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Wednesday, April 29, 2009

Ind. Decisions - Two Indiana rulings today from 7th Circuit

In Rick Madden v. Royles Royce Corp. (SD Ind., Judge McKinney), a 6-page opinion, Judge Posner writes:

The Uniformed Services Em- ployment and Reemployment Rights Act, 38 U.S.C. §§ 4301 et seq., forbids discrimination in employment on the basis of military service. The plaintiff is a member of the U.S. Air Force Reserve (oddly, the record does not indicate the precise nature of his work for the Air Force, but it seems to involve the refueling of aircraft). He was hired by Rolls Royce, which though it is a famously English company has American facilities, for a temporary position as a “process engineer,” who designates the steps to be followed in a manufacturing process. Robin Savin, who hired and supervised the plaintiff, was a graduate of Purdue’s engineering program and was suitably impressed when the plaintiff told him that he had a degree in aeronautical engineering from Purdue. But the plaintiff made many mistakes in his new job—which is not surprising, because he was not a grad- uate of Purdue; he had flunked out. At the end of the 90- day period for which he had been hired, Savin (who did not know about the resumé fraud), because there was not enough work for all the process engineers, decided to terminate the plaintiff rather than giving him a permanent position or terminating another temp, who had done a better job than the plaintiff. But according to the plaintiff, Savin, when he told the plaintiff the bad news, did not complain about the plaintiff’s performance but instead said that since the plaintiff was about to be called for a stint of active duty with the Air Force, he should be the process engineer to be terminated.

Later the plaintiff applied for an engineering job with the codefendant, DS&S (Data Systems and Solutions), a supplier to (and now owned by) Rolls Royce. He was turned down and again says that the hiring officer referred (albeit obliquely) to his military obligations as a factor in turning him down. But before he would have been hired for the permanent job that he was seeking, there would have been a check of his credentials and work record, and not only his resumé fraud but also his poor work for Savin (the first probably, the second cer- tainly) would have come to light and doomed his chances for being hired, regardless of his military obligations. Although Savin had hired him without a careful check of his credentials, it was for a temporary job for a fellow alumnus (he thought) of Purdue. In fact, the hiring officer for DS&S did try to verify the plaintiff’s references and was unable to do so, which may well have been the real reason he didn’t offer the plaintiff a job.

The district judge granted summary judgment for the defendants with respect to both the refusal to give the plaintiff a permanent job and the later refusal of DS&S to hire him. * * *

[T]he first refusal to hire was based on his incompetent performance, discovered before the refusal, and the defendant in the second episode would have discovered the disqualifying facts about the plaintiff (certainly his poor work record and probably his resumé fraud as well) before hiring him, so the discriminatory motive could have had no consequence. In the McKennon case the discriminatory motive did have a consequence—it resulted in the plaintiff’s discharge sooner than would otherwise have happened.

There are other issues, but none that requires discussion. AFFIRMED.

In Westfield Insurance v. Sheehan Construction (SD Ind., Judge Young), a 7-page opinion, Chief Judge Easterbrook writes:
Sheehan Construction Co. was the general contractor for the Crystal Lake residential subdivision in Indianapolis. A few years after moving in, the owners began to notice moisture in places that should have been dry. An investigation traced the problem to defective work by one of Sheehan’s subcontractors. Litigation in state court ended with a settlement of about $2.8 million. Sheehan wants its insurer, Westfield Insurance Co., to indemnify that expense. (The settlement assigned to the homeowners Sheehan’s rights in the policy, but for simplicity we refer to Sheehan.) Westfield declined and filed this declaratory-judgment action. Indiana supplies the rules of decision. * * *

Sheehan scarcely tries to argue that the policy’s actual language covers the loss that the homeowners incurred. Nor does Sheehan deny that several Indiana decisions, addressing functionally identical situations, have held that the insurer need not indemnify a general contractor. * * * Sheehan contends that these opinions are “outdated” (as if judicial decisions came stamped with expiration dates!) because of the 1986 change to the trade association’s form policy. How a change in 1986 can supersede judicial decisions rendered in 1997 and 2004 is anyone’s guess. * * *

The parties’ other arguments do not require discussion. We cannot refrain from remarking, however, that Sheehan’s insistence that it is entitled to punitive damages because Westfield’s denial of coverage was “in bad faith” is the sort of argument that calls into question the bona fides of all other contentions. How can an insurer exhibit “bad faith” by taking a position that not only follows the policy’s language but also is endorsed by a district judge? We can imagine a procedural form of bad faith—refusal to take any stance on the policy’s coverage while leaving the insured to fend for itself in the underlying litigation—but Westfield addressed Sheehan’s claim with dispatch and filed a prompt declaratory-judgment suit to have the dispute resolved. Sheehan’s insistence, even after losing on the merits in the district court, that the insurer acted “in bad faith” implies that its strategy has been to strong-arm a settle- ment by in terrorem claims, rather than to vindicate its legal entitlements. Lawyers should think carefully about the message that their contentions convey to the court, as well as the effect they may have on the other litigants. AFFIRMED

Posted by Marcia Oddi on April 29, 2009 10:46 AM
Posted to Ind. (7th Cir.) Decisions