Darren Cuff v. Trans State Holdings, Inc., et al
Filing
Filed opinion of the court by Judge Easterbrook. AFFIRMED. Frank H. Easterbrook, Circuit Judge; Kenneth F. Ripple, Circuit Judge and Ann Claire Williams, Circuit Judge. [6606782-1] [6606782] [13-1241]
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In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 13-‐‑1241
DARREN CUFF,
Plaintiff-‐‑Appellee,
v.
TRANS STATES HOLDINGS, INC., et al.,
Defendants-‐‑Appellants.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 10 C 1349 — Harry D. Leinenweber, Judge.
____________________
ARGUED OCTOBER 30, 2013 — DECIDED SEPTEMBER 19, 2014
____________________
es.
Before EASTERBROOK, RIPPLE, and WILLIAMS, Circuit Judg-‐‑
EASTERBROOK, Circuit Judge. United Airlines contracts
with other firms for regional air services under the “United
Express” brand. Trans States Holdings (Holdings) is one of
United’s suppliers. It owns two air carriers: Trans States Air-‐‑
lines (Trans States) and GoJet Airlines (GoJet). Our case pre-‐‑
sents the question whether Darren Cuff, who was on the
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payroll of Trans States, was covered by the Family and Med-‐‑
ical Leave Act.
The FMLA applies only if the employer has at least 50
employees within 75 miles of a given worker’s station. 29
U.S.C. §2611(2)(B)(ii). Cuff worked at O’Hare Airport in Chi-‐‑
cago. The parties agree that in January 2010, when it fired
Cuff after he took leave despite its denial of his request un-‐‑
der the FMLA, Trans States had 33 employees at or within 75
miles of O’Hare, while GoJet had 343 and Holdings had
none. Cuff contends that he worked for Trans States and Go-‐‑
Jet jointly. The district court granted summary judgment in
Cuff’s favor on that subject, 816 F. Supp. 2d 556 (N.D. Ill.
2011), and a jury later determined that Cuff met the other
standards of eligibility for leave. It awarded Cuff $28,800 in
compensatory damages, to which the judge added $14,400
front pay in lieu of reinstatement. The court also awarded
Cuff about $325,000 in attorneys’ fees and $6,000 in costs and
interest. 2013 U.S. Dist. LEXIS 4467 (N.D. Ill. Jan. 11, 2013).
The Department of Labor has issued a regulation, whose
validity defendants do not challenge, providing that workers
are covered by the FMLA when they are jointly employed by
multiple firms that collectively have 50 or more workers. 29
C.F.R. §825.106(a). A separate regulation adds that two or
more firms may be treated as a single employer when they
operate a joint business. 29 C.F.R. §825.104(c). Cuff invoked
both of these provisions, but the district judge relied exclu-‐‑
sively on the former. Defendants have muddied the waters
by directing much of their appellate presentation to the joint-‐‑
business question. They observe, for example, that the Na-‐‑
tional Mediation Board has concluded that the pilots at
Trans States and GoJet must negotiate separately because the
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two carriers do not conduct joint air operations. But that is
irrelevant to the question whether Trans States and GoJet
jointly used Cuff’s services. The joint-‐‑employment inquiry
under §825.106(a) is person-‐‑specific; it is possible for one
person to be employed jointly by two firms that otherwise
have distinct labor forces.
Regulation 825.106(a) supplies a list of factors to consid-‐‑
er—all relevant, none dispositive. We remarked in Molden-‐‑
hauer v. Tazewell-‐‑Pekin Consolidated Communications Center,
536 F.3d 640, 644 (7th Cir. 2008), that open-‐‑ended lists do not
decide concrete cases. Often a set of factors to be considered
and balanced implies the need for a trial, but summary
judgment is possible when the facts allow. Cf. Secretary of
Labor v. Lauritzen, 835 F.2d 1529 (7th Cir. 1987). And, like the
district court, we think the summary-‐‑judgment record al-‐‑
lows only one answer. The two lead factors identified by the
regulation are whether “there is an arrangement between
employers to share an employee’s services” and whether
“one employer acts directly or indirectly in the interest of the
other employer in relation to the employee”. Both questions
must be answered “yes,” none of the remaining factors helps
defendants, and it follows that Cuff was a joint employee of
at least Trans States and GoJet, if not of Holdings too.
Cuff was the “regional manager” of Trans States and rep-‐‑
resented the three firms in their dealings with United and
O’Hare. His business card bore the logos of all three firms.
Terry Basham, the Vice President for Customer Services at
Holdings (the corporate parent of the two air carriers) testi-‐‑
fied by deposition that Cuff had been hired to provide ser-‐‑
vices to both Trans States and GoJet. The internal directories
of Holdings and United Express identified Cuff as the per-‐‑
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son to contact with any question about how Trans States or
GoJet operated at O’Hare. Cuff’s supervisor notified United
and other airlines in 2008 that, “[e]ffective immediately, Dar-‐‑
ren Cuff, Regional Manager, Trans States Holdings, Inc. [sic:
his official employer was Trans States Airlines] will be your
go to person if there are any operational issues or concerns
with Trans States or GoJet Airlines flights operating in and
out of your cities.” Cuff related by deposition and affidavit
that he worked with Trans States and GoJet every day.
Cuff’s replacement was put on the payroll of Holdings be-‐‑
cause, Basham explained, “We made the decision to put the
support positions that support both [Trans States and GoJet]
where we can into a Holdings position.” There’s more, but
this is quite enough.
This case had to be tried, notwithstanding the resolution
of the joint-‐‑employer question, because defendants made a
blizzard of other contentions. They insisted, for example,
that the FMLA did not apply because Cuff would not have
needed medical leave had he been more conscientious in fol-‐‑
lowing his physicians’ recommendations. The district judge
ultimately squelched that defense on legal grounds but
could not so easily dispatch others, which depended on the
principle, established in McKennon v. Nashville Banner Pub-‐‑
lishing Co., 513 U.S. 352 (1995), that after-‐‑acquired evidence
of an employee’s misconduct can limit damages even if the
evidence does not retroactively erase the violation. Although
McKennon was decided under the Age Discrimination in
Employment Act, its analysis is generalizable to remedies
under other federal statutes. Every court of appeals that has
considered the subject has concluded that McKennon applies
to the FMLA. See, e.g., Dotson v. Pfizer, Inc., 558 F.3d 284, 298
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(4th Cir. 2009); Edgar v. JAC Products, Inc., 443 F.3d 501, 514
(6th Cir. 2006). We agree with that conclusion.
Defendants contended (among other things) that Cuff
had a sexual relationship with a subordinate, lied about it in
an internal investigation, failed to report an arrest for driv-‐‑
ing while intoxicated, and was taking so many narcotic
drugs for his medical conditions that he was not fit for work.
The judge allowed defendants to introduce evidence that
Cuff had lied during an internal investigation but excluded
other evidence for problematic reasons. For example, the
judge wrongly believed that defendants could not introduce
any evidence about misconduct unless they could show that
they had fired another worker for doing exactly what they
belatedly learned about Cuff. That’s not what McKennon
holds; it says that damages can be curtailed if the employer
would have fired this employee, in particular, on learning of
the worker’s misconduct. That principle is not an anti-‐‑
discrimination norm that requires a comparison with how
the employer has treated other workers.
The district judge also excluded some of defendants’ evi-‐‑
dence under Fed. R. Evid. 403 on the ground that it would be
used to impeach Cuff. This misunderstands the reason why
it was offered and is wrong on its own terms. The question
under Rule 403 is not whether evidence is “prejudicial”; all
defense evidence is designed to undermine the plaintiff’s
case; it is whether the evidence is unfairly prejudicial. Any
evidence within the scope of McKennon will cast the plaintiff
in a poor light. The worse the light, the more likely the belat-‐‑
edly discovered facts would have produced a discharge. It is
inappropriate to exclude evidence under Rule 403 because it
casts the plaintiff in a really bad light, because doing that
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would effectively nullify the strongest of the class of defens-‐‑
es that McKennon recognizes.
When a district judge excludes evidence, the party ag-‐‑
grieved by that decision must make an offer of proof if it
wants to raise the issue on appeal. Fed. R. Evid. 103(a)(2). An
offer of proof in a situation like this would be something
along the lines of: “Manager X would testify that, had he
known Fact Y [the fact excluded from evidence], he would
have fired Cuff.” Cuff’s brief asks us to hold that defendants
forfeited their appellate arguments by not making offers of
proof. In response, defendants’ reply brief says—nothing.
When we explored this subject at oral argument, defendants’
lawyer resisted giving an answer but, after an extended col-‐‑
loquy, finally conceded that the defense had not made even
one offer of proof at trial. That scuttles a McKennon defense,
because without anyone in authority testifying that Cuff
would have been sacked when the truth came out (had he
still been on the payroll), there was no basis to stop the run-‐‑
ning of damages. The jury’s verdict therefore stands.
FMLA authorizes an award of reasonable attorneys’ fees
to the prevailing party. 29 U.S.C. §2617(a)(3). Defendants
concede that Cuff prevailed, and they do not contest either
the number of hours counsel devoted to the case or the hour-‐‑
ly rate counsel charged. Defendants’ sole argument is that an
award of almost $325,000 is not reasonable in relation to
Cuff’s recovery, which is less than $50,000.
The ratio certainly seems high. Rational people do not set
out to invest $325,000 in order to obtain $50,000. But then
Cuff’s lawyers surely did not expect at the outset of this case
to invest that much legal time in its pursuit. Sometimes
events during the litigation change the calculus, and a law-‐‑
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yer must avoid the sunk-‐‑cost fallacy. If, after spending
$25,000 in legal time, a lawyer is confronted with a defense
that will cost $30,000 to defeat, counsel will not say: “It is ir-‐‑
rational to spend $55,000 to get $50,000.” The $25,000 is
sunk; if the suit is abandoned the recovery will be zero, so
the right question is whether it is reasonable to spend
$30,000 more to get $50,000, and the answer is yes. Suppose
the same thing happens over and over in a suit, with one
unexpected development after another raising the costs
without raising the expected recovery. It can be reasonable
to meet each of these events by investing more, even though
an analysis that looks only at the bottom line ($325,000 in-‐‑
vested to get $50,000) makes the total seem unreasonable.
Something like our example may have happened in this
litigation. At each turn the defendants injected new issues
and arguments into the case. And the defense was conduct-‐‑
ed in blunderbuss fashion. We have mentioned one of the
examples: defendants contended that Cuff was not qualified
for FMLA leave because he was not taking all of the medica-‐‑
tions his physician prescribed. The defense did not cite any
statute, regulation, or judicial decision in support of this ar-‐‑
gument. That thrust on Cuff’s lawyers (and the judge) the
burden of legal research. Cuff’s lawyers did the work and
discovered that the defense argument was nothing but hot
air. The right question under the FMLA is whether the em-‐‑
ployee has a medical need for leave at the time he requests
time off, not whether he could have managed his life better
to avoid needing time off.
Later in the case, defendants’ attempts to use McKennon
required extensive discovery and a trial, and it was all a
waste because the defense did not take a basic step such as
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making an offer of proof. We said earlier that the district
judge erred in excluding some of the evidence that the de-‐‑
fense proffered, but it is hard to blame the judge, who asked
the defense for legal argument in support of the evidence’s
admissibility—only to be met with silence. The defense had
not done its homework; it was content to leave the labor to
Cuff’s team and the judge. And so it goes for issue after issue
in this litigation. Defendants do not argue that the number of
hours Cuff’s lawyers devoted to refuting their defenses was
unreasonable; defendants contest only the aggregate outlay,
yet the high total is the expected result of the way the de-‐‑
fense was conducted.
Fee-‐‑shifting statutes such as §2617(a)(3) are designed to
prevent the potentially high costs of litigation from stifling
justified claims. Without such a statute, defendants might
have said to Cuff at the outset: “We concede violating your
rights under the Act, and we also concede that your loss is
$50,000, but we plan to wage an all-‐‑out defense that will cost
at least $200,000 to overcome. You might as well capitulate,
because you will lose on net.” A business that can establish a
reputation for intransigence may end up not paying damag-‐‑
es and not having to defend all that often either, because if a
prevailing party who litigates to victory gets only a small
award of fees the next would-‐‑be victim will see that litiga-‐‑
tion is futile and the employer won’t have to repeat the cost-‐‑
ly defense. That’s why we held in BCS Services, Inc. v. BG In-‐‑
vestments, Inc., 728 F.3d 633 (7th Cir. 2013), that hyperaggres-‐‑
sive defendants who drive up the expense of litigation must
pay the full costs, even if legal fees seem excessive in retro-‐‑
spect. That principle controls here—or, more properly, the
district judge did not abuse his discretion in thinking that it
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controls and deeming Cuff’s legal expenses reasonable in
light of the defendants’ conduct.
AFFIRMED
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