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Nature of Suit Code: 710
Nature of Suit: Fair Labor Standards Act
Cause of Action: 

---

In the 

United States Court of Appeals 

For the Seventh Circuit ____________________

No. 13‐3818

RAMON ALVARADO, et al.,

Plaintiffs‐Appellants,

v.

CORPORATE CLEANING SERVICES, INC., et al.,

Defendants‐Appellees.

____________________

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

No. 07 C 6361 — Edmond E. Chang, Judge.

____________________

ARGUED FEBRUARY 10, 2015 — DECIDED APRIL 1, 2015

____________________

Before POSNER, MANION, and TINDER, Circuit Judges.

POSNER, Circuit Judge. The plaintiffs in this suit under the

Fair Labor Standards Act, 29 U.S.C. §§ 201, et seq., are 24

window washers employed currently or formerly by Corpo‐

rate Cleaning Services, the defendant (along with a couple of

executives of the company, who need not be discussed sepa‐

rately). There is a procedural hurdle to our resolving the ap‐

peal, which is by the plaintiffs from an adverse judgment in

the district court. But we defer consideration of it to the end

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2 No. 13‐3818

of our opinion because understanding the hurdle requires

acquaintance with some of the facts germane to the substan‐

tive issue presented by the appeal.

CCS, as the defendant is commonly referred to, is Chica‐

go’s largest provider of window‐washing service to high‐rise

commercial and apartment buildings (average height 30 to

40 stories), along with some governmental and other non‐

commercial, nonresidential buildings, such as hospitals and

museums; fewer than 1 percent of its customers are private

homeowners. See generally Corporate Cleaning Services,

www.corporatecleaning.com (visited March 30, 2015, as

were the other websites cited in this opinion). The company

employs about 100 window washers.

A provision of the Fair Labor Standards Act requires an

employer engaged in interstate commerce (as CCS is con‐

ceded to be) to pay its hourly workers at least one and a half

times their normal hourly wage for any hours they work in

excess of 40 hours a week, 29 U.S.C. § 207(a)(1), which CCS

has conceded it has not done for the plaintiffs in this case.

But there is an exception, pertinent to this case, that requires

satisfaction of three conditions: the worker’s regular pay ex‐

ceeds one and a half times the federal minimum wage (a

condition conceded to be satisfied by the plaintiffs, so we’ll

discuss it no further); “more than half his compensation for a

representative period (not less than one month) represents

commissions on goods or services”; and he must be em‐

ployed by “a retail or service establishment.” 29 U.S.C.

§ 207(i). So the issues presented by the appeal are whether

CCS’s window washers are paid mostly by commission and

whether CCS is a retail or service establishment. The district

court granted summary judgment in favor of CCS with re‐

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No. 13‐3818 3

gard to its status as a retail or service establishment and, af‐

ter a three‐day bench trial, ruled in favor of CCS on the

commission requirement. And so the suit was dismissed,

precipitating this appeal.

When CCS receives a window‐washing order, it calcu‐

lates the number of “points” to assign to the job based on the

job’s complexity and the estimated number of hours that the

window washers will take to complete it; usually each

worker assigned to the job gets the same share of the points

allocated to it. CCS pays each window washer the number of

points allocated to him multiplied by a rate, specific to each

worker, that is specified in the company’s collective bargain‐

ing agreement with the union that represents the employees,

the Service Employees International Union (SEIU). CCS also

uses the number of points assigned to a job to determine the

price it charges to customers; naturally it uses a higher ratio

of dollars per point for setting its price for customers than

for compensating its employees, so that it can make a profit.

And CCS regularly makes price adjustments, such as adding

the costs of permits and equipment rentals, rounding the

price to the nearest $25 increment, and reducing the price

because of competition or a desire to maintain good relations

with customers. These adjustments cause the percentage of

the price attributable to window washers’ compensation to

vary from job to job.

The annual pay of those plaintiffs employed throughout

2007 (the year the suit was filed) ranged from approximately

$40,000 to $60,000. Although the collective bargaining

agreement contains a provision entitling the window wash‐

ers to be paid by the hour and thus (as hourly workers) to

receive overtime pay, apparently the union has never tried

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to enforce this provision, and—apparently content with the

company’s compensation system—has kept its hands off this

litigation. Apart from the plaintiffs, the window washers

employed by CCS appear to be content with the challenged

compensation system as well. CCS distributed written notice

to them that they were entitled to hourly and overtime pay‐

ment, yet except for a six‐month period (December 2007 to

June 2008) they chose the points‐based system of compensa‐

tion instead.

The company doesn’t call its compensation system a

“commission” system, but instead a “piece‐rate” (or, equiva‐

lently, “piecework”) system, which is not subject to the sec‐

tion 207(i) exemption. See 29 U.S.C. § 207(g). But the nomen‐

clature is not determinative; the “word [‘commission’] need

not be used for the exemption to be applicable.” Yi v. Sterling

Collision Centers, Inc., 480 F.3d 505, 508 (7th Cir. 2007). There

are real differences between the two compensation systems

(commission and piecework), and the reality, which over‐

comes the nomenclature, is that CCS’s system is a commis‐

sion system. In a piece‐rate system a worker is paid by the

item produced by him: so much per scarf, for example, if his

job is to make scarves. In a commission system he is paid by

the sale—so if he works for a shoe store he’s paid a specified

amount per pair of shoes that he sells. Thus the scarf worker

is paid for making scarves even if they haven’t been sold—

that is, even if he’s producing for inventory—while the shoe

salesman is paid only when he makes a sale. In the present

case, as in the shoe‐store example, the window washers are

paid only if there’s been a sale, namely a sale of window‐

washing service to a building owner or manager.

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No. 13‐3818 5

The parties’ briefs spill much ink over whether a com‐

mission system requires that the compensation bear an

“identifiable and consistent correlation” to the price charged

to customers or that the compensation just be “proportional

and correlated” to the price. The plaintiffs urge the former,

the defendant the latter, as the latter is a more accurate de‐

scription of CCS’s compensation system. Our decision in Yi,

cited earlier, which involved auto repair, supports CCS’s po‐

sition. As in this case, the employer in Yi made adjustments

to the price of its service for such things as differences in

costs of materials used. The adjustments made the percent‐

age of the price attributable to its auto mechanics’ compensa‐

tion vary from repair to repair. We held that this didn’t in‐

validate the compensation system as a commission system.

Yi v. Sterling Collision Centers, Inc., supra, 480 F.3d at 509–10.

The Third Circuit agreed. Parker v. NutriSystem, Inc., 620 F.3d

274, 283 (3d Cir. 2010) (“we decline to adopt a test that re‐

quires a commission, under § [20]7(i), to be strictly based on

a percentage of the end cost to the consumer”). We are una‐

ware of any contrary authority.

A more important consideration is that commission‐

compensated work involves irregular hours of work. See Yi

v. Sterling Collision Centers, Inc., supra, 480 F.3d at 510; Mech‐

met v. Four Seasons Hotels, Ltd., 825 F.2d 1173, 1176–77 (7th

Cir. 1987); Gieg v. DDR, Inc., 407 F.3d 1038, 1045–46 (9th Cir.

2005). An employee who is paid by the sale is not a commis‐

sion worker if his sales are made at a uniform rate (e.g., one

sale per hour), so that the ratio of his hours worked to his

pay is constant. For in that case his pay is effectively hourly.

That’s why piece‐rate workers are not within the commis‐

sion exception: because they keep producing even when no

sale is imminent, the relation between the hours they work

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and their output tends to be constant. But CCS’s employees

can work only when CCS is hired to wash a building’s win‐

dows. Employment necessarily is irregular (rather than the

standard eight‐hour workday) because of the peculiar condi‐

tions of the window‐washing business. Washing the outside

of windows of tall buildings while standing on scaffolds or

dangling from harnesses is dangerous work and CCS is just‐

ly proud of its excellent safety record. That record necessi‐

tates irregular work time by its employees. The largest

source of danger to high‐rise window washers is weather;

window washers do not wash the outside of windows (and

it is the outside that requires the most frequent washing) in

high winds, rain, snow, sleet, or freezing temperatures. An‐

other reason that work slackens off in the winter months is

that managers of residential buildings often will not allow

window washing before 9 a.m., in order to avoid disturbing

the residents; a late start, coupled with the early darkness on

winter days, shrinks the amount of time window washers

can work. And obviously there is no production of window

washing for inventory, which would allow CCS to smooth

out these fluctuations in working hours. There is so little

work during much of the winter than many of the workers

take long vacations in Mexico. (Oddly, most of CCS’s win‐

dow washers come from a single small town in Mexico—

Villa Garcia de la Cadena. See Vicki Cox, “Window Washer

Scrubs Chicago Skyline,” American Profile, July 25, 2012,

http://americanprofile.com/articles/chicago‐window‐w

asher—a colorful account of a Chicago window washer from

that Mexican town.)

The window washers make up for this slack by often

working more than eight hours a day during spring, sum‐

mer, and fall, though even in those months there are times

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No. 13‐3818 7

when they can’t work eight hours a day, whether because of

other work being done on the building, the manager’s fail‐

ure to notify residents of the window washing, a slowdown

in demand for CCS’s services by building owners or manag‐

ers, or, most exotically, attacks on the window washers by

peregrine falcons. Formidable predators whose speed of

flight can exceed 200 miles an hour, these birds build nests,

for breeding and taking care of their fledglings, on the roofs

of tall buildings in Chicago. When a nesting falcon sees win‐

dow washers high on its building, near its nest, it may attack

them, thus preventing them from completing their work. For

a live video of such an attack, see “Falcons Attack Window

Washers 2,” YouTube, www.youtube.com/watch?v=e2Mvg

GA8Q7I.

The result of these impediments to steady work is that a

window washer can’t count on working 40 hours each week

for an entire year. This is the reason for exempting his em‐

ployer from the requirement of paying the worker time and

half for overtime. Suppose the hourly wage in two separate

businesses is an identical $15. In one business the work is

steady and the worker works 2000 hours a year ($15 per

hour x 40 hours x 50 weeks = $30,000). There is no overtime,

so no requirement of time and a half pay ($22.50) per over‐

time hour. In the other business the worker also works 2000

hours a year, but he does no work at all for 10 weeks of the

year and in the remaining 40 weeks (we’re assuming that

both workers take a two‐week unpaid vacation) he works 50

hours a week. Were he entitled to overtime for 10 hours each

week for the 40 weeks he works, his total wages for the year

would be $15 per hour x 40 hours (= $600) + $22.50 x 10

hours (= $225), a total of $825 a week, which times 40 weeks

equals $33,000. In this example, both workers work the same

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number of hours a year, at the same job, but the one who

works irregular hours is paid 10 percent more. That doesn’t

make any sense. The anomaly, which we said in Yi is “the

rationale for the commission exemption from the FLSA’s

overtime provision,” Yi v. Sterling Collision Centers, Inc., su‐

pra, 480 F.3d at 508, is avoided by recognizing that the sec‐

ond set of workers, corresponding to our window washers,

are commission workers and therefore have no statutory en‐

titlement to overtime pay.

But to prevail CCS must show not only that its employ‐

ees are paid by commission, but also that the company is a

retail or service establishment, terms not defined in the stat‐

ute. A “retail establishment” sounds like a store, which CCS

is not; “service establishment” is much broader. CCS is sell‐

ing a service, not goods, and that as we’ve seen is supportive

of the exemption. Demand for services often varies, and

when demand drops the seller cannot make up for it, as a

maker of goods can do, by producing for inventory rather

than for immediate sale.

As a service establishment CCS meets the “retail or ser‐

vice establishment” requirement in section 207(i). If that

weren’t enough (though it is), CCS is probably best de‐

scribed as a retail service establishment. It sells its window‐

cleaning services to building owners and managers; they are

the ultimate customers; they do not resell the window clean‐

ing, and therefore CCS is not a wholesaler. No doubt the

building owners and managers pass on (so far as market

conditions allow) the cost of window cleaning to the occu‐

pants of the building. But that is not resale. It would be ab‐

surd to suggest that a dealer in motor vehicles, when it sells

a truck to a moving company, is “wholesaling” the truck be‐

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No. 13‐3818 9

cause the buyer will doubtless try to recover the cost of the

purchase in the price he charges for his moving services,

which utilize the truck. The opinions cited to us as being

contrary—Gray v. Swanney‐McDonald, Inc., 436 F.2d 652, 653–

54 (9th Cir. 1971); Goldberg v. Furman Beauty Supply, Inc., 300

F.2d 16, 18–19 (3d Cir. 1962); Goldberg v. Warren G. Kleban

Engineering Corp., 303 F.2d 855, 857–59 (5th Cir. 1962); Mitch‐

ell v. Sherry Corine Corp., 264 F.2d 831, 834–35 (4th Cir.

1959)—involve a different statutory exemption from the

commission exemption. See 29 U.S.C. § 213(a)(2); Idaho Sheet

Metal Works, Inc. v. Wirtz, 383 U.S. 190, 192–94 (1966). Section

213(a)(2) is an exemption for intrastate businesses from the

Fair Labor Standards Act’s overtime and wage requirements.

Although two congressional reports discussing the amend‐

ment that added the commission exemption to the Act said

that “retail or service establishment” is defined in section

213(a)(2), S. Rep. 145, 87th Cong., first session, p. 27; H.R. 75,

87th Cong., first session p. 9, the reports are not the law and

don’t explain why a definition meant for the intrastate busi‐

ness exemption should also apply to the commission exemp‐

tion; the two provisions serve different.

An additional reason to classify CCS as a retailer is that it

sells its service to building owners and managers by the

building; it doesn’t make a new contract for each window on

each building. Judged by the unit of sale recognized in the

industry, then, CCS is a retailer. Consider by way of analogy

a small jeweler selling pearl necklaces to consumers. The

jeweler would not be considered a wholesaler of pearls just

because each necklace contains more than one pearl.

The plaintiffs argue that the sale of window‐washing

services to managers of tall buildings “lacks a retail con‐

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10 No. 13‐3818

cept,” whatever that might mean. The phrase is found in a

Department of Labor regulation, 29 C.F.R. § 779.317, which

states that

There are types of establishments in industries where it

is not readily apparent whether a retail concept exists

and whether or not the exemption can apply. It, there‐

fore, is not possible to give a complete list of the types

of establishments that have no retail concept. It is pos‐

sible, however, to give a partial list of establishments

to which the retail concept does not apply. This list is

as follows:

Accounting firms.

Adjustment and credit bureaus and collection agencies

Advertising agencies including billboard advertising.

Air‐conditioning and heating systems contractors.

Aircraft and aeronautical equipment; establishments

  engaged in the business of dealing in.

Airplane crop dusting, spraying and seeding firms.

Airports, airport servicing firms and fixed base

  operators.

Ambulance service companies.

Apartment houses.

Armored car companies.

Art; commercial art firms.

Auction houses

Auto‐wreckersʹ and junk dealersʹ establishments

Automatic vending machinery; establishments

  engaged in the business of dealing in.

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No. 13‐3818 11

(Citations omitted.) The list goes on and on. We’ll stop with

the A’s. There is no reference to window washing (though

“loft buildings or office buildings, concerns engaged in rent‐

ing and maintenance of” is included), and, more important,

no explanation for the choice of which firms to describe as

lacking a retail concept. Most of them sell goods and services

to the actual user of the service or product, rather than

wholesaling them to a retailer who will resell them to the ac‐

tual user. We have seen that allowing CCS to claim the ex‐

emption for commission sales fits the rationale for the ex‐

emption.

The Department of Labor, in an amicus curiae brief that

it has filed in this case, embraces the plaintiffs’ argument

that the building managers who buy CCS’s cleaning services

“resell” them to the building’s occupants, as if the managers

were buying mops that they planned to resell to the occu‐

pants. The Department accuses the district court of

“declin[ing] to defer to the Department’s list of businesses

lacking a retail concept,” found in the regulation, but as we

said window washing is not in the list. The brief states that

sale to the “general public” is “a fundamental characteristic

of a retail or service establishment,” but many retailers sell

to narrow segments of the public: think of sellers of hospital

supplies, or of judges’ robes, or of body bags.

Nowhere does the Department engage with the primary

reason for treating CCS’s window washers as commission

workers—their irregular work hours. Nowhere does it sug‐

gest that the window washers will be better off if paid over‐

time, which could induce the company to reduce its hourly

wage (for that wage is far above the minimum wage). The

Department seems obsessed with its incomplete, arbitrary,

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and essentially mindless catalog of sellers lacking “a retail

concept”—a catalog that, to repeat, despite its inordinate

length does not include window washing. The brief cites de‐

partmental regulations that attempt to define a “retail or

service establishment” by listing factors of dubious rele‐

vance, such as that “75 per centum of [its] annual dollar vol‐

ume of sales of goods or services (or of both) is not for resale

and is recognized as retail sales or services in the particular

industry,” 29 C.F.R. § 779.312, or that the establishment

“serves the everyday needs of the community in which it is

located.” 29 C.F.R. § 779.318. We don’t see the connection

between these criteria and the reasons for excusing certain

employers from the overtime provision of the Fair Labor

Standards Act. But nor does CCS fail to satisfy these criteria.

It’s no surprise, by the way, that there is no connection.

The Department’s definition comes from section 213(a)(2),

which as we’ve noted was the intrastate business exemption.

This definition made sense in that context: if Congress’s

purpose was to exempt local mom and pop stores from

wide‐sweeping federal labor legislation (and not just from

the overtime requirement), courts would want to ensure that

most of the local stores’ output would remain within the

state—in other words that they are operating on a small

scale in the community. The Department of Labor and some

courts, see Gieg v. DDR, Inc., supra, 407 F.3d at 1047–49; Reich

v. Delcorp, Inc., supra, 3 F.3d at 1183 (8th Cir. 1993); Martin v.

The Refrigeration School, Inc., 968 F.2d 3, 6–8 (9th Cir. 1992),

have woodenly ported the definition from section 213(a)(2)

to the commission exemption with no sensitivity to the very

different purpose of that exemption.

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No. 13‐3818 13

The plaintiffs make other arguments, but what all their

arguments have in common is that they are decoupled from

any plausible concern with the welfare of CCS’s window

washers. They point out that one purpose of the overtime

provision of the FLSA is to encourage employers to spread

out full‐time work among different employees. Fair enough;

but giving CCS’s window washers overtime pay wouldn’t

further that purpose because it hasn’t been shown that they

are on average working more than 2,000 hours a year (50 40‐

hour work weeks). A second purpose of requiring added

pay for overtime is, by discouraging employers from requir‐

ing their workers to work overtime, to reduce workplace in‐

juries stemming from fatigue. But CCS has achieved an ad‐

mirable safety record without paying its workers for work‐

ing overtime. Finally the requirement of paying extra for

overtime is said to be a boon to low‐wage workers. But the

plaintiffs aren’t low‐wage workers; their yearly income, as

we said, is between $40,000 and $60,000.

So the window washers are well paid. And because of

their skills, strength, and daring, and CCS’s concern with

safety (not only the workers’ safety, but the safety of pass‐

ersby on the sidewalks far beneath the workers and thus far

beneath their scaffolds and equipment), their dangerous jobs

are actually safe; and their irregular hours of work enable

them to enjoy warmth and family in Mexico when it is win‐

ter in Chicago. It is no surprise that most of the workers, and

their union, want nothing to do with the plaintiffs’ case.

It remains to consider the procedural hurdle that we

mentioned at the outset of this opinion. Ten days after the

appeal was argued, the parties filed a joint stipulation to

dismiss it pursuant to Rule 42(b) of the appellate rules.

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Normally such stipulations are accepted and the appeal

dismissed, though we can decline to do so if necessary to

avoid an injustice, and especially to “protect the rights of

anyone who did not consent to the dismissal.” Safeco Ins. Co.

of America v. American Int’l Group, Inc., 710 F.3d 754, 755 (7th

Cir. 2013); see also Noatex Corp. v. King Construction of Hou‐

ston, L.L.C., 732 F.3d 479, 487 (5th Cir. 2013); Suntharalinkam

v. Keisler, 506 F.3d 822, 827 (9th Cir. 2007) (en banc)

(Kozinski, J., dissenting); American Automobile Manufacturers’

Association v. Massachusetts Department of Environmental Pro‐

tection, 31 F.3d 18, 22 (1st Cir. 1994).

After initially accepting the stipulation, we became con‐

cerned about whether it had received the actual consent of

all 24 plaintiffs. Remember that the plaintiffs consist of 24

former and present employees of CCS, that many (maybe all,

for all we know) come from the same small town in Mexico,

and that they return there—the ones not yet retired mainly

in the winter, when the window washing business in Chica‐

go is slow (this winter in Chicago was savage)—to visit with

family. We wondered whether they had all been consulted

about, and agreed to, the stipulation. We therefore ordered

the mandate recalled and the parties ordered to verify to us

that each of the 24 plaintiffs had consented to the stipulation

and to any settlement underlying it.

The parties have now filed statements in response to our

order. The defendant expresses no opinion on whether the

plaintiffs consented to the stipulation to dismiss their appeal.

It states: “There is no written settlement agreement among

the parties. [CCS] agreed to the proposed stipulation to dis‐

miss conditioned upon the payment of certain costs incurred

in connection with the appeal, which were in fact paid.”

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No. 13‐3818 15

This, if true, means that the plaintiffs not only received noth‐

ing in exchange for abandoning their suit, but that they paid

the defendant “certain costs.” The plaintiffs’ statement in re‐

sponse to our order says that “the agreement between the

Parties provided that Defendants would receive payment of

a compromised amount of litigation costs and that the case

would be dismissed. There was no written settlement

agreement between the Parties.” There is also no indication

that the Department of Labor was consulted, despite its hav‐

ing filed an amicus curiae brief in support of the plaintiffs.

The statement goes on to say that the plaintiffs’ lawyer

“communicated with and obtained authority from each of

the 24 Plaintiffs.” However, it is apparent from the statement

that the only communications were by telephone and that

there is no record of what was said by either party to any of

the telephone calls—no record either of what the plaintiffs

were told or what they said in reply.  

Although the plaintiff’s attorneys, in paying to dismiss

their own case (for remember their agreeing to pay some of

the defendants’ costs), may be thinking that they might do

better re‐trying the issue in a new case, that’s a type of stra‐

tegic behavior that we do not encourage. As Judge Kozinski

explained in Suntharalinkam v. Keisler, supra, 506 F.3d at 828,

the fact “that petitionerʹs counsel has filed a motion that can

do his client zero good, and possibly great harm, for no ap‐

parent reason other than to avoid an adverse ruling that

would affect other parties in other cases, militates strongly

against exercising our discretion in favor of granting the mo‐

tion at this late date.”

Recently, in a parallel situation, we denied a joint motion

to dismiss an appeal pursuant to Rule 42(b), concluding that

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“it would be irresponsible to dismiss th[e] case without re‐

view.” Americana Art China Co., Inc. v. Foxfire Printing &

Packaging, Inc., 743 F.3d 243, 246 (7th Cir. 2014). And so it

would be here, where we are asked to endorse a most un‐

professional way of attempting to end a litigation. But little

purpose would be served by our instituting a proceeding to

determine whether the plaintiffs gave meaningful consent to

the dismissal of their case and to payment of some of the de‐

fendant’s costs. True, we don’t know whether those costs

were actually borne by the plaintiffs. They may have been

borne by the plaintiffs’ attorneys, who, anticipating an ad‐

verse opinion, may have concluded that paying the defend‐

ant’s costs was the lesser evil compared to having to

acknowledge an adverse ruling on their appeal. For it is

plain from the analysis in this opinion that the plaintiffs’ ap‐

peal must fail on the merits. Having recalled the mandate,

we retain jurisdiction and can decide the merits, and the is‐

suance of our opinion (which was on the verge of comple‐

tion when the stipulation was filed) provides the cleaner

method of disposing of the case. We remain troubled, how‐

ever, by the unexplained provision regarding compensation

of some of the defendant’s costs. We therefore order the

stipulation dissolved, but the judgment of the district court

AFFIRMED.

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