Employment Law Daily Court’s conflicting reinstatement, front pay remedy set aside to defer to jury’s front pay award
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Tuesday, August 30, 2016

Court’s conflicting reinstatement, front pay remedy set aside to defer to jury’s front pay award

By Kathleen Kapusta, J.D. Finding that under the Seventh Amendment, it is the jury’s decision on the front pay question that must be respected and the court’s conflicting front pay award that must be set aside, the Ninth Circuit reversed an equitable award of front pay to a discharged employee on his ERISA retaliatory discharge claim after he had already been awarded lump-sum damages on his state-law retaliatory discharge claim. Given his potential for a windfall and in light of his affirmative election to seek front pay from the jury, the appeals court also set aside the lower court’s reinstatement award (Teutscher v. Woodson, August 26, 2016, Friedland, M.). The employee, a legal operations manager for an ERISA-governed trust providing legal defense services to Riverside Sheriffs’ Association (RSA) members, alleged that he was fired in retaliation for reporting that the trust’s coverage of a deputy sheriff’s legal expenses was illegal. In his subsequent lawsuit arising out of his termination, he asserted claims under federal and California law, including retaliatory discharge in violation of ERISA, Section 510, wrongful discharge in violation of California public policy, and retaliatory discharge in violation of state law. Damage awards. After a trial on the state-law claims, the jury, using a general verdict form, awarded lump-sum damages to the employee in the amount of $425,000 and punitive damages of $357,500. Based on trial evidence, the district court then found RSA liable for retaliation in violation of Section 510 and ordered RSA to reinstate him and to provide interim front pay until reinstatement occurred. Seventh Amendment. On appeal, RSA argued that the district court’s ERISA remedy violated both the Seventh Amendment and the prohibition on double recovery. Turning first to the Seventh Amendment, which provides that "[i]n Suits at common law, . . . the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise reexamined in any Court of the United States, than according to the rules of the common law," the court pointed out that because both the employee’s state law claims were legal in nature, and he made a timely jury demand on those claims, he was entitled to have them tried to a jury. However, he had no right to a jury trial on his ERISA claim because it was equitable in nature. In a case where legal claims are tried by a jury and equitable claims are tried by a judge, and the claims are based on the same facts, the trial judge must follow the jury’s factual determinations in deciding the equitable claims. With respect to both claims, the court found that the employee attempted at trial to show that his reporting of the allegedly improper coverage of the deputy sheriff’s legal expenses motivated his termination. By finding RSA liable on the state law claims, said the court, the jury implicitly found that the employee’s protected activity motivated his discharge. Consistent with this finding, it was appropriate for the district court to enter judgment for the employee on his ERISA claim as well. The more difficult question, and the one at issue here, was whether the court’s ERISA remedy shared common questions of fact with the jury’s damages calculation. Hybrid remedy. Looking to the forms of relief available for both claims, the appeals court noted that under California law, a wrongfully discharged employee is entitled to damages that tend to make him whole and that represent just compensation for the loss. Compensatory damages can include an award of back pay as well as front pay. Further, a wrongfully discharged plaintiff is entitled to seek front pay from a jury. And while ERISA does not provide for compensatory damages, it does provide prospective relief for a retaliatorily discharged employee by giving courts equitable authority to reinstate him to his former position. Here, observed the appeals court, the district court crafted a hybrid remedy for the employee’s Section 510 claim, awarding reinstatement as well as interim front pay at his full former salary until reinstatement occurred. However, the jury’s determination of the employee’s entitlement to front pay as a remedy for his state-law claim foreclosed the district court from granting front pay on his ERISA claim. Noting that in order to obtain front pay on either claim, the employee needed to make the same factual showing and meet the same defenses, the appeals court found the district court should have viewed itself as bound under the Seventh Amendment to respect the jury’s findings on front pay when considering his request for front pay under ERISA. The jury’s finding as to the employee’s entire entitlement to front pay—taking into account his age, his work-life expectancy, the likelihood of RSA’s maintaining his former position, his reasonable ability to mitigate, etc.—was implicit in its award of $457,250 in compensatory damages, said the appeals court, finding that the district court was bound by this determination in crafting any subsequent equitable relief. However, when it ordered RSA to pay the employee $98,235 per year in front pay until reinstating him, the district court impermissibly concluded that he was entitled to $98,235 per year more in front pay than the jury had found and awarded. "The Seventh Amendment does not permit the jury’s findings to be cast aside in this manner," said the court. Lump-sum award. And while the employee attempted to parse the jury’s lump-sum award to show that it did not actually grant him any front-pay damages, the appeals court found that the lump-sum format of the jury’s verdict prevented it from ascertaining the relative amounts of back pay and front pay awarded. The employee asked the jury to award front pay, back pay, and emotional distress damages and did not object to the lump-sum verdict form. It had to assume, said the court, that the jury awarded all of the front pay to which it believed the employee was entitled. The district court’s decision to then award an additional front pay remedy disregarded the jury’s finding as to the entire amount of compensation that would make the employee whole. Reinstatement. And while the Seventh Amendment does not prohibit the reinstatement award, the appeals court found it unclear whether the jury’s front pay decision turned on a factor—such as the expected elimination of any position the employee might fill—that would preclude a reinstatement remedy, or instead on a factor—such as his failure to fully mitigate—that would not. When the basis for the jury’s verdict is open to multiple interpretations, the Seventh Amendment permits the district court to reach any interpretation supported by the evidence. Here, however, the district court did not explicitly determine the basis for the jury’s verdict or how it comported with the equitable awards. Instead, it cursorily awarded reinstatement, stating only that it would "not assume an antagonistic relationship between [the employee] and RSA merely because of the protracted litigation." Reinstatement improper. While this lack of explanation would normally require remand, the appeals court declined to so here, instead holding that even if reinstatement does not conflict with the jury’s implicit findings, it was improper for other reasons: the employee waived reinstatement when he elected to seek front pay from the jury. He was unjustly enriched, said the court, to the extent the damages awarded included a front pay component covering the same period during which he would be reinstated. Reinstatement and front pay are alternative remedies that cannot be awarded for the same period of time, the court explained. Deciding to reverse the equitable reinstatement award and permit the employee to keep the full amount of damages awarded by the jury, the court found it evident that he waived his right to a reinstatement award when he affirmatively elected to seek front pay from the jury. Finally, said the appeals court, its holding that the jury’s monetary award precluded the district court’s equitable award in this case turned on the particular way in which the employee chose to pursue his claims. While there were ways he could have pursued both legal and equitable relief at the same time, he affirmatively elected to seek front pay from the jury. Concurrence. While Judge Smith concurred in the judgment, he disagreed that the district court "should have viewed itself as bound under the Seventh Amendment" because the employee "needed to make the same factual showing and to meet the same defenses" in order to obtain both future lost earnings and reinstatement. Rather, Smith would have held that the district court’s equitable remedy was an improper abuse of discretion because the district court did not give reasons why additional equitable relief was appropriate after the jury had already compensated the employee for the monetary harm he suffered.

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