Tuesday, June 9, 2015

Sue the State: It's Where the Money Is

"Illinois is not broke. Illinois is flush."
-letter to the editor, Chicago Sun Times, June 4, 2015

A local municipality with a job opening for an individual who spoke fluent Spanish refused to hire an applicant who spoke fluent Spanish because she was not Hispanic.

That certainly sounds like workplace discrimination that would be actionable under Title VII of the Civil Rights Act of 1964, 42 U.S.C. sec. 2000e et seq. (“Title VII”), and perhaps under that part of the Civil Rights Act of 1871 that is known as the “Ku Klux Klan Act,” 42 U.S.C. sec. 1983 (“Section 1983”).

It is an unlawful employment practice under Title VII for an “employer” to fail or refuse to hire an individual “because of” his/her national origin. (42 U.S.C. sec. 2000e-2(a)). And a municipal corporation is a proper defendant in a Title VII case because “employer” is defined in terms of “person,” and the definition of “person” includes governments, government agencies, and political subdivisions. (42 U.S.C. secs. 2000e(a) and 2000e(b)).

A Title VII plaintiff must contend with two disadvantages, though they are more like molehills than like mountains. First, the general statute of limitations is short, i.e., 180 days from the unlawful employment practice, and 300 days in those states that have a counterpart to the federal Equal Employment Opportunity Commission (“EEOC”). Illinois has such a counterpart, the Illinois Human Rights Commission). There are some exceptions to the 180-day/ 300-day rule, but they are not relevant to the situation under examination here. Additionally, a Title VII plaintiff cannot go straight to the courthouse with the case but must first file charges with the EEOC or with a state counterpart (e.g., the Illinois Human Rights Commission) and obtain a right-to-sue letter. But as a rule all you have to do to get a right-to-sue letter is ask for it.

The case under examination here might also be actionable under section 1983, which imposes liability on those who, acting color of state law, deprive another of rights “secured” by the Constitution and laws of the United States. The case at hand entails an actual or arguable deprivation of the rights of a job applicant under a federal statute (Title VII) by one or more representatives of a local governmental unit, although there is a large body of case law to the effect that Title VII preempts section 1983 unless the conduct complained of rises to the level of a Constitutional violation. The typical “section 1983” plaintiff is someone who has had a disagreeable experience in the criminal justice system. But the statute applies in other contexts, too, including employment. (A section 1983 case is pending at this writing against the trustees of the University of Illinois on the grounds that their refusal to rubber stamp a conditional offer of employment extended by a college administrator violated the civil rights of an opinionated teacher from another university whose postings on social media have been characterized by some as anti-Semitic.)

A section 1983 case has obstacles all its own, and they can be daunting. Take the situation under examination here. The only viable defendant in the case could very well be a low-level clerk who communicated the rejection and added the point about the job being available only to a person of Hispanic background. There is no vicarious liability under section 1983 and the case law construing it. In concrete terms, the city would not be liable for the conduct of the low-level employee merely because of the employer-employee relationship between them. The city would be a viable defendant only if the violation of Title VII were the result of a policy, practice, or custom which top-level policymakers established or tolerated with indifference. Another obstacle of consequence to a 1983 case is the widespread availability of various immunity defenses.

But the statute of limitations in a section 1983 case is longer than the statute of limitations in a Title VII case. It matches the statute of limitations for a personal injury case, which is two years in Illinois. A section 1983 plaintiff can take the case straight to the courthouse without first routing it through an administrative agency. And there are some limitations on damages recoverable under Title VII that are inapplicable to a section 1983 case (e.g., 42 U.S.C. sec. 1981a).

The television and the newspapers are awash every day with stories about cities and states being on the brink of financial ruin for one reason or another (crushing pension obligations, crumbling roads and bridges, crippling rates of interest, and all the rest of it). But have you also noticed that they always have plenty of money (hundreds of thousands of dollars and even millions) to resolve civil rights lawsuits brought against them, especially under federal statutes of the kind examined above, which have one-way fee-shifting statutes that favor the plaintiffs. It calls to mind the now-famous exchange with bank robber Willie Sutton. Question: Willie, why do you rob banks? Answer: Because that’s where the money is.

If your rights have been violated, or you think they have, by the city or the state, don’t wait, get after them now. That’s where the money is, and it’s not theirs, so they don’t mind spending it.

Monday, June 8, 2015

Fiduciary Duties and the Presumption of Fraud

A stranger called recently in the mistaken belief that this office had prepared a power of attorney for property that named her estranged brother as the attorney-in-fact for her ill and aged mother. Evidently her brother had used a power of attorney to transfer large sums (hundreds of thousands of dollars) from accounts owned by his mother to accounts owned by him, although the wants and needs of the mother did not warrant these transactions.

He had not answered a letter from a lawyer demanding an accounting. The question was whether litigation against the brother would be worthwhile. And it was practically impossible to tell without actually engaging in some litigation. But the obstacles were manageable. One, although the brother had left Illinois, the “long-arm statute” would permit Illinois courts to exercise jurisdiction over him at least as to the transactions that took place while he lived in Illinois. Two, the amount at stake was certainly sufficient to justify some pursuit of him in the courts if he did not provide a satisfactory explanation, for the risk that he was judgment proof was all but nil: He was frugal and had no one to care for but himself. Above all, the transactions were presumptively fraudulent, and the onus would be on him to show otherwise.

Fraud is not, as a rule, presumed. But there is an exception when a fiduciary profits from a transaction with the beneficiary of his/her trust. In this case the son was a fiduciary of the mother, not because of the mother-son relationship, but because of the power of attorney. As such, he owed her the utmost honesty, loyalty, and due care; and he was answerable to her for the slightest breach of those duties. It is well-settled that when a fiduciary benefits from a transaction with the beneficiary of the trust relationship, the law will presume that the transaction was fraudulent. The presumption is rebuttable, but the fiduciary must show -- by evidence that is clear and convincing -- that the transaction was wholly fair and equitable to the beneficiary and in no way the product of undue influence or overreaching.

The courts look for the following “significant” factors: first, a showing that -- before the transaction -- the fiduciary made a full and frank disclosure of all relevant information; second, that the fiduciary furnished adequate consideration for the transaction; and, third, that the principal had the benefit of competent and independent advice. By those standards it would be practically impossible for the fiduciary in this case to rebut the presumption. (And let this be noted: Rebutting the presumption of fraud does not ipso facto establish that the transaction was free of fraud. The presumption is a legally acceptable substitute for evidence, and so if there is evidence of fraud, it might be sufficient to support a conclusion that the transactions were fraudulent even if the presumption of fraud were overcome.)

             See Franciscan Sisters Health Care Corp. v. Dean, 95 Ill.2d 452, 69 Ill. Dec. 960, 448 N.E.2d 872 (1983); Rizzo v. Rizzo, 3 Ill.2d 291, 120 N.E.2d 546 (1954); In re Estate of Miller, 334 Ill.App.3d 692, 268 Ill.