Civil claim settlements often involve an intricate, if not confusing, interaction of different sources of law. Settling Title VII1 intentional discrimination claims with local government entities in Illinois provides no exception.2 Most civil claim settlements will implicate elements of contract, professional responsibility, agency, and various procedural laws at some point during the settlement process. Settling Title VII claims with local government entities in Illinois also involves these elements of law. But due to the federal nature of the Title VII claim and the defendant’s governmental status, settling such claims also requires a further analysis into both state and federal law to insure a valid settlement agreement. This article focuses on those federal and state laws that take on a special significance in the context of settling Title VII claims with local government entities. More specifically, this article attempts to point out the legal traps and pitfalls that an unwary Title VII claimant or government defendant can fall into before and during the settlement process.
The case of Carver v. Sheriff of LaSalle County3 best illustrates these legal traps and pitfalls that parties may encounter when settling Title VII intentional discrimination claims with local government entities in Illinois. That involves a former employee of the LaSalle County Sheriff’s Department who sued the LaSalle County Sheriff’s Office, the sheriff individually, and LaSalle County in federal court for intentional employment discrimination under Title VII. Ultimately, the Seventh Circuit concluded that LaSalle County was the responsible party for compensating the plaintiffs under a settlement agreement. More importantly, however, was the way in which the federal courts and the Illinois Supreme Court reached their conclusions.
What becomes clear from the Carver cases is that to create a valid and functional settlement agreement between the employee and the government employer, both parties must ensure that the employer is the correct entity to settle an employment claim, make certain that the individual making the settlement on behalf of the governmental unit has authority to settle, and that all government entities with an interest in settling have the opportunity to participate.
II. Carver v. Sheriff of LaSalle County
The facts of the Carver case illustrate the importance of taking the necessary precautions to ensure that the claimants and defendants enter into a valid settlement agreement. In June 1994, the plaintiffs filed a Title VII intentional discrimination suit in federal court, naming the LaSalle County Sheriff’s Office, Sheriff Condie individually, and LaSalle County as defendants. The county moved - and was granted - a dismissal from the case. Following the dismissal, the plaintiffs filed an amended complaint naming only Sheriff Condie as the defendant.4 During pre-trial preparation, the plaintiffs entered into settlement discussions with the sheriff and rejected an offer for $30,000. After further discussions, the parties came to an agreement where $500,000 would be assessed “against defendant Anthony M. Condie, Sheriff of LaSalle County.” Both parties indicated to the court before it issued a consent decree that they regarded the judgment as an obligation of the sheriff’s department. 5
Although the parties agreed the settlement obligation was the sheriff’s department, the plaintiffs filed and served a third party citation to discover assets on LaSalle County to satisfy the terms of the consent decree because the Counties Code appeared to require the county to indemnify the sheriff’s office.6 The county responded with a motion to set aside the consent decree, but the court denied the motion because the county was no longer a party to the case. The court also quashed the plaintiffs’ citation because there was no evidence that the county had in its possession any of the sheriff’s assets.7
The county appealed the court’s decision and the Seventh Circuit (Carver I) reversed and remanded with instructions to determine the county’s standing to attack the consent decree.8 After remand and subsequent appeal to the Seventh Circuit, the court certified the question to the Illinois Supreme Court of “whether…Illinois law requires counties to pay judgments entered against a sheriff’s office in an official capacity.” The Supreme Court held that the sheriff’s office (not the sheriff individually) is the proper defendant, that the sheriff has the authority to settle claims against the sheriff’s office, and that the county is required to pay under state law any judgment entered in accordance with the settlement agreement.9 The decision rested on the fact that the county had prior notice of the proceedings because it was an original party; the Court refrained from deciding what would happen if the county did not have prior notice.10 The Seventh Circuit concluded from the Illinois Supreme Court’s opinion, that for the purposes of the Title VII claims against the sheriff’s office, the county is an indispensable party to the litigation, and must pay the plaintiff the amount agreed upon in the settlement agreement.11
he framework established by the Illinois Supreme Court and the Seventh Circuit requires parties in Title VII cases to determine the proper governmental defendant under federal and state law, which parties may settle and ultimately pay under state law, and that all indispensable parties have an opportunity to settle pursuant federal procedural rules.12 The following sections more specifically address the legal issues that underlie the Carver decisions.
III. The Proper Government Entities to Include in Settlement Talks
For the purposes of a Title VII claim against a local governmental unit in Illinois, Section 9-102 of the Local Governmental and Government Employees Tort Immunity Act (“Tort Immunity Act”) provides the basis for government entities to enter into a settlement agreement.13 Section 9-102 provides:
“…A local public entity may make payments to settle or compromise a claim or action which has been or might be filed or instituted against it when the governing body or person vested by law or ordinance with authority to make over-all policy decisions for such entity considers it advisable to enter into such a settlement or compromise.”14
The court in Carver II held that the sheriff’s office was a “local public entity” under Section 9-102 and therefore was a proper entity to be involved in settlement talks.15 But to reach this conclusion, the court had to first explain why Section 9-102 was the controlling statute,16 and then why the sheriff’s office itself was a “local public entity.”17
The Illinois Supreme Court concluded that Section 9-102 of the Tort Immunity Act is the controlling statute in Illinois governing settlement talks with government entities for the purpose of Title VII.18 First, the court notes that Title VII claims are “by necessity, an official-capacity action because only an ‘employer’ may be held liable for discrimination which violates Title VII’s provisions.”19 The court cites Williams v. Banning, 20 where the Seventh Circuit, in applying this rule, rejected the plaintiff’s argument that her supervisor in a construction company should be held individually liable under Title VII. In Williams, the court analogizes the definition of “employer” under Title VII to the definition of employer under the Americans with Disabilities Act (“ADA”), where the Seventh Circuit had previously determined that Congress intended liability under the ADA to only apply to the employer, not the agents of the employer as well. The underlying reasoning is that because Congress restricts the application of Title VII to employers with fifteen or more employees, it is reasonable to infer that Congress did not intend liability under Title VII to apply to small entities or to individuals.21
Because Title VII only applies to “official-capacity” type claims, the court in Carver II then concluded that Section 9-102 of the Tort Immunity Act was the only applicable state statute governing settlement agreements with government entities involving Title VII claims.22 The court rejects the notion that because Section 5-100223 of the Counties Code requires the county to indemnify the sheriff or sheriff’s deputies for judgments recovered against him or her, the county is necessarily liable in Title VII cases. The court notes the language in the statute referring to “the sheriff” and to claims “against him or her” indicate Section 5-1002 was only meant to apply to cases where the sheriff if sued individually.24 Section 9-102, however, refers to “the local public entity” and therefore applied to cases where the public entity itself is being sued.25
The court then proceeded to answer the next obvious question, whether the sheriff’s office is considered a public entity under Section 9-102.26 For the purposes of the Tort Immunity Act, Section 1-206 defines a “local public entity” to include, among others, a county and municipality.27 Section 1-206 also has a “catch all” clause as it also applies to “all other local government bodies” not already listed. One issue in Carver II was whether the sheriff’s office was a “local public entity” under Section 1-206. If so, the sheriff could settle the Title VII claim in his official capacity under Section 9-102. If not, the settlement agreement entered into would be invalid. The sheriff’s office is not specifically listed under Section 1-206, therefore, if the sheriff’s office was to be included it must fall under the “all other local government bodies” clause. The court held that the sheriff’s office is a “local public entity” under the Tort Immunity Act. The court’s reasoning provides a legal framework for future Title VII plaintiffs and government defendants in Illinois.
Citing Franklin v. Zaruba,28 the Carver II court concludes that the sheriff’s office is a “local public entity” for the purposes of the Tort Immunity Act.29 Franklin was a Seventh Circuit, Section 1983, case where the plaintiffs sued the Sheriff of DuPage County in his official capacity for alleged Constitutional violations that occurred while the plaintiff was in custody of the sheriff’s office following an arrest. The Franklin court was asked to determine the question of whether the sheriff was an agent of the state or the county for purposes of respondeat superior liability. The court held that in Illinois, the sheriff was not an agent of either the state or the county, but an agent of the county sheriff’s office itself, an independently-elected office, which is not subject to the control of the county in most respects.30 For the Franklin court, the controlling factors were the constitutional nature of the office31 and the ability to make policy decisions for the sheriff’s office.32 The fact the sheriff’s office was not a taxing authority and depended on the county for funding was not a controlling factor for the purposes of Section 1-206.33
Those parties seeking to enter into settlement agreements, therefore, must be aware that Title VII claims are official capacity claims, and that Section 9-102 of the Tort Immunity Act provides the source of law for government entities to both engage in settlement talks and to enter into settlement agreements. In most cases, the government entity will be a specifically listed entity under Section 1-206. Municipalities, counties, and school districts, for example, are all subject to the Tort Immunity Act. For government entities not specifically listed in Section 1-206, the parties must first look to the nature of the office, and whether the entity is charged with the ability to formulate employment policies.
IV. Authority to Settle
Once the proper government defendant has been identified, both parties must ensure that the individual representing the government entity in settlement talks has the proper authority to bind the government entity to a settlement agreement. The court in Carver II concluded that because Section 9-102 empowers local government entities to enter into settlement agreements, the person who makes overall policy decisions for the government entity is the proper person to bind the government to an agreement.34 In Illinois, the General Assembly empowered the elected county sheriff with the ability to make the overall policy decisions for the office of the sheriff.35 Determining who has authority to settle in cases involving other types of local government entities, however, may become more difficult.
Although the court in Carver II did not explicitly indicate which body of law would govern, the Seventh Circuit had previously concluded that state law will govern questions regarding the authority to settle Title VII cases.36 The Seventh Circuit in Morgan v. South Bend Community School Corp, discussed the applicability of state law in resolving who has authority to settle Title VII claims. In Morgan, a black school principal, who was fired from his position, filed an employment discrimination suit under Title VII against the South Bend Community School Corporation in Indiana. He entered into an oral settlement agreement for reinstatement with his superintendent, and the school district attorney, without the approval of the school board.37 The plaintiff asked the court to formulate a federal common law rule that would permit oral settlement agreements based on apparent agency principles in Title VII cases. The court rejected his request, and applied the law of Indiana which permits only the school board to consent to the reinstatement of an employee. The court reasoned that applying state law to settlement agreements would not interfere with the federal interest in encouraging settlements in Title VII cases because having written agreements, as opposed to oral agreements, actually facilitate the settlement process by allowing parties to be confident in the terms agreed upon.38 Thus, the Morgan decision requires that parties look to the relevant state law in determining who has actual authority to settle Title VII cases.39
In Illinois, Section 9-102 empowers the “governing body or person vested by law or ordinance with authority to make over-all policy decisions for such entity” to enter into a settlement agreement on behalf of the government entity.40 Besides the sheriff’s office, where the Carver II court concluded the duly elected sheriff is the person vested by law with the authority to settle, other units of government are frequently defendants in Title VII claims. Municipalities are an example of such a unit. The governing body for Illinois non-home-rule municipalities, according to Section 4-5-2 of the Municipal Code, is the city council.41 Section 4-5-2 grants the city council the ability to stipulate by ordinance the powers and duties of officers and employees. One such power frequently found in ordinances is the ability of an officer to compromise claims against the municipality.42
Problems can arise, however, when a municipal officer settles an agreement without the explicit grant of authority to do so from the city council. In City of Belleville v. Ill. Frat. Order of Police Labor Council, 43 for example, the court held that an amendment to a labor contract negotiated between the labor union and the mayor of the City of Belleville was invalid because the mayor did not have authority from the city council to enter into such an agreement. In reaching its holding, the Belleville court distinguished the facts from the case of City of Burbank v. Ill. State Labor Relations Board, 44 where the court held that a settlement agreement entered into by the city’s mayor without council approval was valid. The Belleville court noted that in Burbank the council was aware and even participated in the mayor’s negotiations with the union, and complied with the terms of the agreement following the settlement.45 The facts in Belleville indicate that the council had no knowledge of the negotiations, nor did the council ever comply with the terms settled on by the mayor.46 Although Belleville and Burbank are distinguishable, both courts require at least an explicit or implicit grant of authority from the city council to effectuate a valid agreement.
Ultimately, parties settling a Title VII claim against a governmental entity in Illinois must look to state law to determine who will have the authority to enter into a binding settlement agreement. Whether the government entity is the sheriff’s office, school district, municipality, or any other unit of local government, a settlement agreement entered into by an individual with no authority under state law to do so, will not result in a valid settlement agreement.
V. Indispensable Parties
The Carver cases, however, reveal one more hurdle that parties must cross before entering into a valid settlement agreement: all indispensable government entities must be named defendants and have the opportunity to participate in the Title VII settlement talks. In Carver II, the Illinois Supreme Court addressed LaSalle County’s argument that by allowing only the sheriff and the plaintiff to negotiate a settlement agreement, when the county is financially obligated to pay the amount agreed upon, would open the door for collusion between the sheriff and the plaintiff. The county believed the settlement agreement was simply a “ploy” to obtain money from the county. 47 The court did not deny that such a scenario could happen in other contexts, but indicated that because LaSalle County had notice of the proceedings, and voluntarily requested a dismissal from the case, the county was in no position to complain about the results of the settlement.48 The Seventh Circuit in Carver III concluded that because the county is responsible under state law for paying settlement agreements, federal law deems the county an indispensable party to the litigation.49
The Seventh Circuit did not elaborate on the indispensable party analysis, but the court appears to accept the reasoning exemplified in the United States Supreme Court case of Martin v. Wilks.50 The Court in Martin, a Title VII disparate impact case, held that white firefighters who would have been impacted by an earlier consent decree between the City of Birmingham, Alabama and black employees should have been joined under Rule 19 of the Federal Rules of Civil Procedure as necessary or indispensable parties.51 The Court reasoned that compulsory joinder under Rule 19, not intervention under Rules 24(a) and (b), was the better mechanism for protecting the rights of interested third parties. The original plaintiffs and defendants would know better the nature and scope of the lawsuit than a third party that may or may not know of the pending litigation, and the original plaintiffs and defendants should therefore bear the burden of bringing the third parties into the litigation.52 Although Congress afterwards partially overruled Wilks,53 the congressional prohibition on challenging Title VII consent decrees in disparate impact cases is very narrow, leaving the Wilks holding very much alive in cases of intentional discrimination. 54
The Seventh Circuit in Carver III, therefore, makes it clear that a local government entity that is financially obligated to pay a settlement is an indispensable party to the litigation.55 The financially obligated governmental entity must be joined as a named defendant, and given the opportunity to participate in settlement talks.56 The Seventh Circuit apparently agreed with LaSalle County’s concern that allowing settlement talks to proceed, without the participation of the entity that is required to pay, will open the door to collusion. Although neither governmental entity will necessarily be able to assert control over the other governmental entity, the rationale appears to be that allowing the third party to be present will deter any collusive tendencies on the part of the other parties, while allowing the party responsible for paying to assert its own rights in case.
The importance of following the proper procedures and taking the proper precautions in entering into Title VII settlement agreements with local governmental entities cannot be overestimated. The employee, the government employer, and perhaps a third entity responsible for funding the employer could suffer significant financial losses and missed opportunities as a result of not considering the state and federal laws governing Title VII settlement agreements. To avoid these problems when settling Title VII claims, each party must recognize the unique issues relating to settling Title VII claims with Illinois local governments, and act on their rights before it is too late.
1 Title VII of the 1964 Civil Rights Act prohibits employers from discriminating against an individual with respect to compensation, terms, conditions, or privileges of employment because of such individual’s race, color, religion, sex or national origin. 42 U.S.C. 2000e-2(a)(1).
2 Title VII distinguishes between intentional discrimination cases and disparate impact cases. In intentional discrimination cases the proper remedy is compensatory damages. 42 U.S.C. 1981a(a)(1). In disparate impact cases the proper remedy is injunctive relief. 42 U.S.C. 2000e-5(f)(2). This article focuses on intentional discrimination claims.
3 Formerly titled Carver v. Condie. There are numerous opinions among the federal district court, the Seventh Circuit Court of Appeals, and the Illinois Supreme Court regarding the same parties and facts. For the purposes of this article, three of these opinions will be referred to and cited as follows: Carver v. Condie (Carver I), 169 F.3d 469 (7th Cir. 1999); Carver v. Sheriff of LaSalle County (Carver II), 203 Ill.2d 497 (2003); Carver v. Sheriff of LaSalle County (Carver III), 324 F.3d 947 (7th Cir. 2003).
4 Carver I, at 470.
5 Id. at 471.
6 See 55 ILCS 5/5-1002 (West), “the county shall indemnify the sheriff or deputy…for any judgment recovered against him or her as the result of that injury, except where the injury results from the willful misconduct of the sheriff or deputy…to the extent of not to exceed $500,000[now $1,000,000].”
7 Carver I, at 471.
8 Id. at 474.
9 Carver II, 203 Ill.2d at 522; See 55 ILCS 5/5-1106 (West) (requiring the county to provide for the reasonable expenses for the use of the sheriff.)
10 Id. at 519
11 Carver III, 324 F.3d at 947-48.
12 See Carver II, at 522; Carver III, at 947-48.
13 745 ILCS 10/1-101 et seq (West); See Carver II, at 510.
14 745 ILCS 10/9-102
15 Carver II, at 515.
16 Id. at 510
17 Id. at 515.
18 Id. at 510.
19 Id. at 509
20 Williams v. Banning, 72 F.3d 552, 555 (7th Cir. 1995).
21 Id. at 554
22 Carver II, at 510.
23 55 ILCS 5/5-1002 (see note 6).
24 Carver II, at 508.
25 See Id. at 510.
26 Id. at 511-15.
27 “Local public entity includes a county, township, municipality, municipal corporation, school district, school board, educational service region, regional school board of trustees, community college district, community college board, forest preserve district, park district, fire protection district, sanitary district, museum district, emergency telephone system board, and all other local government bodies.” 745 ILCS 10/1-206.
28 Franklin v. Zaruba, 150 F.3d 682 (7th Cir. 1998).
29 Carver II, at 512.
30 Franklin, at 685.
31 See ILCS Const.. Art 7, § 4(c).
32 See Franklin, at 685.
33 Carver II, at 514.
34 Id. at 515.
35 See 55 ILCS 5/3-6018 (West).
36 See Morgan v. South Bend Cmty Sch. Corp., 797 F.2d 471, 475-76 (7th Cir. 1986).
37 Id. at 473-74.
38 Id. at 475.
39 See Id.
40 745 ILCS 10/9-102 (West).
41 65 ILCS 5/4-5-2 (West).
42 See e.g. Chicago, Ill., Code § 2-60-080. (Granting the city attorney the “authority, when directed by the city council, to make settlements of lawsuits and controverted claims against the city.”)
43 City of Belleville v. Ill. Frat. Order of Police Labor Council, 312 Ill. App. 3d 561, 565 (5th Dist. 2000).
44 City of Burbank v. Ill. State Labor Relations Board, 185 Ill. App. 3d 997, 1006 (1st Dist. 1989).
45 Belleville, at 564.
47 Carver II, at 519.
49 Carver III, at 948.
50 Martin v. Wilks, 490 U.S. 755 (1989).
51 Id. at 768.
52 Id. at 767.
53 See 42 U.S.C § 2000e-2(n)(1)(A), (n)(1)(B) (West).
54 See Andrea Catania & Charles A. Sullivan, Judging Judgments: The 1991 Civil Rights Act and the Lingering Ghost of Martin v. Wilks, 57 Brook. L. Rev. 995, 1045 (1992).
55 Carver III, at 948.
Marcus J. Zarlengo is a 3rd year law student at Northern Illinois University, College of Law and a law clerk for the firm of Ottosen, Trevarthen, Britz, Kelly & Cooper, Ltd. He earned a B.A. in Economics from the University of Colorado at Denver in 2000.