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HARTMAN v. DUFFEY

May 20, 1998

CAROLEE BRADY HARTMAN, et al., Plaintiffs,
v.
JOSEPH DUFFEY, et al., Defendants.



The opinion of the court was delivered by: ROBERTSON

MEMORANDUM OPINION

 This employment discrimination suit was brought in 1977 by a class of women who alleged that they were wrongly denied employment at the United States Information Agency ("USIA"). In 1984, the late Judge Charles R. Richey found that defendant had "discriminated against women as a class with regard to hiring" in six occupational categories at USIA. *fn1" Hartman v. Wick, 600 F. Supp. 361, 375 (D.D.C. 1984), aff'd, 319 U.S. App. D.C. 169, 88 F.3d 1232 (D.C. Cir. 1996). In January 1987, Judge Richey conducted a trial to determine appropriate remedies and thereafter issued an opinion and order requiring that individual Teamster hearings be held before a Special Master. Hartman v. Wick, 678 F. Supp. 312, 344-45 (D.D.C. 1988). Judge Richey's order provided that back pay awards would be calculated on the basis of a "proxy-salary model." The proxy salaries are to reflect the "average salaries actually paid to persons currently employed by the agency who were hired into positions similar to the one that the class member would have filled absent discrimination." Id. at 337. The Special Master was given the responsibility for developing the proxy-salary model and for determining what fringe benefits (vacation leave, sick leave and medical coverage) and overtime and shift differentials would be included in awards of back pay. Id.

 On January 31, 1992, with the consent of the parties, Special Master Stephen Saltzburg selected Drs. Cheryl and Martin Asher as the experts who would create the proxy-salary damages model. For some five years thereafter, the parties were intimately involved in the development of the damages model. In a May 22, 1995 Order the Special Master ordered the parties to "simultaneously provide [the experts] with all objections, suggestions and additional data relating to the proposed damages model no later than 5:00 p.m., Friday July 21, 1995." Objections made after that date would be considered waived.

 After receiving and considering timely filed objections, the Ashers delivered their proposed damages model to the Special Master on June 15, 1996. Both sides had objections, defendant's being much more extensive than those of plaintiffs. The Special Master heard most of the objections on November 13, 1996, and rejected all the challenges considered at the hearing.

 The experts made further changes in response to the parties' objections and delivered the final damages model to the Special Master on March 1, 1997. After reviewing the model, the experts' explanations of their work, and the history underlying the model's formulation, the Special Master concluded in his report to this Court that this is "as fair a model as could possibly be fashioned." SM Rep. at 1. The Special Master "strongly recommended that [the damages model] be approved by the Court and used to compute back pay as to all claims." Id.

 After considering the parties' objections to the damages model I have decided to affirm the recommendations of the Special Master in every respect except two: the rate of pre-judgment interest, and the application of an across-the-board factor to reduce health and life insurance benefits.

 Pre-judgment interest

 The parties agree that each successful claimant is entitled to receive interest on her back pay award from November 21, 1991, the effective date of the Civil Rights Act of 1991, until judgment is entered in her favor. They disagree, however, about what rate of interest to apply. Defendant argues for the three-month Treasury bill rate averaged over each year. The experts, who originally proposed the one-year Treasury bill rate, changed their opinions after Forman v. Korean Air Lines Co., 318 U.S. App. D.C. 6, 84 F.3d 446 (D.C. Cir.), cert. denied, 136 L. Ed. 2d 513, 117 S. Ct. 582 (1996), and now argue for the prime rate.

 In Forman, which was a tort action between private parties, the court observed that "the prime rate is not merely as appropriate as the Treasury Bill rate, but more appropriate." Id. at 450. The court quoted In the Matter of Oil Spill by the Amoco Cadiz Off the Coast of France, 954 F.2d 1279, 1332 (7th Cir., 1992), which favored the "market rate" of interest for prejudgment awards because that is the rate "the victim must pay ... and the rate the wrongdoer has available to it." 84 F.3d at 450-51. Cf. Gorenstein Enterprises, Inc. v. Quality Care USA, Inc., 874 F.2d 431, 436 (7th Cir. 1989) (the risk of default bears directly on the appropriate rate of interest); Cement Division, National Gypsum Co. v. City of Milwaukee, 31 F.3d 581, 587 (7th Cir. 1994) (allowing the district court to consider the City's status as a municipality when setting the interest rate), aff'd, 515 U.S. 189, 132 L. Ed. 2d 148, 115 S. Ct. 2091 (1995); In the Matter of Oil Spill by the Amoco Cadiz off the Coast of France, 954 F.2d at 1332 (noting that the market rate reflects in part the risk of non-payment).

 Plaintiffs acknowledge that a government defendant does not borrow money at prime, but they argue, relying on 42 U.S.C. § 2000e-16(d), that they should have the benefit of the same interest rate that would apply in a case between private parties. Section 2000e-16(d) declares that in Title VII cases involving the government "the same interest to compensate for delay in payment shall be available as in cases involving nonpublic parties." 42 U.S.C. § 2000e-16(d). In the context of this case, that provision requires, at most, that the interest rate payable by the government be determined using the same Forman analysis that would be applied if the defendant were a nonpublic party. Money is "available to" the government at the rate of interest established by the sale of Treasury bills. Granted that victims cannot borrow money at the government's rate, there is no unjust enrichment to the government in selecting the one-year Treasury Bill rate as the rate of pre-judgment interest, and I believe it an appropriate use of my discretion to do so. That rate was the pre-Forman recommendation of the experts and has been, over time, about one-half percent greater than the three month T-bill rate urged by the government.

 Health and life insurance

 The damages model calculates the value of health and life insurance benefits for each claimant by applying a multiplier, known as the H&L Factor, to the claimant's imputed base salary for a given year. The H&L Factor reflects the percentage of the USIA's total personnel budget spent on those benefits in any given year. Defendant challenges the use of the multiplier, arguing that it incorporates the faulty assumption that health and life insurance benefits increase in proportion to salary. *fn2"

 Defendant points out that the federal government does not pay for life insurance coverage but instead offers its employees an option to buy life insurance underwritten by the government. Agency spending on life insurance is for underwriting costs, not premiums, and is not correlated with individual salaries. An individual claimant may be entitled to an award representing her increased life insurance costs if she proves that she did buy life insurance in the private market and had to pay higher premiums than would have been available to her in government service, but any such award would have to be based upon individualized proof.

 As for health insurance, defendant's evidence is that 84 percent of government health care plan enrollees receive 95 percent or more of the maximum government contribution allowable. Def. Obj. at 13. The government benefit increases in proportion to salary, but only to a point, and not beyond a maximum allowable contribution. Moreover, those individual plaintiffs who have been employed will be presumed to have received health insurance during their employment. The presumption may be rebutted in the individual case by a showing that the claimant did buy health insurance, or that the employer did not provide it, or both. Damages for lost health insurance for ...


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