Graham v. Board of Education of the City of Chicago, No. 19-2745 (7th Cir. 2021)
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Chicago offers public-school teachers higher pay if they earn extra college credits. Graham sought a higher salary under this program in July 2015, only to have her application ignored. She tried again in September and was fired on the ground that her application had been backdated, which the Board of Education considered fraud. A hearing officer ordered her reinstated with back pay. Graham alleges 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.
Graham sued, alleging violations of 42 U.S.C. 1983 by discriminating against her on account of sex and race and of the Employee Retirement Income Security Act (ERISA) by depriving her of pension and health benefits.
The Seventh Circuit vacated the dismissal of the complaint. The complaint does not identify other employees who received better treatment from the school system but It is enough for a plaintiff to assert that she was treated worse because of protected characteristics. The school system’s plans are exempt from ERISA. 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.
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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 o ers 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 red on the ground that her application had been backdated, 2 No. 19-2745 which the Board of Education took as fraud. A hearing o cer 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 complaint, 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 bene ts, 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 complaint 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 identify 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 wagepayment claim fails because the correct calculation of Graham’s pay depends on interpreting a collective-bargaining agreement, which the judge thought preempted by federal labor law. See 2019 U.S. Dist. LEXIS 7579 (N.D. Ill. Jan. 16, 2019) (dismissing with leave to le an amended complaint), 2019 U.S. Dist. LEXIS 110365 (July 2, 2019) (dismissing the amended complaint and terminating the suit). The rst of these decisions demands too much of a complaint. The district judge wanted Graham to put in the complaint 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 complaint in federal court pleads claims, not facts. A claim must be plausible, but it need not supply the speci cs 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 Iqbal questions the continuing force of Swierkiewicz. It is enough for a plainti 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 Management 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’ union. 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 represents 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 Conduct 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 compatible with Illinois law.) Graham has a right to self-representation, see 28 U.S.C. §1654, and her decision to use that right has signi cance for the ethical responsibilities of defendants’ counsel. Surely the Board of Education and its lawyers know about §152(2), which a ects 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. Hermandorfer of Williams & Connolly LLP lled this role ably, as did J. Mabhew Rice of the same rm, who presented oral argument. 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 bene t plan if “such plan is a governmental plan (as de ned in section 1002(32) of this title)”. Section 1002(32) de nes a “governmental 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 subdivision 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-bene t 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 su ce, 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 de nitional clause speaks of a plan “established or maintained [by a unit of government] for its employees” (emphasis added). The Department of Labor, which has a principal role in administering ERISA, understands the phrase “for its employees” to mean that, to be exempt, a governmental plan must not include 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 opinion 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 antecedent of “for its employees” is “maintained”, but “established or maintained” seems to be a unit of like things, which would imply that the phrase modi es both. Recent decisions of the Supreme Court have had some trouble with the seriesquali er 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 workers? The Department of Labor’s opinions do not address that question, though the answer could a ect how to treat Chicago’s plan. And what weight do the Department’s opinions receive when they apply? They are not regulations or administrative adjudications, so they are not entitled to Chevron deference—compare Chevron U.S.A. Inc. v. Natural Resources Defense 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 governmental 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-pro t 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 assume that a bare declaration of public status, without the attributes of public operation, would not su ce to produce No. 19-2745 7 governmental employees for the purpose of ERISA. Still, charter schools have enough public abributes to make them (permissibly) governmental under ERISA. Example: each charter school is “funded by the school district 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 management 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 con icts of interest.” 105 ILCS 5/27A-10.5(b). The local school board and governing body of the charter school also must approve. 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 speci ed 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 re teachers and decide how much to pay them. Charter schools’ teachers are not subject to the collective-bargaining agreements that govern public-school teachers. Administrative exibility is the stated bene t of a charter school, which introduces an element of competition into the public education system. Parents get to choose where to send their children, and if more exibility produces beber educational results, 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 distance 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 o erings, 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, coverage of the charter-school teachers is another indicator that they are “public”; it is how Illinois ensures that their pensions and other fringe bene ts 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 essential 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 violated several federal statutes by billing her for payments that the lebers said were necessary to continue her medical insurance after her discharge. But Graham did not pay, and the school district did not cut o her health coverage. Another example: Graham accuses the school system of violating the Due Process Clause by not o ering her an adequate hearing about the validity of her discharge. Yet a hearing was o ered 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 reply 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 (emphasis added). Graham ignored this directive. Her silence forfeits any claim of injury, except to the extent of the three substantive topics that we have discussed. One nal observation. Defendants contend that Graham lost any opportunity to recover damages for the two claims that we have held are valid because she led 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 lings can cost a litigant the opportunity to pursue 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 opportunity to have Graham’s remaining claims dismissed as a penalty 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 justiciable controversy. With respect to the §1983 and late-payment claims, the judgment is vacated, and the case is remanded for proceedings consistent with this opinion. With respect to the ERISA claim, the judgment is a rmed.
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