In the
United States Court of Appeals
For the Seventh Circuit

No. 01-1894

IRENE J. HOJNACKI, Doctor,

Plaintiff-Appellant,

v.
DONNA KLEIN-ACOSTA, DORETTA O’BRIEN,
ADDUS HEALTHCARE, INCORPORATED, et al.,

Defendants-Appellees.

Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 00 C 1356--Matthew F. Kennelly, Judge.

ARGUED JANUARY 14, 2002--DECIDED March 28, 2002



  Before POSNER, RIPPLE and DIANE P. WOOD,
Circuit Judges.

  RIPPLE, Circuit Judge. Dr. Irene
Hojnacki, a discharged employee of Addus
Healthcare, Inc., ("Addus") brought this
action against Addus, its chief financial
officer and Illinois Department of
Corrections officials, alleging due proc
ess violations and claiming the right to
a name-clearing hearing. The district
court held that the due process claim
must fail because Dr. Hojnacki was not an
employee of the Illinois Department of
Corrections. For the reasons set forth in
the following opinion, we affirm the
judgment of the district court.

I

BACKGROUND

A.   Facts

  Dr. Hojnacki was employed by Addus
Healthcare, a private company under
contract with the Illinois Department of
Corrections ("DOC") to supply health care
services to inmates at DOC prisons. She
worked as medical director at the Dwight
Correctional Center for Women ("Dwight").
In March 1995, Doretta O’Brien, the
Administrator of Dwight’s Healthcare Unit
("HCU"), filed an Incident Report with
the warden of the facility, Donna Klein-
Acosta. According to the report,
Administrator O’Brien had reviewed an
inmate’s medical chart and discovered
that she had been given a soft drink, 7-
Up. Administrator O’Brien asked a nurse
how the inmate came to have the soft
drink, and the nurse responded that Dr.
Hojnacki had given the soft drink to the
inmate and had asked the nurse to give it
to the inmate./1 The report states that
Dr. Hojnacki had been informed that 7-Up
could not be given to inmates and that
their diets must come from the DOC. The
report further indicates that Dr.
Hojnacki stated, apparently upon being
informed of this rule, that she would
"bring [the soft drink] her self." R.1,
Ex.B-1. The report also indicates that
"[s]he was advised against it." Id.

  After receiving the Incident Report,
Warden Klein-Acosta sent a letter to Mark
Heaney, the Chief Financial Officer of
Addus, relating that Dr. Hojnacki had
knowingly violated prison policies by
delivering the 7-Up to a prisoner and
recommending that "appropriate
disciplinary action be taken that would
disallow her entrance into the Dwight
Correctional Center/KMSU." R.1, Ex.C.
Addus then discharged Dr. Hojnacki
because she was no longer allowed access
to Dwight and because "no other similar
positions exist[ed] with the Company."
R.1, Ex.A.

  When Dr. Hojnacki learned that she had
been discharged, she requested a hearing
from the warden, but the warden refused.
Dr. Hojnacki also claims that the
defendants made it known to employees of
the prison and to medical professionals
in Joliet, Illinois, that she brought
contraband into the prison and gave it to
a prisoner, a violation of Illinois law.
Dr. Hojnacki denies the allegations
against her and further asserts that they
have become widely known in Dwight,
Joliet and Chicago and that, as a result,
she has not been able to find comparable
employment.

B.   District Court Proceedings

  Dr. Hojnacki filed a six-count complaint
against Warden Klein-Acosta,
Administrator O’Brien, Addus Healthcare
and Mr. Heaney. She alleged that all of
the defendants had violated her due
process rights under the Fourteenth
Amendment by defaming her in connection
with her discharge and thereby preventing
her from finding comparable employment.
She sought a name-clearing hearing. Dr.
Hojnacki also asserted claims for sex
discrimination under Title VII against
all of the defendants and age
discrimination under the Age
Discrimination in Employment Act against
Addus and Mr. Heaney. The remaining
counts set forth various state-law causes
of action.

  The defendants filed motions to dismiss,
asserting that, in order to prevail on
her due process claim for a name-clearing
hearing, Dr. Hojnacki had to demonstrate
that she was a state employee, a showing
that the defendants maintained she could
not make. In response to the motions to
dismiss, Dr. Hojnacki accepted the
defendants’ assertions that she would
have to show that she was a DOC employee
to prevail. She stated in her Answer: "We
take as Bible Addus’ and Heaney’s
assertion: In order to sustain a claim
for Constitutional Tort - Liberty
Interest - Name Clearing, plaintiff must
demonstrate that 1) she was a public
employee . . . ." R.10 at 2. The Answer
explains further: "If [the defendants]
are correct in their contention that the
plaintiff was not a public employee, then
this case should be dismissed." Id. at 7.
Dr. Hojnacki maintained, however, that
her employment status could only be
determined after discovery. She observed
that "[t]he discovery involved in
establishing the issue of employment is
but a small part of the overall
discovery. It would indeed be unfortunate
for all of the parties with great amounts
of time and expenditures, as well as the
time of the court, if it were pre-
ordained that the plaintiff was not a
public employee." Id. at 8. Dr. Hojnacki
therefore suggested that "[a] limitation
of discovery to only the issue of
employment should promptly ascertain
sufficient information to dispose of the
issue." Id.

  The district court denied the motions to
dismiss but adopted the parties’ view
that only a state employee could state a
claim against a state agency for defaming
her in connection with her discharge and
thereby preventing the employee from
finding comparable employment. The court
also adopted Dr. Hojnacki’s proposal and
ordered that discovery initially be
limited to the issue of whether Dr.
Hojnacki was an employee of the DOC.
After discovery, the defendants filed
motions for summary judgment on that sole
issue.

  The district court held that Dr.
Hojnacki was not a state employee and
entered summary judgment for the
defendants on the due process claim. The
court also entered summary judgment for
the individual defendants on the age and
sex discrimination claims, a
determination that Dr. Hojnacki does not
appeal. Dr. Hojnacki moved for a
voluntary non-suit on the age and sex
discrimination claims that remained
against Addus. The court granted the
motion and dismissed those claims with
prejudice./2 It also dismissed the
remaining state-law claims. The only
question on appeal is whether the
district court properly granted summary
judgment for the defendants because Dr.
Hojnacki is not a state employee.

II

DISCUSSION

  We review de novo the district court’s
grant of summary judgment. See Thomas v.
Pearle Vision, Inc., 251 F.3d 1132, 1136
(7th Cir. 2001). Summary judgment is
appropriate "if the pleadings,
depositions, answers to interrogatories,
and admissions on file, together with
affidavits, if any, show that there is no
genuine issue as to any material fact and
that the moving party is entitled to a
judgment as a matter of law." Fed. R.
Civ. P. 56(c); see Celotex Corp. v.
Catrett, 477 U.S. 317, 322-23 (1986). The
relevant facts here are not in dispute;
we therefore must determine only whether
Dr. Hojnacki was an employee of the DOC
as a matter of law and, if not, whether
the defendants were entitled to summary
judgment.

A.   The Cause of Action

  Alleging a claim under 42 U.S.C. sec.
1983, Dr. Hojnacki maintained that the
defendants had violated her due process
rights by defaming her in connection with
her discharge and thereby preventing her
from finding comparable employment. A
person does not have a protectable
liberty or property interest in her
reputation, see Paul v. Davis, 424 U.S.
693, 701, 711-12 (1976), and mere
defamation by the government does not
deprive a person of "liberty" protected
by the Fourteenth Amendment, even when it
causes "serious impairment of [one’s]
future employment," Siegert v. Gilley,
500 U.S. 226, 234 (1991); see Paul, 424
U.S. at 697. Rather, it is the
"alteration of legal status," that,
"combined with the injury resulting from
the defamation, justifie[s] the
invocation of procedural safeguards."
Paul, 424 U.S. at 708-09, 710. Thus,
"[w]e have held many times that state
employees have a liberty interest in not
being discharged from their employment
while being defamed such that they cannot
get other government employment."
Strasburger v. Bd. of Educ., 143 F.3d
351, 356 (7th Cir. 1998).

  It may be that a resulting inability to
find work in the defamed person’s chosen
profession is itself an "alteration of
legal status" that would give rise to a
due process claim on the part of a non-
government employee whose employment was
terminated because of the government’s
defamation. See Kartseva v. Dep’t of
State, 37 F.3d 1524, 1528 (D.C. Cir.
1995) (government contractor employee
whose security clearance was inexplicably
revoked by the Department of State and
who could not find comparable work as a
result could prevail on her claim for a
name-clearing hearing if the DOS action
formally or automatically excluded her
from government employment opportunities
or had "the broad effect of largely
precluding [her] from pursuing her chosen
career"); see also Greene v. McElroy, 360
U.S. 474, 492 (1959) ("[T]he right to
hold specific private employment and to
follow a chosen profession free from
unreasonable governmental interference
comes within the ’liberty’ and ’property’
concepts of the Fifth Amendment . . .
."); Colaizzi v. Walker, 812 F.2d 304,
307 (7th Cir. 1987) ("If a state or the
federal government formally banned a
person from a whole category of
employment, it would be infringing
liberty of occupation--a component of the
liberty that the due process clauses of
the Fifth and Fourteenth Amendment[s]
protect, and recognized as such almost
since the beginning of this nation.").
Dr. Hojnacki, however, has not made such
an argument either before the district
court or on appeal. Rather, she has
maintained throughout the course of this
litigation that she must show that she
was a state employee to prevail./3 A
party waives any argument that it does
not raise before the district court or,
if raised in the district court, it fails
to develop on appeal. See United States
v. 1948 S. Martin Luther King Dr., 270
F.3d 1102, 1117 n.17 (7th Cir. 2001). It
is "not the work of this Court to
formulate arguments for the parties."
Kurzawa v. Jordan, 146 F.3d 435, 447-48
(7th Cir. 1998).

  The liberty interest of which Dr.
Hojnacki claims to have been deprived,
then, is the liberty interest that state
employees have "in not being discharged
from their employment while being defamed
such that they cannot get other
government employment." Strasburger, 143
F.3d at 356. To prevail Dr. Hojnacki must
show that she was a state employee.

B.   Employment Issue

  Dr. Hojnacki maintains that she was
either an employee or a loaned employee
of the DOC. In determining whether a
person is an employee, we apply a common-
law test that involves "general
principles of agency." Alexander v. Rush
N. Shore Med. Ctr., 101 F.3d 487, 492
(7th Cir. 1997) (internal quotation
omitted); see also Nationwide Mut. Ins.
Co. v. Darden, 503 U.S. 318, 323-24
(1992) (applying common-law test to
determine whether a person is an employee
as defined by the Employee Retirement and
Income Security Act). The test requires
us to consider five factors: (1) the
extent of the employer’s control and
supervision over the worker, (2) the kind
of occupation and nature of skill
required, (3) which party has
responsibility for the costs of
operation, such as the provision of
equipment and supplies and the
maintenance of the workplace, (4) the
source of payment and benefits and (5)
the duration of the job. See Alexander,
101 F.3d at 492 (quoting Ost v. W.
Suburban Travelers Limousine, Inc., 88
F.3d 435, 438 (7th Cir. 1996)). Of these
factors, the extent of control and
supervision over the worker is the most
significant in determining the employment
status. See id. at 493. In this case,
consideration of the last four factors
does not indicate conclusively whether
Dr. Hojnacki was an employee of the DOC.
The second and fourth factors tend to
show that she was not an employee of the
state; the fifth factor tends to show
that she was an employee; the third
factor is inconclusive. The DOC’s lack of
control over the performance of Dr.
Hojnacki’s duties suggests, however, that
Dr. Hojnacki was not a DOC employee.

  Beginning with the second factor, Dr.
Hojnacki did not derive her medical
skills from her employment with the DOC.
With regard to the costs of operation,
the DOC supplied and maintained "the
space, equipment, furniture, fixtures and
other items required for the efficient
operation of the health care unit . . .
." R.23, Ex.17, para. 4.12(a). Addus,
however, supplied clothing for in-patient
prisoners and "[a]ll medical supplies,"
which the contract with the DOC defined
as medical equipment "with a unit cost of
$100 or less." Id., para. 4.12(b), (e).
The third factor, then, does not weigh
heavily in favor of either possibility. A
consideration of the fourth factor
indicates that Dr. Hojnacki was not an
employee of the DOC, because it was
Addus, and not the DOC, that paid Dr.
Hojnacki’s wages and provided her with
employment benefits. In fact, the
contract between Addus and the DOC stated
explicitly that Addus employees were not
"entitled to participation in any
retirement or pension plan, group
insurance program, or other programs
designed to benefit employees of the
State of Illinois, Department of
Corrections." R.23, Ex.17, para. 4.1.

  The duration of Dr. Hojnacki’s job,
however, lends some support to a
determination that she was a DOC
employee. Dr. Hojnacki worked at the
Dwight Correctional Facility for three
years even while the DOC twice changed
correctional healthcare providers. Dr.
Hojnacki signed her initial employment
contract in 1996 with Coastal
Correctional Healthcare, Inc. In 1997,
Coastal was replaced by Correctional
Healthcare Solutions, and Dr. Hojnacki
signed an employment contract with that
provider. In 1998, the DOC contracted
with Addus, with which Dr. Hojnacki
signed an employment contract as well.
Dr. Hojnacki’s presence at Dwight as
medical director of the HCU for three
years while the DOC cycled through three
different healthcare providers suggests
that she was an employee of the DOC.

  Consideration of the most important
factor, however, confirms that she was
not an employee. The DOC did not control
the performance of Dr. Hojnacki’s duties.
The contract between Addus and the DOC
provided that Addus, not the DOC, "shall
supervise all persons employed by it
during the performance of their work
within said institution, and they shall
be employees of the Contractor and not
employees of the Department of
Corrections." R.21, Ex.B, at para.
2.0(E). Under the heading "Professional
Ethics," the manual setting out the
policies and procedures of the health
care unit at Dwight provided that "[a]ll
medical, psychiatric and dental matters
involving clinical judgment are the sole
province of the physician or dentist
responsible for the care of inmates at
Dwight Correctional Center . . . ." R.29,
Ex.D, at 7. Dr. Hojnacki suggests that
the manual’s statement of professional
ethics is mere surplusage because it
simply reiterates the ethical standard
that all doctors adopt with the
Hippocratic Oath, and no doctor would
allow a lay person to overrule her
clinical judgment. Even so, the statement
reflects a policy of deference in all
"matters involving clinical judgment." As
medical director, Dr. Hojnacki was to
"plan, implement, direct and control all
clinical aspects of the health care
program." R.23, Ex.17, para. 4.8(o). The
contract between Addus and the DOC also
specified that "[i]n addition to
administrative responsibilities, the on-
site Medical Director shall also provide
primary health care services on a routine
basis." Id. Implementing "all clinical
aspects of the health care program" and
providing "primary health care services"
would undoubtedly involve "clinical
judgment" and would therefore be the
"sole province" of Dr. Hojnacki.

  Dr. Hojnacki submits, however, that the
DOC controlled her work through the
various policies and procedures with
which the DOC required her to comply. For
example, the DOC required Dr. Hojnacki to
complete some training, though Dr.
Hojnacki does not specify what kind; the
DOC required Dr. Hojnacki, as medical
director, to serve on a Quality
Improvement Committee, which was to sit
monthly, perform audits and report to a
governing body headed by the warden, all
in an effort "to assure that high quality
patient care is delivered in a cost
efficient, safe and appropriate manner,"
R.29, Ex.D, at 18; the DOC required Dr.
Hojnacki to perform a monthly review of
mortality cases; the DOC specified what
information should be included in
admission and discharge forms; and the
DOC specified how often to perform
physical examinations of prisoners, what
kind of questions to ask the inmates and
to observe an inmate’s behavior,
appearance and mental status.

  For an employer-employee relationship to
exist, however, the employer must have
"the right to control and direct the work
of an individual, not only as to the
result to be achieved, but also as to the
details by which that result is achieved
. . . ." Alexander, 101 F.3d at 493. The
procedural requirements that Dr. Hojnacki
has put forward as examples of the DOC’s
control over her merely specify her
duties as medical director; they do not
control the manner in which she is to
perform those duties.

  We considered similar procedural
requirements over a purported employee in
EEOC v. North Knox School Corp., 154 F.3d
744, 748 (7th Cir. 1998). We determined
that bus drivers were not school district
employees even though the district set
the precise route and schedule of each
driver, limited the number of times and
for what reasons a driver could be
absent, and required drivers to enforce
its disciplinary policies but did not
allow them to administer punishment or
set their own rules for appropriate
behavior. See id. We observed that "one
can ’control’ the conduct of another
contracting party by setting out in
detail his obligations; this is nothing
more than the freedom of contract. This
sort of one-time ’control’ is
significantly different than the
discretionary control an employer daily
exercises over its employees’ conduct."
Id. Here, too, the DOC’s contract with
Addus requires Addus’ employees to abide
by the DOC’s rules and regulations. The
DOC’s manual, which Dr. Hojnacki
characterizes as the "most important evi
dence" in her case, Appellant’s Br. at
23, merely details Dr. Hojnacki’s
obligations. As in North Knox, the
requirements are "significantly different
than the discretionary control an
employer daily exercises over its
employees’ conduct." Id.

  Dr. Hojnacki also submits that the DOC
controlled her by setting her working
hours and requiring her to be on call. We
rejected a similar argument in Ost v.
West Suburban Travelers Limousine, Inc.,
88 F.3d 435, 438 (7th Cir. 1996), in
which we held that limousine drivers were
not the employees of their dispatchers
even though the dispatcher determined the
drivers’ starting times, because "the
details concerning performance of the
work remained essentially within the
control of the driver." Id. at 438-39.
For the same reason, we also rejected the
argument that a hospital’s requirement
that a doctor remain on call rendered the
doctor an employee of the hospital. See
Alexander, 101 F.3d at 493. Dr.
Hojnacki’s arguments meet with no more
success here because such constraints did
not amount to control of the details of
her performance.

  After considering the relevant factors,
especially the lack of control that the
DOC exercised over the performance of Dr.
Hojnacki’s duties, we conclude that Dr.
Hojnacki was not an employee of the DOC.

  Nor did Addus loan Dr. Hojnacki to the
DOC as an employee. "The loaned servant
doctrine is a principle of agency law in
which the first principal ’loans’ his
agent to a second principal, giving the
second principal a heightened degree of
control over the agent, along with the
corresponding responsibility for the
agent’s acts and omissions." Williams v.
Shell Oil Co., 18 F.3d 396, 400 (7th Cir.
1994). The control requirement applies to
loaned employees as well. See Williams v.
Grimes Aerospace Co., 988 F. Supp. 925,
936 (D.S.C. 1997) ("Under the common law,
’[a] dual employment relationship may
exist if more than one individual or
company has the right to control or
direct an employee in the performance of
the work.’") (quoting 27 Am. Jur. 2d
Employment Relationship sec. 5 (1996)).
Therefore, because the DOC did not
control Dr. Hojnacki in the performance
of her duties, she was not the DOC’s
loaned employee.
Conclusion

  Dr. Hojnacki has not argued that her
inability to find work in her chosen
profession itself entitles her to relief.
Although she alleged in her complaint
that she has been unable to find
comparable work, she has argued
throughout that the loss of her
government job as a result of the DOC’s
defaming her in connection with her
discharge gave rise to her due process
claim for a name-clearing hearing.
Because she was not a government
employee, however, her claim, as she has
chosen to frame and argue it, must fail.
Accordingly, we must affirm the judgment
of the district court. The district court
therefore did not err in granting summary
judgment for the defendants. The judgment
of the district court is affirmed./4

AFFIRMED

FOOTNOTES

/1 The report indicates, somewhat equivocally, that
Dr. Hojnacki both gave the soft drink to the
inmate and asked the nurse to do so.

/2 The district court’s order granting the motion
for a voluntary non-suit did not indicate whether
the claims were to be dismissed with or without
prejudice. The district court subsequently grant-
ed Dr. Hojnacki’s motion to clarify the record,
however, and issued an order amending the previ-
ous order nunc pro tunc to provide for the
dismissal of the claims with prejudice.

/3 Counsel for Dr. Hojnacki explicitly disclaimed
any reliance on the theory that she could prevail
as an employee of the private sector. At oral
argument, the court engaged in the following
colloquy with counsel for Dr. Hojnacki.

THE COURT: [Y]ou don’t think the employment
status is outcome determinative of your law suit?
COUNSEL: Oh, we must prove that she’s an employ-
ee.

THE COURT:    Of who?

COUNSEL:    Of the state. . . .

THE COURT:    Are you sure of that?

COUNSEL:    That is our position.

* * *
THE COURT: You’re not relying on the theory that
the state in effect has created such a blot on
her character by barring her from the institution
that she cannot be employed in her profession
anywhere.

COUNSEL:   We have not relied on that. . . .

* * *

THE COURT: Let me put it to you this way, . . .
if we don’t agree with you today and believe that
summary judgment was correctly granted to your
opponents on the issue of employment, is there
anything left in this case?

COUNSEL: Ah, we are out of court.

Audio Tape of Oral Argument, No. 01-1894, Jan.
14, 2002.

/4 Dr. Hojnacki has moved to strike portions of the
defendants’ briefs. Our disposition of her claim
renders those motions moot.
