Morgan v. South Bend Community School Corp.

• Citation: 797 F.2d 471
• Decision Date: 29 August 1986
• Docket Number: No. 85-2955,85-2955
• Parties: 41 Fair Empl.Prac.Cas. 736, 40 Empl. Prac. Dec. P 36,364, 34 Ed. Law Rep. 19 Willie E. MORGAN, Plaintiff-Appellant, v. SOUTH BEND COMMUNITY SCHOOL CORPORATION and James P. Scamman, Defendants- Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 471

797 F.2d 471

41 Fair Empl.Prac.Cas. 736,

40 Empl. Prac. Dec. P 36,364, 34 Ed. Law Rep. 19

Willie E. MORGAN, Plaintiff-Appellant, v. SOUTH BEND COMMUNITY SCHOOL CORPORATION and James P.

Scamman, Defendants- Appellees.

No. 85-2955.

United States Court of Appeals, Seventh Circuit.

Argued May 14, 1986.

Decided July 29, 1986.

Rehearing and Rehearing En Banc Denied Aug. 29, 1986.

LaVeeda Morgan Battle, Montgomery, Ala., for plaintiff-appellant.

Richard W. Morgan, South Bend, Ind., for defendants-appellees.

Before POSNER and EASTERBROOK, Circuit Judges, and CAMPBELL, Senior District Judge. ^*

EASTERBROOK, Circuit Judge.

In September 1980 a kindergarten student was sexually molested on her way to Perley School in South Bend, Indiana. Dale Fozo, the principal of Perley, neglected to report the incident promptly to the police. The school district held a meeting of all principals to remind them of the steps to be taken, including immediate reports to parents and the police, in the event of sexual incidents. Willie Morgan, the principal of Oliver School, was at the meeting. Within two weeks an eighth grade boy and a seventh grade girl were found having sexual relations in the basement of Oliver School. Morgan was informed almost immediately but told others not to let the news "out of the building". Neither the school district's administration nor the police learned of the event until April 1981. On April 22, 1981, the director of employee relations of the school district reminded Morgan in the strongest terms that he must report sexual incidents immediately. The very next day two Oliver School students were caught in a boy's bathroom immediately after school, apparently engaged in intercourse while other students watched. The school's custodian chased the students away; they went to a nearby garage and took up where they had left off. When Morgan learned of the incident, he told the students that in the future they should leave the building promptly. Only after the school counselor at Oliver School had learned of the incident, and insisted that Morgan call the police, did Morgan notify the administration and the police.

These lapses on Morgan's part led the officials of the school district to conclude that Morgan lacked sound judgment, a requirement for a principal. Morgan, the principal at Oliver since 1975, had been told at the beginning of the 1980-81 school year that his performance would be monitored closely. (One incident, in which Morgan taped a conversation in his office and replayed it so that others could hear, led to the creation of a special committee to "monitor the staff-principal working relationship at Oliver School in an effort to resolve conflicts and improve staff moral [sic].") During this year of close attention Morgan not only neglected to report the two sexual incidents but also decided to overlook the theft of a basketball backboard at the school. In addition, Morgan allowed the owner of the garage in which the children had continued their escapade of April 23 to question the boy, in private, at the school. Morgan conceded that such private interrogation was against the school district's policy and his own better judgment.

On April 29, when the school district first learned of the April 23 incident, Morgan was suspended with pay. At a meeting on May 1, officials of the school district, including James Scamman, the superintendent of schools, told Morgan that his evaluation for 1980-81 would be negative. Although Morgan had a contract as an administrator through 1981-82, the negative evaluation would make a renewal unlikely. Scamman asked Morgan to accept a reassignment as a classroom teacher in 1981-82, a position in which Morgan would have tenure. Morgan would keep his principal's salary and benefits for 1981-82 but would revert to a teacher's lower pay in the fall of 1982. Morgan later accepted Scamman's proposal. His suspension as principal was lifted. Morgan finished the year as principal of Oliver School and became a classroom teacher.

The school district calls this a "voluntary reassignment". Of the 20 principals identified for close monitoring during the 1980-81 year, four were "voluntarily reassigned" at the end of the year. One of them was Dale Fozo, whose oversight in September 1980 led to the increased sensitivity about sexual misconduct. Three of the four "voluntarily reassigned" principals are white. Morgan is black. He filed this suit under Title VII of the Civil Rights Act of 1964, 42 U.S.C. Sec. 2000e et seq., and 42 U.S.C. Secs. 1981 and 1983. The district court held a bench trial and concluded that Morgan had been demoted because of substandard performance rather than race.

I

At the conference the Equal Employment Opportunity Commission held in December 1981 on Morgan's charge of discrimination, the hearing officer proposed a settlement. Scamman, Ralph Komasinski (the Director of Employee Relations), and the board's attorney discussed the proposal among themselves, and Scamman agreed to it. Komasinski asked Scamman whether he had the votes on the board; Scamman said he did, and he later orally accepted the proposal.

The terms of this settlement were that Morgan would be assigned to the next available principalship (presumably at the beginning of the 1982-83 school year), that he would retain his principal's salary until reappointed as a principal, that the school board would expunge from its files all references to the charge of discrimination, and that Morgan would not be penalized in the future because of his charge. The agreement was to be reduced to writing later. The meeting broke up, the end to the dispute apparently at hand. The defendants concede that Scamman made this agreement with Morgan.

But Scamman did not have the votes. The district court concluded: "Scamman canvassed some board members to determine what their opinions were on the proposed reinstatement of Mr. Morgan to the next available principal's position. The opinions which are documented in this record are all negative." Scamman did not speak with all of the members, but he spoke with enough to see that the deal would fail if put to a vote. The district court continued: "In an effort to avoid the negative effect of making a formal recommendation at a public meeting and having it defeated, Dr. Scamman decided not to make a formal recommendation at a public meeting. Mr. Morgan was notified that the proposed settlement would not be implemented."

Morgan wants the board to implement the settlement. His argument has four steps: first, the existence of a settlement of a claim under Title VII is a question of federal law; second, federal law recognizes oral settlements; third, oral settlements are binding if approved by those with apparent authority; fourth, Scamman and the board's attorney had apparent authority to bind the board. Each link in this chain is troublesome.

Start with the proposition that the existence of a settlement is governed by federal law. We have held this at least three times. Lyles v. Commercial Lovelace Motor Freight, Inc., 684 F.2d 501, 504 (7th Cir.1982); Glass v. Rock Island Refining Corp., 788 F.2d 450, 454-55 (7th Cir.1986); Taylor v. Gordon Flesch Co., 793 F.2d 858, 862 (7th Cir.1986). Each of these cases also holds that under federal law oral settlements of Title VII claims are enforceable. Glass and Taylor cite Lyles, and Lyles, which does not independently analyze the question, cites Fulgence v. J. Ray McDermott & Co., 662 F.2d 1207, 1209 (5th Cir.1981). See also Eatmon v. Bristol Steel & Iron Works, Inc., 769 F.2d 1503 (11th Cir.1985) (following Fulgence ). The discussion in Fulgence reads:

Since this case deals with the operation of a Congressional statutory scheme, the federal courts are competent to determine whether a settlement exists without resort to state law. Creation of a federal rule rather than absorption of a state rule is appropriate where, as here, the rights of the litigants and the operative legal policies derive from a federal source. No significant state interest would be served by absorbing state law as the rule of decision governing Title VII settlement agreements. On the other hand, Louisiana's requirement that settlement agreements be reduced to writing might hamper a significant federal interest, since Congress has mandated a policy of encouraging voluntary settlement of Title VII claims. It bears noting, finally, that the Supreme Court has already established prerequisites to the validity of settlement agreements in Title VII suits. [They must be voluntary waivers.] We conclude that federal law determines the validity of oral settlement agreements in employment discrimination actions brought pursuant to Title VII.

662 F.2d at 1209, citations and footnote omitted. Morgan wants us to extend federal law to questions of authority to make the settlement agreement. Whether to do this depends in part on the strength of the principle that federal law applies.

The Rules of Decision Act, 28 U.S.C. Sec. 1652, states: "The laws of the several states, except where the Constitution or treaties of the United States or Acts of Congress otherwise require or provide, shall be regarded as rules of decision in civil actions in the courts of the United States, in cases where they apply." This statute, which Fulgence does not cite, is not limited to diversity cases. See, e.g., Texas Industries, Inc. v. Radcliff Materials, Inc., 451 U.S. 630, 101 S.Ct. 2061, 68 L.Ed.2d 500 (1981), which applies state law to determine the effect of a settlement in an antitrust case. Another statute, 42 U.S.C. Sec. 1988, applicable to civil rights cases, provides:

The jurisdiction in [civil rights cases] shall be exercised and enforced in conformity with the laws of the United States, so far as such laws are suitable to carry the same into effect; but in all cases where they are not adapted to the object, or are deficient in the provisions necessary to furnish...