Seventh Circuit Court of Appeals Commentary : In Their Opinion : Lawyer & Attorney Michael E. Rigney : Kelley Drye & Warren Law Firm

GROSS v. TOWN OF CICERO (August 27, 2010)

For several years after Clarence Gross retired as a Cicero police officer, he served in a number of appointed positions in the Town's government. The Town President appointed him Chairman of the Board of Fire and Police Commissioners. As Chairman, Gross oversaw the hiring of the Town's police officers. Gross admits that he hired several officers that he deemed unqualified because he was directed to do so by the Town President. Rhonda Gross, Clarence's daughter, also served as a Cicero police officer during this time. She complained to Gross that she and other female police officers were the victims of sexual harassment. Gross approached the Town President on several occasions to discuss the harassment. On each occasion, she deflected his attempt and promised to address it later. Rhonda filed an EEOC charge. The EEOC found substantial evidence that she was the subject of sexual harassment -- the Town settled. After Rhonda filed her charge, Gross was removed from his various appointments. He complained to the Town's attorney that he was owed compensation. When he became involved as a potential witness in litigation against the Town, he claims that the attorney told him he would not get his compensation until the other litigation was resolved. Gross brought suit pursuant to § 1983 against the Town, the President, a successor President, and the Town’s attorney. He alleged First Amendment free-speech violations. The Town brought counterclaims for breach of fiduciary duty and unjust enrichment. Judge Darrah (N.D. Ill.) granted summary judgment to the defendants on Gross' claim, granted summary judgment to Gross on the unjust enrichment claim, but granted summary judgment on liability to the Town on the breach of fiduciary duty claim. The court ultimately awarded over $300,000 on the claim after a bench trial, representing Gross' entire salary for the years in question.

In their opinion, Judges Cudahy, Williams, and Tinder affirmed in part and reversed and remanded in part. The Court first addressed Gross' First Amendment retaliation claims, specifically the first prong of the retaliation inquiry -- whether his speech was constitutionally protected. Three different episodes of retaliation were alleged: a) his sexual harassment complaints on behalf of Rhonda to the Town President, b) his instruction to Rhonda to file an EEOC charge, and c) his conversations with the plaintiffs’ lawyers in another case against the Town. The Court concluded that none of the episodes constituted protected speech: a) his complaints to the Town President about sexual harassment (to the extent there was even any actual content to the speech, as opposed to a mere request to discuss) were not matters of public concern but merely a private grievance, b) any encouragement to Rhonda to file the EEOC charge was not speech on a matter of public concern but, again, a mere private matter (the record also contains no evidence that any defendant was aware of this speech, precluding a finding of causation), and c) there is no evidence in the record to establish that a conversation with plaintiffs' lawyers in another case could constitute protected speech. The Court therefore affirmed the district court's finding in favor of the defendants on Gross’ First Amendment claim. The Court next addressed the Town’s breach of fiduciary duty claim. The district court noted that an Illinois statute sets standards by which municipalities’ Police Boards must evaluate appointed police officers. The court held that the statute created a fiduciary duty on the part of Police Board members to exercise independent judgment. The Court disagreed. The statute does not refer to fiduciary duties and the Court was reluctant to create one. Instead, the statute merely grants authority and establishes rules for the exercise of that authority. Although it concluded that the statute did not create a duty, the Court did recognize that Gross was subject to a duty of loyalty owed by all public officials. Relying on the standard the Illinois Supreme Court stated in upholding a criminal conviction, the Court ruled that there was sufficient evidence (barely) in the record for a factfinder to conclude that Gross violated that duty. A factfinder could conclude that Gross engaged in a quid pro quo arrangement with the Town President by which he protected his and his daughter’s jobs in return for appointing unqualified police officers selected by the President. The Court remanded for additional factual findings on that issue. Its conclusion on liability did not necessitate any analysis of the damage award. Nevertheless, the Court commented that the district court’s total salary forfeiture was not correct, unless Gross was breaching his duty during his entire tenure, a conclusion not supported by the current record.

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 HOLMSTROM v. METROPOLITAN LIFE INSURANCE CO. (August 4, 2010)

Lanette Holmstrom developed a painful nerve condition in her right arm in 2000 and stopped working. Metropolitan Life Insurance Company administered her employer's benefit plan. MetLife paid disability benefits first under the "own-occupation" standard and then under the "any-occupation" standard for several years. Meanwhile, Holmstrom underwent three surgeries. None of the surgeries relieved her pain. Her physician diagnosed complex regional pain syndrome and concluded that further surgical intervention was unwarranted. Instead, Holmstrom was placed on a heavy pain medication regimen. With MetLife's help, Holmstrom applied for and began receiving Social Security benefits. Despite any lack of improvement in her condition, MetLife terminated Holmstrom's benefits in 2005 after a periodic review. Its rationale for the denial was that the medical data "no longer support(ed)" the severity of her impairment. Holmstrom appealed and provided substantial additional information, including a 2005 Functional Capacity Evaluation ("FCE") and a detailed statement from her physician with his diagnosis and his conclusion that she could perform no hand functions. MetLife denied the appeal, noting a lack of "objective findings." MetLife specifically noted that it could have reached a different decision had it been provided a more thorough FCE. Holmstrom submitted the requested FCE and additional test results. MetLife's physicians concluded that Holmstrom's physical limitations were not severe and that her diagnosis was not established by medical data. After a further exchange, one of MetLife's physicians recommended an independent medical examination. MetLife upheld its denial of benefits without seeking such an examination. Holmstrom brought suit under ERISA. Judge Dow (N.D. Ill.) granted summary judgment to MetLife. Holmstrom appeals.

In their opinion, Judges Kanne, Wood, and Hamilton reversed and remanded. Even applying the arbitrary and capricious standard of review, the Court found error. The Court first rejected three of Holmstrom arguments: a) that MetLife could not periodically review and reverse prior benefit decisions, b) that MetLife had to prove that her condition actually improved to reverse its course, and c) that the court could take into consideration MetLife's "batting average" in other federal cases challenging its benefit decisions. On the other hand, the Court found that several factors supported an arbitrary and capricious conclusion: a) erroneously concluding that certain normal test results contraindicated the diagnosis, b) unreasonably demanding objective pain data were no objective test exists, c) not adequately explaining its rejection of the FCEs, d) failing to even consider the Social Security determination, e) discounting Holmstrom's own extensive medical history, f) rejecting the evidence of Holmstrom's cognitive impairment resulting from the medication regimen, g) relying on the opinion of the records-review doctors in the face of overwhelming contrary evidence, h) ignoring the recommendations of its own physician to conduct an independent medical examination, and i) its repeated practice of asking for new data and then rejecting the data for reasons never communicated to Holmstrom. Holmstrom submitted evidence sufficient to establish her disability -- MetLife failed to counter it with sound reasoning supported by the record. The Court added that it saw several factors that suggested a conflict of interest existed. Finally, with respect to the remedy, the court conceded that the normal remedy in such a case is a remand for a fresh administrative decision. Here, however, there was an earlier award of benefits, there has been no apparent positive change in Holmstrom's condition, and the Court had a "firm grasp" of the merits. It decided that the appropriate remedy was a reinstatement of benefits. It remanded for the district court to consider the request for fees, costs, and interest.

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LOUIS AND KAREN METRO FAMILY, LLC v. LAWRENCEBURG CONSERVANCY DISTRICT (July 29, 2010)

Louis and Karen Metro Family, LLC is a limited liability company owned by Louis and Karen Metro. The company owns a number of parcels of property in Ohio and Indiana. One such parcel sat on a bank of Tanners Creek and was home to a pizza parlor. Because Tanners Creek had a long history of flooding, the City of Lawrenceburg and the Lawrenceburg Conservancy District agreed to jointly build a floodwall along the creek. The District notified Metro Family of its intent to acquire the Tanner Creek property through eminent domain. It offered $417,000 -- the appraised fair market value. Metro Family refused the offer but eventually agreed on the sale of the property for $417,000 plus an irrevocable option to purchase 1.4 acres back for $269,490. The option was exercisable for 18 months after completion of the floodwall. Unfortunately, the floodwall was never built. The City withdrew from the project and the District could not complete it on its own. The District conveyed the Metro Family parcel to the City. The property was converted to highway use. Metro Family brought suit against the City and the District for breach of contract. Magistrate Judge Hussman (S.D. Ind.) concluded that there was a breach but that Metro Family was entitled to no monetary recovery. Instead, he ordered reformation of the contract and gave Metro Family 18 additional months within which to exercise the option. The City and the District appeal. Metro Family cross-appeals.

In their opinion, Judges Cudahy, Wood, and Evans vacated and remanded. The only issue on appeal was the remedy for the breach. In Indiana, reformation of the contract is available when there is a mutual mistake. The Court noted that the problem was not really a mutual mistake but a failure to allocate risk in the event the underlying project was canceled. Nevertheless, the Court believed that an Indiana court would use the mutual mistake concept -- that the parties shared a common assumption regarding a fact that was the essence of the agreement -- to find for Metro Family. Therefore, the Metro Family is entitled to the value of the option. The Court opined that the magistrate judge's reformation approach would have been appropriate if the option parcel was still undeveloped. Since exercising the option is no longer a viable alternative, however, the Court concluded that the next best approach was to compare the option price ($269,490) with the appraised value of the option parcel prior to the construction of the highway. Metro Family is entitled to the excess (if any) of the appraised value over the option price.

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SERWATKA v. ROCKWELL AUTOMATION, INC. (January 15, 2010)

Kathleen Serwatka was an employee of Rockwell Automation. Upon her discharge, she brought suit under the Americans with Disabilities Act (ADA). She alleged that she was discharged because her employer considered her to be disabled. At trial, the jury indicated its belief on a special verdict form that a) Rockwell terminated Serwatka because it believed her to be disabled and b) that Rockwell would have fired her anyway. Treating the verdict as a mixed-motive finding, the court awarded no damages but did grant declaratory and injunctive relief and awarded attorneys fees. Rockwell appeals.

In their opinion, Judges Rovner, Evans, and Van Bokkelen vacated and remanded. The Court began its analysis with the Supreme Court's decision in Price Waterhouse. In that case, the Supreme Court held the an employer could violate Title VII even if an improper motive was not the only motive for a termination decision. It also held, however, that an employer would escape liability if it could prove that it would have made the same decision in the absence of the improper motive. Courts applied that Title VII decision to other anti-discrimination statutes. A few years later, Congress codified the Price Waterhouse holding that an improper motive need not be the only motive for a plaintiff to recover. It provided limited remedies, not an absence of liability, in the situation where the employer proves that it would have made the same decision in the absence of the improper motive. Specifically, it allowed for declaratory relief, injunctive relief, and attorneys fees. The ADA incorporates by reference the mixed-motive remedy provisions of Title VII. It was on this basis that the district court fashioned its relief. While the case was on appeal, however, the Supreme Court issued its opinion in Gross. In Gross, the Supreme Court held, notwithstanding Price Waterhouse, that mixed-motive claims were not allowed under the Age Discrimination in Employment Act (ADEA). The Supreme Court concluded that Congress' decision to specifically incorporate the Price Waterhouse approach into Title VII and not to incorporate it into ADEA indicated its intent not to authorize mixed-motive claims under that statute. The "because of" language of the statute therefore required "but for" causation. Like ADEA, the ADA does not include an expressed mixed-motive provision and it uses the same "because of" language. The Court therefore concluded that an ADA plaintiff must establish that the employer would not have fired her absent the improper motive. The special verdict form below indicates that Serwatka failed to do so. The Court vacated and remanded with instructions to enter judgment in Rockwell's favor.

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