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Pizzeria Owes Legal Fees After Harassment Claim

CHICAGO (CN) - A pizzeria owes attorneys' fees to the hostess who won a $30,000 settlement after bringing sexual harassment claims, the 7th Circuit ruled.

Juana Sanchez worked for Giordano's Pizza at its Prudential Tower location in Chicago from November 2008 to July 2010. This franchise restaurant claims to be one of the originators of Chicago-style pizza.

Sanchez says she reported sexual harassment to the chain's owner, Basil Apostolou, in 2010, saying that her manager, Alex Marquez, spoke about wanting to have sex with her and spank her.

Basil says Marquez rejected the claim and that he would take a lie detector test to prove it.

As part of his investigation, Basil held a meeting with Sanchez at Giordano's corporate headquarters, attended partly by his father, John Apostolou, who runs Giordano's Enterprises.

In his affidavit, John said: "I then told Juana Sanchez that Alex Marquez had indicated that he would be willing to take a lie detector test." Basil also testified that his father said to Sanchez: "Alex is willing to take one, are you?"

Giordano's eventually fired Sanchez, leading her to sue the restaurant and John Apostolou for sex discrimination, sexual harassment and retaliation.

As the case headed to trial, Prudential made a $30,000 "offer of judgment" under Rule 68 of the Federal Rules of Civil Procedure, which Sanchez accepted.

Rule 68 allows civil defendants to offer a settlement amount, valid for 14 days, before a suit goes to trial. A plaintiff who rejects an offer and does not obtain a more favorable judgment must pay costs incurred after the offer was made.

Prudential's offer stated that it included "all of plaintiff's claims for relief," but, after the judgment was entered, the parties disagreed as to whether the offer included attorneys' fees and costs.

Applying contract law principles, U.S. District Judge Sharon Johnson Coleman ruled against Sanchez last April.

"Costs and fees were specifically addressed by the terms of the offer of judgment," Coleman wrote.

A three-judge panel of the 7th Circuit reversed Monday, finding that any ambiguities in a Rule 68 offer of judgment must be resolved against the defendant.

"If the terms of a Rule 68 offer are not specific and clear, there are opportunities for both confusion and mischief," Judge David Hamilton wrote for the panel.

Prudential argued that the offer was not silent regarding fees because it referred to Sanchez's "claims for relief," and her complaint requested attorneys' fees and costs.

The 7th Circuit detemined, however, that the stakes of a Rule 68 offer require ambiguities to be judged at an elevated standard. Plaintiffs should not need to guess the meaning of an offer.

"In the absence of the judicial gloss holding that an offer that is ambiguous as to costs and attorney fees will be held against the defendant, an ambiguous offer puts the plaintiff in a very difficult situation and would allow the offering defendant to exploit the ambiguity in a way that has the flavor of 'heads I win, tails you lose,'" Hamilton wrote.

"If the plaintiff accepts the ambiguous offer, the defendant can argue that costs and fees were included," he added. "If the plaintiff rejects the offer and later wins a modest judgment, the defendant can then argue that costs and fees were not included, so the rejected offer was more favorable than the ultimate judgment and that the plaintiff's recovery of costs and fees should be limited accordingly."

Hamilton concluded, "If Prudential Pizza's offer was meant to include attorney fees and costs, the offer was not specific enough."

The appeals court remanded the case for a calculation of attorneys' fees and costs.

Previously, the trial court granted Sanchez summary judgment in her claim against Apostolou under the Employee Polygraph Protection Act (EPPA). It also ordered Apostolou to pay Sanchez $140,000 in attorney fees.

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