In the prior post, we concluded that Churchill will likely be reinstated at CU, at which point CU might ask Churchill, how much do you want not to be reinstated? However, if Judge Naves finds "exceptional circumstances and is ultimately upheld," the question of front pay kicks in and is the subject of this post which answers the question: will Churchill be awarded $1,000,000 in front pay he has publicly stated he wants if not reinstated?
Before investigating the legal and practical issues associated with front pay for Churchill should Judge Naves finds "exceptional circumstances," it is important to note that Churchill and his legal team have both declared emphatically that reinstatement is their sole objective in the interest of justice and that if reinstatement is not granted, this issue would likely be appealed. This was reported in the Denver Post on 4/12/08 in an article from the Daily Camera entitled "All he wants is CU job back, Churchill says: The lightning-rod professor says he's ready to challenge any financial award offered." It is very clear that Churchill and his legal team do not want CU, the public, and in particular, Judge Naves, to view Churchill's earlier public statement that should the court rule against reinstatement, Churchill would be satisfied if the front pay awarded amounted to $1,000,000.
Clearly, Churchill is in the better position to first be reinstated into his full professor tenured position at CU for two important reasons: (1) reinstatement truly makes Churchill whole and gives him the remedy he earned by winning the jury trial on the merits; (2) Churchill can decide to accept the position or consider an offer by CU to buy out his contract/position which could be far in access of $1,000,000 depending upon how motivated CU is to avoid Churchill's return.
In the prior post on reinstatement considerations that Judge Naves would likely consider under existing case law, not only is reinstatement the preferred remedy in this kind of legal action, but CU's assertion that Churchill should not be reinstated based upon the "exceptional circumstances" defense that Churchill was found through internal investigations to have engaged in reseach misconduct, ostensibly has no merit. Under the rationale of the Squires case, the jury's holding that CU would not have terminated Churchill in the absence of the protected speech preempts the court from looking at the issue again for purposes of the appropriated remedy where reinstatement is involved. To deny reinstatement would in essence vitiate the jury's finding and Churchill's win on the legal merits of his case. Indeed, should Churchill not be reinstated, it would be a "Pyrrhic Victory" for Churchill as seen in the following analysis of front pay Judge Naves could award Churchill in lieu of reinstatement.
But just in case Judge Naves rules in favor of CU by not reinstating Churchill, then the following legal issues are involved with front pay (from the jury instructions by the Ninth Circuit on front pay):
1. "Limit on Front Pay Award: Front pay is intended to be temporary in nature. The plaintiff has a duty to make reasonable efforts to obtain a new job of like kind, status, and pay. Thus, you must limit any award of front pay to compensate only for the period of time you find will be necessary for the plaintiff to obtain such a job if [he] [she] makes a reasonable effort. The defendant has the burden of proving by a preponderance of the evidence that a reduction should be made and the amount by which the award should be reduced."
It is likely that Churchill, at age 61, could argue that he is entitled to nine years of $110,000 (his compensation plus benefits before CU dismissed him for a total of $990,000) since most full professors commonly retire at age 70. This might change given the severe reduction in faculty retirement accounts due to the economic downturn. On his duty to make reasonable efforts to obtain a new job, Churchill testified that while he had a couple of inquiries from faculty members from other universities for placement, once university administrations got wind of the "feelers," the inquiries ended in each case. Clearly, Churchill can successfully argue that it would be very difficult, despite his "reasonable efforts, to obtain a new job of like kind, status, and pay at another university."
2. "Reduction to Present Cash Value: Any award of front pay must also be reduced to the present cash value of the award."
Since the $110,000 would be paid over nine years, a current lump sum payment should be reduced to the present cash value of the award. Consequently, CU would not pay $990,000 ($110,000 over nine years), but $748,186 as a current lump sum and the present value of the award. This assumes a 6% annual discount rate.
Finally, since Section 104 of the Internal Revenue Code would treat this lump sum payment as income, the majority of the lump sum would be taxed at a 35% marginal tax rate plus 5% for the state of Colorado. Consequently, of the approximate $1,000,000 award of front pay would effectively be reduced to $448,912 calculated as follows:
Present Value of the Front Pay Lump Sum: $748,186
Less 40% in income taxes -299,274
Net Front Pay after taxes $448,912
CU would likely be pleased with this ultimate result.
Potential Impact on the Award of Attorney Fees to Churchill:
Moreover, this "Pyrrhic Victory" for Churchill could bring into question the full award of Churchill's attorney fees under the Supreme Court's rationale in Farrer v. Hobby, 506 U.S. 103 (1992) in which the court held that the plaintiff was not entitled to an award for attorney fees under 42 USC 1998 dealing with constitutional claims, even though the plaintiff was the prevailing party, since he was awarded de minimus damages. The Supreme Court reasoned that the resulting "Pyrrhic victory" goes to the reasonableness of the attorney fees. Subsequent courts applying this Supreme Court rationale scrutinize and may limit an award of attorney fees when the amount awarded is less than the attorney fees.
In a prior post on the award of attorney fees, it was estimated that Churchill's fees could easily exceed $1,000,000 given his three attorney legal team and numerous expert witnesses. If the front pay is $748,186 or cut in half if the court awards four to five years of front pay rather than nine years (or even further reduced under a duty to mitigate theory), the attorney fees of over $1,000,000 could trigger a court reduction for attorney fees under the Farrer v. Hobby analysis. In short, Churchill needs to vigorously defend his assertion that reinstatement is the preferred remedy for him.