Tamika Graham v. Board of Education of the City ( 2021 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 19-2745
TAMIKA GRAHAM,
Plaintiff-Appellant,
v.
BOARD OF EDUCATION OF THE CITY OF CHICAGO and HEALTH
CARE SERVICE CORPORATION,
Defendants-Appellees.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 18 C 4761 — Virginia M. Kendall, Judge.
____________________
ARGUED MAY 26, 2021 — DECIDED AUGUST 10, 2021
____________________
Before EASTERBROOK, ROVNER, and HAMILTON, Circuit
Judges.
EASTERBROOK, Circuit Judge. Chicago offers public-school
teachers higher pay if they earn extra college credits. Tamika
Graham sought a higher salary under this program in July
2015, only to have her application ignored. She tried again in
September, and this time she was not ignored. Instead she was
fired on the ground that her application had been backdated,
2 No. 19-2745
which the Board of Education took as fraud. A hearing officer
ordered her reinstated with back pay, but the Board did not
honor this decision in full, published a declaration that she is
a fraudster, and refused to consider her for open positions.
These and all other factual statements come from her com-
plaint, which we must accept at this stage of the litigation.
Graham contends that the school system violated 42
U.S.C. §1983 by discriminating against her on account of sex
and race, violated the Employee Retirement Income Security
Act (ERISA) by depriving her of pension and health benefits,
and violated an Illinois law that requires the prompt payment
of wages. She has some other legal theories as well, and we
explain later why they need not be discussed. As for the three
we have mentioned: the district judge dismissed the com-
plaint on the ground that it does not state a claim on which
relief may be granted. Fed. R. Civ. P. 12(b)(6). The judge stated
that the §1983 claim fails because the complaint does not iden-
tify other employees who received beber treatment from the
school system, that the ERISA claim fails because the school
system’s plans are exempt from ERISA, and that the wage-
payment claim fails because the correct calculation of Gra-
ham’s pay depends on interpreting a collective-bargaining
agreement, which the judge thought preempted by federal la-
bor law. See 2019 U.S. Dist. LEXIS 7579 (N.D. Ill. Jan. 16, 2019)
(dismissing with leave to file an amended complaint), 2019
U.S. Dist. LEXIS 110365 (July 2, 2019) (dismissing the amended
complaint and terminating the suit).
The first of these decisions demands too much of a com-
plaint. The district judge wanted Graham to put in the com-
plaint all facts that would be needed to defeat a motion for
summary judgment. But that’s not the function of a
No. 19-2745 3
complaint. Even after Bell Atlantic Corp. v. Twombly, 550 U.S.
544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009), a com-
plaint in federal court pleads claims, not facts. A claim must
be plausible, but it need not supply the specifics required at
the summary-judgment stage. So the Supreme Court said in
Swierkiewicz v. Sorema N.A., 534 U.S. 506 (2002), which holds
that fact pleading to show a prima facie case is not needed in
an employment-discrimination case. Neither Twombly nor Iq-
bal questions the continuing force of Swierkiewicz. It is enough
for a plaintiff to assert that she was treated worse because of
protected characteristics. See, e.g., Swanson v. Citibank, N.A.,
614 F.3d 400 (7th Cir. 2010). That’s what Graham did assert.
Whether she can prove this is a subject for a later stage of the
litigation.
The state-law wage-payment claim likewise requires lible
analysis. The school system does not deny that 820 ILCS 115
requires it to pay, promptly, everything that is due—and for
Graham what is due includes a back-pay award. But the
Board argued, and the district judge held, that the Labor Man-
agement Relations Act, 29 U.S.C. §§ 141–97, preempts state
law because the calculation of Graham’s salary (and her back
pay) depends on interpretation of a collective-bargaining
agreement between the school district and the teachers’ un-
ion. That position fails to reckon with 29 U.S.C. §152(2), which
excludes states and their subdivisions from the scope of this
Act. See also Strasburger v. Board of Education, 143 F.3d 351, 359
(7th Cir. 1998). Illinois law alone determines whether the
school system owes Graham extra for delay in payment.
The district court’s errors with respect to §1983 and
preemption may be understandable because Graham repre-
sents herself. The school system’s counsel did not call
4 No. 19-2745
Swierkiewicz or §152(2) to the district court’s abention (or
ours)—though it should have done so, because Graham was
unaware of these controlling authorities. See N.D. Ill. Local R.
83.50, incorporating ABA Model Rule of Professional Con-
duct 3.3(a)(2). (Local Rule 83.50 adopts all of the Model Rules,
unless inconsistent with Illinois law, and Rule 3.3(a)(2) is com-
patible with Illinois law.) Graham has a right to self-represen-
tation, see 28 U.S.C. §1654, and her decision to use that right
has significance for the ethical responsibilities of defendants’
counsel. Surely the Board of Education and its lawyers know
about §152(2), which affects all of the Board’s labor relations.
The district judge should not have been left in the dark.
Although Graham does not want to be represented by a
lawyer, we asked one to appear as amicus curiae and present
oral argument on the ERISA question, which is more complex
than the two subjects we have covered. Whitney D. Herman-
dorfer of Williams & Connolly LLP filled this role ably, as did
J. Mabhew Rice of the same firm, who presented oral argu-
ment. Both have our thanks.
Two sections of ERISA exempt governmental pension and
welfare plans from the statute’s coverage. Section 4(b)(1), 29
U.S.C. §1003(b)(1), provides that ERISA (technically, “this
subchapter” of Title 29) does not apply to an employee benefit
plan if “such plan is a governmental plan (as defined in sec-
tion 1002(32) of this title)”. Section 1002(32) defines a “govern-
mental plan” to include “a plan established or maintained for
its employees by the Government of the United States, by the
government of any State or political subdivision thereof, or by
any agency or instrumentality of any of the foregoing.” The
district court observed that Chicago’s school system is a sub-
division of Illinois and concluded that this sebles the maber.
No. 19-2745 5
Graham maintains that charter schools in Illinois are private
bodies whose employees are included in Chicago’s pension
and welfare-benefit plans; she contended that this means that
ERISA must apply. But the district judge thought it enough
that the plans were “established” and “maintained” by the
Board of Education. The statute uses the word “or”, so either
establishing or maintaining will suffice, and Chicago’s plans
satisfy both. This makes it irrelevant, the district judge wrote,
whether the plans also cover employees of private businesses.
2019 U.S. Dist. LEXIS 7579 at *7–8.
A problem with this approach is that the definitional
clause speaks of a plan “established or maintained [by a unit
of government] for its employees” (emphasis added). The De-
partment of Labor, which has a principal role in administer-
ing ERISA, understands the phrase “for its employees” to
mean that, to be exempt, a governmental plan must not in-
clude more than a “de minimis” portion of private workers.
See Advisory Op. 2012-01A at 3–4 (Apr. 27, 2012); Advisory
Op. 2005-07A at 2 (May 3, 2005); Advisory Op. 2004-01A (Jan.
27, 2004); Advisory Op. 95-27A (Nov. 8, 1995). An earlier opin-
ion assumed that a governmental plan could not include even
one private employee. Advisory Op. 83-54A (Oct. 21, 1983).
The statutory language and the administrative opinions
present all sorts of problems. For example, what does the
phrase “for its employees” modify? “Maintained” alone, or
both “established” and “maintained”? The immediate ante-
cedent of “for its employees” is “maintained”, but “estab-
lished or maintained” seems to be a unit of like things, which
would imply that the phrase modifies both. Recent decisions
of the Supreme Court have had some trouble with the series-
qualifier canon and the rule of the immediate antecedent.
6 No. 19-2745
Compare Lockhart v. United States, 577 U.S. 347 (2016), with
Paroline v. United States, 572 U.S. 434 (2014). It isn’t clear what
the Justices would make of ERISA’s language.
Suppose a plan has only governmental workers when it is
“established” but coverage for private workers is added later.
Is that enough to maintain the exemption even though the
plan is no longer “maintained” exclusively for public work-
ers? The Department of Labor’s opinions do not address that
question, though the answer could affect how to treat Chi-
cago’s plan. And what weight do the Department’s opinions
receive when they apply? They are not regulations or admin-
istrative adjudications, so they are not entitled to Chevron def-
erence—compare Chevron U.S.A. Inc. v. Natural Resources De-
fense Council, Inc., 467 U.S. 837 (1984), with United States v.
Mead Corp., 533 U.S. 218 (2001)—but they might be entitled to
respect to the extent that they are well reasoned. See Yates v.
Hendon, 541 U.S. 1, 17–18 (2004). But do they qualify? Where
does the “de minimis” standard come from, except thin air?
What does it mean concretely? Why isn’t it enough that a gov-
ernmental plan covers some public employees, whether or not
it also covers private workers?
Fortunately, we need not answer any of these questions
today. Graham and the amicus curiae want us to treat charter
schools as private entities, but we conclude that Illinois law
provides otherwise. For one thing, that’s what state law says:
“A charter school shall be a public, nonsectarian, nonreligious,
non-home based, and non-profit school.” 105 ILCS 5/27A-5(a).
State law adds that charter schools operate “within the public
school system” of Illinois. 105 ILCS 5/27A-2(a)(3). We may as-
sume that a bare declaration of public status, without the at-
tributes of public operation, would not suffice to produce
No. 19-2745 7
governmental employees for the purpose of ERISA. Still, char-
ter schools have enough public abributes to make them (per-
missibly) governmental under ERISA.
Example: each charter school is “funded by the school dis-
trict in which it operates.” Comprehensive Community Solutions,
Inc. v. Rockford School District No. 205, 216 Ill. 2d 455, 458 (2005)
(cleaned up). Charter schools must have governing bodies
that are “separate and distinct from the governing body of
any [charter management organization] or [educational man-
agement organization].” 105 ILCS 5/27A-10.5. The Illinois
State Board of Education must approve charter schools (and
their credentials’ renewals) and must “review the governance
model proposed by the applicant to ensure that there are no
conflicts of interest.” 105 ILCS 5/27A-10.5(b). The local school
board and governing body of the charter school also must ap-
prove. 105 ILCS 5/27A-6. Each “governing body must include
at least one parent or guardian of a pupil currently enrolled
in the charter school”. 105 ILCS 5/27A-5(c). A charter means
that “the local school board authorizes the governing body of
the charter school to operate the charter school on the terms
specified in the contract.” 105 ILCS 5/27A-6(a). The charter
also “may not waive or release the charter school from the
State goals, standards, and assessments established [under
state law]” and (depending on population) may require the
charter school to administer “any other nationally recognized
standardized tests”. 105 ILCS 5/27A-6(b). Once a charter
school is approved, the school receives state funding to cover
its start-up costs as well as the ongoing costs of operation. 105
ILCS 5/27A-11.5(2).
What distinguishes charter schools from ordinary public
schools in Illinois is that they are not administratively parts of
8 No. 19-2745
the school district. They have their own managers, who hire
and fire teachers and decide how much to pay them. Charter
schools’ teachers are not subject to the collective-bargaining
agreements that govern public-school teachers. Administra-
tive flexibility is the stated benefit of a charter school, which
introduces an element of competition into the public educa-
tion system. Parents get to choose where to send their chil-
dren, and if more flexibility produces beber educational re-
sults, that will put pressure on public schools to improve. And
if a charter school doesn’t hold up well against other schools,
it will fail. Competition works both ways.
Because the state not only funds the charter schools but
also approves their establishment and continued existence, it
is not appropriate to treat them as private institutions subject
to public regulation. Cf. Rendell-Baker v. Kohn, 457 U.S. 830(1982). The business model of a charter school is some dis-
tance from the model of a genuinely private school, such as
the University of Chicago Laboratory Schools, the Francis W.
Parker School, Christian Heritage Academy, or Saint Mary of
the Angels School. Like a state university, a charter school in
Illinois is part of the set of public educational offerings, which
makes it appropriate to conclude that the school district may
include charter-school teachers in its pension and welfare
plans without losing its exemption under ERISA. Indeed, cov-
erage of the charter-school teachers is another indicator that
they are “public”; it is how Illinois ensures that their pensions
and other fringe benefits are paid, even if a given charter
school decides to close its doors.
This wraps up our discussion of the three principal issues.
As we said earlier, Graham advances many other contentions,
but it is not clear to us how she could have been injured by
No. 19-2745 9
the other things of which she complains, and injury is essen-
tial to make a suit justiciable. See, e.g., TransUnion LLC v.
Ramirez, 141 S. Ct. 2190 (2021).
For example, Graham contends that the school district vi-
olated several federal statutes by billing her for payments that
the lebers said were necessary to continue her medical insur-
ance after her discharge. But Graham did not pay, and the
school district did not cut off her health coverage. Another ex-
ample: Graham accuses the school system of violating the
Due Process Clause by not offering her an adequate hearing
about the validity of her discharge. Yet a hearing was offered
and held, and Graham prevailed. Where’s the injury?
The school system’s brief contended, among other things,
that Graham has not adequately pleaded injury. Graham’s re-
ply was generic. She observed that she pleaded lost wages.
That’s why her §1983 and late-payment claims are live. She
could be entitled to compensatory damages even if she has
received full back pay. See Burlington Northern & Santa Fe Ry.
v. White, 548 U.S. 53, 72–73 (2006). But Graham did not say
how each of her claims entails injury. After oral argument, we
gave her another chance. We directed Graham to explain by
June 9 how she “has been injured by each of the things about
which she complains. This information is essential to establish
whether Graham has standing.” Order of May 27, 2021 (em-
phasis added). Graham ignored this directive. Her silence for-
feits any claim of injury, except to the extent of the three sub-
stantive topics that we have discussed.
One final observation. Defendants contend that Graham
lost any opportunity to recover damages for the two claims
that we have held are valid because she filed a petition in
bankruptcy, and received a discharge, without revealing
10 No. 19-2745
these claims in her lists of assets. Omibing legal claims from
bankruptcy filings can cost a litigant the opportunity to pur-
sue them. See, e.g., Cannon-Stokes v. PoUer, 453 F.3d 446, 448
(7th Cir. 2006); Biesek v. Soo Line R.R., 440 F.3d 410, 413 (7th
Cir. 2006). But this is not a jurisdictional problem. Defendants
did not mention the bankruptcy in the district court. Just as
Graham has forfeited her opportunity to show injury from
many of her claims, defendants have forfeited their oppor-
tunity to have Graham’s remaining claims dismissed as a pen-
alty for concealing assets during bankruptcy.
With respect to all but the ERISA, §1983, and late-payment
claims, the judgment of the district court is vacated, and the
case is remanded with directions to dismiss for want of a jus-
ticiable controversy. With respect to the §1983 and late-pay-
ment claims, the judgment is vacated, and the case is re-
manded for proceedings consistent with this opinion. With
respect to the ERISA claim, the judgment is affirmed.