Court Opinion

ID: 3001795
Source: CourtListenerOpinion
Date Created: 2015-09-24 20:20:53.970945+00
Date Added: 2024-06-11T13:22:59.135047
License: Public Domain

In the
 United States Court of Appeals
               For the Seventh Circuit
                          ____________

No. 06-4290
STEVEN PETERS,
                                                Plaintiff-Appellant,
                                 v.

GILEAD SCIENCES, INCORPORATED,
                                                Defendant-Appellee.
                          ____________
             Appeal from the United States District Court
     for the Southern District of Indiana, Indianapolis Division.
             No. 04 C 1338—John Daniel Tinder, Judge.
                          ____________
       ARGUED MAY 22, 2007—DECIDED JULY 14, 2008
                          ____________

  Before EASTERBROOK, Chief Judge, and WILLIAMS and
SYKES, Circuit Judges.
  SYKES, Circuit Judge. Steven Peters suffered a shoulder
injury while he was employed by Gilead Sciences, Inc.
He took a relatively short medical leave to have correc-
tive surgery, and when his condition did not improve
after returning to work, he took another leave. During his
second absence, Gilead filled his position with another
employee, and when Peters returned to work, Gilead
offered him a different position. He declined and Gilead
terminated his employment.
2                                               No. 06-4290

  Peters filed suit against Gilead, alleging (as relevant
here) a violation of the Family and Medical Leave Act
(“FMLA”), 29 U.S.C. §§ 2601 et seq., and a claim for pro-
missory estoppel under Indiana law. Gilead moved for
summary judgment on the FMLA claim, arguing that
Peters was ineligible for FMLA leave based on a provi-
sion in the Act that excludes employees at worksites at
which less that 50 employees are employed “if the total
number of employees employed by that employer
within 75 miles of that worksite is less than 50.” 29 U.S.C.
§ 2611(2)(B)(ii). It was undisputed that Gilead employed
less than 50 employees within 75 miles of Peters’ worksite,
making him statutorily ineligible for FMLA leave. It
was also undisputed that if Peters was eligible for FMLA
leave, Gilead had miscalculated the 12-week duration of
his leave and replaced him before it expired.
   Relying on language in Dormeyer v. Comerica Bank-Illinois,
223 F.3d 579, 582 (7th Cir. 2000), Peters argued that
Gilead was equitably estopped from asserting the FMLA’s
50/75 exclusion based on representations made in
Gilead’s employee handbook and in letters it sent to
Peters regarding his entitlement to 12 weeks of medical
leave. The district court concluded Peters had not estab-
lished the elements of equitable estoppel and granted
summary judgment for Gilead.
  We reverse. While Dormeyer suggested that FMLA
eligibility might, “in an appropriate case,” arise by
estoppel, the issue need not have been addressed in this
case. Peters alleged a state-law claim for promissory
estoppel—an equitable contract remedy that permits
enforcement of a promise that induces actual and reason-
able reliance on the part of the plaintiff, at least to the
extent of the plaintiff’s reliance damages. The doctrine is
No. 06-4290                                               3

available when a promise lacks the elements of contract; a
threshold question is whether the promise created an
enforceable contract.
  The medical-leave representations contained in Gilead’s
employee handbook (repeated in its letters to Peters) may
have created an enforceable contract under Indiana
law, giving Peters a contractual right to the equivalent
of FMLA leave (that is, 12 weeks) regardless of his statu-
tory ineligibility. If the representations in the handbook
are not contractually enforceable, Indiana’s promissory-
estoppel cause of action allows enforcement of Gilead’s
promises to the extent of the reliance harm Peters suf-
fered. Accordingly, we need not decide whether this is an
“appropriate case” to apply FMLA eligibility-by-estoppel,
a possibility assumed but not decided in Dormeyer.

                      I. Background
   In July 2001 Peters began employment as a Therapeutic
Specialist for Gilead, a pharmaceutical company. As a
Therapeutic Specialist, Peters worked from his home in
Indianapolis representing and marketing Gilead’s prod-
ucts to physicians and healthcare professionals in its
Midwest region. In November 2001 Peters suffered a work-
related injury to his neck and right shoulder. When he
reaggravated his shoulder in October 2002, Peters reported
the injury to Gilead and filed a worker’s compensation
claim. At the end of November, his physician imposed
lifting restrictions, and Peters worked under these restric-
tions until early December of that same year. He then
underwent corrective surgery, taking what he thought
was FMLA medical leave from December 5 through
December 16, 2002.
4                                              No. 06-4290

  The day after his leave started, Peters received a letter
from Gilead stating in part:
      The Federal Family and Medical Leave Act
    (“FMLA”) went into effect August 5, 1993. The act
    grants eligible employees of covered employers up
    to twelve weeks of unpaid leave in a twelve month
    period to care for a newborn or adopted or foster
    child, to care for the seriously ill parent, child, or
    spouse of the employee, or to attend to the employee’s
    own serious health condition. To be eligible for FMLA
    benefits, an employee must have worked for a cov-
    ered employer for a total of 12 months and have
    worked at least 1,250 hours over the previous twelve
    months.
       You will retain your employee status during the
    period of your FMLA Leave. This includes accrual of
    tenure and vacation, in addition to continued health
    benefits coverage. You will be guaranteed reinstate-
    ment in your position, or equivalent position, if
    you return to work by the time your FMLA leave
    expires. In this case, since your leave began December
    5, 2002, you will need to return to work by February 28,
    2003 to be guaranteed such reinstatement.
This excerpt (with the exception of the specific start and
end dates for the leave) tracks language in Gilead’s em-
ployee handbook regarding employees’ entitlement to
family and medical leave. The handbook provides, under
the bold heading “FAMILY AND MEDICAL CARE
LEAVE” and the subheading “ELIGIBILITY”: “A request
for family and medical care leave will be granted for all
employees employed by the Company [Gilead] for at
least twelve months and who have worked 1,250 hours
during the twelve months preceding the commencement
No. 06-4290                                                 5

of leave.” Like the letter Peters received, the handbook
guarantees 12 weeks of family and medical leave during
a 12-month period and reinstatement to the same (or an
equivalent) position with the company upon return to
work.
  Peters returned to work on December 16, 2002, and
worked under restrictions that limited him to left hand and
arm work. On March 4, 2003, Peters took a second leave
when his doctors began treating him with Neurontin, a
drug that causes significant side effects. This second
leave lasted until May 5, 2003. At the start of this second
leave, Gilead sent Peters a letter, similar to the first,
again setting forth his eligibility for medical leave. Dated
March 17, 2003, this letter stated:
    In this case, your original leave began December 5,
    2002, and you returned to work as of January 26, 2003
    (7 weeks and 4 days). Since you reestablished your
    leave as of March 4, 2004, you will need to return to
    work by April 4, 2003 (4 weeks and 3 days) to be
    guaranteed such reinstatement.
The letter erroneously identified January 26 as the date
Peters returned from his first leave. In fact, his first leave
only lasted until December 16, 2002. Accordingly, the
April 4, 2003 return-to-work deadline in the letter
was incorrect.1 Properly calculated, Peters’ second
leave would have run through May 9, 2003.2 Peters never

1
  There is no dispute that the second letter miscalculated
Peters’ available leave time.
2
  May 9 is the last day of the twelfth workweek of available
leave. According to Gilead’s employee handbook, “[e]ligible
                                              (continued...)
6                                                  No. 06-4290

received this second letter with the miscalculated return-to-
work date, however. Gilead sent it by certified mail, but
apparently no one at Peters’ residence signed for it.
  In early April 2003, Gilead decided to replace Peters
with another employee. On April 16, 2003, Frank Romeo,
Gilead’s Associate Director for Human Resources, re-
ceived a letter from Peters’ doctor releasing him to return
to work on May 5, 2003, within what would have been
his properly calculated return-to-work deadline. On
April 21 Gilead offered Peters’ Therapeutic Specialist
position to an outside candidate who accepted and
began employment on April 28, 2003. By letter dated
April 25, 2003, Gilead informed Peters that because he
held a “key” position, Gilead could not keep his job open.3

2
  (...continued)
employees shall be entitled to twelve workweeks of designated
family and medical care leave during a twelve-month period.”
This corresponds to the FMLA’s guarantee of twelve weeks of
family and medical care leave during a twelve-month period.
29 U.S.C. § 2612(a)(1).
3
   The FMLA permits employers to deny job restoration protec-
tion for “key” salaried FMLA-eligible employees. See 29 U.S.C.
§ 2614(b)(2). A Department of Labor Regulation states “an
employer may deny job restoration to salaried eligible em-
ployees (’key employees,’ as defined in paragraph (c) of
§ 825.217) if such denial is necessary to prevent substantial
and grievous economic injury to the operations of the em-
ployer.” 29 C.F.R. § 825.216(c). “A ‘key employee’ is a salaried
FMLA-eligible employee who is among the highest paid 10
percent of all the employees employed by the employer within
75 miles of the employee’s worksite.” 29 C.F.R. § 825.217(a);
29 U.S.C. § 2614(b)(2). Gilead’s employee handbook states
                                                 (continued...)
No. 06-4290                                                    7

This letter advised Peters that his old position had been
filled but offered him placement as a Senior Sales Analyst.
Peters declined this alternative position, and Gilead
terminated his employment.
   Peters sued Gilead in federal court, alleging causes of
action under Title VII, the FMLA, and the Americans
with Disabilities Act. Peters also asserted claims for
retaliatory discharge and promissory estoppel under
Indiana law. Gilead moved for summary judgment.
Regarding the FMLA claim, Gilead argued Peters was
not an “eligible employee” as defined in the Act. Peters
filed a cross-motion for partial summary judgment,
claiming Gilead was estopped from asserting a statutory
ineligibility defense to FMLA liability.
  The district court granted summary judgment for
Gilead on the Title VII and ADA claims, as well as the
state-law claim for retaliatory discharge.4 The FMLA
count survived, and the state-law promissory-estoppel

3
  (...continued)
that “[c]ertain key employees may be denied job reinstate-
ment if substantial and grievous economic injury to Gilead
would result if the employee were reinstated.” The handbook
also states that “Gilead will notify any key employee of
his/her job status as a key employee upon requesting leave.”
Gilead did not notify Peters that he was considered a “key
employee” until April 25, 2003, long after his second leave
request was granted. In any event, the issue of whether
Peters is a “key employee” has not been raised on appeal.
4
    The dismissal of these claims is not at issue on appeal.
8                                                    No. 06-4290

claim was not specifically addressed.5 Gilead then filed a
motion for reconsideration as to the FMLA claim, which
the court granted, concluding that Peters had not estab-
lished the elements of equitable estoppel. The court held
that Peters failed to present evidence from which a trier
of fact reasonably could have inferred he was capable of
returning to work by April 4, the return-to-work date
specified in Gilead’s second letter to Peters. If Peters
was physically unable to work by that date, the court
reasoned, he could not have detrimentally relied on
Gilead’s representations in deciding when to return to
work.

                        II. Discussion
 We review the district court’s order granting sum-
mary judgment de novo, viewing the facts and all reason-

5
   In its brief supporting its summary-judgment motion, Gilead
noted that Peters brought an Indiana common-law claim for
promissory estoppel/detrimental reliance but recharacterized
it as a claim for equitable estoppel: “Because this is an equitable
estoppel claim under a federal statute, federal (not Indiana) law
principals [sic] of equitable estoppel are applicable.” We
disagree that a claim for relief grounded in promissory
estoppel is interchangeable with the doctrine of equitable
estoppel. While both are equitable judicial doctrines based on
detrimental reliance, the former is a cause of action and the
latter is a defensive doctrine used to bar the opposing party
from asserting a claim or defense. A remedial aspect of state
contract law, a promissory-estoppel cause of action permits
the enforcement of a promise that otherwise lacks the elements
of a contract. “Promissory estoppel is a sword, and equitable
estoppel is a shield.” Jablon v. United States, 657 F.2d 1064,
1068 (9th Cir. 1981).
No. 06-4290                                                  9

able inferences drawn from them in the light most favor-
able to the nonmoving party. Nissan N. Am., Inc. v. Jim
M’Lady Oldsmobile, Inc., 486 F.3d 989, 994 (7th Cir. 2007);
DeBoer v. Vill. of Oak Park, 267 F.3d 558, 565 (7th Cir. 2001).
  The parties agree that Peters did not meet the statutory
requirements for FMLA eligibility. More precisely,
Peters falls within an exception to the general statutory
definition of “eligible employee” for employees at
worksites at which the employer employs less than 50
employees “if the total number of employees employed
by that employer within 75 miles of that worksite is
less than 50.” 29 U.S.C. § 2611(2)(B)(ii). The so-called
“50/75” provision is an exception to the FMLA’s general
eligibility provision, which premises eligibility on an
employee’s having worked for the employer for at least
12 months and worked a minimum of 1,250 hours during
the previous 12 months. See 29 U.S.C. § 2611(2)(A).
  Gilead’s employee handbook and its letters to Peters
recited the 12-month, 1,250-hour prerequisites for family-
and medical-leave eligibility, but listed no further re-
quirements or exceptions. That is, the handbook and letters
stated that family and medical leave would be provided
to “all employees” who were employed with Gilead for
at least 12 months with a minimum of 1,250 hours
worked during the prior 12 months; neither the handbook
nor the letters contained any reference to the 50/75 ex-
ception.
  Peters claims this omission equitably estops Gilead
from asserting a defense of statutory ineligibility that
would otherwise bar his FMLA claim. It is true that in
Dormeyer we suggested equitable estoppel might, “in an
appropriate case,” be applied to block the assertion of an
available statutory defense in an FMLA action: “[A]n
10                                                 No. 06-4290

employer who by his silence misled an employee con-
cerning the employee’s entitlement to family leave might,
if the employee reasonably relied and was harmed as a
result, be estopped to plead the defense of ineligibility
to the employee’s claim to entitlement to family leave.”
Dormeyer, 223 F.3d at 582. But the factual predicates for
application of equitable estoppel were not present in
Dormeyer, and the issue was not further elaborated.6 Id.
at 582-83.
   We need not consider whether this is an appropriate
case to take up where Dormeyer left off. Peters brought a
state-law claim for promissory estoppel based on his
reliance on Gilead’s representations regarding his entitle-
ment to medical leave. Indiana recognizes this cause of
action in the employment context and has adopted the
formulation of the claim set forth in the Restatement (Second)
of Contracts § 90(1): “A promise which the promisor should
reasonably expect to induce action or forbearance on the
part of the promisee or a third person and which does
induce such action or forbearance is binding if injustice can
be avoided only by the enforcement of the promise.” See
Jarboe v. Landmark Cmty. Newspapers of Ind., Inc., 644 N.E.2d
118, 121 (Ind. 1994). This species of contract claim sounds
in equity, as do other forms of estoppel, see Brown v. Branch,
758 N.E.2d 48, 51-52 (Ind. 2001), but is an affirmative cause
of action and thus differs from equitable estoppel, which

6
  Other circuits have recognized the availability of equitable
estoppel to defeat a defense of FMLA ineligibility. See Minard v.
ITC Deltacom Commc’ns, Inc., 447 F.3d 352, 358 (5th Cir. 2006);
Duty v. Norton-Alcoa Proppants, 293 F.3d 481, 493-94 (8th Cir.
2002); Kosakow v. New Rochelle Radiology Assocs., 274 F.3d 706,
723-25 (2d Cir. 2001).
No. 06-4290                                                 11

operates defensively to bar the assertion of a claim or
defense. Promissory estoppel steps in where a promise
lacks the elements of a binding contract but has induced
detrimental reliance on the part of the promisee. Sometimes
the facts of a given case raise a threshold question of
whether the promise created an enforceable contract in
the first place.7
  Gilead’s employee handbook promised 12 weeks of
medical leave—the equivalent of the leave guaranteed by
the FMLA—and Gilead repeated these promises in its
letters to Peters. It is not clear whether this is sufficient
to establish a binding contract under Indiana law. See Orr
v. Westminster Vill. N., Inc., 689 N.E.2d 712, 719-20 (Ind.
1997) (discussing, without resolving, the question whether
“unilateral contracts in the employment context always
require adequate independent consideration and whether
an employee handbook can ever constitute a unilateral
contract serving to modify the otherwise at-will employ-
ment relationship”); see also Workman v. United Parcel Serv.,
Inc., 234 F.3d 998, 1000 (7th Cir. 2000) (citing Orr and noting
that “Indiana has yet to decide whether to follow” other
states in holding that employee handbooks may, under
certain circumstances, create binding contracts); Damon
Corp. v. Estes, 750 N.E.2d 891, 893 (Ind. Ct. App. 2001)
(enforcing the terms of an employee handbook in favor of
employer); Ind. Heart Assocs., P.C. v. Bahamonde, 714 N.E.2d
309, 311-12 (Ind. Ct. App. 1999) (same); Die & Mold, Inc. v.

7
  We questioned counsel about the state-law theory of this case
at oral argument, and the parties agreed that jurisdiction was
secure under 28 U.S.C. § 1332. Pursuant to 28 U.S.C. § 1653,
Peters has since repleaded the jurisdictional component of
his complaint to properly invoke diversity jurisdiction.
12                                                    No. 06-4290

Western, 448 N.E.2d 44, 48 (Ind. Ct. App. 1983) (same).8

8
   In Orr, the Indiana Supreme Court was confronted with the
question of whether an employee handbook was sufficiently
contractual to convert an at-will employment relationship
into one terminable only for cause. Orr v. Westminster Vill. N.,
Inc., 689 N.E.2d 712, 719-20 (Ind. 1997). After declining to
specifically decide the question, id. at 720 (“we decline plaintiffs’
invitation to use this case as a vehicle for resolving these
questions”), the Court went on, for the sake of argument, to
analyze the case under the approach used in Illinois for deter-
mining whether an employee handbook creates a contract. Id.
(citing Duldulao v. Saint Mary of Nazareth Hosp. Ctr., 505 N.E.2d
314, 318 (Ill. 1987)). We have previously noted, based on Orr,
that the issue remains unresolved in Indiana. Workman v. United
Parcel Serv., Inc., 234 F.3d 998, 1000 (7th Cir. 2000). We are aware
of two decisions of the Indiana Court of Appeals that read Orr
as rejecting the proposition that an employee handbook can
create a contract. McCalment v. Eli Lilly & Co., 860 N.E.2d 884,
889 (Ind. Ct. App. 2007) (citing Orr for the proposition that
“[u]nder Indiana law, employee handbooks do not constitute
unilateral contracts of employment”); City of Indianapolis v.
Byrns, 745 N.E.2d 312, 317 n.3 (Ind. Ct. App. 2001) (“We also
note our supreme court’s explicit rejection of the proposition
that employee handbooks or guidelines create so-called unilat-
eral contracts of employment[,]” citing Orr.). These decisions
are difficult to reconcile with the language of Orr itself and also
with a line of Indiana cases that has enforced the terms of
employee handbooks running in favor of employers on the
issue of employees’ entitlement to vacation pay upon termina-
tion. Damon Corp. v. Estes, 750 N.E.2d 891, 893 (Ind. Ct. App.
2001); Ind. Heart Assocs., P.C. v. Bahamonde, 714 N.E.2d 309,
312 (Ind. Ct. App. 1999); Die & Mold, Inc. v. Western, 448
N.E.2d 44, 48 (Ind. Ct. App. 1983).
No. 06-4290                                                  13

  In the absence of a binding contract, however, Indiana
permits enforcement of Gilead’s promises to the extent
of Peters’ reliance damages. Orr, 698 N.E.2d at 718; Jarboe,
644 N.E.2d at 121; Clark v. Millikin Mortgage Co., 495
N.E.2d 544, 547 (Ind. Ct. App. 1986). Under Indiana law,
the promissory-estoppel cause of action requires: “(1) a
promise by the promissor; (2) made with the expectation
that the promisee will rely thereon; (3) which induces
reasonable reliance by the promisee; (4) of a definite and
substantial nature; and (5) injustice can be avoided only
by enforcement of the promise.” Brown, 758 N.E.2d at 52.
The undisputed evidence here establishes the first four
elements of this cause of action; the fifth relates to the scope
of the remedy. Jarboe, 644 N.E.2d at 121-22.
  If the medical-leave provisions in Gilead’s employee
handbook are actionable as a contract or as a promise
giving rise to recovery under promissory estoppel, Gilead’s
invocation of the FMLA’s 50/75 exception, and Peters’
assertion of equitable estoppel to block it, are simply be-
side the point. Gilead’s handbook does not exclude any
employees from the entitlement to 12 weeks of family
and medical leave except those who do not meet the basic
prerequisites of 12 months’ employment with the com-
pany and 1,250 hours of work in the preceding 12 months.
There is no reason employers cannot offer FMLA-like
leave benefits using eligibility requirements less restric-
tive than those in the FMLA, cf. Harrell v. United States
Postal Serv., 445 F.3d 913, 924 (7th Cir. 2006), and that is
what Gilead did. Peters’ statutory ineligibility is irrelevant
to the contract-based theories of liability.
  The issue of Peters’ ability to return to work by the
April 4 date specified in Gilead’s second letter is likewise
irrelevant. There is no dispute that if Peters is entitled to
14                                              No. 06-4290

12 weeks of medical leave (either contractually or by
application of promissory estoppel), then the April 4
date was miscalculated. Twelve weeks of leave expired
on May 9, and it is undisputed that Peters was medically
cleared to return to work on May 5.
  The district court did not address whether Gilead’s
promises are actionable as a contract or under promissory
estoppel. This was understandable because the parties
focused their arguments on Dormeyer and the equitable
estoppel theory as a means of establishing eligibility
under the FMLA. As we have explained, however, using
equitable estoppel to block an employer from asserting
a statutory defense to FMLA liability is not the same as
using promissory estoppel to enforce a promise by an
employer to allow 12 weeks of medical leave. Promissory
estoppel is a well-established state-law remedy; on the
other hand, the availability of equitable estoppel to block a
statutory defense to FMLA eligibility has been assumed but
not decided in this circuit. We think the prudent course is
to remand this case for consideration of Gilead’s liability
under state law. The leave provisions in Gilead’s employee
handbook may be enforceable as a contract under Indiana
law; at the least, they are promises giving rise to recovery
under promissory estoppel. We note for purposes of the
proceedings on remand that the scope of recovery may
differ. See Jarboe, 644 N.E.2d at 121-22 (discussing the
difference between contract “expectancy” damages and
promissory estoppel “reliance” damages).
                                 REVERSED and REMANDED.

                   USCA-02-C-0072—7-14-08