Part-Time Impact (" PTI" ) employees (sometimes referred to as associates). (UMF No. 4; Declaration of Marcia Mitchell in Support of Plaintiffs EEOC's and Khan's Motion for Partial Summary Judgment [" Mitchell Motion Decl." (Dkt. No. 98)], Ex. 11 [Videotaped Deposition of Amy Yoakum (" Yoakum Dep." )] 59:9-24 .) Abercrombie also employs
" Models" who work on the sales floor. (UMF No. 3; Mitchell Motion Decl., Ex. 7 [Deposition of Chad W. Moorefield (" Moorefield Dep." ] 50:8-51:14 .)
Abercrombie maintains a " Look Policy" which was effective at all times relevant to this case. (UMF No. 5.) The Look Policy is a grooming policy that gives employees guidelines regarding their appearance and the clothing they are expected to wear while at work. (Mitchell Motion Decl., Ex. 4 [Deposition of Deon Riley, Ph.D. (" Riley 3/14/12 Dep." )] 135:16-25.) The Look Policy requires employees to wear clothes similar to those sold in Abercrombie stores, though they are not required to wear Abercrombie clothing. ( Id. 202:4-8.)  In 2010, the Look Policy prohibited employees from wearing headwear. (Mitchell Motion Decl., Ex. 6; Yoakum Dep. 255:19-25; Clark Decl., Ex. E. [30(b)(6) Deposition of Christopher Fugarino (" Fugarino Dep." )] at Ex. 26 at 29-30.)
In addition to the Look Policy, Abercrombie's marketing strategy seeks to create an " in-store experience" for customers that conveys the principal elements and personality of each Abercrombie brand. (Mitchell Motion Decl., Ex. 2 [Abercrombie & Fitch Co., Annual Report (Form 10-K) (January 30, 2010)] at 2.) The in-store experience is the " primary vehicle for communicating the spirit of each brand." ( Id. ) " [S]ales associates . . . reinforce the aspirational lifestyles represented by the brands" and " are a central element in creating the atmosphere of the stores." ( Id. ) Abercrombie considers the in-store experience to be its main form of marketing, although it also engages customers through social media and mobile commerce. ( Id. at 3.)
All store employees, including Impact and PTI employees, are required to comply with the Look Policy. (UMF No. 6.) Applicants for employment are informed of the Look Policy during the interview process. (UMF No. 7.) New employees sign an acknowledgement of the Look Policy when they are hired, and the Look Policy also appears in the Abercrombie employee handbook. (UMF No. 8.)
B. Khan's Employment with Abercrombie
Plaintiff Umme-Hani Khan is Muslim. (UMF No. 1.) Khan believes that Islam dictates that she wear clothes that she considers modest. (Mitchell Motion Decl., Ex. 1 [Videotaped Deposition of Umme-Hani Khan (" Khan Dep." )] 23:7-15.)  She further believes that Islam requires her to wear a head scarf, also known as a hijab, when in public or in the presence of men who are not immediate family members. ( Id. 17:13-16, 22:7-14, 46:16-48:3.) At the time of her hire, Khan had fully adopted the practice of wearing a hijab in public or when in the presence of males outside of her immediate family. ( Id. 50:18-24.) She wore a headscarf when she was interviewed for her position, and knew
that Abercrombie did not sell headscarves. (UMF Nos. 10 & 11.) When hired, Khan acknowledged the Look Policy and agreed to abide by it. (Khan Dep. 79:15-80:10, 89:8-11.)
In October 2009, Khan began work as a PTI employee at a Hollister store in the Hillsdale Shopping Center in San Mateo. (UMF No. 9.) As a PTI employee, she was responsible for ensuring that merchandise was prepared for the sales floor, which included folding clothes received in shipments, placing those items on the floor, and replacing those items as clothes are sold. (Yoakum Dep. 59:9-24; Khan Dep. 76:6-13 (also ensured shipments were complete); Moorefield Dep. 34:16- 23 (impact associate's job is " to process shipment and fill the sales floor" ).) Khan's duties were performed primarily in the stockroom. (Khan Dep. 77:5-8; Yoakum Dep. 60:5-9.) While the unpacking and folding of items would take place in stockrooms, Khan would restock clothes on the floor anywhere from one to four times per shift. (Khan Dep. 77:9-20.)
Khan wore her headscarf at work from October 2009 until her termination in February 2010. She regularly wore long-sleeved shirts and jeans purchased at Hollister along with a pair of flip-flops to work. (Plaintiff-Intervenor Umme-Hani Khan's Declaration in Support of Plaintiffs' Motion for Partial Summary Judgment [Dkt. No. 99] ¶ 4.) Local supervisors permitted Khan to wear her headscarf so long as it matched company colors. (Khan Dep. 69:5-23.) During that time, the store managers never informed her she was not complying with the Look Policy. ( Id. 84:16-21.)
On or around February 10, 2010, during a regularly scheduled store visit to the Hillsdale store, District Manager Adam Chmielewski noticed that Khan was not in compliance with the Look Policy. (UMF No. 12.) When he saw Khan on that occasion, he did not know that she had been employed by Abercrombie for several months. (UMF No. 13.) Chmielewski contacted Amy Yoakum, Senior Manager of Human Resources, for guidance on how to address the situation. (UMF No. 14.) On February 15, 2010, Yoakum discussed the situation with Chmielewski and Khan over the phone. (UMF No. 15.) During that phone conversation, Yoakum told Khan that her headscarf was in violation of the company's Look Policy and asked her if she could take it off. (UMF No. 16.) Khan told Yoakum that she could not take the headscarf off because it was part of her religion. (UMF No. 17.) Yoakum informed Khan that Abercrombie would suspend her shifts but continue to pay her while they investigated. (Yoakum Dep. 63:5-15.)
Khan returned to the store on February 22, 2010 for a second phone conversation with Yoakum and Chmielewski. (UMF No. 18.) Prior to the phone call, Abercrombie prepared Khan's final paycard (equivalent to a paycheck). (Yoakum Dep. 101:23-103:3.) During the call, Yoakum asked again whether Khan could remove her headscarf while she was on the clock. (UMF No. 19.) Khan responded, again, that she could not do so because of her religious beliefs. (UMF No. 20.) Yoakum terminated Khan's employment for non-compliance with the company's Look Policy. (UMF Nos. 21 & 22.) Khan's refusal to remove her hijab was the sole reason for her suspension and termination. (Mitchell Motion Decl., Ex. 9; Yoakum Dep. 61:11-23, 62:24-64:19, 99:13-18.)
Eleven days later, on March 5, 2010, Abercrombie extended Khan an unconditional offer of reinstatement with the accommodation of being allowed to wear her headscarf to work. (UMF No. 23.) Khan
declined the offer of reinstatement. (Khan Dep. 140:6-8.)
C. Post-Termination Conduct Between EEOC and Abercrombie
Khan filed a Charge of Discrimination with the EEOC and DFEH on March 1, 2010. (Declaration of Michael Baldonado in Support of Plaintiff's Motion for Partial Summary Judgment [" Baldonado Decl." (Dkt. No. 100)], Ex. 1.) On March 8, 2010, the EEOC notified Abercrombie of the charge. (Baldonado Decl., Ex. 2.)
In 2010, the EEOC was involved in two other cases with Abercrombie: (1) EEOC v. Abercrombie & Fitch Stores, Inc., d/b/a Abercrombie Kids, No. 10-cv-03911-EJD (N.D. Cal.) and (2) EEOC v. Abercrombie & Fitch Stores, Inc., d/b/a Abercrombie Kids, No. 09-cv-602-GKF-FHM (N.D. Okla.). In the Northern District of California action (hereafter, " Banafa " ), the EEOC alleged that Abercrombie refused to hire Halla Banafa as a PTI associate because she wore a hijab. (Mitchell Reply Decl. ¶ 4.) In the Northern District of Oklahoma case (hereafter, " Elauf " ), the EEOC alleged that Abercrombie refused to hire Samantha Elauf into a Model position because she wore a hijab. ( Id. ¶ 5.) On or about September 16, 2010, the EEOC informed Abercrombie's counsel that it would be interested in jointly negotiating a settlement of the Banafa and Elauf cases. ( Id. ¶ ¶ 7-8 & Ex. 2.)
On September 24, 2010, the EEOC sent Abercrombie a " Determination" letter stating that there was reasonable cause to believe it had discriminated against Khan in violation of Title VII. (Baldonado Decl., Ex. 3; Mitchell Reply Decl. ¶ 9; Declaration of Stacia Marie Jones, Esq. [Dkt. No. 104-14] ¶ 4.) In the Determination, the EEOC invited Abercrombie to conciliate the charge informally. Also on September 24, the EEOC sent a conciliation offer letter to Abercrombie recommending compensatory damages and other forms of non-monetary relief, to which Abercrombie replied with a counteroffer. (Clark Decl., Ex. O.)
The EEOC and Abercrombie jointly discussed settlement of Banafa and Elauf in October 2010. (Mitchell Reply Decl., Ex. 3.) Marcia Mitchell, the attorney assigned to negotiate with Abercrombie in Banafa and in the instant action (which was then in conciliation) understood that the parties were pursuing a global settlement of all three matters. ( Id. ¶ ¶ 10 & 12.) The discussions in October 2010 included exchanging draft consent decrees containing terms to resolve all three matters. ( Id. ¶ 14.) Negotiations regarding the consent decrees continued into November 2010. ( Id. ¶ ¶ 16-23 & Exs. 4-11.) On December 10, 2010, the parties participated in a settlement conference in Elauf before a magistrate judge, but the case did not settle. ( Id. ¶ 25.)
On December 17, 2010, the EEOC presented Abercrombie with proposed language to adopt as company policy. (Clark Decl., Ex. M [Deposition of Hussam Ayloush Pursuant to Federal Rule 30(b)(6) on Behalf of CAIR-California] at Ex. 48.)  The EEOC stated that " [i]f Hollister is willing to incorporate the above language in its policies, then the EEOC would be happy to continue with conciliation efforts on issues of money and other injunctive relief." ( Id. ) In addition, the EEOC " included the new requests from Charging Party [Khan] and her counsel." ( Id. ) Abercrombie rejected the conciliation demand on December ...