In the

United States Court of Appeals

For the Seventh Circuit

Nos. 07-2242, 07-3615, 07-3671

SANDRA C. LEISTER,

Plaintiff-Appellee, Cross-Appellant,

v.

DOVETAIL, INC., MICHELLE PETERSON, and

EVAN PETERSON,

Defendants-Appellants, Cross-Appellees.

Appeals from the United States District Court

for the Central District of Illinois.

No. 05-2115—Harold A. Baker, Judge.

ARGUED MAY 7, 2008—DECIDED OCTOBER 23, 2008

Before BAUER, POSNER, and WILLIAMS, Circuit Judges.

POSNER, Circuit Judge. The plaintiff, Sandra Leister, and

the Petersons (the individual defendants) were

employed by a company that sells “employee assistance

programs” to employers; the programs provide

counseling for troubled employees. In 1997 the Petersons

bought some of their employer’s employee-assistanceprogram contracts and created the corporate defendant,

Dovetail, of which the Petersons are the sole owners and
2 Nos. 07-2242, 07-3615, 07-3671

officers. They hired Leister, a psychologist, to work for

Dovetail, and the terms of employment included

Dovetail’s agreeing to deposit a specified portion of

her salary in a 401(k) retirement account and to

match a specified portion of these elective deferrals of

compensation with its own contributions. The defendants

complied with the agreement only for the first year of

Leister’s employment. After that they diverted corporate

receipts that should have been contributed to her 401(k)

account to their own pockets. They also failed, despite

her repeated requests, to provide her with copies of the

documents that defined her rights with regard to the

retirement account.

In 2005 she sued Dovetail and the Petersons to recover

the contributions that the defendants were obligated

to make to her 401(k) account and to obtain statutory

penalties for their failure to give her copies of the plan

documents. She based the suit on various provisions of

ERISA, the federal pension law. The district judge, after

a bench trial, awarded her $82,741 for the defendants’

failure to make the required deposits in her 401(k)

account—a failure that the judge deemed a willful

breach of the defendants’ fiduciary duties, 29 U.S.C.

§ 1104—but refused, because of their precarious financial

condition, to award her any statutory penalty for their

failure to give her copies of the retirement-plan documents.

At $110 a day, the maximum statutory penalty, 29 U.S.C.

§ 1132(c)(1); 29 C.F.R. § 2575.502c-1, Leister would be

entitled to receive at least $200,000 in statutory penalties

and maybe much more, because while the defendants

have finally given her some of the plan documents they
Nos. 07-2242, 07-3615, 07-3671 3

have not given her all of them. Her cross-appeal seeks an

award of statutory penalties but does not specify an

amount.

Dovetail was the plan’s sponsor; the Petersons were, as

mentioned, owners and officers of Dovetail; and Mrs.

Peterson was the plan’s administrator. The judge treated

the defendants as a singularity by awarding relief against

all three of them jointly and severally, since co-fiduciary

liability is joint and several under ERISA. 29 U.S.C.

§ 1105(a); La Scala v. Scrufari, 479 F.3d 213, 220 (2d Cir.

2007); In re Masters Mates & Pilots Pension Plan, 957 F.2d

1020, 1023 (2d Cir. 1992); Donovan v. Robbins, 752 F.2d 1170

(7th Cir. 1985) (concurring opinion); cf. Mertens v. Hewitt

Associates, 508 U.S. 248, 262-63 (1993).

The defendants’ principal argument, mysteriously

not mentioned by the district judge although they had

made it to him, is that the claim for the contributions

that the plan failed to make to Leister’s 401(k) account

is barred by the applicable statute of limitations.

Two statutes of limitations apply to suits under ERISA.

One, 29 U.S.C. § 1113, provides that a plaintiff complaining

about “a fiduciary’s breach of any responsibility, duty, or

obligation under” sections 1101 to 1114 has the shorter

of six years from the date of the breach to file suit or (with

an immaterial exception) three years “after the earliest

date on which the plaintiff had actual knowledge of the

breach.” The other statute of limitations is borrowed from

the most analogous state statute of limitations and is

applicable, so far as bears on this case, to suits “to recover

benefits due to [the plaintiff] under the terms of his
4 Nos. 07-2242, 07-3615, 07-3671

plan.” 29 U.S.C. § 1132(a)(1)(B). If this is the governing

provision, the borrowed statute of limitations would be

Illinois’s 10-year statute of limitations for breach of a

written contract. 735 ILCS 5/13-206.

Although the judge based his grant of relief on the

defendants’ having violated their fiduciary duties, Leister

also claims to be entitled to relief under section

1132(a)(1)(B). She may need that alternative ground

because she may need the longer statute of limitations

applicable to it, as we shall see. In addition (as she

seems not to realize, however) her cross-appeal, which

seeks the tax benefits that she would have realized had

the defendants made the contributions to her 401(k)

account that the plan required, can succeed only if she

is entitled to obtain lost benefits. The relief the judge

ordered was pursuant to 29 U.S.C. § 1132(a)(2) and required the defendants to make restitution of their gain

from the breach of fiduciary duty, see § 1109, and that

gain did not include the tax benefits that Leister would

have obtained. She can recover them only under section

1132(a)(1)(B), as part of the benefits that the ERISA plan

entitled her to.

But there are obstacles to her claim to benefits that she

must overcome. To begin with, an ERISA plan can be

established only by a writing, 29 U.S.C. § 1102(a)(1);

Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73, 83-84

(1995); Neuma, Inc. v. AMP, Inc., 259 F.3d 864, 872-73 (7th

Cir. 2001), and anyway the 10-year borrowed Illinois

statute of limitations is applicable only to suits on written

contracts. The only writing in this case is a “Plan Adoption
Nos. 07-2242, 07-3615, 07-3671 5

Agreement” made between Dovetail and a third-party

provider of the 401(k) program, a bank that handled

various financial details of the plan. The agreement,

however, specifies the benefits, including the elective

deferrals, to which participants are entitled. There is

enough detail to satisfy the requirement that an ERISA

plan be in writing. See Lumpkin v. Envirodyne Industries,

Inc., 933 F.2d 449, 465-66 (7th Cir. 1991); Jenkins v. Local

705 Int’l Brotherhood of Teamsters Pension Plan, 713 F.2d

247, 252 (7th Cir. 1983); Williams v. Wright, 927 F.2d 1540,

1548 (11th Cir. 1991).

Another potential obstacle to the benefits claim is that

the complaint does not name the plan itself, as distinct

from Dovetail and the Petersons, as a defendant. Several

cases say that only the plan (or what is the equivalent, the

plan administrator named only in his or her official

capacity, which wasn’t done either) can be named as a

defendant in a suit for benefits. E.g., Jass v. Prudential

Health Care Plan, 88 F.3d 1482, 1490 (7th Cir. 1996); Graden

v. Conexant Systems Inc., 496 F.3d 291, 301 (3d Cir. 2007); Lee

v. Burkhart, 991 F.2d 1004, 1009 (2d Cir. 1993); Gelardi v.

Pertec Computer Corp., 761 F.2d 1323, 1324 (9th Cir. 1985).

Other courts think it enough if whoever controls the

administration of the plan is named as defendant. E.g.,

Layes v. Mead Corp., 132 F.3d 1246, 1249 (8th Cir. 1998);

Garren v. John Hancock Mutual Life Ins. Co., 114 F.3d 186, 187

(11th Cir. 1997); Daniel v. Eaton Corp., 839 F.2d 263, 266

(6th Cir. 1988). But there is less to the difference than

meets the eye.

The cases in the first group rely on the language of

29 U.S.C. § 1132(d): “an employee benefit plan may sue
6 Nos. 07-2242, 07-3615, 07-3671

or be sued under this title as an entity,” and “any

money judgment under this title against an employee

benefit plan shall be enforceable only against the plan as

an entity and shall not be enforceable against any other

person unless liability against such person is established

in his individual capacity under this subchapter.” The first

clause just allows plans to sue or be sued, and the second

clause just specifies consequences if the plan is sued;

neither seems to be limiting the class of defendants

who may be sued. The benefits are an obligation of the

plan, so the plan is the logical and normally the only

proper defendant. But in cases such as this, in which the

plan has never been unambiguously identified as a

distinct entity, we have permitted the plaintiff to name

as defendant whatever entity or entities, individual or

corporate, control the plan, Riordan v. Commonwealth

Edison Co., 128 F.3d 549, 551 (7th Cir. 1997), thus bridging

the two groups of cases. In the present case, involving as it

does a small new company of conspicuous informality with

no designated plan entity, the company itself and its two

principals were appropriate defendants to name in a

suit to recover plan benefits.

Leister argues that Illinois’s 10-year statute of limitations for breach of a written contract applies because

all that she is suing for are the benefits that the plan

entitled her to—the amount that should have been in her

401(k) account. Actually, there are also the statutory

penalties that she is suing to obtain, but as to them no

statute of limitations defense is pleaded, though it could

have been. See Stone v. Travelers Corp., 58 F.3d 434, 439 (9th

Cir. 1995); Groves v. Modified Retirement Plan for Hourly
Nos. 07-2242, 07-3615, 07-3671 7

Paid Employees of Johns Manville Corp. & Subsidiaries, 803

F.2d 109, 117 (3d Cir. 1986); George Lee Flint, Jr., “ERISA:

Fumbling the Limitations Period,” 84 Neb. L. Rev. 313, 319-

20 (2005). And remember that she seeks relief not

only under the benefits provision but also for the defendants’ violation of 29 U.S.C. § 1104, which requires an

ERISA fiduciary to act in the sole interest of the plan’s

participants and beneficiaries. As the district judge

found, the defendants failed to do this when they lined

their pockets with money that the plan required to be

placed in Leister’s 401(k) account.

The statute of limitations applicable to a claim under

section 1104 is, as we know, section 1113, and Leister

discovered the initial breach of the defendants’ fiduciary

obligations in 1999, more than six years before she sued.

It is true that there is no indication that she learned then

that the defendants would never comply with the terms

specified in the Adoption Agreement—that they had

repudiated the agreement. Had she learned it then,

claims for every subsequent failure to match would be

barred by the three-year statute of limitations, e.g., Lewis

v. City of Chicago, 528 F.3d 488, 492-93 (7th Cir. 2008); Daill

v. Sheet Metal Workers’ Local 73 Pension Fund, 100 F.3d 62,

66-67 (7th Cir. 1996); Miller v. Fortis Benefits Ins. Co., 475

F.3d 516, 521-23 (3d Cir. 2007), whereas if every default

was pursuant to a fresh decision by the defendants not

to comply with the agreement each such decision would

be a fresh breach. Webb v. Indiana National Bank, 931 F.2d

434, 437 (7th Cir. 1991); Palmer v. Board of Education of

Community Unit School District 201-U, 46 F.3d 682, 685-86

(7th Cir. 1995); cf. Bay Area Laundry & Dry Cleaning Pension
8 Nos. 07-2242, 07-3615, 07-3671

Trust Fund v. Ferbar Corp., 522 U.S. 192, 206 (1997); compare

Impro Products, Inc. v. Block, 722 F.2d 845, 850 n. 9 (D.C. Cir.

1983).

Concerned lest the three-year statute of limitations

defeat her claim of breach of fiduciary duty, Leister argues

that the defendants lulled her into delaying her suit by

promising to work things out. If so (the judge made no

finding), the doctrine of equitable estoppel (if applicable

to section 1113—an open question in this circuit, Doe v.

Blue Cross & Blue Shield United, 112 F.3d 869, 875-76 (7th

Cir. 1997); Wolin v. Smith Barney Inc., 83 F.3d 847, 850, 853-

56 (7th Cir. 1996); cf. Librizzi v. Children’s Memorial Medical

Center, 134 F.3d 1302, 1307 (7th Cir. 1998), though closed

against its applicability in the D.C. Circuit, Larson v.

Northrop Corp., 21 F.3d 1164, 1171-72 (D.C. Cir. 1994))

would allow her to delay suing until the fog lifted. Teamsters & Employers Welfare Trust v. Gorman Brothers Ready

Mix, 283 F.3d 877, 881-82 (7th Cir. 2002); Bomba v. W.L.

Belvidere, Inc., 579 F.2d 1067, 1071 (7th Cir. 1978);

McAllister v. FDIC, 87 F.3d 762, 767 (5th Cir. 1996).

All this turns out to be of no moment, however, because

the relief that Leister is seeking under 29 U.S.C.

§ 1132(a)(1)(B), a provision governed as we know by the

10-year borrowed statute of limitations, exceeds what she

is seeking under section 1104. United States v. Whited, 246

U.S. 552, 563-64 (1918). And she is entitled to relief under

that statute as well as under section 1104. There was

enough of a writing to satisfy both ERISA and the Illinois

statute of limitations. Contributions to a plan and benefits

owed by a plan are not necessarily equivalent, and section
Nos. 07-2242, 07-3615, 07-3671 9

1132(a)(1)(B) authorizes suit only for benefits. But the

benefits to which Leister was entitled were the assets

that would have been in her 401(k) account had the

defendants complied with their fiduciary duties.

Those assets include not only the unpaid contributions

but also a reasonable estimate of how those contributions,

had they been made, would have grown by being

invested responsibly in accordance with the terms of the

retirement plan. 29 U.S.C. § 1002(34); LaRue v. DeWolff,

Boberg & Associates, 128 S. Ct. 1020, 1022 n. 1 (2008);

Harzewski v. Guidant Corp., 489 F.3d 799, 807 (7th Cir. 2007);

Graden v. Conexant Systems Inc., supra, 496 F.3d at 296-97.

So Clair v. Harris Trust & Savings Bank, 190 F.3d 495, 497

(7th Cir. 1999), where we held that the plaintiff was not

entitled to interest on benefits paid late because the plan

did not provide for such interest, is not on point.

But the valuation by Leister’s expert witness of the

benefits that the 401(k) account would have yielded was

erroneous, though accepted by the district judge. It was

based not on the average performance of the investment

vehicles in which the contributions might have been

placed but on the performance of the best of those vehicles,

as improperly determined ex post. There was money in

Leister’s 401(k) account, and assuming that if there

had been more in it she would have continued to allocate

her investments as she had in the past, the return on

the existing investment would have been the appropriate

benchmark. Nancy G. Ross and Steven W. Kasten, “Calculating Damages in 401(k) Litigation Over Company

Stock,” 19 Benefits L.J. 61, 64 (2006). Instead the witness
10 Nos. 07-2242, 07-3615, 07-3671

estimated a rate of return by looking back at what the

most profitable allocation would have been. Although

Donovan v. Bierwirth, 754 F.2d 1049, 1056 (2d Cir. 1985),

echoed in many cases, says that “where several alternative

investment strategies were equally plausible, the court

should presume that the funds would have been used

in the most profitable of these,” that is incorrect if understood (as it should not be) to mean that at the time of

suit the court should look back and decide which of

those investment strategies has proved most profitable.

Such a methodology would yield a windfall, given the

uncertainty of investments. Cathy M. Niden, “Economic

Analysis in ERISA Class Actions Involving Employee Investments in Company Stock,” 44 Benefits & Compensation

Digest 4 (2007), www.ifebp.org/pdf/webexclusive/07apr.pdf

(visited Aug. 28, 2008). The defendants, however, don’t

complain about the witness’s valuation method, and at the

oral argument their lawyer stated flatly that he had no

problem with it. So the issue is waived.

Leister argues in her cross-appeal that the tax benefits

from investing in a 401(k) plan should be considered in

deciding what value the unpaid contributions would have

had if they had been paid as they should have been. They

would not have been taxable until they were withdrawn

from the 401(k) account in the form of benefits, and as a

result would have grown faster because they would be

growing at a tax-free compound interest rate. This tax

benefit should have been included in calculating the

value the account would have attained had the defendants complied with their fiduciary duties, but of course

minus the cost of the future tax liability discounted to
Nos. 07-2242, 07-3615, 07-3671 11

present value. Buche v. Buche, 423 N.W.2d 488, 492 (Neb.

1988); Corliss v. Corliss, 320 N.W.2d 219, 221 (Wis. App.

1982); see generally John H. Langbein et al., Pension and

Employee Benefit Law 229-32 (4th ed. 2006). (A further

complication, however, that should be taken into

account is that the deferred future tax may tax phantom

gains due to inflation, offsetting some or perhaps all of the

benefit of deferral.) So the case must be remanded for a

recalculation of the benefits due.

The defendants had also promised to pay Leister, when

she was employed by Dovetail, certain sales commissions

that it failed to pay her. That sounds like a straightforward breach of contract claim under Illinois’s common

law of contracts (or possibly a claim under the Illinois

Wage Payment and Collection Act, 820 ILCS 115, for

failure to pay accrued wages owed to an employee), and

Leister did include it in her complaint as a supplemental

claim, 28 U.S.C. § 1367, to her ERISA claim. But she also

tried to shoehorn it into ERISA by alleging that had she

received the commissions she would have deposited

them in her 401(k) account; and the district court

accepted the argument. That was a mistake. ERISA does

not require an employer to pay an employee the wage

they have agreed on, whatever the employee might

decide to do with the money; regular compensation is not

an ERISA benefit. 29 C.F.R. § 2510.3-1(b)(1); Massachusetts

v. Morash, 490 U.S. 107, 115-19 (1989); Stern v. IBM, 326

F.3d 1367, 1372-73 (11th Cir. 2003); Anthuis v. Colt Industries

Operating Corp., 789 F.2d 207, 213 n. 5 (3d Cir. 1986).

But since the claim for unpaid commissions was also

pleaded as a supplemental state-law claim, the district
12 Nos. 07-2242, 07-3615, 07-3671

judge will have to consider its merits. When the federal

claim in a case drops out before trial, the presumption

is that the district judge will relinquish jurisdiction over

any supplemental claim to the state courts. Brazinski v.

Amoco Petroleum Additives Co., 6 F.3d 1176, 1182 (7th Cir.

1993); cf. 28 U.S.C. § 1367(c)(3); Carnegie-Mellon University

v. Cohill, 484 U.S. 343, 350 n. 7 (1988); Rodriguez v. Doral

Mortgage Corp., 57 F.3d 1168, 1177 (1st Cir. 1995). The

presumption is reversed when as in this case the federal

claim is decided on the basis of a trial. Brazinski v. Amoco

Petroleum Additives Co., supra, 6 F.3d at 1182; Purgess v.

Sharrock, 33 F.3d 134, 138 (2d Cir. 1994); see also Miller

Aviation v. Milwaukee County Board of Supervisors, 273

F.3d 722, 731-32 (7th Cir. 2001); Growth Horizons, Inc. v.

Delaware County, 983 F.2d 1277, 1284-85 (3d Cir. 1993).

Ordinarily in a case in which the reverse presumption

is invoked, the trial will have led to the dismissal of the

federal claim, and here it did not; and while a district

judge can decline to exercise supplemental jurisdiction

even though the federal claim has not been dismissed, see

28 U.S.C. §§ 1367(c)(1), (3), (4), that is rarely done and we

cannot think of any reason why it should be done in

this case.

For guidance to the district judge’s determination on

remand of Leister’s claim under Illinois law for unpaid

commissions, we note the following points:

Leister will not be entitled to recover damages for the tax

benefits that she would have received had she deposited

the commissions in her 401(k) account. “Generally, where

there is delay in the making of stipulated payments, the
Nos. 07-2242, 07-3615, 07-3671 13

only recoverable damage accruing to the payee is

interest at legal or contractual rate for the time of delay.”

Green Briar Drainage District v. Clark, 292 Fed. 828, 831 (7th

Cir. 1923); see Siegel v. Western Union Telegraph Co., 37

N.E.2d 868, 871 (Ill. App. 1941); Meinrath v. Singer Co., 87

F.R.D. 422, 425-27 (S.D.N.Y. 1980); 25 Williston on

Contracts § 66.96 (Richard A. Lord ed., 4th ed. 2004). As

explained in Siegel v. Western Union Telegraph Co., supra,

37 N.E.2d at 871, this rule is an application of the

doctrine of Hadley v. Baxendale, 9 Ex. 341, 156 Eng. Rep.

145 (1854), which bars the recovery of consequential

damages in a suit for breach of contract unless the defendant was on notice of what the consequences of a

breach would be and agreed to compensate the plaintiff

for them if there was a breach. See Equity Ins. Managers of

Illinois, LLC v. McNichols, 755 N.E.2d 75, 80-81 (Ill. App.

2001); Mohr v. Dix Mutual County Fire Ins. Co., 493 N.E.2d

638, 643-44 (Ill. App. 1986); cf. Evra Corp. v. Swiss Bank

Corp., 673 F.2d 951, 955-57 (7th Cir. 1982). There is no

indication that the defendants knew what Leister’s tax

bracket was or knew any other details of her financial

situation that would have affected the size of the tax

benefits that she would have obtained from the

inclusion of the commissions in her 401(k) plan rather

than in currently taxable income. So she is entitled just to

the commissions, possibly enhanced by prejudgment

interest, depending on the application of a rather complex

body of Illinois law, on which see Perlman v. Zell, 185

F.3d 850, 857 (7th Cir. 1999), and Needham v. White Laboratories, Inc., 847 F.2d 355, 361-62 (7th Cir. 1988).
14 Nos. 07-2242, 07-3615, 07-3671

The statute of limitations governing the claim for commissions is different from the one applicable to the

ERISA claim. There was never a written agreement to

pay the sales commissions, and the applicable limitations period under Illinois law both for breaches of unwritten contracts and for violations of the Wage Payment and

Collection Act (which creates, as we noted, a remedy for

breach of a contract for wages that have been earned and

are due and owing) is five years. 735 ILCS 5/13-205;

Gregory K. McGillivary, Wage and Hour Laws: A State-byState Survey 599 (2004). So any commissions that were

due her before May 2001 (five years prior to the date

the complaint was filed) are time-barred unless the limitations period is tolled.

We add that another Illinois statute, the Attorneys Fees

in Wage Actions Act, entitles the plaintiff who prevails in

a suit under the wage-payment statute to an award of

attorneys’ fees, provided a demand for the earned but

unpaid compensation was made at least three days before

filing suit and does not exceed the damages ultimately

awarded for the breach of the wage contract. 705 ILCS

225/1; Anderson v. First American Group of Cos., 818

N.E.2d 743, 751-52 (Ill. App. 2004); Caruso v. Board of

Trustees, 473 N.E.2d 417, 420 (Ill. App. 1984).

Leister also complains about the district judge’s

declining to award her any statutory penalties. The aim

of penalties, whatever form they take (fines, punitive

damages, or, as in this case, statutory penalties), is to

deter; and the poorer the defendant, the lower the

penalty can be set and still deter wrongdoers in the
Nos. 07-2242, 07-3615, 07-3671 15

same financial stratum. Kemezy v. Peters, 79 F.3d 33, 35-36

(7th Cir. 1996); Zazu Designs v. L’Oreal S.A., 979 F.2d 499,

507-08 (7th Cir. 1992). Picking the right penalty in light of

such considerations, like picking a federal criminal sentence within a statutory range, inescapably involves

judgment, and so judicial review of the trial judge’s

determination is light, as noted with specific reference

to the statutory penalties for failing to furnish ERISA plan

documents to a requesting plan participant or beneficiary

in Lowe v. McGraw-Hill Cos., 361 F.3d 335, 338 (7th Cir.

2004); see also Bartling v. Fruehauf Corp., 29 F.3d 1062, 1068

(6th Cir. 1994); Rodriguez-Abreu v. Chase Manhattan Bank,

N.A., 986 F.2d 580, 588 (1st Cir. 1993). But given the

willful character of the defendants’ breach—a breach that

they have tried to leverage into a statute of limitations

defense because the unavailability of the documents

delayed Leister’s ascertaining her rights—and the fact

that none of the defendants is in bankruptcy (Dovetail

continues in business), the award of zero penalties was

unreasonable.

It is true that “many courts have refused to impose any

penalty at all under § 1132(c)(1)(B) in the absence of a

showing of prejudice or bad faith.” Bartling v. Fruehauf

Corp., supra, 29 F.3d at 1068-69; see also Byars v. Coca-Cola

Co., 517 F.3d 1256, 1270-71 (11th Cir. 2008); McGowan v.

NJR Service Corp., 423 F.3d 241, 250 (3d Cir. 2005);

Rodriguez-Abreu v. Chase Manhattan Bank, N.A., supra, 986

F.2d at 588-89. But in this case there was both prejudice

and bad faith. See Lowe v. McGraw-Hill Cos., supra, 361 F.3d

at 338; Ames v. American National Can Co., 170 F.3d 751, 760

(7th Cir. 1999). The failure to award penalties was, in the
16 Nos. 07-2242, 07-3615, 07-3671

circumstances, an abuse of discretion. Daughtrey v.

Honeywell, Inc., 3 F.3d 1488, 1494-95 (11th Cir. 1993).

The judgment is affirmed except for the district judge’s

determinations with respect to tax benefits, sales commissions, and statutory penalties; as to those matters the

case is remanded for further proceedings consistent

with this opinion.

AFFIRMED IN PART, REVERSED IN PART,

 AND REMANDED.

10-23-08