Unpublished Disposition, 876 F.2d 897 (9th Cir. 1986)

MEMORANDUM^* 

John J. Sanche sued Orbanco, Inc. and The Oregon Bank (hereinafter "Bank") in Oregon state court. He alleged claims based on violation of the federal Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq. ("ADEA"), wrongful discharge, tortious breach of the implied covenant of good faith and fair dealing, and breach of an implied, at-will employment contract.

The Bank removed the case to the district court pursuant to 28 U.S.C. § 1441. The district court granted summary judgment in favor of Orbanco, Inc. and the Bank. It held that the federal ADEA claim was barred by the ADEA's two-year statute of limitations and dismissed the ADEA claim. The state claims for wrongful discharge, tortious breach of the implied covenant of good faith and fair dealing, and breach of contract were also dismissed. The Bank appeals. We have jurisdiction under 28 U.S.C. § 1291 and we affirm.

FACTS

Sanche joined the Bank as a trust officer in September 1965. He was transferred to the internal auditing department in February 1973. In March, 1979 he was promoted to assistant vice president. He became an audit manager the same year. As audit manager, Sanche was directly responsible for trust department audits. He supervised branch audits performed by other auditors, but performed no branch audits himself. His yearly written performance evaluations generally were favorable, with some criticisms of his technical audit abilities, and communication and supervisory skills. He received a merit increase in September 1983.

In 1983 the Bank ran into financial difficulties. By October, several branches had been closed, with more closures pending. The audit division was reduced from thirteen to eleven persons and all of the audit manager positions were eliminated.

One manager was placed in a supervisory position shared by Joseph Waldron, Sanche's supervisor. A second manager, thirty years old and earning approximately the same salary as Sanche, was transferred to another department. Sanche was assigned to perform branch audits and audit trust services, with no reduction in salary or benefits. A third manager, thirty years old and earning substantially less than Sanche, was scheduled to be laid off but won a reprieve when another employee agreed to a voluntary transfer.

In February 1984, one of the younger auditors was placed in a supervisory position over Sanche on branch audits. In a written performance evaluation dated April 9, 1984, Sanche's performance was rated "fair." His "interpersonal skills and branch operations knowledge" were rated as "need [ing] improvement." The evaluation concluded that Sanche's performance was below the expected level for interpersonal skills and branch operations knowledge.

On May 24, 1984, Waldron told Sanche his audit position and that of another auditor were being eliminated due to an imminent branch closing. The second auditor was thirty years old and had an annual salary of $18,000. Sanche was fifty-four years old, with an annual salary of approximately $32,000. Waldron told Sanche that by the May 24 meeting Sanche was being given advance notice he would no longer be on the payroll after September 30, 1984. Waldron also told Sanche that the personnel department would look for another suitable position for him within the Bank, although the possibility of finding one was "fairly remote."

After spending a couple of weeks on vacation, Sanche returned to the Bank on June 22, 1984. He was told that June 22 would be his last day at the Bank. On June 25 the head of the personnel department told Sanche the Bank had no available openings and discussed severance terms with him. Sanche's severance pay ended on November 6, 1984. Sanche alleges he was terminated based on his age and salary. The Bank contends Sanche was laid off as part of a reduction in force prompted by a downturn in the Bank's economic fortunes.

ANALYSIS

Under the ADEA, it is unlawful for an employer "to discharge any individual or otherwise discriminate against any individual ... because of such individual's age." 29 U.S.C. § 623(a); Kelly v. American Standard, Inc., 640 F.2d 974, 977 (9th Cir. 1981). The ADEA incorporates the remedial rights and procedures of the Fair Labor Standards Act ("FLSA"). Id. at 977-78. Actions alleging violations of the ADEA are governed by the statute of limitations set out at 29 U.S.C. § 255(a). 29 U.S.C. § 626(e) (1). Claims must be brought within two years after the cause of action accrues, or within three years if violation of the statute is willful.

Sanche argues his claim is not barred by the statute of limitations because he was terminated on June 22, 1984, and therefore his June 4, 1986 filing was within the two-year limitations period. In the alternative, Sanche contends he has presented evidence that the Bank willfully violated the ADEA and his claim was timely filed within the three-year limitations period.

The district court determined Sanche had presented no facts or direct evidence showing that the Bank had willfully violated the ADEA. It found that Sanche's cause of action accrued when he received notice in May, 1984 of his termination and that his claim was barred by the two-year statute of limitations.

The limitations period for ADEA suits begins to run on the date the employee knows or should know that an unlawful employment practice has been committed. Aronsen v. Crown Zellerbach, 662 F.2d 584, 591 (9th Cir. 1981), cert. denied, 459 U.S. 1200 (1983); Delaware State College v. Ricks, 449 U.S. 250, 257 (1980). If a factual dispute exists concerning that date, summary judgment is inappropriate. Aronsen, 662 F.2d at 585. The unlawful employment practice alleged by Sanche is his discharge based on age.

The parties do not dispute that Waldron told Sanche during the May 24, 1984 meeting that his position was being eliminated and that he would not be on the audit department payroll after September 30, 1984. Waldron also stated that the personnel office might be able to find Sanche a suitable position in another part of the Bank, "but that chances of success were fairly remote." On June 7, 1984, Waldron offered to extend Sanche's salary an additional two weeks past September 30 if Sanche agreed to perform some training for the Bank. Sanche asserts this offer, and the possibility that he would be offered another position elsewhere in the Bank, tolled the limitations period until June 22, 1984, when he officially left the Bank.

As explained in Ricks, continued employment following notification of termination, and attempts to seek a reversal of termination prior to the last day of work, do not delay commencement of the limitations period. Ricks, 449 U.S. at 504; Naton v. Bank of California, 649 F.2d 691, 695 n. 4 (9th Cir. 1981). Similarly, a plaintiff's efforts to find a new position within the same company prior to his last day of work do not alter the limitations period unless there is a question regarding when the employee knew or should have known of the alleged wrongful employment practice. Aronsen, 662 F.2d at 593. It is uncontroverted in this case that Sanche knew that he was being terminated on May 24, that the termination was effective September 30, and that Sanche believed at the time that he was being discharged based on his age and salary.¹ 

Summary judgment may be inappropriate where an employer gives an employee notice of termination but at the same time holds out the possibility of employment elsewhere in the company, provided the notice of termination is insufficient to alert the employee that he is being discharged in violation of the ADEA. McConnell v. General Telephone Co., 814 F.2d 1311, 1317 (9th Cir. 1987), cert. denied, --- U.S. ----, 108 S. Ct. 1013 (1988). McConnell addressed the willful termination of an employee, as evidenced by the court's application of the three-year statute of limitations under 29 U.S.C. § 255(a). Id. at 1316. The plaintiff alleged his employer misled him by actively attempting to terminate him while at the same time reassuring him that another position would be found. Id. at 1317. The court held that the reasonableness of the plaintiff's reliance on the reassurances that another position would be found for him presented a genuine issue of material fact. Id. at 1317, citing Naton, 649 F.2d at 696. The court explained that notice of termination may have alerted the appellant to some discriminatory action, but the reassurances of alternative employment made it far from clear that the discriminatory act was his termination from the company. Id.

Sanche similarly argues he relied on the "remote possibility" of another position being found for him until June 22, 1984, the date he left the company. He presents no evidence, however, of any assurances by anyone in the company that he would be transferred to another department. Rather, he admits in his deposition that he was told the possibility of rehire in another position was "remote."

The district court properly found that Sanche's claim accrued on May 24. As both Ricks and Aronsen make clear, it is the date upon which the claimant knew or should have known of the alleged unemployment practice, and not the date upon which the effects of that unlawful practice became apparent, which controls when the limitations period begins to run.

An action alleging willful violation of the ADEA must be brought within three years of the date the cause of action accrued. 29 U.S.C. § 255(a). Sanche's action accrued on May 24, 1984. Consequently, his June 1986 filing would be timely under a three-year limitations period.

A willful violation has occurred if an employer "knew or showed reckless disregard for the matter of whether its conduct was prohibited by the statute." McLaughlin v. Richland Shoe Co., --- U.S. ----, 108 S. Ct. 1677, 1681 (1988); Brock v. Shirk, 860 F.2d 1545, 1545 (9th Cir.,1988). The district court determined the "undisputed facts" did not support Sanche's contention that the Bank willfully terminated higher salaried, and therefore older, employees. We agree.

The parties do not dispute that the Bank discharged Sanche as part of a legitimate reduction in force necessitated by economic concerns. Three of the four auditors laid off or transferred in 1983 were under forty years old. The auditor laid off with Sanche was thirty years old and earning an annual salary of $18,000, substantially less than Sanche's $32,000 salary.

The Bank also presented written evaluations showing Sanche's performance was less than satisfactory in some areas. Prior to Sanche's layoff, all employees in the audit department were evaluated to determine who was to be discharged. Such subjective evaluations are not discriminatory in the absence of evidence indicating the ranking was used to mask unlawful or pretextual discrimination. Sengupta v. Morrison-Knudsen, Inc., 804 F.2d 1072, 1075 (9th Cir. 1986). Sanche's evaluation indicated his performance was "fair," his interpersonal skills were below the expected level, and his branch operations knowledge needed improvement. Sanche and the second auditor were selected for layoff in part based on these evaluations.

None of the evidence supports a finding that the Bank willfully violated the ADEA or acted in reckless disregard of its provisions. There was no showing that Sanche was misled by any actions of the Bank, or that a majority of the discharged employees were over forty, or that any Bank employee relied on Sanche's age in deciding to discharge him.²  Cf. McConnell v. General Telephone Co., 814 F.2d at 1317 (employer gave false reassurances of alternative reemployment); Cassino v. Reichhold Chemicals, Inc., 817 F.2d 1338, 1348 (9th Cir. 1987) (all laid off employees were over forty, and company employees made public statements that overall age of employees at company was too high); Russo v. Trifari, Krussman & Fishel, Inc., 837 F.2d 40, 43 (2d Cir. 1988) (employer attempted to conceal acts which could be construed as age discrimination).

Because Sanche has not presented any evidence showing the Bank willfully violated the ADEA, the district court did not err in determining his claim was barred by the two-year statute of limitations.

Sanche alleges state tort causes of action for wrongful discharge and for the tortious breach of a covenant of good faith and fair dealing, which covenant he contends is implied in at-will employment contracts. The district court granted the Bank's motion for summary judgment on these claims without stating grounds.

Oregon has enacted a statutory scheme prohibiting employment discrimination. Or.Rev.Stat. 659 et seq. Oregon law also recognizes the doctrine of "fire at will" in at-will employment relationships. Patton v. J.C. Penney Co., Inc., 719 P.2d 854, 857 (Or.1986). There are two categories of exceptions to the rule which give rise to common law wrongful discharge claims. Patton, 719 P.2d 854, 856 (Or.1986); Kofoid v. Woodard Hotels, Inc., 716 P.2d 771, 774 (Or.App.1986). A plaintiff has a cause of action for wrongful discharge if (1) he was fired for fulfilling a societal obligation, such as jury duty, Nees v. Hocks, 536 P.2d 512 (Or.1975); or (2) he was fired for pursuing private statutory rights related to his role as an employee and of important public interest, such as the right to file a worker's compensation claim, Brown v. Transcon Lines, 588 P.2d 1087 (Or.1978), or to resist sexual harassment, Holien v. Sears, Roebuck and Co., 689 P.2d 1292 (Or.1984). No common law cause of action exists if a statutory remedy adequately protects the interests of society. Patton, 719 P.2d at 857 (citing Walsh v. Consolidated Freightways, 563 P.2d 1205 (Or.1977)).

Sanche argues the Oregon statutory scheme does not bar his claim and relies upon the specific exception set out in Holien. This reliance is misplaced. The Oregon Supreme Court held in Holien that the plaintiff could bring a claim for wrongful discharge because she had been fired for resisting sexual harassment by a supervisor. Holien, 689 P.2d at 1299-1300. The court reasoned that the wrongful act for which the employee sought redress--discharge for resisting sexual harassment--was the type of act for which a common law tort remedy was available prior to the passage of the Oregon statutory scheme prohibiting discrimination.

The court emphasized the wrongful conduct for which plaintiff was seeking redress was not the discriminatory sexual harassment itself, but her discharge for resisting that harassment. Id. After examining the legislative history behind Or.Rev.Stat. 659, the court determined the statutory scheme was not intended to supersede common law remedies for such tortious conduct. Id. at 1303-04.

Sanche argues that the Holien exception applies equally to his age discrimination claim. He alleges, in effect, that he was discharged based on his age and therefore the Holien court's finding that section 659 cannot provide complete relief applies equally to him. Nowhere does he assert, however, that he was discharged for resisting age discrimination.

Judge Linde, in a concurring opinion in Holien, makes clear the narrowness of that holding:

If plaintiff's tort claim were one for 'discriminatory discharge,' that is to say, if her claim were that she was discharged buy reason of her sex, there would be serious doubt that the remedies for employment discrimination enacted by the legislature leave room for an action for damages or that the common law would recognize it. But this plaintiff's case does not hinge on showing that her employer ... discharged her by reason of her sex. Her case depends on showing that Sears discharged her for exercising a legal right to resist a supervisor's sexual advances, which is a very different thing.

Holien, 689 P.2d at 1305 (Linde, J. concurring). Because no claim for wrongful discharge is available to Sanche under Oregon law, we affirm the district court's grant of summary judgment on this claim.

2. Breach of the Implied Covenant of Good Faith and Fair Dealing

Under Oregon law, an employee has no right to be discharged only for good cause, in the absence of statute, unless such an obligation is explicitly stated or implied in a contract. Swanson v. Van Duyn Chocolate Shops, Inc., 579 P.2d 239, 240 (Or.1978) (en banc).

Sanche argues that his length of service with the Bank, his performance, and his reliance on policies which required warnings prior to termination warrant the implication of a covenant of good faith and fair dealing into his at-will employment contract. He does not contend there was any provision in the agreement giving rise to such a covenant, but relies on an Oregon Supreme Court opinion. Perkins v. Standard Oil Co., 383 P.2d 107 (Or.), modif. denied, 383 P.2d 1002 (Or.1963).

In Perkins, the Oregon Supreme Court found that where a contract required the plaintiff to sell a minimum quantity of the defendant's products on an exclusive basis, an implied covenant existed barring the defendant from soliciting the customers which plaintiff had obtained by his own efforts. Perkins, 383 P.2d at 111-12. Sanche argues Perkins stands for the proposition that such a covenant is to be implied automatically in at-will employment contracts. This argument is without merit in light of the case law applying Perkins. See Swanson, 579 P.2d at 242 (actual terms of a contract determine whether the concept of "good cause" should be implied into contract in absence of any conduct by defendant giving rise to such an implied covenant).

In Sheets v. Knight, 759 P.2d 307, 310 (Or.App.), review denied, 767 P.2d 75 (Or.1988), the Oregon court of appeals recently reiterated in dicta that no cause of action exists under Oregon law for breach of an implied covenant of good faith and fair dealing with respect to terminations of at-will employees. Sheets, 759 P.2d at 310 (Rossman, J., concurring). Although the court held no cause of action was available to the plaintiff because he had resigned rather than waiting to be discharged, Judge Rossman in a concurring opinion clarified that the plaintiff also was unable to state a claim for either wrongful discharge or breach of an implied covenant of good faith and fair dealing. Regarding the latter cause of action, the judge stated:

[Plaintiff] concedes that there is no precedent recognizing his claim of breach of a covenant of good faith and fair dealing with respect to decisions to terminate at will employees. The rule that he proposes is so broad that it would literally swallow the at will rule, which has long been recognized as prevailing in this state.

Sheets, 759 P.2d at 310. Oregon law has strictly limited the situations in which an action for wrongful discharge may be brought by a plaintiff employed at will. Allowing a claim for breach of an implied covenant of good faith and fair dealing in an at will contract would swallow those restrictions. Id. (citing Kofoid v. Woodard Hotels, Inc., 716 P.2d 771 (Or.1986)).

Because Oregon law does not recognize the existence of an implied covenant of good faith and fair dealing in at-will employment contracts, the district court's grant of summary judgment was proper on this claim.

Sanche appeals the district court's dismissal without prejudice of his pendent state claim for breach of an implied contract, arguing this claim instead should have been remanded to state court where Sanche originally filed it. See Carnegie-Mellon University v. Cohill, --- U.S. ----, 108 S. Ct. 614, 619 (1988) (district court has discretion to decide whether to dismiss or remand pendent claims to state court).

Sanche's sole argument for remand turns on the time and expense of refiling in state court. We have held that the passage of time and the expense of refiling a case in state court are insufficient to establish abuse of discretion. Danner v. Himmelfarb, 858 F.2d 515, 524 (9th Cir. 1988). "Having to bring parallel suits may be a hardship, but it is not an injustice." Id. (quoting Hartford Accident & Indem. Co. v. Sullivan, 846 F.2d 377, 381 (7th Cir. 1988)). The statute of limitations has not run on this claim, and Sanche is free to refile in state court. We affirm the district court's dismissal without prejudice of Sanche's pendent state contract claim.

CONCLUSION

Sanche's ADEA claim is barred by the statute of limitations. No claim for wrongful discharge based on age discrimination exists under Oregon law. Oregon does not recognize the existence of an implied covenant of good faith and fair dealing in an at-will employment contract. The district court did not abuse its discretion in dismissing Sanche's breach of contract claim without prejudice, rather than remanding it to state court.

AFFIRMED.