Luna, Patricia A. v. US Dept Navy ( 2006 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 04-4143
PATRICIA A. LUNA,
Plaintiff-Appellant,
v.
UNITED STATES OF AMERICA,
Defendant-Appellee.
____________
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 00 C 1329—Rebecca R. Pallmeyer, Judge.
____________
ARGUED SEPTEMBER 20, 2005—DECIDED JULY 17, 2006
____________
Before EASTERBROOK, MANION, and SYKES, Circuit Judges.
SYKES, Circuit Judge. Patricia Luna injured herself at
the Great Lakes Naval Base, where she worked as an
instructor under a contract between the Navy and a private
contractor. She sued the United States under the Federal
Tort Claims Act (“FTCA”), which provides a remedy for
personal injuries caused by negligent acts of governmental
employees acting within the scope of their employment. See
28 U.S.C. § 1346(b)(1). Under the FTCA the federal govern-
ment is liable to the same extent that a private individual
would be under the law of the state where the negligent act
occurred—in this case, Illinois. See 28 U.S.C. § 2674. The
Illinois Workers’ Compensation Act (“IWCA”) provides the
exclusive recovery against employers and “borrowing
2 No. 04-4143
employers” for workers injured in the course of their
employment. The Navy is not Luna’s employer; the question
in this case is whether the Navy is a “borrowing employer”
for purposes of the IWCA. We hold that it is, and on this
basis affirm the judgment in favor of the United States.
I. Background
Patricia Luna was addressing a large group of Navy
recruits at the seamanship school at the Great Lakes Naval
Base in northeastern Illinois when she fell and injured her
knee. The auditorium-like room where she was injured was
designed to simulate the deck of a ship docked at a pier.
Part of the floor was painted gray to resemble the deck of a
ship; the rest was painted blue to simulate the water
surrounding the ship. At the edge of the ship’s “deck” was
a three-foot drop-off to the “water” below. About 200
recruits were seated on the floor of this training area to
hear Luna’s presentation. Luna positioned herself near the
drop-off at the edge of the “deck” and began instructing the
recruits. A few minutes into her remarks she stepped
backward and fell off the unprotected edge of the “deck”
onto the blue-painted concrete floor below. She sustained a
torn meniscus in her knee and recovered $20,706.40 in
workers’ compensation benefits under the IWCA. She then
sued the United States under the FTCA, alleging that the
Navy was negligent because it did not put up a barrier to
prevent her fall off the simulated ship’s “deck.”
Luna was not employed by the Navy; she worked for a
company called Resource Consultants, Inc. (“RCI”), which
is in the business of supplying employees to govern-
mental agencies. Luna was assigned to the Great Lakes
Naval Base as part of a team of employees RCI provided
to the Navy under a five-year contract. The contract
provided that the Navy would pay RCI a fixed rate for the
employees to perform certain work at the base, and RCI
No. 04-4143 3
was responsible for paying the employees’ wages and
providing workers’ compensation coverage.
The United States sought summary judgment, arguing
that it was a “borrowing employer” under the IWCA and
was entitled to immunity from suit by operation of the
IWCA’s exclusivity provisions. The government cited
Belluomini v. United States, 64 F.3d 299 (7th Cir. 1995), a
decision of this court that identified two tests derived
from Illinois Supreme Court case law for determining
whether an employer is a borrowing employer under the
IWCA. The first test, based on the language of the IWCA
defining a “loaning employer,” looks to the relationship
between the employers. If the employer supplying the
employee meets the statutory definition of a loaning
employer, then the employer on the other end of the
relationship—the one receiving the services of the em-
ployee—is deemed a borrowing employer. Id. at 302. The
second test, which the parties here have dubbed the “control
test,” focuses on the “extent of control which the alleged
borrowing employer has over the employee and inquires as
to whether a contract existed between the employee and the
borrowing employer.” Id. The United States maintained
that RCI met the statutory definition of a loaning employer,
and the Navy was thus a borrowing employer under the
first of the tests identified in Belluomini.
The district court rejected the government’s argument.
The court concluded that Belluomini had incorrectly
assumed “that if an entity qualified as a ‘loaning employer’
under [the IWCA,] then the entity to which it ‘loaned’ an
employee automatically became a ‘borrowing employer.’ ”
The judge thought Belluomini’s articulation of this “statu-
tory test” was flawed based on two subsequent opinions
from the Illinois court of appeals. Concluding that issues of
fact remained as to whether the “control test” was satisfied,
the district court denied the government’s motion for
summary judgment.
4 No. 04-4143
The case proceeded to a bench trial, and the court
issued a written decision holding that the government failed
to satisfy the control test for a borrowing employer under
the IWCA. The court nevertheless entered judgment for the
United States, concluding that the Navy was not negligent
and Luna’s injury was the result of her own carelessness.
Luna appeals, arguing that the district court erred in
finding her solely responsible for her injury and also
challenging certain evidentiary rulings. We need not reach
these arguments, however. The United States defends its
judgment on appeal by reiterating its claim that the Navy
was a borrowing employer for purposes of the IWCA, and
we agree.
II. Discussion
The FTCA is a limited waiver of the United States’
sovereign immunity. Warrum v. United States, 427 F.3d
1048, 1049-50 (7th Cir. 2005). It exposes the United States
to liability for personal injuries as a result of its negligence
to the same extent that a private person would be liable
under the law of the place where the negligence occurred.
See 28 U.S.C. § 1346(b)(1). In Illinois, where the Navy’s
alleged negligence occurred, the IWCA is the exclusive
remedy for workers injured on the job; covered employers
cannot be sued for accidental workplace injuries. Under
workers’ compensation statutes, employers are relieved
of the risk of large damages verdicts in tort lawsuits arising
from accidental workplace injuries, and employees receive
the benefit of no-fault recovery. See Meerbrey v. Marshall
Field & Co., 564 N.E.2d 1222, 1225 (Ill. 1990).
The IWCA applies to employers who “borrow” workers
from another employer:
Where an employer operating under and subject to the
provisions of this Act loans an employee to another such
employer and such loaned employee sustains a compen-
No. 04-4143 5
sable accidental injury in the employment of such
borrowing employer and where such borrowing em-
ployer does not provide or pay the benefits or payments
due such injured employee, such loaning employer is
liable to provide or pay all benefits or payments due
such employee under this Act and as to such employee
the liability of such loaning and borrowing employers is
joint and several, provided that such loaning employer
is in the absence of agreement to the contrary entitled
to receive from such borrowing employer full reimburse-
ment for all sums paid or incurred pursuant to this
paragraph together with reasonable attorneys’ fees and
expenses in any hearings before the Illinois Workers’
Compensation Commission or in any action to secure
such reimbursement.
820 ILL. COMP. STAT. 305/1(a)4; Belluomini, 64 F.3d at 302.
A loaning employer is thus jointly and severally liable for
workers’ compensation benefits with the borrowing em-
ployer. Absent a contrary agreement between the employ-
ers, the loaning employer is entitled to reimbursement from
the borrowing employer for workers’ compensation pay-
ments made to a worker injured while on the job. Loaning
and borrowing employers share immunity from tort liability
under the IWCA. Belluomini, 64 F.3d at 302; O’Loughlin v.
ServiceMaster Co. Ltd. P’ship, 576 N.E.2d 196, 201 (Ill.
1991); Saldana v. Wirtz Cartage Co., 385 N.E.2d 664, 668
(Ill. 1978).
The IWCA does not define “borrowing employer.” It does,
however, define “loaning employer”:
An Employer whose business or enterprise or a sub-
stantial part thereof consists of hiring, procuring or
furnishing employees to or for other employers operat-
ing under and subject to the provisions of this Act for
the performance of the work of such other employers
and who pays such employees their salary or wages
6 No. 04-4143
notwithstanding that they are doing the work of such
other employers shall be deemed a loaning employer
within the meaning and provisions of this Section.
820 ILL. COMP. STAT. 305/1(a)4. Based on an Illinois Su-
preme Court case, Chicago’s Finest Workers Co. v. Indus-
trial Commission, 335 N.E.2d 434, 436 (Ill. 1975), this court
in Belluomini extrapolated from this definition the elements
of a statutory test for a borrowed employment relationship.
Belluomini, 64 F.3d at 302. It is this aspect of Belluomini
that the district court questioned. It should not have done
so.
We note as a preliminary matter that the parties agree
that an employer may be a borrowing employer under the
IWCA if it has “control” of a loaned employee—a test
measured by a variety of factors1 we need not consider here
because the United States now concedes it cannot satisfy
this so-called “control test” on the facts of this case. The
question for us is whether Illinois law recognizes a statu-
tory test under the IWCA for borrowing employers and
whether the Navy satisfies that test.
The Navy characterizes this as a question of subject-
matter jurisdiction. It is not. The district court had subject-
matter jurisdiction because Luna brought her claim under
the FTCA, which is to say she presented the district court
with a federal question. See 28 U.S.C. § 1331. Whether the
Navy is a borrowing employer under the IWCA is a question
about the merits of this case—the extent to which a private
individual would be liable under Illinois law. If the Navy
prevails on this point, it simply means Luna has no claim
1
For a discussion of the factors included in the “control test,” see,
e.g., A.J. Johnson Paving Co. v. Indus. Comm’n, 412 N.E.2d 477,
480-81 (Ill. 1980); Chaney v. Yetter Mfg. Co., 734 N.E.2d 1028,
1031 (Ill. App. Ct. 2000); Crespo v. Weber Stephen Prods. Co.,
656 N.E.2d 154, 156 (Ill. App. Ct. 1995).
No. 04-4143 7
under the FTCA, not that the district court had no author-
ity to determine whether she has a claim.
Luna argues that the United States waived its “jurisdic-
tional” argument because it did not file a cross-appeal from
the district court’s ruling on whether it was a borrowing
employer. That argument is wrong on two fronts. First, if
this were truly an argument about subject-matter juris-
diction (which it is not), then it could not be waived. See,
e.g., Arbaugh v. Y&H Corp., 126 S. Ct. 1235, 1244 (2006).
Second, the United States had no reason to file a cross-
appeal because the judgment is entirely in its favor. Byron
v. Clay, 867 F.2d 1049, 1050 (7th Cir. 1989). Parties in
litigation may suffer setbacks along the road to favorable
judgments. Appeals are taken to reverse judgments, not
intermediate setbacks. The United States is entitled to
defend the judgment in its favor on any ground supported
by the record without filing a cross-appeal specifically
attacking the district court’s denial of its motion for sum-
mary judgment. Id. We can affirm a judgment on
any ground fairly supported by the record. Cardoso v.
Robert Bosch Corp., 427 F.3d 429, 432 (7th Cir. 2005).
We return now to the question before us—whether the
Navy was a borrowing employer under the IWCA. The
answer is controlled by Belluomini, which held that the
IWCA’s definition of “loaning employer” established a
statutory test for a borrowed employment relationship. If an
employer supplies an employee to another employer and
otherwise meets the statutory definition of a loaning
employer, then the receiving employer is deemed a borrow-
ing employer. Belluomini, 64 F.3d at 302. The district court
thought this aspect of Belluomini was premised on improper
assumptive legal work. We disagree. Belluomini expressly
relied on Chicago’s Finest Workers, the only case from the
state’s highest court that addresses this issue. Chicago’s
Finest Workers applied the statutory definition of loaning
employer and held that “[t]he evidence establishes without
8 No. 04-4143
contradiction that under this section of the [IWCA] Chi-
cago’s Finest was a loaning employer and [the receiving
employer] was the borrowing employer.” Chicago’s Finest
Workers, 335 N.E.2d at 436-37.
The district court was concerned that later rulings by
the intermediate Illinois appellate court had undermined
Belluomini. Indeed, several decisions of the Illinois court of
appeals have determined that there is no statutory test for
a borrowing employer under the IWCA and that the issue
of borrowed employment is a question of fact to be resolved
solely by application of the multi-factor “control test.” See,
e.g., Lanphier v. Gilster-Mary Lee Corp., 765 N.E.2d 493,
496 (Ill. App. Ct. 2002); Chaney v. Yetter Mfg. Co., 734
N.E.2d 1028, 1032 (Ill. App. Ct. 2000); Crespo v. Weber
Stephen Prods. Co., 656 N.E.2d 154, 156-57 (Ill. App. Ct.
1995). These courts concluded that the statutory definition
of a loaning employer was not intended to establish a
corresponding test for borrowing employers. Lanphier, 765
N.E.2d at 495-96; Chaney, 734 N.E.2d at 1032; Crespo, 656
N.E.2d at 157. None of these cases, however, mention the
Illinois Supreme Court’s decision in Chicago’s Finest
Workers. The district judge nevertheless determined that
she could “safely predict” that the Illinois Supreme Court
would agree there is no statutory test for a borrowing
employer.
That prediction was error for two reasons. First, the
Illinois Supreme Court has already spoken on the matter,
as this court specifically noted in Belluomini; it held in
Chicago’s Finest Workers that if the employer supplying
an employee satisfies the statutory definition of a loaning
employer, then the receiving employer is a borrowing
employer within the meaning of the IWCA. See Reiser v.
Residential Funding Corp., 380 F.3d 1027, 1029 (7th Cir.
2004) (“Once the state’s highest court acts, the need for
prediction is past.”). Second, even if Belluomini misread
Chicago’s Finest Workers, the district court should not be
No. 04-4143 9
making contrary predictions when this court has ruled
squarely on the matter. Ours is a hierarchical system. Gacy
v. Welborn, 994 F.2d 305, 310 (7th Cir. 1993). If a district
court concludes that the intermediate state appellate courts
have correctly answered a question this court botched, it
should “report [its] conclusions while applying the existing
law of the circuit.” Id.; see also Reiser, 380 F.3d at 1029
(“[D]ecisions of intermediate state courts . . . do not them-
selves liberate district judges from the force of our deci-
sions.”).
We are satisfied that Belluomini correctly decided the
matter. For one thing, the Illinois Supreme Court has
neither overruled Chicago’s Finest Workers nor revisited the
issue in a way that suggests our reading of that case
is wrong. In addition, it is clear from the face of the
IWCA that loaning and borrowing employers go hand in
hand. The Act defines only loaning employers, 820 ILL.
COMP. STAT. 305/1(a)4, but there is no need to define
borrowing employers because the connection is plain—if one
employer lends an employee and meets the statutory
definition for a loaning employer, the recipient employer
is borrowing the employee for purposes of the IWCA. The
Act itself discusses joint and several liability using the term
“loaning employer” as a necessary predicate to a “borrowing
employer.”
To establish that RCI was a loaning employer as defined
by the IWCA, the United States must show (1) a substantial
part of RCI’s business is hiring, procuring, or furnishing
employees to do the work of other employers; (2) RCI pays
the employees’ wages even though they are working for
others; and (3) the Navy is operating under the IWCA. 820
ILL. COMP. STAT. 305/1(a)4; Belluomini, 64 F.3d at 302. RCI
easily satisfies the test for a loaning employer. It is undis-
puted that a substantial part of its business involved hiring,
procuring, or furnishing employees to do jobs for govern-
mental and private agencies. In fact, during more than
10 No. 04-4143
eighteen years as a governmental contractor, RCI drew over
90% of its revenues from contracts like the one with the
Navy in this case. In addition, RCI was responsible for
paying Luna’s wages even though she performed tasks for
the Navy. Finally, the Navy operated under the IWCA. For
purposes of the FTCA, the Navy is considered to be operat-
ing under the IWCA if a private entity under similar
circumstances would be found to be operating under the
IWCA. 28 U.S.C. § 1346(b); Belluomini, 64 F.3d at 303. An
employer in Illinois may, if it is not already obligated to
provide workers’ compensation insurance for its workers,
elect to be bound by the IWCA. 820 ILL. COMP. STAT. 305/2.
Here, the Navy required RCI to provide workers’ compensa-
tion coverage for the employees it loaned the Navy under
the contract. In Belluomini we commented that a similar
contractual provision was the functional equivalent of an
election by the government to provide such coverage itself.
64 F.3d at 303. That is a sensible inference and we find the
same to be true here.
Because RCI was a loaning employer as defined by the
IWCA, the Navy was a borrowing employer protected from
tort suits for accidental injuries to workers on the job. The
judgment of the district court in favor of the Navy is
AFFIRMED.
No. 04-4143 11
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—7-17-06