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Landmark Federal Appeals Ruling Holds Sexual Orientation Discrimination Violates Title VII

Posted on: April 5th, 2017 by Art Leonard No Comments

The full bench of the U.S. Court of Appeals for the 7th Circuit, based in Chicago, substantially advanced the cause of gay rights on April 4, releasing an unprecedented decision in Kimberly Hively v. Ivy Tech Community College, 2017 WL 1230393, holding that Title VII of the Civil Rights Act of 1964, which applies generally to all employers with fifteen or more employees as well as many federal, state and local government operations, prohibits discriminating against a person because of their sexual orientation.  The text of the statute does not mention sexual orientation, so the interpretive question for the court was whether discriminating against somebody because they are lesbian, gay or bisexual can be considered a form of sex discrimination.

What was particularly amazing about the affirmative decision, the first to rule this way by a federal appeals court, was that the 7th Circuit is composed overwhelmingly of Republican appointees, many of whom were appointed as long ago as the Reagan Administration.  Although the lead opinion for the Circuit was written by Chief Judge Diane Pamela Wood, who was appointed by Bill Clinton, the 8-member majority of the 11-judge bench included more Republicans than Democrats.  Many of the judges in the majority could be generally characterized as judicial conservatives.

Wood’s opinion was joined by Frank Easterbrook (Reagan appointee), Ilana Rovner (George H. W. Bush appointee), Ann Claire Williams (Clinton appointee), and David F. Hamilton (the only Obama appointee on the Circuit). Richard Posner (Reagan appointee) wrote a concurring opinion.  Joel Martin Flaum (Reagan appointee) wrote a concurring opinion which was joined by Kenneth Francis Ripple (Reagan appointee).  The dissent by Diane S. Sykes (George W. Bush appointee) was joined by Michael Stephen Kanne (Reagan appointee) and William Joseph Bauer (Ford appointee).  Ripple and Bauer are senior judges who were sitting on the en banc hearing because they were part of the three-judge panel (with Judge Rovner) that ruled on the case last year.  The Circuit has 11 authorized positions, but there are two vacancies among the active judges, part of the Republican Senate’s legacy of refusing to confirm most of President Obama’s judicial appointees during his second term.

The Circuit’s decision to grant en banc review clearly signaled a desire to reconsider the issue, which Judge Rovner had called for doing in her panel opinion. Rovner then made a persuasive case that changes in the law since the 7th Circuit had previously ruled negatively on the question called out for reconsideration.  Those who attended the oral argument on November 30 or listened to the recording on the court’s website generally agreed that the circuit was likely to overrule its old precedents, the only mystery being who would write the opinion, what theories they would use, and who would dissent.

The lawsuit was filed by Kimberly Hively, a lesbian who was working as an adjunct professor at the college, which is located in South Bend, Indiana. Despite years of successful teaching, her attempts to secure a full-time tenure-track position were continually frustrated and finally her contract was not renewed under circumstances that led her to believe it was because of her sexual orientation.  Since Indiana’s state law does not forbid sexual orientation discrimination, and South Bend’s ordinance (which does forbid sexual orientation discrimination) would not apply to the state college, she filed suit in federal court under Title VII.  She represented herself at that stage.  The trial judge, Rudy Lozano, granted the college’s motion to dismiss the case on the ground that 7th Circuit precedents exclude sexual orientation discrimination claims under Title VII.

Hively obtained representation from Lambda Legal on appeal. The three-judge panel rejected her appeal, while two of the judges urged that the precedents be reconsidered.

Judge Wood found that several key Supreme Court decisions have broadened the meaning of “because of sex” in Title VII, to the extent that she could write that “in the years since 1964, Title VII has been understood to cover far more than the simple decision of an employer not to hire a woman for Job A, or a man for Job B.” The broadening includes launching a complex law of sexual harassment, including same-sex sexual harassment, and discrimination against a person who fails to conform to “a certain set of gender stereotypes.”

As have many of the other judges who have written on this issue, Wood quoted from Justice Antonin Scalia’s opinion for the unanimous court in Oncale v. Sundowner Offshore Services, Inc., 523 U.S. 75 (1998), the same-sex harassment case, in which, after noting that “male-on-male sexual harassment in the workplace was assuredly not the principal evil Congress was concerned with when it enacted Title VII,” this did not mean that the statute could not be interpreted to apply to such a situation. “But statutory prohibitions often go beyond the principal evil to cover reasonably comparable evils,” Scalia wrote, “and it is ultimately the provisions of our laws rather than the principal concerns of our legislators by which we are governed.”

Woods found convincing Hively’s contention, argued to the court by Lambda Legal’s Greg Nevins, that two alternative theories would support her claim. The first follows a “comparative method in which we attempt to isolate the significance of the plaintiff’s sex to the employer’s decision: has she described a situation in which, holding all other things constant and changing only her sex, she would have been treated the same way?”  The second rests on an intimate association claim, relying on the Supreme Court’s 1967 ruling striking down state laws barring interracial marriages, Loving v. Virginia.  The Supreme Court held that a ban on interracial marriage was a form of race discrimination, because the state was taking race in account in deciding whom somebody could marry.  Similarly here, an employer is taking sex into account when discriminating against somebody because they associate intimately with members of the same sex.  After briefly describing these two theories, Wood wrote, “Although the analysis differs somewhat, both avenues end up in the same place: sex discrimination.”

Woods noted at least two rulings by other circuits under Title VII that had adapted Loving’s interracial marriage analysis to an employment setting, finding race discrimination where an employer discriminated against persons who were in interracial relationships, Parr v. Woodmen of the World Life Insurance Co., 791 F.2 888 (11th Cir. 1986), and Holcomb v. Iona College, 521 F.3d 130 (2nd Cir. 2008).  These citations were a bit ironic, since the 11th and 2nd Circuits have in recent weeks rejected sexual orientation discrimination claims under Title VII, in which the plaintiffs advanced the same analogy to support their Title VII claims.  These recent opinions were by three-judge panels that held themselves to be bound by prior circuit rulings.  Lambda Legal has already filed a petition for en banc review in the 11th Circuit case, and counsel for plaintiff in the 2nd Circuit case is thinking about doing the same.

Ultimately, Wood acknowledged, “It would require considerable calisthenics to remove the ‘sex’ from ‘sexual orientation.’ The effort to do so has led to confusing and contradictory results, as our panel opinion illustrated so well.  The EEOC concluded, in its Baldwin decision, that such an effort cannot be reconciled with the straightforward language of Title VII.  Many district courts have come to the same conclusion.  Many other courts have found that gender identity claims are cognizable under Title VII.”

Woods recited the now well-worn argument about how it is a basic inconsistency in the law that a person can enter into a same-sex marriage on Saturday and then be fired without legal recourse for having done so when they show up at the workplace on Monday. That is still the state of the law in a majority of the states.

Wood acknowledged that this decision does not end the case. Because Hively’s original complaint was dismissed by the district court without a trial, she has not yet been put to the test of proving that her sexual orientation was a motivating factor in the college’s decision not to hire her or renew her adjunct contract.  And, what passed unspoken, the college might decide to petition the Supreme Court to review this ruling, although the immediate reaction of a college spokesperson was that the school – which has its own sexual orientation non-discrimination policy – denies that it discriminated against Hively, and is ready to take its chances at trial.

Judge Posner submitted a rather odd concurring opinion, perhaps reflecting the oddity of some of his comments during oral argument, including the stunning question posed to the college’s lawyer: “Why are there lesbians?” Posner, appointed by Reagan as an economic conservative and social libertarian, has evolved into a forceful advocate for LGBT rights, having satisfied himself that genetics and biology play a large part in determining sexual identity and that it is basically unfair to discriminate against LGBT people without justification.  He wrote the Circuit’s decision striking down bans on same-sex marriage in Indiana and Wisconsin in 2014.

In this opinion, he takes on the contention that it is improper for the court to purport to “interpret” the language adopted by Congress in 1964 to cover sexual orientation discrimination. After reviewing various models of statutory interpretation, he insisted that “interpretation can mean giving a fresh meaning to a statement (which can be a statement found in a constitutional or statutory text) – a meaning that infuses the statement with vitality and significance today.”  He used as his prime example judicial interpretation of the Sherman Antitrust Act of 1890, adopted “long before there was a sophisticated understanding of the economics of monopoly and competition.”  As a result of changing times and new knowledge, he observed, “for more than thirty years the Act has been interpreted in conformity to the modern, not the nineteenth-century, understanding of the relevant economics.” Basically, the courts have “updated” the Act in order to keep it relevant to the present.

He argued that the same approach should be brought to interpreting Title VII, adopted more than half a century ago. This old law “invites an interpretation that will update it to the present, a present that differs markedly from the era in which the Act was enacted.”  And, after reviewing the revolution in understanding of human sexuality and public opinion about it, he concluded it was time to update Title VII to cover sexual orientation claims, even though “it is well-nigh certain that homosexuality, male or female, did not figure in the minds of the legislators who enacted Title VII.”  Although some of the history he then recites might arouse some quibbles, he was able to summon some pointed examples of Justice Scalia employing this method in his interpretation of the Constitution regarding, for example, flag-burning and an individual right to bear arms.

“Nothing has changed more in the decades since the enactment of the statute than attitudes toward sex,” wrote Posner, going on to recite the litigation history of the struggle for marriage equality that culminated in 2015 with the Supreme Court’s ruling in Obergefell v. Hodges.

Although it might sound odd at times as a judicial opinion, Posner’s concurrence is eminently readable and packed full of interesting information, including his list of “homosexual men and women (and also bisexuals, defined as having both homosexual and heterosexual orientations)” who have made “many outstanding intellectual and cultural contributions to society (think for example of Tchaikovsky, Oscar Wilde, Jane Addams, Andre Gide, Thomas Mann, Marlene Dietrich, Bayard Rustin, Alan Turing, Alec Guinness, Leonard Bernstein, Van Cliburn, and James Baldwin – a very partial list).”

This brought to the writer’s mind a famous paragraph in Supreme Court Justice Harry Blackmun’s opinion rejecting a challenge to the traditional anti-trust exemption for professional baseball, in which Blackmun included his own list of the greatest professional baseball players in history (compiled through a survey of the Supreme Court’s members and their young legal clerks).

Instead of pursuing Judge Wood’s line of reasoning, Posner was ready to declare that sexual orientation discrimination is a form of sex discrimination without such detailed analysis. “The most tenable and straightforward ground for deciding in favor of Hively is that while in 1964 sex discrimination meant discrimination against men or women as such and not against subsets of men or women such as effeminate men or mannish women, the concept of sex discrimination has since broadened in light of the recognition, which barely existed in 1964, that there are significant numbers of both men and women who have a sexual orientation that sets them apart from the heterosexual members of their genetic sex (male or female), and that while they constitute a minority their sexual orientation is not evil and does not threaten society.  Title VII in terms forbids only sex discrimination, but we now understand discrimination against homosexual men and women to be a form of sex discrimination; and to paraphrase [Oliver Wendell Holmes, Jr.], ‘We must consider what this country has become in deciding what that [statute] has reserved.’”

In his concurring opinion Judge Flaum took a narrower approach, noting that Title VII was amended in 1991 to provide that “an unlawful employment practice is established when the complaining party demonstrates that … sex … was a motivating factor for any employment practice, even though other factors also motivated the practice.” In other words, discrimination does not have to be “solely” because of sex to violate Title VII.  It is enough if the individual’s sex was part of the reason for the discrimination.  In light of this, Flaum (and Ripple, who joined his opinion) would look to the analogy with discrimination against employees in interracial relationships.  In addition, he noted, “One cannot consider a person’s homosexuality without also accounting for their sex: doing so would render ‘same’ and ‘own’ meaningless” in dictionary definitions that define homosexuality in terms of  whether somebody is attracted to persons of “the same” or “their own” sex.  Clearly, “sex” is involved when people are discriminated against because they are gay.

Judge Sykes’s dissent channeled scores of cases going back to the early years of Title VII and argued against the method of statutory interpretation used by the various opinions making up the majority. “The question before the en banc court is one of statutory interpretation,” she wrote.  “The majority deploys a judge-empowering, common-law decision method that leaves a great deal of room for judicial discretion.  So does Judge Posner in his concurrence.  Neither is faithful to the statutory text, read fairly, as a reasonable person would have understood it when it was adopted.  The result is a statutory amendment courtesy of unelected judges.  Judge Posner admits this; he embraces and argues for this conception of judicial power.  The majority does not, preferring instead to smuggle in the statutory amendment under cover of an aggressive reading of loosely related Supreme Court precedents.  Either way, the result is the same: the circumvention of the legislative process by which the people govern themselves.”

Although Sykes conceded that sexual orientation discrimination is wrong, she was not ready to concede that one could find it illegal by interpretation of a 1964 statute prohibiting sex discrimination at a time when the legislature could not possibly have been intending to ban discrimination against LGBT people. As Posner pointed out, that issue wasn’t on the radar in 1964.  Thus, to Sykes, Bauer and Kanne, it was not legitimate for a court to read this into the statute under the guise of “interpretation.”

Speculating about the ultimate fate of this decision could go endlessly on. There are fierce debates within the judiciary about acceptable methods of interpreting statutes, and various theories about how to deal with aging statutes that are out of sync with modern understandings.

Posner’s argument for judicial updating allows for the possibility that if Congress disagrees with what a court has done, it can step in and amend the statute, as Congress has frequently amended Title VII to overrule Supreme Court interpretations with which it disagreed. (For example, Congress overruled the Supreme Court’s decision that discrimination against pregnant women was not sex discrimination in violation of Title VII.)  Posner’s approach will be familiar to those who have read the influential 1982 book by then-Professor (now 2nd Circuit Judge) Guido Calabresi, “A Common Law for the Age of Statutes,” suggesting that courts deal with the problem of ancient statutes and legislative inertia by “updating” statutes through interpretation to deal with contemporary problems, leaving it to the legislature to overrule the courts if they disagree.  This method is more generally accepted in other common law countries (British Commonwealth nations), such as Australia, South Africa, India and Canada, than in the United States, but it clearly appeals to Posner as eminently practical.

So far the Republican majorities in Congress have not been motivated to address this issue through amendments to Title VII, or to advance the Equality Act, introduced during Obama’s second term, which would amend all federal sex discrimination laws to address sexual orientation and gender identity explicitly. Perhaps they will be provoked to act, however, if the question gets up to the Supreme Court and the 7th Circuit’s view prevails.

With the possibility of appeals now arising from three different circuits with different views of the issue, Supreme Court consideration of this question is highly likely. Public opinion polls generally show overwhelming support for prohibiting sexual orientation and gender identity discrimination in the workplace, which might serve as a brake on conservative legislators who would otherwise respond adversely to a Supreme Court ruling approving the 7th Circuit’s holding.

Federal Court in NYC Dismisses Sexual Orientation Discrimination Claim under Title VII

Posted on: March 10th, 2016 by Art Leonard No Comments

In 2000, the U.S. Court of Appeals for the 2nd Circuit, which has appellate jurisdiction over cases in the federal trial courts in New York, rejected the argument that sexual orientation discrimination claims could be dealt with as sex discrimination claims under federal law, but was open to the possibility that a gay litigant who had suffered discrimination because of failure to conform with the employer’s stereotypical views of appropriate gender behavior could pursue such a claim.  On March 9, a gay litigant informed the 2nd Circuit that he will appeal a Manhattan trial court’s dismissal of his federal sexual orientation claim, joining the trial judge in urging the appeals court to reconsider its 2000 decision.

Since the 2nd Circuit decided Simonton v. Runyon, 232 F.3d 33 (2000), the law affecting LGBT rights has drastically changed.  In 2003, the Supreme Court ruled that gay sex between consenting adults could no longer be outlawed.  In 2002, New York State joined New York City in outlawing sexual orientation discrimination in employment, housing and public accommodations, and the next year New York City extended the local law to gender identity discrimination claims.  In 2009 the federal government added sexual orientation and gender identity to the national Hate Crimes Law, and subsequently repealed the “don’t ask, don’t tell” anti-gay military policy.   In 2011 New York passed a Marriage Equality Act, in 2013 the Supreme Court ruled that the federal government must recognize same-sex marriages formed under state law, and last year the Supreme Court ruled that same-sex couples are entitled to marry and have their marriages recognized by state governments everywhere in the country.

Through all this change, however, the principal federal anti-discrimination law, the Civil Rights Act of 1964, has never been amended to extend explicit protection against discrimination to LGBT people. The Equal Employment Opportunity Commission (EEOC), the federal agency charged with enforcing Title VII, the employment provisions of the Civil Rights Act, has interpreted the federal ban on sex discrimination as extending to gender identity and sexual orientation discrimination, but federal courts are not bound by that interpretation, and federal trial judges have differed about how to handle sexual orientation discrimination claims.  So far, no federal appeals court has ruled on the question since the EEOC issued its decision last summer, but cases are pending on appeal in several circuits.

On March 9, U.S. District Judge Katherine Polk Failla, ruling on an employer’s motion to dismiss a Title VII claim filed by a gay man in Christiansen v. Omnicom Group, 2016 U.S. Dist. LEXIS 29972, found that his attempt to squeeze the case into the sex stereotype theory was unsuccessful and dismissed his claim, concluding that she was bound by the 2nd Circuit precedent to reject a sexual orientation discrimination claim under Title VII.  Reviewing the facts alleged by Matthew Christiansen against Omnicom Group (the parent company) and DDB Worldwide Communications (the business by which he is employed in New York), the judge found that all but one of the incidents he described in his complaint related to sexual orientation.

Indeed, Christiansen’s allegations clearly state that his supervisor, Joe Cianciotto, was “openly resentful and hostile toward Plaintiff because of his sexual orientation.” The various incidents of harassment that Christiansen described in his complaint all involved Cianciotto’s expression of such hostility in some form.  Only once did he refer to Christiansen as “effeminate,” which might have supported a sex stereotype claim, but most of the time Cianciotto’s razzing focused on Christiansen’s “big muscles” (as described by Cianciotto), pictorial invocations of exaggerated masculinity, and references to gay stereotypes.

Judge Failla focused on the difficulty of distinguishing between sexual orientation and sex stereotyping claims, quoting from several other court decisions illustrating that difficulty, and warning against using passing stereotypical references by a supervisor to “shoehorn” a sexual orientation claim into Title VII coverage.

“The lesson imparted by the body of Title VII litigation concerning sexual orientation discrimination and sexual stereotyping seems to be that no coherent line can be drawn between these two sorts of claims,” she wrote. “Yet the prevailing law in this Circuit – and, indeed, every Circuit to consider the question – is that such a line must be drawn.  Simonton is still good law, and, as such, this Court is bound by its dictates.  Consequently, the Court must consider whether the Plaintiff has pleaded a claim based on sexual stereotyping, separate and apart from the stereotyping inherent in his claim for discrimination based on sexual orientation.  The Court finds that he has not.”

Christiansen’s complaint alleges that Ciancotto told a coworker that Christiansen was “effeminate and gay so he must have AIDS,” but this was not enough for Judge Failla. “This is the sole mention of Plaintiff as effeminate or otherwise non-conforming to traditional gender norms in the whole of the [first amended complaint],” she wrote.  “It alone cannot serve to transform a claim for discrimination that Plaintiff plainly interpreted – and the facts support – as stemming from sexual orientation animus into one for sexual stereotyping.  While Plaintiff provides virtually no support in his [complaint] for an allegation of discrimination based on sexual stereotyping, he provides multiple illustrations of Cianciotto’s animus toward gay individuals.  The [complaint] notes, for instance, the fact that ‘most of the pictures Cianciotto drew were of men fornicating, and they always involved a gay employee’; that he repeatedly expressed a belief that gay men were reckless and disease-prone; and that he commented at a meeting that he did not want an advertisement to be ‘too gay.’  All of these examples lend further support to the inference that Cianciotto’s harassment was motivated by sexual-orientation-based discriminatory animus, not sexual stereotyping.”

Failla conceded that she might be able to “latch onto the single use of the word ‘effeminate’ and the depiction of Plaintiff’s head on a woman’s body, strip these facts of the context provided by the rest of the [complaint], and conjure up a claim for ‘sexual stereotyping.’ But while the ends might be commendable, the means would be intellectually dishonest; the Court would obliterate the line the Second Circuit has drawn, rightly or wrongly, between sexual orientation and sex-based claims.  In light of the EEOC’s recent decision on Title VII’s scope, and the demonstrated impracticability of considering sexual orientation discrimination as categorically different from sexual stereotyping, one might reasonably ask – and, lest there by any doubt, this Court is asking – whether that line should be erased.  Until it is, however, discrimination based on sexual orientation will not support a claim under Title VII; Plaintiff’s Title VII discrimination claim must therefore be dismissed.”

Reading Christiansen’s factual allegations, one would have to be amazed that a supervisor behaving the way Joe Cianciotto is alleged to have behaved would be tolerated by a socially conscious employer in New York, much less a large advertising agency. As far as society has advanced over the past few decades in treating gay people with simple human dignity, the facts one reads in employment discrimination complaints filed by LGBT suggest that there is still a long way to go.

Christiansen, who is HIV-positive, also asserted an Americans With Disabilities Act claim, but Judge Failla found it was not timely, since the only incident on point occurred more than 300 days before Christiansen filed his charge with the EEOC, and in that charge he didn’t even mention the ADA. She also found that his factual allegations would not support a claim under the ADA in any event, since there was scant evidence that he was mistreated by the company because of his HIV status, and that the facts also did not support his claim to have suffered retaliation for filing his discrimination charges.  His complaint asserted a “constructive discharge” claim, which he had to withdraw since he was still working for the company when the complaint was filed

However, it is a fair inference from Judge Failla’s characterization of the evidence that if she felt Title VII could be construed to cover sexual orientation discrimination, she would not have granted the motion to dismiss. She also granted a motion to dismiss filed on behalf of various supervisory and managerial officials of the employer, as the federal anti-discrimination laws do not pose personal liability on company officials.  Having dismissed all the federal statutory claims that Christiansen made, the judge declined to extend jurisdiction over his state law claims, so he should be able to pursue his case further in state court, where the statutes do expressly forbid sexual orientation discrimination.

In the meantime, however, Christiansen’s reaction to the March 9 dismissal was immediate, as his attorney filed a notice of appeal with the 2nd Circuit the same day.  Little more than a week earlier, the EEOC had advanced its campaign to win judicial acceptance of the agency’s interpretation of Title VII by filing its first affirmative sexual orientation discrimination claims against employers in other parts of the country.  The EEOC had already intervened as a co-plaintiff in several other pending cases since last year’s administrative ruling.

Christiansen is represented by Susan Chana Lask, a New York City trial lawyer.

 

Oregon Appeals Court Affirms Damages Award Against Bar That Ousted LGBT Social Club

Posted on: September 26th, 2015 by Art Leonard No Comments

The Court of Appeals of Oregon has affirmed an award of $405,000 against a North Portland bar and the bar’s owner, Chris Penner, upon a finding by the Oregon Bureau of Labor and Industries (OBLI) that they violated the state’s public accommodations law by denying “equal accommodations” to an informal social club that included gay and transgender people. Blachana, LLC v. Oregon Bureau of Labor and Industries, 273 Ore. App. 806, 2015 Ore. App. LEXIS 1116, 2015 WL 5595483 (Sept. 23, 2015). The court rejected the petitioners’ outlandish argument that they hadn’t discriminated and their conduct was protected by the 1st Amendment freedom of speech.

The case involves an informal social group called Rose City T-Girls that met in bars on Friday nights. The membership was diverse, including lesbians, gay men, transgender people, transvestites, and straight people as well. For a time they were meeting in a bar then called P Club in North Portland. On June 18, 2012, the proprietor of the bar phoned one of the “regulars” of the club and left a voicemail, asking that they not come to his bar on Friday nights. As transcribed by the recipient, the call stated: “Hello, my name is Chris, I’m the owner of the P Club Bar and Grill on North Lombard. Um, unfortunately, uh due to circumstances beyond my control I am going to have to ask for you, Cass, and your group not to come back on Friday nights. Um, I really don’t like having to do that but unfortunately it’s the area we’re in and it’s hurting business a lot. If you have any questions, please feel free to give me a call. . . Again I’m really sorry about having to do this but yeah give me a call. Thanks, bye.”

The recipient of this call left a voicemail for Chris Penner, asking the “real reason” for his request, and received the following voice mail: “Hello Cassandra, this is Chris from the P Club. Sorry it took me awhile to return your phone call. There is no underlying reason for asking you folks not to come back other than money. Um, sales on Friday nights have been declining at the bar for the last 18 months. Uh, about a year ago I was looking at asking you folks not to come in anymore and the girls said, “No, no, no don’t,” so I gave it a while longer. Um, I own another bar in north Portland; sales are going great on Fridays, and so I’ve done some investigating as to why my sales are declining and there’s two things I keep hearing: People think that (a) we’re a tranny bar or (b) that we’re a gay bar. We are neither. People are not coming in because they just don’t want to be there on a Friday night now. In the beginning sales were doing fine but they’ve been on a steady decrease so I have to look at what the problem is, what the reason is, and take care of it; that’s my job as the owner. So unfortunately, I have to do what I have to do and that is the only reason. It’s all about money.”

Cassandra Lynn recorded and transcribed the calls and shared them with the other members of the group, and none of them returned to P Bar. Instead, they filed complaints with BOLI, which enforces the state’s public accommodations law. That law bans discrimination because of sexual orientation and gender identity. BOLI found a violation of the law based on a complaint by the Commissioner of the agency, and assessed damages of $50,000 for each complainant and $5,000 in penalties against the bar and Penner.

On appeal, Penner’s counsel argued that actually the law had not been violated, as none of the complainants had come to the bar after those messages were received, and so nobody had actually been turned away or denied services. They argued that if the entire case turned on the phone messages, then it was an unconstitutional penalty for speech.

The Court of Appeals ultimately found these arguments totally lacking in merit, agreeing with BOLI that the phone messages constituted “an actual denial of service.” Wrote Judge Douglas L. Tookey for the court, “As we understand it, that statement including a finding that, through the voicemails, Penner was not just stating his opinion, but was actually informing the T-Girls that they would not be served if they came to the P Club on Friday nights. That finding is supported by substantial evidence.” Thus, the club and its owner were not being held liable for their speech, itself, but for the “forbidden effect” of the speech, a denial of services by a public accommodation. “When Penner left the voicemails for Lynn,” wrote Tookey, “he was verbally barring her and the T-Girls from the P Club on Friday nights.” Thus, he concluded, the fact that none of the T-Girls returned to the club was “immaterial” to the case.

The court did not pay any attention to Penner’s asserted justification in his voicemails that the Club’s attendance on Friday nights had fallen off after the T-Girls began meeting there. Such a defense has long since been rejected in public accommodations cases dating back to the 1960s when the federal civil rights laws prohibited places of public accommodation from discrimination because of race. If an owner could justify denying service to a class of people on the ground that other people would stop patronizing the business, laws banning discrimination by places of public accommodation would be toothless at best.

After the publicity surrounding this case, Penner changed the name of the bar to Twilight Room Annex. In a 2012 interview, he said that he is neither homophobic nor anti-transgender, but that other customers had complained about the T-Girls and business had declined after they started coming to the bar on Friday nights. After OBLI’s judgment became final, according to a September 23 report in the Oregonian, Penner’s bank accounts were seized to satisfy the judgment, Penner laid off five employees, and the Twilight Room Annex closed.