PUBLISH 

UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT

Equal Employment Opportunity 

Commission, 

 Plaintiff-Appellee, No. 14-1012 

 v. 

Beverage Distributors Company, 

LLC, 

 Defendant-Appellant. 

Appeal from the United States District Court 

for the District of Colorado 

(D.C. No. 1:11-cv-02557-CMA-CBS)

Scott Forman, Littler Mendelson, P.C., Miami, Florida (Joshua B. 

Kirkpatrick and Jennifer S. Harpole, Littler Mendelson, P.C., Denver, 

Colorado, with him on the brief), for Appellant. 

James Tucker, Equal Employment Opportunity Commission, Washington, 

D.C. (P. David Lopez, General Counsel, Carolyn L. Wheeler, Acting 

Associate General Counsel, and Jennifer S. Goldstein, Acting Assistant 

General Counsel, Equal Employment Opportunity Commission, 

Washington, D.C., with him on the brief), for Appellee. 

Before TYMKOVICH, HOLMES, and BACHARACH, Circuit Judges. 

BACHARACH, Circuit Judge. 

 

FILED 

United States Court of Appeals 

Tenth Circuit 

March 16, 2015

Elisabeth A. Shumaker 

Clerk of Court

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 This case involves a claim of employment discrimination. Mr. 

Michael Sungaila, who is legally blind, worked for Beverage Distributors 

Company. When his position was eliminated, Mr. Sungaila obtained a 

higher-paying job in the company’s warehouse. But, Mr. Sungaila’s 

employment was conditioned on passing a physical examination. 

 Mr. Sungaila passed the physical. But, the examining doctor stated 

that Mr. Sungaila would require workplace accommodations to mitigate the 

risks from his impaired vision. Beverage Distributors concluded that it 

could not reasonably accommodate Mr. Sungaila’s condition and rescinded 

the offer of a job in the warehouse. Shortly thereafter, Mr. Sungaila found 

a lower-paying position with another company. 

 Mr. Sungaila filed a discrimination claim with the Equal Employment 

Opportunity Commission, which then sued Beverage Distributors on Mr. 

Sungaila’s behalf under the Americans with Disabilities Act. 

 At trial, Beverage Distributors asserted two defenses. 

1. Direct Threat. Beverage Distributors stated that Mr. Sungaila’s 

impaired vision would create a significant risk of harm to 

himself and others and no reasonable accommodations could 

reduce or eliminate that risk. 

2. Failure to Mitigate Damages. Beverage Distributors added that 

if Mr. Sungaila were to prevail, the fact-finder should reduce 

the award because of a failure to mitigate damages. 

 The jury found that Beverage Distributors was liable for 

discrimination and that Mr. Sungaila was not a direct threat. But, the jury 

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also found that Mr. Sungaila had failed to mitigate his damages. Based on 

these findings, the jury awarded Mr. Sungaila a reduced back pay award 

because of his failure to mitigate. 

 The EEOC filed two post-trial motions. In the first motion, the EEOC 

invoked Federal Rule of Civil Procedure 50(a) and argued that Beverage 

Distributors had not proven as a matter of law that Mr. Sungaila failed to 

mitigate his damages. The court agreed and reinstated the full damage 

award. In the second motion, the EEOC sought a tax-penalty offset to 

compensate Mr. Sungaila for the additional tax liability resulting from the 

lump-sum award of back pay. The court granted that motion and awarded 

the tax offset. 

 Beverage Distributors appeals, arguing in part: 

1. The direct-threat instruction constitutes reversible error; and 

2. the district court abused its discretion in awarding the tax 

offset. 

We reverse because the direct-threat jury instruction constituted error. But, 

if the EEOC prevails upon retrial, Mr. Sungaila may be entitled to a tax 

offset.

I. Direct-Threat Instruction 

 Beverage Distributors argues that the direct-threat instruction 

constituted reversible error. We agree, concluding that the instruction 

inaccurately conveyed the direct-threat standard. 

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A. Standard of Review 

 We first consider whether the direct-threat instruction is erroneous. 

In doing so, we review the entire instruction de novo1

 to determine whether 

it accurately states the governing law. Gardetto v. Mason, 100 F.3d 803, 

816 (10th Cir. 1996). 

B. Direct-Threat Defense 

 The direct-threat defense stems from the Americans with Disabilities 

Act. Under the Act, an employer cannot discriminate on the basis of a 

disability. See 42 U.S.C. § 12112(a). But, an employer may decide not to 

hire disabled individuals if they pose a “direct threat to the health or 

safety” of themselves or others. 29 C.F.R. § 1630.15(b)(2). A “direct 

threat” involves “a significant risk of substantial harm to the health or 

safety of the [person] or others that cannot be eliminated or reduced by 

reasonable accommodation.” 29 C.F.R. § 1630.2(r). 

 The existence of a direct threat is an affirmative defense to a 

statutory claim of discrimination. McKenzie v. Benton, 388 F.3d 1342, 

1353-54 (10th Cir. 2004). For this defense, Beverage Distributors had to 

 

1

 The EEOC urges an abuse-of-discretion standard. We disagree. That 

standard is appropriate only when we are reviewing a district court’s 

decision to give (or not to give) a specific instruction. See Lederman v. 

Frontier Fire Prot., Inc., 685 F.3d 1151, 1154 (10th Cir. 2012) (stating 

that appellate courts “review a district court’s decision to give a particular 

jury instruction for abuse of discretion”). Here, we are reviewing the legal 

sufficiency of an instruction, which is a question we review de novo. 

Townsend v. Lumbermens Mut. Cas. Co., 294 F.3d 1232, 1237 (10th Cir. 

2002); Sherouse v. Ratchner, 573 F.3d 1055, 1059 (10th Cir. 2009). 

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show that it reasonably determined that Mr. Sungaila had posed a direct 

threat. See Jarvis v. Potter, 500 F.3d 1113, 1122 (10th Cir. 2007) (stating 

that “the fact-finder does not independently assess whether it believes that 

the employee posed a direct threat,” but “determine[s] [instead] whether 

the employer’s decision was objectively reasonable”). 

 In sum, Beverage Distributors could avoid liability by showing that it 

reasonably determined: 

1. Mr. Sungaila posed a significant risk of substantial harm to the 

health or safety of himself or others, and 

 2. that risk could not be eliminated or reduced by reasonable 

 accommodation. 

C. The Direct-Threat Instruction 

 We consider these elements to determine whether the district court 

correctly instructed the jury. Doing so, we conclude that the instruction did 

not accurately convey the direct-threat standard. 

 The direct-threat instruction contained two parts. The first part 

explained what Beverage Distributors had to “prove” to establish the 

defense: 

 To establish this defense, Beverage Distributors must 

prove both of the following by a preponderance of the 

evidence: 

1. Mr. Sungaila’s employment in a Night Warehouse 

position posed a significant risk of substantial harm to 

the health or safety of Mr. Sungaila and/or other 

employees; and 

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2. Such a risk could not have been eliminated or reduced by 

reasonable accommodation. 

Appellant’s App. at 78. The second part of the instruction elaborated 

on the standard: 

The determination that a direct threat exists must have been 

based on a specific personal assessment of Mr. Sungaila’s 

ability to safely perform the essential functions of the job. This 

assessment of Mr. Sungaila’s ability must have been based on 

either a reasonable medical judgment that relied on medical 

knowledge [or best objective evidence] available at the time of 

assessment . . . . An employer’s subjective belief that a direct 

threat exists, even if maintained in good faith, is not sufficient 

unless it is objectively reasonable. 

 . . . . 

 In determining whether Beverage Distributors acted 

objectively reasonably when it determined that Mr. Sungaila 

was a direct threat, you must consider the following factors: (a) 

the duration of the risk; (b) the nature and severity of the 

potential harm; (c) the likelihood that the potential harm would 

occur; and (d) the imminence of the potential harm. 

 

Id. The instruction did not accurately convey the direct-threat standard. 

 The first part of the instruction required Beverage Distributors to 

prove more than what was legally necessary. According to the first part, 

Beverage Distributors had to prove that Mr. Sungaila posed a direct threat. 

That was not accurate under our case law. Beverage Distributors should 

have avoided liability if it had reasonably believed the job would entail a 

direct threat; proof of an actual threat should have been unnecessary. See 

Jarvis v. Potter, 500 F.3d 1113, 1122 (10th Cir. 2007) (“[T]he fact-finder 

does not independently assess whether it believes that the employee posed 

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a direct threat.”). Thus, the instruction overstated Beverage Distributors’ 

burden. See Menne v. Celotex Corp., 861 F.2d 1453, 1470-71 (10th Cir. 

1988) (concluding that jury instructions were erroneous because they 

confused the burden of proof). 

 The second part of the instruction did not cure the error. This part 

stated that the jury was to consider the reasonableness of Beverage 

Distributors’ belief regarding the existence of a direct threat. But, the jury 

was never told why it was to consider the reasonableness of what Beverage 

Distributors thought. Thus, the error was not cured by a reference in the 

instruction to the reasonableness of the company’s subjective belief.2

 In sum, the instruction was erroneous. The first part of the 

instruction inaccurately stated that Beverage Distributors had to prove that 

Mr. Sungaila posed a direct threat. And the second part of the instruction 

did not cure the error by directing the jury, without explanation, to 

consider the reasonableness of Beverage Distributors’ belief. 

 

2

 The EEOC suggests that the instruction directed the jury to consider 

Beverage Distributors’ subjective determination by referring to that 

determination in the past tense. For instance, the instruction stated that 

“[t]he determination that a direct threat exist[ed] must have been based on 

a specific personal assessment of Mr. Sungaila’s ability to safely perform 

the essential functions of the job.” Appellant’s App. at 78 (emphasis 

added). We reject this argument. Even if the instruction had directed the 

jury to consider Beverage Distributors’ determination, that determination 

was about the “existence” of a direct threat, not the objective 

reasonableness of the determination. 

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D. Need for Reversal 

 We must reverse if the jury might have relied on an erroneous jury 

instruction. Level 3 Commc’n, LLC v. Liebert Corp., 535 F.3d 1146, 1158 

(10th Cir. 2008). Thus, reversal is warranted even if it is “very unlikely” 

that the jury relied on the erroneous standard. Id.

 We conclude that the jury might have relied on the erroneous directthreat standard; thus, reversal is warranted. The inaccurate standard 

appeared prominently in the instruction, and the verdict form directed the 

jury to consider that erroneous standard. See Appellant’s App. at 91 (“Did 

Defendant Beverage Distributors prove . . . both elements of its affirmative 

defense that Mr. Sungaila’s employment in the Night Warehouse position 

posed a direct threat to himself or other employees . . . ?” (emphasis 

added)). Because the instruction and verdict form could have misled the 

jury on the standard, we must reverse. 

II. Mitigation of Damages 

 Beverage Distributors also argues that the district court erroneously 

granted the EEOC’s Rule 50(a) motion, arguing that the evidence could 

have allowed the jury to find a failure to mitigate damages. We need not 

decide this issue. The sufficiency of the evidence entails a fact-intensive 

inquiry, and the mitigation evidence may be different on remand. Thus, we 

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decline to address the sufficiency of the mitigation evidence.3 See Doering 

ex rel. Barrett v. Copper Mountain, Inc., 259 F.3d 1202, 1216 (10th Cir. 

2001) (declining to address the award of punitive damages when the Court 

reversed the judgment based on error in the jury instructions). 

III. Tax Offset 

 Beverage Distributors argues that the district court abused its 

discretion in awarding Mr. Sungaila a tax penalty offset.4

 This issue is 

affected by our reversal of the EEOC’s award. On remand, this issue might 

or might not recur. But, unlike mitigation of damages, the tax offset issue 

is primarily legal rather than factual. Thus, we will address the issue. 

Doing so, we conclude that the district court did not err in awarding a tax 

offset. 

 

3

 The EEOC has suggested that we might lack jurisdiction over this 

part of the appeal. Appellee’s Supp. Resp. Br. at 12 n.5 (Feb. 5, 2015). 

Because we are declining to address the issue on other grounds, we need 

not address the EEOC’s suggestion that we lack jurisdiction. 

4

 Beverage Distributors also asserts that the offset award constituted 

unlawful additur in violation of the Seventh Amendment. But, the company 

did not raise this argument in district court. See Appellee’s Supp. App. at 

7-8. Thus, this argument has been forfeited. See Cummings v. Norton, 393 

F.3d 1186, 1190 (10th Cir. 2005). Though we can consider forfeited 

arguments under the plain-error standard, Beverage Distributors has not 

argued plain error. See Bishop v. Smith, 760 F.3d 1070, 1095 (10th Cir. 

2014) (stating that we will not consider the possibility of plain error on a 

forfeited theory when the claimant fails to argue for plain error), cert. 

denied, __ U.S. __, 135 S. Ct. 271 (2014). 

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A. Jurisdiction 

 The EEOC argues that we lack jurisdiction because the notice of 

appeal preceded the district court’s entry of judgment and computation of 

the amount. See EEOC v. Wal-Mart Stores, Inc., 187 F.3d 1241, 1250 (10th 

Cir. 1999) (discussing prematurity of an appeal involving a post-judgment 

award of attorneys’ fees). But, we conclude that we have jurisdiction on 

the tax offset issue. 

 Even if the notice of appeal had been premature, Beverage 

Distributors filed a post-judgment motion for a stay pending appeal. This 

motion (1) specified that Beverage Distributors was taking the appeal, (2) 

stated that the company was appealing the “monetary components” of the 

district court’s amended order, which would necessarily include the tax 

offset award, and (3) stated that the appeal was to our court. Def.’s Mot. 

for Stay Pending Appeal at 1, EEOC v. Beverage Distributs. Co., LLC, No. 

1:11-cv-02557-CBA-CBS (filed May 13, 2014), Doc. No. 137. Thus, the 

motion for a stay served as the “functional equivalent” of a notice of 

appeal under Federal Rule of Appellate Procedure 3. See Smith v. Barry, 

502 U.S. 244, 248-49 (1992) (“If a document . . . gives the notice required 

by Rule 3, it is effective as a notice of appeal.”). In these circumstances, 

we have appellate jurisdiction. 

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B. Merits 

 Courts have broad discretion in prescribing remedies for victims of 

discrimination. See Franks v. Bowman Transp. Co., 424 U.S. 747, 763 

(1976). One such remedy is a tax penalty offset, which compensates 

victims for additional tax liabilities they would incur as a result of a lumpsum payment. See Sears v. Atchison Topeka & Santa Fe Ry., Co., 749 F.2d 

1451, 1456 (10th Cir. 1984) (awarding a tax offset for victims of 

discrimination). 

 The district court determined that Mr. Sungaila was entitled to a tax 

penalty offset. Mr. Sungaila obtained a lump-sum damage award, which 

would increase his tax liability.5

 Given this result, the court concluded that 

an offset would compensate Mr. Sungaila for the added liability and 

“restore [him] to the position he would have been but for his wrongful 

separation from Beverage Distributors.” EEOC v. Beverage Distribs. Co., 

LLC, No. 11-cv-02557, 2013 WL 6458735, at *8 (D. Colo. Dec. 9, 2013). 

 This award fell within the district court’s discretion. Mr. Sungaila 

obtained a lump-sum damage award that would increase his tax liability. 

And the court acted within its discretion in compensating Mr. Sungaila for 

the added burden. 

 

5

 The parties do not dispute that the lump-sum award would increase 

Mr. Sungaila’s tax liability. 

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 Beverage Distributors disagrees. In its view, Mr. Sungaila is not 

entitled to the offset because his added tax burden would not be 

“significant.” Appellant’s Opening Br. at 39. This argument is based on 

Blim v. W. Elec. Co., 731 F.2d 1473 (10th Cir. 1984). We are not 

persuaded. 

 In Blim, we concluded that a tax offset award was improper because 

the plaintiffs would “suffer no significant tax penalty.” 731 F.2d at 1480. 

The penalty would not have been “significant” because the plaintiffs could 

eliminate “nearly all” of their additional tax liability by using the tax 

code’s averaging provisions. Id.

 That reasoning is inapplicable here. Unlike the plaintiffs in Blim, Mr. 

Sungaila cannot lighten his additional tax liability because Congress 

repealed the averaging provisions in 1986. See Tax Reform Act of 1986, 

Pub. L. No. 99-514, § 141(a), 100 Stat. 2117 (repealing 26 U.S.C. §§ 1302-

1305). Without other ways of reducing the added tax liability, Mr. Sungaila 

would experience a tax disadvantage that the Blim plaintiffs were able to 

avoid. 

 Beverage Distributors also contends that Mr. Sungaila is not entitled 

to an offset because his case is “typical.” Appellant’s Opening Br. at 39. 

This contention is based on our opinion in Sears v. Atchison, Topeka & 

Santa Fe Ry., Co., where we affirmed an offset award while suggesting that 

such an award “may not be appropriate in a typical [discrimination] case.” 

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749 F.2d 1451, 1456 (10th Cir. 1984). But, we did not hold that tax offsets 

were limited to atypical cases. In our view, the district court acted within 

its discretion even if Mr. Sungaila’s situation might be considered 

“typical.” See, e.g., EEOC v. N. Star Hospitality, Inc., __ F.3d __, No. 14-

1660, 2015 WL 363997, at *5 (7th Cir. Jan. 29, 2015) (upholding an award 

of a tax offset in an EEOC claim on behalf of a single plaintiff in order to 

make the plaintiff “whole”). 

 Accordingly, we conclude that the district court did not err in 

awarding a tax offset. 

IV. Conclusion 

 We conclude that (1) the direct-threat jury instruction constituted 

reversible error, and (2) the district court did not err in awarding a tax 

offset. 

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