329 F.3d 740 (9th Cir. 2003), 02-35235, Pottenger v. Potlatch Corp.

Docket Nº:02-35235
Citation:329 F.3d 740
Party Name:Pottenger v. Potlatch Corp.
Case Date:May 19, 2003
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit

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329 F.3d 740 (9th Cir. 2003)

Charles R. POTTENGER, Plaintiff-Appellant,


POTLATCH CORPORATION, a Delaware corporation, Defendant-Appellee.

No. 02-35235.

United States Court of Appeals, Ninth Circuit

May 19, 2003

Argued and Submitted March 4, 2003.

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Candy W. Dale and Tamsen L. Leachman, Hall Farley Oberecht & Blanton, Boise, ID, for the appellant.

Michael E. McNichols, Clements Brown & McNichols, Lewiston, ID, Jerrold C. Schaefer and Lisa M. Pooley, Hanson, Bridgett, Marcus, for Appellee.

Appeal from the United States District Court for the District of Idaho; Edward J. Lodge, District Judge, Presiding. D.C. No. CV-00-00612-EJL.

Before: REINHARDT, W. FLETCHER and GOULD, Circuit Judges.



Charles R. Pottenger worked for the Potlatch Corporation, a diversified forest products company, for 32 years until he was discharged in April 2000 at age 60. During his tenure at Potlatch, Pottenger rose to Group Vice President of Pulp and Paper, reporting directly to Potlatch's President, Richard Paulson. After his dismissal, Pottenger sued Potlatch alleging that he was forced to retire in violation of the Age Discrimination in Employment Act ("ADEA"), 29 U.S.C. §§ 621 et seq., and the Idaho Human Rights Act, Idaho Code §§ 67-5901 et seq. Pottenger also claims intentional infliction of emotional distress and defamation under Idaho law. The district court dismissed all Pottenger's claims on summary judgment, and we affirm.


Pottenger joined Potlatch in 1968 after receiving his Ph.D. in paper technology. He held a variety of positions in the company, generally moving up through the ranks. In 1993, he became a group vice president, and at the date of his termination he was Group Vice President of Pulp and Paper. As a group vice president, Pottenger reported directly to the President and Chief Operating Officer of Potlatch, Richard Paulson, who reported to the CEO, Pendleton Siegel. Pottenger worked in Lewiston, Idaho, and oversaw Potlatch's operations in Idaho and Arkansas, including the Idaho Pulp and Paperboard Division ("IPPD") based in Lewiston. After the cost of capital, IPPD lost $63.7 million in 1997, $67.4 million in 1998, $85.0 million in 1999, and $14.5 million in the first quarter of 2000.

In January 1999, shortly before he became president of Potlatch, Paulson attended an executive training course at the University of Michigan. After attending the training course, Paulson decided that Potlatch needed to make "real and significant" changes in order to improve its performance. On November 23, 1999, Pottenger and three of his colleagues responsible for pulp and paperboard met with Paulson in Spokane, Washington, to talk about turning the pulp and paperboard business around. At the meeting, Paulson characterized Pottenger and his team as an "old management team" using an "old business model."

In February 2000, Paulson gave Pottenger his performance review for 1999. Pottenger received an MR- rating. In the Potlatch rating system, MR+ means that the individual has more than met the requirements of the job. MR means that the individual has fully met the requirements of the job. MR- means that there is some reason for concern. MM means that

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the individual has met the minimum requirements for the job. Out of twelve managers listed in Potlatch's records that year, two received MR+ ratings, six received MR ratings, three received MR- ratings, and one received an MM rating. On the review form, Paulson characterized Pottenger's strengths as "smart," "knows business," "loyal to Potlatch," "technical knowledge," "enthusiastic leader," and "wants Potlatch to succeed." He also wrote the following under areas for improvement: "break victim mentality in IPPD," "be a strong leader in stopping the 'mill town' mentality in Lewiston," "set higher expectations for people," and "think in terms of opportunities and develop change strategies to get there."

In March 2000, the Potlatch management committee, which included Pottenger, met to discuss cost-cutting strategies. Because the company was in financial trouble, the committee members made a commitment to each other to eliminate "deadwood," and to do so quickly. At the end of March, the committee distributed a memo announcing that the company was embarking on a course of significant change in response to poor earnings. The changes included a wide array of cost-cutting measures (including cuts in travel, mail, cell phone, and trade association expenses). The memo also announced that over the next two months the committee would be "evaluating where to make significant reductions in the number of salaried positions."

The management committee met again on April 12, 2000, to discuss the company's plan for a reduction in force. During the day, Paulson and Siegel (Potlatch's CEO) met separately from the committee for 10-15 minutes to discuss Pottenger. Paulson described his concerns that Pottenger was not capable of bringing about real and significant change in the Lewiston operation. At their meeting, Paulson and Siegel decided to fire Pottenger.

Paulson told Pottenger of his termination on April 18, 2000. When Pottenger asked Paulson why he was being fired, Paulson stated that he lacked confidence that Pottenger had the commitment to make the hard decisions necessary to make Potlatch successful. 1 Paulson offered Pottenger an enhanced severance package as part of his termination. Without the enhancement, Pottenger was entitled to 52 weeks of severance pay (equaling his yearly base pay of $324,120) and one year of employee benefits (medical, dental, and life insurance). After a year, Potlatch would pay monthly retirement benefits of $15,134.74 and 75% of Pottenger's medical, dental, and life insurance premiums. The enhanced severance package included an additional 26 weeks of base pay (for a total of 78 weeks or $486,180) and an additional monthly payment thereafter of $5,401.74 (for a total monthly payment of $20,536.48). The enhanced package also offered fully-paid medical, dental, and life insurance until age 65 (the mandatory retirement age for executives at Potlatch), and 75% payment thereafter. In return for the enhanced severance package, Paulson asked Pottenger to sign a separation agreement waiving any claim under the Age Discrimination Employment Act.

The next day, the company distributed a memo to all employees from Paulson stating that Pottenger had "elected to take early retirement." Pottenger had declined Paulson's offer the previous day to help

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write the notice. The memo stated that Craig Nelson, formerly the Consumer Products Division Vice President, was assuming Pottenger's position. At the time, Pottenger was 60 years old and Nelson was 43.

Pottenger ultimately declined the enhanced severance package and refused to waive his claims under the ADEA. He then brought suit in federal district court claiming age discrimination under the ADEA, 29 U.S.C. §§ 621 et seq., and the Idaho Human Rights Act, 2 Idaho Code § 67-5909, and claiming defamation and intentional infliction of emotional distress.

The district court granted Potlatch's motion for summary judgment. The court found that Pottenger had made out a prima facie case of age discrimination, but that Potlatch had articulated a legitimate, nondiscriminatory reason for discharging...

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