Free Motion for Damages - District Court of Colorado - Colorado

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No. 01-cv-02199-MSK-MEH MICHAEL E. CLAWSON and JARED L. DILLON, Plaintiffs, vs. MOUNTAIN COAL COMPANY, L.L.C., ARCH WESTERN RESOURCES, L.L.C., and ARCH COAL, INC. Defendants.

DEFENDANTS' MOTION FOR APPLICATION OF STATUTORY DAMAGE CAP TO COMPENSATORY DAMAGE AWARDS AND FOR REDUCTION OF ADVISORY BACK PAY AWARDS
I. INTRODUCTION

Defendants Mountain Coal Company, L.L.C. ("Mountain Coal"), Arch Western Resources, L.L.C. ("Arch Western Resources"), and Arch Coal, Inc. ("Arch Coal") hereby move for application of the statutory damage cap set forth in 42 U.S.C. §1981a(b)(3) to the compensatory damage awards to both Plaintiffs.1 Defendants further move for a reduction of the jury's advisory back pay awards to both Plaintiffs on the grounds that the calculations relied upon by the jury, presented by Plaintiffs' expert, Ron Brennan, are inherently unreliable and

1

As to the compensatory damage awards, Defendants reserve their right to move for a remittitur or new trial under Fed.R.Civ.P. 59 after entry of judgment.

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flawed.2 Finally, Defendants request that the jury's advisory back pay award to Clawson be offset by certain income replacement benefits (incorrectly characterized by Plaintiffs as "collateral sources") received by him. II. A. ARGUMENT

The Compensatory Damage Awards to Both Plaintiffs Should Be Capped at $200,000. Each of the Plaintiffs was awarded $250,000 in compensatory damages by the jury.

Under 42 U.S.C. §1981a(a)(2), "[i]n an action brought by a complaining party under [the ADA] ... the complaining party may recover compensatory ... damages as allowed in subsection (b)." Subsection (b) provides that the amount of compensatory damages "shall not exceed, for each complaining party ... in the case of a respondent who has more than 200 and fewer than 501 employees ... $200,000." Even with the jury's finding that Mountain Coal and Arch Western Resources constituted an integrated enterprise and that Mountain Coal and Arch Coal constituted an integrated enterprise, the total number of employees of the three entities combined, at all relevant times, did not exceed 500 employees. Therefore, Defendants hereby move the Court for an order applying the $200,000 damage cap to the compensatory damages award of each of the Plaintiffs, pursuant to 42 U.S.C. §1981a(b)(3).3 Because the statutory damage cap is not
2

As to the advisory back pay awards, Defendants reserve their right to move for a new trial under Fed.R.Civ.P. 59 after entry of judgment.

Although Defendants were unable to locate any Tenth Circuit authority on the issue, it appears from various district court opinions that Defendants bear the burden of proof as to the number of employees for purposes of applying the statutory damage cap. See, e.g., Dominic v. Devilbiss Air Power Co., 2006 WL 516847 at *4 (W.D. Ark. March 2, 2006), citing to Hamlin v. Charter Township of Flint, 965 F.Supp. 984, 988 (E.D. Mich. 1997), Appendix at Tab 20. The affidavits, exhibits, and other non-published materials referenced herein are included in the Appendix submitted herewith. Subsequent references to the Appendix in this motion are to "App. at Tab ___."

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submitted to the jury, it is appropriate to address and submit the evidence on such issue on posttrial motion. See Smith v. Norwest Fin. Wyoming, Inc., 964 F.Supp. 327, 330 (D. Wyo. 1996), aff'd, 129 F.3d 1408 (10th Cir. 1997). Section §1981a(b) states that the number of employees should be reviewed for the time period "in each of 20 or more calendar weeks in the current or preceding calendar year." Courts are generally in agreement that the term "current year" should be construed to mean the year in which the discriminatory action occurred. See, e.g., Vance v. Union Planters Corp., 279 F.3d 295, 296-97 (5th Cir. 2002). In this case, Plaintiffs were "not accommodated" in 1999 and were terminated in early 2000. Thus, the relevant time period to determine the number of employees is 1998 through 2000. Beginning with the last quarter of 1998, as of 12/31/1998, Arch had 164 employees, Arch Western Resources had no employees, and Mountain Coal had 275 employees, for a total of 439 employees at the three entities combined. See Affidavit of Sherrie Eastwood, HR Administrator, Arch Coal, Inc., at ¶ 3, App. at Tab 1. As set forth in Eastwood's affidavit, thereafter, over the course of the four quarters of 1999 and of 2000, at no time did the combined total of employees at the three entities exceed 500. Id. At its greatest, the total number of employees of all three entities combined was 451, as of December 31, 2000. Id. Plaintiffs may attempt to dispute such numbers by pointing to the EEO-1 reports for 1999 and 2000 filed by Arch. In 1999, all Arch affiliated companies located in St. Louis reported that they had 234 employees. See Ex. 99, 1999 Arch Coal EEO-1 Report, App. at Tab 2. In 2000, all Arch affiliated companies located in St. Louis reported that they had 297 employees. See Ex. 102, 2000 Arch Coal EEO-1 Report, App. at Tab 3. Such reports cannot be relied upon to

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demonstrate the numbers of employees only at Arch and Arch Western Resources. Rather, such reports, as opposed to the numbers provided by Eastwood, include employees for more than just Arch Coal and Arch Western because they are reported based on location (St. Louis), not the entity by which the employees are employed. See Ex. 103, Affidavit of Pat Madras, App. at Tab 4. Thus, even combining the employee counts of Mountain Coal, Arch Western Resources, and Arch Coal, Defendants did not have more than 500 employees during the applicable time period. Plaintiffs may contend that the Court should include the employees of all subsidiaries of Arch Coal and Arch Western Resources, not just those of Mountain Coal. However, the jury found only that Mountain Coal and Arch Western Resources, and Mountain Coal and Arch Coal constituted integrated enterprises. The finding that such entities constituted integrated enterprises does not translate into a finding that such entities are also integrated with all of Arch Coal and/or Arch Western's subsidiaries other than Mountain Coal. Frank v. U.S. West, Inc., 3 F.3d 1357, 1362 (10th Cir. 1993). In fact, Plaintiffs did not allege, present evidence, or ask the jury to make any findings as to any of the other subsidiaries. Nonetheless, Defendants anticipate that Plaintiffs will now seek to have the Court count employees of all of Arch Coal's subsidiaries for purposes of applying the statutory damage cap. Courts have rejected attempts made by plaintiffs to sweep in additional subsidiaries for purposes of liability in such circumstances without sufficient evidence as to the integration of all such subsidiaries. See Frank v. U.S. West, 3 F.3d at 1362; Parrish v. Sollecito, 280 F.Supp.2d 145, 154-58 (S.D.N.Y. 2003); Faas v. Aramia, Ltd., 2000 WL 34239128 (W.D. Wis. May 24, 2000), App. at Tab 21; Glover v. Heart of America Mgmt. Co., 38 F. Supp.2d 881,

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890-92 (D. Kan. 1999); Walker v. Toolpushers Supply Co., 955 F. Supp 1377, 1380-84 (D. Wyo. 1997). The fact that Arch Coal is the common parent of such subsidiaries is not sufficient to also include them. Glover, 955 F. Supp. at 891. Courts have expressed reluctance "to hold one subsidiary liable for the acts of another subsidiary," Glover, 955 F.Supp. at 892, n. 8, which is what Plaintiffs would attempt to do here. Because the total number of persons employed by Mountain Coal, Arch Western Resources, and Arch Coal during the relevant time period, 1998 to 2000, did not exceed 500, the Court should apply the damage cap set forth in 42 U.S.C. § 1981a(b)(3) to both of Plaintiffs' compensatory damage awards and reduce such awards to $200,000 each. B. The Court Should Reject the Jury's Advisory Verdicts as to Back Pay and Award a Reduced Amount of Back Pay Damages to Plaintiffs Clawson and Dillon As part of its verdict, the jury awarded $236,000 in economic damages (lost back pay and benefits) to Plaintiff Clawson and $108,000 to Plaintiff Dillon. For the reasons set out below, Defendants submit that such back pay awards are excessive, and therefore, the Court should reject the jury's advisory awards and adopt a lesser figure for both Plaintiffs. 1. To the extent the jury's advisory back pay awards relied upon calculations by Plaintiffs' expert witness, Ron Brennan, because of his lack of qualifications and numerous changes in methodology, the Court should disregard such calculations.

As is discussed in more detail below, the jury's advisory awards for both Plaintiffs Clawson and Dillon relied upon the calculations of Plaintiffs' expert witness, Ron Brennan. See Exs. 721 (Dillon) and 722 (Clawson), App. at Tabs 5 and 6. As the Court is well aware from the Daubert/Rule 702 hearing in this case and the cross-examination of Brennan at trial, Brennan's qualifications to act as an expert witness on economic damages issues are weak, at best. Further,

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Brennan's numerous changes in methodology from report to report, again as shown during the Daubert/Rule 702 hearing and the cross-examination at trial, render his calculations highly suspect. Therefore, to the extent the jury relied upon such calculations, this Court should reject the jury's advisory awards. 2. Back pay damages as to Plaintiff Clawson a) The evidence does not support a calculation of damages based upon the Miner I pay rate for Clawson

The jury rendered an advisory verdict of $236,000 in back pay damages for Clawson. In doing so, the jury presumably accepted, and rounded up slightly, Brennan's back pay calculation of $235,431. See Ex. 722, App. at Tab 6. This calculation assumes damages from May 13, 1999 (the so-called "dismissal date") to February 3, 2003 (the date of the re-employment offer at Mountain Coal) at the Miner I pay rate. From the form of the verdict, it is impossible to determine what accommodation the jury thought Mountain Coal should have made for Clawson.4 As the evidence at trial showed, Clawson could not return to his former job as an Underground Production/Utility Miner (or his former job assignment of material hauling), consistent with his doctor's restriction that he could not drive vehicles without good shocks over rough roads. Even Clawson himself admitted that he did not suggest, at the May 18, 1999 meeting, that he could return to material hauling. Similarly, on cross-examination, Clawson admitted that at no time, even after the July 29, 1999 Dr. Huene visit, did he suggest to Mountain Coal that his restrictions had been "lifted" or that he
4

Mountain Coal intends to address this issue further in its Fed.R.Civ.P. 59 motion for new trial. Mountain Coal respectfully submits that the Court's refusal to require the jury to specify the accommodation, especially to the extent it involved a reassignment to a vacant, alternative position, makes it impossible to review the jury's verdict for sufficiency of the evidence and properly determine damages.

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could return to material hauling. Thus, the evidence at trial does not support a calculation of damages based upon the Miner I pay rate for Clawson. Rather, at trial, Plaintiff Clawson contended that Mountain Coal should have accommodated his "regarded as" disability by (1) allowing him to continue his temporary, lightduty assignment hauling fuel, or (2) reassigning him to a vacant, alternative position, such as the Warehouse, Surface Operator, Surface Environmental Technician, or Underground Surveyor positions, either at Mountain Coal or Canyon Fuel Company. While Mountain Coal denied that it was obligated to reassign Clawson to such positions, they each carry with them lower pay rates. In his third report, dated February 17, 2005, and his fourth "report," the opinions rendered at the August 25, 2005 and September 8, 2005 Daubert/Rule 702 hearing, Brennan provided calculations for the Warehouse Tech and fuel hauler positions. See Ex. 723, App. at Tab 7.5 For the Warehouse Tech I & II job, Brennan calculated Clawson's damages through February 3, 2003 at $140,020.6 For the fuel hauler "job," Brennan calculated Clawson's damages at $156,211. However, in his final report, dated March 24, 2006, Ex. 722, App. at Tab 6, Brennan

5

Ex. 723 was offered and admitted at trial as a demonstrative exhibit. Defendants would request that the Court consider Ex. 723 as a summary, pursuant to F.R.E. 1006, of Brennan's various reports, and as substantive evidence, not merely for demonstrative purposes.

Of course, as shown during the cross-examination of Brennan, even this calculation is grossly overstated. It assumes that Clawson would have started in the position in May, at the Warehouse Tech I level, and would have been promoted to Warehouse Tech II three months later, on August 1, 1999, notwithstanding that five years' warehouse experience was required for the Warehouse Tech II level and that Clawson did not even interview for the vacant Warehouse position until August 11, 1999. It is difficult to take Brennan's calculations seriously when he would promote Clawson to a higher-level position for which he was clearly not qualified before Clawson had even interviewed for the basic, entry-level position.

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abandoned these alternative calculations, providing a calculation only at the higher Miner I pay rate.7 Thus, to the extent that the jury found that Mountain Coal failed to accommodate Clawson by not reassigning him to a vacant, alternative position, a back pay damage award at the Miner I pay rate, as reflected in the jury's advisory award, overstates Clawson's economic damages, and therefore, should be rejected by the Court. b) Brennan's calculation as to Clawson is demonstrably wrong as to fringe benefits for 1999 and 2000.

In calculating Clawson's economic damages, Brennan assumed that Clawson did not receive any fringe benefits from Mountain Coal during the period May 14, 1999 to December 31, 1999 or during all of 2000. This can be seen from Ex. 722, page 2, App. at Tab 6, where Brennan assumes projected fringe benefits of $14,946 for 1999 and $23,973 for 2000, as compared with "actual" fringe benefits for Clawson of $0 for 1999 and $2,858 (all from nonMountain Coal employment) for 2000. According to Brennan, Ex. 722, page 3, the value of fringe benefits at Mountain Coal was 35.5% of Clawson's earnings, and the value of his actual fringe benefits for 2000 was 8.7%. Id., p. 4. However, Brennan's assumption ­ that Clawson did not receive any fringe benefits from Mountain Coal during May-December 1999 and 2000 is not correct. In fact, as shown by the Affidavit of Drema Scanlon and the exhibits thereto, App. at Tab 8, Clawson continued to be employed by Mountain Coal and receive full benefits through February 1, 2000, when he was As the testimony at trial indicated, the pay rate for the Underground Surveyor position is the same as for the Warehouse position. Brennan did not calculate damages based upon the Surface Operator or Surface Environmental Technician positions; however, the testimony at trial was that these positions paid 50¢ per hour less than the Underground Production/Utility Miner or Underground Maintenance Mechanic positions.
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terminated.8 Further, Clawson continued to receive health and life insurance coverage from Mountain Coal even after he was terminated, through October 25, 2000, in connection with his claim for LTD benefits. Id. at ¶ 5. According to Brennan, see Ex. 722, page 3, App. at Tab 6, the value of such coverage (stated as a percentage of earnings at Mountain Coal) was as follows: Medical insurance Life insurance Prescription drug coverage Total 11.6% .2% + .3% 12.1%

As Brennan's calculation fails to take into account the value of certain fringe benefits that were, in fact, provided by Mountain Coal during 1999 and 2000, his calculation should be adjusted as follows. As to 1999, Clawson suffered no fringe benefit loss, as he continued to receive his full benefits at Mountain Coal throughout the year. Thus, Brennan's 1999 lost fringe benefit figure of $14,946 is wholly incorrect. Ex. 722, p. 2, App. at Tab 6. As to 2000, Brennan shows projected fringe benefits as $23,973 ($67,530 x 35.5%). Id. He calculates "actual" fringe benefits as $2,858 ($32,855 x 8.7%). Id. In fact, Clawson's actual fringe benefits were $9,667 -$2,858, plus the value of health and life insurance benefits which he continued to receive from Mountain Coal, $6,809 ($67,530 x 12.1% x 10/12 ­ benefits provided January-October 2000 ). Thus, the lost fringe benefits for 2000 should have been $14,306 ($23,973 - $9,667), not $21,115, a reduction of $6,809.

Plaintiffs may argue that, by failing to present such evidence at trial, Defendants have waived any such argument. Such is not the case. The jury's award was only advisory, and the Court may, in its discretion, hear such additional evidence as it deems appropriate. Further, since this issue is intertwined, to a significant degree, with the so-called "collateral source" issues discussed infra in Section C, it would not have been appropriate for Defendants to have presented such evidence at trial.

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Therefore, Defendants submit that the jury's advisory back pay award as to Clawson, which is based upon Brennan's calculation of economic damages (including lost fringe benefits), should be reduced as follows:

1999 2000 Total reduction

$14,946 + 6,809 $21,755

c)

There are additional reasons why the jury's $236,000 advisory back pay award is excessive.

There are two additional reasons why the jury's $236,000 advisory back pay award as to Clawson is too high. First, the Brennan calculation upon which such advisory award is based takes as its starting point a figure of $64,591 as the "Annual Earnings of the Plaintiff [Clawson] Before the Damages Began." Ex. 722, p. 2, App. at Tab 6. This figure represents Clawson's 1997 earnings from Mountain Coal, wholly ignoring his earnings of $46,742 in 1998, his last full year of employment before his damages began. Considering that the evidence showed that Clawson worked all 12 months during 1998, there was simply no valid reason for Brennan to ignore Clawson's 1998 earnings and use, instead, the higher earnings figure from the next most previous year, 1997, as a basis for his calculations. By doing so, Brennan overstated Clawson's damages by approximately $18,000 per year, plus the associated benefits, an error which was then compounded each year for the period 1999-2002. Second, the undisputed evidence was that a fire occurred at the West Elk Mine, beginning on January 28, 2000 and continuing for approximately six months, during which time very little, if any, overtime was worked. However, Brennan's calculation did not make any adjustment for this lack of overtime. Especially to the extent that Brennan utilized Clawson's 1997 earnings

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figure of $64,591, which included a substantial amount of overtime, Brennan's calculation overstates Clawson's damages for 2000. d) The calculations of Defendants' expert witness, Dr. Jerome Darnell, are more accurate and should be utilized by the Court.

In contrast to Brennan, Defendants' damages expert, Dr. Jerome Darnell, is highly qualified to render economic damages opinions. See Ex. 613, pp. 2-5, 12 (Darnell curriculum vitae), App. at Tab 9. Further, as the evidence showed, Darnell utilized a reasonable and consistent methodology in each of his three reports in the case. As Darnell testified, even utilizing the Miner I pay rate, Clawson's back pay damages through 2002 (essentially, through the date of the re-employment offer at Mountain Coal) were $53,943. See Ex. 725 (Table 2, p. 5), App. at Tab 10.9 Darnell also calculated back pay damages for the same period for the Surface Operator or Surface Environmental Technician position at $37,293. Id. (Table 4). Finally, Darnell concluded that, had Clawson been reassigned to the Warehouse position, he would not have suffered any loss, but rather have received a net gain of $2,043. Id. (Table 3, p. 7). Due to having insufficient data, Darnell's calculations did not include amounts for voluntary overtime or lost benefits. Darnell estimated that lost benefits might add 10-20% to his damage calculations. He did not make a similar estimate as to overtime.10
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Darnell testified to such matters at trial. During his testimony, Ex. 725 was offered and admitted at trial as a demonstrative exhibit. For ease of reference, Defendants request that the Court now consider Ex. 725 as substantive evidence, not merely for demonstrative purposes.

Darnell pointed to the two fires in the West Elk Mine, in 2000 and 2005-06, as examples of why it is difficult to predict the availability of overtime. For his part, Brennan made no effort to determine actual overtime levels during 1999-2002, nor did he take into account the effect of the 2000 fire. Rather, Brennan simply assumed that Clawson would each year continue to earn at the 1997 rate (plus assumed wage growth), which included a substantial overtime component.

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Thus, Defendants submit that Darnell's calculations of Clawson's back pay damages are more credible than those of Brennan, and therefore, should be adopted by the Court. If the Court deems it appropriate, Defendants would not oppose some small adjustment being made to Darnell's calculations to take into account lost benefits and/or voluntary overtime for Clawson. e) Back pay damages as to Plaintiff Clawson ­ conclusion

For these reasons, Defendants submit that the jury's advisory award as to Clawson is excessive and should be reduced by the Court. Defendants contend that the Court should: 1. Use Darnell's calculations and award Clawson back pay and benefits of $20,469,

which represents Darnell's calculation for the Warehouse positions, Ex. 725, Table 3 (p. 7), App. at Tab 10, plus 20% for lost benefits and voluntary overtime.11 In the alternative, it should award Clawson $44,752, based upon Darnell's calculation for the Surface Operator or Surface Environmental Tech position, id., Table 4 ( p. 9), plus 20%; or award Clawson $64,732, based upon Darnell's calculation for the Miner I position, id., Table 2 (p. 5), plus 20%. 2. In the alternative, if the Court determines to use Brennan's calculations: a. The Court should use Brennan's Warehouse calculation ($140,020), rather

than the Miner I calculation ($235,431), but reduce it by 25%, to $105,015, for the reasons set forth in footnote 6, supra. An additional adjustment of $11,000 should also be made for 1999 and 2000 fringe benefits actually received by Clawson, resulting in a figure of $94,015.
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The adjusted calculation is as follows. Taking Darnell's Table 3, each of the values in the Expected Earnings column for the years 1999-2002 are increased by 20%. Values in the Actual Earnings column remain the same. This yields a total loss of $20,469, as compared with Darnell's original conclusion for the Warehouse position of a gain of $2,043 for the same time period.

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b.

Alternatively, the Court should use Brennan's Fuel Hauler calculation

($156,211), rather than the Miner I calculation ($235,431), but again with an adjustment of $11,000 for 1999 and 2000 fringe benefits actually received by Clawson, resulting in a figure of $145,211. c. Alternatively, the Court should use Brennan's Miner I calculation

($235,431), but reduce such figure by $79,200 because such calculation utilizes an unreasonably large starting salary.12 Further, such figure should be reduced by an additional $21,755 on account of 1999 and 2000 fringe benefits actually received by Clawson. Thus, if the Miner I calculation is to be used, it should be reduced by the Court to $134,476. 3. Back pay damages as to Plaintiff Dillon. a) The evidence does not support a calculation of damages based upon the Miner I pay rate for Dillon.

The jury rendered an advisory back pay award of $108,000 in favor of Dillon. In doing so, it appears that the jury accepted Brennan's back pay calculation of $146,830, see Ex. 721, App. at Tab 5, but made an adjustment, cutting off damages as of the end of 2001, on the theory that Dillon fully mitigated his damages once he became employed at Oxbow Mining in February 2002.13 Brennan's calculation for Dillon assumes that Dillon would have advanced from Miner

This calculation is as follows. Take a reduction of $18,000 per year x 4 years (1999-2002) = $72,000, plus 10%, or $7,200, for associated benefits, for a total reduction of $79,200. It appears that the adjustment was as follows. Brennan calculated lost back pay and benefits through 4/21/06 to be $146,830. See Ex. 721, p. 1, App. at Tab 5. Lost earnings for the years 2002-06 were $17,042 and lost fringe benefits for 2002-06 were $21,985, for a total adjustment of $39,027. Id., p. 3. Subtracting $39,027 from $146,830 results in lost earnings and fringe benefits through 2001 of $107,803, which the jury rounded up to $108,000.
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III to Miner II to Miner I. However, at trial, Dillon argued that he was a "lube man," a low-level, Miner III pay grade job which did not require lifting more than 15 pounds. Dillon contended that he could have remained in such position, consistent with his restrictions, and not have progressed to the Miner II or the Miner I pay grades, which would have required performing a wider range of tasks, including lifting in excess of his restrictions. Thus, Dillon's own theory, as well as the evidence at trial, does not support a calculation of damages based upon the Miner I pay rate for Dillon. Further, at trial, Dillon contended that Mountain Coal should have accommodated his "regarded as" disability by reassigning him to a vacant, alternative position such as the vacant Mountain Coal Warehouse position in July 1999, Ex. 96, or the Canyon Fuel Warehouse positions in November 1999, Ex. 540, or May 2000, Ex. 539. From the form of the verdict, it is impossible to determine what accommodation the jury thought Mountain Coal should have made for Dillon.14 However, as the evidence at trial showed, Dillon could not have been reassigned to either the vacant Mountain Coal Warehouse position that closed July 9, 1999 or the vacant Canyon Fuel Warehouse position that closed November 12, 1999, because at those times he had not yet been released to return to work by his doctor. As to the Canyon Fuel Warehouse position that closed May 9, 2000, Defendants contend that there was no obligation to consider Dillon for such position as there was no evidence that as of January 24, 2000 (Dillon's date of termination), Mountain Coal knew or reasonably could have anticipated that such a position would become

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See footnote 4, supra.

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available at Canyon Fuel several months later.15 Nor did Dillon present evidence that he was qualified for any of these Warehouse positions. However, even assuming that Dillon should have been reassigned to one of these jobs, they carry with them lower pay rates. Unlike as to Clawson, Brennan did not provide calculations for Dillon for any alternative positions. However, the evidence was undisputed that these positions paid less than the Miner I rate, and therefore, any back pay award to Dillon based upon the Miner I pay rate, as reflected in the jury's advisory award, overstates Dillon's damages, and therefore, should be rejected by the Court.16 b) There are additional reasons why the jury's $108,000 advisory back pay award is excessive.

There are two additional reasons why the jury's $108,000 advisory award to Dillon is too high. First, the Brennan calculation upon which such advisory verdict is based takes as its starting point a figure of $49,266 as the "Annual Earnings of the Plaintiff [Dillon] Before the Damages Began." Ex. 721, p. 2, App. at Tab 5. As was shown in his cross-examination, Brennan used a different, lower figure of $41,600 for the starting point of his calculations in each

15

Further, Defendants continue to assert that Mountain Coal was under no duty to consider reassigning Dillon to a job at Canyon Fuel by way of accommodation. The evidence at trial did not establish that Mountain Coal had a policy or practice of transferring hourly employees to its sister company, Canyon Fuel. A calculation for Dillon in the Warehouse position, using Brennan's figures, can be performed as follows. In Ex. 596, p. 8, Brennan's 3rd report as to Clawson, dated 2/17/05, which was not admitted, but which Defendants would request the Court consider, App. at Tab 11, Brennan calculated what Clawson would have earned in the Warehouse position during 2000 and 2001 (a total of $131,639, including associated fringe benefits). For the reasons discussed above in the Clawson section, Brennan's Warehouse calculations are overstated, and therefore, should be reduced by 25%, to $98,729. According to Ex. 721, p. 2, App. at Tab 5, Dillon had actual earnings during 2000 and 2001 of $33,488 (including fringe benefits). Thus, his loss would be $65,241 ($98,729-33,488).

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of his five previous reports.17 However, in his sixth and final Dillon report, dated April 15, 2006, Ex. 721, App. at Tab 5, Brennan increased the starting figure for his calculation to $49,266. As can be seen on the face of Ex. 721, p. 2, this amount ­ $49,266 ­ was what Dillon actually made at Oxbow Mining in 2002. Brennan had absolutely no basis to use such figure as a starting point, beginning in November 1999, for his calculation as to what Dillon would have made had he continued to have been employed at Mountain Coal. In fact, Brennan's only reason for increasing the starting figure for his calculation from $41,600 to $49,266 was to "soften the blow" of another change made in his sixth report ­ that is, he assumed (for the first time) that Dillon would have continued to have been employed at Oxbow continuously from 2003 to the date of trial.18 By making this change, Brennan overstated Dillon's damages by approximately $7,666 per year, plus the associated benefits, an error which was then compounded each year for the period 1999-2001. Second, as with Clawson, Brennan's calculations for Dillon did not make any adjustment for the lack of overtime during the 2000 fire at the West Elk Mine. Thus, in this additional respect, Brennan's calculation overstates Dillon's damages for 2000.

17

This figure was calculated by taking the Miner I pay rate of $20.00 per hour and multiplying it times 2,080 hours per year.

Taking these changes into account, according to Brennan, Dillon's lost back pay and benefits would have been $146,830, down from $235,631 in Brennan's fifth report, dated March 24, 2006. See Ex. 724, App. at Tab 12. Ex. 724 was offered and admitted at trial as a demonstrative exhibit. Defendants request that the Court consider Ex. 724 as a summary, pursuant to F.R.E. 1006, of Brennan's various reports, and as substantive evidence, not merely for demonstrative purposes.

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c)

Dr. Darnell's calculations for Dillon are more accurate and should be utilized by the Court.

As Darnell testified, he performed a number of alternative calculations for Dillon. Table 2 of Ex. 726, p. 4, App. at Tab 13,19 showed the difference in expected earnings if Dillon had worked at Mountain Coal at the Miner III pay scale, less the actual earnings which he received. Through April 10, 2006, the date of trial, Dillon's losses in Table 2 are shown as $107,172; through 2001 (the date the jury cut off Dillon's damages), the Table 2 losses for Dillon are $51,926. Id. In Table 4, Ex. 726, p. 6, App. at Tab 13, Darnell performed a similar calculation, but assumed that Dillon would have advanced from Miner III to Miner II and then Miner I. The Table 4 calculation reflects losses through April 10, 2006 of $174,978; if Dillon's losses are cut off as of the end of 2001, the Table 4 losses are $67,147. Id. As with Clawson, due to having insufficient data, Darnell's calculations did not include amounts for voluntary overtime or lost benefits. Darnell estimated the lost benefits might add 10-20% to his damage calculations. He did not make a similar estimate as to overtime. Thus, Defendants submit that Darnell's calculations of Dillon's back pay damages are more credible than those of Brennan, and therefore, should be adopted by the Court. If the Court deems it appropriate, Defendants would not oppose some small adjustment being made to Darnell's calculations to take into account lost benefits and/or voluntary overtime for Dillon.

19

Ex. 726 was offered and admitted for use as a demonstrative exhibit. However, Defendants request that the Court consider Ex. 726 as substantive, not merely demonstrative, evidence.

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d)

Back pay damages as to Plaintiff Dillon ­ conclusion

For these reasons, Defendants submit that the jury's advisory award as to Dillon is excessive and should be reduced by the Court. Defendants contend that the Court should: 1. Use Darnell's calculations and award Dillon back pay and benefits of $30,031,

which represents a calculation for Dillon for the Warehouse position based in part upon Darnell's Warehouse calculation for Clawson, plus 20% for lost benefits and voluntary overtime.20 In the alternative, the Court should award Dillon $62,311, which represents Darnell's calculation for Dillon at the Miner III rate through 2001 ($51,926, Ex. 726, Table 2, App. at Tab 13), plus 20% for lost benefits and voluntary overtime. 2. In the alternative, if the Court determines to use Brennan's calculations: a. The Court should use a calculation for Dillon for the Warehouse position

based in part upon Brennan's Warehouse calculation for Clawson and award Dillon back pay and benefits of $65,241. See footnote 16, supra. b. Alternatively, the Court should use Brennan's Miner I calculation, as

adjusted by the jury ($108,000), but reduce such figure by $18,398 because such calculation utilizes an unreasonably large starting salary,21 and by an additional $2,520

20

A calculation for Dillon in the Warehouse position, using Darnell's figures, can be performed as follows. In Ex. 725, Darnell's report dated 4/10/06 as to Clawson, Table 3, App. at Tab 10, Darnell calculated what Clawson would have earned in the Warehouse position during 2000 and 2001 (a total of $55,831). According to Ex. 726, Darnell's report dated 4/10/06 as to Dillon, Table 2, App. at Tab 13, Dillon had actual earnings during 2000 and 2001 of $30,805, yielding a difference of $25,026. Adding 20% to this figure for lost benefits and voluntary overtime results in a figure of $30,031.

21

This represents a reduction of $7,666 for both 2000 and 2001, or $15,332, plus 20%, or $3,066, for the associated benefits.

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because of the lack of overtime available during the 2000 fire.22 Thus, if the Miner I calculation is to be used, it should be reduced by the Court to $87,082. C. The Court Should Exercise Its Discretion and Offset Clawson's Back Pay Award By Income Replacement Benefits Received By Him 1. General principles as to damages and offset

The ADA adopts the remedies provided in Title VII of the Civil Rights Act of 1964, which authorizes courts to award back pay as an equitable remedy. 42 U.S.C. §§ 12117(a); 2000e-5(g)(1). The Supreme Court, in reviewing this provision, has noted that it has two primary purposes: (1) deterring discrimination and (2) making persons whole for injuries suffered as a result of discrimination. See McKennon v. Nashville Banner Publ. Co., 513 U.S. 352, 358 (1995); Albermarle Paper Co. v. Moody, 422 U.S. 405, 417-18 (1975). Given the "make whole" purpose of the back pay remedy, some courts have stressed that it would be unfair to allow prevailing plaintiffs to receive more than they are justly due. The purpose of an offset for amounts received by a plaintiff during the back pay period is to serve the goal of making the plaintiff whole, without overcompensation. See McKennon, 513 U.S. at 362 ("The object of compensation is to restore the employee to the position he or she would have been in absent the discrimination."). Thus, some courts also have emphasized the requirement that interim earnings, as required by Title VII, and other benefits, such as disability, workers' compensation, severance pay, and unemployment compensation, should be deducted from back pay awards because a failure to do so would produce double benefits for the wronged employees, making them more than whole. See cases cited infra. The Tenth Circuit noted in EEOC v.
22

This represents 5% of Dillon's 2000 projected earnings (per Brennan) of $50,399, Ex. 721, p. 2, App. at Tab 5.

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Sandia, 639 F.2d 600, 626 (10th Cir. 1980), that it was appropriate to offset severance payments. Subsequently, in EEOC v. Wyoming Retirement Sys., 771 F.2d 1425, 1431-32 (10th Cir. 1985), the Tenth Circuit upheld the trial court's exercise of discretion to deduct social security payments from a back pay award, stating, in part, that "the individual claimants would not have received the benefits had they continued working for the defendants and they would still be made whole even though their damage awards were reduced to the extent of the Social Security payment." See also Szedlock v. Tenet, 139 F. Supp. 2d 725, 735-37 (E.D. Va. 2001). In discrimination cases, plaintiffs have a statutory duty to mitigate their damages. The statute states that "interim earnings or amounts earnable with reasonable diligence" by plaintiffs must be used to "reduce the back pay otherwise allowable." 42 U.S.C. § 2000e-5(g)(1). This is because "the employee cannot be both earning wages for working at another job and obtaining an award from the employer who is paying the back pay without some recognition for the duplication." Salazar v. Board of County Commissioners of Alamosa County, Civil Action No. 99-F-2340 (OES), Order Granting Defendants' Motion re: Workers' Compensation Setoff, at 12, dated December 18, 2003 ("Salazar Order"), at 7-8, App. at Tab 22. Moreover, "if the terminated employee is receiving benefits that are `in lieu of wages,' that is the employee is receiving the benefits because the employee is not able to work, such benefits are the equivalent of `interim earnings' and should be deducted." Id. at 8. In prior briefing in this case, Plaintiffs have argued that the "collateral source" rule should serve as a bar to offset. In general, the collateral source rule states that "benefits received by the plaintiff from a source collateral to the defendant may not be used to reduce that defendant's liability for damages." 1 Dan B. Dobbs, Law of Remedies ("Dobbs") § 3.8(1) at

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372-73 (2d ed. 1993). Although the collateral source rule is considered and, at times, applied in employment discrimination cases, as demonstrated by the cases cited herein, it does not serve as an absolute bar to offset the amounts received by Plaintiffs. Rather, it is simply one consideration in a determination as to the appropriate back pay award to a successful plaintiff. As noted by Judge Figa in Salazar, "the current status of the law in the Tenth Circuit appears to be that the decision of whether to allow an offset to Title VII back pay, for any type of benefit, is still a matter of discretion with the trial court." Salazar Order at 6, App. at Tab 22. See also Wyoming Retirement Sys., 771 F.2d at 1431-32; Whatley v. Skaggs, 707 F.2d 1129, 1138-1139 (10th Cir. 1983); Sandia, 639 F.2d at 624-26. In any event, the collateral source rule does not apply when the defendant is the source of the compensation to the plaintiff. See, e.g., Sandia, 639 F.2d at 626; Olivas v. U.S., 506 F.2d 1158, 1163-64 (9th Cir. 1974); Dobbs § 3.8(2) (concluding that the collateral source rule does not apply when the benefit is derived from the defendant itself). Plaintiffs also have argued that offsetting the benefits at issue here would result in injustice and a windfall to Defendants. However, even with an offset for the benefits at issue here, Clawson's back pay award is still significant enough to serve the deterrent purpose of discrimination remedies. See McLean v. Runyon, 222 F3d. 1150, 1156-57 (9th Cir. 2000) ("the reduced damages award serves the purpose of eradicating discrimination, although less so than an award not offset ... by imposing a substantial burden upon [defendant] for breaching its duty of reasonable accommodation"); Szedlock, 139 F. Supp.2d at 736-37 (deterrent effect of back pay award not weakened by offset where amount awarded still substantial).

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Moreover, since the passage of the 1991 Civil Rights Act, 42 U.S.C. § 1981a, plaintiffs may receive compensatory and punitive damages in certain cases of intentional discrimination. Here, Clawson was awarded significant compensatory damages. Such an award serves a deterrent effect to Defendants and others from engaging in similar conduct and is more suitable for serving such purpose than by making Clawson more than whole through a back pay award. See H.R. Rep. 102-40 (II), dated May 17, 1991, at *1 (noting that one of the purposes of the Civil Rights Act of 1991 was "to provide more effective deterrence"). 2. Short-term disability benefits

From May 12, 1999 to November 11, 1999, Clawson received short-term disability ("STD") benefits from Defendants. As the STD plan clearly states, "STD benefits are paid directly by the Company, as opposed to being insured," meaning that all STD payments come directly from Defendants. Excerpt from 1/99 Benefits Handbook, "Your Disability Benefits," Ex 571, p. 1, App. at Tab 14.23 There is no third-party insurer, only a third party who administers claims for STD. Id. Employees of Mountain Coal do not purchase STD insurance or contribute to any premiums. Id. Because STD payments were made directly by Defendants, they do not fall within the definition of a collateral source. See, e.g., Flowers v. Komatsu Mining Systems, Inc., 165 F.3d 554, 558 (7th Cir. 1999) ("In an employment case, if the employer is the source of the funds at issue, then the payments can be deducted from the award."); Smith v. Office of Personnel Mgmt., 778 F.2d 258, 263 (5th Cir. 1985) (collateral source rule does not apply when

Ex. 571 was not offered or admitted at trial. However, a portion of Ex. 571 ­ that portion relating only to STD benefits ­ was admitted as Ex. 565. Defendants would now request that the Court consider Ex. 571, which also addresses LTD benefits, discussed infra.

23

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the collateral source is the defendant). Moreover, there is no windfall to Defendants if the STD benefits are offset, since they are the ones who paid them in the first place. In contrast, there would be an improper double recovery to Clawson if the STD benefits are not offset. Clawson received such payments from Defendants as salary continuation once it was determined that he could not return to his position due to his restrictions. The intent of the plan is to provide employees "with an alternate source of income if [they] are unable to work because of a sickness or injury." Id. While the jury may have found that the determination that he was unable to work was erroneous, it does not change the fact that Clawson received salary continuation from Defendants. From May 12, 1999 through August 29, 1999, Clawson received $11,180 in STD benefits from Defendants. See Worksheet attached to letter to Clawson from Langrand, dated 10/6/99, Ex. 27, App. at Tab 15. From August 30 through November 11, 1999, the date Clawson exhausted his 26 weeks of STD benefits, Defendants would have paid him $389.02 per pay period (STD less workers' compensation disability payments). Id. However, because Defendants believed that they had overpaid STD benefits to Clawson due to his receipt of workers' compensation benefits, Defendants withheld the remaining payments of $389.02. Id. In any event, had Clawson been working at Mountain Coal during the 26-week STD period, he would not have received both the STD benefits and his wages from Mountain Coal. Accordingly, he should not be able to keep the STD benefits he has already been paid by Defendants and also obtain an award of damages from Defendants for the amount of wages he would have earned from Mountain Coal during the exact same time period. If STD benefits are not offset, the back pay award to Clawson would result in him being made more than whole.

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In Sandia, the Tenth Circuit found that a back pay award should be offset by severance paid wholly by the allegedly discriminating employer because it was not an amount that came from a third person (i.e., a collateral source). Sandia, 639 F.2d 626-27. The STD payments made directly by Defendants are more analogous to the severance payments in Sandia, since both come directly from the employer (not a collateral source) and are mutually exclusive. Such amounts are more in the nature of "interim earnings," and thus, should be deducted. 3. Long-term disability benefits

Clawson was awarded long-term disability ("LTD") benefits retroactive to November 9, 1999 (when his STD benefits ended) and received them through September 30, 2000, when such benefits were terminated because he was working full-time and earning over 100% of his indexed earnings, as defined by the LTD plan. See Scanlon Affidavit, ¶ 6 and Exhibit E thereto, letter from Nancy Jones, Provident Life & Accident Insurance Co., to Michael Clawson, dated December 21, 2000, pp. 2-3, App. at Tab 8. Because LTD payments are intended as income replacement and, although insured, were paid for by Defendants and provided to Clawson at no cost to him, such payments should be offset against Clawson's back pay award. During the year 2000, Clawson received $5,809 in LTD benefits. See Ex. 43, Clawson 2000 Form 1040 and Form W-2 attached thereto, App. at Tab 16. In contrast to STD benefits, LTD benefits are insured. Ex. 571, p. 120, App. at Tab 14. However, like STD, the cost of the coverage was paid solely by Defendants. Id. In addition, like STD benefits, Defendants provide LTD benefits to their employees as "an alternate source of income if [they] are unable to work because of a sickness or injury." Id. Such income, like STD

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benefits, is intended as income replacement during the period that a former employee is unable to work due to disability, as defined in the Plan, beyond the first 26 weeks of STD. As with STD benefits, Clawson would not have collected LTD payments and also earned his full wages from Mountain Coal during that time period. Therefore, such amounts are again more in the nature of "interim earnings," and thus, the $5,809 should be deducted from his award. Otherwise, Clawson would recover both his wages as if he had worked at Mountain Coal during that time period and income replacement, paid for by Defendants, for the same time period. Again, the failure to offset LTD payments to Clawson from any award of back pay would result in him being made more than whole. 4. Unemployment compensation

Finally, unemployment compensation received by Clawson should be offset from his back pay award. The offset of unemployment compensation is within the trial court's discretion. See Sandia, 639 F.2d at 625-26 & n. 9 (citing cases holding that no abuse of discretion occurred when the trial court offset unemployment benefits from a back pay award). See also Orzel v. City of Wauwatosa Fire Dep't, 697 F.2d 743, 756 (7th Cir. 1983) (finding no abuse of discretion in deduction of unemployment and retirement pension benefits from back pay award based on judge's statement that he saw no reason to provide plaintiff with double recovery for lost employment); Smith, 778 F.2d at 263 (noting that the district court has discretion to reduce back pay award in discrimination case by sums plaintiff has received from other sources, including third parties); Naton v. Bank of Calif., 649 F.2d 691, 699-700 (9th Cir. 1981) (deduction of unemployment benefits from back pay award within court's discretion in declining to award what would amount to double recovery for lost employment); EEOC v. Enterprise Ass'n

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Steamfitters Local No. 638, 542 F.2d 579, 591-92 (2nd Cir. 1976) (and cases cited therein) (upholding exercise of discretion to deduct sums such as unemployment compensation, finding no compelling reason to provide double recovery or compelling reason of deterrence, and holding that court was not in business of redistributing wealth beyond making the discrimination victim whole). The Tenth Circuit noted in Sandia that the company had not made any argument for offset based upon its contribution to the unemployment fund. Id. at 626. However, such an argument would apply here. Under Colorado's unemployment compensation system, after a company's first year of operation, it pays into the unemployment system based on a computed rate tied directly to the company's average annual payroll and its unemployment experience rating. See C.R.S. §§ 8-76-103 (1)(a), (3)(a)(I) & (IV) & (3)(a)(I)-(II). As a result, the unemployment compensation received by Plaintiffs is, at least indirectly and in part, paid by Mountain Coal. In any event, it is not paid by Plaintiff. See C.R.S. § 8-76-101 (unemployment taxes "shall not be deducted, in whole or in part, from the wages of individuals"). Therefore, it is not accurate to characterize the offset of such payments against a back pay award as "unjust enrichment" or a "windfall" to the employer, when the employer is responsible for paying the back pay award and for paying a greater amount into the unemployment system as a result of the plaintiffs' receipt of unemployment benefits. Clawson received $4,747 in unemployment in the year 2000 (Federal Tax Return ­ Ex. 43, App. at Tab 16), $4,333 in unemployment in the year 2001 (Federal Tax Return ­ Ex. 44, App. at Tab 17), $4,101 in unemployment in the year 2002 (Federal Tax Return ­ Ex. 45, App. at Tab 18), and $2,228 in the year 2003 prior to his unconditional offer of reemployment from

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Mountain Coal and his acceptance of Bowie's offer of employment (2003 Federal Tax Return ­ Ex. 46, App. at Tab 19). Thus, from his termination from Mountain Coal in 2000 through the beginning of his employment at Bowie in 2003, Clawson received a total of $15,409 in unemployment benefits. As with the other types of benefits, Clawson would not have received both his full wages from Mountain Coal and unemployment compensation during the same time periods. Thus, if Clawson is provided his entire back pay award, without any offset for unemployment benefits, he will be made more than whole, contrary to the equitable purpose of the back pay remedy. Finally, the deduction of Clawson's unemployment benefits from a back pay award will not reduce such award so significantly as to eliminate its deterrent effect. 5. Conclusion as to offsets

In sum, for the reasons stated above, Defendants respectfully request that the following amounts be offset from Clawson's back pay damage award: STD benefits LTD benefits Unemployment Total $ 11,180 5,809 + 15,409 $32,398

III.

CONCLUSION

For all the foregoing reasons, Defendants respectfully submit that this Court should (1) apply the statutory damage cap set forth in 42 U.S.C. § 1981a(b)(3) so as to reduce the compensatory damage awards to Plaintiffs to $200,000 each, (2) reduce the economic damage (back pay) awards to Plaintiffs as set forth above, and (3) reduce the economic damage (back pay) award to Clawson by the income replacement benefits received by him, as set forth above.

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DATED: May 11, 2006.

Respectfully submitted,

s/Jeffrey T. Johnson Jeffrey T. Johnson Monique A. Tuttle HOLLAND & HART LLP 555 Seventeenth Street, Ste. 3200 Post Office Box 8749 Denver, Colorado 80201 Telephone: (303) 295-8000 Facsimile: (303) 295-8261 E-mail: [email protected] [email protected] ATTORNEYS FOR DEFENDANTS

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CERTIFICATE OF SERVICE (CM/ECF)

I hereby certify that on May 11, 2006, I electronically filed the foregoing with the Clerk of Court using the CM/ECF system, which will send notification of such filing to the following e-mail addresses: [email protected] [email protected] I am not aware of any non CM/ECF participants in this matter requiring service by other means.

s/Jeffrey T. Johnson Jeffrey T. Johnson Monique A. Tuttle Attorneys for Defendants HOLLAND & HART LLP 555 Seventeenth Street, Ste. 3200 Post Office Box 8749 Denver, Colorado 80201 Telephone: (303) 295-8000 Facsimile: (303) 295-8261 E-mail: [email protected] [email protected]

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