author: WOOD, District Judge.

text:
    Ashoor RASHO, Plaintiff-Appellant, v. Willard O. ELYEA, et al., Defendants-Appellees.
    No. 14-1902
    United States Court of Appeals, Seventh Circuit.
    Argued April 17, 2015
    Decided March 7, 2017

      Amended May 5, 2017

    Rehearing Denied May 5, 2017

      Lee N. Abrams, Marc R. Kadish, Attorneys, Mayer Brown LLP, Chicago, IL, Daniel Edward Jones, Attorney, Mayer Brown LLP, Washington, DC, for Plaintiff-Appellant.
    Evan Siegel, Attorney, Office of the Attorney General, Civil Appeals Division, Chicago, IL, Natalie D. Thompson, Craig L. Unrath, Attorneys, Heyl, Royster, Voelker & Allen, Peoria, IL, for Defendants-Appellees.
    Before POSNER and WILLIAMS, Circuit Judges, and WOOD, District Judge.

       This amended opinion replaces and supersedes the opinion that was issued by the panel on March 7, 2017 and reported at 850 F.3d 318.

       Of the Northern District of Illinois sitting by designation.

   WOOD, District Judge.

Ashoor Rasho arrived at the Pontiac Correctional Center (“Pontiac”), an Illinois prison, in 2003. Rasho has a history of mental illness and, after'he stopped taking his medication and began showing escalating symptoms, he was transferred into Pontiac’s Mental Health Unit. He remained in the Mental Health Unit until 2006, when he was transferred to the North Segregation Unit. Rasho believes that he was transferred out of the Mental Health Unit not because he no longer required the specialized treatment offered there but instead in retaliation for complaints he had lodged against various prison staff. According to Rasho, after he was transferred, he was denied even minimally adequate mental health care for more than 20 months.

Rasho subsequently filed a lawsuit pursuant to 42 U.S.C. § 1983 against the Pontiac staff psychiatrist and psychology services administrator who recommended his transfer out of the Mental Health Unit, as well as the warden, medical director, and director of mental health, alleging that each acted with deliberate indifference to his serious medical needs in violation of the Eighth Amendment to the United States Constitution. The district court granted summary judgment in favor of all of the defendants. Rasho now appeals.

I.

Rasho has been an inmate in the custody of the Illinois Department of Corrections (“IDOC”) since 1996, although he did not arrive at Pontiac until 2003. He has a history of mental illness—characterized by auditory hallucinations, severe depression, agitation, self-mutilation, and suicide attempts—for which he has been prescribed psychotropic medications. At various times, he has been diagnosed with the Axis I mental disorders “Major Depressive Disorder, Recurrent, with Psychotic Features or Schizophrenia” and “Major Depressive Disorder with Psychotic Features, Recurrent.” While at Pontiac, he also received an Axis I diagnosis of “history of polysub-stance abuse and dependence” and an Axis II diagnosis of “antisocial personality disorder and borderline personality disorder.” As described by his expert witness in this case, Rasho is a “very, very sick man.”

In April 2004, after Rasho stopped taking his medications and began cutting himself, a psychiatrist at Pontiac recommended that he be transferred to the prison’s Mental Health Unit. Inmates assigned to that unit have more frequent access to mental health professionals and receive greater continuity of mental health care than those in other prison units. Among the therapeutic benefits available to inmates in the Mental Health Unit are group therapy, cells with open bars, and the ability to have private and confidential conversations with mental health staff more easily. Inmates in the Mental Health Unit also may receive individual therapy, crisis intervention, and psychotropic medication management.

While Rasho was in the Mental Health Unit, he met with mental health professionals at least monthly and was prescribed psychotropic medications. Yet the record reveals that Rasho still cut himself on approximately five or six occasions— including at least twice that resulted in Rasho being placed on crisis watch—and engaged in other disruptive and self-destructive behavior. He complained frequently and acted out while in the Mental Health Unit and filed several grievances regarding Pontiac staff.

Rasho remained in the Mental Health Unit until he was transferred to the North Segregation Unit in November 2006. The transfer was initially recommended by Dr. Michael Massa, who worked as a staff psychiatrist at Pontiac and treated Rasho. The transfer was also approved by Dr. John Garlick, who held the position of Psychology Services Administrator and was Dr. Massa’s supervisor. At the time, Dr. Massa provided mental health services to Pontiac inmates pursuant to the IDOC’s contract with private contractor Wexford Health Sources, Inc. (“Wexford”). Dr. Massa first recommended that Rasho be transferred out of the Mental Health Unit on May 25, 2006; he followed with another recommendation on August 3, 2006. Rasho was eventually transferred in November 2006.

The parties dispute the reason for Dr. Massa’s and Dr. Garlick’s determination to transfer Rasho out of the Mental Health Unit. Dr. Massa claims that he recommended the transfer because he did not believe that Rasho had a diagnosis or set of symptoms such that he was benefitting from the placement. Dr. Massa also claims that he had become concerned that Rasho’s continued presence in the Mental Health Unit would be detrimental to other inmates in the unit—specifically, Rasho was showing signs of antisocial personality disorder that made him a risk to the genuinely mentally ill and vulnerable inmates there. Dr. Garlick claims that he agreed that Rasho should leave the Mental Health Unit based on his own interactions with Rasho and his knowledge of Rasho’s condition and behavior. According to Dr. Gar-lick, he too was concerned that Rasho’s continued presence in the Mental Health Unit would have a detrimental effect on other inmates and he also doubted that Rasho was benefitting from placement there.

Rasho challenges Dr. Massa’s and Dr. Garlick’s stated reasons for recommending his transfer out of the Mental Héalth Unit. He contends that they actually decided to have him transferred as punishment for his complaints. In fact, Rasho claims that both Dr. Massa and Dr. Garlick actually told him that he was kicked out of the Mental Health Unit because he filed too many grievances. Rasho also points out that Dr. Massa recommended the transfer even though Dr. Massa was well aware of Rasho’s history of mental health problems and continued to prescribe Rasho powerful psychotropic medications after making the recommendation. One of those medications was Geodon, which is primarily used to treat schizophrenia and mania and to provide maintenance for bipolar disorder. If Dr. Massa truly believed that he did not require specialized mental health treatment, Rasho argues, then why would he continue to prescribe medications indicated only for that purpose?

Rasho also has presented testimony from Dr. Jose Matthews, who treated Rasho in the North Segregation Unit, and Dr. Joel Silverberg, an expert witness retained on Rasho’s behalf for purposes of this case. Dr. Matthews testified that after treating Rasho for some time in the North Segregation Unit (and initially believing that Rasho might be malingering), he came to believe that Rasho did require greater care than would be provided in the North Segregation Unit and should be transferred back to the Mental Health Unit. When Dr. Matthews raised the issue, however, Dr. Garlick rejected the idea stating “no, no, no, [Rasho] can’t go there.”

Similarly, Dr. Silverberg has offered an expert opinion that Rasho should have been kept in the Mental Health Unit and not transferred to the North Segregation Unit, an environment that he considers to have been “toxic” to Rasho’s mental health and where there was no meaningful mental health treatment. According to Dr. Silver-berg, inmates in the North Segregation Unit were isolated and treated like animals. Moreover, the filth and noise there aggravated Rasho’s condition and, because the unit did not have places that allowed Rasho to talk to mental health staff in private, Rasho was forced to downplay his issues. Dr. Silverberg concluded that Rasho was undertreated while at Pontiac but did respond when provided with appropriate care—ie., beginning no earlier than 2008 (or approximately 20 months after Rasho was transferred), when Dr. Matthews arrived at Pontiac and began paying special attention to Rasho beyond what would otherwise have been provided.

Although it is undisputed that Rasho cut himself both while he was in the Mental Health Unit and after he was transferred, supported by the testimony from Dr. Matthews and Dr. Silverberg, Rasho claims that his mental health deteriorated and his self-mutilation escalated after he was transferred.

Rasho was transferred from Pontiac to Stateville Correctional Center in 2011, but then returned to Pontiac’s North Segregation Unit in February 2012. Rasho claims that his mental health treatment upon his return to Pontiac was very different than during his prior stint there. The difference was the attention he received from Dr. Matthews, who began meeting with Rasho for two hours each week. Rasho characterizes the treatment that Dr. Matthews provided him as exceptional and not at all typical of the care usually provided to inmates in the North Segregation Unit. Dr. Matthews has acknowledged that he initially felt that Rasho might be faking his symptoms. By the time he left Pontiac in September 2012, however, Dr. Matthews had changed his mind and recommended that Rasho be transferred to the Mental Health Unit. As noted above, this recommendation was rejected by Dr. Garlick.

Rasho claims in his lawsuit that Dr. Massa and Dr. Garlick acted with deliberate indifference to his serious medical needs by transferring him out of the Mental Health Unit. Rasho also has sued three supervisory IDOC staff for their purported deliberate indifference: Dr. Wendy Blank (originally named in Rasho’s lawsuit under her prior name, Wendy Navarro) served as IDOC’s Director of Mental Health beginning in 2006; Dr. Willard Elyea served as IDOC’s medical director from 1999 until April 2007; and finally, Eddie Jones was Pontiac’s warden from 2006 to 2008. Rasho seeks to hold these defendants liable under a theory that they failed in their respective duties to take reasonable steps to ensure adequate medical care for seriously men-, tally ill inmates.

The district court granted summary judgment in favor of all of the defendants. Focusing on his claim against Dr. Massa, the district court found that Rasho could not show that he actually received inadequate care while in the North Segregation Unit. Key to the district court’s conclusion was the opinion from Dr. Silverberg that the care provided to Rasho by Dr. Matthews fell within the appropriate standard of care. As the district court explained, “the importance of [Dr. Silverberg’s] testimony is the fact that Rasho was capable of getting ‘appropriate and reasonable’ treats ment while being housed in North Segregation unit. Given this, it is difficult to find that Dr. Massa’s recommendation to transfer Rasho to North Segregation would violate the Constitution.” The district court went on to express skepticism that Rasho would be able to establish any injury as a result of the alleged constitutional violation, since he self-mutilated both before and after the transfer.

Having concluded that Rasho could not prevail against the medical provider most directly responsible for the decision to transfer him out of the Mental Health Unit, the district court next considered Rasho’s claims against Dr. Garlick, Dr. Elyea, Dr. Blank, and Warden Jones. With respect to Dr. Garlick, the district court found that he was even further removed from the transfer decision than Dr. Massa and, in any case, that there was no evidence he knew a transfer from the Mental Health Unit would be detrimental to Rasho’s mental health. With respect to Dr. Elyea and Dr. Navarro, who were even further removed from the transfer decision than Dr. Garlick, the district court concluded that there was no evidence their actions caused any harm to Rasho in particular. Finally, the district court held that the record could not support a finding that Warden Jones failed to comply with any duty by not preventing Rasho from being transferred out of the Mental Health Unit into the allegedly terrible conditions of the North Segregation Unit.

II.

We review the district court’s grant of summary judgment de novo, viewing the record in the light most favorable to Rasho and drawing all inferences in his favor. Petties v. Carter, 836 F.3d 722, 727 (7th Cir. 2016). Summary judgment is appropriate if “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a).

It is well-established that prison officials and medical staff violate the Eight Amendment’s prohibition on cruel and unusual punishment when they act with deliberate indifference to a prisoner’s serious medical needs. Estelle v. Gamble, 429 U.S. 97, 104, 97 S.Ct. 285, 50 L.Ed.2d 251 (1976); Chatham v. Davis, 839 F.3d 679, 684 (7th Cir. 2016). “To determine if the Eighth Amendment has been violated in the prison medical context, we perform a two-step analysis, first examining whether a plaintiff suffered from an objectively serious medical condition, and then determining whether the individual was deliberately indifferent to that condition.” Petties, 836 F.3d at 727-28 (citing Farmer v. Brennan, 511 U.S. 825, 834, 114 S.Ct. 1970, 128 L.Ed.2d 811 (1994); Berry v. Peterman, 604 F.3d 435, 440 (7th Cir. 2010)).

For purposes of summary judgment, the defendants conceded below that whether Rasho suffered from an objectively serious medical condition constitutes a triable issue of fact for a jury to decide. And so the question to be determined here is whether Rasho has produced sufficient evidence to permit a jury to find that any of the defendants were deliberately indifferent to his condition.

Deliberate indifference requires that a defendant actually know about yet disregard a substantial risk of harm to an inmate’s health or safety. Petties, 836 F.3d at 728. “The standard is a subjective one: The defendant must know facts from which he could infer that a substantial risk of serious harm exists and he must actually draw the inference.” Zaya v. Sood, 836 F.3d 800, 804 (7th Cir. 2016). Emphasizing the deference owed to the professional judgment of medical providers, we have observed that “[b]y definition a treatment decision [that is] based on professional judgment cannot evince deliberate indifference because professional judgment implies a choice of what the defendant believed to be the best course of treatment.” Id. at 805; see also McGee v. Adams, 721 F.3d 474, 481 (7th Cir. 2013); Sain v. Wood, 512 F.3d 886, 894-95 (7th Cir. 2008). “A medical professional acting in his professional capacity may be held to have displayed deliberate indifference only if the decision by the professional is such a substantial departure from accepted professional judgment, practice, or standards, as to demonstrate that the person responsible actually did not base the decision on such a judgment.” Sain, 512 F.3d at 895 (internal quotation marks omitted).

The defendants would like us to view the decision to transfer Rasho out of the Mental Health Unit as an exercise of medical judgment entitled to judicial deference. But Rasho claims that Dr. Massa and Dr. Garlick did not exercise medical judgment at all in deciding to recommend that he be transferred. Instead, Rasho contends, their decision was motivated by spite: they sought to have him transferred in retaliation for his several grievances against prison staff and medical personnel.

In Petties, we recognized that the choice of “an easier and less efficacious treatment without exercising professional judgment” can constitute deliberate indifference. 836 F.3d at 730 (internal quotation marks omitted). Most often, this concern arises when a medical provider is alleged to have chosen a treatment—or lack thereof— based on cost considerations rather than medical judgment. See, e.g., Roe v. Elyea, 631 F.3d 843, 863 (7th Cir. 2011) (“Although administrative convenience and costs may be, in appropriate circumstances, permissible factors for correctional systems to consider in making treatment decisions, the Constitution is violated when they are considered to the exclusion of reasonable medical judgment about inmate health.” (emphasis omitted)); Johnson v. Doughty, 433 F.3d 1001, 1013 (7th Cir. 2006) (“The cost of treatment alternatives is a factor in determining what constitutes adequate, minimum-level medical care, but medical personnel cannot simply resort to an easier course of treatment that they know is ineffective.” (citations omitted)). But a similar concern arises if a medical provider bases his or her treatment decision on personal prejudices or animosity. In either circumstance, the medical provider may violate the patient-inmate’s constitutional rights by failing to exercise medical judgment at all. See Roe, 631 F.3d at 863.

Rasho here has put forward sufficient evidence from which a reasonable jury could decide that Dr. Massa and Dr. Garlick caused him to be transferred out of the Mental Health Unit for reasons that had nothing to do with medical judgment. Such evidence includes Rasho’s own testimony that Dr. Massa and Dr. Garlick each explicitly told him that he was transferred in response to his complaints. The district court discounted Rasho’s testimony on this point as not sufficiently unequivocal in its language. But Rasho’s credibility and the weight to be afforded his testimony is a matter for a jury to decide. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (“Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge[.]”). Together with his mental health history, the continued prescription of psychotropic medications after his transfer, the testimony from Dr. Matthews regarding his need for mental health treatment and Dr. Garlick’s refusal to allow him to return to the Mental Health Unit, and Dr. Silverberg’s expert testimony, Rasho’s testimony is sufficient to create a disputed issue of material fact regarding whether Dr. Massa and Dr. Garlick recommended the transfer as retaliation rather than as a matter of medical judgment.

Furthermore, we reject the suggestion that a reasonable jury could not find that Dr. Massa and Dr. Garlick acted in retaliation for Rasho’s grievances simply because those grievances were directed toward other Pontiac staff members. To the contrary, a reasonable inference to be drawn from the evidence could be that Dr. Massa and Dr. Garlick were motivated either to punish Rasho for his complaints against their colleagues or by a desire to remove a troublemaking inmate before .they became the next targets of his complaints.

In addition, drawing all reasonable inferences from the evidence in Rasho’s favor, a jury could conclude that Rasho was harmed as a result of his transfer out of the Mental Health Unit. The district court expressed skepticism that such a causal connection could be proved. But a jury could agree with Dr. Silverberg that being transferred out of the Mental Health Unit increased the risk that Rasho’s mental condition would deteriorate, leading to self-mutilation and other self-destructive behavior. That Rasho was capable of getting appropriate and reasonable treatment while in the North Segregation Unit is not dispositive where a jury could find that to have been the case only due to an extraordinary effort by Dr. Matthews.

As an alternative basis for its grant of summary judgment in favor of Dr. Mas-sa, the district court concluded that Rasho’s claim is barred by the Prison Litigation Reform Act, 42 U.S.C. § 1997e(e), because he cannot present evidence of a physical injury. Section 1997e(e) provides that “[n]o Federal civil action may be brought by a prisoner confined in a jail, prison, or other correctional facility, for mental or emotional injury suffered while in custody -without a prior showing of physical injury or the commission of a sexual act.” 42 U.S.C. § 1997e(e). The district court found that Rasho could not present evidence of a physical injury resulting from his transfer out of the Mental Health Unit and therefore his claim is barred. But Rasho did present evidence of at least one undisputed incident of self-mutilation. That incident is sufficient to satisfy the physical harm requirement. And as discussed above, Rasho has demonstrated that there is a triable issue of fact regarding whether that harm is attributable to the increased risk to his mental health resulting from his transfer.

Even if Rasho were unable to point to any physical injury, the lack of such an injury would not bar his claim but rather merely limit the damages he could recover: if Rasho proved his claim, he would still be able to recover .nominal and punitive damages. Gray v. Hardy, 826 F.3d 1000, 1007 (7th Cir. 2016); Calhoun v. DeTella, 319 F.3d 936, 941-42 (7th Cir. 2003). Thus the district court erred in suggesting that the lack of a physical injury provided an independent basis to grant summary judgment in Dr. Massa’s favor.

III.

As noted above, in addition to Dr. Massa and Dr. Garlick, Rasho also sued three defendants with more tenuous connections to his mental health treatment: Dr. Elyea, Dr. Blank, and Warden Jones. Specifically, Rasho sought to hold Dr. Elyea accountable for his alleged failure to supervise properly the contract between IDOC and its medical provider, Wexford; he asserted a claim against Dr. Blank based on the allegation that she knew the mental health staff at Pontiac was less than half as large as needed to provide adequate care for its inmates and that Wexford’s psychiatrists were not working enough hours to comply with their contractual requirements; and finally, he sued Warden Jones based on the theory that, as the prison official in charge of ensuring proper implementation of the policies and procedures established by IDOC’s Director of Mental Health, Warden Jones was ultimately responsible for the decision to transfer him from the Mental Health Unit to the North Segregation Unit.

But in order to hold an individual defendant hable under § 1983 for a violation of an inmate’s constitutional rights, the inmate must show that the defendant was personally responsible for that violation. Childress v. Walker, 787 F.3d 433, 439 (7th Cir. 2015); Sanville v. McCaughtry, 266 F.3d 724, 740 (7th Cir. 2001). “A defendant will be deemed to have sufficient personal responsibility if he directed the conduct causing the constitutional violation, or if it occurred with his knowledge or consent.” Sanville, 266 F.3d at 740 (internal quotation marks omitted). While the defendant need not have participated directly in the deprivation of the plaintiffs constitutional right to be held liable, he or she must nonetheless have “ %now[n] about the conduct, facilitate[d] it, approve[d] it, condone[d] it, or turne[d] a blind eye for fear of what they might see.’ ” Matthews v. City of East St. Louis, 675 F.3d 703, 708 (7th Cir. 2012) (quoting Jones v. City of Chicago, 856 F.2d 985, 992-93 (7th Cir. 1988)).

As the district court correctly concluded, Rasho has presented no evidence to show that any of Dr. Elyea, Dr. Blank, or Warden Jones was personally responsible for the decision to transfer him out of the Mental Health Unit or otherwise to connect the alleged conduct of those defendants to the deficient mental health care he claims to have received after that transfer. There is no evidence, for example, that Dr. Elyea’s alleged failure to supervise properly Wexford’s contract or Dr. Blank’s alleged failure to promulgate protocols led to Rasho’s transfer or caused him any harm. Nor is there any evidence that Warden Jones knew about, facilitated, approved, condoned, or turned a blind eye toward the psychiatric staffs purported decision to punish Rasho by transferring him out of the Mental Health Unit.

Rasho also has failed to put forward any facts suggesting that Dr. Elyea, Dr. Blank, or Dr. Jones had any reason to doubt that Dr. Massa and Dr. Garlick based their recommendations on anything other than medical judgment. Prison officials generally are entitled to rely on the judgment of medical professionals treating an inmate, see Rice ex rel. Rice v. Corr. Med. Servs., 675 F.3d 650, 676 (7th Cir. 2012) (noting that “jail officials ordinarily are entitled to defer to the judgment of medical professionals”); Arnett v. Webster, 658 F.3d 742, 755 (7th Cir. 2011) (noting that non-medical prison officials can rely on the expertise of medical personnel and will generally be justified in believing that the prisoner is in capable hands). While Dr. Elyea and Dr. Blank were themselves medical professionals who might ordinarily be held to a different standard than a non-medical prison official, in this case Rasho seeks to hold Dr. Elyea and Dr. Blank accountable as prison administrators and policymakers, not treaters. Rasho has not presented evidence that either of them should have realized that something was amiss with Dr. Massa’s and Dr. Garlick’s transfer recommendation. Accordingly, the grant of summary judgment in their favor was appropriate as well.

IV.

As the district court found that Rasho could not show that any of the defendants acted with deliberate indifference to his serious medical needs, the court did not reach the issue of qualified immunity. But in light of our determination that the district court erred in granting summary judgment on that basis as to Dr. Massa and Dr. Garlick, the qualified-immunity defense warrants some discussion.

This Court has construed the Supreme Court’s holding that employees of privately-operated prisons may not assert a qualified-immunity defense also to deny that defense to employees of private corporations that contract with the state to provide medical care for prisoners. Zaya, 836 F.3d at 807 (citing Richardson v. McKnight, 521 U.S. 399, 412, 117 S.Ct. 2100, 138 L.Ed.2d 540 (1997)). Thus, Dr. Massa, as an employee of the private contractor Wexford, cannot assert qualified immunity as a defense to Rasho’s claims. See Petties, 836 F.3d at 734 (“[Qualified immunity does not apply to private medical personnel in prisons.”) (citing Shields v. Ill. Dep’t of Corr., 746 F.3d 782, 794 (7th Cir. 2014)); see also Currie v. Chhabra, 728 F.3d 626, 632 (7th Cir. 2013) (citing with approval the Sixth Circuit’s holding in McCullum v. Tepe, 693 F.3d 696 (6th Cir. 2012), that “a [private] doctor providing psychiatric services to inmates at a state prison is not entitled to assert qualified immunity”).

Even if a qualified-immunity defense were available to Dr. Massa, it would be inappropriate to award summary judgment on that basis in favor of either Dr. Massa or Dr. Garlick, who is a state employee rather than a private contractor and thus permitted to raise the defense, while such threshold factual questions as their states of mind remain disputed. See Petties, 836 F.3d at 734; see also Zaya, 836 F.3d at 807 (finding summary judgment on a qualified-immunity defense inappropriate because the plaintiffs claim turned on the defendant’s mental state and “it is well established what the law requires in that regard”). If Dr. Massa and Dr. Garlick denied Rasho mental health treatment to retaliate against him for his grievances, then their conduct violates clearly-established law under the Eighth Amendment. For reasons we have discussed above, that is a question of fact for the jury to decide.

Y.

For the reasons stated above, we AFFIRM the district court’s grant of summary judgment in favor of Defendants Elyea, Blank, and Jones, but REVERSE the grant of summary judgment in favor of Defendants Massa and Garlick. This case is REMANDED for further proceedings.

      . As explained in the district court's opinion, Rasho’s individual action has been separated from the putative class action Rasho, et al. v. Director Roger E. Walker, Jr., et al., Case No. 07-cv-1298 (C.D. Ill.). The present appeal, like the lower court ruling from which it has been taken, addresses only Rasho’s individual claims.

      . "Axis I" is a classification for clinical disorders recognized in the Diagnostic and Statistical Manual of Mental Disorders (4th ed. Text ■ Rev. 2000) ("DSM-IV”), published by the American Psychiatric Association and widely recognized as an authoritative source for information about mental conditions. "Axis II” is the DSM-IV’s classification for personality disorders.


source: Caselaw Access Project

author: KANNE, Circuit Judge.

license: Public Domain

text:
    MILWAUKEE POLICE ASSOCIATION, Michael V. Crivello, and Joseph A. Anderer, Plaintiffs-Appellants, v. CITY OF MILWAUKEE, Defendant-Appellee.
    No. 16-4151
    United States Court of Appeals, Seventh Circuit.
    Argued April 4, 2017
    Decided May 3, 2017
    Rehearing and Rehearing En Banc Denied June 7, 2017

      Jonathan Cermele, Attorney, CER-MELE & ASSOCIATES, Milwaukee, WI, for Plaintiffs-Appellants.
    Stuart S. Mukamal, Attorney, MILWAUKEE CITY ATTORNEY’S OFFICE, for Defendant-Appellee.
    Before WOOD, Chief Judge, and KANNE and ROVNER, Circuit Judges.
   KANNE, Circuit Judge.

The Milwaukee Police Association and officers Michael V. Crivello and Joshua A. Anderer challenge a provision in Milwaukee’s corporate charter requiring all, law enforcement, fire, and emergency personnel to reside within fifteen miles of city limits.

Milwaukee’s corporate charter previously required all city employees to live within city limits. But in 2013, the Wisconsin legislature passed a statute prohibiting local governments from imposing a residency requirement as a condition of employment. Wis. Stat. § 66.0502(3)(a) (2013). The statute, however, allows a local government to “impose a residency requirement on law enforcement, fire, or emergency personnel that requires such personnel to reside within 15 miles of the jurisdictional boundaries of the local governmental unit.” Wis. Stat. § 66.0502(4)(b).

After the statute passed, Milwaukee refused to follow it. Milwaukee instead passed a resolution announcing its intent to enforce its original residency requirement, citing the Wisconsin Constitution’s home-rule provision as authority. Wis. Const, art. XI, § 3(1). The police association filed suit, arguing that the City could not enforce the residency requirement under the home-rule provision. The Wisconsin Supreme Court agreed. Black v. City of Milwaukee, 369 Wis.2d 272, 882 N.W.2d 333, 342-50 (2016). Four weeks later, the City amended its corporate charter to require all law enforcement, fire, and emergency personnel to reside within fifteen miles of city limits—a requirement consistent with the Wisconsin statute. The City gave affected employees six months from the date that the amended charter became effective to comply. If compliance within that timeframe proved impossible, affected employees could petition the Milwaukee Board of Fire and Police Commissioners for an extension or a temporary hardship exception.

The plaintiffs then sued. They claimed that the Wisconsin statute gives them a vested right to live outside of the City and that Milwaukee’s new residency requirement for law enforcement, fire, and emergency personnel—adopted three years after the Wisconsin statute became effective—violates that right. Specifically, the plaintiffs brought a claim under § 1983, alleging that the City violated the Fourteenth Amendment’s Due Process Clause, and a claim under the Wisconsin Constitution’s related provision, Article I, § 1. The district court granted the City’s motion for judgment on the pleadings. This appeal followed.

To start, the plaintiffs conflate vested rights, which are protected by procedural due process, with substantive-due-process rights. They labelled their § 1983 claim “Violation of Substantive Due Process (Property Right)” but claimed that the City deprived them of property without due process of law. (R. 1 at 9.) If the plaintiffs are arguing that the amended charter violates their substantive-due-process rights, we can dispose of the claim quickly. Substantive due process “provides heightened protection against government interference with certain fundamental rights and liberty interests.” Sung Park v. Ind. Univ. Sch. of Dentistry, 692 F.3d 828, 832 (7th Cir. 2012) (quoting Washington v. Glucksberg, 521 U.S. 702, 720, 117 S.Ct. 2258, 138 L.Ed.2d 772 (1997)). But the list of fundamental rights and liberty interests is short. Id. And municipal employees do not have a fundamental right to be free from residency requirements. See McCarthy v. Phila. Civil Serv. Comm’n, 424 U.S. 645, 645-46, 96 S.Ct. 1154, 47 L.Ed.2d 366 (1976); Gusewelle v. City of Wood River, 374 F.3d 569, 578 (7th Cir. 2004).

If, on the other hand, the plaintiffs are arguing that the amended charter violates procedural due process by retroactively depriving them of a vested right, we have rejected a similar argument before. Andre v. Bd. of Trs. of Vill. of Maywood, 561 F.2d 48, 50-51 (7th Cir. 1977). In Andre, the village passed an ordinance requiring certain municipal employees to reside within village limits as a condition of employment. The previous ordinance had allowed employees to work for the village despite being nonresidents. The employees claimed that the new ordinance violated their vested right to live outside of the village, a right that the original ordinance had allegedly created. We rejected that argument for two reasons: first, the statute did not create a vested right, and second, the ordinance applied only prospectively.

The same analysis applies here. Under Wisconsin law, “[a] legislative enactment is presumed not to create ‘contractual or vested rights but merely declares a policy to be pursued until the legislature shall ordain otherwise.’ ” Madison Teachers, Inc. v. Walker, 358 Wis.2d 1, 851 N.W.2d 337, 379 (2014) (quoting Nat’l R.R. Passenger Corp. v. Atchison, Topeka & Santa Fe Ry. Co., 470 U.S. 451, 466, 105 S.Ct. 1441, 84 L.Ed.2d 432 (1985)). Unless a statute’s language clearly expresses the state’s intent to bind itself, a statute does not create a vested right. Id. at 380.

Although the statute here abolishes residency requirements generally, it does not create a vested right for law enforcement, fire, and emergency personnel to live wherever they want. Quite the opposite, it grants local governments the authority to adopt a fifteen-mile radius requirement for those employees. We could not plausibly say that the plaintiffs have a vested right when the statute expressly allows the right to be taken away in this manner. Lands’ End, Inc. v. City of Dodgeville, 370 Wis.2d 500, 881 N.W.2d 702, 716 (2016) (defining a “vested right” as one that is “so far perfected that it cannot be taken away by statute”). No employee covered by the new residency requirement could have moved, and no new employee could have accepted a job, after Wisconsin passed its statute but before Milwaukee amended its corporate charter and reasonably expected to be free from a residency requirement forever. At most, the plaintiffs had a “right” to live where they wanted, contingent upon the City not enacting a residency requirement. And that interest does not amount to a vested right. Andre, 561 F.2d at 51.

Second, as was the case in Andre, the residency requirement does not apply retroactively. A statute applies retroactively if it “attaches new legal consequences to events completed before its enactment.” Landgraf v. USI Film Prods., 511 U.S. 244, 270, 114 S.Ct. 1483, 128 L.Ed.2d 229 (1994). And here, the statute does not. The amended corporate- charter does not penalize those employees who live outside of the fifteen-mile radius “for having so resided in the past.” Andre, 561 F.2d at 51. Instead, the amended charter requires only that all law enforcement, fire, and emergency personnel live within fifteen miles of city limits as a condition of continued employment. Simply put, the residency requirement applies only prospectively and attaches no legal consequences to any employee’s residency before the amendment.

The plaintiffs fare no better under the Wisconsin Constitution. Under the Wisconsin Constitution, state conduct violates a person’s substantive-due-process rights “if the. conduct ‘shocks the conscience ... or interferes with rights implicit in the concept of ordered society.’ ” Black, 882 N.W.2d at 352 (quoting State ex rel. Greer v. Wiedenhoeft, 353 Wis.2d 307, 845 N.W.2d 373, 386 (2014)). The Wisconsin Supreme Court rejected a similar substantive-due-process claim in Black. In addition to challenging the original residency requirement’s state constitutionality, the police association argued in Black that the City’s continued enforcement of the original residency requirement violated its Fourteenth Amendment substantive-due-process rights. The court concluded that the continued enforcement of the original residency requirement neither shocked the conscience nor deprived the association of a fundamental right or liberty. Id. at 352-54.

Although the association in Black made its substantive-due-process argument under the federal constitution rather than under the Wisconsin Constitution, because the constitutions “provide substantively similar due process guarantees,” the outcome here is no different. In re Mental Commitment of Christopher S., 366 Wis.2d 1, 878 N.W.2d 109, 121 n.18 (2016). And the plaintiffs cannot distinguish this claim from that in Black. Indeed, the substantive-due-process arguments are the same at their cores: whether enforcement of a residency requirement after the legislature passed Wisconsin Statute § 66.0502 violates the respective plaintiffs’ substantive-due-process rights.

Likewise, any proeedural-due-pro-cess claim also fails under the Wisconsin Constitution. Under Wisconsin law, retroactive legislation that affects a vested right must satisfy due process. Neiman v. Am. Nat’l Prop. & Cas. Co., 236 Wis.2d 411, 613 N.W.2d 160, 164 (2000). The plaintiffs want us to apply the balancing test that the Wisconsin Supreme Court has adopted for determining if a statute violates procedural due process. Id. at 164-65; Martin by Scoptur v. Richards, 192 Wis.2d 156, 531 N.W.2d 70, 88-89 (1995). But that argument misses the point: a statute only implicates the Wisconsin Constitution’s due-process guarantee if it retroactively affects a vested right. Neiman, 613 N.W.2d at 164. And as discussed above, the plaintiffs do not have a vested right in being free from a residency requirement and the amended charter does not apply retroactively.

For those reasons, the district court’s decision is AFFIRMED.

      . Employees actually had nearly ninth months to comply. The amendment passed on July 26, 2016, but became effective on October 11, 2016. The six-month compliance window started from the latter date.


author: ROVNER, Circuit Judge.

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Charles PETRUNAK, Defendant-Appellant.
    No. 16-3631
    United States Court of Appeals, Seventh Circuit.
    Argued February 21, 2017
    Decided May 4, 2017
    MaryAnn T. Mindrum, Brian L. Reitz, Attorneys, Office of the United States Attorney, Indianapolis, IN, for Plaintiff-Ap-pellee.

      Kimberly S. Robinson, Attorney, Law Office of Kimberly S. Robinson, Indianapolis, IN, for Defendant-Appellant.
    Before WOOD, Chief Judge, and FLAUM and ROVNER, Circuit Judges.
   ROVNER, Circuit Judge.

On May 6, 2014, Charles Petrunak was indicted on three counts of making and subscribing false and fraudulent IRS forms, in violation of 26 U.S.C. § 7206(1). The counts corresponded to IRS forms 1096, 1120S, and 1040, filed by Petrunak. A jury convicted him on all counts, and he was sentenced to 24 months’ imprisonment. Petrunak now argues that the court erred in excluding certain evidence at his trial and he also challenges his sentence.

Petrunak was a pyrotechnician who was the sole proprietor of Abyss Special FX, Inc. (“Abyss”), a pyrotechnic and aerial fireworks business engaged in providing outdoor and in-door fireworks displays. Because Abyss was a pyrotechnic business, it was regulated by the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF). In September 2001, two ATF inspectors, Jill Krofta and Manuel Vicario, conducted a mandatory inspection of Abyss and filed a report detailing violations found in that inspection. Petrunak challenged the violations in an administrative hearing conducted in June 2003 at which Krofta and Vicar-io testified. The administrative law judge found Petrunak in violation of explosives regulations and revoked his explosives license. Petrunak was therefore unable to work with fireworks and explosives, and Abyss went out of business.

About five years later, Petrunak targeted Krofta and Vicario who he apparently blamed for the demise of his company. He mailed both of them an IRS W-9 form requesting identifying information, and then sent them an IRS Form 1099 (“1099”) alleging that Abyss had paid each of them $250,000. Krofta and Vicario both provided the forms to their supervisors, and filed their taxes indicating only the income they received and therefore excluding the fictional $250,000 payment. Because Krofta’s tax return did not include the $250,000 for which a 1099 had issued, the IRS then audited Krofta and informed her that she owed $101,114 in taxes. Krofta was forced to spend a significant amount of time and energy unraveling the situation, and her return was delayed between six months and a year.

In the meantime, Petrunak submitted those sham “payments” as business expenses in submissions to the IRS, characterizing them as payments for “outside services/independent contractors.” Petru-nak characterizes that as an effort to ascribe his personal and business losses to each of the agents. Shortly thereafter, Pe-trunak filed Abyss’ corporate tax return claiming the $500,000 deduction based on those falsified 1099 payments. Because Abyss was an S-corporation, the proceeds flowed through to Petrunak as the owner and applied to his personal taxes; therefore, he was able to report a loss exceeding $500,000 in his personal taxes in 2008, and could carry that loss forward to offset taxes owed for 20 years until the loss was exhausted.

After the discrepancy in Krofta’s tax return became apparent, the IRS began investigating Petrunak as well. He admitted to filing the forms, claiming that he did so based on the illegal loss of licensing for his business as a result of the falsified testimony of Krofta and Vicario at the administrative hearing. He was charged with three counts of making and subscribing false and fraudulent IRS forms in violation of 26 U.S.C. § 7206(1), corresponding to the IRS Forms 1096, 1120S, and 1040 which included the fraudulent claims.

Petrunak acknowledged sending the 1099s and claiming the deduction, but asserted that he believed he suffered personal and business income loss because the inspectors lied at the administrative hearing. He maintained that he tried to contact the IRS on multiple occasions and was referred to an IRS Publication, and that he concluded that he could use the IRS 1099-Miscellaneous income forms to ascribe his losses to the agents, but he did not intend for the 1099s to represent that he paid each inspector $250,000 in income. To bolster his contention, he sought to introduce evidence of Abyss’ corporate meeting minutes.

Petrunak argues that the corporate meeting minutes should have been admitted under the business records exception. He claims that those minutes included references to his reduced income, income tax losses, and concerns regarding those matters. He claims that the records would have demonstrated his state of mind in preparing the tax forms. Included in the minutes are statements such as the following:

Need to mention that there was a verbal conversation with an IRS representative. She said that issuing the 1099s and to write off the losses from the business were acceptable. However she would not be specific to my situation.

In addition, it included statements bemoaning that the IRS was not more helpful, and declarations that the ATF agents perjured themselves in the case.

Under the business records exception in Federal Rule of Evidence (FRE) 803(6), records of regularly conducted activity, made at or near the time of the transaction, are excluded from the hearsay rule unless “the source of information or the method of preparation indicate a lack of trustworthiness.” Such records are presumed reliable because businesses depend upon them for the operation of their own affairs, and therefore there is little incentive to falsify such records, and because the regularity of such record-keeping leads to habits of accuracy. Jordan v. Binns, 712 F.3d 1123, 1135 (7th Cir. 2013).

The district court excluded the records in this case, and we review that determination only for abuse of discretion. United States v. Kielar, 791 F.3d 733, 744 (7th Cir. 2015). The court noted that the records contained multiple instances of hearsay, and that it lacked evidence that the business records exception applied to the minutes. That determination by the district court was not an abuse of discretion. The purported “minutes” were created by Petrunak, who by his own admission, as the “sole employee,” was the sole attendee at the meetings. He acknowledges that there was no one else there to even transcribe minutes. Moreover, the minutes he submitted to the court are not even the originals, which he shredded, but are reproductions apparently prepared in 2010, at a time in which the IRS was already investigating him. None of the indicia of reliability that render business records reliable are present here, in that there is no indication that the records are relied upon for the operation of Abyss’ affairs, and the destruction of the originals casts doubt on whether the minutes submitted were actually made at or near the time of the meeting, or produced or altered in light of the impending litigation. Jordan, 712 F.3d at 1135 (“documents prepared with an eye toward litigation raise serious trustworthiness concerns because there is a strong incentive to deceive”). The absence of any attendees at the meetings and the timing of the decision to transcribe the minutes all support a determination that the “source of information or the method of preparation indicate a lack of trustworthy ness.” FRE 803(6)(E). Accordingly, the evidence was properly excluded.

Petrunak also challenges the calculation of his sentence, arguing that the court erred in calculating his Guidelines range by incorrectly determining the tax loss to be $140,000. We review the district court’s calculation of the tax loss for clear error. United States v. Black, 815 F.3d 1048, 1051 (7th Cir. 2016). In order to demonstrate clear error, a defendant must show that the tax loss calculations by the district court were not merely inaccurate but “outside the realm of permissible computations.” Id.

Petrunak argues that U.S.S.G. § 2Tl.l(c), which defines tax loss, is intended to reflect the revenue that the government was owed but did not receive due • to the defendant’s criminal conduct. He argues that the district court’s calculation is incorrect because it determined the tax loss not based on what is owed to the government, but on the amount of improperly claimed deductions.

This argument is without merit. Section 2Tl.l(c) provides that “[I]f the offense involved tax evasion or a fraudulent or false tax return, statement or other document, the tax loss is the total amount of loss that was the object of the offense (i.e. the loss that would have resulted had the offense been successfully completed).” Therefore, the intended loss is the proper focus, and includes any loss that would have occurred had the offense been completed. Black, 815 F.3d at 1051. The total loss that was the object of the offense in this case was the $500,000 tax deduction. Because of the potential for a 20-year carryover of that tax deduction, the specific loss amount could not be ascertained by the court. Section 2Tl.l(e)(l)(B), however, provides for the method of calculating the loss in such situations, providing:

(B) If. the offense involved improperly claiming a deduction of an exemption, the tax loss shall be treated as equal to 28% of the amount of the improperly claimed deduction or exemption (34% if the taxpayer is a corporation) plus 100% of any false credits claimed against tax, unless a more accurate determination of the tax loss can be made.

The district court applied the most conservative number under that framework, calculating the tax loss amount as 28% of $500,000 for a total of $140,000. Petrunak cannot show that a more accurate determination of the tax loss can be made, and therefore the calculation was proper under the Guidelines.

The decision of the district court is AFFIRMED.


author: PER CURIAM. POSNER, Circuit Judge,

text:
    Jennifer J. MYRICK, Plaintiff-Appellant, v. Richard G. GREENWOOD, et al., Defendants-Appellees.
    No. 16-3342
    United States Court of Appeals, Seventh Circuit.
    Submitted April 13, 2017

    Decided May 5, 2017
    Rehearing Denied May 22, 2017

      Jennifer Jonette Myrick, Pro se.
    Before WOOD, Chief Judge, and POSNER and EASTERBROOK, Circuit Judges.

       The appellees were not served with process in the district court and have not participated in this appeal. We decide the appeal without oral argument because it is frivolous. Fed. R. App. P. 34(a)(2)(A).

   PER CURIAM.

Dismayed that her former husband has been awarded custody of-their son, Jennifer Myrick brought this suit seeking damages from the six state judges and court commissioners who presided over parts of the lengthy divorce and child-custody proceedings. She maintains that, by ruling against her, the judges manifested bias in favor of her former husband, violating her right to due process of law in that and other ways, and overlooked misconduct by her former husband, her son’s guardians ad litem, and her own attorney. She did not ask the federal court in this suit under 42 U.S.C. § 1983 to change the award of custody but did request damages.

The district court summarily dismissed the suit because judges are absolutely immune from awards of damages for acts taken in a judicial capacity, whether or not the judges erred in conducting the litigation. See, e.g., Mireles v. Waco, 502 U.S. 9, 112 S.Ct. 286, 116 L.Ed.2d 9 (1991); Stump v. Sparkman, 435 U.S. 349, 98 S.Ct. 1099, 55 L.Ed.2d 331 (1978).

Myrick’s brief does not try to explain why the defendants are not entitled to immunity. It does not contend that the defendants acted other than in a judicial capacity. It is instead a compendium of reasons Myrick believes that the state judges should have ruled in her favor. Myrick contends that the judges acted in bad faith, but “judicial immunity is not overcome by allegations of bad faith or malice”. Mireles, 502 U.S. at 11, 112 S.Ct. 286. The Supreme Court of Wisconsin, not the federal judiciary, is responsible for dealing with claims that state judges erred. The judgment of the district court therefore is

AFFIRMED.

POSNER, Circuit Judge,

concurring.

I join the panel opinion without reservations, but wish to note some wrinkles in the case that merit the attention of our staff attorneys; of our judges when they review orders, disposing of appeals, drafted by staff attorneys; of the district judges; and of litigants and their lawyers, when the litigants have lawyers.

As noted in the panel opinion, the plaintiff filed this suit in federal district court in Wisconsin against six Wisconsin circuit court judges and family court commissioners, and the opinion rightly notes that the defendants are immune from liability for rulings made in the course of their judicial duties, as all the rulings that the plaintiff challenges were. But it is worth noting that the “commissioner” defendants, though not called judges, are judicial officers and therefore really do partake of the same immunity as the state circuit court judges. See Milwaukee County Courts, Family Division, “What is the Family Court Commissioner’s Office?,” http:// eounty.milwaukee.gov/Courts/Family.htm (visited May 5, 2017); Brunson v. Murray, 843 F.3d 698 (7th Cir. 2016).

Another wrinkle concerns a footnote that often appears in our orders and opinions deciding appeals when we have not heard oral argument: “We have agreed to decide this case without oral argument because the briefs and record adequately present the facts and legal arguments, and oral argument would not significantly aid the court.” This language is derived from Rule 34(a)(2) of the Federal Rules of Appellate Procedure, which states: “Oral argument must be allowed in every case unless a panel of three judges who have examined the briefs and record unanimously agrees that oral argument is unnecessary for any of the following reasons: (A) the appeal is frivolous; (B) the disposi-tive issue or issues have been authoritatively decided; or (C) the facts and legal arguments are adequately presented in the briefs and record, and the decisional process would not be significantly aided by oral argument.”

The commonly appearing footnote quoted above thus tracks Rule 34(a)(2)(C), but is inapposite to the present case and thus is properly omitted from the panel opinion. The appellees were not served with process in the district court and have not participated in the appeal, and the only brief (not briefs) filed in the case was the plaintiffs. The plaintiff has no lawyer, has not requested that we try to find one to represent her in this court, and has not asked for oral argument. The appellate record circulated to the three judges who constitute this appellate panel consisted solely of her complaint, the district judge’s order dismissing the case, and her brief—a brief that contains almost nothing that could be regarded as a legal argument and in many places misapprehends the function of a court of appeals, as when she asks us “for a money judgment for no less than $3 million and no more than $1 billion.”

It is true that additional material (available to the judges on request) appears in a separate appendix lodged with the clerk of our court, but none of that material is germane to the issues on appeal. It recounts, for example, the appellant’s custody battles with her former husband, including her state court custody litigation, and it adds some medical records. Finally there is the district court record, which has been filed with us but which contains nothing of significance to the plaintiffs appeal: her consent to jurisdiction by a magistrate judge; the chief district judge’s order dismissing the case and denying her motion for leave to appeal in forma pau-peris; and her notice of appeal.

So there is a brief but not briefs, a scanty appellate record, no request for oral argument—and no purpose would be served by oral argument because, as the majority opinion points out, the appéal is frivolous. It is therefore because of Rule 34(a)(2)(A) (“the appeal is frivolous”) rather than 34(a)(2)(C) (“the facts and legal arguments are adequately presented in the briefs and record, and the decisional process would not be significantly aided by oral argument”) that we are authorized to decide the case without oral argument.


author: POSNER, Circuit Judge. MANION, Circuit Judge,

text:
    WISCONSIN CENTRAL LTD., Illinois Central R.R. Co., and Grand Trunk Western R.R. Co., Plaintiffs-Appellants, v. UNITED STATES of America, Defendant-Appellee.
    Nos. 16-3300, -3303, -3304
    United States Court of Appeals, Seventh Circuit.
    Argued March 30, 2017
    Decided May 8, 2017
    William J. McKenna, Jr., Attorney, Foley & Lardner LLP, Chicago, IL, Richard F. Riley, Jr., Attorney, Foley & Lardner. LLP, Washington, DC, for Wisconsin Central Limited.

      Jonathan W. Garlough, William J. McKenna, Jr., Attorneys, Foley & Lardner LLP, Chicago, IL, Richard F. Riley, Jr., Attorney, Foley & Lardner LLP, Washington, DC, for Illinois Central Railroad Company and Grand Trunk Western Railroad Company.
    Ellen P. DelSole, Noreene C. Stehlik, Francesca Ugolini, Attorneys, Department of Justice, Washington, DC, Prashant Kol-luri, Attorney, Office of the United States Attorney, Chicago, IL, for Defendant-Ap-pellee.
    Maureen A. McGuire, Attorney, Anderson, Rasor & Partners, LLP, Chicago, IL, for Amicus Curiae Association of American Railroads.
    Before POSNER, MANION, and HAMILTON, Circuit Judges.
   POSNER, Circuit Judge.

Beginning in 1996, the plaintiff-appellants, subsidiaries of the Canadian National Railway Company (to simplify we’ll refer to the subsidiaries as “the railway”), began including stock options in the compensation plans of a number of employees. In this suit against the government, the railway argues that income from the exercise of stock options that a railroad gives its employees is not a form of “money remuneration” to them and is therefore not taxable to the railway as compensation under the Railroad Retirement Tax Act, 26 U.S.C. § 3281(e)(1), which defines “compensation” as “any form of money remuneration paid to an individual for services rendered as an employee to one or more employers.” See also BNSF Railway Co. v. United States, 775 F.3d 743 (5th Cir. 2015).

As explained in Standard Office Building Corp. v. United States, 819 F.2d 1371, 1373 (7th Cir. 1987), “the Railroad Retirement Tax Act, passed in 1937, is to the railroad industry what the Social Security Act is to other industries: the imposition of an employment or payroll tax on both the employer and the employee, with the proceeds used to pay pensions and other benefits .... The Act requires the railroad to pay an excise tax equal to a specified percentage of its employees’ wages, and also to withhold a specified percentage of its employees’ wages as their share of the tax. The railroad retirement tax rates are much higher than the social security tax rates.”

The question presented by this case is whether the excise tax should be levied not only on employees’ wages but also on the value of stock options exercised by employees who, having received the options from their employer, exercise them when the market price exceeds the “strike price” (the price at which the employee has a right to buy the stock) and thus obtain the stock at a favorable price. The Internal Revenue Service answers yes, see 26 C.F.R. § 31.3231(e)-l, and the district court agreed, precipitating this appeal.

The lawyer for the IRS told us at oral argument that anything that has a market value is a “form of money remuneration.” That goes too far; it would impose a tax liability on an employer who bought an employee a birthday cake, even though the employee could do nothing with his cake except eat it or give it away. But if instead he exercises a stock option, he now owns stock, and stock has so well-defined a monetary value in our society that there is no significant economic difference between receiving a $1000 salary bonus and a share or shares of stock having a market value of $1000.

By compensating an employee with stock options rather than cash the employer encourages the employee to work harder for the company, because the better the company does the more valuable its stock is. The value of a company’s stock is a function of the company’s profitability, whereas the size of a cash bonus, once it is given, is unaffected by the company’s future business successes or failures. Underscoring the point, we note that the railway’s stock-option plans are performance-based: they can be exercised only if the company achieves specified goals.

As the discussion in the preceding paragraphs implies, the fact that cash and stock are not the same things doesn’t make a stock-option plan any less a “form of money remuneration” than cash. Indeed the railway offers its employees a choice to have an agent exercise an employee’s stock option, sell the shares of stock obtained by that exercise of the option, reserve part of the money received in the sale for taxes and administrative costs, and deposit the balance in the employee’s bank account. An employee who uses this method will thus experience the stock option as a cash deposit.

It’s true that the Railroad Retirement Tax Act, in which the term “money remuneration” appears, dates back to 1935, when the nation was mired in the Great Depression of the 1930s which had driven down the value of corporate stock. Maybe stock then wasn’t a form of money remuneration, but there is no reason to think that the framers and ratifiers of the Act meant money remuneration to be limited to cash even if, as was eventually to happen, stock became its practical equivalent, just as today 100 dimes is the exact monetary equivalent of a $10 bill. A $10 bill is paper; so is a stock certificate that can be sold for $10. The dictionary definition of money may remain constant while the instruments that comprise it change over time: sheep may have once been a form of money; now stock is. The Internal Revenue Code of 1939 is of limited help here; it treats “money” and “stock” as different concepts, but that’s not inconsistent with stock options’ falling within “any form of money remuneration.”

The equivalence of stock to cash is actually signaled in the statutory exception for qualified stock options, explicitly divorced from “money remuneration” by 26 U.S.C. § 3231(e)(12). That exception, by virtue of its narrowness, supports an inference that non-qualified stock options, which are the options at issue in this case, are covered by the term “money remuneration” and are therefore taxable. There are moreover other statutory exceptions for other forms of non-cash employee benefits, and their existence reinforces the inference that non-qualified stock options are “money remuneration” and therefore taxable. See, e.g., § 3231(e)(1) (excluding payments for health insurance or health care and travel expenses); (e)(5) (excluding non-cash employee achievement awards); (e)(6) (excluding educational benefits); (e)(9) (excluding value of meals and lodging provided to employees); and (e)(10) & (11) (excluding contributions for medical and health savings plans).

The government’s position also makes good practical sense by avoiding the creation of a tax incentive that might distort the ways in which employers structure compensation packages for their managers. And finally we are not alone in equating non-qualified stock options to money remuneration in the Railroad Retirement Tax Act. See BNSF Railway Co. v. United States, supra, 775 F.3d at 757; CSX Corp., et al. v. United States, No. 3:15-cv-427-BJD-JRK (M.D. Fla. March 14, 2017).

Affirmed.

MANION, Circuit Judge,

dissenting.

The railroad plaintiffs have sought a tax refund on the ground that stock options they provided to their employees aren’t taxable as “compensation” under the Railroad Retirement Tax Act. Compensation under the Act is defined as “any form of money remuneration paid to an individual for services rendered as an employee to one or more employers.” 26 U.S.C. § 3231(e)(1). The railroads argue that stock options aren’t “money remuneration,” so they are not taxable as “compensation” under the Act.

The court disagrees. Although it admits that “[mjaybe stock ... wasn’t a form of money remuneration” when the RRTA was enacted, the court posits that “there is no reason to think that the framers and ratifiers of the Act meant money remuneration to be limited to cash” in the event of future economic changes. Maj. Op. at 492. Even if that were true, our job is to interpret the Act as it would have been understood by people at the time it was enacted, not to speculate about the intent of Depression-era legislators. Because the plain language of the statute’s definition of “compensation” does not cover stock or stock options, I respectfully dissent.

“It is a ‘fundamental canon of statutory construction’ that, ‘unless otherwise defined, words will be interpreted as taking their ordinary, contemporary, common meaning.’ ” Sandifer v. U.S. Steel Corp., - U.S. -, 134 S.Ct. 870, 876, 187 L.Ed.2d 729 (2014) (quoting Perrin v. United States, 444 U.S. 37, 42, 100 S.Ct. 311, 62 L.Ed.2d 199 (1979)). “That means we look to the meaning of the word at the time the statute was enacted, often by referring to dictionaries.” Jackson v. Blitt & Gaines, P.C., 833 F.3d 860, 863 (7th Cir. 2016) (citations omitted). There are some “common law statutes” whose meaning may evolve over time, such as the Sherman Antitrust Act. See Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877, 899, 127 S.Ct. 2705, 168 L.Ed.2d 623 (2007). But neither party has argued that the RRTA falls into that category, and the specific contrast Congress drew between it and the Federal Insurance Contributions Act (FICA) belies this contention. Thus, we must interpret the RRTA using normal principles of statutory interpretation, giving effect to the words Congress chose. If the stock options at issue wouldn’t have been money remuneration in 1935, neither should they be in 2017.

As the statute is written, it is clear that “money remuneration” does not include stock options. For one, as I alluded to above, “it is well established that RRTA and FICA are parallel statutes.” BNSF Ry. Co. v. United States, 775 F.3d 743, 754 (5th Cir. 2015). But they are not identical; they contain different definitions of what is taxable. The RRTA subjects to taxation “compensation,” defined as “any form of money remuneration paid to an individual for services rendered as an employee to one or more employers.” 26 U.S.C. § 3231(e)(1) (emphasis added). FICA, on the other hand, taxes “wages,” which are “all remuneration for employment, including the cash value of all remuneration (including benefits) paid in any medium other than cash.” Id. § 3121(a) (emphasis added).

We must give effect to Congress’s distinction between “money remuneration” and “all remuneration.” “After all, it is axiomatic that such notable linguistic differences in two otherwise similar statutes are normally presumed to convey differences in meaning.” United States v. Smith, 756 F.3d 1179, 1186 (10th Cir. 2014) (Gorsuch, J.); see also N. Haven Bd. of Educ. v. Bell, 456 U.S. 512, 530, 102 S.Ct. 1912, 72 L.Ed.2d 299 (1982) (“[AJlthough two statutes may be similar in language and objective, we must not fail to give effect to the differences between them.”). The court’s result effectively reads this contrast out of the statutes, rendering the words “money” and “all,” as well as the two references to “cash” in the FICA definition, mere surplusage. That is “always a disfavored result in the business of statutory interpretation.” Smith, 756 F.3d at 1186. “While it is possible that [these differences were] inadvertent, that possibility seems remote given the stark difference that was thereby introduced into the otherwise similar texts.” United States v. Ressam, 553 U.S. 272, 277, 128 S.Ct. 1858, 170 L.Ed.2d 640 (2008).

The difference in the statutes reveals that “money,” when contrasted with “all,” is a word of limitation. Further, its original meaning would not have encompassed company stock or stock options. The contemporary Webster’s Second Dictionary defined “money” principally as “[m]etal, as gold, silver, or copper, coined, or stamped, and issued by recognized authority as a medium of exchange.” Webster’s New International Dictionary of the English Language 1583 (2d ed. 1934). More generally, money was “[a]nything customarily used as a medium of exchange and measure of value, as sheep, wampum, copper rings, quills of salt or of gold dust, shovel blades, etc.” Id. Its synonyms were “cash,” “currency,” and “legal tender.” Id. In other words, media of exchange issued by a recognized authority. Simply put (and as the court somewhat acknowledges), money remuneration meant remuneration in cash or cash equivalents.

Furthermore, the Internal Revenue Code of 1939, which included for the first time the definitions of “compensation” and “wages” under the RRTA and FICA, consistently treated money and stocks separately. One example is Section 115, which governed distributions by corporations. It said that when a distribution is payable “either (A) in its stock or in rights to acquire its stock ... or (B) in money or any other property (including its stock or in rights to acquire its stock),” then the distribution shall be considered a taxable dividend “regardless of the medium in which paid.” 1939 Code, § 115(f)(2). Section 115(h)(1) said that such a distribution would not be considered a “distribution of earnings or profits of any corporation” if “no gain to such distributee from the receipt of such stock or securities, property or money, was recognized by law.” See also Helvering v. Credit Alliance Corp., 316 U.S. 107, 112, 62 S.Ct. 989, 86 L.Ed. 1307 (1942) (Section 115(h) was inapplicable “because the distribution here was in property and money and not in stock or securities” (emphases added)). And Section 1857 defined a safe deposit box as “any vault, safe, box, or other receptacle, of not more than 40 cubic feet capacity, used for the safe-keeping or storage of jewelry, plate, money, specie, bullion, stocks, bonds, securities, valuable papers of any kind, or other valuable personal property.” (emphases added). Examples are plentiful throughout the Code. This supports the conclusion that the original meaning of “money” did not encompass either stocks or stock options.

The court relies on later-enacted statutory exceptions—principally a 2004 exception for qualified stock options added to both the RRTA and FICA—to draw an inference that “money remuneration” is broader than its original meaning suggests. However, “absent a clearly established congressional intention, repeals by implication are not favored.” Branch v. Smith, 538 U.S. 254, 273, 123 S.Ct. 1429, 155 L.Ed.2d 407 (2003) (plurality opinion) (citations and internal quotation marks omitted). Implied repeal can occur only: “(1) [wjhere provisions in the two acts are in irreconcilable conflict;” and “(2) if the later act covers the whole of the subject of the earlier one and is clearly intended as a substitute.” Posadas v. National City Bank of N.Y., 296 U.S. 497, 503, 56 S.Ct. 349, 80 L.Ed. 351 (1936).

Neither exception to the presumption against implied repeal is applicable. First, there is no conflict between a general definition and an exception that might cover things the general definition doesn’t cover. In United States v. Quality Stores, Inc., — U.S. -, 134 S.Ct. 1395, 1402, 188 L.Ed.2d 413 (2014), the Supreme Court explained that, under the broad FICA “wages” definition, a statutory “command that all severance payments be treated ‘as if they were wages for income-tax withholding is in all respects consistent with the proposition that at least some severance payments are wages.” After all, “the statement that ‘all men. shall be treated as if they were six feet tall does not imply that no men are six feet tall.’ ” Id. (quoting CSX Corp. v. United States, 518 F.3d 1328, 1342 (Fed. Cir. 2008)). The converse of this is that an exception might exclude, for whatever reason, something the general definition already omits. There might be any number of explanations for this. Congress might have wanted to fill a potential gap without revisiting the general definition. In any event, there is no conflict between the general provisions and the exceptions, as both are consistent with the excepted forms of remuneration not being “money remuneration.” Moreover, there can be no serious contention that an exception to a definitional statute “covers the whole subject” of the original definition, so the second exception to the presumption against implied repeal is also inapplicable.

To be sure, “the implication of a later enactment ... will often change the meaning that would otherwise be given to an earlier provision that is ambiguous.” An-tonin Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts 330 (2012) (emphasis added). However, the definition of “compensation” in the RRTA is not ambiguous with respect to the question presented here. As I have demonstrated, the original meaning of “money remuneration” was limited to cash and cash equivalents and did not include stock or stock options. Because the definitional statute is unambiguous, the later-enacted exceptions cannot alter its meaning.

In sum, Congress has long treated railroads differently than other industries. See, e.g., Federal Employers Liability Act, 45 U.S.C. § 51 et seq.; Railway Labor Act, 45 U.S.C. § 151 et seq. In the labor relations context, the Supreme Court has cautioned that “parallels between the [National Labor Relations Act] and the [Railway Labor Act] ... should be drawn with the utmost care and with full awareness of the differences between the statutory schemes.” Chic. & N. W. Ry. Co. v. United Transp. Union, 402 U.S. 570, 579 n.11, 91 S.Ct. 1731, 29 L.Ed.2d 187 (1971). For whatever reason, the RRTA is another example of this. Given the increased liquidity of corporate stock, it may be long past time to remove the word “money” from the definition of compensation under the RRTA, but we lack the power to do so where Congress has declined. Therefore, I would hold that the non-qualified stock options provided to employees of these railroads are not taxable as compensation under the RRTA.

I respectfully dissent.

      . The court concedes that "money” isn't everything with a monetary value. Maj. Op. at 491-92. The value of this concession is limited. There is a market for everything, even the birthday cake that the court points to as the quintessential non-money item. The only difference between the birthday cake (and personal property, for that matter) and a share of stock is that the latter's value is more easily discoverable (because it's listed on a public exchange). But what about stock in a closely-held corporation, the value of which is not so obvious to the public? The court's result requires drawing a distinction on this non-textual basis. Interpreting the statute as it was originally understood avoids this problem.
      Moreover, although it’s true that the stock options are not taxed until they are exercised (meaning that the employee purchases the stock at the strike price), it seems-strange to call a stock option "money remuneration” when its value is so contingent on future performance. While a share of stock in a publicly traded company has a well-known value, a stock option’s value isn’t quite the same thing. If an employee receives an option to purchase one share of Canadian National stock at $50 per share, but the stock plunges to $40 per share the next day and remains there during the length of the option, the option would be worthless. Although it would never be taxed in that instance, it would also not be of much value to the employee, who would have preferred "money remuneration.”

      . Furthermore, the RRTA was enacted during the Great Depression, when corporate stock would not have been understood to be as liquid as it is today. Employees in the 1930s would not have taken it kindly had they been asked to accept company stock options in lieu of money remuneration. That lends credence to the conclusion that stock and stock options were not money remuneration.

      . I must point out that, although I would hold the non-qualified stock options non-taxable under the RRTA, the proceeds from the sale of stock are of course taxable under generally applicable laws when the employee makes a profit. From the railroads' perspective, of course, they would avoid paying the tax on their end of the transaction.


author: POSNER, Circuit Judge.

text:
    Luis A. PLATA, Plaintiff-Appellant, v. EUREKA LOCKER, INC., Defendant-Appellee.
    No. 16-2030
    United States Court of Appeals, Seventh Circuit.
    Submitted April 13, 2017
    Decided May 9, 2017

      Luis A. Plata, Pro Se.
    James Joseph Sipchen, Attorney, Pretzel & Stouffer, Chartered, Chicago, IL, for Defendant-Appellee.
    Before WOOD, Chief Judge, and POSNER and EASTERBROOK, Circuit Judges.
   POSNER, Circuit Judge.

Plata, a butcher employed by Eureka Locker, a meat-processing company, sued Eureka under both state law and federal law (42 U.S.C. § 2000e et seq.), charging it with having fired him in retaliation for his having filed a worker’s compensation claim against the company. He claimed that Scott Bittner, the company’s owner, had told him he was “done” after he told Bitt-ner that he intended to file a worker’s compensation claim.

Bittner died suddenly while the case was in its early stages. That left Plata the only witness to the alleged conversation. Eureka argued to the district court that the Illinois Dead Man’s Act, 735 ILCS 5/8-301, barred Plata from testifying about a conversation with Bittner that the latter, being dead, could no longer rebut. The statute “forbids a party to a suit by or against a firm to testify about any conversation with a dead agent of the firm, unless a living agent of the firm was also present at the conversation (to testify as the dead man himself might have testified to what was said).” Lovejoy Electronics, Inc. v. O’Berto, 873 F.2d 1001, 1005 (7th Cir. 1989). Although Plata’s suit was filed in federal rather than state court, Rule 601 of the Federal Rules of Evidence (“Competency to Testify in General”) states that “in a civil case, state law governs the witness’s competency regarding a claim or defense for which state law supplies the rule of decision,” and Plata’s suit charged a violation of state as well as federal law.

No living agent of the firm was present at the conversation between Plata and Bittner except of course Bittner, who couldn’t testify at the trial because by then he was dead. The district court, relying on Sohigro Service Co. v. Industrial Comm’n, 172 Ill.App.3d 47, 122 Ill.Dec. 424, 526 N.E.2d 683, 689 (1988), ruled that Plata could testify that he had told Bittner that he intended to file a worker’s compensation claim, but could not testify to what Bittner had said in response. The judge reasoned that Bittner’s alleged response— that Plata was “done”—was too closely related to Plata’s employment contract with Eureka. The judge also threw out Plata’s federal claims, on the ground that they were time-barred and unsupported by evidence. The state-law retaliation claim survived, but only—the judge said—“by the thinnest of margins.”

In arguing that the Dead Man’s Act prohibited Plata from testifying to any part of his conversation with Bittner, Eureka relied on the provision of the Act, 735 ILCS 5/8-301, that states that “in any action or proceeding by or against any surviving partner or partners, or joint contractor or joint contractors, no adverse party or person adversely interested in the event thereof [such as Plata] shall ... be rendered a competent witness to testify to any admission or conversation by any deceased partner or joint contractor” unless a surviving partner was present for the conversation. The statute also bars evidence of conversations with any deceased agent “who has contracted with” an adverse party. But Plata sued for retaliatory discharge, a common-law action created by the Illinois Supreme Court, so it wasn’t a contract dispute. Eureka argued that the Act bars evidence of conversations with any deceased agent of a company, period, but this ignores the statutory language limiting the prohibition to a conversation with an agent “who has contracted with” the witness.

We needn’t pursue the issue of the applicability of the Dead Man’s Act further, because Plata makes no issue of it in this court and the district judge based his decision not on whether Plata’s termination was a result of telling Bittner that he was going to file a worker’s compensation claim but instead on Plata’s failure to prove damages.

Plata was a difficult litigant, whose lawyer was allowed by the judge to withdraw from the case after Plata refused to respond to the defendant’s discovery requests. Plata also ignored deadlines to identify proposed exhibits and witnesses and failed to itemize the damages that he sought from the defendant. Because he failed to comply with the court’s discovery rules, the judge forbade him to present any evidence at trial other than his own testimony.

At the trial Plata waived opening statement, repeated his version of what Bittner had said to him, and announced that he was seeking $133,000 in damages—but added that this was just the “initial part of the damages” he was seeking. He did not explain how he had arrived at the $133,000 figure. He did not say what he’d been paid at Eureka, how long he’d been unemployed after being fired, or what attempts he’d made during that period to find another job. He did reveal on cross examination that he’d worked at several places after he left Eureka. But he did not explain whether the wages he’d received at those jobs had reduced the damages he was seeking. Unsurprisingly the judge refused to award him any damages.

So Plata has appealed, but his appeal brief is unrelated to damages or to other relief that he might seek; it is devoted instead to arguing that the court unreasonably refused to recruit a lawyer for him. That argument goes nowhere, given his treatment of his first lawyer.

He also argues that summary judgment should have been granted to him and that the district judge did not give him enough time during the trial to present his case for damages. But Plata’s thin case obviously did not warrant summary judgment in his favor, nor did it require more time than the judge allotted to it. We therefore find no error in the district judge’s decision not to award Plata any relief.

The judgment of the district court is

AFFIRMED.