Rice v. Sunrise Express

• Court: U.S. Court of Appeals — Seventh Circuit
• Writing for the Court: Before EASTERBROOK, RIPPLE and EVANS; RIPPLE; TERRENCE T. EVANS
• Citation: Rice v. Sunrise Express, 209 F.3d 1008 (7th Cir. 2000)
• Decision Date: 07 April 2000
• Docket Number: Nos. 97-3982,s. 97-3982
• Parties: (7th Cir. 2000) Sandra L. RICE, Plaintiff-Appellee, v. SUNRISE EXPRESS, INCORPORATED, GAINEY CORPORATION and SUNRISE U.S.A., INCORPORATED, Defendants-Appellants. & 98-2195

Page 1008

209 F.3d 1008 (7th Cir. 2000)

Sandra L. RICE, Plaintiff-Appellee, v. SUNRISE EXPRESS, INCORPORATED, GAINEY CORPORATION and SUNRISE U.S.A., INCORPORATED, Defendants-Appellants.

Nos. 97-3982 & 98-2195

In the United States Court of Appeals For the Seventh Circuit

Argued May 17, 1999

Decided April 7, 2000

Appeals from the United States District Court for the Northern District of Indiana. No. 96 C 447--William C. Lee, Chief Judge. Roger B. Cosbey, Magistrate Judge. [Copyrighted Material Omitted] Before EASTERBROOK, RIPPLE and EVANS, Circuit Judges.

RIPPLE, Circuit Judge.

Sandra Rice brought an action against Sunrise Express, Inc. ("Sunrise Express") for violating the Family Medical Leave Act ("FMLA" or "the Act") after Sunrise Express terminated her upon her return from a medical leave. Sunrise Express argued that Ms. Rice would have been terminated even if she had not taken leave, and, thus, the company had not violated the Act. The jury returned a verdict for Ms. Rice.

On appeal, Sunrise Express first asserts that the district court erroneously placed the burden of proof on Sunrise Express to prove that it had a legitimate business reason for her termination. Sunrise Express' second argument is that insufficient evidence exists to find a violation of the FMLA. For the reasons set forth in more detail in the following opinion, we hold that the district court improperly placed the burden of proof on Sunrise Express. Therefore, we reverse the judgment of the district court and remand the case to the district court for proceedings consistent with this opinion.

I BACKGROUND

A. Facts

In 1994, Sunrise Express, a trucking company, hired Sandra Rice as a payroll billing clerk. When Sunrise Express hired Ms. Rice, it already employed two other payroll billing clerks. Both of these other employees left the company by early 1995. Thereafter, Sunrise Express hired Christy Huntington to replace the departing employees.

In 1995, the owners of Sunrise Express sold the company to Gainey Corporation ("Gainey"), and later, in 1997, Sunrise Express was merged into Sunrise U.S.A., Inc. ("Sunrise USA"). Due to the sale of Sunrise Express, the company reorganized its office, computerized its payables and receivables, and upgraded its computer system. Sunrise Express asserts that this upgrade, completed by November 1995, drastically increased the speed of data entry, the main responsibility of payroll billing clerks. Consequently, the workload of these individuals also was reduced drastically. The company further claims that it restructured the duties of several employees so that the manager of the payroll billing clerks assumed some of their tangential duties. Meanwhile, the company began to experience a decrease in its freight business. Sunrise Express argues that all of these factors led to its decision to terminate one of its payroll billing clerks.

Ms. Rice began working for Sunrise Express in January 1994; she had 6 to 12 months experience in the trucking industry and 8 to 10 years experience as a payroll/billing clerk. She never had received a written evaluation of her work, and she never had been disciplined, reprimanded, or verbally warned. Employees of Sunrise Express, including one of its owners, testified that she performed satisfactorily and that they had no problems with her work.

In mid-January 1996, Ms. Rice injured a toe on her right foot and experienced both swelling and infection. Her physician admitted her to the hospital and placed her on antibiotics. She remained in the hospital for one week and then returned home for a second week. Her physician then authorized her to work half-days, which she did for one more week. At the end of the week, however, the physician informed her that her toe had to be amputated. Ms. Rice underwent surgery on February 14 and remained on leave from work for 4 more weeks before her doctor released her to return to work beginning on March 11.

On March 5, Ms. Rice informed Sunrise Express that she would be returning to work on March 11; however, on March 7 she was informed that she was being laid-off beginning March 11. According to Sunrise Express, her lay-off stemmed from the decrease in freight and the ability of other employees to complete the work without her. Sunrise Express claimed that Ms. Rice was chosen for the lay-off over Ms. Huntington because the latter had a better work ethic and because Ms. Rice wasted time taking smoke breaks, playing computer games, and talking on the telephone.

Ms. Rice claims, however, that Betty Keiser, the owner of Sunrise Express, told her that the reason for her lay-off was because she was "already off." Tr.V at 60. The plaintiff also states that others in Sunrise Express management told her that the decision to terminate her was made months before her medical leave. Sunrise Express offered the personal circumstances of Ms. Rice as its reason for not terminating her before her FMLA leave. Sunrise Express states that it chose January 1 as the target date for Ms. Rice's lay-off because the company did not wish to dismiss an employee during the holiday season. Around the target date, Ms. Rice's family experienced the death of a member and also suffered other health and financial problems. Therefore, Sunrise Express claims, it decided to delay her lay-off a "short time" and within that "short time" she went on FMLA leave.

Ms. Rice sued Sunrise Express for violating 29 U.S.C. sec. 2614(a)(1) for failing to reinstate her to her previous position at the end of a qualified medical leave.¹ She thereafter amended her complaint to add Sunrise USA and Gainey as defendants. The district court denied the defendants' joint motion for summary judgment and Ms. Rice's cross-motion for partial summary judgment.

B. Procedural History

On September 17, 1997, the district court conducted a final pre-trial conference. At that meeting, the court raised the issue of whether Gainey was liable as a successor corporation or as a joint employee of Sunrise Express. Defense counsel told the court that, as a practical matter, the issue of Gainey's liability was not material to the outcome of the case or to the viability of any judgment that Ms. Rice might obtain. The parties explained that they had stipulated that Sunrise USA was the successor corporation of Sunrise Express following their merger and, therefore, would be liable for any judgment rendered against Sunrise Express. Satisfied that Sunrise USA had ample resources to pay any judgment that might be rendered in favor of Ms. Rice, the district court suggested that the parties enter into a stipulation to that effect and "simply hold in abeyance any determination of successor liability by Gainey Corporation until such time as it may become material." Tr.I at 5. Both counsel agreed that this course of action was acceptable, and the court stated that they could "get the issue out of the case for the time being, and perhaps not have to deal with it at all." Tr.I at 6.² No formal order was entered severing the successor liability claim against Gainey or dismissing Gainey without prejudice. The case proceeded to trial only against Sunrise Express and its successor, Sunrise USA. Indeed, the Agreed Statement of the Case identified the defendants at trial as Sunrise Express, Inc. and Sunrise USA, Inc. There was no mention of Gainey.

Several weeks later, the district court raised the possibility of referring this case to a magistrate judge for trial because the district judge's own calendar was running somewhat behind. Counsel for the defense later filed a written consent on behalf of Sunrise Express, Inc.³ No consent was sought from Gainey, even though the same counsel represented both Sunrise USA and Gainey.

The magistrate judge proceeded to conduct a two- day trial on October 22 & 23, 1997. Counsel appeared at trial on behalf of Sunrise Express and Sunrise USA. Throughout the course of trial, no indication was given that Gainey was missing from the trial.

At the conclusion of the two-day trial, the jury rendered a verdict in favor of Ms. Rice. The magistrate judge then entered an order and judgment in her favor and against Sunrise USA. The judgment order specifically indicated that the judgment was against Sunrise USA alone because the parties had stipulated that Sunrise USA was the "proper named defendant in this case." R.86 at 9.⁴ At no time did counsel for Sunrise USA object that the record lacked Gainey's consent to trial before the magistrate judge.

Sunrise USA appealed the judgment of the district court to this court. On December 16, 1997, we entered an order sua sponte requiring Sunrise USA, Sunrise Express, and Gainey to file a jurisdictional memorandum. In reply to that order, these corporations raised for the first time the argument that Gainey had not consented to trial by a magistrate judge and that such consent was necessary for jurisdiction.

On January 30, 1998, Ms. Rice filed, in the district court, a motion for correction of record and entry of an order nunc pro tunc. The district court granted Ms. Rice's motion and directed the clerk of the district court to enter a notation in the record to show that the court had, on September 17, 1997, accepted the stipulation of the parties that Gainey was to be severed from the case.⁵ In issuing the order, the district court pointedly noted that it was taking the action in order to show what had been done previously, not to alter substantive rights:

As the transcript of the September 17, 1997 final pre-trial conference shows, this court determined that Sunrise USA was financially able to satisfy any judgment against it, and then obtained both counsel's agreement that determination of Gainey's liability would not be an issue at trial. Therefore Gainey was severed from the trial. Under Rule 21 of the Federal Rules of Civil Procedure, severance creates two separate actions where previously there was but one.

R.122 at 6.

II DISCUSSION

A...