Petition — Skaggs Cos., Inc. v. Whatley

Supreme Court brief1983

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83-492

IN THE

SUPREME COURT OF THE

NDER L STEVAS, |

UNITED STATES) “°c

OCTOBER TERM, 1983

No.

SKAGGS COMPANIES, INC.,

Petitioner,

US.

LOUIS WHATLEY,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

Earl K. Madsen

Bradley, Campbell & Carney

1717 Washington Avenue

Golden, Colorado 80401

(303) 278 3300

Attorneys for Petitioner

QUESTIONS PRESENTED

1. Whether the Court of Appeals’ affirmance of the

finding that the employment discrimination claimant

continued to accrue backpay even after the claimant’s

subsequent voluntary resignation from employment is

consistent with this Court’s decision in Ford Motor

Company v. Equal Employment Opportunity Com-

mission, decisions of other panels of the same Court of

Appeals, and decisions of other Federal Courts of Appeal.

2. Whether the Court of Appeals’ affirmance of the

finding that the employment discrimination claimant

continues to accrue backpay after the claimant’s

voluntary resignation and while the claimant was

unavailable for work and disabled due to disability

incurred while working for a subsequent employer

voluntarily chosen by claimant, is consistent with this

Court’s decision in Ford Motor Company v. Equal

Employment Opportunity Commission, decisions of

other Federal Courts of Appeal, and with the remedial

standards of Title VII.

3. Whether disability payments in a workmen’s com-

pensation settlement received by the employment

discrimination claimant for disability incurred while

working for a subsequent employer after claimant’s

voluntary resignation should be deducted from or offset

against the employer's backpay liability.

TABLE OF CONTENTS

Page No

GURSLIONS PRESENTED ........00.c0ccccccpeces i

tg 0 9 | + iii

ose etccescdcdssnecuss 2

ek ened citescoesoesesees 2

I EE W CESS, oo ces ces ccc cccccenavens 9

RE OE BEBE OASIS: 22. esc c esc crcclec cece 3

REASONS FOR GRANTING THE WRIT: .......... 6

I. THE DECISION BELOW RAISES SUB—

STANTIAL FEDERAL QUESTIONS IN

THE ADMINISTRATION OF BACKPAY

REMEDIES IN FEDERAL ANTIDIS—

CRIMINATION STATUTES IN HOLDING

THAT THE DEFENDANT EMPLOYER

MUST INSURE DISCRIMINATION

CLAIMANT AGAINST RISKS OF UN—

EMPLOYMENT AND DISABILITY

INCURRED WITH OTHER EMPLOYERS

AFTER CLAIMANT'S VOLUNTARY

RESIGNATION, IN CONFLICT WITH

THIS COURT'S DECISION IN FORD

MOTOR CO. v. EEOC AND OTHER

DECISIONS OF THE TENTH CIRCUIT,

AND DECISIONS OF OTHER CIRCUITS. 7

Il. THE DECISION BELOW HOLDING

THAT THE BACKPAY ACCRUAL

LIABILITY PERIOD FOR THE DE—

FENDANT EMPLOYER MUST INCLUDE

POST-VOLUNTARY RESIGNATION

PERIODS OF UNAVAILABILITY

FROM THE LABOR FORCE, AND DIS-

ABILITY INCURRED IN VOLUNTARY

EMPLOYMENT WITH A SUBSEQUENT

ill

EMPLOYER, CONFLICTS WITH DE-

CISIONS OF OTHER CIRCUITS. ........ 15

III. THE DECISION BELOW RAISES A

SUBSTANTIAL FEDERAL QUESTION

WHETHER STATE DISABILITY

BENEFITS PAYMENTS MADE Ex-

PRESSLY TO COMPENSATE THE

CLAIMANT FOR PERIODS OF DIS-

ABILITY FROM THE LABOR FORCE

SHOULD BE OFFSET FROM BACKPAY

TO AVOID DOUBLE COMPENSATION

TO TH CURIA AINE. © 65 cic cnasevene co's 19

CIE BGs a iG vas craw cteap-senaresctcveeibes 22

TABLE OF AUTHORITIES

Page No.

Albemarle Paper Co. v. Moody, 422 U.S. 405,

95 S. Ct. 2362, 45 L.Ed 2d 280,

0) I Ces TEE CIPO cbs ont cals docccscreasss 7,8

Alberichi Construction Co., 149 NLRB 751,

SR Se Sa I ns, cat eegalled dau dha ad os 21

American Manufacturing Co., 167 NLRB 520,

GB LRM 1180 CIGTE) 2. onc cccccccsccescvscevces 21

Bourque v. Powell Electrical Manufacturing

Company, 617 F.2d 61, 22 FEP Cases 1191

ee. Si Paes cee es bata 11,14

Clark v. Marsh, 665 F.2d 1168, 26 FEP Cases

ng ee anes

EEOC v. Sandia Corp., 639 F.2d 600, 23 FEP

Cases 799 (10th Cir. 1960) ................

Equal Employment Opportunity Commission v.

Enterprise Association Steamfitters,

542 F.2d 579 (1976) cert. denied.

430 U.S. 911, 97 S. Ct. 1186, 51 L.Ed.2d

588 (1977)

Ford Motor Co. v. Equal Employment

Opportunity Commission, ___. U.S. ___

102 S. Ct. __ , 73 L.Ed.2d 721, 29 FEP

Cases 121 (1982) Mh Ebon then sce se 6,8,9,10,13,17,18

Inda v. United Air Lines, Inc., 405 F. Supp.

426 (N.D. Cal. 1975), aff'd in part, vacated

in part on other grounds, 565 F.2d 554, 16

FEP Cases 251 (9th Cir. 1977), cert. denied

435 U.S. 1007, 98 S. Ct. 1877, 56 L.Ed.2d

388, 17 FEP Cases 553 (1978)

Irving v. Dubuque Packing Co.,

689 F.2d 170 (1982)

eeoeeveeeeeeeeeeesee eee

Muller v. U.S. Steel Corp., 509 F.2d 923, 10 FEP

Cases 323 (10th Cir. 1975)

SH@eCaoaunveaevpeuneaads

10,11,12

NLRB v. Gullet Gin Company, Inc., 340 U.S.

361, 71 S.Ct. 337, 96 L.Ed. 337 (1960)............ 21

Naton v. Bank of California, 649 F.2d 691,

CTD Ca Cs BI soo oc cin Save we ce asancece 21

Orzel v. City of Wauwatosa Fire Department,

GOT F.3d 748 at Cie Cir. 1BGE) ccc cscccscccencs 21

Ostapowicz v. Johnson Bronze Co., 541 F.2d

394, 13 FEP Cases 517 (3rd Cir. 1976)

cert. denied, 429 U.S. 1041 (1977)................ 16

Peters v. Missouri Pac. R.R. Co., 483 F.2d

490, 6 FEP Cases 163 (Sth Cir. 1972) cert.

mae, GIe TIE Pee Lee ack cc ccciceemanweiedcs 16

Sangster v. United Air Lines, Inc., 633 F.2d

864, 24 FEP Cases 845 (9th Cir. 1980),

cert. denied 451 U.S. 971, 68 L.Ed.2d 350,

ee ee IE Dc cio cle Wee oc cc's pb inebencoea 17

Sprogis v. United Air Lines, Inc., 517 F.2d

387, 10 FEP Cases 1249 (7th Cir. 1975).......... 16

Taylor v. Safeway Stores, Inc., 524 F.2d 263,

11 FEP Cases 449 (10th Cir. 1975) ......... 10,11,15

Walston v. School Board of Suffolk, 566 F.2d

1201, 16 FEP Cases 728 (4th Cir. 1977).......... 16

Statutes:

Colorado Revised Statutes 1973 §8-73-107(2)\(c)

and 107 (1)(cI) (1980 Supp.) ..............0...

NE NEE 6 dnc Sin oCh dh ovindusceteas convents

NS EI oss no a cnc bles kawcventon cack is

Be er I EE 6.0 ok as So occ oreo dae poke cnewce:

i oe Leah 1 as

ee ee

ee Se Gciaad's «ed vawiee 6 ev ps ena 0%

ee MED oa bas ¢.hnw/s'n senses ciccsvscecccn

Rt ee IR Sw aides cap ees ca ctetscddacies

Treatises:

C. McCormick Handbook on the Law of

Damages, 127-158 (1935) .................. ate

Schlei & Grossman, Employment

eee eae dc

Appendices:

A. Slip Opinion Court of Appeals, Tenth Circuit ...

Denial of Petition for Rehearing, Court of

Appeals, Tenth Circuit .....................

eae

Vil

B. District Court Opinion on Liability ............. 45

C. District Court Supplemental Opinion on

I Sano PON To Lu nhdawch ances cude«ess 62,63

i I PRION Se oss cab dec stabhepelacees 69

I re oe aha. sale ca dew 0G WG aie ek Oe Ga A's 63

IN THE

SUPREME COURT OF THE

UNITED STATES

OCTOBER TERM, 1983

No.

SKAGGS COMPANIES, INC.,

Petitioner,

LOUIS WHATLEY,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

The Petitioner, Skaggs Companies, Inc. (“Skaggs”’),

asks this Court to review the May 9, 1983 judgment of the

United States Court of Appeals for the Tenth Circuit in

Whatley, Plaintiff-Appellant and Cross-Appellant, v.

Skaggs Companies, Inc., Defendant-Appellant and

Cross-Appellee.

OPINIONS BELOW

The opinion of the Court of Appeals is reported at

Whatley v. Skaggs Companies, Inc., ___. F.2d ___ , 31

FEP Cases 1202 (10th Cir. 1983). The slip opinion is set

forth as Appendix A to this petition. The two decisions of

the federal district court below, the opinion on liability

and the supplemental opinion on backpay liability are

reported at 502 F.Supp. 370, 27 FEP Cases 452, and 508

F.Supp. 302, 27 FEP 459, respectively. These two

opinions are included herein as Appendices B and C,

respectively.

JURISDICTION

The judgment of the Court of Appeals was entered on

May 9, 1983. Skaggs’ petition for rehearing and sug-

gestion for rehearing en banc was denied on June 13,

1983, as shown in Appendix A, p. 28. This court has juris-

diction to review the Court of Appeals’ decision by writ of

certiorari under 28 U.S.C. §1254(1).

STATUTES INVOLVED

The relevant provisions of the Civil Rights Act of

1964, as amended, Title VII, 42 U.S.C. §2000e-2(a), (j) and

-g) are set forth in Appendix D1-2. The Civil Rights Act,

42 U.S.C. §1981, is also set forth in Appendix D3.

STATEMENT OF THE CASE

This case arises under Title VII, with additional

claims based on the 1866 Civil Rights Act, 42 U.S.C.

§1981. The claimant, Mr. Whatley, brought this action

against Skaggs alleging that it discriminatorily demoted

him in September, 1971 from Lobby Manager to Ware-

house Clerk, based on his hispanic national origin, in

violation of Title VII, 42 U.S.C. §2000e-2, et seg., and the

Civil Rights Act, 42 U.S.C. §1981. The District Court

found that the demotion was in violation of these Acts.

The Court of Appeals for the Tenth Circuit affirmed the

decision and all backpay findings and conclusions of the

district court.

The claimant was first employed by the Skaggs

Companies on August 28, 1965 as a parttime employee,

and he later became a fulltime employee and held several

positions in retail stores of the Skaggs Companies in the

Denver metropolitan area. On November 7, 1969, the

claimant, Mr. Whatley, was promoted to the position of

Lobby Manager at the Skaggs Companies’ Lakeside

store, Store 22, and he remained in that capacity at that

store through September 16, 1971.

On September 17, 1971, Mr. Whatley was transferred

to the Denver Warehouse as a Clerk and he remained

there through June 8, 1973, when he voluntarily resigned

his employment.’ Mr. Whatley was eligible thereafter for

re-employment with the company at the Warehouse, as

set forth in the company’s records (Defendant’s Exhibit

“A”, p. 2).

When claimant told the Skaggs District Manager that he was

going to resign, the District Manager offered claimant another and

higher paying job, diese! truck driver. Claimant declined the job (Tr.

349, Defendant's Ex. “O”).

“Record references are as follows: With respect to the District

Court decision on liability, transcript of testimony references are

simply referred to by transcript page; references to the exhibits will be

by reference to Plaintiffs exhibits by number, and to Defendant's

exhibits by letter.

Mr. Whatley was transferred and reassigned to the

Warehouse on September 17, 1971, by the District

Manager for the Denver District of the Skaggs Com-

panies, because the General Manager of the particular

store in which Mr. Whatley was working, Store 22, had

told the District Manager that Mr. Whatley was not

going to make it as a Manager, and was not qualified to

remain in the position of Lobby Manager at the store(Tr.

322-324; 379). The District Manager then initially

planned on terminating the employment of the claimant,

Mr. Whatley, but after Mr. Whatley requested that he be

allowed to transfer to the Warehouse rather than be

terminated (Tr. 326) the District Manager relented. The

District Manager then voided the scheduled termination,

sent the claimant to the Warehouse to work as a Ware-

house Clerk.’ The claimant accepted transfer to the

Warehouse and remained at the Warehouse until June 8,

1973, nearly two years later, when he voluntarily

resigned his employment.

The District Court held, see App. B, p. 49, that the

company’s decision to transfer or demote Mr. Whatley

from the position cf Lobby Manager to the position of

Warehouse Clerk, even though it represented a

“relenting” of the District Manager’s previously planned

termination of Mr. Whatley, nevertheless was the legal

equivalent to a “termination” of employment, effective

September, 1971. The District Court explained in its

order, App. B, p. 49, that since Mr. Whatley was “dis-

missed” as Lobby Manager in September 1971, this wasa

“termination” and therefore his reassignment and

Defendant's Exhibits “A’’ and “O”, personnel records, showed

continuous employment of claimant Whatley without interruption

from August 28, 1965 to the date of his resignation on June 8, 1973.

Plaintiffs Exhibit 26, an employment termination form, showed that

such form had been prepared for a termination of claimant Whatley

by Skaggs in September, 1971, but the word “void"’ was then written

on the face of the form at the direction of the District Manager and Mr.

Whatley'’s employment was not terminated.

employment at the Warehouse as a Clerk had the same

“legal effect” as a new job. App. B, p. 50; App. C, p. 68.

The District Court in the same supplemental findings,

App. C, p. 68, found that Mr. Whatley much later, on June

8, 1973, left the Warehouse Clerk job by his own

voluntary resignation, and by such act “lost his profit-

sharing rights.” The District Court held that Mr.

Whatley’s forfeiture of these rights was a natural result

of his voluntary resignation in 1973 from his Skaggs’

employment, and could not be considered as part of

backpay in this matter.

The District Court then granted full backpay eligi-

bility from September, 1971 to the date of the trial in

September, 1980, including periods of disability and un-

availability from the work force. Skaggs appealed the

decision of the District Court to the United States Court

of Appeals for the Tenth Circuit, and a three-judge panel

of that court entered its decision on May 9, 1983, affirm-

ing the decision of the District Court. The basis for the

decision of the United States Court of Appeals for the

Tenth Circuit affirming all backpay findings and con-

clusions of the District Court was that under Title VII, 42

U.S.C. §2000e-5i(g), that Act:

leaves to the discretion of the trial court the

amount of backpay to be awarded a successful

plaintiff in an employment discrimination action.

Absent an abuse of that discretion, the appellate

court will not disturb the trial court’s deter-

mination. App. A, p. 38.

Skaggs filed its timely petition for rehearing and

suggestion for rehearing en banc, urging that the Court

of Appeals erred in its adoption of its narrow and limited

scope of review of the backpay award, and erred in

holding that backpay accrued after the voluntary resig-

nation of the claimant in 1973, and after claimant

voluntarily chose other employment after his

resignation, and during periods of unavailability and

disability after his resignation and to date of trial in 1980.

REASONS FOR GRANTING THE WRIT

The decision of the Court of Appeals below poses

substantial questions in the administration of backpay

remedics under Federal Employment Discrimination

Statutes. Fundamentally at issue is whether and to what

extent employers can properly be required to hold dis-

crimination claimants harmless against the risks of

unemployment and disability incurred after the claimant

has voluntarily quit his employment with the employer.

The Court’s decision holds that periods of labor market

unavailability of the claimant after such voluntary quit,

including periods when the claimant was unavailable

due to a disability incurred with a subsequent employer

are included in the backpay accrual period. Moreover, the

Court’s decision holds that even though periods of dis-

ability are included in the backpay accrual period, the

defendant former employer is not permitted to offset

disability insurance payments paid to the claimant to

compensate him for such periods of disability, thus

effectively requiring the defendant former employer to

double compensate the claimant.

Review by this Court is necessary because those

holdings of the Court of Appeals below conflict with other

decisions of the same Court of Appeals, and decisions of

other Circuits. In addition, the writ should be granted

because the Tenth Circuit has adopted standards for

calculation of backpay, which this Court has expressly

rejected in Ford Motor Co. v. Equal Employment

Opportunity Commission, ___. U.S. ____ , 102 S.Ct. ___.,

73 L.Ed.2d 721, 29 FEP Cases 121 (1982).

The decision below, if left standing, will affect not

only the rights of parties in future backpay proceedings

under Title VII, but the administration of backpay

remedies under other Federal employment discrimina-

tion laws as well. The District Court and the Court of

Appeals below treated the backpay standards for the

found violation of Title VII and 42 U.S.C. §1981 to be

identical. These backpay standards will also apply to

claims brought under the National Labor Relations Act,

29 U.S.C. §§151-69, Albemarle Paper Co. v. Moody, 422

U.S. 405, 95 S.Ct. 2362, 45 L.Ed.2d 280, 10 FEP Cases

1181 (1975), and presumably backpay calculations under

the Age Discrimination in Employment Act as well, see

29 U.S.C. §621 et seq. Thus, the questions posed herein

are clearly of substantial and ongoing importance in the

administration of Federal employment discrimination

laws.

THE DECISION BELOW RAISES SUB.-

STANTIAL FEDERAL QUESTIONS IN THE

ADMINISTRATION OF BACKPAY REMEDIES

IN FEDERAL ANTIDISCRIMINATION

STATUTES IN HOLDING THAT THE

DEFENDANT EMPLOYER MUST INSURE

DISCRIMINATION CLAIMANT AGAINST

RISKS OF UNEMPLOYMENT AND DIS.

ABILITY INCURRED WITH OTHER

EMPLOYERS AFTER CLAIMANT’S VOLUN.

TARY RESIGNATION, IN CONFLICT WITH

THIS COURT’S DECISION IN FORD MOTOR

CO. v. EEOC AND OTHER DECISIONS OF THE

TENTH CIRCUIT, AND DECISIONS OF

OTHER CIRCUITS.

Since the District Court expressly found and the

Court of Appeals affirmed that the claimant in this case

was not constructively discharged by Skaggs, the back-

pay principles applied below will, unless reversed by this

Court, stand as precedents to be applied in any future

case in which an employee voluntarily resigns his

employment after some action by his employer that is

later found to be discriminatory, and then voluntarily

accepts a position with another employer. If left stand-

ing, these precedents will create substantial problems in

the administration of backpay remedies under Federal

employment discrimination statutes, because the

principles applied by the court below are fundamentally

at odds with the decision of this Court in Ford Motor Co.

v. Equal Employment Opportunity Commission, —_

U.S. —__ , 102 S.Ct. ____ , 73 L.Ed.2d 721, 29 FEP Cases

121 (1982) and with the decisions of other panels of the

Tenth Circuit and other circuits.

The Conflict With Ford Motor Co. v. EEOC.

In Ford Motor Company v. Equal Employment

Opportunity Commission, __ , U.S. ___., 102 S.Ct. ___,

73 L.Ed.2d 721, 29 FEP Cases 121, (1982) this court held

that while backpay is a remedy which the courts may

invoke in the exercise of their sound discretion, never-

theless, the reviewing court must exercise this power in

light of the “large objectives of the Act,” and in doing so

must be guided by “meaningful standards enforced by

thorough appellate review,” citing to this court's decision

in Albemarle Paper Co. v. Moody, 422 U.S. 405, 415, 416.

This court then further cited from its previous decision in

Albemarle Paper Co., supra, holding that “discretionary

choices are not left to the court’s ‘inclination, but to its

judgment; and its judgment is to be guided by sound legal

principles.’”’ 73 L.Ed.2d at 729; 29 FEP Cases at 125.

Applying these principles, this Court concluded, 73

L.Ed.2d at 734, 29 FEP Cases at 128, that to hold Ford

responsible for backpay after the claimants lost their

jobs and then had obtained a better job with another

employer, would require:

that Ford insure them against the risks of un-

employment in a new and independent under-

taking. Such a rule would not merely restore

[claimants] to the ‘position where they would have

been were it not for the unlawful discrimination’

[citing Albemarle Paper Company v. Moody, 422

U.S. at 421, 10 FEP Cases at 1189 (1975)]; it would

catapault them into a better position than they

would have enjoyed in the absence of dis-

crimination.

This Court expressly rejected such a rule and reversed the

decision of the Fourth Circuit in that case.

Like the decision of the Fourth Circuit in that case, the

decision of the Tenth Circuit below has the perverse

result of requiring the employer to insure the claimant

against the risk of other employment voluntarily chosen.

The claimant here, after continuing in Skaggs employ

long after the transfer to another job, or demotion found

to be discriminatory by the Courts below, voluntarily quit

his employment with Skaggs, and then about a year or

more later, voluntarily accepted a position with another

employer. The rationale of the Ford decision, supra,

requires the conclusion that in these circumstances,

ongoing accrual of backpay liability stopped when the

claimant voluntarily terminated his Skaggs employment

to seek employment elsewhere. Such conclusion,

moreover, is completely consistent with Title VII's policy

of making whole the discrimination victim, while at the

same time placing a logical end point on the employer's

liability to a former employee.

The effect of the decision of the Court of Appeals is to

place employers, who believe they have not

discriminated despite the claims of the claimant, in an

unsolvable dilemma. The employer cannot have any

protection from such claims, unless it reinstates

immediately and provides full backpay to the claimant.

This is no choice at all, because it requires the employer to

surrender his defense. Even assuming the case could

proceed to trial after such conduct by the employer and

reinstatement with full backpay for the claimant, the

employer would have no recourse against the claimant

for the cost of such backpay even were it erroneously paid

to the claimant.

The backpay rules adopted in other decisions of the

Court of Appeals below, and other Courts of Appeals, as

well as those established by this Court in Ford Motor Co.

v. EEOC, supra, sensibly permit the claimant to retain

his employment with the employer, and seek full backpay

in court, affording the defendant employer the

opportunity to raise its defences at trial. In the

alternative, these rules permit the employee at his own

free and voluntary choice, to resign such employment

and seek employment elsewhere, thereby stopping the

backpay accural period. This Court has recognized this

employer dilemma and the sensibility of such rules

terminating backpay accrual periods as resolving that

dilemma without compelling either claimant or employer

to compromise claims or surrender defenses. Ford Motor

Company v. EEOC, supra, 73 L.Ed.2d at 738, n. 29, 29

FEP Cases 131, n. 29.

The Court of Appeals’ decision forces Skaggs to

insure the claimant, and “catapaults” him into a better

position than he would have enjoyed absent any dis-

crimination. The decision below forces Skaggs to insure

the claimant against risks of unemployment and even

disability in new and independent undertakings

voluntarily chosen by the claimant. Accordingly, the

claimant is now in a much better position than he would

have been absent any discrimination found by the

District Court.

The Conflict With Decisions of the Tenth and Other

Circuits.

The Court of Appeals’ panel deciding this case,

entered a decision in conflict with a different panel of the

Court previously in Taylor v. Safeway Stores, Inc., 524

F.2d 263, 11 FEP Cases 449 (10th Cir. 1975), and also

another panel of the Court in Muller v. U.S. Steel Corp.,

509 F.2d 923, 10 FEP Cases 323 (10th Cir. 1975) holding,

that when, as here, the claimant accepts employment

elsewhere, such resignation and acceptance of other

employment cuts off the backpay accrual period. See

Taylor v. Safeway Stores, Inc., supra, 524 F.2d 267-268, 11

FEP Cases at 451. The Tenth Circuit held in Muller v.

U.S. Steel Corp., supra, 509 F.2d at 924, 10 FEP Cases at

329:

Unless appellant was constructively discharged,

he would not be entitled to damages in the form of

backpay, interest and retirement from the date of

leaving the Steel Company's employ. His damage

would be measured by the difference between

actual pay and the amount he would have made if

he had been chosen as spell foreman during the

period from September 17, 1967 until he quit,

August 6, 1969.

Failure to apply the same rule in the Skaggs case results

in a decision of the panel of the Court of Appeals in this

case which is squarely inconsistent with the prior

decisions in Muller v. U.S. Steel Corp., supra, and Taylor

v. Safeway Stores, Inc., supra.

The decision of the Court of Appeals in this case also

conflicts with applicable decisions of sister Federal

Courts of Appeal. Several other Circuits have ruled that

the voluntary resignation of employment by the

claimant does terminate the backpay accrual period, and

limits backpay liability of the employer. See, for example,

Bourque v. Powell Electrical Manufacturing Company,

617 F.2d 61, 22 FEP Cases 1191 at 1194 (5th Cir. 1980). In

that decision, the Court of Appeals for the Fifth Circuit

had before it a claimant who alleged that she was forced

to resign her position because she was given

compensation that she knew to be not equal to that

earned by males holding the same or similar job. The

claimant argued that such was a constructive discharge.

The Fifth Circuit held that such circumstances did not

result in a conclusion of constructive discharge:

We have no question that her resignation resulted

directly from her disappointment in not receiving

the raise she had expected. We cannot fault her for

that disappointment. Nevertheless, we cannot

accept that under the circumstances presented

here a reasonable employee would have felt com-

pelled to resign. Moreover, we believe that

discrimination manifesting itself in the form of

unequal pay cannot, alone, be sufficient to support

a finding of constructive discharge.

617 F.2d at 62, 22 FEP Cases at 1194.

The Court then limited the plaintiff to backpay

measured by the difference between the rate at which she

was compensated and the rate at which male buyers were

compensated in the backpay period measured by the

period the claimant was actually employed by the

defendant as a buyer. Thus, the Court cut off the backpay

accrual period at the date of her resignation. The Court

plainly noted this in its footnote 8, at 617 F.2d 62, 22 FEP

Cases at 1194:

Plaintiff also contends that even if she was not

constructively discharged, the proper measure of

damages would be the difference between the rate

at which she was compensated and rate at which

male buyers were paid and that the backpay

period should have continued until she obtained

permanent employment. We find no error in the

trial court’s decision to limit damages to the period

[the claimant] was employed by defendant as a

buyer. See Muller, supra, 509 F.2d at 930, 10 FEP

Cases at 329; Schlet & Grossman, supra, at 1240 n.

23 (1976).

The Court of Appeals for the Fifth Circuit cited and relied

upon the decision of the Court of Appeals for the Tenth

Circuit noted above in this petition for certiorari, that is

Muller v. United States Steel Corporation, 509 F.2d 923,

10 FEP Cases 323 (10th Cir. 1975), cert. denied, 423 U.S.

825, 96 S.Ct. 39, 46 L.Ed.2d 41, 11 FEP Cases 576 (1975)

for its holding. Reference by that Court also to the most

accepted treatise in this field, Schlei & Grossman,

Employment Discrimination Law, for the same point

indicates the extent to which this basic concept in back-

pay accrual and liability under Title VII has been estab-

lished in this field of law.

Moreover, recently, in Clark v. Marsh, 665 F.2d 1168,

26 FEP Cases 1156, (D.C. Cir. 1981), the Court of Appeals

for the District of Columbia adopted both the Muller v.

U.S. Steel, supra, and Bourque v. Powell Electrical Manu-

facturing Company, supra, decisions, and concluded that

the established law under Title VII requires that backpay

accrual is cut off with the voluntary resignation of the

claimant from the employment with the defendant

employer. The court articulated the basic reason estab-

lished for such rule. That reason is that a claimant must

mitigate his or her damages by remaining on the job

unless the employer makes the job so onerous as to force

the resignation of the employee, that is, to force a

“constructive discharge.” The Court of Appeals in Clark

v. Marsh, supra, stated this concept as follows:

A Title VII plaintiff must, therefore, ‘mitigate

damages by remaining on the job’ unless the job

presents ‘such an aggravated situation that a

reasonable employee would be forced to resign.’

[citing Bourque v. Powell Electrical Manu-

facturing Company, 617 F.2d at 66.| Because dis-

crimination manifested in the form of unequal pay

cannot itself constitute such an aggravated

situation [again citing Bourque, supra], and be-

cause plaintiff offered no further evidence of other

objectionable working conditions, the court con-

cluded that a finding of constructive discharge

could not be sustained.

665 F.2d at 1173-1174.

This duty to minimize damages has previously been

described by this Court as “rooted in an ancient principle

of law’, reported in C. McCormick, Handbook on the Law

of Damages, 127-158 (1935) which requires the claimant

to “use reasonable diligence in finding other suitable

employment.” Ford Motor Co. v. EEOC, 73 L.Ed.2d at

732, 29 FEP Cases at 127. In the context of a demotion on

the job, the employee's duty to mitigate damages requires

that he remain on the job, unless and until the employer

undertakes such deliberate actions through

“aggravating factors” as to “constructively discharge”

the claimant by forcing his quit. In the instant case, the

District Court as affirmed by the Court of Appeals held

that the voluntary quit of the claimant from his Skaggs

employment on June 8, 1973, was his own voluntary act

and was not a constructive discharge.

These cases all confirm a basic Title VII policy. That

policy is that society will be best served if, wherever

possible, unlawful discrimination is attacked within the

context of existing employment relationships. Bourque v.

Powell Electrical Manufacturing Company, 617 F.2d at

66 (5th Cir. 1980); Clark v. Marsh, 665 F.2d at 1173. Only

in the event that the employee is forced to resign, so that

the resignation is not voluntary but is rather a “con-

structive discharge,” will that policy be superseded by

the other Title VII policy that is,an employer must not be

permitted to stop the backpay accrual period simply by

creating such onerous circumstances by “aggravating

factors” that the employee is forced to resign. E.g. Clark

vu. Marsh, supra, 665 F.2d at 1174.

Recently, after the decision in Clark v. Marsh, supra,

the United States Court of Appeals for the Tenth Circuit

in Irving v. Dubuque Packing Co., 689 F.2d 170 (1982)

reiterated the basic rule that constructive discharge must

be based on other “aggravating factors”, citing with

approval Bourque v. Powell Electrical Manufacturing

Company, supra, and Clark v. Marsh, supra, as well as

Muller v. U.S. Steel, supra. Those authorities are in stark

and direct conflict with the decision reached by the three-

judge panel of the United States Court of Appeals for the

Tenth Circuit in this case with respect to continuation of

the backpay accrual period even after the voluntary

resignation, expressly found not to be a constructive

discharge.

II.

THE DECISION BELOW HOLDING THAT THE

BACKPAY ACCRUAL LIABILITY PERIOD

FOR THE DEFENDANT EMPLOYER MUST

INCLUDE POST-VOLUNTARY RESIG-

NATION PERIODS OF UNAVAILABILITY

FROM THE LABOR FORCE, AND DISABILITY

INCURRED IN VOLUNTARY EMPLOYMENT

WITH A SUBSEQUENT EMPLOYER, CON-

FLICTS WITH DECISIONS OF OTHER

CIRCUITS.

It is established law in the field of employment

discrimination law that periods of disability and

unavailability from the labor market are not to be

included in the backpay accrual period. In Taylor v.

Safeway Stores, Inc., 524 F.2d 263, 11 FEP Cases 449, at

451 (10th Cir. 1975) another panel of the United States

Court of Appeals for the Tenth Circuit held that a

claimant enrolled in college full time is not someone who

is “ready, willing and available” for employment, and is

thus not entitled to a backpay award. The court

significantly commented in this regard as follows:

If a discharged employee accepted employment

elsewhere, there is little doubt that this would

cut off any backpay award. If not, the employee

would be receiving a double benefit for the same

period of time. Likewise, when an employee opts to

attend school, curtailing present earning capacity

in order to reap greater future earnings, a back-

pay award for the period while attending school

also would be like receiving a double benefit.

524 F.2d at 267-268.

Other decisions in sister Courts of Appeals have

adopted the same basic standard that periods in which

the claimant is not ready, willing and available for

employment in the labor market cannot be included in

the backpay calculation period. See, e.g., Sprogis v.

United Air Lines, Inc., 517 F.2d 387, 10 FEP Cases 1249

(7th Cir. 1975), where the Court of Appeals held that the

plaintiff could not recover backpay during an eighth

month period while she was pregnant since she could not

have worked as a stewardess while pregnant and was

therefore not ready and available for work.

Schlei & Grossman, Employment Discrimination

Law, 2d Edition, BNA, 1983, Chapter 38, Monetary

Relief, paragraph 6, “Periods of Unavailability,” p. 1450,

state as follows on this point:

Periods of unavailability, whether because of

illness, disability, or other reasons, have been

excluded from backpay awards under both Title

VII and under the [National Labor Relations Act]

NLRB.

The authors of this learned treatise in footnote 147 cite

representative authorities with respect to the rule that

there is no backpay for periods where employees are un-

employable due to illness or otherwise unable to work.

See, for example, Walston v. School Board of Suffolk, 566

F.2d 1201, 16 FEP Cases 728 (4th Cir. 1977); Ostapowicz

v. Johnson Bronze Co., 541 F.2d 394, 13 FEP Cases 517

(3rd Cir. 1976), cert. denied, 429 U.S. 1041 (1977); Peters v.

_ Missouri Pac. R.R. Co., 483 F.2d 490,6 FEP Cases 163 (5th

Cir. 1972), cert. denied, 414 U.S. 1002(1973). See also Inda

v. United Air Lines, Inc., 405 F.Supp. 426(N.D. Cal. 1975),

aff'd in part, vacated in part on other grounds, 565 F.2d

554, 16 FEP Cases 251 (9th Cir. 1977), cert. denied, 435

U.S. 1007, 98 S.Ct. 1877, 56 L.Ed.2d 388, 17 FEP Cases 553

(1978) holding that periods of unavailability due to two

pregnancies for a time period of 13.6 months must be

excluded from the backpay accrual period. This rule is a

familiar one cited above, see e.g. Peters v. Missouri Pac.

R.R. Co., supra, holding that periods of unavailability

because the plaintiffs would have been “physically

unable to work” must also be excluded from the backpay

calculation period. (483 F.2d at 492, see n.4,6 FEP Cases

at 165.)

In the present case, claimant Whatley at trial

admitted that after he resigned his Skaggs employment

on June 8, 1973, he did not look for work or obtain other

work until later in 1974-75 (Tr. 178, 179). He then testified

that he was disabled and not able to work for the time

period from 1975 through 1980, and testified at trial that

he has never worked for any employer since 1975. (Tr.

137, Tr. 19). He testified at trial that he has a current

disability, (Tr. 231) but that he “can’t answer” the

complete status of his current disability (Tr. 231), other

than the fact that he has a “certain percent of disability”

(Tr. 231). The Court of Appeals expressly adopted the

finding that claimant was disabled and not in the labor

force from 1975-1980, App. A, p. 38. The Court,

nevertheless, affirmed the District Court's bootstrap

finding that if Skaggs had not demoted (‘‘terminated"’)

the claimant from Lobby Manager to Warehouse Clerk in

September, 1971, he would not have sought blue collar

work with a meatpacking company in late 1974, and he

would not have been injured in that job in 1975, and

would not have been disabled App. A, p. 36. The Court

has thus effectively required Skaggs to be the insurer of

unemployment and disability in claimant's future

working life :fter his voluntary resignation on June 8,

1973, nearly two years after his demotion

(“termination”’) on September 17, 1971. This ruling of the

Court of Appeals, again, is plainly in conflict with this

court’s decision in Ford Motor Co. v. Equal Employment

Opportunity Commission, supra.

The undisputed evidence that the claimant was

disabled or unavailable from the labor market or looking

for work in the labor market from 1973-mid 1974, and

again from 1975 through the date of trial in 1980, also

conclusively establishes a failure on the part of claimant

Whatley to mitigate damages. See and compare Sangster

v. United Air Lines, Inc., 633 F.2d 864, 24 FEP Cases 845

(9th Cir. 1980), cert. denied 451 U.S. 971, 68 L.Ed.2d 350,

101 S.Ct. 2048 (1981). In that case a supervisor for the air

lines quit and for nine years thereafter did not hold any

employment. The Court of Appeals for the Ninth Circuit

held that this evidence conclusively showed that the

supervisor failed to meet her duty to mitigate damages

under the Act. Claimant Whatley’s instant six-year

period of voluntarily chosen unemployment from 1975

through the date of trial in 1980, assuming his disability

did not prevent some other employment, conclusively

showed a failure to mitigate damages. The Court rejected

the evidence and this argument and held that periods of

disability and unavailability would be included in the

backpay calculation period, App. A, pp. 38-39. Thus, even

after claimant Whatley resigned his employment on

June 8, 1973, and subsequently found other employment

in late 1974 for a short period of time, during which he

became permanently and at least partially disabled, all

such periods of unavailability and disability following

his resignation from Skaggs have been held to be within

the backpay accrual period for which Skaggs is

responsible to the claimant. As stated, this is flatly

contrary to this Court’s Ford Motor Co. v. EEOC, supra,

decision and applicable precedent in sister circuits.

Furthermore, it sets the remedial standards of Title VII

upside down.

The statute itself provides, Title VII, 42 U.S.C. §2000e-

dig):

Backpay liability shall not accrue from a date

more than two years prior to the filing of the

charge with the Commission. Interim earnings or

amounts earnable with reasonable diligence by

the person or persons discriminated against shall

operate to reduce the backpay otherwise

allowable.

If such periods of unavailability and disability of

claimant Whatley are to be considered as accrual periods,

that would squarely contradict the statute by entitling

him to compensation from Skaggs in the form of backpay

for periods when he is not able, willing, or available to

look for work or to work, and either will not or cannot

mitigate backpay with interim earnings which would

otherwise be earnable through reasonable diligence by

the claimant. Such double recovery repudiates the

statutory remedial scheme.

The findings and conclusions of the Court of Appeals

in affirming the District Court thus flatly contradict this

Court's decisions, applicable authorities of other panels

of the court and sister circuits, as well as the statutory

remedial system itself.

Ill.

THE DECISION BELOW RAISES A SUB-

STANTIAL FEDERAL QUESTION WHETHER

STATE DISABILITY BENEFITS PAYMENTS

MADE EXPRESSLY TO COMPENSATE THE

CLAIMANT FOR PERIODS OF DISABILITY

FROM THE LABOR FORCE SHOULD BE

OFFSET FROM BACKPAY TO AVOID

DOUBLE COMPENSATION TO THE

CLAIMANT.

Claimant Whatley received a lump sum workmen's

compensation settlement from the State of Colorado in

the amount of $30,126, for his permanent partial dis-

ability. Defendant's Exhibit L. The District Court held

that this sum could not be offset from the backpay held to

be due. The District Court held even though periods of

disability must be included in the backpay accrual

period, that Mr. Whatley’s workmen's compensation

benefits were “collateral” benefits and could not be offset

by Skaggs from the backpay ordered by the Court.' The

District Court relied upon a decision of the United States

Court of Appeals for the Tenth Circuitin EEOC v. Sandia

Corp., 639 F.2d 600, 23 FEP Cases 799 (10th Cir. 1980) for

such holding. The District Court treated workmen’s

compensation funds as equivalent to unemployment

compensation funds.

However, it was legally incorrect to compare the

workmen’s compensation settlement fund with

unemployment compensation benefits. Unemployment

compensation is payable to a claimant who is actively

seeking work and is ready and able to work and in the

labor market but simply cannot find work [Colorado

Revised Statutes 1973 §8-73-107(2)(c), and 107 (1)\(c\I)

(1980 Supp.).] The conditions of eligibility for unemploy-

ment compensation are thus compatible with the reason-

able diligence requirement for backpay eligibility. In the

case of a workmen’s compensation settlement, on the

other hand, that settlement is designed to compensate

the claimant for periods when the claimant was disabled

'The workmen's compensation settlement of claimant,

Defendant's Ex. “L.”, is to compensate for lost income due to disability,

and expressly recites that ‘all medical expenses” of claimant for his

“back surgery” as a result of his November 7, 1975 accident were

previously paid by the insurer. Employers Insurance of Wausau. Such

medical expenses were expressly excluded from the settlement. While

the claimant is referenced in the settlement as permanently partially

disabled, the [istrict Court held claimant able to work for Skaggs and

ordered reinstatement, App. B. p. 7. Thus the workman's compensa-

tion fund, according to the Court, compensates claimant Whatley for

lost income during his penods of disability

and. thus. not able to look for work or to be in the labor

market.

The decision below also conflicts with the decision of

the Court of Appeals for the Second Circuit, in Equal

Employment Opportunity Commission v. Enterprise

Association Steamfitters, 542 F.2d 579 (1976), cert.

denied, 430 U.S. 911, 97 S.Ct. 1186, 51 L.Ed.2d 588 (1977),

which held that public assistance could be deducted from

backpay awarded under Title VII. The Second Circuit

based its decision upon policy considerations holding

that it saw “no compelling reason for providing the

injured party with double recovery for his lost employ-

ment. . . and [that the court was] not in the business of

redistributing the wealth beyond the goal of making the

victim of discrimination whole.” 542 F.2d at 592. Accord,

Orzel v. City of Wauwatosa Fire Department, 697 F.2d

743 at 756 (7th Cir. 1983), deducting both unemployment

compensation benefits and pension benefits from

backpay awarded, to avoid double recovery. See also

Naton v. Bank of California, 649 F.2d 691, 699-700 (9th

Cir. 1981) authorizing such deductions.

The workmen's compensation benefits involved here

thus cannot properly be analogized tothe unemployment

compensation benefits which this Court addressed in

NLRB v. Gullet Gin Company, Inc., 340 U.S. 361,71S.Ct.

337, 95 L.Ed. 337 (1950). In that case this Court approved

the rule that unemployment benefits may not be deducted

from backpay awards, since unemployment

compensation payments to employees are not made to

discharge any liability or obligation of the employer but

The NLRB in discriminatory refusal to hire and unlawful

discharge cases has allowed deduction of workmen's compensation

income from backpay awarded. as part of interim mitigation earnings

See Alherichi Construction Co., 249 NLRB 751, 104 LRRM 1444 (1980)

and see in particular American Manufacturing Co., 167 NLRB 520,

522-525. 66 LLRM 1122. 1125-26 (1976). In the American case, the

NLRB noted that the purpose of the rule was to avoid double payment

to claimant to the extent such sums are intended to replace claimant s

lost wages due to disability. 167 NLRB at 523.66 LRRM at 1126.

ie)

to carry out a policy for the benefit of the entire state. To

the contrary in the instant case, the workmen's

compensation is expressly designed to compensate the

employee for his lost wages from disability incurred with

his subsequent employer, and the fact that the claimant

was unable to work because of such disability. The policy

considerations are quite different from those involving

unemployment compensation benefits and the payments

are expressly made for the condition held to be the

liability of the employer in this case. The failure of the

Court below to recognize these differences was clear error

and resulted in a precedent which, if allowed to stand,

will cause continuing problems and conflicts in the

administration of backpay remedies in employment

cases in the future.

CONCLUSION

For the reasons stated above, Petitioner requests that

its petition for writ of certiorari be granted.

Respectfully submitted,

BRADLEY, CAMPBELL & CARNEY

Professional Corporation

Ear] K. Madsen, #0655

1717 Washington Avenue

Golden, Colorado 80401

(303) 278-3300

Attorneys for Petitioner

United States Court of Appeals

For the Tenth Circuit

SLIP OPINION

APP. A

PUBLISH

UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

LOUIS WHATLEY,

Plaintiff-Appellee, )

and Cross-Appellant, )

me Nos. 81-1303

81-1357

Defendant-Appellant,

)

SKAGGS COMPANIES, INC.

)

and Cross-Appellee. )

APPEAL FROM THE UNITED STATES

DISTRICT COURT

FOR THE DISTRICT OF COLORADO

(D.C. No. 76-C-449)

Earl K. Madsen of Bradley, Campbe!! & Carney, Golden,

Colorado for Defendant-Appellant and Cross-Appellee.

Paul A. Baca, Attorney, Denver, Colorado, for Plaintiff-

Appellee and Cross-Appellant.

Before SETH, Chief Judge, and HOLLOWAY and

McWILLIAMS, Circuit Judges.

HOLLOWAY, Circuit Judge

Defendant-appellant Skaggs Companies, Inc., brings

a timely appeal in No. 81-1303 from a judgment,

following a trial to the court, in favor of plaintiff-appellee

Louis Whatley, a former Skaggs employee, on his

employment discrimination claim against defendant for

allegedly discriminatory treatment of plaintiff because

of his status as a Mexican-American. Plaintiff bases his

claims on Title VII of the Civil Rights Act of 1964, 42

U.S.C. §§2000e, et seq.,' as amended, and the Civil Rights

Act of 1870, 42 U.S.C. §1981.- Plaintiff Whatley cross-

appeals in No. 81-1357, asserting error in an off-set

against the back pay award, exclusion of profit-sharing

income from the award, and failure to award interest.

The district court entered findings, conclusions, and

judgment for plaintiff and further ordered that the

parties confer in an attempt to reach an agreement on the

proper amount of back pay to be awarded. 502 F.Supp.

370. The court withheld entry of final judgment until

after determination of back pay and attorney's fees

awards.

The parties were unable to reach agreement. Con-

sequently, the court held a hearing to determine the

42 U.S.C. §§2000e — 2000e-17 deal with equal employment

opportunities. 42 U.S.C. §2000e-2/a1) provides:

It shall be an unlawful employment practice for an

employer— to fail or refuse to hire or to discharge any

individual, or otherwise to discriminate against any

individual with respect to his compensation, terms, condi-

tions, or privileges of employment, because of such

individual's race, color, religion, sex, or national! origin.

#42 U.S.C. §1981 provides:

All persons within the jurisdiction of the United States shal]

have the same right in every State and Territory to make and

enforce contracts, to sue, be parties, give evidence, and to the

full and equal benefit of all laws and proceedings for the

security of persons and property as is enjoyed by white

citizens, and shall be subject to like punishment, pains,

penalties, taxes, licenses, and exactions of every kind, and to

no other.

appropriate level of back pay and attorney's fees. It then

made supplemental findings and conclusions, entered

judgment in favor of plaintiff for $89,236.15, plus costs,

and attorney's fees in the amount of $5,115.00. 508

F.Supp. 302. The appeal and cross-appeal followed.

Defendant operates a large chain of retail stores.

During the time of plaintiffs employment, most of the

stores sold prescription drugs, over-the-counter drugs,

and sundries. The organizational district containing the

stores in which plaintiff worked consisted of ten stores.

Management in each of defendant’s stores consisted

of a general manager who was responsible for the entire

store; an assistant general manager directly responsible

for the drug sales area which constituted the bulk of the

sales floor in each store and who was responsible for the

entire store in the general manager's absence; and a

lobby manager who was directly responsible for candy,

tobacco, and film counters which were usually located in

the front of the store beyond the line of checkout counters.

The lobby manager ordered merchandise, organized

displays, and scheduled employees for work in his area.

Defendant's stores were staffed by clerks assigned to

each area. A district manager oversaw the operations ofa

number of different stores.

Promotions to the lowest managerial position were

usually made from among the clerks. Lobby managers

could be promoted to assistant general managers and

assistant general managers to general managers.

Promotion usually also meant transfer to another store

in defendant's chain. Recommendations for promotion or

demotion were made by a store’s general manager, some-

times accompanied by an assistant general manager's

recommendation, to the district manager. Recommenda-

tions were always made orally. Defendant had no formal

employee evaluation procedure; there were no written,

objective standards or tests.

District managers forwarded recommendations from

general managers to defendant's home office in Salt

Lake City for approval or disapproval. During the time of

plaintiff's employment, the district manager supervising

the stores in whicn he worked was Arnold Ford. Ford

testified that he consistently supported recommenda-

tions made by the general managers under his

supervision.

The trial court’s findings on plaintiffs claim were

essentially as follows:

Plaintiff, a Mexican-American, began his employ-

ment with defendant as a clerk at defendant's Store No.

22 during the 1965 Christmas season. In January 1966

plaintiff accepted full-time employment as a clerk inthat

store. Store 22’s general manager was then Gus Roe.

Plaintiff worked through 1966 as a sales clerk. During

1966 Ellred Jensen became genera! manager of Store No.

22. In late 1966 or early 1967 plaintiff was involuntarily

reassigned by Jensen to the shipping department.

In February 1968 Robert Benedict, general manager

of defendant’s Store No. 50, told Jensen that he needed a

shipping clerk. Jensen reassigned plaintiff to Store

No. 50, and in early 1969 plaintiff requested and received

reassignment to the sales floor.

Benedict eventually recommended plaintiff to Ford

for promotion. In November 1969 plaintiff was named

lobby manager and reassigned to Store No. 22 where

Jensen was still general manager. In April or May 1970,

Store No. 22’s then assistant general manager was

replaced by Coleman Nay. Jensen and Nay worked as

general manager and assistant general manager over

plaintiff until plaintiff was fired as lobby manager.

On September 17, 1971, plaintiff was called to

Jensen's office to meet with Ford and Jensen. Ford

ordered plaintiff to surrender his keys to the store and

informed him that he was no longer a lobby manager.

Ford testified that these actions terminated plaintiff's

employment with defendant.’ Ford, Nay, and Jensen had

participated in the decision to dismiss plaintiff. Nay and

Jensen both told Ford that plaintiff was performing

poorly as lobby manager. Based on their opinions, Ford

recommended plaintiffs termination to his superiors.

With their approval, Ford dismissed plaintiff. When

plaintiff asked why he was being fired, Jensen told him

that, in his opinion, he would never be able to handle the

position of general manager at one of defendant's stores.

Plaintiff asked for reassignment to another position in

defendant's organization, and Ford sent him to work in

defendant’s central Denver warehouse.

Plaintiff remained as a warehouseman with

defendant until his resignation on June &, 1973. Plaintiff

gave as the reason for his resignation his inability to

support his family on his wages. Plaintiff held part-time

jobs until he found full-time employment with Gold Star

Beef Company. A 1975 on-the-job back injury at Gold

Star, however, resulted in his temporary total disability

and he currently has a partial disability. Plaintiff now

resides in Mesa, Arizona, in part for health reasons.

In explaining its rulings, the trial court first found

that defendant failed to articulate a legitimate, non-

discriminatory reason for plaintiffs dismissal to rebut

There is some dispute as to whether Ford's actions, in view of

plaintiff's continued employment with defendant as described below,

constituted dismissal or merely demotion. The trial judge character-

izes the action as termination of employment, followed by rehiring. (I

R. 79-80). Defendant characterizes the action taken as a demotion.

(Brief in Chief of Appellant at 10-11). For purposes of Title VII

liability, the proper characterization is immaterial. Be it dismissal or

be it demotion, if defendant's action in relieving plaintiff of his status

as a lobby manager was motivated by plaintiff's Mexican-American

ancestry, defendant's action was unlawful. For purposes of awarding

back pay to plaintiff, however, the characterization assumes

importance. Based upon our review of the record, including Ford's,

Nay’s. and Jensen's testimony, we accept the conclusion of the trial

judge that plaintiff was terminated by Ford's action on September 17.

the inference raised by plaintiff's prima facie showing of

discrimination. The court based this finding upon its

judgment that the testimony of defendant's witnesses

Jensen and Nay as to a nondiscriminatory reason for

their recommendations of dismissal was not credible.

The court found that Jensen's testimony that plaintiff

lacked good business sense was both unsupported and

highly subjective. The specifics of Nay’s testimony that

plaintiff simply did not do his job were contradicted by

plaintiff's witnesses, whom the court found to be credible,

and defendant's attempts to impeach plaintiff were un-

successful. Thus, the court found that the testimony

offered by defendant purporting to establish a legitimate,

nondiscriminatory reason for plaintiffs dismissal was

not credible. (I R. 81-83).

Alternatively, the court found that even if defendant

did articulate a legitimate reason for plaintiffs

dismissal, plaintiff had rebutted the defense case by

showing that defendant discriminated against him in

making its decision to discharge him. The court found

that although testimony from defendant's numerous

Hispanic witnesses established that defendant had no

company-wide policy of discrimination against

Hispanics, this was of little comfort to plaintiff for it

appeared that discrimination “played a major part in his

firing-demotion,” I R. 54, and he was not claiming a

company-wide policy of discrimination. The court found

as a fact that both Jensen and Nay used racial slurs in

referring to Blacks, that both of them made ethnic jokes,

some of which were directed at plaintiff and his wife, and

that Nay had a history of problems with members of

minority groups, both employees and customers.

Defendant contested much of plaintiffs evidence regard-

ing these matters, but the court resolved questions of

credibility in favor of plaintiff and ultimately found that

Jensen and Nay made their recommendations that

plaintiff be dismissed as a result of their prejudice

against him as a Mexican-American. (I R. 83-85).

The court's findings regarding the circumstances of

plaintiffs dismissal buttressed the inference of dis-

crimination. Neither Jensen nor Nay discussed with

plaintiff the deficiencies in his performance which they

said were responsible for his dismissal; none of

defendant's officers or supervisory employees warned

defendant that his position was in jeopardy; and plaintiff

received no reprimand, warning, or counselling on how to

improve. Hence the court determined that defendant's

claims of deficiencies in plaintiffs performance were

merely pretextual.

The trial court found that the proof adduced to estab-

lish defendant's liability on the Title VII claim was also

sufficient to establish his §1981 claim. In some instances

the discriminatory intent required to establish Title VII

liability is different than that required to establish §1981

liability. For a Title VII claim of disparate impact of

employment practices, the required intent is less than

that for a §1981 claim. The court found that for this

disparate treatment claim, the intent proven for the Title

VII claim was sufficient to establish liability under §1981

as well.

Ill

For reversal, defendant first contends that the trial

judge erred by completely misapplying the burden of

proof in a Title VII disparate treatment case, that he

shifted the burden of proving nondiscrimination to

defendant, and that he failed to consider overwhelming

evidence produced by defendant showing that plaintiff

was dismissed for a nondiscriminatory reason. We find

no merit in these contentions.

A prima facie Title VII claim here required a showing

that plaintiff (1) is a member of a protected group, (2) he

was qualified for the position from which he was dis-

missed, (3) he was removed from that position, and (4) he

was replaced by someone not a member of the protected

group. See McDonnell Douglas Corp. v. Green, 411 U.S.

792, 802; Texas Department of Community Affairs v.

Burdine, 450 U.S. 248, 253 n.6. The trial judge found that

plaintiff has presented a prima facie case by his evidence

that he is a Mexican-American, was qualified to be a

lobby manager, was terminated, and was replaced by a

white male. (I R. 80). The burden then shifted to the

defendant to articulate a legitimate, nondiscriminatory

reason for plaintiff's discharge. All that defendant need

do to rebut plaintiff's prima facie case is produce evidence

that there was indeed a legitimate reason for plaintiff's

discharge. “The defendant need not persuade the court

that it was actually motivated by the proffered reasons. It

is sufficient if the defendant's evidence raises a genuine

issue of fact as to whether it discriminated against the

plaintiff.” Burdine, 450 U.S. at 254. SeeVerniero v. Air

Force Academy School District No. 20, _— F.2d ——

(10th Cir. 4/13/83); Mohammed v. Callaway, 698 F.2d

395, 399 (10th Cir. 1983).

Defendant says that its witnesses did articulate a

legitimate, nondiscriminatory reason for the treatment

of plaintiff; in essence, that plaintiff was dismissed

because he was not performing well enough as lobby

manager to continue in the management of defendant's

stores. (I R. 81).* Defendant argues that the trial court

fundamentally erred by holding that:

[T]o carry its burden, the defendant must present

evidence that is at least credible. Since Skaggs has

not presented credible evidence, it has not articu-

lated any legitimate, nondiscriminatory reason

for dismissing Mr. Whatley. Therefore, Skaggs

‘Defendant offered evidence by Ford, Nay, and Jensen as to

plaintiffs poor performance as a lobby manager. Our examination of

the record discloses that the evidence was sufficiently specific to

constitute a proper articulation of a legitimate reason for plaintiff's

dismissal. See 1 R. 81-83. Burdine requires that in fairness to plaintiff,

defendant's evidence regarding its reason for plaintiffs dismissal

must be reasonably specific. 450 U.S. at 258.

has failed to rebut Whatley’s prima facie case of

discrimination, and Whatley should prevail. (I R.

83).

We agree that under the explanation on the

procedural steps made in Burdine, 450 U.S. at 254-55,

We agree that under the explanation on the

procedural steps made in Burdine, 450 U.S. at 254-55,

decided after the trial court’s ruling, it seems that there

was an error in reasoning at this point when the trial

court said defendant had not produced “credible”

evidence to rebut the prima facie case and that plaintiff

should prevail. This analysis seems at odds with the

Supreme Court's statements in Burdine defining the

burden of the defendant in meeting the prima facie case

of the plaintiff: “The defendant need not persuade the

court that it was actually motivated by the proffered

reasons.” Burdine, 450 U.S. at 254.

However, the trial judge foresaw this procedural

problem and went on to hold alternatively that:

Even if Skaggs had sufficiently articulated a

legitimate reason, Whatley has rebutted the

defense case by showing that Skaggs dis-

criminated against him in making its decision to

discharge him. (I R. 83).

Thus the ultimate burden was left on the plaintiff and

the court made the critical findings for the plaintiff under

the proper standard. As has been recently made clear,

after the defendant failed to persuade the trial judge to

dismiss for lack of a prima facie case, (see III R. 300, 303),

and the defendant responded by offering evidence of the

reason for the plaintiffs dismissal, the McDonnell-

Burdine presumption actually dropped from the case and

the court was in a position to decide the ultimate factual

issue, as the trial judge did here. See United States Postal

Service Board of Governors v. Aikens, _— U.S. __ , 51

U.S.L.W. 4354, 4355. In view of the alternate finding of

the trial court for the plaintiff on the ultimate issue, with

the burden properly placed on the plaintiff, there was no

reversible error.

Under this proposition defendant also argues that the

trial court failed completely to consider “overwhelming”

evidence showing that plaintiff was dismissed for a non-

discriminatory reason, citing at length the defense

testimony of shortcomings by plaintiff in his work. See

Brief of Appellant Skaggs Co., Inc., at 19-24. However,

the trial judge discussed such testimony and weaknesses

which he felt were apparent in it. I R. 81-82. The judge

also pointed to testimony by witnesses for the plaintiff

contradicting the defense evidence. I R. 82-83. We are

satisfied that the trial court carefully considered all the

evidence and its findings should not be set aside unless

clearly erroneous, with regard being given to the oppor-

tunity of the trial court to judge the credibility of the

witnesses. Rule 52(a), F.R.Civ.P. Gutierrez v. Denver

Post, Inc., 691 F.2d 945, 946 (10th Cir. 1982). Moreover the

clearly erroneous standard applies to the ultimate

findings of the trial court in a Title VII action. Pullman-

Standard v. Swint, 50 U.S.L.W. 4425: Verniero v. Air

Force Academy District 20, ___ F.2d —_ (10th Cir.

4/13/83).

Similarly, defendant says that the trial judge erred in

not finding that the defense evidence of comparative

treatment of other Hispanics rebutted any inference of

disparate treatment of plaintiff, in failing to consider

defendant’s evidence contradicting testimony on Nay’s

ethnic prejudice, and in ignoring other evidence on

important points. The evidence on treatment of other

Hispanics was considered, but the court found it “simply

not responsive.” I R. 84. We agree the evidence was ad-

missible and relevant but cannot say there was error in

the findings. The weighing of all the contradictory

evidence, such as is detailed at length in the Appendix to

the Brief of Appellant, was for the trial judge. We are not

persuaded that he erred in his consideration of the case or

in his findings.

In sum the defendant has demonstrated no reversible

error in the findings and analysis of the trial court.

Defendant argues that the trial court erred by admit-

ting in evidence a Determination dated January 30, 1975

by the District Director of the Equal Employment Oppor-

tunity Commission (EEOC), adverse to the company. See

Plaintiffs Exhibit 3). More specifically, the company

argues that admission of the Determination was error

because it prominently reported a 1975 incident which

was irrelevant to the alleged discriminatory action by the

company in 1971; the use of the report in effect denied the

company’s right to trial de novo by the district court on

the Title VII claim; and the Determination included in-

admissible hearsay findings and conclusions by the

agency.

The Determination, consisting of three typewritten

single spaced pages, reported on the investigation by the

District Director of plaintiff's discrimination charge. It

reported on the lack of reprimands and the lack of records

of any deficiency in the charging party’s job per-

formance. The report reviewed generally some facts in

the employment records pertaining to good performance

by the charging party and it summarized testimony from

some witnesses. Further the Determination stated that

substantial weight had been accorded to the state

agency's findings relating to the subject charge. The

Determination concluded that there was reasonable

cause to believe that the respondent had violated Title

VII and stated that a notice of conciliation process was

enclosed.

We must agree that the admission of the evidence

raises a substantial question, but are not persuaded there

was any reversible error. First, the 1975 incident reported

concerned an observation by an investigator of a picture

of Dr. Martin Luther King with an unusual inscription.”

The question of admissibility due to possible remoteness

and irrelevance would be a matter for the trial judge’s

discretion, and an abuse of discretion is not shown.

Second, the argument that admission of the Deter-

mination infringed the company’s right to atrial de novo

by the court is unpersuasive. The report was not relied on

in the trial judge’s opinions and he independently

reviewed the evidence in detail and stated his own

findings and conclusions.

Third, we feel that a more serious question is theo-

retically involved concerning the hearsay objection. We

must agree that admission of such a report with its

cumulation of hearsay and observations by the investi-

gator, and its reference to investigation by still other

parties, appears to be in error. See Cox v. Babcock and

Wilcox Co., 471 F.2d 13, 15 (4th Cir. 1972); Smith v.

Universal Services, Inc., 454 F.2d 154, 160-61 (Sth Cir.

1972) (Dyer, Circuit Judge, dissenting); cf. Gillin v.

Federal Paper Board Co., Inc., 479 F.2d 97, 99 (2d Cir.

1973). Nevertheless we find no reversible error in the

admission of the exhibit. In his ruling admitting Exhibit

3 and Exhibit 12, not in question, the trial judge stated

(III R. 299-300):

I’m going to admit these two exhibits for whatever

value they may have in this case, if any, but I

assure you that I am concerned primarily with the

evidence here under oath and I’m not going to give

a whole lot of weight, if any, to somebody else’s

previous determinations in a case that’s not heard

in my court.

‘The picture bore an inscription “To Eldred with Love, Martin.”

The manager. Mr. Jensen, was asked about the authenticity of the

inscription and the report says he replied that it was “phoney, kind of

a joke.”

The judge thus clearly showed that his interest was

focused on the evidence given under oath and that he

would give slight attention to the Determination. More-

over, as noted above, the two written opinions of the

judge contained no reference to the report. In these

circumstances we are satisfied that any error in the

admission of the Determination was harmless error, not

affecting the substantial rights of the company. See 28

U.S.C. §2111.

Defendant strenously objects to the order for

plaintiffs reinstatement to a position equivalent to that

from which he was dismissed in 1971. The company says

that the plaintiff never requested reinstatement and that

the court ignored his physical disability in granting such

relief.

We find no merit in these contentions. The court may

fashion an order in such cases to eliminate the effects of

discrimination and to restore the plaintiff to the position

he would have held but for the discrimination, and such

equitable relief may be provided, even ifit was not sought

in the pleadings. See Fitzgerald v. Sirloin Stockade, Inc.,

624 F.2d 945, 957 (10th Cir. 1980); Sias v. City Demonstra-

tion Agency, 588 F.2d 692, 696 (9th Cir. 1978). Moreover

the trial court did consider the facts pertaining to dis-

ability and the duties performed by plaintiff. The

responsibilities of his job as lobby manager were

developed on cross-examination of plaintiff by defense

counsel. III R. 233-35.

The fact of his disability was stated several times in

the court’s findings which concluded that he currently

has a partial disability. I R. 80, 87; I R. 134. The court

stated that plaintiffs disabling back injury, suffered in

his new strenuous physical labor, would not have

occurred had defendant not terminated him as lobby

manager. I R. 134 n.1.

We find no error or abuse of discretion in the relief

afforded to plaintiff.

Defendant next contends that the trial court erred by

awarding back pay to plaintiff for any time period after

his resignation from defendant's employ in June 1973.

Defendant says that plaintiff then voluntarily resigned;

that an award of back pay is improper because it did not

constructively discharge plaintiff in that the company

did not demote or transfer plaintiff in an attempt to force

his resignation, citing Muller v. United States Steel

Corp., 509 F.2d 923, 929 (10th Cir.), cert. denied, 423 U.S.

825 (1975), and Bourque v. Powell Electrical Mfg. Co.,617

F.2d 61 (5th Cir. 1980); and that only during the period

from plaintiff's termination as lobby to his voluntary

resignation, 1971 to 1973, was plaintiff damaged by

defendant's discrimination.

As the trial court found, however, this case raises no

issue of constructive discharge. I R. &&. The court found

that Ford’s testimony established that plaintiff was

terminated — fired — on September 17, 1971, as lobby

manager. The only reason that plaintiff continued in

defendant's employ was that he requested that defendant

give him some sort of job. The trial court found that “in

these circumstances, Whatley’s tenure in the Skaggs

warehouse has the same legal effect as if he had

permanently left Skagg’s employ on September 17, 1971,

and had found employment elsewhere, later the same

day.” Id. We agree. Therefore, it was within the court's

discretion to award plaintiff back pay for the period

subsequent to June 1973.

Vil

Defendant says that the trial court erred in its

calculation of the award of back pay to plaintiff; that

plaintiff i is not entitled to back pay for the period from

1975 ‘to 1980 when he was disabled and was not seeking

employment, and that the trial court erroneously failed to

deduct plaintiffs disability benefits from its back pay

liability.

Title 42 U.S.C. §2000e-5/g) leaves to the discretion of

the trial court the amount of back pay to be awarded a

successful plaintiff in an employment discrimination

action. Absent an abuse of that discretion, the appellate

court will not disturb the trial court’s determination.

Comacho v. Colorado Electronic Technical College, 590

F.2d 887, 888 (10th Cir. 1979): Taylor v. Safeway Stores,

Inc., 524 F.2d 263, 267 (10th Cir. 1975). It is true that the

Statute does reduce allowable back pay awards by any

amount earnable by a discharged plaintiff with reason-

able diligence” and that the plaintiff has a duty to

mitigate his damages, presumably by seeking employ-

ment elsewhere. United States v. Lee Way Motor F reight,

625 F.2d 918, 936-38 (10th Cir. 1979); see Equal Employ-

ment Opportunity Commission v. Sandia Corp., 639 F.2d

600, 627 (10th Cir. 1980). It is also true, however. that

plaintiff here worked both full and part time jobs from his

1971 dismissal by plaintiff until 1975,” and he was dis-

abled from 1975 to 1980. Further. mitigation requires not

success in finding alternate employment, but only a

reasonable exertion to mitigate damages. Lee Way, 625

F.2d at 937. Under these circumstances, we find no abuse

“42 US.C. §2000e-K%g) provides, in part: “Interim earnings or

amounts earnable with reasonable diligence by the person or persons

discriminated against shal! operate to reduce the back pay otherwise

allowable”

‘The court found that after he suffered his disability in November.

1975, plaintifi kad no employment during 1976. 1977. and 1978, and

substantially no employment during 1979 and 1980 (I R. 132-33). The

court found nw bad faith failure to mitigate damages during those

years. nor did it find that plaintiff was able to secure employment

“through reasonable diligence.” Plaintiff continues to draw Social

Security disability benefits. See 11 R. 139. X R. 19

of discretion in the trial court’s refusal to reduce

defendant's back pay liability as requested.”

The trial court’s refusal to deduct plaintiffs disability

benefits from defendant's back pay liability is likewise

not error. Such benefits are from a collateral source, and

offset is not required. See Equal Employment Oppor-

tunity Commission v. Sandia, 639 F.2d 600, 624-26 ( 10th

Cir. 1980): Marshall v. Goodyear Tire & Rubber Co., 554

F.2d 730, 736 (5th Cir. 1977).

Vill

Defendant argues that the trial court erred in holding

that liability was also established under §1981. It

contends that the court was in error in applying the six-

year Colorado statute of limitation of C.R.S. 1973 §13-80-

110 and in holding that the test for liability under §1981

was the same as for the Title VII claim involved here.

We are convinced that the district court properly

rejected these same arguments in its thorough treatment

of them. See 502 F.Supp. at 376-77. The statute of limita-

tions issue in connection with such a §1981 claim is

clearly settled in Zuniga v. Amfac Foods, Inc., 580 F.2d

380 (10th Cir.), as the trial judge noted. The claim may be

asserted under §1981 for such discrimination in employ-

ment and the six-year Colorado limitation was correctly

“The trial court also expressly rejected a reduction of defendant's

back pay liability based on plaintiff's disability, saying:

Here. Whatley would not have suffered his disabling back

injury had Skaggs not terminated him as lobby manager

Skaggs’ act of discrimination forced Whatley from his

management position to blue-collar jobs that required

strenuous physical labor resulting in injury to his back.

IR. i34n1

applied.’ Moreover the type of Title VII claim upheld here

was for disparate treatment. We agree with the trial judge

that a successful claim for such intentional discrimina-

tion supports §1981 liability as well, in accord with the

principles governing such constitutional claims noted in

Washington v. Davis, 426 U.S. 229, 238-248. See also T&

S Service Assoc., Inc. v. Crenson, 666 F.2d 722, 724 (1st

Cir.); McWilliams v. Escambia County School Bd., 658

F.2d 326, 331-32 (5th Cir.).

Plaintiff asserts three claims of error regarding the

trial court’s calculation of back pay due him in its supple-

mental findings and order. First he says that the court

erred by offsetting monies he earned from part-time

employment from his back pay award. In determining

plaintiffs back pay award, the court reduced the award

by $14,329.79, the amount plaintiff had earned between

1971 and 1974, while still working full time at defendant's

warehouse and then at Gold Star Beef, by ‘“moon-

lighting’ at Dillon Companies and then at Denver

School District No. 1.

Title 42 U.S.C. §2000e-5(g) provides, ‘Interim

earnings ... by the person or persons discriminated

against shall operate to reduce the back pay otherwise

allowable.”” Moonlighting earnings will be considered

“interim” earnings and offset against a successful

plaintiff's back pay award if he would have been unable

to hold the moonlighting job at the same time as the job

“Plaintiff's §1981 claim is grounded on allegations of racial dis-

crimination affecting his employment relationship and his demotion

from his position as an assistant manager. This is sufficient to come

within the ambit of §1981 which “affords a federal remedy against

discnmination in private employment on the basis of race.’ Johnson

v. Railway Express Agency, 421 U.S. 454, 460: and see Manzanares v

Safeway Stores, Inc., 593 F 2d 968 (10th Cir.)

he lost because of discrimination. Bing v. Roadway

Express, Inc., 485 F.2d 441, 454 (5th Cir. 1973).'° The trial

court properly found plaintiffs moonlighting earnings to

constitute interim pay based on plaintiffs testimony

both at trial and at the supplemental hearing that as

lobby manager he worked ten to twelve hours a day, six or

seven days a week; defendant did not require plaintiff to

work more than a five day, forty hour week, but the

responsibilities of his management position and the

incentives of promotion and larger bonuses create the

likelihood that plaintiff would have continued to work

long hours had he remained a lobby manager, and he

would consequently have been unable to moonlight. (See

I R. 134; Supplemental Volume I R. 7-8).'! The trial court’s

set-off was therefore not error.

Second, Plaintiff says that the trial court erred by

failing to include an amount equal to his profit sharing

account in defendant's profit sharing plan in his back

pay award. The trial court refused such an award on the

grounds that plaintiff's profit sharing rights terminated

not when plaintiff was dismissed as lobby manager, but

when plaintiff quit his warehouse job with defendant

because of his low salary before his profit sharing rights

had vested: thus, plaintiff lost his profit sharing rights by

In Bing, 485 F.2d at 454, the court stated:

If a supplemental or moonlight job is one that the discnimi-

natee cannot perform when he wins his new position, the

supplemental job is necessarily temporary, provisional or

“interim”. By contrast, if one can hold his supplemental job

and his desired full-time job simultaneously and there is

reason to believe he will do so, the supplemental job assumes

a permanent rather than interim nature. Those earnings

would be independent of the position sought and should not

be taken into account in back pay calculations.

‘Plaintiff testified at the supplemental hearing that as a lobby

manager he could have moonlighted. He admitted, however, that atno

time during his tenure as lobby manager did he in fact do so. (Supple

ment Volume I R. &).

voluntarily leaving his warehouse job for reasons not

directly related to any act of discrimination by

defendant. Further, defendant received no benefit from

plaintiff's forfeited funds; plaintiff's account was merely

redistributed among the accounts of other employees of

defendant. (I R. 135-36).

As both the trial court and defendant recognize,

monetary benefits from profit sharing plans may

properly be made part of a successful plaintiff's back pay

award under Title VII. See EEOC v. Kallir, Phillips,

Ross, Inc., 401 F.Supp. 66, 74 (S.D.N.Y. 1975), aff'd mem.,

559 F.2d 1203 (2d Cir.), cert. denied, 434 U.S. 920 (1977):

Plaintiff-Appellant’s Brief in Chief at 10. We find noerror

in the finding that plaintiff forfeited his profit sharing

rights by resigning before they had vested. See Supple-

mental Volume I R. 57. Plaintiff and defendant

stipulated to this fact. (I R. 119). In these circumstances.

and in view of the trial court’s broad discretion in these

matters, we find no errorin the court's declining to award

plaintiff an amount equal to his profit sharing account

with defendant.

Finally, plaintiff contends that the trial court erred by

failing to award interest on the back pay award. Plaintiff

argues that absent an award of interest, the high rate of

inflation of the period 1971-1981 would reduce the value

of the back pay award so as to thwart Title VII’s purpose

of making whole those discriminated against in

employment.

We agree that in a proper case interest is an allowable

part of a back pay award. See United States v. Lee Way

Motor Freight, Inc., 625 F.2d 918, 940 (10th Cir. 1979).

Further, the purpose of Title VII is indeed to make whole

the victims of unlawful employment discrimination.

Title VII however, does not specifically provide for

interest on a back pay award; interest is within the dis-

cretion of the trial court.'- Here at the supplemental

hearing, plaintiff requested interest on back pay.

(Supplemental Volume I R. 55). Yet, without further

discussion in the record and without any mention of

interest in the supplemental order fixing the amount of

the back pay award, the trial court simply granted no

interest. Plaintiff has requested a remand for considera-

tion of the interest question and we feel this is proper. On

remand the trial court may consider the circumstances

and should make findings and a determination on the

propriety of awarding interest and the proper award, if

the court finds that interest should be awarded.

The plaintiff has also requested an award of

attorney's fees on appeal. Since he has prevailed on most

issues such an award seems proper.’’ On remand, the

trial court should afford a hearing on this matter and

make proper findings and an award of reasonable

attorney's fees for the appeal.

Accordingly the judgment is affirmed except that the

interest and appellate attorney's fee matters will be deter-

mined on remand as provided herein.

-See Goodwin v. City of Pittsburgh, 480 F.Supp. 627, 635 n.3

(W.D. Pa.), aff'd. without opinion, 624 F.2d 1090 (3d Cir. 1980).

See Marks v. Prattco, Inc., 633 F.2d 1122, 1125-26 (5th Cir. 1981);

Lowry v. Whitaker Cable Corp., 472 F.2d 1210 (8th Cir. 1973).

MAY TERM — June 13, 1983

Before Honorable Oliver Seth, Honorable William J.

Holloway, Jr., Honorable Robert H. McWilliams,

Honorable James E. Barrett, Honorable William E.

Doyle, Honorable Monore G. McKay, Honorable James

K. Logan, and Honorable Stephanie K. Seymour, Circuit

Judges.

LOUIS WHATLEY,

Plaintiff-Appellee,

Cross-Appellant,

A Nos. 81-1303

— 81-1357

)

SKAGGS COMPANIES, INC. )

)

Defendant-Appellant

Cross-Appellee )

This matter comes on for consideration of appellant/

cross-appellee’s, Skaggs Companies, Inc., petition for

rehearing and suggestion for rehearing in banc in the

captioned appeals.

Upon consideration whereof, the petition for rehear-

ing is denied by the panel that rendered the decision

sought to be reheard.

The petition for rehearing having been denied by the

panel to whom the case was argued and submitted, and

no member of the panel nor judge in regular active service

on the court having requested that the court be polled on

rehearing in banc, Rule 35, Federal Rules of Appellate

Procedure, the suggestion for rehearing in banc is denied.

HOWARD K. PHILLIPS, Clerk

By Robert L. Hoecker

Chief Deputy Clerk

WHATLEY v. SKAGGS COS.

U.S. District Court,

District of Colorado

WHATLEY v. SKAGGS COMPANIES, INC., No.

76-C-449, November 25, 1980

CIVIL RIGHTS ACT OF 1964

1. National origin discrimination — Discharge —

Rebuttal > 108.1215 » 108.7335 » 108.8101

Employer failed to rebut discharged Mexican-

American assistant store manager’s prima facie case,

where general testimony of district manager that assis-

tant manager was not qualified was not supported by

any credible evidence, and ethnic jokes and slurs made

by district manager and assistant general manager, who

had testified that assistant manager had not done his

job, and assistant general manager’s difficulties in deal-

ing with minority-group members indicate that they

made their recommendation to discharge assistant

manager because of prejudice.

CIVIL RIGHTS ACT OF 1866

2. Intent » 106.0642

Former employee's proof of intentional disparate treat-

ment under Title VII of Civil Rights Act of 1964 sup-

ports imposition of liability under 42 U.S.C. §1981 as

well.

CIVIL RIGHTS ACT OF 1964

3. Remedy — Reinstatement — Discharge — Back

pay — Period — Measurement > 220.405 » 210.304

> 210.315

APPENDIX B

Unlawfully discharged assistant store manager is en-

titled to reinstatement to equivalent position and to

back pay from date of termination until date on which

employer offers to reinstate him, with back pay based

on assistant manager's salary as adjusted for cost-of-

living and step increases that have occurred since

discharge.

4. Remedy — Back pay — Deduction » 210.335

Employer's back-pay liability to employee whom it

unlawfully discharged will not be reduced by compen-

sation award that he received for disability that he in-

curred while working for another company after

discharge, since such disability award is collateral

source.

5. National origin discrimination — Constructive

discharge » 108.1215

Employer's termination of Mexican-American assis-

tant store manager was not constructive discharge, even

though at time of discharge employer granted his re-

quest for employment in its warehouse; he was merely

making diligent attempt to mitigate his damages by

seeking reemployment in lesser capacity.

Action under 42 U.S.C. §1981 and Title VII of Civil

Rights Act of 1964 by former employee against employer.

Judgment for former employee.

Paul A. Baca, Denver, Colo., for plaintiff.

Earl K. Madsen (Bradley, Campbell & Carney),

Golden, Colo., for defendant.

Full Text of Opinion

CARRIGAN, District Judge: — This action was filed

pursuant to Title VII of the Civil Rights Act of 1964,

42 U.S.C. Sections 2000e, et seq., as amended, and 42

U.S.C. Section 1981, the Civil Rights Act of 1870. The

plaintiff, Louis Whatley, claims that he was demoted

from his in-store managerial position with defendant

Skaggs Companies, Inc. (‘‘Skaggs’’) because of his status

as a Mexican American. Skaggs is an employer within

the meaning of 42 U.S.C. Section 2000e(b).

General Background.

Skaggs operates a chain of retail stores. During the

time period in question, most of these stores sold

prescription drugs, over-the-counter drugs, a variety of

household items, and sundries. At that time, Skaggs had

ten stores in its Denver district: one in Colorado Springs,

two in Pueblo, and seven in the Denver metropolitan

area.

Management in each of these stores consisted of a

general manager, an assistant general manager, and an

assistant (usually referred to as ‘‘lobby’’) manager. The

general manager was responsible for the entire store.

The assistant general manager was directly responsi-

ble for the “drug” area, which constituted the bulk of

the sales floor in each store. The lobby manager was

directly responsible for the candy, tobacco, and film

counters which were usually located in the front of the

store outside the line of cash registers where the

checkout lanes ended. The stores were staffed by clerks

assigned to the respective areas.

Promotions to the lowest managerial position, lobby

manager, were usually made from among the clerks.

From the position of lobby manager, one could be pro-

moted to assistant general manager. General managers

were selected from the ranks of assistant general

managers. Promotions sometimes occurred within the

same store, but most often a promotion required transfer-

ring to another store in the Skaggs chain.

Recommendations for promotion or demotion were

made by a store general manager. These were sometimes

accompanied by a recommendation from the store’s assis-

tant general manager. Recommendations were always

made orally: Skaggs had no formal employee evaluation

procedure. Nor were there any written objective stan-

dards or tests.

The district manager forwarded recommendations

from general managers, with proposed personnel

changes, to the home office in Salt Lake City. During

the time in question the Denver district manager was

Arnold Ford. Ford testified that he consistently sup-

ported promotion recommendations made by the general

managers under his supervision.

Plaintiff Whatley, an American citizen of Mexican

ancestry, was first employed by Skaggs as a clerk at

Store No. 22 (the “Lakeside” store) during the 1965

Christmas season. He was then approximately thirty

years old.

During January, 1966, Whatley was offered, and ac-

cepted, full-time employment as a clerk in that store.

The general manager at Skaggs’ Lakeside store was

then Gus Roe. Whatley worked through 1966 as a sales

clerk in the drug area. Sometime during that year,

Eldred Jensen became general manager of the Lakeside

store. In late 1966 or early 1967, Whatley was involun-

tarily reassigned, by Jensen, to the shipping department

at Lakeside.

In February 1968, Robert Benedict, general manager

of the Federal store, told Jensen that he needed a ship-

ping clerk. Jensen sent Whatley who spent the next year

in the shipping department at the Federal store. In ear-

ly 1969, Whatley requested and received reassignment

to the sales floor.

Benedict eventually recommended Whatley to Ford for

promotion. In November 1969, Whatley was named lob-

by manager and reassigned to the Lakeside store where

Jensen was still general manager. One Skip Bailey was

then assistant general manager. In April or May 1970,

Bailey was replaced by Coleman Nay. Jensen and Nay

worked on the Lakeside management team with

Whatley until Whatley was fired as lobby manager.

Whatley’s dismissal took place on Friday morning,

September 17, 1971. Without any warning, Whatley was

called into Jensen's office at the Lakeside store to meet

with Ford and Jensen. Ford peremptorily ordered

Whatley to turn over his keys, and informed him that

he was no longer a lobby manager. Ford testified that

his actions on this occasion terminated Whatley’s

employment with Skaggs.

Whatley asked why he was being fired. He was told

that, in Jensen’s opinion, he would never be able to han-

dle the position of general manager of a Skaggs store.

Whatley asked for reassignment to another position in

the Skaggs organization, and Ford relented, sending him

to work in the Skaggs central warehouse for the Denver

district.

Whatley remained as a warehouseman with Skaggs

until June 8, 1973, when he resigned. He gave as his

reason his inability to support his family on his wages.

He found part-time employment with King Soopers’

Stores, and later with the Denver School District.

Whatley eventually found full-time employment with

Gold Star Beef Company. However, a 1975 on-the-job

back injury at Gold Star resulted in his temporary total

disability. Whatley currently suffers a partial disabili-

ty. He now lives in Mesa, Arizona, in part for health

reasons.

I. Liability.

A. Title VIL

To make out a prima facie case of Title VII employ-

ment discrimination, a plaintiff who has been dismissed

from his job must show (1) that he is a member of a pro-

tected group, (2) that he was qualified for the position

from which he was dismissed, (3) that he was removed

from his position, and (4) that he was replaced by

someone not a member of the protected group. McDon-

nell Douglas Corp. v. Green, 411 U.S. 792, 802, 5 FEP

Cases 965 (1973). The Green rule applies where the

plaintiff has been dismissed from his job. See Silberhorn

v. General Iron Works Co., 584 F.2d 970, 971, 18 FEP

Cases 507 (10th Cir. 1978).

After the plaintiffs prima facie showing, the burden

shifts to the defendant to articulate some legitimate,

nondiscriminatory reason for terminating the plaintiff.

Green, supra, 411 U.S. at 802; Silberhorn, supra, 584

F.2d at 971. Plaintiff then has the opportunity to rebut

this evidence.

[1] Whatley established a prima facie case of

discrimination by evidence showing that he is of

Mexican-American ancestry; that he was qualified to

be a lobby manager, that he was terminated, and that

he was replaced by Don Bruning, a white male. The

burden thus shifted to Skaggs to articulate some

‘Whatley is a native-born American of Mexican descent. His

paternal grandfather was part English and part Indian. This ac-

counts for his surname, which admittedly is not of Spanish deriva-

tion. His other grandparents were of Mexican ancestry. Whatley

was present at counsel table throughout the trial, and testified in

his case-in-chief and in rebuttal. Whattley’s physical characteristics

are such that a reasonable person should recognize that Whatley

is of Mexican ancestry. Skaggs did not contest the issue of Whatley’s

national original at trial.

legitimate, nondiscriminatory reason for Whatley’s ter-

mination as lobby manager.

In an attempt to articulate a reason for Whatley’s

dismissal, Skaggs presented the testimony of Ford, Nay,

and Jensen. All three participated in some way in the

decision to terminate Whatley. Nay and Jensen both told

Ford that Whatley was not performing well enough as

lobby manager to continue in the management of a

Skaggs store. Based on their opinions, Ford recom-

mended Whatley’s termination to his superiors in the

Skaggs organization. With his superiors’ approval, Ford

dismissed Whatley.

It was uncontroverted that Jensen's recommendation

was the critical factor in the decision to terminate

Whatley: Ford’s practice was to base his personnel

recommendations to Skaggs management almost en-

tirely upon the recommendation of the general manager

with direct supervision of the employee involved. Jensen

was questioned repeatedly at trial about the basis for

his opinion that Whatley was not qualified to continue

as lobby manager. Invariably, his response was in terms

of the generality that Whatley did not have good

business sense. When asked what facts about Whatley

gave rise to this conclusion, Jensen confessed that it was

a “gut reaction.”

Jenson did testify that he recalled one or two com-

plaints from customers about Whatley, that Whatley had

trouble covering shortages of products specially adver-

tised during a particular week, and that Whatley had

trouble scheduling the work of employees under his

supervision. However, Jensen's overall recollection dur-

ing direct and cross-examination was poor. This, coupled

with the fact that Whatley offered evidence contradict-

ing each of Jensen’s recollections, undermined the credi-

bility of Jensen’s testimony as to particular events. His

bald conclusion that Whatley lacked good business

sense, therefore, is unsupported by any credible evidence.

~_-

It is questionable whether, standing alone, Jensen's

highly subjective reason for recommending that Whatley

be dismissed constitutes a sufficient articulation of a

legitimate, nondiscriminatory reason to rebut Whatley’s

prima facie case of discrimination. Nay was also present

at the Lakeside store on a daily basis, and had ample

opportunity to observe Whatley’s job performance. It is

uncertain how much weight Nay’s negative impression

of this performance carried in the decision to remove

Whatley. However, Nay’s testimony can at least be

treated as an attempt to articulate the reasons for

Whatley’s dismissal.

Nay is a fifteen-year employee of Skaggs. At the time

of trial, Nay was assistant general manager of a Skaggs

store in Great Falls, Montana. He held a like position

at Lakeside when he worked with Whatley.

The essence of Nay’s testimony was that Whatley

simply did not do his job. Nay testified that Whatley was

unable to prepare displays of merchandise for promo-

tional sales, unable to execute efficiently his daily order-

ing and pricing responsibilities, and unable to schedule

the employees assigned to his department. In addition,

Nay testified that Whatley was slow in bringing his mer-

chandise up from the store room, and that Whatley fail-

ed to prepare adequately for the quarterly inventory.

Nay testified that on several occasions he had to leave

his duties in the drug area and assist Whatley in per-

forming tasks that Whatley should have handled on his

own.

Jesen’s recollection of these events was so vague that

he could not corroborate Nay’s testimony. Skaggs did of-

fer the testimony of Kathy Romero Parker, who worked

for Whatley in the lobby department for a year. Mrs.

Parker testified that she often had to work alone as the

lobby cashier, though she admitted that Whatley was

in the store and available to help her when necessary.

Whatley offered testimony to contradict Nay, as well

as testimony to impeach Nay’s credibility. Whatley

testified that one of the first things he did when he ar-

rived at Lakeside after his promotion was to clean the

old displays, build new ones, and paint the lobby area

fixtures. It was uncontradicted that Skaggs’ policy was

to give its lobby managers authority over ordering and

pricing of goods, as well as scheduling the employees in

the department. This authority was subject to the

general manager’s power to modify the lobby manager’s

decisions. One of Whatley’s chief contentions throughout

his case was that Jensen constantly modified his orders

and prices, and that this effectively deprived him of any

chance fully to carry out his responsibilities as lobby

manager. Whatley’s testimony supported this

contention.

In addition to contradicting Nay’s testimony by his

own, Whatley offered the testimony of Howard Juross

and Debbie Adams. Both of these witnesses worked at

Lakeside in the lobby department while Whatley was

lobby manager. Both testified that they had a good work

relationship with Whatley, and that his work in the

department was done in a satisfactory manner.

Since Whatley’s and Skagg’s evidence on these issues

is in direct contradiction, their resolution turns on

credibility. Skaggs devoted most of its efforts at impeach-

ment to contradiction. The Court finds that Skagg’s

other attempts to impeach Whatley’s witnesses with

deposition testimony and EEOC affidavits failed of its

purpose. The inconsistencies uncovered by Skaggs were

insubstantial and almost imperceptible.

Whatley, however, offered evidence that both Jensen

and Nay had made prior inconsistent statements. The

most telling evidence of this kind related to ethnic jokes

and slurs uttered by both Jensen and Nay. These will

be discussed more fully below. (see footnotes 2, 3, and

5). For the purposes of evaluating their credibility, it is

sufficient to say that both Jensen and Nay denied mak-

ing certain jokes and insults when they were cross-

examined. Whatley confronted these witnesses with the

specific content of the alleged jokes and insults, then of-

fered testimony by himself or Juross that such remarks

had been made. From this evidence, the Court finds as

a fact that the testimony offered by Skaggs purporting

to establish a legitimate, nondiscriminatory reason for

Whatley’s dismissal is not credible.

The defendant’s burden in a Title VII Case to rebut

a prima facie case of discrimination is not heavy. Board

of Trustees of Keene State College v. Sweeney, 439 U.S.

24, 25, 18 FEP Cases 520 (1978); Silberhorn v. General

Iron Works Co., 584 F.2d 970, 971, 18 FEP Cases 507

(10th Cir. 1978). However, to carry its burden the defen-

dant must present evidence that is at least credible.

Since Skaggs has not presented credible evidence, it has

not articulated any legitimate, nondiscriminatory

reason for dismissing Mr. Whatley. Therefore Skaggs has

failed to rebut Whatley’s prima facie case of discrimina-

tion, and Whatley should prevail.

Even if Skaggs had sufficiently articulated a

legitimate reason, Whatley has rebutted the defense

case by showing that Skaggs discriminated against him

in making its decision to discharge him.

As a major aspect of its defense, Skaggs paraded

numerous Spanish surnamed male employees into court

to testify that they had encountered no discrimination

in seeking promotions to managerial positions. These

employees testified under the watchful eye of a Skaggs

home office executive who sat at defense counsel table

throughout the trial. The cumulative effect of their

evidence established that Skaggs has no company-wide

policy or practice of discriminating against this minority

group. This provides little comfort to Whatley, however,

for it appears that discrimination played a major part

in his firing-demotion. Whatley did not complain of a

company-wide policy of discrimination by Skaggs, and

thus the Skaggs evidence is simply not responsive.

Whatley proved that both Jensen and Nay used the

term “‘nigger’’ to refer to Black people? that both Jensen

and Nay made ethnic jokes and slurs, some of which were

directed at Whatley or his wife? and that Nay had a

history of problems with members of minority groups,

both employees and customers‘

*Jensen used the term in at least one joke, set forth in note 3,

below. Whatley testified that Jensen also used the term in asking

Whatley if the wife of another employee was a ‘nigger.’ This oc-

curred when Whatley was still a clerk at the Lakeside store. Nay

apparently used the term “nigger” regularly to refer to a Black

person. Juross testified that both Jensen and Nay each used the

term “nigger” at least ten times a year.

*It was the testimony of Juross that Jensen once said that every

store should have at least one ‘‘nigger’’ to ‘keep and eye on the

others.” This statement was allegedly made in Jensen's office.

Whatley testified that Nay made several ethnic jokes or slurs Once,

Nay asked Whatley what the difference was between a ““Mexican”’

and a “nigger.” Whatley’s “I don’t know” brought the punchline:

“Their hair” Whatley once bought a birthday cake for his daughter.

The baker had decorated the cake with the figure of a gingerbread

man. Upon seeing the cake, Nay said, ‘Perfect for a little Mexican

baby.” This testimony was corroborated by Juross Whatley’s

daughter once babysat for Nay; when bringing the girl home on

this occasion, Whatley invited Nay into the Whatley home. Whatley

testified that Nay said, ‘““You have a nice house for a Mexican.”

Whatley also testified that Nay once inquired of Whatley if his wife

was a “nigger.” Nay did not confine his remarks to Blacks and

Hispanics. Juross testified the Nay once told him, “If you don’t work

faster, we're going to turn up the ovens” Juross is Jewish.

“Whatley testified that Nay once chased a 10-12 year old male

Mexican shoplifter out of the store, grabbed him, and began to twist

his arm. Nay’s response to Whatley’s protest was: “Butt out, Lou.

I can’t stand these Mexican punks”’ Nay admitted that two other

complaints of discrimination had been filed against him, one by

a Black man and one by an Hispanic.

Jensen and Nay contested this evidence either in

whole or in part? Thus resolution of the issue turned

on credibility. The Court finds that Jensen and Nay did

make the remarks charged and that Nay did have dif-

ficulties in dealing with members of minority groups.

From these facts, the Court infers that, absent any other

credible explanation, Jensen and Nay made their recom-

mendations that Whatley be dismissed as a result of

their prejudice against Whatley because he is a Mexican-

American.

This inference of discrimination is buttressed by the

circumstances in which Whatley was fired. It would be

difficult to imagine a less considerate, more thoughtless,

harsh or abrupt manner of dealing with a long term

supervisory employee. Neither Jensen nor Nay took the

time to discuss with Whatley the alleged deficiencies

in his performance which they now assert were respon-

sible for his dismissal. Nor did any of Skaggs’ officers

or supervisory employees give Whatley any warning

that his position was in jeopardy. It seems highly unlike-

ly that if Whatley’s job performance had been so inade-

quate for so long as claimed, he would not have received

a reprimand, warning or counseling on how to improve.

Rather this Court finds that Skaggs’ claims of deficien-

‘Jensen categorically denied ever using the term “nigger”’ to refer

to anyone in his life, and denied making any of the remarks at-

tributed to him by plaintiffs witnesses However, Jensen did ad-

mit to keeping a picture of Martin Luther King, Jr. in his office

for a year. The picture had been sent to him, with the inscription

“To Eldred, with love.’ The picture had not been sent by Dr. King,

since Jensen received it several years after King’s death.

Nay admitted that he used the term “nigger” to refer to Blacks,

and that he made regular use of ethnic “humor.” He also admitted

making the “ovens” remark to Juross that is described in note 2

above. He admitted that he probably made ethnic jokes to Whatley,

but denied making the joke about hair as the only distinguishing

features between “niggers” and “Mexicans,” and denied making

disparaging remarks about plaintiffs wife or their home. Nay

denied any recollection of the incident with the birthday cake.

cies in Whatley’s job performance were merely pretex-

tual. The testimony of several Skaggs employees

established that warnings were normal procedure. These

witnesses were managers all called by Skaggs.

The Court finds and concludes that Whatley has

proved his case of discriminatory job termination, and

has established liability under Title VII.

B. Section 1981.

Skaggs has contended since it filed its answer that

Whatley’s Section 1981 claim is barred by the statute

of limitations. Whatley filed his discrimination com-

plaint with the EEOC on September 29, 1971. The

EEOC issued a right-to-sue letter on January 27, 1976.

Whatley filed this suit on April 23, 1976. His Title VII

claim, which had to be filed within ninety days after

receipt of the EEOC right-to-sue letter, was timely filed.

See Plunkett v. Roadway Express, Inc., 504 F.2d 417, 8

FEP Cases 817 (10th Cir. 1974).

Whatley filed his Section 1981 claim with his Title

VI claim on April 23, 1976. His section 1981 claim arose

with his termination on September 17, 1971, four years

and seven months before he filed his claim. Since a six-

year limitations period is applied to Section 1981 claims

of employment discrimination that arise in Colorado, his

Section 1981 claim was timely filed. See Zuniga v.

AMFAC Foods, Inc., 580 F.2d 380, 387, 17 FEP Cases

1195 (10th Cir. 1978).

It is clear that a plaintiff may state a claim for relief

under 42 U.S.C. §1981 for acts of discrimination directed

against him because he is a Mexican-American.

Manzanares v. Safeway Stores, Inc., 593 F.2d 968, 971,

19 FEP Cases 191 (10th Cir. 1979). Discrimination ac-

tionable under Section 1981 may occur in the employ-

ment context. Johnson v. Railway Express Agency, 421

U.S. 454, 459-60, 10 FEP Cases 817 (1975), Section 1981

gorge a basis for relief independent from Title VII.

. at 461.

The difference between the discriminatory intent re-

quired to recover under Section 1981 and that required

to recover under Title VII is not clear. See Manzanares

v. Safeway Stores, Inc., 593 F.2d 968, 971, 19 FEP Cases

191 (10th Cir. 1979). A greater showing of discriminatory

intent seems to be required for “constitutional” claims

of discrimination than is required for Title VII claims.

Id. This is so because some Title VII cases do not require

a showing by the plaintiff that the defendant employer

purposely discriminated against him. See Washington

v. Davis, 426 U.S. 229, 238, 12 FEP Cases 1415 (1976).

However, Title VII does not require proof of

discriminatory intent only when the suit is one for

“adverse impact.” See Griggs v. Duke Power Co., 401 U.S.

424, 3 FEP Cases 175 (1971). Title VII imposes liabili-

ty for ‘adverse impact’’ when an employer uses some

decision-making device that is neutral on its face, but

adversely affects the employment of a particular pro-

tected group. “Disparate treatment” cases, on the other

hand, follow the evidentiary rule of McDonnel-Douglas

Corp. v. Green, 411 U.S. 792, 5 FEP Cases 965 (1973).

From an examination of the shifting burdens suggested

by Green for “disparate treatment”’ cases, it is apparent

that these cases turn on a finding of intentional

discrimination. Therefore, the showing of discriminatory

intent required to establish Title VII liability under

Green differs only slightly, if at all, from the showing

required to establish Section 1981 liability.

(2) Whatley tried and proved his case under Title VII

on theory of ‘disparate treatment.” This Court applied

the Green rule, and found intentional aiscrimination

from the facts discussed above. This finding supports im-

position of Section 1981 liability as well. Therefore,

Whatley’s proof establishes Section 1981 liability in ad-

dition to Title VII liability.

Il. Remedies

Whatley was terminated from his position as lobby

manager at the Lakeside store on September 17, 1971.

Since that termination was an act of intentional

discrimination against him because of his national

origin, he is entitled to reinstatement to an equivalent

position with Skaggs. 42 U.S.C. $2000e-5(g). Whatley

cannot be reinstated to the position he formerly held at

Lakeside because Skaggs closed its Lakeside store

several years ago.

Whatley is also entitled to back pay. The period for

which back pay is recoverable commences on September

17, 1971, the date of his termination. Since Whatley filed

his charge of discrimination with the EEOC on

September 20, 1971, this is well within the statutory

limit restricting back pay liability to two years prior to

the filing of the charge with the EEOC. See 42 U.SC.

§2000e-5(g).

(3) Skaggs’ liability for back pay will terminate on the

date Skaggs offers to reinstate Whatley. See United

States v. Lee Way Motor Freight, Inc. 625 F.2d 918,

931-32, 20 FEP Cases 1345 (10th Cir. 1979); Schlei and

Grossman, Employment Discrimination Law 1240

(1976). The back pay award will be based on the salary

for an assistant or lobby manager with Skaggs. This

amount is to be adjusted for cost-of-living and step in-

creases which have occurred since September 17, 1971.

The back pay award is to be reduced by Whatley’s earn-

ings during the back pay period, including the amount

earned by Whatley while employed in Skaggs’

warehouse.

[4] However, the back pay award will not be reduced

by Whatley’s compensation award for the disability he

incurred while working at Gold Star Beef Company.

There might be justification for reducing the award by

this amount if Whatley had been in Skaggs’ employ

when the disability occurred, since Skaggs would have

paid premiums for disability insurance. See Equal

Employment Opportunity Commission v. Sandia Corp.,

639 F.2d 600, at 625-626, 23 FEP Cases 799 (10th Cir.

1980).

However, a disability award received as a result of an

injury while Whatley was working for another employer

is a collateral source. Id. at 625. In Sandia, the Tenth

Circuit affirmed the District Court’s refusal to allow a

set-off of unemployment benefits against a back-pay

award. A fortiori, set-off of a disability award cannot be

allowed, since it is compensation for an injury entirely

different from the loss of employment “‘cured”’ by a back-

pay award.

[5] Skaggs has raised the issue of constructive

discharge. This is not a constructive discharge case. A

“constructive discharge” is an act of demotion or transfer

designed to force an employee to resign. See Muller v.

United States Steel Corp., 509 F.2d 923, 10 FEP Cases

323 (10th Cir. 1975). Whatley was terminated-fired on

September 17, 1971 as lobby manager. The testimony

of Arnold Ford, the Skaggs employee who terminated

Whatley, establishes this. The only reason Whatley con-

tinued in Skaggs’ employ was his request for some sort

of job in the Skaggs organization. He was merely making

a diligent attempt to mitigate his damages by seeking

reemployment in a lesser capacity. In these cir-

cumstances, Whatley’s tenure in the Skaggs warehouse

has the same legal effect as if he had permanently left

Skaggs’ employ on September 17, 1971, and had found

employment elsewhere, later that same day.

Whatley is entitled to reasonable attorney’s fees as a

prevailing party in a civil action to enforce the provi-

sions of Title VII. See 42 U.S.C. §2000e-5(k). He is also

entitled to reasonable attorney’s fees as the prevailing

party in a civil action to enforce the provisions of Sec-

tion 1981. See 42 U.S.C. §1988. He is not, however, en-

titled to a double recovery of attorney’s fees. As the

prevailing party, Whatley is also entitled to recover his

costs.

Accordingly, it is

ORDERED that the Clerk enter judgment for the

plaintiff on his claims under Title VII, 42 USC.

§2000e-5, and the Civil rights Act of 1870, 42 U.SC.

§1981. The plaintiff must file his claim for attorney’s

fees within twenty days from the entry of this Order. The

defendant may file its objections within ten days after

this claim is filed. A hearing wil be set upon request

of counsel.

FURTHER ORDERED that the parties confer within

twenty days following the date of this Order in an at-

tempt to reach an agreement on the proper amount of

the back pay award. If no agreement can be reached,

the Court will consider appropriate motions as soon as

they can be heard on a short notice, priority basis. The

Clerk shall withhold entry of final judgment until after

the awards of attorney’s fees and back pay are

determined.

(THIS PAGE INTENTIONALLY LEFT BLANK)

WHATLEY v. SKAGGS COS.

U.S. District Court,

District of Colorado

WHATLEY v. SKAGGS COMPANIES, INC. No.

76-C-449, February 23, 1981

CIVIL RIGHTS ACTS OF 1986 AND 1964

1. Remedy — Back pay — Moonlight earnings

> 210.3655

Employer that unlawfully terminated assistant store

manager but then reemployed him as warehouse worker

is entitled to offset his ““moonlighting”’ earnings while

employed as warehouse worker, where he testified that

he worked 10 to 12 hours a day six or seven days a week

as assistant manager, and while he testified that

employer did not require him to work more than eight-

hour day or more than five days a week, responsibilities

of his position and incentives of faster promotion and

larger bonuses render it more likely than not that he

would have continued to work long hours had he remain-

ed assistant manager, thus rendering him unable to

moonlight.

2. Remedy — Back pay — Moonlight earnings

> 210.3655

Employer that unlawfully terminated employee is not

entitled to offset money that he earned while helping

his wife, where these earnings reflect work that he easily

could have performed in spare time, on occasional basis,

to help family business.

APPENDIX C

3. Remedy — Back-pay period » 210.304

Period for which former management employee may

obtain back pay for his unlawful discha-ge by employer

includes years during which he was disabled as result

of back injury suffered in job with another company,

where he would not have suffered injury had employer

not teminated him as assistant store manager and forced

him into blue-collar jobs requiring strenuous physical

labor.

4. Remedy — Back pay — Deduction > 210.3651

Employer that unlawfully terminated employee is not

entitled to offset against back-pay award monthly

payments that he received from sale of duplex in which

he lived, despite employee’s statement that he is in real

estate business, where payments constitute proceeds

from sale of personal residence.

5. Remedy — Profit-sharing benefits » 225.501

Former employee who immediately was employed by

employer in warehouse following his unlawful termina-

tion as assistant store manager and who subsequently

quit his warehouse job voluntarily before his profit-

sharing rights had vested is not entitled to be compen-

sated for profit-sharing benefits he lost when he left

employer’s employ.

Proceeding to determine back pay following 27 FEP

Cases 452, 502 F.Supp. 370. Back pay determined.

Paul A. Baca, Denver, Colo., for plaintiff.

Earl K. Madsen, Golden, Colo. for defandant.

6§

Full Text of Opinion

CARRIGAN, District Judge: — THIS MATTER is

before the Court for determination of the proper amount

of back pay and attorney’s fees to be awarded the plain-

tiff, Louis Whatley. Whatley prevailed against the defen-

dant Skaggs Companies, Inc., on claims of employment

discrimination brought under Title VII, 42 USC.

§§2000e, et seq., as amended, and the Civil Rights Act

of 1870, 42 U.S.C. §1981. See this Court’s Opinion filed

November, 25, 1980. At the parties’ request, a hearing

on these questions was held and additional evidence was

received.

1. Specific Findings and Conclusions

Skaggs intends to appeal from this Court’s finding that

Skaggs is liable to Whatley for employment discrimina-

tion. Subject to that reservation, the parties have

stipulated that Whatley is entitled to $5,115.00 in at-

torney’s fees.

The parties also have stipulated that, had Whatley re-

mained with Skaggs as a lobby manager, his additional

earnings during the time at issue would have totaled

$118,169.53. This figure reflects an offset for Whatley’s

earnings at Skaggs’ warehouse from September, 1971,

to June, 1973. The parties agree that Skaggs is entitled

to offset an additional $14,603.59 because of Whatley’s

full-time employment earnings at Gold Star Beef Com-

pany and at AC&S, Inc. during 1974 and 1975.

The parties disagree, however, on whether Skaggs may

offset Whatley’s part-time, ‘“‘moonlight” earnings dur-

ing 1971 through 1974 and his earnings from self-

employment during 1975, 1979, and 1980. The parties

also disagree on whether Whatley is entitled to have an

amount equa! to what he would have received through

Skaggs’ profit-sharing plan included in his back pay

The rule on “moonlighting” earnings is best stated

in Bing v. Roadway Express, Inc., 485 F.2d 441, 454, 6

FEP Cases 677 (5th Cir. 1973). A plaintiff's

“moonlighting” earnings will be offset against his back

pay award if he would have been unable to hold the

“moonlighting” job simultaneously with the job he lost

because of discrimination.

[1] Whatley testified, both at trial and at the post-trial

back pay hearing, that as lobby manager he worked ten

to twelve hours a day, six or seven days a week. Although

he testified at the hearing that Skaggs did not require

him to work more than an eight-hour day, or more than

five days a week, the responsibilities of his management

position and the incentives of faster promotion and

larger bonuses render it more likely than not that

Whatley would have continued to work long hours had

he remained a lobby manager. Therefore he would not

have been able to ‘moonlight.’ Consequently, Skaggs

is entitled to offset $14,329.79 because of Whatley’s

“moonlighting” earnings at the Dillon Companies and

School District No. 1 during 1971-74.

(2) Skaggs is not, however, entitled to offset Whatley’s

self-employment earnings in 1975, 1979, and 1980. In

1975, Whatley earned $732.77 while helping his wife

operate her business. These earnings reflect work he

easily could have performed in spare time, on an occa-

sional basis, to help the family business. Such earnings

should not be offset. See Buck v. Board of Education,

10 E.P.D. 410,363, 27 FEP Cases 461 (E.D.N.Y.1975).

(3) Whatley suffered a disability in November, 1975,

and did not work at all during 1976, 1977, or 1978: In

1979, Whatley again was able, occasionally, to help his

wife with her ousiness, but he drew no wages Effectively,

he was still disabled, and Skaggs is not entitled to an

offset for this year.

(4) The Whatleys purchased a duplex in Denver in

1959. Whatley and his immediate family lived in one

unit, and his wife’s parents lived rent-free in the other

unit. In February, 1980, the Whatleys, with Mrs.

Whatley’s parents, moved to Mesa, Arizona. They sold

their duplex on an installment sale contract, retaining

title until fully paid. The Whatleys receive $830.00 per

month pursuent to this contract. Skaggs claims that the

amounts received from this arrangement should be off-

set since Whatley testified at his derosition in July, 1980

that he was “in the real estate business.”

Mr. Whatley clarified this statement at the back pay

hearing. Mr. Whatley owns no income property other

than the Denver duplex. He is not in the busines of buy-

ing and selling real estate, and he has never been li-

censed as a realtor or broker. Whatley explained that

he has sometimes described himself as being “‘in the real

estate business’”’ to avoid the embarrassment and stigma

of admitting that he is unemployed at age forty-five with

no obvious disability. The Court finds as a fact that the

monthly payments from the land contract on the Denver

duplex constitute proceeds from the sale of Whatley’s

personal residence. These payments are not earnings

‘Although an argument might be made that Whatley should

receive no back pay during the time he was disabled, see Taylor

v. Safeway Stores, Inc., 524 F.2d 263, 267-68, 11 FEP Cases 449 (10th

Cir. 1975), the facts do no. justify the application of that rule in

this case. Here, Whatley would not have suffered his disabling back

injury had Skaggs not terminated him as lobby manager. Skaggs’

act of discrimination forced Whatley from his management posi-

tion into blue-collar jobs that required strenuous physical labor

resulting in injury to his back.

within the meaning of Title VII, 42 U.S.C. §2000e-5(g).

Hence Skaggs is not entitled to any offset for these

payments.

Finally, Whatley claims that $5,997.75 should be add-

ed to his back pay award to compensate him for the

profit-sharing benefits he lost when he left Skaggs. A

back pay award may include “profit sharing ... to which

plaintiff would have been entitled had [he] been con-

tinued in [his] employment.’ EEOC v. Kallir, Phillips,

Ross, Inc., 401 F.Supp. 66, 74, 11 FEP Cases 241 (S.D.

N-Y.1975), aff'd mem., 559 F.2d 1203, 15 FEP Cases 1369

(2d Cir.), cert. denied, 434 U.S. 920, 15 FEP Cases 1618

(1977).

[5] In this case, however, Whatley immediately

reentered Skaggs’ employ after he was terminated as

a lobby manager, and his profit-sharing rights were not

terminated when he was ousted as lobby manager.

Rather, those rights continued until he voluntarily quit

his warehouse job before his profit sharing had vested.

This Court has already found that Whatley’s dismissal]

as lobby manager in September, 1971, was a termina-

tion, and that his employment at the warehouse had the

same legal effect as a new job. Whatley left that

warehouse job voluntarily for reasons not directly

related to any act of discrimination by Skaggs, and, by

leaving, lost his profit-sharing rights Although Whatley

forfeited the funds previously credited to his profit-

sharing account by resigning before the six-year vesting

period, that forfeiture did not inure to Skaggs’ benefit.

Whatley’s account is merely redistributed to the ac-

counts held for the other plan participants.

For these reasons, Whatley is not entitled to have an

amount equal to his profit-sharing account included in

his back pay award.

Accordingly,

IT IS ORDERED that judgment be entered for the

plaintiff and against the defendant in the amount of

$89,236.15. Plaintiff is entitled to costs.

IT IS FURTHER ORDERED that the defendant pay

Paul A. Baca $5,115.00 in attorney’s fees.

§ 2000e-2(e). Discrimination because of race, color,

religion, sex, or national origin

(a) Employers. It shall be an unlawful employment

practice for an employer—

(1) to fail or refuse to hire or to discharge any in-

dividual, or otherwise to discriminate aganist any in-

dividual with respect to his compensation, terms, con-

ditions, or privileges of employment, because of such

individual’s race, color, religion, sex or national origin;

(2) to limit, segregate, or classify his employees or ap-

plicants for employment in any way which would

deprive or tend to deprive any individual of employ-

ment opportunities or otherwise adversly affect his

status as an employee, because of such individual’s

race, color, religion, sex, or national origin.

APPENDIX D

§ 2000e-2(j). Preferential treatment not required on

account of numerical or percentage imbalance.

Nothing contained in this title [42 USCS §§ 2000e et

seq.) shall be interpreted to require any employer,

employment agency, labor organization, or joint labor-

management committee subject to this title [42 USCS

§§ 2000e et seq.) to grant preferential treatment to any

individual or to any group because of the race, color,

religion, sex, or national origin of such individual or

group on account of an imbalance which may exist with

respect to the total number or percentage of persons of

any race, color, religion, sex, or national origin employed

by an employer, referred or classified for employment

by any employment agency or labor organization, ad-

mitted to membership or classified by any labor

organization, or admitted to, or employed in, any appren-

ticeship or other training program, in comparison with

the total number or percentage of persons of such race,

color, religion, sex, or national origin in any communi-

ty, State, section, or other area, or in the available work

force in any community, State, section, or other area.

42 USCS § 1981. Equal rights under the law

All persons within the jurisdiction of the United States

shall have the same right in every State and Territory

to make and enforce contracts, to sue, be parties, give

evidence, and to the full and equal benefit of all laws

and proceedings for the security of persons and proper-

ty as is enjoyed by white citizens, and shall be subject

to like punishment, pains, penalties, taxes, licenses, and

exactions of every kind, and to no other.

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