Jansen v. Packaging Corp. of America , 123 F.3d 490 ( 1997 )

EASTERBROOK, Circuit Judge,

concurring in part and dissenting in part.

Chief Judge Posner’s approach to this subject has many virtues, simplicity and the creation of desirable incentives prominent among them. I would join his opinion if I thought that federal judges were free to devise a law of vicarious liability for Title VII cases. Yet we are not. Title VII creates a national anti-discrimination rule but does not deal with all discrimination in the labor force. Only employers and their agents are covered. 42 U.S.C. § 2000e(b). Who speaks or acts for the employer? Who is an agent? Title YII does not say. It does not even hint. The answer must come from elsewhere. When a federal statute is silent, we obtain the necessary rule from state law, unless application of state law would undermine a federal norm. Atherton v. FDIC, — U.S. —, —, 117 S.Ct. 666, 670, 136 L.Ed.2d 656 (1997) (collecting cases); Turner/Ozanne v. Hyman/Power, 111 F.3d 1312 (7th Cir.1997).

Meritor Savings Bank, fsb v. Vinson, 477 U.S. 57, 72, 106 S.Ct. 2399, 2408, 91 L.Ed.2d 49 (1986), directs the inferior courts “to look to agency principles for guidance in this area.” “Agency principles” come from state law, as the Court implied by citing the Restatement of Agency, a distillation of decisions by state courts. “Agency principles” answer the question: who can make commitments, and whose acts can create liability, for a corporation? Like other questions about a corporation’s organization and distribution of powers, and about the liability of its investors (who really pay judgments against corporations), agency depends on state law, for it is state law under which corporations exist. Corporations are complex webs of contracts, themselves specialties of state law. Thus Meritor tells us to “look to,” not “make up,” agency principles. One can “look to” principles only in an existing body of law, which means state law, for there is no free-floating common law. Erie R.R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938).

Relations such as agency that are undefined by federal statute, like other elements of the background against which federal rules operate, come from state law — either directly, when the Rules of Decision Act, 28 U.S.C. § 1652, requires, or indirectly when federal law absorbs a needed rule from state law. (The difference between direct and indirect use of state law does not matter to these cases.) Although use of state law to determine the extent of vicarious liability entails disparity across state borders, even within a single firm, this is no more an objection than it would be for other torts or contracts. Suppose Slowik entered into a contract with Ellerth raising her salary, or made a defamatory statement about her (as she says he did, when he implied in conversation that she had capitulated to his demands). State law would determine whether the raise stuck (or whether someone higher up had the final word), and whether the slander was within the scope of employment — which is to say, state law determines who is the firm’s agent, and for what purposes. Who speaks or acts on behalf of a corporation is a fundamental question of corporate organization, all but invariably resolved under state law, as Atherton shows even for firms chartered by the United States.

Absence of a national rule means that firms must answer for supervisors’ acts in some states but not others. Many of my colleagues object to the possibility of variation, but if different treatment of the same facts in different states authorized the creation of federal common law, Swift v. Tyson, 41 U.S. 1, 16 Pet. 1, 10 L.Ed. 865 (1842), would hold sway today, United States v. Kimbell Foods, Inc., 440 U.S. 715, 99 S.Ct. 1448, 59 L.Ed.2d 711 (1979), would have come out the other way, and a host of cases from the last 20 years using state law to decide subsidiary, but dispositive, questions in litigation under federal statutes would be overthrown. E.g., O’Melveny & Myers v. FDIC, 512 U.S. 79, 114 S.Ct. 2048, 129 L.Ed.2d 67 (1994); Kamen v. Kemper Financial Services, Inc., 500 U.S. 90, 111 S.Ct. 1711, 114 L.Ed.2d 152 (1991); Wilson v. Garcia, 471 U.S. 261, 105 S.Ct. 1938, 85 L.Ed.2d 254 (1985); Marrese v. American Academy of Orthopaedic Surgeons, 470 U.S. 373, 105 S.Ct. 1327, 84 L.Ed.2d 274 (1985); Texas Industries, Inc. v. Radcliff Materials, Inc., 451 U.S. 630, 101 S.Ct. 2061, 68 L.Ed.2d 500 (1981); Robertson v. Wegmann, 436 U.S. 584, 98 S.Ct. 1991, 56 L.Ed.2d 554 (1978); Miree v. DeKalb County, 433 U.S. 25, 97 S.Ct. 2490, 53 L.Ed.2d 557 (1977). Reverse the uniformity question and ask: Why should an act of sexual harassment by a supervisor be attributed to the firm under state law but not under Title VII (or under Title VII but not state law)? Federal common law achieves horizontal but not vertical uniformity.

Title VII is no different, in needing the assistance of state-law principles, from the antitrust, aviation, banking, securities, and other civil rights laws, the subjects of the seven eases just cited. O’Melveny and Kamen in particular use principles of state law to address questions about responsibility of a firm for acts of employees or agents, although in both cases liability would be based on national law.¹ Employment is a contractual relation, see Hishon v. King & Spalding, 467 U.S. 69, 74, 104 S.Ct. 2229, 2233, 81 L.Ed.2d 69 (1984), which implies that the line between an employee (covered by Title VII) and a partner or independent contractor (not covered) comes from state contract law. Cf. Ost v. West Suburban Travelers Limousine, Inc., 88 F.3d 435 (7th Cir.1996) (using common law principles to distinguish employees from independent contractors, but without discussing choice of law). The question whether a person can bind the employer by contract — for example, by settling litigation under Title VII — similarly depends on state law. Morgan v. South Bend Community School Corp., 797 F.2d 471 (7th Cir.1986). Cf. Kokkonen v. Guardian Life Insurance Co., 511 U.S. 375, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994). In Peacock v. Thomas, — U.S. —, 116 S.Ct. 862, 133 L.Ed.2d 817 (1996), the Supreme Court held that.state law determines when an investor is vicariously liable for a federal-law judgment against the corporation. These principles likewise point to state law to determine when the corporation is vicariously liable for an employee’s acts.

None of the parties argues that federal statutory law specifies the extent of an employee’s ability to bind the employer. Federal law requires complainants to file them grievances initially with state agencies, 42 U.S.C. § 2000e-5(e), the better to coordinate application of national and local anti-discrimination rules. Why undercut coordination by adopting for purposes of Title VII a set of agency rules that differs from those the state would apply to the same claim of discrimination? Preserving vertical uniformity is a strong reason not to have federal rules. Although the parties have briefed these cases on the assumption that federal law governs, we are entitled to disregard that forfeiture and to decide independently which body of law supplies the essential principles. Kamen, 500 U.S. at 99, 111 S.Ct. at 1717-18. See also United States National Bank of Oregon v. Independent Insurance Agents of America, Inc., 508 U.S. 439, 445-48, 113 S.Ct. 2173, 2177-79, 124 L.Ed.2d 402 (1993).

State courts devising principles of vicarious responsibility are not stuck in the 1940s or condemned to use irrelevant analogies. Corporate law, actively monitored and adjusted by state courts, is one source of rules for determining when a manager’s acts are attributed to the firm. Many states are developing distinctive bodies of law about workplace harassment, sometimes holding employers liable for acts perpetrated by supervisors. Some of these cases have been decided under state or local anti-discrimination laws. State courts may interpret their usual agency principles when adjudicating claims of discrimination, just as we have been invited to do, or they may devise a specialized body of agency doctrine for discrimination cases, as several of my colleagues prefer. Green Hills Country Club v. Illinois Human Rights Commission, 162 Ill. App.3d 216, 113 Ill.Dec. 216, 514 N.E.2d 1227 (5th Dist.1987), shows that Illinois holds a firm answerable for the kinds of supervisory conduct involved in our cases. A statute dealing with vicarious liability in discrimination cases supports its conclusion. 775 ILCS 5/2-102(D). State statutes and judicial decisions alike supply the law that we should use. (Recall what Erie held: that statutory and common law are treated the same under the Rules of Decision Act.) Illinois would hold both employers vicariously responsible for the conduct of Ellerth’s and Jansen’s supervisors.² Federal law then makes that conduct actionable.

Illinois does not draw a line, for purposes of -vicarious liability, between quid pro quo demands and hostile work environments. We should not superimpose such a distinction on a body of agency law that does not require it. Not unless Title VII itself requires that distinction, and it does not. Title VII forbids sex discrimination in employment. Insistence on performance of sexual services as a condition of receiving the pay or position to which a person is otherwise entitled is sex discrimination; so is the maintenance of an environment in which women are made to feel unwelcome or miserable, when men performing the same tasks are treated well. See Harris v. Forklift Systems, Inc., 510 U.S. 17, 114 S.Ct. 367, 126 L.Ed.2d 295 (1993). Recognition that there are multiple ways to discriminate, in violation of federal law, does not imply different rules of vicarious liability.

Distinctively federal rules of vicarious liability in discrimination cases would be justified if application of the state’s law of agency undermined a federal interest. State law then is preempted, and the court must fashion a substitute. In Community for Creative Non-Violence v. Reid, 490 U.S. 730, 109 S.Ct. 2166, 104 L.Ed.2d 811 (1989), the Court devised a special agency rule for copyright cases, believing state rules to be inconsistent with one of the aims of the federal law. No one contends that Illinois’ law of agency and Title VII are similarly incompatible. Cf. Johnson v. Fankell, — U.S. —, —, —, 117 S.Ct. 1800, 1804-07, 138 L.Ed.2d 108 (1997) (collecting cases about the incompatibility caveat to the use of state law). Chief Judge Posner’s assertion that my approach “implies that by a stroke of the pen Illinois could eliminate all Title VII liability in that state that depended on the principles of agency law” (123 F.3d at 508) slights the doctrine that state law is used only if compatible with the federal norm. If a risk that state law may try to undercut the interest protected by federal law means that state law does not apply, then state law would never be used to resolve subordinate issues in federal litigation. A state’s ability to set a one-day statute of limitations for personal-injury claims would allow it to wipe out liability for constitutional torts under § 1983, which in turn (on my colleague’s view) would foreclose resort to state law no matter what its actual period of limitations was. What the Supreme Court has told us to do is different: we use state law unless its actual period of limitations is so short or so freighted with conditions that its application imperils vindication of the federal right. Burnett v. Grattan, 468 U.S. 42, 104 S.Ct. 2924, 82 L.Ed.2d 86 (1984). See Morgan, 797 F.2d at 475; Amanda Acquisition Corp. v. Universal Foods Corp., 877 F.2d 496 (7th Cir.1989). A state may set a period of limitations as long as it likes, or apply lax tolling rules; a longer time to sue does not undermine the interest protected by the federal law. See Gosnell v. Troy, 59 F.3d 654, 656 (7th Cir.1995). Similarly a state may expand employers’ liability, by imputing many supervisors’ acts to the firm, without offending Title VII. My colleagues do not identify a single state agency rule, anywhere in the nation, that is incompatible with Title VII. Irony lies in adopting a novel federal rule — one less favorable to victims of workplace torts than actual state rules — in order to avoid a phantom “hostile” state rule.

Employers’ (and employees’) main source of protection from silly rules is generality: a state cannot affect claims under federal law without affecting claims under state law too. Nothing I have written here implies that federal courts should pay heed to a law such as: “For purposes of litigation under Title VII, supervisors’ acts are attributed to the firm if....” Illinois’ agency rules largely favor claims by employees. How far a state may move toward negating principles of re-spondeat superior is not a question we need engage today. Answering that question is impossible in the abstract, and hard in the concrete; some difficulties, at least, therefore are avoided if we disregard state law. But inventing federal common law is a dubious pi’oject for reasons both legal and practical. The legal reasons I have covered. The practical objections include the difficulty of formulating a good rule. Why should we think that our latest brainstorm will really be an improvement? Most mutations in biology and law alike are inferior. Common law of agency has stood the test of time in a way my colleagues’ proposals have not. Any federal rule also creates vertical disuniformity: the same supervisory act is imputed to the firm for purposes of state but not federal law, or the reverse. Perhaps more surprisingly, a federal rule will do little to create horizontal uniformity. Thirteen federal courts of appeals comprising some 200 judges are bound to see these issues differently— the one proposition conclusively established by today’s welter of opinions — and the Supreme Court lacks the time (and may lack the inclination) to superintend a national body of agency law. Admiralty, the most distinctive body of federal common law, has taxed the Court’s resources and patience. Discrimination cases are more plentiful by two orders of magnitude, yet in the 33 years since Title VII was enacted the Supreme Court has heard only two involving workplace harassment. Prospects for a uniform federal common law in this field are dim.

Title VII does not preempt state anti-discrimination laws, and it is unwise to use one set of agency rules for state purposes and a completely different set for the same acts by the same supervisors under Title VII. Several of my colleagues’ opinions endorse strict liability for supervisors’ quid-pro-quo demands, even though Mentor rejected that approach for similar claims.³ Now it may be that agency principles often imply automatic corporate liability for supervisors’ misconduct, as Judge Wood concludes (and as Green Hills Country Club shows), but following normal agency principles when they produce that outcome does not offend Meritor; this is what Meritor requires us to do. Judge Wood’s opinion reaches sound conclusions about both the law and the facts; I join it in every respect but one.

The exception is that I would treat both Jansen and Ellerth as claims of hostile working environments. Although, on the approach Judge Wood and I take, there is no material legal difference between quid-pro-quo and hostile environment claims, this distinction matters to a majority of the court, so it is helpful to get the nomenclature straight. Slowik implied that he would hinder Ellerth’s advancement if she did not provide sexual favors, but when she refused he did not carry through. He did not reduce her status or salary; indeed, he secured a promotion for her. Ellerth quit only because the working environment was spoiled by the sexual innuendo and offensive touchings. Antoni, like Slowik, also relented when his victim balked. The delay in Jansen’s raise did not cost her anything; the employer provided back pay, and Jansen does not contend that she was entitled to interest on this sum. (For all we know, the employer paid interest.) Both plaintiffs therefore received their injuries exclusively from a supervisor’s boorish conduct, rather than via the pay envelope or by submitting to unlawful demands. Both Slowik and Antoni solicited other persons to pay tribute (in the form of sexual acts) in order to receive benefits to which they were entitled. That is not only attempted extortion of the subordinate but also attempted theft from the employer, because Slowik and Antoni tried to use the company payroll to finance the acquisition of personal sexual services. Extortion and theft, whether completed or attempted, are crimes, and the incidence of this conduct might decrease if prosecutors treated them that way. What matters for current purposes, however, is that the attempts failed, leaving only the unpleasant working environments.

2 . Chief Judge Posner cites an impressive number of opinions in which Illinois courts declined to impose respondeat superior liability for wrongs employees committed against third parties, such as customers, shoplifters, guests, students, and patients. Green Hills is that state’s only appellate case dealing with sexual harassment of coworkers, and given 775 ILCS 5/2-102(D), we lack a good reason to suppose that the Supreme Court of Illinois would disapprove the approach Green Hills took.

3 . Taylor, the supervisor in Meritor, allegedly demanded that Vinson perform sexual acts to show "gratitude” for his assistance in securing her employment and advancement; she says that she complied. See Vinson v. Taylor, 753 F.2d 141, 143-44 (D.C.Cir.1985). A woman forced to pay a bribe (in sexual services) is a victim of sex discrimination, because a male employee would have received the same salary or advancement without bribing the supervisor.