F I LED

United States Court of Appeals

Tenth Circuit

August 14, 2006

Elisabeth A. Shumaker

Clerk of Court

PUBLISH

UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

DIANE C. McINNIS,

Plaintiff-Appellee/CrossAppellant,

v.

FAIRFIELD COMMUNITIES, INC.,

d/b/a FAIRFIELD RESORTS, INC., a

Delaware corporation,

Defendant-Appellant/CrossAppellee.

Nos. 04-1343 & 04-1359

Appeal from the United States District Court

for the District of Colorado

(D.C. No. 02-Z-0671 (BNB))

K. Preston Oade Jr., (Timothy M. Reynolds with him on the brief) Holme Roberts

& Owen, LLP, Denver, Colorado, for Defendant-Appellant/Cross-Appellee.

Andrea J. Kershner, (Elwyn F. Schaefer with her on the brief) Elwyn F. Schaefer

& Assoc., P.C., Denver, Colorado, for Plaintiff-Appellee/Cross-Appellant.

Before MURPHY, EBEL, and HARTZ, Circuit Judges.

EBEL, Circuit Judge.
We are taking the evidence and any inferences to be drawn therefrom in 1

the light most favorable to McInnis because she prevailed before the jury. See

Deters v. Equifax Credit Info. Servs., Inc., 202 F.3d 1262, 1269 (10th Cir. 2000);

Baty v. Willamette Indus., Inc., 172 F.3d 1232, 1241 (10th Cir. 1999), overruled

on other grounds by National R.R. Passenger Corp. v. Morgan, 536 U.S. 101

(2002).

- 2 -

Plaintiff-Appellee/Cross-Appellant Diane C. McInnis (“McInnis”) filed this

employment discrimination suit against her former employer, DefendantAppellant/Cross-Appellee Fairfield Communities, Inc., d/b/a Fairfield Resorts

(“Fairfield”), claiming retaliation in violation of 42 U.S.C. § 2000e (“Title VII”). 

A jury found Fairfield liable and judgment was entered in her favor, awarding her

$90,000 in back pay, $38,000 in compensatory damages, and $167,000 in punitive

damages. The district court denied McInnis’s request for front pay damages;

ordered that “each party shall pay her or its own costs;” and awarded McInnis

$189,103.75 in attorneys’ fees, which was approximately half of the amount

McInnis requested. Fairfield appeals from the judgment; McInnis cross-appeals

from the denial of costs and front pay and from the order awarding reduced

attorneys’ fees. We AFFIRM on all appeal issues and REVERSE on all crossappeal issues.

BACKGROUND1

In 1985, McInnis began working for Fairfield in Pagosa Springs, Colorado.

Fairfield is one of only two large employers in the area. From June 1998 to April
- 3 -

1999, McInnis worked as the assistant to the Vice President of Sales and

Operations at Pagosa Springs, Steve Thull. In April 1999, McInnis was promoted

to Property Manager at Fairfield’s site in Pagosa Springs. Thull maintained

supervisory authority over McInnis after her promotion. 

Shortly after her promotion, McInnis alleges that Thull began to sexually

harass her. Thull’s sexually aggressive behavior toward McInnis allegedly

increased in severity, and McInnis claims that he raped her on several occasions. 

In March 2000, Thull was transferred to Las Vegas. Although this temporarily

ended the day-to-day harassment, McInnis was instructed to contact Thull while

on a business trip in Las Vegas, and Thull showed up at her hotel room and again

allegedly raped her. 

Months after his transfer to Las Vegas, Thull telephoned McInnis and told

her he was returning to Fairfield in Pagosa Springs. McInnis started to cry, told

him she could not take his harassment anymore and that she was going to tell

someone at Fairfield. Thull became very angry and threatened to fire her if she

told anyone. Soon after this conversation, Thull enlisted Michael Turolla, who

had taken over Thull’s position as Vice President of Sales at Pagosa Springs, and

Ed Mikula, the Regional Human Resource Director, to retaliate against McInnis. 

Together, these three supervisors, especially Turolla, began interfering with
- 4 -

McInnis’s ability to perform her job and documenting alleged problems with

McInnis’s performance.

In August 2000, McInnis’s then-immediate supervisor, Kris Jamtaas,

resigned, and, in November 2000, Mark Gray, the Senior Regional Vice President

of Property Management in the western region, became McInnis’s new immediate

supervisor. On January 28, 2001, McInnis telephoned Gray at his home to

complain about Thull’s sexual harassment and Turolla’s, Thull’s, and Mikula’s

retaliation against her. After this phone call, Gray did not follow-up with

McInnis about her complaint; instead, Gray started communicating with Turolla,

Thull, and Mikula and joined in the retaliation against McInnis. When McInnis

called Gray a second time to raise her sexual harassment and retaliation

complaint, Gray became very angry with her and told her, “every rock I turn over,

I find something on you.” Gray also told her he “did not need this on [his] 90 day

[probation period].” He then directed McInnis to report any past personnel issues

to Mikula because “he [Gray] didn’t want to get involved.” At trial, Gray

testified that he “didn’t really want to know” or get involved with McInnis’s

complaint because it sounded like “some kind of an affair.” 

Gray apparently decided to terminate McInnis’s employment after this

second telephone call and thus contacted Mikula, in human resources, who

requested documentation to support the termination. In the meantime, McInnis
- 5 -

also contacted Mikula, who told her to put her retaliation complaint in writing. 

While preparing this written complaint, McInnis sent a memorandum to Alex

Fogel, the Vice President of Property Management, addressing Gray’s retaliation

and failure to respond to her complaint. Fogel immediately informed Gray by

email of McInnis’s complaint. Only hours after Fogel’s email, Gray contacted

McInnis by email and told her that he was “made aware of the memo [she] sent to

[Fogel] regarding some concerns . . . [and in] response to those concerns, [would]

be arriving in Pagosa Springs [the following day] and would like to schedule a

meeting with [her].” The following day, Gray and Mikula met with McInnis, and

Gray terminated her employment. 

DISCUSSION

I. Fairfield’s Appeal Issues

Fairfield has appealed on several issues: it claims that district court erred in

1) denying its Fed. R. Civ. P. 50 motions for judgment as a matter of law on the

issue of punitive damages; 2) refusing its proposed jury instruction; and 

3) excluding as hearsay emails written by one of Fairfield’s managers. We affirm

the district court’s decision on each of these issues. 

A. Punitive Damages

We review the sufficiency of the evidence to support a punitive damages

award de novo. See Deters, 202 F.3d at 1269. We also review a district court’s
- 6 -

disposition of a motion for judgment as a matter of law de novo. See Baty, 172

F.3d at 1241. 

Such a judgment is warranted only if the evidence points but one way

and is susceptible to no reasonable inferences supporting the party

opposing the motion. We do not weigh the evidence, pass on the

credibility of the witnesses, or substitute our conclusions for those of

the jury. However, we must enter judgment as a matter of law in favor

of the moving party if there is no legally sufficient evidentiary basis

with respect to a claim or defense under the controlling law. We must

view the evidence and any inferences to be drawn therefrom most

favorably to the non-moving party. 

Id. (citations, quotations, alterations omitted); see also Fed. R. Civ. P. 50(a).

A Title VII plaintiff is entitled to punitive damages if his or her employer

engaged in discriminatory practices “with malice or with reckless indifference to

[her] federally protected rights.” 42 U.S.C. § 1981a(b)(1). “Malice” or “reckless

indifference” do not require “a showing of egregious or outrageous” conduct, but

instead require proof that the employer acted “in the face of a perceived risk that

its actions [would] violate federal law.” Kolstad v. Am. Dental Ass’n, 527 U.S.

526, 535-36 (1999). An employer may be either directly or vicariously liable for

the malicious or recklessly indifferent acts of its officers and employees. 

An employer is vicariously (or indirectly) liable for compensatory damages

when “a supervisor with immediate (or successively higher) authority over the

employee” perpetrates the Title VII violation. See Faragher v. City of Boca

Raton, 524 U.S. 775, 807 (1998), and Burlington Indus., Inc. v. Ellerth, 524 U.S.
Although the Supreme Court has not defined “managerial capacity,” it 2

explained that “determining whether an employee meets this description requires

a fact-intensive inquiry” in which the court “should review the type of authority

that the employer has given to the employee, the amount of discretion that the

employee has in what is done and how it is accomplished.” Kolstad, 527 U.S. at

543. The employee “need not be the employer’s top management, officers, or

directors, to be acting in a managerial capacity,” although the employee must be

“important.” Id. (quotations, citations omitted).

An employee may be said to act within the scope of employment if the

employee’s conduct “is ‘the kind the employee is employed to perform,’ ‘occurs

substantially within the authorized time and space limits,’ and ‘is actuated, at

least in part, by a purpose to serve the’ employer.” Id. at 543-44 (quoting

Restatement (Second) of Agency, § 228(1)). 

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742, 765 (1998); see also Deters, 202 F.3d at 1270 n. 3. Because “it is ‘improper

ordinarily to award punitive damages against one who himself is personally

innocent and therefore liable only vicariously,’” Kolstad, 527 U.S. at 544 (quoting

Restatement (Second) of Torts, § 909, cmt. b), “before a company is held liable

for punitive damages for acts of harassment by low-level employees, there [must]

be some culpability beyond mere negligence at the management level,” Danco,

Inc. v. Wal-Mart Stores, Inc., 178 F.3d 8, 18 (10th Cir. 1999) (first emphasis in

original; second emphasis added). Thus, an employer is vicariously liable for

punitive damages “where an employee serving in a ‘managerial capacity’

committed the wrong while ‘acting in the scope of employment.’” Kolstad, 527

U.S. at 543. However, “in the punitive damages context, an employer may not be 2

vicariously liable for the [violative] decisions of managerial agents where th[o]se
 This has come to be known as the “good faith” or “Kolstad” defense to 3

punitive damages. We have not yet decided whether this so-called “defense”

“represents an affirmative defense on which the defendant bears the burden of

proof or whether the plaintiff must disprove the defendant’s good faith

compliance with Title VII.” Davey v. Lockheed Martin Corp., 301 F.3d 1204,

1209 (10th Cir. 2002) (quotations omitted). A number of other courts have

determined that the defense is an affirmative one and place the burden to establish

it on the defendant. See Zimmerman v. Assoc. First Capital Corp., 251 F.3d 376,

385 (2d Cir. 2001); Romano v. U-Haul, Int’l, 233 F.3d 655, 670 (1st Cir. 2000);

Passantino v. Johnson & Johnson Consumer Prods., Inc., 212 F.3d 493, 516 (9th

Cir. 2000); Deffenbaugh-Williams v. Wal-Mart Stores, Inc., 188 F.3d 278, 286

(5th Cir. 1999). We need not resolve this issue in deciding whether judgment as a

matter of law was warranted in this case because our result would be the same

under either standard.

We therefore do not address whether the evidence would also support the 4

punitive damages award under a direct liability theory. Direct liability, unlike

vicarious liability, is premised on a party’s own malfeasance. Because a

corporation “can only act through its officers and employees,” Magnum Foods,

Inc. v. Cont’l Cas. Co., 36 F.3d 1491, 1499 (10th Cir. 1994), were we to address

direct liability in this case, we would need to resolve the issue of what level of

employment is equivalent to “management-level.” See Deters, 202 F.3d at 1270

(noting that “employer malice or reckless indifference in failing to remedy or

(continued...)

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decisions are contrary to the employer’s good faith efforts to comply with Title

VII.” Id. at 545 (quotations omitted); see also Deters, 202 F.3d at 1271.3

Here, the evidence was sufficient to support the jury’s punitive damages

award under a vicarious liability theory because managerial employees within

Fairfield maliciously and recklessly retaliated against McInnis for reporting

sexual harassment. Specifically, the evidence indicates that after McInnis first

4
(...continued) 4

prevent a hostile or offensive work environment of which management-level

employees knew or should have known is premised on direct liability”) (emphasis

added). We recognize that some of our cases seem to inconsistently define which

employees are sufficiently highly ranked to hold an employer directly liable at all,

as well as to inconsistently define which employees are sufficient to hold an

employer directly liable for compensatory and punitive damages. Because this

issue was not adequately briefed, and because it is unnecessary to decide whether

judgment could be predicated on direct liability, we do not resolve these issues

today. Compare Deters, 202 F.3d at 1269-71; Fitzgerald v. Mountain States Tel.

& Tel. Co., 68 F.3d 1257, 1264 (10th Cir. 1995); with Lockard v. Pizza Hut, Inc.,

162 F.3d 1062, 1074 (10th Cir. 1998); Adler v. Wal-Mart Stores, Inc., 144 F.3d

664, 674 (10th cir. 1998); Wilson v. Tulsa Junior College, 164 F.3d 534, 542

(10th Cir. 1998); Jeffries v. Kansas, 147 F.3d 1220, 1229 n.7 (10th Cir. 1998),

abrogated on other grounds by Ellerth, 524 U.S. 742 (1988); Sauers v. Salt Lake

County, 1 F.3d 1122, 1125 (10th Cir. 1993).

- 9 -

complained to Gray about Thull’s sexual harassment and Turolla’s, Thull’s, and

Mikula’s retaliation, Gray began retaliating against her by interfering with her

ability to perform her job and documenting alleged problems with McInnis’s

performance that had not previously existed. After McInnis’s second complaint

to Gray, he told her that he did not want to get involved and almost immediately

thereafter decided to terminate her employment. Then, the day after Gray

discovered that McInnis complained to Fogel, the Vice President of Property

Management, about Gray’s retaliation and his failure to respond to her complaint,

Gray scheduled a meeting with McInnis and Mikula and immediately terminated

McInnis’s employment. Based on this evidence, a reasonable jury could find that

McInnis’s termination was illegal retaliation against her federally protected rights

for reporting sexual harassment. 
- 10 -

As Fairfield acknowledges, it regularly trained its employees concerning

Title VII’s prohibitions against harassment and retaliation. In fact, Turolla

testified that the training was “mandatory.” More importantly, Gray specifically

testified that he understood that employees have a right to complain formally or

informally about sexual harassment. A reasonable jury could therefore have

concluded that at least one managerial agent, the Senior Regional Vice President

of Property Management for the western region, was aware of the relevant federal

prohibitions and nevertheless retaliated against McInnis. By terminating

McInnis’s employment in retaliation for reporting sexual harassment “in the face

of a perceived risk that [such] actions w[ould] violate federal law,” Kolstad, 527

U.S. at 543, the jury could reasonably have found Fairfield vicariously liable in

punitive damages.

Fairfield argues that punitive damages were nevertheless not warranted

because 1) it made good-faith efforts to comply with Title VII; and 2) McInnis

failed to follow Fairfield’s complaint procedure. We reject both of these

arguments.

1. Kolstad defense

To avail itself of Kolstad’s good-faith-compliance standard, an employer

must at least 1) “adopt antidiscrimination policies;” 2) “make a good faith effort

to educate its employees about these policies and the statutory prohibitions”; and
 An additional problem for Fairfield’s position in this regard is that it 5

maintained procedures only for reporting sexual harassment. Here, the jury found

Fairfield liable for retaliation, and none of Fairfield’s policies make any reference

to procedures for reporting retaliation, although Fairfield’s policies prohibited

retaliation as well as sexual harassment.

- 11 -

3) make “good faith efforts to enforce an antidiscrimination policy.” Cadena v.

Pacesetter Corp., 224 F.3d 1203, 1210 (10th Cir. 2000) (quotations omitted)

(emphasis in original). Fairfield contends that it maintained a written policy

against discrimination and retaliation. While there is some debate regarding 5

whether Fairfield demonstrated good-faith efforts to educate its employees about

its specific policies, we need not address that issue because the jury could have

reasonably concluded that Fairfield failed to enforce, or make good-faith efforts

to enforce, any antidiscrimination policies it adopted. We have previously

explained that, “even if an employer[] adduces evidence showing it maintains on

paper a strong non-discrimination policy and makes good faith efforts to educate

its employees about that policy and Title VII, a plaintiff may still recover punitive

damages if she demonstrates the employer failed to adequately address Title VII

violations of which it was aware.” Cadena, 224 F.3d at 1210. 

Here, the evidence indicates that, in December 1999, McInnis complained

to Jamtaas, her then-immediate supervisor, about Thull’s sexually harassing

behavior. Although Jamtaas contacted Thull about McInnis’s complaint, he never
In his farewell letter to McInnis after resigning from Fairfield, Jamtaas 6

wrote:

And finally Diane . . . I have to thank you for providing me a safe haven

during all of my visits to Pagosa Springs. I can honestly say that I was

truly an angel during each of my many visits with you and your team.

Of course it had nothing to do with the fact that I knew that if I ever

even looked any of your staff eye-to-eye after hours that I would be hit

with a harassment suite [sic] before I could blink! There is something

in the water up there!

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followed up with McInnis and later made light of her complaint. In January 6

2001, McInnis called Gray, her immediate supervisor at the time, to complain

about Thull’s sexual harassment and Turolla’s, Thull’s, and Mikula’s retaliation

against her. Gray told McInnis that “[she] [could] always look at something

different, when you step away from it, out of sight and out of mind” and that

McInnis “needed to not let emotions take over.” After this phone call, Gray did

not follow-up with McInnis about her complaint. McInnis called Gray a second

time to raise her sexual harassment and retaliation complaint. During this

conversation, Gray told McInnis that after their first telephone call, he talked to

Thull, Mikula, and Fogel about her complaint. Gray then told McInnis that he

“did not need this on [his] 90 day [probation period].” He directed McInnis to

report any past personnel issues to Mikula because he did not want to get

involved. McInnis then contacted Mikula to complain about being harassed and

retaliated against, and he instructed her to put her retaliation complaint in writing. 
 The Seventh Circuit has expressed concern that the Kolstad good faith 7

defense could never be employed in a vicarious liability case if the harasser’s (or

retaliator’s) knowledge of the harassment (or retaliation) were imputed to the

employer. See Cooke v. Stefani Mgmt. Servs., Inc., 250 F.3d 564, 569 (7th Cir.

2001). Although we recognize the basis of this concern, it does not affect our

decision in this case because Fogel, the Vice President of Property Management,

in addition to Gray, Mikula, Turolla, and Thull, was informed of the harassment

and retaliation.

- 13 -

While preparing this written complaint, McInnis sent a memorandum to Fogel

complaining of Gray’s retaliation and his failure to respond to her complaint. 

Fogel then contacted Gray by email and informed him of McInnis’s complaint. 

In short, the evidence in this case indicates that between December 1999

and February 2001, McInnis reported harassment and retaliation to at least the

Senior Regional Vice President of Property Management, the Vice President of

Property Management, and the Regional Human Resource Director, all of whom

failed to take any action to remedy the situation or stop the retaliation. “Because 7

sufficient evidence was presented on which a jury could have found [Fairfield]

did not make good faith efforts to comply with Title VII, this court will not enter

judgment as a matter of law in favor of [Fairfield] on the question of punitive

damages.” Cadena, 224 F.3d at 1210. 

2. Compliance with complaint procedures

Fairfield also contends that punitive damages were not warranted because

McInnis failed to follow Fairfield’s complaint procedure. Under Faragher and
- 14 -

Ellerth, an employer is shielded from vicarious liability for Title VII violations

where no tangible employment action was taken against the employee if it can

prove a two-pronged affirmative defense: 1) “the employer exercised reasonable

care to prevent and correct promptly any sexually harassing behavior,” and 2) the

plaintiff “unreasonably failed to take advantage of any preventative or corrective

opportunities provided by the employer or to avoid harm otherwise.” Faragher,

524 U.S. at 807; Ellerth, 524 U.S. at 765. Fairfield acknowledges that it is not

entitled to the Faragher/Ellerth defense because terminating McInnis’s

employment constituted a tangible employment action; however, it urges us to

adopt a new rule precluding punitive damages where an employee fails to follow

known procedures for reporting Title VII violations. 

None of the cases cited by Fairfield in support of their position, Williams v.

Missouri Dep’t of Mental Health, 407 F.3d 972 (8th Cir. 2005), cert. denied, 74

U.S.L.W. 3390 (U.S. Jan 09, 2006) (NO. 05-515); Cooke v. Stefani Mgmt. Servs.,

250 F.3d 564 (7th Cir. 2001); and Williams v. Trader Publ’g Co., 218 F.3d 481

(5th Cir. 2000), adopt or apply the rule Fairfield urges us to adopt. More

importantly, unlike the Faragher/Ellerth doctrine, Kolstad does not depend on the

actions of the plaintiff but merely requires that the employer demonstrate it made

“good-faith efforts to prevent discrimination in the workplace.” Kolstad, 527

U.S. at 546; see also Cadena, 224 F.3d at 1210 (describing the acts an employer
The “Fairfield Communities, Inc. Employee Handbook” directed that: 8

If an employee believes he/she is the subject of sexual harassment, the

employee must report the alleged act(s) within forty-eight (48) hours to

his or her supervisor. If the supervisor is unavailable or the employee

is uncomfortable contacting the supervisor, the employee should

immediately contact the Vice President of Human Resources.

Employees can raise concerns and make reports without fear of reprisal.

. . .

Any supervisor or manager who becomes aware of possible sexual or

other unlawful harassment must promptly advise the Vice President of

Human Resources who will handle the matter in a timely and

confidential manner.

Fairfield instead contends that its “Sexual Harassment Policy,” revised in 9

March 1998, changed the complaint procedure to require that employees “report

the alleged act(s) [of sexual harassment] within forty eight (48) hours to the local

general manager or, if you are not comfortable with this reporting arrangement,

(continued...)

- 15 -

must take to be shielded from vicarious punitive damages liability without any

reference to actions (or inactions) by the plaintiff). The Supreme Court thus did

not impose a requirement that an employee follow known procedures for reporting

harassment or retaliation in order to receive punitive damages. 

In any event, although Fairfield contends otherwise, sufficient evidence

exists for the jury to have found that McInnis followed Fairfield’s complaint

procedures. Fairfield’s Employee Handbook directed employees to report

harassment to their supervisor. Fairfield does not dispute that Gray was 8

McInnis’s supervisor. Thus, when McInnis informed Gray of Thull’s sexual 9
(...continued) 9

you can contact Paul Tocash . . . or Marilyn Calva . . . in the Corporate Human

Resources Department.” McInnis testified, however, that she received the

Employee Handbook, which directed her to report harassment to her supervisor, in

1999, which is after the Sexual Harassment Policy allegedly amended Fairfield’s

reporting procedure. We do “not make credibility determinations or weigh the

evidence” when reviewing a motion for judgment as a matter of law. Loughridge

v. Chiles Power Supply Co., 431 F.3d 1268, 1280 (10th Cir. 2005). Language in

Fairfield’s Employee Handbook supports a determination that Fairfield’s sexual

harassment policy instructed employees to inform their supervisor of allegations

of sexual harassment. Notwithstanding other evidence, we accept evidence

favorable to McInnis.

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harassment and Turolla’s, Thull’s, and Mikula’s retaliation, she complied with

Fairfield’s complaint policies.

B. Refused Proposed Jury Instruction

In its second issue on appeal, Fairfield claims it was prejudiced by the

district court’s erroneous refusal to give the jury the following tendered

instruction: “Fear of retaliation is not a legitimate reason for failure to use a

reasonable and available procedure for reporting alleged harassment.” It argues

that the district court’s refusal to give this instruction allowed the jury to ignore

McInnis’s failure to follow Fairfield’s policy and likely nullified Fairfield’s goodfaith Kolstad defense to punitive damages. We disagree. 

“We review for abuse of discretion a district court’s decision not to give a

tendered jury instruction.” Quigley v. Rosenthal, 327 F.3d 1044, 1062 (10th Cir.

2003). “In doing so, we also consider the instructions as a whole de novo to

determine whether they accurately informed the jury of the governing law.” Id.
McInnis urges us to hold in this appeal that the Faragher/Ellerth 10

defense never applies to a retaliation case because the defense does not apply

when the employee suffered a “tangible employment action” and retaliation under

(continued...)

- 17 -

(quotations omitted). “[F]aulty jury instruction[s] require[] reversal when (1) we

have substantial doubt whether the instructions, considered as a whole, properly

guided the jury in its deliberations; and (2) when a deficient jury instruction is

prejudicial.” Townsend v. Lumbermens Mut. Cas. Co., 294 F.3d 1232, 1242

(10th Cir. 2002) (quotations, citations omitted). 

The instruction tendered by Fairfield appears to be a correct statement of

federal law for purposes of applying the Faragher/Ellerth defense. See Harrison

v. Eddy Potash, Inc., 248 F.3d 1014, 1026 (10th Cir. 2001) (recognizing a similar

proposed jury instruction to be a correct statement of federal law); see also

Barrett v. Applied Radiant Energy Corp., 240 F.3d 262, 267 (4th Cir. 2001)

(stating, in the context of the Faragher/Ellerth defense, that “[a] generalized fear

of retaliation does not excuse a failure to report sexual harassment”); Shaw v.

AutoZone, Inc., 180 F.3d 806, 813 (7th Cir. 1999) (“[A]n employee’s subjective

fears of confrontation, unpleasantness or retaliation do not alleviate the

employee’s duty under Ellerth to alert the employer to the allegedly hostile

environment.”). But the Faragher/Ellerth defense does not apply in cases where

the employer takes an adverse employment actions; here, Fairfield terminated

McInnis’s employment. See Harrison, 248 F.3d at 1024. It was not an abuse of 10
(...continued) 10

Tenth Circuit case law requires an adverse employment action. Hillig v.

Rumsfeld, 381 F.3d 1028, 1031 (10th Cir. 2004) (“One element of a prima facie

case under Title VII is that the plaintiff suffered an ‘adverse employment

action.’”). The Supreme Court, however, recently held that a retaliation claim

does not require proof of an adverse employment action. See Burlington N. &

Santa Fe Ry. Co. v. White, — U.S. — , 126 S. Ct. 2405, 2414-15 (2006); see also

Argo v. Blue Cross & Blue Shield of Kan., Inc., — F.3d — , 2006 WL 1806605,

at *7 (10th Cir. 2006).

With regard to punitive damages, the district court instructed the jury, in 11

relevant part, as follows:

If you find in favor of Plaintiff on her claim of retaliation, then you

must decide whether defendant acted with malice or reckless

indifference to Plaintiff’s right not to be retaliated against. Defendant

acted with malice or reckless indifference if it has been proved by the

preponderance of the evidence that the person or persons who

terminated Plaintiff’s employment knew that the termination was in

violation of the law prohibiting retaliation for engaging in protected

activity, or acted with reckless disregard of that law.

Although this instruction does not precisely track the Supreme Court’s language

in Kolstad, it does not appear that Fairfield challenged it before the district court,

and it does not argue on appeal that this instruction improperly informed the jury

of the governing law. See 10th Cir. R. 28.2(C)(3)(b) (noting that “[b]riefs must

cite the precise reference in the record where a required objection was made and

ruled on, if the appeal is based on . . . the giving of or refusal to give a particular

jury instruction”); 10th Cir. R. 10.1(A)(1) (“The appellant must provide all

portions of the transcript necessary to give the court a complete and accurate

record of the proceedings related to the issues on appeal.”). 

- 18 -

discretion for the district court to refuse to give a proper instruction on an

irrelevant issue. The district court’s instructions properly conveyed to the jury

the issues to be decided.11

C. Excluded Emails
- 19 -

We review a district court’s evidentiary rulings for an abuse of discretion. 

United States v. Visinaiz, 428 F.3d 1300, 1313 (10th Cir. 2005), cert. denied, 74

U.S.L.W. 3393 (U.S. Jan. 9, 2006) (No. 05-7839). “We will not overturn an

evidentiary ruling absent a distinct showing that it was based on a clearly

erroneous finding of fact or an erroneous conclusion of law or manifests a clear

error of judgment.” Id. (quotations omitted). Even assuming the district court

abused its discretion in excluding evidence, we must also determine whether the

exclusion was harmless error because “we will not set aside a jury verdict unless

the error prejudicially affects a substantial right of a party.” Praseuth v.

Rubbermaid, Inc., 406 F.3d 1245, 1253 (10th Cir. 2005). “An error affecting a

substantial right of a party is an error which had a ‘substantial influence’ or which

leaves one in ‘grave doubt’ as to whether it had such an effect on the outcome.” 

United States v. Sarracino, 340 F.3d 1148, 1171 (10th Cir. 2003) (citing

Kotteakos v. United States, 328 U.S. 750 (1946)). “When conducting our

harmless error analysis, we review the record as a whole.” Id. (quotations

omitted). 

At trial, Fairfield offered a series of emails written by Turolla as evidence

of Turolla’s state of mind and to rebut McInnis’s charge that his complaints

against her were motivated by a desire to retaliate. The district court refused to
- 20 -

admit the emails on the ground that they were inadmissible hearsay, which

Fairfield contends was prejudicial error. We disagree with Fairfield’s contention.

1. Whether the district court erred

Fairfield contends that the emails were admissible 1) under Fed. R. of Evid.

801(d)(1)(B) as prior consistent statements, 2) as nonhearsay, 3) under Fed. R.

Evid. 803’s state of mind exception, or 4) under the Best Evidence Rule.

a. Prior consistent statements

Fed. R. of Evid. 801(d)(1)(B) provides that a statement is not hearsay if:

The declarant testifies at the trial or hearing and is subject to crossexamination concerning the statement, and the statement is . . .

consistent with the declarant’s testimony and is offered to rebut an

express or implied charge against the declarant of recent fabrication or

improper influence or motive.

The Supreme Court has held that this rule “permits the introduction of a

declarant’s consistent out-of-court statements to rebut a charge of recent

fabrication or improper influence or motive only when those statements were

made before the charged recent fabrication or improper influence or motive.” 

Tome v. United States, 513 U.S. 150, 167 (1995) (emphasis added). Under this

requirement, then, Turolla’s prior consistent statements are inadmissable hearsay

unless he made them before his improper motive arose. See United States v.

Albers, 93 F.3d 1469, 1482 (10th Cir. 1996). 
- 21 -

According to McInnis, Turolla’s improper motive arose in September 2000,

immediately after the telephone call between her and Thull and once Thull again

became Turolla’s direct boss. Prior to that conversation, McInnis had no

documented performance issues. The record indicates that, after that telephone

call and upon Thull’s return to Pagosa Springs, Turolla informed McInnis that he

had spoken with Thull about her and Turolla’s attitude toward her changed

abruptly after that conversation. The emails offered by Fairfield are dated

October 17, October 31, and November 4, 2000. Thus, the premotive requirement

for prior consistent statements was not met because the emails were written after

the conflict between Turolla and McInnis arose. The district court therefore did

not abuse its discretion by refusing to admit the emails as prior-consistent

statements. 

b. Nonhearsay because not offered for the truth of the

matter asserted but merely to show Fairfield’s state

of mind

Fairfield alternatively argues that the emails were admissible as nonhearsay

to show its agents’ states of mind in making the decision to discharge McInnis

and not to prove the truth of the matter asserted in the emails. We have
- 22 -

previously held that out-of-court statements may properly be admitted to show an

employer’s state of mind in making employment decisions. See Faulkner v. Super

Valu Stores, Inc., 3 F.3d 1419, 1434-35 (10th Cir. 1993) (holding admissible

certain out-of-court statements which were “offered to establish [defendant’s]

state of mind in making its hiring decisions and [were] not offered for the truth of

the matter asserted”); see also Staniewicz v. Beecham, Inc., 687 F.2d 526, 530-31

(1st Cir. 1982) (permitting, in an age discrimination case, the supervisor to testify

as to conversations with third parties about plaintiff because “they were offered to

show [the supervisor’s] intent in calling the meeting with [the plaintiff] which

ultimately resulted in the resignation of [plaintiff]”); Haddad v. Lockheed Cal.

Corp., 720 F.2d 1454, 1456 (9th Cir. 1983) (permitting, in an age and national

origin discrimination case, management witnesses to testify about complaints

received about plaintiff because the testimony “was relevant in demonstrating [the

employer’s] non-discriminatory intent in its employment practices”). Turolla’s

emails, however, were only sent to Thull or Mikula or both. Neither of these men

made the decision to termination McInnis. As a result, the statements were

inadmissible to show Fairfield’s state of mind in discharging McInnis because

there is no evidence the decision-maker responsible for McInnis’s

termination—Gray—ever read or learned of the contents of the emails.

c. Rule 803(3) state of mind exception
 Rule 803(3) provides that “statement[s] of the declarant’s then existing 12

state of mind, emotion, sensation, or physical condition (such as intent, plan,

motive, design, mental feeling, pain, and bodily health)” are “not excluded by the

hearsay rule, even though the declarant is available as a witness.” Fed. R. Evid.

803(3). 

To the extent the statements of memory or belief were not offered to 13

(continued...)

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Fairfield also argues that the emails were admissible under Fed. R. Evid.

803(3), the state of mind exception to the general hearsay rule. That Rule 12

expressly excludes from the exception “a statement of memory or belief to prove

the fact remembered or believed unless it relates to the execution, revocation,

identification, or terms of declarant’s will.” Fed. R. Evid. 803(3). Based on this

limitation to the exception, we have held that 803(3) “does not permit the witness

to relate any of the declarant’s statements as to why [the declarant] held the

particular state of mind, or what [the declarant] might have believed that would

have induced the state of mind.” United States v. Joe, 8 F.3d 1488, 1493 (10th

Cir. 1993). 

Turolla’s emails contain hearsay statements expressing his then existing

state of mind (i.e., “I hate to be in this predicament;” “I am at my wits end;” “I

am concerned for the future”) as well as assertions of why Turolla had these

feelings (i.e., descriptions of conversations, interactions, incidents, and problems

he was allegedly having with McInnis). The statements explaining why Turolla

had these feelings are expressly outside the state-of-mind exception. See Joe, 8 13
(...continued) 13

prove the fact remembered or believed, they are irrelevant because, as discussed

earlier, Turolla did not make the decision to terminate McInnis and there is no

evidence that Gray ever read or learned of the contents of the emails.

- 24 -

F.3d at 1493 (holding that victim’s hearsay statement that she was “afraid

sometimes” was admissible under Rule 803(3) but that remainder of statement

indicating “why she was afraid” was “clearly a statement of memory or belief”

and “was not admissible under Rule 803(3)”) (emphasis in original); United States

v. Tome, 61 F.3d 1446, 1453-54 (10th Cir. 1995) (holding that a child’s

statements that she did not want to return to her father “because my father gets

drunk and he thinks I’m his wife” were not a state-of-mind expression because the

first statement was not an expression of fear and the second was a “statement of

memory to prove the fact remembered”); see also Fed. R. Evid. 803(3) advisory

committee’s note (“The exclusion of ‘statements of memory or belief to prove the

fact remembered or believed’ is necessary to avoid the virtual destruction of the

hearsay rule which would otherwise result from allowing state of mind, provable

by a hearsay statement, to serve as the basis for an inference of the happening of

the event which produced the state of mind.”).

Fairfield does not argue, nor does the evidence suggest, that Fairfield

offered to redact the inadmissible portion of the emails. Nevertheless, to the

extent that the court abused its discretion by not admitting the emails in redacted
- 25 -

form, any error did not prejudice Fairfield for the reasons described more fully

below.

d. Best Evidence Rule

Finally, Fairfield argues that the exclusion of Turolla’s emails prevented it

from presenting “the best evidence of his true motive.” Fed. R. Evid. 1002,

known as the best evidence rule, states that “[t]o prove the content of a writing,

recording, or photograph, the original writing, recording, or photograph is

required, except as otherwise provided in these rules or by Act of Congress.” The

best evidence rule is not an exception to the general rule excluding the admission

of hearsay. Instead,

[w]hile Rule 1002 limits the admissibility of evidence offered to prove

the contents of a writing . . . satisfying Rule 1002 does not mean that

the evidence in question is necessarily admissible. The evidence

remains subject to other admissibility objections under the Evidence

Rules and the Constitution. Specifically, the evidence frequently also

raises admissibility issues under the rules regulating hearsay and

authentication.

31 Charles A. Wright and Victor J. Gold, Federal Practice and Procedure § 7183

(2000) (footnotes omitted). Therefore, Fairfield’s claim that the emails are the

best evidence of Turolla’s motivation does not support its argument that the

district court abused its discretion by excluding that evidence as hearsay.

2. Whether any error was prejudicial
- 26 -

Assuming exclusion of the emails, in whole or in part, was erroneous, their

exclusion did not prejudice Fairfield. Turolla testified at length about his state of

mind, his alleged nonretaliatory motive, and his problems with McInnis’s

performance, which is the same subject matter contained in the excluded emails. 

There is no indication that Fairfield’s substantial rights were affected by the

district court’s refusal to admit the actual documents into evidence. See Polys v.

Trans-Colorado Airlines, Inc., 941 F.2d 1404, 1407 n.3 (10th Cir. 1991)

(recognizing that a district court’s error in excluding evidence is harmless if the

excluded evidence would not have added anything new to the evidence already

presented or if the outcome of the trial would have been the same if the excluded

evidence had been admitted).

Accordingly, we hold that it was not an abuse of discretion for the district

court to exclude the emails, and that, even if it was, any error did not prejudice

Fairfield’s rights because the author testified to the substance of the excluded

emails. We therefore affirm the district court’s exclusion of this evidence.

II. McInnis’s Cross-Appeal Issues 

McInnis has cross-appealed, challenging the district court’s costs, front

pay, and attorneys’ fees awards. Reviewing each award for an abuse of

discretion, see Rodriguez v. Whiting Farms, Inc., 360 F.3d 1180, 1190 (10th Cir.

2004) (costs); Smith v. Diffee Ford-Lincoln-Mercury, Inc., 298 F.3d 955, 964
 Fed. R. Civ. P. 54(d) provides in relevant part: 14

Except when express provision therefor is made either in a statute of the

United States or in these rules, costs other than attorneys’ fees shall be

allowed as of course to the prevailing party unless the court otherwise

directs.

- 27 -

(10th Cir. 2002) (front pay); Chavez v. Thomas & Betts Corp., 396 F.3d 1088,

1102 (10th Cir. 2005) (attorneys’ fees), we reverse. 

A. Costs

The district court ordered “each party shall pay her or its own costs”

without providing any reason for its decision. McInnis requested that the court

alter or amend its order and award her costs, but the district court also denied that

motion without explanation. In Cantrell v. International Board of Electric

Workers, Local 2021, 69 F.3d 456 (10th Cir. 1995) (en banc), we held that a

district court’s discretion under Fed. R. Civ. P. 54(d) is restrained in that “it 14

must provide a valid reason for not awarding costs to a prevailing party.” Id. at

459; see also Rodriguez, 360 F.3d at 1190. Fairfield does not dispute that

McInnis was the prevailing party and does not object to a remand on this issue in

light of Cantrell. We agree with the parties that remand is appropriate so that the

district court may make the required findings and provide a valid reason for

denying McInnis costs should it decide on remand to do so; however, we note that
- 28 -

“Rule 54 creates a presumption that the district court will award the prevailing

party costs.” Rodriguez, 360 F.3d at 1190. 

B. Front Pay

McInnis also appeals the district court’s denial of front pay damages. 

“Front pay is simply money awarded for lost compensation during the period

between judgment and reinstatement or in lieu of reinstatement” to make the

plaintiff whole. Abuan v. Level 3 Commc’n, Inc., 353 F.3d 1158, 1176 (10th Cir.

2003) (alteration, quotations, citation omitted). Although reinstatement is the

preferred remedy under Title VII, it “may not be appropriate . . . when the

employer has exhibited such extreme hostility that, as a practical matter, a

productive and amicable working relationship would be impossible.” E.E.O.C. v.

Prudential Fed. Sav. and Loan Ass’n, 763 F.2d 1166, 1172 (10th Cir. 1985); see

also Fitzgerald v. Sirloin Stockade, Inc., 624 F.2d 945, 957 (10th Cir. 1980)

(holding that denial of reinstatement was appropriate in a Title VII case where

there was an atmosphere of hostility). Here, reinstatement was not a suitable
 Fairfield argues that front pay is not available because McInnis never 15

requested reinstatement. However, “[a] plaintiff need not ‘request reinstatement

as a prerequisite to obtaining front pay where the evidence reveals an atmosphere

of hostility.’” Prudential, 763 F.2d at 1173 n.2 (quoting Fitzgerald, 624 F.2d at

957).

- 29 -

option. As the district court found, “it would be devastating to the plaintiff to 15

be reinstated with Fairfield.” 

“The amount [of front pay], if any, is set in the court’s discretion.” 

Whittington v. Nordam Group Inc., 429 F.3d 986, 1000 (10th Cir. 2005). The

following factors are relevant in assessing such an award: 

work life expectancy, salary and benefits at the time of termination, any

potential increase in salary through regular promotions and cost of

living adjustment, the reasonable availability of other work

opportunities, the period within which the plaintiff may become

re-employed with reasonable efforts, and methods to discount any award

to net present value. 

In formulating a front-pay award the district court may consider

all evidence presented at trial concerning the individualized

circumstances of both the employee and employer, but it must avoid

granting the plaintiff a windfall.

Whittington, 429 F.3d at 1000-01 (citations, quotations omitted). The district

court, however, did not consider these factors in denying McInnis front pay and

instead simply noted that McInnis “got a job where she’s comfortable and doing

well and seems to me that that would be much better for her than reinstatement.” 

This was an error of law and, consequently, an abuse of discretion. 
 In November 2001, McInnis obtained a part-time consulting position 16

with Angel Fire Resorts in New Mexico, earning $9.75 per hour. Angel Fire

Resorts expanded this job to create a salaried position for $28,000 per year. 

However, this employment was not comparable to her employment at Fairfield

because it paid less and required her to, at least periodically, commute to Angel

Fire, which was located 3.5 hours from Pagosa Springs. 

- 30 -

McInnis’s vocational expert testified that McInnis has absolutely no

prospects of attaining a pay level equivalent to the pay she received at Fairfield.16

Fairfield is the largest resort in the Pagosa Springs area, and the job market in the

area is very limited. As a result, the record indicates that McInnis will be

adversely affected by the termination of her employment with Fairfield. We

therefore reverse the district court’s denial of front pay and remand for the district

court to determine in the first instance the proper award. 

C. Attorneys’ Fees

With regard to the attorneys’ fees award, McInnis argues on cross-appeal

that the district court abused its discretion by 1) denying her discovery of

Fairfield’s attorneys’ fees and costs; 2) denying her the opportunity to reply in

support of her motion for attorneys’ fees; and 3) reducing her requested attorneys’

fee award by half.

1. Denial of discovery concerning Fairfield’s billing records

Before the district court, McInnis sought to discover Fairfield’s billing

records, including attorneys’ billing rates, costs, and hours expended, as relevant
- 31 -

to the reasonableness of her own counsels’ fees because, as she contends, it

demonstrates Fairfield’s maneuvering and provides comparative information

about reasonable rates, fees, and hours expended in this case. While we have

long “accepted the proposition that one of the factors useful in evaluating the

reasonableness of the number of attorney hours in a fee request is the responses

necessitated by the maneuvering of the other side,” Robinson v. City of Edmond,

160 F.3d 1275, 1284 (10th Cir. 1998) (quotations omitted), McInnis’s motion for

attorneys’ fees details the degree to which Fairfield’s alleged maneuvering

affected her attorneys’ fees. Thus, although McInnis contends that evidence of

Fairfield’s attorneys’ fees and expenses are relevant to the reasonableness of her

counsels’ fees, there is no evidence that the district court was not intimately

aware of Fairfield’s maneuvering and the tenacity with which Fairfield litigated

this case. See City of Riverside v. Rivera, 477 U.S. 561, 580 n.11 (1986) (“The

government cannot litigate tenaciously and then be heard to complain about the

time necessarily spent by the plaintiff in response.”) (quotations omitted).

Furthermore, McInnis has not justified discovery of Fairfield’s attorneys’

billing records beyond her allegations of maneuvering. We therefore cannot say

that the district court abused its discretion by denying McInnis’s motion to

compel discovery of this evidence. In any event, for the reasons described below,

McInnis will have an opportunity on remand to reply to Fairfield’s challenge to
- 32 -

the reasonableness of her attorneys’ hourly rates and time expended in this case

with, for example, an expert report supporting her attorneys’ fee petition and/or

affidavits from local attorneys reflecting their customary fee for work in similar

cases. 

2. Denial of the opportunity to reply

McInnis argues that the district court abused its discretion by denying her

the opportunity to reply in support of her motion for attorneys’ fees. The district

court’s local rules provide that “[t]he moving party may file a reply within 15

days after the filing date of the response, or such lesser or greater time as the

court may allow.” D.C. Colo. L. Civ. R. 7.1(C). We review a district court’s

application of its local rules for abuse of discretion. See Hernandez v. George,

793 F.2d 264, 268 (10th Cir. 1986). 

Our review of the district court docket indicates the following sequence of

events: McInnis filed her motion for attorneys’ fees and expert witness fees on

July 23, 2004. Fairfield’s response was filed on August 5. Under the local rules,

then, McInnis had until August 20 to file a reply. See D.C. Colo. L. Civ. R.

7.1(C). On August 10, McInnis filed a motion for extension of time to file a

reply. On August 12, the district court denied McInnis’s motion for an extension

in an order that stated, without further explanation: “FURTHER ORDERED that

Plaintiff’s request to reply regarding her Motion for Attorneys’ Fees and Expert
- 33 -

Witness Fees is denied.” Then, on August 19, a day before her reply was due

under the general local rule time period, the court entered its award of attorneys’

fees.

Without any explanation for its order, denying McInnis the opportunity to

reply even though she was expressly authorized to do so under the district court’s

local rules was “an arbitrary, capricious, whimsical, or manifestly unreasonable

judgment.” Schrier v. Univ. of Colo., 427 F.3d 1253, 1258 (10th Cir. 2005). 

Accordingly, we conclude that the district court abused its discretion, and we

remand with instructions to allow McInnis the opportunity to reply.

3. Reduction of requested attorneys’ fee award

Because we are remanding to allow McInnis the opportunity to reply, we do

not address whether the district court abused its discretion by decreasing

McInnis’s attorneys’ fees award. However, we note that we see nothing

intrinsically wrong with the district court’s current award of attorneys’ fees. 

While the district court must articulate reasons for its fee award, Public Serv. Co.

v. Cont’l Cas. Co., 26 F.3d 1508, 1520 (10th Cir. 1994), “[a] general reduction of

hours claimed in order to achieve what the court determines to be a reasonable

number is not an erroneous method, so long as there is sufficient reason for its
- 34 -

use,” Mares v. Credit Bureau of Raton, 801 F.2d 1197, 1203 (10th Cir. 1986). 

Here, the district court found both the number of hours expended on this litigation

and the hourly rate charged by McInnis’s attorneys to be unreasonable, and it

therefore reduced both. Additionally, we note that ultimately “an appellate court

plays [only] a ‘limited role’ in reviewing a district court’s award of attorneys’

fees and costs, and deference is given to a district court’s judgment on the matter,

since the court is in a better position to assess the course of litigation and quality

of work.” Gamble, Simmons & Co. v. Kerr-McGee Corp., 175 F.3d 762, 773-74

(10th Cir. 1999). However, once the district court considers McInnis’s reply

brief, it will be in a better position to consider anew the matter of the award of

attorneys’ fees.

CONCLUSION

For the foregoing reasons, we AFFIRM the district court’s decision on all

appeal issues, REVERSE on all cross-appeal issues, and REMAND for further

proceedings consistent with this opinion.